hi this is john with e-gov access inc and this is form 709 the gift tax and generation skipping transfer tax this is the official government form which was downloaded from the irs website so you can use this form to file your tax return if you want to although we've made some changes to it we've added some yellow navigation buttons the navigation buttons appear on the screen but they won't print when you print the paper copy so you can use this to file your tax return so for example if i was to click here it would take me to my navigation page and i can click on any one of these buttons to go wherever i want on the form so for example i could click here to go to schedule b and then back to the navigation page and then back to page one where it was before the other thing important to point out is that as you can see up here i've opened this form with adobe acrobat reader and that's important because the form actually will not compute unless you open it with the reader so for example if i click on this button here the word amended appears and will print on the top of the form which is what the irs wants for an amended return now as you can see i've already filled out some of the information here for sam jones his address and his social security number and moving down the form to lines eight and nine which don't apply we'll skip those but line ten asks for the number of donees and we're going to say for this purpose there's one donee which is sam's son ed and then on line 11 have you previously filed this form in a previous year we're going to say no has your address changed we'll say no and then are you splitting uh your gifts with your wife and uh we're gonna say no to that and so we can skip 13 to 18 and go down to 19 which says have you applied um d-s-u-e d-s-u-e stands for deceased spouse unused exemption and we're gonna say that sam doesn't have a spouse so we're gonna say no to that question now let's continue by entering the gift that sam gave to his son ed so to do that we're going to go to the navigation page and we want to go to schedule a part 1 gifts subject only to gift tax so here we are on schedule a and the first question asks if we have a discount we're going to say no and then this one doesn't apply because there's no section 520 29 election and the first gift will be gift number one and the irs wants the name and address relationship and description so we'll enter that information here ed jones and the address is going to be the same and we're going to say that he gave cash to his son like that and um the cash that he gave is gonna be five million dollars the date is going to be 10 15 20 20 and the value is also 5 million so the net transfer is 5 million and the total for part 1 is also 5 million the next thing we want to do on this tax return is enter the annual exclusion so to do that we'll go to schedule a part four right here and the annual exclusion goes on line two for this year it's fifteen thousand dollars for each donee so the taxable gift is four million nine eighty five now let's take a look at the tax computation and that is right here part two right here the 4 million 95 came over from schedule a part 4 which we were just looking at and the total taxable gifts is also that same amount now the um tax from the tax table is computed for you here on line four and that comes down to the balance on line six on line seven you get a um a credit um a lifetime credit uh on line seven that's right here from the instructions for line seven you can see the the credit is four million five hundred seventy seven thousand eight hundred goes on line seven however non-run residents are not eligible for that credit and they have to enter zero on line seven so let's go back to where we were and um there's the four million five seventy seven eight hundred carries down to line eleven and then it says on line twelve to enter the small smaller of six or eleven six is this and eleven is that so line twelve is the uh 1 million 9 39 800 and then the total credits is also the s that same figure so that's how that computes for sam if sam had been a non-resident however um you check this box and you see he wouldn't get any credit at all according to the instructions he would actually owe that amount of money so it's a good thing he's not a non-resident now let's change things a little bit and let's see what happens if in addition to giving 5 million to his son this year he gave 10 million to his son last year and let's see how that affects the tax return so to do that we'll go to schedule b which is uh gifts from prior year prior periods and we're going to say in 2019 he gave cash of 10 million and we need to check the box on line 11 hey let's do that okay 11a have you previously filed we need to change that to yes there we go now let's go back to schedule b and internal revenue office let's say that was ogden and uh this should be 10 million not 1 million there we go now this number came from this worksheet so let's take a look at the worksheet this worksheet is in the irs instructions and we've included it here as part of our software and you can see it calculates for you automatically so there's the 2019 and there's the 10 million and the allowable credit is 3 million 940 which comes to schedule b in column c right there and just like that now let's go back to the tax computation and see how the change here affects that so we're going to go back here to page 2 and you can see it's quite a bit different line 1 is still the same that's the amount that we had from schedule a and but line two is now 10 million dollars that's the 10 million dollars that was donated in uh 2019 the total gifts then on line three is the summer sum of those two 14 million 985 and we need to compute the tax on that on the 14 995 which is 5 million 9 thirty nine eight hundred and then we compute the tax just on the amount on line two on the ten million which uh was given in the prior year and that comes out to this figure three nine forty five eight hundred now the balance is the difference between those two numbers so the tax on the 14 million minus the tax just on the 10 million equals 1 million 994 so that's the the total tax that's computed on this tax return and line seven is still the same that's the lifetime credit but now we've got a number on line eight which is the credit that we used in the prior year so the difference between those two numbers is the credit that we've got left over um the total lifetime credit minus what we've previously used equals 632 000 so that's what's available to us this year and that carries down to line 14 and the difference between 14 and six remember six is the tax balance that's due now and line 14 is what we previously used so our tax is going to be 1 million 362 000 this year and that comes down to line 19 right there now let's change things around again let's suppose that instead of being sam's son ed is his grandson so that will um involve the generations skipping transfer tax and we'll go to the navigation page and so we want to do part two direct skips right here so [Music] right now online on part one we've got this information but we want to move it down here to want to part two so let's go ahead and do that like that now we've got all that information in part two um so the total is the same 5 million but this time instead of being subject only to the gift tax it's going to also be subject to both the gift tax and the generation skipping transfer tax which is going to make a pretty big difference on this tax return as you'll see in a minute now let's take a look to see how this change affects the tax computation first we need to change this to grandson like that and then we need to go back to the navigation page and we want to go to schedule d part 2 the gst reconciliation so here we are and the lifetime exemption the maximum allowable is 11 580. but remember we used 10 million in the prior year in 2019 so let's enter that here and that and then the exemption available is 1580 and the exemption claimed is also the same that's because this has been automatically allocated down here on part three so there's the transfer the 5 million transfer in 2020 and then this 1 million 580 is allocated here to the 5 million and our ratios come out to these figures here and uh our tax is one million three hundred sixty eight thousand just like that so now if we go back to the text computation well let's go to uh actually let's go to part four here first and you can see our one million three one million three hundred eight sixty eight 000 comes here on line 10. so now our total gifts our taxable gifts rather changes from 4985 to 6353 and that is going to go to the tax computation right there on line one so that's an increase and so the total on line three is now 16353 and the tax goes to 6 million 487 and the difference here between 4 and 5 is 2541 and then coming down here this 632 is still the same between the difference between the gift tax and the and the applicable credit from 2019 but the balance is now 1909 200 because the difference between 14 and 6 6 has increased because of that gst tax and now we owe um on line 19 it's really three million two hundred seventy seven thousand two hundred so that's how that works and uh that's our video i hope you give that's given you a pretty good idea of how this form works and thanks for listening