The Internal Revenue Service ("IRS") has finally released Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return ("Form 709") for gifts made during 2010, together with instructions for the Form 709. The new Form 709 for 2010 reflects changes in the gift and generation-skipping transfer ("GST") tax law for gifts made in 2010, including changes made by the Tax Relief Act of 2010.
Form 709 is used to report transfers subject to the federal gift and certain GST taxes and to figure the tax, if any, due on those transfers. It also is used to report allocation of the lifetime GST exemption to property transferred during the transferor's lifetime. A caption entitled “What's New” in the instructions for Form 709 notes the following changes:
- Regular annual exclusion. The annual exclusion remains at $13,000
- Annual exclusion for gifts to noncitizen spouses. For gifts made to spouses who are not U.S. citizens, the annual exclusion has increased to $134,000
- Top rate. The top rate on gifts is now 35%
- GST rate. For 2010, the GST tax rate is 0%
- Unified credit. The unified credit for 2010 is $330,800
- Credit allocated to prior gifts. Section 302(d)(2) of the Tax Relief Act of 2010 mandates that any unified credit allocated to gifts made in prior periods be redetermined using current gift tax rates. Information concerning gifts from prior periods is reported in five columns on Schedule B of Form 709. Column C reports the unified credit used for the gift. The instructions contain elaborate rules for determining the unified credit for prior gifts under the section 302(d)(2) mandate. First, the donor must determine which one of three scenarios he falls under:
- Scenario 1: Prior gifts totaling $500,000 or less;
- Scenario 2: Prior gifts totaling between $500,000 and $1,000,000; or
- Scenario 3: Prior gifts totaling over $1,000,000.
For Scenario 1, the donor enters in column C the amount of unified credit actually applied in the prior period, as shown on Forms 709 previously filed. For Scenario 2, a number of steps must be applied in a worksheet to determine the amount to enter in column C. There is a blank worksheet and a filled-in one serving as an example. An even more elaborate worksheet applies for Scenario 3. Here, too, there is a blank worksheet and a filled-in one serving as an example. If any amount of specific exemption is claimed for gifts made after Sept. 8, '76, and before Jan. 1, '77, the donor must use the worksheet for Scenario 3.
- Trust transfers. All transfers in trust made after Dec. 31, 2009, except as provided in regulations, are treated as a transfer of property by gift unless the trust is treated as wholly owned by the donor or the donor's spouse under the grantor trust provisions in Code Sec. 671 to Code Sec. 678 .
Form 709 can be viewed at www.irs.gov/pub/irs-pdf/f709.pdf
Instructions to Form 709 can be viewed at www.irs.gov/pub/irs-pdf/i709.pdf
The instructions for Form 709 indicate that dispite the fact that the 2010 Form 709 was just released, the filing deadline remains the same as in prior years, that is April 15th of the year following the year in which the gift was made or for 2011, April 18, 2011 because April 15th is a legal holiday in 2011.
Interestingly, according to the Form 709 Instructions, it should take about 6 hours to complete the Form 709 from start to finish (from recordkeeping to copying and filing with the IRS). This is pretty much the same time the IRS thought it should take for 2009 gifts, before the changes brought by the Tax Relief Act of 2010. Go figure.