IRS Releases Draft 2011Form 709 Gift Tax Return and Instructions

12/05/2011

The Internal Revenue Service (IRS) has released draft 2011 Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return and instructions. The draft Form 709 and instructions reflect law, administrative and indexing changes for gifts made in 2011, including changes made by the Tax Relief Act of 2010.

Form 709 should be used to report transfers subject to the federal gift and certain generation-skipping transfer (GST) taxes and to figure the tax, if any, due on those transfers.  It should also be used to report allocation of the lifetime GST exemption to property transferred during the transferor's lifetime. 

A caption entitled “What's New” on the draft Form 709 notes the following changes:

  • Due date. The due date for 2011 gifts is Apr. 17, 2011, because April 15 is a Sunday and April 16 is the Emancipation Day holiday in the District of Columbia.
  • 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 $136,000.
  • Top rate. The top rate for gifts and generation-skipping transfers is now 35%.
  • Unified credit. The unified credit for 2011 is $1,730,800.
  • 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. The instructions contain elaborate worksheets for doing this.
  • Applicable exclusion amount. The applicable exclusion amount now may consist of a basic exclusion amount of $5,000,000 that, starting in 2012, will be indexed for inflation and, in the case of a surviving spouse, the unused exclusion amount of a predeceased spouse (who died after Dec. 31, 2010). The executor of a predeceased spouse's estate must have elected on a timely and complete Form 706 to allow the donor to use the predeceased spouse's unused exclusion amount (see Federal Taxes Weekly Alert 10/06/2011).

Note that he indexed applicable exclusion amount for 2012 is $5,120,000 (see Rev Proc 2011-52, 2011-45 IRB 701).

The draft Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return for gifts made during 2011 and the draft Instruction to Form 709 can be viewed on the IRS website at http://www.irs.gov/pub/irs-dft/f709--dft.pdf and http://www.irs.gov/pub/irs-dft/i709--dft.pdf.