Generation-Skipping Transfer Tax Return For Terminations

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Instructions for Form 706-GS(T)

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Instructions for
Form 706-GS(T)

Department of the Treasury
Internal Revenue Service

(Rev. October 2008)
Generation-Skipping Transfer Tax Return for Terminations
Section references are to the Internal
Revenue Code unless otherwise noted.

Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999

• At no time after the termination may

a distribution be made from the trust to
a skip person.

What’s New

Trusts

Exceptions

• On page 1 of Form 706-GS(T), we

Nonexplicit trusts. An arrangement
that has substantially the same effect
as a trust will be treated as a trust even
though it is not an explicit trust.
Examples of such arrangements are
insurance and annuity contracts,
arrangements involving life estates and
remainders, and estates for years.

Irrevocable trusts. Except as
described under Additions to
irrevocable trusts below, the GST tax
does not apply to any termination of an
interest in a trust that was irrevocable
on September 25, 1985. Any trust in
existence on September 25, 1985, will
be considered irrevocable unless:
1. On September 25, 1985, the
settlor held a power with respect to
such trust that would have caused the
value of the trust to be included in the
settlor’s gross estate for federal estate
tax purposes by reason of section 2038
(regarding revocable transfers) if the
settlor had died on September 25,
1985; or
2. Regarding a policy of life
insurance that is treated as a trust
under section 2652(b), the insured
possessed an incident of ownership on
September 25, 1985, that would have
caused the insurance proceeds to be
included in the insured’s gross estate
for federal estate tax purposes if the
insured had died on September 25,
1985.

have revised the paid preparer
signature block. Paid preparers must
sign the return and furnish the preparer
information requested in the Paid
Preparer’s Use Only area.
• The Small Business and Work
Opportunity Tax Act of 2007, P.L.
110-28, extends the application of
return preparer penalties to preparers
of all tax returns. See Penalties and
Interest, Return preparer on page 3 for
more information.

General Instructions
Purpose of Form
Form 706-GS(T) is used by a trustee to
figure and report the tax due from
certain trust terminations that are
subject to the generation-skipping
transfer (GST) tax.

Who Must File
In general, the trustee of any trust that
has a taxable termination (defined on
this page) must file Form 706-GS(T) for
the tax year in which the termination
occurred.

When To File
Generally, the trustee must file Form
706-GS(T) by April 15th of the year
following the calendar year in which the
termination occurs. If the due date falls
on a Saturday, Sunday, or legal
holiday, file on the next business day.
If you are not able to file the return
by the due date, you may request an
extension of time to file by filing Form
7004. The extension is automatic, so
you do not have to sign the form or
provide a reason for your request. You
must file Form 7004 on or before the
regular due date of Form 706-GS(T).
See Form 7004 for more information.

Where To File
File Form 706-GS(T) at the following
address:

In general, a transfer of property in
which the identity of the transferee is
conditioned on the occurrence of an
event is a transfer in trust. This rule
does not apply to a testamentary trust,
however, if the event is to occur within
6 months of the transferor’s date of
death.
Nonexplicit trusts do not include
decedents’ estates.
In the case of a nonexplicit trust, the
person in actual or constructive
possession of the property involved is
considered the trustee and is liable for
filing Form 706-GS(T).
If you are filing this return for a
nonexplicit trust, see the instructions for
line 1b on page 3.
Separate trusts. You must treat as
separate trusts:
• Portions of a trust that are
attributable to transfers from different
transferors and
• Substantially separate and
independent shares of different
beneficiaries in a trust.
If you are the trustee for separate
trusts as described above, you must file
a single Form 706-GS(T) but separate
Schedules A for each separate trust, as
that term is used here.

Terminations Subject to
GST Tax
A termination may occur by reason of
death, lapse of time, release of a
power, or any other means.
In general, all taxable terminations
are subject to the GST tax. A taxable
termination is the termination of an
interest in property held in trust unless:
• Immediately after the termination, a
non-skip person has an interest in the
property or
Cat. No. 10829R

For more information, see
Regulations section 26.2601-1(b).
Trusts containing qualified
terminable interest property.
Irrevocable trusts in existence on
September 25, 1985, that hold qualified
terminable interest property (QTIP) (as
defined in section 2056(b)(7)) as a
result of an election under section
2056(b)(7) or 2523(f), are treated for
purposes of the GST tax as if the QTIP
election had not been made. Thus,
transfers from such a trust will not be
subject to the GST tax.
Additions to irrevocable trusts. If an
addition has been made after
September 25, 1985, to an irrevocable
trust, the termination of any interest in
the trust may be subject in part to the
GST tax. Additions include constructive
additions described in Regulations
section 26.2601-1(b)(1)(v).
Medical and educational exclusion.
If all of the property to which the
termination applied has been
distributed and used for medical or
educational expenses of the transferee
such that if the transfer had been made

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inter vivos by an individual, it would not
have been subject to gift tax by reason
of the medical and educational
exclusion, then the termination is not a
generation-skipping transfer, and you
do not have to file this form to report
the termination.

Transition Rule for
Revocable Trusts
The GST tax will not apply to any
termination of an interest in a revocable
trust, provided:
• The trust was executed before
October 22, 1986;
• The trust as it existed on October 21,
1986, was not amended after October
21, 1986, in any way that created or
increased the amount of a
generation-skipping transfer;
• Except as provided in Exceptions to
Additions Rule below, no additions
were made to the trust; and
• The settlor died before January 1,
1987.
A revocable trust is any trust that on
October 22, 1986, was not an
irrevocable trust, as defined on page 1,
and would not have been an
irrevocable trust had it been created
before September 25, 1985.
The instructions under Trusts
containing qualified terminable interest
property on page 1 apply also to
revocable trusts covered by these
transition rules.
Amendments to revocable trusts.
An amendment to a revocable trust in
existence on October 21, 1986, will not
be considered to result in the creation
of, or an increase in the amount of, a
generation-skipping transfer where:
• The amendment is administrative or
clarifying in nature, and it only
incidentally increases the amount
transferred to a skip person (defined
below), or
• It is designed to perfect a marital or
charitable deduction for an existing
transfer, and it only incidentally
increases the amount transferred to a
skip person (defined below).
See Regulations section
26.2601-1(b)(2)(vii) for examples
demonstrating these rules.
Additions to revocable trusts. If an
addition (including a constructive
addition) to a revocable trust is made
after October 21, 1986, and before the
death of the settlor, all subsequent
terminations of interests in the trust will
be subject to the GST tax if the other
requirements of taxability are met. For
settlors dying before January 1, 1987,
any addition made to a revocable trust
after the death of the settlor will be
treated as made to an irrevocable trust.

Transition Rule in Case of
Mental Disability
If the settlor was under a mental
disability on October 22, 1986, the GST

tax may not apply. See Regulations
section 26.2601-1(b)(3) for a definition
of the term “mental disability” and
additional details.

Exceptions to Additions Rule
Do not treat as an addition to a trust
any addition that is made pursuant to
an instrument or arrangement that is
covered by the transition rules
discussed above under Transition Rule
for Revocable Trusts and Transition
Rule in Case of Mental Disability. This
also applies to inter vivos transfers if
the same property would have been
added to the trust by such an
instrument. For examples illustrating
this rule, see Regulations section
26.2601-1(b)(4)(ii).

Definitions
Skip Persons
For termination purposes, skip person
means a trust beneficiary who is either:
1. A natural person assigned to a
generation that is two or more
generations below the settlor’s
generation, or
2. A trust that meets either of the
following conditions:
a. All interests in the trust are held
by skip persons, or
b. No person holds an interest in the
trust, and at no time after the transfer to
the trust may a distribution be made to
a non-skip person.

Interest
A person holds an interest in the trust if,
at the time the determination is made,
the person:
1. Has a current right to receive
income or corpus from the trust,
2. Is a permissible current recipient
of income or corpus from the trust
(other than charitable entities), or
3. Is a charitable or other entity
described in section 2055(a) and the
trust is a charitable remainder annuity
trust, a charitable remainder unitrust, or
a pooled income fund.
Any interest that is created primarily
to postpone or avoid the GST tax is
disregarded.

Non-Skip Person
A non-skip person is any person who is
not a skip person.

Generation Assignment
A generation is determined along family
lines as follows:
1. Where the beneficiary is a lineal
descendant of a grandparent of the
transferor (for example, the donor’s
cousin, niece, nephew, etc.), the
number of generations between the
transferor and the descendant is
determined by subtracting the number
of generations between the

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grandparent and the transferor from the
number of generations between the
grandparent and the descendant.
2. Where the beneficiary is the
lineal descendant of a grandparent of a
spouse (or former spouse) of the
transferor, the number of generations
between the transferor and the
descendant is determined by
subtracting the number of generations
between the grandparent and the
spouse (or former spouse) from the
number of generations between the
grandparent and the descendant.
3. For this purpose, a relationship
by adoption is considered a blood
relationship. A relationship by
half-blood is considered a relationship
by whole blood.
4. The spouse or former spouse of
a transferor or lineal descendant is
considered to belong to the same
generation as the transferor or lineal
descendant, as the case may be.
5. A person who is not assigned to
a generation according to the rules
above is assigned to a generation
based on his or her birth date as
follows.
a. A person who was born not more
than 121/2 years after the transferor is in
the transferor’s generation.
b. A person born more than 121/2
years, but not more than 371/2 years,
after the transferor is in the first
generation younger than the transferor.
c. Similar rules apply for a new
generation every 25 years.
If more than one of the rules for
assigning generations applies to a
beneficiary, the beneficiary is generally
assigned to the youngest of the
generations that apply.
If an entity such as a partnership,
corporation, trust, or estate has an
interest in property, each individual who
has a beneficial interest in the entity
(for example, partners, shareholders,
and beneficiaries) is treated as having
an interest in the property. The
individual is then assigned to a
generation using the rules described
above.
Government entities and certain
charitable organizations are assigned to
the transferor’s generation.
Terminations in their favor will never be
generation-skipping transfers.

Generation Assignment
Where Intervening Parent is
Deceased
If you made a gift or bequest to your
grandchild and at the time you made
the gift or bequest, the grandchild’s
parent (who is your or your spouse’s or
your former spouse’s child) is
deceased, then for purposes of
generation assignment, your grandchild
will be considered to be your child
rather than your grandchild. Your

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grandchild’s children will be treated as
your grandchildren rather than your
great-grandchildren.
This rule is also applied to your lineal
descendants below the level of
grandchild. For example, if your
grandchild is deceased, your
great-grandchildren who are lineal
descendants of the deceased
grandchild are considered your
grandchildren for purposes of the GST
tax.
This rule is also applied to other
lineal descendants. For example, if
property is transferred to an individual
who is a descendant of a parent of the
transferor, and that individual’s parent
(who is a lineal descendant of the
parent of the transferor) is deceased at
the time the transfer is subject to gift or
estate tax, then for purposes of
generation assignment, the individual is
treated as if he or she is a member of
the generation that is one generation
below the lower of:
• The transferor’s generation or
• The generation assignment of the
youngest living ancestor of the
individual, who is also a descendant of
the parent of the transferor.
The same rules apply to the
generation assignment of any
descendant of the individual.
This rule does not apply to a transfer
to an individual who is not a lineal
descendant of the transferor if the
transferor has any living lineal
descendants.
If any transfer of property to a trust
would have been a direct skip except
for this generation assignment rule,
then the rule also applies to transfers
from the trust attributable to such
property.
Ninety-day rule. For purposes of
determining if an individual’s parent is
deceased at the time of a testamentary
transfer, an individual’s parent who dies
no later than ninety days after a
transfer occurring by reason of the
death of the transferor is treated as
having predeceased the transferor. The
ninety-day rule applies to transfers
occurring on or after July 18, 2005. See
Regulations section 26.2651-1, for
more information.

Multiple Skips
If after a generation-skipping transfer,
the property transferred is held in trust,
then for the purpose of determining the
taxability of subsequent transfers from
the trust involving that property, the
transferor of the property is assigned to
the first generation above the highest
generation of any person who has an
interest in the trust immediately after
the initial transfer.

Penalties and Interest
Section 6651 provides for penalties for
both late filing and for late payment
unless there is reasonable cause for
the delay. The law also provides
penalties for willful attempts to evade
payment of tax.
The late filing penalty will not be
imposed if the taxpayer can show that
the failure to file a timely return is due
to reasonable cause. Trustees filing late
(after the due date, including
extensions) should attach an
explanation to the return to show
reasonable cause.
Section 6662 provides penalties for
underpayments of GST taxes which
exceed $5,000 that are attributable to
valuation understatements. A
substantial valuation understatement
occurs when the value of property
reported on Form 706-GS(T) is 65% or
less of the actual value of the property.
Interest will be charged on taxes not
paid by their due date, even if an
extension of time to file is granted.
Interest is also charged on any
additions to tax imposed by section
6651 from the due date of the return
(including any extensions) until the
addition to tax is paid.
Return preparer. The Small Business
and Work Opportunity Tax Act of 2007
(Act) extends the application of return
preparer penalties to all tax return
preparers. Under section 6694, as
amended by the Act, and the
transitional relief provided by Notice
2007-54, 2007-27 I.R.B. 12, tax return
preparers, who prepare any return or
claim for refund which reflects an
understatement of tax liability due to
willful or reckless conduct, are subject
to a penalty of $5,000 or 50% of the
income derived (or income to be
derived), whichever is greater, for the
preparation of each such return. See
section 6694; Notice 2008-11, 2008-3
I.R.B. 279; Notice 2008-13, 2008-3
I.R.B. 282; and Notice 2008-46,
2008-18 I.R.B. 868 for more details.

Signature
Form 706-GS(T) must be signed by the
trustee or by an authorized
representative.
If you fill in your own return, leave
the Paid Preparer’s space blank. If
someone prepares your return and
does not charge you, that person
should not sign the return.
Generally, anyone who is paid to
prepare the return must sign the return
in the space provided and fill in the
Paid Preparer’s Use Only area. See
section 7701(a)(36)(B) for exceptions.
In addition to signing and completing
the required information, the paid
preparer must give a copy of the
completed return to the taxpayer.

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Note. A paid preparer may sign
original or amended returns by rubber
stamp, mechanical device, or computer
software program.

Specific Instructions
Complete Form 706-GS(T) in the
following order: Parts I and II, Schedule
A (through line 4), Schedule B,
Schedule A (lines 5 through 10),
Part III.

Part I—General
Information
Line 1b. Trust’s Employer
Identification Number
All trusts filing Form 706-GS(T) must
have an employer identification number
(EIN). A nonexplicit trust as described
on page 1 under Who Must File must
have an EIN that is separate from any
other entity’s EIN and that will be used
only by the entity in its capacity as the
nonexplicit trust.
A trust or nonexplicit trust that does
not have an EIN should apply for one
on Form SS-4, Application for Employer
Identification Number. You can get
Form SS-4, and other IRS tax forms
and publications, by calling
1-800-TAX-FORM (1-800-829-3676) or
by accessing the IRS website at www.
irs.gov.
Send Form SS-4 to the Internal
Revenue Service Center listed under
Where To File on page 1. If you do not
receive the EIN by the filing time for the
GST form, write “Applied for” on line 1b.
You can also apply for an EIN online
at www.irs.gov/businesses or obtain an
EIN immediately by calling
1-800-829-4933.

Part II—Trust
Information
Line 4
Whenever property is transferred into a
pre-existing trust, the inclusion ratio
must be refigured. See Multiple
transfers on page 6 for the rule on how
to refigure the inclusion ratio.

Line 7
If a qualified terminable interest
property deduction was taken by the
settlor as donor spouse or by the
executor of a decedent settlor’s estate
for the transfer of any property into this
trust, the donor spouse or the executor,
as the case may be, may have made
an election at that time to treat such
transfer for the purpose of the GST tax
as if it was not qualified terminable
interest property. In this case, you must
refer to the gift tax return (Form 709,
United States Gift (and Generation-

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Skipping Transfer) Tax Return) of the
donor spouse or the decedent’s estate
tax return (Form 706, United States
Estate (and Generation-Skipping
Transfer) Tax Return) for the
information needed to figure the
inclusion ratio.

Schedule A (Lines 1–4)
Note. If you need more than one
Schedule A, make copies before
completing it. Also, make a copy of
Schedule B for each Schedule A you
will file. If you need additional space to
provide all the required information for
any given schedule, attach a separate
sheet of the same size to that schedule.
Combine on a single Schedule A all
terminations from a single trust that
have the same inclusion ratio (as
discussed on page 5). However, you
must complete a separate Schedule A
for each terminating interest that has a
different inclusion ratio. Number each
Schedule A consecutively in the space
provided at the top.

Line 2
For the purposes of line 2, termination
means the termination (for example, by
death, lapse of time, or release of
power, etc.) of an interest in property
held in trust unless:
• Immediately after the termination, a
non-skip person has an interest in such
property or
• At no time after the termination is it
possible for a distribution (including
distributions on termination) to be made
from the trust to a skip person.
Also, if you are reporting separate
trusts (as that term is described under
Who Must File on page 1) on this Form
706-GS(T), explain why you are
treating parts of the trust as separate
trusts.

Line 3
You may elect alternate valuation under
section 2032 for all terminations in the
same trust that occurred at the same
time as and as a result of the death of
an individual. If you elect alternate
valuation, you must use it to value all
property included in those terminations.
You may not elect alternate
valuation unless the election will
decrease both the total value of the
property interests that were subject to
the termination and the total net GST
tax due after the allowable credit.
Check the box on line 3 of all the
applicable Schedules A if you elect
alternate valuation. Once made, the
election cannot be revoked. You may
make the election on a late filed Form
706-GS(T) provided it is not filed later
than 1 year after the due date
(including extensions).

If you elect alternate valuation, value
the property interest that has been
terminated as follows.
1. Any property distributed or
otherwise disposed of or separated
from the trust within 6 months after the
termination is valued on the date of
distribution or other disposition. Value
the property on the date it ceases to
form a part of the trust; that is, on the
date the title passes as a result of its
distribution or other disposition.
2. Any property not distributed or
otherwise disposed of within 6 months
following the termination is valued on
the date 6 months after the termination.
3. Any property or interest that is
affected by mere lapse of time is valued
as of the time of termination. However,
you may change this date of
termination value to the date of
distribution or other disposition to
account for any change that is not due
to mere lapse of time.
If the alternate valuation date falls
after the initial due date of the return,
you must request an extension to file
on Form 7004. The extension is
automatic, so you do not have to sign
the form or provide a reason for your
request. See Form 7004 for more
information.

Line 4
Terminations of interests in trusts to
which additions have been made.
As described on page 1, when an
addition is made to an irrevocable trust
after September 25, 1985, only the
portion of the trust resulting from the
addition is subject to the GST tax. For
terminations, this portion is the product
of the allocation fraction and the value
of the property subject to the
termination (including accumulated
income and appreciation on that
property).
The allocation fraction is a fraction,
the numerator of which is the value of
the addition as of the date it was made
(regardless of whether it was subject to
gift or estate tax). The denominator of
the fraction is the fair market value of
the entire trust immediately after the
addition, less any trust amount that is
similar to expenses, indebtedness, or
taxes that would be allowable as a
deduction under section 2053.
When there is more than one
addition, the allocation fraction must be
revised after each addition. The
numerator of the revised fraction is the
sum of:
• The value of the portion of the trust
subject to the GST tax immediately
before the last addition, and
• The amount of the latest addition.
The denominator of the revised
fraction is the total value of the entire
trust immediately after the latest
addition.

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If the addition results from a
generation-skipping transfer, reduce
both the numerator and denominator by
the amount of any GST tax imposed on
the transfer and recovered from the
trust.
Round off the allocation fraction to
five decimal places (for example,
“.00123”).
Column a. Item no. Identify by
separate item number all property in
which an interest has terminated during
the tax year. You may combine under
the same item number all property that
has the same termination date,
valuation date, and unit value, such as
stocks or bonds. Otherwise, assign a
separate item number to each article of
property.
Column b. Description of property.
Real estate. Describe the real
estate in enough detail so that the IRS
can easily locate it for inspection and
valuation. For each parcel of real
estate, report the area and, if the parcel
is improved, describe the
improvements. For city or town
property, report the street number,
ward, subdivision, block and lot, etc.
For rural property, report the township,
range, landmarks, etc.
Stocks and bonds. For stocks,
give:
• Number of shares;
• Whether common or preferred;
• Issue;
• Par value where needed for
valuation;
• Price per share;
• Exact name of corporation;
• Principal exchange upon which sold,
if listed on an exchange; and
• CUSIP number.
For bonds, give:
• Quantity and denomination;
• Name of obligor;
• Date of maturity;
• Principal exchange, if listed on an
exchange;
• Interest rate;
• Interest due date; and
• CUSIP number.
If the stock or bond is unlisted, show
the company’s principal business office.
The CUSIP (Committee on Uniform
Security Identification Procedure)
number is a nine-digit number assigned
to all stocks and bonds traded on major
exchanges and many unlisted
securities. Usually, the CUSIP number
is printed on the face of the stock
certificate. If the CUSIP number is not
printed on the certificate, it may be
obtained through the company’s
transfer agent.
Other personal property. Any
interest in personal property involved in
a termination must be described in
enough detail that the IRS can value it.
Column d. Valuation date. Unless
you elected alternate valuation by

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checking the box on line 3 of Schedule
A, the valuation date should be the
same as the termination date.
Column e. Value. Reduce the value
of any property being reported on
Schedule A by the amount of any
consideration provided by the skip
person.
Explain how the values reported in
column e were determined and attach
copies of any appraisals.

Schedules B(1) and B(2)
To determine the taxable amount for a
taxable termination, you may deduct
expenses similar to those deductible
under section 2053 from the value of
the property subject to the termination.

Schedule B(1)—General
Trust Debts, Expenses, and
Taxes
Report here only those expenses
related to the entire trust. Examples of
such expenses are trustee’s fees,
administrative expenses, financial
advisor’s fees, and accounting fees.
Column a. Item no. Assign an item
number to each separate expense.
These will not necessarily correspond
with the item numbers on Schedule A.
Column b. Description. List the
names and addresses of persons to
whom the expenses are payable and
describe the nature of the expenses.
Column c. Amount. Enter here the
entire amount of the expense for the
tax year for which the return is being
filed.
Line 2. Figure the percentage of
expense to allocate to the property
involved in the termination as follows.
1. Divide the value of the interest
that has been terminated by the total
value of the trust at the time of the
termination; and
2. Multiply the result by a fraction,
the numerator of which is the number of
days in the year through the date of the
termination, and the denominator of
which is the total number of days in the
year (or, if the entire trust was
terminated during the year, the total
number of days the trust was in
existence during the year).
If there is more than one termination
during the year, you must reduce the
total expense used in the allocation by
the expense allocated to the prior
terminations. For example, assume that
the total administrative expense for the
year was $1,000 and $300 was
allocated to the first termination. The
expense allocated to the second
termination would be a percentage of
$700, not of the entire $1,000.

Schedule B(2)—Specific
Termination-Related Debts,
Expenses, and Taxes
Report here only those expenses
related solely to the interest that has
terminated. Examples of these
expenses are property tax on real
estate, the cost of selling property, or
attorney’s fees for defending the title to
property.
Column a. Item no. Assign an item
number to each separate expense. This
will not necessarily correspond with the
item numbers on Schedule A.
Column b. Description. List the
names and addresses of persons to
whom the expenses are payable and
describe the nature of the expense. List
the item number(s) from Schedule A to
which the expense relates.
Column c. Amount. If the expense
relates to more property than that
involved in the termination but less than
the entire trust, enter in column c only
the amount attributable to the property
involved in the termination. Determine
this amount by multiplying the total
expense times a fraction. The
numerator of the fraction is the value of
the property involved in the termination
and to which the expense relates. The
denominator is the total value of the
property to which the expense relates.

Schedule A (Lines 5–10)
Line 7. Inclusion Ratio
The trustee must figure the inclusion
ratio for every termination. All
terminations, or any parts of a single
termination, that have different inclusion
ratios must be shown on separate
Schedules A. Identify the separate
trusts by Schedule A number when
showing your inclusion ratio calculation.
The inclusion ratio is the excess of 1
over the applicable fraction determined
for the trust in which the termination
occurred.
Applicable fraction. The applicable
fraction is a fraction, the numerator of
which is the amount of the GST
exemption. The denominator of the
fraction is:
1. The value of the property
transferred to the trust, minus
2. The sum of:
a. Any federal estate tax or state
death tax actually recovered from the
trust attributable to the property, and
b. Any charitable deduction allowed
under section 2055 or 2522 with
respect to the property.
Round the applicable fraction to at
least the nearest one-thousandth (for
example,“.001”).
Numerator. GST exemption. Every
individual settlor is allowed a lifetime
GST exemption against property that

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the individual has transferred. For
generation-skipping transfers made
through 1998, the amount of the
exemption was $1 million. The GST
exemption amounts for 1999 through
2009 are as follows:
Year of Transfer
1999 . . . . . . . . . . . .
2000 . . . . . . . . . . . .
2001 . . . . . . . . . . . .
2002 . . . . . . . . . . . .
2003 . . . . . . . . . . . .
2004 and 2005 . . . . .
2006, 2007, and 2008
2009 . . . . . . . . . . . .

.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.

.
.
.
.
.
.
.
.

GST
exemption
$1,010,000
$1,030,000
$1,060,000
$1,100,000
$1,120,000
$1,500,000
$2,000,000
$3,500,000

For existing trusts, transferors may
allocate the additional GST exemption
amount attributable to indexing
adjustments if they otherwise qualify
under the existing rules for late
allocations. For more information, see
section 2632 and Multiple transfers on
page 6.
Once made, allocations are
irrevocable.
Allocation of the GST exemption is
made by the settlor on Form 709, and/
or on Form 706 by the executor of the
settlor’s estate. Therefore, you should
obtain information regarding the
allocation of the exemption to this trust
from the settlor or the executor of the
settlor’s estate, as applicable.
If the settlor’s entire GST exemption
is not allocated by the due date
(including extensions) of the settlor’s
estate tax return, the exemption is
automatically allocated to the settlor’s
generation-skipping transfers under the
rules of section 2632.
Denominator. Valuation of trust
assets. In general, for an inter vivos
transfer, you should use the gift tax
value in the denominator of the
applicable fraction as long as the
allocation of the GST exemption was
made on a timely filed gift tax return or
was deemed made under section
2632(b)(1).
If the allocation of the exemption to
an inter vivos transfer is not made on a
timely filed gift tax return and is not
deemed made under section
2632(b)(1), the value for purposes of
the applicable fraction is the value of
the property transferred at the time the
allocation under section 2632(a) is filed
with the IRS.
The value of a testamentary transfer
is generally the estate tax value.
For qualified terminable interest
property (QTIP) that is included in the
estate of the surviving spouse of the
settlor because of section 2044, if the
surviving spouse is considered the
transferor under section 2652(a) for
GST purposes, the value is the estate
tax value in the estate of the surviving
spouse.

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Instructions for Form 706-GS(T)

13:13 - 24-OCT-2008

The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing.

A special QTIP election allows
property for which a QTIP election was
made for estate or gift tax purposes to
be treated for GST tax purposes as if
the QTIP election had not been made.
If the special QTIP election has been
made, the predeceased settlor spouse
is the transferor and the value is that
spouse’s estate or gift tax value under
the rules described above. The settlor
spouse or the executor of the
predeceased settlor spouse’s estate
must have made the special QTIP
election.

Multiple transfers. When a transfer is
made to a pre-existing trust, the
applicable fraction must be refigured.
The numerator of the new fraction is
the sum of:
1. The exemption allocated to the
current transfer and
2. The nontax portion of the trust
immediately before the current transfer
(the product of the applicable fraction
and the value of all the property in the
trust immediately before the current
transfer).

Transfers subject to an estate tax
inclusion period. If a transferor made
an inter vivos transfer, and the property
transferred would have been includible
in the transferor’s estate if he or she
had died immediately after the transfer
(other than by reason of the transferor
dying within 3 years of making the gift),
for purposes of determining the
inclusion ratio, an allocation of GST
exemption will only become effective at
the close of the estate tax inclusion
period (ETIP).

The denominator of the new fraction
is the sum of:
1. The value of the current transfer
(minus any federal estate tax or state
death tax actually paid by the trust
attributable to such property and any
charitable deduction allowed for such
property) and
2. The value (determined under the
rules described above) of all property in
the trust immediately before the current
transfer.

The value of the property for the
purpose of figuring the inclusion ratio is
the estate tax value if the property is
includible in the transferor’s gross
estate. Otherwise, the property is
valued at the close of the ETIP,
provided that the GST exemption is
allocated on a timely filed gift tax return
for the calendar year in which the ETIP
closes.

To figure the inclusion ratio, use only
the value of the total additions made to
the trust after September 25, 1985.

The ETIP closes at the earliest of:

• The time the transferred property

would no longer be includible in the
settlor’s estate,
• The date of a generation-skipping
transfer of the property, or
• The date of death of the settlor.
If the allocation is not made on a
timely filed gift tax return, the property
is valued at the time of the late
allocation.

Charitable lead annuity trusts. For
termination of an interest in a charitable
lead annuity trust, the numerator of the
applicable fraction is the adjusted GST
exemption as defined below. The
denominator is the value of the trust
immediately after the termination of the
charitable lead annuity interest.
The adjusted GST exemption is the
sum of:
1. The exemption allocated to the
trust and
2. Interest on the exemption
determined at the interest rate used to
figure the estate or gift deduction for
the charitable lead annuity and for the
actual period of the charitable lead
annuity.

In the case of a late allocation, the
amount of interest accrued prior to the
date of allocation is zero.

Line 8
Enter, using the table below, the
maximum federal estate tax rate in
effect at the time the generationskipping transfer occurred.

Table of Maximum Tax Rates
The
If the generation-skipping maximum
transfer occurred . . . . . . . . tax rate is
After December 31, 2002 but
before January 1, 2004

49%

After December 31, 2003 but
before January 1, 2005

48%

After December 31, 2004 but
before January 1, 2006

47%

After December 31, 2005 but
before January 1, 2007

46%

After December 31, 2006 but
before January 1, 2010

45%

Part III—Tax
Computation
Line 9b
If you have more than six Schedules A
attached to this form, enter on the line
indicated the total GST tax from all
Schedules A in excess of six.

Line 12
Make your check payable to the “United
States Treasury.” Please write the
trust’s EIN, the year, and “Form
706-GS(T)” on the check to assist us in
posting it to the proper account.
Enclose, but do not attach, the payment
with Form 706-GS(T).

Privacy Act and Paperwork Reduction Act Notice. We ask for the information on this form to carry out the Internal
Revenue laws of the United States. You are required to give us the information. We need it to ensure that you are complying
with these laws and to allow us to figure and collect the right amount of tax. Section 6109 requires return preparers to provide
their identifying numbers on the return.
You are not required to provide the information requested on a form that is subject to the Paperwork Reduction Act unless
the form displays a valid OMB control number. Books or records relating to a form or its instructions must be retained as long
as their contents may become material in the administration of any Internal Revenue law. Generally, tax returns and return
information are confidential, as required by section 6103.
The time needed to complete and file this form will vary depending on individual circumstances. The average estimated
time is:
Form
706-GS(T)
Schedule A
Schedule B

Recordkeeping
39 min.
13 min.
13 min.

Learning about the law or
the form
32 min.
13 min.
9 min.

Preparing the form
32 min.
37 min.
19 min.

Copying, assembling, and
sending the form to the IRS
20 min.
20 min.
20 min.

If you have comments concerning the accuracy of these estimates or suggestions for making this form simpler, we would
be happy to hear from you. You can write to the Internal Revenue Service, Tax Products Coordinating Committee,
SE:W:CAR:MP:T:T:SP, 1111 Constitution Ave. NW, IR-6526, Washington, DC 20224. Do not send the form to this address.
Instead, see Where To File on page 1.

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