Generation-Skipping Transfer Tax Return for Distributions

Instructions for
Form 706-GS(D)

Department of the Treasury
Internal Revenue Service

(Rev. June 2019)

Generation-Skipping Transfer Tax Return for Distributions
Section references are to the Internal
Revenue Code unless otherwise noted.

the year following the calendar year
when the distributions were made.

Future Developments

If you are not able to file the return
by the due date, you may request an
automatic 6-month extension of time
to file by filing Form 7004, Application
for Automatic Extension of Time To
File Certain Business Income Tax,
Information, and Other Returns. 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(D). See
Form 7004 for more information.

For the latest information about
developments related to Form
706-GS(D) and its instructions, such
as legislation enacted after they were
published, go to IRS.gov/
Form706GSD.

What’s New
New filing address. Effective July 1,
2019, Form 706-GS(D) will be filed in
Kansas City, Missouri. See Where To
File, later.

General Instructions
Purpose of Form

Form 706-GS(D) is used by a skip
person distributee to calculate and
report the tax due on distributions
from a trust that are subject to the
generation-skipping transfer (GST)
tax.

Who Must File

In general, any skip person who
receives a taxable distribution from a
trust must file Form 706-GS(D).
Trustees are required to report
taxable distributions to skip person
distributees on Form 706-GS(D-1),
Notification of Distribution From a
Generation-Skipping Trust.

If you receive a Form 706-GS(D-1)
and the inclusion ratio found on Part II,
line 3, column d, is zero for all
distributions, you do not need to file
Form 706-GS(D). If you are required
to file Form 706-GS(D), you do not
have to include any distributions that
have an inclusion ratio of zero.

When To File

The GST tax on distributions is figured
and reported on a calendar year
basis, regardless of your income tax
accounting period. Generally, you
must file Form 706-GS(D) on or after
January 1 but not later than April 15 of
January 15, 2019

Private delivery services (PDSs).
You can use certain PDSs designated
by the IRS to meet the "timely mailing
as timely filing/paying" rule for tax
returns and payments. Go to IRS.gov/
PDS for the current list of designated
services.
The PDS can tell you how to get
written proof of the mailing date.
For the IRS mailing address to use
if you’re using a PDS, go to IRS.gov/
PDSStreetAddresses.
PDSs can’t deliver items to
P.O. boxes. You must use the
CAUTION U.S. Postal Service to mail
any item to an IRS P.O. box address.

!

Where To File

On or before June 30, 2019, file Form
706-GS(D) at the following address:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999
If using a PDS, use this address.
Internal Revenue Submission
Processing Center
201 West Rivercenter Blvd.
Covington, KY 41011

After June 30, 2019, file Form
706-GS(D) at the following address:

Cat. No. 10828G

Department of the Treasury
Internal Revenue Service Center
Kansas City, MO 64999
If using a PDS, use this address.
Internal Revenue Submission
Processing Center
333 W. Pershing
Kansas City, MO 64108

Penalties and Interest

Section 6651 provides penalties for
both late filing and late payment
unless there is reasonable cause for
the delay. The law also provides
penalties for willful attempts to evade
payment of tax.

A return is late when it is filed after
the due date, including extensions.
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.
Reasonable cause determinations.
If you receive a notice about penalties
and interest after you file Form
706-GS(D), send us an explanation
and we will determine if you meet
reasonable cause criteria. Do not
attach an explanation when you file
Form 706-GS(D). Explanations
attached to the return at the time of
filing will not be considered.
Section 6662 provides a penalty for
underpayment of GST taxes which
exceeds $5,000, if the underpayment
is due to a valuation understatement.
A substantial valuation understatement occurs when the reported
value of property listed on Form
706-GS(D) is 65% or less of the actual
value of the property. A gross
valuation understatement occurs
when the reported value of property
listed on Form 706-GS(D) is 40% 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. Estate tax return
preparers who prepare any return or
claim for refund which reflects an
understatement of tax liability due to
an unreasonable position are subject
to a penalty equal to the greater of
$1,000 or 50% of the income derived
(or to be derived) for the preparation
of each such return. Estate tax return
preparers who prepare a 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 75% of the
income derived (or income to be
derived), whichever is greater, for the
preparation of each such return. See
sections 6694(a) and 6694(b), the
related regulations, and
Announcement 2009-15, 2009-11
I.R.B. 687 (available at IRS.gov/pub/
irs-irbs/irb09-11.pdf), for more
information.

Signature

Either the distributee or an authorized
representative must sign Form
706-GS(D).
If you fill in your own return, leave
the Paid Preparer Use Only 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 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
distributee.
Note. A paid preparer may sign
original or amended returns by rubber
stamp, mechanical device, or
computer software program.

Specific Instructions
Part I
Line 1a

If the skip person distributee is a trust,
enter the name of the trust here.

Line 1b

For skip person distributees who are
individuals, enter the distributee's
social security number (SSN) here
and leave line 1c blank. If the skip
person distributee is a trust, see the
instructions for line 1c. Do not enter a
number on both line 1b and line 1c.

Line 1c

If the skip person distributee is a trust,
enter the trust's employer
identification number (EIN) and leave
line 1b blank. Do not enter a number
on both line 1b and line 1c.

Line 2a

If the skip person distributee is a trust,
enter the trustee's name here. If the
skip person distributee is a minor or is
under some disability that precludes
the individual from filing the return,
enter the name of the person who is
legally responsible for conducting the
affairs of the distributee, such as a
parent or guardian. Also, include the
title or relationship to the distributee.

Line 2b

Enter the address at which you wish
to receive correspondence from the
IRS regarding this return. If there is an
entry on line 2a, the address entered
here will normally be that of the
person listed on line 2a, rather than
the individual or trust listed on line 1a.

Part II

Report all the taxable distributions
with inclusion ratios greater than zero
that you received during the year. The
trustee will report these distributions
to you on Form 706-GS(D-1). Attach a
copy of each Form 706-GS(D-1) you
received during the year to this return.
You should also keep a copy for your
records.
If you need more space than is
provided in Part II, attach an additional
sheet of the same size and use the
same format that is used in Part II.
Make sure that the total tentative
transfers from the continuation sheet
are included on line 3 of Part II.

Column b

In column b, use the same item
number that was used for the
corresponding distribution on Form
706-GS(D-1). If you receive
distributions from more than one trust,
you may need to repeat item
numbers.
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Column c

There may be instances when the
trustee has either not completed
columns e (value) and f (tentative
transfer) of Form 706-GS(D-1) or
when you disagree with the amounts
the trustee entered. If this occurs,
attach a statement to this return
showing what you think are the
correct amounts and how you figured
them.
To figure the tentative transfer
(column c of this form), multiply the
applicable inclusion ratio from Form
706-GS(D-1), Part II, column d, by the
value of the distribution. Use the
following guidelines to determine the
value of the distribution.
The value of a distribution is its fair
market value on the date of
distribution. Fair market value (FMV)
is the price at which the property
would change hands between a
willing buyer and a willing seller when
neither is forced to buy or to sell, and
both have reasonable knowledge of
all the relevant facts. FMV may not be
determined by a forced sale price nor
by the sale price of the item in a
market other than that in which the
item is most commonly sold to the
public. The location of the item must
be taken into account whenever
appropriate.
Determine the value of the property
distributed as of the date of the
distribution. The date of distribution is
listed in Form 706-GS(D-1), Part II,
column c.
Reduce the value of any property
being reported in Part II by the amount
of any consideration provided by the
distributee.
Value the stock of close
corporations or inactive stock on the
basis of net worth, earnings, earning
and dividend capacity, and other
relevant factors. For such stock,
attach balance sheets, particularly the
one nearest the date of the
distribution, and statements of net
earnings or operating results and
dividends paid for each of the 5
preceding years.
Reduce the reported value of real
estate by the amount of any
outstanding lien against the property
on the date of distribution. Attach
copies of any such liens. Explain how
the reported values were determined
and attach copies of any appraisals.

For more information, see the
Instructions for Form 706, United
States Estate (and GenerationSkipping Transfer) Tax Return. You
can get the Instructions for Form 706,
and other IRS forms and publications,
by calling 800-TAX-FORM or by
visiting IRS.gov.

Part III
Line 4

You may deduct any adjusted
allowable expenses incurred in
connection with the preparation of this
Form 706-GS(D) or any other
expenses incurred in connection with
the determination, collection, or
refund of the GST tax reported or
which should have been reported on
this return from the amount of the
distribution you received.
Adjusted allowable expenses are
equal to the total allowable expenses
multiplied by the inclusion ratio. If you
have more than one inclusion ratio in
Part II, column d, of Form 706-GS
(D-1), prorate the total expense
among the inclusion ratios based on
the relative value of each distribution
made at the various inclusion ratios.
You may deduct an expense even
though it has not been paid at the time
the return is filed as long as the
amount of the expense is clearly
ascertainable at that time. If an

additional allowable expense is
incurred after the return is filed, file
Form 843, Claim for Refund and
Request for Abatement, to claim a
refund.
Example. The following example
illustrates the rules above.
You listed three distributions in Part
II of Form 706-GS(D). The value of the
first distribution is $10,000 and has an
inclusion ratio of 0.25. The value of
the second distribution is $20,000 and
has an inclusion ratio of 0.33. The
value of the third distribution is
$30,000 and has an inclusion ratio of
0.50. You received the completed
return from the preparer along with the
bill for the preparer's fee on April 14
and filed the return on April 15. You
paid the preparer's $200 fee on April
20. The adjusted allowable expense
you should report on line 4 of Part III is
$80, calculated as follows.
$10,000
× 200 = 33.33 × 0.25 = 8 (rounded)
$60,000
$20,000
× 200 = 66.67 × 0.33 = 22 (rounded)
$60,000
$30,000
× 200 = 100 × 0.50 = 50
$60,000
Adjusted allowable expense

Line 6

= 80

Enter, using the table below, the
applicable rate in effect at the time the

generation-skipping distribution
occurred.

Line 9

Make your check payable to “United
States Treasury.” Please write your
SSN (or EIN), the year, and “Form
706-GS(D)” on the check to assist us
in posting it to the proper account.
Enclose, but do not attach, the
payment with Form 706-GS(D).
Table of Maximum Tax Rates
If the generation-skipping
transfer occurred:

The
maximum
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%

After December 31, 2009, but
before January 1, 2011 . .

0%

After December 31, 2010, but
before January 1, 2013 . .

35%

After December 31,
2012 . . . . . . . . .

40%
. . . . .

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. We need it to figure and collect the right amount of tax. Subtitle B, Estate and Gift
Taxes, of the Internal Revenue Code imposes a tax on certain distributions from a trust to a skip person; section 6109
requires you to provide your identification number. This form is used to figure the amount of the taxes that you owe.
Failure to provide this information in a timely manner, or providing false or fraudulent information, may subject you to
penalties. We may disclose this information to the Department of Justice for civil and criminal litigation, and to cities,
states, the District of Columbia, and U.S. commonwealths and possessions for use in administering their tax laws. We
may also disclose this information to other countries under a tax treaty, to federal and state agencies to enforce federal
nontax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism.
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:
Recordkeeping

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Learning about the law or the form
Preparing the form

6 min.

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13 min.

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18 min.

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

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20 min.

If you have comments concerning the accuracy of these time estimates or suggestions for making this form simpler,
we would be happy to hear from you. You can send us comments from IRS.gov/FormComments. Or you can write to the
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Internal Revenue Service, Tax Forms and Publications Division, 1111 Constitution Ave. NW, IR-6526, Washington, DC
20224. Do not send the form to this address. Instead, see Where To File, earlier.

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