Table of Contents
A trustee uses Form 706-GS(D-1) to report certain distributions from a trust that are subject to the generation- skipping transfer (GST) tax and to provide the skip person distributee with information needed to figure the tax due on the distribution.
In general, the trustee of any trust that makes a taxable distribution must file a Form 706-GS(D-1) for each skip person.
See Distributions Subject to GST Tax below for a discussion of what constitutes a taxable distribution. The trustee must file a return for each skip person even
if the inclusion ratio applicable to the distribution is zero. See Column d. Inclusion Ratio on
page 4.
Generally, the trustee must file Copy A of Form 706-GS(D-1) with the IRS and send Copy B to the distributee by April 15th of the year following the calendar year when the distribution was made. If the due date falls on a Saturday, Sunday, or legal holiday, file on the next business day.
The trustee must send Copy A of Form 706-GS(D-1) to the following address:
Department of the Treasury
Internal Revenue Service Center
Cincinnati, OH 45999
-
Portions of a trust that are attributable to transfers from different transferors and
-
Substantially separate and independent shares of different beneficiaries in a trust.
In general, all taxable distributions are subject to the GST tax. A taxable distribution is any distribution from a trust to a skip person (other than a taxable termination or a direct skip).
If any GST tax imposed on a distribution is paid out of the trust from which the distribution was made, the amount of tax paid by the trust is also a taxable distribution.
A distribution is not considered a taxable distribution if, had it been made while an individual was alive, it would have been a nontaxable gift because of section 2503(e) (relating to transfers made for certain educational or medical expenses).
Also, a distribution (or any portion thereof) is not a taxable distribution to the extent that:
-
The property distributed was previously subject to GST tax and
-
The distributee in the prior distribution is assigned to a generation the same as or lower than the distributee in the current distribution.
This rule does not apply if the transfers have the effect of avoiding GST tax for any transfer.
-
On September 25, 1985, the value of the trust could have been included in the settlor's gross estate for federal estate tax purposes by reason of section 2038 if the settlor had died on September 25, 1985, or
-
Regarding a policy of life insurance that is treated as a trust under section 2652(b), the insured was an owner on September 25, 1985, and this 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.
-
The value of the trust subject to the GST tax immediately before the last addition and
-
The amount of the latest addition.
The GST tax will not apply to any distributions from 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 below, no addition was 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 above) 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.
-
The amendment is administrative or clarifying in nature 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.
If the settlor was under a 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 details on the application of this 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 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).
-
A natural person assigned to a generation that is two or more generations below the settlor's generation, or
-
A trust that meets the following conditions:
-
All interests in the trust are held by skip persons, or
-
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.
-
-
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 grandparent and the transferor from the number of generations between the grandparent and the descendant.
-
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.
-
For this purpose, a relationship by adoption is considered a blood relationship. A relationship by half-blood is considered a relationship by whole blood.
-
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.
-
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 person who was born not more than 12½ years after the transferor is in the transferor's generation.
-
A person born more than 12½ years, but not more than 37½ years, after the transferor is in the first generation younger than the transferor.
-
Similar rules apply for a new generation every 25 years.
-
-
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.
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.
More Online Instructions |