Lesson 36: Filing Form 709 for GST Tax

As part of the larger topic of Generation-Skipping Transfer Tax (GST Tax), it's essential to understand how to file Form 709. This form is used to report gifts subject to the federal gift tax and certain GST taxes.

What is Form 709?

Form 709 is the United States Gift (and Generation-Skipping Transfer) Tax Return. It is used to report transfers subject to the federal gift tax and certain GST taxes.

Who Must File Form 709?

Any U.S. citizen or resident who makes a taxable gift or transfers an amount above the annual exclusion needs to file Form 709. Additionally, for GST tax purposes, individuals may need to report certain transfers to skip persons.

When to File Form 709?

Form 709 must be filed by April 15th of the year following the year in which the gift was made.

The deadline for filing Form 709 is April 15th of the year following the gift. Extensions are available by filing Form 4868 or Form 8892.

Steps to Complete Form 709

Completing Form 709 can be complex. Below are the general steps:

  1. Gather all information about the donor, donee, and the gifts.
  2. Calculate the total amount of gifts given during the year.
  3. Determine the applicable exclusions and deductions.
  4. Calculate the GST tax, if applicable.
  5. Fill out Form 709 and attach any required schedules.

Example of GST Tax Calculation

Let's consider an example to illustrate the calculation. Donor gives $150,000 to a trust for their grandchild. Since the GST tax exemption is $11.7 million (2021), the first $11.7 million is exempt. Any amount above this will be subject to the GST tax rate of 40%.

Let's consider an example to illustrate the calculation:

graph LR A["Donor"] -->|Gift of $150,000| B["Trust for Grandchild"] B -->|GST Tax| C["IRS"]

The donor gives $150,000 to a trust for their grandchild. Since the GST tax exemption is $11.7 million (2021), the first $11.7 million is exempt. Any amount above this will be subject to the GST tax rate of 40%.


// Example calculation of GST tax
const gstExemption = 11700000;
const giftAmount = 150000;
const gstRate = 0.40;

let taxableAmount = giftAmount - gstExemption;
if (taxableAmount < 0) {
    taxableAmount = 0; // No GST tax if within exemption
}

const gstTax = taxableAmount * gstRate;

console.log("GST Tax: $" + gstTax);

For a more detailed look into GST tax calculations, consider this book on estate tax law.

Additional Resources

For more detailed instructions on completing Form 709, refer to the IRS Instructions for Form 709.

Explore other lessons on our site to deepen your understanding of federal estate tax law:

« Previous
Take the Quiz »