Instructions for Form 706-GS(D) |
2003 Tax Year |
Specific Instructions
This is archived information that pertains only to the 2003 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
If the skip person distributee is a trust, enter the name of the trust here.
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.
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.
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.
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.
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 to this return a copy of each Form 706-GS(D-1) you received during the year.
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.
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.
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 (col. c of this form), multiply the applicable inclusion ratio from Part II, col. d, of Form
706-GS(D-1) by the value of the distribution. Use the following guidelines to determine the value of the distribution. See
the instructions for
Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return, for more information. You can get Form 706, and other
IRS
forms and publications, by calling 1-800-TAX-FORM (1-800-829-3676) or by accessing the IRS Web Site at www.irs.gov.
You must determine the value of the property distributed as of the date of the distribution. The date of distribution is listed
in Part II, column
c, of Form 706-GS(D-1).
The value of a distribution is its fair market value on the date of distribution. Fair market value 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. Fair market value 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.
Reduce the value of any property being reported in Part II by the amount of any consideration provided by the distributee.
Stock of close corporations or inactive stock must be valued 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.
You may deduct from the amount of the distribution you received 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.
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 .25. The
value of the second distribution is $20,000 and has an inclusion ratio of .33. The value of the third distribution is $30,000
and has an inclusion
ratio of .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:
Enter, using the table on page 3, the maximum Federal estate tax rate in effect at the time the generation-skipping distribution
occurred.
Table of Maximum Tax Rates
If the generation-skipping transfer occurred |
The maximum tax rate is |
Before January 1, 2002 |
55% |
After December 31, 2001 but before January 1, 2003 |
50% |
After December 31, 2002 but before January 1, 2004 |
49% |
After December 31, 2003 but before January 1, 2005 |
48% |
You can only claim a credit for state GST tax if the taxable distribution occurred at the same time as, and as a result of,
the death of an
individual, and the distribution is also reported on this form. Enter on line 8 the state GST tax, if any, that meets these
requirements.
The credit for state GST taxes cannot exceed 5% of the gross GST tax.
The generation-skipping transfer tax you pay on income distributions qualifies as a deductible tax for the purpose of Federal
income tax. The tax
is deductible on Schedule A (Form 1040) filed for the year in which the GST tax was paid. For example, you would deduct on
your 2002 Schedule A (filed
in 2003) the GST tax paid in 2002 on distributions made in 2001.
You can only deduct the taxes you paid on distributions that were both reported on Form 706-GS(D) and included in your income
on Form 1040. These
distributions will be reported to you by the trustee on Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc.
To figure the deduction, first look at Part II, column d, of all Forms 706-GS(D-1) that you received for the year. If the inclusion
ratio is the same for all items, compute a fraction, the numerator of which is the total of all income items from your Schedules
K-1 (Form 1041) whose
values are included in column e of Form 706-GS(D-1). The denominator is the total of all the fair market values in column e.
Multiply the amount on line 11, Form 706-GS(D), by this fraction. Enter the result on the applicable line of Schedule A (Form
1040) (or the applicable
line of Form 1041 if the distribution was made to a trust).
If the distributions, whether from the same or from different trusts, have different inclusion ratios, the GST tax attributable
to income
distributions from each different inclusion ratio must be figured separately in the following manner.
Step 1. Figure the portion of the total GST tax that is attributable to distributions having the same inclusion ratio. To do this,
multiply the total GST tax shown on line 11, Form 706-GS(D), by a fraction. The numerator of the fraction is the amount in
Part II, column c,
Form 706-GS(D), for all distributions that have the same inclusion ratio. The denominator is line 3 of Form 706-GS(D). Calculate
this amount for
each different inclusion ratio.
Step 2. Multiply the amount determined in Step 1 above by a different fraction. The numerator of this fraction is the income shown
on
Schedule K-1 (Form 1041) from distributions that both have the same inclusion ratios and are also included in column e of Form 706-GS(D-1).
The denominator is the total amount shown in column e of Form 706-GS(D-1) for those same distributions.
Make your check payable to the 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).
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