Gifts Subject — Instruction 709 — Instructions for Form 709

Definitions

Direct skip. The GST tax you must report on Form 709 is that imposed only on inter vivos direct skips. An inter vivos direct skip is a transfer that is:

Subject to the gift tax,

Instructions for Form 709 (2025) 9

Of an interest in property, and
Made to a skip person.

All three requirements must be met before the gift is subject to the GST tax.

A gift is “subject to the gift tax” if you are required to list it on Schedule A of Form 709. However, if you make a nontaxable gift (which is a direct skip) to a trust for the benefit of an individual, this transfer is subject to the GST tax unless:

During the lifetime of the beneficiary, no corpus or income may be distributed to anyone other than the beneficiary; and
If the beneficiary dies before the termination of the trust, the assets of the trust will be included in the gross estate of the beneficiary.

Note: If the property transferred in the direct skip would have been includible in the donor’s estate if the donor died immediately after the transfer, see Transfers Subject to an Estate Tax Inclusion Period (ETIP) , earlier.

To determine if a gift “is of an interest in property” and “is made to a skip person,” you must first determine if the donee is a “natural person” or a “trust,” as defined below.

Trust. For purposes of the GST tax, a trust includes not only an ordinary trust, but also any other arrangement (other than an estate) that although not explicitly a trust, has substantially the same effect as a trust. For example, a trust includes life estates with remainders, terms for years, and insurance and annuity contracts. A transfer of property that is conditional on the occurrence of an event is a transfer in trust.

Interest in property. If a gift is made to a natural person, it is always considered a gift of an interest in property for purposes of the GST tax.

If a gift is made to a trust, a natural person will have an interest in the property transferred to the trust if that person either has a present right to receive income or corpus from the trust (such as an income interest for life) or is a permissible current recipient of income or corpus from the trust (for example, possesses a general power of appointment).

Skip person. A donee, who is a natural person, is a skip person if that donee is assigned to a generation that is two or more generations below the generation assignment of the donor. See Determining the Generation of a Donee, later.

A donee that is a trust is a skip person if all the interests in the property transferred to the trust (as defined above) are held by skip persons.

A trust will also be a skip person if there are no interests in the property transferred to the trust held by any person, and future distributions or terminations from the trust can be made only to skip persons.

Nonskip person. A nonskip person is any donee who is not a skip person.

Determining the Generation of a Donee Generally, a generation is determined along family lines as follows.

If the donee is a lineal descendant of a grandparent of the donor (for example, the donor’s cousin, niece, nephew, etc.), the number of generations between the donor and the descendant (donee) is determined by subtracting the number of generations between the grandparent and the donor from the number of generations between the grandparent and the descendant (donee).
If the donee is a lineal descendant of a grandparent of a spouse (or former spouse) of the donor, the number of generations between the donor and the descendant

(donee) 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 (donee).

A person who at any time was married to a person described in (1) or (2) above is assigned to the generation of that person. A person who at any time was married to the donor is assigned to the donor’s generation.
A relationship by adoption or half-blood is treated as a relationship by whole-blood.

A person who is not assigned to a generation according to (1), (2), (3), or (4) above is assigned to a generation based on the person’s birth date as follows.

A person who was born not more than 12 ¹ /2 years after the donor is in the donor’s generation.
A person born more than 12 ¹ /2 years, but not more than 37 ¹ /2 years, after the donor is in the first generation younger than the donor.
Similar rules apply for a new generation every 25 years.

If more than one of the rules for assigning generations apply to a donee, that donee is generally assigned to the youngest of the generations that would apply.

If an estate, trust, partnership, corporation, or other entity (other than governmental entities and certain charitable organizations and trusts, described in sections 511(a)(2) and 511(b)(2), as discussed later) is a donee, then each person who indirectly receives the gift through the entity is treated as a donee and is assigned to a generation as explained in the above rules.

Charitable organizations and trusts, described in sections 511(a)(2) and 511(b)(2), and governmental entities are assigned to the donor’s generation. Transfers to such organizations are therefore not subject to the GST tax. These gifts should always be listed in Part 1 of Schedule A.

Generation assignments under Notice 2017-15. Notice 2017-15 permits a taxpayer to reduce the GST exemption allocated to transfers that were made to or for the benefit of transferees whose generation assignment is changed as a result of the Windsor decision. A taxpayer’s GST exemption that was allocated to a transfer to a transferee (or a trust for the sole benefit of such transferee) whose generation assignment should have been determined on the basis of a familial relationship as the result of the Windsor decision, and are nonskip persons, is deemed void. For additional information, go to IRS.gov/ Businesses/Small-Businesses-Self-Employed/Estate-and-Gift- Taxes .

Charitable Remainder Trusts Gifts in the form of charitable remainder annuity trusts, charitable remainder unitrusts, and pooled income funds are not transfers to skip persons and are therefore not direct skips. You should list these gifts in Part 1 of Schedule A if none of the life beneficiaries are skip persons. If a life beneficiary is a skip person, list these gifts on Part 3 of Schedule A.

Generation Assignment Where Intervening Parent Is Deceased If you made a gift to your grandchild and at the time you made the gift, 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 is considered to be your child rather than your grandchild. Your grandchild’s children will be treated as your grandchildren rather than your great-grandchildren.

10 Instructions for Form 709 (2025)

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 special rule may also apply in other cases of the death of a parent of the transferee. If property is transferred to a descendant of a parent of the transferor and that person’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 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 at the time of the transfer 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 assigning individuals to generations for purposes of the GST tax, any individual who dies no later than 90 days after a transfer occurring by reason of the death of the transferor is treated as having predeceased the transferor. The 90-day rule applies to transfers occurring on or after July 18, 2005. See Regulations section 26.2651-1(a)(2)(iii) for more information.

Examples

The GST rules can be illustrated by the following examples.

Example 1. You give your house to your daughter with the remainder then passing to your daughter’s children. This gift is made to a “trust” even though there is no explicit trust instrument. The interest in the property transferred (the present right to use the house) is transferred to a nonskip person (your daughter). Therefore, the trust is not a skip person because there is an interest in the transferred property that is held by a nonskip person, and the gift is not a direct skip. The transfer is an indirect skip, however, because on the death of your daughter, a termination of your daughter’s interest in the trust will occur that may be subject to the GST tax. See Part 3, later, for a discussion of how to allocate GST exemption to such a trust.

Example 2. You give $100,000 to your grandchild. This gift is a direct skip that is not made in trust. You should list it in Part 2 of Schedule A.

Example 3. You establish a trust that is required to accumulate income for 10 years and then pay its income to your grandchildren for their lives and upon their deaths distribute the corpus to their children. Because the trust has no current beneficiaries, there are no present interests in the property transferred to the trust. All of the persons to whom the trust can make future distributions (including distributions upon the termination of interests in property held in trust) are skip persons (that is, your grandchildren and great-grandchildren). Therefore, the trust itself is a skip person and you should list the gift in Part 2 of Schedule A.

Example 4. You establish a trust that pays all of its income to your grandchildren for 10 years. At the end of 10 years, the corpus is to be distributed to your children. Because for this

purpose interests in trusts are defined only as present interests, all of the interests in this trust are held by skip persons (the children’s interests are future interests). Therefore, the trust is a skip person and you should list the entire amount you transferred to the trust in Part 2 of Schedule A even though some of the trust’s ultimate beneficiaries are nonskip persons.

Part 1—Gifts Subject Only to Gift Tax List in Part 1 gifts subject only to the gift tax. Generally, all of the gifts you made to your spouse (that are required to be listed, as described earlier), to your children, and to charitable organizations are not subject to the GST tax and should therefore be listed only in Part 1.

Group the gifts in four categories.

Gifts made to your spouse.
Gifts made to third parties that are to be split with your spouse.
Charitable gifts (if you are not splitting gifts with your spouse).
Other gifts.

If a transfer results in gifts to two or more individuals (such as a life estate to one with remainder to the other), list the gift to each separately.

Number and describe all gifts (including charitable, public, and similar gifts) in the columns provided in Schedule A.

Columns (b) Through (d)

Describe each gift in enough detail so that the property can be easily identified, as explained below.

For real estate, give:

A legal description of each parcel;
The street number, name, and area if the property is located in a city; and
A short statement of any improvements made to the property.

For bonds, give:

The number of bonds transferred;
The principal amount of each bond;
Name of obligor;
Date of maturity;
Rate of interest;
Date or dates when interest is payable;
Series number, if there is more than one issue;
Exchanges where listed or, if unlisted, give the location of the principal business office of the corporation; and
Committee on Uniform Securities Identification Procedures (CUSIP) number. The CUSIP number is a nine-digit number assigned by the American Banking Association to traded securities.

For stocks:

Give number of shares;
State whether common or preferred;
If preferred, give the issue, par value, quotation at which returned, and exact name of corporation;
If unlisted on a principal exchange, give the location of the principal business office of the corporation, the state in which incorporated, and the date of incorporation;
If listed, give principal exchange; and
CUSIP number.

For interests in property based on the length of a person’s life, give the date of birth of the person. If you transfer any interest in a closely held entity, provide the EIN of the entity.

Instructions for Form 709 (2025) 11

For life insurance policies, give the name of the insurer and the policy number.

Clearly identify in the description column which gifts create the opening of an ETIP as described under Transfers Subject to an Estate Tax Inclusion Period (ETIP) , earlier. Describe the interest that is creating the ETIP. An allocation of GST exemption to property subject to an ETIP that is made prior to the close of the ETIP becomes effective no earlier than the date of the close of the ETIP. See Schedule D. Computation of GST Tax, later.

Column (e). Donor’s Adjusted Basis of Gift

Show the basis you would use for income tax purposes if the gift were sold or exchanged. Generally, this means cost plus improvements, less applicable depreciation, amortization, and depletion.

For more information on adjusted basis, see Pub. 551, Basis of Assets.

Columns (f) and (g). Date of Gift and Value at Date of Gift

The value of a gift is the fair market value (FMV) of the property on the date the gift is made (valuation date). The 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 when both have reasonable knowledge of all 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.

The FMV of a stock or bond (whether listed or unlisted) is the mean between the highest and lowest selling prices quoted on the valuation date. If only the closing selling prices are available, then the FMV is the mean between the quoted closing selling price on the valuation date and on the trading day before the valuation date. If there were no sales on the valuation date, figure the FMV as follows.

Find the mean between the highest and lowest selling prices on the nearest trading date before and the nearest trading date after the valuation date. Both trading dates must be reasonably close to the valuation date.
Prorate the difference between mean prices to the valuation date.
Add or subtract (whichever applies) the prorated part of the difference to or from the mean price figured for the nearest trading date before the actual valuation date.

If no actual sales were made reasonably close to the valuation date, make the same computation using the mean between the bona fide bid and the asked prices instead of sales prices. If actual sales prices or bona fide bid and asked prices are available within a reasonable period of time before the valuation date but not after the valuation date, or vice versa, use the mean between the highest and lowest sales prices or bid and asked prices as the FMV.

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.

Generally, the best indication of the value of real property is the price paid for the property in an arm’s-length transaction on or before the valuation date. If there has been no such transaction, use the comparable sales method. In comparing

similar properties, consider differences in the date of the sale, and the size, condition, and location of the properties, and make all appropriate adjustments.

The value of all annuities, life estates, terms for years, remainders, or reversions is generally the present value on the date of the gift.

Sections 2701 and 2702 provide special valuation rules to determine the amount of the gift when a donor transfers an equity interest in a corporation or partnership (section 2701) or makes a gift in trust (section 2702). The rules only apply if, immediately after the transfer, the donor (or an applicable family member) holds an applicable retained interest in the corporation or partnership, or retains an interest in the trust. For details, see sections 2701 and 2702, and their regulations.

Column (h). Split Gifts

Enter an amount in this column only if you have chosen to split gifts with your spouse.

Split Gifts—Gifts Made by Spouses If you elected to split gifts with your spouse and your spouse has given a gift(s) that is being split with you, enter in this area of Part 1 information on the gift(s) made by your spouse. If only you made gifts and you are splitting them with your spouse, do not make an entry in this area.

Generally, if you elect to split your gifts, you must split all gifts made by you and your spouse to third-party donees. The only exception is if you gave your spouse a general power of appointment over a gift you made.

Supplemental Documents To support the value of your gifts, you must provide information showing how it was determined.

For stock of close corporations or inactive stock, attach balance sheets, particularly the one nearest the date of the gift, and statements of net earnings or operating results and dividends paid for each of the 5 preceding years. In lieu of this information, you may attach an appraisal described in Regulations section 301.6501(c)-1(f)(3).

For each life insurance policy, attach Form 712, Life Insurance Statement.

Note for single-premium or paid-up policies. In certain situations, for example, where the surrender value of the policy exceeds its replacement cost, the true economic value of the policy will be greater than the amount shown on line 59 of Form 712. In these situations, report the full economic value of the policy on Schedule A. See Rev. Rul. 78-137, 1978-1 C.B. 280, for details.

If the gift was made by means of a trust, attach a certified or verified copy of the trust instrument to the return on which you report your first transfer to the trust. However, to report subsequent transfers to the trust, you may attach a brief description of the terms of the trust or a copy of the trust instrument.

Also attach any appraisal used to determine the value of real estate or other property.

If you do not attach this information, Schedule A must include a full explanation of how value was determined.

Part 2—Direct Skips List in Part 2 only those gifts that are currently subject to both the gift and GST taxes. You must list the gifts in Part 2 in the

12 Instructions for Form 709 (2025)

chronological order that you made them. Number, describe, and value the gifts as described in the instructions for Part 1.

If you made a transfer to a trust that was a direct skip, list the entire gift as one line entry in Part 2.

Column (j). Section 2632(b) Election Out

If you elect under section 2632(b)(3) to not have the automatic allocation rules of section 2632(b) apply to a transfer, enter a check in column (j) next to the transfer. You must also attach a statement to Form 709 clearly describing the transaction and the extent to which the automatic allocation is not to apply. Reporting a direct skip on a timely filed Form 709 and paying the GST tax on the transfer will qualify as such a statement.

How to report GSTs after the close of an ETIP. If you are reporting a GST that was subject to an ETIP (provided the ETIP closed as a result of something other than the death of the transferor; see Form 706), do not include the transfer subject to an ETIP on Schedule A. Rather, report the transfer subject to an ETIP on Schedule D. See Schedule D, Part 1—Generation-Skipping Transfers , later. Report all other gifts made during the year on Schedule A as you normally would.

Split Gifts—Gifts Made by Spouse See this heading under Part 1.

Part 3—Indirect Skips and Other Transfers in Trust Some gifts made to trusts are subject only to gift tax at the time of the transfer but may later be subject to GST tax. The GST tax could apply either at the time of a distribution from the trust, at the termination of the trust, or both.

Section 2632(c) defines indirect skips and applies special rules to the allocation of GST exemption to such transfers. In general, an indirect skip is a transfer of property that is subject to gift tax (other than a direct skip) and is made to a GST trust. A GST trust is a trust that could have a GST with respect to the transferor, unless the trust provides for certain distributions of trust corpus to nonskip persons. See section 2632(c)(3)(B) for details.

List in Part 3 those gifts that are indirect skips as defined in section 2632(c) or may later be subject to GST tax. This includes indirect skips for which election 2, described below, will be made in the current year or has been made in a previous year. You must list the gifts in Part 3 in the chronological order that you made them.

Column (n). Section 2632(c) Election

Section 2632(c) provides for the automatic allocation of the donor’s unused GST exemption to indirect skips. This section also sets forth three different elections you may make regarding the allocation of exemption.

Election 1. You may elect not to have the automatic allocation rules apply to the current transfer made to a particular trust. Election 2. You may elect not to have the automatic rules apply to both the current transfer and any and all future transfers made to a particular trust. Election 3. You may elect to treat any trust as a GST trust for purposes of the automatic allocation rules. See section 2632(c)(5) for details.

When to make an election. Election 1 is timely made if it is made on a timely filed gift tax return for the year the transfer was made or was deemed to have been made.

Elections 2 and 3 may be made on a timely filed gift tax return for the year for which the election is to become effective.

To make one of these elections, check column (n) next to the transfer to which the election applies. You must also attach an explanation as described below. If you are making election 2 or 3 on a return on which the transfer is not reported, simply attach the statement described below.

If you are reporting a transfer to a trust for which election 2 or 3 was made on a previously filed return, do not make an entry in column (n) for that transfer and do not attach a statement unless you are terminating the election.

Attachment. Attach a statement to Form 709 that describes the election you are making (or terminating) and clearly identifies the trusts and/or transfers to which the election applies.

Split Gifts—Gifts Made by Spouse See this heading under Part 1.

Part 4—Taxable Gift Reconciliation

Line 1

Enter only gifts of the donor. If gift splitting has been elected, enter only the value of the gift that is attributable to the spouse that is filing the return.

Line 2

Enter the total annual exclusions you are claiming for the gifts listed on Schedule A. See Annual Exclusion, earlier. If you split a gift with your spouse, the annual exclusion you claim against that gift may not be more than the smaller of your half of the gift or $19,000.

Deductions

Line 4. Marital Deduction

Enter all of the gifts to your U.S. citizen spouse that you listed on Schedule A and for which you are claiming a marital deduction. Enter the total value of items on Parts 1 and 3 of Schedule A for which the box in column (l) is checked. Do not enter any gift that you did not include on Schedule A.

Tip: Do not enter on line 4 any gifts to your spouse who was not a U.S. citizen at the time of the gift.

You may deduct all gifts of nonterminable interests made during the year that you entered on Schedule A regardless of amount, and certain gifts of terminable interests as outlined below.

Terminable interests. Generally, you cannot take the marital deduction if the gift to your spouse is a terminable interest. In most instances, a terminable interest is nondeductible if someone other than the donee spouse will have an interest in the property following the termination of the donee spouse’s interest. Some examples of terminable interests are:

A life estate,
An estate for a specified number of years, or
Any other property interest that after a period of time will terminate or fail.

If you transfer an interest to your spouse as sole joint tenant with yourself or as a tenant by the entirety, the interest is not considered a terminable interest just because the tenancy may be severed.

Instructions for Form 709 (2025) 13

Life estate with power of appointment. You may deduct, without an election, a gift of a terminable interest if all four requirements below are met.

Your spouse is entitled for life to all of the income from the entire interest.
The income is paid yearly or more often.
Your spouse has the unlimited power, while alive or by will, to appoint the entire interest in all circumstances.
No part of the entire interest is subject to another person’s power of appointment (except to appoint it to your spouse).

If either the right to income or the power of appointment given to your spouse pertains only to a specific portion of a property interest, the marital deduction is allowed only to the extent that the rights of your spouse meet all four of the above conditions. For example, if your spouse is to receive all of the income from the entire interest, but only has a power to appoint one-half of the entire interest, then only one-half qualifies for the marital deduction.

A partial interest in property is treated as a specific portion of an entire interest only if the rights of your spouse to the income and to the power are a fractional or percentile share of the entire property interest. This means that the interest or share will reflect any increase or decrease in the value of the entire property interest. If the spouse is entitled to receive a specified sum of income annually, the capital amount that would produce such a sum will be considered the specific portion from which the spouse is entitled to receive the income.

Election to deduct qualified terminable interest property (QTIP). You may elect to deduct a gift of a terminable interest if it meets requirements (1), (2), and (4) earlier, even though it does not meet requirement (3).

You make this election simply by listing the QTIP on Schedule A and deducting its value from Schedule A, Part 4, line 4, checking the box in column (l). You are presumed to have made the election for all qualified property that you both list and deduct on Schedule A. You may not make the election on a late-filed Form 709.

Special QTIP election. If you elect QTIP treatment for any gifts in trust listed on Schedule A, then you may also check column (m) to elect to treat the entire trust as non-QTIP for purposes of the GST tax. The election must be made for the entire trust that contains the particular gift involved on this return. Be sure to identify the item number of the specific gift for which you are making this special QTIP election.

Line 5

Enter the amount of the annual exclusions that were claimed for the gifts listed on line 4.

Line 7. Charitable Deduction

You may deduct from the total gifts made during the calendar year all gifts you gave to or for the use of:

The United States, a state or political subdivision of a state, or the District of Columbia for exclusively public purposes;
Any corporation, trust, community chest, fund, or foundation organized and operated only for religious, charitable, scientific, literary, or educational purposes, or to prevent cruelty to children or animals, or to foster national or international amateur sports competition (if none of its activities involve providing athletic equipment unless it is a qualified amateur sports organization), as long as no part of the earnings benefits any one person, no substantial

propaganda is produced, and no lobbying or campaigning for any candidate for public office is done;

A fraternal society, order, or association operating under a lodge system, if the transferred property is to be used only for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; or
Any war veterans’ organization organized in the United States (or any of its territories), or any of its auxiliary departments or local chapters or posts, as long as no part of any of the earnings benefits any one person.

On line 7, show your total charitable, public, or similar gifts (minus annual exclusions allowed). Enter the total value of items on Parts 1 and 3 of Schedule A for which the box in column (k) is checked.

Line 10. GST Tax

If GST tax is due on any gift which is a direct skip, the amount of the gift shall be increased by the amount of GST tax imposed on the direct skip. See section 2515.

If you entered gifts on Part 2, or if you and your spouse elected gift splitting and your spouse made gifts subject to the GST tax that you are required to show on your Form 709, complete Schedule D, and enter on line 10 the total from Schedule D, Part 3, column (g). Otherwise, enter zero on line 10.

Line 12. Election Out of QTIP Treatment of Annuities

Section 2523(f)(6) creates an automatic QTIP election for gifts of joint and survivor annuities where the spouses are the only possible recipients of the annuity prior to the death of the last surviving spouse.

The donor spouse can elect out of QTIP treatment, however, by checking the box on line 12 and entering the item number from Schedule A for the annuities for which you are making the election. Any annuities entered on line 12 cannot also be entered on line 4 of Schedule A, Part 4. Any such annuities that are not listed on line 12 must be entered on line 4 of Schedule A, Part 4. If there is more than one such joint and survivor annuity, you are not required to make the election for all of them. Once made, the election is irrevocable.