Generation-Skipping Transfer Tax Return For
Distributions 2012 Checklist
Form 706-GS(D) serves as the reporting mechanism for skip-person distributees who receive
taxable distributions from trusts subject to the generation-skipping transfer tax. The 2012 version applies pre-2013 exemption allocation rules and inclusion ratio determinations without incorporating stimulus provisions, ACA changes, or TCJA modifications. Filers must report only taxable distributions and calculate GST tax liability using the 2012 maximum rate of 35 percent, as established by the 2010 Tax Relief Act. No year-specific stimulus, ACA, or TCJA provisions apply to Form 706-GS(D) for 2012 distributions.
Understanding Who Files and When
Any skip person who receives a taxable distribution from a trust must file Form 706-GS(D) to calculate and report the generation-skipping transfer tax due on that distribution. The Internal
Revenue Service requires the skip person distributee, not the trustee, to complete and sign this return.
When the skip person distributee operates as a testamentary trust or dynasty trust, the trustee of that receiving trust completes the form on behalf of the trust entity. You do not file this form if all distributions you received have an inclusion ratio of zero, as indicated on Form 706-GS(D-1)
provided by the distributing trustee.
The GST tax on distributions operates on a calendar year basis, regardless of your income tax accounting period. You must file Form 706-GS(D) on or after January 1 but not later than April
15 of the year following the calendar year when the distributions occurred.
Filing Deadlines and Extensions
Request an automatic six-month extension by filing Form 7004 before the regular due date if you cannot complete the return by April 15. Section 6651 imposes penalties for both late filing and late payment unless reasonable cause exists for the delay.
Taxable Distribution Requirements Under the
Generation-Skipping Transfer Tax System
Form 706-GS(D) applies exclusively to taxable distributions as defined under IRC Section
2612(b). A taxable distribution means any distribution from a trust to a skip person that does not qualify as a taxable termination or direct skip. Taxable terminations require Form 706-GS(T)
filing by the trustee, while direct skips follow different reporting procedures on Form 706 or Form
709. The generation-skipping transfer tax system defines three distinct types of transfers, each with varying filing requirements and responsible parties.
Verify that the beneficiary receiving the distribution qualifies as a skip person under IRC Section
2613. Skip persons include individuals assigned to a generation two or more generations below the transferor's generation, and certain trusts in which all current beneficiaries are skip persons.
Inclusion Ratio Calculation and Trust Estate Exemption
Allocation
The inclusion ratio determines the portion of each distribution that is subject to the generation-skipping transfer tax. Calculate the inclusion ratio using the formula: inclusion ratio equals one minus the applicable fraction.
The applicable fraction is the GST exemption amount allocated to the property, divided by the value of the property transferred. When the applicable fraction equals 1, the inclusion ratio becomes 0, and no GST applies to distributions.
The trustee of the distributing trust calculates and reports the inclusion ratio to you on Form
706-GS(D-1). You do not compute the inclusion ratio yourself when filing Form 706-GS(D). The trustee determined this ratio based on GST exemption allocations made when the trust received property, either through automatic allocation rules or explicit allocation on Form 709 or Schedule
R of Form 706. Specialized trust structures follow the same inclusion ratio calculation methodology under IRC Section 2642.
Computing the GST Tax Due
Complete Part III of Form 706-GS(D) before calculating the tax in Part II. List all taxable distributions you received during 2012 with inclusion ratios greater than zero. Attach copies of each Form 706-GS(D-1) you received from trustees during the year. For each distribution, multiply the fair market value of the property distributed by the applicable inclusion ratio shown in column (d) of Form 706-GS(D-1) Part II to determine the tentative transfer amount.
The value of a distribution equals its fair market value on the date of distribution. Fair market value represents the price at which property would change hands between a willing buyer and a willing seller when neither faces compulsion, and both possess reasonable knowledge of relevant facts.
Determine the GST tax rate by multiplying the inclusion ratio by the 2012 maximum estate tax rate of 35 percent. The generation-skipping transfer tax system uses the highest federal estate tax rate in effect during the year of distribution.
Allowable Deductions and Adjustments
You may deduct adjusted allowable expenses incurred in preparing Form 706-GS(D) or in determining, collecting, or seeking a refund of GST tax reported on this return. Calculate adjusted allowable expenses by multiplying permissible total expenditures by the inclusion ratio.
When you receive multiple distributions with different inclusion ratios, prorate costs based on the relative distribution values. You may deduct expenses not yet paid at filing time if the amount appears clearly ascertainable, then file Form 843 later if additional allowable expenses arise after filing.
Part I Identification Requirements
Enter the skip person distributee's information in Part I. If you are an individual distributee, provide your name and Social Security number.
If the distributee operates as a generation-skipping trust or other trust estate, enter the trust's legal name and taxpayer identification number. When the skip person distributee qualifies as a minor or person under disability precluding individual filing, the parent, guardian, or legally responsible person completes the form and provides their name, title, and contact information.
The address entered in Part I serves as your correspondence address for Internal Revenue
Service communications regarding this return. When someone other than the individual distributee completes the form, use that representative's address rather than the individual's residence.
Signature and Filing Procedures
Either the distributee or an authorized representative must sign Form 706-GS(D). The skip person who received the distribution bears responsibility for signing, not the trustee of the distributing trust.
When the distributee is a trust, its trustee signs as the distributee's representative. Leave the
Paid Preparer Use Only space blank if you complete your own return without paid assistance.
Mail completed Form 706-GS(D) with required attachments to the Internal Revenue Service
Center in Kansas City, Missouri. Private delivery services designated by the Internal Revenue
Service meet the timely mailing rule for tax returns.
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