Form 706-GS(D) (2020): GST Distribution Checklist
What This Return Covers and Who Must File
This checklist supports preparation of the Generation-Skipping Transfer Tax Return for
Distributions for taxable distributions received during calendar year 2020 under chapter 13. It applies when a trust distribution transfers property to a skip person and the transaction is neither a taxable termination nor a direct skip.
The skip person distributee generally files this tax return, while the trustee provides reporting support through Form 706-GS(D-1). This workflow often intersects with broader estate planning and an estate plan built around dynasty trusts, trust structures, or other trust arrangements designed for long-term wealth transfer.
Key Concepts That Drive GST Tax
GST tax is determined by the inclusion ratio and the applicable tax rate, in accordance with the
GST exemption and related allocation of exemption rules. These computations are transfer tax concepts tied to section 2612 definitions and related automatic allocation rules, not income tax concepts such as DNI.
The analysis should stay separate from gift tax reporting on Form 709, gift tax returns for prior years, and estate tax filings, such as an estate tax return prepared on IRS forms used in the
United States estate framework. Even when the same trust agreement supports multiple filings, the taxable distribution calculation is not rebuilt from estate tax or federal gift computations.
Ten-Step Filing Checklist
Step 1: Confirm the Event Type and the Liable Filer
Confirm the 2020 transaction is a taxable distribution to a skip person and not a taxable termination or a direct skip. Confirm the distributee is the filer and that trustee reporting is limited to the related notice on Form 706-GS(D-1).
This step prevents the use of the wrong return within the Form 706GS family and avoids mixing
Schedules R and R-1 concepts that apply to other GST settings. Clear classification also supports later filing considerations if professional advice is needed.
Step 2: Review Trustee Notices and Determine Whether Filing Is Required
Review each trustee notice for 2020 and confirm whether any distribution shows an inclusion ratio above zero. If every distribution shows an inclusion ratio of zero, filing is generally not required because no GST tax should be due.
If any inclusion ratio exceeds zero, the return must be prepared to compute the tax due and document the GST exemption position used by the trust. Keep the notices aligned to the trust distribution amounts so reconciliation is straightforward.
Step 3: Compile Distributee, Trust, and Transferor Identification
Confirm that the distributee’s taxpayer identification number, address, and personal information match the trustee reporting to reduce Internal Revenue Service processing issues. Confirm the trust name and EIN, along with trustee contact details, especially when multiple trusts or qualified severance plans create separate reporting streams.
This step also helps when the trust is tied to a Subchapter S corporation interest through a
Qualified Subchapter S Trust or an Electing Small Business Trust, since trustee discretion and entity reporting can create valuation questions. Accurate records matter for tax professionals supporting the file.
Step 4: Build a Complete List of 2020 Distributions
Create a complete list of taxable distributions received in 2020 and tie each item to the correct trust or subtrust. Include all property transferred, including cash, securities, and noncash assets, subject to a fair market value determination.
This list should not be filtered by “income versus principal,” because GST treatment turns on the trust’s GST status and the recipient’s skip person status. The same approach applies even when distributions relate to medical care or payments that resemble medical expenses in other tax contexts.
Step 5: Determine Fair Market Value for Each Distribution Date
Determine fair market value for each distribution as of the distribution date, using statements or valuation support appropriate to the asset. When the distribution involves real property, hard-to-value assets, or entity interests, valuation support should be strong enough to stand on its own.
This step becomes more critical when the trust holds life insurance policy interests or life insurance proceeds, or when the transfer involves a life estate or a general power of appointment structure. Documenting valuation supports later questions about the inclusion ratio applied to the property transfer.
Step 6: Reduce Value for Consideration Paid, If Applicable
If the distributee provided consideration for the distribution, reduce the reported value as permitted by the instructions. Keep proof of the payment and show how it changes the taxable amount used in the GST computation.
This adjustment can be material in complex trust arrangements, including asset protection provisions or transfers governed by a rule against perpetuities strategy. The duplicate recordkeeping helps if later correspondence requires explanation.
Step 7: Confirm Inclusion Ratio Sourcing and Consistency
Use the inclusion ratio information from trustee notices unless a clear, supportable issue exists.
The inclusion ratio reflects prior GST exemption allocations, deemed allocation at death rules, or other allocation mechanics that may be affected by section 9100 relief concepts in rare correction scenarios.
Do not rebuild the trust’s internal computations unless the notice is incomplete or clearly inconsistent with the trust agreement. This step avoids importing estate tax or federal estate tax concepts that belong to separate filings.
Step 8: Compute the Taxable Amount and Apply the Correct GST Tax Rate
Compute the taxable amount by applying the inclusion ratio to the distribution value and then using the applicable federal gift and estate tax rate framework as required for GST tax purposes. The computation should clearly show the taxable base, the inclusion ratio, the resulting applicable rate, and the final GST tax due.
This work should not rely on the Tax Cuts and Jobs Act or the Inflation Reduction Act concepts unless the instructions explicitly require them for event timing. Keep the presentation clean so the tax rate applied is easy to verify.
Step 9: Prepare Attachments and Maintain a Durable Workpaper File
Attach the trustee notices and keep computation workpapers that show each distribution’s fair market value, inclusion ratio, and tax computation. Maintain internal support for valuation and expenses without attaching unnecessary documents.
A durable file helps when later estate planning work interacts with an estate tax filing threshold analysis, a marital deduction structure, or QTIP trusts in a related estate tax matter. Clean documentation also helps if a separate IRS Form 706 filing exists for an associated estate tax event.
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Step 10: Sign, File, and Retain Proof of Timely Submission
Ensure the distributee or an authorized representative signs the return, and keep proof of filing.
File by the deadline for the calendar-year return, and confirm the correct mailing address and delivery method at the time of filing.
Retain the complete package for future reference, including interactions with Chapter 11 transfer tax concepts that may appear in related files. This recordkeeping is also applicable when preparing account history requests or responding to IRS follow-up.
Practical Limitations and Compliance Guardrails
This return applies only to taxable distributions to skip persons and does not replace trustee filings for taxable terminations or direct skips. It also does not replace gift tax reporting on Form
709 or broader transfer tax reporting used in the United States gift framework.
GST reporting should stay grounded in the trust distribution facts, the trust agreement terms, and the inclusion ratio data supplied by the trustee. When uncertainty exists, professional advice from tax professionals familiar with estate taxation and transfer tax rules is often more efficient than improvising computations.
If you’re missing tax documents or want to ensure the numbers you enter match IRS records, we can help.
