What Form 706-GS(D) (2019) Is For
IRS Form 706-GS(D) (2019) is used to report and pay the generation-skipping transfer tax, a federal tax applied to transfers that skip one or more generations. It applies when a skip person—such as a grandchild or great-grandchild—receives a taxable distribution from a trust. The form ensures that these transfers, which might otherwise be exempt from estate and gift taxes, are subject to the same level of federal tax oversight.
This tax works in conjunction with the estate tax and gift tax to prevent wealthy families from transferring assets to younger generations without incurring transfer taxes. The GST tax is part of the broader federal estate and gift tax system, which includes lifetime exemption limits and an estate tax rate of 40 percent. By requiring this form, the IRS helps maintain fairness in how taxable gifts, taxable terminations, and taxable distributions are treated across generations.
For a detailed breakdown of filing requirements, eligibility rules, and step-by-step instructions for IRS Form 706-GS(D) (2019)—Generation-Skipping Transfer Tax, see our comprehensive guide.
When You’d Use Form 706-GS(D)
A taxpayer must file IRS Form 706-GS(D) (2019) if they received a taxable distribution from a trust during the 2019 calendar year. The generation-skipping transfer rules apply when the transferor or grantor pays assets to someone two or more generations younger. Filing this form ensures proper reporting of GST taxes owed, much like reporting a gift or estate tax on other federal forms.
The form is also used to correct prior filings or report late payments under the same tax year. Late filers may still submit their return, pay any additional tax, and provide an explanation for the delay to reduce penalties. Filing Form 706-GS(D) helps taxpayers meet their transfer tax obligations and minimize estate taxes through proper exemption use, especially under the increased exemption amount and lifetime exemption thresholds provided by the Tax Cuts and Jobs Act.
Key Rules or Details for 2019
In 2019, the generation-skipping transfer tax rate was 40 percent, the same as the federal estate tax rate. The exemption amount was $11.4 million per person, allowing many families to transfer assets to younger generations without paying GST tax.
Anyone filing IRS Form 706-GS(D) (2019) must use the fair market value of the taxable distribution on the date it was received. Certain related expenses, such as preparation or valuation costs, can be deducted to reduce the taxable amount. If the inclusion ratio is zero, no GST tax is owed; if it’s higher, the tax applies at the flat 40 percent rate.
For complete details on wage reporting, withholdings, and unemployment tax filings, see our guide for estate, gift, and trust forms.
Step-by-Step (High Level)
Step 1: Receive Form 706-GS(D-1)
The trustee must provide this form by April 15 of the following year, listing each taxable distribution and its corresponding inclusion ratio.
Step 2: Verify Information
The taxpayer should check all reported values and ratios for accuracy. If errors are found, contact the trustee and request a corrected Form 706-GS(D-1).
Step 3: Complete Part I – General Information
Enter the taxpayer’s name, Social Security Number, and mailing address. If filing on behalf of a trust, use the Employer Identification Number instead.
Step 4: Complete Part II – Distributions
List each taxable distribution received in 2019 and multiply its value by its inclusion ratio to find the tentative transfer amount.
Step 5: Complete Part III – Tax Calculation
Subtract adjusted deductible expenses from the tentative transfers. Apply the 40 percent tax rate to determine the total tax owed.
Step 6: Make Payment
Make the check payable to “United States Treasury.” Write the taxpayer identification number, the year 2019, and “Form 706-GS(D)” on the check.
Step 7: File the returns
Mail the completed form to the Internal Revenue Service Center, Kansas City, MO 64999. Private delivery services should use 333 W. Pershing Road, Kansas City, MO 64108.
Common Mistakes and How to Avoid Them
Failing to File When Required
Many assume the trustee’s filing of Form 706-GS(D-1) means no additional filing is needed. However, each recipient must still file Form 706-GS(D) personally if any inclusion ratio is greater than zero.
Using Incorrect Identification Numbers
Individual filers must use their Social Security Number. Trust filers must use the trust’s Employer Identification Number. Do not enter both.
Incorrect Valuation of Assets
All distributions must be valued at fair market value on the date of distribution, not on another date.
Failing to Attach Form 706-GS(D-1)
Every Form 706-GS(D-1) received must be attached to the return. Missing attachments delay processing.
Improper Deduction Calculations
Preparation fees and other expenses must be multiplied by the inclusion ratio before deduction. Each distribution with a different ratio requires a separate calculation.
Missing the Payment Deadline
An extension to the file does not extend the payment deadline. Interest accrues from the original due date.
Poor Record Retention
Taxpayers should retain all related records and receipts for a minimum of three years in case of an audit or other tax-related investigation.
Learn more about how to avoid business tax problems in our guide on How to File and Avoid Penalties.
What Happens After You File
After filing IRS Form 706-GS(D) (2019), the IRS reviews the return and applies any payment made toward the generation-skipping transfer tax owed. If more information or additional tax is needed, the IRS will send a notice to the filer.
If the return is accurate, processing usually takes several weeks. Taxpayers who overpaid may receive a refund, while those who underpaid will owe the remaining balance plus interest. Keeping copies of the filed form, payment records, and any related trust documents helps ensure accuracy for future estate or gift tax filings.
FAQs
What is IRS Form 706-GS(D) (2019) used for?
IRS Form 706-GS(D) (2019) is filed by individuals who receive a taxable distribution from a trust subject to the generation-skipping transfer tax. It reports and calculates the GST tax owed on assets transferred to skip persons.
How does the generation-skipping transfer tax differ from the estate tax or gift tax?
The generation-skipping transfer tax applies when assets skip one or more generations, while estate and gift taxes apply to direct transfers. Together, these federal transfer taxes prevent wealthy families from avoiding estate and gift obligations.
Who qualifies as a skip person under the GST tax?
A skip person is someone two or more generations younger than the person making the transfer. This typically includes grandchildren, great-grandchildren, or unrelated persons more than 37½ years younger than the donor or decedent.
What is the GST exemption, and how does it relate to the federal estate tax exemption?
The GST exemption allows a specific exemption amount to pass free of generation-skipping transfer taxes. For 2019, the federal estate tax exemption and GST exemption were both $11.4 million, helping reduce estate taxes for many married couples.
How can taxpayers reduce estate taxes and GST tax liability through planning?
Taxpayers can reduce estate taxes and GST taxes by strategically transferring assets through lifetime gifts, utilizing irrevocable trusts, applying the annual gift tax exclusion, and coordinating estate and gift tax exemptions within their estate plan.
