Form 706-GS(D) Tax Year 2010 Checklist
2010 Year Uniqueness
Form 706-GS(D) for 2010 is exceptional because the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act retroactively reinstated the generation-skipping transfer tax effective January 1, 2010, with a zero percent applicable tax rate and a five-million-dollar exemption amount. Filing was mandatory even though no tax was due, distinguishing 2010 from both 2009 (when the GST tax did not apply) and 2011 onward (when the rate became 35 percent).
The retroactive reinstatement resolved uncertainty about GST treatment of distributions made during calendar year 2010. This unique zero percent rate applied to all generation-skipping transfers occurring in 2010, including taxable distributions from trusts, taxable terminations, and direct skips, making 2010 a singular year in the history of federal transfer taxation. The legislative framework required full compliance with reporting requirements, even in the absence of tax liability, thereby establishing a precedent for future GST calculations and inclusion ratio determinations.
Year-Specific Programs Applying to 2010 Form 706-GS(D)
The Tax Relief Act of 2010 established that the GST tax applicable rate for all generation-skipping transfers occurring in 2010 was zero percent, eliminating tax liability on distributions but not filing obligations. The GST exemption amount was set at $5 million, indexed thereafter, allowing donors to allocate the exemption to 2010 transfers without tax consequences. The filing deadline for 2010 GST distributions occurred on September 19, 2011, for distributions made from January 1 through December 16, 2010, and on April 18, 2011, for distributions made on or after December 17, 2010.
This deadline established the finality of the inclusion ratio for future years, even when inclusion ratios were zero. This dual deadline structure reflected the retroactive nature of the legislation and provided extended filing time for most 2010 distributions. The zero percent rate applied regardless of whether the transferor had allocated GST exemption to the trust, creating planning opportunities for trustees and beneficiaries to receive distributions without transfer tax consequences.
Ten-Step Filing Checklist for 2010 Form 706-GS(D)
1. Obtain Form 706-GS(D-1) from Trustee
Obtain a copy of Form 706-GS(D-1) from the trustee showing all taxable distributions made in calendar year 2010 and the inclusion ratio for each distribution as determined under 2010 GST exemption rules. The trustee is required to provide Form 706-GS(D-1) to each skip person distributee by the date the trustee files Form 706-GS(T) or by the due date for filing Form 706-GS(D), whichever is earlier.
For 2010, verify that the trustee has correctly calculated the inclusion ratio based on the five-million-dollar GST exemption amount and has allocated any available exemption to reduce the inclusion ratio. Maintain all documentation showing the trust’s GST status, prior exemption allocations, and the transferor’s identity for accurate calculation of the inclusion ratio.
2. Complete Part I Distributee Information
Complete Part I, line 1a, entering the name of the skip person distributee (individual or trust), and line 1b or 1c with the social security number or employer identification number, respectively, as required by the 2010 instructions. A skip person is defined as an individual assigned to a generation two or more generations below the transferor’s generation, or a trust if skip persons hold all interests in the trust.
For 2010, ensure proper classification of the distributee’s generation assignment using the rules under IRC Section 2651, which assign generations based on family relationships or, for non-family members, based on age differences of 12.5 years per generation. Document the relationship between the distributee and the original transferor to support skip person status.
3. Identify the Responsible Person for Filing
Complete Part I, line 2a, entering the name of the person responsible for filing the return (required if distributee is a minor or disabled), and address lines 2b through 2i where the IRS should send correspondence. For 2010, if the distributee is a minor under age 18 or is legally disabled, the parent, guardian, conservator, or other legal representative must file Form 706-GS(D) on behalf of the distributee.
Provide a complete mailing address, including street address, city, state, and ZIP code. If the distributee has a foreign address, complete all international address fields as specified in the 2010 instructions. The person signing the return must have legal authority to act on behalf of the distributee.
4. Record Trust Identification and Inclusion Ratio
In Part II, record the trust employer identification number from Form 706-GS(D-1), line 2a, and confirm all distributions are reported with inclusion ratios provided by the trustee on Form 706-GS(D-1), Part II, column d. For 2010, the inclusion ratio reflects the extent to which the trust is subject to GST tax, ranging from zero (fully exempt) to one (fully taxable).
Verify that the trustee correctly calculated the inclusion ratio based on the applicable fraction determined at the time the trust became subject to GST tax, adjusted for any subsequent exemption allocations. Cross-reference the inclusion ratio shown on Form 706-GS(D-1) with prior year Forms 706-GS(T) to ensure consistency.
5. Calculate Tentative Transfer Amount
Calculate tentative transfer in Part II by multiplying the inclusion ratio from Form 706-GS(D-1), column d, by the fair market value of property distributed, even though the 2010 applicable tax rate of zero percent means no tax will be due. For 2010, the tentative transfer calculation establishes the basis for future GST computations if the trust makes additional distributions in subsequent years when the GST tax rate is not zero.
Document the fair market value of all distributed property as of the distribution date using qualified appraisals for hard-to-value assets. The tentative transfer amount represents the portion of the distribution subject to GST tax based on the trust’s inclusion ratio.
6. Deduct Adjusted Allowable Expenses
Deduct adjusted allowable expenses on line 4 of Part II, defined as total allowable expenses multiplied by the inclusion ratio, reducing the taxable amount. For 2010, permissible expenses include expenses, indebtedness, and taxes properly chargeable against the distributed property under IRC Section 2621, such as trustee fees, attorney fees, accountant fees, and state taxes attributable to the distribution.
Only the portion of expenses allocable to the taxable portion of the distribution (determined by the inclusion ratio) is deductible. Maintain receipts, invoices, and supporting documentation for all claimed expenses. The adjusted allowable expenses reduce the taxable distribution amount for GST purposes.
7. Apply 2010 GST Tax Rate
On line 6 of Part II, enter the maximum federal estate tax rate applicable when the distribution occurred in 2010, which the 2010 instructions identify as zero percent for GST purposes. For 2010, the appropriate rate under IRC Section 2641 equals the product of the maximum federal estate tax rate (zero percent for 2010) and the inclusion ratio.
Because the maximum rate is zero, all 2010 GST distributions result in zero tax liability regardless of the inclusion ratio. Complete the tax computation to establish the final inclusion ratio and create a record for IRS examination and future GST events. The zero percent rate applies uniformly to all generation-skipping transfers occurring during calendar year 2010.
8. Report All 2010 Distributions in Part III
Complete Part III by reporting all distributions received during calendar year 2010 with inclusion ratios greater than zero on line 11, and attach a copy of each Form 706-GS(D-1) received during the year to the return. For 2010, if the distributee received multiple distributions from one or more trusts during the calendar year, each distribution must be reported separately, along with its corresponding inclusion ratio and tentative transfer amount.
Attach all Forms 706-GS(D-1) received from trustees in chronological order. If no Form 706-GS(D-1) was received, contact the trustee immediately, as failure to receive the notice does not relieve the distributee of filing obligations.
9. Sign and Date the Return
Sign and date the return in the signature block, declaring under penalties of perjury that the return is accurate, correct, and complete, as required by the 2010 form instructions. For 2010, the distributee (or their legal representative, if they are a minor or disabled) must sign and date the return.
If a paid preparer completes the return, they must also sign, date, and provide their preparer tax identification number (PTIN) and firm information. The signature certifies that all information reported is accurate and that all distributions received during calendar year 2010 have been adequately reported. Keep copies of the signed return and all attachments for recordkeeping purposes.
10. File by Applicable Deadline
File the completed Form 706-GS(D) with all attachments to the address specified in the 2010 Where to File instructions by September 19, 2011, for distributions made January 1 through December 16, 2010, or by April 18, 2011, for distributions made December 17, 2010, or later, using Form 7004 for any automatic six-month extension if necessary.
For 2010, the dual deadline structure reflects the retroactive nature of the Tax Relief Act of 2010, which was enacted on December 17, 2010. Distributions occurring before the enactment date received an extended filing time to September 19, 2011. Distributions occurring on or after the enactment date follow the standard April 15 deadline (extended to April 18, 2011, due to Emancipation Day in Washington, D.C.)—file extension requests on Form 7004 by the original due date to obtain an automatic six-month extension.
Line and Section Changes for 2010 Form 706-GS(D)
The 2010 Form 706-GS(D) consolidated reporting of distributions to skip persons by requiring trustees to provide the inclusion ratio on Form 706-GS(D-1), which the distributee then used to calculate tentative transfer amounts in Part II, column c. Prior-year instructions did not explicitly address the zero tax rate for 2010 distributions, requiring the form to clarify that filing remained mandatory, even though the applicable rate determined under IRC Section 2641 was zero percent.
The 2010 version updated Part II to indicate that the tax computation utilized the zero percent rate established by the Tax Relief Act and added emphasis that filing Form 706-GS(D) was required even when all inclusion ratios were zero to ensure the inclusion ratio became final for later GST events. The form instructions clarified that the dual deadline structure (September 19, 2011, for pre-December 17 distributions, and April 18, 2011, for later distributions) applied to all 2010 GST distributions, regardless of the inclusion ratio or tax liability.
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This checklist is for educational purposes only and does not constitute tax or legal advice. Always review official IRS instructions and consult a qualified professional for guidance.
