1999 Department of the Treasury Internal Revenue Service Instructions for Form 709 United States Gift (and Generation-Skipping Transfer) Tax Return (For gifts made during calendar year 1999.) For Privacy Act Notice, see the Instructions for Form 1040. Section references are to the Internal Revenue Code unless otherwise noted. If you are filing this form solely to elect gift-splitting for gifts of not more than $20,000 per donee, you may be able to use Form 709–A, United States Short Form Gift Tax Return, instead of this form. See Who Must File on page 2 and When the Consenting Spouse Must Also File a Gift Tax Return beginning on page 4. Changes To Note l  For gifts made in 1999, the unified credit has increased to $211,300. l  For gifts made to spouses who are not U.S. citizens, the annual exclusion has increased to $101,000. See page 3. l  The generation-skipping transfer (GST) lifetime exemption has increased to $1,010,000. See page 7. General Instructions Note:   If you meet all of the following requirements, you are not required to file Form 709: 1. You made no gifts during the year to your spouse; 2. You gave no more than $10,000 during the year to any one donee; and 3. All of the gifts you made were of present interests. For additional information, see Transfers Not Subject to the Gift Tax below and Who Must File on page 2. Purpose of Form Use Form 709 to report the following: l  Transfers subject to the Federal gift and certain generation-skipping transfer (GST) taxes and to figure the tax, if any, due on those transfers, and l  Allocation of the lifetime GST exemption to property transferred during the transferor's lifetime. (For more details, see the instructions for Part—2 GST Exemption Reconciliation starting on page 7, and Regulations section 26.2632-1.) All gift and GST taxes are computed and filed on a calendar year basis regardless of your income tax accounting period. Transfers Subject to the Gift Tax Generally, the Federal gift tax applies to any transfer by gift of real or personal property, whether tangible or intangible, that you made directly or indirectly, in trust, or by any other means to a donee. The gift tax applies not only to the gratuitous transfer of any kind of property, but also to sales or exchanges, not made in the ordinary course of business, where money or money's worth is exchanged but the value of the money (or property) or money's worth received is less than the value of what is sold or exchanged. The gift tax is in addition to any other tax, such as Federal income tax, paid or due on the transfer. The exercise or release of a general power of appointment may be a gift by the individual possessing the power. General powers of appointment are those in which the holders of the power can appoint the property subject to the power to themselves, their creditors, their estates, or the creditors of their estates. To qualify as a power of appointment, it must be created by someone other than the holder of the power. The gift tax may also apply to the forgiveness of a debt, to interest-free or below market interest rate loans, to the assignment of the benefits of an insurance policy, to certain property settlements in divorce cases, and to the giving up of some amount of annuity in exchange for the creation of a survivor annuity. Bonds that are exempt from Federal income taxes are not exempt from Federal gift taxes. Code sections 2701 and 2702 provide rules for determining whether certain transfers to a family member of interests in corporations, partnerships, and trusts are gifts. The rules of section 2704 determine whether the lapse of any voting or liquidation right is a gift. Transfers Not Subject to the Gift Tax Three types of transfers are not subject to the gift tax.   These are transfers to political organizations and payments that qualify for the educational and medical exclusions.   These transfers are not “gifts” as that term is used on Form 709 and its instructions. You need not file a Form 709 to report these transfers and should not list them on Schedule A of Form 709 if you do file Form 709. Political organizations.   The gift tax does not apply to a transfer to a political organization (defined in section 527(e)(1)) for the use of the organization. Educational exclusion.   The gift tax does not apply to an amount you paid on behalf of an individual to a qualifying domestic or foreign educational organization as tuition for the education or training of the individual. A qualifying educational organization is one that normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. See section 170(b)(1)(A)(ii) and its regulations. The payment must be made directly to the qualifying educational organization and it must be for tuition. No educational exclusion is allowed for amounts paid for books, supplies, room and board, or other similar expenses that do not constitute direct tuition costs. To the extent that the payment to the educational institution was for something other than tuition, it is a gift to the individual for whose benefit it was made, and may be offset by the annual exclusion if it is otherwise available. Contributions to a qualified state tuition program on behalf of a designated beneficiary do not qualify for the educational exclusion. Medical exclusion.   The gift tax does not apply to an amount you paid on behalf of an individual to a person or institution that provided medical care for the individual. The payment must be to the care provider. The medical care must meet the requirements of section 213(d) (definition of medical care for income tax deduction purposes). Medical care includes expenses incurred for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body, or for transportation primarily for and essential to medical care. Medical care also includes amounts paid for medical insurance on behalf of any individual. The medical exclusion does not apply to amounts paid for medical care that are reimbursed by the donee's insurance.   If payment for a medical expense is reimbursed by the donee's insurance company, your payment for that expense, to the extent of the reimbursed amount, is not eligible for the medical exclusion and you have made a gift to the donee. To the extent that the payment was for something other than medical care, it is a gift to the individual on whose behalf the payment was made, and may be offset by the annual exclusion if it is otherwise available. The medical and educational exclusions are allowed without regard to the relationship between you and the donee. For examples illustrating these exclusions, see Regulations section 25.2503-6. Qualified disclaimers.   A donee's refusal to accept a gift is called a disclaimer.   If a person makes a qualified disclaimer with respect to any interest in property, the property will be treated as if it had never been transferred to For Gifts Made Use Revision of After and Before Form 709 Dated — — — January 1, 1982 November 1981 December 31, 1981 January 1, 1987 January 1987 December 31, 1986 January 1, 1989 December 1988 December 31, 1988 January 1, 1990 December 1989 December 31, 1989 October 9, 1990 October 1990 October 8, 1990 January 1, 1992 November 1991 December 31, 1992 January 1, 1998 December 1996 Cat. No. 16784X