IRS Form 706-GS(D): Generation-Skipping Transfer Tax Return For Distributions

What Is Form 706-GS(D): Generation-Skipping Transfer Tax Return For Distributions?

Form 706-GS(D) is a tax form distributed by the Internal Revenue Service (IRS) that is used to calculate taxes due on trust distributions subject to a generation-skipping transfer tax (GSTT).

When a person dies and leaves their estate to heirs, they may attempt to avoid a large amount of estate taxes by passing assets to heirs who are not their children. To do this, they may transfer a large amount of assets to their grandchildren or other inheritors. If the grantor’s children never personally take possession of the assets, the estate tax does not apply. One way a person may choose to do this is through a trust.

Generation-skipping still may provide some benefits to a grantor's children. For example, the grantor may specify that their children are entitled to any income that the assets in the trust generate, even if the assets themselves are left in trust for their grandchildren.

Who Can File Form 706-GS(D): Generation-Skipping Transfer Tax Return For Distributions?

Taxpayers who receive a taxable distribution coming from a trust must use Form 706-GS(D): Generation-Skipping Transfer Tax Return For Distributions. Specifically, the form should be filled out by the skip distributee, which is the person receiving the benefit from the generation-skipping trust.

Taxpayers should file this form between Jan. 1 and the tax filing deadline of the year following the distribution of money from the trust. If the form cannot be filed on time, an extension can be requested by filing Form 7004.

How to File Form 706-GS(D): Generation-Skipping Transfer Tax Return For Distributions

Part I of the form requires general information including the name and Social Security Number of the distributee, the name, and address of the person filing the return (if different from the distributee), and the employer identification number of the trust distributee. In Part II, the filer outlines the nature of the distributions. This is followed by Part III, where the amount of tax is calculated.

Form 706-GS(D) is available on the IRS website.

Form 706-GS(D) vs. Form 706-GS(D-1) vs. Form 706

Form 706-GS(D-1), which is filed by trustees when a trust has transferred assets to them, is part of the larger tax Form 706. This form is used for filing estate taxes in general. The section on generation-skipping transfers is included on Form 706-GS(D).