General Instructions

Purpose of Form

Form 706-GS(D) is used by a skip person distributee to calculate and report the tax due on distributions from a trust that are subject to the generation-skipping transfer (GST) tax.

Who Must File

In general, any skip person who receives a taxable distribution from a trust must file Form 706-GS(D). Trustees are required to report taxable distributions to skip person distributees on Form 706-GS(D-1), Notification of Distribution From a Generation-Skipping Trust.

If you receive a Form 706-GS(D-1) and the inclusion ratio found on Part II, line 3, column d, is zero for all distributions, you do not need to file Form 706-GS(D). If you are required to file Form 706-GS(D), you do not have to include any distributions that have an inclusion ratio of zero.

When To File

The generation-skipping transfer tax on distributions is figured and reported on a calendar year basis, regardless of your income tax accounting period. Generally, you must file Form 706-GS(D) on or after January 1 but not later than April 15 of the year following the calendar year when the distributions were made.

If you are not able to file the return by the due date, you may request an automatic 6-month extension of time to file by filing Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns. The extension is automatic, so you do not have to sign the form or provide a reason for your request. You must file Form 7004 on or before the regular due date of Form 706-GS(D). See Form 7004 for more information.

Where To File

File Form 706-GS(D) at the following address:

Department of the Treasury 
Internal Revenue Service 
Cincinnati, OH 45999

Penalties and Interest

Section 6651 provides penalties for both late filing and late payment unless there is reasonable cause for the delay. The law also provides penalties for willful attempts to evade payment of tax.

A return is late when it is filed after the due date, including extensions. The late filing penalty will not be imposed if the taxpayer can show that the failure to file a timely return is due to reasonable cause.

Reasonable cause determinations.   If you receive a notice about penalties and interest after you file Form 706-GS(D), send us an explanation and we will determine if you meet reasonable cause criteria. Do not attach an explanation when you file Form 706-GS(D). Explanations attached to the return at the time of filing will not be considered.

Section 6662 provides a penalty for underpayment of GST taxes which exceeds $5,000, if the underpayment is due to a valuation understatement. A substantial valuation under- 
statement occurs when the reported value of property listed on Form 706-GS(D) is 65% or less of the actual value of the property. A gross valuation understatement occurs when the reported value of property listed on Form 706-GS(D) is 40% or less of the actual value of the property.

Interest will be charged on taxes not paid by their due date, even if an extension of time to file is granted. Interest is also charged on any additions to tax imposed by section 6651 from the due date of the return (including any extensions) until the addition to tax is paid.

Return preparer.   The Small Business and Work Opportunity Tax Act of 2007 extended return preparer penalties to all tax return preparers. Under section 6694 and its regulations, tax return preparers, who prepare any return or claim for refund which shows an understatement of tax liability due to willful or reckless conduct, can be penalized $5,000 or 50% of the income earned (or income to be earned), whichever is greater, for each return.

Signature

Either the distributee or an authorized representative must sign Form 706-GS(D).

If you fill in your own return, leave the Paid Preparer Use Only space blank. If someone prepares your return and does not charge you, that person should not sign the return.

Generally, anyone who is paid to prepare the return must sign the return in the space provided and fill in the Paid Preparer Use Only area. See section 7701(a)(36)(B) for exceptions.

In addition to signing and completing the required information, the paid preparer must give a copy of the completed return to the distributee.

Note.

A paid preparer may sign original or amended returns by rubber stamp, mechanical device, or computer software program.


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