INSTRUCTIONS FOR U. S. GIFT TAX RETURN, FORM 709 1. Requirement of return.-Any individual citizen or resident of the United States who within the calendar year made gifts (or who, as explained in section 8 of these instructions, is considered as having made gifts) to any one donee of more than $3,000 (or regardless of value in the case of a gift of a future interest in property), must file a gift tax return on Form 709. The return is required even though because of authorized deductions, a tax may not be due. A nonresident not a citizen of the United States is similarly required to file a gift tax return if the subject of the gift consisted of property situated in the United States. Individuals only are required to file returns as donors and not trusts, estates, partnerships, or corporations. However, where gifts are made by trusts, estates, partnerships, or corporations, the individual beneficiaries, partners, or stockholders become donors and may incur liability under the Federal gift tax law. Where the donor dies before filing his return, the executor of his will or the administrator of his estate shall file the return. Donees or trustees receiving reportable gifts must file information returns, Form 710. 2. Time and place for filing return.-This return must be filed in duplicate on or before the 15th day of March following the close of the calendar year in which the gifts were made. The required return cannot be filed prior to the close of the calendar year in which the gifts were made unless the return is for a deceased donor. The return should be filed with the director of internal revenue for the district in which is located the legal residence of the donor, or, if he has no legal residence in the United States, then, unless the Commissioner of Internal Revenue otherwise designates, with the director at Baltimore, Maryland. 3. Payment of tax.-The tax should be paid to the director by the donor on or before the 15th day of March following the close of the calendar year in which the gifts were made, unless an extension of time for payment thereof has been granted by the Commissioner. The tax may be paid at the election of the donor at any time prior to the 15th day of March following the close of the calendar year in which the gifts were made. No discount will be allowed for payment in advance of the due date. Check or money order in payment of the tax should be made payable to "Director of Internal Revenue at ," naming city and State in which is located the office of the director with whom the return is filed. 4. Penalties. For penalties for failure to file the return when due, keep records, and supply information, or for the preparation or presentation or the aiding or assisting in the preparation or presentation of a false or fraudulent return, affidavit, claim, or document, or for causing a deficiency by negligence or intentional disregard of rules and regulations, see the appropriate Gift Tax Regulations. 5. Transfers for a consideration in money or money's worth.The Federal gift tax is not limited in its imposition to transfers without consideration, but extends to sales and exchanges for less than an adequate and full consideration in money or money's worth. In the case of a transfer of property for less than an adequate and full consideration in money or money's worth, the amount by which the value of the property exceeded the value of the consideration constitutes a gift within the meaning of the statute. If the consideration is not reducible to a money value, as in the case of love and affection, promise of marriage, etc., it is to be wholly disregarded and the entire value of the property transferred constitutes the amount of the gift. A bona fide sale, exchange, or other transfer of property in the ordinary course of business and free from any donative intent, is considered as made for an adequate and full consideration in money or money's worth. 6. Powers of appointment.-The exercise or release of a power of appointment may constitute a gift by the individual possessing such power. In any case where such action has been taken the Gift Tax Regulations should be consulted. 7. Gift of husband or wife to third party after April 2, 1948.— If husband and wife consent, all gifts made by them after April 2, 1948, to third persons may, for the purpose of the gift tax, be considered as made one-half by each. For this purpose, an individual is to be considered as the spouse of another individual only if he is married to such individual at the time of the gift and does not remarry during the remainder of the calendar year. This provision of law will apply only for a calendar year for which both spouses signify their consent as explained below, and will not apply (1) if the consenting spouses were not married to each other on the date of gift, (2) if either spouse was a nonresident not a citizen of the United States on the date of gift, (3) to a gift by one spouse if he created in the other spouse a power of appointment over the property interest transferred. If one spouse transferred property in part to his spouse and in part to third parties, the consent is effective only insofar as the interest transferred to third parties is presently ascertainable. For any calendar year for which a consent is effective the liability with respect to the entire gift tax of each spouse shall be joint and several. The consent referred to above must be signified, by the spouse filing the return, by answering "Yes" to question B on the face of the return and, by the other spouse, by executing the "Consent of Spouse" appearing on the face of the return. The consent of the husband is to be signified on both returns where possible but his consent will be considered sufficient if signified on one return. The same rule is applicable to the wife. Where one spouse files more than one return for a calendar year on or before the 15th day of March following the close of such year, the last return so filed will, for the purpose of determining whether a consent has been signified, be considered as the return. The consent may be so signified at any time after the close of the calendar year, subject to the following limitations: (1) The consent may not be signified after the 15th day of March following the close of such year, unless no return has been filed before that day for such year by either spouse, in which case the consent may not be signified after a return for such year is filed by either spouse, and (2) the consent may not be signified after a notice of deficiency with respect to the tax for such year has been sent to either spouse. The executor or administrator of a deceased spouse or the guardian or committee of a legally incompetent spouse, as the case may be, may signify such consent. 8. Exclusion of $3,000.-The first $3,000 of gifts (other than gifts of future interests in property) made to any one donee during the calendar year is, for the purpose of the computation of the tax, excluded from the amount of gifts for the year. The entire value of gifts totaling more than $3,000 to any one donee during the year must be listed on the return. Where husband and wife consent to have the gifts made by them to third parties during the calendar year considered as having been made one-half by each of them, all gifts to any third party donee during the year totaling more than $3,000 must also be listed on the return irrespective of the fact that, by reason of such consent, neither spouse is considered to have made gifts in excess of $3,000 in value. The entire value of any gift of a future interest in property must be included in the total amount of gifts for the calendar year in which such a gift is made. "Future interests" is a legal term, and includes reversions, remainders, and other interests or estates, whether vested or contingent, and whether or not supported by a particular interest or estate, which are limited to commence in use, possession, or enjoyment at some future date or time. The term has no reference to such contractual rights as exist in a bond, note (though bearing no interest until maturity), or in a policy of life insurance, the obligations of which are to be discharged by payment in the future. But a future interest or interests in such contractual obligations may be created by the limitations contained in a trust or other instrument of transfer employed in effecting a gift. 9. Schedule A; gifts made during calendar year for which this return is filed.-All gifts (including charitable, public, and similar gifts) made by the donor during the calendar year for which this return is filed must, to the extent indicated in section 8 of these instructions, be disclosed under schedule A. If husband and wife consent to have the gifts made by them to third parties during the calendar year considered as having been made onehalf by each of them, the full value of the gifts made by the spouse filing the return must be included and the portion to be reported by the other spouse deducted at item b. None of the gifts made by the other spouse are to be listed individually but the total amount of such gifts to be reported by the spouse filing the return is to be included at item d. In listing the gifts on schedule A the computation of items b, h (1), and h (2) will be facilitated if the various items are segregated into gifts to the spouse and gifts to third parties and the latter category further subdivided into charitable, public and similar gifts, and all other gifts. In all cases in which it is not apparent how the amounts entered at items b, h (1), and h (2) were computed, additional sheets of the same size as the return should be attached and the computations set forth thereon in detail. 10. Description of property.-In listing upon the return the property comprising the gifts made during the calendar year, the description thereof should be such that the property may be readily identified. Thus, a legal description should be given of each parcel of real estate, and if located in a city the name of street and number, its area, and, if improved, a short statement of the character of the improvements. Description of bonds should include the number transferred, principal amount, name of obligor, date of maturity, rate of interest, date or dates on which interest is payable, series number where there is more than one issue, the exchange upon which listed, or the principal business office of the corporation, if unlisted. Descriptions of stocks should include number of shares, whether common or preferred, and, if preferred, what issue thereof, par value, quotation at which returned, exact name of corporation, and, if the stock is unlisted, the location of the principal business office and State in which incorporated and the date of incorporation. If a listed security, state principal exchange upon which sold. In describing an interest in property based on the duration of a person's life, the date of birth of that person should be stated. Description of life insurance policies should give the name of the insurer and the number of the policy. 11. Date of valuation of property.-If the gift is made in property other than money, such property is valued as of the date of the gift. 12. Supplemental documents. For every policy of life insurance listed on the return, the donor must procure a statement by the company on Form 938, revised, and file it with the director. If the gift was made by means of a trust, a certified copy of the trust instrument must be submitted. In the case of stock of close corporations or inactive stock (which should be valued on the basis of net worth, earning and dividend paying capacity), there must be submitted balance sheets, particularly the one nearest the date of the gift, and statements of the net earnings or operating results and dividends paid for each of the five preceding years. Any other documents, such as appraisal lists, required for an adequate explanation should be filed with the return. For example, where the gift consists of real estate, a copy of the appraisal, if available, should be submitted, otherwise full information as to the basis of the valuation used should be set forth under schedule A. 13. Deductions for charitable, public, and similar gifts.-The values of all charitable, public, and similar gifts listed on schedule A should be totaled, the total exclusions claimed on schedule A with respect to such gifts deducted, and the balance entered at item h (1). If money or other property is so given that the income is, for the duration of a life or a term of years, to be paid to the donor or other individual, and the property is then to be devoted exclusively for charitable, public, and similar purposes, only the present worth or value of such remainder (that is, its value as of the date of gift) is deductible. (For information as to deductions authorized for charitable, public, and similar gifts, which may be claimed under this schedule, consult the Gift Tax Regulations.) 14. Marital deduction.-In determining the amount of the net gifts for the calendar year there may be deducted, if the donor was a citizen or resident of the United States at the time the gift was made, an amount equal to one-half the value of any property interest (except as otherwise indicated below) transferred by gift after April 2, 1948, to a donee who at the time of the gift was the donor's spouse. Where the included amount of the gifts to the donee spouse, as reflected in the "Total included amount of gifts for year," item g, is less than one-half the total value of the gifts to such spouse, the deduction is allowable only to the extent of such included amount. For the purpose of the marital deduction the donor's spouse is considered as the donee in the case of property interests transferred in trust if the terms of the trust satisfy the following conditions: 1. The donee spouse must be entitled for life to all of the income from the corpus of the trust. 2. Such income must be payable annually or at more frequent intervals. 3. The donee spouse must have the power, exercisable in favor of herself or of her estate, to appoint the entire corpus free of the trust. 4. Such power in the donee spouse must be exercisable by such spouse alone and (whether exercisable by will or during life) must be exercisable in all events. "community property" as used for this purpose includes property held as community property (as defined in the Gift Tax Regulations), separate property acquired by the donor as a result of a conversion, during the calendar year 1942 or after April 2, 1948, of property then held by him and the donee spouse as community property, and property acquired by the donor in exchange for such separate property. 15. Specific exemption.-In determining the amount of the net gifts for the calendar year there may be deducted, if the donor was a citizen or resident of the United States at the time the gifts were made, a specific exemption of $30,000 less the sum of the amounts claimed and allowed as an exemption in prior calendar years. The exemption, at the option of the donor, may be taken in its entirety in a single year, or be spread over a period of years in such amounts as he sees fit, but after the limit has been reached no further exemption is allowable. A donor who was a nonresident not a citizen of the United States at the time the gifts were made is not entitled to this exemption. 16. Schedule B; gifts made during preceding calendar years (subsequent to June 6, 1932).-Gift tax returns, Form 709, filed for preceding years subsequent to June 6, 1932, should be indicated in schedule B. The donor's name used in each return filed for preceding years should be shown in schedule B where there has been a change in name in this or any prior return. Any variation such as the use of full given names instead of initials should also be indicated. The correct amount of the net gifts for each prior year during which gifts were made (the amount finally determined), and not necessarily the amount returned in the prior case, should be entered in the last column; and the amount of the specific exemption claimed and allowed for each such prior year should be entered in the third column. Enter at item b any amount by which the total specific exemption claimed and allowed for preceding years (line a) exceeds $30,000. Any amount entered at item b should be added to the amount entered in the last column on line a, and the sum thus obtained should be entered at item c. The amount shown at item c is the "Total amount of net gifts for preceding years" computed for the purpose of this return, and should be carried forward to item 2 under “Computation of tax" on the first page of the return. 17. Computation of tax.-Enter at item 1 under “Computation of tax" the amount of the net gifts for the year. Enter at item 2 the total amount of net gifts for preceding years, if any, taken from item c of schedule B. Enter at item 3 the sum of item 1 and item 2. Compute the tax on item 3 in accordance with the "Table for computing gift tax" and enter the result obtained at item 4. Compute the tax on the total amount of net gifts for preceding years, if any, item 2, in accordance with the table and enter the result obtained at item 5. Then subtract item 5, the tax computed on the total amount of net gifts for preceding years, from item 4, the tax computed on the total net gifts, and enter the difference at item 6, which is the tax on net gifts for the year. This latter amount should be paid to the director. 18. Declarations. In addition to the taxpayer's declaration, if the return was prepared by another, the second declaration should be executed by the person preparing the return. 19. Gift tax regulations.-For further instructions consult the Gift Tax Regulations, a copy of which may be obtained from the director of internal revenue. 5. The corpus of the trust must not be subject to a power in any other person to appoint any part thereof to any person other than the donee spouse. Where the income from property is made payable to the donor or a third party for life, or for a term of years, with remainder absolutely to the donor's spouse or to her estate, the marital deduction is equal to one-half the present value of the remainder. The marital deduction is generally not allowable where the interest transferred to the donee spouse was a "terminable interest." The expression "terminable interest" refers to a life estate, an estate for years, or any other property interest which, upon the lapse of time, upon the occurrence of an event or contingency, or upon the failure of an event or contingency to occur, will terminate or fail. If the interest is transferred to the donee spouse as sole joint tenant with the donor or as tenant by the entirety, the interest will not be considered a "terminable interest" solely by reason of the possibility that the donor may survive the donee spouse, or that there may occur a severance of the tenancy. The marital deduction also is not allowable where |