What documentation do I need for Form 709?

Filing Form 709 requires the completed return itself plus enough supporting documentation to "adequately disclose" each gift, which typically means a description of the property transferred, the relationship between donor and recipient, and valuation support for anything that isn't cash.

For most gifts of real estate, closely held business interests, or other non-cash property, that valuation support should be a qualified appraisal report. A proper gift tax appraisal documents the appraiser's qualifications, the valuation date, the fair market value conclusion, and the methodology used, including any discounts applied for lack of control or marketability on things like LLC or family limited partnership interests. If you don't attach an appraisal, the IRS requires a detailed written explanation of how you arrived at value instead, which is a much weaker position if your return is ever questioned.

Beyond the appraisal, plan to gather:

• Prior years' Form 709 filings from the same donor, needed to reconcile lifetime exclusion amounts used to date
• Financial statements for gifted business interests, including balance sheets and five years of earnings history if no appraisal is provided
• Trust documents, including the trust instrument for a first-time transfer to a trust and its EIN
• Identification of donor and donee and their relationship, along with a description of the property transferred

Because valuation is often the most scrutinized part of a gift tax return, see how gifts are valued for tax purposes for more on what supports a defensible number, and confirm who is responsible for paying the gift tax before you file.