GRAT taxation has two layers. For gift tax, the reportable gift equals the value of property transferred minus the actuarial value of the retained annuity (computed with the 7520 rate). For Income tax, GRATs are usually grantor trusts, so income, gains, and deductions flow to the grantor,who pays the tax-effectively allowing additional tax-free wealth shifts. Estate inclusion may occur if the grantor dies during the term or retains prohibited powers. Accurate Form 709 reporting and careful administration preserve intended tax outcomes.

CPAs report the GRAT as a grantor trust, with income taxed to the grantor. Gift value is shown on 709; if the grantor dies during the term, counsel evaluates estate inclusion. Proper records defend valuations and allocations.