§ 1025. Appendix to article twenty-six-B. The following provisions of the United States Internal Revenue Code of 1986 shall apply to the tax imposed by this article, to the extent specified in this article: § 2601. Tax imposed A tax is hereby imposed on every generation-skipping transfer (within the meaning of subchapter B). § 2602. Amount of tax The amount of the tax imposed by section 2601 is- (1) the taxable amount (determined under subchapter C), multiplied by (2) the applicable rate (determined under subchapter E). § 2603. Liability for tax (a) Personal liability.- (1) Taxable distributions.-In the case of a taxable distribution, the tax imposed by section 2601 shall be paid by the transferee. (2) Taxable termination.-In the case of a taxable termination or a direct skip from a trust, the tax shall be paid by the trustee. (3) Direct skip.-In the case of a direct skip (other than a direct skip from a trust), the tax shall be paid by the transferor. (b) Source of tax.-Unless otherwise directed pursuant to the governing instrument by specific reference to the tax imposed by this chapter, the tax imposed by this chapter on a generation-skipping transfer shall be charged to the property constituting such transfer. (c) Cross reference.- For provisions making estate and gift tax provisions with respect to transferee liability, liens, and related matters applicable to the tax imposed by section 2601, see section 2661. § 2604. Credit for certain State taxes (a) General rule.-If a generation-skipping transfer (other than a direct skip) occurs at the same time as and as a result of the death of an individual, a credit against the tax imposed by section 2601 shall be allowed in an amount equal to the generation-skipping transfer tax actually paid to any State in respect to any property included in the generation-skipping transfer. (b) Limitation.-The aggregate amount allowed as a credit under this section with respect to any transfer shall not exceed 5 percent of the amount of the tax imposed by section 2601 on such transfer. § 2611. Generation-skipping transfer defined (a) In general.-For purposes of this chapter, the term "generation-skipping transfer" means- (1) a taxable distribution, (2) a taxable termination, and (3) a direct skip. (b) Certain transfers excluded.-The term "generation-skipping transfer" does not include- (1) any transfer which, if made inter vivos by an individual, would not be treated as a taxable gift by reason of section 2503(e) (relating to exclusion of certain transfers for educational or medical expenses), and (2) any transfer to the extent- (A) the property transferred was subject to a prior tax imposed under this chapter, (B) the transferee in the prior transfer was assigned to the same generation as (or a lower generation than) the generation assignment of the transferee in this transfer, and (C) such transfers do not have the effect of avoiding tax under this chapter with respect to any transfer. § 2612. Taxable termination; taxable distribution; direct skip (a) Taxable termination.-(1) General rule.-For purposes of this chapter, the term "taxable termination" means the termination (by death, lapse of time, release of power, or otherwise) of an interest in property held in a trust unless- (A) immediately after such termination, a non-skip person has an interest in such property, or (B) at no time after such termination may a distribution (including distributions on termination) be made from such trust to a skip person. (2) Certain partial terminations treated as taxable.-If, upon the termination of an interest in property held in trust by reason of the death of a lineal descendant of the transferor, a specific portion of the trust's assets are distributed to one or more skip persons (or one or more trusts for the exclusive benefit of such persons), such termination shall constitute a taxable termination with respect to such portion of the trust property. (b) Taxable distribution.-For purposes of this chapter, the term "taxable distribution" means any distribution from a trust to a skip person (other than a taxable termination or a direct skip). (c) Direct skip.--For purposes of this chapter - (1) In general.--The term "direct skip" means a transfer subject to a tax imposed by chapter 11 or 12 of an interest in property to a skip person. (2) Look-thru rules not to apply.--Solely for purposes of determining whether any transfer to a trust is a direct skip, the rules of section 2651(f)(2) shall not apply. § 2613. Skip person and non-skip person defined (a) Skip person.-For purposes of this chapter, the term "skip person" means- (1) a natural person assigned to a generation which is two or more generations below the generation assignment of the transferor, or (2) a trust- (A) if all interests in such trust are held by skip persons, or (B) if- (i) there is no person holding an interest in such trust, and (ii) at no time after such transfer may a distribution (including distributions on termination) be made from such trust to a non-skip person. (b) Non-skip person.-For purposes of this chapter, the term "non-skip person" means any person who is not a skip person. § 2621. Taxable amount in case of taxable distribution (a) In general.-For purposes of this chapter, the taxable amount in the case of any taxable distribution shall be- (1) the value of the property received by the transferee, reduced by (2) any expense incurred by the transferee in connection with the determination, collection, or refund of the tax imposed by this chapter with respect to such distribution. (b) Payment of GST tax treated as taxable distribution.-For purposes of this chapter, if any of the tax imposed by this chapter with respect to any taxable distribution is paid out of the trust, an amount equal to the portion so paid shall be treated as a taxable distribution. § 2622. Taxable amount in case of taxable termination (a) In general.-For purposes of this chapter, the taxable amount in the case of a taxable termination shall be- (1) the value of all property with respect to which the taxable termination has occurred, reduced by (2) any deduction allowed under subsection (b). (b) Deduction for certain expenses.-For purposes of subsection (a), there shall be allowed a deduction similar to the deduction allowed by section 2053 (relating to expenses, indebtedness, and taxes) for amountsattributable to the property with respect to which the taxable termination has occurred. § 2624. Valuation (a) General rule.-Except as otherwise provided in this chapter, property shall be valued as of the time of the generation-skipping transfer. (b) Alternate valuation and special use valuation elections apply to certain direct skips.-In the case of any direct skip of property which is included in the transferor's gross estate, the value of such property for purposes of this chapter shall be the same as its value for purposes of chapter 11 (determined with regard to sections 2032 and 2032A). (c) Alternate valuation election permitted in the case of taxable terminations occurring at death.-If one or more taxable terminations with respect to the same trust occur at the same time as and as a result of the death of an individual, an election may be made to value all of the property included in such terminations in accordance with section 2032. (d) Reduction for consideration provided by transferee.-For purposes of this chapter, the value of the property transferred shall be reduced by the amount of any consideration provided by the transferee. § 2651. Generation assignment (a) In general.-For purposes of this chapter, the generation to which any person (other than the transferor) belongs shall be determined in accordance with the rules set forth in this section. (b) Lineal descendants.- (1) In general.-An individual who is a lineal descendant of a grandparent of the transferor shall be assigned to that generation which results from comparing the number of generations between the grandparent and such individual with the number of generations between the grandparent and the transferor. (2) On spouse's side.-An individual who is a lineal descendant of a grandparent of a spouse (or former spouse) of the transferor (other than such spouse) shall be assigned to that generation which results from comparing the number of generations between such grandparent and such individual with the number of generations between such grandparent and such spouse. (3) Treatment of legal adoptions, etc.-For purposes of this subsection- (A) Legal adoptions.-A relationship by legal adoption shall be treated as a relationship by blood. (B) Relationships by half-blood.-A relationship by the half-blood shall be treated as a relationship of the whole-blood. (c) Marital relationship.- (1) Marriage to transferor.-An individual who has been married at any time to the transferor shall be assigned to the transferor's generation. (2) Marriage to other lineal descendants.-An individual who has been married at any time to an individual described in subsection (b) shall be assigned to the generation of the individual so described. (d) Persons who are not lineal descendants.-An individual who is not assigned to a generation by reason of the foregoing provisions of this section shall be assigned to a generation on the basis of the date of such individual's birth with- (1) an individual born not more than 12 1/2 years after the date of the birth of the transferor assigned to the transferor's generation, (2) an individual born more than 12 1/2 years but not more than 37 1/2 years after the date of the birth of the transferor assigned to the first generation younger than the transferor, and (3) similar rules for a new generation every 25 years.(e) Special rules for persons with a deceased parent.-- (1) In general.--For purposes of determining whether any transfer is a generation-skipping transfer, if-- (A) an individual is a descendant of a parent of the transferor (or the transferor's spouse or former spouse), and (B) such individual's parent who is a lineal descendant of the parent of the transferor (or the transferor's spouse or former spouse) is dead at the time the time the transfer (from which an interest of such individual is established or derived) is subject to a tax imposed by chapter 11 or 12 upon the transferor (and if there shall be more than 1 such time, then at the earliest such time), such individual shall be treated as if such individual were a member of the generation which is 1 generation below the lower of the transferor's generation or the generation assignment of the youngest living ancestor of such individual who is also a descendant of the parent of the transferor (or the transferor's spouse or former spouse), and the generation assignment of any descendant of such individual shall be adjusted accordingly. (2) Limited application of subsection to collateral heirs.--This subsection shall not apply with respect to a transfer to any individual who is not a lineal descendant of the transferor (or the transferor's spouse or former spouse) if, at the time of the transfer, such transferor has any living lineal descendant. (f) Other special rules.- (1) Individuals assigned to more than one generation.-Except as provided in regulations, an individual who, but for this subsection, would be assigned to more than one generation shall be assigned to the youngest such generation. (2) Interests through entities.-Except as provided in paragraph (3), if an estate, trust, partnership, corporation, or other entity has an interest in property, each individual having a beneficial interest in such entity shall be treated as having an interest in such property and shall be assigned to a generation under the foregoing provisions of this subsection. (3) Treatment of certain charitable organizations and governmental entities.-Any- (A) organization described in section 511(a)(2), (B) charitable trust described in section 511(b)(2), and (C) governmental entity, shall be assigned to the transferor's generation. § 2652. Other definitions (a) Transferor.-For purposes of this chapter- (1) In general.-Except as provided in this subsection or section 2653(a), the term "transferor" means- (A) in the case of any property subject to the tax imposed by chapter 11, the decedent, and (B) in the case of any property subject to the tax imposed by chapter 12, the donor. An individual shall be treated as transferring any property with respect to which such individual is the transferor. (2) Gift-splitting by married couples.-If, under section 2513, one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of such individual, such gift shall be so treated for purposes of this chapter. (3) Special election for qualified terminable interest property.-In the case of- (A) any trust with respect to which a deduction is allowed to the decedent under section 2056 by reason of subsection (b)(7) thereof, and(B) any trust with respect to which a deduction to the donor spouse is allowed under section 2523 by reason of subsection (f) thereof, the estate of the decedent or the donor spouse, as the case may be, may elect to treat all of the property in such trust for purposes of this chapter as if the election to be treated as qualified terminable interest property had not been made. (b) Trust and trustee.- (1) Trust.-The term "trust" includes any arrangement (other than an estate) which, although not a trust, has substantially the same effect as a trust. (2) Trustee.-In the case of an arrangement which is not a trust but which is treated as a trust under this subsection, the term "trustee" shall mean the person in actual or constructive possession of the property subject to such arrangement. (3) Examples.-Arrangements to which this subsection applies include arrangements involving life estates and remainders, estates for years, and insurance and annuity contracts. (c) Interest.- (1) In general.-A person has an interest in property held in trust if (at the time the determination is made) such person- (A) has a right (other than a future right) to receive income or corpus from the trust, (B) is a permissible current recipient of income or corpus from the trust and is not described in section 2055(a), or (C) is described in section 2055(a) and the trust is- (i) a charitable remainder annuity trust, (ii) a charitable remainder unitrust within the meaning of section 664, or (iii) a pooled income fund within the meaning of section 642(c)(5). (2) Certain interests disregarded.-For purposes of paragraph (1), an interest which is used primarily to postpone or avoid any tax imposed by this chapter shall be disregarded. (3) Certain support obligations disregarded.-The fact that income or corpus of the trust may be used to satisfy an obligation of support arising under State law shall be disregarded in determining whether a person has an interest in the trust, if- (A) such use is discretionary, or (B) such use is pursuant to the provisions of any State law substantially equivalent to the Uniform Gifts to Minors Act. (d) Executor.-For purposes of this chapter, the term "executor" has the meaning given such term by section 2203. § 2653. Taxation of multiple skips (a) General rule.-For purposes of this chapter, if- (1) there is a generation-skipping transfer of any property, and (2) immediately after such transfer such property is held in trust, for purposes of applying this chapter (other than section 2651) to subsequent transfers from the portion of such trust attributable to such property, the trust will be treated as if the transferor of such property were assigned to the first generation above the highest generation of any person who has an interest in such trust immediately after the transfer. (b) Trust retains inclusion ratio.- (1) In general.-Except as provided in paragraph (2), the provisions of subsection (a) shall not affect the inclusion ratio determined with respect to any trust. Under regulations prescribed by the Secretary, notwithstanding the preceding sentence, proper adjustment shall be made to the inclusion ratio with respect to such trust to take into accountany tax under this chapter borne by such trust which is imposed by this chapter on the transfer described in subsection (a). (2) Special rule for pour-over trust.- (A) In general.-If the generation-skipping transfer referred to in subsection (a) involves the transfer of property from one trust to another trust (hereinafter in this paragraph referred to as the "pour-over trust"), the inclusion ratio for the pour-over trust shall be determined by treating the nontax portion of such distribution as if it were a part of a GST exemption allocated to such trust. (B) Nontax portion.-For purposes of subparagraph (A), the nontax portion of any distribution is the amount of such distribution multiplied by the applicable fraction which applies to such distribution. § 2654. Special rules (a) Basis adjustment.- (1) In general.-Except as provided in paragraph (2), if property is transferred in a generation-skipping transfer, the basis of such property shall be increased (but not above the fair market value of such property) by an amount equal to that portion of the tax imposed by section 2601 (computed without regard to section 2604) with respect to the transfer which is attributable to the excess of the fair market value of such property over its adjusted basis immediately before the transfer. The preceding shall be applied after any basis adjustment under section 1015 with respect to the transfer. (2) Certain transfers at death.-If property is transferred in a taxable termination which occurs at the same time as and as a result of the death of an individual, the basis of such property shall be adjusted in a manner similar to the manner provided under section 1014(a); except that, if the inclusion ratio with respect to such property is less than one, any increase or decrease in basis shall be limited by multiplying such increase or decrease (as the case may be) by the inclusion ratio. (b) Certain trusts treated as separate trusts.-For purposes of this chapter- (1) the portions of a trust attributable to transfers from different transferors shall be treated as separate trusts, and (2) substantially separate and independent shares of different beneficiaries in a trust shall be treated as separate trusts. Except as provided in the preceding sentence, nothing in this chapter shall be construed as authorizing a single trust to be treated as two or more trusts. For purposes of this subsection, a trust shall be treated as part of an estate during any period that the trust is so treated under section 645. (c) Disclaimers.- For provisions relating to the effect of a qualified disclaimer for purposes of this chapter, see section 2518. (d) Limitation on personal liability of trustee.-A trustee shall not be personally liable for any increase in the tax imposed by section 2601 which is attributable to the fact that- (1) section 2642(c) (relating to exemption of certain nontaxable gifts) does not apply to a transfer to the trust which was made during the life of the transferor and for which a gift tax return was not filed, or (2) the inclusion ratio with respect to the trust is greater than the amount of such ratio as computed on the basis of the return on which was made (or was deemed made) an allocation of the GST exemption to property transferred to such trust.The preceding sentence shall not apply if the trustee has knowledge of facts sufficient reasonably to conclude that a gift tax return was required to be filed or that the inclusion ratio was erroneous.
§ 1025. Appendix to article twenty-six-B. The following provisions of the United States Internal Revenue Code of 1986 shall apply to the tax imposed by this article, to the extent specified in this article: § 2601. Tax imposed A tax is hereby imposed on every generation-skipping transfer (within the meaning of subchapter B). § 2602. Amount of tax The amount of the tax imposed by section 2601 is- (1) the taxable amount (determined under subchapter C), multiplied by (2) the applicable rate (determined under subchapter E). § 2603. Liability for tax (a) Personal liability.- (1) Taxable distributions.-In the case of a taxable distribution, the tax imposed by section 2601 shall be paid by the transferee. (2) Taxable termination.-In the case of a taxable termination or a direct skip from a trust, the tax shall be paid by the trustee. (3) Direct skip.-In the case of a direct skip (other than a direct skip from a trust), the tax shall be paid by the transferor. (b) Source of tax.-Unless otherwise directed pursuant to the governing instrument by specific reference to the tax imposed by this chapter, the tax imposed by this chapter on a generation-skipping transfer shall be charged to the property constituting such transfer. (c) Cross reference.- For provisions making estate and gift tax provisions with respect to transferee liability, liens, and related matters applicable to the tax imposed by section 2601, see section 2661. § 2604. Credit for certain State taxes (a) General rule.-If a generation-skipping transfer (other than a direct skip) occurs at the same time as and as a result of the death of an individual, a credit against the tax imposed by section 2601 shall be allowed in an amount equal to the generation-skipping transfer tax actually paid to any State in respect to any property included in the generation-skipping transfer. (b) Limitation.-The aggregate amount allowed as a credit under this section with respect to any transfer shall not exceed 5 percent of the amount of the tax imposed by section 2601 on such transfer. § 2611. Generation-skipping transfer defined (a) In general.-For purposes of this chapter, the term "generation-skipping transfer" means- (1) a taxable distribution, (2) a taxable termination, and (3) a direct skip. (b) Certain transfers excluded.-The term "generation-skipping transfer" does not include- (1) any transfer which, if made inter vivos by an individual, would not be treated as a taxable gift by reason of section 2503(e) (relating to exclusion of certain transfers for educational or medical expenses), and (2) any transfer to the extent- (A) the property transferred was subject to a prior tax imposed under this chapter, (B) the transferee in the prior transfer was assigned to the same generation as (or a lower generation than) the generation assignment of the transferee in this transfer, and (C) such transfers do not have the effect of avoiding tax under this chapter with respect to any transfer. § 2612. Taxable termination; taxable distribution; direct skip (a) Taxable termination.-(1) General rule.-For purposes of this chapter, the term "taxable termination" means the termination (by death, lapse of time, release of power, or otherwise) of an interest in property held in a trust unless- (A) immediately after such termination, a non-skip person has an interest in such property, or (B) at no time after such termination may a distribution (including distributions on termination) be made from such trust to a skip person. (2) Certain partial terminations treated as taxable.-If, upon the termination of an interest in property held in trust by reason of the death of a lineal descendant of the transferor, a specific portion of the trust's assets are distributed to one or more skip persons (or one or more trusts for the exclusive benefit of such persons), such termination shall constitute a taxable termination with respect to such portion of the trust property. (b) Taxable distribution.-For purposes of this chapter, the term "taxable distribution" means any distribution from a trust to a skip person (other than a taxable termination or a direct skip). (c) Direct skip.--For purposes of this chapter - (1) In general.--The term "direct skip" means a transfer subject to a tax imposed by chapter 11 or 12 of an interest in property to a skip person. (2) Look-thru rules not to apply.--Solely for purposes of determining whether any transfer to a trust is a direct skip, the rules of section 2651(f)(2) shall not apply. § 2613. Skip person and non-skip person defined (a) Skip person.-For purposes of this chapter, the term "skip person" means- (1) a natural person assigned to a generation which is two or more generations below the generation assignment of the transferor, or (2) a trust- (A) if all interests in such trust are held by skip persons, or (B) if- (i) there is no person holding an interest in such trust, and (ii) at no time after such transfer may a distribution (including distributions on termination) be made from such trust to a non-skip person. (b) Non-skip person.-For purposes of this chapter, the term "non-skip person" means any person who is not a skip person. § 2621. Taxable amount in case of taxable distribution (a) In general.-For purposes of this chapter, the taxable amount in the case of any taxable distribution shall be- (1) the value of the property received by the transferee, reduced by (2) any expense incurred by the transferee in connection with the determination, collection, or refund of the tax imposed by this chapter with respect to such distribution. (b) Payment of GST tax treated as taxable distribution.-For purposes of this chapter, if any of the tax imposed by this chapter with respect to any taxable distribution is paid out of the trust, an amount equal to the portion so paid shall be treated as a taxable distribution. § 2622. Taxable amount in case of taxable termination (a) In general.-For purposes of this chapter, the taxable amount in the case of a taxable termination shall be- (1) the value of all property with respect to which the taxable termination has occurred, reduced by (2) any deduction allowed under subsection (b). (b) Deduction for certain expenses.-For purposes of subsection (a), there shall be allowed a deduction similar to the deduction allowed by section 2053 (relating to expenses, indebtedness, and taxes) for amountsattributable to the property with respect to which the taxable termination has occurred. § 2624. Valuation (a) General rule.-Except as otherwise provided in this chapter, property shall be valued as of the time of the generation-skipping transfer. (b) Alternate valuation and special use valuation elections apply to certain direct skips.-In the case of any direct skip of property which is included in the transferor's gross estate, the value of such property for purposes of this chapter shall be the same as its value for purposes of chapter 11 (determined with regard to sections 2032 and 2032A). (c) Alternate valuation election permitted in the case of taxable terminations occurring at death.-If one or more taxable terminations with respect to the same trust occur at the same time as and as a result of the death of an individual, an election may be made to value all of the property included in such terminations in accordance with section 2032. (d) Reduction for consideration provided by transferee.-For purposes of this chapter, the value of the property transferred shall be reduced by the amount of any consideration provided by the transferee. § 2651. Generation assignment (a) In general.-For purposes of this chapter, the generation to which any person (other than the transferor) belongs shall be determined in accordance with the rules set forth in this section. (b) Lineal descendants.- (1) In general.-An individual who is a lineal descendant of a grandparent of the transferor shall be assigned to that generation which results from comparing the number of generations between the grandparent and such individual with the number of generations between the grandparent and the transferor. (2) On spouse's side.-An individual who is a lineal descendant of a grandparent of a spouse (or former spouse) of the transferor (other than such spouse) shall be assigned to that generation which results from comparing the number of generations between such grandparent and such individual with the number of generations between such grandparent and such spouse. (3) Treatment of legal adoptions, etc.-For purposes of this subsection- (A) Legal adoptions.-A relationship by legal adoption shall be treated as a relationship by blood. (B) Relationships by half-blood.-A relationship by the half-blood shall be treated as a relationship of the whole-blood. (c) Marital relationship.- (1) Marriage to transferor.-An individual who has been married at any time to the transferor shall be assigned to the transferor's generation. (2) Marriage to other lineal descendants.-An individual who has been married at any time to an individual described in subsection (b) shall be assigned to the generation of the individual so described. (d) Persons who are not lineal descendants.-An individual who is not assigned to a generation by reason of the foregoing provisions of this section shall be assigned to a generation on the basis of the date of such individual's birth with- (1) an individual born not more than 12 1/2 years after the date of the birth of the transferor assigned to the transferor's generation, (2) an individual born more than 12 1/2 years but not more than 37 1/2 years after the date of the birth of the transferor assigned to the first generation younger than the transferor, and (3) similar rules for a new generation every 25 years.(e) Special rules for persons with a deceased parent.-- (1) In general.--For purposes of determining whether any transfer is a generation-skipping transfer, if-- (A) an individual is a descendant of a parent of the transferor (or the transferor's spouse or former spouse), and (B) such individual's parent who is a lineal descendant of the parent of the transferor (or the transferor's spouse or former spouse) is dead at the time the time the transfer (from which an interest of such individual is established or derived) is subject to a tax imposed by chapter 11 or 12 upon the transferor (and if there shall be more than 1 such time, then at the earliest such time), such individual shall be treated as if such individual were a member of the generation which is 1 generation below the lower of the transferor's generation or the generation assignment of the youngest living ancestor of such individual who is also a descendant of the parent of the transferor (or the transferor's spouse or former spouse), and the generation assignment of any descendant of such individual shall be adjusted accordingly. (2) Limited application of subsection to collateral heirs.--This subsection shall not apply with respect to a transfer to any individual who is not a lineal descendant of the transferor (or the transferor's spouse or former spouse) if, at the time of the transfer, such transferor has any living lineal descendant. (f) Other special rules.- (1) Individuals assigned to more than one generation.-Except as provided in regulations, an individual who, but for this subsection, would be assigned to more than one generation shall be assigned to the youngest such generation. (2) Interests through entities.-Except as provided in paragraph (3), if an estate, trust, partnership, corporation, or other entity has an interest in property, each individual having a beneficial interest in such entity shall be treated as having an interest in such property and shall be assigned to a generation under the foregoing provisions of this subsection. (3) Treatment of certain charitable organizations and governmental entities.-Any- (A) organization described in section 511(a)(2), (B) charitable trust described in section 511(b)(2), and (C) governmental entity, shall be assigned to the transferor's generation. § 2652. Other definitions (a) Transferor.-For purposes of this chapter- (1) In general.-Except as provided in this subsection or section 2653(a), the term "transferor" means- (A) in the case of any property subject to the tax imposed by chapter 11, the decedent, and (B) in the case of any property subject to the tax imposed by chapter 12, the donor. An individual shall be treated as transferring any property with respect to which such individual is the transferor. (2) Gift-splitting by married couples.-If, under section 2513, one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of such individual, such gift shall be so treated for purposes of this chapter. (3) Special election for qualified terminable interest property.-In the case of- (A) any trust with respect to which a deduction is allowed to the decedent under section 2056 by reason of subsection (b)(7) thereof, and(B) any trust with respect to which a deduction to the donor spouse is allowed under section 2523 by reason of subsection (f) thereof, the estate of the decedent or the donor spouse, as the case may be, may elect to treat all of the property in such trust for purposes of this chapter as if the election to be treated as qualified terminable interest property had not been made. (b) Trust and trustee.- (1) Trust.-The term "trust" includes any arrangement (other than an estate) which, although not a trust, has substantially the same effect as a trust. (2) Trustee.-In the case of an arrangement which is not a trust but which is treated as a trust under this subsection, the term "trustee" shall mean the person in actual or constructive possession of the property subject to such arrangement. (3) Examples.-Arrangements to which this subsection applies include arrangements involving life estates and remainders, estates for years, and insurance and annuity contracts. (c) Interest.- (1) In general.-A person has an interest in property held in trust if (at the time the determination is made) such person- (A) has a right (other than a future right) to receive income or corpus from the trust, (B) is a permissible current recipient of income or corpus from the trust and is not described in section 2055(a), or (C) is described in section 2055(a) and the trust is- (i) a charitable remainder annuity trust, (ii) a charitable remainder unitrust within the meaning of section 664, or (iii) a pooled income fund within the meaning of section 642(c)(5). (2) Certain interests disregarded.-For purposes of paragraph (1), an interest which is used primarily to postpone or avoid any tax imposed by this chapter shall be disregarded. (3) Certain support obligations disregarded.-The fact that income or corpus of the trust may be used to satisfy an obligation of support arising under State law shall be disregarded in determining whether a person has an interest in the trust, if- (A) such use is discretionary, or (B) such use is pursuant to the provisions of any State law substantially equivalent to the Uniform Gifts to Minors Act. (d) Executor.-For purposes of this chapter, the term "executor" has the meaning given such term by section 2203. § 2653. Taxation of multiple skips (a) General rule.-For purposes of this chapter, if- (1) there is a generation-skipping transfer of any property, and (2) immediately after such transfer such property is held in trust, for purposes of applying this chapter (other than section 2651) to subsequent transfers from the portion of such trust attributable to such property, the trust will be treated as if the transferor of such property were assigned to the first generation above the highest generation of any person who has an interest in such trust immediately after the transfer. (b) Trust retains inclusion ratio.- (1) In general.-Except as provided in paragraph (2), the provisions of subsection (a) shall not affect the inclusion ratio determined with respect to any trust. Under regulations prescribed by the Secretary, notwithstanding the preceding sentence, proper adjustment shall be made to the inclusion ratio with respect to such trust to take into accountany tax under this chapter borne by such trust which is imposed by this chapter on the transfer described in subsection (a). (2) Special rule for pour-over trust.- (A) In general.-If the generation-skipping transfer referred to in subsection (a) involves the transfer of property from one trust to another trust (hereinafter in this paragraph referred to as the "pour-over trust"), the inclusion ratio for the pour-over trust shall be determined by treating the nontax portion of such distribution as if it were a part of a GST exemption allocated to such trust. (B) Nontax portion.-For purposes of subparagraph (A), the nontax portion of any distribution is the amount of such distribution multiplied by the applicable fraction which applies to such distribution. § 2654. Special rules (a) Basis adjustment.- (1) In general.-Except as provided in paragraph (2), if property is transferred in a generation-skipping transfer, the basis of such property shall be increased (but not above the fair market value of such property) by an amount equal to that portion of the tax imposed by section 2601 (computed without regard to section 2604) with respect to the transfer which is attributable to the excess of the fair market value of such property over its adjusted basis immediately before the transfer. The preceding shall be applied after any basis adjustment under section 1015 with respect to the transfer. (2) Certain transfers at death.-If property is transferred in a taxable termination which occurs at the same time as and as a result of the death of an individual, the basis of such property shall be adjusted in a manner similar to the manner provided under section 1014(a); except that, if the inclusion ratio with respect to such property is less than one, any increase or decrease in basis shall be limited by multiplying such increase or decrease (as the case may be) by the inclusion ratio. (b) Certain trusts treated as separate trusts.-For purposes of this chapter- (1) the portions of a trust attributable to transfers from different transferors shall be treated as separate trusts, and (2) substantially separate and independent shares of different beneficiaries in a trust shall be treated as separate trusts. Except as provided in the preceding sentence, nothing in this chapter shall be construed as authorizing a single trust to be treated as two or more trusts. For purposes of this subsection, a trust shall be treated as part of an estate during any period that the trust is so treated under section 645. (c) Disclaimers.- For provisions relating to the effect of a qualified disclaimer for purposes of this chapter, see section 2518. (d) Limitation on personal liability of trustee.-A trustee shall not be personally liable for any increase in the tax imposed by section 2601 which is attributable to the fact that- (1) section 2642(c) (relating to exemption of certain nontaxable gifts) does not apply to a transfer to the trust which was made during the life of the transferor and for which a gift tax return was not filed, or (2) the inclusion ratio with respect to the trust is greater than the amount of such ratio as computed on the basis of the return on which was made (or was deemed made) an allocation of the GST exemption to property transferred to such trust.The preceding sentence shall not apply if the trustee has knowledge of facts sufficient reasonably to conclude that a gift tax return was required to be filed or that the inclusion ratio was erroneous.
§ 1025. Appendix to article twenty-six-B. The following provisions of the United States Internal Revenue Code of 1986 shall apply to the tax imposed by this article, to the extent specified in this article: § 2601. Tax imposed A tax is hereby imposed on every generation-skipping transfer (within the meaning of subchapter B). § 2602. Amount of tax The amount of the tax imposed by section 2601 is- (1) the taxable amount (determined under subchapter C), multiplied by (2) the applicable rate (determined under subchapter E). § 2603. Liability for tax (a) Personal liability.- (1) Taxable distributions.-In the case of a taxable distribution, the tax imposed by section 2601 shall be paid by the transferee. (2) Taxable termination.-In the case of a taxable termination or a direct skip from a trust, the tax shall be paid by the trustee. (3) Direct skip.-In the case of a direct skip (other than a direct skip from a trust), the tax shall be paid by the transferor. (b) Source of tax.-Unless otherwise directed pursuant to the governing instrument by specific reference to the tax imposed by this chapter, the tax imposed by this chapter on a generation-skipping transfer shall be charged to the property constituting such transfer. (c) Cross reference.- For provisions making estate and gift tax provisions with respect to transferee liability, liens, and related matters applicable to the tax imposed by section 2601, see section 2661. § 2604. Credit for certain State taxes (a) General rule.-If a generation-skipping transfer (other than a direct skip) occurs at the same time as and as a result of the death of an individual, a credit against the tax imposed by section 2601 shall be allowed in an amount equal to the generation-skipping transfer tax actually paid to any State in respect to any property included in the generation-skipping transfer. (b) Limitation.-The aggregate amount allowed as a credit under this section with respect to any transfer shall not exceed 5 percent of the amount of the tax imposed by section 2601 on such transfer. § 2611. Generation-skipping transfer defined (a) In general.-For purposes of this chapter, the term "generation-skipping transfer" means- (1) a taxable distribution, (2) a taxable termination, and (3) a direct skip. (b) Certain transfers excluded.-The term "generation-skipping transfer" does not include- (1) any transfer which, if made inter vivos by an individual, would not be treated as a taxable gift by reason of section 2503(e) (relating to exclusion of certain transfers for educational or medical expenses), and (2) any transfer to the extent- (A) the property transferred was subject to a prior tax imposed under this chapter, (B) the transferee in the prior transfer was assigned to the same generation as (or a lower generation than) the generation assignment of the transferee in this transfer, and (C) such transfers do not have the effect of avoiding tax under this chapter with respect to any transfer. § 2612. Taxable termination; taxable distribution; direct skip (a) Taxable termination.-(1) General rule.-For purposes of this chapter, the term "taxable termination" means the termination (by death, lapse of time, release of power, or otherwise) of an interest in property held in a trust unless- (A) immediately after such termination, a non-skip person has an interest in such property, or (B) at no time after such termination may a distribution (including distributions on termination) be made from such trust to a skip person. (2) Certain partial terminations treated as taxable.-If, upon the termination of an interest in property held in trust by reason of the death of a lineal descendant of the transferor, a specific portion of the trust's assets are distributed to one or more skip persons (or one or more trusts for the exclusive benefit of such persons), such termination shall constitute a taxable termination with respect to such portion of the trust property. (b) Taxable distribution.-For purposes of this chapter, the term "taxable distribution" means any distribution from a trust to a skip person (other than a taxable termination or a direct skip). (c) Direct skip.--For purposes of this chapter - (1) In general.--The term "direct skip" means a transfer subject to a tax imposed by chapter 11 or 12 of an interest in property to a skip person. (2) Look-thru rules not to apply.--Solely for purposes of determining whether any transfer to a trust is a direct skip, the rules of section 2651(f)(2) shall not apply. § 2613. Skip person and non-skip person defined (a) Skip person.-For purposes of this chapter, the term "skip person" means- (1) a natural person assigned to a generation which is two or more generations below the generation assignment of the transferor, or (2) a trust- (A) if all interests in such trust are held by skip persons, or (B) if- (i) there is no person holding an interest in such trust, and (ii) at no time after such transfer may a distribution (including distributions on termination) be made from such trust to a non-skip person. (b) Non-skip person.-For purposes of this chapter, the term "non-skip person" means any person who is not a skip person. § 2621. Taxable amount in case of taxable distribution (a) In general.-For purposes of this chapter, the taxable amount in the case of any taxable distribution shall be- (1) the value of the property received by the transferee, reduced by (2) any expense incurred by the transferee in connection with the determination, collection, or refund of the tax imposed by this chapter with respect to such distribution. (b) Payment of GST tax treated as taxable distribution.-For purposes of this chapter, if any of the tax imposed by this chapter with respect to any taxable distribution is paid out of the trust, an amount equal to the portion so paid shall be treated as a taxable distribution. § 2622. Taxable amount in case of taxable termination (a) In general.-For purposes of this chapter, the taxable amount in the case of a taxable termination shall be- (1) the value of all property with respect to which the taxable termination has occurred, reduced by (2) any deduction allowed under subsection (b). (b) Deduction for certain expenses.-For purposes of subsection (a), there shall be allowed a deduction similar to the deduction allowed by section 2053 (relating to expenses, indebtedness, and taxes) for amountsattributable to the property with respect to which the taxable termination has occurred. § 2624. Valuation (a) General rule.-Except as otherwise provided in this chapter, property shall be valued as of the time of the generation-skipping transfer. (b) Alternate valuation and special use valuation elections apply to certain direct skips.-In the case of any direct skip of property which is included in the transferor's gross estate, the value of such property for purposes of this chapter shall be the same as its value for purposes of chapter 11 (determined with regard to sections 2032 and 2032A). (c) Alternate valuation election permitted in the case of taxable terminations occurring at death.-If one or more taxable terminations with respect to the same trust occur at the same time as and as a result of the death of an individual, an election may be made to value all of the property included in such terminations in accordance with section 2032. (d) Reduction for consideration provided by transferee.-For purposes of this chapter, the value of the property transferred shall be reduced by the amount of any consideration provided by the transferee. § 2651. Generation assignment (a) In general.-For purposes of this chapter, the generation to which any person (other than the transferor) belongs shall be determined in accordance with the rules set forth in this section. (b) Lineal descendants.- (1) In general.-An individual who is a lineal descendant of a grandparent of the transferor shall be assigned to that generation which results from comparing the number of generations between the grandparent and such individual with the number of generations between the grandparent and the transferor. (2) On spouse's side.-An individual who is a lineal descendant of a grandparent of a spouse (or former spouse) of the transferor (other than such spouse) shall be assigned to that generation which results from comparing the number of generations between such grandparent and such individual with the number of generations between such grandparent and such spouse. (3) Treatment of legal adoptions, etc.-For purposes of this subsection- (A) Legal adoptions.-A relationship by legal adoption shall be treated as a relationship by blood. (B) Relationships by half-blood.-A relationship by the half-blood shall be treated as a relationship of the whole-blood. (c) Marital relationship.- (1) Marriage to transferor.-An individual who has been married at any time to the transferor shall be assigned to the transferor's generation. (2) Marriage to other lineal descendants.-An individual who has been married at any time to an individual described in subsection (b) shall be assigned to the generation of the individual so described. (d) Persons who are not lineal descendants.-An individual who is not assigned to a generation by reason of the foregoing provisions of this section shall be assigned to a generation on the basis of the date of such individual's birth with- (1) an individual born not more than 12 1/2 years after the date of the birth of the transferor assigned to the transferor's generation, (2) an individual born more than 12 1/2 years but not more than 37 1/2 years after the date of the birth of the transferor assigned to the first generation younger than the transferor, and (3) similar rules for a new generation every 25 years.(e) Special rules for persons with a deceased parent.-- (1) In general.--For purposes of determining whether any transfer is a generation-skipping transfer, if-- (A) an individual is a descendant of a parent of the transferor (or the transferor's spouse or former spouse), and (B) such individual's parent who is a lineal descendant of the parent of the transferor (or the transferor's spouse or former spouse) is dead at the time the time the transfer (from which an interest of such individual is established or derived) is subject to a tax imposed by chapter 11 or 12 upon the transferor (and if there shall be more than 1 such time, then at the earliest such time), such individual shall be treated as if such individual were a member of the generation which is 1 generation below the lower of the transferor's generation or the generation assignment of the youngest living ancestor of such individual who is also a descendant of the parent of the transferor (or the transferor's spouse or former spouse), and the generation assignment of any descendant of such individual shall be adjusted accordingly. (2) Limited application of subsection to collateral heirs.--This subsection shall not apply with respect to a transfer to any individual who is not a lineal descendant of the transferor (or the transferor's spouse or former spouse) if, at the time of the transfer, such transferor has any living lineal descendant. (f) Other special rules.- (1) Individuals assigned to more than one generation.-Except as provided in regulations, an individual who, but for this subsection, would be assigned to more than one generation shall be assigned to the youngest such generation. (2) Interests through entities.-Except as provided in paragraph (3), if an estate, trust, partnership, corporation, or other entity has an interest in property, each individual having a beneficial interest in such entity shall be treated as having an interest in such property and shall be assigned to a generation under the foregoing provisions of this subsection. (3) Treatment of certain charitable organizations and governmental entities.-Any- (A) organization described in section 511(a)(2), (B) charitable trust described in section 511(b)(2), and (C) governmental entity, shall be assigned to the transferor's generation. § 2652. Other definitions (a) Transferor.-For purposes of this chapter- (1) In general.-Except as provided in this subsection or section 2653(a), the term "transferor" means- (A) in the case of any property subject to the tax imposed by chapter 11, the decedent, and (B) in the case of any property subject to the tax imposed by chapter 12, the donor. An individual shall be treated as transferring any property with respect to which such individual is the transferor. (2) Gift-splitting by married couples.-If, under section 2513, one-half of a gift is treated as made by an individual and one-half of such gift is treated as made by the spouse of such individual, such gift shall be so treated for purposes of this chapter. (3) Special election for qualified terminable interest property.-In the case of- (A) any trust with respect to which a deduction is allowed to the decedent under section 2056 by reason of subsection (b)(7) thereof, and(B) any trust with respect to which a deduction to the donor spouse is allowed under section 2523 by reason of subsection (f) thereof, the estate of the decedent or the donor spouse, as the case may be, may elect to treat all of the property in such trust for purposes of this chapter as if the election to be treated as qualified terminable interest property had not been made. (b) Trust and trustee.- (1) Trust.-The term "trust" includes any arrangement (other than an estate) which, although not a trust, has substantially the same effect as a trust. (2) Trustee.-In the case of an arrangement which is not a trust but which is treated as a trust under this subsection, the term "trustee" shall mean the person in actual or constructive possession of the property subject to such arrangement. (3) Examples.-Arrangements to which this subsection applies include arrangements involving life estates and remainders, estates for years, and insurance and annuity contracts. (c) Interest.- (1) In general.-A person has an interest in property held in trust if (at the time the determination is made) such person- (A) has a right (other than a future right) to receive income or corpus from the trust, (B) is a permissible current recipient of income or corpus from the trust and is not described in section 2055(a), or (C) is described in section 2055(a) and the trust is- (i) a charitable remainder annuity trust, (ii) a charitable remainder unitrust within the meaning of section 664, or (iii) a pooled income fund within the meaning of section 642(c)(5). (2) Certain interests disregarded.-For purposes of paragraph (1), an interest which is used primarily to postpone or avoid any tax imposed by this chapter shall be disregarded. (3) Certain support obligations disregarded.-The fact that income or corpus of the trust may be used to satisfy an obligation of support arising under State law shall be disregarded in determining whether a person has an interest in the trust, if- (A) such use is discretionary, or (B) such use is pursuant to the provisions of any State law substantially equivalent to the Uniform Gifts to Minors Act. (d) Executor.-For purposes of this chapter, the term "executor" has the meaning given such term by section 2203. § 2653. Taxation of multiple skips (a) General rule.-For purposes of this chapter, if- (1) there is a generation-skipping transfer of any property, and (2) immediately after such transfer such property is held in trust, for purposes of applying this chapter (other than section 2651) to subsequent transfers from the portion of such trust attributable to such property, the trust will be treated as if the transferor of such property were assigned to the first generation above the highest generation of any person who has an interest in such trust immediately after the transfer. (b) Trust retains inclusion ratio.- (1) In general.-Except as provided in paragraph (2), the provisions of subsection (a) shall not affect the inclusion ratio determined with respect to any trust. Under regulations prescribed by the Secretary, notwithstanding the preceding sentence, proper adjustment shall be made to the inclusion ratio with respect to such trust to take into accountany tax under this chapter borne by such trust which is imposed by this chapter on the transfer described in subsection (a). (2) Special rule for pour-over trust.- (A) In general.-If the generation-skipping transfer referred to in subsection (a) involves the transfer of property from one trust to another trust (hereinafter in this paragraph referred to as the "pour-over trust"), the inclusion ratio for the pour-over trust shall be determined by treating the nontax portion of such distribution as if it were a part of a GST exemption allocated to such trust. (B) Nontax portion.-For purposes of subparagraph (A), the nontax portion of any distribution is the amount of such distribution multiplied by the applicable fraction which applies to such distribution. § 2654. Special rules (a) Basis adjustment.- (1) In general.-Except as provided in paragraph (2), if property is transferred in a generation-skipping transfer, the basis of such property shall be increased (but not above the fair market value of such property) by an amount equal to that portion of the tax imposed by section 2601 (computed without regard to section 2604) with respect to the transfer which is attributable to the excess of the fair market value of such property over its adjusted basis immediately before the transfer. The preceding shall be applied after any basis adjustment under section 1015 with respect to the transfer. (2) Certain transfers at death.-If property is transferred in a taxable termination which occurs at the same time as and as a result of the death of an individual, the basis of such property shall be adjusted in a manner similar to the manner provided under section 1014(a); except that, if the inclusion ratio with respect to such property is less than one, any increase or decrease in basis shall be limited by multiplying such increase or decrease (as the case may be) by the inclusion ratio. (b) Certain trusts treated as separate trusts.-For purposes of this chapter- (1) the portions of a trust attributable to transfers from different transferors shall be treated as separate trusts, and (2) substantially separate and independent shares of different beneficiaries in a trust shall be treated as separate trusts. Except as provided in the preceding sentence, nothing in this chapter shall be construed as authorizing a single trust to be treated as two or more trusts. For purposes of this subsection, a trust shall be treated as part of an estate during any period that the trust is so treated under section 645. (c) Disclaimers.- For provisions relating to the effect of a qualified disclaimer for purposes of this chapter, see section 2518. (d) Limitation on personal liability of trustee.-A trustee shall not be personally liable for any increase in the tax imposed by section 2601 which is attributable to the fact that- (1) section 2642(c) (relating to exemption of certain nontaxable gifts) does not apply to a transfer to the trust which was made during the life of the transferor and for which a gift tax return was not filed, or (2) the inclusion ratio with respect to the trust is greater than the amount of such ratio as computed on the basis of the return on which was made (or was deemed made) an allocation of the GST exemption to property transferred to such trust.The preceding sentence shall not apply if the trustee has knowledge of facts sufficient reasonably to conclude that a gift tax return was required to be filed or that the inclusion ratio was erroneous.
