-CITE-
    26 USC CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS    01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS

-HEAD-
             CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS         

-MISC1-
    Subchapter                                                  Sec.(!1)
    A.      Tax imposed                                             2601 
    B.      Generation-skipping transfers                           2611
    C.      Taxable amount                                          2621
    D.      GST exemption                                           2631
    E.      Applicable rate; inclusion ratio                        2641
    F.      Other definitions and special rules                     2651
    G.      Administration                                          2661

                                AMENDMENTS                            
      1986 - Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986,
    100 Stat. 2717, struck out "CERTAIN" after "TAX ON" in chapter
    heading, substituted "Generation-skipping transfers" for
    "Definitions and special rules" in item for subchapter B and
    "Taxable amount" for "Administration" in item for subchapter C, and
    added items for subchapters D, E, and F.

-FOOTNOTE-
    (!1) Section numbers editorially supplied.


-End-


-CITE-
    26 USC Subchapter A - Tax Imposed                           01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter A - Tax Imposed

-HEAD-
                        SUBCHAPTER A - TAX IMPOSED                    

-MISC1-
    Sec.                                                     
    2601.       Tax imposed.                                          
    2602.       Amount of tax.                                        
    2603.       Liability for tax.                                    
    2604.       Credit for certain State taxes.                       


-STATAMEND-
                           AMENDMENT OF ANALYSIS                       
      For termination of amendment by section 901 of Pub. L. 107-16,
    see Effective and Termination Dates of 2001 Amendment note set out
    under section 2011 of this title.


-MISC2-
                                AMENDMENTS                            
      2004 - Pub. L. 108-311, title IV, Sec. 408(a)(21), Oct. 4, 2004,
    118 Stat. 1192, added item 2604.
      2001 - Pub. L. 107-16, title V, Sec. 532(c)(15), (d), title IX,
    Sec. 901, June 7, 2001, 115 Stat. 75, 150, temporarily struck out
    item 2604 "Credit for certain State taxes". See Effective and
    Termination Dates of 2001 Amendment note set out under section 2011
    of this title.
      1986 - Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986,
    100 Stat. 2717, in amending analysis of subchapter A generally,
    added item 2604.

-End-



-CITE-
    26 USC Sec. 2601                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter A - Tax Imposed

-HEAD-
    Sec. 2601. Tax imposed

-STATUTE-
      A tax is hereby imposed on every generation-skipping transfer
    (within the meaning of subchapter B).

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1879; amended Pub. L. 99-514, title XIV, Sec. 1431(a), Oct.
    22, 1986, 100 Stat. 2718.)


-MISC1-
                                AMENDMENTS                            
      1986 - Pub. L. 99-514 amended section generally, substituting
    "(within the meaning of subchapter B)" for "in the amount
    determined under section 2602".

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section 1433 of Pub. L. 99-514, as amended by Pub. L. 100-647,
    title I, Sec. 1014(h)(1)-(3)(A), (4), Nov. 10, 1988, 102 Stat.
    3567, 3568, provided that:
      "(a) General Rule. - Except as provided in subsection (b), the
    amendments made by this subtitle [subtitle D (Secs. 1431-1433) of
    title XIV of Pub. L. 99-514, amending chapter 13 of this title,
    enacting section 2515 of this title, and amending sections 164,
    303, 691, 2013, 2032, and 6166 of this title] shall apply to any
    generation-skipping transfer (within the meaning of section 2611 of
    the Internal Revenue Code of 1986) made after the date of the
    enactment of this Act [Oct. 22, 1986].
      "(b) Special Rules. - 
        "(1) Treatment of certain inter vivos transfers made after
      september 25, 1985. - For purposes of subsection (a) (and chapter
      13 of the Internal Revenue Code of 1986 as amended by this part),
      any inter vivos transfer after September 25, 1985, and on or
      before the date of the enactment of this Act [Oct. 22, 1986]
      shall be treated as if it were made on the 1st day after the date
      of enactment of this Act.
        "(2) Exceptions. - The amendments made by this subtitle shall
      not apply to - 
          "(A) any generation-skipping transfer under a trust which was
        irrevocable on September 25, 1985, but only to the extent that
        such transfer is not made out of corpus added to the trust
        after September 25, 1985 (or out of income attributable to
        corpus so added),
          "(B) any generation-skipping transfer under a will or
        revocable trust executed before the date of the enactment of
        this Act [Oct. 22, 1986] if the decedent dies before January 1,
        1987, and
          "(C) any generation-skipping transfer - 
            "(i) under a trust to the extent such trust consists of
          property included in the gross estate of a decedent (other
          than property transferred by the decedent during his life
          after the date of the enactment of this Act [Oct. 22, 1986]),
          or reinvestments thereof, or
            "(ii) which is a direct skip which occurs by reason of the
          death of any decedent;
      but only if such decedent was, on the date of the enactment of
      this Act [Oct. 22, 1986], under a mental disability to change the
      disposition of his property and did not regain his competence to
      dispose of such property before the date of his death.
        "(3) Treatment of certain transfers to grandchildren. - 
          "(A) In general. - For purposes of chapter 13 of the Internal
        Revenue Code of 1986, the term 'direct skip' shall not include
        any transfer before January 1, 1990, from a transferor to a
        grandchild of the transferor to the extent the aggregate
        transfers from such transferor to such grandchild do not exceed
        $2,000,000.
          "(B) Treatment of transfers in trust. - For purposes of
        subparagraph (A), a transfer in trust for the benefit of a
        grandchild shall be treated as a transfer to such grandchild if
        (and only if) - 
            "(i) during the life of the grandchild, no portion of the
          corpus or income of the trust may be distributed to (or for
          the benefit of) any person other than such grandchild,
            "(ii) the assets of the trust will be includible in the
          gross estate of the grandchild if the grandchild dies before
          the trust is terminated, and
            "(iii) all of the income of the trust for periods after the
          grandchild has attained age 21 will be distributed to (or for
          the benefit of) such grandchild not less frequently than
          annually.
          "(C) Coordination with section 2653(a) of the 1986 code. - In
        the case of any transfer which would be a generation-skipping
        transfer but for subparagraph (A), the rules of section 2653(a)
        of the Internal Revenue Code of 1986 shall apply as if such
        transfer were a generation-skipping transfer.
          "(D) Coordination with taxable terminations and taxable
        distributions. - For purposes of chapter 13 of the Internal
        Revenue Code of 1986, the terms 'taxable termination' and
        'taxable distribution' shall not include any transfer which
        would be a direct skip but for subparagraph (A).
        "(4) Definitions. - Terms used in this section shall have the
      same respective meanings as when used in chapter 13 of the
      Internal Revenue Code of 1986; except that section 2612(c)(2) of
      such Code shall not apply in determining whether an individual is
      a grandchild of the transferor.
      "(c) Repeal of Existing Tax on Generation-Skipping Transfers. - 
        "(1) In general. - In the case of any tax imposed by chapter 13
      of the Internal Revenue Code of 1954 [now 1986] (as in effect on
      the day before the date of the enactment of this Act [Oct. 22,
      1986]), such tax (including interest, additions to tax, and
      additional amounts) shall not be assessed and if assessed, the
      assessment shall be abated, and if collected, shall be credited
      or refunded (with interest) as an overpayment.
        "(2) Waiver of statute of limitations. - If on the date of the
      enactment of this Act [Oct. 22, 1986] (or at any time within 1
      year after such date of enactment) refund or credit of any
      overpayment of tax resulting from the application of paragraph
      (1) is barred by any law or rule of law, refund or credit of such
      overpayment shall, nevertheless, be made or allowed if claim
      therefore [sic] is filed before the date 1 year after the date of
      the enactment of this Act.
      "(d) Election for Certain Transfers Benefiting Grandchild. - 
        "(1) In general. - For purposes of chapter 13 of the Internal
      Revenue Code of 1986 (as amended by this Act) and subsection (b)
      of this section, any transfer in trust for the benefit of a
      grandchild of a transferor shall be treated as a direct skip to
      such grandchild if - 
          "(A) the transfer occurs before the date of enactment of this
        Act [Oct. 22, 1986],
          "(B) the transfer would be a direct skip to a grandchild
        except for the fact that the trust instrument provides that, if
        the grandchild dies before vesting of the interest transferred,
        the interest is transferred to the grandchild's heir (rather
        than the grandchild's estate), and
          "(C) an election under this subsection applies to such
        transfer.
      Any transfer treated as a direct skip by reason of the preceding
      sentence shall be subject to Federal estate tax on the
      grandchild's death in the same manner as if the contingent gift
      over had been to the grandchild's estate.
        "(2) Election. - An election under paragraph (1) shall be made
      at such time and in such manner as the Secretary of the Treasury
      or his delegate may prescribe.
    Unless the grandchild otherwise directs by will, the estate of such
    grandchild shall be entitled to recover from the person receiving
    the property on the death of the grandchild any increase in Federal
    estate tax on the estate of the grandchild by reason of the
    preceding sentence."
      [Pub. L. 101-508, title XI, Sec. 11703(c)(3), Nov. 5, 1990, 104
    Stat. 1388-517, provided that: "Subparagraph (C) of section
    1433(b)(2) of the Tax Reform Act of 1986 [Pub. L. 99-514, set out
    above] shall not exempt any generation-skipping transfer from the
    amendments made by subtitle D of title XVI of such Act [probably
    means subtitle D (Secs. 1431-1433) of title XIV of Pub. L. 99-514,
    amending chapter 13 of this title, enacting section 2515 of this
    title, and amending sections 164, 303, 691, 2013, 2032, and 6166 of
    this title] to the extent such transfer is attributable to property
    transferred by gift or by reason of the death of another person to
    the decedent (or trust) referred to in such subparagraph after
    August 3, 1990."]
      [Section 1014(h)(3)(B) of Pub. L. 100-647 provided that: "Clause
    (iii) of section 1443(b)(3)(B) [1433(b)(3)(B)] of the Reform Act
    [Pub. L. 99-514, set out above] (as amended by subparagraph (A))
    shall apply only to transfers after June 10, 1987."]
      [Section 1014(h)(5) of Pub. L. 100-647 provided that:
    "Subparagraph (C) of section 1433(b)(2) of the Reform Act [Pub. L.
    99-514, set out above] shall not exempt any direct skip from the
    amendments made by subtitle D of title XIV of the Reform Act [Pub.
    L. 99-514, amending chapter 13 of this title, enacting section 2515
    of this title, and amending sections 164, 303, 691, 2013, 2032, and
    6166 of this title] if - 
        ["(A) such direct skip results from the application of section
      2044 of the 1986 Code, and
        ["(B) such direct skip is attributable to property transferred
      to the trust after October 21, 1988."]

                              EFFECTIVE DATE                          
      Section 2006(c) of Pub. L. 94-455, as amended by Pub. L. 95-600,
    title VII, Sec. 702(n)(1), Nov. 6, 1978, 92 Stat. 2935; Pub. L. 97-
    34, title IV, Sec. 428, Aug. 13, 1981, 95 Stat. 319; Pub. L. 99-
    514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
      "(1) In general. - Except as provided in paragraph (2), the
    amendments made by this section [enacting this chapter and amending
    sections 303, 691, and 2013 of this title] shall apply to any
    generation-skipping transfer (within the meaning of section 2611(a)
    of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) made
    after June 11, 1976.
      "(2) Exceptions. - The amendments made by this section shall not
    apply to any generation-skipping transfer - 
        "(A) under a trust which was irrevocable on June 11, 1976, but
      only to the extent that the transfer is not made out of corpus
      added to the trust after June 11, 1976, or
        "(B) in the case of a decedent dying before January 1, 1983,
      pursuant to a will (or revocable trust) which was in existence on
      June 11, 1976, and was not amended at any time after that date in
      any respect which will result in the creation of, or increasing
      the amount of, any generation-skipping transfer.
    For purposes of subparagraph (B), if the decedent on June 11, 1976,
    was under a mental disability to change the disposition of his
    property, the period set forth in such subparagraph shall not
    expire before the date which is 2 years after the date on which he
    first regains his competence to dispose of such property.
      "(3) Trust equivalents. - For purposes of paragraph (2), in the
    case of a trust equivalent within the meaning of subsection (d) of
    section 2611 of the Internal Revenue Code of 1986, the provisions
    of such subsection (d) shall apply."
      [Amendment of section 2006(c) of Pub. L. 94-455, set out above,
    by section 702(n)(1) of Pub. L. 95-600, effective Oct. 4, 1976, see
    section 702(n)(5) of Pub. L. 95-600, set out as an Effective Date
    of 1978 Amendment note under section 2613 of this title.]

-End-



-CITE-
    26 USC Sec. 2602                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter A - Tax Imposed

-HEAD-
    Sec. 2602. Amount of tax

-STATUTE-
      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).

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1879; amended Pub. L. 95-600, title VII, Sec. 702(h)(2),
    (n)(4), Nov. 6, 1978, 92 Stat. 2931, 2936; Pub. L. 97-34, title IV,
    Sec. 403(a)(2)(B), Aug. 13, 1981, 95 Stat. 301; Pub. L. 99-514,
    title XIV, Sec. 1431(a), Oct. 22, 1986, 100 Stat. 2718.)


-MISC1-
                                AMENDMENTS                            
      1986 - Pub. L. 99-514 amended section generally, substituting
    provisions that amount of tax imposed by section 2601 is the
    taxable amount (determined under subchapter C), multiplied by the
    applicable rate (determined under subchapter E) for former
    provisions which set out in detail the calculations and formulae
    for determining amount of tax imposed by section 2601.
      1981 - Subsec. (c)(5). Pub. L. 97-34 redesignated subpars. (B)
    and (C) as (A) and (B), respectively, and struck out former subpar.
    (A) relating to adjustments to marital deduction and providing that
    if the generation-skipping transfer occurs at the same time as, or
    within 9 months after, the death of the deemed transferor, for
    purposes of section 2056, relating to bequests, etc., to surviving
    spouse, the value of the gross estate of the deemed transferor
    shall be deemed to be increased by the amount of such transfer.
      1978 - Subsec. (a)(1)(C). Pub. L. 95-600, Sec. 702(h)(2),
    inserted ", as modified by section 2001(e)" after "within the
    meaning of section 2001(b)".
      Subsec. (d)(1)(A). Pub. L. 95-600, Sec. 702(n)(4)(A), inserted
    "(or at the same time as the death of a beneficiary of the trust
    assigned to a higher generation than such deemed transferor)" after
    "such deemed transferor".
      Subsec. (d)(2)(A). Pub. L. 95-600, Sec. 702(n)(4)(B), inserted
    "(or beneficiary)" after "the deemed transferor".

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

                     EFFECTIVE DATE OF 1981 AMENDMENT                 
      Amendment by Pub. L. 97-34 applicable to estates of decedents
    dying after Dec. 31, 1981, but inapplicable under certain
    conditions under will executed before date which is 30 days after
    Aug. 13, 1981, or under trust created by such date, see section
    403(e) of Pub. L. 97-34, set out as a note under section 2056 of
    this title.

                     EFFECTIVE DATE OF 1978 AMENDMENT                 
      Amendment by section 702(h)(2) of Pub. L. 95-600 applicable to
    estates of decedents dying after Dec. 31, 1976, except that such
    amendment shall not apply to transfers made before Jan. 1, 1977,
    see section 702(h)(3) of Pub. L. 95-600, set out as a note under
    section 2001 of this title.
      Amendment by section 702(n)(4) of Pub. L. 95-600 effective as if
    included in this chapter as added by section 2006 of Pub. L. 94-
    455, see section 702(n)(5) of Pub. L. 95-600, set out as a note
    under section 2613 of this title.

-End-



-CITE-
    26 USC Sec. 2603                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter A - Tax Imposed

-HEAD-
    Sec. 2603. Liability for tax

-STATUTE-
    (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.

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1881; amended Pub. L. 99-514, title XIV, Sec. 1431(a), Oct.
    22, 1986, 100 Stat. 2718.)


-MISC1-
                                AMENDMENTS                            
      1986 - Pub. L. 99-514 amended section generally, substituting tax
    liability provisions consisting of language placing liability,
    under different circumstances, on the transferee, the trustee, or
    the transferor, the source of the tax, and a cross reference to
    section 2661 for former provisions which covered the question of
    liability for tax with language covering the trustee and the
    distributee, the limitation on personal liability of the trustee
    who relied on certain information furnished by the Secretary, the
    limitation on personal liability of distributee, and the lien on
    property transferred until the tax was paid in full or became
    unenforceable by reason of lapse of time.

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2604                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter A - Tax Imposed

-HEAD-
    Sec. 2604. Credit for certain State taxes

-STATUTE-
    (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.
    (c) Termination
      This section shall not apply to the generation-skipping transfers
    after December 31, 2004.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2718; amended Pub. L. 107-16, title V, Sec. 532(c)(10), June
    7, 2001, 115 Stat. 75.)


-STATAMEND-
                           AMENDMENT OF SECTION                       
      For termination of amendment by section 901 of Pub. L. 107-16,
    see Effective and Termination Dates of 2001 Amendment note below.


-MISC1-
                                AMENDMENTS                            
      2001 - Subsec. (c). Pub. L. 107-16, Secs. 532(c)(10), 901,
    temporarily added subsec. (c). See Effective and Termination Dates
    of 2001 Amendment note below.

             EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT         
      Amendment by Pub. L. 107-16 applicable to estates of decedents
    dying, and generation-skipping transfers, after Dec. 31, 2004, see
    section 532(d) of Pub. L. 107-16, set out as a note under section
    2011 of this title.
      Amendment by Pub. L. 107-16 inapplicable to estates of decedents
    dying, gifts made, or generation skipping transfers, after Dec. 31,
    2010, and the Internal Revenue Code of 1986 to be applied and
    administered to such estates, gifts, and transfers as if such
    amendment had never been enacted, see section 901 of Pub. L. 107-
    16, set out as a note under section 1 of this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-


-CITE-
    26 USC Subchapter B - Generation-Skipping Transfers         01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter B - Generation-Skipping Transfers

-HEAD-
               SUBCHAPTER B - GENERATION-SKIPPING TRANSFERS           

-MISC1-
    Sec.                                                     
    2611.       Generation-skipping transfer defined.                 
    2612.       Taxable termination; taxable distribution; direct
                 skip.                                                
    2613.       Skip person and non-skip person defined.              

                                AMENDMENTS                            
      1986 - Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986,
    100 Stat. 2718, substituted "Generation-Skipping Transfers" for
    "Definitions and Special Rules" in subchapter heading, substituted
    "Generation-skipping transfer defined" for "Generation-skipping
    transfer" in item 2611, "Taxable termination; taxable distribution;
    direct skip" for "Deemed transferor" in item 2612, and "Skip person
    and non-skip person defined" for "Other definitions" in item 2613,
    and struck out item 2614 "Special rules".

-End-



-CITE-
    26 USC Sec. 2611                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter B - Generation-Skipping Transfers

-HEAD-
    Sec. 2611. Generation-skipping transfer defined

-STATUTE-
    (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.

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1882; amended Pub. L. 99-514, title XIV, Sec. 1431(a), Oct.
    22, 1986, 100 Stat. 2718; Pub. L. 100-647, title I, Secs.
    1014(g)(1), (2), 1018(u)(43), Nov. 10, 1988, 102 Stat. 3562, 3592.)


-MISC1-
                                AMENDMENTS                            
      1988 - Subsec. (a). Pub. L. 100-647, Secs. 1014(g)(1),
    1018(u)(43), substituted "generation-skipping transfer" for
    "generation-skipping transfers" and "means" for "mean".
      Subsec. (b). Pub. L. 100-647, Sec. 1014(g)(2), redesignated pars.
    (2) and (3) as (1) and (2), respectively, and struck out former
    par. (1) which read as follows: "any transfer (other than a direct
    skip) from a trust, to the extent such transfer is subject to a tax
    imposed by chapter 11 or 12 with respect to a person in the 1st
    generation below that of the grantor, and".
      1986 - Pub. L. 99-514 amended section generally, substituting
    provisions defining "generation-skipping transfers" and what that
    term does not include, for former provisions which defined
    "generation-skipping transfer", "transfer", and "generation-
    skipping trust", contained provisions to be used in determining
    the ascertainment of generation, and provided for a generation-
    skipping trust equivalent.

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2612                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter B - Generation-Skipping Transfers

-HEAD-
    Sec. 2612. Taxable termination; taxable distribution; direct skip

-STATUTE-
    (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 specified portion of the trust's assets are
      distributed to 1 or more skip persons (or 1 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.

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1883; amended Pub. L. 99-514, title XIV, Sec. 1431(a), Oct.
    22, 1986, 100 Stat. 2719; Pub. L. 100-647, title I, Sec.
    1014(g)(5)(B), (7), (15), Nov. 10, 1988, 102 Stat. 3564-3566; Pub.
    L. 105-34, title V, Sec. 511(b), Aug. 5, 1997, 111 Stat. 861.)


-MISC1-
                                AMENDMENTS                            
      1997 - Subsec. (c)(2). Pub. L. 105-34, Sec. 511(b)(2),
    substituted "section 2651(f)(2)" for "section 2651(e)(2)".
      Pub. L. 105-34, Sec. 511(b)(1), redesignated par. (3) as (2) and
    struck out heading and text of former par. (2). Text read as
    follows: "For purposes of determining whether any transfer is a
    direct skip, if - 
        "(A) an individual is a grandchild of the transferor (or the
      transferor's spouse or former spouse), and
        "(B) as of the time of the transfer, the parent of such
      individual who is a lineal descendant of the transferor (or the
      transferor's spouse or former spouse) is dead,
    such individual shall be treated as if such individual were a child
    of the transferor and all of that grandchild's children shall be
    treated as if they were grandchildren of the transferor. In the
    case of lineal descendants below a grandchild, the preceding
    sentence may be reapplied. If any transfer of property to a trust
    would be a direct skip but for this paragraph, any generation
    assignment under this paragraph shall apply also for purposes of
    applying this chapter to transfers from the portion of the trust
    attributable to such property."
      Subsec. (c)(3). Pub. L. 105-34, Sec. 511(b)(1), redesignated par.
    (3) as (2).
      1988 - Subsec. (a)(2). Pub. L. 100-647, Sec. 1014(g)(15), amended
    par. (2) generally. Prior to amendment, par. (2) read as follows:
    "If, upon the termination of an interest in property held in a
    trust, a specified portion of the trust assets are distributed to
    skip persons who are lineal descendants of the holder of such
    interest (or to 1 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."
      Subsec. (c)(2). Pub. L. 100-647, Sec. 1014(g)(7), in closing
    provisions, inserted at end "If any transfer of property to a trust
    would be a direct skip but for this paragraph, any generation
    assignment under this paragraph shall apply also for purposes of
    applying this chapter to transfers from the portion of the trust
    attributable to such property."
      Subsec. (c)(3). Pub. L. 100-647, Sec. 1014(g)(5)(B), added par.
    (3).
      1986 - Pub. L. 99-514 amended section generally, substituting
    provisions covering definition and application of "taxable
    termination", "taxable distribution", and "direct skip" for former
    provisions which indicated who the "deemed transferor" would be for
    purposes of this chapter and that, for purposes of determining the
    person deemed the transferor, a parent related to the grantor of a
    trust by blood or adoption was to be deemed more closely related
    than a parent related to a grantor by marriage.

                     EFFECTIVE DATE OF 1997 AMENDMENT                 
      Section 511(c) of Pub. L. 105-34 provided that: "The amendments
    made by this section [amending this section and section 2651 of
    this title] shall apply to terminations, distributions, and
    transfers occurring after December 31, 1997."

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2613                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter B - Generation-Skipping Transfers

-HEAD-
    Sec. 2613. Skip person and non-skip person defined

-STATUTE-
    (a) Skip person
      For purposes of this chapter, the term "skip person" means - 
        (1) a natural person assigned to a generation which is 2 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 nonskip person.
    (b) Non-skip person
      For purposes of this chapter, the term "non-skip person" means
    any person who is not a skip person.

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1884; amended Pub. L. 95-600, title VII, Sec. 702(n)(2), (3),
    Nov. 6, 1978, 92 Stat. 2935, 2936; Pub. L. 96-222, title I, Sec.
    107(a)(2)(B), Apr. 1, 1980, 94 Stat. 222; Pub. L. 99-514, title
    XIV, Sec. 1431(a), Oct. 22, 1986, 100 Stat. 2720; Pub. L. 100-647,
    title I, Sec. 1014(g)(5)(A), Nov. 10, 1988, 102 Stat. 3564.)


-MISC1-
                                AMENDMENTS                            
      1988 - Subsec. (a)(1). Pub. L. 100-647 inserted "natural" before
    "person".
      1986 - Pub. L. 99-514 amended section generally, substituting
    definitions of "skip person" and "non-skip person" for former
    provisions which defined and applied the terms "taxable
    distribution", "taxable termination", "younger generation
    beneficiary", and "related or subordinate trustee".
      1980 - Subsec. (e)(2)(A)(i). Pub. L. 96-222, Sec.
    107(a)(2)(B)(i), inserted "(other than as a potential appointee
    under a power of appointment held by another)" after "trust".
      Subsec. (e)(2)(B). Pub. L. 96-222, Sec. 107(a)(2)(B)(ii),
    redesignated cls. (iii) to (v) as (iv) to (vi), added cl. (iii),
    and struck out cl. (vi) which related to an employee of a
    corporation in which the grantor or any beneficiary of the trust is
    an executive.
      1978 - Subsec. (b)(2)(B). Pub. L. 95-600, Sec. 702(n)(3),
    substituted "a present interest and a present power" for "an
    interest and a power" and "present interest or present power" for
    "interest or power" wherever appearing.
      Subsec. (e). Pub. L. 95-600, Sec. 702(n)(2), inserted provisions
    relating to powers of independent trustees and definition of a
    related or subordinate trustee.

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

                     EFFECTIVE DATE OF 1980 AMENDMENT                 
      Amendment by Pub. L. 96-222 effective, except as otherwise
    provided, as if it had been included in the provisions of the
    Revenue Act of 1978, Pub. L. 95-600, to which such amendment
    relates, see section 201 of Pub. L. 96-222, set out as a note under
    section 32 of this title.

                     EFFECTIVE DATE OF 1978 AMENDMENT                 
      Section 702(n)(5) of Pub. L. 95-600, as amended by Pub. L. 99-
    514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
      "(A) Except as provided in subparagraph (B), the amendments made
    by this subsection [amending this section, section 2602 of this
    title, and provisions set out as a note under section 2601 of this
    title] shall take effect as if included in chapter 13 of the
    Internal Revenue Code of 1986 [formerly I.R.C. 1954] as added by
    section 2006 of the Tax Reform Act of 1976 [Pub. L. 94-455, title
    XX, Sec. 2006, Oct. 4, 1976, 90 Stat. 1879].
      "(B) The amendment made by paragraph (1) [amending provisions set
    out as a note under section 2601 of this title] shall take effect
    on October 4, 1976."

-End-



-CITE-
    26 USC Sec. 2614                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter B - Generation-Skipping Transfers

-HEAD-
    [Sec. 2614. Omitted]

-COD-
                               CODIFICATION                           
      Section, added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4,
    1976, 90 Stat. 1887; amended Pub. L. 95-600, title VII, Sec.
    702(c)(1)(B), Nov. 6, 1978, 92 Stat. 2926; Pub. L. 96-223, title
    IV, Sec. 401(c)(3), Apr. 2, 1980, 94 Stat. 300, related to special
    rules for generation-skipping transfers, prior to the general
    revision of this chapter by Pub. L. 99-514, Sec. 1431(a).

-End-


-CITE-
    26 USC Subchapter C - Taxable Amount                        01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter C - Taxable Amount

-HEAD-
                       SUBCHAPTER C - TAXABLE AMOUNT                   

-MISC1-
    Sec.                                                     
    2621.       Taxable amount in case of taxable distribution.       
    2622.       Taxable amount in case of taxable termination.        
    2623.       Taxable amount in case of direct skip.                
    2624.       Valuation.                                            

                                AMENDMENTS                            
      1986 - Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986,
    100 Stat. 2720, substituted "Taxable Amount" for "Administration"
    in subchapter heading, substituted "Taxable amount in case of
    taxable distribution" for "Administration" in item 2621 and
    "Taxable amount in case of taxable termination" for "Regulations"
    in item 2622, and added items 2623 and 2624.

-End-



-CITE-
    26 USC Sec. 2621                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter C - Taxable Amount

-HEAD-
    Sec. 2621. Taxable amount in case of taxable distribution

-STATUTE-
    (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.

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1887; amended Pub. L. 97-34, title IV, Sec. 422(e)(4), Aug.
    13, 1981, 95 Stat. 316; Pub. L. 99-514, title XIV, Sec. 1431(a),
    Oct. 22, 1986, 100 Stat. 2720.)


-MISC1-
                                AMENDMENTS                            
      1986 - Pub. L. 99-514 amended section generally, substituting
    provisions relating to taxable amount in case of a taxable
    distribution for former provisions which related generally to
    administration of this chapter. See section 2661 of this title.
      1981 - Subsec. (b). Pub. L. 97-34 substituted "Section 6166" for
    "Sections 6166 and 6166A" in heading and "section 6166 (relating to
    extension of time" for "sections 6166 and 6166A (relating to
    extensions of time" in text.

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

                     EFFECTIVE DATE OF 1981 AMENDMENT                 
      Amendment by Pub. L. 97-34 applicable to estates of decedents
    dying after Dec. 31, 1981, see section 422(f)(1) of Pub. L. 97-34,
    set out as a note under section 6166 of this title.

-End-



-CITE-
    26 USC Sec. 2622                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter C - Taxable Amount

-HEAD-
    Sec. 2622. Taxable amount in case of taxable termination

-STATUTE-
    (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 amounts
    attributable to the property with respect to which the taxable
    termination has occurred.

-SOURCE-
    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1888; amended Pub. L. 99-514, title XIV, Sec. 1431(a), Oct.
    22, 1986, 100 Stat. 2720.)


-MISC1-
                                AMENDMENTS                            
      1986 - Pub. L. 99-514 amended section generally, substituting
    provisions relating to taxable amount in case of a taxable
    termination for former provisions which authorized the Secretary to
    promulgate regulations. See section 2663 of this title.

                     EFFECTIVE DATE OF 1986 AMENDMENT                 
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2623                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter C - Taxable Amount

-HEAD-
    Sec. 2623. Taxable amount in case of direct skip

-STATUTE-
      For purposes of this chapter, the taxable amount in the case of a
    direct skip shall be the value of the property received by the
    transferee.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2721.)


-MISC1-
                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2624                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter C - Taxable Amount

-HEAD-
    Sec. 2624. Valuation

-STATUTE-
    (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 1 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.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2721.)


-MISC1-
                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-


-CITE-
    26 USC Subchapter D - GST Exemption                         01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter D - GST Exemption

-HEAD-
                       SUBCHAPTER D - GST EXEMPTION                   

-MISC1-
    Sec.                                                     
    2631.       GST exemption.                                        
    2632.       Special rules for allocation of GST exemption.        

-End-



-CITE-
    26 USC Sec. 2631                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter D - GST Exemption

-HEAD-
    Sec. 2631. GST exemption

-STATUTE-
    (a) General rule
      For purposes of determining the inclusion ratio, every individual
    shall be allowed a GST exemption amount which may be allocated by
    such individual (or his executor) to any property with respect to
    which such individual is the transferor.
    (b) Allocations irrevocable
      Any allocation under subsection (a), once made, shall be
    irrevocable.
    (c) GST exemption amount
      For purposes of subsection (a), the GST exemption amount for any
    calendar year shall be equal to the applicable exclusion amount
    under section 2010(c) for such calendar year.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2721; amended Pub. L. 105-34, title V, Sec. 501(d), Aug. 5,
    1997, 111 Stat. 846; Pub. L. 105-206, title VI, Sec. 6007(a)(1),
    July 22, 1998, 112 Stat. 806; Pub. L. 107-16, title V, Sec. 521(c),
    June 7, 2001, 115 Stat. 72.)


-STATAMEND-
                           AMENDMENT OF SECTION                       
      For termination of amendment by section 901 of Pub. L. 107-16,
    see Effective and Termination Dates of 2001 Amendment note below.


-MISC1-
                                AMENDMENTS                            
      2001 - Subsec. (a). Pub. L. 107-16, Secs. 521(c)(1), 901,
    temporarily substituted "amount" for "of $1,000,000". See Effective
    and Termination Dates of 2001 Amendment note below.
      Subsec. (c). Pub. L. 107-16, Secs. 521(c)(2), 901, temporarily
    amended heading and text of subsec. (c) generally, substituting
    provisions relating to the GST exemption amount for any calendar
    year for provisions which related to inflation adjustment of the
    $1,000,000 amount contained in subsec. (a) in the case of any
    calendar year after 1998 and applicability of any increase for any
    such calendar year. See Effective and Termination Dates of 2001
    Amendment note below.
      1998 - Subsec. (c). Pub. L. 105-206 reenacted heading without
    change and amended text generally. Prior to amendment, text read as
    follows: "In the case of an individual who dies in any calendar
    year after 1998, the $1,000,000 amount contained in subsection (a)
    shall be increased by an amount equal to - 
        "(1) $1,000,000, multiplied by
        "(2) the cost-of-living adjustment determined under section
      1(f)(3) for such calendar year by substituting 'calendar year
      1997' for 'calendar year 1992' in subparagraph (B) thereof.
    If any amount as adjusted under the preceding sentence is not a
    multiple of $10,000, such amount shall be rounded to the next
    lowest multiple of $10,000."
      1997 - Subsec. (c). Pub. L. 105-34 added subsec. (c).

             EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT         
      Amendment by Pub. L. 107-16 applicable to estates of decedents
    dying, and generation-skipping transfers, after Dec. 31, 2003, see
    section 521(e)(3) of Pub. L. 107-16, set out as a note under
    section 2010 of this title.
      Amendment by Pub. L. 107-16 inapplicable to estates of decedents
    dying, gifts made, or generation skipping transfers, after Dec. 31,
    2010, and the Internal Revenue Code of 1986 to be applied and
    administered to such estates, gifts, and transfers as if such
    amendment had never been enacted, see section 901 of Pub. L. 107-
    16, set out as a note under section 1 of this title.

                     EFFECTIVE DATE OF 1998 AMENDMENT                 
      Amendment by Pub. L. 105-206 effective, except as otherwise
    provided, as if included in the provisions of the Taxpayer Relief
    Act of 1997, Pub. L. 105-34, to which such amendment relates, see
    section 6024 of Pub. L. 105-206, set out as a note under section 1
    of this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2632                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter D - GST Exemption

-HEAD-
    Sec. 2632. Special rules for allocation of GST exemption

-STATUTE-
    (a) Time and manner of allocation
      (1) Time
        Any allocation by an individual of his GST exemption under
      section 2631(a) may be made at any time on or before the date
      prescribed for filing the estate tax return for such individual's
      estate (determined with regard to extensions), regardless of
      whether such a return is required to be filed.
      (2) Manner
        The Secretary shall prescribe by forms or regulations the
      manner in which any allocation referred to in paragraph (1) is to
      be made.
    (b) Deemed allocation to certain lifetime direct skips
      (1) In general
        If any individual makes a direct skip during his lifetime, any
      unused portion of such individual's GST exemption shall be
      allocated to the property transferred to the extent necessary to
      make the inclusion ratio for such property zero. If the amount of
      the direct skip exceeds such unused portion, the entire unused
      portion shall be allocated to the property transferred.
      (2) Unused portion
        For purposes of paragraph (1), the unused portion of an
      individual's GST exemption is that portion of such exemption
      which has not previously been allocated by such individual (or
      treated as allocated under paragraph (1) or subsection (c)(1)).
      (3) Subsection not to apply in certain cases
        An individual may elect to have this subsection not apply to a
      transfer.
    (c) Deemed allocation to certain lifetime transfers to GST trusts
      (1) In general
        If any individual makes an indirect skip during such
      individual's lifetime, any unused portion of such individual's
      GST exemption shall be allocated to the property transferred to
      the extent necessary to make the inclusion ratio for such
      property zero. If the amount of the indirect skip exceeds such
      unused portion, the entire unused portion shall be allocated to
      the property transferred.
      (2) Unused portion
        For purposes of paragraph (1), the unused portion of an
      individual's GST exemption is that portion of such exemption
      which has not previously been - 
          (A) allocated by such individual,
          (B) treated as allocated under subsection (b) with respect to
        a direct skip occurring during or before the calendar year in
        which the indirect skip is made, or
          (C) treated as allocated under paragraph (1) with respect to
        a prior indirect skip.
      (3) Definitions
        (A) Indirect skip
          For purposes of this subsection, the term "indirect skip"
        means any transfer of property (other than a direct skip)
        subject to the tax imposed by chapter 12 made to a GST trust.
        (B) GST trust
          The term "GST trust" means a trust that could have a
        generation-skipping transfer with respect to the transferor
        unless - 
            (i) the trust instrument provides that more than 25 percent
          of the trust corpus must be distributed to or may be
          withdrawn by one or more individuals who are non-skip persons
          - 
              (I) before the date that the individual attains age 46,
              (II) on or before one or more dates specified in the
            trust instrument that will occur before the date that such
            individual attains age 46, or
              (III) upon the occurrence of an event that, in accordance
            with regulations prescribed by the Secretary, may
            reasonably be expected to occur before the date that such
            individual attains age 46,

            (ii) the trust instrument provides that more than 25
          percent of the trust corpus must be distributed to or may be
          withdrawn by one or more individuals who are non-skip persons
          and who are living on the date of death of another person
          identified in the instrument (by name or by class) who is
          more than 10 years older than such individuals,
            (iii) the trust instrument provides that, if one or more
          individuals who are non-skip persons die on or before a date
          or event described in clause (i) or (ii), more than 25
          percent of the trust corpus either must be distributed to the
          estate or estates of one or more of such individuals or is
          subject to a general power of appointment exercisable by one
          or more of such individuals,
            (iv) the trust is a trust any portion of which would be
          included in the gross estate of a non-skip person (other than
          the transferor) if such person died immediately after the
          transfer,
            (v) the trust is a charitable lead annuity trust (within
          the meaning of section 2642(e)(3)(A)) or a charitable
          remainder annuity trust or a charitable remainder unitrust
          (within the meaning of section 664(d)), or
            (vi) the trust is a trust with respect to which a deduction
          was allowed under section 2522 for the amount of an interest
          in the form of the right to receive annual payments of a
          fixed percentage of the net fair market value of the trust
          property (determined yearly) and which is required to pay
          principal to a non-skip person if such person is alive when
          the yearly payments for which the deduction was allowed
          terminate.

        For purposes of this subparagraph, the value of transferred
        property shall not be considered to be includible in the gross
        estate of a non-skip person or subject to a right of withdrawal
        by reason of such person holding a right to withdraw so much of
        such property as does not exceed the amount referred to in
        section 2503(b) with respect to any transferor, and it shall be
        assumed that powers of appointment held by non-skip persons
        will not be exercised.
      (4) Automatic allocations to certain GST trusts
        For purposes of this subsection, an indirect skip to which
      section 2642(f) applies shall be deemed to have been made only at
      the close of the estate tax inclusion period. The fair market
      value of such transfer shall be the fair market value of the
      trust property at the close of the estate tax inclusion period.
      (5) Applicability and effect
        (A) In general
          An individual - 
            (i) may elect to have this subsection not apply to - 
              (I) an indirect skip, or
              (II) any or all transfers made by such individual to a
            particular trust, and

            (ii) may elect to treat any trust as a GST trust for
          purposes of this subsection with respect to any or all
          transfers made by such individual to such trust.
        (B) Elections
          (i) Elections with respect to indirect skips
            An election under subparagraph (A)(i)(I) shall be deemed to
          be timely if filed on a timely filed gift tax return for the
          calendar year in which the transfer was made or deemed to
          have been made pursuant to paragraph (4) or on such later
          date or dates as may be prescribed by the Secretary.
          (ii) Other elections
            An election under clause (i)(II) or (ii) of subparagraph
          (A) may be made on a timely filed gift tax return for the
          calendar year for which the election is to become effective.
    (d) Retroactive allocations
      (1) In general
        If - 
          (A) a non-skip person has an interest or a future interest in
        a trust to which any transfer has been made,
          (B) such person - 
            (i) is a lineal descendant of a grandparent of the
          transferor or of a grandparent of the transferor's spouse or
          former spouse, and
            (ii) is assigned to a generation below the generation
          assignment of the transferor, and

          (C) such person predeceases the transferor,

      then the transferor may make an allocation of any of such
      transferor's unused GST exemption to any previous transfer or
      transfers to the trust on a chronological basis.
      (2) Special rules
        If the allocation under paragraph (1) by the transferor is made
      on a gift tax return filed on or before the date prescribed by
      section 6075(b) for gifts made within the calendar year within
      which the non-skip person's death occurred - 
          (A) the value of such transfer or transfers for purposes of
        section 2642(a) shall be determined as if such allocation had
        been made on a timely filed gift tax return for each calendar
        year within which each transfer was made,
          (B) such allocation shall be effective immediately before
        such death, and
          (C) the amount of the transferor's unused GST exemption
        available to be allocated shall be determined immediately
        before such death.
      (3) Future interest
        For purposes of this subsection, a person has a future interest
      in a trust if the trust may permit income or corpus to be paid to
      such person on a date or dates in the future.
    (e) Allocation of unused GST exemption
      (1) In general
        Any portion of an individual's GST exemption which has not been
      allocated within the time prescribed by subsection (a) shall be
      deemed to be allocated as follows - 
          (A) first, to property which is the subject of a direct skip
        occurring at such individual's death, and
          (B) second, to trusts with respect to which such individual
        is the transferor and from which a taxable distribution or a
        taxable termination might occur at or after such individual's
        death.
      (2) Allocation within categories
        (A) In general
          The allocation under paragraph (1) shall be made among the
        properties described in subparagraph (A) thereof and the trusts
        described in subparagraph (B) thereof, as the case may be, in
        proportion to the respective amounts (at the time of
        allocation) of the nonexempt portions of such properties or
        trusts.
        (B) Nonexempt portion
          For purposes of subparagraph (A), the term "nonexempt
        portion" means the value (at the time of allocation) of the
        property or trust, multiplied by the inclusion ratio with
        respect to such property or trust.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2721; amended Pub. L. 100-647, title I, Sec. 1014(g)(16),
    Nov. 10, 1988, 102 Stat. 3566; Pub. L. 107-16, title V, Sec.
    561(a), (b), June 7, 2001, 115 Stat. 86, 89.)


-STATAMEND-
                           AMENDMENT OF SECTION                       
      For termination of amendment by section 901 of Pub. L. 107-16,
    see Effective and Termination Dates of 2001 Amendment note below.


-MISC1-
                                AMENDMENTS                            
      2001 - Subsec. (b)(2). Pub. L. 107-16, Secs. 561(b), 901,
    temporarily substituted "or subsection (c)(1)" for "with respect to
    a prior direct skip". See Effective and Termination Dates of 2001
    Amendment note below.
      Subsecs. (c) to (e). Pub. L. 107-16, Secs. 561(a), 901,
    temporarily added subsecs. (c) and (d) and redesignated former
    subsec. (c) as (e). See Effective and Termination Dates of 2001
    Amendment note below.
      1988 - Subsec. (b)(2). Pub. L. 100-647 substituted "paragraph (1)
    with respect to a prior direct skip)" for "paragraph (1)) with
    respect to a prior direct skip".

             EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT         
      Pub. L. 107-16, title V, Sec. 561(c), June 7, 2001, 115 Stat. 89,
    provided that:
      "(1) Deemed allocation. - Section 2632(c) of the Internal Revenue
    Code of 1986 (as added by subsection (a)), and the amendment made
    by subsection (b) [amending this section], shall apply to transfers
    subject to chapter 11 or 12 made after December 31, 2000, and to
    estate tax inclusion periods ending after December 31, 2000.
      "(2) Retroactive allocations. - Section 2632(d) of the Internal
    Revenue Code of 1986 (as added by subsection (a)) shall apply to
    deaths of non-skip persons occurring after December 31, 2000."
      Amendment by Pub. L. 107-16 inapplicable to estates of decedents
    dying, gifts made, or generation skipping transfers, after Dec. 31,
    2010, and the Internal Revenue Code of 1986 to be applied and
    administered to such estates, gifts, and transfers as if such
    amendment had never been enacted, see section 901 of Pub. L. 107-
    16, set out as a note under section 1 of this title.

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-


-CITE-
    26 USC Subchapter E - Applicable Rate; Inclusion Ratio      01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter E - Applicable Rate; Inclusion Ratio

-HEAD-
              SUBCHAPTER E - APPLICABLE RATE; INCLUSION RATIO          

-MISC1-
    Sec.                                                     
    2641.       Applicable rate.                                      
    2642.       Inclusion ratio.                                      

-End-



-CITE-
    26 USC Sec. 2641                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter E - Applicable Rate; Inclusion Ratio

-HEAD-
    Sec. 2641. Applicable rate

-STATUTE-
    (a) General rule
      For purposes of this chapter, the term "applicable rate" means,
    with respect to any generation-skipping transfer, the product of - 
        (1) the maximum Federal estate tax rate, and
        (2) the inclusion ratio with respect to the transfer.
    (b) Maximum Federal estate tax rate
      For purposes of subsection (a), the term "maximum Federal estate
    tax rate" means the maximum rate imposed by section 2001 on the
    estates of decedents dying at the time of the taxable distribution,
    taxable termination, or direct skip, as the case may be.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2722.)


-MISC1-
                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2642                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter E - Applicable Rate; Inclusion Ratio

-HEAD-
    Sec. 2642. Inclusion ratio

-STATUTE-
    (a) Inclusion ratio defined
      For purposes of this chapter - 
      (1) In general
        Except as otherwise provided in this section, the inclusion
      ratio with respect to any property transferred in a generation-
      skipping transfer shall be the excess (if any) of 1 over - 
          (A) except as provided in subparagraph (B), the applicable
        fraction determined for the trust from which such transfer is
        made, or
          (B) in the case of a direct skip, the applicable fraction
        determined for such skip.
      (2) Applicable fraction
        For purposes of paragraph (1), the applicable fraction is a
      fraction - 
          (A) the numerator of which is the amount of the GST exemption
        allocated to the trust (or in the case of a direct skip,
        allocated to the property transferred in such skip), and
          (B) the denominator of which is - 
            (i) the value of the property transferred to the trust (or
          involved in the direct skip), reduced by
            (ii) the sum of - 
              (I) any Federal estate tax or State death tax actually
            recovered from the trust attributable to such property, and
              (II) any charitable deduction allowed under section 2055
            or 2522 with respect to such property.
      (3) Severing of trusts
        (A) In general
          If a trust is severed in a qualified severance, the trusts
        resulting from such severance shall be treated as separate
        trusts thereafter for purposes of this chapter.
        (B) Qualified severance
          For purposes of subparagraph (A) - 
          (i) In general
            The term "qualified severance" means the division of a
          single trust and the creation (by any means available under
          the governing instrument or under local law) of two or more
          trusts if - 
              (I) the single trust was divided on a fractional basis,
            and
              (II) the terms of the new trusts, in the aggregate,
            provide for the same succession of interests of
            beneficiaries as are provided in the original trust.
          (ii) Trusts with inclusion ratio greater than zero
            If a trust has an inclusion ratio of greater than zero and
          less than 1, a severance is a qualified severance only if the
          single trust is divided into two trusts, one of which
          receives a fractional share of the total value of all trust
          assets equal to the applicable fraction of the single trust
          immediately before the severance. In such case, the trust
          receiving such fractional share shall have an inclusion ratio
          of zero and the other trust shall have an inclusion ratio of
          1.
          (iii) Regulations
            The term "qualified severance" includes any other severance
          permitted under regulations prescribed by the Secretary.
        (C) Timing and manner of severances
          A severance pursuant to this paragraph may be made at any
        time. The Secretary shall prescribe by forms or regulations the
        manner in which the qualified severance shall be reported to
        the Secretary.
    (b) Valuation rules, etc.
      Except as provided in subsection (f) - 
      (1) Gifts for which gift tax return filed or deemed allocation
        made
        If the allocation of the GST exemption to any transfers of
      property is made on a gift tax return filed on or before the date
      prescribed by section 6075(b) for such transfer or is deemed to
      be made under section 2632(b)(1) or (c)(1) - 
          (A) the value of such property for purposes of subsection (a)
        shall be its value as finally determined for purposes of
        chapter 12 (within the meaning of section 2001(f)(2)), or, in
        the case of an allocation deemed to have been made at the close
        of an estate tax inclusion period, its value at the time of the
        close of the estate tax inclusion period, and
          (B) such allocation shall be effective on and after the date
        of such transfer, or, in the case of an allocation deemed to
        have been made at the close of an estate tax inclusion period,
        on and after the close of such estate tax inclusion period.
      (2) Transfers and allocations at or after death
        (A) Transfers at death
          If property is transferred as a result of the death of the
        transferor, the value of such property for purposes of
        subsection (a) shall be its value as finally determined for
        purposes of chapter 11; except that, if the requirements
        prescribed by the Secretary respecting allocation of post-death
        changes in value are not met, the value of such property shall
        be determined as of the time of the distribution concerned.
        (B) Allocations to property transferred at death of transferor
          Any allocation to property transferred as a result of the
        death of the transferor shall be effective on and after the
        date of the death of the transferor.
      (3) Allocations to inter vivos transfers not made on timely filed
        gift tax return
        If any allocation of the GST exemption to any property not
      transferred as a result of the death of the transferor is not
      made on a gift tax return filed on or before the date prescribed
      by section 6075(b) and is not deemed to be made under section
      2632(b)(1) - 
          (A) the value of such property for purposes of subsection (a)
        shall be determined as of the time such allocation is filed
        with the Secretary, and
          (B) such allocation shall be effective on and after the date
        on which such allocation is filed with the Secretary.
      (4) QTIP trusts
        If the value of property is included in the estate of a spouse
      by virtue of section 2044, and if such spouse is treated as the
      transferor of such property under section 2652(a), the value of
      such property for purposes of subsection (a) shall be its value
      for purposes of chapter 11 in the estate of such spouse.
    (c) Treatment of certain direct skips which are nontaxable gifts
      (1) In general
        In the case of a direct skip which is a nontaxable gift, the
      inclusion ratio shall be zero.
      (2) Exception for certain transfers in trust
        Paragraph (1) shall not apply to any transfer to a trust for
      the benefit of an individual unless - 
          (A) during the life of such individual, no portion of the
        corpus or income of the trust may be distributed to (or for the
        benefit of) any person other than such individual, and
          (B) if the trust does not terminate before the individual
        dies, the assets of such trust will be includible in the gross
        estate of such individual.

      Rules similar to the rules of section 2652(c)(3) shall apply for
      purposes of subparagraph (A).
      (3) Nontaxable gift
        For purposes of this subsection, the term "nontaxable gift"
      means any transfer of property to the extent such transfer is not
      treated as a taxable gift by reason of - 
          (A) section 2503(b) (taking into account the application of
        section 2513), or
          (B) section 2503(e).
    (d) Special rules where more than 1 transfer made to trust
      (1) In general
        If a transfer of property is made to a trust in existence
      before such transfer, the applicable fraction for such trust
      shall be recomputed as of the time of such transfer in the manner
      provided in paragraph (2).
      (2) Applicable fraction
        In the case of any such transfer, the recomputed applicable
      fraction is a fraction - 
          (A) the numerator of which is the sum of - 
            (i) the amount of the GST exemption allocated to property
          involved in such transfer, plus
            (ii) the nontax portion of such trust immediately before
          such transfer, and

          (B) the denominator of which is the sum of - 
            (i) the value of the property involved in such transfer
          reduced by the sum of - 
              (I) any Federal estate tax or State death tax actually
            recovered from the trust attributable to such property, and
              (II) any charitable deduction allowed under section 2055
            or 2522 with respect to such property, and

            (ii) the value of all of the property in the trust
          (immediately before such transfer).
      (3) Nontax portion
        For purposes of paragraph (2), the term "nontax portion" means
      the product of - 
          (A) the value of all of the property in the trust, and
          (B) the applicable fraction in effect for such trust.
      (4) Similar recomputation in case of certain late allocations
        If - 
          (A) any allocation of the GST exemption to property
        transferred to a trust is not made on a timely filed gift tax
        return required by section 6019, and
          (B) there was a previous allocation with respect to property
        transferred to such trust,

      the applicable fraction for such trust shall be recomputed as of
      the time of such allocation under rules similar to the rules of
      paragraph (2).
    (e) Special rules for charitable lead annuity trusts
      (1) In general
        For purposes of determining the inclusion ratio for any
      charitable lead annuity trust, the applicable fraction shall be a
      fraction - 
          (A) the numerator of which is the adjusted GST exemption, and
          (B) the denominator of which is the value of all of the
        property in such trust immediately after the termination of the
        charitable lead annuity.
      (2) Adjusted GST exemption
        For purposes of paragraph (1), the adjusted GST exemption is an
      amount equal to the GST exemption allocated to the trust
      increased by interest determined - 
          (A) at the interest rate used in determining the amount of
        the deduction under section 2055 or 2522 (as the case may be)
        for the charitable lead annuity, and
          (B) for the actual period of the charitable lead annuity.
      (3) Definitions
        For purposes of this subsection - 
        (A) Charitable lead annuity trust
          The term "charitable lead annuity trust" means any trust in
        which there is a charitable lead annuity.
        (B) Charitable lead annuity
          The term "charitable lead annuity" means any interest in the
        form of a guaranteed annuity with respect to which a deduction
        was allowed under section 2055 or 2522 (as the case may be).
      (4) Coordination with subsection (d)
        Under regulations, appropriate adjustments shall be made in the
      application of subsection (d) to take into account the provisions
      of this subsection.
    (f) Special rules for certain inter vivos transfers
      Except as provided in regulations - 
      (1) In general
        For purposes of determining the inclusion ratio, if - 
          (A) an individual makes an inter vivos transfer of property,
        and
          (B) the value of such property would be includible in the
        gross estate of such individual under chapter 11 if such
        individual died immediately after making such transfer (other
        than by reason of section 2035),

      any allocation of GST exemption to such property shall not be
      made before the close of the estate tax inclusion period (and the
      value of such property shall be determined under paragraph (2)).
      If such transfer is a direct skip, such skip shall be treated as
      occurring as of the close of the estate tax inclusion period.
      (2) Valuation
        In the case of any property to which paragraph (1) applies, the
      value of such property shall be - 
          (A) if such property is includible in the gross estate of the
        transferor (other than by reason of section 2035), its value
        for purposes of chapter 11, or
          (B) if subparagraph (A) does not apply, its value as of the
        close of the estate tax inclusion period (or, if any allocation
        of GST exemption to such property is not made on a timely filed
        gift tax return for the calendar year in which such period
        ends, its value as of the time such allocation is filed with
        the Secretary).
      (3) Estate tax inclusion period
        For purposes of this subsection, the term "estate tax inclusion
      period" means any period after the transfer described in
      paragraph (1) during which the value of the property involved in
      such transfer would be includible in the gross estate of the
      transferor under chapter 11 if he died. Such period shall in no
      event extend beyond the earlier of - 
          (A) the date on which there is a generation-skipping transfer
        with respect to such property, or
          (B) the date of the death of the transferor.
      (4) Treatment of spouse
        Except as provided in regulations, any reference in this
      subsection to an individual or transferor shall be treated as
      including a reference to the spouse of such individual or
      transferor.
      (5) Coordination with subsection (d)
        Under regulations, appropriate adjustments shall be made in the
      application of subsection (d) to take into account the provisions
      of this subsection.
    (g) Relief provisions
      (1) Relief from late elections
        (A) In general
          The Secretary shall by regulation prescribe such
        circumstances and procedures under which extensions of time
        will be granted to make - 
            (i) an allocation of GST exemption described in paragraph
          (1) or (2) of subsection (b), and
            (ii) an election under subsection (b)(3) or (c)(5) of
          section 2632.

        Such regulations shall include procedures for requesting
        comparable relief with respect to transfers made before the
        date of the enactment of this paragraph.
        (B) Basis for determinations
          In determining whether to grant relief under this paragraph,
        the Secretary shall take into account all relevant
        circumstances, including evidence of intent contained in the
        trust instrument or instrument of transfer and such other
        factors as the Secretary deems relevant. For purposes of
        determining whether to grant relief under this paragraph, the
        time for making the allocation (or election) shall be treated
        as if not expressly prescribed by statute.
      (2) Substantial compliance
        An allocation of GST exemption under section 2632 that
      demonstrates an intent to have the lowest possible inclusion
      ratio with respect to a transfer or a trust shall be deemed to be
      an allocation of so much of the transferor's unused GST exemption
      as produces the lowest possible inclusion ratio. In determining
      whether there has been substantial compliance, all relevant
      circumstances shall be taken into account, including evidence of
      intent contained in the trust instrument or instrument of
      transfer and such other factors as the Secretary deems relevant.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2722; amended Pub. L. 100-647, title I, Sec. 1014(g)(3)(A),
    (4), (17)(A), (B), (18), Nov. 10, 1988, 102 Stat. 3563, 3566, 3567;
    Pub. L. 101-239, title VII, Sec. 7811(j)(4), Dec. 19, 1989, 103
    Stat. 2411; Pub. L. 101-508, title XI, Secs. 11703(c)(1), (2),
    11704(a)(17), (36), Nov. 5, 1990, 104 Stat. 1388-517, 1388-519;
    Pub. L. 107-16, title V, Secs. 562(a), 563(a), (b), 564(a), June 7,
    2001, 115 Stat. 89-91.)


-STATAMEND-
                           AMENDMENT OF SECTION                       
      For termination of amendment by section 901 of Pub. L. 107-16,
    see Effective and Termination Dates of 2001 Amendment note below.


-MISC1-
                                AMENDMENTS                            
      2001 - Subsec. (a)(3). Pub. L. 107-16, Secs. 562(a), 901,
    temporarily added par. (3). See Effective and Termination Dates of
    2001 Amendment note below.
      Subsec. (b)(1). Pub. L. 107-16, Secs. 563(a), 901, temporarily
    reenacted heading without change and amended text of par. (1)
    generally. Prior to amendment, text read as follows: "If the
    allocation of the GST exemption to any property is made on a gift
    tax return filed on or before the date prescribed by section
    6075(b) or is deemed to be made under section 2632(b)(1) - 
        "(A) the value of such property for purposes of subsection (a)
      shall be its value for purposes of chapter 12, and
        "(B) such allocation shall be effective on and after the date
      of such transfer."
    See Effective and Termination Dates of 2001 Amendment note below.
      Subsec. (b)(2)(A). Pub. L. 107-16, Secs. 563(b), 901, temporarily
    reenacted heading without change and amended text of subpar. (A)
    generally. Prior to amendment, text read as follows: "If property
    is transferred as a result of the death of the transferor, the
    value of such property for purposes of subsection (a) shall be its
    value for purposes of chapter 11; except that, if the requirements
    prescribed by the Secretary respecting allocation of post-death
    changes in value are not met, the value of such property shall be
    determined as of the time of the distribution concerned." See
    Effective and Termination Dates of 2001 Amendment note below.
      Subsec. (g). Pub. L. 107-16, Secs. 564(a), 901, temporarily added
    subsec. (g). See Effective and Termination Dates of 2001 Amendment
    note below.
      1990 - Subsec. (b)(3). Pub. L. 101-508, Sec. 11704(a)(36),
    amended Pub. L. 100-647, Sec. 1014(g)(4)(F)(ii). See 1988 Amendment
    note below.
      Subsec. (c)(2). Pub. L. 101-508, Sec. 11703(c)(2), inserted at
    end: "Rules similar to the rules of section 2652(c)(3) shall apply
    for purposes of subparagraph (A)."
      Subsec. (c)(2)(B). Pub. L. 101-508, Sec. 11703(c)(1), substituted
    "the trust does not terminate before the individual dies" for "such
    individual dies before the trust is terminated".
      Subsec. (d)(2)(B)(i)(I). Pub. L. 101-508, Sec. 11704(a)(17),
    substituted "State" for "state".
      1989 - Subsec. (b)(1), (3). Pub. L. 101-239 substituted "a gift
    tax return filed on or before the date prescribed by section
    6075(b)" for "a timely filed gift tax return required by section
    6019" in introductory provisions.
      1988 - Subsec. (a)(2). Pub. L. 100-647, Sec. 1014(g)(4)(B),
    struck out at end "Except as provided in paragraphs (3) and (4) of
    subsection (b), the value determined under subparagraph (B)(i)
    shall be of the property as of the time of the transfer to the
    trust (or the direct skip)."
      Subsec. (b). Pub. L. 100-647, Sec. 1014(g)(4)(D), inserted
    "Except as provided in subsection (f) - " as introductory
    provision.
      Subsec. (b)(2)(A). Pub. L. 100-647, Sec. 1014(g)(4)(C), inserted
    before period at end "; except that, if the requirements prescribed
    by the Secretary respecting allocation of post-death changes in
    value are not met, the value of such property shall be determined
    as of the time of the distribution concerned."
      Subsec. (b)(2)(B). Pub. L. 100-647, Sec. 1014(g)(4)(E),
    substituted "to property transferred at death" for "at or after
    death" in heading and "to property transferred as a result of the
    death of the transferor" for "at or after the death of the
    transferor" in text.
      Subsec. (b)(3). Pub. L. 100-647, Sec. 1014(g)(4)(F)(ii), as
    amended by Pub. L. 101-508, Sec. 11704(a)(36), substituted
    "Allocations to inter vivos transfers" for "Inter vivos
    allocations" in heading.
      Pub. L. 100-647, Sec. 1014(g)(4)(F)(i), substituted "to any
    property not transferred as a result of the death of the transferor
    is" for "to any property is made during the life of the transferor
    but is".
      Subsec. (c). Pub. L. 100-647, Sec. 1014(g)(17)(A), inserted
    "direct skips which are" in heading and amended text generally.
    Prior to amendment, text read as follows:
      "(1) Direct skips. - In the case of any direct skip which is a
    nontaxable gift, the inclusion ratio shall be zero.
      "(2) Treatment of nontaxable gifts made to trusts. - 
        "(A) In general. - Except as provided in subparagraph (B), any
      nontaxable gift which is not a direct skip and which is made to a
      trust shall not be taken into account under subsection (a)(2)(B).
        "(B) Determination of 1st transfer to trust. - In the case of
      any nontaxable gift referred to in subparagraph (A) which is the
      1st transfer to the trust, the inclusion ratio for such trust
      shall be zero.
      "(3) Nontaxable gift. - For purposes of this section, the term
    'nontaxable gift' means any transfer of property to the extent such
    transfer is not treated as a taxable gift by reason of - 
        "(A) section 2503(b) (taking into account the application of
      section 2513), or
        "(B) section 2503(e)."
      Subsec. (d)(1). Pub. L. 100-647, Sec. 1014(g)(17)(B), struck out
    "(other than a nontaxable gift)" after "transfer of property".
      Subsec. (d)(2)(B)(i). Pub. L. 100-647, Sec. 1014(g)(18), amended
    cl. (i) generally. Prior to amendment, cl. (i) read as follows:
    "the value of the property involved in such transfer, reduced by
    any charitable deduction allowed under section 2055 or 2522 with
    respect to such property, and".
      Subsec. (e). Pub. L. 100-647, Sec. 1014(g)(3)(A), added subsec.
    (e).
      Subsec. (f). Pub. L. 100-647, Sec. 1014(g)(4)(A), added subsec.
    (f).

             EFFECTIVE AND TERMINATION DATES OF 2001 AMENDMENT         
      Pub. L. 107-16, title V, Sec. 562(b), June 7, 2001, 115 Stat. 90,
    provided that: "The amendment made by this section [amending this
    section] shall apply to severances after December 31, 2000."
      Pub. L. 107-16, title V, Sec. 563(c), June 7, 2001, 115 Stat. 91,
    provided that: "The amendments made by this section [amending this
    section] shall apply to transfers subject to chapter 11 or 12 of
    the Internal Revenue Code of 1986 made after December 31, 2000."
      Pub. L. 107-16, title V, Sec. 564(b), June 7, 2001, 115 Stat. 91,
    provided that:
      "(1) Relief from late elections. - Section 2642(g)(1) of the
    Internal Revenue Code of 1986 (as added by subsection (a)) shall
    apply to requests pending on, or filed after, December 31, 2000.
      "(2) Substantial compliance. - Section 2642(g)(2) of such Code
    (as so added) shall apply to transfers subject to chapter 11 or 12
    of the Internal Revenue Code of 1986 made after December 31, 2000.
    No implication is intended with respect to the availability of
    relief from late elections or the application of a rule of
    substantial compliance on or before such date."
      Amendment by Pub. L. 107-16 inapplicable to estates of decedents
    dying, gifts made, or generation skipping transfers, after Dec. 31,
    2010, and the Internal Revenue Code of 1986 to be applied and
    administered to such estates, gifts, and transfers as if such
    amendment had never been enacted, see section 901 of Pub. L. 107-
    16, set out as a note under section 1 of this title.

                     EFFECTIVE DATE OF 1990 AMENDMENT                 
      Section 11703(c)(4) of Pub. L. 101-508 provided that: "The
    amendments made by paragraphs (1) and (2) [amending this section]
    shall apply to transfers after March 31, 1988."

                     EFFECTIVE DATE OF 1989 AMENDMENT                 
      Amendment by Pub. L. 101-239 effective, except as otherwise
    provided, as if included in the provision of the Technical and
    Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
    amendment relates, see section 7817 of Pub. L. 101-239, set out as
    a note under section 1 of this title.

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Section 1014(g)(3)(B) of Pub. L. 100-647 provided that: "The
    amendment made by subparagraph (A) [amending this section] shall
    apply for purposes of determining the inclusion ratio with respect
    to property transferred after October 13, 1987."
      Section 1014(g)(17)(C) of Pub. L. 100-647 provided that: "The
    amendments made by this paragraph [amending this section] shall
    apply to transfers after March 31, 1988."
      Amendment by section 1014(g)(4), (18) of Pub. L. 100-647
    effective, except as otherwise provided, as if included in the
    provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which
    such amendment relates, see section 1019(a) of Pub. L. 100-647, set
    out as a note under section 1 of this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-


-CITE-
    26 USC Subchapter F - Other Definitions and Special Rules    01/03/2007 

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter F - Other Definitions and Special Rules

-HEAD-
            SUBCHAPTER F - OTHER DEFINITIONS AND SPECIAL RULES        

-MISC1-
    Sec.                                                     
    2651.       Generation assignment.                                
    2652.       Other definitions.                                    
    2653.       Taxation of multiple skips.                           
    2654.       Special rules.                                        

-End-



-CITE-
    26 USC Sec. 2651                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter F - Other Definitions and Special Rules

-HEAD-
    Sec. 2651. Generation assignment

-STATUTE-
    (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 rule 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 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 1 generation
        Except as provided in regulations, an individual who, but for
      this subsection, would be assigned to more than 1 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.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2725; amended Pub. L. 100-647, title I, Sec. 1014(g)(11),
    (19), Nov. 10, 1988, 102 Stat. 3565, 3567; Pub. L. 105-34, title V,
    Sec. 511(a), Aug. 5, 1997, 111 Stat. 860.)


-MISC1-
                                AMENDMENTS                            
      1997 - Subsecs. (e), (f). Pub. L. 105-34 added subsec. (e) and
    redesignated former subsec. (e) as (f).
      1988 - Subsec. (b)(2). Pub. L. 100-647, Sec. 1014(g)(19),
    inserted "(or former spouse)" after "a spouse".
      Subsec. (e)(3). Pub. L. 100-647, Sec. 1014(g)(11), amended par.
    (3) generally, including governmental entities among the
    organizations to be assigned to transferor's generation.

                     EFFECTIVE DATE OF 1997 AMENDMENT                 
      Amendment by Pub. L. 105-34 applicable to terminations,
    distributions, and transfers occurring after Dec. 31, 1997, see
    section 511(c) of Pub. L. 105-34, set out as a note under section
    2612 of this title.

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2652                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter F - Other Definitions and Special Rules

-HEAD-
    Sec. 2652. Other definitions

-STATUTE-
    (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.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2726; amended Pub. L. 100-647, title I, Sec. 1014(g)(6), (8),
    (9), (14), (20), Nov. 10, 1988, 102 Stat. 3565-3567; Pub. L. 105-
    34, title XIII, Sec. 1305(b), Aug. 5, 1997, 111 Stat. 1040; Pub.
    L. 105-206, title VI, Sec. 6013(a)(3), (4)(A), July 22, 1998, 112
    Stat. 819.)


-MISC1-
                                AMENDMENTS                            
      1998 - Subsec. (b)(1). Pub. L. 105-206, Sec. 6013(a)(4)(A),
    struck out at end "Such term shall not include any trust during any
    period the trust is treated as part of an estate under section
    645."
      Pub. L. 105-206, Sec. 6013(a)(3), substituted "section 645" for
    "section 646".
      1997 - Subsec. (b)(1). Pub. L. 105-34 inserted at end "Such term
    shall not include any trust during any period the trust is treated
    as part of an estate under section 646."
      1988 - Subsec. (a)(1). Pub. L. 100-647, Sec. 1014(g)(9),
    substituted "any property" for "a transfer of a kind" in subpars.
    (A) and (B) and inserted at end "An individual shall be treated as
    transferring any property with respect to which such individual is
    the transferor."
      Subsec. (a)(3). Pub. L. 100-647, Sec. 1014(g)(14), substituted
    "any trust" for "any property" in subpars. (A) and (B) and "may
    elect to treat all of the property in such trust" for "may elect to
    treat such property" in closing provisions.
      Subsec. (c)(2). Pub. L. 100-647, Sec. 1014(g)(8), struck out
    "nominal" before "interests" in heading and substituted "any tax"
    for "the tax" in text.
      Subsec. (c)(3). Pub. L. 100-647, Sec. 1014(g)(6), added par. (3).
      Subsec. (d). Pub. L. 100-647, Sec. 1014(g)(20), added subsec.
    (d).

                     EFFECTIVE DATE OF 1998 AMENDMENT                 
      Amendment by Pub. L. 105-206 effective, except as otherwise
    provided, as if included in the provisions of the Taxpayer Relief
    Act of 1997, Pub. L. 105-34, to which such amendment relates, see
    section 6024 of Pub. L. 105-206, set out as a note under section 1
    of this title.

                     EFFECTIVE DATE OF 1997 AMENDMENT                 
      Amendment by Pub. L. 105-34 applicable with respect to estates of
    decedents dying after Aug. 5, 1997, see section 1305(d) of Pub. L.
    105-34, set out as an Effective Date note under section 645 of this
    title.

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2653                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter F - Other Definitions and Special Rules

-HEAD-
    Sec. 2653. Taxation of multiple skips

-STATUTE-
    (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 account any 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 1 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.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2727.)


-MISC1-
                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2654                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter F - Other Definitions and Special Rules

-HEAD-
    Sec. 2654. Special rules

-STATUTE-
    (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 1, 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 2 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.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2727; amended Pub. L. 100-647, title I, Sec. 1014(g)(12),
    (13), Nov. 10, 1988, 102 Stat. 3565, 3566; Pub. L. 101-239, title
    VII, Sec. 7811(j)(2), Dec. 19, 1989, 103 Stat. 2411; Pub. L. 105-
    206, title VI, Sec. 6013(a)(4)(B), July 22, 1998, 112 Stat. 819.)


-MISC1-
                                AMENDMENTS                            
      1998 - Subsec. (b). Pub. L. 105-206 inserted at end "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."
      1989 - Subsec. (a)(1). Pub. L. 101-239 inserted at end "The
    preceding shall be applied after any basis adjustment under section
    1015 with respect to the transfer."
      1988 - Subsec. (a)(2). Pub. L. 100-647, Sec. 1014(g)(12),
    inserted "or decrease" after "any increase" and "or decrease (as
    the case may be)" after "such increase".
      Subsec. (b). Pub. L. 100-647, Sec. 1014(g)(13), substituted
    "Certain trusts" for "Separate shares" in heading and amended text
    generally. Prior to amendment, text read as follows: "Substantially
    separate and independent shares of different beneficiaries in a
    trust shall be treated as separate trusts."

                     EFFECTIVE DATE OF 1998 AMENDMENT                 
      Amendment by Pub. L. 105-206 effective, except as otherwise
    provided, as if included in the provisions of the Taxpayer Relief
    Act of 1997, Pub. L. 105-34, to which such amendment relates (see
    section 1305 of Pub. L. 105-34), see section 6024 of Pub. L. 105-
    206, set out as a note under section 1 of this title.

                     EFFECTIVE DATE OF 1989 AMENDMENT                 
      Amendment by Pub. L. 101-239 effective, except as otherwise
    provided, as if included in the provision of the Technical and
    Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such
    amendment relates, see section 7817 of Pub. L. 101-239, set out as
    a note under section 1 of this title.

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-


-CITE-
    26 USC Subchapter G - Administration                        01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter G - Administration

-HEAD-
                       SUBCHAPTER G - ADMINISTRATION                   

-MISC1-
    Sec.                                                     
    2661.       Administration.                                       
    2662.       Return requirements.                                  
    2663.       Regulations.                                          
    2664.       Termination.                                          

                                AMENDMENTS                            
      2001 - Pub. L. 107-16, title V, Sec. 501(c)(2), June 7, 2001, 115
    Stat. 69, added item 2664.

-End-



-CITE-
    26 USC Sec. 2661                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter G - Administration

-HEAD-
    Sec. 2661. Administration

-STATUTE-
      Insofar as applicable and not inconsistent with the provisions of
    this chapter - 
        (1) except as provided in paragraph (2), all provisions of
      subtitle F (including penalties) applicable to the gift tax, to
      chapter 12, or to section 2501, are hereby made applicable in
      respect of the generation-skipping transfer tax, this chapter, or
      section 2601, as the case may be, and
        (2) in the case of a generation-skipping transfer occurring at
      the same time as and as a result of the death of an individual,
      all provisions of subtitle F (including penalties) applicable to
      the estate tax, to chapter 11, or to section 2001 are hereby made
      applicable in respect of the generation-skipping transfer tax,
      this chapter, or section 2601 (as the case may be).

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2728.)


-MISC1-
                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2662                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter G - Administration

-HEAD-
    Sec. 2662. Return requirements

-STATUTE-
    (a) In general
      The Secretary shall prescribe by regulations the person who is
    required to make the return with respect to the tax imposed by this
    chapter and the time by which any such return must be filed. To the
    extent practicable, such regulations shall provide that - 
        (1) the person who is required to make such return shall be the
      person liable under section 2603(a) for payment of such tax, and
        (2) the return shall be filed - 
          (A) in the case of a direct skip (other than from a trust),
        on or before the date on which an estate or gift tax return is
        required to be filed with respect to the transfer, and
          (B) in all other cases, on or before the 15th day of the 4th
        month after the close of the taxable year of the person
        required to make such return in which such transfer occurs.
    (b) Information returns
      The Secretary may by regulations require a return to be filed
    containing such information as he determines to be necessary for
    purposes of this chapter.

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2728.)


-MISC1-
                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2663                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter G - Administration

-HEAD-
    Sec. 2663. Regulations

-STATUTE-
      The Secretary shall prescribe such regulations as may be
    necessary or appropriate to carry out the purposes of this chapter,
    including - 
        (1) such regulations as may be necessary to coordinate the
      provisions of this chapter with the recapture tax imposed under
      section 2032A(c),
        (2) regulations (consistent with the principles of chapters 11
      and 12) providing for the application of this chapter in the case
      of transferors who are nonresidents not citizens of the United
      States, and
        (3) regulations providing for such adjustments as may be
      necessary to the application of this chapter in the case of any
      arrangement which, although not a trust, is treated as a trust
      under section 2652(b).

-SOURCE-
    (Added Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100
    Stat. 2729; amended Pub. L. 100-647, title I, Sec. 1014(g)(10),
    Nov. 10, 1988, 102 Stat. 3565.)


-MISC1-
                                AMENDMENTS                            
      1988 - Par. (3). Pub. L. 100-647 added par. (3).

                     EFFECTIVE DATE OF 1988 AMENDMENT                 
      Amendment by Pub. L. 100-647 effective, except as otherwise
    provided, as if included in the provision of the Tax Reform Act of
    1986, Pub. L. 99-514, to which such amendment relates, see section
    1019(a) of Pub. L. 100-647, set out as a note under section 1 of
    this title.

                              EFFECTIVE DATE                          
      Section applicable to generation-skipping transfers (within the
    meaning of section 2611 of this title) made after Oct. 22, 1986,
    except as otherwise provided, see section 1433 of Pub. L. 99-514,
    set out as a note under section 2601 of this title.

-End-



-CITE-
    26 USC Sec. 2664                                            01/03/2007

-EXPCITE-
    TITLE 26 - INTERNAL REVENUE CODE
    Subtitle B - Estate and Gift Taxes
    CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
    Subchapter G - Administration

-HEAD-
    Sec. 2664. Termination

-STATUTE-
      This chapter shall not apply to generation-skipping transfers
    after December 31, 2009.

-SOURCE-
    (Added Pub. L. 107-16, title V, Sec. 501(b), June 7, 2001, 115
    Stat. 69.)


-STATAMEND-
                          TERMINATION OF SECTION                      
      For termination of section by section 901 of Pub. L. 107-16, see
    Effective and Termination Dates note below.


-MISC1-
                      EFFECTIVE AND TERMINATION DATES                  
      Section applicable to the estates of decedents dying, and
    generation-skipping transfers, after December 31, 2009, see section
    501(d) of Pub. L. 107-16, set out as a note under section 2210 of
    this title.
      Section inapplicable to estates of decedents dying, gifts made,
    or generation skipping transfers, after Dec. 31, 2010, and the
    Internal Revenue Code of 1986 to be applied and administered to
    such estates, gifts, and transfers as if it had never been enacted,
    see section 901 of Pub. L. 107-16, set out as a note under section
    1 of this title.

-End-