‘‘(2) the portion of the trust to which a person 
who is not the grantor is a deemed owner by reason 
of the rules of subpart E of part 1 of subchapter J 
of chapter 1, and such deemed owner engages in a 
sale, exchange, or comparable transaction with the 
trust that is disregarded for purposes of subtitle A. 
For purposes of paragraph (2), the portion of the trust 
described with respect to a transaction is the portion of 
the trust attributable to the property received by the trust 
in such transaction, including all retained income there-
from, appreciation thereon, and reinvestments thereof, net 
of the amount of consideration received by the deemed 
owner in such transaction. 
‘‘(c) EXCEPTIONS.—This section shall not apply to— 
‘‘(1) any trust that is includible in the gross es-
tate of the deemed owner (without regard to sub-
section (a)(1)), and 
‘‘(2) any other type of trust that the Secretary 
determines by regulations or other guidance does not 
have as a significant purpose the avoidance of trans-
fer taxes. 
‘‘(d) DEEMED OWNER DEFINED.—For purposes of 
this section, the term ‘deemed owner’ means any person 
who is treated as the owner of a portion of a trust under 
subpart E of part 1 of subchapter J of chapter 1. 
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‘‘(e) REDUCTION FOR TAXABLE GIFTS TO TRUST 
MADE BY OWNER.—The amount to which subsection (a) 
applies shall be reduced by the value of any transfer by 
gift by the deemed owner to the trust previously taken 
into account by the deemed owner under chapter 12. 
‘‘(f) LIABILITY FOR PAYMENT OF TAX.—Any tax im-
posed pursuant to subsection (a) shall be a liability of the 
trust.’’. 
(b) CLERICAL AMENDMENT.—The table of chapters 
for subtitle B is amended by adding at the end the fol-
lowing new item: 
‘‘CHAPTER 16. SPECIAL RULES FOR GRANTOR TRUSTS’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply— 
(1) to trusts created on or after the date of the 
enactment of this Act; 
(2) to any portion of a trust established before 
the date of the enactment of this Act which is attrib-
utable to a contribution made on or after such date; 
and 
(3) to any portion of a trust established before 
the date of the enactment of this Act to which sec-
tion 2901(a) of the Internal Revenue Code of 1986 
(as added by subsection (a)) applies by reason of a 
transaction described in section 2901(b)(2) of such 
Code on or after such date. 
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SEC. 405. ELIMINATION OF GENERATION-SKIPPING TRANS-
FER TAX EXEMPTION FOR CERTAIN TRUSTS. 
(a) IN GENERAL.—Section 2642 is amended by add-
ing at the end the following new subsection: 
‘‘(h) ELIMINATION OF GST EXEMPTION FOR CER-
TAIN TRUSTS.— 
‘‘(1) IN GENERAL.— 
‘‘(A) TRANSFERS FROM NON-QUALIFYING 
TRUSTS.—In the case of any generation-skip-
ping transfer made from a trust that is not a 
qualifying trust, the inclusion ratio with respect 
to any property transferred in such transfer 
shall be 1. 
‘‘(B) QUALIFYING TRUST.—For purposes 
of this subsection, the term ‘qualifying trust’ 
means a trust for which the date of termination 
of such trust is not greater than 50 years after 
the date on which such trust is created. 
‘‘(2) TRUSTS CREATED BEFORE DATE OF EN-
ACTMENT.—In the case of any trust created before 
the date of the enactment of this subsection, such 
trust shall be deemed to be a qualifying trust for a 
period of 50 years after the date of the enactment 
of this subsection. 
‘‘(3) DATE OF CREATION OF CERTAIN DEEMED 
SEPARATE TRUSTS.—In the case of any portion of a 
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trust which is treated as a separate trust under sec-
tion 2654(b)(1), such separate trust shall be treated 
as created on the date of the first transfer described 
in such section with respect to such separate trust. 
‘‘(4) DATE
OF
CREATION
OF
POUR-OVER 
TRUSTS.—In the case of any generation-skipping 
transfer of property which involves the transfer of 
property from 1 trust to another trust, the date of 
the creation of the transferee trust shall be treated 
as being the earlier of— 
‘‘(A) the date of the creation of such trans-
feree trust, or 
‘‘(B) the date of the creation of the trans-
feror trust. 
In the case of multiple transfers to which the pre-
ceding sentence applies, the date of the creation of 
the transferor trust shall be determined under the 
preceding sentence before the application of the pre-
ceding sentence to determine the date of the creation 
of the transferee trust. 
‘‘(5) REGULATIONS.—The Secretary may pre-
scribe such regulations or other guidance as may be 
necessary or appropriate to carry out this sub-
section.’’. 
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(b) EFFECTIVE DATE.—The amendments made by 
this section shall take effect on the date of the enactment 
of this Act. 
SEC. 406. SIMPLIFYING GIFT TAX EXCLUSION FOR ANNUAL 
GIFTS. 
(a) IN GENERAL.—Paragraph (1) of section 2503(b) 
is amended to read as follows: 
‘‘(1) IN GENERAL.— 
‘‘(A) LIMIT PER DONEE.—In the case of 
gifts made to any person by the donor during 
the calendar year, the first $10,000 of such 
gifts to such person shall not, for purposes of 
subsection (a), be included in the total amount 
of gifts made during such year. 
‘‘(B) CUMULATIVE LIMIT PER DONOR.— 
‘‘(i) IN
GENERAL.—The aggregate 
amount excluded under subparagraph (A) 
with respect to all transfers described in 
clause (ii) made by the donor during the 
calendar year shall not exceed twice the 
dollar amount in effect under such sub-
paragraph for such calendar year. 
‘‘(ii) TRANSFERS SUBJECT TO LIMITA-
TION.—The transfers described in this 
clause are— 
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100 
‘‘(I) a transfer in trust, 
‘‘(II) a transfer of an interest in 
a passthrough entity, 
‘‘(III) a transfer of an interest 
subject to a prohibition on sale, and 
‘‘(IV) any other transfer of prop-
erty that, without regard to with-
drawal, put, or other such rights in 
the donee, cannot immediately be liq-
uidated by the donee.’’. 
(b) CONFORMING AMENDMENT.—Section 2503 is 
amended by striking subsection (c). 
(c) REGULATIONS.—The Secretary of the Treasury, 
or the Secretary of the Treasury’s delegate, may prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the amendments made by this 
section. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to any calendar year beginning 
after the date of the enactment of this Act. 
Æ 
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