26 U.S.C. § 2612 — Taxable termination; taxable distribution;

Page 2654 TITLE 26—INTERNAL REVENUE CODE § 2611 Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF REPEAL Repeal effective Dec. 19, 2014, subject to a savings provision, see section 221(b) of Pub. L. 113–295, set out as an Effective Date of 2014 Amendment note under sec- tion 1 of this title. Subchapter B—Generation-Skipping Transfers Sec. 2611. Generation-skipping transfer defined. 2612. Taxable termination; taxable distribution; di- rect skip. 2613. Skip person and non-skip person defined. Editorial Notes AMENDMENTS 1986—Pub. L. 99–514, title XIV, § 1431(a), Oct. 22, 1986, 100 Stat. 2718, substituted ‘‘Generation-Skipping Trans- fers’’ for ‘‘Definitions and Special Rules’’ in subchapter heading, substituted ‘‘Generation-skipping transfer de- fined’’ 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 defini- tions’’ in item 2613, and struck out item 2614 ‘‘Special rules’’. § 2611. Generation-skipping transfer defined (a) In general For purposes of this chapter, the term ‘‘gen- eration-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 tax- able gift by reason of section 2503(e) (relating to exclusion of certain transfers for edu- cational 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 as- signment 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. (Added Pub. L. 94–455, title XX, § 2006(a), Oct. 4, 1976, 90 Stat. 1882; amended Pub. L. 99–514, title XIV, § 1431(a), Oct. 22, 1986, 100 Stat. 2718; Pub. L. 100–647, title I, §§ 1014(g)(1), (2), 1018(u)(43), Nov. 10, 1988, 102 Stat. 3562, 3592.) Editorial Notes AMENDMENTS 1988—Subsec. (a). Pub. L. 100–647, §§ 1014(g)(1), 1018(u)(43), substituted ‘‘generation-skipping transfer’’ for ‘‘generation-skipping transfers’’ and ‘‘means’’ for ‘‘mean’’. Subsec. (b). Pub. L. 100–647, § 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, sub- stituting 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 as- certainment of generation, and provided for a genera- tion-skipping trust equivalent. Statutory Notes and Related Subsidiaries 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 sec- tion 1433 of Pub. L. 99–514, set out as a note under sec- tion 2601 of this title. § 2612. Taxable termination; taxable distribution; direct skip (a) Taxable termination (1) General rule For purposes of this chapter, the term ‘‘tax- able termination’’ means the termination (by death, lapse of time, release of power, or oth- erwise) of an interest in property held in a trust unless— (A) immediately after such termination, a non-skip person has an interest in such prop- erty, 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 tax- able 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 spec- ified portion of the trust’s assets are distrib- uted to 1 or more skip persons (or 1 or more trusts for the exclusive benefit of such per- sons), such termination shall constitute a tax- able termination with respect to such portion of the trust property. (b) Taxable distribution For purposes of this chapter, the term ‘‘tax- able 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. Page 2655 TITLE 26—INTERNAL REVENUE CODE § 2613 (Added Pub. L. 94–455, title XX, § 2006(a), Oct. 4, 1976, 90 Stat. 1883; amended Pub. L. 99–514, title XIV, § 1431(a), Oct. 22, 1986, 100 Stat. 2719; Pub. L. 100–647, title I, § 1014(g)(5)(B), (7), (15), Nov. 10, 1988, 102 Stat. 3564–3566; Pub. L. 105–34, title V, § 511(b), Aug. 5, 1997, 111 Stat. 861.) Editorial Notes AMENDMENTS 1997—Subsec. (c)(2). Pub. L. 105–34, § 511(b)(2), sub- stituted ‘‘section 2651(f)(2)’’ for ‘‘section 2651(e)(2)’’. Pub. L. 105–34, § 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 grand- child’s children shall be treated as if they were grand- children of the transferor. In the case of lineal descend- ants 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, § 511(b)(1), redesignated par. (3) as (2). 1988—Subsec. (a)(2). Pub. L. 100–647, § 1014(g)(15), amended par. (2) generally. Prior to amendment, par. (2) read as follows: ‘‘If, upon the termination of an in- terest 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 per- sons), such termination shall constitute a taxable ter- mination with respect to such portion of the trust property.’’ Subsec. (c)(2). Pub. L. 100–647, § 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, § 1014(g)(5)(B), added par. (3). 1986—Pub. L. 99–514 amended section generally, sub- stituting 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. Statutory Notes and Related Subsidiaries EFFECTIVE DATE OF 1997 AMENDMENT Pub. L. 105–34, title V, § 511(c), Aug. 5, 1997, 111 Stat. 861, provided that: ‘‘The amendments made by this sec- tion [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 sec- tion 1433 of Pub. L. 99–514, set out as a note under sec- tion 2601 of this title. § 2613. Skip person and non-skip person defined (a) Skip person For purposes of this chapter, the term ‘‘skip person’’ means— (1) a natural person assigned to a generation which is 2 or more generations below the gen- eration 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. (Added Pub. L. 94–455, title XX, § 2006(a), Oct. 4, 1976, 90 Stat. 1884; amended Pub. L. 95–600, title VII, § 702(n)(2), (3), Nov. 6, 1978, 92 Stat. 2935, 2936; Pub. L. 96–222, title I, § 107(a)(2)(B), Apr. 1, 1980, 94 Stat. 222; Pub. L. 99–514, title XIV, § 1431(a), Oct. 22, 1986, 100 Stat. 2720; Pub. L. 100–647, title I, § 1014(g)(5)(A), Nov. 10, 1988, 102 Stat. 3564.) Editorial Notes AMENDMENTS 1988—Subsec. (a)(1). Pub. L. 100–647 inserted ‘‘natural’’ before ‘‘person’’. 1986—Pub. L. 99–514 amended section generally, sub- stituting definitions of ‘‘skip person’’ and ‘‘non-skip person’’ for former provisions which defined and ap- plied the terms ‘‘taxable distribution’’, ‘‘taxable termi- nation’’, ‘‘younger generation beneficiary’’, and ‘‘re- lated or subordinate trustee’’. 1980—Subsec. (e)(2)(A)(i). Pub. L. 96–222, § 107(a)(2)(B)(i), inserted ‘‘(other than as a potential ap- pointee under a power of appointment held by an- other)’’ after ‘‘trust’’. Subsec. (e)(2)(B). Pub. L. 96–222, § 107(a)(2)(B)(ii), re- designated 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, § 702(n)(3), sub- stituted ‘‘a present interest and a present power’’ for ‘‘an interest and a power’’ and ‘‘present interest or present power’’ for ‘‘interest or power’’ wherever ap- pearing. Subsec. (e). Pub. L. 95–600, § 702(n)(2), inserted provi- sions relating to powers of independent trustees and definition of a related or subordinate trustee. Statutory Notes and Related Subsidiaries 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.