§2653 Taxation of multiple skips

Summary

When property is passed as a generation-skipping transfer and put into a trust right after, the trust’s inclusion ratio usually does not change. But Treasury rules can require adjusting that ratio so it reflects any GST tax the trust pays because of that transfer. If the transfer moves property from one trust into another (a pour-over trust), the receiving trust treats the tax-free part of that distribution as if it used GST exemption. The tax-free part equals the distribution times the applicable fraction. Definitions: generation-skipping transfer = gift to a later generation; inclusion ratio = part of a trust counted for GST tax; pour-over trust = receiving trust; applicable fraction = fraction used to find the tax-free part.