§2653 Taxation of Multiple Skips

Summary

If property skips a generation and is put into a trust right after the transfer, then for applying the tax rules in this chapter (except section 2651) to later distributions from the part of the trust made up of that property, the original owner is treated as if they belong to the generation just above the oldest person who has an interest in the trust right after the transfer. The rule above does not change the trust’s inclusion ratio, except that the Treasury can make regulatory adjustments to account for any tax the trust pays on that original transfer. If the transfer is from one trust into another (a pour-over trust), the new trust’s inclusion ratio treats the tax-free part of the distribution as if it were GST exemption allocated to that trust. The tax-free part equals the distribution amount multiplied by the applicable fraction.