Generation Skipping Tax
Section 2601 imposes a generation-skipping transfer tax on:
|(1) the termination of an interest in property held in trust that is then held for or distributed to a skip person; |
|(2) transfers under trusts with beneficiaries of more than one generation below the transferor (one who makes a transfer); and |
|(3) direct transfers to beneficiaries of more than one generation below the transferor. |
A generation-skipping transfer (GST) is defined as a transfer of assets more than a single generation below the transferor (e.g., from grandmother to grandchild). This tax is imposed (with certain exceptions) when any of the three following events occur: a taxable termination, a taxable distribution (this includes a distribution of income), and a direct skip.