Internal Revenue Code:Sec. 2601. Tax imposed

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Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle B - Estate and Gift Taxes
       CHAPTER 13 - TAX ON GENERATION-SKIPPING TRANSFERS
        Subchapter A - Tax Imposed
      

Statute

    Sec. 2601. Tax imposed
 
      A tax is hereby imposed on every generation-skipping transfer
    (within the meaning of subchapter B).
 

Sources

    (Added Pub. L. 94-455, title XX, Sec. 2006(a), Oct. 4, 1976, 90
    Stat. 1879; amended Pub. L. 99-514, title XIV, Sec. 1431(a), Oct.
    22, 1986, 100 Stat. 2718.)
 

Miscellaneous

                                 AMENDMENTS
      1986 - Pub. L. 99-514 amended section generally, substituting
    ''(within the meaning of subchapter B)'' for ''in the amount
    determined under section 2602''.
                      EFFECTIVE DATE OF 1986 AMENDMENT
      Section 1433 of Pub. L. 99-514, as amended by Pub. L. 100-647,
    title I, Sec. 1014(h)(1)-(3)(A), (4), Nov. 10, 1988, 102 Stat.
    3567, 3568, provided that:
      ''(a) General Rule. - Except as provided in subsection (b), the
    amendments made by this subtitle (subtitle D (Sec. 1431-1433) of
    title XIV of Pub. L. 99-514, amending chapter 13 of this title,
    enacting section 2515 of this title, and amending sections 164,
    303, 691, 2013, 2032, and 6166 of this title) shall apply to any
    generation-skipping transfer (within the meaning of section 2611 of
    the Internal Revenue Code of 1986) made after the date of the
    enactment of this Act (Oct. 22, 1986).
      ''(b) Special Rules. -
        ''(1) Treatment of certain inter vivos transfers made after
      september 25, 1985. - For purposes of subsection (a) (and chapter
      13 of the Internal Revenue Code of 1986 as amended by this part),
      any inter vivos transfer after September 25, 1985, and on or
      before the date of the enactment of this Act (Oct. 22, 1986)
      shall be treated as if it were made on the 1st day after the date
      of enactment of this Act.
        ''(2) Exceptions. - The amendments made by this subtitle shall
      not apply to -
          ''(A) any generation-skipping transfer under a trust which
        was irrevocable on September 25, 1985, but only to the extent
        that such transfer is not made out of corpus added to the trust
        after September 25, 1985 (or out of income attributable to
        corpus so added),
          ''(B) any generation-skipping transfer under a will or
        revocable trust executed before the date of the enactment of
        this Act (Oct. 22, 1986) if the decedent dies before January 1,
        1987, and
          ''(C) any generation-skipping transfer -
            ''(i) under a trust to the extent such trust consists of
          property included in the gross estate of a decedent (other
          than property transferred by the decedent during his life
          after the date of the enactment of this Act (Oct. 22, 1986)),
          or reinvestments thereof, or
            ''(ii) which is a direct skip which occurs by reason of the
          death of any decedent;
     but only if such decedent was, on the date of the enactment of
        this Act (Oct. 22, 1986), under a mental disability to change
        the disposition of his property and did not regain his
        competence to dispose of such property before the date of his
        death.
        ''(3) Treatment of certain transfers to grandchildren. -
          ''(A) In general. - For purposes of chapter 13 of the
        Internal Revenue Code of 1986, the term 'direct skip' shall not
        include any transfer before January 1, 1990, from a transferor
        to a grandchild of the transferor to the extent the aggregate
        transfers from such transferor to such grandchild do not exceed
        $2,000,000.
          ''(B) Treatment of transfers in trust. - For purposes of
        subparagraph (A), a transfer in trust for the benefit of a
        grandchild shall be treated as a transfer to such grandchild if
        (and only if) -
            ''(i) during the life of the grandchild, no portion of the
          corpus or income of the trust may be distributed to (or for
          the benefit of) any person other than such grandchild,
            ''(ii) the assets of the trust will be includible in the
          gross estate of the grandchild if the grandchild dies before
          the trust is terminated, and
            ''(iii) all of the income of the trust for periods after
          the grandchild has attained age 21 will be distributed to (or
          for the benefit of) such grandchild not less frequently than
          annually.
          ''(C) Coordination with section 2653(a) of the 1986 code. -
        In the case of any transfer which would be a
        generation-skipping transfer but for subparagraph (A), the
        rules of section 2653(a) of the Internal Revenue Code of 1986
        shall apply as if such transfer were a generation-skipping
        transfer.
          ''(D) Coordination with taxable terminations and taxable
        distributions. - For purposes of chapter 13 of the Internal
        Revenue Code of 1986, the terms 'taxable termination' and
        'taxable distribution' shall not include any transfer which
        would be a direct skip but for subparagraph (A).
        ''(4) Definitions. - Terms used in this section shall have the
      same respective meanings as when used in chapter 13 of the
      Internal Revenue Code of 1986; except that section 2612(c)(2) of
      such Code shall not apply in determining whether an individual is
      a grandchild of the transferor.
      ''(c) Repeal of Existing Tax on Generation-Skipping Transfers. -
        ''(1) In general. - In the case of any tax imposed by chapter
      13 of the Internal Revenue Code of 1954 (now 1986) (as in effect
      on the day before the date of the enactment of this Act (Oct. 22,
      1986)), such tax (including interest, additions to tax, and
      additional amounts) shall not be assessed and if assessed, the
      assessment shall be abated, and if collected, shall be credited
      or refunded (with interest) as an overpayment.
        ''(2) Waiver of statute of limitations. - If on the date of the
      enactment of this Act (Oct. 22, 1986) (or at any time within 1
      year after such date of enactment) refund or credit of any
      overpayment of tax resulting from the application of paragraph
      (1) is barred by any law or rule of law, refund or credit of such
      overpayment shall, nevertheless, be made or allowed if claim
      therefore (sic) is filed before the date 1 year after the date of
      the enactment of this Act.
      ''(d) Election for Certain Transfers Benefiting Grandchild. -
        ''(1) In general. - For purposes of chapter 13 of the Internal
      Revenue Code of 1986 (as amended by this Act) and subsection (b)
      of this section, any transfer in trust for the benefit of a
      grandchild of a transferor shall be treated as a direct skip to
      such grandchild if -
          ''(A) the transfer occurs before the date of enactment of
        this Act (Oct. 22, 1986),
          ''(B) the transfer would be a direct skip to a grandchild
        except for the fact that the trust instrument provides that, if
        the grandchild dies before vesting of the interest transferred,
        the interest is transferred to the grandchild's heir (rather
        than the grandchild's estate), and
          ''(C) an election under this subsection applies to such
        transfer.
      Any transfer treated as a direct skip by reason of the preceding
      sentence shall be subject to Federal estate tax on the
      grandchild's death in the same manner as if the contingent gift
      over had been to the grandchild's estate.
        ''(2) Election. - An election under paragraph (1) shall be made
      at such time and in such manner as the Secretary of the Treasury
      or his delegate may prescribe.
    Unless the grandchild otherwise directs by will, the estate of such
    grandchild shall be entitled to recover from the person receiving
    the property on the death of the grandchild any increase in Federal
    estate tax on the estate of the grandchild by reason of the
    preceding sentence.''
      (Pub. L. 101-508, title XI, Sec. 11703(c)(3), Nov. 5, 1990, 104
    Stat. 1388-517, provided that: ''Subparagraph (C) of section
    1433(b)(2) of the Tax Reform Act of 1986 (Pub. L. 99-514, set out
    above) shall not exempt any generation-skipping transfer from the
    amendments made by subtitle D of title XVI of such Act (probably
    means subtitle D (Sec. 1431-1433) of title XIV of Pub. L. 99-514,
    amending chapter 13 of this title, enacting section 2515 of this
    title, and amending sections 164, 303, 691, 2013, 2032, and 6166 of
    this title) to the extent such transfer is attributable to property
    transferred by gift or by reason of the death of another person to
    the decedent (or trust) referred to in such subparagraph after
    August 3, 1990.'')
      (Section 1014(h)(3)(B) of Pub. L. 100-647 provided that: ''Clause
    (iii) of section 1443(b)(3)(B) (1433(b)(3)(B)) of the Reform Act
    (Pub. L. 99-514, set out above) (as amended by subparagraph (A))
    shall apply only to transfers after June 10, 1987.'')
      (Section 1014(h)(5) of Pub. L. 100-647 provided that:
    ''Subparagraph (C) of section 1433(b)(2) of the Reform Act (Pub. L.
    99-514, set out above) shall not exempt any direct skip from the
    amendments made by subtitle D of title XIV of the Reform Act (Pub.
    L. 99-514, amending chapter 13 of this title, enacting section 2515
    of this title, and amending sections 164, 303, 691, 2013, 2032, and
    6166 of this title) if -
        (''(A) such direct skip results from the application of section
      2044 of the 1986 Code, and
        (''(B) such direct skip is attributable to property transferred
      to the trust after October 21, 1988.'')
                               EFFECTIVE DATE
      Section 2006(c) of Pub. L. 94-455, as amended by Pub. L. 95-600,
    title VII, Sec. 702(n)(1), Nov. 6, 1978, 92 Stat. 2935; Pub. L.
    97-34, title IV, Sec. 428, Aug. 13, 1981, 95 Stat. 319; Pub. L.
    99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
      ''(1) In general. - Except as provided in paragraph (2), the
    amendments made by this section (enacting this chapter and amending
    sections 303, 691, and 2013 of this title) shall apply to any
    generation-skipping transfer (within the meaning of section 2611(a)
    of the Internal Revenue Code of 1986 (formerly I.R.C. 1954)) made
    after June 11, 1976.
      ''(2) Exceptions. - The amendments made by this section shall not
    apply to any generation-skipping transfer -
        ''(A) under a trust which was irrevocable on June 11, 1976, but
      only to the extent that the transfer is not made out of corpus
      added to the trust after June 11, 1976, or
        ''(B) in the case of a decedent dying before January 1, 1983,
      pursuant to a will (or revocable trust) which was in existence on
      June 11, 1976, and was not amended at any time after that date in
      any respect which will result in the creation of, or increasing
      the amount of, any generation-skipping transfer.
    For purposes of subparagraph (B), if the decedent on June 11, 1976,
    was under a mental disability to change the disposition of his
    property, the period set forth in such subparagraph shall not
    expire before the date which is 2 years after the date on which he
    first regains his competence to dispose of such property.
      ''(3) Trust equivalents. - For purposes of paragraph (2), in the
    case of a trust equivalent within the meaning of subsection (d) of
    section 2611 of the Internal Revenue Code of 1986, the provisions
    of such subsection (d) shall apply.''
      (Amendment of section 2006(c) of Pub. L. 94-455, set out above,
    by section 702(n)(1) of Pub. L. 95-600, effective Oct. 4, 1976, see
    section 702(n)(5) of Pub. L. 95-600, set out as an Effective Date
    of 1978 Amendment note under section 2613 of this title.)
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 164, 303, 2602, 2603,
    2604, 2654, 2661, 6166 of this title.