Which of the following constitute direct skips? Assume in each question that the

Question

Which of the following constitute direct skips? Assume in each question that the parents of Grandchild are living unless stated otherwise.

A) Donor makes an inter vivos transfer of property to Donor’s child.

B) Donor makes an inter vivos transfer of property to Donor’s grandchild.

C) Donor makes an inter vivos transfer of property to Donor’s Great-Grandchild.

D) Decedent bequeaths property to Decedent’s Grandchild.

E) Donor makes an inter vivos transfer of property to Donor’s Grandchild, but Grandchild’s Parent (Donor’s Child) is dead and Grandchild is being raised by Grandchild’s Other Parent.

F) Donor makes a transfer of property to a trust with income to Grandchild for ten years, and a remainder to Grandchild or Grandchild’s estate.

G) Same as question (1)(f), above, except the trust is revocable.

H) Same as question (1)(f), above, but Grandchild’s Parent (Donor’s Child) is dead.

I) Donor pays Grandchild’s law school tuition.

Explanation / Answer

A) Donor makes an inter vivos transfer of property to Donor’s child.Subject to estate or GT - GT, transfer of prop’y by gift, 2) D’s child has an interest in the transferred property. 2652(c) only defines interest in property for interest in prop’y held in trust - if direct transfer don’t need 2652(c). 3) GA of C is 1 below. Not skip person b/c need 2 or more. Not direct skip . We have transfer subject to ch 12 but not to a skip person so not direct skip

B) Donor makes an inter vivos transfer of property to Donor’s Grandchild. 1) Subject to GT – ch 12. 2) D’s GC has

an interest in the prop’y. 3) D’s GC is GA 2 so he’s a skip person under 2613(a). This is a direct skip under

2612(c)(1).

C). Donor makes an inter vivos transfer of prop’y to Donor’s Great-Grandchild. 1) GA for GGC is 3 below. GGC is skip person. Direct skip – 2 generations get skipped. Taxed only once even if skipping multiple generations – 26.1612-1(a) (1), 26.2612-1(f), Ex 2.

D). Decedent bequeaths property to D’s Grandchild. Subject to ET – included in GE under 2033. D’s GC GA - 3. Direct skip

E). Donor makes an inter vivos transfer of prop’y to Donor’s Grandchild, but Grandchild’s Parent (Donor’s Child) is dead and Grandchild is being raised by Grandchild’s Other Parent. 2651(e) – child is dead at time of transfer – step up in GA of GC – 2. Not direct skip.

F) Donor makes a transfer of prop’y to a trust w/income to Grandchild for 10 yrs, and a Rm to Grandchild of Grandchild’s estate. 2612(c)(2) – Solely for purposes of determining whether any transfer to a trust is a direct skip, the rules of 2651(f)(2) shall not apply. Grand child has interest. So it is a direct skip.

.G) Same as question (1)(f), above, except the trust is revocable. It is not a direct skip. It is an indirect skip and is the distribution of income or property from a trust to a skip person that is not otherwise subject to estate or gift tax.

H) Same as question (1)(f), above, but Grandchild’s Parent (Donor’s Child) is dead. It is not a direct skip. It is an indirect skip and is taxable termination which involves a skip person and a non-skip person. A non-skip person is the primary beneficiary who will receive property before it is transferred to the skip person

I). Internal Code Section 2503(e) (2)(A) excludes from gift tax any amount paid on behalf of an individual as tuition at an educational organization described in Section 170(b)(1)(A)(ii). Such gifts are not, under Section 2611(b)(1), subject to generation-skipping transfer tax (GST tax). No direct skips.

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