2006 New York Code - Appendix To Article Twenty-six-b

 
    §  1025. Appendix to article twenty-six-B. The following provisions of
  the United States Internal Revenue Code of 1986 shall apply to  the  tax
  imposed by this article, to the extent specified in this article:
    § 2601. Tax imposed
    A  tax is hereby imposed on every generation-skipping transfer (within
  the meaning of subchapter B).
    § 2602. Amount of tax
    The amount of the tax imposed by section 2601 is-
    (1) the taxable amount (determined under subchapter C), multiplied by
    (2) the applicable rate (determined under subchapter E).
    § 2603. Liability for tax
    (a) Personal liability.-
    (1) Taxable distributions.-In the case of a taxable distribution,  the
  tax imposed by section 2601 shall be paid by the transferee.
    (2)  Taxable  termination.-In  the  case of a taxable termination or a
  direct skip from a trust, the tax shall be paid by the trustee.
    (3) Direct skip.-In the case of a direct skip  (other  than  a  direct
  skip from a trust), the tax shall be paid by the transferor.
    (b) Source of tax.-Unless otherwise directed pursuant to the governing
  instrument by specific reference to the tax imposed by this chapter, the
  tax  imposed  by this chapter on a generation-skipping transfer shall be
  charged to the property constituting such transfer.
    (c) Cross reference.-
    For provisions making estate and gift tax provisions with  respect  to
  transferee  liability,  liens, and related matters applicable to the tax
  imposed by section 2601, see section 2661.
    § 2604. Credit for certain State taxes
    (a) General rule.-If a  generation-skipping  transfer  (other  than  a
  direct  skip) occurs at the same time as and as a result of the death of
  an individual, a credit against the tax imposed by section 2601 shall be
  allowed in an amount  equal  to  the  generation-skipping  transfer  tax
  actually  paid  to  any State in respect to any property included in the
  generation-skipping transfer.
    (b) Limitation.-The aggregate amount allowed as a  credit  under  this
  section  with  respect to any transfer shall not exceed 5 percent of the
  amount of the tax imposed by section 2601 on such transfer.
    § 2611. Generation-skipping transfer defined
    (a)   In   general.-For   purposes   of   this   chapter,   the   term
  "generation-skipping transfer" means-
    (1) a taxable distribution,
    (2) a taxable termination, and
    (3) a direct skip.
    (b)   Certain   transfers   excluded.-The   term  "generation-skipping
  transfer" does not include-
    (1) any transfer which, if made inter vivos by  an  individual,  would
  not  be treated as a taxable gift by reason of section 2503(e) (relating
  to exclusion of certain transfers for educational or medical  expenses),
  and
    (2) any transfer to the extent-
    (A)  the property transferred was subject to a prior tax imposed under
  this chapter,
    (B) the transferee in the prior transfer  was  assigned  to  the  same
  generation  as (or a lower generation than) the generation assignment of
  the transferee in this transfer, and
    (C) such transfers do not have the effect of avoiding tax  under  this
  chapter with respect to any transfer.
    § 2612. Taxable termination; taxable distribution; direct skip
    (a) Taxable termination.-
    (1)  General  rule.-For  purposes  of  this chapter, the term "taxable
  termination" means the termination (by death, lapse of time, release  of
  power, or otherwise) of an interest in property held in a trust unless-
    (A)  immediately  after  such  termination,  a  non-skip person has an
  interest in such property, or
    (B) at no time after such termination may  a  distribution  (including
  distributions on termination) be made from such trust to a skip person.
    (2)  Certain  partial  terminations  treated  as taxable.-If, upon the
  termination of an interest in property held in trust by  reason  of  the
  death  of  a  lineal descendant of the transferor, a specific portion of
  the trust's assets are distributed to one or more skip persons  (or  one
  or  more  trusts  for  the  exclusive  benefit  of  such  persons), such
  termination shall constitute a taxable termination with respect to  such
  portion of the trust property.
    (b)  Taxable  distribution.-For  purposes  of  this  chapter, the term
  "taxable distribution" means any distribution from a  trust  to  a  skip
  person (other than a taxable termination or a direct skip).
    (c) Direct skip.--For purposes of this chapter -
    (1)  In general.--The term "direct skip" means a transfer subject to a
  tax imposed by chapter 11 or 12 of an interest in  property  to  a  skip
  person.
    (2)  Look-thru rules not to apply.--Solely for purposes of determining
  whether any transfer to a trust is a direct skip, the rules  of  section
  2651(f)(2) shall not apply.
    § 2613. Skip person and non-skip person defined
    (a)  Skip person.-For purposes of this chapter, the term "skip person"
  means-
    (1) a natural person assigned to a generation which  is  two  or  more
  generations below the generation assignment of the transferor, or
    (2) a trust-
    (A) if all interests in such trust are held by skip persons, or
    (B) if-
    (i) there is no person holding an interest in such trust, and
    (ii)  at  no  time  after  such transfer may a distribution (including
  distributions on termination) be made from  such  trust  to  a  non-skip
  person.
    (b)  Non-skip person.-For purposes of this chapter, the term "non-skip
  person" means any person who is not a skip person.
    § 2621. Taxable amount in case of taxable distribution
    (a) In general.-For purposes of this chapter, the  taxable  amount  in
  the case of any taxable distribution shall be-
    (1) the value of the property received by the transferee, reduced by
    (2)  any  expense  incurred  by  the transferee in connection with the
  determination, collection, or refund of the tax imposed by this  chapter
  with respect to such distribution.
    (b)  Payment  of GST tax treated as taxable distribution.-For purposes
  of this chapter, if any of the tax imposed by this chapter with  respect
  to any taxable distribution is paid out of the trust, an amount equal to
  the portion so paid shall be treated as a taxable distribution.
    § 2622. Taxable amount in case of taxable termination
    (a)  In  general.-For  purposes of this chapter, the taxable amount in
  the case of a taxable termination shall be-
    (1) the value of all  property  with  respect  to  which  the  taxable
  termination has occurred, reduced by
    (2) any deduction allowed under subsection (b).
    (b)  Deduction  for  certain expenses.-For purposes of subsection (a),
  there shall be allowed a deduction similar to the deduction  allowed  by
  section 2053 (relating to expenses, indebtedness, and taxes) for amounts
  attributable   to  the  property  with  respect  to  which  the  taxable
  termination has occurred.
    § 2624. Valuation
    (a)  General  rule.-Except  as  otherwise  provided  in  this chapter,
  property shall be valued as  of  the  time  of  the  generation-skipping
  transfer.
    (b)  Alternate  valuation and special use valuation elections apply to
  certain direct skips.-In the case of any direct skip of  property  which
  is included in the transferor's gross estate, the value of such property
  for purposes of this chapter shall be the same as its value for purposes
  of chapter 11 (determined with regard to sections 2032 and 2032A).
    (c)  Alternate  valuation  election  permitted  in the case of taxable
  terminations occurring at death.-If one  or  more  taxable  terminations
  with respect to the same trust occur at the same time as and as a result
  of  the  death of an individual, an election may be made to value all of
  the property included in such terminations in  accordance  with  section
  2032.
    (d)  Reduction  for consideration provided by transferee.-For purposes
  of this chapter, the value of the property transferred shall be  reduced
  by the amount of any consideration provided by the transferee.
    § 2651. Generation assignment
    (a)  In general.-For purposes of this chapter, the generation to which
  any person (other than the transferor) belongs shall  be  determined  in
  accordance with the rules set forth in this section.
    (b) Lineal descendants.-
    (1)  In  general.-An  individual  who  is  a  lineal  descendant  of a
  grandparent of the transferor shall be assigned to that generation which
  results from comparing the number of generations between the grandparent
  and  such  individual  with  the  number  of  generations  between   the
  grandparent and the transferor.
    (2)  On  spouse's  side.-An individual who is a lineal descendant of a
  grandparent of a spouse (or former spouse) of the transferor (other than
  such spouse) shall be assigned to that  generation  which  results  from
  comparing  the  number  of generations between such grandparent and such
  individual with the number of generations between such  grandparent  and
  such spouse.
    (3)   Treatment   of   legal  adoptions,  etc.-For  purposes  of  this
  subsection-
    (A) Legal adoptions.-A relationship by legal adoption shall be treated
  as a relationship by blood.
    (B) Relationships by  half-blood.-A  relationship  by  the  half-blood
  shall be treated as a relationship of the whole-blood.
    (c) Marital relationship.-
    (1)  Marriage to transferor.-An individual who has been married at any
  time to the transferor shall be assigned to the transferor's generation.
    (2) Marriage to other lineal descendants.-An individual who  has  been
  married  at  any time to an individual described in subsection (b) shall
  be assigned to the generation of the individual so described.
    (d) Persons who are not lineal descendants.-An individual who  is  not
  assigned  to  a generation by reason of the foregoing provisions of this
  section shall be assigned to a generation on the basis of  the  date  of
  such individual's birth with-
    (1)  an  individual  born not more than 12 1/2 years after the date of
  the birth of the transferor assigned to the transferor's generation,
    (2) an individual born more than 12 1/2 years but not more than 37 1/2
  years after the date of the birth of  the  transferor  assigned  to  the
  first generation younger than the transferor, and
    (3) similar rules for a new generation every 25 years.
    (e) Special rules for persons with a deceased parent.--
    (1) In general.--For purposes of determining whether any transfer is a
  generation-skipping transfer, if--
    (A)  an  individual  is a descendant of a parent of the transferor (or
  the transferor's spouse or former spouse), and
    (B) such individual's parent who is a lineal descendant of the  parent
  of  the transferor (or the transferor's spouse or former spouse) is dead
  at the time the time the  transfer  (from  which  an  interest  of  such
  individual  is  established  or  derived) is subject to a tax imposed by
  chapter 11 or 12 upon the transferor (and if there shall be more than  1
  such  time,  then  at  the earliest such time), such individual shall be
  treated as if such individual were a member of the generation which is 1
  generation below  the  lower  of  the  transferor's  generation  or  the
  generation assignment of the youngest living ancestor of such individual
  who  is  also  a  descendant  of  the  parent  of the transferor (or the
  transferor's spouse or former spouse), and the generation assignment  of
  any descendant of such individual shall be adjusted accordingly.
    (2)  Limited  application  of  subsection  to  collateral heirs.--This
  subsection shall not apply with respect to a transfer to any  individual
  who  is  not  a lineal descendant of the transferor (or the transferor's
  spouse or  former  spouse)  if,  at  the  time  of  the  transfer,  such
  transferor has any living lineal descendant.
    (f) Other special rules.-
    (1)  Individuals  assigned  to  more  than  one  generation.-Except as
  provided in regulations, an individual who,  but  for  this  subsection,
  would  be  assigned to more than one generation shall be assigned to the
  youngest such generation.
    (2) Interests through entities.-Except as provided in  paragraph  (3),
  if  an  estate,  trust, partnership, corporation, or other entity has an
  interest in property, each individual having a  beneficial  interest  in
  such  entity shall be treated as having an interest in such property and
  shall be assigned to a generation under the foregoing provisions of this
  subsection.
    (3) Treatment of certain  charitable  organizations  and  governmental
  entities.-Any-
    (A) organization described in section 511(a)(2),
    (B) charitable trust described in section 511(b)(2), and
    (C) governmental entity,
    shall be assigned to the transferor's generation.
    § 2652. Other definitions
    (a) Transferor.-For purposes of this chapter-
    (1)  In  general.-Except  as  provided  in  this subsection or section
  2653(a), the term "transferor" means-
    (A) in the case of any property subject to the tax imposed by  chapter
  11, the decedent, and
    (B)  in the case of any property subject to the tax imposed by chapter
  12, the donor.
    An individual shall be  treated  as  transferring  any  property  with
  respect to which such individual is the transferor.
    (2)   Gift-splitting  by  married  couples.-If,  under  section  2513,
  one-half of a gift is treated as made by an individual and  one-half  of
  such gift is treated as made by the spouse of such individual, such gift
  shall be so treated for purposes of this chapter.
    (3)  Special  election  for qualified terminable interest property.-In
  the case of-
    (A) any trust with respect to which a  deduction  is  allowed  to  the
  decedent under section 2056 by reason of subsection (b)(7) thereof, and
    (B) any trust with respect to which a deduction to the donor spouse is
  allowed under section 2523 by reason of subsection (f) thereof,
    the  estate  of  the decedent or the donor spouse, as the case may be,
  may elect to treat all of the property in such  trust  for  purposes  of
  this  chapter  as  if the election to be treated as qualified terminable
  interest property had not been made.
    (b) Trust and trustee.-
    (1) Trust.-The term "trust" includes any arrangement  (other  than  an
  estate)  which,  although not a trust, has substantially the same effect
  as a trust.
    (2) Trustee.-In the case of an arrangement which is not  a  trust  but
  which  is  treated  as a trust under this subsection, the term "trustee"
  shall mean the person  in  actual  or  constructive  possession  of  the
  property subject to such arrangement.
    (3)  Examples.-Arrangements  to  which this subsection applies include
  arrangements involving life estates and remainders, estates  for  years,
  and insurance and annuity contracts.
    (c) Interest.-
    (1)  In general.-A person has an interest in property held in trust if
  (at the time the determination is made) such person-
    (A) has a right (other than a  future  right)  to  receive  income  or
  corpus from the trust,
    (B)  is  a  permissible current recipient of income or corpus from the
  trust and is not described in section 2055(a), or
    (C) is described in section 2055(a) and the trust is-
    (i) a charitable remainder annuity trust,
    (ii) a charitable remainder unitrust within  the  meaning  of  section
  664, or
    (iii) a pooled income fund within the meaning of section 642(c)(5).
    (2)  Certain  interests disregarded.-For purposes of paragraph (1), an
  interest which is used primarily to postpone or avoid any tax imposed by
  this chapter shall be disregarded.
    (3) Certain support obligations disregarded.-The fact that  income  or
  corpus  of  the  trust  may  be used to satisfy an obligation of support
  arising under State law shall be disregarded in  determining  whether  a
  person has an interest in the trust, if-
    (A) such use is discretionary, or
    (B)  such  use  is  pursuant  to  the  provisions  of  any  State  law
  substantially equivalent to the Uniform Gifts to Minors Act.
    (d) Executor.-For purposes of this chapter, the  term  "executor"  has
  the meaning given such term by section 2203.
    § 2653. Taxation of multiple skips
    (a) General rule.-For purposes of this chapter, if-
    (1) there is a generation-skipping transfer of any property, and
    (2) immediately after such transfer such property is held in trust,
    for  purposes  of  applying  this chapter (other than section 2651) to
  subsequent transfers from the portion of such trust attributable to such
  property, the trust will  be  treated  as  if  the  transferor  of  such
  property  were  assigned  to  the  first  generation  above  the highest
  generation of any person who has an interest in such  trust  immediately
  after the transfer.
    (b) Trust retains inclusion ratio.-
    (1) In general.-Except as provided in paragraph (2), the provisions of
  subsection  (a)  shall  not  affect  the inclusion ratio determined with
  respect to any trust. Under regulations  prescribed  by  the  Secretary,
  notwithstanding  the preceding sentence, proper adjustment shall be made
  to the inclusion ratio with respect to such trust to take  into  account
  any  tax under this chapter borne by such trust which is imposed by this
  chapter on the transfer described in subsection (a).
    (2) Special rule for pour-over trust.-
    (A)  In  general.-If  the  generation-skipping transfer referred to in
  subsection (a) involves the transfer  of  property  from  one  trust  to
  another  trust  (hereinafter  in  this  paragraph  referred  to  as  the
  "pour-over trust"), the inclusion ratio for the pour-over trust shall be
  determined by treating the nontax portion of such distribution as if  it
  were a part of a GST exemption allocated to such trust.
    (B)  Nontax  portion.-For  purposes  of  subparagraph  (A), the nontax
  portion  of  any  distribution  is  the  amount  of  such   distribution
  multiplied   by   the   applicable   fraction   which  applies  to  such
  distribution.
    § 2654. Special rules
    (a) Basis adjustment.-
    (1) In general.-Except as provided in paragraph (2),  if  property  is
  transferred  in  a  generation-skipping  transfer,  the  basis  of  such
  property shall be increased (but not above the fair market value of such
  property) by an amount equal to that  portion  of  the  tax  imposed  by
  section  2601  (computed without regard to section 2604) with respect to
  the transfer which is attributable to the  excess  of  the  fair  market
  value  of  such  property over its adjusted basis immediately before the
  transfer. The preceding shall be  applied  after  any  basis  adjustment
  under section 1015 with respect to the transfer.
    (2)  Certain  transfers  at  death.-If  property  is  transferred in a
  taxable termination which occurs at the same time as and as a result  of
  the death of an individual, the basis of such property shall be adjusted
  in a manner similar to the manner provided under section 1014(a); except
  that,  if the inclusion ratio with respect to such property is less than
  one, any increase or decrease in basis shall be limited  by  multiplying
  such increase or decrease (as the case may be) by the inclusion ratio.
    (b)  Certain  trusts  treated as separate trusts.-For purposes of this
  chapter-
    (1) the portions of a trust attributable to transfers  from  different
  transferors shall be treated as separate trusts, and
    (2)   substantially  separate  and  independent  shares  of  different
  beneficiaries in a trust shall be treated as separate trusts.
    Except as provided in the preceding sentence, nothing in this  chapter
  shall be construed as authorizing a single trust to be treated as two or
  more  trusts.  For purposes of this subsection, a trust shall be treated
  as part of an estate during any period that  the  trust  is  so  treated
  under section 645.
    (c) Disclaimers.-
    For  provisions  relating  to the effect of a qualified disclaimer for
  purposes of this chapter, see section 2518.
    (d) Limitation on personal liability of trustee.-A trustee  shall  not
  be personally liable for any increase in the tax imposed by section 2601
  which is attributable to the fact that-
    (1)  section  2642(c)  (relating  to  exemption  of certain nontaxable
  gifts) does not apply to a transfer to the trust which was  made  during
  the  life  of  the  transferor  and  for which a gift tax return was not
  filed, or
    (2) the inclusion ratio with respect to the trust is greater than  the
  amount of such ratio as computed on the basis of the return on which was
  made (or was deemed made) an allocation of the GST exemption to property
  transferred to such trust.
    The preceding sentence shall not apply if the trustee has knowledge of
  facts  sufficient  reasonably  to  conclude  that  a gift tax return was
  required to be filed or that the inclusion ratio was erroneous.