[Federal Register Volume 61, Number 114 (Wednesday, June 12, 1996)]
[Proposed Rules]
[Pages 29714-29715]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-13858]



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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 26

[PS-22-96]
RIN 1545-AU26


Generation-Skipping Transfer Tax

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking.

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SUMMARY: This document contains proposed regulations relating to the 
final generation-skipping transfer (GST) tax regulations under chapter 
13 of the Internal Revenue Code (Code). This document proposes a change 
to the final regulations and is necessary to provide guidance to 
taxpayers so that they may comply with chapter 13 of the Code.

DATES: Written comments and requests for a public hearing must be 
received by September 10, 1996.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (PS-22-96), room 5228, 
Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, 
DC 20044. In the alternative, submissions may be hand delivered between 
the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (PS-22-96), Courier's 
Desk, Internal Revenue Service, 1111 Constitution NW., Washington, DC 
20224.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulation, 
James F. Hogan, (202) 622-3090 (not a toll-free number); concerning 
submissions, Christina Vasquez, (202) 622-7180, (not a toll-free 
number).

SUPPLEMENTARY INFORMATION:

Background

    On December 24, 1992, the IRS published a notice of proposed 
rulemaking in the Federal Register (57 FR 61356) containing proposed 
regulations under sections 2611, 2612, 2613, 2632, 2641, 2642, 2652, 
2653, 2654, and 2663. On December 27, 1995, the IRS published final 
regulations in the Federal Register (60 FR 66898) under sections 2611, 
2612, 2613, 2632, 2641, 2642, 2652, 2653, 2654, and 2663. This proposed 
regulation will delete Sec. 26.2652-1(a)(4) and two related examples.

Explanation of Provision

    Section 2652(a)(1) provides generally, that 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 is treated 
as transferring any property with respect to which the individual is 
the transferor. Under Sec. 26.2652-1(a)(2), a transfer is subject to 
Federal gift tax if a gift tax is imposed under section 2501(a) and is 
subject to Federal estate tax if the value of the property is 
includable in the decedent's gross estate determined under section 2031 
or section 2103. Under Sec. 26.2652-1(a)(4), the exercise of a power of 
appointment that is not a general power of appointment is also treated 
as a transfer subject to Federal estate or gift tax by the holder of 
the power if the power is exercised in a manner that may postpone or 
suspend the vesting, absolute ownership, or power of alienation of an 
interest in property for a period, measured from the date of the 
creation of the trust, extending beyond any specified life in being at 
the date of creation of the trust plus a period of 21 years plus, if 
necessary, a reasonable period of gestation.
    The purpose of the rule in Sec. 26.2652-1(a)(4) was to apply the 
GST tax when

[[Page 29715]]

it may not otherwise have applied. It was never intended to (nor could 
it) prevent the application of the tax pursuant to the statutory 
provisions that apply based on the original taxable transfer. To 
eliminate any uncertainty concerning the proper application of the GST 
tax, the regulations under section 2652(a) will be clarified by 
eliminating Sec. 26.2652-1(a)(4) and Example 9 and Example 10 in 
Sec. 26.2652-1(a)(6) from the final regulations.

Proposed Effective Date

    These amendments apply to transfers to trusts on or after June 12, 
1996.

Special Analysis

    It has been determined that this notice of proposed rulemaking is 
not a significant regulatory action as defined in EO 12866. Therefore, 
a regulatory assessment is not required. It has also been determined 
that section 553(b) of the Administrative Procedure Act (5 U.S.C. 
chapter 5) and the Regulatory Flexibility Act (5 U.S.C. chapter 6) do 
not apply to these regulations, and therefore, a Regulatory Flexibility 
Analysis is not required. Pursuant to section 7805(f) of the Internal 
Revenue Code, the notice of proposed rulemaking preceding these 
regulations was submitted to the Small Business Administration for 
comment on its impact on small business.

Comments and Requests for a Public Hearing

    Before this proposed regulation is adopted as a final regulation, 
consideration will be given to any written comments (a signed original 
and eight (8) copies) that are submitted timely to the IRS. All 
comments will be available for public inspection and copying. A public 
hearing may be scheduled if requested in writing by a person that 
timely submits written comments. If a public hearing is scheduled, 
notice of the date, time, and place for the hearing will be published 
in the Federal Register.

Drafting Information

    The principal author of this proposed regulation is James F. Hogan, 
Office of the Chief Counsel, IRS. Other personnel from the IRS and 
Treasury Department participated in its development.

List of Subjects in 26 CFR Part 26

    Estate taxes, Reporting and recordkeeping requirements.

Adoption of Amendments to the Regulations

    Accordingly, 26 CFR part 26 is proposed to be amended as follows:

PART 26--GENERATION-SKIPPING TRANSFER TAX REGULATIONS UNDER THE TAX 
REFORM ACT OF 1986

    Paragraph 1. The authority citation for part 26 continues to read, 
in part, as follows:

    Authority: 26 U.S.C. 7805 * * *

    Par. 2. Section 26.2652-1 is amended as follows:

Sec. 26.2652-1  [Amended]

    1. Paragraph (a)(4) is removed and paragraphs (a)(5) and (a)(6) are 
redesignated as paragraphs (a)(4) and (a)(5), respectively.
    2. In newly designated paragraph (a)(5), Examples 9 and 10 are 
removed and Example 11 is redesignated as Example 9.
Margaret Milner Richardson,
Commissioner of Internal Revenue.
[FR Doc. 96-13858 Filed 6-11-96; 8:45 am]
BILLING CODE 4830-01-U