[Federal Register Volume 62, Number 97 (Tuesday, May 20, 1997)]
[Rules and Regulations]
[Page 27498]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13126]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 26

[TD 8720]
RIN 1545-AU26


Generation-Skipping Transfer Tax

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the 
generation-skipping transfer (GST) tax regulations under chapter 13 of 
the Internal Revenue Code (Code). This document amends the final 
regulations under section 2652 and is necessary to provide guidance to 
taxpayers so that they may comply with chapter 13 of the Code.

DATES: This regulation is effective on May 20, 1997.
    For dates of applicability of these regulations, see Effective Date 
under Supplementary Information.

FOR FURTHER INFORMATION CONTACT: James F. Hogan, (202) 622-3090 (not a 
toll-free number).

SUPPLEMENTARY INFORMATION:

Background

    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. On June 12, 1996, a notice of 
proposed rulemaking deleting Sec. 26.2652-1(a)(4) and two related 
examples was published in the Federal Register (61 FR 29714). No 
comments responding to the notice of proposed rulemaking were received, 
and no public hearing was requested or held. The final regulations are 
adopted as proposed.

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 
includible 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 impose the 
GST tax when 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) are clarified by 
eliminating Sec. 26.2652-1(a)(4) and Example 9 and Example 10 in 
Sec. 26.2652-1(a)(6) from the regulations.

Effective Date

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

Special Analyses

    It has been determined that this Treasury Decision 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) 
does not apply to these regulations and, because these regulations do 
not impose a collection of information on small entities, the 
Regulatory Flexibility Act (5 U.S.C. chapter 6) does not apply. 
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.

Drafting Information

    The principal author of this 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.

Amendments to the Regulations

    Accordingly, 26 CFR part 26 is 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:
    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.

    Approved: May 1, 1997.

Donald C. Lubick,
Acting Assistant Secretary of the Treasury.
[FR Doc. 97-13126 Filed 5-19-97; 8:45 am]
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