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Internal Revenue Code, § 2654. Special Rules

I.R.C. § 2654(a) Basis Adjustment
I.R.C. § 2654(a)(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 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.
I.R.C. § 2654(a)(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 1, any increase or decrease in basis shall be limited by multiplying such increase or decrease (as the case may be) by the inclusion ratio.
I.R.C. § 2654(b) Certain Trusts Treated As Separate Trusts
For purposes of this chapter—
I.R.C. § 2654(b)(1)
the portions of a trust attributable to transfers from different transferors shall be treated as separate trusts, and
I.R.C. § 2654(b)(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 2 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.
I.R.C. § 2654(c) Disclaimers
For provisions relating to the effect of a qualified disclaimer for purposes of this chapter, see section 2518.
I.R.C. § 2654(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—
I.R.C. § 2654(d)(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
I.R.C. § 2654(d)(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.
(Added by Pub. L. 99-514, title XIV, Sec. 1431(a), Oct. 22, 1986, 100 Stat. 2727, and amended Pub. L. 100-647, title I, Sec. 1014(g)(12), (13), Nov. 10, 1988, 102 Stat. 3565, 3566; Pub. L. 101-239, title VII, Sec. 7811(j)(2), Dec. 19, 1989, 103 Stat. 2411; Pub. L. 105-206, title VI, Sec. 6013, July 22, 1998, 112 Stat 685; Pub. L. 113-295, Div. A, title II, Sec. 221(a)(95)(B)(iii), Dec. 19, 2014.)
BACKGROUND NOTES
AMENDMENTS
2014 - Subsec. (a)(1). Pub. L. 113-295, Div. A, Sec. 221(a)(95)(B)(iii), amended par. (1) by striking “computed without regard to section 2604)”.
1998 - Subsec. (b). Pub. L. 105-206, Sec. 6013(a)(4)(B), amended subsec. (b) by adding the sentence at the end.
1989 - Subsec. (a)(1). Pub. L. 101-239 inserted at end ‘The preceding shall be applied after any basis adjustment under section 1015 with respect to the transfer.’
1988 - Subsec. (a)(2). Pub. L. 100-647, Sec. 1014(g)(12), inserted ‘or decrease’ after ‘any increase’ and ‘or decrease (as the case may be)’ after ‘such increase’.
Subsec. (b). Pub. L. 100-647, Sec. 1014(g)(13), substituted ‘Certain trusts’ for ‘Separate shares’ in heading and amended text generally. Prior to amendment, text read as follows: ‘Substantially separate and independent shares of different beneficiaries in a trust shall be treated as separate trusts.’
EFFECTIVE DATE OF 2014 AMENDMENT
Amendment by Pub. L. 113-295, Div. A, Sec. 221(a)(95)(B)(iii), effective on the date of the enactment of this Act [Enacted: Dec. 19, 2014].
EFFECTIVE DATE OF 1998 AMENDMENTS
Amendment by Sec. 6013(a)(4)(B) of Pub. L. 105-206 effective as if included in the provisions of the Taxpayer Relief Act of 1997 to which it relates [Effective Date of Pub. L. 105-34, Sec. 1305: estates of decedents dying, and gifts made, after December 31, 1997].
EFFECTIVE DATE OF 1989 AMENDMENT
Amendment by Pub. L. 101-239 effective, except as otherwise provided, as if included in the provision of the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, to which such amendment relates, see section 7817 of Pub. L. 101-239, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99-514, to which such amendment relates, see section 1019(a) of Pub. L. 100-647, set out as a note under section 1 of this title.
EFFECTIVE DATE
Section applicable to generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99-514, set out as a note under section 2601 of this title.
REINSTATEMENT OF ESTATE TAX; REPEAL OF CARRYOVER BASIS
Section 301 of Pub. L. 111-312 provided:
“(a) IN GENERAL.—Each provision of law amended by subtitle A or E of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 is amended to read as such provision would read if such subtitle had never been enacted.
“(b) CONFORMING AMENDMENT.—On and after January 1, 2011, paragraph (1) of section 2505(a) of the Internal Revenue Code of 1986 is amended to read as such paragraph would read if section 521(b)(2) of the Economic Growth and Tax Relief Reconciliation Act of 2001 had never been enacted.
“(c) SPECIAL ELECTION WITH RESPECT TO ESTATES OF DECEDENTS DYING IN 2010.—Notwithstanding subsection (a), in the case of an estate of a decedent dying after December 31, 2009, and before January 1, 2011, the executor (within the meaning of section 2203 of the Internal Revenue Code of 1986) may elect to apply such Code as though the amendments made by subsection (a) do not apply with respect to chapter 11 of such Code and with respect to property acquired or passing from such decedent (within the meaning of section 1014(b) of such Code). Such election shall be made at such time and in such manner as the Secretary of the Treasury or the Secretary's delegate shall provide. Such an election once made shall be revocable only with the consent of the Secretary of the Treasury or the Secretary's delegate. For purposes of section 2652(a)(1) of such Code, the determination of whether any property is subject to the tax imposed by such chapter 11 shall be made without regard to any election made under this subsection.
“(d) EXTENSION OF TIME FOR PERFORMING CERTAIN ACTS.—
“ (1) ESTATE TAX.—In the case of the estate of a decedent dying after December 31, 2009, and before the date of the enactment of this Act, the due date for—
“(A) filing any return under section 6018 of the Internal Revenue Code of 1986 (including any election required to be made on such a return) as such section is in effect after the date of the enactment of this Act without regard to any election under subsection (c),
“(B) making any payment of tax under chapter 11 of such Code, and
“(C) making any disclaimer described in section 2518(b) of such Code of an interest in property passing by reason of the death of such decedent, shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(2) GENERATION-SKIPPING TAX.—In the case of any generation-skipping transfer made after December 31, 2009, and before the date of the enactment of this Act, the due date for filing any return under section 2662 of the Internal Revenue Code of 1986 (including any election required to be made on such a return) shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(e) EFFECTIVE DATE.—Except as otherwise provided in this section, the amendments made by this section shall apply to estates of decedents dying, and transfers made, after December 31, 2009.”
TERMINATION
Section 501(b) (Generation-Skipping Transfer Tax Repeal) of Pub. L. 107-16 added Code Sec. 2664, which states that chapter 13 of subtitle B shall not apply to generation-skipping transfers after December 31, 2009.
Note, however, that Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358 and Pub. L. 111-312, and struck by Pub. L. 112-240, Sec. 101(a)(1) (effective for taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012), provided that:
“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--
“(1) to taxable, plan, or limitation years beginning after December 31, 2012, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2012.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”