[4830-01-U]
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.
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 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
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 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 26.2652-1(a)(4) was to apply 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) will be clarified by eliminating 26.2652-
1(a)(4) and Example 9 and Example 10 in 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.
Proposed 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:
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.
Commissioner of Internal Revenue