Question

Which of the following gifts made by Tristan, age 49, is subject to the generation-skipping transfer tax?

a) $20,000 to his niece, age 6.

b) Payment to a medical school for tuition of $50,000 for the granddaughter of Joe, Tristan’s best friend.

c) $20,000 to the daughter (age 6) of Tristan’s former college roommate.

d) $15,000 to his grandson.

Answer 1

Under federal law, a transfer of property by gift or at death to any person who is 2 or more generations below that of the transferor is called a generation-skipping transfer. This means that direct descendent of son/daughter and grandsons/granddaughter are not subject to generation skipping transfer tax. Any generation below this 2 generations are subject to generation skipping transfer tax.

In the given question, niece is not direct generation of Tristan. Best friend and college roommate are excluded from family and hence, tax is not applicable. The generation skipping transfer tax is only applicable to grandson.

Hence, correct option is d. $15,000 to his grandson.