Question

Concerning the Federal tax on generation-skipping transfers:

	a.	The tax applies in addition to any applicable gift or estate tax.
	b.	The tax applies in lieu of any applicable gift or estate tax.
	c.	The tax is applied at a flat 33 percent tax rate.
	d.	The annual gift tax exclusion cannot be used to reduce the tax.

Answer 1

Option B;The tax applies in lieu of any applicable gift or estate tax.

So look what is meant by genration Skipping Tax, Is first introduced to Collexct tax exactly equal to the estate or gift tax that was avoided.(By transfering to next generation and so on to GrandChildren by setting Trust ). If the Trust is Not subjeted to Estate Tax at Child's Death then Genertion Skipping Tax is Imposed.

Why Not other?

C. Generation skipping tax is around 40% as of now.

D. There is Gifting limit per annum for which Tax is not impose according to Relation between parties