Question

PART I

All of the following are subject to generation-skipping transfer tax except:

a) Taxable terminations.

b) Indirect skips.

c) Direct skips.

d) Taxable distributions.

Part II

The generation-skipping transfer tax is imposed:

a) As an alternative to the estate tax.

b) And is deductible from any gift tax.

c) In addition to gift and estate taxes.

d) As a progressive tax like the estate tax.

Answer 1

Part 1

Answer- Option (b)- Indirect skips

( Explanation- As generation-skipping transfer tax is applicable to

• direct skips
• taxable distributions
• taxable terminations

and Indirect skips are not included in the list which means it is not applicable on indirect skips)

Part 2

Answer- Option (c)- In addition to gift and estate tax

( Explanation- As the gift tax is imposed on such transfers that are made during the continuation of life if it is made beyond a particular limit i.e. exemption limit and estate tax is imposed on such transfers that are made at the time of death if it is made beyond a particular limit i.e. exemption limit. The generation-skipping transfer tax is imposed in addition to gift and estate tax and GSTT is not a subsitute for gift and estate tax)