EXPANSION OF EXCEPTION FROM GENERATION-SKIPPING TRANSFER TAX FOR TRANSFERS TO INDIVIDUALS WITH DECEASED PARENTS.

SEC. 611. EXPANSION OF EXCEPTION FROM GENERATION-SKIPPING TRANSFER TAX FOR TRANSFERS TO INDIVIDUALS WITH DECEASED PARENTS. (a) In General.—Section 2651 (relating to generation assignment) is amended by redesignating subsection (e) as subsection (f) and by inserting after subsection (d) the following new subsection: “(e) Special Rule for Persons With a Deceased Parent.—111 STAT. 861 “(1) In general.—For purposes of determining whether any transfer is a generation-skipping transfer, if— “(A) an individual is a descendant of a parent of the transferor (or the transferor’s spouse or former spouse), and “(B) such individual’s parent who is a lineal descendant of the parent of the transferor (or the transferor’s spouse or former spouse) is dead at the time the transfer (from which an interest of such individual is established or derived) is subject to a tax imposed by chapter 11 or 12 upon the transferor (and if there shall be more than 1 such time, then at the earliest such time), such individual shall be treated as if such individual were a member of the generation which is 1 generation below the lower of the transferor’s generation or the generation assignment of the youngest living ancestor of such individual who is also a descendant of the parent of the transferor (or the transferor’s spouse or former spouse), and the generation assignment of any descendant of such individual shall be adjusted accordingly. “(2) Limited application of subsection to collateral heirs.—This subsection shall not apply with respect to a transfer to any individual who is not a lineal descendant of the transferor (or the transferor’s spouse or former spouse) if, at the time of the transfer, such transferor has any living lineal descendant.”. (b) Conforming Amendments — (1) Section 2612(c) (defining direct skip) is amended by striking paragraph (2) and by redesignating paragraph (3) as paragraph (2). (2) Section 2612(c)(2) (as so redesignated) is amended by striking “section 2651(e)(2)” and inserting “section 2651(f)(2)”. (c) Effective Date.—The amendments made by this section shall apply to terminations, distributions, and transfers occurring after December 31, 1997.