Page:United States Statutes at Large Volume 100 Part 3.djvu/914

 100 STAT. 2722

PUBLIC LAW 99-514—OCT. 22, 1986 portion, the entire unused portion shall be allocated to the property transferred. "(2) UNUSED PORTION.—For purposes of paragraph (1), the

unused portion of an individual's GST exemption is that portion of such exemption which has not previously been allocated by such individual (or treated as allocated under paragraph (1)) with respect to a prior direct skip. "(3) SUBSECTION NOT TO APPLY IN CERTAIN CASES.—An individ-

ual may elect to have this subsection not apply to a transfer. "(c) ALLOCATION OF UNUSED GST EXEMPTION.—

"(1) IN GENERAL.—Any portion of an individual's GST exemption which has not been allocated within the time prescribed by subsection (a) shall be deemed to be allocated as follows— "(A) first, to property which is the subject of a direct skip occurring at such individual's death, and "(B) second, to trusts with respect to which such individual is the transferor and from which a taxable distribution or a taxable termination might occur at or after such individual's death. "(2) ALLOCATION WITHIN CATEGORIES.—

"(A) IN GENERAL.—The allocation under paragraph (1) shall be made among the properties described in subparagraph (A) thereof and the trusts described in subparagraph (B) thereof, as the case may be, in proportion to the respective amounts (at the time of allocation) of the nonexempt portions of such properties or trusts. "(B) NONEXEMPT PORTION.—For purposes of subparagraph (A), the term 'nonexempt portion means the value (at the time of allocation) of the property or trust, multiplied by the inclusion ratio with respect to such property or trust.

"Subchapter E—Applicable Rate; Inclusion Ratio "Sec. 2641. Applicable rate. "Sec. 2642. Inclusion ratio. "SEC. 2641. APPLICABLE RATE.

"(a) GENERAL RULE.—For purposes of this chapter, the term 'applicable rate' means, with respect to any generation-skipping transfer, the product of— "(1) the maximum Federal estate tax rate, and "(2) the inclusion ratio with respect to the transfer. "(b) MAXIMUM FEDERAL ESTATE TAX RATE.—For purposes of

subsection (a), the term 'maximum Federal estate tax rate' means the maximum rate imposed by section 2001 on the estates of decedents dying at the time of the taxable distribution, taxable termination, or direct skip, as the case may be. "SEC. 2642. INCLUSION RATIO.

"(a) INCLUSION RATIO DEFINED.—For purposes of this chapter— "(1) IN GENERAL.—Except as otherwise provided in this section, the inclusion ratio with respect to any property transferred in a generation-skipping transfer shall be the excess (if any) of 1 over— "(A) except as provided in subparagraph (B), the applicable fraction determined for the trust from which such transfer is made, or

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