Generation-Skipping Transfer Tax - Answer Key
The only correct answer is that a GSTT gift is also subject to the gift tax.
GSTT transfers apply to gifts, transfers, distributions and bequests.
Beverly can give up to $14,000 per year to each of her grandchildren under the annual exclusion for 2013. Her niece is not a skip person and a direct tuition payment is an excluded transfer. The daughter of her best friend is a skip person because she is a non-lineal descendant that is considered a skip person because she is more than 37.5 years younger than the transferor.
Judy can gift up to $14,000 (in 2013) to any individual she desires without any GSTT liability. The children and grandchildren of James and Judy are all non-skip beneficiaries due to the death of Allen. GSTT exclusion is not portable.