TAXABLE TERMINATION

TAXABLE TERMINATION

taxable termination. A taxable event that occurs when (1) an interest in a generation-skipping trust property terminates (as on the death of a skip person’s parent who possessed the interest), (2) no interest in the trust is held by a nonskip person, and (3) a distribution may be made to a skip person. ? Before the creation of taxable terminations in 1976, a taxpayer could create a trust that paid income to a child for life, then to that child’s child for life, and so on without incurring an estate or gift tax liability at the death of each generation’s beneficiary. See GENERATION-SKIPPING TRANSFER R; generation-skipping transfer tax under TAX; generation-skipping trust under TRUST; SKIP PERSON. [Cases: Internal Revenue 4224.]
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