876 / How is the amount of tax on a GST determined?

The amount of tax is the “taxable amount” (based on the kind of GST involved–see Q 875) multiplied by the “applicable rate.”¹ The applicable rate of tax applied to the taxable amount is itself a product. It is a product of the maximum federal estate tax rate in effect at the time of the GST (35 percent in 2011 and 2012 and 40 percent for tax years beginning after 2012) and the “inclusion ratio” with respect to the transfer.² The inclusion ratio, in turn, depends on allocations of the “GST exemption ( Q 877).”³ The GST tax was zero percent for one year in 2010.⁴

Taxable Amount

In the case of a taxable distribution, the taxable amount is the value of the property received by the transferee reduced by any expense incurred by the transferee with respect to the GST tax imposed on the distribution. If any portion of the GST tax with respect to a taxable distribution is paid out of the trust, the taxable distribution is increased by such an amount.⁵

In the case of a taxable termination, the taxable amount is the value of all property with respect to which the taxable termination has occurred, reduced by the expenses, similar to those allowed as a deduction under IRC Section 2053 in determining the taxable estate for estate tax purposes (see Q 848), with respect to which the taxable termination has occurred.⁶