---
kind: "section"
citation: "26 U.S.C. § 2632"
title: "26"
title_heading: "Internal Revenue Code"
number: "2632"
heading: "Special rules for allocation of GST exemption"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/26/2632"
units:
  - "Subtitle B — Estate and Gift Taxes"
  - "Chapter 13 — Tax on Generation-Skipping Transfers"
  - "Subchapter D — GST Exemption"
---

# §2632. Special rules for allocation of GST exemption

- (a) **Time and manner of allocation—**
  - (1) **Time—** Any allocation by an individual of his GST exemption under [section 2631(a)](/usc/26/2631.md?p=a) may be made at any time on or before the date prescribed for filing the estate tax return for such individual’s estate (determined with regard to extensions), regardless of whether such a return is required to be filed.
  - (2) **Manner—** The Secretary shall prescribe by forms or regulations the manner in which any allocation referred to in [paragraph (1)](#a-1) is to be made.
- (b) **Deemed allocation to certain lifetime direct skips—**
  - (1) **In general—** If any individual makes a direct skip during his lifetime, any unused portion of such individual’s GST exemption shall be allocated to the property transferred to the extent necessary to make the inclusion ratio for such property zero. If the amount of the direct skip exceeds such unused portion, the entire unused portion shall be allocated to the property transferred.
  - (2) **Unused portion—** For purposes of [paragraph (1)](#b-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)](#b-1) or [subsection (c)(1)](#c-1)).
  - (3) **Subsection not to apply in certain cases—** An individual may elect to have this subsection not apply to a transfer.
- (c) **Deemed allocation to certain lifetime transfers to GST trusts—**
  - (1) **In general—** If any individual makes an indirect skip during such individual’s lifetime, any unused portion of such individual’s GST exemption shall be allocated to the property transferred to the extent necessary to make the inclusion ratio for such property zero. If the amount of the indirect skip exceeds such unused portion, the entire unused portion shall be allocated to the property transferred.
  - (2) **Unused portion—** For purposes of [paragraph (1)](#c-1), the unused portion of an individual’s GST exemption is that portion of such exemption which has not previously been—
    - (A) allocated by such individual,
    - (B) treated as allocated under [subsection (b)](#b) with respect to a direct skip occurring during or before the calendar year in which the indirect skip is made, or
    - (C) treated as allocated under [paragraph (1)](#c-1) with respect to a prior indirect skip.
  - (3) **Definitions—**
    - (A) **Indirect skip—** For purposes of this subsection, the term “indirect skip” means any transfer of property (other than a direct skip) subject to the tax imposed by [chapter 12](/usc/26/chstB/ch12.md) made to a GST [trust](/usc/26/2652.md?p=b-1).
    - (B) **GST trust—** The term “GST [trust](/usc/26/2652.md?p=b-1)” means a [trust](/usc/26/2652.md?p=b-1) that could have a [generation-skipping transfer](/usc/26/2611.md?p=a) with respect to the [transferor](/usc/26/2652.md?p=a-1) unless—
      - (i) the [trust](/usc/26/2652.md?p=b-1) instrument provides that more than 25 percent of the [trust](/usc/26/2652.md?p=b-1) corpus must be distributed to or may be withdrawn by one or more individuals who are [non-skip persons](/usc/26/2613.md?p=b)—
        - (I) before the date that the individual attains age 46,
        - (II) on or before one or more dates specified in the [trust](/usc/26/2652.md?p=b-1) instrument that will occur before the date that such individual attains age 46, or
        - (III) upon the occurrence of an event that, in accordance with regulations prescribed by the Secretary, may reasonably be expected to occur before the date that such individual attains age 46,
      - (ii) the [trust](/usc/26/2652.md?p=b-1) instrument provides that more than 25 percent of the [trust](/usc/26/2652.md?p=b-1) corpus must be distributed to or may be withdrawn by one or more individuals who are [non-skip persons](/usc/26/2613.md?p=b) and who are living on the date of death of another person identified in the instrument (by name or by class) who is more than 10 years older than such individuals,
      - (iii) the [trust](/usc/26/2652.md?p=b-1) instrument provides that, if one or more individuals who are [non-skip persons](/usc/26/2613.md?p=b) die on or before a date or event described in clause [(i)](#c-3-B-i) or [(ii)](#c-3-B-ii), more than 25 percent of the [trust](/usc/26/2652.md?p=b-1) corpus either must be distributed to the estate or estates of one or more of such individuals or is subject to a general power of appointment exercisable by one or more of such individuals,
      - (iv) the [trust](/usc/26/2652.md?p=b-1) is a [trust](/usc/26/2652.md?p=b-1) any portion of which would be included in the gross estate of a [non-skip person](/usc/26/2613.md?p=b) (other than the [transferor](/usc/26/2652.md?p=a-1)) if such person died immediately after the transfer,
      - (v) the [trust](/usc/26/2652.md?p=b-1) is a charitable lead annuity [trust](/usc/26/2652.md?p=b-1) (within the meaning of [section 2642(e)(3)(A)](/usc/26/2642.md?p=e-3-A)) or a charitable remainder annuity [trust](/usc/26/2652.md?p=b-1) or a charitable remainder unitrust (within the meaning of [section 664(d)](/usc/26/664.md?p=d)), or
      - (vi) the [trust](/usc/26/2652.md?p=b-1) is a [trust](/usc/26/2652.md?p=b-1) with respect to which a deduction was allowed under [section 2522](/usc/26/2522.md) for the amount of an interest in the form of the right to receive annual payments of a fixed percentage of the net fair market value of the [trust](/usc/26/2652.md?p=b-1) property (determined yearly) and which is required to pay principal to a [non-skip person](/usc/26/2613.md?p=b) if such person is alive when the yearly payments for which the deduction was allowed terminate.

      For purposes of this subparagraph, the value of transferred property shall not be considered to be includible in the gross estate of a [non-skip person](/usc/26/2613.md?p=b) or subject to a right of withdrawal by reason of such person holding a right to withdraw so much of such property as does not exceed the amount referred to in [section 2503(b)](/usc/26/2503.md?p=b) with respect to any [transferor](/usc/26/2652.md?p=a-1), and it shall be assumed that powers of appointment held by [non-skip persons](/usc/26/2613.md?p=b) will not be exercised.

  - (4) **Automatic allocations to certain GST trusts—** For purposes of this subsection, an indirect skip to which [section 2642(f)](/usc/26/2642.md?p=f) applies shall be deemed to have been made only at the close of the estate tax inclusion period. The fair market value of such transfer shall be the fair market value of the [trust](/usc/26/2652.md?p=b-1) property at the close of the estate tax inclusion period.
  - (5) **Applicability and effect—**
    - (A) **In general—** An individual—
      - (i) may elect to have this subsection not apply to—
        - (I) an indirect skip, or
        - (II) any or all transfers made by such individual to a particular [trust](/usc/26/2652.md?p=b-1), and
      - (ii) may elect to treat any [trust](/usc/26/2652.md?p=b-1) as a GST [trust](/usc/26/2652.md?p=b-1) for purposes of this subsection with respect to any or all transfers made by such individual to such [trust](/usc/26/2652.md?p=b-1).
    - (B) **Elections—**
      - (i) **Elections with respect to indirect skips—** An election under [subparagraph (A)(i)(I)](#c-5-A-i-I) shall be deemed to be timely if filed on a timely filed gift tax return for the calendar year in which the transfer was made or deemed to have been made pursuant to [paragraph (4)](#c-4) or on such later date or dates as may be prescribed by the Secretary.
      - (ii) **Other elections—** An election under clause [(i)(II)](#c-5-A-i-II) or [(ii)](#c-5-A-ii) of subparagraph (A) may be made on a timely filed gift tax return for the calendar year for which the election is to become effective.
- (d) **Retroactive allocations—**
  - (1) **In general—** If—
    - (A) a [non-skip person](/usc/26/2613.md?p=b) has an interest or a future interest in a [trust](/usc/26/2652.md?p=b-1) to which any transfer has been made,
    - (B) such person—
      - (i) is a lineal descendant of a grandparent of the [transferor](/usc/26/2652.md?p=a-1) or of a grandparent of the [transferor](/usc/26/2652.md?p=a-1)’s spouse or former spouse, and
      - (ii) is assigned to a generation below the generation assignment of the [transferor](/usc/26/2652.md?p=a-1), and
    - (C) such person predeceases the [transferor](/usc/26/2652.md?p=a-1),

    then the [transferor](/usc/26/2652.md?p=a-1) may make an allocation of any of such [transferor](/usc/26/2652.md?p=a-1)’s unused GST exemption to any previous transfer or transfers to the [trust](/usc/26/2652.md?p=b-1) on a chronological basis.

  - (2) **Special rules—** If the allocation under [paragraph (1)](#d-1) by the [transferor](/usc/26/2652.md?p=a-1) is made on a gift tax return filed on or before the date prescribed by [section 6075(b)](/usc/26/6075.md?p=b) for gifts made within the calendar year within which the [non-skip person](/usc/26/2613.md?p=b)’s death occurred—
    - (A) the value of such transfer or transfers for purposes of [section 2642(a)](/usc/26/2642.md?p=a) shall be determined as if such allocation had been made on a timely filed gift tax return for each calendar year within which each transfer was made,
    - (B) such allocation shall be effective immediately before such death, and
    - (C) the amount of the [transferor](/usc/26/2652.md?p=a-1)’s unused GST exemption available to be allocated shall be determined immediately before such death.
  - (3) **Future interest—** For purposes of this subsection, a person has a future interest in a [trust](/usc/26/2652.md?p=b-1) if the [trust](/usc/26/2652.md?p=b-1) may permit income or corpus to be paid to such person on a date or dates in the future.
- (e) **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)](#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](/usc/26/2652.md?p=b-1) with respect to which such individual is the [transferor](/usc/26/2652.md?p=a-1) 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)](#e-1) shall be made among the properties described in [subparagraph (A)](#e-2-A) thereof and the [trusts](/usc/26/2652.md?p=b-1) described in [subparagraph (B)](#e-2-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](/usc/26/2652.md?p=b-1).
    - (B) **Nonexempt portion—** For purposes of [subparagraph (A)](#e-2-A), the term “nonexempt portion” means the value (at the time of allocation) of the property or [trust](/usc/26/2652.md?p=b-1), multiplied by the inclusion ratio with respect to such property or [trust](/usc/26/2652.md?p=b-1).

## Source credit

(Added Pub. L. 99–514, title XIV, § 1431(a), Oct. 22, 1986, 100 Stat. 2721; amended Pub. L. 100–647, title I, § 1014(g)(16), Nov. 10, 1988, 102 Stat. 3566; Pub. L. 107–16, title V, § 561(a), (b), June 7, 2001, 115 Stat. 86, 89.)

## Notes

### Editorial Notes

### Amendments

2001—Subsec. (b)(2). Pub. L. 107–16, § 561(b), substituted “or subsection (c)(1)” for “with respect to a prior direct skip”.

Subsecs. (c) to (e). Pub. L. 107–16, § 561(a), added subsecs. (c) and (d) and redesignated former subsec. (c) as (e).

1988—Subsec. (b)(2). Pub. L. 100–647 substituted “paragraph (1) with respect to a prior direct skip)” for “paragraph (1)) with respect to a prior direct skip”.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2001 Amendment

Pub. L. 107–16, title V, § 561(c), June 7, 2001, 115 Stat. 89, provided that: Deemed allocation.—Section 2632(c) of the Internal Revenue Code of 1986 (as added by subsection (a)), and the amendment made by subsection (b) [amending this section], shall apply to transfers subject to chapter 11 or 12 made after December 31, 2000, and to estate tax inclusion periods ending after December 31, 2000. Retroactive allocations.—Section 2632(d) of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply to deaths of non-skip persons occurring after December 31, 2000.”

### Effective Date of 1988 Amendment

Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provision of the Tax Reform Act of 1986, Pub. L. 99–514, to which such amendment relates, see section 1019(a) of Pub. L. 100–647, set out as a note under section 1 of this title.

### Effective Date

Section applicable to generation-skipping transfers (within the meaning of section 2611 of this title) made after Oct. 22, 1986, except as otherwise provided, see section 1433 of Pub. L. 99–514, set out as a note under section 2601 of this title.