26 U.S.C. § 2642: Inclusion ratio

except as provided in subparagraph (B), the applicable fraction determined for the trust from which such transfer is made, or in the case of a direct skip, the applicable fraction determined for such skip. the numerator of which is the amount of the GST exemption allocated to the trust (or in the case of a direct skip, allocated to the property transferred in such skip), and the value of the property transferred to the trust (or involved in the direct skip), reduced by any Federal estate tax or State death tax actually recovered from the trust attributable to such property, and any charitable deduction allowed under section 2055 or 2522 with respect to such property. If a trust is severed in a qualified severance, the trusts resulting from such severance shall be treated as separate trusts thereafter for purposes of this chapter. the single trust was divided on a fractional basis, and the terms of the new trusts, in the aggregate, provide for the same succession of interests of beneficiaries as are provided in the original trust. If a trust has an inclusion ratio of greater than zero and less than 1, a severance is a qualified severance only if the single trust is divided into two trusts, one of which receives a fractional share of the total value of all trust assets equal to the applicable fraction of the single trust immediately before the severance. In such case, the trust receiving such fractional share shall have an inclusion ratio of zero and the other trust shall have an inclusion ratio of 1. The term “qualified severance” includes any other severance permitted under regulations prescribed by the Secretary. A severance pursuant to this paragraph may be made at any time. The Secretary shall prescribe by forms or regulations the manner in which the qualified severance shall be reported to the Secretary. the value of such property for purposes of subsection (a) shall be its value as finally determined for purposes of chapter 12 (within the meaning of section 2001(f)(2)), or, in the case of an allocation deemed to have been made at the close of an estate tax inclusion period, its value at the time of the close of the estate tax inclusion period, and such allocation shall be effective on and after the date of such transfer, or, in the case of an allocation deemed to have been made at the close of an estate tax inclusion period, on and after the close of such estate tax inclusion period. If property is transferred as a result of the death of the transferor, the value of such property for purposes of subsection (a) shall be its value as finally determined for purposes of chapter 11; except that, if the requirements prescribed by the Secretary respecting allocation of post-death changes in value are not met, the value of such property shall be determined as of the time of the distribution concerned. Any allocation to property transferred as a result of the death of the transferor shall be effective on and after the date of the death of the transferor. the value of such property for purposes of subsection (a) shall be determined as of the time such allocation is filed with the Secretary, and such allocation shall be effective on and after the date on which such allocation is filed with the Secretary. If the value of property is included in the estate of a spouse by virtue of section 2044, and if such spouse is treated as the transferor of such property under section 2652(a), the value of such property for purposes of subsection (a) shall be its value for purposes of chapter 11 in the estate of such spouse. In the case of a direct skip which is a nontaxable gift, the inclusion ratio shall be zero. during the life of such individual, no portion of the corpus or income of the trust may be distributed to (or for the benefit of) any person other than such individual, and if the trust does not terminate before the individual dies, the assets of such trust will be includible in the gross estate of such individual. section 2503(b) (taking into account the application of section 2513), or section 2503(e). If a transfer of property is made to a trust in existence before such transfer, the applicable fraction for such trust shall be recomputed as of the time of such transfer in the manner provided in paragraph (2). the amount of the GST exemption allocated to property involved in such transfer, plus the nontax portion of such trust immediately before such transfer, and any Federal estate tax or State death tax actually recovered from the trust attributable to such property, and any charitable deduction allowed under section 2055 or 2522 with respect to such property, and the value of all of the property in the trust (immediately before such transfer). the value of all of the property in the trust, and the applicable fraction in effect for such trust. any allocation of the GST exemption to property transferred to a trust is not made on a timely filed gift tax return required by section 6019, and there was a previous allocation with respect to property transferred to such trust, the numerator of which is the adjusted GST exemption, and the denominator of which is the value of all of the property in such trust immediately after the termination of the charitable lead annuity. at the interest rate used in determining the amount of the deduction under section 2055 or 2522 (as the case may be) for the charitable lead annuity, and for the actual period of the charitable lead annuity. The term “charitable lead annuity trust” means any trust in which there is a charitable lead annuity. The term “charitable lead annuity” means any interest in the form of a guaranteed annuity with respect to which a deduction was allowed under section 2055 or 2522 (as the case may be). Under regulations, appropriate adjustments shall be made in the application of subsection (d) to take into account the provisions of this subsection. an individual makes an inter vivos transfer of property, and the value of such property would be includible in the gross estate of such individual under chapter 11 if such individual died immediately after making such transfer (other than by reason of section 2035), if such property is includible in the gross estate of the transferor (other than by reason of section 2035), its value for purposes of chapter 11, or if subparagraph (A) does not apply, its value as of the close of the estate tax inclusion period (or, if any allocation of GST exemption to such property is not made on a timely filed gift tax return for the calendar year in which such period ends, its value as of the time such allocation is filed with the Secretary). the date on which there is a generation-skipping transfer with respect to such property, or the date of the death of the transferor. Except as provided in regulations, any reference in this subsection to an individual or transferor shall be treated as including a reference to the spouse of such individual or transferor. Under regulations, appropriate adjustments shall be made in the application of subsection (d) to take into account the provisions of this subsection. an allocation of GST exemption described in paragraph (1) or (2) of subsection (b), and an election under subsection (b)(3) or (c)(5) of section 2632. In determining whether to grant relief under this paragraph, the Secretary shall take into account all relevant circumstances, including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the Secretary deems relevant. For purposes of determining whether to grant relief under this paragraph, the time for making the allocation (or election) shall be treated as if not expressly prescribed by statute. An allocation of GST exemption under section 2632 that demonstrates an intent to have the lowest possible inclusion ratio with respect to a transfer or a trust shall be deemed to be an allocation of so much of the transferor’s unused GST exemption as produces the lowest possible inclusion ratio. In determining whether there has been substantial compliance, all relevant circumstances shall be taken into account, including evidence of intent contained in the trust instrument or instrument of transfer and such other factors as the Secretary deems relevant. Section 2642(g)(1) of the Internal Revenue Code of 1986 (as added by subsection (a)) shall apply to requests pending on, or filed after, December 31, 2000 . Section 2642(g)(2) of such Code (as so added) shall apply to transfers subject to chapter 11 or 12 of the Internal Revenue Code of 1986 made after December 31, 2000 . No implication is intended with respect to the availability of relief from late elections or the application of a rule of substantial compliance on or before such date.”