(a)

In general

For purposes of this chapter, the term "generation-skipping transfer" means -

(1)

a taxable distribution,

(2)

a taxable termination, and

(3)

a direct skip.

(b)

Certain transfers excluded

The term "generation-skipping transfer" does not include -

(1)

any transfer which, if made inter vivos by an individual, would not be treated as a taxable gift by reason of section 2503(e) (relating to exclusion of certain transfers for educational or medical expenses), and

(2)

any transfer to the extent -

(A)

the property transferred was subject to a prior tax imposed under this chapter,

(B)

the transferee in the prior transfer was assigned to the same generation as (or a lower generation than) the generation assignment of the transferee in this transfer, and

(C)

such transfers do not have the effect of avoiding tax under this chapter with respect to any transfer.