Section 2654. Special rules (a) Basis adjustment

-    (1) In general.-Except as provided in paragraph (2),  if  property  is
  transferred  in  a  generation-skipping  transfer,  the  basis  of  such
  property shall be increased (but not above the fair market value of such
  property) by an amount equal to that  portion  of  the  tax  imposed  by
  section  2601  (computed without regard to section 2604) with respect to
  the transfer which is attributable to the  excess  of  the  fair  market
  value  of  such  property over its adjusted basis immediately before the
  transfer. The preceding shall be  applied  after  any  basis  adjustment
  under section 1015 with respect to the transfer.
    (2)  Certain  transfers  at  death.-If  property  is  transferred in a
  taxable termination which occurs at the same time as and as a result  of
  the death of an individual, the basis of such property shall be adjusted
  in a manner similar to the manner provided under section 1014(a); except
  that,  if the inclusion ratio with respect to such property is less than
  one, any increase or decrease in basis shall be limited  by  multiplying
  such increase or decrease (as the case may be) by the inclusion ratio.
    (b)  Certain  trusts  treated as separate trusts.-For purposes of this
  chapter-
    (1) the portions of a trust attributable to transfers  from  different
  transferors shall be treated as separate trusts, and
    (2)   substantially  separate  and  independent  shares  of  different
  beneficiaries in a trust shall be treated as separate trusts.
    Except as provided in the preceding sentence, nothing in this  chapter
  shall be construed as authorizing a single trust to be treated as two or
  more  trusts.  For purposes of this subsection, a trust shall be treated
  as part of an estate during any period that  the  trust  is  so  treated
  under section 645.
    (c) Disclaimers.-
    For  provisions  relating  to the effect of a qualified disclaimer for
  purposes of this chapter, see section 2518.
    (d) Limitation on personal liability of trustee.-A trustee  shall  not
  be personally liable for any increase in the tax imposed by section 2601
  which is attributable to the fact that-
    (1)  section  2642(c)  (relating  to  exemption  of certain nontaxable
  gifts) does not apply to a transfer to the trust which was  made  during
  the  life  of  the  transferor  and  for which a gift tax return was not
  filed, or
    (2) the inclusion ratio with respect to the trust is greater than  the
  amount of such ratio as computed on the basis of the return on which was
  made (or was deemed made) an allocation of the GST exemption to property
  transferred to such trust.

    The preceding sentence shall not apply if the trustee has knowledge of
  facts  sufficient  reasonably  to  conclude  that  a gift tax return was
  required to be filed or that the inclusion ratio was erroneous.