Peggy gives $200,000 to her grandson.This is an example of a direct skip for purposes of the GSTT (generation-skipping transfer tax).

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A direct skip occurs when a transfer is made to a skip person (a person who is at least 2 generations below the transferor, such as a grandchild) without any prior transfers to non-skip persons (such as the grandchild's parent). This type of transfer may trigger the GSTT, which is designed to prevent wealthy individuals from avoiding estate taxes by transferring assets to grandchildren and future generations. Therefore, Peggy's gift of $200,000 to her grandson would qualify as a direct skip and potentially be subject to the GSTT.

Peggy Gives $200,000 to Her Grandson