A more thorough explanation:

TAXABLE DISTRIBUTION

A taxable distribution is a transfer of assets from a trust to a beneficiary that is subject to taxation. This type of transfer is not considered a direct skip or a taxable termination. It is typically associated with generation-skipping transfers, which are transfers of assets to a skip person (i.e., a beneficiary who is two or more generations younger than the grantor).

Example 1: A grandfather establishes a trust for his grandchildren. The trust is designed to provide income to the grandchildren for their lifetimes, with the remaining assets passing to their children (i.e., the great-grandchildren). When one of the grandchildren dies, the trust distributes a portion of the assets to their child. This distribution is considered a taxable distribution because it is a generation-skipping transfer to a skip person.

Example 2: A father establishes a trust for his son, with the assets passing to his grandson upon the son's death. When the son dies, the trust distributes the assets to the grandson. This distribution is not considered a taxable distribution because it is not a generation-skipping transfer. The grandson is not a skip person because he is only one generation younger than the grantor.

A taxable distribution is a transfer of assets from a trust to a skip person that is subject to taxation. This type of transfer is not considered a direct skip or a taxable termination. The examples illustrate how a distribution from a trust can be considered taxable or non-taxable depending on whether it is a generation-skipping transfer to a skip person. In Example 1, the distribution to the grandchild's child is a generation-skipping transfer to a skip person, making it taxable. In Example 2, the distribution to the grandson is not a generation-skipping transfer, making it non-taxable.