Final answer:
Micah's transfer to his granddaughter Susannah is the one subject to the generation skipping transfer tax, as she is considered a skip person being two generations below him, particularly since her father is deceased.
Step-by-step explanation:
For the purpose of the generation skipping transfer tax (GST tax), the transfer that was made to a 'skip person' in the current year is the second option: “Micah (65) transferred $21000 to his granddaughter, Susannah(29). Susannah’s father (Micah’s son) died two years ago.”
The GST tax is a tax on transfers made to individuals who are at least two generations below the transferor. A skip person could include grandchildren or unrelated individuals who are more than 37.5 years younger than the donor. In this specific option, Susannah is Micah's granddaughter, and because her father is deceased, she becomes a direct skip person, subject to GST tax on the transfer made by Micah, assuming it exceeds any applicable GST exemption amounts.
Other transfers mentioned do not qualify as skip person transfers under the generation skipping transfer tax rules. Transfers to cousins, neighbors' children, or nieces and nephews do not typically classify as generation-skipping unless such transfers are made in trust and the beneficiaries are multiple generations below the grantor.