Internal Revenue Code:Sec. 2702. Special valuation rules in case of transfers of interests in trusts

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Contents


Location in Internal Revenue Code


     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle B - Estate and Gift Taxes
       CHAPTER 14 - SPECIAL VALUATION RULES
     

Statute

    Sec. 2702. Special valuation rules in case of transfers of
        interests in trusts
 
    (a) Valuation rules
      (1) In general
        Solely for purposes of determining whether a transfer of an
      interest in trust to (or for the benefit of) a member of the
      transferor's family is a gift (and the value of such transfer),
      the value of any interest in such trust retained by the
      transferor or any applicable family member (as defined in section
      2701(e)(2)) shall be determined as provided in paragraph (2).
      (2) Valuation of retained interests
        (A) In general
          The value of any retained interest which is not a qualified
        interest shall be treated as being zero.
        (B) Valuation of qualified interest
          The value of any retained interest which is a qualified
        interest shall be determined under section 7520.
      (3) Exceptions
        (A) In general
          This subsection shall not apply to any transfer -
            (i) if such transfer is an incomplete gift,
            (ii) if such transfer involves the transfer of an interest
          in trust all the property in which consists of a residence to
          be used as a personal residence by persons holding term
          interests in such trust, or
            (iii) to the extent that regulations provide that such
          transfer is not inconsistent with the purposes of this
          section.
        (B) Incomplete gift
          For purposes of subparagraph (A), the term ''incomplete
        gift'' means any transfer which would not be treated as a gift
        whether or not consideration was received for such transfer.
    (b) Qualified interest
      For purposes of this section, the term ''qualified interest''
    means -
        (1) any interest which consists of the right to receive fixed
      amounts payable not less frequently than annually,
        (2) any interest which consists of the right to receive amounts
      which are payable not less frequently than annually and are a
      fixed percentage of the fair market value of the property in the
      trust (determined annually), and
        (3) any noncontingent remainder interest if all of the other
      interests in the trust consist of interests described in
      paragraph (1) or (2).
    (c) Certain property treated as held in trust
      For purposes of this section -
      (1) In general
        The transfer of an interest in property with respect to which
      there is 1 or more term interests shall be treated as a transfer
      of an interest in a trust.
      (2) Joint purchases
        If 2 or more members of the same family acquire interests in
      any property described in paragraph (1) in the same transaction
      (or a series of related transactions), the person (or persons)
      acquiring the term interests in such property shall be treated as
      having acquired the entire property and then transferred to the
      other persons the interests acquired by such other persons in the
      transaction (or series of transactions).  Such transfer shall be
      treated as made in exchange for the consideration (if any)
      provided by such other persons for the acquisition of their
      interests in such property.
      (3) Term interest
        The term ''term interest'' means -
          (A) a life interest in property, or
          (B) an interest in property for a term of years.
      (4) Valuation rule for certain term interests
        If the nonexercise of rights under a term interest in tangible
      property would not have a substantial effect on the valuation of
      the remainder interest in such property -
          (A) subparagraph (A) of subsection (a)(2) shall not apply to
        such term interest, and
          (B) the value of such term interest for purposes of applying
        subsection (a)(1) shall be the amount which the holder of the
        term interest establishes as the amount for which such interest
        could be sold to an unrelated third party.
    (d) Treatment of transfers of interests in portion of trust
      In the case of a transfer of an income or remainder interest with
    respect to a specified portion of the property in a trust, only
    such portion shall be taken into account in applying this section
    to such transfer.
    (e) Member of the family
      For purposes of this section, the term ''member of the family''
    shall have the meaning given such term by section 2704(c)(2).
 

Sources

    (Added Pub. L. 101-508, title XI, Sec. 11602(a), Nov. 5, 1990, 104
    Stat. 1388-497; amended Pub. L. 104-188, title I, Sec. 1702(f)(11),
    Aug. 20, 1996, 110 Stat. 1872.)
 

Miscellaneous

                                 AMENDMENTS
      1996 - Subsec. (a)(3)(A)(i). Pub. L. 104-188, Sec.
    1702(f)(11)(A)(i), (ii), (B)(i), substituted ''if'' for ''to the
    extent'' and ''incomplete gift'' for ''incomplete transfer'', and
    struck out ''or'' at end.
      Subsec. (a)(3)(A)(ii). Pub. L. 104-188, Sec. 1702(f)(11)(A)(iii),
    substituted '', or'' for period at end.
      Subsec. (a)(3)(A)(iii). Pub. L. 104-188, Sec. 1702(f)(11)(A)(iv),
    added cl. (iii).
      Subsec. (a)(3)(B). Pub. L. 104-188, Sec. 1702(f)(11)(B),
    substituted ''incomplete gift'' for ''incomplete transfer'' in
    heading and text.
                      EFFECTIVE DATE OF 1996 AMENDMENT
      Amendment by Pub. L. 104-188 effective, except as otherwise
    expressly provided, as if included in the provision of the Revenue
    Reconciliation Act of 1990, Pub. L. 101-508, title XI, to which
    such amendment relates, see section 1702(i) of Pub. L. 104-188, set
    out as a note under section 38 of this title.
 

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