ESTATE PLANNING - ESTATE TAXES LAW
TITLE 26 - INTERNAL REVENUE CODE
CHAPTER 11 - ESTATE TAX
Subchapter A - Estates of Citizens or Residents
PART I - TAX IMPOSEDPART II - CREDITS AGAINST TAX
PART III - GROSS ESTATE
PART IV - TAXABLE ESTATE
PART III - Gross Estate
Sec. 2035. Adjustments for certain gifts made within 3 years of
decedent's death
Sec. 2036. Transfers with retained life estate
Sec. 2037. Transfers taking effect at death
Sec. 2038. Revocable transfers
Sec. 2039. Annuities
Sec. 2041. Powers of appointment
Sec. 2042. Proceeds of life insurance
Sec. 2043. Transfers for insufficient consideration
Sec. 2044. Certain property for which marital deduction was
previously allowed
Sec. 2045. Prior interests-STATUTE-
The value of the gross estate shall include the value of all
property to the extent of any interest therein of the surviving
spouse, existing at the time of the decedent's death as dower or
curtesy, or by virtue of a statute creating an estate in lieu of
dower or curtesy.
Sec. 2035. Adjustments for certain gifts made within 3 years of decedent's death-STATUTE-
(a) Inclusion of certain property in gross estate
If -
(1) the decedent made a transfer (by trust or otherwise) of an
interest in any property, or relinquished a power with respect to
any property, during the 3-year period ending on the date of the
decedent's death, and
(2) the value of such property (or an interest therein) would
have been included in the decedent's gross estate under section
2036, 2037, 2038, or 2042 if such transferred interest or
relinquished power had been retained by the decedent on the date
of his death,
the value of the gross estate shall include the value of any
property (or interest therein) which would have been so included.
(b) Inclusion of gift tax on gifts made during 3 years before
decedent's death
The amount of the gross estate (determined without regard to this
subsection) shall be increased by the amount of any tax paid under
chapter 12 by the decedent or his estate on any gift made by the
decedent or his spouse during the 3-year period ending on the date
of the decedent's death.
(c) Other rules relating to transfers within 3 years of death
(1) In general
For purposes of -
(A) section 303(b) (relating to distributions in redemption
of stock to pay death taxes),
(B) section 2032A (relating to special valuation of certain
farms, etc., real property), and
(C) subchapter C of chapter 64 (relating to lien for taxes),
the value of the gross estate shall include the value of all
property to the extent of any interest therein of which the
decedent has at any time made a transfer, by trust or otherwise,
during the 3-year period ending on the date of the decedent's
death.
(2) Coordination with section 6166
An estate shall be treated as meeting the 35 percent of
adjusted gross estate requirement of section 6166(a)(1) only if
the estate meets such requirement both with and without the
application of paragraph (1).
(3) Marital and small transfers
Paragraph (1) shall not apply to any transfer (other than a
transfer with respect to a life insurance policy) made during a
calendar year to any donee if the decedent was not required by
section 6019 (other than by reason of section 6019(2)) to file
any gift tax return for such year with respect to transfers to
such donee.
(d) Exception
Subsection (a) shall not apply to any bona fide sale for an
adequate and full consideration in money or money's worth.
(e) Treatment of certain transfers from revocable trusts
For purposes of this section and section 2038, any transfer from
any portion of a trust during any period that such portion was
treated under section 676 as owned by the decedent by reason of a
power in the grantor (determined without regard to section 672(e))
shall be treated as a transfer made directly by the decedent.Sec. 2036. Transfers with retained life estate
-STATUTE-
(a) General rule
The value of the gross estate shall include the value of all
property to the extent of any interest therein of which the
decedent has at any time made a transfer (except in case of a bona
fide sale for an adequate and full consideration in money or
money's worth), by trust or otherwise, under which he has retained
for his life or for any period not ascertainable without reference
to his death or for any period which does not in fact end before
his death -
(1) the possession or enjoyment of, or the right to the income
from, the property, or
(2) the right, either alone or in conjunction with any person,
to designate the persons who shall possess or enjoy the property
or the income therefrom.
(b) Voting rights
(1) In general
For purposes of subsection (a)(1), the retention of the right
to vote (directly or indirectly) shares of stock of a controlled
corporation shall be considered to be a retention of the
enjoyment of transferred property.
(2) Controlled corporation
For purposes of paragraph (1), a corporation shall be treated
as a controlled corporation if, at any time after the transfer of
the property and during the 3-year period ending on the date of
the decedent's death, the decedent owned (with the application of
section 318), or had the right (either alone or in conjunction
with any person) to vote, stock possessing at least 20 percent of
the total combined voting power of all classes of stock.
(3) Coordination with section 2035
For purposes of applying section 2035 with respect to paragraph
(1), the relinquishment or cessation of voting rights shall be
treated as a transfer of property made by the decedent.
(c) Limitation on application of general rule
This section shall not apply to a transfer made before March 4,
1931; nor to a transfer made after March 3, 1931, and before June
7, 1932, unless the property transferred would have been includible
in the decedent's gross estate by reason of the amendatory language
of the joint resolution of March 3, 1931 (46 Stat. 1516).
Sec. 2037. Transfers taking effect at death-STATUTE-
(a) General rule
The value of the gross estate shall include the value of all
property to the extent of any interest therein of which the
decedent has at any time after September 7, 1916, made a transfer
(except in case of a bona fide sale for an adequate and full
consideration in money or money's worth), by trust or otherwise, if
-
(1) possession or enjoyment of the property can, through
ownership of such interest, be obtained only by surviving the
decedent, and
(2) the decedent has retained a reversionary interest in the
property (but in the case of a transfer made before October 8,
1949, only if such reversionary interest arose by the express
terms of the instrument of transfer), and the value of such
reversionary interest immediately before the death of the
decedent exceeds 5 percent of the value of such property.
(b) Special rules
For purposes of this section, the term ''reversionary interest''
includes a possibility that property transferred by the decedent -
(1) may return to him or his estate, or
(2) may be subject to a power of disposition by him,
but such term does not include a possibility that the income alone
from such property may return to him or become subject to a power
of disposition by him. The value of a reversionary interest
immediately before the death of the decedent shall be determined
(without regard to the fact of the decedent's death) by usual
methods of valuation, including the use of tables of mortality and
actuarial principles, under regulations prescribed by the
Secretary. In determining the value of a possibility that property
may be subject to a power of disposition by the decedent, such
possibility shall be valued as if it were a possibility that such
property may return to the decedent or his estate. Notwithstanding
the foregoing, an interest so transferred shall not be included in
the decedent's gross estate under this section if possession or
enjoyment of the property could have been obtained by any
beneficiary during the decedent's life through the exercise of a
general power of appointment (as defined in section 2041) which in
fact was exercisable immediately before the decedent's death.
Sec. 2038. Revocable transfers-STATUTE-
(a) In general
The value of the gross estate shall include the value of all
property.
(1) Transfers after June 22, 1936
To the extent of any interest therein of which the decedent has
at any time made a transfer (except in case of a bona fide sale
for an adequate and full consideration in money or money's
worth), by trust or otherwise, where the enjoyment thereof was
subject at the date of his death to any change through the
exercise of a power (in whatever capacity exercisable) by the
decedent alone or by the decedent in conjunction with any other
person (without regard to when or from what source the decedent
acquired such power), to alter, amend, revoke, or terminate, or
where any such power is relinquished during the 3 year period
ending on the date of the decedent's death.
(2) Transfers on or before June 22, 1936
To the extent of any interest therein of which the decedent has
at any time made a transfer (except in case of a bona fide sale
for an adequate and full consideration in money or money's
worth), by trust or otherwise, where the enjoyment thereof was
subject at the date of his death to any change through the
exercise of a power, either by the decedent alone or in
conjunction with any person, to alter, amend, or revoke, or where
the decedent relinquished any such power during the 3 year period
ending on the date of the decedent's death. Except in the case
of transfers made after June 22, 1936, no interest of the
decedent of which he has made a transfer shall be included in the
gross estate under paragraph (1) unless it is includible under
this paragraph.
(b) Date of existence of power
For purposes of this section, the power to alter, amend, revoke,
or terminate shall be considered to exist on the date of the
decedent's death even though the exercise of the power is subject
to a precedent giving of notice or even though the alteration,
amendment, revocation, or termination takes effect only on the
expiration of a stated period after the exercise of the power,
whether or not on or before the date of the decedent's death notice
has been given or the power has been exercised. In such cases
proper adjustment shall be made representing the interests which
would have been excluded from the power if the decedent had lived,
and for such purpose, if the notice has not been given or the power
has not been exercised on or before the date of his death, such
notice shall be considered to have been given, or the power
exercised, on the date of his death.-STATUTE-
(a) General
The gross estate shall include the value of an annuity or other
payment receivable by any beneficiary by reason of surviving the
decedent under any form of contract or agreement entered into after
March 3, 1931 (other than as insurance under policies on the life
of the decedent), if, under such contract or agreement, an annuity
or other payment was payable to the decedent, or the decedent
possessed the right to receive such annuity or payment, either
alone or in conjunction with another for his life or for any period
not ascertainable without reference to his death or for any period
which does not in fact end before his death.
(b) Amount includible
Subsection (a) shall apply to only such part of the value of the
annuity or other payment receivable under such contract or
agreement as is proportionate to that part of the purchase price
therefor contributed by the decedent. For purposes of this
section, any contribution by the decedent's employer or former
employer to the purchase price of such contract or agreement
(whether or not to an employee's trust or fund forming part of a
pension, annuity, retirement, bonus or profit sharing plan) shall
be considered to be contributed by the decedent if made by reason
of his employment.-STATUTE-
(a) General rule
The value of the gross estate shall include the value of all
property to the extent of the interest therein held as joint
tenants with right of survivorship by the decedent and any other
person, or as tenants by the entirety by the decedent and spouse,
or deposited, with any person carrying on the banking business, in
their joint names and payable to either or the survivor, except
such part thereof as may be shown to have originally belonged to
such other person and never to have been received or acquired by
the latter from the decedent for less than an adequate and full
consideration in money or money's worth: Provided, That where such
property or any part thereof, or part of the consideration with
which such property was acquired, is shown to have been at any time
acquired by such other person from the decedent for less than an
adequate and full consideration in money or money's worth, there
shall be excepted only such part of the value of such property as
is proportionate to the consideration furnished by such other
person: Provided further, That where any property has been acquired
by gift, bequest, devise, or inheritance, as a tenancy by the
entirety by the decedent and spouse, then to the extent of one-half
of the value thereof, or, where so acquired by the decedent and any
other person as joint tenants with right of survivorship and their
interests are not otherwise specified or fixed by law, then to the
extent of the value of a fractional part to be determined by
dividing the value of the property by the number of joint tenants
with right of survivorship.
(b) Certain joint interests of husband and wife
(1) Interests of spouse excluded from gross estate
Notwithstanding subsection (a), in the case of any qualified
joint interest, the value included in the gross estate with
respect to such interest by reason of this section is one-half of
the value of such qualified joint interest.
(2) Qualified joint interest defined
For purposes of paragraph (1), the term ''qualified joint
interest'' means any interest in property held by the decedent
and the decedent's spouse as -
(A) tenants by the entirety, or
(B) joint tenants with right of survivorship, but only if the
decedent and the spouse of the decedent are the only joint
tenants.Sec. 2041. Powers of appointment
-STATUTE-
(a) In general
The value of the gross estate shall include the value of all
property.
(1) Powers of appointment created on or before October 21, 1942
To the extent of any property with respect to which a general
power of appointment created on or before October 21, 1942, is
exercised by the decedent -
(A) by will, or
(B) by a disposition which is of such nature that if it were
a transfer of property owned by the decedent, such property
would be includible in the decedent's gross estate under
sections 2035 to 2038, inclusive;
but the failure to exercise such a power or the complete release
of such a power shall not be deemed an exercise thereof. If a
general power of appointment created on or before October 21,
1942, has been partially released so that it is no longer a
general power of appointment, the exercise of such power shall
not be deemed to be the exercise of a general power of
appointment if -
(i) such partial release occurred before November 1, 1951,
or
(ii) the donee of such power was under a legal disability
to release such power on October 21, 1942, and such partial
release occurred not later than 6 months after the
termination of such legal disability.
(2) Powers created after October 21, 1942
To the extent of any property with respect to which the
decedent has at the time of his death a general power of
appointment created after October 21, 1942, or with respect to
which the decedent has at any time exercised or released such a
power of appointment by a disposition which is of such nature
that if it were a transfer of property owned by the decedent,
such property would be includible in the decedent's gross estate
under sections 2035 to 2038, inclusive. For purposes of this
paragraph (2), the power of appointment shall be considered to
exist on the date of the decedent's death even though the
exercise of the power is subject to a precedent giving of notice
or even though the exercise of the power takes effect only on the
expiration of a stated period after its exercise, whether or not
on or before the date of the decedent's death notice has been
given or the power has been exercised.
(3) Creation of another power in certain cases
To the extent of any property with respect to which the
decedent -
(A) by will, or
(B) by a disposition which is of such nature that if it were
a transfer of property owned by the decedent such property
would be includible in the decedent's gross estate under
section 2035, 2036, or 2037,
exercises a power of appointment created after October 21, 1942,
by creating another power of appointment which under the
applicable local law can be validly exercised so as to postpone
the vesting of any estate or interest in such property, or
suspend the absolute ownership or power of alienation of such
property, for a period ascertainable without regard to the date
of the creation of the first power.
(b) Definitions
For purposes of subsection (a) -
(1) General power of appointment
The term ''general power of appointment'' means a power which
is exercisable in favor of the decedent, his estate, his
creditors, or the creditors of his estate; except that -
(A) A power to consume, invade, or appropriate property for
the benefit of the decedent which is limited by an
ascertainable standard relating to the health, education,
support, or maintenance of the decedent shall not be deemed a
general power of appointment.
(B) A power of appointment created on or before October 21,
1942, which is exercisable by the decedent only in conjunction
with another person shall not be deemed a general power of
appointment.
(C) In the case of a power of appointment created after
October 21, 1942, which is exercisable by the decedent only in
conjunction with another person -
(i) If the power is not exercisable by the decedent except
in conjunction with the creator of the power - such power
shall not be deemed a general power of appointment.
(ii) If the power is not exercisable by the decedent except
in conjunction with a person having a substantial interest in
the property, subject to the power, which is adverse to
exercise of the power in favor of the decedent - such power
shall not be deemed a general power of appointment. For the
purposes of this clause a person who, after the death of the
decedent, may be possessed of a power of appointment (with
respect to the property subject to the decedent's power)
which he may exercise in his own favor shall be deemed as
having an interest in the property and such interest shall be
deemed adverse to such exercise of the decedent's power.
(iii) If (after the application of clauses (i) and (ii))
the power is a general power of appointment and is
exercisable in favor of such other person - such power shall
be deemed a general power of appointment only in respect of a
fractional part of the property subject to such power, such
part to be determined by dividing the value of such property
by the number of such persons (including the decedent) in
favor of whom such power is exercisable.
For purposes of clauses (ii) and (iii), a power shall be deemed
to be exercisable in favor of a person if it is exercisable in
favor of such person, his estate, his creditors, or the
creditors of his estate.
(2) Lapse of power
The lapse of a power of appointment created after October 21,
1942, during the life of the individual possessing the power
shall be considered a release of such power. The preceding
sentence shall apply with respect to the lapse of powers during
any calendar year only to the extent that the property, which
could have been appointed by exercise of such lapsed powers,
exceeded in value, at the time of such lapse, the greater of the
following amounts:
(A) $5,000, or
(B) 5 percent of the aggregate value, at the time of such
lapse, of the assets out of which, or the proceeds of which,
the exercise of the lapsed powers could have been satisfied.
(3) Date of creation of power
For purposes of this section, a power of appointment created by
a will executed on or before October 21, 1942, shall be
considered a power created on or before such date if the person
executing such will dies before July 1, 1949, without having
republished such will, by codicil or otherwise, after October 21,
1942.
Sec. 2042. Proceeds of life insurance-STATUTE-
The value of the gross estate shall include the value of all
property -
(1) Receivable by the executor
To the extent of the amount receivable by the executor as
insurance under policies on the life of the decedent.
(2) Receivable by other beneficiaries
To the extent of the amount receivable by all other
beneficiaries as insurance under policies on the life of the
decedent with respect to which the decedent possessed at his
death any of the incidents of ownership, exercisable either alone
or in conjunction with any other person. For purposes of the
preceding sentence, the term ''incident of ownership'' includes a
reversionary interest (whether arising by the express terms of
the policy or other instrument or by operation of law) only if
the value of such reversionary interest exceeded 5 percent of the
value of the policy immediately before the death of the
decedent. As used in this paragraph, the term ''reversionary
interest'' includes a possibility that the policy, or the
proceeds of the policy, may return to the decedent or his estate,
or may be subject to a power of disposition by him. The value of
a reversionary interest at any time shall be determined (without
regard to the fact of the decedent's death) by usual methods of
valuation, including the use of tables of mortality and actuarial
principles, pursuant to regulations prescribed by the Secretary.
In determining the value of a possibility that the policy or
proceeds thereof may be subject to a power of disposition by the
decedent, such possibility shall be valued as if it were a
possibility that such policy or proceeds may return to the
decedent or his estate.
Sec. 2043. Transfers for insufficient consideration-STATUTE-
(a) In general
If any one of the transfers, trusts, interests, rights, or powers
enumerated and described in sections 2035 to 2038, inclusive, and
section 2041 is made, created, exercised, or relinquished for a
consideration in money or money's worth, but is not a bona fide
sale for an adequate and full consideration in money or money's
worth, there shall be included in the gross estate only the excess
of the fair market value at the time of death of the property
otherwise to be included on account of such transaction, over the
value of the consideration received therefor by the decedent.
(b) Marital rights not treated as consideration
(1) In general
For purposes of this chapter, a relinquishment or promised
relinquishment of dower or curtesy, or of a statutory estate
created in lieu of dower or curtesy, or of other marital rights
in the decedent's property or estate, shall not be considered to
any extent a consideration ''in money or money's worth''.
(2) Exception
For purposes of section 2053 (relating to expenses,
indebtedness, and taxes), a transfer of property which satisfies
the requirements of paragraph (1) of section 2516 (relating to
certain property settlements) shall be considered to be made for
an adequate and full consideration in money or money's worth.PART III - GROSS ESTATE
Sec. 2044. Certain property for which marital deduction was
previously allowed-STATUTE-
(a) General rule
The value of the gross estate shall include the value of any
property to which this section applies in which the decedent had a
qualifying income interest for life.
(b) Property to which this section applies
This section applies to any property if -
(1) a deduction was allowed with respect to the transfer of
such property to the decedent -
(A) under section 2056 by reason of subsection (b)(7)
thereof, or
(B) under section 2523 by reason of subsection (f) thereof,
and
(2) section 2519 (relating to dispositions of certain life
estates) did not apply with respect to a disposition by the
decedent of part or all of such property.
(c) Property treated as having passed from decedent
For purposes of this chapter and chapter 13, property includible
in the gross estate of the decedent under subsection (a) shall be
treated as property passing from the decedent.
PART III - GROSS ESTATE-STATUTE-
Except as otherwise specifically provided by law, sections 2034
to 2042, inclusive, shall apply to the transfers, trusts, estates,
interests, rights, powers, and relinquishment of powers, as
severally enumerated and described therein, whenever made, created,
arising, existing, exercised, or relinquished.
PART III - GROSS ESTATE-STATUTE-
For provisions relating to the effect of a qualified
disclaimer for purposes of this chapter, see section 2518.
