United States Code (Last Updated: May 24, 2014) |
Title 26. INTERNAL REVENUE CODE |
SubTitle B. Estate and Gift Taxes |
Chapter 11. ESTATE TAX |
SubChapter A. Estates of Citizens or Residents |
Part III. GROSS ESTATE |
§ 2036. Transfers with retained life estate
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(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 afterMarch 3, 1931 , and beforeJune 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 ofMarch 3, 1931 (46 Stat. 1516).
Amendments
1990—Subsecs. (c), (d). Pub. L. 101–508 redesignated subsec. (d) as (c) and struck out former subsec. (c) which enunciated a rule that retention of retained interest would be considered to be a retention of enjoyment of transferred property if a person held a substantial interest in an enterprise, and such person in effect transferred after
1988—Subsec. (c)(1)(B). Pub. L. 100–647, § 3031(e), substituted “an interest” for “a disproportionately large share” after “whole retaining”.
Subsec. (c)(2). Pub. L. 100–647, § 3031(g)(1), substituted “consideration furnished by” for “sales to” in heading, and amended text generally. Prior to amendment, text read as follows: “The exception contained in subsection (a) for a bona fide sale shall not apply to a transfer described in paragraph (1) if such transfer is to a member of the transferor’s family.”
Subsec. (c)(3)(C). Pub. L. 100–647, § 3031(d), substituted “Except as provided in regulations, an” for “An”.
Subsec. (c)(4). Pub. L. 100–647, § 3031(a)(1), amended par. (4) generally, substituting provisions relating to treatment of certain transfers for provisions relating to coordination with section 2035.
Subsec. (c)(5). Pub. L. 100–647, § 3031(g)(2), amended par. (5) generally, substituting provisions relating to the making of appropriate adjustments in amounts included in gross estate for provisions relating to coordination with section 2043.
Subsec. (c)(6). Pub. L. 100–647, § 3031(b), added par. (6).
Subsec. (c)(7), (8). Pub. L. 100–647, § 3031(b)[(c)], added pars. (7) and (8).
1987—Subsecs. (c), (d). Pub. L. 100–203 added subsec. (c) and redesignated former subsec. (c) as (d).
1978—Subsec. (a). Pub. L. 95–600, § 702(i)(2), struck out provision following par. (2) relating to the retention of voting rights in retained stock.
Subsecs. (b), (c). Pub. L. 95–600, § 702(i)(1), added subsec. (b) and redesignated former subsec. (b) as (c).
1976—Subsec. (a). Pub. L. 94–455 provided that, for purposes of par. (1), the retention of voting rights in retained stock be considered to be a retention of the enjoyment of that stock.
1962—Subsec. (a). Pub. L. 87–834 struck out provisions which excepted real property situated outside of the United States.
Effective Date Of Amendment
Pub. L. 101–508, title XI, § 11601(c),
Pub. L. 100–647, title III, § 3031(h),
Pub. L. 100–203, title X, § 10402(b),
Pub. L. 95–600, title VII, § 702(i)(3),
Pub. L. 94–455, title XX, § 2009(e)(1),
Amendment by Pub. L. 87–834 applicable to estates of decedents dying after