§ 2702. — Special valuation rules in case of transfers of interests in trusts.
[Laws in effect as of January 24, 2002]
[Document not affected by Public Laws enacted between
January 24, 2002 and December 19, 2002]
[CITE: 26USC2702]
TITLE 26--INTERNAL REVENUE CODE
Subtitle B--Estate and Gift Taxes
CHAPTER 14--SPECIAL VALUATION RULES
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).
(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.)
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.
