26 U.S.C. § 2702 : US Code - Section 2702: Special valuation rules in case of transfers of interests in trusts

Search 26 U.S.C. § 2702 : US Code - Section 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).