# N.Y. TAX Law § 999-A: Appendix to article twenty-six

> New York · Statutes · In force

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## Section

- **Citation:** N.Y. TAX Law § 999-A
- **Heading:** Appendix to article twenty-six
- **Jurisdiction:** New York
- **Kind:** Statutes
- **Status:** In force
- **Text as of:** August 14, 2026
- **Source:** Compiled text
- **Location:** New York Code / Act TAX / Article 26 / Part 4 / Section 999-A

## Text

§ 999-a. Appendix to article twenty-six. The following provisions of\nthe United States Internal Revenue Code of 1986, with all amendments\nenacted on or before January first, two thousand fourteen, shall apply\nto the tax imposed by this article, to the extent specified in this\narticle.\n § 2031. Definition of Gross Estate.\n (a) General.--The value of the gross estate of the decedent shall be\ndetermined by including to the extent provided for in this part, the\nvalue at the time of his death of all property, real or personal,\ntangible or intangible, wherever situated.\n (b) Valuation of unlisted stock and securities.--In the case of stock\nand securities of a corporation the value of which, by reason of their\nnot being listed on an exchange and by reason of the absence of sales\nthereof, cannot be determined with reference to bid and asked prices or\nwith reference to sales prices, the value thereof shall be determined by\ntaking into consideration, in addition to all other factors, the value\nof stock or securities of corporations engaged in the same or a similar\nline of business which are listed on an exchange.\n (c) Estate tax with respect to land subject to a qualified\nconservation easement.--\n (1) In general.--If the executor makes the election described in\nparagraph (6), then, except as otherwise provided in this subsection,\nthere shall be excluded from the gross estate the lesser of--\n (A) the applicable percentage of the value of land subject to a\nqualified conservation easement, reduced by the amount of any deduction\nunder section 2055(f) with respect to such land, or\n (B) the exclusion limitation.\n (2) Applicable percentage.--For purposes of paragraph (1), the term\n"applicable percentage" means 40 percent reduced (but not below zero) by\n2 percentage points for each percentage point (or fraction thereof) by\nwhich the value of the qualified conservation easement is less than 30\npercent of the value of the land (determined without regard to the value\nof such easement and reduced by the value of any retained development\nright (as defined in paragraph (5)). The values taken into account under\nthe preceding sentence shall be such values as of the date of the\ncontribution referred to in paragraph (8)(B).\n (3) Exclusion limitation.--For purposes of paragraph (1), the\nexclusion limitation is the limitation determined in accordance with the\nfollowing table:\nIn the case of estates of decedents dying The exclusion limitation\nduring: is:\n1998..................................... 100,000\n1999..................................... 200,000\n2000..................................... 300,000\n2001..................................... 400,000\n2002 or thereafter....................... 500,000\n (4) Treatment of certain indebtedness.--\n (A) In general.--The exclusion provided in paragraph (1) shall not\napply to the extent that the land is debt-financed property.\n (B) Definitions.--For purposes of this paragraph--\n (i) Debt-financed property.--The term "debt-financed property" means\nany property with respect to which there is an acquisition indebtedness\n(as defined in clause (ii)) on the date of the decedent's death.\n (ii) Acquisition indebtedness.--The term "acquisition indebtedness"\nmeans, with respect to debt-financed property, the unpaid amount of--\n (I) the indebtedness incurred by the donor in acquiring such property,\n (II) the indebtedness incurred before the acquisition of such property\nif such indebtedness would not have been incurred but for such\nacquisition,\n (III) the indebtedness incurred after the acquisition of such property\nif such indebtedness would not have been incurred but for such\nacquisition and the incurrence of such indebtedness was reasonably\nforeseeable at the time of such acquisition, and\n (IV) the extension, renewal, or refinancing of an acquisition\nindebtedness.\n (5) Treatment of retained development right.--
\nacquisition,\n (III) the indebtedness incurred after the acquisition of such property\nif such indebtedness would not have been incurred but for such\nacquisition and the incurrence of such indebtedness was reasonably\nforeseeable at the time of such acquisition, and\n (IV) the extension, renewal, or refinancing of an acquisition\nindebtedness.\n (5) Treatment of retained development right.--\n (A) In general.--Paragraph (1) shall not apply to the value of any\ndevelopment right retained by the donor in the conveyance of a qualified\nconservation easement.\n (B) Termination of retained development right.--If every person in\nbeing who has an interest (whether or not in possession) in the land\nexecutes an agreement to extinguish permanently some or all of any\ndevelopment rights (as defined in subparagraph (D)) retained by the\ndonor on or before the date for filing the return of the tax imposed by\nsection 2001, then any tax imposed by section 2001 shall be reduced\naccordingly. Such agreement shall be filed with the return of the tax\nimposed by section 2001. The agreement shall be in such form as the\nSecretary shall prescribe.\n (C) Additional tax.--Any failure to implement the agreement described\nin subparagraph (B) not later than the earlier of--\n (i) the date which is 2 years after the date of the decedent's death,\nor\n (ii) the date of the sale of such land subject to the qualified\nconservation easement,\n shall result in the imposition of an additional tax in the amount of\nthe tax which would have been due on the retained development rights\nsubject to such agreement. Such additional tax shall be due and payable\non the last day of the 6th month following such date.\n (D) Development right defined.--For purposes of this paragraph, the\nterm "development right" means any right to use the land subject to the\nqualified conservation easement in which such right is retained for any\ncommercial purpose which is not subordinate to and directly supportive\nof the use of such land as a farm for farming purposes (within the\nmeaning of section 2032A(e)(5)).\n (6) Election.--The election under this subsection shall be made on or\nbefore the due date (including extensions) for filing the return of tax\nimposed by section 2001 and shall be made on such return. Such an\nelection, once made, shall be irrevocable.\n (7) Calculation of estate tax due.--An executor making the election\ndescribed in paragraph (6) shall, for purposes of calculating the amount\nof tax imposed by section 2001, include the value of any development\nright (as defined in paragraph (5)) retained by the donor in the\nconveyance of such qualified conservation easement. The computation of\ntax on any retained development right prescribed in this paragraph shall\nbe done in such manner and on such forms as the Secretary shall\nprescribe.\n (8) Definitions.--For purposes of this subsection--\n (A) Land subject to a qualified conservation easement.--The term "land\nsubject to a qualified conservation easement" means land--\n (i) which is located in the United States or any possession of the\nUnited States,\n (ii) which was owned by the decedent or a member of the decedent's\nfamily at all times during the 3-year period ending on the date of the\ndecedent's death, and\n (iii) with respect to which a qualified conservation easement has been\nmade by an individual described in subparagraph (C), as of the date of\nthe election described in paragraph (6).\n (B) Qualified conservation easement.--The term "qualified conservation\neasement" means a qualified conservation contribution (as defined in\nsection 170(h)(1)) of a qualified real property interest (as defined in\nsection 170(h)(2)(C)), except that clause (iv) of section 170(h)(4)(A)\nshall not apply, and the restriction on the use of such interest\ndescribed in section 170(h)(2)(C) shall include a prohibition on more\nthan a de minimis use for a commercial recreational activity.\n (C) Ind
ied conservation contribution (as defined in\nsection 170(h)(1)) of a qualified real property interest (as defined in\nsection 170(h)(2)(C)), except that clause (iv) of section 170(h)(4)(A)\nshall not apply, and the restriction on the use of such interest\ndescribed in section 170(h)(2)(C) shall include a prohibition on more\nthan a de minimis use for a commercial recreational activity.\n (C) Individual described.--An individual is described in this\nsubparagraph if such individual is--\n (i) the decedent,\n (ii) a member of the decedent's family,\n (iii) the executor of the decedent's estate, or\n (iv) the trustee of a trust the corpus of which includes the land to\nbe subject to the qualified conservation easement.\n (D) Member of family.--The term "member of the decedent's family"\nmeans any member of the family (as defined in section 2032A(e)(2)) of\nthe decedent.\n (9) Treatment of easements granted after death.--In any case in which\nthe qualified conservation easement is granted after the date of the\ndecedent's death and on or before the due date (including extensions)\nfor filing the return of tax imposed by section 2001, the deduction\nunder section 2055(f) with respect to such easement shall be allowed to\nthe estate but only if no charitable deduction is allowed under chapter\n1 to any person with respect to the grant of such easement.\n (10) Application of this section to interests in partnerships,\ncorporations, and trusts.--This section shall apply to an interest in a\npartnership, corporation, or trust if at least 30 percent of the entity\nis owned (directly or indirectly) by the decedent, as determined under\nthe rules described in section 2057(e)(3).\n (d) Cross reference.--\n For executor's right to be furnished on request a statement regarding\nany valuation made by the Secretary within the gross estate, see section\n7517.\n § 2032. Alternate Valuation.\n (a) General.--The value of the gross estate may be determined, if the\nexecutor so elects, by valuing all the property included in the gross\nestate as follows:\n (1) In the case of property distributed, sold, exchanged, or otherwise\ndisposed of, within 6 months after the decedent's death such property\nshall be valued as of the date of distribution, sale, exchange, or other\ndisposition.\n (2) In the case of property not distributed, sold, exchanged, or\notherwise disposed of, within 6 months after the decedent's death such\nproperty shall be valued as of the date 6 months after the decedent's\ndeath.\n (3) Any interest or estate which is affected by mere lapse of time\nshall be included at its value as of the time of death (instead of the\nlater date) with adjustment for any difference in its value as of the\nlater date not due to mere lapse of time.\n (b) Special rules.--No deduction under this chapter of any item shall\nbe allowed if allowance for such items is in effect given by the\nalternate valuation provided by this section. Wherever in any other\nsubsection or section of this chapter reference is made to the value of\nproperty at the time of the decedent's death, such reference shall be\ndeemed to refer to the value of such property used in determining the\nvalue of the gross estate
apter of any item shall\nbe allowed if allowance for such items is in effect given by the\nalternate valuation provided by this section. Wherever in any other\nsubsection or section of this chapter reference is made to the value of\nproperty at the time of the decedent's death, such reference shall be\ndeemed to refer to the value of such property used in determining the\nvalue of the gross estate. In case of an election made by the executor\nunder this section, then--\n (1) for purposes of the charitable deduction under section 2055 or\n2106(a)(2), any bequest, legacy, devise, or transfer enumerated therein,\nand\n (2) for the purpose of the marital deduction under section 2056, any\ninterest in property passing to the surviving spouse,\n shall be valued as of the date of the decedent's death with adjustment\nfor any difference in value (not due to mere lapse of time or the\noccurrence or nonoccurrence of a contingency) of the property as of the\ndate 6 months after the decedent's death (substituting, in the case of\nproperty distributed by the executor or trustee, or sold, exchanged, or\notherwise disposed of, during such 6-month period, the date thereof).\n (c) Election must decrease gross estate and estate tax.--No election\nmay be made under this section with respect to an estate unless such\nelection will decrease--\n (1) the value of the gross estate, and\n (2) the sum of the tax imposed by this chapter and the tax imposed by\nchapter 13 with respect to property includible in the decedent's gross\nestate (reduced by credits allowable against such taxes).\n (d) Election.--\n (1) In general.--The election provided for in this section shall be\nmade by the executor on the return of the tax imposed by this chapter.\nSuch election, once made, shall be irrevocable.\n (2) Exception.--No election may be made under this section if such\nreturn is filed more than 1 year after the time prescribed by law\n(including extensions) for filing such return.\n § 2032A. Valuation of Certain Farm, Etc., Real Property.\n (a) Value based on use under which property qualifies.--\n (1) General rule.--If--\n (A) the decedent was (at the time of his death) a citizen or resident\nof the United States, and\n (B) the executor elects the application of this section and files the\nagreement referred to in subsection (d)(2),\n then, for purposes of this chapter, the value of qualified real\nproperty shall be its value for the use under which it qualifies, under\nsubsection (b), as qualified real property.\n (2) Limitation on aggregate reduction in fair market value.--The\naggregate decrease in the value of qualified real property taken into\naccount for purposes of this chapter which results from the application\nof paragraph (1) with respect to any decedent shall not exceed $750,000.\n (3) Inflation adjustment.--In the case of estates of decedents dying\nin a calendar year after 1998, the $750,000 amount contained in\nparagraph (2) shall be increased by an amount equal to--\n (A) $750,000, multiplied by\n (B) the cost-of-living adjustment determined under section 1(f)(3) for\nsuch calendar year by substituting "calendar year 1997" for "calendar\nyear 1992" in subparagraph (B) thereof.\n If any amount as adjusted under the preceding sentence is not a\nmultiple of $10,000, such amount shall be rounded to the next lowest\nmultiple of $10,000.\n (b) Qualified real property.--\n (1) In general.--For purposes of this section, the term "qualified\nreal property" means real property located in the United States which\nwas acquired from or passed from the decedent to a qualified heir of the\ndecedent and which, on the date of the decedent's death, was being used\nfor a qualified use by the decedent or a member of the decedent's\nfamily, but only if--\n (A) 50 percent or more of the adjusted value of the gross estate\nconsists of the adjusted value of real or personal property which--\n (i) on the date of the decedent's death, was being
from the decedent to a qualified heir of the\ndecedent and which, on the date of the decedent's death, was being used\nfor a qualified use by the decedent or a member of the decedent's\nfamily, but only if--\n (A) 50 percent or more of the adjusted value of the gross estate\nconsists of the adjusted value of real or personal property which--\n (i) on the date of the decedent's death, was being used for a\nqualified use by the decedent or a member of the decedent's family, and\n (ii) was acquired from or passed from the decedent to a qualified heir\nof the decedent.\n (B) 25 percent or more of the adjusted value of the gross estate\nconsists of the adjusted value of real property which meets the\nrequirements of subparagraphs (A)(ii) and (C),\n (C) during the 8-year period ending on the date of the decedent's\ndeath there have been periods aggregating 5 years or more during which--\n (i) such real property was owned by the decedent or a member of the\ndecedent's family and used for a qualified use by the decedent or a\nmember of the decedent's family, and\n (ii) there was material participation by the decedent or a member of\nthe decedent's family in the operation of the farm or other business,\nand\n (D) such real property is designated in the agreement referred to in\nsubsection (d)(2).\n (2) Qualified use.--For purposes of this section, the term "qualified\nuse" means the devotion of the property to any of the following:\n (A) use as a farm for farming purposes, or\n (B) use in a trade or business other than the trade or business of\nfarming.\n (3) Adjusted value.--For purposes of paragraph (1), the term "adjusted\nvalue" means--\n (A) in the case of the gross estate, the value of the gross estate for\npurposes of this chapter (determined without regard to this section),\nreduced by any amounts allowable as a deduction under paragraph (4) of\nsection 2053(a), or\n (B) in the case of any real or personal property, the value of such\nproperty for purposes of this chapter (determined without regard to this\nsection), reduced by any amounts allowable as a deduction in respect of\nsuch property under paragraph (4) of section 2053(a).\n (4) Decedents who are retired or disabled.--\n (A) In general.--If, on the date of the decedent's death, the\nrequirements of paragraph (1)(C)(ii) with respect to the decedent for\nany property are not met, and the decedent--\n (i) was receiving old-age benefits under title II of the Social\nSecurity Act for a continuous period ending on such date, or\n (ii) was disabled for a continuous period ending on such date,\n then paragraph (1)(C)(ii) shall be applied with respect to such\nproperty by substituting "the date on which the longer of such\ncontinuous periods began" for "the date of the decedent's death" in\nparagraph (1)(C).\n (B) Disabled defined.--For purposes of subparagraph (A), an individual\nshall be disabled if such individual has a mental or physical impairment\nwhich renders him unable to materially participate in the operation of\nthe farm or other business.\n (C) Coordination with recapture.--For purposes of subsection\n(c)(6)(B)(i), if the requirements of paragraph (1)(C)(ii) are met with\nrespect to any decedent by reason of subparagraph (A), the period ending\non the date on which the continuous period taken into account under\nsubparagraph (A) began shall be treated as the period immediately before\nthe decedent's death.\n (5) Special rules for surviving spouses.--\n (A) In general.--If property is qualified real property with respect\nto a decedent (hereinafter in this paragraph referred to as the "first\ndecedent") and such property was acquired from or passed from the first\ndecedent to the surviving spouse of the first decedent, for purposes of\napplying this subsection and subsection (c) in the case of the estate of\nsuch surviving spouse, active management of the farm or other business\nby the surviving spouse shall be treated as material participati
n this paragraph referred to as the "first\ndecedent") and such property was acquired from or passed from the first\ndecedent to the surviving spouse of the first decedent, for purposes of\napplying this subsection and subsection (c) in the case of the estate of\nsuch surviving spouse, active management of the farm or other business\nby the surviving spouse shall be treated as material participation by\nsuch surviving spouse in the operation of such farm or business.\n (B) Special rule.--For the purposes of subparagraph (A), the\ndetermination of whether property is qualified real property with\nrespect to the first decedent shall be made without regard to\nsubparagraph (D) of paragraph (1) and without regard to whether an\nelection under this section was made.\n (C) Coordination with paragraph (4).--In any case in which to do so\nwill enable the requirements of paragraph (1)(C)(ii) to be met with\nrespect to the surviving spouse, this subsection and subsection (c)\nshall be applied by taking into account any application of paragraph\n(4).\n (c) Tax treatment of dispositions and failures to use for qualified\nuse.--\n (1) Imposition of additional estate tax.--If, within 10 years after\nthe decedent's death and before the death of the qualified heir--\n (A) the qualified heir disposes of any interest in qualified real\nproperty (other than by a disposition to a member of his family), or\n (B) the qualified heir ceases to use for the qualified use the\nqualified real property which was acquired (or passed) from the\ndecedent,\n then, there is hereby imposed an additional estate tax.\n (2) Amount of additional tax.--\n (A) In general.--The amount of the additional tax imposed by paragraph\n(1) with respect to any interest shall be the amount equal to the lesser\nof--\n (i) the adjusted tax difference attributable to such interest, or\n (ii) the excess of the amount realized with respect to the interest\n(or, in any case other than a sale or exchange at arm's length, the fair\nmarket value of the interest) over the value of the interest determined\nunder subsection (a).\n (B) Adjusted tax difference attributable to interest.--For purposes of\nsubparagraph (A), the adjusted tax difference attributable to an\ninterest is the amount which bears the same ratio to the adjusted tax\ndifference with respect to the estate (determined under subparagraph\n(C)) as--\n (i) the excess of the value of such interest for purposes of this\nchapter (determined without regard to subsection (a)) over the value of\nsuch interest determined under subsection (a), bears to\n (ii) a similar excess determined for all qualified real property.\n (C) Adjusted tax difference with respect to the estate.--For purposes\nof subparagraph (B), the term "adjusted tax difference with respect to\nthe estate" means the excess of what would have been the estate tax\nliability but for subsection (a) over the estate tax liability
ch interest determined under subsection (a), bears to\n (ii) a similar excess determined for all qualified real property.\n (C) Adjusted tax difference with respect to the estate.--For purposes\nof subparagraph (B), the term "adjusted tax difference with respect to\nthe estate" means the excess of what would have been the estate tax\nliability but for subsection (a) over the estate tax liability. For\npurposes of this subparagraph, the term "estate tax liability" means the\ntax imposed by section 2001 reduced by the credits allowable against\nsuch tax.\n (D) Partial dispositions.--For purposes of this paragraph, where the\nqualified heir disposes of a portion of the interest acquired by (or\npassing to) such heir (or a predecessor qualified heir) or there is a\ncessation of use of such a portion--\n (i) the value determined under subsection (a) taken into account under\nsubparagraph (A)(ii) with respect to such portion shall be its pro rata\nshare of such value of such interest, and\n (ii) the adjusted tax difference attributable to the interest taken\ninto account with respect to the transaction involving the second or any\nsucceeding portion shall be reduced by the amount of the tax imposed by\nthis subsection with respect to all prior transactions involving\nportions of such interest.\n (E) Special rule for disposition of timber.--In the case of qualified\nwoodland to which an election under subsection (e)(13)(A) applies, if\nthe qualified heir disposes of (or severs) any standing timber on such\nqualified woodland--\n (i) such disposition (or severance) shall be treated as a disposition\nof a portion of the interest of the qualified heir in such property, and\n (ii) the amount of the additional tax imposed by paragraph (1) with\nrespect to such disposition shall be an amount equal to the lesser of--\n (I) the amount realized on such disposition (or, in any case other\nthan a sale or exchange at arm's length, the fair market value of the\nportion of the interest disposed or severed), or\n (II) the amount of additional tax determined under this paragraph\n(without regard to this subparagraph) if the entire interest of the\nqualified heir in the qualified woodland had been disposed of, less the\nsum of the amount of the additional tax imposed with respect to all\nprior transactions involving such woodland to which this subparagraph\napplied.\n For purposes of the preceding sentence, the disposition of a right to\nsever shall be treated as the disposition of the standing timber. The\namount of additional tax imposed under paragraph (1) in any case in\nwhich a qualified heir disposes of his entire interest in the qualified\nwoodland shall be reduced by any amount determined under this\nsubparagraph with respect to such woodland.\n (3) Only 1 additional tax imposed with respect to any 1 portion.--In\nthe case of an interest acquired from (or passing from) any decedent, if\nsubparagraph (A) or (B) of paragraph (1) applies to any portion of an\ninterest, subparagraph (B) or (A), as the case may be, of paragraph (1)\nshall not apply with respect to the same portion of such interest.\n (4) Due date.--The additional tax imposed by this subsection shall\nbecome due and payable on the day which is 6 months after the date of\nthe disposition or cessation referred to in paragraph (1).\n (5) Liability for tax; furnishing of bond.--The qualified heir shall\nbe personally liable for the additional tax imposed by this subsection\nwith respect to his interest unless the heir has furnished bond which\nmeets the requirements of subsection (e)(11).\n (6) Cessation of qualified use.--For purposes of paragraph (1)(B),\nreal property shall cease to be used for the qualified use if--\n (A) such property ceases to be used for the qualified use set forth in\nsubparagraph (A) or (B) of subsection (b)(2) under which the property\nqualified under subsection (b), or\n (B) during any period of 8 years ending after the date of the\ndecedent
(e)(11).\n (6) Cessation of qualified use.--For purposes of paragraph (1)(B),\nreal property shall cease to be used for the qualified use if--\n (A) such property ceases to be used for the qualified use set forth in\nsubparagraph (A) or (B) of subsection (b)(2) under which the property\nqualified under subsection (b), or\n (B) during any period of 8 years ending after the date of the\ndecedent's death and before the date of the death of the qualified heir,\nthere had been periods aggregating more than 3 years during which--\n (i) in the case of periods during which the property was held by the\ndecedent, there was no material participation by the decedent or any\nmember of his family in the operation of the farm or other business, and\n (ii) in the case of periods during which the property was held by any\nqualified heir, there was no material participation by such qualified\nheir or any member of his family in the operation of the farm or other\nbusiness.\n (7) Special rules.--\n (A) No tax if use begins within 2 years.--If the date on which the\nqualified heir begins to use the qualified real property (hereinafter in\nthis subparagraph referred to as the commencement date) is before the\ndate 2 years after the decedent's death--\n (i) no tax shall be imposed under paragraph (1) by reason of the\nfailure by the qualified heir to so use such property before the\ncommencement date, and\n (ii) the 10-year period under paragraph (1) shall be extended by the\nperiod after the decedent's death and before the commencement date.\n (B) Active management by eligible qualified heir treated as material\nparticipation.--For purposes of paragraph (6)(B)(ii), the active\nmanagement of a farm or other business by--\n (i) an eligible qualified heir, or\n (ii) a fiduciary of an eligible qualified heir described in clause\n(ii) or (iii) of subparagraph (C),\n shall be treated as material participation by such eligible qualified\nheir in the operation of such farm or business. In the case of an\neligible qualified heir described in clause (ii), (iii), or (iv) of\nsubparagraph (C), the preceding sentence shall apply only during periods\nduring which such heir meets the requirements of such clause.\n (C) Eligible qualified heir.--For purposes of this paragraph, the term\n"eligible qualified heir" means a qualified heir who--\n (i) is the surviving spouse of the decedent,\n (ii) has not attained the age of 21,\n (iii) is disabled (within the meaning of subsection (b)(4)(B)), or\n (iv) is a student.\n (D) Student.--For purposes of subparagraph (C), an individual shall be\ntreated as a student with respect to periods during any calendar year if\n(and only if) such individual is a student (within the meaning of\nsection 152(f)(2)) for such calendar year.\n (E) Certain rents treated as qualified use.--For purposes of this\nsubsection, a surviving spouse or lineal descendant of the decedent\nshall not be treated as failing to use qualified real property in a\nqualified use solely because such spouse or descendant rents such\nproperty to a member of the family of such spouse or descendant on a net\ncash basis. For purposes of the preceding sentence, a legally adopted\nchild of an individual shall be treated as the child of such individual\nby blood.\n (8) Qualified conservation contribution is not a disposition.--A\nqualified conservation contribution (as defined in section 170(h)) by\ngift or otherwise shall not be deemed a disposition under subsection\n(c)(1)(A).\n (d) Election; agreement.--\n (1) Election.--The election under this section shall be made on the\nreturn of the tax imposed by section 2001. Such election shall be made\nin such manner as the Secretary shall by regulations prescribe
sition.--A\nqualified conservation contribution (as defined in section 170(h)) by\ngift or otherwise shall not be deemed a disposition under subsection\n(c)(1)(A).\n (d) Election; agreement.--\n (1) Election.--The election under this section shall be made on the\nreturn of the tax imposed by section 2001. Such election shall be made\nin such manner as the Secretary shall by regulations prescribe. Such an\nelection, once made, shall be irrevocable.\n (2) Agreement.--The agreement referred to in this paragraph is a\nwritten agreement signed by each person in being who has an interest\n(whether or not in possession) in any property designated in such\nagreement consenting to the application of subsection (c) with respect\nto such property.\n (3) Modification of election and agreement to be permitted.--The\nSecretary shall prescribe procedures which provide that in any case in\nwhich the executor makes an election under paragraph (1) (and submits\nthe agreement referred to in paragraph (2)) within the time prescribed\ntherefor, but--\n (A) the notice of election, as filed, does not contain all required\ninformation, or\n (B) signatures of 1 or more persons required to enter into the\nagreement described in paragraph (2) are not included on the agreement\nas filed, or the agreement does not contain all required information,\n the executor will have a reasonable period of time (not exceeding 90\ndays) after notification of such failures to provide such information or\nsignatures.\n (e) Definitions; special rules.--For purposes of this section--\n (1) Qualified heir.--The term "qualified heir" means, with respect to\nany property, a member of the decedent's family who acquired such\nproperty (or to whom such property passed) from the decedent. If a\nqualified heir disposes of any interest in qualified real property to\nany member of his family, such member shall thereafter be treated as the\nqualified heir with respect to such interest.\n (2) Member of family.--The term "member of the family" means, with\nrespect to any individual, only--\n (A) an ancestor of such individual,\n (B) the spouse of such individual,\n (C) a lineal descendant of such individual, of such individual's\nspouse, or of a parent of such individual, or\n (D) the spouse of any lineal descendant described in subparagraph (C).\n For purposes of the preceding sentence, a legally adopted child of an\nindividual shall be treated as the child of such individual by blood.\n (3) Certain real property included.--In the case of real property\nwhich meets the requirements of subparagraph (C) of subsection (b)(1),\nresidential buildings and related improvements on such real property\noccupied on a regular basis by the owner or lessee of such real property\nor by persons employed by such owner or lessee for the purpose of\noperating or maintaining such real property, and roads, buildings, and\nother structures and improvements functionally related to the qualified\nuse shall be treated as real property devoted to the qualified use.\n (4) Farm.--The term "farm" includes stock, dairy, poultry, fruit,\nfurbearing animal, and truck farms, plantations, ranches, nurseries,\nranges, greenhouses or other similar structures used primarily for the\nraising of agricultural or horticultural commodities, and orchards and\nwoodlands.\n (5) Farming purposes.--The term "farming purposes" means-\n (A) cultivating the soil or raising or harvesting any agricultural or\nhorticultural commodity (including the raising, shearing, feeding,\ncaring for, training, and management of animals) on a farm;\n (B) handling, drying, packing, grading, or storing on a farm any\nagricultural or horticultural commodity in its unmanufactured state, but\nonly if the owner, tenant, or operator of the farm regularly produces\nmore than one-half of the commodity so treated; and\n (C)(i) the planting, cultivating, caring for, or cutting of trees, or\n (ii) the preparation (other than milling) of t
on a farm;\n (B) handling, drying, packing, grading, or storing on a farm any\nagricultural or horticultural commodity in its unmanufactured state, but\nonly if the owner, tenant, or operator of the farm regularly produces\nmore than one-half of the commodity so treated; and\n (C)(i) the planting, cultivating, caring for, or cutting of trees, or\n (ii) the preparation (other than milling) of trees for market.\n (6) Material participation.--Material participation shall be\ndetermined in a manner similar to the manner used for purposes of\nparagraph (1) of section 1402(a) (relating to net earnings from\nself-employment).\n (7) Method of valuing farms.--\n (A) In general.--Except as provided in subparagraph (B), the value of\na farm for farming purposes shall be determined by dividing--\n (i) the excess of the average annual gross cash rental for comparable\nland used for farming purposes and located in the locality of such farm\nover the average annual State and local real estate taxes for such\ncomparable land, by\n (ii) the average annual effective interest rate for all new Federal\nLand Bank loans.\n For purposes of the preceding sentence, each average annual\ncomputation shall be made on the basis of the 5 most recent calendar\nyears ending before the date of the decedent's death.\n (B) Value based on net share rental in certain cases.--\n (i) In general.--If there is no comparable land from which the average\nannual gross cash rental may be determined but there is comparable land\nfrom which the average net share rental may be determined, subparagraph\n(A)(i) shall be applied by substituting "average annual net share\nrental" for "average annual gross cash rental".\n (ii) Net share rental.--For purposes of this paragraph, the term "net\nshare rental" means the excess of--\n (I) the value of the produce received by the lessor of the land on\nwhich such produce is grown, over\n (II) the cash operating expenses of growing such produce which, under\nthe lease, are paid by the lessor.\n (C) Exception.--The formula provided by subparagraph (A) shall not be\nused--\n (i) where it is established that there is no comparable land from\nwhich the average annual gross cash rental may be determined, or\n (ii) where the executor elects to have the value of the farm for\nfarming purposes determined and that there is no comparable land from\nwhich the average net share rental may be determined under paragraph\n(8).\n (8) Method of valuing closely held business interests, etc.--In any\ncase to which paragraph (7)(A) does not apply, the following factors\nshall apply in determining the value of any qualified real property:\n (A) The capitalization of income which the property can be expected to\nyield for farming or closely held business purposes over a reasonable\nperiod of time under prudent management using traditional cropping\npatterns for the area, taking into account soil capacity, terrain\nconfiguration, and similar factors,\n (B) The capitalization of the fair rental value of the land for\nfarmland or closely held business purposes,\n (C) Assessed land values in a State which provides a differential or\nuse value assessment law for farmland or closely held business,\n (D) Comparable sales of other farm or closely held business land in\nthe same geographical area far enough removed from a metropolitan or\nresort area so that nonagricultural use is not a significant factor in\nthe sales price, and\n (E) Any other factor which fairly values the farm or closely held\nbusiness value of the property.\n (9) Property acquired from decedent.--Property shall be considered to\nhave been acquired from or to have passed from the decedent if--\n (A) such property is so considered under section 1014(b) (relating to\nbasis of property acquired from a decedent),\n (B) such property is acquired by any person from the estate, or\n (C) such property is acquired by any person from a trust (to the\nextent such property is incl
ed from decedent.--Property shall be considered to\nhave been acquired from or to have passed from the decedent if--\n (A) such property is so considered under section 1014(b) (relating to\nbasis of property acquired from a decedent),\n (B) such property is acquired by any person from the estate, or\n (C) such property is acquired by any person from a trust (to the\nextent such property is includible in the gross estate of the decedent).\n (10) Community property.--If the decedent and his surviving spouse at\nany time held qualified real property as community property, the\ninterest of the surviving spouse in such property shall be taken into\naccount under this section to the extent necessary to provide a result\nunder this section with respect to such property which is consistent\nwith the result which would have obtained under this section if such\nproperty had not been community property.\n (11) Bond in lieu of personal liability.--If the qualified heir makes\nwritten application to the Secretary for determination of the maximum\namount of the additional tax which may be imposed by subsection (c) with\nrespect to the qualified heir's interest, the Secretary (as soon as\npossible, and in any event within 1 year after the making of such\napplication) shall notify the heir of such maximum amount. The qualified\nheir, on furnishing a bond in such amount and for such period as may be\nrequired, shall be discharged from personal liability for any additional\ntax imposed by subsection (c) and shall be entitled to a receipt or\nwriting showing such discharge.\n (12) Active management.--The term "active management" means the making\nof the management decisions of a business (other than the daily\noperating decisions).\n (13) Special rules for woodlands.--\n (A) In general.--In the case of any qualified woodland with respect to\nwhich the executor elects to have this subparagraph apply, trees growing\non such woodland shall not be treated as a crop.\n (B) Qualified woodland.--The term "qualified woodland" means any real\nproperty which--\n (i) is used in timber operations, and\n (ii) is an identifiable area of land such as an acre or other area for\nwhich records are normally maintained in conducting timber operations.\n (C) Timber operations.--The term "timber operations" means--\n (i) the planting, cultivating, caring for, or cutting of trees, or\n (ii) the preparation (other than milling) of trees for market.\n (D) Election.--An election under subparagraph (A) shall be made on the\nreturn of the tax imposed by section 2001. Such election shall be made\nin such manner as the Secretary shall by regulations prescribe. Such an\nelection, once made, shall be irrevocable.\n (14) Treatment of replacement property acquired in section 1031 or\n1033 transactions.--\n (A) In general.--In the case of any qualified replacement property,\nany period during which there was ownership, qualified use, or material\nparticipation with respect to the replaced property by the decedent or\nany member of his family shall be treated as a period during which there\nwas such ownership, use, or material participation (as the case may be)\nwith respect to the qualified replacement property.\n (B) Limitation.--Subparagraph (A) shall not apply to the extent that\nthe fair market value of the qualified replacement property (as of the\ndate of its acquisition) exceeds the fair market value of the replaced\nproperty (as of the date of its disposition).\n (C) Definitions.--For purposes of this paragraph--\n (i) Qualified replacement property.--The term "qualified replacement\nproperty" means any real property which is--\n (I) acquired in an exchange which qualifies under section 1031, or\n (II) the acquisition of which results in the nonrecognition of gain\nunder section 1033.\n Such term shall only include property which is used for the same\nqualified use as the replaced property was being used before the\nexchange.\n (ii) Replaced proper
"qualified replacement\nproperty" means any real property which is--\n (I) acquired in an exchange which qualifies under section 1031, or\n (II) the acquisition of which results in the nonrecognition of gain\nunder section 1033.\n Such term shall only include property which is used for the same\nqualified use as the replaced property was being used before the\nexchange.\n (ii) Replaced property.--The term "replaced property" means--\n (I) the property transferred in the exchange which qualifies under\nsection 1031, or\n (II) the property compulsorily or involuntarily converted (within the\nmeaning of section 1033).\n (f) Statute of limitations.--If qualified real property is disposed of\nor ceases to be used for a qualified use, then--\n (1) the statutory period for the assessment of any additional tax\nunder subsection (c) attributable to such disposition or cessation shall\nnot expire before the expiration of 3 years from the date the Secretary\nis notified (in such manner as the Secretary may by regulations\nprescribe) of such disposition or cessation (or if later in the case of\nan involuntary conversion or exchange to which subsection (h) or (i)\napplies, 3 years from the date the Secretary is notified of the\nreplacement of the converted property or of an intention not to replace\nor of the exchange of property), and\n (2) such additional tax may be assessed before the expiration of such\n3-year period notwithstanding the provisions of any other law or rule of\nlaw which would otherwise prevent such assessment.\n (g) Application of this section and section 6324B to interests in\npartnerships, corporations, and trusts.--The Secretary shall prescribe\nregulations setting forth the application of this section and section\n6324B in the case of an interest in a partnership, corporation, or trust\nwhich, with respect to the decedent, is an interest in a closely held\nbusiness (within the meaning of paragraph (1) of section 6166(b)). For\npurposes of the preceding sentence, an interest in a discretionary trust\nall the beneficiaries of which are qualified heirs shall be treated as a\npresent interest.\n (h) Special rules for involuntary conversions of qualified real\nproperty.--\n (1) Treatment of converted property.--\n (A) In general.--If there is an involuntary conversion of an interest\nin qualified real property--\n (i) no tax shall be imposed by subsection (c) on such conversion if\nthe cost of the qualified replacement property equals or exceeds the\namount realized on such conversion, or\n (ii) if clause (i) does not apply, the amount of the tax imposed by\nsubsection (c) on such conversion shall be the amount determined under\nsubparagraph (B).\n (B) Amount of tax where there is not complete reinvestment.--The\namount determined under this subparagraph with respect to any\ninvoluntary conversion is the amount of the tax which (but for this\nsubsection) would have been imposed on such conversion reduced by an\namount which--\n (i) bears the same ratio to such tax, as\n (ii) the cost of the qualified replacement property bears to the\namount realized on the conversion.\n (2) Treatment of replacement property.--For purposes of subsection\n(c)--\n (A) any qualified replacement property shall be treated in the same\nmanner as if it were a portion of the interest in qualified real\nproperty which was involuntarily converted; except that with respect to\nsuch qualified replacement property the 10-year period under paragraph\n(1) of subsection (c) shall be extended by any period, beyond the 2-year\nperiod referred to in section 1033(a)(2)(B)(i), during which the\nqualified heir was allowed to replace the qualified real property,\n (B) any tax imposed by subsection (c) on the involuntary conversion\nshall be treated as a tax imposed on a partial disposition, and\n (C) paragraph (6) of subsection (c) shall be applied--\n (i) by not taking into account periods after the involuntary\nconversion and before t
to in section 1033(a)(2)(B)(i), during which the\nqualified heir was allowed to replace the qualified real property,\n (B) any tax imposed by subsection (c) on the involuntary conversion\nshall be treated as a tax imposed on a partial disposition, and\n (C) paragraph (6) of subsection (c) shall be applied--\n (i) by not taking into account periods after the involuntary\nconversion and before the acquisition of the qualified replacement\nproperty, and\n (ii) by treating material participation with respect to the converted\nproperty as material participation with respect to the qualified\nreplacement property.\n (3) Definitions and special rules.--For purposes of this subsection--\n (A) Involuntary conversion.--The term "involuntary conversion" means a\ncompulsory or involuntary conversion within the meaning of section 1033.\n (B) Qualified replacement property.--The term "qualified replacement\nproperty" means--\n (i) in the case of an involuntary conversion described in section\n1033(a)(1), any real property into which the qualified real property is\nconverted, or\n (ii) in the case of an involuntary conversion described in section\n1033(a)(2), any real property purchased by the qualified heir during the\nperiod specified in section 1033(a)(2)(B) for purposes of replacing the\nqualified real property.\n Such term only includes property which is to be used for the qualified\nuse set forth in subparagraph (A) or (B) of subsection (b)(2) under\nwhich the qualified real property qualified under subsection (a).\n (4) Certain rules made applicable.--The rules of the last sentence of\nsection 1033(a)(2)(A) shall apply for purposes of paragraph (3)(B)(ii).\n (i) Exchanges of qualified real property.--\n (1) Treatment of property exchanged.--\n (A) Exchanges solely for qualified exchange property.--If an interest\nin qualified real property is exchanged solely for an interest in\nqualified exchange property in a transaction which qualifies under\nsection 1031, no tax shall be imposed by subsection (c) by reason of\nsuch exchange.\n (B) Exchanges where other property received.--If an interest in\nqualified real property is exchanged for an interest in qualified\nexchange property and other property in a transaction which qualifies\nunder section 1031, the amount of the tax imposed by subsection (c) by\nreason of such exchange shall be the amount of tax which (but for this\nsubparagraph) would have been imposed on such exchange under subsection\n(c)(1), reduced by an amount which--\n (i) bears the same ratio to such tax, as\n (ii) the fair market value of the qualified exchange property bears to\nthe fair market value of the qualified real property exchanged.\n For purposes of clause (ii) of the preceding sentence, fair market\nvalue shall be determined as of the time of the exchange.\n (2) Treatment of qualified exchange property.--For purposes of\nsubsection (c)--\n (A) any interest in qualified exchange property shall be treated in\nthe same manner as if it were a portion of the interest in qualified\nreal property which was exchanged,\n (B) any tax imposed by subsection (c) by reason of the exchange shall\nbe treated as a tax imposed on a partial disposition, and\n (C) paragraph (6) of subsection (c) shall be applied by treating\nmaterial participation with respect to the exchanged property as\nmaterial participation with respect to the qualified exchange property.\n (3) Qualified exchange property.--For purposes of this subsection, the\nterm "qualified exchange property" means real property which is to be\nused for the qualified use set forth in subparagraph (A) or (B) of\nsubsection (b)(2) under which the real property exchanged therefor\noriginally qualified under subsection (a).\n § 2033. Property in Which the Decedent had an Interest. The value of\nthe gross estate shall include the value of all property to the extent\nof the interest therein of the decedent at the time of his death.\n § 2034
nused for the qualified use set forth in subparagraph (A) or (B) of\nsubsection (b)(2) under which the real property exchanged therefor\noriginally qualified under subsection (a).\n § 2033. Property in Which the Decedent had an Interest. The value of\nthe gross estate shall include the value of all property to the extent\nof the interest therein of the decedent at the time of his death.\n § 2034. Dower or Curtesy Interests. The value of the gross estate\nshall include the value of all property to the extent of any interest\ntherein of the surviving spouse, existing at the time of the decedent's\ndeath as dower or curtesy, or by virtue of a statute creating an estate\nin lieu of dower or curtesy.\n § 2035. Adjustments for Certain Gifts Made Within Three Years of\nDecedent's Death. (a) Inclusion of certain property in gross\nestate.--If--\n (1) the decedent made a transfer (by trust or otherwise) of an\ninterest in any property, or relinquished a power with respect to any\nproperty, during the 3-year period ending on the date of the decedent's\ndeath, and\n (2) the value of such property (or an interest therein) would have\nbeen included in the decedent's gross estate under section 2036, 2037,\n2038, or 2042 if such transferred interest or relinquished power had\nbeen retained by the decedent on the date of his death,\n the value of the gross estate shall include the value of any property\n(or interest therein) which would have been so included.\n (b) Inclusion of gift tax on gifts made during 3 years before\ndecedent's death.--The amount of the gross estate (determined without\nregard to this subsection) shall be increased by the amount of any tax\npaid under chapter 12 by the decedent or his estate on any gift made by\nthe decedent or his spouse during the 3-year period ending on the date\nof the decedent's death.\n (c) Other rules relating to transfers within 3 years of death.--\n (1) In general.--For purposes of--\n (A) section 303(b) (relating to distributions in redemption of stock\nto pay death taxes),\n (B) section 2032A (relating to special valuation of certain farms,\netc., real property), and\n (C) subchapter C of chapter 64 (relating to lien for taxes),\n the value of the gross estate shall include the value of all property\nto the extent of any interest therein of which the decedent has at any\ntime made a transfer, by trust or otherwise, during the 3-year period\nending on the date of the decedent's death.\n (2) Coordination with section 6166.--An estate shall be treated as\nmeeting the 35 percent of adjusted gross estate requirement of section\n6166(a)(1) only if the estate meets such requirement both with and\nwithout the application of subsection (a).\n (3) Marital and small transfers.--Paragraph (1) shall not apply to any\ntransfer (other than a transfer with respect to a life insurance policy)\nmade during a calendar year to any donee if the decedent was not\nrequired by section 6019 (other than by reason of section 6019(2)) to\nfile any gift tax return for such year with respect to transfers to such\ndonee.\n (d) Exception.--Subsection (a) and paragraph (1) of subsection (c)\nshall not apply to any bona fide sale for an adequate and full\nconsideration in money or money's worth.\n (e) Treatment of certain transfers from revocable trusts.--For\npurposes of this section and section 2038, any transfer from any portion\nof a trust during any period that such portion was treated under section\n676 as owned by the decedent by reason of a power in the grantor\n(determined without regard to section 672(e)) shall be treated as a\ntransfer made directly by the decedent.\n § 2036. Transfers with Retained Life Estate
s from revocable trusts.--For\npurposes of this section and section 2038, any transfer from any portion\nof a trust during any period that such portion was treated under section\n676 as owned by the decedent by reason of a power in the grantor\n(determined without regard to section 672(e)) shall be treated as a\ntransfer made directly by the decedent.\n § 2036. Transfers with Retained Life Estate. (a) General rule.--The\nvalue of the gross estate shall include the value of all property to the\nextent of any interest therein of which the decedent has at any time\nmade a transfer (except in case of a bona fide sale for an adequate and\nfull consideration in money or money's worth), by trust or otherwise,\nunder which he has retained for his life or for any period not\nascertainable without reference to his death or for any period which\ndoes not in fact end before his death--\n (1) the possession or enjoyment of, or the right to the income from,\nthe property, or\n (2) the right, either alone or in conjunction with any person, to\ndesignate the persons who shall possess or enjoy the property or the\nincome therefrom.\n (b) Voting rights.--\n (1) In general.--For purposes of subsection (a)(1), the retention of\nthe right to vote (directly or indirectly) shares of stock of a\ncontrolled corporation shall be considered to be a retention of the\nenjoyment of transferred property.\n (2) Controlled corporation.--For purposes of paragraph (1), a\ncorporation shall be treated as a controlled corporation if, at any time\nafter the transfer of the property and during the 3-year period ending\non the date of the decedent's death, the decedent owned (with the\napplication of section 318), or had the right (either alone or in\nconjunction with any person) to vote, stock possessing at least 20\npercent of the total combined voting power of all classes of stock.\n (3) Coordination with section 2035.--For purposes of applying section\n2035 with respect to paragraph (1), the relinquishment or cessation of\nvoting rights shall be treated as a transfer of property made by the\ndecedent.\n (c) Limitation on application of general rule.--This section shall not\napply to a transfer made before March 4, 1931; nor to a transfer made\nafter March 3, 1931, and before June 7, 1932, unless the property\ntransferred would have been includible in the decedent's gross estate by\nreason of the amendatory language of the joint resolution of March 3,\n1931 (46 Stat. 1516).\n § 2037. Transfers Taking Effect at Death. (a) General rule.--The value\nof the gross estate shall include the value of all property to the\nextent of any interest therein of which the decedent has at any time\nafter September 7, 1916, made a transfer (except in case of a bona fide\nsale for an adequate and full consideration in money or money's worth),\nby trust or otherwise, if--\n (1) possession or enjoyment of the property can, through ownership of\nsuch interest, be obtained only by surviving the decedent, and\n (2) the decedent has retained a reversionary interest in the property\n(but in the case of a transfer made before October 8, 1949, only if such\nreversionary interest arose by the express terms of the instrument of\ntransfer), and the value of such reversionary interest immediately\nbefore the death of the decedent exceeds 5 percent of the value of such\nproperty.\n (b) Special rules.--For purposes of this section, the term\n"reversionary interest" includes a possibility that property transferred\nby the decedent--\n (1) may return to him or his estate, or\n (2) may be subject to a power of disposition by him,\n but such term does not include a possibility that the income alone\nfrom such property may return to him or become subject to a power of\ndisposition by him
l rules.--For purposes of this section, the term\n"reversionary interest" includes a possibility that property transferred\nby the decedent--\n (1) may return to him or his estate, or\n (2) may be subject to a power of disposition by him,\n but such term does not include a possibility that the income alone\nfrom such property may return to him or become subject to a power of\ndisposition by him. The value of a reversionary interest immediately\nbefore the death of the decedent shall be determined (without regard to\nthe fact of the decedent's death) by usual methods of valuation,\nincluding the use of tables of mortality and actuarial principles, under\nregulations prescribed by the Secretary. In determining the value of a\npossibility that property may be subject to a power of disposition by\nthe decedent, such possibility shall be valued as if it were a\npossibility that such property may return to the decedent or his estate.\nNotwithstanding the foregoing, an interest so transferred shall not be\nincluded in the decedent's gross estate under this section if possession\nor enjoyment of the property could have been obtained by any beneficiary\nduring the decedent's life through the exercise of a general power of\nappointment (as defined in section 2041) which in fact was exercisable\nimmediately before the decedent's death.\n § 2038. Revocable Transfers. (a) In general.--The value of the gross\nestate shall include the value of all property--\n (1) Transfers after June 22, 1936.--To the extent of any interest\ntherein of which the decedent has at any time made a transfer (except in\ncase of a bona fide sale for an adequate and full consideration in money\nor money's worth), by trust or otherwise, where the enjoyment thereof\nwas subject at the date of his death to any change through the exercise\nof a power (in whatever capacity exercisable) by the decedent alone or\nby the decedent in conjunction with any other person (without regard to\nwhen or from what source the decedent acquired such power), to alter,\namend, revoke, or terminate, or where any such power is relinquished\nduring the 3-year period ending on the date of the decedent's death.\n (2) Transfers on or before June 22, 1936.--To the extent of any\ninterest therein of which the decedent has at any time made a transfer\n(except in case of a bona fide sale for an adequate and full\nconsideration in money or money's worth), by trust or otherwise, where\nthe enjoyment thereof was subject at the date of his death to any change\nthrough the exercise of a power, either by the decedent alone or in\nconjunction with any person, to alter, amend, or revoke, or where the\ndecedent relinquished any such power during the 3-year period ending on\nthe date of the decedent's death. Except in the case of transfers made\nafter June 22, 1936, no interest of the decedent of which he has made a\ntransfer shall be included in the gross estate under paragraph (1)\nunless it is includible under this paragraph.\n (b) Date of existence of power.--For purposes of this section, the\npower to alter, amend, revoke, or terminate shall be considered to exist\non the date of the decedent's death even though the exercise of the\npower is subject to a precedent giving of notice or even though the\nalteration, amendment, revocation, or termination takes effect only on\nthe expiration of a stated period after the exercise of the power,\nwhether or not on or before the date of the decedent's death notice has\nbeen given or the power has been exercised. In such cases proper\nadjustment shall be made representing the interests which would have\nbeen excluded from the power if the decedent had lived, and for such\npurpose, if the notice has not been given or the power has not been\nexercised on or before the date of his death, such notice shall be\nconsidered to have been given, or the power exercised, on the date of\nhis death.\n § 2039. Annuities
n such cases proper\nadjustment shall be made representing the interests which would have\nbeen excluded from the power if the decedent had lived, and for such\npurpose, if the notice has not been given or the power has not been\nexercised on or before the date of his death, such notice shall be\nconsidered to have been given, or the power exercised, on the date of\nhis death.\n § 2039. Annuities. (a) General.--The gross estate shall include the\nvalue of an annuity or other payment receivable by any beneficiary by\nreason of surviving the decedent under any form of contract or agreement\nentered into after March 3, 1931 (other than as insurance under policies\non the life of the decedent), if, under such contract or agreement, an\nannuity or other payment was payable to the decedent, or the decedent\npossessed the right to receive such annuity or payment, either alone or\nin conjunction with another for his life or for any period not\nascertainable without reference to his death or for any period which\ndoes not in fact end before his death.\n (b) Amount includible.--Subsection (a) shall apply to only such part\nof the value of the annuity or other payment receivable under such\ncontract or agreement as is proportionate to that part of the purchase\nprice therefor contributed by the decedent. For purposes of this\nsection, any contribution by the decedent's employer or former employer\nto the purchase price of such contract or agreement (whether or not to\nan employee's trust or fund forming part of a pension, annuity,\nretirement, bonus or profit sharing plan) shall be considered to be\ncontributed by the decedent if made by reason of his employment.\n § 2040. Joint Interests. (a) General rule.--The value of the gross\nestate shall include the value of all property to the extent of the\ninterest therein held as joint tenants with right of survivorship by the\ndecedent and any other person, or as tenants by the entirety by the\ndecedent and spouse, or deposited, with any person carrying on the\nbanking business, in their joint names and payable to either or the\nsurvivor, except such part thereof as may be shown to have originally\nbelonged to such other person and never to have been received or\nacquired by the latter from the decedent for less than an adequate and\nfull consideration in money or money's worth: Provided, That where such\nproperty or any part thereof, or part of the consideration with which\nsuch property was acquired, is shown to have been at any time acquired\nby such other person from the decedent for less than an adequate and\nfull consideration in money or money's worth, there shall be excepted\nonly such part of the value of such property as is proportionate to the\nconsideration furnished by such other person: Provided further, That\nwhere any property has been acquired by gift, bequest, devise, or\ninheritance, as a tenancy by the entirety by the decedent and spouse,\nthen to the extent of one-half of the value thereof, or, where so\nacquired by the decedent and any other person as joint tenants with\nright of survivorship and their interests are not otherwise specified or\nfixed by law, then to the extent of the value of a fractional part to be\ndetermined by dividing the value of the property by the number of joint\ntenants with right of survivorship.\n (b) Certain joint interests of husband and wife.--\n (1) Interests of spouse excluded from gross estate.--Notwithstanding\nsubsection (a), in the case of any qualified joint interest, the value\nincluded in the gross estate with respect to such interest by reason of\nthis section is one-half of the value of such qualified joint interest.\n (2) Qualified joint interest defined.--For purposes of paragraph (1),\nthe term "qualified joint interest" means any interest in property held\nby the decedent and the decedent's spouse as--\n (A) tenants by the entirety, or\n (B) joint tenants with right of survivorship, but only if the decedent\nand the s
by reason of\nthis section is one-half of the value of such qualified joint interest.\n (2) Qualified joint interest defined.--For purposes of paragraph (1),\nthe term "qualified joint interest" means any interest in property held\nby the decedent and the decedent's spouse as--\n (A) tenants by the entirety, or\n (B) joint tenants with right of survivorship, but only if the decedent\nand the spouse of the decedent are the only joint tenants.\n § 2041. Powers of Appointment. (a) In general.--The value of the gross\nestate shall include the value of all property--\n (1) Powers of appointment created on or before October 21, 1942.--To\nthe extent of any property with respect to which a general power of\nappointment created on or before October 21, 1942, is exercised by the\ndecedent--\n (A) by will, or\n (B) by a disposition which is of such nature that if it were a\ntransfer of property owned by the decedent, such property would be\nincludible in the decedent's gross estate under sections 2035 to 2038,\ninclusive;\n but the failure to exercise such a power or the complete release of\nsuch a power shall not be deemed an exercise thereof. If a general power\nof appointment created on or before October 21, 1942, has been partially\nreleased so that it is no longer a general power of appointment, the\nexercise of such power shall not be deemed to be the exercise of a\ngeneral power of appointment if--\n (i) such partial release occurred before November 1, 1951, or\n (ii) the donee of such power was under a legal disability to release\nsuch power on October 21, 1942, and such partial release occurred not\nlater than 6 months after the termination of such legal disability.\n (2) Powers created after October 21, 1942.--To the extent of any\nproperty with respect to which the decedent has at the time of his death\na general power of appointment created after October 21, 1942, or with\nrespect to which the decedent has at any time exercised or released such\na power of appointment by a disposition which is of such nature that if\nit were a transfer of property owned by the decedent, such property\nwould be includible in the decedent's gross estate under sections 2035\nto 2038, inclusive. For purposes of this paragraph (2), the power of\nappointment shall be considered to exist on the date of the decedent's\ndeath even though the exercise of the power is subject to a precedent\ngiving of notice or even though the exercise of the power takes effect\nonly on the expiration of a stated period after its exercise, whether or\nnot on or before the date of the decedent's death notice has been given\nor the power has been exercised.\n (3) Creation of another power in certain cases.--To the extent of any\nproperty with respect to which the decedent--\n (A) by will, or\n (B) by a disposition which is of such nature that if it were a\ntransfer of property owned by the decedent such property would be\nincludible in the decedent's gross estate under section 2035, 2036, or\n2037,\n exercises a power of appointment created after October 21, 1942, by\ncreating another power of appointment which under the applicable local\nlaw can be validly exercised so as to postpone the vesting of any estate\nor interest in such property, or suspend the absolute ownership or power\nof alienation of such property, for a period ascertainable without\nregard to the date of the creation of the first power.\n (b) Definitions.--For purposes of subsection (a)--\n (1) General power of appointment.--The term "general power of\nappointment" means a power which is exercisable in favor of the\ndecedent, his estate, his creditors, or the creditors of his estate;\nexcept that--\n (A) A power to consume, invade, or appropriate property for the\nbenefit of the decedent which is limited by an ascertainable standard\nrelating to the health, education, support, or maintenance of the\ndecedent shall not be deemed a general power of appointment.\n (B) A power of appoint
isable in favor of the\ndecedent, his estate, his creditors, or the creditors of his estate;\nexcept that--\n (A) A power to consume, invade, or appropriate property for the\nbenefit of the decedent which is limited by an ascertainable standard\nrelating to the health, education, support, or maintenance of the\ndecedent shall not be deemed a general power of appointment.\n (B) A power of appointment created on or before October 21, 1942,\nwhich is exercisable by the decedent only in conjunction with another\nperson shall not be deemed a general power of appointment.\n (C) In the case of a power of appointment created after October 21,\n1942, which is exercisable by the decedent only in conjunction with\nanother person--\n (i) If the power is not exercisable by the decedent except in\nconjunction with the creator of the power--such power shall not be\ndeemed a general power of appointment.\n (ii) If the power is not exercisable by the decedent except in\nconjunction with a person having a substantial interest in the property,\nsubject to the power, which is adverse to exercise of the power in favor\nof the decedent--such power shall not be deemed a general power of\nappointment. For the purposes of this clause a person who, after the\ndeath of the decedent, may be possessed of a power of appointment (with\nrespect to the property subject to the decedent's power) which he may\nexercise in his own favor shall be deemed as having an interest in the\nproperty and such interest shall be deemed adverse to such exercise of\nthe decedent's power.\n (iii) If (after the application of clauses (i) and (ii)) the power is\na general power of appointment and is exercisable in favor of such other\nperson--such power shall be deemed a general power of appointment only\nin respect of a fractional part of the property subject to such power,\nsuch part to be determined by dividing the value of such property by the\nnumber of such persons (including the decedent) in favor of whom such\npower is exercisable.\n For purposes of clauses (ii) and (iii), a power shall be deemed to be\nexercisable in favor of a person if it is exercisable in favor of such\nperson, his estate, his creditors, or the creditors of his estate.\n (2) Lapse of power.--The lapse of a power of appointment created after\nOctober 21, 1942, during the life of the individual possessing the power\nshall be considered a release of such power. The preceding sentence\nshall apply with respect to the lapse of powers during any calendar year\nonly to the extent that the property, which could have been appointed by\nexercise of such lapsed powers, exceeded in value, at the time of such\nlapse, the greater of the following amounts:\n (A) $5,000, or\n (B) 5 percent of the aggregate value, at the time of such lapse, of\nthe assets out of which, or the proceeds of which, the exercise of the\nlapsed powers could have been satisfied.\n (3) Date of creation of power.--For purposes of this section, a power\nof appointment created by a will executed on or before October 21, 1942,\nshall be considered a power created on or before such date if the person\nexecuting such will dies before July 1, 1949, without having republished\nsuch will, by codicil or otherwise, after October 21, 1942.\n § 2042. Proceeds of Life Insurance. The value of the gross estate\nshall include the value of all property--\n (1) Receivable by the executor.--To the extent of the amount\nreceivable by the executor as insurance under policies on the life of\nthe decedent.\n (2) Receivable by other beneficiaries.--To the extent of the amount\nreceivable by all other beneficiaries as insurance under policies on the\nlife of the decedent with respect to which the decedent possessed at his\ndeath any of the incidents of ownership, exercisable either alone or in\nconjunction with any other person
by the executor as insurance under policies on the life of\nthe decedent.\n (2) Receivable by other beneficiaries.--To the extent of the amount\nreceivable by all other beneficiaries as insurance under policies on the\nlife of the decedent with respect to which the decedent possessed at his\ndeath any of the incidents of ownership, exercisable either alone or in\nconjunction with any other person. For purposes of the preceding\nsentence, the term "incident of ownership" includes a reversionary\ninterest (whether arising by the express terms of the policy or other\ninstrument or by operation of law) only if the value of such\nreversionary interest exceeded 5 percent of the value of the policy\nimmediately before the death of the decedent. As used in this paragraph,\nthe term "reversionary interest" includes a possibility that the policy,\nor the proceeds of the policy, may return to the decedent or his estate,\nor may be subject to a power of disposition by him. The value of a\nreversionary interest at any time shall be determined (without regard to\nthe fact of the decedent's death) by usual methods of valuation,\nincluding the use of tables of mortality and actuarial principles,\npursuant to regulations prescribed by the Secretary. In determining the\nvalue of a possibility that the policy or proceeds thereof may be\nsubject to a power of disposition by the decedent, such possibility\nshall be valued as if it were a possibility that such policy or proceeds\nmay return to the decedent or his estate.\n § 2043. Transfers for Insufficient Consideration. (a) In general.--If\nany one of the transfers, trusts, interests, rights, or powers\nenumerated and described in sections 2035 to 2038, inclusive, and\nsection 2041 is made, created, exercised, or relinquished for a\nconsideration in money or money's worth, but is not a bona fide sale for\nan adequate and full consideration in money or money's worth, there\nshall be included in the gross estate only the excess of the fair market\nvalue at the time of death of the property otherwise to be included on\naccount of such transaction, over the value of the consideration\nreceived therefor by the decedent.\n (b) Marital rights not treated as consideration.--\n (1) In general.--For purposes of this chapter, a relinquishment or\npromised relinquishment of dower or curtesy, or of a statutory estate\ncreated in lieu of dower or curtesy, or of other marital rights in the\ndecedent's property or estate, shall not be considered to any extent a\nconsideration "in money or money's worth".\n (2) Exception.--For purposes of section 2053 (relating to expenses,\nindebtedness, and taxes), a transfer of property which satisfies the\nrequirements of paragraph (1) of section 2516 (relating to certain\nproperty settlements) shall be considered to be made for an adequate and\nfull consideration in money or money's worth.\n § 2044. Certain Property for Which Marital Deduction Was Previously\nAllowed. (a) General rule.--The value of the gross estate shall include\nthe value of any property to which this section applies in which the\ndecedent had a qualifying income interest for life.\n (b) Property to which this section applies.--This section applies to\nany property if--\n (1) a deduction was allowed with respect to the transfer of such\nproperty to the decedent--\n (A) under section 2056 by reason of subsection (b)(7) thereof, or\n (B) under section 2523 by reason of subsection (f) thereof, and\n (2) section 2519 (relating to dispositions of certain life estates)\ndid not apply with respect to a disposition by the decedent of part or\nall of such property.\n (c) Property treated as having passed from decedent.--For purposes of\nthis chapter and chapter 13, property includible in the gross estate of\nthe decedent under subsection (a) shall be treated as property passing\nfrom the decedent.\n § 2045. Prior Interests
to dispositions of certain life estates)\ndid not apply with respect to a disposition by the decedent of part or\nall of such property.\n (c) Property treated as having passed from decedent.--For purposes of\nthis chapter and chapter 13, property includible in the gross estate of\nthe decedent under subsection (a) shall be treated as property passing\nfrom the decedent.\n § 2045. Prior Interests. Except as otherwise specifically provided by\nlaw, sections 2034 to 2042, inclusive, shall apply to the transfers,\ntrusts, estates, interests, rights, powers, and relinquishment of\npowers, as severally enumerated and described therein, whenever made,\ncreated, arising, existing, exercised, or relinquished.\n § 2046. Disclaimers. For provisions relating to the effect of a\nqualified disclaimer for purposes of this chapter, see section 2518.\n § 2053. Expenses, indebtedness, and taxes. (a) General rule.--For\npurposes of the tax imposed by section 2001, the value of the taxable\nestate shall be determined by deducting from the value of the gross\nestate such amounts--\n (1) for funeral expenses,\n (2) for administration expenses,\n (3) for claims against the estate, and\n (4) for unpaid mortgages on, or any indebtedness in respect of,\nproperty where the value of the decedent's interest therein,\nundiminished by such mortgage or indebtedness, is included in the value\nof the gross estate,\n as are allowable by the laws of the jurisdiction, whether within or\nwithout the United States, under which the estate is being administered.\n (b) Other administration expenses.--Subject to the limitations in\nparagraph (1) of subsection (c), there shall be deducted in determining\nthe taxable estate amounts representing expenses incurred in\nadministering property not subject to claims which is included in the\ngross estate to the same extent such amounts would be allowable as a\ndeduction under subsection (a) if such property were subject to claims,\nand such amounts are paid before the expiration of the period of\nlimitation for assessment provided in section 6501.\n (c) Limitations.--\n (1) Limitations applicable to subsections (a) and (b).--\n (A) Consideration for claims.--The deduction allowed by this section\nin the case of claims against the estate, unpaid mortgages, or any\nindebtedness shall, when founded on a promise or agreement, be limited\nto the extent that they were contracted bona fide and for an adequate\nand full consideration in money or money's worth; except that in any\ncase in which any such claim is founded on a promise or agreement of the\ndecedent to make a contribution or gift to or for the use of any donee\ndescribed in section 2055 for the purposes specified therein, the\ndeduction for such claims shall not be so limited, but shall be limited\nto the extent that it would be allowable as a deduction under section\n2055 if such promise or agreement constituted a bequest.\n (B) Certain taxes.--Any income taxes on income received after the\ndeath of the decedent, or property taxes not accrued before his death,\nor any estate, succession, legacy, or inheritance taxes, shall not be\ndeductible under this section.\n (C) Certain claims by remaindermen.--No deduction shall be allowed\nunder this section for a claim against the estate by a remainderman\nrelating to any property described in section 2044.\n (D) Section 6166 interest.--No deduction shall be allowed under this\nsection for any interest payable under section 6601 on any unpaid\nportion of the tax imposed by section 2001 for the period during which\nan extension of time for payment of such tax is in effect under section\n6166.\n (2) Limitations applicable only to subsection (a).--In the case of the\namounts described in subsection (a), there shall be disallowed the\namount by which the deductions specified therein exceed the value, at\nthe time of the decedent's death, of property subject to claims, except\nto the extent that such deductions represe
sion of time for payment of such tax is in effect under section\n6166.\n (2) Limitations applicable only to subsection (a).--In the case of the\namounts described in subsection (a), there shall be disallowed the\namount by which the deductions specified therein exceed the value, at\nthe time of the decedent's death, of property subject to claims, except\nto the extent that such deductions represent amounts paid before the\ndate prescribed for the filing of the estate tax return. For purposes of\nthis section, the term "property subject to claims" means property\nincludible in the gross estate of the decedent which, or the avails of\nwhich, would under the applicable law, bear the burden of the payment of\nsuch deductions in the final adjustment and settlement of the estate,\nexcept that the value of the property shall be reduced by the amount of\nthe deduction under section 2054 attributable to such property.\n (d) Certain foreign death taxes.--\n (1) In general.--Notwithstanding the provisions of subsection\n(c)(1)(B), for purposes of the tax imposed by section 2001, the value of\nthe taxable estate may be determined, if the executor so elects before\nthe expiration of the period of limitation for assessment provided in\nsection 6501, by deducting from the value of the gross estate the amount\n(as determined in accordance with regulations prescribed by the\nSecretary) of any estate, succession, legacy, or inheritance tax imposed\nby and actually paid to any foreign country, in respect of any property\nsituated within such foreign country and included in the gross estate of\na citizen or resident of the United States, upon a transfer by the\ndecedent for public, charitable, or religious uses described in section\n2055. The determination under this paragraph of the country within which\nproperty is situated shall be made in accordance with the rules\napplicable under subchapter B (sec. 2101 and following) in determining\nwhether property is situated within or without the United States. Any\nelection under this paragraph shall be exercised in accordance with\nregulations prescribed by the Secretary.\n (2) Condition for allowance of deduction.--No deduction shall be\nallowed under paragraph (1) for a foreign death tax specified therein\nunless the decrease in the tax imposed by section 2001 which results\nfrom the deduction provided in paragraph (1) will inure solely for the\nbenefit of the public, charitable, or religious transferees described in\nsection 2055 or section 2106(a)(2). In any case where the tax imposed by\nsection 2001 is equitably apportioned among all the transferees of\nproperty included in the gross estate, including those described in\nsections 2055 and 2106(a)(2) (taking into account any exemptions,\ncredits, or deductions allowed by this chapter), in determining such\ndecrease, there shall be disregarded any decrease in the Federal estate\ntax which any transferees other than those described in sections 2055\nand 2106(a)(2) are required to pay.\n (3) Effect on credit for foreign death taxes of deduction under this\nsubsection.--\n (A) Election.--An election under this subsection shall be deemed a\nwaiver of the right to claim a credit, against the Federal estate tax,\nunder a death tax convention with any foreign country for any tax or\nportion thereof in respect of which a deduction is taken under this\nsubsection.\n (B) Cross reference.--\n See section 2011(d) for the effect of a deduction taken under this\nparagraph on the credit for foreign death taxes.\n (e) Marital rights.--\n For provisions treating certain relinquishments of marital rights as\nconsideration in money or money's worth, see section 2043(b)(2).\n § 2054. Losses
thereof in respect of which a deduction is taken under this\nsubsection.\n (B) Cross reference.--\n See section 2011(d) for the effect of a deduction taken under this\nparagraph on the credit for foreign death taxes.\n (e) Marital rights.--\n For provisions treating certain relinquishments of marital rights as\nconsideration in money or money's worth, see section 2043(b)(2).\n § 2054. Losses. For purposes of the tax imposed by section 2001, the\nvalue of the taxable estate shall be determined by deducting from the\nvalue of the gross estate losses incurred during the settlement of\nestates arising from fires, storms, shipwrecks, or other casualties, or\nfrom theft, when such losses are not compensated for by insurance or\notherwise.\n § 2055. Transfers for public, charitable, and religious uses.\n (a) In general.--For purposes of the tax imposed by section 2001, the\nvalue of the taxable estate shall be determined by deducting from the\nvalue of the gross estate the amount of all bequests, legacies, devises,\nor transfers--\n (1) to or for the use of the United States, any State, any political\nsubdivision thereof, or the District of Columbia, for exclusively public\npurposes;\n (2) to or for the use of any corporation organized and operated\nexclusively for religious, charitable, scientific, literary, or\neducational purposes, including the encouragement of art, or to foster\nnational or international amateur sports competition (but only if no\npart of its activities involve the provision of athletic facilities or\nequipment), and the prevention of cruelty to children or animals, no\npart of the net earnings of which inures to the benefit of any private\nstockholder or individual, which is not disqualified for tax exemption\nunder section 501(c)(3) by reason of attempting to influence\nlegislation, and which does not participate in, or intervene in\n(including the publishing or distributing of statements), any political\ncampaign on behalf of (or in opposition to) any candidate for public\noffice;\n (3) to a trustee or trustees, or a fraternal society, order, or\nassociation operating under the lodge system, but only if such\ncontributions or gifts are to be used by such trustee or trustees, or by\nsuch fraternal society, order, or association, exclusively for\nreligious, charitable, scientific, literary, or educational purposes, or\nfor the prevention of cruelty to children or animals, such trust,\nfraternal society, order, or association would not be disqualified for\ntax exemption under section 501(c)(3) by reason of attempting to\ninfluence legislation, and such trustee or trustees, or such fraternal\nsociety, order, or association, does not participate in, or intervene in\n(including the publishing or distributing of statements), any political\ncampaign on behalf of (or in opposition to) any candidate for public\noffice;\n (4) to or for the use of any veterans' organization incorporated by\nAct of Congress, or of its departments or local chapters or posts, no\npart of the net earnings of which inures to the benefit of any private\nshareholder or individual; or\n (5) to an employee stock ownership plan if such transfer qualifies as\na qualified gratuitous transfer of qualified employer securities within\nthe meaning of section 664(g).\n For purposes of this subsection, the complete termination before the\ndate prescribed for the filing of the estate tax return of a power to\nconsume, invade, or appropriate property for the benefit of an\nindividual before such power has been exercised by reason of the death\nof such individual or for any other reason shall be considered and\ndeemed to be a qualified disclaimer with the same full force and effect\nas though he had filed such qualified disclaimer
he\ndate prescribed for the filing of the estate tax return of a power to\nconsume, invade, or appropriate property for the benefit of an\nindividual before such power has been exercised by reason of the death\nof such individual or for any other reason shall be considered and\ndeemed to be a qualified disclaimer with the same full force and effect\nas though he had filed such qualified disclaimer. Rules similar to the\nrules of section 501(j) shall apply for purposes of paragraph (2).\n (b) Powers of appointment.--Property includible in the decedent's\ngross estate under section 2041 (relating to powers of appointment)\nreceived by a donee described in this section shall, for purposes of\nthis section, be considered a bequest of such decedent.\n (c) Death taxes payable out of bequests.--If the tax imposed by\nsection 2001, or any estate, succession, legacy, or inheritance taxes,\nare, either by the terms of the will, by the law of the jurisdiction\nunder which the estate is administered, or by the law of the\njurisdiction imposing the particular tax, payable in whole or in part\nout of the bequests, legacies, or devises otherwise deductible under\nthis section, then the amount deductible under this section shall be the\namount of such bequests, legacies, or devises reduced by the amount of\nsuch taxes.\n (d) Limitation on deduction.--The amount of the deduction under this\nsection for any transfer shall not exceed the value of the transferred\nproperty required to be included in the gross estate.\n (e) Disallowance of deductions in certain cases.--\n (1) No deduction shall be allowed under this section for a transfer to\nor for the use of an organization or trust described in section 508(d)\nor 4948(c)(4) subject to the conditions specified in such sections.\n (2) Where an interest in property (other than an interest described in\nsection 170(f)(3)(B)) passes or has passed from the decedent to a\nperson, or for a use, described in subsection (a), and an interest\n(other than an interest which is extinguished upon the decedent's death)\nin the same property passes or has passed (for less than an adequate and\nfull consideration in money or money's worth) from the decedent to a\nperson, or for a use, not described in subsection (a), no deduction\nshall be allowed under this section for the interest which passes or has\npassed to the person, or for the use, described in subsection (a)\nunless--\n (A) in the case of a remainder interest, such interest is in a trust\nwhich is a charitable remainder annuity trust or a charitable remainder\nunitrust (described in section 664) or a pooled income fund (described\nin section 642(c)(5)), or\n (B) in the case of any other interest, such interest is in the form of\na guaranteed annuity or is a fixed percentage distributed yearly of the\nfair market value of the property (to be determined yearly).\n (3) Reformations to comply with paragraph (2).--\n (A) In general.--A deduction shall be allowed under subsection (a) in\nrespect of any qualified reformation.\n (B) Qualified reformation.--For purposes of this paragraph, the term\n"qualified reformation" means a change of a governing instrument by\nreformation, amendment, construction, or otherwise which changes a\nreformable interest into a qualified interest but only if--\n (i) any difference between--\n (I) the actuarial value (determined as of the date of the decedent's\ndeath) of the qualified interest, and\n (II) the actuarial value (as so determined) of the reformable\ninterest,\n does not exceed 5 percent of the actuarial value (as so determined) of\nthe reformable interest,\n (ii) in the case of--\n (I) a charitable remainder interest, the nonremainder interest (before\nand after the qualified reformation) terminated at the same time, or\n (II) any other interest, the reformable interest and the qualified\ninterest are for the same period, and\n (iii) such change is effective as of the date of the decedent's death.\
(as so determined) of\nthe reformable interest,\n (ii) in the case of--\n (I) a charitable remainder interest, the nonremainder interest (before\nand after the qualified reformation) terminated at the same time, or\n (II) any other interest, the reformable interest and the qualified\ninterest are for the same period, and\n (iii) such change is effective as of the date of the decedent's death.\n A nonremainder interest (before reformation) for a term of years in\nexcess of 20 years shall be treated as satisfying subclause (I) of\nclause (ii) if such interest (after reformation) is for a term of 20\nyears.\n (C) Reformable interest.--For purposes of this paragraph--\n (i) In general.--The term "reformable interest" means any interest for\nwhich a deduction would be allowable under subsection (a) at the time of\nthe decedent's death but for paragraph (2).\n (ii) Beneficiary's interest must be fixed.--The term "reformable\ninterest" does not include any interest unless, before the remainder\nvests in possession, all payments to persons other than an organization\ndescribed in subsection (a) are expressed either in specified dollar\namounts or a fixed percentage of the fair market value of the property.\nFor purposes of determining whether all such payments are expressed as a\nfixed percentage of the fair market value of the property, section\n664(d)(3) shall be taken into account.\n (iii) Special rule where timely commencement of reformation.--Clause\n(ii) shall not apply to any interest if a judicial proceeding is\ncommenced to change such interest into a qualified interest not later\nthan the 90th day after--\n (I) if an estate tax return is required to be filed, the last date\n(including extensions) for filing such return, or\n (II) if no estate tax return is required to be filed, the last date\n(including extensions) for filing the income tax return for the 1st\ntaxable year for which such a return is required to be filed by the\ntrust.\n (iv) Special rule for will executed before January 1, 1979, etc.--In\nthe case of any interest passing under a will executed before January 1,\n1979, or under a trust created before such date, clause (ii) shall not\napply.\n (D) Qualified interest.--For purposes of this paragraph, the term\n"qualified interest" means an interest for which a deduction is\nallowable under subsection (a).\n (E) Limitation.--The deduction referred to in subparagraph (A) shall\nnot exceed the amount of the deduction which would have been allowable\nfor the reformable interest but for paragraph (2).\n (F) Special rule where income beneficiary dies.--If (by reason of the\ndeath of any individual, or by termination or distribution of a trust in\naccordance with the terms of the trust instrument) by the due date for\nfiling the estate tax return (including any extension thereof) a\nreformable interest is in a wholly charitable trust or passes directly\nto a person or for a use described in subsection (a), a deduction shall\nbe allowed for such reformable interest as if it had met the\nrequirements of paragraph (2) on the date of the decedent's death
with the terms of the trust instrument) by the due date for\nfiling the estate tax return (including any extension thereof) a\nreformable interest is in a wholly charitable trust or passes directly\nto a person or for a use described in subsection (a), a deduction shall\nbe allowed for such reformable interest as if it had met the\nrequirements of paragraph (2) on the date of the decedent's death. For\npurposes of the preceding sentence, the term "wholly charitable trust"\nmeans a charitable trust which, upon the allowance of a deduction, would\nbe described in section 4947(a)(1).\n (G) Statute of limitations.--The period for assessing any deficiency\nof any tax attributable to the application of this paragraph shall not\nexpire before the date 1 year after the date on which the Secretary is\nnotified that such reformation (or other proceeding pursuant to\nsubparagraph (J)1 has occurred.\n (H) Regulations.--The Secretary shall prescribe such regulations as\nmay be necessary to carry out the purposes of this paragraph, including\nregulations providing such adjustments in the application of the\nprovisions of section 508 (relating to special rules relating to section\n501(c)(3) organizations), subchapter J (relating to estates, trusts,\nbeneficiaries, and decedents), and chapter 42 (relating to private\nfoundations) as may be necessary by reason of the qualified reformation.\n (I) Reformations permitted in case of remainder interests in residence\nor farm, pooled income funds, etc.--The Secretary shall prescribe\nregulations (consistent with the provisions of this paragraph)\npermitting reformations in the case of any failure--\n (i) to meet the requirements of section 170(f)(3)(B) (relating to\nremainder interests in personal residence or farm, etc.), or\n (ii) to meet the requirements of section 642(c)(5).\n (J) Void or reformed trust in cases of insufficient remainder\ninterests.--In the case of a trust that would qualify (or could be\nreformed to qualify pursuant to subparagraph (B)) but for failure to\nsatisfy the requirement of paragraph (1)(D) or (2)(D) of section 664(d),\nsuch trust may be--\n (i) declared null and void ab initio, or\n (ii) changed by reformation, amendment, or otherwise to meet such\nrequirement by reducing the payout rate or the duration (or both) of any\nnoncharitable beneficiary's interest to the extent necessary to satisfy\nsuch requirement,\n pursuant to a proceeding that is commenced within the period required\nin subparagraph (C)(iii). In a case described in clause (i), no\ndeduction shall be allowed under this title for any transfer to the\ntrust and any transactions entered into by the trust prior to being\ndeclared void shall be treated as entered into by the transferor.\n (4) Works of art and their copyrights treated as separate properties\nin certain cases.--\n (A) In general.--In the case of a qualified contribution of a work of\nart, the work of art and the copyright on such work of art shall be\ntreated as separate properties for purposes of paragraph (2).\n (B) Work of art defined.--For purposes of this paragraph, the term\n"work of art" means any tangible personal property with respect to which\nthere is a copyright under Federal law.\n (C) Qualified contribution defined.--For purposes of this paragraph,\nthe term "qualified contribution" means any transfer of property to a\nqualified organization if the use of the property by the organization is\nrelated to the purpose or function constituting the basis for its\nexemption under section 501.\n (D) Qualified organization defined.--For purposes of this paragraph,\nthe term "qualified organization" means any organization described in\nsection 501(c)(3) other than a private foundation (as defined in section\n509)
y to a\nqualified organization if the use of the property by the organization is\nrelated to the purpose or function constituting the basis for its\nexemption under section 501.\n (D) Qualified organization defined.--For purposes of this paragraph,\nthe term "qualified organization" means any organization described in\nsection 501(c)(3) other than a private foundation (as defined in section\n509). For purposes of the preceding sentence, a private operating\nfoundation (as defined in section 4942(j)(3)) shall not be treated as a\nprivate foundation.\n (5) Contributions to donor advised funds.--A deduction otherwise\nallowed under subsection (a) for any contribution to a donor advised\nfund (as defined in section 4966(d)(2)) shall only be allowed if--\n (A) the sponsoring organization (as defined in section 4966(d)(1))\nwith respect to such donor advised fund is not--\n (i) described in paragraph (3) or (4) of subsection (a), or\n (ii) a type III supporting organization (as defined in section\n4943(f)(5)(A)) which is not a functionally integrated type III\nsupporting organization (as defined in section 4943(f)(5)(B)), and\n (B) the taxpayer obtains a contemporaneous written acknowledgment\n(determined under rules similar to the rules of section 170(f)(8)(C))\nfrom the sponsoring organization (as so defined) of such donor advised\nfund that such organization has exclusive legal control over the assets\ncontributed.\n (f) Special rule for irrevocable transfers of easements in real\nproperty.--A deduction shall be allowed under subsection (a) in respect\nof any transfer of a qualified real property interest (as defined in\nsection 170(h)(2)(C)) which meets the requirements of section 170(h)\n(without regard to paragraph (4)(A) thereof).\n (g) Cross references.--\n (1) For option as to time for valuation for purpose of deduction under\nthis section, see section 2032.\n (2) For treatment of certain organizations providing child care, see\nsection 501(k).\n (3) For exemption of gifts and bequests to or for the benefit of\nLibrary of Congress, see section 5 of the Act of March 3, 1925, as\namended (2 U.S.C. 161).\n (4) For treatment of gifts and bequests for the benefit of the Naval\nHistorical Center as gifts or bequests to or for the use of the United\nStates, see section 7222 of Title 10, United States Code.\n (5) For treatment of gifts and bequests to or for the benefit of\nNational Park Foundation as gifts or bequests to or for the use of the\nUnited States, see section 8 of the Act of December 18, 1967 (16 U.S.C.\n191).\n (6) For treatment of gifts, devises, or bequests accepted by the\nSecretary of State, the Director of the International Communication\nAgency, or the Director of the United States International Development\nCooperation Agency as gifts, devises, or bequests to or for the use of\nthe United States, see section 25 of the State Department Basic\nAuthorities Act of 1956.\n (7) For treatment of gifts or bequests of money accepted by the\nAttorney General for credit to "Commissary Funds, Federal Prisons" as\ngifts or bequests to or for the use of the United States, see section\n4043 of Title 18, United States Code.\n (8) For payment of tax on gifts and bequests of United States\nobligations to the United States, see section 3113(e) of Title 31,\nUnited States Code.\n (9) For treatment of gifts and bequests for benefit of the Naval\nAcademy as gifts or bequests to or for the use of the United States, see\nsection 6973 of Title 10, United States Code.\n (10) For treatment of gifts and bequests for benefit of the Naval\nAcademy Museum as gifts or bequests to or for the use of the United\nStates, see section 6974 of Title 10, United States Code.\n (11) For exemption of gifts and bequests received by National Archives\nTrust Fund Board, see section 2308 of Title 44, United States Code.\n (12) For treatment of gifts and bequests to or for the use of Indian\ntribal governments (or their subdivisions), see
e Naval\nAcademy Museum as gifts or bequests to or for the use of the United\nStates, see section 6974 of Title 10, United States Code.\n (11) For exemption of gifts and bequests received by National Archives\nTrust Fund Board, see section 2308 of Title 44, United States Code.\n (12) For treatment of gifts and bequests to or for the use of Indian\ntribal governments (or their subdivisions), see section 7871.\n § 2056. Bequests, etc., to surviving spouse. (a) Allowance of marital\ndeduction.--For purposes of the tax imposed by section 2001, the value\nof the taxable estate shall, except as limited by subsection (b), be\ndetermined by deducting from the value of the gross estate an amount\nequal to the value of any interest in property which passes or has\npassed from the decedent to his surviving spouse, but only to the extent\nthat such interest is included in determining the value of the gross\nestate.\n (b) Limitation in the case of life estate or other terminable\ninterest.--\n (1) General rule.--Where, on the lapse of time, on the occurrence of\nan event or contingency, or on the failure of an event or contingency to\noccur, an interest passing to the surviving spouse will terminate or\nfail, no deduction shall be allowed under this section with respect to\nsuch interest--\n (A) if an interest in such property passes or has passed (for less\nthan an adequate and full consideration in money or money's worth) from\nthe decedent to any person other than such surviving spouse (or the\nestate of such spouse); and\n (B) if by reason of such passing such person (or his heirs or assigns)\nmay possess or enjoy any part of such property after such termination or\nfailure of the interest so passing to the surviving spouse;\n and no deduction shall be allowed with respect to such interest (even\nif such deduction is not disallowed under subparagraphs (A) and (B))--\n (C) if such interest is to be acquired for the surviving spouse,\npursuant to directions of the decedent, by his executor or by the\ntrustee of a trust.\n For purposes of this paragraph, an interest shall not be considered as\nan interest which will terminate or fail merely because it is the\nownership of a bond, note, or similar contractual obligation, the\ndischarge of which would not have the effect of an annuity for life or\nfor a term.\n (2) Interest in unidentified assets.--Where the assets (included in\nthe decedent's gross estate) out of which, or the proceeds of which, an\ninterest passing to the surviving spouse may be satisfied include a\nparticular asset or assets with respect to which no deduction would be\nallowed if such asset or assets passed from the decedent to such spouse,\nthen the value of such interest passing to such spouse shall, for\npurposes of subsection (a), be reduced by the aggregate value of such\nparticular assets.\n (3) Interest of spouse conditional on survival for limited\nperiod.--For purposes of this subsection, an interest passing to the\nsurviving spouse shall not be considered as an interest which will\nterminate or fail on the death of such spouse if--\n (A) such death will cause a termination or failure of such interest\nonly if it occurs within a period not exceeding 6 months after the\ndecedent's death, or only if it occurs as a result of a common disaster\nresulting in the death of the decedent and the surviving spouse, or only\nif it occurs in the case of either such event; and\n (B) such termination or failure does not in fact occur.\n (4) Valuation of interest passing to surviving spouse.--In determining\nfor purposes of subsection (a) the value of any interest in property\npassing to the surviving spouse for which a deduction is allowed by this\nsection--\n (A) there shall be taken into account the effect which the tax imposed\nby section 2001, or any estate, succession, legacy, or inheritance tax,\nhas on the net value to the surviving spouse of such interest; and\n (B) where such interest or property is e
of subsection (a) the value of any interest in property\npassing to the surviving spouse for which a deduction is allowed by this\nsection--\n (A) there shall be taken into account the effect which the tax imposed\nby section 2001, or any estate, succession, legacy, or inheritance tax,\nhas on the net value to the surviving spouse of such interest; and\n (B) where such interest or property is encumbered in any manner, or\nwhere the surviving spouse incurs any obligation imposed by the decedent\nwith respect to the passing of such interest, such encumbrance or\nobligation shall be taken into account in the same manner as if the\namount of a gift to such spouse of such interest were being determined.\n (5) Life estate with power of appointment in surviving spouse.--In the\ncase of an interest in property passing from the decedent, if his\nsurviving spouse is entitled for life to all the income from the entire\ninterest, or all the income from a specific portion thereof, payable\nannually or at more frequent intervals, with power in the surviving\nspouse to appoint the entire interest, or such specific portion\n(exercisable in favor of such surviving spouse, or of the estate of such\nsurviving spouse, or in favor of either, whether or not in each case the\npower is exercisable in favor of others), and with no power in any other\nperson to appoint any part of the interest, or such specific portion, to\nany person other than the surviving spouse--\n (A) the interest or such portion thereof so passing shall, for\npurposes of subsection (a), be considered as passing to the surviving\nspouse, and\n (B) no part of the interest so passing shall, for purposes of\nparagraph (1)(A), be considered as passing to any person other than the\nsurviving spouse.\n This paragraph shall apply only if such power in the surviving spouse\nto appoint the entire interest, or such specific portion thereof,\nwhether exercisable by will or during life, is exercisable by such\nspouse alone and in all events.\n (6) Life insurance or annuity payments with power of appointment in\nsurviving spouse.--In the case of an interest in property passing from\nthe decedent consisting of proceeds under a life insurance, endowment,\nor annuity contract, if under the terms of the contract such proceeds\nare payable in installments or are held by the insurer subject to an\nagreement to pay interest thereon (whether the proceeds, on the\ntermination of any interest payments, are payable in a lump sum or in\nannual or more frequent installments), and such installment or interest\npayments are payable annually or at more frequent intervals, commencing\nnot later than 13 months after the decedent's death, and all amounts, or\na specific portion of all such amounts, payable during the life of the\nsurviving spouse are payable only to such spouse, and such spouse has\nthe power to appoint all amounts, or such specific portion, payable\nunder such contract (exercisable in favor of such surviving spouse, or\nof the estate of such surviving spouse, or in favor of either, whether\nor not in each case the power is exercisable in favor of others), with\nno power in any other person to appoint such amounts to any person other\nthan the surviving spouse--\n (A) such amounts shall, for purposes of subsection (a), be considered\nas passing to the surviving spouse, and\n (B) no part of such amounts shall, for purposes of paragraph (1)(A),\nbe considered as passing to any person other than the surviving spouse.\n This paragraph shall apply only if, under the terms of the contract,\nsuch power in the surviving spouse to appoint such amounts, whether\nexercisable by will or during life, is exercisable by such spouse alone\nand in all events.\n (7) Election with respect to life estate for surviving spouse.--\n (A) In general.--In the case of qualified terminable interest\nproperty--\n (i) for purposes of subsection (a), such property shall be treated as\npassing to the surviving s
ower in the surviving spouse to appoint such amounts, whether\nexercisable by will or during life, is exercisable by such spouse alone\nand in all events.\n (7) Election with respect to life estate for surviving spouse.--\n (A) In general.--In the case of qualified terminable interest\nproperty--\n (i) for purposes of subsection (a), such property shall be treated as\npassing to the surviving spouse, and\n (ii) for purposes of paragraph (1)(A), no part of such property shall\nbe treated as passing to any person other than the surviving spouse.\n (B) Qualified terminable interest property defined.--For purposes of\nthis paragraph--\n (i) In general.--The term "qualified terminable interest property"\nmeans property--\n (I) which passes from the decedent,\n (II) in which the surviving spouse has a qualifying income interest\nfor life, and\n (III) to which an election under this paragraph applies.\n (ii) Qualifying income interest for life.--The surviving spouse has a\nqualifying income interest for life if--\n (I) the surviving spouse is entitled to all the income from the\nproperty, payable annually or at more frequent intervals, or has a\nusufruct interest for life in the property, and\n (II) no person has a power to appoint any part of the property to any\nperson other than the surviving spouse.\n Subclause (II) shall not apply to a power exercisable only at or after\nthe death of the surviving spouse. To the extent provided in\nregulations, an annuity shall be treated in a manner similar to an\nincome interest in property (regardless of whether the property from\nwhich the annuity is payable can be separately identified).\n (iii) Property includes interest therein.--The term "property"\nincludes an interest in property.\n (iv) Specific portion treated as separate property.--A specific\nportion of property shall be treated as separate property.\n (v) Election.--An election under this paragraph with respect to any\nproperty shall be made by the executor on the return of tax imposed by\nsection 2001. Such an election, once made, shall be irrevocable.\n (C) Treatment of survivor annuities.--In the case of an annuity\nincluded in the gross estate of the decedent under section 2039 (or, in\nthe case of an interest in an annuity arising under the community\nproperty laws of a State, included in the gross estate of the decedent\nunder section 2033) where only the surviving spouse has the right to\nreceive payments before the death of such surviving spouse--\n (i) the interest of such surviving spouse shall be treated as a\nqualifying income interest for life, and\n (ii) the executor shall be treated as having made an election under\nthis subsection with respect to such annuity unless the executor\notherwise elects on the return of tax imposed by section 2001.\n An election under clause (ii), once made, shall be irrevocable.\n (8) Special rule for charitable remainder trusts.--\n (A) In general.--If the surviving spouse of the decedent is the only\nbeneficiary of a qualified charitable remainder trust who is not a\ncharitable beneficiary nor an ESOP beneficiary, paragraph (1) shall not\napply to any interest in such trust which passes or has passed from the\ndecedent to such surviving spouse.\n (B) Definitions.--For purposes of subparagraph (A)--\n (i) Charitable beneficiary.--The term "charitable beneficiary" means\nany beneficiary which is an organization described in section 170(c).\n (ii) ESOP beneficiary.--The term "ESOP beneficiary" means any\nbeneficiary which is an employee stock ownership plan (as defined in\nsection 4975(e)(7)) that holds a remainder interest in qualified\nemployer securities (as defined in section 664(g)(4)) to be transferred\nto such plan in a qualified gratuitous transfer (as defined in section\n664(g)(1)).\n (iii) Qualified charitable remainder trust.--The term "qualified\ncharitable remainder trust" means a charitable remainder annuity trust\nor a charitable remainder unitrust
\nsection 4975(e)(7)) that holds a remainder interest in qualified\nemployer securities (as defined in section 664(g)(4)) to be transferred\nto such plan in a qualified gratuitous transfer (as defined in section\n664(g)(1)).\n (iii) Qualified charitable remainder trust.--The term "qualified\ncharitable remainder trust" means a charitable remainder annuity trust\nor a charitable remainder unitrust (described in section 664).\n (9) Denial of double deduction.--Nothing in this section or any other\nprovision of this chapter shall allow the value of any interest in\nproperty to be deducted under this chapter more than once with respect\nto the same decedent.\n (10) Specific portion.--For purposes of paragraphs (5), (6), and\n(7)(B)(iv), the term "specific portion" only includes a portion\ndetermined on a fractional or percentage basis.\n (c) Definition.--For purposes of this section, an interest in property\nshall be considered as passing from the decedent to any person if and\nonly if--\n (1) such interest is bequeathed or devised to such person by the\ndecedent;\n (2) such interest is inherited by such person from the decedent;\n (3) such interest is the dower or curtesy interest (or statutory\ninterest in lieu thereof) of such person as surviving spouse of the\ndecedent;\n (4) such interest has been transferred to such person by the decedent\nat any time;\n (5) such interest was, at the time of the decedent's death, held by\nsuch person and the decedent (or by them and any other person) in joint\nownership with right of survivorship;\n (6) the decedent had a power (either alone or in conjunction with any\nperson) to appoint such interest and if he appoints or has appointed\nsuch interest to such person, or if such person takes such interest in\ndefault on the release or nonexercise of such power; or\n (7) such interest consists of proceeds of insurance on the life of the\ndecedent receivable by such person.\n Except as provided in paragraph (5) or (6) of subsection (b), where at\nthe time of the decedent's death it is not possible to ascertain the\nparticular person or persons to whom an interest in property may pass\nfrom the decedent, such interest shall, for purposes of subparagraphs\n(A) and (B) of subsection (b)(1), be considered as passing from the\ndecedent to a person other than the surviving spouse.\n § 2103. Definition of Gross Estate. For the purpose of the tax imposed\nby section 2101, the value of the gross estate of every decedent\nnonresident not a citizen of the United States shall be that part of his\ngross estate (determined as provided in section 2031) which at the time\nof his death is situated in the United States.\n § 2104. Property Within the United States. (a) Stock in\ncorporation.--For purposes of this subchapter shares of stock owned and\nheld by a nonresident not a citizen of the United States shall be deemed\nproperty within the United States only if issued by a domestic\ncorporation.\n (b) Revocable transfers and transfers within 3 years of death.--For\npurposes of this subchapter, any property of which the decedent has made\na transfer, by trust or otherwise, within the meaning of sections 2035\nto 2038, inclusive, shall be deemed to be situated in the United States,\nif so situated either at the time of the transfer or at the time of the\ndecedent's death.\n (c) Debt obligations.--For purposes of this subchapter, debt\nobligations of-\n (1) a United States person, or\n (2) the United States, a State or any political subdivision thereof,\nor the District of Columbia,\n owned and held by a nonresident not a citizen of the United States\nshall be deemed property within the United States. With respect to\nestates of decedents dying after December 31, 1969, deposits with a\ndomestic branch of a foreign corporation, if such branch is engaged in\nthe commercial banking business, shall, for purposes of this subchapter,\nbe deemed property within the United States
a,\n owned and held by a nonresident not a citizen of the United States\nshall be deemed property within the United States. With respect to\nestates of decedents dying after December 31, 1969, deposits with a\ndomestic branch of a foreign corporation, if such branch is engaged in\nthe commercial banking business, shall, for purposes of this subchapter,\nbe deemed property within the United States. This subsection shall not\napply to a debt obligation to which section 2105(b) applies.\n § 2105. Property Without the United States. (a) Proceeds of life\ninsurance.--For purposes of this subchapter, the amount receivable as\ninsurance on the life of a nonresident not a citizen of the United\nStates shall not be deemed property within the United States.\n (b) Bank deposits and certain other debt obligations.--For purposes of\nthis subchapter, the following shall not be deemed property within the\nUnited States--\n (1) amounts described in section 871(i)(3), if any interest thereo

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Source: Frix Law Library, https://www.frixlaw.com/law-library/statutes/STATE_NY_ATAX_A26_P4_S999-A. Check the current official text before relying on it. Not legal advice.