United States Code

AMENDMENTS

1962-Subsec. (a). Pub. L. 87-834 eliminated provisions which excepted real property situated outside the United States.

EFFECTIVE DATE of 1962 AMENDMENT

Section 18(b) of Pub. L. 87-834 provided that:

"(1) Except as provided in paragraph (2), the amendments made by subsection (a) [amending this section and sections 2033, 2034, 2035, 2036, 2037, 2038, 2040 and 2041 of this title] shall apply to the estates of decedents dying after the date of the enactment of this Act [Oct. 16, 1962].

"(2) In the case of a decedent dying after the date of the enactment of this Act [Oct. 16, 1962] and before July 1, 1964, the value of real property situated outside of the United States shall not be included in the gross estate (as defined in section 2031(a)) of the decedent

"(A) under section 2033, 2034, 2035(a), 2036(a), 2037(a), or 2038 (a) to the extent the real property, or the decedent's interest in it, was acquired by the decedent before February 1, 1962;

"(B) under section 2040 to the extent such property or interest was acquired by the decedent before February 1, 1962, or was held by the decedent and the survivor in a joint tenancy or tenancy by the entirety before February 1, 1962; or

"(C) under section 2041 (a) to the extent that before February 1, 1962, such property or interest was subject to a general power of appointment (as defined in section 2041) possessed by the decedent.

In the case of real property, or an interest therein, situated outside of the United States (including a general power of appointment in respect of such property or interest, and including property held by the decedent and the survivor in a joint tenancy or tenancy by the entirety) which was acquired by the decedent after January 31, 1962, by gift within the meaning of section 2511, or from a prior dececent by devise or inheritance, or by reason of death, form of ownership, or other conditions (including the exercise or nonexercise of a power of appointment), for purposes of this paragraph such property or interest therein shall be deemed to have been acquired by the decedent before February 1, 1962, if before that date the donor or prior decedent had acquired the property or his interest therein or had possessed a power of appointment in respect of the property or interest."

CROSS REFERENCES

Gross estate of nonresidents not citizens, see section 2103 of this title.

Taxable estate of nonresidents not citizens, see section 2106 of this title.

§ 2032. Alternate valuation. (a) General.

The value of the gross estate may be determined, if the executor so elects, by valuing all the property included in the gross estate as follows:

(1) In the case of property distributed, sold, exchanged, or otherwise disposed of, within 1 year after the decedent's death such property shall be valued as of the date of distribution, sale, exchange, or other disposition.

(2) In the case of property not distributed, sold, exchanged, or otherwise disposed of, within 1 year after the decedent's death such property shall be valued as of the date 1 year after the decedent's death.

(3) Any interest or estate which is affected by mere lapse of time shall be included at its value as of the time of death (instead of the later date) with adjustment for any difference in its value as of the later date not due to mere lapse of time. (b) Special rules.

No deduction under this chapter of any item shall be allowed if allowance for such item is in

effect given by the alternate valuation provided by this section. Wherever in any other subsection or section of this chapter reference is made to the value of property at the time of the decedent's death, such reference shall be deemed to refer to the value of such property used in determining the value of the gross estate. In case of an election made by the executor under this section, then

(1) for purposes of the charitable deduction under section 2055 or 2106 (a) (2), any bequest, legacy, devise, or transfer enumerated therein, and

(2) for the purpose of the marital deduction under section 2056, any interest in property passing to the surviving spouse,

shall be valued as of the date of the decedent's death with adjustment for any difference in value (not due to mere lapse of time or the occurrence or nonoccurrence of a contingency) of the property as of the date 1 year after the decedent's death (substituting, in the case of property distributed by the executor or trustee, or sold, exchanged, or otherwise disposed of, during such 1-year period, the date thereof).

The election provided for in this section shall be exercised by the executor on his return if filed within the time prescribed by law or before the expiration of any extension of time granted pursuant to law for the filing of the return. (Aug. 16, 1954, ch. 736, 68A Stat. 381.)

CROSS REFERENCES

Basis of property acquired from a decedent, see section 1014 of this title.

Taxable estate of nonresident not citizen, see section 2106 of this title.

Transfers for public, charitable, and religious uses, see section 2055 of this title.

§ 2033. Property in which the decedent had an interest. The value of the gross estate shall include the value of all property to the extent of the interest therein of the decedent at the time of his death. (Aug. 16, 1954, ch. 736, 68A Stat. 381; Oct. 16, 1962, Pub. L. 87-834, § 18(a) (2) (A), 76 Stat. 1052.)

AMENDMENTS

1962-Pub. L. 87-834 eliminated provisions which excepted real property situated outside of the United States.

EFFECTIVE Date of 1962 AMENDMENT

Amendment of section by Pub. L. 87-834 applicable, except as otherwise provided, to the estates of decedents dying after Oct. 16, 1962, see section 18(b) of Pub. L. 87-834, set out as a note under section 2031 of this title.

§ 2034. Dower or curtesy interests.

The value of the gross estate shall include the value of all property to the extent of any interest therein of the surviving spouse, existing at the time of the decedent's death as dower or curtesy, or by virtue of a statute creating an estate in lieu of dower or curtesy. (Aug. 16, 1954, ch. 736, 68A Stat. 381; Oct. 16, 1962, Pub. L. 87-834, § 18(a) (2) (B), 76 Stat. 1052.)

AMENDMENTS

1962-Pub. L. 87-834 eliminated provisions which excepted real property situated outside of the United States.

EFFECTIVE DATE of 1962 AMENDMENT Amendment of section by Pub. L. 87-834 applicable, except as otherwise provided, to the estates of decedents dying after Oct. 16, 1962, see section 18(b) of Pub. L. 87-834, set out as a note under section 2031 of this title. § 2035. Transactions in contemplation of death. (a) General rule.

(b) Application of general rule.

If the decedent within a period of 3 years ending with the date of his death (except in case of a bona fide sale for an adequate and full consideration in money or money's worth) transferred an interest in property, relinquished a power, or exercised or released a general power of appointment, such transfer, relinquishment, exercise, or release shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this section and sections 2038 and 2041 (relating to revocable transfers and powers of appointment); but no such transfer, relinquishment, exercise, or release made before such 3-year period shall be treated as having been made in contemplation of death. (Aug. 16, 1954, ch. 736, 68A Stat. 381; Oct. 16, 1962, Pub. L. 87-834, § 18(a) (2) (C), 76 Stat. 1052.)

AMENDMENTS

1962 Subsec. (a). Pub. L. 87-834 eliminated provisions which excepted real property situated outside of the United States.

EFFECTIVE DATE OF 1962 AMENDMENT Amendment of section by Pub. L. 87-834 applicable, except as otherwise provided, to the estates of decedents dying after Oct. 16, 1962, see section 18(b) of Pub. L. 87-834, set out as a note under section 2031 of this title. CROSS REFERENCES

Estates of nonresidents not citizens, see section 2104 of this title.

§ 2036. Transfers with retained life estate. (a) General rule.

The value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death

(1) the possession or enjoyment of, or the right to the income from, the property, or

(2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom.

(b) Limitation on application of general rule.

This section shall not apply to a transfer made before March 4, 1931; nor to a transfer made after March 3, 1931, and before June 7, 1932, unless the

property transferred would have been includible in the decedent's gross estate by reason of the amendatory language of the joint resolution of March 3, 1931 (46 Stat. 1516). (Aug. 16, 1954, ch. 736, 68A Stat. 382; Oct. 16, 1962, Pub. L. 87-834, § 18(a) (2) (D), 76 Stat. 1052.)

AMENDMENTS

1962 Subsec. (a). Pub. L. 87-834 eliminated provisions which excepted real property situated outside of the United States.

Estates of nonresidents not citizens, see section 2104 of this title.

§ 2037. Transfers taking effect at death. (a) General rule.

The value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time after September 7, 1916, made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, if—

(1) possession or enjoyment of the property can, through ownership of such interest, be obtained only by surviving the decedent, and

(2) the decedent has retained a reversionary interest in the property (but in the case of a transfer made before October 8, 1949, only if such reversionary interest arose by the express terms of the instrument of transfer), and the value of such reversionary interest immediately before the death of the decedent exceeds 5 percent of the value of such property.

(b) Special rules.

For purposes of this section, the term "reversionary interest" includes a possibility that property transferred by the decedent

(1) may return to him or his estate, or

(2) may be subject to a power of disposition by him,

but such term does not include a possibility that the income alone from such property may return to him or become subject to a power of disposition by him. The value of a reversionary interest immediately before the death of the decedent shall be determined (without regard to the fact of the decedent's death) by usual methods of valuation, including the use of tables of mortality and actuarial principles. under regulations prescribed by the Secretary or his delegate. In determining the value of a possibility that property may be subject to a power of disposition by the decedent, such possibility shall be valued as if it were a possibility that such property may return to the decedent or his estate. Notwithstanding the foregoing, an interest so transferred shall not be included in the decedent's gross estate under this section if possession or enjoyment of the property could have been obtained by any beneficiary during the decedent's life through the exercise of a general power of appointment (as defined in section 2041) which in fact was exercis

able immediately before the decedent's death. (Aug. 16, 1954, ch. 736, 68A Stat. 382; Oct. 16, 1962, Pub. L. 87-834, § 834, § 18(a) (2) (E), 76 Stat. 1052.)

AMENDMENTS

1962 Subsec. (a). Pub. L. 87-834 eliminated provisions which excepted real property situated outside of the United States.

Estates of nonresidents not citizens, see section 2104 of this title.

§ 2038. Revocable transfers.

(a) In general.

The value of the gross estate shall include the value of all property.

(1) Transfers after June 22, 1936.

To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke, or terminate, or where any such power is relinquished in contemplation of decedent's death.

(2) Transfers on or before June 22, 1936.

To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money's worth), by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, or revoke, or where the decedent relinquished any such power in contemplation of his death. Except in the case of transfers made after June 22, 1936, no interest of the decedent of which he has made a transfer shall be included in the gross estate under paragraph (1) unless it is includible under this paragraph.

(b) Date of existence of power.

For purposes of this section, the power to alter, amend, revoke, or terminate shall be considered to exist on the date of the decedent's death even though the exercise of the power is subject to a precedent giving of notice or even though the alteration, amendment, revocation, or termination takes effect only on the expiration of a stated period after the exercise of the power, whether or not on or before the date of the decedent's death notice has been given or the power has been exercised. In such cases proper adjustment shall be made representing the interests which would have been excluded from the power if the decedent had lived, and for such

purpose, if the notice has not been given or the power has not been exercised on or before the date of his death, such notice shall be considered to have been given, or the power exercised, on the date of his death.

For purposes of this section, in the case of a decedent who was (for a continuous period beginning not less than 3 months before December 31, 1947, and ending with his death) under a mental disability to relinquish a power, the term "power" shall not include a power the relinquishment of which on or after January 1, 1940, and on or before December 31, 1947, would, by reason of section 1000 (e) of the Internal Revenue Code of 1939, be deemed not to be a transfer of property for purposes of chapter 4 of the Internal Revenue Code of 1939. (Aug. 16, 1954, ch. 736, 68A Stat. 383; Aug. 7, 1959, Pub. L. 86-141, § 1, 73 Stat. 288; Oct. 16, 1962, Pub. L. 87-834, § 18(a) (2) (F), 76 Stat. 1052.)

AMENDMENTS

1962 Subsec. (a). Pub. L. 87-834 eliminated provisions which excepted real property situated outside of the United States. 1959 Subsec. (c). Pub. L. 86-141 added subsec. (c). EFFECTIVE DATE OF 1962 AMENDMENT

EFFECTIVE Date of 1959 AMENDMENT

Section 2 of Pub. L. 86-141 provided that: "The amendment made by the first section of this Act [adding subsec. (c) of this section] shall apply only with respect to estates of decedents dying after August 16, 1954. No interest shall be allowed or paid on any overpayment resulting from the application of the amendment made by the first section of this Act with respect to any payment made before the date of the enactment of this Act [Aug. 7, 1959]."

CROSS REFERENCES

Estates of nonresidents not citizens, see section 2104 of this title.

§ 2039. Annuities. (a) General.

The gross estate shall include the value of an annuity or other payment receivable by any beneficiary by reason of surviving the decedent under any form of contract or agreement entered into after March 3, 1931 (other than as insurance under policies on the life of the decedent), if, under such contract or agreement, an annuity or other payment was payable to the decedent, or the decedent possessed the right to receive such annuity or payment, either alone or in conjunction with another for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death.

(b) Amount includible.

Subsection (a) shall apply to only such part of the value of the annuity or other payment receivable under such contract or agreement as is proportionate to that part of the purchase price therefor contributed by the decedent. For purposes of this section, any contribution by the decedent's employer or former employer to the purchase price of such contract or agreement (whether or not to an employee's trust or fund forming part of a pension,

annuity, retirement, bonus or profit sharing plan) shall be considered to be contributed by the decedent if made by reason of his employment.

Notwithstanding the provisions of this section or of any provision of law, there shall be excluded from the gross estate the value of an annuity or other payment receivable by any beneficiary (other than the executor) under

(1) an employees' trust (or under a contract purchased by an employees' trust) forming part of a pension, stock bonus, or profit-sharing plan which, at the time of the decedent's separation from employment (whether by death or otherwise), or at the time of termination of the plan if earlier, met the requirements of section 401 (a); (2) a retirement annuity contract purchased by an employer (and not by an employees' trust) pursuant to a plan which, at the time of decedent's separation from employment (by death or otherwise), or at the time of termination of the plan if earlier, was a plan described in section 403 (a); or

(3) a retirement annuity contract purchased for an employee by an employer which is an organization referred to in section 503 (b) (1), (2), or (3), and which is exempt from tax under section 501 (a).

If such amounts payable after the death of the decedent under a plan described in paragraph (1) or (2) or under a contract described in paragraph (3) are attributable to any extent to payments or contributions made by the decedent, no exclusion shall be allowed for that part of the value of such amounts in the proportion that the total payments or contributions made by the decedent bears to the total payments or contributions made. For purposes of this subsection, contributions or payments made by the decedent's employer or former employer under a trust or plan described in paragraph (1) or (2) shall not be considered to be contributed by the decedent, and contributions or payments made by the decedent's employer or former employer toward the purchase of an annuity contract described in paragraph (3) shall, to the extent excludable from gross income under section 403 (b), not be considered to be contributed by the decedent. This subsection shall apply to all decedents dying after December 31, 1953. For purposes of this subsection, contributions or payments on behalf of the decedent while he was an employee within the meaning of section 401(c) (1) made under a trust or plan described in paragraph (1) or (2) shall be considered to be contributions or payments made by the decedent. (Aug. 16, 1954, ch. 736, 68A Stat. 384; Sept. 2, 1958, Pub. L. 85-866, title I, §§ 23 (e), 67(a), 72 Stat. 1622, 1658; Oct. 10, 1962, Pub. L. 87-792; § 7(1), 76 Stat. 830.)

AMENDMENTS

1962 Subsec. (c). Pub. L. 87-792 substituted "was a plan described in section 403(a)" for "met the requirements of section 401(a) (3), (4), (5), and (6)" in par. (2), and inserted sentence providing, for purposes of this subsection, that contributions or payments on behalf of the decedent while he was an employee within the meaning of section 401 (c) (1) made under a trust or plan

described in paragraph (1) or (2) shall be considered to be contributions or payments made by the decedent. 1958-Subsec. (c) (2). Pub. L. 85–866, § 67(a), inserted “(4), (5), and (6)" following "section 401(a) (3)”.

Subsec. (c). Public L. 85-866, § 23 (e), added par. (3), inserted "or under contract described in paragraph (3)" in second sentence, and substituted "paragraph (1) or (2) shall not be considered to be contributed by the decedent, and contributions or payments made by the decedent's employer or former employer toward the purchase of an annuity contract described in paragraph (3) shall, to the extent excludable from gross income under section 403(b)," for "this subsection shall" in third sentence. EFFECTIVE DATE OF 1962 AMENDMENT Amendment of section by Pub. L. 87-792 applicable to taxable years beginning after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a note under section 37 of this title.

EFFECTIVE Date of 1958 AMENDMENT

Section 67 (b) of Pub. L. 85-866 provided that: "The amendment made by subsection (a) [to subsec. (c) (2) of this section] shall apply with respect to estates of decedents dying after December 31, 1953."

Amendment of subsec. (c) of this section by Pub. L. 85-866, § 23 (e), applicable with respect to estates of decedents dying after Dec. 31, 1957, see section 23(g) of Pub. L. 85-866, set out as a note under section 403 of this title.

§ 2040. Joint interests.

The value of the gross estate shall include the value of all property to the extent of the interest therein held as joint tenants by the decedent and any other person, or as tenants by the entirety by the decedent and spouse, or deposited, with any person carrying on the banking business, in their joint names and payable to either or the survivor, except such part thereof as may be shown to have originally belonged to such other person and never to have been received or acquired by the latter from the decedent for less than an adequate and full consideration in money or money's worth: Provided, That where such property or any part thereof, or part of the consideration with which such property was acquired, is shown to have been at any time acquired by such other person from the decedent for less than an adequate and full consideration in money or money's worth, there shall be excepted only such part of the value of such property as is proportionate to the consideration furnished by such other person: Provided further, That where any property has been acquired by gift, bequest, devise, or inheritance, as a tenancy by the entirety by the decedent and spouse, then to the extent of one-half of the value thereof, or, where so acquired by the decedent and any other person as joint tenants and their interests are not otherwise specified or fixed by law, then to the extent of the value of a fractional part to be determined by dividing the value of the property by the number of joint tenants. (Aug. 16, 1954, ch. 736, 68A Stat. 385; Oct. 16, 1962, Pub. L. 87-834, § 18(a) (2) (G), 76 Stat. 1052.)

AMENDMENTS 1962-Pub. L. 87-834 eliminated provisions which excepted real property outside of the United States.

§ 2041. Powers of appointment. (a) In general.

The value of the gross estate shall include the value of all property.

(1) Powers of appointment created on or before October 21, 1942.

To the extent of any property with respect to which a general power of appointment created on or before October 21, 1942, is exercised by the decedent

(A) by will, or

(B) by a disposition which is of such nature that if it were a transfer of property owned by the decedent, such property would be includible in the decedent's gross estate under sections 2035 to 2038, inclusive;

but the failure to exercise such a power or the complete release of such a power shall not be deemed an exercise thereof. If a general power of appointment created on or before October 21, 1942, has been partially released so that it is no longer a general power of appointment, the exercise of such power shall not be deemed to be the exercise of a general power of appointment if—

(i) such partial release occurred before November 1, 1951, or

(ii) the donee of such power was under a legal disability to release such power on October 21, 1942, and such partial release occurred not later than 6 months after the termination of such legal disability.

(2) Powers created after October 21, 1942.

To the extent of any property with respect to which the decedent has at the time of his death a general power of appointment created after October 21, 1942, or with respect to which the decedent has at at any time exercised or released such a power of appointment by a disposition which is of such nature that if it were a transfer of property owned by the decedent, such property would be includible in the decedent's gross estate under sections 2035 to 2038, inclusive. A disclaimer or renunciation of such a power of appointment shall not be deemed a release of such power. For purposes of this paragraph (2), the power of appointment shall be considered to exist on the date of the decedent's death even though the exercise of the power is subject to a precedent giving of notice or even though the exercise of the power takes effect only on the expiration of a stated period after its exercise, whether or not on or before the date of the decedent's death notice has been given or the power has been exercised. (3) Creation of another power in certain cases. To the extent of any property with respect to which the decedent

(A) by will, or

(B) by a disposition which is of such nature that if it were a transfer of property owned by the decedent such property would be includible in the decedent's gross estate under section 2035, 2036, or 2037,

exercises a power of appointment created after October 21, 1942, by creating another power of 36-500 0-65-vol. 6- -42

appointment which under the applicable local law can be validly exercised so as to postpone the vesting of any estate or interest in such property, or suspend the absolute ownership or power of alienation of such property, for a period ascertainable without regard to the date of the creation of the first power.

(b) Definitions.

For purposes of subsection (a)—

(1) General power of appointment.

The term "general power of appointment" means a power which is exercisable in favor of the decedent, his estate, his creditors, or the creditors of his estate; except that

(A) A power to consume, invade, or appropriate property for the benefit of the decedent which is limited by an ascertainable standard relating to the health, education, support, or maintenance of the decedent shall not be deemed a general power of appointment.

(B) A power of appointment created on or before October 21, 1942, which is exercisable by the decedent only in conjunction with another person shall not be deemed a general power of appointment.

(C) In the case of a power of appointment created after October 21, 1942, which is exercisable by the decedent only in conjunction with another person

(i) If the power is not exercisable by the decedent except in conjunction with the creator of the power-such power shall not be deemed a general power of appointment.

(ii) If the power is not exercisable by the decedent except in conjunction with a person having a substantial interest in the property, subject to the power, which is adverse to exercise of the power in favor of the decedent such power shall not be deemed a general power of appointment. For the purposes of this clause a person who, after the death of the decedent, may be possessed of a power of appointment (with respect to the property subject to the decedent's power) which he may exercise in his own favor shall be deemed as having an interest in the property and such interest shall be deemed adverse to such exercise of the decedent's power.

(iii) If (after the application of clauses (i) and (ii)) the power is a general power of appointment and is exercisable in favor of such other person-such power shall be deemed a general power of appointment only in respect of a fractional part of the property subject to such power, such part to be determined by dividing the value of such property by the number of such persons (including the decedent) in favor of whom such power is exercisable.

For purposes of clauses (ii) and (iii), a power shall be deemed to be exercisable in favor of a person if it is exercisable in favor of such person, his estate, his creditors, or the creditors of his estate.

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United States Code, Volum 6