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Sec. 2035. Adjustments For Certain Gifts Made Within 3 Years Of Decedent's Death

I.R.C. § 2035(a) Inclusion Of Certain Property In Gross Estate
If—
I.R.C. § 2035(a)(1)
the decedent made a transfer (by trust or otherwise) of an interest in any property, or relinquished a power with respect to any property, during the 3-year period ending on the date of the decedent's death, and
I.R.C. § 2035(a)(2)
the value of such property (or an interest therein) would have been included in the decedent's gross estate under section 2036, 2037, 2038, or 2042 if such transferred interest or relinquished power had been retained by the decedent on the date of his death,
the value of the gross estate shall include the value of any property (or interest therein) which would have been so included.
I.R.C. § 2035(b) Inclusion Of Gift Tax On Gifts Made During 3 Years Before Decedent's Death
The amount of the gross estate (determined without regard to this subsection) shall be increased by the amount of any tax paid under chapter 12 by the decedent or his estate on any gift made by the decedent or his spouse during the 3-year period ending on the date of the decedent's death.
I.R.C. § 2035(c) Other Rules Relating To Transfers Within 3 Years Of Death
I.R.C. § 2035(c)(1) In General
For purposes of—
I.R.C. § 2035(c)(1)(A)
section 303(b) (relating to distributions in redemption of stock to pay death taxes),
I.R.C. § 2035(c)(1)(B)
section 2032A (relating to special valuation of certain farms, etc., real property), and
I.R.C. § 2035(c)(1)(C)
subchapter C of chapter 64 (relating to lien for taxes),
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, by trust or otherwise, during the 3-year period ending on the date of the decedent's death.
I.R.C. § 2035(c)(2) Coordination With Section 6166
An estate shall be treated as meeting the 35 percent of adjusted gross estate requirement of section 6166(a)(1) only if the estate meets such requirement both with and without the application of subsection (a).
I.R.C. § 2035(c)(3) Marital And Small Transfers
Paragraph (1) shall not apply to any transfer (other than a transfer with respect to a life insurance policy) made during a calendar year to any donee if the decedent was not required by section 6019 (other than by reason of section 6019(2)) to file any gift tax return for such year with respect to transfers to such donee.
I.R.C. § 2035(d) Exception
Subsection (a) and paragraph (1) of subsection (c) shall not apply to any bona fide sale for an adequate and full consideration in money or money's worth.
I.R.C. § 2035(e) Treatment Of Certain Transfers From Revocable Trusts
For purposes of this section and section 2038, any transfer from any portion of a trust during any period that such portion was treated under section 676 as owned by the decedent by reason of a power in the grantor (determined without regard to section 672(e)) shall be treated as a transfer made directly by the decedent.
(Aug. 16, 1954, ch. 736, 68A Stat. 381; Oct. 16, 1962, Pub. L. 87-834, 18(a)(2)(C), 76 Stat. 1052; Oct. 4, 1976, Pub. L. 94-455, title XX, 2001(a)(5), 90 Stat. 1848; Nov. 6, 1978, Pub. L. 95-600, title VII, 702(f)(1), 92 Stat. 2930; Aug. 13, 1981, Pub. L. 97-34, title IV, 403(b)(3)(B), 424(a), 95 Stat. 301, 317; Jan. 12, 1983, Pub. L. 97-448, title I, 104(a)(9), (d)(1)(A), (C), (2), 96 Stat. 2381, 2383; Pub. L. 105-34, title XIII, Sec. 1310(a), Aug. 5, 1997, 111 Stat 788; Pub. L. 106-554, Sec. 319, Dec. 21, 2000, 114 Stat. 2763.)
BACKGROUND NOTES
AMENDMENTS
2000--Subsec. (c)(2). Pub. L. 106-554, Sec. 319(14)(A), amended par. (2) by substituting “subsection (a)” for “paragraph (1)”.
Subsec. (d). Pub. L. 106-554, Sec. 319(14)(B), amended subsec. (d) by inserting “and paragraph (1) of subsection (c)” after “Subsection (a)”.
1997--Sec. 2035. Pub. L. 105-34, Sec. 1310(a), amended Sec. 2035. Prior to amendment it read as follows:
“2035. Adjustments for gifts made within 3 years of decedent's death
“(a) Inclusion of gifts made by decedent
Except as provided in subsection (b), 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, by trust or otherwise, during the 3-year period ending on the date of the decedent's death.
“(b) Exceptions
Subsection (a) shall not apply--
“(1) to any bona fide sale for an adequate and full consideration in money or money's worth, and
“(2) to any gift to a donee made during a calendar year if the decedent was not required by section 6019 (other than by reason of section 6019(2)) to file any gift tax return for such year with respect to gifts to such donee.
Paragraph (2) shall not apply to any transfer with respect to a life insurance policy.
“(c) Inclusion of gift tax on certain gifts made during 3 years before decedent's death
The amount of the gross estate (determined without regard to this subsection) shall be increased by the amount of any tax paid under chapter 12 by the decedent or his estate on any gift made by the decedent or his spouse after December 31, 1976, and during the 3-year period ending on the date of the decedent's death.
“(d) Decedents dying after 1981
“(1) In general
Except as otherwise provided in this subsection, subsection (a) shall not apply to the estate of a decedent dying after December 31, 1981.
“(2) Exceptions for certain transfers
Paragraph (1) of this subsection and paragraph (2) of subsection (b) shall not apply to a transfer of an interest in property which is included in the value of the gross estate under section 2036, 2037, 2038, or 2042 or would have been included under any of such sections if such interest had been retained by the decedent.
“(3) 3-year rule retained for certain purposes
Paragraph (1) shall not apply for purposes of--
“(A) section 303(b) (relating to distributions in redemption of stock to pay death taxes),
“(B) section 2032A (relating to special valuation of certain farm, etc., real property), and
“(C) subchapter C of chapter 64 (relating to lien for taxes).
“(4) Coordination of 3-year rule with section 6166(a)(1)
An estate shall be treated as meeting the 35-percent of adjusted gross estate requirement of section 6166(a)(1) only if the estate meets such requirement both with and without the application of paragraph (1).”
1983--Subsec. (b)(2). Pub. L. 97-448, 104(a)(9), substituted “section 6019(2)” for “section 6019(a)(2)”.
Subsec. (d)(2). Pub. L. 97-448, 104(d)(2), inserted “of this subsection and paragraph (2) of subsection (b)” after “Paragraph (1)”, and struck out “2041,” after “2038,”.
Subsec. (d)(3)(C), (D). Pub. L. 97-448, 104(d)(1)(C), redesignated subpar. (D) as (C). Former subpar. (C), which referred to section 6166 (relating to extension of time for payment of estate tax where estate consists largely of interest in closely held business), was struck out.
Subsec. (d)(4). Pub. L. 97-448, 104(d)(1)(A), added par. (4).
1981--Subsec. (b)(2). Pub. L. 97-34, 403(b)(3)(B), inserted “(other than by reason of section 6019(a)(2))” after “section 6019”.
Subsec. (d). Pub. L. 97-34, 424(a), added subsec. (d).
1978--Subsec. (b). Pub. L. 95-600 substituted in par. (2) provisions relating to gifts for which donee was not required by section 6019 to file gift tax returns for provisions relating to gifts excludable in computing taxable gifts by reason of section 2503(b) and inserted provisions following par. (2) relating to inapplicability of par. (2) to transfers respecting life insurance policies.
1976--Pub. L. 94-455 substituted provisions covering adjustments for gifts made within 3 years of decedent's death for provisions under which transfers by the decedent within 3 years of the decedent's death were deemed to have been made in contemplation of death and included in the value of the gross estate.
1962--Subsec. (a). Pub. L. 87-834 struck out provisions which excepted real property situated outside of the United States.
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendments by Sec. 1310(a) of Pub. L. 105-34 applicable to estates of decedents dying after the date of the enactment of this Act [Aug. 5, 1997].
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise provided, as if it had been included in the provision of the Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 109 of Pub. L. 97-448, set out as a note under section 1 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Amendment by section 403(b)(3)(B) of Pub. L. 97-34 applicable to the estates of decedents dying after Dec. 31, 1981, see section 403(e) of Pub. L. 97-34, set out as a note under section 2056 of this title.
Section 424(b) of Pub. L. 97-34 provided that: “The amendment made by subsection (a) [amending this section] shall apply to the estates of decedents dying after December 31, 1981.”
EFFECTIVE DATE OF 1978 AMENDMENT
Section 702(f)(2) of Pub. L. 95-600 provided that: “The amendment made by paragraph (1) [amending this section] shall apply to the estates of decedents dying after December 31, 1976, except that it shall not apply to transfers made before January 1, 1977.”
EFFECTIVE DATE OF 1976 AMENDMENT
Amendment by Pub. L. 94-455 applicable to estates of decedents dying after Dec. 31, 1976 but not to transfers made before Jan. 1, 1977, see section 2001(d)(1) of Pub. L. 94-455, set out as a note under section 2001 of this title.
EFFECTIVE DATE OF 1962 AMENDMENT
Amendment 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.
TRANSFERS MADE BY DECEDENT DURING 1977; ELECTION AVAILABLE TO EXECUTOR ON OR BEFORE DUE DATE FOR FILING ESTATE TAX RETURN
Pub. L. 96-222, title I, 107(a)(2)(F), Apr. 1, 1980, 94 Stat. 223, as amended by Pub. L. 99-514, 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
“(i) If the executor elects the benefits of this subparagraph with respect to any estate, section 2035(b) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to adjustments for gifts made within 3 years of decedent's death) shall be applied with respect to transfers made by the decedent during 1977 as if paragraph (2) of such section 2035(b) read as follows:
“‘(2) to any gift to a donee made during 1977 to the extent of the amount of such gift which was excludable in computing taxable gifts by reason of section 2503(b) (relating to $3,000 annual exclusion for purposes of the gift tax) determined without regard to section 2513(a).’
“(ii) The election under clause (i) with respect to any estate shall be made on or before the later of--
“(I) the due date for filing the estate tax return, or
“(II) the day which is 120 days after the date of the enactment of this Act [Apr. 1, 1980].”
REINSTATEMENT OF ESTATE TAX; REPEAL OF CARRYOVER BASIS
Section 301 of Pub. L. 111-312 provided:
“(a) IN GENERAL.—Each provision of law amended by subtitle A or E of title V of the Economic Growth and Tax Relief Reconciliation Act of 2001 is amended to read as such provision would read if such subtitle had never been enacted.
“(b) CONFORMING AMENDMENT.—On and after January 1, 2011, paragraph (1) of section 2505(a) of the Internal Revenue Code of 1986 is amended to read as such paragraph would read if section 521(b)(2) of the Economic Growth and Tax Relief Reconciliation Act of 2001 had never been enacted.
“(c) SPECIAL ELECTION WITH RESPECT TO ESTATES OF DECEDENTS DYING IN 2010.—Notwithstanding subsection (a), in the case of an estate of a decedent dying after December 31, 2009, and before January 1, 2011, the executor (within the meaning of section 2203 of the Internal Revenue Code of 1986) may elect to apply such Code as though the amendments made by subsection (a) do not apply with respect to chapter 11 of such Code and with respect to property acquired or passing from such decedent (within the meaning of section 1014(b) of such Code). Such election shall be made at such time and in such manner as the Secretary of the Treasury or the Secretary's delegate shall provide. Such an election once made shall be revocable only with the consent of the Secretary of the Treasury or the Secretary's delegate. For purposes of section 2652(a)(1) of such Code, the determination of whether any property is subject to the tax imposed by such chapter 11 shall be made without regard to any election made under this subsection.
“(d) EXTENSION OF TIME FOR PERFORMING CERTAIN ACTS.—
“ (1) ESTATE TAX.—In the case of the estate of a decedent dying after December 31, 2009, and before the date of the enactment of this Act, the due date for—
“(A) filing any return under section 6018 of the Internal Revenue Codeof 1986 (including any election required to be made on such a return) as such section is in effect after the date of the enactment of this Act without regard to any election under subsection (c),
“(B) making any payment of tax under chapter 11 of such Code, and
“(C) making any disclaimer described in section 2518(b) of such Code of an interest in property passing by reason of the death of such decedent, shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(2) GENERATION-SKIPPING TAX.—In the case of any generation-skipping transfer made after December 31, 2009, and before the date of the enactment of this Act, the due date for filing any return under section 2662 of the Internal Revenue Code of 1986 (including any election required to be made on such a return) shall not be earlier than the date which is 9 months after the date of the enactment of this Act.
“(e) EFFECTIVE DATE.—Except as otherwise provided in this section, the amendments made by this section shall apply to estates of decedents dying, and transfers made, after December 31, 2009.”
TERMINATION
Section 501(a) (Estate Tax Repeal) of Pub. L. 107-16 added Code Sec. 2210, which states that chapter 11 of subtitle B shall not apply to the estates of decedents dying after December 31, 2009.
Note, however, that Section 901 (Sunset of Provisions of Act) of Pub. L. 107-16, as amended by Pub. L. 107-358 and Pub. L. 111-312, and struck by Pub. L. 112-240, Sec. 101(a)(1) (effective for taxable, plan, or limitation years beginning after Dec. 31, 2012, and estates of decedents dying, gifts made, or generation skipping transfers after Dec. 31, 2012), provided that:
“(a) IN GENERAL.--All provisions of, and amendments made by, this Act shall not apply--
“(1) to taxable, plan, or limitation years beginning after December 31, 2012, or
“(2) in the case of title V, to estates of decedents dying, gifts made, or generation skipping transfers, after December 31, 2012.
“(b) APPLICATION OF CERTAIN LAWS.--The Internal Revenue Code of 1986 and the Employee Retirement Income Security Act of 1974 shall be applied and administered to years, estates, gifts, and transfers described in subsection (a) as if the provisions and amendments described in subsection (a) had never been enacted.
“(c) EXCEPTION.-Subsection (a) shall not apply to section 803 (relating to no federal income tax on restitution received by victims of the Nazi regime or their heirs or estates).”