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Internal Revenue Code, § 2501. Imposition Of Tax

I.R.C. § 2501(a) Taxable Transfers
I.R.C. § 2501(a)(1) General Rule
A tax, computed as provided in section 2502, is hereby imposed for each calendar year on the transfer of property by gift during such calendar year by any individual resident or nonresident.
I.R.C. § 2501(a)(2) Transfers Of Intangible Property
Except as provided in paragraph (3), paragraph (1) shall not apply to the transfer of intangible property by a nonresident not a citizen of the United States.
I.R.C. § 2501(a)(3) Exception
I.R.C. § 2501(a)(3)(A) Certain Individuals
Paragraph (2) shall not apply in the case of a donor to whom section 877(b) applies for the taxable year which includes the date of the transfer.
I.R.C. § 2501(a)(3)(B) Credit For Foreign Gift Taxes
The tax imposed by this section solely by reason of this paragraph shall be credited with the amount of any gift tax actually paid to any foreign country in respect of any gift which is taxable under this section solely by reason of this paragraph.
I.R.C. § 2501(a)(4) Transfers To Political Organizations
Paragraph (1) shall not apply to the transfer of money or other property to a political organization (within the meaning of section 527(e)(1)) for the use of such organization.
I.R.C. § 2501(a)(5) Transfers Of Certain Stock
I.R.C. § 2501(a)(5)(A) In General
In the case of a transfer of stock in a foreign corporation described in subparagraph (B) by a donor to whom section 877(b) applies for the taxable year which includes the date of the transfer—
I.R.C. § 2501(a)(5)(A)(i)
section 2511(a) shall be applied without regard to whether such stock is situated within the United States, and
I.R.C. § 2501(a)(5)(A)(ii)
the value of such stock for purposes of this chapter shall be its U.S.-asset value determined under subparagraph (C).
I.R.C. § 2501(a)(5)(B) Foreign Corporation Described
A foreign corporation is described in this subparagraph with respect to a donor if—
I.R.C. § 2501(a)(5)(B)(i)
the donor owned (within the meaning of section 958(a)) at the time of such transfer 10 percent or more of the total combined voting power of all classes of stock entitled to vote of the foreign corporation, and
I.R.C. § 2501(a)(5)(B)(ii)
such donor owned (within the meaning of section 958(a)), or is considered to have owned (by applying the ownership rules of section 958(b)), at the time of such transfer, more than 50 percent of—
I.R.C. § 2501(a)(5)(B)(ii)(I)
the total combined voting power of all classes of stock entitled to vote of such corporation, or
I.R.C. § 2501(a)(5)(B)(ii)(II)
the total value of the stock of such corporation.
I.R.C. § 2501(a)(5)(C) U.S.-Asset Value
For purposes of subparagraph (A), the U.S.-asset value of stock shall be the amount which bears the same ratio to the fair market value of such stock at the time of transfer as—
I.R.C. § 2501(a)(5)(C)(i)
the fair market value (at such time) of the assets owned by such foreign corporation and situated in the United States, bears to
I.R.C. § 2501(a)(5)(C)(ii)
the total fair market value (at such time) of all assets owned by such foreign corporation.
I.R.C. § 2501(a)(6) Transfers To Certain Exempt Organizations
Paragraph (1) shall not apply to the transfer of money or other property to an organization described in paragraph (4), (5), or (6) of section 501(c) and exempt from tax under section 501(a), for the use of such organization.
I.R.C. § 2501(b) Certain Residents Of Possessions Considered Citizens Of The United States
A donor who is a citizen of the United States and a resident of a possession thereof shall, for purposes of the tax imposed by this chapter, be considered a “citizen” of the United States within the meaning of that term wherever used in this title unless he acquired his United States citizenship solely by reason of (1) his being a citizen of such possession of the United States, or (2) his birth or residence within such possession of the United States.
I.R.C. § 2501(c) Certain Residents Of Possessions Considered Nonresidents Not Citizens Of The United States
A donor who is a citizen of the United States and a resident of a possession thereof shall, for purposes of the tax imposed by this chapter, be considered a “nonresident not a citizen of the United States” within the meaning of that term wherever used in this title, but only if such donor acquired his United States citizenship solely by reason of (1) his being a citizen of such possession of the United States, or (2) his birth or residence within such possession of the United States.
I.R.C. § 2501(d) Cross References
I.R.C. § 2501(d)(1)
For increase in basis of property acquired by gift for gift tax paid, see section 1015(d).
I.R.C. § 2501(d)(2)
For exclusion of transfers of property outside the United States by a nonresident who is not a citizen of the United States, see section 2511(a).
(Aug. 16, 1954, ch. 736, 68A Stat. 403; Sept. 2, 1958, Pub. L. 85-866, title I, Sec. 43(b), 102(b), 72 Stat. 1641, 1674; Sept. 14, 1960, Pub. L. 86-779, Sec. 4(d), 74 Stat. 1000; Nov. 13, 1966, Pub. L. 89-809, title I, Sec. 109(a), 80 Stat. 1574; Dec. 31, 1970, Pub. L. 91-614, title I, Sec. 102(a)(1), 84 Stat. 1838; Jan. 3, 1975, Pub. L. 93-625, Sec. 14(a), 88 Stat. 2121; Oct. 4, 1976, Pub. L. 94-455, title XIX, Sec. 1902(a)(10), 1906(b)(13)(A), 90 Stat. 1805, 1834; Aug. 13, 1981, Pub. L. 97-34, title IV, Sec. 442(a)(1), 95 Stat. 320; Nov. 10, 1988, Pub. L. 100-647, title III, Sec. 3031(a)(2), 102 Stat. 3635; Nov. 5, 1990, Pub. L. 101-508, title XI, Sec. 11601(b)(2), 104 Stat. 1388-490; Aug. 20, 1996, Pub. L. 104-191, 501, 110 Stat. 1936; Pub. L. 105-34, title XVI, Sec. 1602(g)(5), Aug. 5, 1997, 111 Stat 788; Pub. L. 108-357, title VIII, Sec. 804(d), Oct. 22, 2004, 118 Stat. 1418; Pub. L. 114-113, Div. Q, title IV, Sec. 408.)
BACKGROUND NOTES
AMENDMENTS
2015 - Subsec. (a)(6). Pub. L. 114-113, Div. Q, Sec. 408(a), added par. (6).
2004 - Subsec. (a)(3). Pub. L. 108-357, Sec. 804(d)(1), amended par. (3). Before amendment, it read as follows:
“(3) Exception
“(A) Certain individuals
“Paragraph (2) shall not apply in the case of a donor who, within the 10-year period ending with the date of transfer, lost United States citizenship, unless such loss did not have for 1 of its principal purposes the avoidance of taxes under this subtitle or subtitle A.
“(B) Certain individuals treated as having tax avoidance purpose
“For purposes of subparagraph (A), an individual shall be treated as having a principal purpose to avoid such taxes if such individual is so treated under section 877(a)(2).
“(C) Exception for certain individuals
“Subparagraph (B) shall not apply to a donor meeting the requirements of section 877(c)(1).
“(D) Credit for foreign gift taxes
“The tax imposed by this section solely by reason of this paragraph shall be credited with the amount of any gift tax actually paid to any foreign country in respect of any gift which is taxable under this section solely by reason of this paragraph.
“(E) Cross reference
“For comparable treatment of long-term lawful permanent residents who ceased to be taxed as residents, see section 877(e).”
Subsec. (a)(4). Pub. L. 108-357, Sec. 804(d)(1), struck par. (4). Before being struck, it read as follows:
“(4) Burden of proof
“If the Secretary establishes that it is reasonable to believe that an individual's loss of United States citizenship would, but for paragraph (3), result in a substantial reduction for the calendar year in the taxes on the transfer of property by gift, the burden of proving that such loss of citizenship did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A shall be on such individual.”
Subsec. (a)(5). Pub. L. 108-357, Sec. 804(d)(1), redesignated par. (5) as par. (4).
Subsec. (a)(5). Pub. L. 108-357, Sec. 804(d)(2), added par. (5).
1997 - Subsec. (a)(3)(C). Pub. L. 105-34, Sec. 1602(g)(5), amended subpar. (C) by substituting “donor” for “decedent”.
1996 - Subsec. (a)(3). Pub. L. 104-191, Sec. 511, amended par. (3). Before amendment, par. (3) read as follows:
(3) Exceptions
Paragraph (2) shall not apply in the case of a donor who at any time after March 8, 1965, and within the 10-year period ending with the date of transfer lost United States citizenship unless--
(A) such donor's loss of United States citizenship resulted from the application of section 301(b), 350, or 355 of the Immigration and Nationality Act, as amended (8 U.S.C. 1401(b), 1482, or 1487), or
(B) such loss did not have for one of its principal purposes the avoidance of taxes under this subtitle or subtitle A.”
1990 - Subsec. (d)(3). Pub. L. 101-508 struck out par. (3) which read as follows: ‘For treatment of certain transfers related to estate tax valuation freezes as gifts to which this chapter applies, see section 2036(c)(4).’
1988 - Subsec. (d)(3). Pub. L. 100-647 added par. (3).
1981 - Subsec. (a)(1), (4). Pub. L. 97-34 substituted ‘calendar year’ for ‘calendar quarter’ wherever appearing.
1976 - Subsec. (a)(1). Pub. L. 94-455 inserted ‘for each calendar quarter’ after ‘hereby imposed’ and struck out ‘For the first calendar quarter of calendar year 1971 and each calendar quarter thereafter’ after ‘General rule-’.
Subsec. (a)(4). Pub. L. 94-455, Sec. 1906(b)(13)(A), struck out ‘or his delegate’ after ‘Secretary’.
1975 - Subsec. (a)(5). Pub. L. 93-625 added par. (5).
1970 - Subsec. (a)(1). Pub. L. 91-614, Sec. 102(a)(1)(A), substituted ‘For the first calendar quarter of the calendar year 1971 and each calendar quarter thereafter’ for ‘For the calendar year 1955 and each calendar year thereafter’ and ‘during such calendar quarter’ for ‘during such calendar year’.
Subsec. (a)(4). Pub. L. 91-614, Sec. 102(a)(1)(B), substituted ‘calendar quarter’ for ‘calendar year’.
1966 - Subsec. (a). Pub. L. 89-809 redesignated existing provisions as par. (1), struck out ‘, except transfers of intangible property by a nonresident not a citizen of the United States and who was not engaged in business in the United States during such calendar year’ after ‘resident or nonresident’, and added pars. (2) to (4).
1960 - Subsec. (a). Pub. L. 86-779, Sec. 4(d)(2), struck out ‘who is’ before ‘not a citizen’.
Subsecs. (c), (d). Pub. L. 86-779, Sec. 4(d)(1), added subsec. (c) and redesignated former subsec. (c) as (d).
1958 - Subsec. (b). Pub. L. 85-866, Sec. 102(b), added subsec. (b) and redesignated former subsec. (b) as (c).
Subsec. (c). Pub. L. 85-866, Sec. 102(b), redesignated former subsec. (b) as (c) and Pub. L. 85-866, Sec. 43(b), made the heading read in the plural, designated existing provisions as par. (2) and added par. (1).
EFFECTIVE DATE OF 2015 AMENDMENT
Amendment by Pub. L. 114-113, Div. Q, Sec. 408(a), effective for gifts made after the date of the enactment of this Act. Sec. 408(c) of Pub. L. 114-113, Div. Q, provided the following:
“(c) No inference.—Nothing in the amendment made by subsection (a) shall be construed to create any inference with respect to whether any transfer of property (whether made before, on, or after the date of the enactment of this Act) to an organization described in paragraph (4), (5), or (6) of section 501(c) of the Internal Revenue Code of 1986 is a transfer of property by gift for purposes of chapter 12 of such Code.”
EFFECTIVE DATE OF 2004 AMENDMENTS
Amendments by Sec. 804(d) of Pub. L. 108-357 effective for individuals who expatriate after June 3, 2004.
EFFECTIVE DATE OF 1997 AMENDMENTS
Amendment by Sec. 1602(g)(5) of Pub. L. 105-34 effective as if included in the provisions of the Health Insurance Portability and Accountability Act of 1996 to which such amendments relate.
EFFECTIVE DATE OF 1996 AMENDMENT
Amendment by Pub. L. 104-191 applicable to:
(A) individuals losing United States citizenship (within the meaning of section 877 of the Internal Revenue Code of 1986) on or after February 6, 1995, and
(B) long-term residents of the United States with respect to whom an event described in subparagraph (A) or (B) of section 877(e)(1) of such Code occurs on or after February 6, 1995.
(2) Ruling requests.--In no event shall the 1-year period referred to in section 877(c)(1)(B) of such Code, as amended by this section, expire before the date which is 90 days after the date of the enactment of this Act [Aug. 21, 1996].
(3) Special rule.--
(A) In general.--In the case of an individual who performed an act of expatriation specified in paragraph (1), (2), (3), or (4) of section 349 (a) of the Immigration and Nationality Act (8 U.S.C. 1481(a)(1)-(4)) before February 6, 1995, but who did not, on or before such date, furnish to the United States Department of State a signed statement of voluntary relinquishment of United States nationality confirming the performance of such act, the amendments made by this section and section 512 shall apply to such individual except that the 10-year period described in section 877(a) of such Code shall not expire before the end of the 10-year period beginning on the date such statement is so furnished.
(B) Exception.--Subparagraph (A) shall not apply if the individual establishes to the satisfaction of the Secretary of the Treasury that such loss of United States citizenship occurred before February 6, 1994.
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 applicable in the case of property transferred after Dec. 17, 1987, see section 11601(c) of Pub. L. 101-508, set out as a note under section 2036 of this title.
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 applicable in cases where transfer referred to in section 2036(c)(1)(B) of this title is on or after June 21, 1988, see section 3031(h)(2) of Pub. L. 100-647, set out as a note under section 2036 of this title.
EFFECTIVE DATE OF 1981 AMENDMENT
Section 442(e) of Pub. L. 97-34 provided that: ‘The amendments made by this section (amending this section and sections 1015, 2502, 2503, 2504, 2505, 2512, 2513, 2522, 6019, 6075, and 6212 of this title) shall apply with respect to gifts made after December 31, 1981.’
EFFECTIVE DATE OF 1976 AMENDMENT
Section 1902(c)(2) of Pub. L. 94-455, as amended by Pub. L. 95-600, title VII, Sec. 703(j)(12), Nov. 6, 1978, 92 Stat. 2942, provided that: ‘The amendments made by paragraphs (10), (11), and (12)(D) and (E) of subsection (a) (amending this section and sections 2522 and 2523 of this title) shall apply with respect to gifts made after December 31, 1976.’
EFFECTIVE DATE OF 1975 AMENDMENT
Section 14(b) of Pub. L. 93-625 provided that: ‘The amendment made by subsection (a) (amending this section) shall apply to transfers made after May 7, 1974.’
EFFECTIVE DATE OF 1970 AMENDMENT
Section 102(e) of Pub. L. 91-614 provided that: ‘The amendments made by this section (amending this section and sections 1015, 2012, 2502, 2503, 2504, 2512, 2513, 2515, 2521, 2522, 2523, 6019, 6075, 6212, 6214, 6324, 6501, and 6512 of this title and enacting provisions set out as a note under this section) shall apply with respect to gifts made after December 31, 1970.’
EFFECTIVE DATE OF 1966 AMENDMENT
Section 109(c) of Pub. L. 89-809 provided that: ‘The amendments made by this section (amending this section and section 2511 of this title) shall apply with respect to the calendar year 1967 and all calendar years thereafter.’
EFFECTIVE DATE OF 1960 AMENDMENT
Section 4(e)(3) of Pub. L. 86-779 provided that: ‘The amendments made by subsection (d) (amending this section) shall apply with respect to gifts made after the date of the enactment of this Act (Sept. 14, 1960).’
EFFECTIVE DATE OF 1958 AMENDMENT
Amendment by Pub. L. 85-866 applicable to gifts made after September 2, 1958, see section 102(d) of Pub. L. 85-866, set out as a note under section 2011 of this title.
ELECTION TO HAVE AMENDMENTS BY TITLE IV OF THE ECONOMIC RECOVERY TAX ACT OF 1981 NOT APPLY
Pub. L. 97-448, title I, Sec. 104(d)(3), Jan. 12, 1983, 96 Stat. 2383, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
‘(A) In the case of any decedent -
‘(i) who dies before August 13, 1984, and
‘(ii) who made a gift (before August 13, 1981, and during the 3-year period ending on the date of the decedent's death) on which tax imposed by chapter 12 of the Internal Revenue Code of 1986 (formerly I.R.C. 1954) has been paid before April 16, 1982, such decedent's executor may make an election to have subtitle B of such Code (relating to estate and gift taxes) applied with respect to such decedent without regard to any of the amendments made by title IV of the Economic Recovery Tax Act of 1981 (Pub. L. 97-34, title IV).
‘(B) An election under subparagraph (A) shall be made at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe.
‘(C) An election under subparagraph (A), once made, shall be irrevocable.’