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Internal Revenue Code, § 2703. Certain Rights And Restrictions Disregarded

I.R.C. § 2703(a) General Rule
For purposes of this subtitle, the value of any property shall be determined without regard to—
I.R.C. § 2703(a)(1)
any option, agreement, or other right to acquire or use the property at a price less than the fair market value of the property (without regard to such option, agreement, or right), or
I.R.C. § 2703(a)(2)
any restriction on the right to sell or use such property.
I.R.C. § 2703(b) Exceptions
Subsection (a) shall not apply to any option, agreement, right, or restriction which meets each of the following requirements:
I.R.C. § 2703(b)(1)
It is a bona fide business arrangement.
I.R.C. § 2703(b)(2)
It is not a device to transfer such property to members of the decedent's family for less than full and adequate consideration in money or money's worth.
I.R.C. § 2703(b)(3)
Its terms are comparable to similar arrangements entered into by persons in an arms' length transaction.
(Added by Pub. L. 101-508, title XI, Sec. 11602(a), Nov. 5, 1990, 104 Stat. 1388-498.)
BACKGROUND NOTES
EFFECTIVE DATE
Section 11602(e)(1) of Pub. L. 101-508 provided that:
‘(A) In general. - The amendments made by subsection (a) (enacting this chapter) -
‘(i) to the extent such amendments relate to sections 2701 and 2702 of the Internal Revenue Code of 1986 (as added by such amendments), shall apply to transfers after October 8, 1990,
‘(ii) to the extent such amendments relate to section 2703 of such Code (as so added), shall apply to -
‘(I) agreements, options, rights, or restrictions entered into or granted after October 8, 1990, and
‘(II) agreements, options, rights, or restrictions which are substantially modified after October 8, 1990, and
‘(iii) to the extent such amendments relate to section 2704 of such Code (as so added), shall apply to restrictions or rights (or limitations on rights) created after October 8, 1990.
‘(B) Exception. - For purposes of subparagraph (A)(i), with respect to property transferred before October 9, 1990 -
‘(i) any failure to exercise a right of conversion,
‘(ii) any failure to pay dividends, and
‘(iii) any failure to exercise other rights specified in regulations, shall not be treated as a subsequent transfer.’