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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1873

or passed from a decedent (within the meaning of section 1014(b)) and which is not excluded pursuant to paragraph (2) 26 USC 1014. or (3). (2) CERTAIN PROPERTY NOT CARRYOVER BASIS PROPERTY.—The

teraa 'carryover basis property ' does not include— " (A) any item of gross income i n respect of a decedent described in section 691; " (B) property described in section 2042 (relating to proceeds of life insurance); " (C) a joint and survivor annuity under which the surviving annuitant is taxable under section 72, and payments and distributions under a deferred compensation plan described in part I of subchapter D of chapter 1 to the extent such payments and distributions a r e taxable to the decedent's beneficiary under chapter 1; " (D) property included in the decedent's gross estate by reason of section 2035, 2038, or 2041 which has been disposed of before the decedent's death in a transaction in which gain or loss is recognizable for purposes of chapter 1; " (E) stock or a stock option passing from the decedent to the extent income in respect of such stock or stock option is includable in gross income under section 422(c)(1), 423(c), or 4 2 4 (c)(1); and " (F) property described in section 1014(b)(5). "(3)

$10,000 EXCLUSION FOR CERTAIN ASSETS.—

" (A) EXCLUSION.—The term 'carryover basis property' does not include any asset— " (i) which, in the hands of the decedent, was a personal o r household effect, and " ( i i) with respect to which the executor has made an election under this paragraph. " (B) LIMITATION.—The fair market value of all assets designated under this subsection with respect to any decedent shall not exceed $10,000. " (C) ELECTION.—An election under this paragraph with respect to any asset shall be made by the executor not later than the date prescribed by section 6075(a) for filing the return of the tax imposed by section 2001 or 2101 (including Ante, pp. 1846, extensions thereof), and shall be made in such manner as 1^50. the Secretary shall by regulations prescribe. "(c)

INCREASE I N BASIS FOR FEDERAL AND STATE ESTATE TAXES

ATTRIBUTABLE TO APPRECIATION.—The basis of appreciated carryover basis property (determined after any adjustment under subsection (h)) which is subject to the tax imposed by section 2001 or 2101 in the hands of the person acquiring it from the decedent shall be increased by a n amount which bears the same ratio to the Federal and State estate taxes as— " (1) the n e t appreciation in value of such property, bears to " (2) the fair market value of all property which is subject to the tax imposed by section 2001 or 2101. " (d) $60,000 MINIMUM FOR BASES OF CARRYOVER BASIS PROPERTIES.—

" (1) IN GENERAL.—If $60,000 exceeds the aggregate bases (as determined after any adjustment under subsection (h) or (c)) of all carryover basis property, the basis of each appreciated carryover basis property (after any adjustment under subsection (h) or (c)) shall be increased by an amount which bears the same ratio to the amount of such excess as—

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Page:United States Statutes at Large Volume 90 Part 2.djvu/406

 90 STAT. 1874

PUBLIC LAW 94-455—OCT. 4, 1976 " (A) the n e t appreciation in value of such property, bears to " (B) the n e t appreciation i n value of all such property. "(2)

SPECIAL RULE FOR PERSONAL OR HOUSEHOLD E F F E C T. — For

purposes of paragraph (1), the basis of any property which is a personal or household effect shall be treated as not greater than the fair market value of such property. " (3) NONRESIDENT NOT CITIZEN.—This

subsection

shall

not

apply to any carryover basis property acquired from any decedent who was ( a t the time of his death) a nonresident not a citizen of the United States. " (e) F U R THE R INCREASE I N BASIS FOR CERTAIN STATE SUCCESSION T A X P A I D BY TRANSFEREE OF PROPERTY. — I f —

" (1) any person acquires appreciated carryover basis property from a decedent, and " (2) such person actually pays an amount of estate, inheritance, legacy, or succession taxes with respect to such property to any State or the District of Columbia for which the estate is not liable, then the basis of such property (after any adjustment under subsection (h), (c), o r (d)) shall be increased by an amount which bears the same ratio to the aggregate amount of all such taxes paid by such person as— " (A) the net appreciation in value of such property, bears to " (B) the fair market value of all property acquired by such person which is subject to such taxes. " (f) SPECIAL RULES AND DEFINITIONS FOR APPLICATION OF SUBSECTIONS (c), (d), AND (e). — " (1) F A I R MARKET VALUE LIMITATION.—The adjustments under

subsections (c), (d), and (e) shall not increase the basis of property above its fair market value. " (2) N E T APPRECIATION.—For purposes of this section, the n e t appreciation in value of any property is the amount by which the fair market value of such property exceeds the adjusted basis of such property immediately before the death of the decedent (as determined after any adjustment under subsection (h)). For purposes of subsection (d), such adjusted basis shall be increased by the amount of any adjustment under subsection (c), and, for purposes of subsection (e), such adjusted basis shall be increased by the amount of any adjustment under subsection (c) or (d). "(3)

Ante, pp. 1846, 1850.

FEDERAL AND STATE ESTATE TAXES.—For purposes of sub-

section (c), the term 'Federal and State estate taxes' means— " (A) the tax imposed by section 2001 or 2101, reduced by the credits against such tax, and " (B) any estate, inheritance, legacy, or succession taxes, for which the estate is liable, actually paid by the estate to any State or the District of Columbia. " (4) CERTAIN 3IARITAL AND CHARITABLE DEDUCTION PROPERTY TREATED AS NOT SUBJECT TO T A X. — For purposes of subsections (c)

26 USC 2055, 2056, 2106.

and (e), property shall be treated as not subject to a tax— " (A) with respect to the tax imposed by section 2001 or 2101, to the extent that a deduction is allowable with respect to such property under section 2055 or 2056 or under section 2106(a)(2), and " (B) with respect to State estate taxes and with respect to the State taxes referred to i n subsection (e)(2), to the extent that such property is not subject to such taxes.

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 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 1875

" (5) APPRECIATED CARRYOVER BASIS PROPERTY.—For purposes of

this section, the term 'appreciated carryover basis property' means any carryover basis property if the fair market value of such property exceeds the adjusted basis of such property immediately before the death of the decedent. " (g) OTHER SPECIAL RULES AND DEFINITIONS. — " (1) F A I R MARKET VALUE.—For purposes of this section, when

not otherwise distinctly expressed, the term 'fair market value' means value as determined under chapter 11. " (2) PROPERTY PASSING FROM THE DECEDENT.—For purposes of

this section, property passing from the decedent shall be treated as property acquired from the decedent. "(3)

DECEDENT'S BASIS U N K NOW N. — I f the facts necessary to

determine the basis (unadjusted) of carryover basis property immediately before the death of the decedent are unknown to the person acquiring such property from the decedent, such basis shall be treated as being the fair market value of such property as of the date (or approximate date) at which such property was acquired by the decedent or by the last preceding owner in whose hands it did not have a basis determined in whole or in part by reference to its basis in the hands of a prior holder. "(4)

CERTAIN MORTGAGES.—For purposes of subsections

(c),

(d), and (e),if— " (A) there is an u n p a i d mortgage on, or indebtedness in respect of, property, " (B) such mortgage or indebtedness does not constitute a liability of the estate, and " (C) such property is included in the gross estate undiminished by such mortgage or indebtedness, then the fair market value of such property to be treated as included i n the §ross estate shall be the fair market value of such property, diminished by such mortgage or indebtedness. " (h) ADJUSTMENT TO BASIS FOR DECEMBER 31, 1976, F A I R M A R K E T VALUE.— " (1) MARKETABLE BONDS AND SECURITIES.—If the adjusted basis

immediately before the death of the decedent of any property which is carryover basis property reflects the adjusted basis of any marketable bond or security on December 31, 1976, and if the fair market value of such bond or security on December 31, 1976, exceeded its adjusted basis on such date, then, for purposes of determining gain, the adjusted basis of such property shall be increased by the amount of such excess. " (2) PROPERTY OTHER THAN MARKETABLE BONDS AND SECURITIES.— " (A) IN GENERAL. I f

" (i) the adjusted basis immediately before the death of the decedent of any property which is carryover basis property reflects the adjusted basis on December 3 1, 1976, of any property other than a marketable bond or security, and " ( i i) the value of such carryover basis property (as determined with respect to the estate of the decedent without regard to section 2032) exceeds the adjusted 26 USC 2032. basis of such property immediately before the death of the decedent (determined without regard to this subsection), then, for purposes of determining gain, the adjusted basis of such property immediately before the death of the decedent

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Page:United States Statutes at Large Volume 90 Part 2.djvu/408

 9 0 STAT. 1876

PUBLIC LAW 94-455—OCT. 4, 1976 (determined without regard to this subsection) shall be increased by the amount determined under subparagraph (B). " (B) A M O U N T OF INCREASE.—The a m o u n t of the increase

under this subparagraph for any property is the sum of— " (i) the excess referred to in subparagraph (A) ( i i), reduced by an amount equal to all adjustments for depreciation, amortization, or depletion for the holding period of such property, and then multiplied by the applicable fraction determined under subparagraph (C),and " ( i i) the adjustments to basis for depreciation, amortization, or depletion which are attributable to that portion of the holding period for such property which occurs before January 1, 1977. " (C) APPLICABLE PRACTioN.For purposes of subparagraph (B)(i), the term 'applicable fraction' means, with respect to any property, a fraction— " (i) the numerator of which is the number of days in the holding period with respect to such property which occurs before January 1, 1977, and " ( i i) the denominator of which is the total number of days in such holding period. "(D)

26 USC 1016.

"Estate tax."

IMPROVEMENTS.—Under

reflations

prescribed by the Secretary, if there is a substantial improvement of any property, such substantial improvement shall be treated as a separate property for purposes of this paragraph. " (E) DEFINITIONS. — For purposes of this paragraph — " (i) The term 'marketable bond or security' means any security for which, as of December 1976, there was a market on a stock exchange, in an over-the-counter market, or otherwise. " (ii) The term 'holding period' means, w i t h respect to any carryover basis property, the period during which the decedent (or, if any other person held such property immediately before the death of the decedent, such other person) held such property as determined under section 1223; except that such period shall end on the date of the decedent's death, " (i) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this section." (3) AMENDMENT o r SECTION 1016.—Section 1016(a) (relating to adjustments to basis) is amended by striking out the period a t the end thereof and by inserting in lieu thereof a semicolon and by adding a t the end thereof the following new paragraph: "(23) to the extent provided in section 1023, relating to carryover basis for certain property acquired from a decedent dying after December 31, 1976." (4)

26 USC 691.

SUBSTANTIAL

AMENDMENTS OF SECTION 6 9 1. —

(A) Section 6 9 1 (c)(2)(A) (relating to deduction for estate tax in case of income in respect of decedents) is amended to read as follows: " (A) The term 'estate tax ' means Federal and State estate taxes (within the meaning of section 1 0 2 3 (f)(3)). " (B) Section 691(c)(2)(C) is amended to read as follows: " (C) The estate tax attributable to such net value shall be an amount which bears the same ratio to the estate tax as such net value bears to the value of the gross estate."

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Page:United States Statutes at Large Volume 90 Part 2.djvu/409

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1877

(5) R E P E A L OF SECTION 1246(e).—Section 1246 ( r e l a t i n g to g a i n

26 USC 1246.

on foreign investment company stock) is amended by striking out subsection (e) and by redesignating subsections (f) and (g) as subsections (e) and (f), respectively. (b) NONRECOGNITION OF G A I N W H E R E CERTAIN APPRECIATED CARRYOVER B A S I S PROPERTY I s U S E D I N S A T I S F ACTION OF A P E C U N I A R Y

R E Q U E S T. — Part III of subchapter O of chapter 1 (relating to common nontaxable exchanges) is amended by a d d i n g a t the end thereof the following new section: "SEC. 1040. USE OF CERTAIN APPRECIATED CARRYOVER BASIS PROP- 26 USC 1040. ERTY TO SATISFY PECUNIARY REQUEST. " (a) GENERAL RULE. — I f the executor of the estate of any decedent

satisfies the r i g h t of any person to receive a pecuniary bequest with appreciated carryover basis property (as defined i n section 1023(f) -Ante, p. 1872. (5)), then gain on such exchange shall be recognized to the estate only to the extent that, on the date of such exchange, the fair market value of such property exceeds the value of such property for purposes of chapter 11. "(b)

S I M I L A R RULE FOR CERTAIN T R U S T S. — To the extent provided

in regulations prescribed by the Secretary, a rule similar to the rule provided in subsection (a) shall apply where— " (1) by reason of the death of the decedent, a person has a r i g h t to receive from a trust a specific dollar amount which is the equivalent of a pecuniary bequest, and " (2) the trustee of the trust satisfies such r i g h t with carryover basis property to which section 1023 applies. " (c) B A S I S OF PROPERTY ACQUIRED IN E X C H A N G E DESCRIBED I N S U B -

SECTION (a) OR (b). — The basis of property acquired in a n exchange with respect to which gain realized is not recognized by reason of SUDsection (a) o r (b) shall be the basis of such property immediately before the exchange, increased by the amount of the gain recognized to the estate or trust on the exchange." (c) L I M I T A T I O N OF INCREASE I N B A S I S FOR G I F T T A X P A I D TO T H A T PORTION OF G I F T T A X ATTRIBUTABLE TO N E T APPRECIATION I N V A L U E. —

Subsection (d) of section 1015 (relating to increased basis for gift tax 26 USC 1015. p a i d) is amended by a d d i n g a t the end thereof the following new paragraph: "(6)

S P E C I A L RULE FOR G I F T S M A D E A F T E R DECEMBER 31, 1976. —

(A) IN GENERAL.—In the case of any gift made after December 31, 1976, the increase in basis provided by this subsection with respect to any gift for the gift tax paid under chapter 12 shall be an amount (not i n excess of the amount of tax so p a i d) which bears the same ratio to the amount of tax so p a i d as— " (i) the n e t appreciation in value of the gift, bears to " ( i i) the amount of the gift. " (B) N E T APPRECIATION.—For purposes of paragraph (1), the n e t appreciation in value of any gift is the amount by which the fair market value of the gift exceeds the donor's adjusted basis immediately before the gift." (d)

INFORMATION REQUIREMENT. —

(1) IN GENERAL.—Subpart A of part III of subchapter A of chapter 61 (relating to information concerning persons subject to special provisions) is amended by inserting after section 6039 the following new section:

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1878 26 USC 6039A.

Ante, p. 1872.

"SEC. 6039A. INFORMATION REGARDING CARRYOVER BASIS PROPERTY ACQUIRED FROM A DECEDENT. " (a) IN GENERAL.—Every executor ( a s defined i n section 2203) shall furnish the Secretary such information with respect to carryover basis property to which section 1023 applies as the Secretary may by regulations prescribe. (b) STATEMENTS TO B E F U R N I S H E D TO PERSONS W H O ACQUIRE PROPERTY F R O M A D E C E D E N T. — E v e r y executor who is required to fur-

26 USC 6694.

nish information under subsection (a) shall furnish in writing to each person acquiring a n item of such property from the decedent ( o r to whom the item passes from the decedent) the adjusted basis of such item." (2) PENALTIES.—Subchapter B of chapter 68 (relating to assessable penalties) is amended by a d d i n g a t the end thereof the following new section: "SEC. 6694. FAILURE TO FILE INFORMATION WITH RESPECT TO CARRYOVER BASIS PROPERTY. "(a)

Penalties. Supra.

INFORMATION REQUIRED To B E F U R N I S H E D TO THE SECRE-

TARY.—Any executor who fails to furnish information required under subsection (a) of section 6039A on the date prescribed therefor (determined with regard to any extension of time for filing), unless it is shown that such failure is due to reasonable cause and not to willful neglect, shall pay a penalty of $100 for each such failure, b u t the total amount imposed for all such failures shall not exceed $5,000. " (b) INFORMATION REQUIRED To B E F U R N I S H E D TO B E N E F I C I A R I E S. —

Any executor who fails to furnish in writing to each person described in subsection (b) of section 6039A the information required under such subsection, unless it is shown that such failure is due to reasonable cause and not to willful neglect, shall p a y a penalty of $50 for each such failure, b u t the total amount imposed for all such failures shall not exceed $2,500." (e) CLERICAL AMENDMENTS. —

(1) The table of sections for part II of subchapter O of chapter 1 is amended by striking out the item relating to section 1023 and inserting in lieu thereof the following: "Sec. 1023. Carryover basis for certain property acquired from a decedent dying after December 31, 1976. "Sec. 1024. Cross references." (2) The table of sections for part III of subchapter O of chapter 1 is amended by adding a t the end thereof the following: "Sec. 1040. Use of certain appreciated carryover basis property to satisfy pecuniary bequest." (3) The table of sections for part III of subchapter A of chapter 61 is amended by inserting after the item relating to section 6039 the following: "Sec. 6039A. Information regarding carryover basis property acquired from a decedent." (4) The table of sections for subchapter B of chapter 68 is amended by a d d i n g a t the end thereof the following: "Sec. 6694. Failure to file information with respect to carryover basis property." (f)

26 USC 1023 note.

EFFECTIVE D A T E S. —

(1) Except as provided in paragraph (2), the amendments made by this section shall apply in respect of decedents dying after December 31, 1976.

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1879

(2) The amendment made by subsection (c) shall apply to gifts 26 USC 1023 made after December 31, 1976. note. SEC. 2006. CERTAIN GENERATION-SKIPPING TRANSFERS. (a) IMPOSITION OF TAX.—Subtitle B (relating to estate and gift taxes) is amended by adding at the end thereof the following new chapter:

"CHAPTER IS—TAX ON CERTAIN GENERATION-SKIPPING TRANSFERS "SUBCHAPTER A. Tax imposed.

"SUBCHAPTER B. Definitions and special rules. "SUBCHAPTER C. Administration.

"Subchapter A—Tax Imposed "Sec. 2601. Tax imposed. "Sec. 2602. Amount of tax. "Sec. 2603. Liability for tax. "SEC. 2601. TAX IMPOSED.

26 USC 2601.

"A tax is hereby imposed on every generation-skipping transfer in the amount determined under section 2602. "SEC. 2602. AMOUNT OF TAX. 26 USC 2602. "(a) GENERAL RULE.—The amount of the tax imposed by section

2601 with respect to any transfer shall be the excess of— "(1) a tentative tax computed in accordance with the rate schedule set forth in section 2001(c) (as in effect on the date Ante, p. 1846. of transfer) on the sum of— "(A) the fair market value of the property transferred determined as of the date of transfer (or in the case of an election under subsection (d), as of the applicable valuation date prescribed by section 2032), "(B) the aggregate fair market value (determined for purposes of this chapter) of all prior transfers of the deemed transferor to which this chapter applied, "(C) the amount of the adjusted taxable gifts (within the meaning of section 2001(b)) made by the deemed transferor before this transfer, and "(D) if the deemed transferor has died at the same time as, or before, this transfer, the taxable estate of the deemed transferor, over "(2) a tentative tax (similarly computed) on the sum of the amounts determined under subparagraphs (B), (C), and (D) of paragraph (1). "(b) MULTIPLE SIMULTANEOUS TRANSFERS.—If two or more transfers which are taxable under section 2601 and which have the same deemed Supra. transferor occur by reason of the same event, the tax imposed by section 2601 on each such transfer shall be the amount which bears the same ratio to— "(1) the amount of the tax which would be imposed by section 2601 if the aggregate of such transfers were a single transfer, as "(2) the fair market value of the property transferred in such transfer bears to the aggregate fair market value of all property transferred in such transfers. "(c) DEDUCTIONS, CREDITS, ETC.—

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Page:United States Statutes at Large Volume 90 Part 2.djvu/412

 9 0 STAT. 1880

Ante, p. 1879.

PUBLIC LAW 94-455—OCT. 4, 1976 " (1) GENERAL RULE.—Except as otherwise provided in this subsection, no deduction, exclusion, exemption, or credit shall be allowed against the tax imposed by section 2601. " (2) CHARITABLE DEDUCTIONS ALLOWED.—The deduction under

26 USC 2055, 2106, 2522.

section 2055, 2106(a)(2), or 2522, whichever is appropriate, shall be allowed in determining the tax imposed by section 2601. " (3) U N U S E D PORTION OF UNIFIED CREDIT.—If the generation-

Anu, p. 1848. Ante, p. 1846.

skipping transfer occurs at the same time as, or after, the death of the deemed transferor, then the portion of the credit under section 2010(a) (relating to unified credit) which exceeds the sum of— " (A) the tax imposed by section 2001, and " (B) the taxes theretofore imposed by section 2601 with respect to t h i s deemed transferor, shall be allowed as a credit against the tax imposed by section 2601. The amount of the credit allowed by the preceding sentence shall not exceed the amount of the tax imposed by section 2601. " (4) CREDIT FOR TAX ON PRIOR TRANSFERS.—The c r e d i t under

section 2013 (relating to credit for tax on prior transfers) shall be allowed against the tax imposed by section 2601. For purposes of the preceding sentence, section 2013 shall be applied a s if so much of the property subject to tax under section 2601 as is not taken into account for purposes of determining the credit allowable by section 2013 with respect to the estate or the deemed transferor passed from the transferor (as defined in section 2013) to the deemed transferor. " (5) COORDINATION W I T H ESTATE TAX.— " (A) ADJUSTMENTS TO MARITAL DEDUCTION.—If the genera-

tion-skipping transfer occurs a t the same time as, o r within 9 months after, the death of the deemed transferor, for purposes of section 2056 (relating to bequests, etc., to surviving spouse), the value of the gross estate of the deemed transferor shall be deemed to be increased by the amount of such transfer. "(B)

CERTAIN EXPENSES ATTRIBUTABLE TO GENERATION-SKIP-

PING TRANSFER.—If the generation-skipping transfer occurs a t the same time as, or after, the death of the deemed transferor, for purposes of this section, the amount taken into account with respect to such transfer shall be reduced— " (i) in the case of a taxable termination, by any item referred to in section 2053 o r 2054 to the extent that a deduction would have been allowable under such section for such item if the amount of the trust had been includible in the deemed transferor's gross estate and if the deemed transferor h a d died immediately before such transfer, or " ( i i) in the case of a taxable distribution, by any expense incurred i n connection with the determination, collection, or refund of the tax imposed by section 2601 on such transfer. " (C) CREDIT FOR STATE INHERITANCE TAX.—If the genera-

tion-skipping transfer occurs at the same time as, or after, the death of the deemed transferor, there shall be allowed as a credit against the tax imposed by section 2601 an amount equal to that portion of the estate, inheritance, legacy, o r succession tax actually paid to any State or the District of Columbia in respect of any property included in the genera-

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Page:United States Statutes at Large Volume 90 Part 2.djvu/413

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1881

tion-skipping transfer, but only to the extent of the lesser of— " (i) that portion of such taxes which is levied on such transfer, or " ( i i) the excess of the limitation applicable under section 2011(b) if the adjusted taxable estate of the decedent h a d been increased by the amount of the transfer and all prior generation-skipping transfers to which this subparagraph applied which had the same deemed transferor, over the sum of the amount allowable as a credit under section 2011 with respect to the estate of the decedent plus the aggregate amounts allowable under this subparagraph with respect to such p r i o r generationskipping transfers. "(d)

ALTERNATE V A L U A T I O N. — " (1) IN GENERAL.—In the case of—

" (A) 1 or more generation-skipping transfers from the same t r u s t which have the same deemed transferor and which are taxable terminations occurring at the same time as the death of such deemed transferor; or " (B) 1 or more generation-skipping transfers from the same trust with different deemed transferors— " (i) which are taxable terminations occurring on the same d a y; and " ( i i) which would, but for section 2613(b)(2), have occurred at the same time as the death of the individuals who are the deemed transferors with respect to the transfers; the trustee may elect to value all of the property transferred in such transfers in accordance with section 2032. " (2) SPECIAL RULES.—If the trustee makes an election under paragraph (1) with respect to any generation-skipping transfer, section 2032 shall be applied by taking into account (in lieu of the date of the decedent's death) the following date: " (A) in the case of any generation-skipping transfer described in paragraph (1)(A), the date of the death of the deemed transferor described in such paragraph, or " (B) in the case of any generation-skipping transfer described in paragraph (1)(B), the date on which such transfer occurred. "(e)

TRANSFERS W I T H I N 3 YEARS or

D E A T H or

DEEMED T R A N S -

FEROR.—Under regulations prescribed by the Secretary, the principles of section 2035 shall apply with respect to transfers made during the 3-year period ending on the date of the deemed transferor's death. I n the case of any transfer to which this subsection applies, the amount of the tax imposed by this chapter shall be determined as if the transfer occurred after the death of the deemed transferor and a p p r o p r i a t e adjustments shall be made with respect to the amount of any p r i o r transfer which is taken into account under subparagraph (B) or (C) of subsection (a)(1). "SEC. 2603. LIABILITY FOR TAX. 26 USC 2603. "(a)

PERSONAL L I A B I L I T Y. —

" (1) IN GENERAL.—If the tax imposed by section 2601 is not Ante, p. 1879. paid, when due then— " (A) except to the extent provided in paragraph (2), the trustee shall be personally liable for any portion of such tax which is attributable to a taxable termination, and

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Page:United States Statutes at Large Volume 90 Part 2.djvu/414

 9 0 STAT. 1882

PUBLIC LAW 94-455—OCT. 4, 1976 " (B) the distributee of the property shall be personally liable for such tax to the extent provided i n paragraph (3). " (2) L I M I T A T I O N OF PERSONAL LIABILITY OF TRUSTEE W H O RELIES ON CERTAIN INFORMATION FURNISHED BY THE SECRETARY.— " (A) INFORMATION W I T H RESPECT TO RATES.—The trustee

shall not be personally liable for any increase i n the tax imposed by section 2601 which is attributable to the application to the transfer of rates of tax which exceeds the rates of tax furnished by the Secretary to the trustee as being the rates at which the transfer may reasonably be expected to be taxed.

Anu, p. 360.

"(B)

A M O U N T OF REMAINING EXCLUSION.—The trustee shall

not be personally liable for any increase in the tax imposed by section 2601 which is attributable to the fact that — " (i) the amount furnished by the Secretary to the trustee as being the amount of the exclusion for a transfer to a grandchild of the grantor of the trust which may reasonably be expected to remain with respect to the deemed transferor, is less than " ( i i) the amount of such exclusion remaining with respect to such deemed transferor. " (3) L I M I T A T I O N ON PERSONAL LIABILITY OF DISTRIBUTEE.—The

distributee of the property shall be personally liable for the tax imposed by section 2601 only to the extent of an amount equal to the fair market value (determined a s of the time of the distribution) of the property received by the distributee in the distribution. " (b) L I E N. — The tax imposed by section 2601 on any transfer shall be a lien on the property transferred until the tax is p a i d i n full or becomes unenforceable by reason of lapse of time. ^'Subchapter B—Definitions and Special R u l e s

26 USC 2611.

"Sec. 2611. Generation-skipping transfer. "Sec. 2612. Deemed transferor. "Sec. 2613. Other definitions. "Sec. 2614. Special rules. "SEC. 2611. GENERATION-SKIPPING TRANSFER. "(a)

Post, p. 1884. Rules.

G E N E R A T I O N - S K I P P I N G TRANSFER DEFINED.—For purposes of

this chapter, the terms 'generation-skipping transfer' and 'transfer' mean any taxable distribution o r taxable termination w i t h respect to a generation-skipping trust or t r u s t equivalent. " (b) GENERATION-SKIPPING T R U S T. — For purposes of this chapter, the term 'generation-skipping t r u s t ' means any t r u s t h a v i n g younger generation beneficiaries (within the meaning of section 2613(c)(1)) who are assigned to more than one generation. " (c) ASCERTAINMENT OF GENERATION.—For purposes of this chapter, the generation to which any person (other than the g r a n to r) belongs shall be determined in accordance with the following r u l e s: " (1) an individual who is a lineal descendent of a g r and p a r e n t of the g r a n to r shall be assigned to that generation which results from comparing the number of generations between the g r and p a r ent and such individual with the number of generations between the g r and p a r e n t and the grantor, " (2) a n individual who has been a t any time m a r r i e d to a person described in paragraph (1) shall be assigned to the generation of the person so described and a n individual who has been a t any

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1883

time married to the g r a n to r shall be assigned to the grantor's generation, " (3) a relationship by the half blood shall be treated as a relationship by the whole blood, " (4) a relationship by legal adoption shall be treated as a relationship by blood, " (5) an individual who is not assigned to a generation by reason of the foregoing paragraph s shall be assigned to a generation on the basis of the date of such individual's birth, with— " (A) an individual born not more than 121/^ years after the date of the birth of the g r a n to r assigned to the grantor's generation, " (B) an individual born more than 121/^ years b u t not more than 371/^ years after the date of the birth of the g r a n to r assigned to the first generation younger than the grantor, and " (C) similar rules for a new generation every 25 years, " (6) a n individual who, b u t for this paragraph, would be assigned to more than one generation shall be assigned to the youngest such generation, and " (7) if any beneficiary of the trust is an estate or a trust, partnership, corporation, or other entity (other than a n organization described in section 511(a)(2) and other than a charitable t r u s t described i n section 5 1 1 (b)(2)), each individual having a n indirect interest or power i n the t r u s t through such entity shall be treated as a beneficiary of the trust and shall be assigned to a generation under the foregoing provisions of this subsection. " (d) G E N E R A T I O N - S K I P P I N G TIRUST E Q U IV A L E N T. —

" (1) IN GENERAL.—For purposes of this chapter, the term 'generation-skipping trust equivalent' means any arrangement which, although not a trust, has substantially the same effect as a generation-skipping trust. "(2)

EXAMPLES

OF ARRANGEMENTS

TO W H I C H

SUBSECTION

RELATES.—Arrangements to be taken into account for purposes of determining whether or not paragraph (1) applies include ( b u t are not limited to) arrangements involving life estates and remainders, estates for years, insurance and annuities, and split interests. " (3) REFERENCES TO TRUST INCLUDE REFERENCES TO TRUST EQUIV-

ALENTS.—Any reference in this chapter in respect of a generationskipping trust shall include the appropriate reference in respect of a generation-skipping t r u s t equivalent. "SEC. 2612. DEEMED TRANSFEROR. 26 USC 2612. " (a) GENERAL RULE. — For purposes of t h i s chapter, the deemed transferor with respect to a transfer is— " (1) except as provided i n paragraph (2), the p a r e n t of the transferee of the property who is more closely related to the grantor of the trust than the other p a r e n t of such transferee (or if neither parent is related to such grantor, the parent having a closer affinity to the g r a n to r), o r " (2) if the p a r e n t described in paragraph (1) is not a younger generation beneficiary of the t r u s t but 1 or more ancestors of the transferee i s a younger generation beneficiary related by blood or adoption to the g r a n to r of the trust, the youngest of such ancestors. " (b) DETERMINATION OF RELATIONSHIP. — For purposes of subsection

(a), a parent related to the g r a n to r of the trust by blood or adoption is more closely related than a p a r e n t related to such g r a n to r by marriage.

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Page:United States Statutes at Large Volume 90 Part 2.djvu/416

 90 STAT. 1884 26 USC 2613.

PUBLIC LAW 94-455—OCT. 4, 1976 "SEC. 2613. OTHER DEFINITIONS. "(a)

TAXABLE D I S T R I B U T I O N. — For purposes of t h i s chapter—

" (1) IN GENERAL.—The term 'taxable distribution' means any distribution which is not out of the income of the t r u s t (within the meaning of section 6 4 3 (b)) from a generation-skipping trust to any younger generation beneficiary who is assigned to a generation younger than the generation assignment of any other person who is a younger generation beneficiary. For purposes of the preceding sentence, an individual who a t no time has h a d any t h i n g other than a future interest or future power (or both) in the trust shall not be considered as a younger generation beneficiary. " (2) SOURCE OF DISTRIBUTION.—If, during the tax a b l e year of

the trust, there are distributions out of the income of the t r u s t (within the meaning of section 6 4 3 (b)) and out of other amounts, for purposes of paragraph (1) the distributions of such income shall be deemed to have been made to the beneficiaries (to the extent of the aggregate distributions made to each such beneficiary during such year) in descending order of generations, beginning with the beneficiaries assigned to the oldest generation. " (3) P A Y M E N To r TAX.—If any p o r t i o n of the tax imposed by

this chapter with respect to any transfer is paid out of the income or corpus of the trust, an amount equal to the portion so paid shall be deemed to be a generation-skipping transfer. "(4)

CERTAIN DISTRIBUTIONS EXCLUDED FROM TAX.—The term

'taxable distribution' does not include— " (A) any transfer to the extent such transfer is to a grandchild of the grantor of the trust and does not exceed the limitation provided by subsection (b)(6), and "(13) any transfer to the extent such transfer is subject to tax imposed by chapter 11 or 12. " (b) TAXABLE TERMINATION. — For purposes of t h i s chapter —

" (1) IN GENERAL.—The term 'taxable termination' means the termination (by death, lapse of time, exercise or nonexercise, or otherwise) of the interest or power in a generation-skipping t r u s t of any younger generation beneficiary who is assigned to any generation older than the generation assignment of any other person who is a younger generation beneficiary of that trust. Such term does not include a termination of the interest or power of any person who at no time has h a d anything other than a future interest or future power (or both) in the trust. " (2) T I M E CERTAIN TERMINATIONS DEEMED TO OCCUR.— " (A) W H E R E 2 OR MORE BENEFICIARIES ARE ASSIGNED TO

SAME GENERATION.—In any case where 2 or more younger generation beneficiaries of a trust are assigned to the same generation, except to the extent provided in regulations prescribed by the Secretary, the transfer constituting the termination with respect to each such beneficiary shall be treated as occurring at the time when the last such termination occurs. "(B)

S A M E BENEFICIARY HAS MORE THAN i INTEREST OR

POWER.—In any case where a younger generation beneficiary of a t r u s t has both an interest and a power, or more than 1 interest or power, in the trust, except to the extent provided in regulations prescribed by the Secretary, the termination with respect to each such interest or power shall be treated as occurring at the time when the last such termination occurs. " (C) U N U S U A L ORDER OF TERMINATION.— " (i) IN GENERAL.—If—

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Page:United States Statutes at Large Volume 90 Part 2.djvu/417

 PUBLIC LAW 94-455—OCT. 4, 1976 " (I) but for this subparagraph, there would have been a termination (determined after the application of subparagraphs (A) and (B)) of an interest or power of a younger generation beneficiary (hereinafter in this subparagraph referred to as the 'younger beneficiary'), and ' ' ( II) at the time such termination would have occurred, a beneficiary (hereinafter in this subparagraph referred to as the 'older beneficiary') of the trust assigned to a higher generation than the generation of the younger beneficiary has a present interest or power in the trust, _^ then, except to the extent provided in regulations prescribed by the Secretary, the transfer constituting the termination with respect to the younger beneficiary shall be treated as occurring at the time when the termination of the last present interest or power of the older beneficiary occurs. "(ii) SPECIAL RULES.—If clause (i) applies with respect to any younger beneficiary— " (I) this chapter shall be applied first to the termi-r nation of the interest or power of the older beneficiary as if such termination occurred before the termination of the power or interest of the younger beneficiary; and " ( II) the value of the property taken into account for purposes of determining the tax (if any) imposed by this chapter with respect to the termination of the interest or power of the younger beneficiary shall be reduced by the tax (if any) imposed by this chapter with respect to the termination of the interest or power of the older beneficiary. "(D) SPECIAL RULE.—Subparagraphs (A) and (C) shall also apply where a person assigned to the same generation as, or a higher generation than, the person whose power or interest terminates has a present power or interest immediately after the termination and such power or interest arises as a result of such termination. "(3)

DEEMED TRANSFEREES OF CERTAIN TERMINATIONS.—Where,

at the time of any termination, it is not clear who will be the transferee of any portion of the property transferred, except to the extent provided in regulations prescribed by the Secretary, such portion shall be deemed transferred pro rata to all beneficiaries of the trust in accordance with the amount which each of them would receive under a maximum exercise of discretion on their behalf. For purposes of the preceding sentence, where it is not clear whether discretion will be exercised per stirpes or per capita, it shall be presumed that the discretion will be exercised per stirpes. " (4) TERMINATION or POWER.—In the case of the termination of any power, the property transferred shall be deemed to be the property subject to the power immediately before the termination (determined without the application of paragraph (2)). "(5) CERTAIN TERMINATIONS EXCLUDED FROM TAX.—The term 'taxable termination' does not include— "(A) any transfer to the extent such transfer is to a grandchild of the grantor of the trust and does not exceed the limitation provided by paragraph (6), and

89-194 0_7fl—nt 7

97

90 STAT. 1885

^

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Page:United States Statutes at Large Volume 90 Part 2.djvu/418

 90 STAT. 1886 26 USC 2001 2501, '

I

PUBLIC LAW 94-455—OCT. 4, 1976 " (B) any transfer to the extent such transfer is subject ^o ^ ^^^ imposed by chapter 11 or 12. " (6) $250,000 LIMIT ON EXCLUSION OF TRANSFERS TO GRANDCHILDREN,—In the case of any deemed transferor, the maximum amount exchided from the terms 'taxable distribution' and 'taxable termination' by reason of provisions exempting from such terms transfers to the grandchildren of the g r a n to r of the trust shall be $250,000, The preceding sentence shall be applied to transfers from one or more trusts in the order in which such transfers are made or deemed made. " (7) COORDINATION W I T H SUBSECTION (a). — " (A) TERMINATIONS TAKE PRECEDENCE OVER DISTRIBUTIONS.—If—

" (i) the death of an individual or any other occurrence is a taxable termination with respect to any property, and " ( i i) such occurrence also requires the distribution of part or all of such property i n a distribution which would (but for this subparagraph) be a taxable distribution, then a taxable distribution shall be deemed not to have occurred with respect to the portion described in clause (i). "(B)

CERTAIN PRIOR TRANSFERS.—To the extent that —

" (i) the deemed transferor i n any p r i o r transfer of the property of the trust being transferred in this transfer was assigned to the same generation as ( o r a lower generation than) the generation assignment of the deemed transferor in this transfer, " ( i i) the transferee i n such prior transfer was assigned to the same generation as (or a higher generation than) the generation assignment of the transferee i n this transfer, and " ( i i i) such transfers do not have the effect of avoiding tax under this chapter with respect to any transfer, the terms 'taxable termination' and 'taxable aistribution' do not include this later transfer. " (c) YOUNGER GENERATION B E N E F I C I A R Y; B E N E F I C I A R Y. — For pur-

poses of this chapter— "(1)

,

generation beneficiary' means any beneficiary who is assigned to a generation younger than the grantor's generation. "(2)

I

^

_

YOUNGER GENERATION BENEFICIARY.—The term 'younger

T I M E FOR ASCERTAINING YOUNGER GENERATION BENEFI-

CIARIES.—A person is a younger generation beneficiary of a trust with respect to any transfer only if such person was a younger generation beneficiary of the trust immediately before the transfer (or, in the case of a series of related transfers, only if such person was a younger generation beneficiary of the trust immediately before the first of such transfers). " (3) BENEFICIARY.—The term 'beneficiary' means any person who has a present o r future interest or power in the trust, " (d) INTEREST OR P O W E R. — For purposes of this chapter— " (1) INTEREST.—A person has an interest in a trust if such person— " (A) has a r i g h t to receive income or corpus from the trust, or " (B) is a permissible recipient of such income or corpus. " (2) POWER.—The term 'power' means any power to establish or alter beneficial enjoyment of the corpus o r income of the trust.

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Page:United States Statutes at Large Volume 90 Part 2.djvu/419

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1887

"(e) LIMITED POWER TO APPOINT AMONG LINEAL DESCENDANTS OF GRANTOR NOT TAKEN INTO ACCOUNT IN CERTAIN CASES.—For purposes

of this chapter, if any individual does no^ have any present or future power in the trust other than a power to dispose of the corpus of the trust or the income therefrom to a beneficiary or a class of beneficiaries who are lineal descendants of the grantor assigned to a generation younger than the generation assignment of such individual, then such individual shall be treated as not having any power in the trust. "(f) EFFECT OP ADOPTION.—For purposes of this chapter, a relationship by legal adoption shall be treated as a relationship by blood. "SEC. 2614. SPECIAL RULES. 26 USC 2614. "(a) BASIS ADJUSTMENT.—If property is transferred to any person pursuant to a generation-skipping transfer which occurs before the death of the deemed transferor, the basis of such property in the hands of the transferee shall be increased (but not above the fair market value of such property) by an amount equal to that portion of the tax imposed by section 2601 with respect to the transfer which is attributable to the excess of the fair market value of such property over its adjusted basis immediately before the transfer. If property is transferred in a generation-skipping transfer subject to tax under this chapter which occurs at the same time as, or after, the death of the deemed transferor, the basis of such property shall be adjusted in a manner similar to the manner provided by section 1023 without Ante, p. 1872. regard to subsection (d) thereof (relating to basis of property passing from a decedent dying after December 31, 1976). "(b)

NONRESIDENTS NOT CITIZENS OP THE UNITED STATES.—If the

deemed transferor of any transfer is, at the time of the transfer, a nonresident not a citizen of the United States and— "(1) if the deemed transferor is alive at the time of the transfer, there shall be taken into account only property which would be taken into account for purposes of chapter 12, or 26 USC 2501. "(2) if the deemed transferor has died at the same time as, or before, the transfer, there shall be taken into account only property which would be taken into account for purposes of chapter 11. 26 USC 2001. "(c)

DISCLAIMERS.—

"For provisions relating to the effect of a qualified disclaimer for purposes of this chapter, see section 2518. "Subchapter C—Administration "Sec. 2621. Administration. "Sec. 2622. Regulations. •SEC. 2621. ADMINISTRATION. 26 USC 2621. "(a) GENERAL RULE.—Insofar as applicable and not inconsistent

with the provisions of this chapter— "(1) if the deemed transferor is not alive at the time of the transfer, all provisions of subtitle F (including penalties) applicable to chapter 11 or section 2001 are hereby made applicable in Ante, p. 1846. respect of this chapter or section 2601, as the case may be, and "(2) if the deemed transferor is alive at the time of the transfer, all provisions of subtitle F (including penalties) applicable 26 USC 6001. to chapter 12 or section 2501 are hereby made applicable in respect of this chapter or section 2601, as the case may be. "(b) SECTIONS 6166 AND 6166A NOT APPLICABLE.—For purposes of this chapter, sections 6166 and 6166A (relating to extensions of time ^"'e. P- 1862.

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Page:United States Statutes at Large Volume 90 Part 2.djvu/420

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1888

for payment of estate tax where estate consists largely of interest in closely held business) shall not apply. "(c)

Regulations.

,

Regulations.

26 USC 2622.

RETURN REQUIREMENTS.—

\

" (1) IN GENERAL.—The Secretary shall prescribe by regulations the person who is required to make the return with respect to the tax imposed by this chapter and the time by which any such return must be filed. To the extent practicable, such regulations shall provide that— "(A) the person who is required to make such return shall be— "(i) in the case of a taxable distribution, the distributee^ or "(ii) in the case of a taxable termination, the trustee; and "(B) the return shall be filed— "(i) in the case of a generation-skipping transfer occurring before the death of the deemed transferor, on or before the 90th day after the close of the taxable year of the trust in which such transfer occurred, or "(ii) in the case of a generation-skipping transfer occurring at the same time as, or after, the death of the deemed transferor, on or before the 90th day after the last day prescribed by law (including extensions) for filing the return of tax under chapter 11 with respect to the estate of the deemed transferor (or if later, the day which is 9 months after the day on which such generation-skipping transfer occurred). " (2) INFORMATION RETURNS.—The Secretary may by reflations require the trustee to furnish the Secretary with such information as he determines to be necessary tor purposes of this chapter. "SEC. 2622. REGULATIONS. "The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this chapter, including regulations providing the extent to which substantially separate and independent shares of different beneficiaries in the trust shall be treated as separate trusts." (b) TECHNICAL, CLERICAL, AND CONFORMING CHANGES.— (1) CLERICAL CHANGE.—The table of chapters for subtitle

B is amended by adding at the end thereof the following new item: "OHAPTEE 13. Tax on certain generation-skipping transfers."

26 USC 2013.

(2) CREDIT FOR TAX ON PRIOR TRANSFERS.—Section 2013 (relating

to credit for tax on prior transfers) is amended by adding at the end thereof the following new subsection: " (g) TREATMENT OF TAX IMPOSED ON CERTAIN GENERATION-SKIPPING

'

TRANSFERS.—If any property was transferred to the decedent in a transfer which is taxable under section 2601 (relating to tax imposed on generation-skipping transfers) and if the deemed transferor (as defined in section 2612) is not alive at the time of such transfer, for purposes of this section— "(1) such property shall be deemed to have passed to the decedent from the deemed transferor; " (2) the tax payable under section 2601 on such transfer shall be treated as a Federal estate tax payable with respect to the estate of the deemed transferor; and

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 PUBLIC LAW 94-455—OCT. 4, 1976 '

90 STAT. 18819

"(3) the amount of the taxable estate of the deemed transferor shall be increased by the value of such property as determined for purposes of the tax imposed by section 2601 on the transfer." (3) INCOME IN RESPECT OF A DECEDENT.—Subsection (c) of section 691 (relating to deduction for estate tax) is amended by 26 USC 691. adding at the end thereof the following new paragraph: "(3)

SPECIAL RULE FOR GENERATION-SKIPPING TRANSFERS.—For

purposes of this section— "(A) the tax imposed by section 2601 or any State inheritance tax described in section 2602(c)(5)(C) on any generation-skipping transfer shall be treated as a tax imposed by section 2001 on the estate of the deemed transferor (as defined Ante, p. 1846. = in section 2612(a); "(B) any property transferred in such a transfer shall be treated as if it were included in the gross estate of the deemed transferor at the value of such property taken into account for purposes of the tax imposed by section 2601; and "(C) under regulations prescribed by the secretary, any item of gross income subject to the tax imposed under section 2601 shall be treated as income described in subsec' tion (a) if such item is not properly includible in the gross income of the trust on or before the date of the generation• '*' skipping transfer (within the meaning of section 2611(a)) and if such transfer occurs at or after the death of the deemed tranferor (as so defined)." (4)

SPECIAL RULES FOR GENERATION-SKIPPING TRANSFERS.—

Section 303 is amended by adding at the end thereof the following 26 USC 303, new subsection: " (d) SPECIAL RULES FOR GENERATION-SKIPPING TRANSFERS.—Under

regulations prescribed by the Secretary, where stock in a corporation is subject to tax under section 2601 as a result of a generation-skipping transfer (within the meaning of section 2611(a)), which occurs at or after the death of the deemed transferor (within the meaning of section 2612)— "(1) the stock shall be deemed to be included in the gross estate of the deemed transferor; "(2) taxes of the kind referred to in subsection (a)(1) which are imposed because of the generation-skipping transfer shall be treated as imposed because of the deemed transferor's death (and for this purpose the tax imposed by section 2601 shall be treated as an estate tax); "(3) the period of distribution shall be measured from the date of the generation-skipping transfer; and "(4) the relationship of stock to the decedent's estate shall be measured with reference solely to the amount of the generationskipping transfer." (c) EFFECTIVE DATES.—

,

26 USC 2601

(1) IN GENERAL.—Except as provided in paragraph (2), the note. amendments made by this section shall apply to any generationskipping transfer (within the meaning of section 2611(a) of the Internal Revenue Code of 1954) made after April 30, 1976. (2) EXCEPTIONS.—The amendments made by this section shall not apply to any generation-skipping transfer— (A) under a trust which was irrevocable on April 30, 1976, but only to the extent that the transfer is not made out of corpus added to the trust after April 30, 1976, or

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Page:United States Statutes at Large Volume 90 Part 2.djvu/422

 90 STAT. 1890

' '

'

PUBLIC LAW 94-455—OCT. 4, 1976 (B) in the case of a decedent dying before January 1, 1982, pursuant to a will (or revocable trust) which was in existence on April 30, 1976, and was not amended at any time after that date in any respect which will result in the creation of, or increasing the amount of, any generation-skipping transfer. For purposes of subparagraph (B), if the decedent on April 30, 1976, was under a mental disability to change the disposition of his property, the period set forth in such subparagraph shall not expire before the date which is 2 years after the date on which he first regains his competence to dispose of such property. (3) TRUST EQUIVALENTS.—For purposes of paragraph (2), in

26 USC 2057. Ante, p. 1846.

•>,.

J

the case of a trust equivalent within the meaning of subsection (d) of section 2611 of the Internal Revenue Code of 1954, the provisions of such subsection (d) shall apply. SEC. 2007. ORPHANS' EXCLUSION. (a) GENERAL RULE.—Part IV of subchapter A of chapter 11 (relating to taxable estate) is amended by adding at the end thereof the following new section: "SEC. 2057. BEQUESTS, ETC., TO CERTAIN MINOR CHILDREN. "(a) ALLOWANCE OF DEDUCTION.—For purposes of the tax imposed by section 2001, if— "(1) the decedent does not have a surviving spouse, and " (2) the decedent is survived by a minor child who, immediately after the death of the decedent, has no known parent, then the value of the taxable estate shall be determined by deducting from the value of the gross estate an amount equal to the value of any interest in property which passes or has passed from the decedent to such child, but only to the extent that such interest is included in determining the value of the gross estate. "(b) LIMITATION.—The aggregate amount of the deductions allowed under this section (computed without regard to this subsection) with respect to interests in property passing to any minor child shall not exceed an amount equal to $5,000 multiplied by the excess of 21 over the age (in years) which such child has attained on the date of the decedent's death. "(c) LIMITATION IN THE CASE OF LIFE ESTATE O OTHER TERMINABLE R

, •

Post, p. 1894.

INTEREST.—A deduction shall be allowed under this section with respect to any interest in property passing to a minor child only to the extent that a deduction would have been allowable under section 2056(b) if such interest had passed to a surviving spouse of the decedent. For purposes of this subsection, an interest shall not be treated as terminable solely because the property will pass to another person if the child dies before the youngest child of the decedent attains age 21. "(d) DEFINITIONS.—For purposes of this section— "(1) MINOR CHILD.—The term 'minor child' means any child of the decedent who has not attained the age of 21 before the date of the decedent's death. "(2) ADOPTED CHILDREN.—A relationship by legal adoption shall be treated as replacing a relationship by blood. "(3) PROPERTY PASSING FROM THE DECEDENT.—The determination of whether an interest in property passes from the decedent to any person shall be made in accordance with section 2056(d)." (b) CLERICAL AMENDMENT.—The table of sections for part IV of

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Page:United States Statutes at Large Volume 90 Part 2.djvu/423

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1891

subchapter A of chapter 11 is amended by a d d i n g a t the end thereof the following new item: "Sec. 2057. Bequests, etc., to certain minor children." (c) EFFECTIVE D A T E. — The amendments made by this section shall 26 USC 2057 apply to the estates of decedents dying after lpecember 31, 1976. note. SEC. 2008. ADMINISTRATIVE CHANGES. (a) F U R N I S H I N G OF STATEMENT E X P L A I N I N G ESTATE OR G I F T VALUATION.—

(1) IN GENERAL.—Chapter 77 (relating to miscellaneous provisions) is amended by a d d i n g a t the end thereof the following new section: "SEC. 7517. FURNISHING ON REQUEST OF STATEMENT EXPLAINING 26 USC 7517. ESTATE OR GIFT VALUATION. " (a) GENERAL RULE. — I f the Secretary makes a determination or

a proposed determination of the value of an item of property for purposes of the tax imposed under chapter 11, 12, o r 13, h e shall 26 USC 2001, furnish, on the written request of the executor, donor, o r the person 2501. required to make the return of the tax imposed by chapter 13 (as the case may b e), to such executor, donor, or person a written statement containing the material required by subsection (b). Such statement Ante, p. 1879. shall be furnished not later than 45 days after the later of the date of such request or the date of such determination or proposed determination. "(b)

CONTENTS OF STATEMENT.—^A statement required to be fur-

nished under subsection (a) with respect to the value of a n item of property shall— " (1) explain the basis on which the valuation was determined or proposed, " (2) set forth any computation used in a r r i v i n g a t such value, and " (3) contain a copy of any expert appraisal made by or for the Secretary.

' '

" (c) E F F E C T OF STATEMENT. — E x c e p t to the e x t e n t otherwise p r o -

vided by law, the value determined or proposed by the Secretary with respect to which a statement is furnished under this section, and the method used in a r r i v i n g a t such value, shall not be binding on the Secretary." (2) CONFORMING AND CLERICAL AMENDMENTS.—

(A) Section 2031 (defining gross estate) is amended by 26 USC 2031. a d d i n g a t the end thereof the following new subsection: " (c) CROSS R E F E R E N C E. —

"For executor's right to be furnished on request a statement regarding any valuation made by the Secretary within the gross estate, see section 7517." (B) Section 2512 (relating to valuation of gifts) is 26 USC 2512. amended by a d d i n g a t the end thereof the following new subsection: " (c) CROSS R E F E R E N C E. —

'

To r individual's right to be furnished on request a statement regarding any valuation made by the Secretary of a gift by that individual, see section 7517." (C) The table of sections for chapter 77 is amended by a d d i n g at the end thereof the following: "Sec. 7517. Furnishing on request of statement explaining estate or gift valuation."

..,,.„.,.

'"

!,

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Page:United States Statutes at Large Volume 90 Part 2.djvu/424

 90 STAT. 1892 26 USC 6075.

PUBLIC LAW 94-455—OCT. 4, 1976 (b) SPECIAL RULE FOR FILING RETURNS WHERE GIFTS I N CALENDAR QUARTER TOTAL $25,000 OR LESS.—Subsection (b) of section 6075

relating to gift tax returns) is amended to read as follows: "(b)

GIFT TAX RETURNS.—

"(1) GENERAL RULE.—Except as provided in paragraph (2), returns made under section 6019 (relating to gift taxes) shall be filed on or before the 15th day of the second month following the close of the calendar quarter. "(2)

SPECIAL RULE WHERE GIFTS IN A CALENDAR QUARTER TOTAL

125,000 O LESS.—If the total amount of taxable gifts made by a R person during a calendar quarter is $25,000 or less, the return under section 6019 for such quarter shall be filed on or before the 15th day of the second month after— "(A) the close of the first subsequent calendar quarter in the calendar year in which the sum of— "(i) the taxable gifts made during such subsequent quarter, plus "(ii) all other taxable gifts made during the calendar year and for which a return has not yet been required to be filed under this subsection, exceeds $25,000, or "(B) if a return is not required to be filed under subparagraph (A), the close of the fourth calendar quarter of the calendar year.

--

" (3) NONRESIDENTS NOT CITIZENS OF THE UNITED STATES.—In the

^'

case of a nonresident not a citizen of the United States, paragraph (2) shall be applied by substituting '$12,500' for '$25,000' each place it appears." (c) PUBLIC INDEX OF FILED TAX LIENS.— (1) INITIAL FILING OF NOTICE.—

26 USC 6323.

,?lx£ J'

(A) Section 6323(f) (relating to filing of notice of lien) is amended by adding at the end thereof the following new paragraph: "(4) INDEX.—The notice of lien referred to in subsection (a) shall not be treated as meeting the filing requirements under paragraph (1) unless the fact of filing is entered and recorded in a public index at the district office of the Internal Revenue Service for the district in which the property subject to the lien is situated." (B) Paragraph (2) of section 6323(f) is amended by striking out "paragraph (1) " and inserting in lieu thereof "paragraphs (1) and (4)". (2) REFILING OF NOTICE.—Section 6323(g)(2)(A) (relating to refiling of notice of lien) is amended to read as follows: "(A) if such notice of lien is refiled in the office in which ^^ prior notice of lien was filed and the fact of refiling is entered and recorded in an index in accordance with subsection (f)(4); and ". (d) EFFECTIVE DATES.—

26 USC 7517 note. 26 USC 2001. 26 USC 2501.

(1) The amendments made by subsection (a)— (A) insofar as they relate to the tax imposed under chapter 11 of the Internal Revenue Code of 1954, shall apply to the estates of decedents dying after December 31, 1976, and (B) insofar as they relate to the tax imposed under chapter 12 of such Code, shall apply to gifts made after December 31, 1976.

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9 0 STAT. 18S)3

(2) The amendment made by subsection (b) shall apply to gifts made after December 31, 1976. (3) The amendment made by subsection (c) shall take effect— (A) in the case of liens filed before the date of the enactm e n t of this Act, on the 270th d a y after such date of enactment, or (B) in the case of liens filed on or after the date of enactment of this Act, on the 120th day after such date of enactment. SEC. 2009. MISCELLANEOUS PROVISIONS.

26 USC 6075 note. 26 USC 6323 note,

(a) INCLUSION OF STOCK I N DECEDENT'S ESTATE W H E R E DECEDENT

RETAINED VOTING RIGHTS.—Subsection (a) of section 2036 (relating to 26 USC 2036. transfer with retained life estate) is amended by a d d i n g a t the end thereof the following new sentence: " For purposes of paragraph (1), the retention of voting rights in retained stock shall be considered to be a retention of the enjoyment of such stock." (b) DISCLAIMERS.— (1) AMENDMENT OF GIFT TAX PROVISIONS.—Subchapter B of

chapter 12 (relating to transfers for purposes of the gift tax) is amended by a d d i n g at the end thereof the following new section: "SEC. 2518. DISCLAIMERS. 26 USC 2518. " (a) GENERAL RULE. — For purposes of this subtitle, if a person makes a qualified disclaimer with respect to any interest in property, this subtitle shall apply with respect to such interest as if the interest h a d never been transferred to such person. " (b) QUALIFIED DISCLAIMER D E F I N E D. — For purposes of subsection

(a), the term 'qualified disclaimer' means an irrevocable and unqualified refusal by a person to accept an interest in property b u t only if— " (1) such refusal is in writing, " (2) such writing is received by the transferor of the interest, his legal representative, or the holder of the legal title to the property to which the interest relates not later than the date which is 9 months after the later of— " (A) the d a y on which the transfer creating the interest in such person is made, or " (B) the d a y on which such person attains age 21, " (3) such person has not accepted the interest or any of its benefits, and " (4) as a result of such refusal, the interest passes to a person other than the person making the disclaimer (without any direction on the part of the person making the disclaimer). " (c) OTHER RULES. — For purposes of subsection (a) — "(1)

DISCLAIMER OF UNDIVIDED PORTION o r INTEREST.—A dis-

claimer with respect to an undivided portion of a n interest which meets the requirements of the preceding sentence shall be treated as a qualified disclaimer of such portion of the interest. " (2) POWERS.—A power with respect to property shall be treated as an interest in such property." (2) AMENDMENT o r ESTATE TAX PROVISIONS.—Part III of sub-

chapter A of chapter 11 (relating to gross estate) is amended by a d d i n g a t the end thereof the following new section:

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 90 STAT. 1894 26 USC 2045.

PUBLIC LAW 94-455—OCT. 4, 1976 "SEC. 2045. DISCLAIMERS. "For provisions relating to the effect of a qualified disclaimer for purposes of this chapter, see section 2518." (3) C L E R I C A L AMENDMENTS.—

(A) The table of sections for subchapter B of chapter 12 is amended by adding at the end thereof the following: "Sec. 2518. Disclaimers." (B) The table of sections for part III of subchapter A of chapter 11 is amended by adding at the end thereof the following: "Sec. 2045. Disclaimers."

.r

(4) TECHNICAL AND CONFORMING CHANGES.—

26 USC 2041.

(A) Paragraph (2) of section 2041(a) (relating to release of general powers of appointment) is amended by striking out the second sentence thereof. (B) The first sentence of subsection (a) of section 2055 (relating to transfers for public, charitable, and religious uses) is amended by striking out "(including the interest which falls into any such bequest, legacy, devise, or transfer as a result of an irrevocable disclaime^r of a bequest, legacy, devise, transfer, or power, if the disclaimer is made before the date prescribed for the filing of the estate tax return)". (C) The second sentence of subsection (a) of section 2055 is amended— (i) by striking out "an irrevocable" and inserting in lieu thereof "a qualified", and (ii) by striking out "such irrevocable" and inserting in lieu thereof "such qualified". (D) Section 2056 (relating to bequests, etc., to surviving spouse) is amended by striking out subsection (d) and by redesignating subsection (e) as subsection (d). (E) Subsection (a) of section 2056 is amended by striking out "subsections (b), (c), and (d) " and inserting in lieu thereof "subsections (b) and (c)". ^^) Subsection (b) of section 2514 (relating to powers of appointment for purposes of the giit tax) is amended by striking out the second sentence thereof,

26 USC 2055.

26 USC 2056.

26 USC 2514

26 USC 2039.

(c) CERTAIN RETIREMENT BENEFITS.— (1) EXCLUSION FROM GROSS ESTATE OF INDIVIDUAL RETIREMENT ACCOUNTS, ETC.—Section 2039 (relating to annuities) is amended

by adding at the end thereof the following new subsection: "(e)

/

.

EXCLUSION OF INDIVIDUAL RETIREMENT ACCOUNTS, ETC.—-Not-

withstanding the provisions of this section or of any other provision of law, there shall be excluded from the value of the gross estate the value of an annuity receivable by any beneficiary (other than the executor^ under— "(1) an individual retirement account described in section 408(a), "(2) an individual retirement annuity described in section 408(b), or "(3) a retirement bond described in section 409(a). If any payment to an account described in paragraph (1) or for an annuity described in paragraph (2) or a bond described in paragraph

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90 STAT. 1895

(3) was not allowable as a deduction under section 219 and was not a rollover contribution described in section 402(a)(5), 403(a)(4), 408 (d)(3), or 409(b)(3)(C), the preceding sentence shall not apply to that portion of the value of the amount receivable under such account, annuity, or bond (as the case may be) which bears the same ratio to the total value of the amount so receivable as the total amount which was paid to or for such account, annuity, or bond and which was not allowable as a deduction under section 219 and was not such a rollover contribution bears to the total amount paid to or for such account, annuity, or bond. For purposes of this subsection, the term 'annuity' "Annuity." means an annuity contract or other arrangement providing for a series of substantially equal periodic payments to be made to a beneficiary (other than the executor) for his life or over a period extending for at least 36 months after the date of the decedent's death." (2) EXCLUSION FROM GROSS ESTATE or SELF-EMPLOYED PLANS.—

The fifth sentence of section 2039(c) (relating to exemption of 26 USC 2039. annuities under certain trusts and plans) is amended to read as follows: "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, to the extent allowable as a deduction under section 404, be considered to be made by a person other than the decedent and, to the extent not so allowable, shall be considered to be made by the decedent." (3)

EXCLUSION INAPPLICABLE IN CASE OF LUMP SUM DISTRIBU-

TioNS.—The first sentence of subsection (c) of section 2039 (relating to exemption of annuities under certain trusts and plans) is amended by striking out "other payment receivable by any beneficiary" and inserting in lieu thereof "other payment (other than a lump sum distribution described in section 402(e)(4), determined without regard to the next to the last sentence of section 402(e)(4)(A)) receivable by any beneficiary". (4) G I F T TAX TREATMENT OF ELECTIONS UNDER CERTAIN RETIREMENT PLANS. (A) INDIVIDUAL RETIREMENT ACCOUNTS, ETC.—

'^

(i) Subsection (a) of section 2517 (relating to certain 26 USC 2517. annuities under qualified plans) is amended by striking out "or" at the end of paragraph (3), by striking out the period at the end of paragraph (4) and inserting in lieu thereof "; or", and by inserting after paragraph (4) the following new paragraph: "(5) an individual retirement account described in section 408 (a) an individual retirement annuity described in section 408 (b), or a retirement bond described in section 409(a)." (ii) Subsection (b) of section 2517 (relating to transfers attributable to employee contributions) is amended by striking out "other than paragraph (4)" and inserting in lieu thereof "other than paragraphs (4) and (5)". (iii) Subsection (c) of section 2517 (defining employee) is amended by adding at the end thereof the following new sentence: "In the case of a retirement plan described in paragraph (5) of subsection (a), such term means the individual for whose benefit the plan was established." (B) SELF-EMPLOYED PLANS.—The last sentence of section 2517(b) (relating to transfers attributable to employee con-

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 90 STAT. 1896 '

PUBLIC LAW 94-455—OCT. 4, 1976 tributions) is amended to read as follows; "For purposes of this subsection, contributions or payments on behalf of an individual 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) of subsection (a) shall, to the extent allowable as a deduction under section 404, be considered to be made by a person other than such individual and, to the extent not so allowable, shall be considered to be made by such individual." (5) GIFT TAX TREATMENT or CERTAIN COMMUNITY PROPERTY.—

26 USC 2517.

Section 2517 (relating to certain annuities under qualified plans) is amended by redesignating subsection (c) (as amended by paragraph (4)(A) (iii)) as subsection (d) and by inserting after subsection (b) the following new subsection: "(c) EXEMPTION OF CERTAIN ANNUITY INTERESTS CREATED BY COMMUNITY PROPERTY LAWS.—Notwithstanding any other provision of

law, in the case of an employee on whose behalf contributions or payments are made— "(1) by his employer or former employer under a trust or plan described in paragraph (1) or (2) of subsection (a), or toward the purchase of a contract described in paragraph (3) of subsection (a), which under subsection (b) are not considered as contributed by the employee, or "(2) by the employee to a retirement plan described in paragraph (5) of subsection (a), a transfer of benefits attributable to such contributions or payments shall, for purposes of this chapter, not be considered as a transfer by the spouse of the employee to the extent that the value of any interest of such spouse in such contributions or payments or in such trust or plan or such contract— " (A) is attributable to such contribution or payments, and "(B) arises solely by reason of such spouse's interest in community income under the community property laws of the State." (d) INCOME TAX TREATMENT OF CERTAIN EXPENSES OF ESTATE.—Sec-

26 USC 642.

26 USC 2036 "<»**• 26 USC 2518 "o**-

tion 642(g) (relating to disallowance of double deductions) is amended by inserting after "shall not be allowed as a deduction" the following: "(or as an offset against the sales price of property in determining gain or loss)". (e) EFFECTIVE DATES.— (1) FOR SUBSECTION (a).—The amendment made by subsection

(a) shall apply to transfers made after June 22, 1976. (2) FOR SUBSECTION (b).—The amendments made by subsection (b) shall apply with respect to transfers creating an interest in the person disclaiming made after December 31, 1976. (3) FOR SUBSECTION (c). —

26 USC 2039 no*«' 26 USC 2517 "****• 26 USC 642

°®**-

(A) The amendments made by paragraph s (1), (2), and (3) of subsection (c) shall apply to the estates of decedents dying after December 31, 1976. (B) The amendments made by paragraph s (4) and (5) of subsection (c) shall apply to transfers made after December 31, 1976. (4) FOR SUBSECTION (d). — The amendment made by subsection

(d) shall apply to taxable years ending after the date of the enactment of this Act.

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1897

SEC. 2010. CREDIT AGAINST CERTAIN ESTATE TAXES

(a) IN GENERAL.—Subject to the provisions of subsections (b), (c), and (d), credit against the tax imposed by chapter 11 of the Internal Revenue Code of 1954 (relating to estate tax) with respect to the estate 26 USC 2001. of LaVere Kedfield shall be allowed by the Secretary of the Treasury or his delegate for the conveyance of real property located within the boundaries of the Toiyabe National Forest. (b) AMOUNT OF CREDIT.—The amount treated as a credit shall be equal to the fair market value of the real property transferred as of the valuation date used for purposes of the tax imposed (and interest thereon) by chapter 11 of the Internal Revenue Code of 1954. (c) DEED REQUIREMENTS.—The provisions of this section shall apply ^ only if the executrixes of the estate execute a deed (in accordance with the laws of the State in which such real estate is situated) transferring title to the United States which is satisfactory to the Attorney General or his designee. (d) ACCEPTANCE AS NATIONAL FOREST.—The provisions of this section shall apply only if the real property transferred is accepted by the Secretary of Agriculture and added to the Toiyabe National Forest. The lands shall be transferred to the Secretary of Agriculture without reimbursement or payment from the Department of Agriculture. (e) INTEREST.—Unless the Secretary of Agriculture determines and certifies to the Secretary of the Treasury that there has been an expeditious transfer of the real property under this section, no interest payable with respect to the tax imposed by chapter 11 of the Internal Revenue Code of 1954 shall be deemed to be waived by reason of the provisions of this section for any period before the date of such transfer. (f) EFFECTIVE DATE.—The provisions of this section shall be effective on the date of the enactment of this Act.

TITLE XXI—MISCELLANEOUS PROVISIONS SEC. 2101. TAX TREATMENT OF CERTAIN HOUSING ASSOCIATIONS.

(a) GENERAL RULE.—Subchapter F of chapter 1 (relating to exempt organizations) is amended by adding at the end thereof the following new part: "PART VII—CERTAIN HOMEOWNERS ASSOCIATIONS "Sec. 528. Certain homeowners associations. "SEC. 528. CERTAIN HOMEOWNERS ASSOCIATIONS. 26 USC 528. " (a) GENERAL RULE.—A homeowners association (as defined in sub-

section (c)) shall be subject to taxation under this subtitle only to the extent provided in this section. A homeowners association shall be considered an organization exempt from income taxes for the purpose of any law which refers to organizations exempt from income taxes. "(b) TAX IMPOSED.—

"(1) IN GENERAL.—A tax is hereby imposed for each taxable year on the homeowners association taxable income of every homeowners association. Such tax shall consist of a normal tax and surtax computed as provided in section 11 as though the homeowners association were a corporation and as though the

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 90 STAT. 1898 26 USC 11. Ante, p. 1606.

PUBLIC LAW 94-455—OCT. 4, 1976 homeowners association taxable income were the taxable income referred to in section 11. For purposes of this subsection, the surtax exemption provided by section 11(d) shall not be allowed. "(2)

ALTERNATIVE TAX IN CASE OF CAPITAL GAINS.—If for

any

taxable year any homeowners association has a net capital gain, then in lieu of the tax imposed by paragraph (1), there is hereby imposed a tax (if such tax is less that the tax imposed by paragraph (1)) which shall consist of the sum of.— "(A) a partial tax, computed as provided by paragraph (1), on the homeowners association taxable income determined by reducing such income by the amount of such gain, and " (B) a tax of 30 percent of such gain. "(c) HOMEOWNERS ASSOCIATION DEFINED.—For purposes of this section— "(1) HOMEOWNERS ASSOCIATION.—The term 'homeowners association means an organization which is a condominium management association or a residential real estate management association if— "(A) such organization is organized and operated to provide for the acquisition, construction, management, maintenance, and care of association property, "(B) 60 percent or more of the gross income of such organization for the taxable year consists solely of amounts received as membership dues, fees, or assessments from— "(i) owners of residential units in the case of a condominium management association, or " (ii) owners of residences or residential lots in the case of a residential real estate management association. " (C) 90 percent or more of the expenditures of the organization for the taxable year are expenditures for the acquisition, construction, management, maintenance, and care of association property, "(D) no part of the net earnings of such organization inures (other than by acquiring, constructing, or providing management, maintenance, and care of association property, and other than by a rebate of excess membership dues, fees, or assessments) to the benefit of any private shareholder or individual, and " (E) such organization elects (at such time and in such manner as the Secretary by regulations prescribes) to have this section apply for the taxable year. "(2) CONDOMINIUM MANAGEMENT ASSOCIATION.'—The term 'condominium management association' means any organization meeting the requirement of subparagraph (A) of paragraph (1) with respect to a condominium project substantially all of the units of which are used as residences. "(3)

R E S I D E N T I A L REAL ESTATE MANAGEMENT ASSOCIATION.—The

term 'residential real estate management association' means any organization meeting the requirements of subparagraph (A) of paragraph (1) with respect to a subdivision, development, or similar area substantially all the lots or buildings of which may only be used by individuals for residences. "(4) ASSOCIATION PROPERTY.—The term 'association property' means— " (A) property held by the organization.

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 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 1899

" (B) property commonly held by the members of the organization, " (C) property within the organization privately held by the members of the organization, and " (D) property owned by a governmental u n i t and used for the benefit of residents of such unit. "(d)

HOMEOWNERS ASSOCIATION TAXABLE I N C O M E D E F I N E D. — " (1) TAXABLE INCOME D E F I N E D. — For purposes of t h i s section,

the homeowners association taxable income of any organization for any taxable year is an amount equal to the excess (if any) of-^ " (A) the gross income for the taxable year (excluding any exempt function income), over " (B) the deductions allowed by this chapter which are directly connected with the production of the gross income (excluding exempt function income), computed with the modifications provided in paragraph (2). " (2) MODIFICATIONS.—For purposes of tnis subsection— " (A) there shall be allowed a specific deduction of $100, " (B) no net operating loss deduction shall be allowed under section 172, and " (C) no deduction shall be allowed under part VIII of subchapter B (relating to special deductions for corporations). " (3) E X E M P T FUNCTION INCOME.—For purposes of this subsection, the term 'exempt function income' means any amount received as membership dues, fees, or assessments from— " (A) owners of condominium housing units in the case of a condominium management association, or " (B) owners of real property i n the case of a residential real estate management association." (b) Section 216(c) (relating to treatment of property subject to 26 USC 216. depreciation) is amended by a d d i n g a t the end thereof the following new sentence: " The preceding sentence shall not be construed to limit o r deny a deduction for depreciation under 167(a) by a cooperative housing corporation with respect to property owned by such a corporation and leased to tenant-stockholders." (c) REQUIREMENT OF R E T U R N. — S e c t i o n 6012 (a) ( r e l a t i n g to persons

26 USC 6012.

required to make returns of income) is amended by striking out " and " a t the end of paragraph (5), by inserting " and " a t the end of paragraph (6), and by inserting after paragraph (6) the following new paragraph: " (7) E v e r y homeowners association (within the meaning of section 5 2 8 (c)(1)) which has homeowners association taxable Ante, f. 1897. income (within the meaning of section 5 2 8 (d)) for the taxable year." (d) CLERICAL AMENDMENT. — The table of part s for subchapter F of

chapter 1 is amended by a d d i n g a t the end thereof the following new item: "Part VII. Certain homeowners associations." (e) EFFECTIVE D A T E. — E x c e p t as provided in subsection (f)(2), the

amendments made by this section shall a p p l y to taxable years beginn i n g after December 31, 1973. (i)

CERTAIN STOCK OF COOPERATIVE H O U S I N G

26 USC 528

note,

CORPORATIONS.—

(1) Section 216(b) is amended by a d d i n g at the end thereof the following new paragraph:

26 USC 216.

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 90 STAT. 1900

PUBLIC LAW 94-455—OCT. 4, 1976 "(5) STOCK ACQUIRED THROUGH FORECLOSURE BY LENDING INSTI-

26 USC 216 note.

26 USC 451.

TUTION.—If a bank or other lending institution acquires by foreclosure (or by instrument in lieu of foreclosure) the stock of a tenant-stockholder, and a lease or the right to occupy an apartment or house to which such stock is appurtenant, such bank or other lending institution shall be treated as a tenant-stockholder for a period not to exceed three years from the date of acquisition. The preceding sentence shall apply even though, by agreement with the cooperative housing corporation, the banK (or other lending institution) or its nominee may not occupy the house or apartment without the prior approval of such corporation." (2) The amendment made by paragraph (1) shall apply to stock acquired by banks or other lending institutions after the date of the enactment of this Act. SEC. 2102. TREATMENT OF CERTAIN DISASTER PAYMENTS. (a) GENERAL RULE.—Subsection (d) of section 451 (relating to

special rule for crop insurance proceeds) is amended by inserting after the first sentence the following new sentence: "For purposes of the preceding sentence, payments received under the Agricultural Act of 1949, as amended, as a result of (1) destruction or damage to crops caused by drought, flood, or any other natural disaster, or (2) the inability to plant crops because of such a natural disaster shall be treated as insurance proceeds received as a result of destruction or damage to crops." (b) TECHNICAL AMENDMENT.^—The subsection heading for such subsection (d) is amended by striking out "Proceeds" and inserting in lieu thereof "Proceeds or Disaster Payments". 26 USC 451 (c) EFFECTIVE DATE.—The amendments made by this section shall noteapply to payments received after December 31, 1973, in taxable years ending after such date. 26 USC 165 SEC. 2103. TAX TREATMENT OF CERTAIN 1972 DISASTER LOSSES. ""**• (a) APPLICATION OF SECTION.—This section shall apply to any individual— (1) who was allowed a deduction under section 165 of the Internal Revenue Code of 1954 (relating to losses) for a loss attributable to a disaster occurring during calendar year 1972 which was determined by the President, under section 102 of the 42 USC 4402. Disaster Relief Act of 1970, to warrant disaster assistance by the Federal Government, (2) who in connection with such disaster— (A) received income in the form of cancellation of a disas15 USC 636. ter loan under section 7 of the Small Business Act or an emergency loan under subtitle C of the Consolidated Farm 75 Stat. 311. and Rural Development Act, or (B) received income in the form of compensation (not taken into account in computing the amount of the deduction) for such loss in settlement of any claim of the taxpayer against a person for that person's liability in tort for the damage or destruction of that taxpayer's property in connection with the disaster, and "•'• (3) who elects (at such time and in such manner as the Secre—•• tary of the Treasury or his delegate may by regulations prescribe) to take the benefits of this section, (b) EFFECT OF ELECTION.—In the case of any individual to whom this section applies^
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9 0 STAT. 1901

(1) the tax imposed by chapter 1 of the I n t e r n a l Revenue Code of 1954 for the taxable year in which the income taken into 26 USC 1. account is received or accrued which is attributable to such income shall not exceed the additional tax under such chapter which would have been payable for the year in which the deduction for the loss was taken if such deduction h a d not been taken for such year, (2) any amount of tax imposed by chapter 1 attributable to the income taken into account which, on October 1, 1975, was unpaid may be paid in 3 equal annual installments (with the first such installment due and payable on April 15, 1977), and (3) no interest on any deficiency shall be payable for any period before April 16, 1977, to the extent such deficiency is attributable to the receipt of such compensation, and n o interest on j any installment referred to i n paragraph (2) shall be payable for any period before the due date of such installment.

.

(c) INCOME T A K E N I N TO ACCOUNT. — For purposes of t h i s section,

the income taken into account is— (1) i n the case of a n individual described in subsection (a)(2) (A), the amount of income (not in excess of $5,000) attributable to the cancellation of a disaster loan under section 7 of the Small Business A c to r an emergency loan under subtitle C of the Con- 15 USC 636. solidated F a r m and R u r a l Development Act received by reason 19 USC 1961. of the disaster described in subsection (a)(1), or (2) i n the case of an individual described in subsection (a)(2) (B), the amount of compensation (not in excess of $5,000) for the loss in settlement of any claim of the taxpayer against a person for that person's liability in to r t for the damage or destruction of that taxpayer's property in connection with the disaster described in subsection (a)(1). (d) PHASEOUT W H E R E ADJUSTED GROSS INCOME EXCEEDS $15,000.—

I f for the taxable year for which the deduction for the loss was taken the individual's adjusted gross income exceeded $15,000, the $5,000 limit set forth in paragraph (1) or (2) of subsection (c) (whichever applies) shall be reduced by one dollar for each full dollar that such adjusted gross income exceeds $15,000. I n the case of a married individual filing a separate return, the preceding sentence shall be applied by substituting "$7,500" for "$15,000". (e) STATUTE OF L I M I T A T I O N S. — I f refund or credit of any overpay-

ment of income tax resulting from an election made under tins section is prevented on the date of the enactment of this Act, or a t any time within one year after such date, by the operation of any law, or rule of law, refund or credit of such overpayment (to the extent attributable to such election) may, nevertheless, be made or allowed if claim therefor is filed within one year after such date. I f the taxpayer makes an election under this section and if assessment of any deficiency for any taxable year resulting from such election is prevented on the date of the enactment of t h i s Act, o r a t any time within one year after such date, by the operation of any law or rule of law, such asst^ssment (to the extent attributable to such election) may, nevertheless, be made if .*,-;.• made within one year after such date. -" • SEC. 2104. TAX TREATMENT OF CERTAIN DEBTS OWED BY POLITICAL PARTIES, ETC., TO ACCRUAL BASIS TAXPAYERS. (a) IN GENERAL.—Section 271 (relating to debts owed by political 26 USC 271. parties, etc.) is amended by a d d i n g a t the end thereof the following new subsection:

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 90 STAT. 1902

26 USC 271 note. 26 USC 103.

PUBLIC LAW 94-455—OCT. 4, 1976 " (c) EXCEPTION.—In the case of a tax p a y e r who uses a n accrual method of accounting, subsection (a) shall not apply to a debt which accrued as a receivable on a bona fide sale of goods or services i n the ordinary course of the taxpayer's trade or business if— " (1) for the taxable year in which such receivable accrued, more than 30 percent of all receivables which accrued in the ordinary course of the trades and businesses of the tax p a y e r were due from political parties, and " (2) the taxpayer made substantial continuing efforts to collect on the debt." (b) ErFECTivE DATE.—The amendment made by subsection (a) shall apply to taxable years beginning after December 31, 1975. SEC. 2105. TAX-EXEMPT BONDS FOR STUDENT LOANS. (a) IN GENERAL.—Section 103(a) (relating to interest on certain governmental obligations) is amended by striking out " o r " a t the end of paragraph (2), striking out the period at the end of paragraph (3) and inserting in lieu thereof "; or", and by adding a t the end thereof the following: " (4) qualified scholarship funding bonds." (b) DEFINITION OF QUALIFIED SCHOLARSHIP F U N D I N G BONDS.—Sec-

tion 103 is amended by redesignating subsection (f) as (g), and by inserting after subsoction (e) the following new subsection: "(f)

20 USC 1001 o****-

I

QUALIFIED SCHOLARSHIP F U N D I N G B O N D S. — For purposes of

subsection (a), the term 'qualified scholarship funding bonds' means obligations issued by a corporation which— " (1) is a corporation not for profit established and operated exclusively for the purpose of acquiring student loan notes incurred under the H i g h e r Education Act of 1965, and " (2) is organized a t the request of a State or one or more political subdivisions thereof or is requested to exercise such power by one or more political subdivisions and required by its corporate charter and bylaws, or required by State law, to devote any income (after payment of expenses, debt service, and the creation of reserves for the same) to the purchase of additional student loan notes or to p a y over any income to the State o r a political subdivision thereof." (c) CONFORMING AMENDMENTS. —

(1) Section 103(d) (relating to arbitrage bonds) is amended by redesignating paragraph (5) as paragraph (6) and inserting after paragraph (4) the following new paragraph: "(5)

20 USC 1078a.

26 USC 103 "°*®26 USC 543.

STUDENT LOAN INCENTIVE PAYMENTS.—Payments made by

the Commissioner of Education pursuant to section 2 of the E m e r gency Insured Student Loan Act of 1969 are not to be taken into account, for purposes of subsection (d)(2)(A), in determining yields on student loan notes." (2) Section 103(d) (relating to arbitrage bonds) is amended by striking out " (a)(1) " each place it appears in paragraph (1) (including the heading) and paragraph (2) and inserting in lieu thereof " (a)(1) o r (4) ". (d) EFFECTIVE DATE.—The amendments made by this section apply to obligations issued on or after the date of the enactment of this Act. SEC. 2106. PERSONAL HOLDING COMPANY INCOME AMENDMENTS. (a) IN GENERAL.—Section 5 4 3 (a)(6) (relating to definition of personal holding company income) is amended to read as follows: " (6) U S E OF CORPORATE PROPERTY BY SHAREHOLDER.—

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text:
Page:United States Statutes at Large Volume 90 Part 2.djvu/435

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1903

" (A) Amounts received as compensation (however designated and from whomever received) for the use of, or the r i g h t to use, tangible property of the corporation in any case where, at any time during the taxable year, 25 percent or I '1 more in value of the outstanding stock of the corporation is owned, directly or indirectly, by or for an individual entitled to the use of the property (whether such r i g h t is obtained directly from the corporation or by means of a sublease or other a r r a n g e m e n t). " (B) Subparagraph (A) shall a p p l y only to a corporation which has personal holding company income in excess of 10 .,. ,... percent of its ordinary gross income. ^ ' ^ " (C) For purposes of the limitation in subparagraph (B), personal holding company income shall be computed— " (i) without regard to subparagraph (A) or paragraph (2), " ( i i) by excluding amounts received as compensation for the use of (or right to use) intangible property (other than mineral, oil, or gas royalties or copyright royalties) if a substantial part of the tangible property used in connection with such intangible property is owned by the corporation and all such tangible and intangible property is used in the active conduct of a trade or business by an individual or individuals described in subparagraph (A), and " ( i i i) by including copyright royalties and adjusted income from mineral, oil, and gas royalties." (b) EFFECTIVE DATE.—The amendment made by subsection (a) 26 USC 543 shall a p p l y to taxable years beginning after December 31, 1976. note. SEC. 2107. WORK INCENTIVE PROGRAM EXPENSES. (a) INCREASE I N L I M I T A T I O N BASED ON A M O U N T OF T A X. —

(1) Paragraph (2) of section 5 0 A (a) (relating to limitation 26 USC 50A. based on amount of tax) is amended by striking out "$25,000" each place it appears and inserting in lieu thereof "$50,000". (2) Paragraph (4) of section 5 0 A (a) (relating to married individuals) is amended— (A) by striking out "$12,500" and inserting in lieu thereof "$25,000^ and .^ (B) by striking out "$25,000" and inserting in lieu thereof ' "$50,000^^'. (3) Paragraph (5) of section 5 0 A (a) (relating to controlled groups) is amended by striking out "$25,000" each place it appears therein and inserting in lieu thereof "$50,000". (4) Paragraph (3) of section 50B(e) is amended by striking 26 USC SOB. out "$25,000" each place it appears therein and inserting in lieu thereof "$50,000".

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(b) EEDUCTION o r PERIOD D U R I N G W H I C H DISCHARGE OF EMPLOYEE

CAUSES RECAPTURE.—Subparagraph (A) of section 50A(c)(1) (relat- 26 USC 50A. ing to work incentive program expenses) is amended— (1) by striking out "12 months " each place it appears and inserting in lieu thereof "90 days", (2) by striking out "12th calendar month " and inserting in '' ' lieu thereof "90th calendar day", and (3) by striking out "the calendar month " and inserting in lieu thereof " the day".

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