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Page:United States Statutes at Large Volume 90 Part 2.djvu/375

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1843

subsection by subparagraph (E), the price per pound a t which the cotton of such basis grade is contracted to be bought or sold, the date when the purchase or sale was made, and the month or months in which the contract is to be fulfilled or settled; except that m i d d l i n g shall be deemed the basis grade incorporated into the contract if no other basis grade be specified either in the contract or in the memorandum evidencing the same. (C)

^j n

PROVISION FOR DELIVERY OF STANDARD GRADES ONLY.—

Provide that the cotton dealt with therein or delivered thereunder shall be of or within the grades for which standards are established by the Secretary except grades prohibited from being delivered on a contract made under this subsection by subparagraph (E) and no other g r a d e or grades.

,

(D) PROVISION FOR SETTLEMENT ON BASIS or ACTUAL COMMER-

CIAL DIFFERENCES.—Provide that in case cotton of g r a d e other than the basis grade be tendered or delivered in settlement of such contract, the differences above or below the contract price which the receiver shall pay for such grades other than the basis g r a d e shall be the actual commercial differences, determined as hereinafter provided. (E)

PROHIBITION OF DELIVERY OF INFERIOR COTTON.—Pro-

vide that cotton that, because of the presence of extraneous m a t t e r of any character, or iregularities or defects, is reduced in value below that of low middling, or cotton that is below the grade of low middling, or, if tinged, cotton that is below the g r a d e of strict middling, or, if yellow stained, cotton that is below the grade of good middling, the grades mentioned being of the official cotton standards of the United States, or cotton that is less than seven-eighths of an inch in length of staple, or cotton of perished staple, or of immature staple, or cotton that is " g i n c u t " or reginned, or cotton that is "repacked" or "false packed" or "mixed packed" or "water packed", shall not be delivered on, under, or in settlement of such contract. (F)

PROVISIONS FOR TENDER I N FULL, NOTICE OF DELIVERY

DATE, AND CERTIFICATE OF GRADE.—Provide that all tenders of

cotton under such contract shall be the full number of bales involved therein, except that such variations of the number of bales may be permitted as is necessary to b r i n g the total weight of the cotton tendered within the provisions of the contract as to weight; that, on the fifth business day p r i o r to delivery, the person making the tender shall give to the person receiving the same written notice of the date of delivery, and that, on or p r i o r to the date so fixed for delivery, and in advance of final settlement of the contract, the person making the tender shall furnish to the person receiving the sam3 a written notice or certificate s t a t i n g the grade of each individual bale to be delivered and, by means of marks or numbers, identifying each bale with its grade. (G) PROVISION FOR TENDER AND SETTLEMENT I N ACCORDANCE

WITH GOVERNMENT CLASSIFICATION.—Provide that all tenders of cotton and settlements therefor under such contract shall be in accordance with the classification thereof made under the regulations of the Secretary by such officer or officers of the Government as shall be designated for the purpose, and the costs of such classification shall be fixed, assessed, col-

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Page:United States Statutes at Large Volume 90 Part 2.djvu/376

 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 1 8 4 4 Regulations.

lected, and paid as provided in such regulations. The Secretary is authorized to prescribe regulations for carrying o u t the purposes of this subparagraph and the certificates of the officers of the Government as to the classification of any cotton for the purposes of this subparagraph shall be accepted in the courts of the United States in all suits between the parties to such contract, or their privies, as prima facie evidence of the true classification of the cotton involved. (2) INCORPORATION OF CONDITIONS I N CONTRACTS.—The p r o v i -

Ante, p. 1841.

sions of paragraph s (1)(C), (D), (E), (F), and (G) shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the memorandums evidencing the same, a t or prior to the time the same is signed, the phrase "Subject to United States Cotton F u t u r e s Act, subsection (f). " (3J DELIVERY ALLOWANCES.—For the purpose of t h i s subsection,

Rules and regulations.

the differences above or below the contract price which the receiver shall p a y for cotton of grades above or below the basic grade in the settlement of a contract of sale for the future delivery of cotton shall be determined by the actual commercial differences in value thereof upon the sixth business d a y prior to the d a y fixed, in accordance with paragraph (1)(F), for the delivery of cotton on the contract, established by the sale of spot cotton in the spot markets of not less than five places designated for the purpose from time to time by the Secretary, as such values were established by the sales of spot cotton, in such designated five or more markets. For purposes of this paragraph, such values in the such spot markets shall be based upon the standards for grades of cotton established by the Secretary. Whenever the value of one grade is to be determined from the sale or sales of spot cotton of another grade or grades, such value shall be fixed in accordance with rules and regulations which shall be prescribed for the purpose by the Secretary, (g) TENDERED GRADE CONTRACTS.—

(1) CONDITIONS.—Each tendered grade cotton future contract shall comply with each of the following conditions: (A) COMPLIANCE W I T H SUBSECTION (f). — C o m p l y w i t h all

the terms and conditions of subsection (f) not inconsistent with this subsection; and (B)

PROVISION FOR CONTINGENT SPECIFIC PERFORMANCE.—

P r o v i d e that, in case cotton of grade or grades other than the basis grade specified in the contract shall be tendered in performance of the contract, the parties to such contract may agree, a t the time of the tender, as to the price of the grade or grades so tendered, and that if they shall not then agree as to such price, then, and i n that event, the buyer of said contract shall have the r i g h t to demand the specific fulfillment of such contract by the actual delivery of cotton of the basis grade named therein and a t the price specified for such basis grade in said contract. (2)

INCORPORATION OF CONDITIONS I N CONTRACT.—Contracts

made in compliance with this subsection shall be known as "subsection (g) Contracts". The provisions of this subsection shall be deemed fully incorporated into any such contract if there be written or printed thereon, or on the memorandum evidencing the same, a to r prior to the time the same is signed, the phrase "Subject to United States Cotton F u t u r e s Act, subsection (g) ".

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license: Creative Commons - Attribution Share-Alike - https://creativecommons.org/licenses/by-sa/4.0/


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Page:United States Statutes at Large Volume 90 Part 2.djvu/377

 PUBLIC LAW 94^455—OCT. 4, 1976 ^

90 STAT. 1 8 4 5

(3) APPLICATION o r SUBSECTION.—Nothing i n t h i s subsection

shall be so construed as to authorize any contract i n which, or i n the settlement of or in respect to which, any device or arrangement whatever is resorted to, or any agreement is made, for the determination o r adjustment of the price of the g r a d e o r grades tendered other than the basis grade specified in the contract by any "fixed difference" system, or by arbitration, or by any other method not provided for by this section, (h)

SPECIFIC GRADE CONTRACTS.—

(1) CONDITIONS.—Each specific grade cotton futures contract shall comply with each of the following conditions: (A)

CONFORMITY W I T H RULES AND REGULATIONS.—Conform

to the rules and regulations made pursuant to this section. (B) SPECIFICATION OF GRADE, PRICE, DATES OF SALE AND DELIV-

V-

ERY.—Specify the grade, type, sample, or description of the cotton involved in the contract, the price p e r pound a t which such cotton is contracted to be bought o r sold, the date of the purchase or sale, and the time when shipment o r delivery of such cotton is to be made. (C) PROHIBITION OF DELIVERY OF OTHER T H A N SPECIFIED

GRADE.—Provide that cotton of or within the grade or of the type, or according to the sample or description, specified i n the contract shall be delivered thereunder, and that n o cotton which does not conform to the type, sample, or description, or which is not of or within the g r a d e specified i n the contract shall be tendered o r delivered thereunder. (D) PROVISION FOR SPECIFIC PERFORMANCE.—Provide that

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the delivery of cotton under the contract shall not be effected by means of "setoff" o r " r i n g " settlement, b u t only by the actual transfer of the specified cotton mentioned in the contract. (2) INCORPORATION OF CONDITIONS I N CONTRACT.—The provisions

of paragraph s (1)(A), (C), and (D) shall be deemed fully incorporated into any such contract if there be written or printed thereon, o r on the document or memorandum evidencing the same, at or prior to the time the same is entered into, the words " S u b - Ante, p. 1841. ject to United States Cotton F u t u r e s Act, subsection (h) ". . (3) APPLICATION OF SUBSECTION.—This subsection shall not be

construed to apply to any contract of sale made in compliance with subsection (fj o r (g). (i) L I A B I L I T Y OF P R I N C I P A L FOR ACT S OF A G E N T. — W h e n construing

and enforcing the provisions of this section, the act, omission, o r failure of any official, agent, or other person acting for or employed by any association, partnership, o r corporation within the scope of his employment or office shall, in every case, also be deemed the act, omission, or failure of such association, partnership, or corporation, as well as that of the person. (j) REGULATIONS.—The Secretary is authorized to make such regulations with the force and effect of law as he determines may be necessary to carry out the provisions of this section and the powers vested in him by this section. (k) VIOLATIONS.—Any person who knowingly violates any regulation made m pursuance of this section, shall, upon conviction thereof, be fined not less than $100 n o r more than $500, for each violation thereof, m the discretion of the court, and, in case of natural persons, may, in addition be punished by imprisonment for not less than 30 days nor more than 90 days, for each violation, in the discretion of the

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Page:United States Statutes at Large Volume 90 Part 2.djvu/378

 90 STAT. 1846

PUBLIC LAW 94-455—OCT. 4, 1976 court except that this subsection shall not apply to violations subject to subsection (d)(3). (1) APPLICABILITY TO CONTRACTS PRIOR TO EFFECTIVE DATE.—The

26 USC 1.

,

provisions of this section shall not apply to any cotton futures contract entered into prior to the effective date of this section or to any act or failure to act by any person prior to such effective date and all such prior contracts, acts or failure to act shall continue to be governed by the applicable provisions of the Internal Revenue Code of 1964 as in effect prior to the enactment of this section. All designations of bona fide spot markets and all rules and regulations issued by the Secretary pursuant to the applicable provisions of the Internal Revenue Code of 1954 which were in effect on the effective date of this section, shall remain fully effective as designations and regulations under this section until superseded, amended, or terminated by the Secretary. (m) AUTHORIZATION.—There are authorized to be appropriated such sums as may be necessary to carry out this section. (n)

26 USC 6808. 26 USC 7233.

26 USC 7263.

26 USC 7492.

^

7 USC 15b note.

CONFORMING AND CLERICAL AMENDMENTS.—

(1) Section 6808 (relating to cross references) is amended by striking out paragraph (2), and by redesignating paragraphs (3), (6), and (11) as paragraphs (1), (2), and (3), respectively. (2)(A) Section 7233 (relating to failure to pay tax on cotton futures) is repealed. (B) The table of sections for part II of subchapter A of chapter 75 is amended by striking out the item relating to section 7233. (3)(A) Section 7263 (relating to penalties concerning cotton futures) is repealed. (B) The table of sections for subchapter B of chapter 75 is amended by striking out the item relating to section 7263. (4)(A) Subchapter E of chapter 76 (relating to miscellaneous provisions regarding cotton futures contracts) is repealed. (B) The table of subchapters for chapter 76 is amended by striking out the items relating to subchapter E. (5) Chapter 39 (relating to regulatory taxes) is amended by striking out the chapter heading and the table of subchapters. (6) The table of chapters for subtitle D is amended by striking out the item relating to chapter 39. (o) EFFECTIVE DATE.—The provisions of this section shall take effect on the 90th day after the date of the enactment of this Act.

TITLE XX—ESTATE AND GIFT TAXES SEC. 2001. UNIFIED RATE SCHEDULE FOR ESTATE AND GIFT TAXES; UNIFIED CREDIT IN LIEU OF SPECIFIC EXEMPTIONS. (a) 26 USC 2001.

CHANGES IN ESTATE TAX.— (1) IMPOSITION OF TAX; RATE SCHEDULE.—Section 2001 (relat-

ing to rate of tax) is amended to read as follows: "SEC. 2001. IMPOSITION AND RATE OF TAX. "(a) IMPOSITION.—A tax is hereby imposed on the transfer of the taxable estate of every decedent who is a citizen or resident of the United States. "(b) COMPUTATION or TAX.—The tax imposed by this section shall be the amount equal to the excess (if any) of— "(1) a tentative tax computed in accordance with the rate schedule set forth in subsection (c) on the sum of—

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Page:United States Statutes at Large Volume 90 Part 2.djvu/379

 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 18^t7

" (A) the amount of the taxable estate, and "(B) the amount of the adjusted taxable gifts, over "(2) the aggregate amount of tax payable under chapter 12 26 USC 250I. with respect to gifts made by the decedent after December 31, 1976. For purposes of paragraph (1)(B), the term 'adjusted taxable gifts' "Adjusted means the total amount of the taxable gifts (within the meaning of taxable gifts." section 2503) made by the decedent after December 31, 1976, other than gifts which are includible in the gross estate of the decedent. "(c)

RATE SCHEDULE.—

"If the amount with respect to which the The tentative tax i s: tentative tax to be computed i s: Not over $10,000 18 percent of such amount. Over '$10,000 but not over $20,000 $1,800, plus 20 percent of the excess Of such amount over $10,000. Over $20,000 but not over $40,000 $3,800, plus 22 percent of the excess of such amount over $20,000. Over $40,000 but not over $60,000 $8,200, plus 24 percent of the excess of such amount over $40,000. Over $60,000 but not over $80,000 $13,000, plus 26 percent of the excess of such amount over $60,000. Over $80,000 but not over $100,000 $18,200, plus 28 percent of the excess of such amount over $80,000. Over $100,000 but not over $150,000 $23,800, plus 30 percent of the excess of such amount over "$100,000. Over $150,000 but not over $250,000$38,800, plus 32 percent of the excess of such amount over $150,000. Over $250,000 but not over $500,000 $70,800, plus 3 i percent of the excess Of such amount over $250,000. Over $500,000 but not over $750,000$155,800, plus 37 percent of the excess of such amount over $500,000. Over $750,000 but not over $1,000,000 $248,300, plus 39 percent of the excess of such amount over $750,000. Over '$1,000,000 but not over $1,250,000 $345,800 plus 41 percent of the excess of such amount over $1,000,000. Over $1,250,000 but not over $1,500,000 $448,300, plus 43 percent of the excess of such amount over $1,250,000. Over $1,500,000 but not over $2,000,000 $555,800, plus 45 percent of the excess of such amount over $1,500,000. Over $2,000,000 but not over $2,500,000 $780,800, plus 49 percent of the excess of such amount over $2,000,000. Over $2,500,000 but not over $3,000,000__ $1,025,800, plus 53 percent of the excess of such amount over $2,500,000. Over $3,000,000 but not over $3,500,000. _ $1,290,800, plus 57 percent of the excess of such amount over $3,000,000. Over $3,500,000 but not over $4,000,000— $1,575,800, plus 61 percent of the excess of such amount over $3,500,000. Over $4,000,000 but not over $4,500,000. _ $1,880,800, plus 65 percent over the excess of such amount over $-^,000,000. Over $4,500,000 but not over $5,000,000.. $2,205,800, plus 69 percent of the excess of such amount over $'<,500,000. Over $5,000,000 $2,550,800, plus 70 percent of the excess of such amount over $5,000,000. "(d) ADJUSTMENT FOR GIFT TAX PAID BY SPOUSE.—For purposes

of subsection (b)(2), if— "(1) the decedent was the donor of any gift one-half of which was consideY-ed under section 2513 as made by the decedent's spouse, and "(2) the amount of such gift is includible in the gross estate of the decedent, any tax payable by the spouse under chapter 12 on such gift (as determined under section 2012(d)) shall be treated as a tax payable with respect to a gift made by the decedent."

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Page:United States Statutes at Large Volume 90 Part 2.djvu/380

 90 STAT. 1848

PUBLIC LAW 9 4 - 4 5 5 ~ 0 C T. 4, 1976 (2) ALLOWANCE o r UNIFTJED CREDIT.—Part II of subchapter A of

chapter 11 (relating to credits against the estate tax) is amended by inserting before section 2011 the following new section: 26 USC 2010.

" (a) GENERAL RULE. — A credit of $47,000 shall be allowed to the estate of every decedent against the tax imposed by section 2001. " (b) P H A S E - I N OP I47,000 CREDIT.—
 * «EC. 2010. UNIFIED CREDIT AGAINST ESTATE TAX.

"In the case of decedents dying in: 1977 1978 1979 1980 "(c)

Subsection (a) shall be applied by substituting for '$47,000' the following amount: $30,000 34,000 38,000 42,500

ADJUSTMENT TO CREDIT FOR CERTAIN G I F T S M A D E BEFORE

1977.—The amount of the credit allowable under subsection (a) shall be reduced by a n amount equal to 20 percent of the aggregate amount allowed as a specific exemption under section 2521 (as in effect before its repeal by the T a x Reform Act of 1976) with respect to gifts made by the decedent after September 8, 1976. " (d) L I M I T A T I O N BASED ON A M O U N T OF T A X. — The a m o u n t of the

credit allowed by subsection (a) shall not exceed the amount of the tax imposed by section 2001." 26 USC 2012.

(3) TERMINATION OF CREDIT FOR GIFF TAX.—Section 2012 (relat-

ing to credit for gift tax) is amended by a d d i n g at the end thereof the following new subsection: " (e) SECTION INAPPLICABLE TO G I F T S MADE A F T E R DECEMBER 3 1,

1976.—No credit shall be allowed under this section with respect to the amount of any tax paid under chapter 12 on any gift m a d e after December 31, 1976." 26 USC 2052.

(4) REPEAL OF SPECIFIC EXEMPTION.—Section 2052 ( r e l a t i n g to

exemption for purposes of the estate tax) is hereby repealed. (5) ADJUSTMENTS FOR GIFTS MADE W I T H I N 3 TFLARS OF DEATH.—

26 USC 2035.

Section 2035 (relating to transactions in contemplation of death) is amended to read as follows: "SEC. 2035. ADJUSTMENTS FOR GIFTS MADE WITHIN 3 YEARS OF DECEDENTS DEATH. " (a) INCLUSION OP G I F T S MADE BY D E C E D E N T. — E x c e p t as provided

in sul«ection (b), the value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has a t any t i m e made a transfer, by t r u s to r otherwise, during the 3-year period ending on the date of the decedent's death. " (b) EXCEPTIONS.—Subsection (a) shall not apply to — " (1) any bona fide sale for an adequate and full consideration in money or money's worth, and " (2) any gift excludable in computing taxable gifts by reason of section 2503(b) (relating to $3,000 annual exclusion for purposes of the gift tax) determined without regard to section 2513 (a). " (c) INCLUSION OF G I F T T A X ON CERTAIN G I F T S M A D E D U R I N G 3 YEARS BEFORE DECEDENT'S D E A T H. — The a m o u n t of the gross estate

(determined without regard to this subsection) shall be increased by the amount of any tax paid under chapter 12 by the decedent o r h i s estate on any gift made by the decedent or his spouse after DeoC'm-

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Page:United States Statutes at Large Volume 90 Part 2.djvu/381

 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 184.9

ber 31, 1976, and during the 3-year period e n d i n g on the date of the decedent's death." (b) CHANGES I N G I F T T A X. —

(1) E A T E OF TAX.—Subsection (a) of section 2502 (relating 26 USC 2502. to rate of gift tax) is amended to read as follows: " (a) COMPUTATION OF T A X. — The tax imposed by section 2501 for each calendar quarter shall be an amount equal to the excess of— " (1) a tentative tax, computed i n accordance with the rate schedule set forth in section 2001(c), on the aggregate sum of Ante, p. 1846. the taxable gifts for such calendar quarter and for each of the preceding calendar years and calendar quarters, over " (2) a tentative tax, computed i n accordance w i t h such r a t e schedule, on the aggregate sum of the taxable gifts for each of the preceding calendar years and calendar quarters." (2) U N I F I E D CREDIT.—Subchapter A of chapter 12 (relating to determination of gift tax liability) is amended by a d d i n g a t the end thereof the following new section: "SEC. 2505. UNIFIED CREDIT AGAINST GIFT TAX. 25 USC 2505. " (a) GENERAL RULE. — I n the case of a citizen or resident of the United States, there shall be allowed as a credit against the tax imposed by section 2501 for each calendar quarter an amount equal to— " (1) $47,000, reduced by " (2) the sum of the amounts allowable as a credit to the individual under this section for all preceding calendar quarters. " (b) P H A S E - I N OF $47,000 CREDIT.—

Subsection (a)(1) shall be applied by substituting for '$47,000' the follow"In the case of gifts made: ing amount: After December 31, 1976, and before July 1, 1977 $6,000 After June 30, 1977, and before January 1, 1978 $30,000 After December 31, 1977, and before January 1, 1979 $34, 000 After December 31, 1978, and before January 1, 1980 $38,000 After December 31, 1979, and before January 1, 1981 $42, 500 "(c)

ADJUSTMENT

TO CREDIT FOR CERTAIN

G I F T S MADE

•.. -

BEFORE

1977.—The amount allowable under subsection (a) shall be reduced by an amount equal to 20 percent of the aggregate amount allowed as a specific exemption under section 2521 ( a s i n effect before i t s repeal by the T a x Reform Act of 1976) with respect to gifts made by the individual after September 8, 1976. "(d)

L I M I T A T I O N BASED ON A M O U N T OF T A X. — The a m o u n t of the

credit allowed under subsection (a) for any calendar quarter shall not exceed the amount of the tax imposed by section 2501 for such calendar quarter." (3) REPEAL OF SPECIFIC EXEMPTION.—Section 2521 ( r e l a t i n g to

26 USC 2521.

specific exemption in the case of the gift tax) is hereby repealed. (c) T E C H N I C A L, CLERICAL, AND CONFORMING C H A N G E S. — (1) CHANGES I N ESTATE TAX.— (A) CREDIT FOR STATE DEATH TAXES.—Section 2011 (relat-

'

ing to credit for State death taxes) is amended— (i) by striking out "taxable estate" each place i t appears i n subsection (b) (including the heading to the table) and inserting i n lieu thereof "adjusted taxable estate"; (ii) by a d d i n g a t the end of subsection (b) the following new sentence:

26 USC 2011.

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Page:United States Statutes at Large Volume 90 Part 2.djvu/382

 90 STAT. 1850 "Adjusted taxable estate."

PUBLIC LAW 94-455—OCT. 4, 1976 " For purposes of t h i s section, the term 'adjusted taxable estate' means the taxable estate reduced by $60,000.", (iii) by striking o u t "taxable estate" each place i t appears in subsection (e) and inserting in lieu thereof "adjusted taxable estate"; and (iv) by a d d i n g a t the end thereof the following new subsection: "(f)

L I M I T A T I O N BASED ON A M O U N T OF T A X. — The c r e d i t provided

by this section shall not exceed the amount of the tax imposed by section 2001, reduced by the amount of the unified credit provided by section 2010." 26 USC 2012.

Ante, p. 1848.

(B) CREDIT FOR GIFT TAX.—Subsection (a) of section 2012

(relating to credit for gift tax) is amended by striking out "provided by section 2011" and inserting in lieu thereof "provided by section 2011 and the unified credit provided by section 2010". (C) CREDIT FOR TAX ON PRIOR TRANSFERS.—

26 USC 2013.

(i) The first sentence of section 2013(b) is amended by striking out " and increased by the exemption provided for by section 2052 or section 2106(a)(3), o r the corresponding provisions of p r i o r laws, in determining the taxable estate of the transferor for purposes of the estate tax". (ii) Subparagraph (A) of section 2 0 1 3 (e)(1) is amended to read as follows: " (A) the estate tax imposed by section 2001 or section 2101 (after deducting the credits provided for in sections 2010, 2011, 2012, and 2014) computed without regard to this section, exceeds".

26 USC 2101.

(D) R A T E OF TAX I N CASE o r NONRESIDENTS NOT CITIZENS.—

. *£'

Section 2101 (relating to tax imposed in the case of estates of nonresidents not citizens) is amended to read as follows: "SEC. 2101. TAX IMPOSED. " (a) IMPOSITION.—Except as provided i n section 2107, a tax is hereby imposed on the transfer of the taxable estate (determined as provided in section 2106) of every decedent nonresident not a citizen of the United States. " (b) COMPUTATION OF T A X. — The tax imposed by this section shall be the amount equal to the excess (if any) of— " (1) a tentative tax computed i n accordance with the rate schedule set forth i n subsection (d) on the sum of— " (A) the amount of the taxable estate, and " (B) the amount of the adjusted taxable gifts, over " (2) a tentative tax computed i n accordance with the rate schedule set forth i n subsection (d) on the amount of the adjusted taxable gifts. " (c) ADJUSTMENTS FOR TAXABLE G I F T S. — " (1) ADJUSTED TAXABLE GIFTS DEFINED.—For purposes of t h i s

section, the term 'adjusted taxable gifts' means the total amount of the taxable gifts (within the meaning of section 2503 as modified by section 2511) made by the decedent after December 3 1, 1976, other than gifts which a r e includible i n the gross estate of the decedent. " (2) ADJUSTMENT FOR CERTAIN GIFT TAX.—For purposes of this section, the rules of section 2001(d) shall apply.

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Page:United States Statutes at Large Volume 90 Part 2.djvu/383

 PUBLIC LAW 94-455—OCT. 4, 1976 "(d)

90 STAT. 1851

RATE SCHEDULE.—

"If the amount with respect to which the tentative tax to be computed is: The tentative tax is: Not over $100,000 6% of such amount. Over $100,000 but not over $500,000 $6,000, plus 12% of $100,000. Over $500,000 but not over $1,000,000__. $54,000, plus 18% of $500,000. Over $1,000,000 but not over $2,000,000- $144,000, plus 24% of $1,000,000. Over 2,000,000 $384,000, plus 30% of $2,000,000."

excess over excess over excess over

' ^

excess over

(E) CREDIT I N CASE OF ESTATE OF NONRESIDENTS NOT CITIZENS.—

(i) Section 2102 (relating to credits against tax i n 26 USC 2102. case of estates of nonresidents not citizens) is amended by a d d i n g a t the end thereof the following new subsection:
 * ' (c) U N I F I E D C R E D I T. —

" (1) IN GENERAL.—A credit of $3,600 shall be allowed against the tax imposed by section 2101.

Ante, p. 1850.

" (2) RESIDENTS OF POSSESSIONS o r THE UNITED STATES.—In the

case of a decedent who is considered to be a 'nonresident not a citizen of the United States' under section 2209, the credit under this subsection shall be the greater of— " (A) $3,600, o r " (B) that proportion of $15,075 which the value of that part of the decedent's gross estate which a t the time of his death is situated in the United States bears to the value of his entire gross estate wherever situated. " (3) P H A S E - I N OF PARAGRAPH (2)(B) A M O U N T. — I n the case of

i

a decedent d y i n g before 1981, paragraph (2)(B) shall be applied— " (A) in the case of a decedent dying during 1977, by substituting '$8,480' for '$15,075', " (B) in the case of a decedent dying during 1978, by substituting '$10,080' for '$15,075', " (C) in the case of a decedent dying during 1979, by substituting '$11,680' for '$15,075', and " (D) in the case of a decedent dying during 1980, by substituting '$13,388' for '$15,075'. " (4) L I M I T A T I O N BASED ON AMOUNT OF TAX.—The credit allowed

under this subsection shall not exceed the amount of the tax imposed by section 2101. " (5) APPLICATION OF OTHER CREDITS.—For purposes of subsec-

tion (a), sections 2011 to 2013, inclusive, shall be applied as if the credit allowed under this subsection were allowed under section 2010." (ii) Subsection (c) of section 2107 (relating to expatriation to avoid tax) is amended to read as follows: "(c)

26 USC 2107.

CREDITS.— " (1) U N I F I E D CREDIT.—

" (A) IN GENERAL.—^A credit of $13,000 shall be allowed against the tax imposed by subsection (a). "(B)

' }•• * ' • •

L I M I T A T I O N BASED ON AMOUNT OF TAX.—The credit

allowed under this paragraph shall not exceed the amount of the tax imposed by subsection (a). " (2) OTHER CREDITS.—The tax imposed by subsection (a) shall

be credited with the amounts determined in accordance with sub-

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Page:United States Statutes at Large Volume 90 Part 2.djvu/384

 90 STAT. 1852

PUBLIC LAW 94-455—OCT. 4, 1976 sections (a) and (b) of section 2102. For purposes of subsection (a) of section 2102, sections 2011 to 2013, inclusive, shall be applied as if the credit allowed under paragraph (1) were allowed under section 2010."

/

(F)

26 USC 2106.

R E P E A L o r SPECIFIC E X E M P T I O N. — Paragraph

(3)

of

section 2106(a) (relating to specific exemption in case of decedents nonresidents not citizens) is hereby repealed. (G)

26 USC 2014.

CREDIT FOR FOREIGN DEATH T A X E S. — Paragraph (2)

of

section 2014(b) (relating to limitations on credit) is amended by striking out "sections 2011 and 2012" and inserting in lieu thereof "sections 2010, 2011, and 2012". (H) L I A B I L I T Y OF LIFE INSURANCE BENEFICIARIES,—The first

26 USC 2206.

sentence of section 2206 (relating to liability of life insurance beneficiaries) is amended by striking out "the sum of the taxable estate and the amount of the exemption allowed in comp u t i n g the taxable estate, determined under section 2051" and inserting in lieu thereof " the taxable estate". (I)

26 USC 2207.

first

26 USC 6018.

LIABILITY OF RECIPIENTS OF CERTAIN PROPERTY.—The

sentence of section 2207 (relating to liability of recipient of property over which decedent h a d power of appointment) is amended by striking out " the sum of the taxable estate and the amount of the exemption allowed in computing the taxable estate, determined under section 2052, o r section 2106(a), as the case may b e " and inserting in lieu thereof " the taxable estate". (J) RETURN BY EXECUTOR,—Subsection (a) of section 6018

(relating to estate tax returns by executor) is amended— (i) by striking out "$60,000" in paragraph (1) and inserting in lieu thereof "$175,000"; (ii) by striking out "$30,000" in paragraph (2) and inserting in lieu thereof "$60,000"; and (iii) by a d d i n g at the end thereof the following new paragraphs: " (3) P H A S E - I N OF FILING REQUIREMENT AMOUNT.—In the case of

a decedent dying before 1981, paragraph (1) shall " (A) in the case of a decedent d y i n g during s t i t u t i n g '$120,000' for '$175,000', " (B) in the case of a decedent d y i n g during stituting'$134,000'for'$175,000', " (C) in the case of a decedent dying during stituting'$147,000'for'$175,000', and " (D) in the case of a decedent d y i n g during stituting '$161,000' for '$175,000'.

be applied— 1977, by sub1978, by sub1979, by sub1980, by sub-

" (4) ADJUSTMENT FOR CERTAIN GIFTS.—The a m o u n t applicable

Ante, p. 1846. ' 19 USC 2101.

under paragraph (1) and the amount set forth in paragraph (2) shall each be reduced ( b u t not below zero) by the sum of— " (A) the amount of the adjusted taxable gifts (within the meaning of section 2001(b)) made by the decedent after December 31, 1976, plus " (B) the aggregate amount allowed as a specific exemption under section 2521 (as in effect before its repeal by the T a x Reform Act of 1976) with respect to gifts made by the decedent after September 8, 1976." (K)

26 USC 2038.

REVOCABLE TRANSFERS.—

(i) Paragraph (1) of section 2038(a) (relating to revocable transfers) is amended by striking out "in con-

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90 STAT. 1853

templation of decedent's death " and inserting in lieu thereof " during the 3-year period ending on the date of the decedent's death". (ii) Paragraph (2) of section 2038(a) (relating to 26 USC 2038. revocable transfer) is amended by striking out " i n contemplation of his death " and inserting in lieu thereof " during the 3-year period ending on the date of the decedent's death". (L) PROPERTY W I T H I N THE UNITED STATES.—Subsection (b)

of section 2104 (relating to revocable transfers and transfers 26 USC 2104. in contemplation of death) is amended by striking out "AND TRANSFERS I N CONTEMPLATION OF D E A T H " in the subsection heading and inserting i n lieu thereof "AND TRANSFERS W I T H I N 3 YEARS OF D E A T H ".

(M) PRIOR INTERESTS.—Section 2044 (relating to prior 26 USC 2044. interests) is amended by striking o u t "specifically provided therein" and inserting in lieu thereof "specifically provided by law". (N) CLERICAL AMENDMENTS.—

(i) The item relating to section 2001 in the table of sections for part I of subchapter A of chapter 11 is amended to read as follows: "Sec. 2001. Imposition and rate of tax." (ii) The table of sections for part II of subchapter A of chapter 11 is amended by inserting before the item relating to section 2011 the following new item: "Sec. 2010. Unified credit against estate tax." (iii) The table of sections for part III of subchapter A of chapter 11 is amended by striking out the item relating to section 2035 and inserting in lieu thereof the following new item: "Sec. 2035. Adjustments for gifts made witliin 3 years of decedent's death."

(iv) The table of sections for part IV of subchapter A of chapter 11 is amended by striking out the item relating to section 2052. (2) CHANGES I N GIFT TAX.— (A) TAXABLE GIFTS FOR PRECEDING YEARS AND QUARTERS.—

Subsection (a) of section 2504 (relating to taxable gifts for 26 USC 2504. preceding years and quarters) is amended by striking out "except that " and all that follows and inserting in lieu thereof "except that the specific exemption i n the amount, if any, allowable under section 2521 (as in effect before its repeal by the T a x Reform Act of 1976) shall be applied in all computations in respect of calendar years or calendar quarters ending before January 1, 1977, for purposes of computing the tax for any calendar quarter." (B) CLERICAL AMENDMENTS.—

(i) The table of sections for subchapter A of chapter 12 is amended by a d d i n g a t the end thereof the following new item: "Sec. 2505. Unified credit against gift tax."

(ii) The table of sections for subchapter C of chapter 12 is amended by striking out the item relating to section 2521.

89-194 O—78—pt. 2

25

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Page:United States Statutes at Large Volume 90 Part 2.djvu/386

 90 STAT. 1854

PUBLIC LAW 94-455—OCT. 4, 1976 (d) EFFECTIVE D A T E S. —

26 USC 2001 note.

26 USC 2502 note.

(1) The amendments made by subsections (a) and (c)(1) shall apply to the estates of decedents dying after December 31, 1976; except that the amendments made by subsection (a)(5) and subparagraph s (K) and (L) of subsection (c)(1) shall not apply to transfers made before January 1, 1977. (2) The amendments made by subsections (b) and (c)(2) shall apply to gifts made after December 31, 1976. SEC. 2002. INCREASE IN LIMITATIONS ON MARITAL DEDUCTIONS; FRACTIONAL INTERESTS OF SPOUSE. (a) INCREASE I N ESTATE T A X MARITAL DEDUCTION. — Paragraph

26 USC 2056.

(1)

of section 2056(c) (relating to limitation on m a r i t a l deduction) is amended to read as follows: "(1)

LIMITATION.—

" (A) IN GENERAL.—The aggregate amount of the deductions allowed under this section (computed without regard to this subsection) shall not exceed the greater of— " (i) $250,000, or " ( i i) 50 percent of the value of the adjusted gross estate (as defined in paragraph (2)). "(B)

ADJUSTMENT FOR CERTAIN GIFTS TO SPOUSE.—If

a

deduction is allowed to the decedent under section 2523 with respect to any gift made to his spouse after December 31, 1976, the limitation provided by subparagraph (A) (determined without regard to this subparagraph) shall be reduced (but not below zero) by the excess (if any) of— " (i) the aggregate of the deductions allowed to the decedent under section 2523 with respect to gifts made after December 31, 1976, over " ( i i) the aggregate of the deductions which would have been allowable under section 2523 with respect to gifts made after December 31, 1976, if the amount deductible under such section with respect to any gift were 50 percent of its value. "(C)

COMMUNITY PROPERTY ADJUSTMENT. — The $250,000

amount set forth in subparagraph (A)(i) shall be reduced by the excess (if any) of— " (i) the amount of the subtraction determined under clauses (i), ( i i), and (iii) of paragraph (2)(B), over " ( i i) the excess of the aggregate of the deductions allowed under sections 2053 and 2054 over the amount taken into account with respect to such deductions under clause (iv) of paragraph (2)(B). " (b)

26 USC 2523.

INCREASE I N G I F T T A X MARITAL DEDUCTION.—Subsection (a)

of

section 2523 (relating to deduction for gift to spouse) is amended to read as follows: " (a) ALLOWANCE OF DEDUCTION.—

" (1) IN GENERAL.—Where a donor who is a citizen or resident transfers during the calendar quarter by gift an interest in property to a donee who at the time of the gift is the donor's spouse, there shall be allowed as a deduction in computing taxable gifts for the calendar quarter an amount with respect to such interest equal to its value. " (2) LIMITATION.—The aggregate of the deductions allowed under paragraph (1) for any calendar quarter shall not exceed the sum of—

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 PUBLIC LAW 94-455—OCT. 4, 1976

9 0 STAT. 1855

" (A) $100,000 reduced (but not below zero) by the aggregate of the deductions allowed under this section for preceding calendar quarters beginning after December 31, 1976; plus " (B) 50 percent of the lesser of— " (i) the amount of the deductions allowable under paragraph (1) for such calendar quarter (determined without regard to this paragraph); or " ( i i) the amount (if any) by which the aggregate of the amounts determined under clause (i) for the calendar quarter and for each preceding calendar quarter beginning after December 31, 1976, exceeds $200,000." (c) FRACTIONAL INTEREST OF S P O U S E. —

(1) IN GENERAL.—Section 2040 (relating to joint interests) is 26 USC 2040. amended by adding a t the end thereof the following new subsection: "(b)

CERTAIN JOINT INTERESTS OF HUSBAND AND W I F E. — " (1) INTERESTS OF SPOUSE EXCLUDED FROM GROSS ESTATE.—Not-

withstanding subsection (a), in the case of any qualified joint interest, the value included in the gross estate with respect to such interest by reason of this section is one-half of the value of such qualified joint interest. "(2)

QUALIFIED JOINT INTEREST DEFINED.—For

purposes

of

paragraph (1), the term 'qualified joint interest' means any interest in property held by the decedent and the decedent's spouse as joint tenants or as tenants by the entirety, but only if— " (A) such joint interest was created by the decedent, the decedent's spouse, or both, " (B)(i) in the case of personal property, the creation of such joint interest constituted in whole or m part a gift for purposes of chapter 12, or " ( i i) i n the case of real property, an election under section 2515 applies with respect to the creation of such joint interest, and " (C) in the case of a joint tenancy, only the decedent and the decedent's spouse are joint tenants." (2) AMENDMENT OF RELATED GIFT TAX PROVISION.—Subsection

(c) of section 2515 (relating to election with respect to tenancies 26 USC 2515. by the entirety) is amended to read as follows: "(c)

EXERCISE o r ELECTION. —

" (1) IN GENERAL.—The election provided by subsection (a) shall be exercised by including such creation of a tenancy by the entirety as a transfer by gift, to the extent such transfer constitutes a gift (determined without regard to this section), in the gift tax return of the donor for the calendar quarter in which such tenancy by the entirety was created, filed within the time prescribed by law, irrespective of whether or not the gift exceeds the exclusion provided by section 2503(b). " (2) SUBSEQUENT ADDITIONS I N VALUE.—If the election provided

by subsection (a) has been made with respect to the creation of any tenancy by the entirety, such election shall also apply to each addition made to the value of such tenancy by the entirety. " (3) CERTAIN ACTUARIAL COMPUTATIONS NOT REQUIRED.—In the

case of any election under subsection (a) with respect to any property, the retained interest of each spouse shall be treated as one-half of the value of their joint interest."

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Page:United States Statutes at Large Volume 90 Part 2.djvu/388

 90 STAT. 1856 26 USC 2040.

PUBLIC LAW 94-455—OCT. 4, 1976 (3) CLERICAL AMENDMENT.—Section 2040 is amended by striking out " The value" and inserting in lieu thereof the following: " (a) GENERAL RULE, — The value", (d) EFFECTIVE D A T E S. —

26 USC 2056 °ote.

26 USC 2523 °°*^26 USC 2040 note.

26 USC 2032A.

(1)(A) E x c e p t as provided in subparagraph (B), the amendment made by subsection (a) shall apply with respect to the estates of decedents dying after December 31, 1976. (B) I f (i) the decedent dies after December 31, 1976, and before January 1, 1979, (ii) by reason of the death of the decedent property passes from the decedent or is acquired from the decedent under a will executed before January 1, 1977, or a trust created before such date, which contains a formula expressly providing that the spouse is to receive the maximum amount of property qualifying for the m a r i t a l deduction allowable by Federal law, (iii) the formula referred to in clause (ii) was not amended at any time after December 31, 1976, and before the death of the decedent, and (iv) the State does not enact a statute applicable to such estate which construes this t y p e of formula as referring to the marital deducton allowable by Federal law as amended by subsection (a), then the amendment made by subsection (a) shall not apply to the estate of such decedent. ^2) The amendment made by subsection (b) shall apply to gifts made after December 31, 1976. (3) The amendments made by subsection (c) shall apply to joint interests created after December 31, 1976. SEC. 2003. VALUATION FOR PURPOSES OF THE FEDERAL ESTATE TAX OF CERTAIN REAL PROPERTY DEVOTED TO FARMING OR CLOSELY HELD BUSINESSES. (a) GENERAL RULE. — Part III of subchapter A of chapter 11 (relating to gross estate) is amended by inserting after section 2032 the following new section: "SEC. 2032A. VALUATION OF CERTAIN FARM, ETC., REAL PROPERTY. "(a)

V A L U E BASED ON U S E U N D E R W H I C H PROPERTY Q U A L I F I E S. — " (1) GENERAL RULE.—If—

" (A) the decedent was (at the time of his death) a citizen or resident of the United States, and " (B) the executor elects the application of this section and files the agreement referred to in subsection (d)(2), then, for purposes of this chapter, the value of qualified real property shall be its value for the use under which it qualifies, under subsection (b), as qualified real property. " (2) LIMITATION.—The aggregate decrease in the value of qualified real property taken into account for purposes of this chapter which results from the application of paragraph (1) with respect to any decedent shall not exceed $500,000. "(b)

QUALIFIED R E A L PROPERTY.—

" (1) IN GENERAL.—For purposes of this section, the term 'qualified real property ' means real property located in the United States which, on the date of the decedent's death, was being used for a qualified use, b u t only if—

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1857

" (A) 50 percent or more of the adjusted value of the gross estate consists of the adjusted value of real or personal property which— " (i) on the date of the decedent's death, was being used for a qualified use, and " (ii) was acquired from or passed from the decedent to a qualified heir of the decedent. " (B) 25 percent or more of the adjusted value of the gross estate consists of the adjusted value of real property which meets the requirements of subparagraphs (A) (ii) and (C), " (C) during the 8-year period ending on the date of the decedent's death there have been periods aggregating 5 years or more during which— " (i) such real property was owned by the decedent or a member of the decedent's family and used for a qualified use, and " ( i i) there was material participation by the decedent or a member of the decedent's family in the operation of the farm or other business, and " (D) such real property is designated in the agreement referred to in subsection (d)(2). " (2) QUALIFIED USE.—For purposes of this section, the term 'qualified use' means the devotion of the property to any of the following: " (A) use as a farm for farming purposes, or " (B) use i n a trade or business other than the trade or business of farming. " (3) ADJUSTED VALUE.—For purposes of paragraph

(1), the

term 'adjusted value' means— " (A) in the case of the gross estate, the value of the gross estate for purposes of this chapter (determined without regard to this section), reduced by any amounts allowable as a deduction under paragraph (4) of section 2053(a), or " (B) i n the case of any real or personal property, the value of such property for purposes of this chapter (determined without regard to this section), reduced by any amounts allowable as a deduction in respect of such property under paragraph (4) of section 2053(a). " (c) T A X T R E A T M E N T OF DISPOSITIONS AND FAILURES To U S E FOR QUALIFIED U S E. — " (1) IMPOSITION OF ADDITIONAL ESTATE TAX.—If, w i t h i n 15 years

after the decedent's death and before the death of the qualified heir— " (A) the qualified heir disposes of any interest in qualified real property (other than by a disposition to a member of his f a m i l y), or " (B) the qualified heir ceases to use for the qualified use the qualified real property which was acquired (or passed) from the decedent, then, there is hereby imposed a n additional estate tax. " (2) A M O U N T OF ADDITIONAL TAX.—

" (A) IN GENERAL.—The amount of the additional tax imposed by paragraph (1) with respect to any interest shall be the amount equal to the lesser of— " (i) the adjusted tax difference attributable to such interest, or

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90 STAT. 1858

" ( i i) the excess of the amount realized w i t h respect to the interest (or, i n any case other than a sale or exchange a t arm's length, the fair market value of the interest) over the value of the interest determined under subsection (a). "(B)

ADJUSTED TAX DIFFERENCE ATTRIBUTABLE TO INTER-

EST.—For purposes of subparagraph (A), the adjusted tax difference attributable to an interest is the amount which bears the same ratio to the adjusted tax difference with respect to the estate (determined under subparagraph (C)) as— " (i) the excess of the value of such interest for purposes of this chapter (determined without regard to subsection (a)) over the value of such interest determined under subsection (a), bears to " (ii) a similar excess determined for all qualified real property. "(C)

"Estate tax liability." Ante, p. 1846.

ADJUSTED TAX DIFFERENCE W I T H RESPECT TO THE

ESTATE.—For purposes of subparagraph (B), the term 'adjusted tax difference w i t h respect to the estate' means the excess of w h a t would have been the estate tax liability b u t for subsection (a) over the estate tax liability. For purposes of this subparagraph, the term 'estate tax liability' means the tax imposed by section 2001 reduced by the credits allowable against such tax. "(D)

PARTIAL DISPOSITIONS.—For purposes of t h i s p a r a -

g r a p h, where the qualified heir disposes of a portion of the interest acquired by (or passing to) such heir (or a predecessor qualified heir) or there is a cessation of use of such a portion— " (i) the value determined under subsection (a) taken into account under subparagraph (A) (ii) with respect to such portion shall be its p r o r a t a share of such value of such interest, and " ( i i) the adjusted tax difference attributable to the interest taken into account with respect to the transaction involving the second or any succeeding portion shall be reduced by the amount of the tax imposed by this subsection w i t h respect to all p r i o r transactions involving portions of such interest. "(3)

P H A S E O U T OF ADDITIONAL TAX BETWEEN lOTH AND 15TH

TEARS.—If the date of the disposition or cessation referred to in paragraph (1) occurs more than 120 months and less than 180 months after the date of the death of the decedent, the amount of the tax imposed by this subsection shall be reduced (but not below zero) by a n amount determined by multiplying the amount of such tax (determined without regard to this paragraph) by a fraction— " (A) the numerator of which is the number of full months after such death in excess of 120, and " (B) the denominator of which is 60. "(4)

O N L Y i ADDITIONAL TAX IMPOSED W I T H RESPECT TO A N T i

PORTION.—In the case of an interest acquired from (or passing from) any decedent, if subparagraph (A) or (B) of paragraph (1) applies to any portion of a n interest, subparagraph (B) or

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1859

(A), as the case may be, of paragraph (1) shall not apply with respect to the same portion of such interest. " (5) D U E DATE.—The additional tax imposed by this subsection shall become due and payable on the d a y which is 6 months after the date of the disposition or cessation referred to in paragraph (1). " (6) LIABILITY FOR TAX.—The qualified heir shall be personally liable for the additional tax imposed by this subsection with respect to his interest. " (7) CESSATION OF QUALIFIED U S E. — For purposes of paragraph

(1)(B), real property shall cease to be used for the qualified use if— " (A) such property ceases to be used for the qualified use set forth in subparagraph (A) or (B) of subsection (b)(2) under which the property qualified under subsection (b), or " (B) during any period of 8 years ending after the date of the decedent's death and before the date of the death of the qualified heir, there had been periods aggregating 3 years or more during which— " (i) in the case of periods during which the property was held by the decedent, there was no material participation by the decedent or any member of his family in the operation of the farm o r other business, and " (ii) in the case of periods during which the property was held by any qualified heir, there was no material participation by such qualified heir or any member of his family in the operation of the farm or other business. "(d)

ELECTION; AGREEMENT.—

" (1) ELECTION.—The election under this section shall be made not later than the time prescribed by section 6075(a) for filing 26 USC 6075. the return of tax imposed by section 2001 (including extensions Ante, p. 1846. thereof), and shall be made in such manner as the Secretary shall by regulations prescribe. " (2) AGREEMENT-—The agreement referred to in this paragraph is a written agreement signed by each person in being who has an interest (whether or not in possession) in any property designated in such agreement consenting to the application of subsection (c) with respect to such property. " (e) DEFINITIONS; SPECIAL RULES. — For purposes of this section—

" (1) QUALIFIED HEIR.—The term 'qualified heir' means, with ^ respect to any property, a member of the decedent's family who acquired such property (or to whom such property passed) from the decedent. I f a qualified heir disposes of any interest in qualified real property to any member of his family, such member shall thereafter be treated as the qualified heir with respect to such interest. "(2)

M E M B E R OF F A M I L Y. — The term 'member of the

family'

means, with respect to any individual, only such individual's ancestor o r lineal descendant, a lineal descendant of a grandparent of such individual, the spouse of such individual, or the spouse of any such descendant. For purposes of the preceding sentence, a legally adopted child of an individual shall be treated as a child of such individual by blood. "(3)

CERTAIN REAL PROPERTY INCLUDED.—In the case of

real

property which meets the requirements of subparagraph (C) of subsection (b)(1), residential buildings and related improvements on such real property occupied on a regular basis by the

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Page:United States Statutes at Large Volume 90 Part 2.djvu/392

 90 STAT. 1860

PUBLIC LAW 94-455—OCT. 4, 1976 owner or lessee of such real property or by persons employed by such owner or lessee for the purpose of operating or maintaining such real property, and roads, buildings, and other structures and improvements functionally related to the qualified use shall be treated as real property devoted to the qualified use. " (4) F A R M. — The term ' f a r m ' includes stock, dairy, poultry, fruit, furbearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards and woodlands. " (5) FARMING PURPOSES.—The term 'farming purposes' means— " (A) cultivating the soil or raising or harvesting any agricultural or horticultural commodity (including the raising, shearing, feeding, caring for, training, and management of animals) on a f a r m; " (B) handling, drying, packing, grading, or storing on a f a r m any agricultural o r horticultural commodity i n its unmanufactured state, but only if the owner, tenant, or operator of the farm regularly produces more than one-half of the commodity so t r e a t e d; and " (C)(i) the planting, cultivating, caring for, or cutting of trees, or " ( i i) the preparation (other than milling) of trees for market. " (6) MATERIAL PARTICIPATION.—Material participation shall be

26 USC 1402.

determined in a manner similar to the manner used for purposes of paragraph (1) of section 1402(a) (relating to net earnings from self-employment). " (7) METHOD o r VALUING FARMS.—

" (A) IN GENERAL.—Except as provided i n subparagraph (B), the value of a farm for farming purposes shall be determined by dividing— " (i) the excess of the average annual gross cash rental for comparable land used for farming purposes and located in the locality of such farm over the average annual State and local real estate taxes for' such comparable land, by " ( i i) the average annual effective interest rate for all new Federal L and Bank loans. For purposes of the preceding sentence, each average annual computation shall be made on the basis of the 5 most recent calendar years ending before the date of the decedent's death. " (B) EXCEPTION.—The formula provided by subparagraph (A) shall not be used— " (i) where it is established that there is no comparable land from which the average annual gross cash rental may be determined, or " ( i i) where the executor elects to have the value of the farm for f a r m i n g purposes determined under paragraph (8). " (8) M E T H O D OF VALUING CLOSELY HELD BUSINESS INTERESTS,

ETC.—In any case to which paragraph (7)(A) does not apply, the following factors shall apply in determining the value of any qualified real property: " (A) The capitalization of income which the property can be expected to yield for farming or closely held business pur-

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1 8 6 1

poses over a reasonable period of time under p r u d e n t management using traditional cropping patterns for the area, taking into account soil capacity, terrain configuration, and similar factors, " (B) The capitalization of the fair rental value of the land for farm land or closely held business purposes, " (C) Assessed land values in a State which provides a differential or use value assessment law for farmland or closely held business, " (D) Comparable sales of other farm or closely held business land in the same geographical area f a r enough removed from a metropolitan or resort area so that nonagricultural use is not a significant factor in the sales price, and " (E) Any other factor which fairly values the farm or closely held business value of the property. " (f) STATUTE OF LIMITATIONS.—If qualified real property is disposed of or ceases to be used for a qualified use, then— " (1) the statutory period for the assessment of any additional tax under subsection (c) attributable to such disposition or cessation shall not expire before the expiration of 3 years from the date the Secretary is notified (in such manner as the Secretary may by regulations prescribe) of such disposition or cessation, and " (2) such additional tax may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.

'

" (g) APPLICATION OF T H I S SECTION AND SECTION 6324B TO INTERESTS

IN PARTNERSHIPS, CORPORATIONS, AND T R U S T S. — The Secretary shall Regulations.

prescribe regulations setting forth the application of this section and section 6324B in the case of an interest in a partnership, corporation, or trust which, with respect to the decedent, is an interest in a closely held business (within the meaning of paragraph (1) of section 6166(b))." (b) SPECIAL L I E N. — Subchapter C of chapter 64 (relating to lien for taxes) is amended by inserting after section 6324A the following new section: "SEC 6324B. SPECIAL LIEN FOR ADDITIONAL ESTATE TAX ATTRIBUT- 26 USC 6324B. ABLE TO FARM, ETC., VALUATION. " (a) GENERAL RULE. — I n the case of any interest in qualified real property (within the meaning of section 2 0 3 2 A (b)), an amount equal Ante, p. 1856. to the adjusted tax difference attributable to such interest (within the meaning of section 2032A(c)(2)(B)) shall be a lien i n favor of the United States on the property in which such interest exists. " (b) PERIOD OF L I E N. — The lien imposed by this section shall arise at the time an election is filed under section 2032A and shall continue with respect to any interest in the qualified farm real property— " (1) until the liability for tax under subsection (c) of section 2032A with respect to such interest has been satisfied or has become unenforceable by reason of lapse of time, or " (2) until it is established to the satisfaction of the Secretary that no further tax liability may arise under section 2032A(c) with respect to such interest. "(c)

CERTAIN RULES MADE A P P L I C A B L E. — The rules set forth

in

paragraph s (1), (3), and (4) of section 6324A(d) shall a p p l y with respect to the lien imposed by this section as if it were a lien imposed by section 6324A.

Post, p. 1868.

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Page:United States Statutes at Large Volume 90 Part 2.djvu/394

 9 0 STAT. 1862

PUBLIC LAW 94-455—OCT. 4, 1976 " (d) SUBSTITUTION OF SECURITY FOR L I E N. — To the extent provided

in regulations prescribed by the Secretary, the furnishing of security may be substituted for the lien imposed by t h i s section." 26 USC 2013.

(c) CREDIT FOR T A X ON PRIOR TRANSFERS.—Section 2013 ( r e l a t i n g

to credit for tax on prior transfers) is amended by a d d i n g at the end thereof the following new subsection: "(f)

TREATMENT OF ADDITIONAL T A X IMPOSED U N D E R

SECTION

2032A.—If section 2032A applies to any property included in the gross estate of the transferor and an additional tax is imposed with respect to such property under section 2032A(c) before the date which is 2 years after the date of the decedent's death, for purposes of this section— " (1) the additional tax imposed by section 2032A(c) shall be treated as a Federal estate tax payable with respect to the estate of the transfer o r; and " (2) the value of such property and the amount of the taxable estate of the transferor shall be determined as if section 2032A d i d not apply with respect to such property. " (d)

26 USC 2032A note.

CLERICAL AMENDMENTS. —

(1) The table of sections for part III of subchapter A of chapter 11 is amended by inserting after the item relating to section 2032 the following new item: "Sec. 2032A. Valuation of certain farm, etc., real property." (2) The table of sections for subchapter C of chapter 64 is amended by inserting after the item relating to section 6324A the following new item: "Sec. 6324B. Special lien for additional estate tax attributable to farm, etc., valuation." (e) EFFECTIVE D A T E. — The amendments made by this section shall apply to the estates of decedents dying after December 31, 1976. SEC. 2004. EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX. (a) GENERAL RULE. — Subchapter B of chapter

26 USC 6166.

62

(relating

to

extensions of time for payment of tax) is amended by redesignating section 6166 as section 6166A and by inserting after section 6165 the following new section: "SEC. 6166. ALTERNATE EXTENSION OF TIME FOR PAYMENT OF ESTATE TAX WHERE ESTATE CONSISTS LARGELY OF INTEREST IN CLOSELY HELD BUSINESS. " (a) 5-YEAR DEFERRAL; 10-YEAR INSTALLMENT P A Y M E N T. —

" (1) IN GENERAL.—If the value of an interest in a closely held business which is included in determining the gross estate of a decedent who was (at the date of his death) a citizen or resident of the United States exceeds 65 percent of the adjusted gross estate, the executor may elect to p a y part or all of the tax imposed by section 2001 in 2 or more ( b u t not exceeding 10) equal installments. " (2) L I M I T A T I O N. — The maximum amount of tax which may be paid in installments under this subsection shall be an amount which bears the same ratio to the tax imposed by section 2001 (reduced by the credits against such tax) as— " (A) the closely held business amount, bears to " (B) the amount of the adjusted gross estate. "(3)

D A T E FOR PAYMENT OF INSTALLMENTS.—If a n election is

made under paragraph (1), the first installment shall be paid on or before the date selected by the executor which is not more than

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Page:United States Statutes at Large Volume 90 Part 2.djvu/395

 PUBLIC LAW 94-455—OCT. 4, 1976 5 years after the date prescribed by section 6151(a) for payment of the tax, and each succeeding installment shall be paid on o r before the date which is 1 year after the date prescribed by this paragraph for payment of the preceding installment.

90 STAT. 1863 26 USC 6151,.

" (4) ELIGIBILITY FOR ELECTION.—No election may be m a d e under

this section by the executor of the estate of any decedent if an election under section 6166A applies with respect to the estate Ante, p. 1862. of such decedent. "(b)

DEFINITIONS AND SPECIAL RULES. — " (1) INTEREST I N CLOSELY HELD BUSINESS.—For purposes of t h i s

section, the term 'interest i n a closely held business' means— " (A) an interest as a proprietor in a trade or business carried on as a p r o p r i e to r s h i p; " (B) an interest as a part n e r in a partnership carrying on a trade or business, if— " (i) 20 percent or more of the total capital interest i n such partnership is included in determining the gross estate of the decedent, or " ( i i) such partnership h a d 15 or fewer part n e r s; or " (C) stock in a corporation c a r r y i n g on a trade or business if— " (i) 20 percent or more i n value of the voting stock of such corporation is included in determining the gross estate of the decedent, or " ( i i) such corporation h a d 15 or fewer shareholders. "(2)

RULES 'FOR APPLYING PARAGRAPH (i). — For purposes of

paragraph (1) — " (A) T I M E FOR TESTING.—Determinations shall be made as

of the time immediately before the decedent's death. "(B)

CERTAIN INTERESTS HELD BY HUSBAND AND W I F E. —

Stock or a partnership interest which— " (i) is community property of a husband and wife (or the income from which is community income) under the applicable community property law of a State, or " ( i i) is held by a husband and wife as joint tenants, tenants by the entirety, o r tenants in common, shall be treated as owned by one shareholder or one partner, as the case may be. "(C)

INDIRECT O W N E R S H I P. — Property owned, directly or

indirectly, by or for a corporation, partnership, estate, or t r u s t shall be considered as being owned proportionately by or for its shareholders, partners, or beneficiaries. For purposes of the preceding sentence, a person shall be treated as a beneficiary of any trust only if such person has a present interest in the trust. " (3) FARMHOUSES AND CERTAIN OTHER STRUCTURES TAKEN INTO

ACCOUNT.—For purposes of the 65-percent requirement of subsection (a)(1), an interest in a closely held business which is the business of farming includes an interest in residential buildings and related improvements on the farm which are occupied on a regular basis by the owner or lessee of the farm or by persons employed by such owner or lessee for purposes of operating or maintaining the farm, " (4) V A L U E. — For purposes of this section, value shall be value determined for purposes of chapter 11 (relating to estate tax). " (5) CLOSELY HELD BUSINESS A M O U N T. — For purposes of t h i s

section, the term 'closely held business amount' means the value of

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Page:United States Statutes at Large Volume 90 Part 2.djvu/396

 90 STAT. 1864

26 USC 2053, 2054. Ante, p. 1846.

PUBLIC LAW 94-455—OCT. 4, 1976 the interest in a closely held business which qualifies under subsection (a)(1). " (6) ADJUSTED GROSS ESTATE.—For purposes of this section, the term, 'adjusted gross estate' means the value of the gross estate reduced by the sum of the amounts allowable as a deduction under section 2053 or 2054. Such sum shall be determined on the basis of the facts and circumstances in existence on the date (including extensions) for filing the r e t u r n of tax imposed by section 2001 (or, if earlier, the date on which such r e t u r n is filed). "(c)

SPECIAL RULE FOR INTERESTS I N 2 OR MORE CLOSELY H E L D

BUSINESSES.—For purposes of this section, interests in 2 or more closely held businesses, with respect to each of which there is included in determining the value of the decedent's gross estate more than 20 percent of the total value of each such business, shall be treated as an interest in a single closely held business. For purposes of the 20-percent requirement of the preceding sentence, an interest in a closely held business which represents the surviving spouse's interest in property held by the decedent and the surviving spouse as community property or as joint tenants, tenants by the entirety, or tenants in common shall be treated as having been included in determining the value of the decedent's gross estate. " (d) ELECTION.—Any election under subsection (a) shall be made not later than the time prescribed by section 6075(a) for filing the r e t u r n of tax imposed by section 2001 (including extensions thereof), and shall be made in such manner as the Secretary shall by regulations prescribe. I f an election under subsection (a) is made, the provisions of this subtitle shall apply as though the Secretary were extending the time for payment of the tax. " (e) PRORATION OF D E F I C I E N C Y TO INSTALLMENTS. — I f an election is

made under subsection (a) to p a y any part of the tax imposed by section 2001 in installments and a deficiency has been assessed, the deficiency shall (subject to the limitation provided by subsection (a) (2)) be prorated to the installments payable under subsection (a). The part of the deficiency so prorated to any installment the date for payment of which has not arrived shall be collected a t the same time as, and as a part of, such installment. The part of the deficiency so prorated to any installment the date for payment of which has arrived shall be paid upon notice and demand from the Secretary. T h i s subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, o r to fraud with intent to evade tax. "(f)

T I M E FOR P A Y M E N T OF I N T E R E S T. — I f the time for payment of

any amount of tax has been extended under this section— " (1) INTEREST FOR FIRST 5 YEARS.—Interest payable under section 6601 of any unpaid portion of such amount attributable to the first 5 years after the date prescribed by section 6151(a) for payment of the tax shall be paid annually. "(2)

INTEREST FOR PERIODS AFTER FIRST S YEARS.—Interest p a y -

able under section 6601 on any unpaid portion of such amount attributable to any period after the 5-year period referred to in paragraph (1) shall be paid annually a t the same time as, and as a part of, each installment payment of the tax. "(3)

INTEREST I N THE CASE o r CERTAIN DEFICIENCIES.—In the

case of a deficiency to which subsection (e) applies which is assessed after the close of the 5-year period referred to in paragraph (1), interest attributable to such 5-year period, and interest

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 18(35

assigned under paragraph (2) to any installment the date for payment of which has arrived on or before the date of the assessment of the deficiency, shall be paid upon notice and demand from the Secretary. " (4) SELECTION or SHORTER PERIOD.—If the executor has selected a period shorter than 5 years under subsection (a)(3), such shorter period shall be substituted for 5 years in paragraphs (1), (2), and (3) of this subsection. "(g)

ACCELERATION OF PAYMENT.— "(1) DISPOSITION OF INTEREST; WITHDRAWAL OF FUNDS FROM BUSINESS.—

"(A) If— _ ^ "(i) one-third or more in value of an interest in a closely held business which qualifies under subsection (a)(1) is distributed, sold, exchanged, or otherwise disposed of, or " (ii) aggregate withdrawals of money and other property from the trade or business, an interest in which qualifies under subsection (a)(1), made with respect to such interest, equal or exceed one-third of the value of such trade or business, then the extension of time for payment of tax provided in subsection (a) shall cease to apply, and any unpaid portion of the tax payable in installments shall be paid upon notice and demand from the Secretary. "(B) In the case of a distribution in redemption of stock to which section 303 (or so much of section 304 as relates to 26 USC 303. section 303) applies— "(i) subparagraph (A)(i) does not apply with respect to the stock redeemed; and for purposes of such subparagraph the interest in the closely held business shall be considered to be such interest reduced by the value of the stock redeemed, and "(ii) subparagraph (A) (ii) does not apply with respect to withdrawals of money and other property distributed; and for purposes of such subparagraph the value of the trade or business shall be considered to be such value reduced by the amount of money and other property distributed. This subparagraph shall apply only if, on or before the date prescribed by subsection (a)(3) for the payment of the first installment which becomes due after the date of the distribution (or, if earlier, on or before the day which is 1 year after the date of the distribution), there is paid an amount of the tax imposed by section 2001 not less than the amount of money and other property distributed. "(C) Subparagraph (A)(i) does not apply to an exchange of stock pursuant to a plan of reorganization described in subparagraph (D), (E), or (F) of section 368(a)(1) nor to an exchange to which section 355 (or so much of section 356 as relates to section 355) applies; but any stock received in such an exchange shall be treated for piirposes of subparagraph (A)(i) as an interest qualifying under subsection (a)(1). "(D) Subparagraph (A)(i) does not apply to a transfer of property of the decedent to a person entitled by reason of the decedent's death to receive such property under

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Page:United States Statutes at Large Volume 90 Part 2.djvu/398

 90 STAT. 1866

PUBLIC LAW 94-455—OCT. 4, 1976 the decedeiifs will, the applicable law of descent and distribution, or a t r u s t created by the decedent. " (2) UNDISTRIBUTED INCOME o r ESTATE.—

26 USC 643.

Ante, p. 1846.

" (A) I f a n election is made under this section and the estate has undistributed net income for any taxable year ending on or after the due date for the first installment, the executor shall, on or before the date prescribed by law for filing the income tax r e t u r n for such taxable year (including extensions thereof), p a y an amount equal to such undistributed net income i n liquidation of the unpaid portion of the tax payable in installments. " (B) For purposes of subparagraph (A), the undistributed net income of the estate for any taxable year is the amount by which the distributable net income of the estate for such taxable year (as defined in section 643) exceeds the sum of— " (i) the amounts for such taxable year specified in paragraph s (1) and (2) of section 661(a) (relating to deductions for distributions, e t c.); " ( i i) the amount of tax imposed for the taxable year on the estate under chapter 1; and " ( i i i) the amount of the tax imposed by section 2001 (including interest) paid by the executor during the taxable year (other than any amount paid pursuant to this paragraph). " (3) F A I L U R E TO PAY INSTALLMENT.—If any installment under

!

this section is not paid on or before the date fixed for ment by this section (including any extension of time payment of such installment), the unpaid portion of payable in installments shall be paid upon notice and from the Secretary.

its payfor the the tax demand

" (h) ELECTION I N CASE OF CERTAIN D E F I C I E N C I E S. — " (1) IN GENERAL.—If—

" (A) a deficiency i n the tax imposed by section 2001 is assessed, " (B) the estate qualifies under subsection (a)(1), and " (C) the executor has not made an election under subsection (a), the executor may elect to pay the deficiency in installments. This subsection shall not apply if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax. " (2) T I M E OF ELECTION.—An election under this subsection shall be made not later than 60 days after issuance of notice and demand by the Secretary for the payment of the deficiency, and shall be made in such manner as the Secretary shall by regulations prescribe. " (3) E F F E C To r ELECTION ON P A Y M E N T. — I f an election is m a d e

under this subsection, the deficiency shall (subject to the limitation provided by subsection (a)(2)) be prorated to the installments which would have been due if an election h a d been timely made under subsection (a) a t the time the estate tax return was filed. The part of the deficiency so prorated to any installment the date for payment of which would have arrived shall be p a i d at the time of the making of the election under this subsection. The portion of the deficiency so prorated to installments the date

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 PUBLIC LAW 94^55—OCT. 4, 1976

90 STAT. 1867

for payment of which would not have so arrived shall be paid at the time such installments would have been due if such an election h a d been made. " (i) REGULATIONS.—The Secretary shall prescribe such regulations as may be necessary to the application of this section. " (j) CROSS REFERENCES.—

"(1) Security.— "For authority of the Secretary to require security in the case of an extension under this section, see section 6165. "(2) L i e n ^ "For special lien (in lieu of bond) in the case of an extension under this section, see section 6324A. "(3) Period of limitation.— "For extension of the period of limitation in the case of an extension under this section, see section 6503(d). "(4) Interest.— "For provisions relating to interest on tax payable in installments under this section, see subsection (j) of section 6601." (b) 4 - P E R C E N T INTEREST RATE.—Section 6601 ( r e l a t i n g to interest

26 USC 6601.

on underpayment, nonpayment, or extension of time for payment of tax) is amended by redesignating subsection (j) as subsection (k) and by inserting after subsection (i) the following new subsection: " (j) 4 - P E R C E N T R A T E ON CERTAIN PORTION OF ESTATE T A X EXTENDED U N D E R SECTION 6166.—

" (1) IN GENERAL.—If the time for payment of a n amount of tax imposed by chapter 11 is extended as provided in section 26 USC 2001. 6166, interest on the 4-percent portion of such amount shall (in lieu of the annual rate provided by subsection (a)) be paid a t the rate of 4 percent. For purposes of this subsection, the amount of any deficiency which is prorated to installments payable under section 6166 shall be treated as an amount of tax payable in install,, ments under such section. "(2)

4-PERCENT PORTION.—For purposes of this subsection, the

term '4-percent portion' means the lesser of— " (A) $345,800 reduced by the amount of the credit allowable under section 2010(a); or ^"^«' P- l ^ ^ " (B) the amount of the tax imposed by chapter 11 which is extended as provided in section 6166. " (3) TREATMENT OF PAYMENTS.—If the a m o u n t of tax imposed

by chapter 11 which is extended as provided in section 6166 exceeds the 4-percent portion, any payment of a portion of such amount shall, for purposes of computing interest for periods after such payment, be treated as reducing the 4-percent portion by an amount which bears the same ratio to the amount of such payment as the amount of the 4-percent portion (determined without regard to this paragraph) bears to the amount of the tax which is extended as provided in section 6166." (c) REASONABLE CAUSE SUBSTITUTED FOR U N D U E H A R D S H I P I N DETERMINING ELIGIBILITY FOR EXTENSIONS OF P A Y M E N T OF ESTATE T A X. —

(1) Paragraph (2) of section 6161(a) (relating to extension 26 USC 6161. of time for p a y i n g estate tax) is amended to read as follows: " (2) ESTATE TAX.—The Secretary may, for reasonable cause, extend the time for payment of— " (A) any part of the amount determined by the executor as the tax imposed by chapter 11, or " (R) any part of any installment under section 6166 or 6166A (including any part of a deficiency prorated to any installment under such section),

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Page:United States Statutes at Large Volume 90 Part 2.djvu/400

 90 STAT. 1868

26 USC 6161.

PUBLIC LAW 94-455—OCT. 4, 1976 for a reasonable period not in excess of 10 years from the date prescribed by section 6151(a) for payment of the tax (or, in the case of an amount referred to in subparagraph (B), if later, not beyond the date which is 12 months after the due date for the last installment)." (2) Subsection (b) of section 6161 (relating to extension of time for payment of certain deficiencies) is amended to read as follows: " (b) A M O U N T DETERMINED AS D E F I C I E N C Y. — " (1) I N C O M E, GIFT, AND CERTAIN OTHER TAXES.—Under regula-

26 USC 6163.

tions prescribed by the Secretary, the Secretary may extend the time for the payment of the amount determined as a deficiency of a tax imposed by chapter 1, 12, 41, 42, 43, o r 44 for a period not to exceed 18 months from the date fixed for the payment of the deficiency, and in exceptional cases, for a further period not to exceed 12 months. A n extension under this paragraph may be g r a n t e d only where it is shown to the satisfaction of the Secretary that payment of a deficiency upon the date fixed for the payment thereof will result in undue h a r d s h i p to the tax p a y e r in the case of a tax imposed by chapter 1, 41, 42, 43, or 44, or to the donor in the case of a tax imposed by chapter 12. " (2) ESTATE TAX,—Under regulations prescribed by the Secretary, the Secretary may, for reasonable cause, extend the time for the payment of any deficiency of a tax imposed by chapter 11 for a reasonable period not to exceed 4 years from the date otherwise fixed for the payment of the deficiency. " (3) No EXTENSION FOR CERTAIN DEFICIENCIES.—No extension shall be granted under this subsection for any deficiency if the deficiency is due to negligence, to intentional disregard of rules and regulations, or to fraud with intent to evade tax." (3) Subsection (b) of section 6163 (relating to extension to prevent undue h a r d s h i p in case of reversionary or remainder interest) is amended to read as follows: •'(b) EXTENSION FOR REASONABLE CAUSE.—At the e x p i r a t i o n of the

26 USC 6503.

period of postponement provided for in subsection (a), the Secretary may, for reasonable cause, extend the time for payment for a reasonable period or periods not in excess of 3 years from the expiration of the period of postponement provided in subsection (a), " (4) Subsection (d) of section 6503 (relating to extensions of time for payment of estate tax) is amended by striking out "section 6166" and inserting i n lieu thereof "section 6163, 6166, or 6166A". (d) SPECIAL L I E N FOR ESTATE T A X DEFERRED U N D E R SECTION 6166.—

26 USC 6324A.

(1) IN GENERAL.—Subchapter C of chapter 64 (relating to lien for taxes) is amended by inserting after section 6324 the following new section: «SEC. 6324A. SPECIAL LIEN FOR ESTATE TAX DEFERRED UNDER SECTION 6166 OR 6166A. " (a) GENERAL RULE. — I n the case of any estate with respect to which an election has been made under section 6166 or 6166A, if the executor makes an election under this section ( a t such time and in such manner as the Secretary shall by regulations prescribe) and files the agreement referred to in subsection (c), the deferred amount (plus any interest, additional amount, addition to tax, assessable penalty, and costs attributable to the deferred amount) shall be a lien in favor of the United States on the section 6166 lien property. " (b) SECTION 6166 L I E N PROPERTY.—

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 PUBLIC LAW 94-455—OCT. 4, 1976

90 STAT. 1869

" (1) IN GENERAL.—For purposes of this section, the term 'sec- "Section 6166 tion 6166 lien property' means interests in real and other property lien property." to the extent such interests— " (A) can be expected to survive the deferral period, and " (B) are designated in the agreement referred to in subsection (c). " (2) MAXIMUM VALUE o r REQUIRED PROPERTY.—The maximum

value of the property which the Secretary may require as section 6166 lien property with respect to any estate shall be a value which is not greater than the sum of— " (A) the deferred amount, and " (B) the aggregate interest amount. For purposes of the preceding sentence, the value of any property shall be determined as of the date prescribed by section 6151 26 USC 6151. (a) for payment of the tax imposed by chapter 11 and shall be determined by taking into account any encumbrance such as a lien under section 6324B. Ante, p. 1861. "(3)

PARTIAL SUBSTITUTION o r BOND FOR L I E N. — I f the value

required as section 6166 lien property pursuant to paragraph (2) Ante, p. 1862. exceeds the value of the interests in property covered by the agreement referred to in subsection (c), the Secretary may accept bond in a n amount equal to such excess conditioned on the payment of the amount extended in accordance with the terms of such extension. " (c) AGREEMENT.—The agreement referred to in this subsection is a written agreement signed by each person i n being who has an interest (whether or not in possession) in any property designated in such agreement— " (1) consenting to the creation of the lien under this section with respect to such property, and " (2) designating a responsible person who shall be the agent for the beneficiaries of the estate and for the persons who have consented to the creation of the lien in dealings with the Secretary on matters arising under section 6166 or 6166A or this section. Ante, p. 1862. " (d) SPECIAL RULES. — " (1) REQUIREMENT THAT LIEN BE FILED.—The lien imposed by

this section shall not be valid as against any purchaser, holder of a security interest, mechanic's lien, or judgment lien creditor until notice thereof which meets the requirements of section 6323 (f) has been filed by the Secretary. Such notice shall not be required to be refiled. " (2) PERIOD OF LIEN.—The lien imposed by this section shall arise a t the time the executor is discharged from liability under section 2204 (or, if earlier, at the time notice is filed pursuant to paragraph (1)) and shall continue until the liability for the deferred amount is satisfied or becomes unenforceable by reason of lapse of time. " (3) PRIORITIES.—Even though notice of a lien imposed by this section has been filed as provided in paragraph (1), such lien shall not be valid— " (A) R E A L PROPERTY TAX AND SPECIAL ASSESSMENT L I E N S. —

To the extent provided in section 6323(b)(6). " (B) R E A L PROPERTY SUBJECT TO A MECHANIC'S LIEN FOR REPAIRS AND IMPROVEMENTS.—In the case of any real property

subject to a lien for repair or improvement, as against a mechanic's lienor.

89-194 O—78—pt. 2

26

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Page:United States Statutes at Large Volume 90 Part 2.djvu/402

 90 STAT. 1870

PUBLIC LAW 94-455—OCT. 4, 1976 "(C)

Ante, p. 1862.

REAL

PROPERTY

CONSTRUCTION

OR IMPROVEMENT

FINANCING AGREEMENT.—As against any security interest set forth in paragraph (3) of section 6328(c) (whether such security interest came into existence before or after tax lien filing), Subparagraph s (B) and (C) shall not apply to any security interest which came into existence after the date on which the Secretary filed notice (in a manner similar to notice filed under section 6323(f)) that payment of the deferred amount has been accelerated under section 6166(g) or 6166A (h). " (4) L I E N TO BE I N LIEU OF SECTION 6 3 24 L I E N. — I f the r e is a lien

under this section on any property with respect to any estate, there shall not be any lien under section 6324 on such property with respect to the same estate. " (5) ADDITIONAL LIEN PROPERTY REQUIRED I N CERTAIN CASES.—

I f a t any time the value of the property covered by the agreement is less than the unpaid portion of the deferred amount and the aggregate interest amount, the Secretary may require the addition of property to the agreement ( b u t he may not require under this paragraph that the value of the property covered by the agreement exceed such u n p a i d p o r t i o n). I f property having the required value is not added to the property covered by the agreement (or if other security equal to the required value is not furnished) within 90 days after notice and demand therefor by the Secretary, the failure to comply with the preceding sentence shall be treated as an act accelerating payment of the installments under section 6166(g) or 6166a (h). "(6)

L I E N TO BE I N LIEU OF BOND.—The Secretary may not

require under section 6165 the furnishing of any bond for the payment of any tax to which an agreement which meets the requirements of subsection (c) applies. " (e) DEFINITIONS. — For purposes of this section— " (1) DEFERRED AMOUNT.—The term 'deferred amount' means the aggregate amount deferred under section 6166 or 6166A (determined as of the date prescribed by section 6151(a) for payment of the tax imposed by chapter 11). " (2) AGGREGATE INTEREST A M O U N T. — The term ' a g g r e g a t e inter-

est amount' means the aggregate amount of interest which will be payable over the deferral period with respect to the deferred amount (determined as of the date prescribed by section 6151(a) for payment of the tax imposed by chapter 11). " (3) DEFERRAL PERIOD.—The term 'deferral period' means the period for which the payment of tax is deferred pursuant to the election under section 6166 or 6166A. " (4) APPLICATION OF DEFINITIONS I N CASE OF DEFICIENCIES.—In

the case of a deficiency, a separate deferred amount, aggregate interest amount, and deferral period shall be determined as of the due date of the first installment after the deficiency is prorated to installments under section 6166 or 6166A." (2) DISCHARGE OF EXECUTOR FROM PERSONAL LIABILITY.—Section

26 USC 2204.

2204 (relating to discharge of fiduciary from personal liability) is amended by a d d i n g at the end thereof the following new subsection: '*(c) SPECIAL L I E N U N D E R SECTION 6324A.—For purposes of the

Ante, p. 1868.

second sentence of subsection (a) and the last sentence of subsection (b), an agreement which meets the requirements of section 6324A (relating to special lien for estate tax deferred under section 6166 or 6166A) shall be treated as the furnishing of bond with respect to the

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Page:United States Statutes at Large Volume 90 Part 2.djvu/403

 PUBLIC LAW 94-455—OCT. 4, 1976 amount for which the time for payment has been extended under section 6166 or 6166A."

90 STAT. 1871 -Ante, p. 1862.

(e) AMENDMENTS OF SECTION 303.— (1) E X T E N S I O N o r PERIOD FOR DISTRIBUTION.—Paragraph (1) of

section 303(b) (relating to distributions in redemption of stock to p a y death taxes) is amended by striking out " o r " a t the end of subparagraph (A), by striking out the period a t the end of subparagraph (B) and inserting in lieu thereof ", or ", and by a d d i n g a t the end thereof the following new subparagraph: " (C) I f a n election has been made under section 6166 or 6166A and if the time prescribed by this subparagraph expires a t a later date than the time prescribed by subparagraph (B) of this paragraph, within the time determined under section 6166 o r 6166A for the payment of the installments." (2)

26 USC 303.

RELATIONSHIP OF STOCK TO DECEDENT'S ESTATE.—

(A) Subparagraph (A) of section 303(b)(2) is amended to read as follows: " (A) IN GENERAL.—Subsection (a) shall apply to a distribution by a corporation only if the value ( for Federal estate tax purposes) of all of the stock of such corporation which is included in determining the value of the decedent's gross estate exceeds 50 percent of the excess of— " (i) the value of the gross estate of such decedent, over " ( i i) the sum of the amounts allowable as a deduction under section 2053 or 2054." (B) The first sentence of subparagraph (B) of section 303 (b)(2) is amended by striking out " the 35 percent and 50 percent requirements" and inserting in lieu thereof " the 50 percent requirement".

r

(3) RELATIONSHIP OF SHAREHOLDER TO ESTATE TAX.—Subsection

(b) of section 303 is amended by a d d i n g at the end thereof the following new paragraph s:

" (3) RELATIONSHIP OF SHAREHOLDER TO ESTATE TAX.—Subsection

(a) shall a p p l y to a distribution by a corporation only to the extent that the interest of the shareholder is reduced directly (or through a binding obligation to contribute) by any payment of an amount described in paragraph (1) or (2) of subsection (a). "(4)

ADDITIONAL REQUIREMENTS FOR DISTRIBUTIONS MADE MORE

THAN 4 YEARS AFTER DECEDENT'S DEATH.—In the case of amounts distributed more than 4 years after the date of the decedent's death, subsection (a) shall a p p l y to a distribution by a corporation only to the extent of the lesser of— " (A) the aggregate of the amounts referred to in paragraph (1) or (2) of subsection (a) which remained unpaid immediately before the distribution, or " (B) the aggregate of the amounts referred to in paragraph (1) o r (2) of subsection (a) which are p a i d during the 1-year period beginning on the date of such distribution." (4) STOCK W I T H SUBSTITUTED BASIS.—Subsection (c) of section

303 ( r e l a t i n g to stock with substituted basis) is amended by striking out "limitation specified in subsection (b)(1) " and inserting in lieu thereof "limtations specified in subsection (b) ". (f)

T E C H N I C A L, CLERICAL, AND CONFORMING C H A N G E S. —

(1) The table of sections for subchapter C of chapter 64 is amended by inserting after the item relating to section 6324 the followinsr new item:

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text:
Page:United States Statutes at Large Volume 90 Part 2.djvu/404

 90 STAT. 1872

PUBLIC LAW 94-455—OCT. 4, 1976 "Sec. 6324A. Special lien for estate tax deferred under section 6166 or 6166A."

26 USC 7403. Ante, p. 1862. 26 USC 2011. 26 USC 2204.

(2) Section 7403(a) (relating to action to enforce lien or to subject property to payment of tax) is amended by a d d i n g a t the end thereof the following new sentence: " For purposes of the preceding sentence, any acceleration of payment under section 6166 (g) or 6166A(h) shall be treated as a neglect to p a y tax. " (3) Paragraph (2) of section 2011(c) (relating to credit for State death taxes) is amended by striking out "section 6161" and inserting in lieu thereof "section 6161, 6166 or 6166A". ^4^ ^he last sentence of section 2204(b) is amended by striking out " has not been extended under " and inserting in lieu thereof "has been extended under". (5) The table of sections for subchapter B of chapter 62 is amended by striking out the item relating to section 6166 and inserting in lieu thereof the following: "Sec. 6166. Alternate extension of time for payment of estate tax wtiere estate consists largely of interest in closely held business. "Sec. 6166A. Extension of time for payment of estate tax where estate tax consists largely of interest in closely held business.".

26 USC 6166 note.

(6) Subsections (a) and (b) of section 2204 (relating to discharge of fiduciary from personal liability) are as amended by striking out " o r 6166" and inserting in lieu thereof "6166 or 6166A". (g) EFFECTIVE D A T E, — The amendments made by this section shall apply to the estates of decedents d y i n g after December 31, 1976. SEC. 2005. CARRYOVER BASIS. (a) GENERAL RULE. — (1) AMENDMENT OF SECTION 1014.—Subsection (d) of section

26 USC 1014.

1014 (relating to basis of property acquired from a decedent) is amended to read as follows: " (d) DECEDENTS D Y I N G A F T E R DECEMBER 31, 1976.—In the case of a

decedent d y i n g after December 31, 1976, the section shall not apply to any property for which a carryover basis is provided by section 1023." (2) CARRYOVER BASIS.—Part II of subchapter O of chapter 1

26 USC 1024. 26 USC 1023.

(relating to basis rules of general application) is amended by redesignating section 1023 as section 1024 and by inserting after section 1022 the following new section: "SEC. 1023. CARRYOVER BASIS FOR CERTAIN PROPERTY ACQUIRED FROM A DECEDENT DYING AFTER DECEMBER 31, 1976. " (a) GENERAL RULE. —

" (1) CARRYOVER BASIS.—Except as otherwise provided in this section, the basis of carryover basis property acquired from a decedent d y i n g after December 31, 1976, in the h and s of the person so acquiring it shall be the adjusted basis of the property immediately before the death of the decedent, further adjusted as provided in this section. "(2)

L o s s ON PERSONAL AND HOUSEHOLD EFFECTS.

I n the CaSC

of any carryover basis property which, in the h and s of the decedent, was a personal or household effect, for purposes of determining loss, the basis of such property in the h and s of the person acquiring such property from the decedent shall not exceed its fair market value. " (b) CARRYOVER BASIS PROPERTY D E F I N E D. —

" (1) IN GENERAL.—For purposes of this section, the term 'carryover basis property ' means any property which is acquired from

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