Internal Revenue Code:Sec. 1022. Treatment of property acquired from a decedent dying after December 31, 2009
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Location in Internal Revenue Code
TITLE 26 - INTERNAL REVENUE CODE
Subtitle A - Income Taxes
CHAPTER 1 - NORMAL TAXES AND SURTAXES
Subchapter O - Gain or Loss on Disposition of Property
PART II - BASIS RULES OF GENERAL APPLICATION
Statute
Sec. 1022. Treatment of property acquired from a decedent dying
after December 31, 2009
(a) In general
Except as otherwise provided in this section -
(1) property acquired from a decedent dying after December 31,
2009, shall be treated for purposes of this subtitle as
transferred by gift, and
(2) the basis of the person acquiring property from such a
decedent shall be the lesser of -
(A) the adjusted basis of the decedent, or
(B) the fair market value of the property at the date of the
decedent's death.
(b) Basis increase for certain property
(1) In general
In the case of property to which this subsection applies, the
basis of such property under subsection (a) shall be increased by
its basis increase under this subsection.
(2) Basis increase
For purposes of this subsection -
(A) In general
The basis increase under this subsection for any property is
the portion of the aggregate basis increase which is allocated
to the property pursuant to this section.
(B) Aggregate basis increase
In the case of any estate, the aggregate basis increase under
this subsection is $1,300,000.
(C) Limit increased by unused built-in losses and loss
carryovers
The limitation under subparagraph (B) shall be increased by -
(i) the sum of the amount of any capital loss carryover
under section 1212(b), and the amount of any net operating
loss carryover under section 172, which would (but for the
decedent's death) be carried from the decedent's last taxable
year to a later taxable year of the decedent, plus
(ii) the sum of the amount of any losses that would have
been allowable under section 165 if the property acquired
from the decedent had been sold at fair market value
immediately before the decedent's death.
(3) Decedent nonresidents who are not citizens of the United
States
In the case of a decedent nonresident not a citizen of the
United States -
(A) paragraph (2)(B) shall be applied by substituting
''$60,000'' for ''$1,300,000'', and
(B) paragraph (2)(C) shall not apply.
(c) Additional basis increase for property acquired by surviving
spouse
(1) In general
In the case of property to which this subsection applies and
which is qualified spousal property, the basis of such property
under subsection (a) (as increased under subsection (b)) shall be
increased by its spousal property basis increase.
(2) Spousal property basis increase
For purposes of this subsection -
(A) In general
The spousal property basis increase for property referred to
in paragraph (1) is the portion of the aggregate spousal
property basis increase which is allocated to the property
pursuant to this section.
(B) Aggregate spousal property basis increase
In the case of any estate, the aggregate spousal property
basis increase is $3,000,000.
(3) Qualified spousal property
For purposes of this subsection, the term ''qualified spousal
property'' means -
(A) outright transfer property, and
(B) qualified terminable interest property.
(4) Outright transfer property
For purposes of this subsection -
(A) In general
The term ''outright transfer property'' means any interest in
property acquired from the decedent by the decedent's surviving
spouse.
(B) Exception
Subparagraph (A) shall not apply where, on the lapse of time,
on the occurrence of an event or contingency, or on the failure
of an event or contingency to occur, an interest passing to the
surviving spouse will terminate or fail -
(i)(I) if an interest in such property passes or has passed
(for less than an adequate and full consideration in money or
money's worth) from the decedent to any person other than
such surviving spouse (or the estate of such spouse), and
(II) if by reason of such passing such person (or his heirs
or assigns) may possess or enjoy any part of such property
after such termination or failure of the interest so passing
to the surviving spouse, or
(ii) if such interest is to be acquired for the surviving
spouse, pursuant to directions of the decedent, by his
executor or by the trustee of a trust.
For purposes of this subparagraph, an interest shall not be
considered as an interest which will terminate or fail merely
because it is the ownership of a bond, note, or similar
contractual obligation, the discharge of which would not have
the effect of an annuity for life or for a term.
(C) Interest of spouse conditional on survival for limited
period
For purposes of this paragraph, an interest passing to the
surviving spouse shall not be considered as an interest which
will terminate or fail on the death of such spouse if -
(i) such death will cause a termination or failure of such
interest only if it occurs within a period not exceeding 6
months after the decedent's death, or only if it occurs as a
result of a common disaster resulting in the death of the
decedent and the surviving spouse, or only if it occurs in
the case of either such event, and
(ii) such termination or failure does not in fact occur.
(5) Qualified terminable interest property
For purposes of this subsection -
(A) In general
The term ''qualified terminable interest property'' means
property -
(i) which passes from the decedent, and
(ii) in which the surviving spouse has a qualifying income
interest for life.
(B) Qualifying income interest for life
The surviving spouse has a qualifying income interest for
life if -
(i) the surviving spouse is entitled to all the income from
the property, payable annually or at more frequent intervals,
or has a usufruct interest for life in the property, and
(ii) no person has a power to appoint any part of the
property to any person other than the surviving spouse.
Clause (ii) shall not apply to a power exercisable only at or
after the death of the surviving spouse. To the extent
provided in regulations, an annuity shall be treated in a
manner similar to an income interest in property (regardless of
whether the property from which the annuity is payable can be
separately identified).
(C) Property includes interest therein
The term ''property'' includes an interest in property.
(D) Specific portion treated as separate property
A specific portion of property shall be treated as separate
property. For purposes of the preceding sentence, the term
''specific portion'' only includes a portion determined on a
fractional or percentage basis.
(d) Definitions and special rules for application of subsections
(b) and (c)
(1) Property to which subsections (b) and (c) apply
(A) In general
The basis of property acquired from a decedent may be
increased under subsection (b) or (c) only if the property was
owned by the decedent at the time of death.
(B) Rules relating to ownership
(i) Jointly held property
In the case of property which was owned by the decedent and
another person as joint tenants with right of survivorship or
tenants by the entirety -
(I) if the only such other person is the surviving
spouse, the decedent shall be treated as the owner of only
50 percent of the property,
(II) in any case (to which subclause (I) does not apply)
in which the decedent furnished consideration for the
acquisition of the property, the decedent shall be treated
as the owner to the extent of the portion of the property
which is proportionate to such consideration, and
(III) in any case (to which subclause (I) does not apply)
in which the property has been acquired by gift, bequest,
devise, or inheritance by the decedent and any other person
as joint tenants with right of survivorship and their
interests are not otherwise specified or fixed by law, the
decedent shall be treated as the owner to the extent of the
value of a fractional part to be determined by dividing the
value of the property by the number of joint tenants with
right of survivorship.
(ii) Revocable trusts
The decedent shall be treated as owning property
transferred by the decedent during life to a qualified
revocable trust (as defined in section 645(b)(1)).
(iii) Powers of appointment
The decedent shall not be treated as owning any property by
reason of holding a power of appointment with respect to such
property.
(iv) Community property
Property which represents the surviving spouse's one-half
share of community property held by the decedent and the
surviving spouse under the community property laws of any
State or possession of the United States or any foreign
country shall be treated for purposes of this section as
owned by, and acquired from, the decedent if at least
one-half of the whole of the community interest in such
property is treated as owned by, and acquired from, the
decedent without regard to this clause.
(C) Property acquired by decedent by gift within 3 years of
death
(i) In general
Subsections (b) and (c) shall not apply to property
acquired by the decedent by gift or by inter vivos transfer
for less than adequate and full consideration in money or
money's worth during the 3-year period ending on the date of
the decedent's death.
(ii) Exception for certain gifts from spouse
Clause (i) shall not apply to property acquired by the
decedent from the decedent's spouse unless, during such
3-year period, such spouse acquired the property in whole or
in part by gift or by inter vivos transfer for less than
adequate and full consideration in money or money's worth.
(D) Stock of certain entities
Subsections (b) and (c) shall not apply to -
(i) stock or securities of a foreign personal holding
company,
(ii) stock of a DISC or former DISC,
(iii) stock of a foreign investment company, or
(iv) stock of a passive foreign investment company unless
such company is a qualified electing fund (as defined in
section 1295) with respect to the decedent.
(2) Fair market value limitation
The adjustments under subsections (b) and (c) shall not
increase the basis of any interest in property acquired from the
decedent above its fair market value in the hands of the decedent
as of the date of the decedent's death.
(3) Allocation rules
(A) In general
The executor shall allocate the adjustments under subsections
(b) and (c) on the return required by section 6018.
(B) Changes in allocation
Any allocation made pursuant to subparagraph (A) may be
changed only as provided by the Secretary.
(4) Inflation adjustment of basis adjustment amounts
(A) In general
In the case of decedents dying in a calendar year after 2010,
the $1,300,000, $60,000, and $3,000,000 dollar amounts in
subsections (b) and (c)(2)(B) shall each be increased by an
amount equal to the product of -
(i) such dollar amount, and
(ii) the cost-of-living adjustment determined under section
1(f)(3) for such calendar year, determined by substituting
''2009'' for ''1992'' in subparagraph (B) thereof.
(B) Rounding
If any increase determined under subparagraph (A) is not a
multiple of -
(i) $100,000 in the case of the $1,300,000 amount,
(ii) $5,000 in the case of the $60,000 amount, and
(iii) $250,000 in the case of the $3,000,000 amount,
such increase shall be rounded to the next lowest multiple
thereof.
(e) Property acquired from the decedent
For purposes of this section, the following property shall be
considered to have been acquired from the decedent:
(1) Property acquired by bequest, devise, or inheritance, or by
the decedent's estate from the decedent.
(2) Property transferred by the decedent during his lifetime -
(A) to a qualified revocable trust (as defined in section
645(b)(1)), or
(B) to any other trust with respect to which the decedent
reserved the right to make any change in the enjoyment thereof
through the exercise of a power to alter, amend, or terminate
the trust.
(3) Any other property passing from the decedent by reason of
death to the extent that such property passed without
consideration.
(f) Coordination with section 691
This section shall not apply to property which constitutes a
right to receive an item of income in respect of a decedent under
section 691.
(g) Certain liabilities disregarded
(1) In general
In determining whether gain is recognized on the acquisition of
property -
(A) from a decedent by a decedent's estate or any beneficiary
other than a tax-exempt beneficiary, and
(B) from the decedent's estate by any beneficiary other than
a tax-exempt beneficiary,
and in determining the adjusted basis of such property,
liabilities in excess of basis shall be disregarded.
(2) Tax-exempt beneficiary
For purposes of paragraph (1), the term ''tax-exempt
beneficiary'' means -
(A) the United States, any State or political subdivision
thereof, any possession of the United States, any Indian tribal
government (within the meaning of section 7871), or any agency
or instrumentality of any of the foregoing,
(B) an organization (other than a cooperative described in
section 521) which is exempt from tax imposed by chapter 1,
(C) any foreign person or entity (within the meaning of
section 168(h)(2)), and
(D) to the extent provided in regulations, any person to whom
property is transferred for the principal purpose of tax
avoidance.
(h) Regulations
The Secretary shall prescribe such regulations as may be
necessary to carry out the purposes of this section.
Sources
(Added Pub. L. 107-16, title V, Sec. 542(a), June 7, 2001, 115
Stat. 76.)
Amendment of Section
TERMINATION OF SECTION
For termination of section by section 901 of Pub. L. 107-16,
see Effective and Termination Dates note below.
Miscellaneous
PRIOR PROVISIONS
A prior section 1022, added Pub. L. 88-272, title II, Sec.
225(j)(1), Feb. 26, 1964, 78 Stat. 92, dealt with the increase in
basis with respect to certain foreign personal holding company
stock or securities, prior to repeal by Pub. L. 94-455, title XIX,
Sec. 1901(a)(126), Oct. 4, 1976, 90 Stat. 1784, applicable with
respect to stock or securities acquired from a decedent dying after
Oct. 4, 1976.
Another prior section 1022, act Aug. 16, 1954, ch. 736, 68A Stat.
302, relating to cross references, was renumbered section 1023.
EFFECTIVE AND TERMINATION DATES
Section applicable to estates of decedents dying after Dec. 31,
2009, see section 542(f)(1) of Pub. L. 107-16, set out as an
Effective and Termination Dates of 2001 Amendment note under
section 121 of this title.
Section inapplicable to estates of decedents dying, gifts made,
or generation skipping transfers, after Dec. 31, 2010, and the
Internal Revenue Code of 1986 to be applied and administered to
such estates, gifts, and transfers as if it had never been enacted,
see section 901 of Pub. L. 107-16, set out as an Effective and
Termination Dates of 2001 Amendment note under section 1 of this
title.
References
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in sections 121, 170, 1221, 6018 of
this title.
