Internal Revenue Code:Sec. 2035. Adjustments for certain gifts made within 3 years of decedent's death

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Location in Internal Revenue Code

     TITLE 26 - INTERNAL REVENUE CODE
      Subtitle B - Estate and Gift Taxes
       CHAPTER 11 - ESTATE TAX
        Subchapter A - Estates of Citizens or Residents
         PART III - GROSS ESTATE
       

Statute

    Sec. 2035. Adjustments for certain gifts made within 3 years of
        decedent's death
 
    (a) Inclusion of certain property in gross estate
      If -
        (1) the decedent made a transfer (by trust or otherwise) of an
      interest in any property, or relinquished a power with respect to
      any property, during the 3-year period ending on the date of the
      decedent's death, and
        (2) the value of such property (or an interest therein) would
      have been included in the decedent's gross estate under section
      2036, 2037, 2038, or 2042 if such transferred interest or
      relinquished power had been retained by the decedent on the date
      of his death,
    the value of the gross estate shall include the value of any
    property (or interest therein) which would have been so included.
    (b) Inclusion of gift tax on gifts made during 3 years before
        decedent's death
      The amount 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 or his estate on any gift made by the
    decedent or his spouse during the 3-year period ending on the date
    of the decedent's death.
    (c) Other rules relating to transfers within 3 years of death
      (1) In general
        For purposes of -
          (A) section 303(b) (relating to distributions in redemption
        of stock to pay death taxes),
          (B) section 2032A (relating to special valuation of certain
        farms, etc., real property), and
          (C) subchapter C of chapter 64 (relating to lien for taxes),
      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 at any time made a transfer, by trust or otherwise,
      during the 3-year period ending on the date of the decedent's
      death.
      (2) Coordination with section 6166
        An estate shall be treated as meeting the 35 percent of
      adjusted gross estate requirement of section 6166(a)(1) only if
      the estate meets such requirement both with and without the
      application of subsection (a).
      (3) Marital and small transfers
        Paragraph (1) shall not apply to any transfer (other than a
      transfer with respect to a life insurance policy) made during a
      calendar year to any donee if the decedent was not required by
      section 6019 (other than by reason of section 6019(2)) to file
      any gift tax return for such year with respect to transfers to
      such donee.
    (d) Exception
      Subsection (a) and paragraph (1) of subsection (c) shall not
    apply to any bona fide sale for an adequate and full consideration
    in money or money's worth.
    (e) Treatment of certain transfers from revocable trusts
      For purposes of this section and section 2038, any transfer from
    any portion of a trust during any period that such portion was
    treated under section 676 as owned by the decedent by reason of a
    power in the grantor (determined without regard to section 672(e))
    shall be treated as a transfer made directly by the decedent.
 

Sources

    (Aug. 16, 1954, ch. 736, 68A Stat. 381; Pub. L. 87-834, Sec.
    18(a)(2)(C), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94-455, title
    XX, Sec. 2001(a)(5), Oct. 4, 1976, 90 Stat. 1848; Pub. L. 95-600,
    title VII, Sec. 702(f)(1), Nov. 6, 1978, 92 Stat. 2930; Pub. L.
    97-34, title IV, Sec. 403(b)(3)(B), 424(a), Aug. 13, 1981, 95 Stat.
    301, 317; Pub. L. 97-448, title I, Sec. 104(a)(9), (d)(1)(A), (C),
    (2), Jan. 12, 1983, 96 Stat. 2381, 2383; Pub. L. 105-34, title
    XIII, Sec. 1310(a), Aug. 5, 1997, 111 Stat. 1043; Pub. L. 106-554,
    Sec. 1(a)(7) (title III, Sec. 319(14)), Dec. 21, 2000, 114 Stat.
    2763, 2763A-646.)
 

Miscellaneous

                                 AMENDMENTS
      2000 - Subsec. (c)(2). Pub. L. 106-554, Sec. 1(a)(7) (title III,
    Sec. 319(14)(A)), substituted ''subsection (a)'' for ''paragraph
    (1)''.
      Subsec. (d). Pub. L. 106-554, Sec. 1(a)(7) (title III, Sec.
    319(14)(B)), inserted ''and paragraph (1) of subsection (c)'' after
    ''Subsection (a)''.
      1997 - Pub. L. 105-34 amended section catchline and text
    generally.  Prior to amendment, section consisted of subsecs. (a)
    to (d) relating to adjustments for gifts made within 3 years of
    decedent's death.
      1983 - Subsec. (b)(2). Pub. L. 97-448, Sec. 104(a)(9),
    substituted ''section 6019(2)'' for ''section 6019(a)(2)''.
      Subsec. (d)(2). Pub. L. 97-448, Sec. 104(d)(2), inserted ''of
    this subsection and paragraph (2) of subsection (b)'' after
    ''Paragraph (1)'', and struck out ''2041,'' after ''2038,''.
      Subsec. (d)(3)(C), (D). Pub. L. 97-448, Sec. 104(d)(1)(C),
    redesignated subpar. (D) as (C). Former subpar. (C), which referred
    to section 6166 (relating to extension of time for payment of
    estate tax where estate consists largely of interest in closely
    held business), was struck out.
      Subsec. (d)(4). Pub. L. 97-448, Sec. 104(d)(1)(A), added par.
    (4).
      1981 - Subsec. (b)(2). Pub. L. 97-34, Sec. 403(b)(3)(B), inserted
    ''(other than by reason of section 6019(a)(2))'' after ''section
    6019''.
      Subsec. (d). Pub. L. 97-34, Sec. 424(a), added subsec. (d).
      1978 - Subsec. (b). Pub. L. 95-600 substituted in par. (2)
    provisions relating to gifts for which donee was not required by
    section 6019 to file gift tax returns for provisions relating to
    gifts excludable in computing taxable gifts by reason of section
    2503(b) and inserted provisions following par. (2) relating to
    inapplicability of par. (2) to transfers respecting life insurance
    policies.
      1976 - Pub. L. 94-455 substituted provisions covering adjustments
    for gifts made within 3 years of decedent's death for provisions
    under which transfers by the decedent within 3 years of the
    decedent's death were deemed to have been made in contemplation of
    death and included in the value of the gross estate.
      1962 - Subsec. (a). Pub. L. 87-834 struck out provisions which
    excepted real property situated outside of the United States.
                      EFFECTIVE DATE OF 1997 AMENDMENT
      Section 1310(c) of Pub. L. 105-34 provided that: ''The amendments
    made by this section (amending this section) shall apply to the
    estates of decedents dying after the date of the enactment of this
    Act (Aug. 5, 1997).''
                      EFFECTIVE DATE OF 1983 AMENDMENT
      Amendment by Pub. L. 97-448 effective, except as otherwise
    provided, as if it had been included in the provision of the
    Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
    amendment relates, see section 109 of Pub. L. 97-448, set out as a
    note under section 1 of this title.
                      EFFECTIVE DATE OF 1981 AMENDMENT
      Amendment by section 403(b)(3)(B) of Pub. L. 97-34 applicable to
    estates of decedents dying after Dec. 31, 1981, see section 403(e)
    of Pub. L. 97-34, set out as a note under section 2056 of this
    title.
      Section 424(b) of Pub. L. 97-34 provided that: ''The amendment
    made by subsection (a) (amending this section) shall apply to the
    estates of decedents dying after December 31, 1981.''
                      EFFECTIVE DATE OF 1978 AMENDMENT
      Section 702(f)(2) of Pub. L. 95-600 provided that: ''The
    amendment made by paragraph (1) (amending this section) shall apply
    to the estates of decedents dying after December 31, 1976, except
    that it shall not apply to transfers made before January 1, 1977.''
                      EFFECTIVE DATE OF 1976 AMENDMENT
      Amendment by Pub. L. 94-455 applicable to estates of decedents
    dying after Dec. 31, 1976, but not to transfers made before Jan. 1,
    1977, see section 2001(d)(1) of Pub. L. 94-455, set out as a note
    under section 2001 of this title.
                      EFFECTIVE DATE OF 1962 AMENDMENT
      Amendment by Pub. L. 87-834 applicable to estates of decedents
    dying after Oct. 16, 1962, except as otherwise provided, see
    section 18(b) of Pub. L. 87-834, set out as a note under section
    2031 of this title.
       TRANSFERS MADE BY DECEDENT DURING 1977; ELECTION AVAILABLE TO
        EXECUTOR ON OR BEFORE DUE DATE FOR FILING ESTATE TAX RETURN
      Pub. L. 96-222, title I, Sec. 107(a)(2)(F), Apr. 1, 1980, 94
    Stat. 223, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100
    Stat. 2095, provided that:
        ''(i) If the executor elects the benefits of this subparagraph
      with respect to any estate, section 2035(b) of the Internal
      Revenue Code of 1986 (formerly I.R.C. 1954) (relating to
      adjustments for gifts made within 3 years of decedent's death)
      shall be applied with respect to transfers made by the decedent
      during 1977 as if paragraph (2) of such section 2035(b) read as
      follows:
      '' '(2) to any gift to a donee made during 1977 to the extent of
    the amount of such gift which was 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).'
        ''(ii) The election under clause (i) with respect to any estate
      shall be made on or before the later of -
          ''(I) the due date for filing the estate tax return, or
          ''(II) the day which is 120 days after the date of the
        enactment of this Act (Apr. 1, 1980).''
 

References

                   SECTION REFERRED TO IN OTHER SECTIONS
      This section is referred to in sections 2001, 2036, 2041, 2043,
    2045, 2056, 2104, 2107, 2642, 6166, 6324 of this title.