Editorial Notes

Amendments

1996—Subsec. (a)(3)(B). Pub. L. 104–188, § 1702(f)(1)(B), inserted “certain” before “qualified” in heading.

Subsec. (a)(3)(C). Pub. L. 104–188, § 1702(f)(1)(A), added subpar. (C).

Subsec. (a)(4)(B)(i). Pub. L. 104–188, § 1702(f)(2), inserted “(or, to the extent provided in regulations, the rights as to either income or capital)” after “income and capital”.

Subsec. (b)(2)(C). Pub. L. 104–188, § 1702(f)(3)(A), added subpar. (C).

Subsec. (c)(1)(B)(i). Pub. L. 104–188, § 1702(f)(4), amended cl. (i) generally. Prior to amendment, cl. (i) read as follows: “a right to distributions with respect to any junior equity interest (as defined in subsection (a)(4)(B)(i)),”.

Subsec. (c)(3)(C)(i). Pub. L. 104–188, § 1702(f)(5)(A), amended cl. (i) generally. Prior to amendment, cl. (i) read as follows:

“(i) Waiver of qualified payment treatment.—A transferor or applicable family member may elect with respect to payments under any interest specified in such election to treat such payments as payments which are not qualified payments.”

Subsec. (c)(3)(C)(ii). Pub. L. 104–188, § 1702(f)(5)(B), amended first sentence generally. Prior to amendment, first sentence read as follows: “A transferor or any applicable family member may elect to treat any distribution right as a qualified payment, to be paid in the amounts and at the times specified in such election.”

Subsec. (d)(1). Pub. L. 104–188, § 1702(f)(1)(C), substituted “subsection (a)(3)(B) or (C)” for “subsection (a)(3)(B)”.

Subsec. (d)(3)(A)(iii). Pub. L. 104–188, § 1702(f)(6), struck out “the period ending on the date of” after “with respect to”.

Subsec. (d)(3)(B)(ii)(I). Pub. L. 104–188, § 1702(f)(7), inserted “or the exclusion under section 2503(b),” after “section 2523,”.

Subsec. (d)(4)(A). Pub. L. 104–188, § 1702(f)(1)(C), substituted “subsection (a)(3)(B) or (C)” for “subsection (a)(3)(B)”.

Subsec. (d)(4)(C). Pub. L. 104–188, § 1702(f)(9), added subpar. (C).

Subsec. (e)(3). Pub. L. 104–188, § 1702(f)(3)(B), substituted “Attribution of indirect holdings and transfers” for “Attribution rules” in par. heading, struck out subpar. (A) designation and heading which read “Indirect holdings and transfers”, and struck out subpar. (B) which read as follows:

“(B) Control.—For purposes of subsections (b)(1), an individual shall be treated as holding any interest held by the individual’s brothers, sisters, or lineal descendants.”

Subsec. (e)(5)(A). Pub. L. 104–188, § 1702(f)(8)(A), substituted “such transaction” for “such contribution to capital or such redemption, recapitalization, or other change”.

Subsec. (e)(5)(B). Pub. L. 104–188, § 1702(f)(8)(B), substituted “such transaction” for “the transfer”.

Subsec. (e)(6). Pub. L. 104–188, § 1702(f)(10), inserted “or to reflect the application of subsection (d)” before period at end.

Statutory Notes and Related Subsidiaries

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.

Effective Date

Pub. L. 101–508, title XI, § 11602(e)(1), Nov. 5, 1990, 104 Stat. 1388–500, provided that:

“(A)

In general.—

The amendments made by subsection (a) [enacting this chapter]—

“(i)

to the extent such amendments relate to sections 2701 and 2702 of the Internal Revenue Code of 1986 (as added by such amendments), shall apply to transfers after October 8, 1990,

“(ii)

to the extent such amendments relate to section 2703 of such Code (as so added), shall apply to—

“(I)

agreements, options, rights, or restrictions entered into or granted after October 8, 1990, and

“(II)

agreements, options, rights, or restrictions which are substantially modified after October 8, 1990, and

“(iii)

to the extent such amendments relate to section 2704 of such Code (as so added), shall apply to restrictions or rights (or limitations on rights) created after October 8, 1990.

“(B)

Exception.—

For purposes of subparagraph (A)(i), with respect to property transferred before October 9, 1990—

“(i)

any failure to exercise a right of conversion,

“(ii)

any failure to pay dividends, and

“(iii)

any failure to exercise other rights specified in regulations,

shall not be treated as a subsequent transfer.”

Time for Election Under Subsection (c)(3)(C)(i)

Pub. L. 104–188, title I, § 1702(f)(5)(C), Aug. 20, 1996, 110 Stat. 1871, provided that: “The time for making an election under the second sentence of section 2701(c)(3)(C)(i) of the Internal Revenue Code of 1986 (as amended by subparagraph (A)) shall not expire before the due date (including extensions) for filing the transferor’s return of the tax imposed by section 2501 of such Code for the first calendar year ending after the date of enactment [probably means the date of enactment of Pub. L. 104–188, Oct. 20, 1996].”

Study of Methods Used To Distort Valuation of Property for Purposes of Estate and Gift Tax

Pub. L. 101–508, title XI, § 11602(d), Nov. 5, 1990, 104 Stat. 1388–500, directed the Secretary of the Treasury to conduct a study of the prevalence and types of options and agreements used to distort the valuation of property for purposes of subtitle B of the Internal Revenue Code of 1986, and other methods using discretionary rights to distort this valuation, and report to Congress the results of the study, together with any legislative recommendations, not later than Dec. 31, 1992.