26 U.S.C. § 2037 — Transfers taking effect at death

Page 2591 TITLE 26—INTERNAL REVENUE CODE § 2038 § 2037. Transfers taking effect at death (a) General rule The value of the gross estate shall include the value of all property to the extent of any inter- est therein of which the decedent has at any time after September 7, 1916, made a transfer (except in case of a bona fide sale for an ade- quate and full consideration in money or mon- ey’s worth), by trust or otherwise, if— (1) possession or enjoyment of the property can, through ownership of such interest, be ob- tained only by surviving the decedent, and (2) the decedent has retained a reversionary interest in the property (but in the case of a transfer made before October 8, 1949, only if such reversionary interest arose by the ex- press terms of the instrument of transfer), and the value of such reversionary interest imme- diately before the death of the decedent ex- ceeds 5 percent of the value of such property. (b) Special rules For purposes of this section, the term ‘‘rever- sionary interest’’ includes a possibility that property transferred by the decedent— (1) may return to him or his estate, or (2) may be subject to a power of disposition by him, but such term does not include a possibility that the income alone from such property may re- turn to him or become subject to a power of dis- position by him. The value of a reversionary in- terest immediately before the death of the dece- dent shall be determined (without regard to the fact of the decedent’s death) by usual methods of valuation, including the use of tables of mor- tality and actuarial principles, under regula- tions prescribed by the Secretary. In deter- mining the value of a possibility that property may be subject to a power of disposition by the decedent, such possibility shall be valued as if it were a possibility that such property may re- turn to the decedent or his estate. Notwith- standing the foregoing, an interest so trans- ferred shall not be included in the decedent’s gross estate under this section if possession or enjoyment of the property could have been ob- tained by any beneficiary during the decedent’s life through the exercise of a general power of appointment (as defined in section 2041) which in fact was exercisable immediately before the de- cedent’s death. (Aug. 16, 1954, ch. 736, 68A Stat. 382; Pub. L. 87–834, § 18(a)(2)(E), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94–455, title XIX, § 1906(b)(13)(A), Oct. 4, 1976, 90 Stat. 1834.) Editorial Notes AMENDMENTS 1976—Subsec. (b). Pub. L. 94–455 struck out ‘‘or his delegate’’ after ‘‘Secretary’’. 1962—Subsec. (a). Pub. L. 87–834 struck out provisions which excepted real property situated outside of the United States. Statutory Notes and Related Subsidiaries 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. § 2038. Revocable transfers (a) In general The value of the gross estate shall include the value of all property— (1) Transfers after June 22, 1936 To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money’s worth), by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power), to alter, amend, revoke, or terminate, or where any such power is relinquished during the 3 year period ending on the date of the decedent’s death. (2) Transfers on or before June 22, 1936 To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money’s worth), by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power, either by the decedent alone or in conjunction with any person, to alter, amend, or revoke, or where the decedent relinquished any such power during the 3 year period ending on the date of the decedent’s death. Except in the case of transfers made after June 22, 1936, no interest of the decedent of which he has made a transfer shall be in- cluded in the gross estate under paragraph (1) unless it is includible under this paragraph. (b) Date of existence of power For purposes of this section, the power to alter, amend, revoke, or terminate shall be con- sidered to exist on the date of the decedent’s death even though the exercise of the power is subject to a precedent giving of notice or even though the alteration, amendment, revocation, or termination takes effect only on the expira- tion of a stated period after the exercise of the power, whether or not on or before the date of the decedent’s death notice has been given or the power has been exercised. In such cases proper adjustment shall be made representing the interests which would have been excluded from the power if the decedent had lived, and for such purpose, if the notice has not been given or the power has not been exercised on or before the date of his death, such notice shall be con- sidered to have been given, or the power exer- cised, on the date of his death. (Aug. 16, 1954, ch. 736, 68A Stat. 383; Pub. L. 86–141, § 1, Aug. 7, 1959, 73 Stat. 288; Pub. L. 87–834, § 18(a)(2)(F), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94–455, title XIX, § 1902(a)(3), title XX, § 2001(c)(1)(K), Oct. 4, 1976, 90 Stat. 1804, 1852.)