26 C.F.R. §§ 25.2501-1–25.2504-2

§25.2501-1. Imposition of tax.

26 C.F.R. § 25.2501-1

(a)

In general.

(1)

The tax applies to all transfers by gift of property, wherever situated, by an individual who is a citizen or resident of the United States, to the extent the value of the transfers exceeds the amount of the exclusions authorized by section 2503 and the deductions authorized by sections 2521 (as in effect prior to its repeal by the Tax Reform Act of 1976), 2522, and 2523. For each “calendar period” (as defined in § 25.2502-1(c)(1)), the tax described in this paragraph (a) is imposed on the transfer of property by gift during such calendar period. For gift tax rules related to an ABLE account established under section 529A, see § 1.529A-4 of this chapter.

(2)

The tax does not apply to a transfer by gift of intangible property before January 1, 1967, by a nonresident not a citizen of the United States, unless the donor was engaged in business in the United States during the calendar year in which the transfer was made.

(3)

(i)

The tax does not apply to any transfer by gift of intangible property on or after January 1, 1967, by a nonresident not a citizen of the United States (whether or not he was engaged in business in the United States), unless the donor is an expatriate who lost his U.S. citizenship after March 8, 1965, and within the 10-year period ending with the date of transfer, and the loss of citizenship—

(a) Did not result from the application of section 301(b), 350, or 355 of the Immigration and Nationality Act, as amended (8 U.S.C. 1401(b), 1482, or 1487) (For a summary of these sections, see paragraph (d)(1) of § 20.2107-1 of this chapter (estate tax regulations)), and

(b) Had for one of its principal purposes (but not necessarily its only principal purpose) the avoidance of Federal income, estate, or gift tax.

(ii)

In determining for purposes of subdivision (i)(b) of this subparagraph whether a principal purpose for the loss of U.S. citizenship by a donor was the avoidance of Federal income, estate, or gift tax, the Commissioner must first establish that it is reasonable to believe that the donor's loss of U.S. citizenship would, but for section 2501(a)(3) and this subparagraph, result in a substantial reduction for the calendar period (as defined in § 25.2502-1(c)(1)) in the sum of (a) the Federal gift tax and (b) all gift taxes imposed by foreign countries and political subdivisions thereof, in respect of the transfer of property by gift. Once the Commissioner has so established, the burden of proving that the loss of citizenship by the donor did not have for one of its principal purposes the avoidance of Federal income, estate, or gift tax shall be on the donor. In the absence of complete factual information, the Commissioner may make a tentative determination, based on the information available, that the donor's loss of U.S. citizenship would, but for section 250(a)(3) and this subparagraph, result in a substantial reduction for the calendar period in the sum of the Federal and foreign gift taxes described in (a) and (b) of this subdivision on the transfer of property by gift. This tentative determination may be based upon the fact that the laws of the foreign country of which the donor became a citizen and the laws of the foreign country of which the donor was a resident at the time of the transfer, including the laws of any political subdivision of those foreign countries, would ordinarily result, in the case of a nonexpatriate donor having the same citizenship and residence as the donor, in liability for total gift taxes under such laws for the calendar period substantially lower than the amount of the Federal gift tax which would be imposed for such period on an amount of comparable gifts by a citizen of the United States. In the absence of a preponderance of evidence to the contrary, this tentative determination shall be sufficient to establish that it is reasonable to believe that the donor's loss of U.S. citizenship would, but for section 2501(a)(3) and this subparagraph, result in a substantial reduction for the calendar period in the sum of the Federal and foreign gift taxes described in (a) and (b) of this subdivision on the transfer of property by gift.

(4)

For additional rules relating to the application of the tax to transfers by nonresidents not citizens of the United States, see section 2511 and § 25.2511-3.

(5)

The general rule of this paragraph (a) shall not apply to a transfer after May 7, 1974, of money or other property to a political organization for the use of that organization. However, this exception to the general rule applies solely to a transfer to a political organization as defined in section 527(e)(1) and including a newsletter fund to the extent provided under section 527(g). The general rule governs a transfer of property to an organization other than a political organization as so defined.

(b)

Resident. A resident is an individual who has his domicile in the United States at the time of the gift. For this purpose the United States includes the States and the District of Columbia. The term also includes the Territories of Alaska and Hawaii prior to admission as a State. See section 7701(a)(9). All other individuals are nonresidents. A person acquires a domicile in a place by living there, for even a brief period of time, with no definite present intention of moving therefrom. Residence without the requisite intention to remain indefinitely will not constitute domicile, nor will intention to change domicile effect such a change unless accompanied by actual removal.

(c)

Certain residents of possessions considered citizens of the United States. As used in this part, the term “citizen of the United States” includes a person who makes a gift after September 2, 1958 and who, at the time of making the gift, was domiciled in a possession of the United States and was a United States citizen, and who did not acquire his United States citizenship solely by reason of his being a citizen of such possession or by reason of his birth or residence within such possession. The gift of such a person is, therefore, subject to the tax imposed by section 2501 in the same manner in which a gift made by a resident of the United States is subject to the tax. See paragraph (a) of § 25.01 and paragraph (d) of this section for further information relating to the application of the Federal gift tax to gifts made by persons who were residents of possessions of the United States. The application of this paragraph may be illustrated by the following example and the examples set forth in paragraph (d) of this section:

(d)

Certain residents of possessions considered nonresidents not citizens of the United States. As used in this part, the term “nonresident not a citizen of the United States” includes a person who makes a gift after September 14, 1960, and who at the time of making the gift, was domiciled in a possession of the United States and was a United States citizen, and who acquired his United States citizenship solely by reason of his being a citizen of such possession or by reason of his birth or residence within such possession. The gift of such a person, is, therefore, subject to the tax imposed by section 2501 in the same manner in which a gift is subject to the tax when made by a donor who is a “nonresident not a citizen of the United States.” See paragraph (a) of § 25.01 and paragraph (c) of this section for further information relating to the application of the Federal gift tax to gifts made by persons who were residents of possessions of the United States. The application of this paragraph may be illustrated by the following examples and the example set forth in paragraph (c) of this section. In each of the following examples the person who makes the gift is deemed a “nonresident not a citizen of the United States” and his gift is subject to the tax imposed by section 2501 in the same manner in which a gift is subject to the tax when made by a donor who is a nonresident not a citizen of the United States, since he made the gift after September 14, 1960, but would not have been so deemed and subject to such tax if the person who made the gift had made it on or before September 14, 1960.

Notes, amendments, and revision history

Amendments

[T.D. 6334, 23 FR 8904, Nov. 15, 1958, as amended by T.D. 6542, 26 FR 549 Jan. 20 1961; T.D. 7296, 38 FR 34201, Dec. 12, 1973; T.D. 7871, 45 FR 8004, Feb. 6, 1980; T.D. 7910, 48 FR 40372, Sept. 7, 1983; T.D. 9923, 85 FR 74047, Nov. 19, 2020]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 6334, 23 FR 8904, Nov. 15, 1958, as amended by T.D. 6542, 26 FR 549 Jan. 20 1961; T.D. 7296, 38 FR 34201, Dec. 12, 1973; T.D. 7871, 45 FR 8004, Feb. 6, 1980; T.D. 7910, 48 FR 40372, Sept. 7, 1983; T.D. 9923, 85 FR 74047, Nov. 19, 2020]

§25.2502-1. Rate of tax.

26 C.F.R. § 25.2502-1

(a)

Computation of tax. The rate of tax is determined by the total of all gifts made by the donor during the calendar period and all the preceding calendar periods since June 6, 1932. See § 25.2502-1(c)(1) for the definition of “calendar period” and § 25.2502-1(c)(2) for the definition of “preceding calendar periods.” The following six steps are to be followed in computing the tax:

(1)

First step. Ascertain the amount of the “taxable gifts” (as defined in § 25.2503-1) for the calendar period for which the return is being prepared.

(2)

Second step. Ascertain “the aggregate sum of the taxable gifts for each of the preceding calendar periods” (as defined in § 25.2504-1), considering only those gifts made after June 6, 1932.

(3)

Third step. Ascertain the total amount of the taxable gifts, which is the sum of the amounts determined in the first and second steps. See § 25.2702-6 for an adjustment to the total amount of an individual's taxable gifts where the individual's current taxable gifts include the transfer of certain interests in trust that were previously valued under the provisions of section 2702.

(4)

Fourth step. Compute the tentative tax on the total amount of taxable gifts (as determined in the third step) using the rate schedule in effect at the time the gift (for which the return is being filed) is made.

(5)

Fifth step. Compute the tentative tax on the aggregate sum of the taxable gifts for each of the preceding calendar periods (as determined in the second step), using the same rate schedule set forth in the fourth step of this paragraph (a).

(6)

Sixth step. Subtract the amount determined in the fifth step from the amount determined in the fourth step. The amount remaining is the gift tax for the calendar period for which the return is being prepared.

(b)

Rate of tax. The tax is computed in accordance with the rate schedule in effect at the time the gift was made as set forth in section 2001(c) or corresponding provisions of prior law.

(c)

Definitions.

(1)

The term “calendar period” means—

(i)

Each calendar year for the calendar years 1932 (but only that portion of such year after June 6, 1932) through 1970;

(ii)

Each calendar quarter for the first calendar quarter of the calendar year 1971 through the last calendar quarter of calendar year 1981; or

(iii)

Each calendar year for the calendar year 1982 and each succeeding calendar year.

(2)

The term “preceding calendar periods” means all calendar periods ending prior to the calendar period for which the tax is being computed.

(d)

Examples. The following examples illustrate the application of this section with respect to gifts made by citizens or residents of the United States:

Notes, amendments, and revision history

Amendments

[T.D. 6334, 23 FR 8904, Nov. 15, 1958, as amended by T.D. 7238, 37 FR 28725, Dec. 29, 1972; T.D. 7910, 48 FR 40372, Sept. 7, 1983; T.D. 8395, 57 FR 4255, Feb. 4, 1992]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 6334, 23 FR 8904, Nov. 15, 1958, as amended by T.D. 7238, 37 FR 28725, Dec. 29, 1972; T.D. 7910, 48 FR 40372, Sept. 7, 1983; T.D. 8395, 57 FR 4255, Feb. 4, 1992]

§25.2502-2. Donor primarily liable for tax.

26 C.F.R. § 25.2502-2

Section 2502(d) provides that the donor shall pay the tax. If the donor dies before the tax is paid the amount of the tax is a debt due the United States from the decedent's estate and his executor or administrator is responsible for its payment out of the estate. (See § 25.6151-1 for the time and place for paying the tax.) If there is no duly qualified executor or administrator, the heirs, legatees, devisees, and distributees are liable for and required to pay the tax to the extent of the value of their inheritances, bequests, devises, or distributive shares of the donor's estate. If a husband and wife effectively signify consent, under section 2513, to have gifts made to a third party during any “calendar period” (as defined in § 25.2502-1(c)(1)) considered as made one-half by each, the liability with respect to the gift tax of each spouse for that calendar period is joint and several (see § 25.2513-4). As to the personal liability of the donee, see paragraph (b) of § 301.6324-1 of this chapter (Regulations on Procedure and Administration). As to the personal liability of the executor or administrator, see section 3467 of the Revised Statutes (31 U.S.C. 192), which reads as follows:

Notes, amendments, and revision history

Amendments

[T.D. 7238, 37 FR 28726, Dec. 29, 1972, as amended by T.D. 7910, 48 FR 40373, Sept. 7, 1983]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 7238, 37 FR 28726, Dec. 29, 1972, as amended by T.D. 7910, 48 FR 40373, Sept. 7, 1983]

§25.2503-1. General definitions of “taxable gifts” and of “total amount of gifts.”

26 C.F.R. § 25.2503-1

The term taxable gifts means the “total amount of gifts” made by the donor during the “calendar period” (as defined in § 25.2502-1(c)(1)) less the deductions provided for in sections 2521 (as in effect before its repeal by the Tax Reform Act of 1976), 2522, and 2523 (specific exemption, charitable, etc., gifts and the marital deduction, respectively). The term “total amount of gifts” means the sum of the values of the gifts made during the calendar period less the amounts excludable under section 2503(b). See § 25.2503-2. The entire value of any gift of a future interest in property must be included in the total amount of gifts for the calendar period in which the gift is made. See § 25.2503-3.

Notes, amendments, and revision history

Amendments

[T.D. 7910, 48 FR 40373, Sept. 7, 1983]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 7910, 48 FR 40373, Sept. 7, 1983]

§25.2503-2. Exclusions from gifts.

26 C.F.R. § 25.2503-2

(a)

Except as provided in paragraph (f) of this section (involving gifts to a noncitizen spouse), the first $10,000 of gifts made to any one donee during the calendar year 1982 or any calendar year thereafter, except gifts of future interests in property as defined in §§ 25.2503-3 and 25.2503-4, is excluded in determining the total amount of gifts for the calendar year. In the case of a gift in trust the beneficiary of the trust is the donee.

(b)

Gifts made after December 31, 1970 and before January 1, 1982. In computing taxable gifts for the calendar quarter, in the case of gifts (other than gifts of future interests in property) made to any person by the donor during any calendar quarter of the calendar year 1971 or any subsequent calendar year, $3,000 of such gifts to such person less the aggregate of the amounts of such gifts to such person during all preceding calendar quarters of any such calendar year shall not be included in the total amount of gifts made during such quarter. Thus, the first $3,000 of gifts made to any one donee during the calendar year 1971 or any calendar year thereafter, except gifts of future interests in property as defined in §§ 25.2503-3 and 25.2503-4, is excluded in determining the total amount of gifts for a calendar quarter. In the case of a gift in trust the beneficiary of the trust is the donee. The application of this paragraph may be illustrated by the following examples:

(c)

Gifts made before January 1, 1971. The first $3,000 of gifts made to any one donee during the calendar year 1955, or 1970, or any calendar year intervening between calendar year 1955 and calendar year 1970, except gifts of future interests in property as defined in §§ 25.2503-3 and 25.2503-4, is excluded in determining the total amount of gifts for the calendar year. In the case of a gift in trust the beneficiary of the trust is the donee.

(d)

Transitional rule. The increased annual gift tax exclusion as defined in section 2503(b) shall not apply to any gift subject to a power of appointment granted under an instrument executed before September 12, 1981, and not amended on or after that date, provided that: (1) The power is exercisable after December 31, 1981, (2) the power is expressly defined in terms of, or by reference to, the amount of the gift tax exclusion under section 2503(b) (or the corresponding provision of prior law), and (3) there is not enacted a State law applicable to such instrument which construes the power of appointment as referring to the increased annual gift tax exclusion provided by the Economic Recovery Tax Act of 1981.

(e)

Examples. The provisions of paragraph (d) of this section may be illustrated by the following examples:

(f)

Special rule in the case of gifts made on or after July 14, 1988, to a spouse who is not a United States citizen—

(1)

In general. Subject to the special rules set forth at § 20.2056A-1(c) of this chapter, in the case of gifts made on or after July 14, 1988, if the donee of the gift is the donor's spouse and the donee spouse is not a citizen of the United States at the time of the gift, the first $100,000 of gifts made during the calendar year to the donee spouse (except gifts of future interests) is excluded in determining the total amount of gifts for the calendar year. The rule of this paragraph (f) applies regardless of whether the donor is a citizen or resident of the United States for purposes of chapter 12 of the Internal Revenue Code.

(2)

Gifts made after June 29, 1989. In the case of gifts made after June 29, 1989, the $100,000 exclusion provided in paragraph (f)(1) of this section applies only if the gift in excess of the otherwise applicable annual exclusion is in a form that qualifies for the gift tax marital deduction under section 2523(a) but for the provisions of section 2523(i)(1) (disallowing the marital deduction if the donee spouse is not a United States citizen.) See § 25.2523(i)-1(d), Example 4.

(3)

Effective date. This paragraph (f) is effective with respect to gifts made after August 22, 1995.

Notes, amendments, and revision history

Amendments

[T.D. 7238, 37 FR 28727, Dec. 29, 1972, as amended by T.D. 7910, 48 FR 40373, Sept. 7, 1983; T.D. 7978, 49 FR 38541, Oct. 1, 1984; T.D. 8612, 60 FR 43552, Aug. 22, 1995]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 7238, 37 FR 28727, Dec. 29, 1972, as amended by T.D. 7910, 48 FR 40373, Sept. 7, 1983; T.D. 7978, 49 FR 38541, Oct. 1, 1984; T.D. 8612, 60 FR 43552, Aug. 22, 1995]

§25.2503-3. Future interests in property.

26 C.F.R. § 25.2503-3

(a)

No part of the value of a gift of a future interest may be excluded in determining the total amount of gifts made during the “calendar period” (as defined in § 25.2502-1(c)(1)). “Future interest” is a legal term, and includes reversions, remainders, and other interests or estates, whether vested or contingent, and whether or not supported by a particular interest or estate, which are limited to commence in use, possession, or enjoyment at some future date or time. The term has no reference to such contractual rights as exist in a bond, note (though bearing no interest until maturity), or in a policy of life insurance, the obligations of which are to be discharged by payments in the future. But a future interest or interests in such contractual obligations may be created by the limitations contained in a trust or other instrument of transfer used in effecting a gift. A contribution to an ABLE account established under section 529A is not a future interest.

(b)

An unrestricted right to the immediate use, possession, or enjoyment of property or the income from property (such as a life estate or term certain) is a present interest in property. An exclusion is allowable with respect to a gift of such an interest (but not in excess of the value of the interest). If a donee has received a present interest in property, the possibility that such interest may be diminished by the transfer of a greater interest in the same property to the donee through the exercise of a power is disregarded in computing the value of the present interest, to the extent that no part of such interest will at any time pass to any other person (see example (4) of paragraph (c) of this section). For an exception to the rule disallowing an exclusion for gifts of future interests in the case of certain gifts to minors, see § 25.2503-4.

(c)

The operation of this section may be illustrated by the following examples:

Notes, amendments, and revision history

Amendments

[T.D. 6334, 23 FR 8904, Nov. 15, 1958, as amended by T.D. 7238, 37 FR 28727, Dec. 29, 1972; T.D. 7910, 48 FR 40373, Sept. 7, 1983; T.D. 9923, 85 FR 74047, Nov. 19, 2020]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 6334, 23 FR 8904, Nov. 15, 1958, as amended by T.D. 7238, 37 FR 28727, Dec. 29, 1972; T.D. 7910, 48 FR 40373, Sept. 7, 1983; T.D. 9923, 85 FR 74047, Nov. 19, 2020]

§25.2503-4. Transfer for the benefit of a minor.

26 C.F.R. § 25.2503-4

(a)

Section 2503(c) provides that no part of a transfer for the benefit of a donee who has not attained the age of 21 years on the date of the gift will be considered a gift of a future interest in property if the terms of the transfer satisfy all of the following conditions:

(1)

Both the property itself and its income may be expended by or for the benefit of the donee before he attains the age of 21 years;

(2)

Any portion of the property and its income not disposed of under subparagraph (1) of this paragraph will pass to the donee when he attains the age of 21 years; and

(3)

Any portion of the property and its income not disposed of under subparagraph (1) of this paragraph will be payable either to the estate of the donee or as he may appoint under a general power of appointment as defined in section 2514(c) if he dies before attaining the age of 21 years.

(b)

Either a power of appointment exercisable by the donee by will or a power of appointment exercisable by the donee during his lifetime will satisfy the conditions set forth in paragraph (a)(3) of this section. However, if the transfer is to qualify for the exclusion under this section, there must be no restrictions of substance (as distinguished from formal restrictions of the type described in paragraph (g)(4) of § 25.2523(e)-1 by the terms of the instrument of transfer on the exercise of the power by the donee. However, if the minor is given a power of appointment exercisable during lifetime or is given a power of appointment exercisable by will, the fact that under the local law a minor is under a disability to exercise an intervivos power or to execute a will does not cause the transfer to fail to satisfy the conditions of section 2503(c). Further, a transfer does not fail to satisfy the conditions of section 2503(c) by reason of the mere fact that—

(1)

There is left to the discretion of a trustee the determination of the amounts, if any, of the income or property to be expended for the benefit of the minor and the purpose for which the expenditure is to be made, provided there are no substantial restrictions under the terms of the trust instrument on the exercise of such discretion;

(2)

The donee, upon reaching age 21, has the right to extend the term of the trust; or

(3)

The governing instrument contains a disposition of the property or income not expended during the donee's minority to persons other than the donee's estate in the event of the default of appointment by the donee.

(c)

A gift to a minor which does not satisfy the requirements of section 2503(c) may be either a present or a future interest under the general rules of § 25.2503-3. Thus, for example, a transfer of property in trust with income required to be paid annually to a minor beneficiary and corpus to be distributed to him upon his attaining the age of 25 is a gift of a present interest with respect to the right to income but is a gift of a future interest with respect to the right to corpus.

Notes, amendments, and revision history

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

§25.2503-6. Exclusion for certain qualified transfer for tuition or medical expenses.

26 C.F.R. § 25.2503-6

(a)

In general. Section 2503(e) provides that any qualified transfer after December 31, 1981, shall not be treated as a transfer of property by gift for purposes of Chapter 12 of Subtitle B of the Code. Thus, a qualified transfer on behalf of any individual is excluded in determining the total amount of gifts in calendar year 1982 and subsequent years. This exclusion is available in addition to the $10,000 annual gift tax exclusion. Furthermore, an exclusion for a qualified transfer is permitted without regard to the relationship between the donor and the donee. A contribution to an ABLE account established under section 529A is not a qualified transfer.

(b)

Qualified transfers—

(1)

Definition. For purposes of this paragraph, the term “qualified transfer” means any amount paid on behalf of an individual—

(i)

As tuition to a qualifying educational organization for the education or training of that individual, or

(ii)

To any person who provides medical care with respect to that individual as payment for the qualifying medical expenses arising from such medical care.

(2)

Tuition expenses. For purposes of paragraph (b)(1)(i) of this section, a qualifying educational organization is one which normally maintains a regular faculty and curriculum and normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. See section 170(b)(1)(A)(ii) and the regulations thereunder. The unlimited exclusion is permitted for tuition expenses of full-time or part-time students paid directly to the qualifying educational organization providing the education. No unlimited exclusion is permitted for amounts paid for books, supplies, dormitory fees, board, or other similar expenses which do not constitute direct tuition costs.

(3)

Medical expenses. For purposes of paragraph (b)(1)(ii) of this section, qualifying medical expenses are limited to those expenses defined in section 213(d) (section 213(e) prior to January 1, 1984) and include expenses incurred for the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body or for transportation primarily for and essential to medical care. In addition, the unlimited exclusion from the gift tax includes amounts paid for medical insurance on behalf of any individual. The unlimited exclusion from the gift tax does not apply to amounts paid for medical care that are reimbursed by the donee's insurance. Thus, if payment for a medical expense is reimbursed by the donee's insurance company, the donor's payment for that expense, to the extent of the reimbursed amount, is not eligible for the unlimited exclusion from the gift tax and the gift is treated as having been made on the date the reimbursement is received by the donee.

(c)

Examples. The provisions of paragraph (b) of this section may be illustrated by the following examples.

Notes, amendments, and revision history

Amendments

[T.D. 7978, 49 FR 38541, Oct. 1, 1984; 49 FR 39843, Oct. 11, 1984, as amended by T.D. 9923, 85 FR 74047, Nov. 19, 2020]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 7978, 49 FR 38541, Oct. 1, 1984; 49 FR 39843, Oct. 11, 1984, as amended by T.D. 9923, 85 FR 74047, Nov. 19, 2020]

§25.2504-1. Taxable gifts for preceding calendar periods.

26 C.F.R. § 25.2504-1

(a)

In order to determine the correct gift tax liability for any calendar period it is necessary to ascertain the correct amount, if any, of the aggregate sum of the taxable gifts for each of the “preceding calendar periods” (as defined in § 25.2502-1(c)(2)). See paragraph (a) of § 25.2502-1. The term “aggregate sum of the taxable gifts for each of the preceding calendar periods” means the correct aggregate of such gifts, not necessarily that returned for those calendar periods and in respect of which tax was paid. All transfers that constituted gifts in prior calendar periods under the laws, including the provisions of law relating to exclusions from gifts, in effect at the time the transfers were made are included in determining the amount of taxable gifts for preceding calendar periods. The deductions other than for the specific exemption (see paragraph (b) of this section) allowed by the laws in effect at the time the transfers were made also are taken into account in determining the aggregate sum of the taxable gifts for preceding calendar periods. (The allowable exclusion from a gift is $5,000 for years before 1939, $4,000 for the calendar years 1939 through 1942, $3,000 for the calendar years 1943 through 1981, and $10,000 thereafter.)

(b)

In determining the aggregate sum of the taxable gifts for the “preceding calendar periods” (as defined in § 25.2502-1(c)(2)), the total of the amounts allowed as deductions for the specific exemption, under section 2521 (as in effect prior to its repeal by the Tax Reform Act of 1976) and the corresponding provisions of prior laws, shall not exceed $30,000. Thus, if the only prior gifts by a donor were made in 1940 and 1941 (at which time the specific exemption allowable was $40,000), and if in the donor's returns for those years the donor claimed deductions totaling $40,000 for the specific exemption and reported taxable gifts totaling $110,000, then in determining the aggregate sum of the taxable gifts for the preceding calendar periods, the deductions for the specific exemption cannot exceed $30,000, and the donor's taxable gifts for such periods will be $120,000 (instead of the $110,000 reported on the donor's returns). (The allowable deduction for the specific exemption was $50,000 for calendar years before 1936, $40,000 for calendar years 1936 through 1942, and $30,000 for 1943 through 1976.)

(c)

If the donor and the donor's spouse consented to have gifts made to third parties considered as made one-half by each spouse, pursuant to the provisions of section 2513 or section 1000(f) of the Internal Revenue Code of 1939 (which corresponds to section 2513), these provisions shall be taken into account in determining the aggregate sum of the taxable gifts for the preceding calendar periods (under paragraph (a) of this section).

(d)

If interpretations of the gift tax law in preceding calendar periods resulted in the erroneous inclusion of property for gift tax purposes that should have been excluded, or the erroneous exclusion of property that should have been included, adjustments must be made in order to arrive at the correct aggregate of taxable gifts for the preceding calendar periods (under paragraph (a) of this section). However, see section 1000 (e) and (g) of the 1939 Code relating to certain discretionary trusts and reciprocal trusts. However, see § 25.2504-2(b) regarding certain gifts made after August 5, 1997.

Notes, amendments, and revision history

Amendments

[T.D. 7238, 37 FR 28727, Dec. 29, 1972, as amended by T.D. 7910, 48 FR 40373, Sept. 7, 1983; T.D. 8845, 64 FR 67770, Dec. 3, 1999]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 7238, 37 FR 28727, Dec. 29, 1972, as amended by T.D. 7910, 48 FR 40373, Sept. 7, 1983; T.D. 8845, 64 FR 67770, Dec. 3, 1999]

§25.2504-2. Determination of gifts for preceding calendar periods.

26 C.F.R. § 25.2504-2

(a)

Gifts made before August 6, 1997. If the time has expired within which a tax may be assessed under chapter 12 of the Internal Revenue Code (or under corresponding provisions of prior laws) on the transfer of property by gift made during a preceding calendar period, as defined in § 25.2502-1(c)(2), the gift was made prior to August 6, 1997, and a tax has been assessed or paid for such prior calendar period, the value of the gift, for purposes of arriving at the correct amount of the taxable gifts for the preceding calendar periods (as defined under § 25.2504-1(a)), is the value used in computing the tax for the last preceding calendar period for which a tax was assessed or paid under chapter 12 of the Internal Revenue Code or the corresponding provisions of prior laws. However, this rule does not apply where no tax was paid or assessed for the prior calendar period. Furthermore, this rule does not apply to adjustments involving issues other than valuation. See § 25.2504-1(d).

(b)

Gifts made or section 2701(d) taxable events occurring after August 5, 1997. If the time has expired under section 6501 within which a gift tax may be assessed under chapter 12 of the Internal Revenue Code (or under corresponding provisions of prior laws) on the transfer of property by gift made during a preceding calendar period, as defined in § 25.2502-1(c)(2), or with respect to an increase in taxable gifts required under section 2701(d) and § 25.2701-4, and the gift was made, or the section 2701(d) taxable event occurred, after August 5, 1997, the amount of the taxable gift or the amount of the increase in taxable gifts, for purposes of determining the correct amount of taxable gifts for the preceding calendar periods (as defined in § 25.2504-1(a)), is the amount that is finally determined for gift tax purposes (within the meaning of § 20.2001-1(c) of this chapter) and such amount may not be thereafter adjusted. The rule of this paragraph (b) applies to adjustments involving all issues relating to the gift including valuation issues and legal issues involving the interpretation of the gift tax law. For purposes of determining if the time has expired within which a gift tax may be assessed, see § 301.6501(c)-1(e) and (f) of this chapter.

(c)

Examples. The following examples illustrate the rules of paragraphs (a) and (b) of this section:

(d)

Effective dates. Paragraph (a) of this section applies to transfers of property by gift made prior to August 6, 1997. Paragraphs (b) and (c) of this section apply to transfers of property by gift made after August 5, 1997, if the gift tax return for the calendar period in which the transfer is reported is filed after December 3, 1999.

Notes, amendments, and revision history

Amendments

[T.D. 8845, 64 FR 67770, Dec. 3, 1999]

Authority

Authority: 26 U.S.C. 7805. Section 25.2505-2 also issued under 26 U.S.C. 2010(c)(6). Section 25.2512-5 also issued under 26 U.S.C. 7520(c)(2). Section 25.2512-5A also issued under 26 U.S.C. 7520(c)(2). Section 25.2518-2 is also issued under 26 U.S.C. 2518(b). Section 25.6060-1 also issued under 26 U.S.C. 6060(a). Section 25.6081-1 also issued under the authority of 26 U.S.C. 6081(a). Section 25.6109-2 also issued under 26 U.S.C. 6109(a). Section 25.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 25.6695-1 also issued under 26 U.S.C. 6695(b). Section 25.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 25.7520-4 also issued under 26 U.S.C. 7520(c)(2).

Source

Source: T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted.

Amendments

[T.D. 8845, 64 FR 67770, Dec. 3, 1999]