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Notes

26 C.F.R. §§ 25.2702-1–25.2702-6

6 sections in range

§25.2702-1. Special valuation rules in the case of transfers of interests in trust.

26 C.F.R. § 25.2702-1

(a)
Scope of section 2702. Section 2702 provides special rules to determine the amount of the gift when an individual makes a transfer in trust to (or for the benefit of) a member of the individual's family and the individual or an applicable family member retains an interest in the trust. Section 25.2702-4 treats certain transfers of property as transfers in trust. Certain transfers, including transfers to a personal residence trust, are not subject to section 2702. See paragraph (c) of this section. Member of the family is defined in § 25.2702-2(a)(1). Applicable family member is defined in § 25.2701-1(d)(2).
(b)
Effect of section 2702. If section 2702 applies to a transfer, the value of any interest in the trust retained by the transferor or any applicable family member is determined under § 25.2702-2(b). The amount of the gift, if any, is then determined by subtracting the value of the interests retained by the transferor or any applicable family member from the value of the transferred property. If the retained interest is not a qualified interest (as defined in § 25.2702-3), the retained interest is generally valued at zero, and the amount of the gift is the entire value of the property.
(c)
Exceptions to section 2702. Section 2702 does not apply to the following transfers.
(1)
Incomplete gift. A transfer no portion of which would be treated as a completed gift without regard to any consideration received by the transferor. If a transfer is wholly incomplete as to an undivided fractional share of the property transferred (without regard to any consideration received by the transferor), for purposes of this paragraph the transfer is treated as incomplete as to that share.
(2)
Personal residence trust. A transfer in trust that meets the requirements of § 25.2702-5.
(3)
Charitable remainder trust.
(i)
For transfers made on or after May 19, 1997, a transfer to a pooled income fund described in section 642(c)(5); a transfer to a charitable remainder annuity trust described in section 664(d)(1); a transfer to a charitable remainder unitrust described in section 664(d)(2) if under the terms of the governing instrument the unitrust amount can be computed only under section 664(d)(2)(A); and a transfer to a charitable remainder unitrust if under the terms of the governing instrument the unitrust amount can be computed under section 664(d)(2) and (3) and either there are only two consecutive noncharitable beneficial interests and the transferor holds the second of the two interests, or the only permissible recipients of the unitrust amount are the transferor, the transferor's U.S. citizen spouse, or both the transferor and the transferor's U.S. citizen spouse.
(ii)
For transfers made before May 19, 1997, a transfer in trust if the remainder interest in the trust qualifies for a deduction under section 2522.
(4)
Pooled income fund. A transfer of property to a pooled income fund (as defined in section 642(c)(5)).
(5)
Charitable lead trust. A transfer in trust if the only interest in the trust, other than the remainder interest or a qualified annuity or unitrust interest, is an interest that qualifies for deduction under section 2522.
(6)
Certain assignments of remainder interests. The assignment of a remainder interest if the only retained interest of the transferor or an applicable family member is as the permissible recipient of distributions of income in the sole discretion of an independent trustee (as defined in section 674(c)).
(7)
Certain property settlements. A transfer in trust if the transfer of an interest to a spouse is deemed to be for full and adequate consideration by reason of section 2516 (relating to certain property settlements) and the remaining interests in the trust are retained by the other spouse.
(8)
Transfer or assignment to a Qualified Domestic Trust. A transfer or assignment (as described in section 2056(d)(2)(B)) by a noncitizen surviving spouse of property to a Qualified Domestic Trust under the circumstances described in § 20.2056A-4(b) of this chapter, where the surviving spouse retains an interest in the transferred property that is not a qualified interest and the transfer is not described in sections 2702(a)(3)(A)(ii) or 2702(c)(4).
Notes, amendments, and revision history

Amendments

[T.D. 8395, 57 FR 4265, Feb. 4, 1992, as amended by T.D. 8612, 60 FR 43554, Aug. 22, 1995; T.D. 8791, 63 FR 68194, Dec. 10, 1998]

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. 8395, 57 FR 4265, Feb. 4, 1992, as amended by T.D. 8612, 60 FR 43554, Aug. 22, 1995; T.D. 8791, 63 FR 68194, Dec. 10, 1998]

§25.2702-2. Definitions and valuation rules.

26 C.F.R. § 25.2702-2

(a)
Definitions. The following definitions apply for purposes of section 2702 and the regulations thereunder.
(1)
Member of the family. With respect to any individual, member of the family means the individual's spouse, any ancestor or lineal descendant of the individual or the individual's spouse, any brother or sister of the individual, and any spouse of the foregoing.
(2)
Transfer in trust. A transfer in trust includes a transfer to a new or existing trust and an assignment of an interest in an existing trust. Transfer in trust does not include—
(i)
The exercise, release or lapse of a power of appointment over trust property that is not a transfer under chapter 12; or
(ii)
The execution of a qualified disclaimer (as defined in section 2518).
(3)
Retained. Retained means held by the same individual both before and after the transfer in trust. In the case of the creation of a term interest, any interest in the property held by the transferor immediately after the transfer is treated as held both before and after the transfer.
(4)
Interest. An interest in trust includes a power with respect to a trust if the existence of the power would cause any portion of a transfer to be treated as an incomplete gift under chapter 12.
(5)
Holder. The holder is the person to whom the annuity or unitrust interest is payable during the fixed term of that interest. References to holder shall also include the estate of that person.
(6)
Qualified interest. Qualified interest means a qualified annuity interest, a qualified unitrust interest, or a qualified remainder interest. If a transferor retains a power to revoke a qualified annuity interest or qualified unitrust interest of the transferor's spouse, then the revocable qualified annuity or unitrust interest of the transferor's spouse is treated as a retained qualified interest of the transferor. In order for the transferor to be treated as having retained a qualified interest under the preceding sentence, the interest of the transferor's spouse (the successor holder) must be an interest that meets the requirements of a qualified annuity interest in accordance with § 25.2702-3(b) and (d), or a qualified unitrust interest in accordance with § 25.2702-3(c) and (d), but for the transferor's retained power to revoke the interest.
(7)
Qualified annuity interest. Qualified annuity interest means an interest that meets all the requirements of § 25.2702-3(b) and (d).
(8)
Qualified unitrust interest. Qualified unitrust interest means an interest that meets all the requirements of § 25.2702-3(c) and (d).
(9)
Qualified remainder interest. Qualified remainder interest means an interest that meets all the requirements of § 25.2702-3(f).
(10)
Governing instrument. Governing instrument means the instrument or instruments creating and governing the operation of the trust arrangement.
(b)
Valuation of retained interests—
(1)
In general. Except as provided in paragraphs (b)(2) and (c) of this section, the value of any interest retained by the transferor or an applicable family member is zero.
(2)
Qualified interest. The value of a qualified annuity interest and a qualified remainder interest following a qualified annuity interest are determined under section 7520. The value of a qualified unitrust interest and a qualified remainder interest following a qualified unitrust interest are determined as if they were interests described in section 664.
(c)
Valuation of a term interest in certain tangible property—
(1)
In general. If section 2702 applies to a transfer in trust of tangible property described in paragraph (c)(2) of this section (“tangible property”), the value of a retained term interest (other than a qualified interest) is not determined under section 7520 but is the amount the transferor establishes as the amount a willing buyer would pay a willing seller for the interest, each having reasonable knowledge of the relevant facts and neither being under any compulsion to buy or sell. If the transferor cannot reasonably establish the value of the term interest pursuant to this paragraph (c)(1), the interest is valued at zero.
(2)
Tangible property subject to rule—
(i)
In general. Except as provided in paragraph (c)(2)(ii) of this section, paragraph (c)(1) of this section applies only to tangible property—
(A)
For which no deduction for depreciation or depletion would be allowable if the property were used in a trade or business or held for the production of income; and
(B)
As to which the failure to exercise any rights under the term interest would not increase the value of the property passing at the end of the term interest.
(ii)
Exception for de minimis amounts of depreciable property. In determining whether property meets the requirements of this paragraph (c)(2) at the time of the transfer in trust, improvements that would otherwise cause the property not to qualify are ignored if the fair market value of the improvements, in the aggregate, do not exceed 5 percent of the fair market value of the entire property.
(3)
Evidence of value of property. The best evidence of the value of any term interest to which this paragraph (c) applies is actual sales or rentals that are comparable both as to the nature and character of the property and the duration of the term interest. Little weight is accorded appraisals in the absence of such evidence. Amounts determined under section 7520 are not evidence of what a willing buyer would pay a willing seller for the interest.
(4)
Conversion of property—
(i)
In general. Except as provided in paragraph (c)(4)(iii) of this section, if a term interest in property is valued under paragraph (c)(1) of this section, and during the term the property is converted into property a term interest in which would not qualify for valuation under paragraph (c)(1) of this section, the conversion is treated as a transfer for no consideration for purposes of chapter 12 of the value of the unexpired portion of the term interest.
(ii)
Value of unexpired portion of term interest. For purposes of paragraph (c)(4)(i) of this section, the value of the unexpired portion of a term interest is the amount that bears the same relation to the value of the term interest as of the date of conversion (determined under section 7520 using the rate in effect under section 7520 on the date of the original transfer and the fair market value of the property as of the date of the original transfer) as the value of the term interest as of the date of the original transfer (determined under paragraph (c)(1) of this section) bears to the value of the term interest as of the date of the original transfer (determined under section 7520).
(iii)
Conversion to qualified annuity interest. The conversion of tangible property previously valued under paragraph (c)(1) of this section into property a term interest in which would not qualify for valuation under paragraph (c)(1) of this section is not a transfer of the value of the unexpired portion of the term interest if the interest thereafter meets the requirements of a qualified annuity interest. The rules of § 25.2702-5(d)(8) (including governing instrument requirements) apply for purposes of determining the amount of the annuity payment required to be made and the determination of whether the interest meets the requirements of a qualified annuity interest.
(5)
Additions or improvements to property—
(i)
Additions or improvements substantially affecting nature of property. If an addition or improvement is made to property a term interest in which was valued under paragraph (c)(1) of this section, and the addition or improvement affects the nature of the property to such an extent that the property would not be treated as property meeting the requirements of paragraph (c)(2) of this section if the property had included the addition or improvement at the time it was transferred, the entire property is deemed, for purposes of paragraph (c)(4) of this section, to convert (effective as of the date the addition or improvement is commenced) into property a term interest in which would not qualify for valuation under paragraph (c)(1) of this section.
(ii)
Other additions or improvements. If an addition or improvement is made to property, a term interest in which was valued under paragraph (c)(1) of this section, and the addition or improvement does not affect the nature of the property to such an extent that the property would not be treated as property meeting the requirements of paragraph (c)(2) of this section if the property had included the addition or improvement at the time it was transferred, the addition or improvement is treated as an additional transfer (effective as of the date the addition or improvement is commenced) subject to § 25.2702-2(b)(1).
(d)
Examples.
(1)
The following examples illustrate the rules of § 25.2702-1 and § 25.2702-2. Each example assumes that all applicable requirements of those sections not specifically described in the example are met.
(2)
The following facts apply for Examples 6 through 8 (examples illustrating § 25.2702-2(c)—tangible property exception):
Notes, amendments, and revision history

Amendments

[T.D. 8395, 57 FR 4265, Feb. 4, 1992, as amended by T.D. 9181, 70 FR 9223, Feb. 25, 2005]

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. 8395, 57 FR 4265, Feb. 4, 1992, as amended by T.D. 9181, 70 FR 9223, Feb. 25, 2005]

§25.2702-3. Qualified interests.

26 C.F.R. § 25.2702-3

(a)
In general. This section provides rules for determining if an interest is a qualified annuity interest, a qualified unitrust interest, or a qualified remainder interest.
(b)
Special rules for qualified annuity interests. An interest is a qualified annuity interest only if it meets the requirements of this paragraph and paragraph (d) of this section.
(1)
Payment of annuity amount—
(i)
In general. A qualified annuity interest is an irrevocable right to receive a fixed amount. The annuity amount must be payable to (or for the benefit of) the holder of the annuity interest at least annually. A right of withdrawal, whether or not cumulative, is not a qualified annuity interest. Issuance of a note, other debt instrument, option, or other similar financial arrangement, directly or indirectly, in satisfaction of the annuity amount does not constitute payment of the annuity amount.
(ii)
Fixed amount. A fixed amount means—
(A)
A stated dollar amount payable periodically, but not less frequently than annually, but only to the extent the amount does not exceed 120 percent of the stated dollar amount payable in the preceding year; or
(B)
A fixed fraction or percentage of the initial fair market value of the property transferred to the trust, as finally determined for federal tax purposes, payable periodically but not less frequently than annually, but only to the extent the fraction or percentage does not exceed 120 percent of the fixed fraction or percentage payable in the preceding year.
(iii)
Income in excess of the annuity amount. An annuity interest does not fail to be a qualified annuity interest merely because the trust permits income in excess of the amount required to pay the annuity amount to be paid to or for the benefit of the holder of the qualified annuity interest. Nevertheless, the right to receive the excess income is not a qualified interest and is not taken into account in valuing the qualified annuity interest.
(2)
Incorrect valuations of trust property. If the annuity is stated in terms of a fraction or percentage of the initial fair market value of the trust property, the governing instrument must contain provisions meeting the requirements of § 1.664-2(a)(1)(iii) of this chapter (relating to adjustments for any incorrect determination of the fair market value of the property in the trust).
(3)
Period for payment of annuity amount. The annuity amount may be payable based on either the anniversary date of the creation of the trust or the taxable year of the trust. In either situation, the annuity amount may be paid annually or more frequently, such as semi-annually, quarterly, or monthly. If the payment is made based on the anniversary date, proration of the annuity amount is required only if the last period during which the annuity is payable to the grantor is a period of less than 12 months. If the payment is made based on the taxable year, proration of the annuity amount is required for each short taxable year of the trust during the grantor's term. The prorated amount is the annual annuity amount multiplied by a fraction, the numerator of which is the number of days in the short period and the denominator of which is 365 (366 if February 29 is a day included in the numerator).
(4)
Payment of the annuity amount in certain circumstances. An annuity amount payable based on the anniversary date of the creation of the trust must be paid no later than 105 days after the anniversary date. An annuity amount payable based on the taxable year of the trust may be paid after the close of the taxable year, provided the payment is made no later than the date by which the trustee is required to file the Federal income tax return of the trust for the taxable year (without regard to extensions). If the trustee reports for the taxable year pursuant to § 1.671-4(b) of this chapter, the annuity payment must be made no later than the date by which the trustee would have been required to file the Federal income tax return of the trust for the taxable year (without regard to extensions) had the trustee reported pursuant to § 1.671-4(a) of this chapter.
(5)
Additional contributions prohibited. The governing instrument must prohibit additional contributions to the trust.
(c)
Special rules for qualified unitrust interests. An interest is a qualified unitrust interest only if it meets the requirements of this paragraph and paragraph (d) of this section.
(1)
Payment of unitrust amount—
(i)
In general. A qualified unitrust interest is an irrevocable right to receive payment periodically, but not less frequently than annually, of a fixed percentage of the net fair market value of the trust assets, determined annually. For rules relating to computation of the net fair market value of the trust assets see § 25.2522(c)-3(c)(2)(vii). The unitrust amount must be payable to (or for the benefit of) the holder of the unitrust interest at least annually. A right of withdrawal, whether or not cumulative, is not a qualified unitrust interest. Issuance of a note, other debt instrument, option, or other similar financial arrangement, directly or indirectly, in satisfaction of the unitrust amount does not constitute payment of the unitrust amount.
(ii)
Fixed percentage. A fixed percentage is a fraction or percentage of the net fair market value of the trust assets, determined annually, payable periodically but not less frequently than annually, but only to the extent the fraction or percentage does not exceed 120 percent of the fixed fraction or percentage payable in the preceding year.
(iii)
Income in excess of unitrust amount. A unitrust interest does not fail to be a qualified unitrust interest merely because the trust permits income in excess of the amount required to pay the unitrust amount to be paid to or for the benefit of the holder of the qualified unitrust interest. Nevertheless, the right to receive the excess income is not a qualified interest and is not taken into account in valuing the qualified unitrust interest.
(2)
Incorrect valuations of trust property. The governing instrument must contain provisions meeting the requirements of § 1.664-3(a)(1)(iii) of this chapter (relating to the incorrect determination of the fair market value of the property in the trust).
(3)
Period for payment of unitrust amount. The unitrust amount may be payable based on either the anniversary date of the creation of the trust or the taxable year of the trust. In either situation, the unitrust amount may be paid annually or more frequently, such as semi-annually, quarterly, or monthly. If the payment is made based on the anniversary date, proration of the unitrust amount is required only if the last period during which the annuity is payable to the grantor is a period of less than 12 months. If the payment is made based on the taxable year, proration of the unitrust amount is required for each short taxable year of the trust during the grantor's term. The prorated amount is the annual unitrust amount multiplied by a fraction, the numerator of which is the number of days in the short period and the denominator of which is 365 (366 if February 29 is a day included in the numerator).
(4)
Payment of the unitrust amount in certain circumstances. A unitrust amount payable based on the anniversary date of the creation of the trust must be paid no later than 105 days after the anniversary date. A unitrust amount payable based on the taxable year of the trust may be paid after the close of the taxable year, provided the payment is made no later than the date by which the trustee is required to file the Federal income tax return of the trust for the taxable year (without regard to extensions). If the trustee reports for the taxable year pursuant to § 1.671-4(b) of this chapter, the unitrust payment must be made no later than the date by which the trustee would have been required to file the Federal income tax return of the trust for the taxable year (without regard to extensions) had the trustee reported pursuant to § 1.671-4(a) of this chapter.
(d)
Requirements applicable to qualified annuity interests and qualified unitrust interests—
(1)
In general. To be a qualified annuity or unitrust interest, an interest must be a qualified annuity interest in every respect or a qualified unitrust interest in every respect. For example, if the interest consists of the right to receive each year a payment equal to the lesser of a fixed amount of the initial trust assets or a fixed percentage of the annual value of the trust assets, the interest is not a qualified interest. If, however, the interest consists of the right to receive each year a payment equal to the greater of a stated dollar amount or a fixed percentage of the initial trust assets or a fixed percentage of the annual value of the trust assets, the interest is a qualified interest that is valued at the greater of the two values. To be a qualified interest, the interest must meet the definition of and function exclusively as a qualified interest from the creation of the trust.
(2)
Contingencies. A holder's qualified interest must be payable in any event to or for the benefit of the holder for the fixed term of that interest. Thus, payment of the interest cannot be subject to any contingency other than either the survival of the holder until the commencement, or throughout the term, of that holder's interest, or, in the case of a revocable interest described in § 25.2702-2(a)(6), the transferor's right to revoke the qualified interest of that transferor's spouse.
(3)
Amounts payable to other persons. The governing instrument must prohibit distributions from the trust to or for the benefit of any person other than the holder of the qualified annuity or unitrust interest during the term of the qualified interest.
(4)
Term of the annuity or unitrust interest. The governing instrument must fix the term of the annuity or unitrust and the term of the interest must be fixed and ascertainable at the creation of the trust. The term must be for the life of the holder, for a specified term of years, or for the shorter (but not the longer) of those periods. Successive term interests for the benefit of the same individual are treated as the same term interest.
(5)
Commutation. The governing instrument must prohibit commutation (prepayment) of the interest of the holder.
(6)
Use of debt obligations to satisfy the annuity or unitrust payment obligation—
(i)
In general. In the case of a trust created on or after September 20, 1999, the trust instrument must prohibit the trustee from issuing a note, other debt instrument, option, or other similar financial arrangement in satisfaction of the annuity or unitrust payment obligation.
(ii)
Special rule in the case of a trust created prior to September 20, 1999. In the case of a trust created prior to September 20, 1999, the interest will be treated as a qualified interest under section 2702(b) if—
(A)
Notes, other debt instruments, options, or similar financial arrangements are not issued after September 20, 1999, to satisfy the annuity or unitrust payment obligation; and
(B)
Any notes or any other debt instruments that were issued to satisfy the annual payment obligation on or prior to September 20, 1999, are paid in full by December 31, 1999, and any option or similar financial arrangement issued to satisfy the annual payment obligation is terminated by December 31, 1999, such that the grantor receives cash or other trust assets in satisfaction of the payment obligation. For purposes of the preceding sentence, an option will be considered terminated only if the grantor receives cash or other trust assets equal in value to the greater of the required annuity or unitrust payment plus interest computed under section 7520 of the Internal Revenue Code, or the fair market value of the option.
(e)
Examples. The following examples illustrate the rules of paragraphs (b), (c), and (d) of this section. Each example assumes that all applicable requirements for a qualified interest are met unless otherwise specifically stated.
(f)
Qualified remainder interest—
(1)
Requirements. An interest is a qualified remainder interest only if it meets all of the following requirements:
(i)
It is a qualified remainder interest in every respect.
(ii)
It meets the definition of and functions exclusively as a qualified interest from the creation of the interest.
(iii)
It is non-contingent. For this purpose, an interest is non-contingent only if it is payable to the beneficiary or the beneficiary's estate in all events.
(iv)
All interests in the trust, other than non-contingent remainder interests, are qualified annuity interests or qualified unitrust interests. Thus, an interest is a qualified remainder interest only if the governing instrument does not permit payment of income in excess of the annuity or unitrust amount to the holder of the qualified annuity or unitrust interest.
(2)
Remainder interest. Remainder interest is the right to receive all or a fractional share of the trust property on termination of all or a fractional share of the trust. Remainder interest includes a reversion. A transferor's right to receive an amount that is a stated or pecuniary amount is not a remainder interest. Thus, the right to receive the original value of the trust corpus (or a fractional share) is not a remainder interest.
(3)
Examples. The following examples illustrate rules of this paragraph (f). Each example assumes that all applicable requirements of a qualified interest are met unless otherwise specifically stated.
Notes, amendments, and revision history

Amendments

[T.D. 8395, 57 FR 4267, Feb. 4, 1992, as amended by T.D. 8536, 59 FR 23157, May 5, 1994; T.D. 8633, 60 FR 66090, Dec. 21, 1995; T.D. 8899, 65 FR 53588, Sept. 5, 2000; 65 FR 70792, Nov. 28, 2000; T.D. 9181, 70 FR 9224, Feb. 25, 2005]

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. 8395, 57 FR 4267, Feb. 4, 1992, as amended by T.D. 8536, 59 FR 23157, May 5, 1994; T.D. 8633, 60 FR 66090, Dec. 21, 1995; T.D. 8899, 65 FR 53588, Sept. 5, 2000; 65 FR 70792, Nov. 28, 2000; T.D. 9181, 70 FR 9224, Feb. 25, 2005]

§25.2702-4. Certain property treated as held in trust.

26 C.F.R. § 25.2702-4

(a)
In general. For purposes of section 2702, a transfer of an interest in property with respect to which there are one or more term interests is treated as a transfer in trust. A term interest is one of a series of successive (as contrasted with concurrent) interests. Thus, a life interest in property or an interest in property for a term of years is a term interest. However, a term interest does not include a fee interest in property merely because it is held as a tenant in common, a tenant by the entireties, or a joint tenant with right of survivorship.
(b)
Leases. A leasehold interest in property is not a term interest to the extent the lease is for full and adequate consideration (without regard to section 2702). A lease will be considered for full and adequate consideration if, under all the facts and circumstances as of the time the lease is entered into or extended, a good faith effort is made to determine the fair rental value of the property and the terms of the lease conform to the value so determined.
(c)
Joint purchases. Solely for purposes of section 2702, if an individual acquires a term interest in property and, in the same transaction or series of transactions, one or more members of the individual's family acquire an interest in the same property, the individual acquiring the term interest is treated as acquiring the entire property so acquired, and transferring to each of those family members the interests acquired by that family member in exchange for any consideration paid by that family member. For purposes of this paragraph (c), the amount of the individual's gift will not exceed the amount of consideration furnished by that individual for all interests in the property.
(d)
Examples. The following examples illustrate rules of this section:
Notes, amendments, and revision history

Amendments

[T.D. 8395, 57 FR 4269, 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. 8395, 57 FR 4269, Feb. 4, 1992]

§25.2702-5. Personal residence trusts.

26 C.F.R. § 25.2702-5

(a)
(1)
In general. Section 2702 does not apply to a transfer in trust meeting the requirements of this section. A transfer in trust meets the requirements of this section only if the trust is a personal residence trust (as defined in paragraph (b) of this section). A trust meeting the requirements of a qualified personal residence trust (as defined in paragraph (c) of this section) is treated as a personal residence trust. A trust of which the term holder is the grantor that otherwise meets the requirements of a personal residence trust (or a qualified personal residence trust) is not a personal residence trust (or a qualified personal residence trust) if, at the time of transfer, the term holder of the trust already holds term interests in two trusts that are personal residence trusts (or qualified personal residence trusts) of which the term holder was the grantor. For this purpose, trusts holding fractional interests in the same residence are treated as one trust.
(2)
Modification of trust. A trust that does not comply with one or more of the regulatory requirements under paragraph (b) or (c) of this section will, nonetheless, be treated as satisfying these requirements if the trust is modified, by judicial reformation (or nonjudicial reformation if effective under state law), to comply with the requirements. In the case of a trust created after December 31, 1996, the reformation must be commenced within 90 days after the due date (including extensions) for the filing of the gift tax return reporting the transfer of the residence under section 6075 and must be completed within a reasonable time after commencement. If the reformation is not completed by the due date (including extensions) for filing the gift tax return, the grantor or grantor's spouse must attach a statement to the gift tax return stating that the reformation has been commenced or will be commenced within the 90-day period. In the case of a trust created before January 1, 1997, the reformation must be commenced within 90 days after December 23, 1997 and must be completed within a reasonable time after commencement.
(b)
Personal residence trust—
(1)
In general. A personal residence trust is a trust the governing instrument of which prohibits the trust from holding, for the original duration of the term interest, any asset other than one residence to be used or held for use as a personal residence of the term holder and qualified proceeds (as defined in paragraph (b)(3) of this section). A residence is held for use as a personal residence of the term holder so long as the residence is not occupied by any other person (other than the spouse or a dependent of the term holder) and is available at all times for use by the term holder as a personal residence. A trust does not meet the requirements of this section if, during the original duration of the term interest, the residence may be sold or otherwise transferred by the trust or may be used for a purpose other than as a personal residence of the term holder. In addition, the trust does not meet the requirements of this section unless the governing instrument prohibits the trust from selling or transferring the residence, directly or indirectly, to the grantor, the grantor's spouse, or an entity controlled by the grantor or the grantor's spouse, at any time after the original duration of the term interest during which the trust is a grantor trust. For purposes of the preceding sentence, a sale or transfer to another grantor trust of the grantor or the grantor's spouse is considered a sale or transfer to the grantor or the grantor's spouse; however, a distribution (for no consideration) upon or after the expiration of the original duration of the term interest to another grantor trust of the grantor or the grantor's spouse pursuant to the express terms of the trust will not be considered a sale or transfer to the grantor or the grantor's spouse if such other grantor trust prohibits the sale or transfer of the property to the grantor, the grantor's spouse, or an entity controlled by the grantor or the grantor's spouse. In the event the grantor dies prior to the expiration of the original duration of the term interest, this paragraph (b)(1) does not apply to the distribution (for no consideration) of the residence to any person (including the grantor's estate) pursuant to the express terms of the trust or pursuant to the exercise of a power retained by the grantor under the terms of the trust. Further, this paragraph (b)(1) does not apply to any outright distribution (for no consideration) of the residence to the grantor's spouse after the expiration of the original duration of the term interest pursuant to the express terms of the trust. For purposes of this paragraph (b)(1), a grantor trust is a trust treated as owned in whole or in part by the grantor or the grantor's spouse pursuant to sections 671 through 678, and control is defined in § 25.2701-2(b)(5)(ii) and (iii). Expenses of the trust whether or not attributable to trust principal may be paid directly by the term holder of the trust.
(2)
Personal residence—
(i)
In general. For purposes of this paragraph (b), a personal residence of a term holder is either—
(A)
The principal residence of the term holder (within the meaning of section 1034);
(B)
One other residence of the term holder (within the meaning of section 280A(d)(1) but without regard to section 280A(d)(2)); or
(C)
An undivided fractional interest in either.
(ii)
Additional property. A personal residence may include appurtenant structures used by the term holder for residential purposes and adjacent land not in excess of that which is reasonably appropriate for residential purposes (taking into account the residence's size and location). The fact that a residence is subject to a mortgage does not affect its status as a personal residence. The term personal residence does not include any personal property (e.g., household furnishings).
(iii)
Use of residence. A residence is a personal residence only if its primary use is as a residence of the term holder when occupied by the term holder. The principal residence of the term holder will not fail to meet the requirements of the preceding sentence merely because a portion of the residence is used in an activity meeting the requirements of section 280A(c) (1) or (4) (relating to deductibility of expenses related to certain uses), provided that such use is secondary to use of the residence as a residence. A residence is not used primarily as a residence if it is used to provide transient lodging and substantial services are provided in connection with the provision of lodging (e.g., a hotel or a bed and breakfast). A residence is not a personal residence if, during any period not occupied by the term holder, its primary use is other than as a residence.
(iv)
Interests of spouses in the same residence. If spouses hold interests in the same residence (including community property interests), the spouses may transfer their interests in the residence (or a fractional portion of their interests in the residence) to the same personal residence trust, provided that the governing instrument prohibits any person other than one of the spouses from holding a term interest in the trust concurrently with the other spouse.
(3)
Qualified proceeds. Qualified proceeds means the proceeds payable as a result of damage to, or destruction or involuntary conversion (within the meaning of section 1033) of, the residence held by a personal residence trust, provided that the governing instrument requires that the proceeds (including any income thereon) be reinvested in a personal residence within two years from the date on which the proceeds are received.
(c)
Qualified personal residence trust—
(1)
In general. A qualified personal residence trust is a trust meeting all the requirements of this paragraph (c). These requirements must be met by provisions in the governing instrument, and these governing instrument provisions must by their terms continue in effect during the existence of any term interest in the trust.
(2)
Personal residence—
(i)
In general. For purposes of this paragraph (c), a personal residence of a term holder is either—
(A)
The principal residence of the term holder (within the meaning of section 1034);
(B)
One other residence of the term holder (within the meaning of section 280A(d)(1) but without regard to section 280A(d)(2)); or
(C)
An undivided fractional interest in either.
(ii)
Additional property. A personal residence may include appurtenant structures used by the term holder for residential purposes and adjacent land not in excess of that which is reasonably appropriate for residential purposes (taking into account the residence's size and location). The fact that a residence is subject to a mortgage does not affect its status as a personal residence. The term personal residence does not include any personal property (e.g., household furnishings).
(iii)
Use of residence. A residence is a personal residence only if its primary use is as a residence of the term holder when occupied by the term holder. The principal residence of the term holder will not fail to meet the requirements of the preceding sentence merely because a portion of the residence is used in an activity meeting the requirements of section 280A(c) (1) or (4) (relating to deductibility of expenses related to certain uses), provided that such use is secondary to use of the residence as a residence. A residence is not used primarily as a residence if it is used to provide transient lodging and substantial services are provided in connection with the provision of lodging (e.g., a hotel or a bed and breakfast). A residence is not a personal residence if, during any period not occupied by the term holder, its primary use is other than as a residence. A residence is not a personal residence if, during any period not occupied by the term holder, its primary use is other than as a residence.
(iv)
Interests of spouses in the same residence. If spouses hold interests in the same residence (including community property interests), the spouses may transfer their interests in the residence (or a fractional portion of their interests in the residence) to the same qualified personal residence trust, provided that the governing instrument prohibits any person other than one of the spouses from holding a term interest in the trust concurrently with the other spouse.
(3)
Income of the trust. The governing instrument must require that any income of the trust be distributed to the term holder not less frequently than annually.
(4)
Distributions from the trust to other persons. The governing instrument must prohibit distributions of corpus to any beneficiary other than the transferor prior to the expiration of the retained term interest.
(5)
Assets of the trust—
(i)
In general. Except as otherwise provided in paragraphs (c)(5)(ii) and (c)(8) of this section, the governing instrument must prohibit the trust from holding, for the entire term of the trust, any asset other than one residence to be used or held for use (within the meaning of paragraph (c)(7)(i) of this section) as a personal residence of the term holder (the “residence”).
(ii)
Assets other than personal residence. Except as otherwise provided, the governing instrument may permit a qualified personal residence trust to hold the following assets (in addition to the residence) in the amounts and in the manner described in this paragraph (c)(5)(ii):
(A)
Additions of cash for payment of expenses, etc. (1) Additions. The governing instrument may permit additions of cash to the trust, and may permit the trust to hold additions of cash in a separate account, in an amount which, when added to the cash already held in the account for such purposes, does not exceed the amount required:

(i) For payment of trust expenses (including mortgage payments) already incurred or reasonably expected to be paid by the trust within six months from the date the addition is made;

(ii) For improvements to the residence to be paid by the trust within six months from the date the addition is made; and

(iii) For purchase by the trust of the initial residence, within three months of the date the trust is created, provided that no addition may be made for this purpose, and the trust may not hold any such addition, unless the trustee has previously entered into a contract to purchase that residence; and

(iv) For purchase by the trust of a residence to replace another residence, within three months of the date the addition is made, provided that no addition may be made for this purpose, and the trust may not hold any such addition, unless the trustee has previously entered into a contract to purchase that residence.

(2) Distributions of excess cash. If the governing instrument permits additions of cash to the trust pursuant to paragraph (c)(5)(ii)(A)(1) of this section, the governing instrument must require that the trustee determine, not less frequently than quarterly, the amounts held by the trust for payment of expenses in excess of the amounts permitted by that paragraph and must require that those amounts be distributed immediately thereafter to the term holder. In addition, the governing instrument must require, upon termination of the term holder's interest in the trust, any amounts held by the trust for the purposes permitted by paragraph (c)(5)(ii)(A)(1) of this section that are not used to pay trust expenses due and payable on the date of termination (including expenses directly related to termination) be distributed outright to the term holder within 30 days of termination.

(B)
Improvements. The governing instrument may permit improvements to the residence to be added to the trust and may permit the trust to hold such improvements, provided that the residence, as improved, meets the requirements of a personal residence.
(C)
Sale proceeds. The governing instrument may permit the sale of the residence (except as set forth in paragraph (c)(9) of this section) and may permit the trust to hold proceeds from the sale of the residence, in a separate account.
(D)
Insurance and insurance proceeds. The governing instrument may permit the trust to hold one or more policies of insurance on the residence. In addition, the governing instrument may permit the trust to hold, in a separate account, proceeds of insurance payable to the trust as a result of damage to or destruction of the residence. For purposes of this paragraph, amounts (other than insurance proceeds payable to the trust as a result of damage to or destruction of the residence) received as a result of the involuntary conversion (within the meaning of section 1033) of the residence are treated as proceeds of insurance.
(6)
Commutation. The governing instrument must prohibit commutation (prepayment) of the term holder's interest.
(7)
Cessation of use as a personal residence—
(i)
In general. The governing instrument must provide that a trust ceases to be a qualified personal residence trust if the residence ceases to be used or held for use as a personal residence of the term holder. A residence is held for use as a personal residence of the term holder so long as the residence is not occupied by any other person (other than the spouse or a dependent of the term holder) and is available at all times for use by the term holder as a personal residence. See § 25.2702-5(c)(8) for rules governing disposition of assets of a trust as to which the trust has ceased to be a qualified personal residence trust.
(ii)
Sale of personal residence. The governing instrument must provide that the trust ceases to be a qualified personal residence trust upon sale of the residence if the governing instrument does not permit the trust to hold proceeds of sale of the residence pursuant to paragraph (c)(5)(ii)(C) of this section. If the governing instrument permits the trust to hold proceeds of sale pursuant to that paragraph, the governing instrument must provide that the trust ceases to be a qualified personal residence trust with respect to all proceeds of sale held by the trust not later than the earlier of—
(A)
The date that is two years after the date of sale;
(B)
The termination of the term holder's interest in the trust; or
(C)
The date on which a new residence is acquired by the trust.
(iii)
Damage to or destruction of personal residence—
(A)
In general. The governing instrument must provide that, if damage or destruction renders the residence unusable as a residence, the trust ceases to be a qualified personal residence trust on the date that is two years after the date of damage or destruction (or the date of termination of the term holder's interest in the trust, if earlier) unless, prior to such date—

(1) Replacement of or repairs to the residence are completed; or

(2) A new residence is acquired by the trust.

(B)
Insurance proceeds. For purposes of this paragraph (C)(7)(iii), if the governing instrument permits the trust to hold proceeds of insurance received as a result of damage to or destruction of the residence pursuant to paragraph (c)(5)(ii)(D) of this section, the governing instrument must contain provisions similar to those required by paragraph (c)(7)(ii) of this section.
(8)
Disposition of trust assets on cessation as personal residence trust—
(i)
In general. The governing instrument must provide that, within 30 days after the date on which the trust has ceased to be a qualified personal residence trust with respect to certain assets, either—
(A)
The assets be distributed outright to the term holder;
(B)
The assets be converted to and held for the balance of the term holder's term in a separate share of the trust meeting the requirements of a qualified annuity interest; or
(C)
In the trustee's sole discretion, the trustee may elect to comply with either paragraph (c)(8)(i) (A) or (B) of this section pursuant to their terms.
(ii)
Requirements for conversion to a qualified annuity interest—
(A)
Governing instrument requirements. For assets subject to this paragraph (c)(8) to be converted to and held as a qualified annuity interest, the governing instrument must contain all provisions required by § 25.2702-3 with respect to a qualified annuity interest.
(B)
Effective date of annuity. The governing instrument must provide that the right of the term holder to receive the annuity amount begins on the date of sale of the residence, the date of damage to or destruction of the residence, or the date on which the residence ceases to be used or held for use as a personal residence, as the case may be (“the cessation date”). Notwithstanding the preceding sentence, the governing instrument may provide that the trustee may defer payment of any annuity amount otherwise payable after the cessation date until the date that is 30 days after the assets are converted to a qualified annuity interest under paragraph (c)(8)(i)(B) of this section (“the conversion date”); provided that any deferred payment must bear interest from the cessation date at a rate not less than the section 7520 rate in effect on the cessation date. The governing instrument may permit the trustee to reduce aggregate deferred annuity payments by the amount of income actually distributed by the trust to the term holder during the deferral period.
(C)
Determination of annuity amount— (1) In general. The governing instrument must require that the annuity amount be no less than the amount determined under this paragraph (C).

(2) Entire trust ceases to be a qualified personal residence trust. If, on the conversion date, the assets of the trust do not include a residence used or held for use as a personal residence, the annuity may not be less than an amount determined by dividing the lesser of the value of all interests retained by the term holder (as of the date of the original transfer or transfers) or the value of all the trust assets (as of the conversion date) by an annuity factor determined—

(i) For the original term of the term holder's interest; and

(ii) At the rate used in valuing the retained interest at the time of the original transfer.

(3) Portion of trust continues as qualified personal residence trust. If, on the conversion date, the assets of the trust include a residence used or held for use as a personal residence, the annuity must not be less than the amount determined under paragraph (c)(8)(ii)(C)(2) of this section multiplied by a fraction. The numerator of the fraction is the excess of the fair market value of the trust assets on the conversion date over the fair market value of the assets as to which the trust continues as a qualified personal residence trust, and the denominator of the fraction is the fair market value of the trust assets on the conversion date.

(9)
Sale of residence to grantor, grantor's spouse, or entity controlled by grantor or grantor's spouse. The governing instrument must prohibit the trust from selling or transferring the residence, directly or indirectly, to the grantor, the grantor's spouse, or an entity controlled by the grantor or the grantor's spouse during the retained term interest of the trust, or at any time after the retained term interest that the trust is a grantor trust. For purposes of the preceding sentence, a sale or transfer to another grantor trust of the grantor or the grantor's spouse is considered a sale or transfer to the grantor or the grantor's spouse; however, a distribution (for no consideration) upon or after the expiration of the retained term interest to another grantor trust of the grantor or the grantor's spouse pursuant to the express terms of the trust will not be considered a sale or transfer to the grantor or the grantor's spouse if such other grantor trust prohibits the sale or transfer of the property to the grantor, the grantor's spouse, or an entity controlled by the grantor or the grantor's spouse. In the event the grantor dies prior to the expiration of the retained term interest, this paragraph (c)(9) does not apply to the distribution (for no consideration) of the residence to any person (including the grantor's estate) pursuant to the express terms of the trust or pursuant to the exercise of a power retained by the grantor under the terms of the trust. Further, this paragraph (c)(9) does not apply to an outright distribution (for no consideration) of the residence to the grantor's spouse after the expiration of the retained trust term pursuant to the express terms of the trust. For purposes of this paragraph (c)(9), a grantor trust is a trust treated as owned in whole or in part by the grantor or the grantor's spouse pursuant to sections 671 through 678, and control is defined in § 25.2701-2(b)(5)(ii) and (iii).
(d)
Examples. The following examples illustrate rules of this section. Each example assumes that all applicable requirements of a personal residence trust (or qualified personal residence trust) are met unless otherwise stated.
Notes, amendments, and revision history

Amendments

[T.D. 8395, 57 FR 4269, Feb. 4, 1992; T.D. 8395, 57 FR 11265, Apr. 2, 1992, as amended by T.D. 8743, 62 FR 66988, Dec. 23, 1997]

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. 8395, 57 FR 4269, Feb. 4, 1992; T.D. 8395, 57 FR 11265, Apr. 2, 1992, as amended by T.D. 8743, 62 FR 66988, Dec. 23, 1997]

§25.2702-6. Reduction in taxable gifts.

26 C.F.R. § 25.2702-6

(a)
Transfers of retained interests in trust—
(1)
Inter vivos transfers. If an individual subsequently transfers by gift an interest in trust previously valued (when held by that individual) under § 25.2702-2 (b)(1) or (c), the individual is entitled to a reduction in aggregate taxable gifts. The amount of the reduction is determined under paragraph (b) of this section. Thus, for example, if an individual transferred property to an irrevocable trust, retaining an interest in the trust that was valued at zero under § 25.2702-2(b)(1), and the individual later transfers the retained interest by gift, the individual is entitled to a reduction in aggregate taxable gifts on the subsequent transfer. For purposes of this section, aggregate taxable gifts means the aggregate sum of the individual's taxable gifts for the calendar year determined under section 2502(a)(1).
(2)
Testamentary transfers. If either—
(i)
A term interest in trust is included in an individual's gross estate solely by reason of section 2033, or
(ii)
A remainder interest in trust is included in an individual's gross estate,
(3)
Gift splitting on subsequent transfer. If an individual who is entitled to a reduction in aggregate taxable gifts (or adjusted taxable gifts) subsequently transfers the interest in a transfer treated as made one-half by the individual's spouse under section 2513, the individual may assign one-half of the amount of the reduction to the consenting spouse. The assignment must be attached to the Form 709 on which the consenting spouse reports the split gift.
(b)
Amount of reduction—
(1)
In general. The amount of the reduction in aggregate taxable gifts (or adjusted taxable gifts) is the lesser of—
(i)
The increase in the individual's taxable gifts resulting from the interest being valued at the time of the initial transfer under § 25.2702-2(b)(1) or (c); or
(ii)
The increase in the individual's taxable gifts (or gross estate) resulting from the subsequent transfer of the interest.
(2)
Treatment of annual exclusion. For purposes of determining the amount under paragraph (b)(1)(ii) of this section, the exclusion under section 2503(b) applies first to transfers in that year other than the transfer of the interest previously valued under § 25.2702-2(b)(1) or (c).
(3)
Overlap with section 2001. Notwithstanding paragraph (b)(1) of this section, the amount of the reduction is reduced to the extent section 2001 would apply to reduce the amount of an individual's adjusted taxable gifts with respect to the same interest to which paragraph (b)(1) of this section would otherwise apply.
(c)
Examples. The rules of this section are illustrated by the following examples. The following facts apply for Examples 1-4:
Notes, amendments, and revision history

Amendments

[T.D. 8395, 57 FR 4272, 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. 8395, 57 FR 4272, Feb. 4, 1992]