I 

113TH CONGRESS 

2D SESSION H. R. 4061 

To amend the Internal Revenue Code of 1986 to reform the estate and 

gift tax. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 14, 2014 

Mr. MCDERMOTT introduced the following bill; which was referred to the 

Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to reform 

the estate and gift tax. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Sensible Estate Tax 

5 Act of 2014’’. 

6 SEC. 2. MODIFICATION OF ESTATE TAX EXCLUSION AND ES7 TATE TAX RATES. 

8 (a) EXCLUSION AMOUNT.— 

9 (1) IN GENERAL.—Subparagraph (A) of section 

10 2010(c)(3) of the Internal Revenue Code of 1986 is 


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1 amended by striking ‘‘$5,000,000’’ and inserting 

2 ‘‘$1,000,000’’. 

3 (2) INFLATION ADJUSTMENT.—Subparagraph 

4 (B) of section 2010(c)(3) of such Code is amend5 ed— 

6 (A) by striking ‘‘2011’’ in the matter pre7 ceding clause (i) and inserting ‘‘2014’’, and 

8 (B) by striking ‘‘2010’’ in clause (ii) and 

9 inserting ‘‘2000’’. 

10 (b) ESTATE TAX RATES.— 

11 (1) IN GENERAL.—The table contained in sub12 section (c) of section 2001 of such Code is amended 

13 by striking ‘‘Over $1,000,000’’ and all that follows 

14 and inserting the following: 

‘‘Over $1,000,000 but not over 

$1,250,000.

$345,800, plus 41 percent of the 

excess of such amount over 

$1,000,000. 

Over $1,250,000 but not over 

$1,500,000.

$448,300, plus 43 percent of the 

excess of such amount over 

$1,250,000. 

Over $1,500,000 but not over 

$5,000,000.

$555,800, plus 45 percent of the 

excess of such amount over 

$1,500,000. 

Over $5,000,000 but not over 

$10,000,000.

$2,130,800, plus 50 percent of the 

excess of such amount over 

$5,000,000. 

Over $10,000,000 ......................... $4,630,800, plus 55 percent of the 

excess of such amount over 

$10,000,000.’’. 

15 (2) ADJUSTMENT FOR INFLATION.—Subsection 

16 (c) of section 2001 of such Code is amended— 

17 (A) by inserting the following before the 

18 table contained therein: 


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1 ‘‘(1) IN GENERAL.—’’, and 

2 (B) by adding at the end the following new 

3 paragraph: 

4 ‘‘(2) INFLATION ADJUSTMENT.—In the case of 

5 any decedent dying in a calendar year after 2014— 

6 ‘‘(A) each minimum and maximum dollar 

7 amount for each rate bracket in the table in 

8 paragraph (1) shall be increased by an amount 

9 equal to— 

10 ‘‘(i) such dollar amount, multiplied by 

11 ‘‘(ii) the cost-of-living adjustment de12 termined under section 1(f)(3) for such 

13 calendar year, determined by substituting 

14 ‘2000’ for ‘1992’ in subparagraph (B) 

15 thereof, and 

16 ‘‘(B) each of the amounts setting forth the 

17 tax under such table shall be adjusted to the 

18 extent necessary to reflect the adjustments in 

19 the rate brackets made by subparagraph (A). 

20 If any increase determined under subparagraph (A) 

21 is not a multiple of $10,000, such increase shall be 

22 rounded to the nearest multiple of $10,000.’’. 

23 (c) COORDINATION WITH GIFT TAX TO REFLECT

24 DECREASE IN APPLICABLE CREDIT AMOUNT.—SubVerDate Mar 15 2010 23:32 Feb 18, 2014 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H4061.IH H4061

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1 section (g) of section 2001 of such Code is amended to 

2 read as follows: 

3 ‘‘(g) MODIFICATIONS TO GIFT TAX CALCULATION.— 

4 For purposes of applying subsection (b)(2) with respect 

5 to 1 or more gifts— 

6 ‘‘(1) MODIFICATIONS TO REFLECT DIFFERENT

7 TAX RATES.—The rates of tax under subsection (c) 

8 in effect at the decedent’s death shall, in lieu of the 

9 rates of tax in effect at the time of such gifts, be 

10 used both to compute— 

11 ‘‘(A) the tax imposed by chapter 12 with 

12 respect to such gifts, and 

13 ‘‘(B) the credit allowed against such tax 

14 under section 2505, including in computing— 

15 ‘‘(i) the amount determined under 

16 section 2505(a)(1), and 

17 ‘‘(ii) the sum of the amounts allowed 

18 as a credit for all preceding periods under 

19 section 2505(a)(2). 

20 ‘‘(2) MODIFICATION TO REFLECT REDUCED AP21 PLICABLE CREDIT AMOUNTS.—The amount deter22 mined under section 2505(a)(1) for each calendar 

23 year shall not exceed the estate’s applicable credit 

24 amount under section 2010(c).’’. 


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1 (d) EFFECTIVE DATE.—Except as otherwise pro2 vided by in this subsection, the amendments made by this 

3 section shall apply to estates of decedents dying, genera4 tion-skipping transfers, and gifts made, after December 

5 31, 2014. 

6 SEC. 3. RESTORATION OF CREDIT FOR STATE TRANSFER 

7 TAX. 

8 (a) IN GENERAL.—Section 2011 of the Internal Rev9 enue Code of 1986 is amended by striking subsection (f). 

10 (b) REPEAL OF DEDUCTION FOR STATE TRANSFER

11 TAXES.— 

12 (1) IN GENERAL.—Section 2058 of such Code 

13 is amended by adding at the end the following: 

14 ‘‘(c) TERMINATION.—This section shall not apply to 

15 the estates of decedents dying after December 31, 2014.’’. 

16 (2) CONFORMING AMENDMENT.—Section 

17 2106(a)(4) of such Code is amended by adding at 

18 the end the following new sentence: ‘‘This paragraph 

19 shall not apply to the estates of decedents dying 

20 after December 31, 2014.’’. 

21 (c) EFFECTIVE DATE.—The amendments made by 

22 this section shall apply to estates of decedents dying, and 

23 gifts made, after December 31, 2014. 


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1 SEC. 4. VALUATION RULES FOR CERTAIN TRANSFERS OF 

2 NONBUSINESS ASSETS; LIMITATION ON MI3 NORITY DISCOUNTS. 

4 (a) IN GENERAL.—Section 2031 of the Internal Rev5 enue Code of 1986 is amended by redesignating subsection 

6 (d) as subsection (f) and by inserting after subsection (c) 

7 the following new subsections: 

8 ‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS

9 OF NONBUSINESS ASSETS.—For purposes of this chapter 

10 and chapter 12— 

11 ‘‘(1) IN GENERAL.—In the case of the transfer 

12 of any interest in an entity other than an interest 

13 which is actively traded (within the meaning of sec14 tion 1092)— 

15 ‘‘(A) the value of any nonbusiness assets 

16 held by the entity shall be determined as if the 

17 transferor had transferred such assets directly 

18 to the transferee (and no valuation discount 

19 shall be allowed with respect to such nonbusi20 ness assets), and 

21 ‘‘(B) the nonbusiness assets shall not be 

22 taken into account in determining the value of 

23 the interest in the entity. 

24 ‘‘(2) NONBUSINESS ASSETS.—For purposes of 

25 this subsection— 


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1 ‘‘(A) IN GENERAL.—The term ‘nonbusi2 ness asset’ means any asset which is not used 

3 in the active conduct of 1 or more trades or 

4 businesses. 

5 ‘‘(B) EXCEPTION FOR CERTAIN PASSIVE

6 ASSETS.—Except as provided in subparagraph 

7 (C), a passive asset shall not be treated for pur8 poses of subparagraph (A) as used in the active 

9 conduct of a trade or business unless— 

10 ‘‘(i) the asset is property described in 

11 paragraph (1) or (4) of section 1221(a) or 

12 is a hedge with respect to such property, 

13 or 

14 ‘‘(ii) the asset is real property used in 

15 the active conduct of 1 or more real prop16 erty trades or businesses (within the mean17 ing of section 469(c)(7)(C)) in which the 

18 transferor materially participates and with 

19 respect to which the transferor meets the 

20 requirements of section 469(c)(7)(B)(ii). 

21 For purposes of clause (ii), material participa22 tion shall be determined under the rules of sec23 tion 469(h), except that section 469(h)(3) shall 

24 be applied without regard to the limitation to 

25 farming activity. 


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1 ‘‘(C) EXCEPTION FOR WORKING CAP2 ITAL.—Any asset (including a passive asset) 

3 which is held as a part of the reasonably re4 quired working capital needs of a trade or busi5 ness shall be treated as used in the active con6 duct of a trade or business. 

7 ‘‘(3) PASSIVE ASSET.—For purposes of this 

8 subsection, the term ‘passive asset’ means any— 

9 ‘‘(A) cash or cash equivalents, 

10 ‘‘(B) except to the extent provided by the 

11 Secretary, stock in a corporation or any other 

12 equity, profits, or capital interest in any entity, 

13 ‘‘(C) evidence of indebtedness, option, for14 ward or futures contract, notional principal con15 tract, or derivative, 

16 ‘‘(D) asset described in clause (iii), (iv), or 

17 (v) of section 351(e)(1)(B), 

18 ‘‘(E) annuity, 

19 ‘‘(F) real property used in 1 or more real 

20 property trades or businesses (as defined in sec21 tion 469(c)(7)(C)), 

22 ‘‘(G) asset (other than a patent, trade23 mark, or copyright) which produces royalty in24 come, 

25 ‘‘(H) commodity, 


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1 ‘‘(I) collectible (within the meaning of sec2 tion 401(m)), or 

3 ‘‘(J) any other asset specified in regula4 tions prescribed by the Secretary. 

5 ‘‘(4) LOOK-THRU RULES.— 

6 ‘‘(A) IN GENERAL.—If a nonbusiness asset 

7 of an entity consists of a 10-percent interest in 

8 any other entity, this subsection shall be ap9 plied by disregarding the 10-percent interest 

10 and by treating the entity as holding directly its 

11 ratable share of the assets of the other entity. 

12 This subparagraph shall be applied successively 

13 to any 10-percent interest of such other entity 

14 in any other entity. 

15 ‘‘(B) 10-PERCENT INTEREST.—The term 

16 ‘10-percent interest’ means— 

17 ‘‘(i) in the case of an interest in a cor18 poration, ownership of at least 10 percent 

19 (by vote or value) of the stock in such cor20 poration, 

21 ‘‘(ii) in the case of an interest in a 

22 partnership, ownership of at least 10 per23 cent of the capital or profits interest in the 

24 partnership, and 


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1 ‘‘(iii) in any other case, ownership of 

2 at least 10 percent of the beneficial inter3 ests in the entity. 

4 ‘‘(C) EXCEPTION FOR ACTIVELY TRADED

5 INTERESTS.—Subparagraph (A) shall not apply 

6 to any nonbusiness asset which consists of an 

7 interest which is actively traded (within the 

8 meaning of section 1092). 

9 ‘‘(5) COORDINATION WITH SUBSECTION (b).— 

10 Subsection (b) shall apply after the application of 

11 this subsection. 

12 ‘‘(e) LIMITATION ON MINORITY DISCOUNTS.—For 

13 purposes of this chapter and chapter 12, in the case of 

14 the transfer of any interest in an entity other than an in15 terest which is actively traded (within the meaning of sec16 tion 1092), no discount shall be allowed by reason of the 

17 fact that the transferee does not have control of such enti18 ty if the transferee and members of the family (as defined 

19 in section 2032A(e)(2)) of the transferee have control of 

20 such entity (determined immediately after such trans21 fer).’’. 

22 (b) EFFECTIVE DATE.—The amendments made by 

23 this section shall apply to transfers after the date of the 

24 enactment of this Act. 


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1 SEC. 5. CONSISTENT BASIS REPORTING BETWEEN ESTATE 

2 AND PERSON ACQUIRING PROPERTY FROM 

3 DECEDENT. 

4 (a) CONSISTENT USE OF BASIS.— 

5 (1) PROPERTY ACQUIRED FROM A DECE6 DENT.—Section 1014 of the Internal Revenue Code 

7 of 1986 is amended by adding at the end the fol8 lowing new subsection: 

9 ‘‘(f) BASIS MUST BE CONSISTENT WITH ESTATE

10 TAX RETURN.— 

11 ‘‘(1) IN GENERAL.—For purposes of this sec12 tion, the value used to determine the basis of any in13 terest in property in the hands of the person acquir14 ing such property shall not exceed the value of such 

15 interest as finally determined for purposes of chap16 ter 11. 

17 ‘‘(2) SPECIAL RULE WHERE NO FINAL DETER18 MINATION.—In any case in which the final value of 

19 property has not been determined under chapter 11 

20 and there has been a statement furnished under sec21 tion 6035(a), the value used to determine the basis 

22 of any interest in property in the hands of the per23 son acquiring such property shall not exceed the 

24 amount reported on any statement furnished under 

25 section 6035(a). 


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1 ‘‘(3) REGULATIONS.—The Secretary may by 

2 regulations provide exceptions to the application of 

3 this subsection.’’. 

4 (2) PROPERTY ACQUIRED BY GIFTS AND

5 TRANSFERS IN TRUST.—Section 1015 of the Inter6 nal Revenue Code of 1986 is amended by adding at 

7 the end the following new subsection: 

8 ‘‘(f) BASIS MUST BE CONSISTENT GIFT TAX RE9 TURN.— 

10 ‘‘(1) IN GENERAL.—For purposes of this sec11 tion, the value used to determine the basis of any in12 terest in property in the hands of the person acquir13 ing such property shall not exceed the value of such 

14 interest as finally determined for purposes of chap15 ter 12. 

16 ‘‘(2) SPECIAL RULE WHERE NO FINAL DETER17 MINATION.—In any case in which the final value of 

18 property has not been determined under chapter 12 

19 and there has been a statement furnished under sec20 tion 6035(b), the value used to determine the basis 

21 of any interest in property in the hands of the per22 son acquiring such property shall not exceed the 

23 amount reported on any statement furnished under 

24 section 6035(b). 


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1 ‘‘(3) REGULATIONS.—The Secretary may by 

2 regulations provide exceptions to the application of 

3 this subsection.’’. 

4 (b) INFORMATION REPORTING.— 

5 (1) IN GENERAL.—Subpart A of part III of 

6 subchapter A of chapter 61 of the Internal Revenue 

7 Code of 1986 is amended by inserting after section 

8 6034A the following new section: 

9 ‘‘SEC. 6035. BASIS INFORMATION TO PERSONS ACQUIRING 

10 PROPERTY FROM DECEDENT OR BY GIFT. 

11 ‘‘(a) INFORMATION WITH RESPECT TO PROPERTY

12 ACQUIRED FROM DECEDENTS.— 

13 ‘‘(1) IN GENERAL.—The executor of any estate 

14 required to file a return under section 6018(a) shall 

15 furnish to the Secretary and to each person acquir16 ing any interest in property included in the dece17 dent’s gross estate for Federal estate tax purposes 

18 a statement identifying the value of each interest in 

19 such property as reported on such return and such 

20 other information with respect to such interest as 

21 the Secretary may prescribe. 

22 ‘‘(2) STATEMENTS BY BENEFICIARIES.—Each 

23 person required to file a return under section 

24 6018(b) shall furnish to the Secretary and to each 

25 other person who holds a legal or beneficial interest 


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1 in the property to which such return relates a state2 ment identifying the information described in para3 graph (1). 

4 ‘‘(3) TIME FOR FURNISHING STATEMENT.— 

5 ‘‘(A) IN GENERAL.—Each statement re6 quired to be furnished under paragraph (1) or 

7 (2) shall be furnished at such time as the Sec8 retary may prescribe, but in no case at a time 

9 later than the earlier of— 

10 ‘‘(i) the date which is 30 days after 

11 the date on which the return under section 

12 6018 was required to be filed (including 

13 extensions, if any), or 

14 ‘‘(ii) the date which is 30 days after 

15 the date such return is filed. 

16 ‘‘(B) ADJUSTMENTS.—In any case in 

17 which there is an adjustment to the information 

18 required to be included on a statement filed 

19 under paragraph (1) or (2) after such state20 ment has been filed, a supplemental statement 

21 under such paragraph shall be filed not later 

22 than the date which is 30 days after such ad23 justment is made. 

24 ‘‘(b) INFORMATION WITH RESPECT TO PROPERTY

25 ACQUIRED BY GIFT.— 


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1 ‘‘(1) IN GENERAL.—Each person making a 

2 transfer by gift who is required to file a return 

3 under section 6019 with respect to such transfer 

4 shall furnish to the Secretary and to each person ac5 quiring any interest in property by reason of such 

6 transfer a statement identifying the value of each in7 terest in such property as reported on such return 

8 and such other information with respect to such in9 terest as the Secretary may prescribe. 

10 ‘‘(2) TIME FOR FURNISHING STATEMENT.— 

11 ‘‘(A) IN GENERAL.—Each statement re12 quired to be furnished under paragraph (1) 

13 shall be furnished at such time as the Secretary 

14 may prescribe, but in no case at a time later 

15 than the earlier of— 

16 ‘‘(i) the date which is 30 days after 

17 the date on which the return under section 

18 6019 was required to be filed (including 

19 extensions, if any), or 

20 ‘‘(ii) the date which is 30 days after 

21 the date such return is filed. 

22 ‘‘(B) ADJUSTMENTS.—In any case in 

23 which there is an adjustment to the information 

24 required to be included on a statement filed 

25 under paragraph (1) after such statement has 


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1 been filed, a supplemental statement under 

2 such paragraph shall be filed not later than the 

3 date which is 30 days after such adjustment is 

4 made. 

5 ‘‘(c) REGULATIONS.—The Secretary shall prescribe 

6 such regulations as necessary to carry out this section, in7 cluding regulations relating to— 

8 ‘‘(1) the application of this section to property 

9 with regard to which no estate or gift tax return is 

10 required to be filed, and 

11 ‘‘(2) situations in which the surviving joint ten12 ant or other recipient may have better information 

13 than the executor regarding the basis or fair market 

14 value of the property.’’. 

15 (2) PENALTY FOR FAILURE TO FILE.— 

16 (A) RETURN.—Section 6724(d)(1) of the 

17 Internal Revenue Code of 1986 is amended by 

18 striking ‘‘and’’ at the end of subparagraph (B), 

19 by striking the period at the end of subpara20 graph (C) and inserting ‘‘, and’’, and by insert21 ing after subparagraph (C) the following new 

22 subparagraph: 

23 ‘‘(D) any statement required to be filed 

24 with the Secretary under section 6035.’’. 


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1 (B) STATEMENT.—Section 6724(d)(2) of 

2 such Code is amended by striking ‘‘or’’ at the 

3 end of subparagraph (GG), by striking the pe4 riod at the end of subparagraph (HH) and in5 serting ‘‘, or’’, and by inserting after subpara6 graph (HH) the following new subparagraph: 

7 ‘‘(II) section 6035 (other than a statement 

8 described in paragraph (1)(D)).’’. 

9 (3) CLERICAL AMENDMENT.—The table of sec10 tions for subpart A of part III of subchapter A of 

11 chapter 61 of the Internal Revenue Code of 1986 is 

12 amended by inserting after the item relating to sec13 tion 6034A the following new item: 

‘‘Sec. 6035. Basis information to persons acquiring property from decedent or 

by gift.’’. 

14 (c) PENALTY FOR INCONSISTENT REPORTING.— 

15 (1) IN GENERAL.—Subsection (b) of section 

16 6662 of the Internal Revenue Code of 1986 is 

17 amended by inserting after paragraph (7) the fol18 lowing new paragraph: 

19 ‘‘(8) Any inconsistent estate or gift basis.’’. 

20 (2) INCONSISTENT BASIS REPORTING.—Section 

21 6662 of such Code is amended by adding at the end 

22 the following new subsection: 

23 ‘‘(k) INCONSISTENT ESTATE OR GIFT BASIS RE24 PORTING.—For purposes of this section, the term ‘inconVerDate Mar 15 2010 23:32 Feb 18, 2014 Jkt 039200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\H4061.IH H4061

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1 sistent estate or gift basis’ means the portion of the under2 statement which is attributable to— 

3 ‘‘(1) in the case of property acquired from a de4 cedent, a basis determination with respect to such 

5 property which is not consistent with the value of 

6 such property as determined under section 1014(f), 

7 and 

8 ‘‘(2) in the case of property acquired by gift, a 

9 basis determination with respect to such property 

10 which is not consistent with the value of such prop11 erty as determined under section 1015(f).’’. 

12 (d) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to transfers for which returns are 

14 filed after the date of the enactment of this Act. 

15 SEC. 6. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR 

16 GRANTOR RETAINED ANNUITY TRUSTS. 

17 (a) IN GENERAL.—Subsection (b) of section 2702 of 

18 the Internal Revenue Code of 1986 is amended— 

19 (1) by redesignating paragraphs (1), (2), and 

20 (3) as subparagraphs (A), (B), and (C), respectively, 

21 and by moving such subparagraphs (as so redesig22 nated) 2 ems to the right; 

23 (2) by striking ‘‘For purposes of’’ and inserting 

24 the following: 

25 ‘‘(1) IN GENERAL.—For purposes of’’; 


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1 (3) by striking ‘‘paragraph (1) or (2)’’ in para2 graph (1)(C) (as so redesignated) and inserting 

3 ‘‘subparagraph (A) or (B)’’; and 

4 (4) by adding at the end the following new 

5 paragraph: 

6 ‘‘(2) ADDITIONAL REQUIREMENTS WITH RE7 SPECT TO GRANTOR RETAINED ANNUITIES.—For 

8 purposes of subsection (a), in the case of an interest 

9 described in paragraph (1)(A) (determined without 

10 regard to this paragraph) which is retained by the 

11 transferor, such interest shall be treated as de12 scribed in such paragraph only if— 

13 ‘‘(A) the right to receive the fixed amounts 

14 referred to in such paragraph is for a term of 

15 not less than 10 years, 

16 ‘‘(B) such fixed amounts, when determined 

17 on an annual basis, do not decrease relative to 

18 any prior year during the first 10 years of the 

19 term referred to in subparagraph (A), and 

20 ‘‘(C) the remainder interest has a value 

21 greater than zero determined as of the time of 

22 the transfer.’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to transfers made after the date 

25 of the enactment of this Act. 


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1 SEC. 7. LIMITATION ON GST EXEMPTION OF PERPETUAL 

2 DYNASTY TRUSTS. 

3 (a) IN GENERAL.—Section 2642 of the Internal Rev4 enue Code of 1986 is amended by adding at the end the 

5 following new subsection: 

6 ‘‘(h) EXPIRATION OF GST EXEMPTION 90 YEARS

7 AFTER ESTABLISHMENT OF TRUST.— 

8 ‘‘(1) IN GENERAL.—In the case of any genera9 tion-skipping transfer made from a trust after the 

10 date which is 90 years after the date on which such 

11 trust is created, the inclusion ratio with respect to 

12 any property transferred in such transfer shall be 1. 

13 ‘‘(2) SPECIAL RULES.—For purposes of this 

14 subsection— 

15 ‘‘(A) DATE OF CREATION OF CERTAIN

16 DEEMED SEPARATE TRUSTS.—In the case of 

17 any portion of a trust which is treated as a sep18 arate trust under section 2654(b)(1), such sep19 arate trust shall be treated as created on the 

20 date of the first transfer described in such sec21 tion with respect to such separate trust. 

22 ‘‘(B) DATE OF CREATION OF POUR-OVER

23 TRUSTS.—In the case of any generation-skip24 ping transfer of property which involves the 

25 transfer of property from 1 trust to another 


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1 trust, the date of the creation of the transferee 

2 trust shall be treated as being the earlier of— 

3 ‘‘(i) the date of the creation of such 

4 transferee trust, or 

5 ‘‘(ii) the date of the creation of the 

6 transferor trust. 

7 In the case of multiple transfers to which the 

8 preceding sentence applies, the date of the cre9 ation of the transferor trust shall be determined 

10 under the preceding sentence before the appli11 cation of the preceding sentence to determine 

12 the date of the creation of the transferee trust. 

13 ‘‘(C) EXCEPTION FOR CERTAIN TRANS14 FERS FOR EDUCATION AND MEDICAL EX15 PENSES.—Subparagraph (B) shall not apply to 

16 the transfer of property from 1 trust to another 

17 trust if— 

18 ‘‘(i) such transfer is described in sec19 tion 2642(c)(2), and 

20 ‘‘(ii) the individual referred to in such 

21 section with respect to the transferee trust 

22 was also a beneficiary of the transferor 

23 trust. 

24 ‘‘(3) REGULATIONS.—The Secretary may pre25 scribe such regulations or other guidance as may be 


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1 necessary or appropriate to carry out this sub2 section.’’. 

3 (b) EFFECTIVE DATE.— 

4 (1) IN GENERAL.—The amendments made this 

5 section shall apply to— 

6 (A) trusts created after the date of the en7 actment of this Act, and 

8 (B) generation-skipping transfers made 

9 from trusts created on or before such date, but 

10 only to the extent such transfer is made out of 

11 corpus added to the trust after such date (or 

12 out of income attributable to corpus so added). 

13 (2) DETERMINATION OF DATE OF CREATION.— 

14 For purposes of this subsection, the rules of sections 

15 2642(h)(2) (as added by this section) and 2654(b) 

16 of the Internal Revenue Code of 1986 shall apply for 

17 purposes of determining the date of the creation of 

18 any trust. 

19 (3) EXCEPTIONS.—The Secretary of the Treas20 ury, or his designee, shall issue regulations or other 

21 guidance which provide exceptions to the application 

22 of the amendments made by this section which are 

23 substantially similar to the relevant exceptions under 


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1 paragraph (2) of section 1433(b) of the Tax Reform 

2 Act of 1986. 

Æ 


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