II 

113TH CONGRESS 

2D SESSION S. 2899 

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

generation-skipping taxes, and for other purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 18, 2014 

Mr. SANDERS introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to reinstate 

estate and generation-skipping taxes, and for other purposes. 

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 ‘‘Responsible Estate 

5 Tax Act’’. 

6 SEC. 2. MODIFICATIONS TO ESTATE, GIFT, AND GENERA7 TION-SKIPPING TRANSFER TAXES. 

8 (a) MODIFICATION OF RATES.— 


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1 (1) IN GENERAL.—Section 2001(c) of the Inter2 nal Revenue Code of 1986 is amended by striking 

3 the last 2 rows and inserting the following: 

‘‘Over $750,000 but not over $3,500,000 ............. $248,300 plus 39 percent of the excess of 

such amount over 

$750,000. 

Over $3,500,000 but not over $10,000,000 ........ $1,320,800 plus 40 

percent of the excess of such amount 

over $3,500,000. 

Over $10,000,000 but not over $50,000,000 ...... $4,245,800 plus 50 

percent of the excess of such amount 

over $10,000,000. 

Over $50,000,000 ................................................ $24,245,800 plus 55 

percent of the excess of such amount 

over $50,000,000.’’. 

4 (2) SURTAX ON WEALTHY ESTATES.—Sub5 section (c) of section 2011(c) of such Code is 

6 amended— 

7 (A) by inserting before the table the fol8 lowing: 

9 ‘‘(1) IN GENERAL.—’’, and 

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

11 paragraph: 

12 ‘‘(2) SURTAX ON ESTATES OVER $500,000,000.— 

13 Notwithstanding paragraph (1), if the amount with 

14 respect to which the tentative tax to be computed is 

15 over $500,000,000, the rate of tax otherwise in ef16 fect under this subsection with respect to the 


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1 amount in excess of $500,000,000 shall be increased 

2 by 10 percent.’’. 

3 (b) EXCLUSION AMOUNT.— 

4 (1) ESTATE TAX.—Paragraph (3) of section 

5 2010(c) of the Internal Revenue Code of 1986 is 

6 amended to read as follows: 

7 ‘‘(3) BASIC EXCLUSION AMOUNT.—For pur8 poses of this section, the basic exclusion amount is 

9 $3,500,000.’’. 

10 (2) MODIFICATION TO GIFT TAX EXCLUSION

11 AMOUNT.—Paragraph (1) of section 2505(a) of the 

12 Internal Revenue Code of 1986 is amended to read 

13 as follows: 

14 ‘‘(1) the applicable credit amount in effect 

15 under section 2010(c) for such calendar year (deter16 mined as if the basic exclusion amount in section 

17 2010(c)(2)(A) were $1,000,000), reduced by’’. 

18 (3) MODIFICATIONS OF ESTATE AND GIFT

19 TAXES TO REFLECT DIFFERENCES IN CREDIT RE20 SULTING FROM DIFFERENT EXCLUSION AMOUNTS.— 

21 (A) ESTATE TAX ADJUSTMENT.—Section 

22 2001 of the Internal Revenue Code of 1986 is 

23 amended by adding at the end the following 

24 new subsection: 


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1 ‘‘(h) ADJUSTMENT TO REFLECT CHANGES IN EX2 CLUSION AMOUNT.— 

3 ‘‘(1) IN GENERAL.—If, with respect to any gift 

4 to which subsection (b)(2) applies, the applicable ex5 clusion amount in effect at the time of the dece6 dent’s death is less than such amount in effect at 

7 the time such gift is made by the decedent, the 

8 amount of tax computed under subsection (b) shall 

9 be reduced by the amount of tax which would have 

10 been payable under chapter 12 at the time of the 

11 gift if the applicable exclusion amount in effect at 

12 such time had been the applicable exclusion amount 

13 in effect at the time of the decedent’s death and the 

14 modifications described in subsection (g) had been 

15 applicable at the time of such gifts. 

16 ‘‘(2) LIMITATION.—The aggregate amount of 

17 gifts made in any calendar year to which the reduc18 tion under paragraph (1) applies shall not exceed 

19 the excess of— 

20 ‘‘(A) the applicable exclusion amount in ef21 fect for such calendar year, over 

22 ‘‘(B) the applicable exclusion amount in ef23 fect at the time of the decedent’s death. 

24 ‘‘(3) APPLICABLE EXCLUSION AMOUNT.—The 

25 term ‘applicable exclusion amount’ means, with reVerDate Sep 11 2014 04:12 Oct 02, 2014 Jkt 049200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S2899.IS S2899

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1 spect to any period, the amount determined under 

2 section 2010(c) for such period, except that in the 

3 case of any period for which such amount includes 

4 the deceased spousal unused exclusion amount (as 

5 defined in section 2010(c)(4)), such term shall mean 

6 the basic exclusion amount (as defined under section 

7 2010(c)(3), as in effect for such period).’’. 

8 (B) GIFT TAX ADJUSTMENT.—Section 

9 2502 of such Code is amended by adding at the 

10 end the following new subsection: 

11 ‘‘(d) ADJUSTMENT TO REFLECT CHANGES IN EX12 CLUSION AMOUNT.— 

13 ‘‘(1) IN GENERAL.—If the taxpayer made a tax14 able gift in an applicable preceding calendar period, 

15 the amount of tax computed under subsection (a) 

16 shall be reduced by the amount of tax which would 

17 have been payable under chapter 12 for such appli18 cable preceding calendar period if the applicable ex19 clusion amount in effect for such preceding calendar 

20 period had been the applicable exclusion amount in 

21 effect for the calendar year for which the tax is 

22 being computed and the modifications described in 

23 subsection (g) had been applicable for such pre24 ceding calendar period. 


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1 ‘‘(2) LIMITATION.—The aggregate amount of 

2 gifts made in any applicable preceding calendar pe3 riod to which the reduction under paragraph (1) ap4 plies shall not exceed the excess of— 

5 ‘‘(A) the applicable exclusion amount for 

6 such preceding calendar period, over 

7 ‘‘(B) the applicable exclusion amount for 

8 the calendar year for which the tax is being 

9 computed. 

10 ‘‘(3) APPLICABLE PRECEDING CALENDAR YEAR

11 PERIOD.—The term ‘applicable preceding calendar 

12 year period’ means any preceding calendar year pe13 riod in which the applicable exclusion amount ex14 ceeded the applicable exclusion amount for the cal15 endar year for which the tax is being computed. 

16 ‘‘(4) APPLICABLE EXCLUSION AMOUNT.—The 

17 term ‘applicable exclusion amount’ means, with re18 spect to any period, the amount determined under 

19 section 2010(c) for such period, except that in the 

20 case of any period for which such amount includes 

21 the deceased spousal unused exclusion amount (as 

22 defined in section 2010(c)(4)), such term shall mean 

23 the basic exclusion amount (as defined under section 

24 2010(c)(3), as in effect for such period).’’. 


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

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

3 generation-skipping transfers and gifts made, after De4 cember 31, 2014. 

5 SEC. 3. MODIFICATION OF RULES FOR VALUE OF CERTAIN 

6 FARM, ETC., REAL PROPERTY. 

7 (a) IN GENERAL.—Paragraph (2) of section 

8 2032A(a) of the Internal Revenue Code of 1986 is amend9 ed by striking ‘‘$750,000’’ and inserting ‘‘$3,000,000’’. 

10 (b) INFLATION ADJUSTMENT.—Paragraph (3) of sec11 tion 2032A(a) of such Code is amended— 

12 (1) by striking ‘‘1998’’ and inserting ‘‘2014’’, 

13 (2) by striking ‘‘$750,000’’ and inserting 

14 ‘‘$3,000,000’’ in subparagraph (A), and 

15 (3) by striking ‘‘calendar year 1997’’ and in16 serting ‘‘calendar year 2013’’ in subparagraph (B). 

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

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

19 gifts made, after December 31, 2014. 

20 SEC. 4. MODIFICATION OF ESTATE TAX RULES WITH RE21 SPECT TO LAND SUBJECT TO CONSERVATION 

22 EASEMENTS. 

23 (a) MODIFICATION OF EXCLUSION LIMITATION.— 

24 The table in paragraph (3) of section 2031(c) of the Inter25 nal Revenue Code of 1986 is amended— 


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1 (1) by striking ‘‘or thereafter’’ in the last row 

2 and inserting ‘‘through 2014’’, and 

3 (2) by adding at the end the following row: 

‘‘2015 and thereafter ............................................. $2,000,000’’. 

4 (b) MODIFICATION OF APPLICABLE PERCENTAGE.— 

5 Paragraph (2) of section 2031(c) of the Internal Revenue 

6 Code of 1986 is amended by striking ‘‘40 percent’’ and 

7 inserting ‘‘60 percent’’. 

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

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

10 gifts made, after December 31, 2014. 

11 SEC. 5. CONSISTENT BASIS REPORTING BETWEEN ESTATE 

12 AND PERSON ACQUIRING PROPERTY FROM 

13 DECEDENT. 

14 (a) CONSISTENT USE OF BASIS.— 

15 (1) PROPERTY ACQUIRED FROM A DECE16 DENT.—Section 1014 of the Internal Revenue Code 

17 of 1986 is amended by adding at the end the fol18 lowing new subsection: 

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

20 TAX RETURN.— 

21 ‘‘(1) IN GENERAL.—For purposes of this sec22 tion, the value used to determine the basis of any in23 terest in property in the hands of the person acquir24 ing such property shall not exceed the value of such 


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1 interest as finally determined for purposes of chap2 ter 11. 

3 ‘‘(2) SPECIAL RULE WHERE NO FINAL DETER4 MINATION.—In any case in which the final value of 

5 property has not been determined under chapter 11 

6 and there has been a statement furnished under sec7 tion 6035(a), the value used to determine the basis 

8 of any interest in property in the hands of the per9 son acquiring such property shall not exceed the 

10 amount reported on any statement furnished under 

11 section 6035(a). 

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

13 regulations provide exceptions to the application of 

14 this subsection.’’. 

15 (2) PROPERTY ACQUIRED BY GIFTS AND

16 TRANSFERS IN TRUST.—Section 1015 of the Inter17 nal Revenue Code of 1986 is amended by adding at 

18 the end the following new subsection: 

19 ‘‘(f) BASIS MUST BE CONSISTENT GIFT TAX RE20 TURN.— 

21 ‘‘(1) IN GENERAL.—For purposes of this sec22 tion, the value used to determine the basis of any in23 terest in property in the hands of the person acquir24 ing such property shall not exceed the value of such 


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1 interest as finally determined for purposes of chap2 ter 12. 

3 ‘‘(2) SPECIAL RULE WHERE NO FINAL DETER4 MINATION.—In any case in which the final value of 

5 property has not been determined under chapter 12 

6 and there has been a statement furnished under sec7 tion 6035(b), the value used to determine the basis 

8 of any interest in property in the hands of the per9 son acquiring such property shall not exceed the 

10 amount reported on any statement furnished under 

11 section 6035(b). 

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

13 regulations provide exceptions to the application of 

14 this subsection.’’. 

15 (b) INFORMATION REPORTING.— 

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

17 subchapter A of chapter 61 of the Internal Revenue 

18 Code of 1986 is amended by inserting after section 

19 6034A the following new section: 

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

21 PROPERTY FROM DECEDENT OR BY GIFT. 

22 ‘‘(a) INFORMATION WITH RESPECT TO PROPERTY

23 ACQUIRED FROM DECEDENTS.— 

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

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


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1 furnish to the Secretary and to each person acquir2 ing any interest in property included in the dece3 dent’s gross estate for Federal estate tax purposes 

4 a statement identifying the value of each interest in 

5 such property as reported on such return and such 

6 other information with respect to such interest as 

7 the Secretary may prescribe. 

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

9 person required to file a return under section 

10 6018(b) shall furnish to the Secretary and to each 

11 other person who holds a legal or beneficial interest 

12 in the property to which such return relates a state13 ment identifying the information described in para14 graph (1). 

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

16 ‘‘(A) IN GENERAL.—Each statement re17 quired to be furnished under paragraph (1) or 

18 (2) shall be furnished at such time as the Sec19 retary may prescribe, but in no case at a time 

20 later than the earlier of— 

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

22 the date on which the return under section 

23 6018 was required to be filed (including 

24 extensions, if any), or 


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

2 the date such return is filed. 

3 ‘‘(B) ADJUSTMENTS.—In any case in 

4 which there is an adjustment to the information 

5 required to be included on a statement filed 

6 under paragraph (1) or (2) after such state7 ment has been filed, a supplemental statement 

8 under such paragraph shall be filed not later 

9 than the date which is 30 days after such ad10 justment is made. 

11 ‘‘(b) INFORMATION WITH RESPECT TO PROPERTY

12 ACQUIRED BY GIFT.— 

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

14 transfer by gift who is required to file a return 

15 under section 6019 with respect to such transfer 

16 shall furnish to the Secretary and to each person ac17 quiring any interest in property by reason of such 

18 transfer a statement identifying the value of each in19 terest in such property as reported on such return 

20 and such other information with respect to such in21 terest as the Secretary may prescribe. 

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

23 ‘‘(A) IN GENERAL.—Each statement re24 quired to be furnished under paragraph (1) 

25 shall be furnished at such time as the Secretary 


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

2 than the earlier of— 

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

4 the date on which the return under section 

5 6019 was required to be filed (including 

6 extensions, if any), or 

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

8 the date such return is filed. 

9 ‘‘(B) ADJUSTMENTS.—In any case in 

10 which there is an adjustment to the information 

11 required to be included on a statement filed 

12 under paragraph (1) after such statement has 

13 been filed, a supplemental statement under 

14 such paragraph shall be filed not later than the 

15 date which is 30 days after such adjustment is 

16 made. 

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

18 such regulations as necessary to carry out this section, in19 cluding regulations relating to— 

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

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

22 required to be filed, and 

23 ‘‘(2) situations in which the surviving joint ten24 ant or other recipient may have better information 


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1 than the executor regarding the basis or fair market 

2 value of the property.’’. 

3 (2) PENALTY FOR FAILURE TO FILE.— 

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

5 Internal Revenue Code of 1986 is amended by 

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

7 by striking the period at the end of subpara8 graph (C) and inserting ‘‘, and’’, and by insert9 ing after subparagraph (C) the following new 

10 subparagraph: 

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

12 with the Secretary under section 6035.’’. 

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

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

15 end of subparagraph (GG), by striking the pe16 riod at the end of subparagraph (HH) and in17 serting ‘‘, or’’, and by inserting after subpara18 graph (HH) the following new subparagraph: 

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

20 described in paragraph (1)(D)).’’. 

21 (3) CLERICAL AMENDMENT.—The table of sec22 tions for subpart A of part III of subchapter A of 

23 chapter 61 of the Internal Revenue Code of 1986 is 

24 amended by inserting after the item relating to sec25 tion 6034A the following new item: 


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

by gift.’’. 

1 (c) PENALTY FOR INCONSISTENT REPORTING.— 

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

3 6662 of the Internal Revenue Code of 1986 is 

4 amended by inserting after paragraph (7) the fol5 lowing new paragraph: 

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

7 (2) INCONSISTENT BASIS REPORTING.—Section 

8 6662 of such Code is amended by adding at the end 

9 the following new subsection: 

10 ‘‘(k) INCONSISTENT ESTATE OR GIFT BASIS RE11 PORTING.—For purposes of this section, the term ‘incon12 sistent estate or gift basis’ means the portion of the under13 statement which is attributable to— 

14 ‘‘(1) in the case of property acquired from a de15 cedent, a basis determination with respect to such 

16 property which is not consistent with the value of 

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

18 and 

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

20 basis determination with respect to such property 

21 which is not consistent with the value of such prop22 erty as determined under section 1015(f).’’. 


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

2 this section shall apply to transfers for which returns are 

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

4 SEC. 6. VALUATION RULES FOR CERTAIN TRANSFERS OF 

5 NONBUSINESS ASSETS; LIMITATION ON MI6 NORITY DISCOUNTS. 

7 (a) IN GENERAL.—Section 2031 of the Internal Rev8 enue Code of 1986 is amended by redesignating subsection 

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

10 the following new subsections: 

11 ‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS

12 OF NONBUSINESS ASSETS.—For purposes of this chapter 

13 and chapter 12— 

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

15 of any interest in an entity other than an interest 

16 which is actively traded (within the meaning of sec17 tion 1092)— 

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

19 held by the entity with respect to such interest 

20 shall be determined as if the transferor had 

21 transferred such assets directly to the trans22 feree (and no valuation discount shall be al23 lowed with respect to such nonbusiness assets), 

24 and 


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1 ‘‘(B) such nonbusiness assets shall not be 

2 taken into account in determining the value of 

3 the interest in the entity. 

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

5 this subsection— 

6 ‘‘(A) IN GENERAL.—The term ‘nonbusi7 ness asset’ means any asset which is not used 

8 in the active conduct of 1 or more trades or 

9 businesses. 

10 ‘‘(B) EXCEPTION FOR CERTAIN PASSIVE

11 ASSETS.—Except as provided in subparagraph 

12 (C), a passive asset shall not be treated for pur13 poses of subparagraph (A) as used in the active 

14 conduct of a trade or business unless— 

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

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

17 is a hedge with respect to such property, 

18 or 

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

20 the active conduct of 1 or more real prop21 erty trades or businesses (within the mean22 ing of section 469(c)(7)(C)) in which the 

23 transferor materially participates and with 

24 respect to which the transferor meets the 

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


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1 For purposes of clause (ii), material participa2 tion shall be determined under the rules of sec3 tion 469(h), except that section 469(h)(3) shall 

4 be applied without regard to the limitation to 

5 farming activity. 

6 ‘‘(C) EXCEPTION FOR WORKING CAP7 ITAL.—Any asset (including a passive asset) 

8 which is held as a part of the reasonably re9 quired working capital needs of a trade or busi10 ness shall be treated as used in the active con11 duct of a trade or business. 

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

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

14 ‘‘(A) cash or cash equivalents, 

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

16 Secretary, stock in a corporation or any other 

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

18 ‘‘(C) evidence of indebtedness, option, for19 ward or futures contract, notional principal con20 tract, or derivative, 

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

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

23 ‘‘(E) annuity, 


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

2 property trades or businesses (as defined in sec3 tion 469(c)(7)(C)), 

4 ‘‘(G) asset (other than a patent, trade5 mark, or copyright) which produces royalty in6 come, 

7 ‘‘(H) commodity, 

8 ‘‘(I) collectible (within the meaning of sec9 tion 401(m)), or 

10 ‘‘(J) any other asset specified in regula11 tions prescribed by the Secretary. 

12 ‘‘(4) LOOK-THRU RULES.— 

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

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

15 any other entity, this subsection shall be ap16 plied by disregarding the 10-percent interest 

17 and by treating the entity as holding directly its 

18 ratable share of the assets of the other entity. 

19 This subparagraph shall be applied successively 

20 to any 10-percent interest of such other entity 

21 in any other entity. 

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

23 ‘10-percent interest’ means— 

24 ‘‘(i) in the case of an interest in a cor25 poration, ownership of at least 10 percent 


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1 (by vote or value) of the stock in such cor2 poration, 

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

4 partnership, ownership of at least 10 per5 cent of the capital or profits interest in the 

6 partnership, and 

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

8 at least 10 percent of the beneficial inter9 ests in the entity. 

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

11 Subsection (b) shall apply after the application of 

12 this subsection. 

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

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

15 the transfer of any interest in an entity other than an in16 terest which is actively traded (within the meaning of sec17 tion 1092), no discount shall be allowed by reason of the 

18 fact that the transferee does not have control of such enti19 ty if the transferor, the transferee, and members of the 

20 family (as defined in section 2032A(e)(2)) of the trans21 feror and transferee— 

22 ‘‘(1) have control of such entity, or 

23 ‘‘(2) own the majority of the ownership inter24 ests (by value) in such entity.’’. 


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

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

3 enactment of this Act. 

4 SEC. 7. REQUIRED MINIMUM 10-YEAR TERM, ETC., FOR 

5 GRANTOR RETAINED ANNUITY TRUSTS. 

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

7 the Internal Revenue Code of 1986 is amended— 

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

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

10 and by moving such subparagraphs (as so redesig11 nated) 2 ems to the right; 

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

13 the following: 

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

15 (3) by striking ‘‘paragraph (1) or (2)’’ in para16 graph (1)(C) (as so redesignated) and inserting 

17 ‘‘subparagraph (A) or (B)’’; and 

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

19 paragraph: 

20 ‘‘(2) ADDITIONAL REQUIREMENTS WITH RE21 SPECT TO GRANTOR RETAINED ANNUITIES.—For 

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

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

24 regard to this paragraph) which is retained by the 


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1 transferor, such interest shall be treated as de2 scribed in such paragraph only if— 

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

4 referred to in such paragraph is for a term of 

5 not less than 10 years, 

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

7 on an annual basis, do not decrease relative to 

8 any prior year during the first 10 years of the 

9 term referred to in subparagraph (A), and 

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

11 equal to or greater than 10 percent of the value 

12 of the assets transferred to the trust, deter13 mined as of the time of the transfer.’’. 

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

15 this section shall apply to transfers made after the date 

16 of the enactment of this Act. 

17 SEC. 8. CERTAIN TRANSFER TAX RULES APPLICABLE TO 

18 GRANTOR TRUSTS. 

19 (a) IN GENERAL.—Subtitle B of the Internal Rev20 enue Code of 1986 is amended by adding at the end the 

21 following new chapter: 

22 ‘‘CHAPTER 16—SPECIAL RULES FOR 

23 GRANTOR TRUSTS 

‘‘Sec. 2901. Application of transfer taxes. 


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1 ‘‘SEC. 2901. APPLICATION OF TRANSFER TAXES. 

2 ‘‘(a) IN GENERAL.—In the case of any portion of a 

3 trust to which this section applies— 

4 ‘‘(1) the value of the gross estate of the de5 ceased deemed owner of such portion shall include 

6 all assets attributable to that portion at the time of 

7 the death of such owner, 

8 ‘‘(2) any distribution from such portion to one 

9 or more beneficiaries during the life of the deemed 

10 owner of such portion shall be treated as a transfer 

11 by gift for purposes of chapter 12, and 

12 ‘‘(3) if at any time during the life of the 

13 deemed owner of such portion, such owner ceases to 

14 be treated as the owner of such portion under sub15 part E of part 1 of subchapter J of chapter 1, all 

16 assets attributable to such portion at such time shall 

17 be treated for purposes of chapter 12 as a transfer 

18 by gift made by the deemed owner. 

19 ‘‘(b) PORTION OF TRUST TO WHICH SECTION AP20 PLIES.—This section shall apply to— 

21 ‘‘(1) the portion of a trust with respect to 

22 which the grantor is the deemed owner, and 

23 ‘‘(2) the portion of the trust to which a person 

24 who is not the grantor is a deemed owner by reason 

25 of the rules of subpart E of part 1 of subchapter J 

26 of chapter 1, and such deemed owner engages in a 


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1 sale, exchange, or comparable transaction with the 

2 trust that is disregarded for purposes of subtitle A. 

3 For purposes of paragraph (2), the portion of the trust 

4 described with respect to a transaction is the portion of 

5 the trust attributable to the property received by the trust 

6 in such transaction, including all retained income there7 from, appreciation thereon, and reinvestments thereof, net 

8 of the amount of consideration received by the deemed 

9 owner in such transaction. 

10 ‘‘(c) EXCEPTIONS.—This section shall not apply to— 

11 ‘‘(1) any trust that is includible in the gross es12 tate of the deemed owner (without regard to sub13 section (a)(1)), and 

14 ‘‘(2) any other type of trust that the Secretary 

15 determines by regulations or other guidance does not 

16 have as a significant purpose the avoidance of trans17 fer taxes. 

18 ‘‘(d) DEEMED OWNER DEFINED.—For purposes of 

19 this section, the term ‘deemed owner’ means any person 

20 who is treated as the owner of a portion of a trust under 

21 subpart E of part 1 of subchapter J of chapter 1. 

22 ‘‘(e) REDUCTION FOR TAXABLE GIFTS TO TRUST

23 MADE BY OWNER.—The amount to which subsection (a) 

24 applies shall be reduced by the value of any transfer by 


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25 

•S 2899 IS

1 gift by the deemed owner to the trust previously taken 

2 into account by the deemed owner under chapter 12. 

3 ‘‘(f) LIABILITY FOR PAYMENT OF TAX.—Any tax im4 posed pursuant to subsection (a) shall be a liability of the 

5 trust.’’. 

6 (b) CLERICAL AMENDMENT.—The table of chapters 

7 for subtitle B of such Code is amended by adding at the 

8 end the following new item: 

‘‘CHAPTER 16. SPECIAL RULES FOR GRANTOR TRUSTS’’. 

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

10 this section shall apply— 

11 (1) to trusts created on or after the date of the 

12 enactment of this Act, 

13 (2) to any portion of a trust established before 

14 the date of the enactment of this Act which is attrib15 utable to a contribution made on or after such date, 

16 and 

17 (3) to any portion of a trust established before 

18 the date of the enactment of this Act to which sec19 tion 2901(a) of the Internal Revenue Code of 1986 

20 (as added by subsection (a)) applies by reason of a 

21 transaction described in section 2901(b)(2) of such 

22 Code on or after such date. 

Æ 


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