I
107TH CONGRESS
1ST SESSION
H. R. 1398
To amend the Internal Revenue Code of 1986 to provide individual income
tax rate reductions, tax relief to families with children, marriage penalty
relief, and to immediately eliminate the estate tax for two-thirds of
all decedents currently subject to the estate tax.
IN THE HOUSE OF REPRESENTATIVES
APRIL 4, 2001
Mr. RANGEL (for himself, Mr. BONIOR, Mrs. MINK of Hawaii, Mr. PASTOR,
Mr. SAWYER, Mr. MCNULTY, Mr. PASCRELL, Mr. MATSUI, Mr. BAR-
RETT, and Mr. LEVIN) 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 provide
individual income tax rate reductions, tax relief to fami-
lies with children, marriage penalty relief, and to imme-
diately eliminate the estate tax for two-thirds of all dece-
dents currently subject to the estate tax.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Tax Reduction Act of 2001’’.
(b) AMENDMENT OF 1986 CODE.—Except as other-
wise expressly provided, whenever in this Act an amend-
ment or repeal is expressed in terms of an amendment
to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provi-
sion of the Internal Revenue Code of 1986.
(c) SECTION 15 NOT TO APPLY.—No amendment
made by this Act shall be treated as a change in a rate
of tax for purposes of section 15 of the Internal Revenue
Code of 1986.
TITLE 
I—INDIVIDUAL 
INCOME
TAX RATE REDUCTIONS; EX-
PANSION OF EARNED INCOME
CREDIT ASSISTANCE
SEC. 101. INDIVIDUAL INCOME TAX RATE REDUCTIONS.
(a) IN GENERAL.—Section 1 is amended by adding
at the end the following new subsection:
‘‘(i) 12 PERCENT RATE BRACKET.—
‘‘(1) IN GENERAL.—In the case of taxable years
beginning after December 31, 2000—
‘‘(A) the rate of tax under subsections (a),
(b), (c), and (d) on taxable income not over the
initial bracket amount shall be 12 percent, and
‘‘(B) the 15 percent rate of tax shall apply
only to taxable income over the initial bracket
amount.
‘‘(2) INITIAL BRACKET AMOUNT.—For purposes
of this subsection—
‘‘(A) IN GENERAL.—Except as provided in
subparagraph (B), the initial bracket amount
is—
‘‘(i) $20,000 in the case of subsection
(a),
‘‘(ii) 80 percent of the dollar amount
in clause (i) in the case of subsection (b),
and
‘‘(iii) 50 percent of the dollar amount
in clause (i) in the case of subsections (c)
and (d).
‘‘(B) 
PHASEIN.—The 
initial 
bracket
amount is—
‘‘(i) 1⁄4 the amount otherwise applica-
ble under subparagraph (A) in the case of
taxable years beginning during 2001, and
‘‘(ii) 1⁄2 such amount otherwise appli-
cable under subparagraph (A) in the case
of taxable years beginning during 2002.
‘‘(3) INFLATION ADJUSTMENT.—
‘‘(A) IN
GENERAL.—In the case of any
taxable year beginning in a calendar year after
2003, the $20,000 amount under paragraph
(2)(A)(i) shall be increased by an amount equal
to—
‘‘(i) such dollar amount, multiplied by
‘‘(ii) the cost-of-living adjustment de-
termined under subsection (f)(3) for the
calendar year in which the taxable year be-
gins, determined by substituting ‘calendar
year 2002’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof.
‘‘(B) ROUNDING RULES.—If any amount
after adjustment under subparagraph (A) is not
a multiple of $50, such amount shall be round-
ed to the next lowest multiple of $50.
‘‘(4) ADJUSTMENT OF TABLES.—The Secretary
shall adjust the tables prescribed under subsection
(f) to carry out this subsection.’’
(b) ADJUSTMENT
IN
COMPUTATION
OF
ALTER-
NATIVE MINIMUM TAX.—Paragraph (2) of section 55(a)
is amended to read as follows:
‘‘(2) the sum of—
‘‘(A) the regular tax for the taxable year,
plus
‘‘(B) in the case of an individual, 3 percent
of so much of the individual’s taxable income
for the taxable year as is taxed at 12 percent.’’
(c) REPEAL OF REDUCTION OF REFUNDABLE TAX
CREDITS.—
(1) Subsection (d) of section 24 is amended by
striking paragraph (2) and redesignating paragraph
(3) as paragraph (2).
(2) Section 32 is amended by striking sub-
section (h).
(d) CONFORMING AMENDMENT.—Subclause (II) of
section 1(g)(7)(B)(ii) is amended by striking ‘‘15 percent’’
and inserting ‘‘12 percent’’.
(e) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
(f) PROTECTION OF SOCIAL SECURITY AND MEDI-
CARE.—The amounts transferred to any trust fund under
the Social Security Act shall be determined as if this Act
had not been enacted.
SEC. 102. MODIFICATIONS TO EARNED INCOME TAX CRED-
IT.
(a) INCREASES
IN PERCENTAGES
AND AMOUNTS
USED TO DETERMINE CREDIT; MARRIAGE PENALTY RE-
LIEF.—
(1) IN GENERAL.—Subsection (b) of section 32
is amended to read as follows:
‘‘(b) PERCENTAGES AND AMOUNTS.—
‘‘(1) PERCENTAGES.—The credit percentage,
the initial phaseout percentage, and the final phase-
out percentage shall be determined as follows:
‘‘In the case of an eligible indi-
vidual with:
The credit per-
centage is:
The initial
phaseout per-
centage is:
The final
phaseout per-
centage is:
1 qualifying child ..................
15.98
18.98
2 or more qualifying children
21.06
24.06
No qualifying children ..........
7.65
7.65
7.65
‘‘(2) AMOUNTS.—
‘‘(A) IN
GENERAL.—The earned income
amount and the initial phaseout amount shall
be determined as follows:
‘‘In the case of an eligible individual with:
The earned in-
come amount
is:
The initial
phaseout
amount is:
1 qualifying child ..............................................
$8,140
$13,470
2 or more qualifying children ...........................
$11,120
$13,470
No qualifying children ......................................
$4,900
$6,130.
In the case of a joint return where there is at
least 1 qualifying child, the initial phaseout
amount shall be $2,500 greater than the
amount otherwise applicable under the pre-
ceding sentence.
‘‘(B) FINAL
PHASEOUT
AMOUNT.—The
final phaseout amount is $26,000 ($28,500 in
the case of a joint return).’’
(2) 
MODIFICATION
OF
COMPUTATION
OF
PHASEOUT.—Paragraph (2) of section 32(a) is
amended to read as follows:
‘‘(2) PHASEOUT OF CREDIT.—The amount of
the credit allowable to a taxpayer under paragraph
(1) for any taxable year shall be reduced (but not
below zero) by the sum of—
‘‘(A) the initial phaseout percentage of so
much of the total income (or, if greater, the
earned income) of the taxpayer for the taxable
year as exceeds the initial phaseout amount but
does not exceed the final phaseout amount, plus
‘‘(B) the final phaseout percentage of so
much of the total income (or, if greater, the
earned income) of the taxpayer for the taxable
year as exceeds the final phaseout amount.’’
(3) TOTAL INCOME.—Paragraph (5) of section
32(c) is amended to read as follows:
‘‘(5) TOTAL INCOME.—The term ‘total income’
means adjusted gross income determined without re-
gard to—
‘‘(A) the deductions referred to in para-
graphs (6), (7), (9), (10), (15), (16), and (17)
of section 62(a),
‘‘(B) the deduction allowed by section
162(l), and
‘‘(C) the deduction allowed by section
164(f).’’
(4) CONFORMING AMENDMENTS.—
(A) Subsection (j) of section 32 is amend-
ed to read as follows:
‘‘(j) INFLATION ADJUSTMENT.—
‘‘(1) IN GENERAL.—In the case of any taxable
year beginning after 2002, each of the dollar
amounts in subsection (b)(2) shall be increased by
an amount equal to—
‘‘(A) such dollar amount, multiplied by
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3), for the calendar
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2001’ for
‘calendar year 1992’ in subparagraph (B)
thereof.
‘‘(2) ROUNDING.—If any dollar amount, after
being increased under paragraph (1), is not a mul-
tiple of $10, such dollar amount shall be rounded to
the nearest multiple of $10.’’
(B) Subparagraph (C) of section 32(c)(1)
is amended by striking ‘‘modified adjusted
gross income’’ and inserting ‘‘total income’’.
(C) Paragraph (2) of section 32(f) is
amended to read as follows:
‘‘(2) REQUIREMENTS FOR TABLES.—
‘‘(A) IN GENERAL.—The provisions of sub-
section (a)(1) and the provisions of subsection
(a)(2) shall be reflected in separate tables pre-
scribed under paragraph (1).
‘‘(B) SUBSECTION (a)(1) TABLE.—The ta-
bles prescribed under paragraph (1) to reflect
the provisions of subsection (a)(1) shall have in-
come brackets of not greater than $50 each for
earned income between $0 and the earned in-
come amount.
‘‘(C) SUBSECTION (a)(2) TABLE.—The ta-
bles prescribed under paragraph (1) to reflect
the provisions of subsection (a)(2) shall have in-
come brackets of not greater than $50 each for
total income (or, if greater, the earned income)
above the initial phaseout threshold.’’
(b) REPEAL OF DENIAL OF CREDIT WHERE INVEST-
MENT INCOME.—Section 32 is amended by striking sub-
section (i).
(c) EARNED INCOME TO INCLUDE ONLY AMOUNTS
INCLUDIBLE IN GROSS INCOME.—
(1) IN GENERAL.—Section 32(c)(2)(A)(i) (de-
fining earned income) is amended by inserting ‘‘, but
only if such amounts are includible in gross income
for the taxable year’’ after ‘‘other employee com-
pensation’’.
(2) 
CONFORMING
AMENDMENT.—Section
32(c)(2)(B) is amended by striking ‘‘and’’ at the end
of clause (iv), by striking the period at the end of
clause (v) and inserting ‘‘, and’’, and by adding at
the end the following new clause:
‘‘(vi) the requirement under subparagraph
(A)(i) that an amount be includible in
gross income shall not apply if such
amount is exempt from tax under section
7873 or is derived directly from restricted
and allotted land under the Act of Feb-
ruary 8, 1887 (commonly known as the In-
dian General Allotment Act) (25 U.S.C.
331 et seq.) or from land held under Acts
or treaties containing an exception provi-
sion similar to the Indian General Allot-
ment Act.’’
(d) MODIFICATION
OF JOINT RETURN REQUIRE-
MENT.—Subsection (d) of section 32 is amended to read
as follows:
‘‘(d) MARRIED INDIVIDUALS.—
‘‘(1) IN GENERAL.—If the taxpayer is married
at the close of the taxable year, the credit shall be
allowed under subsection (a) only if the taxpayer
and his spouse file a joint return for the taxable
year.
‘‘(2) MARITAL STATUS.—For purposes of para-
graph (1), an individual legally separated from his
spouse under a decree of divorce or of separate
maintenance shall not be considered as married.
‘‘(3) CERTAIN
MARRIED
INDIVIDUALS
LIVING
APART.—For purposes of paragraph (1), if—
‘‘(A) an individual —
‘‘(i) is married and files a separate re-
turn, and
‘‘(ii) has a qualifying child who is a
son, daughter, stepson, or stepdaughter of
such individual, and
‘‘(B) during the last 6 months of such tax-
able year, such individual and such individual’s
spouse do not have the same principal place of
abode,
such individual shall not be considered as married.’’
(e) EXPANSION OF MATHEMATICAL ERROR AUTHOR-
ITY.—Paragraph (2) of section 6213(g) is amended by
striking ‘‘and’’ at the end of subparagraph (K), by striking
the period at the end of subparagraph (L) and inserting
‘‘, and’’, and by inserting after subparagraph (L) the fol-
lowing new subparagraph:
‘‘(M) the entry on the return claiming the
credit under section 32 with respect to a child
if, according to the Federal Case Registry of
Child Support Orders established under section
453(h) of the Social Security Act, the taxpayer
is a noncustodial parent of such child.’’
(f) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2001.
TITLE II—MARRIAGE PENALTY
RELIEF
SEC. 201. MARRIAGE PENALTY RELIEF.
(a) STANDARD DEDUCTION.—
(1) IN
GENERAL.—Paragraph (2) of section
63(c) (relating to standard deduction) is amended—
(A) by striking ‘‘$5,000’’ in subparagraph
(A) and inserting ‘‘twice the dollar amount in
effect under subparagraph (C) for the taxable
year’’,
(B) by adding ‘‘or’’ at the end of subpara-
graph (B),
(C) by striking ‘‘in the case of’’ and all
that follows in subparagraph (C) and inserting
‘‘in any other case.’’, and
(D) by striking subparagraph (D).
(2) INCREASE ALLOWED AS DEDUCTION IN DE-
TERMINING
MINIMUM
TAX.—Subparagraph (E) of
section 56(b)(1) is amended by adding at the end
the following new sentence: ‘‘The preceding sentence
shall not apply to so much of the standard deduction
under subparagraph (A) of section 63(c)(2) as ex-
ceeds the amount which would be such deduction but
for the amendment made by section 201(a)(1) of the
Tax Reduction Act of 2001.
(3) TECHNICAL AMENDMENTS.—
(A) Subparagraph (B) of section 1(f)(6) is
amended by striking ‘‘(other than with’’ and all
that follows through ‘‘shall be applied’’ and in-
serting ‘‘(other than with respect to sections
63(c)(4) and 151(d)(4)(A)) shall be applied’’.
(B) Paragraph (4) of section 63(c) is
amended by adding at the end the following
flush sentence:
‘‘The preceding sentence shall not apply to the
amount referred to in paragraph (2)(A).’’.
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to taxable years beginning after
December 31, 2000.
TITLE III—ESTATE TAX RELIEF
SEC. 301. INCREASE IN EXEMPTION EQUIVALENT OF UNI-
FIED CREDIT.
(a) IN GENERAL.—Subsection (c) of section 2010
(relating to applicable credit amount) is amended by strik-
ing the table and inserting the following new table:
‘‘In the case of estates of decedents
The applicable
dying, and gifts made, during:
exclusion amount is:
2002 .......................................................................
$2,000,000
2003 and 2004 ......................................................
$2,100,000
2005 and 2006 ......................................................
$2,200,000
2007 and 2008 ......................................................
$2,300,000
2009 .......................................................................
$2,400,000
2010 or thereafter .................................................
$2,500,000.’’
(b) REPEAL
OF SPECIAL BENEFIT
FOR FAMILY-
OWNED BUSINESS INTERESTS.—
(1) Section 2057 is hereby repealed.
(2) Paragraph (10) of section 2031(c) is
amended by inserting ‘‘(as in effect on the day be-
fore the date of the enactment of this parenthet-
ical)’’ before the period.
(3) The table of sections for part IV of sub-
chapter A of chapter 11 is amended by striking the
item relating to section 2057.
(c) CORRECTION OF TECHNICAL ERROR AFFECTING
LARGEST ESTATES.—Paragraph (2) of section 2001(c) is
amended by striking ‘‘$10,000,000’’ and all that follows
and inserting ‘‘$10,000,000. The amount of the increase
under the preceding sentence shall not exceed the sum of
the applicable credit amount under section 2010(c) and
$359,200.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying, and
gifts made, after December 31, 2001.
SEC. 302. CREDIT FOR STATE DEATH TAXES REPLACED
WITH DEDUCTION FOR SUCH TAXES.
(a) REPEAL OF CREDIT.—Section 2011 (relating to
credit for State death taxes) is hereby repealed.
(b) DEDUCTION FOR STATE DEATH TAXES.—Part
IV of subchapter A of chapter 11 is amended by adding
at the end the following new section:
‘‘SEC. 2058. STATE DEATH TAXES.
‘‘(a) ALLOWANCE OF DEDUCTION.—For purposes of
the tax imposed by section 2001, the value of the taxable
estate shall be determined by deducting from the value
of the gross estate the amount of any estate, inheritance,
legacy, or succession taxes actually paid to any State or
the District of Columbia, in respect of any property in-
cluded in the gross estate (not including any such taxes
paid with respect to the estate of a person other than the
decedent).
‘‘(b) PERIOD OF LIMITATIONS.—The deduction al-
lowed by this section shall include only such taxes as were
actually paid and deduction therefor claimed within 4
years after the filing of the return required by section
6018, except that—
‘‘(1) If a petition for redetermination of a defi-
ciency has been filed with the Tax Court within the
time prescribed in section 6213(a), then within such
4-year period or before the expiration of 60 days
after the decision of the Tax Court becomes final.
‘‘(2) If, under section 6161 or 6166, an exten-
sion of time has been granted for payment of the tax
shown on the return, or of a deficiency, then within
such 4-year period or before the date of the expira-
tion of the period of the extension.
‘‘(3) If a claim for refund or credit of an over-
payment of tax imposed by this chapter has been
filed within the time prescribed in section 6511, then
within such 4-year period or before the expiration of
60 days from the date of mailing by certified mail
or registered mail by the Secretary to the taxpayer
of a notice of the disallowance of any part of such
claim, or before the expiration of 60 days after a de-
cision by any court of competent jurisdiction be-
comes final with respect to a timely suit instituted
upon such claim, whichever is later.
Refund based on the deduction may (despite the provisions
of sections 6511 and 6512) be made if claim therefor is
filed within the period above provided. Any such refund
shall be made without interest.’’
(c) CONFORMING AMENDMENTS.—
(1) Subsection (a) of section 2012 is amended
by striking ‘‘the credit for State death taxes pro-
vided by section 2011 and’’.
(2) Subparagraph (A) of section 2013(c)(1) is
amended by striking ‘‘2011,’’.
(3) Paragraph (2) of section 2014(b) is amend-
ed by striking ‘‘, 2011,’’.
(4) Sections 2015 and 2016 are each amended
by striking ‘‘2011 or’’.
(5) Subsection (d) of section 2053 is amended
to read as follows:
‘‘(d) CERTAIN FOREIGN DEATH TAXES.—
‘‘(1) IN GENERAL.—Notwithstanding the provi-
sions of subsection (c)(1)(B) of this section, for pur-
poses of the tax imposed by section 2001, the value
of the taxable estate may be determined, if the ex-
ecutor so elects before the expiration of the period
of limitation for assessment provided in section
6501, by deducting from the value of the gross es-
tate the amount (as determined in accordance with
regulations prescribed by the Secretary) of any es-
tate, succession, legacy, or inheritance tax imposed
by and actually paid to any foreign country, in re-
spect of any property situated within such foreign
country and included in the gross estate of a citizen
or resident of the United States, upon a transfer by
the decedent for public, charitable, or religious uses
described in section 2055. The determination under
this paragraph of the country within which property
is situated shall be made in accordance with the
rules applicable under subchapter B (sec. 2101 and
following) in determining whether property is situ-
ated within or without the United States. Any elec-
tion under this paragraph shall be exercised in ac-
cordance with regulations prescribed by the Sec-
retary.
‘‘(2) CONDITION FOR ALLOWANCE OF DEDUC-
TION.—No deduction shall be allowed under para-
graph (1) for a foreign death tax specified therein
unless the decrease in the tax imposed by section
2001 which results from the deduction provided in
paragraph (1) will inure solely for the benefit of the
public, charitable, or religious transferees described
in section 2055 or section 2106(a)(2). In any case
where the tax imposed by section 2001 is equitably
apportioned among all the transferees of property
included in the gross estate, including those de-
scribed in sections 2055 and 2106(a)(2) (taking into
account any exemptions, credits, or deductions al-
lowed by this chapter), in determining such decrease,
there shall be disregarded any decrease in the Fed-
eral estate tax which any transferees other than
those described in sections 2055 and 2106(a)(2) are
required to pay.
‘‘(3) EFFECT ON CREDIT FOR FOREIGN DEATH
TAXES OF DEDUCTION UNDER THIS SUBSECTION.—
‘‘(A) ELECTION.—An election under this
subsection shall be deemed a waiver of the right
to claim a credit, against the Federal estate
tax, under a death tax convention with any for-
eign country for any tax or portion thereof in
respect of which a deduction is taken under this
subsection.
(13) The table of sections for part IV of sub-
chapter A of chapter 11 is amended by adding at
the end the following new item:
‘‘Sec. 2058. State death taxes.’’
(d) EFFECTIVE DATE.—The amendments made by
this section shall apply to estates of decedents dying after
December 31, 2001.
SEC. 303. VALUATION RULES FOR CERTAIN TRANSFERS OF
NONBUSINESS ASSETS; LIMITATION ON MI-
NORITY DISCOUNTS.
(a) IN GENERAL.—Section 2031 (relating to defini-
tion of gross estate) is amended by redesignating sub-
section (d) as subsection (f) and by inserting after sub-
section (c) the following new subsections:
‘‘(d) VALUATION RULES FOR CERTAIN TRANSFERS
OF NONBUSINESS ASSETS.—For purposes of this chapter
and chapter 12—
‘‘(1) IN GENERAL.—In the case of the transfer
of any interest in an entity other than an interest
which is actively traded (within the meaning of sec-
tion 1092)—
‘‘(A) the value of any nonbusiness assets
held by the entity shall be determined as if the
transferor had transferred such assets directly
to the transferee (and no valuation discount
shall be allowed with respect to such nonbusi-
ness assets), and
‘‘(B) the nonbusiness assets shall not be
taken into account in determining the value of
the interest in the entity.
‘‘(2) NONBUSINESS ASSETS.—For purposes of
this subsection—
‘‘(A) IN
GENERAL.—The term ‘nonbusi-
ness asset’ means any asset which is not used
in the active conduct of 1 or more trades or
businesses.
‘‘(B) EXCEPTION
FOR
CERTAIN
PASSIVE
ASSETS.—Except as provided in subparagraph
(C), a passive asset shall not be treated for pur-
poses of subparagraph (A) as used in the active
conduct of a trade or business unless—
‘‘(i) the asset is property described in
paragraph (1) or (4) of section 1221(a) or
is a hedge with respect to such property,
or
‘‘(ii) the asset is real property used in
the active conduct of 1 or more real prop-
erty trades or businesses (within the mean-
ing of section 469(c)(7)(C)) in which the
transferor materially participates and with
respect to which the transferor meets the
requirements of section 469(c)(7)(B)(ii).
For purposes of clause (ii), material participa-
tion shall be determined under the rules of sec-
tion 469(h), except that section 469(h)(3) shall
be applied without regard to the limitation to
farming activity.
‘‘(C) EXCEPTION
FOR
WORKING
CAP-
ITAL.—Any asset (including a passive asset)
which is held as a part of the reasonably re-
quired working capital needs of a trade or busi-
ness shall be treated as used in the active con-
duct of a trade or business.
‘‘(3) PASSIVE
ASSET.—For purposes of this
subsection, the term ‘passive asset’ means any—
‘‘(A) cash or cash equivalents,
‘‘(B) except to the extent provided by the
Secretary, stock in a corporation or any other
equity, profits, or capital interest in any entity,
‘‘(C) evidence of indebtedness, option, for-
ward or futures contract, notional principal con-
tract, or derivative,
‘‘(D) asset described in clause (iii), (iv), or
(v) of section 351(e)(1)(B),
‘‘(E) annuity,
‘‘(F) real property used in 1 or more real
property trades or businesses (as defined in sec-
tion 469(c)(7)(C)),
‘‘(G) asset (other than a patent, trade-
mark, or copyright) which produces royalty in-
come,
‘‘(H) commodity,
‘‘(I) collectible (within the meaning of sec-
tion 401(m)), or
‘‘(J) any other asset specified in regula-
tions prescribed by the Secretary.
‘‘(4) LOOK-THRU RULES.—
‘‘(A) IN GENERAL.—If a nonbusiness asset
of an entity consists of a 10-percent interest in
any other entity, this subsection shall be ap-
plied by disregarding the 10-percent interest
and by treating the entity as holding directly its
ratable share of the assets of the other entity.
This subparagraph shall be applied successively
to any 10-percent interest of such other entity
in any other entity.
‘‘(B) 10-PERCENT
INTEREST.—The term
‘10-percent interest’ means—
‘‘(i) in the case of an interest in a cor-
poration, ownership of at least 10 percent
(by vote or value) of the stock in such cor-
poration,
‘‘(ii) in the case of an interest in a
partnership, ownership of at least 10 per-
cent of the capital or profits interest in the
partnership, and
‘‘(iii) in any other case, ownership of
at least 10 percent of the beneficial inter-
ests in the entity.
‘‘(5) COORDINATION WITH SUBSECTION (b).—
Subsection (b) shall apply after the application of
this subsection.
‘‘(e) LIMITATION ON MINORITY DISCOUNTS.—For
purposes of this chapter and chapter 12, in the case of
the transfer of any interest in an entity other than an in-
terest which is actively traded (within the meaning of sec-
tion 1092), no discount shall be allowed by reason of the
fact that the transferee does not have control of such enti-
ty if the transferee and members of the family (as defined
in section 2032A(e)(2)) of the transferee have control of
such entity.’’
(b) EFFECTIVE DATE.—The amendments made by
this section shall apply to transfers after the date of the
enactment of this Act.