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‘‘(1) IN GENERAL.—The term ‘qualified funeral
trust’ shall not include any trust which accepts aggre-
gate contributions by or for the benefit of an individ-
ual in excess of $7,000.
‘‘(2) RELATED TRUSTS.—For purposes of para-
graph (1), all trusts having trustees which are related
persons shall be treated as 1 trust. For purposes of the
preceding sentence, persons are related if—
‘‘(A) the relationship between such persons
would result in the disallowance of losses under
section 267 or 707(b),
‘‘(B) such persons are treated as a single
employer under subsection (a) or (b) of section
52, or
‘‘(C) the Secretary determines that treating
such persons as related is necessary to prevent
avoidance of the purposes of this section.
‘‘(3) INFLATION
ADJUSTMENT.—In the case of
any contract referred to in subsection (b)(1) which is
entered into during any calendar year after 1996, the
dollar amount referred to paragraph (1) shall be in-
creased 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 such calendar
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year, by substituting ‘calendar year 1995’ for
‘calendar year 1992’ in subparagraph (B) there-
of.
If any dollar amount after being increased under the
preceding sentence is not a multiple of $100, such dol-
lar amount shall be rounded to the nearest multiple
of $100.
‘‘(d) APPLICATION OF RATE SCHEDULE.—Section 1(e)
shall be applied to each qualified funeral trust by treating
each beneficiary’s interest in each such trust as a separate
trust.
‘‘(e) TREATMENT OF AMOUNTS REFUNDED TO BENE-
FICIARY ON CANCELLATION.—No gain or loss shall be recog-
nized to a beneficiary described in subsection (b)(3) of any
qualified funeral trust by reason of any payment from such
trust to such beneficiary by reason of cancellation of a con-
tract referred to in subsection (b)(1). If any payment re-
ferred to in the preceding sentence consists of property other
than money, the basis of such property in the hands of such
beneficiary shall be the same as the trust’s basis in such
property immediately before the payment.
‘‘(f) SIMPLIFIED REPORTING.—The Secretary may
prescribe rules for simplified reporting of all trusts having
a single trustee.’’
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(b) CLERICAL AMENDMENT.—The table of sections for
subpart F of part I of subchapter J of chapter 1 is amended
by adding at the end the following new item:
‘‘Sec. 684. Treatment of funeral trusts.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to taxable years beginning after the date
of the enactment of this Act.
Subchapter B—Estate and Gift Tax Provisions
SEC. 11611. CLARIFICATION OF WAIVER OF CERTAIN
RIGHTS OF RECOVERY.
(a) AMENDMENT TO SECTION 2207A.—Paragraph (2)
of section 2207A(a) (relating to right of recovery in the case
of certain marital deduction property) is amended to read
as follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will (or
a revocable trust) specifically indicates an intent to
waive any right of recovery under this subchapter
with respect to such property.’’
(b) AMENDMENT TO SECTION 2207B.—Paragraph (2)
of section 2207B(a) (relating to right of recovery where de-
cedent retained interest) is amended to read as follows:
‘‘(2) DECEDENT
MAY
OTHERWISE
DIRECT.—
Paragraph (1) shall not apply with respect to any
property to the extent that the decedent in his will (or
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a revocable trust) specifically indicates an intent to
waive any right of recovery under this subchapter
with respect to such property.’’
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply with respect to the estates of decedents
dying after the date of the enactment of this Act.
SEC. 11612. ADJUSTMENTS FOR GIFTS WITHIN 3 YEARS OF
DECEDENT’S DEATH.
(a) GENERAL RULE.—Section 2035 is amended to
read as follows:
‘‘SEC. 2035. ADJUSTMENTS FOR CERTAIN GIFTS MADE
WITHIN 3 YEARS OF DECEDENT’S DEATH.
‘‘(a) INCLUSION OF CERTAIN PROPERTY IN GROSS ES-
TATE.—If—
‘‘(1) the decedent made a transfer (by trust or
otherwise) of an interest in any property, or relin-
quished a power with respect to any property, during
the 3-year period ending on the date of the decedent’s
death, and
‘‘(2) the value of such property (or an interest
therein) would have been included in the decedent’s
gross estate under section 2036, 2037, 2038, or 2042
if such transferred interest or relinquished power had
been retained by the decedent on the date of his death,
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the value of the gross estate shall include the value of any
property (or interest therein) which would have been so in-
cluded.
‘‘(b) INCLUSION OF GIFT TAX ON GIFTS MADE DURING
3 YEARS BEFORE DECEDENT’S DEATH.—The amount of
the gross estate (determined without regard to this sub-
section) shall be increased by the amount of any tax paid
under chapter 12 by the decedent or his estate on any gift
made by the decedent or his spouse during the 3-year period
ending on the date of the decedent’s death.
‘‘(c) OTHER RULES RELATING TO TRANSFERS WITHIN
3 YEARS OF DEATH.—
‘‘(1) IN GENERAL.—For purposes of—
‘‘(A) section 303(b) (relating to distribu-
tions in redemption of stock to pay death taxes),
‘‘(B) section 2032A (relating to special
valuation of certain farms, etc., real property),
and
‘‘(C) subchapter C of chapter 64 (relating to
lien for taxes),
the value of the gross estate shall include the value of
all property to the extent of any interest therein of
which the decedent has at any time made a transfer,
by trust or otherwise, during the 3-year period ending
on the date of the decedent’s death.
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‘‘(2) COORDINATION WITH SECTION 6166.—An es-
tate shall be treated as meeting the 35 percent of ad-
justed gross estate requirement of section 6166(a)(1)
only if the estate meets such requirement both with
and without the application of paragraph (1).
‘‘(3) MARITAL AND SMALL TRANSFERS.—Para-
graph (1) shall not apply to any transfer (other than
a transfer with respect to a life insurance policy)
made during a calendar year to any donee if the dece-
dent was not required by section 6019 (other than by
reason of section 6019(2)) to file any gift tax return
for such year with respect to transfers to such donee.
‘‘(d) EXCEPTION.—Subsection (a) shall not apply to
any bona fide sale for an adequate and full consideration
in money or money’s worth.
‘‘(e) TREATMENT OF CERTAIN TRANSFERS FROM REV-
OCABLE TRUSTS.—For purposes of this section and section
2038, any transfer from any portion of a trust during any
period that such portion was treated under section 676 as
owned by the decedent by reason of a power in the grantor
(determined without regard to section 672(e)) shall be treat-
ed as a transfer made directly by the decedent.’’
(b) CLERICAL AMENDMENT.—The table of sections for
part III of subchapter A of chapter 11 is amended by strik-
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ing ‘‘gifts’’ in the item relating to section 2035 and insert-
ing ‘‘certain gifts’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall apply to the estates of decedents dying after
the date of the enactment of this Act.
SEC. 11613. CLARIFICATION OF QUALIFIED TERMINABLE IN-
TEREST RULES.
(a) GENERAL RULE.—
(1) ESTATE TAX.—Subparagraph (B) of section
2056(b)(7) (defining qualified terminable interest
property) is amended by adding at the end the follow-
ing new clause:
‘‘(vi) TREATMENT OF CERTAIN INCOME
DISTRIBUTIONS.—An income interest shall
not fail to qualify as a qualified income in-
terest for life solely because income for the
period after the last distribution date and
on or before the date of the surviving
spouse’s death is not required to be distrib-
uted to the surviving spouse or to the estate
of the surviving spouse.’’
(2) GIFT TAX.—Paragraph (3) of section 2523(f)
is amended by striking ‘‘and (iv)’’ and inserting
‘‘(iv), and (vi)’’.
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(b) CLARIFICATION OF SUBSEQUENT INCLUSIONS.—
Section 2044 is amended by adding at the end the following
new subsection:
‘‘(d) CLARIFICATION OF INCLUSION OF CERTAIN IN-
COME.—The amount included in the gross estate under sub-
section (a) shall include the amount of any income from
the property to which this section applies for the period
after the last distribution date and on or before the date
of the decedent’s death if such income is not otherwise in-
cluded in the decedent’s gross estate.’’
(c) EFFECTIVE DATE.—
(1) IN
GENERAL.—The amendments made by
this section shall apply with respect to the estates of
decedents dying, and gifts made, after the date of the
enactment of this Act.
(2) APPLICATION OF SECTION 2044 TO TRANS-
FERS BEFORE DATE OF ENACTMENT.—In the case of
the estate of any decedent dying after the date of the
enactment of this Act, if there was a transfer of prop-
erty on or before such date—
(A) such property shall not be included in
the gross estate of the decedent under section
2044 of the Internal Revenue Code of 1986 if no
prior marital deduction was allowed with respect
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to such a transfer of such property to the dece-
dent, but
(B) such property shall be so included if
such a deduction was allowed.
SEC. 11614. TRANSITIONAL RULE UNDER SECTION 2056A.
(a) GENERAL RULE.—In the case of any trust created
under an instrument executed before the date of the enact-
ment of the Revenue Reconciliation Act of 1990, such trust
shall be treated as meeting the requirements of paragraph
(1) of section 2056A(a) of the Internal Revenue Code of
1986 if the trust instrument requires that all trustees of
the trust be individual citizens of the United States or do-
mestic corporations.
(b) EFFECTIVE DATE.—The provisions of subsection
(a) shall take effect as if included in the provisions of sec-
tion 11702(g) of the Revenue Reconciliation Act of 1990.
SEC. 11615. OPPORTUNITY TO CORRECT CERTAIN FAILURES
UNDER SECTION 2032A.
(a) GENERAL
RULE.—Paragraph (3) of section
2032A(d) (relating to modification of election and agree-
ment to be permitted) is amended to read as follows:
‘‘(3) MODIFICATION OF ELECTION AND AGREE-
MENT TO BE PERMITTED.—The Secretary shall pre-
scribe procedures which provide that in any case in
which the executor makes an election under para-
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graph (1) (and submits the agreement referred to in
paragraph (2)) within the time prescribed therefor,
but—
‘‘(A) the notice of election, as filed, does not
contain all required information, or
‘‘(B) signatures of 1 or more persons re-
quired to enter into the agreement described in
paragraph (2) are not included on the agreement
as filed, or the agreement does not contain all re-
quired information,
the executor will have a reasonable period of time (not
exceeding 90 days) after notification of such failures
to provide such information or signatures.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to the estates of decedents dying after
the date of the enactment of this Act.
SEC. 11616. GIFTS MAY NOT BE REVALUED FOR ESTATE TAX
PURPOSES AFTER EXPIRATION OF STATUTE
OF LIMITATIONS.
(a) IN GENERAL.—Section 2001 (relating to imposi-
tion and rate of estate tax) is amended by adding at the
end the following new subsection:
‘‘(f) VALUATION OF GIFTS.—If—
‘‘(1) the time has expired within which a tax
may be assessed under chapter 12 (or under cor-
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responding provisions of prior laws) on the transfer
of property by gift made during a preceding calendar
period (as defined in section 2502(b)), and
‘‘(2) the value of such gift is shown on the return
for such preceding calendar period or is disclosed in
such return, or in a statement attached to the return,
in a manner adequate to apprise the Secretary of the
nature of such gift,
the value of such gift shall, for purposes of computing the
tax under this chapter, be the value of such gift as finally
determined for purposes of chapter 12.’’
(b) MODIFICATION OF APPLICATION OF STATUTE OF
LIMITATIONS.—Paragraph (9) of section 6501(c) is amend-
ed to read as follows:
‘‘(9) GIFT TAX ON CERTAIN GIFTS NOT SHOWN
ON RETURN.—If any gift of property the value of
which (or any increase in taxable gifts required under
section 2701(d)) is required to be shown on a return
of tax imposed by chapter 12 (without regard to sec-
tion 2503(b)), and is not shown on such return, any
tax imposed by chapter 12 on such gift may be as-
sessed, or a proceeding in court for the collection of
such tax may be begun without assessment, at any
time. The preceding sentence shall not apply to any
item which is disclosed in such return, or in a state-
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ment attached to the return, in a manner adequate to
apprise the Secretary of the nature of such item. The
value of any item which is so disclosed may not be
redetermined by the Secretary after the expiration of
the period under subsection (a).’’
(c) DECLARATORY JUDGMENT PROCEDURE FOR DE-
TERMINING VALUE OF GIFT.—
(1) IN GENERAL.—Part IV of subchapter C of
chapter 76 is amended by inserting after section 7476
the following new section:
‘‘SEC. 7477. DECLARATORY JUDGMENTS RELATING TO
VALUE OF CERTAIN GIFTS.
‘‘(a) CREATION OF REMEDY.—In a case of an actual
controversy involving a determination by the Secretary of
the value of any gift shown on the return of tax imposed
by chapter 12 or disclosed on such return or in any state-
ment attached to such return, upon the filing of an appro-
priate pleading, the Tax Court may make a declaration of
the value of such gift. Any such declaration shall have the
force and effect of a decision of the Tax Court and shall
be reviewable as such.
‘‘(b) LIMITATIONS.—
‘‘(1) PETITIONER.—A pleading may be filed
under this section only by the donor.
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‘‘(2) EXHAUSTION
OF
ADMINISTRATIVE
REM-
EDIES.—The court shall not issue a declaratory judg-
ment or decree under this section in any proceeding
unless it determines that the petitioner has exhausted
all available administrative remedies within the In-
ternal Revenue Service.
‘‘(3) TIME FOR BRINGING ACTION.—If the Sec-
retary sends by certified or registered mail notice of
his determination as described in subsection (a) to the
petitioner, no proceeding may be initiated under this
section unless the pleading is filed before the 91st day
after the date of such mailing.’’
(2) CLERICAL AMENDMENT.—The table of sec-
tions for such part IV is amended by inserting after
the item relating to section 7476 the following new
item:
‘‘Sec. 7477. Declaratory judgments relating to value of certain
gifts.’’
(d) CONFORMING AMENDMENT.—Subsection (c) of sec-
tion 2504 is amended by striking ‘‘, and if a tax under
this chapter or under corresponding provisions of prior
laws has been assessed or paid for such preceding calendar
period’’.
(e) EFFECTIVE DATES.—
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(1) IN
GENERAL.—The amendments made by
subsections (a) and (c) shall apply to gifts made after
the date of the enactment of this Act.
(2) SUBSECTION (b).—The amendment made by
subsection (b) shall apply to gifts made in calendar
years ending after the date of the enactment of this
Act.
SEC. 11617. CLARIFICATIONS RELATING TO DISCLAIMERS.
(a) PARTIAL TRANSFER-TYPE DISCLAIMERS PER-
MITTED.—Paragraph (3) of section 2518(c) (relating to cer-
tain transfers treated as disclaimers) is amended by insert-
ing ‘‘(or an undivided portion of such interest)’’ after ‘‘en-
tire interest in the property’’.
(b) RETENTION OF INTEREST BY DECEDENT’S SPOUSE
PERMITTED
IN
TRANSFER-TYPE
DISCLAIMERS.—Para-
graph (3) of section 2518(c) is amended by adding at the
end the following new flush sentence:
‘‘For purposes of the preceding sentence, a written
transfer by the spouse of the decedent of property to
a trust shall not fail to be treated as a transfer of
such spouse’s interest in such property by reason of
such spouse having an interest in such trust.’’
(c) DISCLAIMERS ARE EFFECTIVE FOR INCOME TAX
PURPOSES.—Subsection (a) of section 2518 is amended by
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inserting ‘‘and subtitle A’’ after ‘‘this subtitle’’ each place
it appears.
(d) EFFECTIVE DATE.—The amendments made by this
section shall apply to transfers creating an interest in the
person disclaiming, and disclaimers, made after the date
of the enactment of this Act.
SEC. 11618. CLARIFICATION OF TREATMENT OF SURVIVOR
ANNUITIES UNDER QUALIFIED TERMINABLE
INTEREST RULES.
(a) IN
GENERAL.—Subparagraph (C) of section
2056(b)(7) is amended by inserting ‘‘(or, in the case of an
interest in an annuity arising under the community prop-
erty laws of a State, included in the gross estate of the dece-
dent under section 2033)’’ after ‘‘section 2039’’.
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to estates of decedents dying after the
date of the enactment of this Act.
SEC. 11619. TREATMENT UNDER QUALIFIED DOMESTIC
TRUST RULES OF FORMS OF OWNERSHIP
WHICH ARE NOT TRUSTS.
(a) IN GENERAL.—Subsection (c) of section 2056A (de-
fining qualified domestic trust) is amended by adding at
the end the following new paragraph:
‘‘(3) TRUST.—To the extent provided in regula-
tions prescribed by the Secretary, the term ‘trust’ in-
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cludes other arrangements which have substantially
the same effect as a trust.’’
(b) EFFECTIVE DATE.—The amendment made by this
section shall apply to estates of decedents dying after the
date of the enactment of this Act.
Subchapter C—Generation-Skipping Tax
Provisions
SEC. 11631. TAXABLE TERMINATION NOT TO INCLUDE DI-
RECT SKIPS.
(a) IN GENERAL.—Paragraph (1) of section 2612(a)
(defining taxable termination) is amended by adding at the
end the following new flush sentence:
‘‘Such term shall not include a direct skip.’’
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall apply to generation-skipping transfers (as
defined in section 2611 of the Internal Revenue Code of
1986) after the date of the enactment of this Act.
CHAPTER 7—EXCISE TAX SIMPLIFICATION
Subchapter A—Provisions Related to Distilled
Spirits, Wines, and Beer
SEC. 11641. CREDIT OR REFUND FOR IMPORTED BOTTLED
DISTILLED SPIRITS RETURNED TO DISTILLED
SPIRITS PLANT.
(a) IN GENERAL.—Paragraph (1) of section 5008(c)
(relating to distilled spirits returned to bonded premises)
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is amended by striking ‘‘withdrawn from bonded premises
on payment or determination of tax’’ and inserting ‘‘on
which tax has been determined or paid’’.
(b) EFFECTIVE DATE.—The amendment made by sub-
section (a) shall take effect at the beginning of the first cal-
endar quarter beginning more than 180 days after the date
of the enactment of this Act.
SEC. 11642. FERMENTED MATERIAL FROM ANY BREWERY
MAY BE RECEIVED AT A DISTILLED SPIRITS
PLANT.
(a) IN GENERAL.—Paragraph (2) of section 5222(b)
(relating to production, receipt, removal, and use of distill-
ing materials) is amended to read as follows:
‘‘(2) beer conveyed without payment of tax from
brewery premises, beer which has been lawfully re-
moved from brewery premises upon determination of
tax, or’’.
(b) CLARIFICATION OF AUTHORITY TO PERMIT RE-
MOVAL OF BEER WITHOUT PAYMENT OF TAX FOR USE AS
DISTILLING MATERIAL.—Section 5053 (relating to exemp-
tions) is amended by redesignating subsection (f) as sub-
section (i) and by inserting after subsection (e) the following
new subsection:
‘‘(f) REMOVAL FOR USE AS DISTILLING MATERIAL.—
Subject to such regulations as the Secretary may prescribe,
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beer may be removed from a brewery without payment of
tax to any distilled spirits plant for use as distilling mate-
rial.’’
(c) CLARIFICATION
OF REFUND
AND CREDIT
OF
TAX.—Section 5056 (relating to refund and credit of tax,
or relief from liability) is amended—
(1) by redesignating subsection (c) as subsection
(d) and by inserting after subsection (b) the following
new subsection:
‘‘(c) BEER
RECEIVED
AT
A
DISTILLED
SPIRITS
PLANT.—Any tax paid by any brewer on beer produced in
the United States may be refunded or credited to the brewer,
without interest, or if the tax has not been paid, the brewer
may be relieved of liability therefor, under regulations as
the Secretary may prescribe, if such beer is received on the
bonded premises of a distilled spirits plant pursuant to the
provisions of section 5222(b)(2), for use in the production
of distilled spirits.’’, and
(2) by striking ‘‘or rendering unmerchantable’’
in subsection (d) (as so redesignated) and inserting
‘‘rendering unmerchantable, or receipt on the bonded
premises of a distilled spirits plant’’.
(d) EFFECTIVE DATE.—The amendments made by this
section shall take effect at the beginning of the first calendar
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quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 11643. REFUND OF TAX ON WINE RETURNED TO BOND
NOT LIMITED TO UNMERCHANTABLE WINE.
(a) IN GENERAL.—Subsection (a) of section 5044 (re-
lating to refund of tax on unmerchantable wine) is amended
by striking ‘‘as unmerchantable’’.
(b) CONFORMING AMENDMENTS.—
(1) Section 5361 is amended by striking
‘‘unmerchantable’’.
(2) The section heading for section 5044 is
amended by striking ‘‘unmerchantable’’.
(3) The item relating to section 5044 in the table
of sections for subpart C of part I of subchapter A of
chapter 51 is amended by striking ‘‘unmerchantable’’.
(c) EFFECTIVE DATE.—The amendments made by this
section shall take effect at the beginning of the first calendar
quarter beginning more than 180 days after the date of the
enactment of this Act.
SEC. 11644. BEER MAY BE WITHDRAWN FREE OF TAX FOR
DESTRUCTION.
(a) IN GENERAL.—Section 5053 is amended by insert-
ing after subsection (g) the following new subsection:
‘‘(h) REMOVALS FOR DESTRUCTION.—Subject to such
regulations as the Secretary may prescribe, beer may be re-