‘‘(C) the value is determined by a court or 
pursuant to a settlement agreement with the 
Secretary. 
‘‘(3) REGULATIONS.—The Secretary may by 
regulations provide exceptions to the application of 
this subsection.’’. 
(b) INFORMATION REPORTING.— 
(1) IN GENERAL.—Section 6035 of the Internal 
Revenue Code of 1986 is amended— 
(A) in the heading, by inserting ‘‘OR BY 
GIFT’’ after ‘‘DECEDENT’’; 
(B) by redesignating subsection (b) as sub-
section (c); 
(C) by inserting after subsection (a) the 
following new subsection: 
‘‘(b) INFORMATION WITH RESPECT TO PROPERTY 
ACQUIRED BY GIFT.— 
‘‘(1) IN
GENERAL.—Each person making a 
transfer by gift who is required to file a return 
under section 6019 with respect to such transfer 
shall furnish to the Secretary and to each person ac-
quiring any interest in property by reason of such 
transfer a statement identifying the value of each in-
terest in such property as reported on such return 
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and such other information with respect to such in-
terest as the Secretary may prescribe. 
‘‘(2) TIME FOR FURNISHING STATEMENT.— 
‘‘(A) IN
GENERAL.—Each statement re-
quired to be furnished under paragraph (1) 
shall be furnished at such time as the Secretary 
may prescribe, but in no case at a time later 
than the earlier of— 
‘‘(i) the date which is 30 days after 
the date on which the return under section 
6019 was required to be filed (including 
extensions, if any), or 
‘‘(ii) the date which is 30 days after 
the date such return is filed. 
‘‘(B) ADJUSTMENTS.—In any case in 
which there is an adjustment to the information 
required to be included on a statement filed 
under paragraph (1) after such statement has 
been filed, a supplemental statement under 
such paragraph shall be filed not later than the 
date which is 30 days after such adjustment is 
made.’’; and 
(D) in paragraph (1) of subsection (c), as 
redesignated by subparagraph (B), by striking 
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‘‘estate tax return’’ and inserting ‘‘estate or gift 
tax return’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for subpart A of part III of subchapter A of 
chapter 61 of the Internal Revenue Code of 1986 is 
amended by striking the item relating to section 
6035 and inserting the following: 
‘‘Sec. 6035. Basis information to persons acquiring property from decedent or 
by gift.’’. 
(c) PENALTY FOR INCONSISTENT REPORTING.— 
(1) IN
GENERAL.—Paragraph (8) of section 
6662(b) of the Internal Revenue Code of 1986 is 
amended by inserting ‘‘or gift’’ after ‘‘estate’’. 
(2) INCONSISTENT
BASIS
REPORTING.—Sub-
section (k) of section 6662 of such Code is amended 
to read as follows: 
‘‘(k) INCONSISTENT ESTATE OR GIFT BASIS RE-
PORTING.—For purposes of this section, there is an ‘in-
consistent estate or gift basis’ if— 
‘‘(1) in the case of property acquired from a de-
cedent, the basis of property claimed on a return ex-
ceeds the basis as determined under section 1014(f), 
and 
‘‘(2) in the case of property acquired by gift, 
the basis of property claimed on a return exceeds 
the basis as determined under section 1015(f).’’. 
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(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transfers for which returns are 
filed after the date of the enactment of this Act. 
SEC. 6. VALUATION RULES FOR CERTAIN TRANSFERS OF 
NONBUSINESS ASSETS; LIMITATION ON MI-
NORITY DISCOUNTS. 
(a) IN GENERAL.—Section 2031 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(d) as subsection (f) and by inserting after subsection (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 with respect to such interest 
shall be determined as if the transferor had 
transferred such assets directly to the trans-
feree (and no valuation discount shall be al-
lowed with respect to such nonbusiness assets), 
and 
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‘‘(B) such 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 one 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 one or more real 
property trades or businesses (within the 
meaning of section 469(c)(7)(C)) in which 
the transferor materially participates and 
with respect to which the transferor meets 
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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, 
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