Source: http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title26-section2701&num=0&edition=prelim
Timestamp: 2019-04-24 20:03:29+00:00

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(2) Exceptions for marketable retained interests, etc.
(C) such interest is proportionally the same as the transferred interest, without regard to nonlapsing differences in voting power (or, for a partnership, nonlapsing differences with respect to management and limitations on liability).
(ii) the total amount of indebtedness of such entity to the transferor (or an applicable family member).
The term "junior equity interest" means common stock or, in the case of a partnership, any partnership interest under which the rights as to income and capital (or, to the extent provided in regulations, the rights as to either income or capital) are junior to the rights of all other classes of equity interests.
The term "equity interest" means stock or any interest as a partner, as the case may be.
(B) a liquidation, put, call, or conversion right.
In the case of a corporation, the term "control" means the holding of at least 50 percent (by vote or value) of the stock of the corporation.
(ii) in the case of a limited partnership, the holding of any interest as a general partner.
For purposes of this subsection, the term "applicable family member" includes any lineal descendant of any parent of the transferor or the transferor's spouse.
(ii) a right to distributions from a partnership with respect to a partner's interest in the partnership.
(iii) any right to receive any guaranteed payment described in section 707(c) of a fixed amount.
The term "liquidation, put, call, or conversion right" means any liquidation, put, call, or conversion right, or any similar right, the exercise or nonexercise of which affects the value of the transferred interest.
The term "liquidation, put, call, or conversion right" does not include any right which must be exercised at a specific time and at a specific amount.
(iv) is subject to adjustments similar to the adjustments under subsection (d) for accumulated but unpaid distributions.
Except as otherwise provided in this paragraph, the term "qualified payment" means any dividend payable on a periodic basis under any cumulative preferred stock (or a comparable payment under any partnership interest) to the extent that such dividend (or comparable payment) is determined at a fixed rate.
(A) The taxable estate of the transferor in the case of a taxable event described in paragraph (3)(A)(i).
(B) The taxable gifts of the transferor for the calendar year in which the taxable event occurs in the case of a taxable event described in paragraph (3)(A)(ii) or (iii).
(ii) the value of such payments paid during such period computed under clause (i) on the basis of the time when such payments were actually paid.
(II) the value of such interests (determined as of the date of the transfer to which subsection (a)(1) applied).
(II) the total number of shares in such corporation (as of such date) which are of the same class as the class described in subclause (I).
For purposes of this subparagraph, the term "equity interest" has the meaning given such term by subsection (a)(4)(B).
(i) The death of the transferor if the applicable retained interest conferring the distribution right is includible in the estate of the transferor.
(ii) The transfer of such applicable retained interest.
(iii) At the election of the taxpayer, the payment of any qualified payment after the period described in paragraph (2)(C), but only with respect to such payment.
(II) consideration for the transfer provided by the spouse.
(C) the spouse of any such descendant.
(C) the spouse of any such ancestor.
(B) under regulations, otherwise holds, immediately after such transaction, an applicable retained interest in such entity.
Under regulations prescribed by the Secretary, if there is any subsequent transfer, or inclusion in the gross estate, of any applicable retained interest which was valued under the rules of subsection (a), appropriate adjustments shall be made for purposes of chapter 11, 12, or 13 to reflect the increase in the amount of any prior taxable gift made by the transferor or decedent by reason of such valuation or to reflect the application of subsection (d).
1996-Subsec. (a)(3)(B). Pub. L. 104–188, §1702(f)(1)(B), inserted "certain" before "qualified" in heading.
Subsec. (a)(3)(C). Pub. L. 104–188, §1702(f)(1)(A), added subpar. (C).
Subsec. (a)(4)(B)(i). Pub. L. 104–188, §1702(f)(2), inserted "(or, to the extent provided in regulations, the rights as to either income or capital)" after "income and capital".
Subsec. (b)(2)(C). Pub. L. 104–188, §1702(f)(3)(A), added subpar. (C).
Subsec. (c)(1)(B)(i). Pub. L. 104–188, §1702(f)(4), amended cl. (i) generally. Prior to amendment, cl. (i) read as follows: "a right to distributions with respect to any junior equity interest (as defined in subsection (a)(4)(B)(i)),".
"(i) Waiver of qualified payment treatment.-A transferor or applicable family member may elect with respect to payments under any interest specified in such election to treat such payments as payments which are not qualified payments."
Subsec. (c)(3)(C)(ii). Pub. L. 104–188, §1702(f)(5)(B), amended first sentence generally. Prior to amendment, first sentence read as follows: "A transferor or any applicable family member may elect to treat any distribution right as a qualified payment, to be paid in the amounts and at the times specified in such election."
Subsec. (d)(1). Pub. L. 104–188, §1702(f)(1)(C), substituted "subsection (a)(3)(B) or (C)" for "subsection (a)(3)(B)".
Subsec. (d)(3)(A)(iii). Pub. L. 104–188, §1702(f)(6), struck out "the period ending on the date of" after "with respect to".
Subsec. (d)(3)(B)(ii)(I). Pub. L. 104–188, §1702(f)(7), inserted "or the exclusion under section 2503(b)," after "section 2523,".
Subsec. (d)(4)(A). Pub. L. 104–188, §1702(f)(1)(C), substituted "subsection (a)(3)(B) or (C)" for "subsection (a)(3)(B)".
Subsec. (d)(4)(C). Pub. L. 104–188, §1702(f)(9), added subpar. (C).
"(B) Control.-For purposes of subsections (b)(1), an individual shall be treated as holding any interest held by the individual's brothers, sisters, or lineal descendants."
Subsec. (e)(5)(A). Pub. L. 104–188, §1702(f)(8)(A), substituted "such transaction" for "such contribution to capital or such redemption, recapitalization, or other change".
Subsec. (e)(5)(B). Pub. L. 104–188, §1702(f)(8)(B), substituted "such transaction" for "the transfer".
Subsec. (e)(6). Pub. L. 104–188, §1702(f)(10), inserted "or to reflect the application of subsection (d)" before period at end.
"(iii) to the extent such amendments relate to section 2704 of such Code (as so added), shall apply to restrictions or rights (or limitations on rights) created after October 8, 1990.
shall not be treated as a subsequent transfer."
Pub. L. 104–188, title I, §1702(f)(5)(C), Aug. 20, 1996, 110 Stat. 1871 , provided that: "The time for making an election under the second sentence of section 2701(c)(3)(C)(i) of the Internal Revenue Code of 1986 (as amended by subparagraph (A)) shall not expire before the due date (including extensions) for filing the transferor's return of the tax imposed by section 2501 of such Code for the first calendar year ending after the date of enactment [probably means the date of enactment of Pub. L. 104–188, Oct. 20, 1996]."
"(2) other methods using discretionary rights to distort the value of property for such purposes.
The Secretary shall, not later than December 31, 1992, report the results of such study, together with such legislative recommendations as the Secretary considers necessary, to the Committee on Finance of the Senate and the Committee on Ways and Means of the House of Representatives."

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