
From the U.S. Code Online via GPO Access
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[Laws in effect as of January 2, 2001]
[Document not affected by Public Laws enacted between
  January 2, 2001 and January 28, 2002]
[CITE: 26USC1040]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                        Subtitle A--Income Taxes
 
                  CHAPTER 1--NORMAL TAXES AND SURTAXES
 
          Subchapter O--Gain or Loss on Disposition of Property
 
                  PART III--COMMON NONTAXABLE EXCHANGES
 
Sec. 1040. Transfer of certain farm, etc., real property


(a) General rule

    If the executor of the estate of any decedent transfers to a 
qualified heir (within the meaning of section 2032A(e)(1)) any property 
with respect to which an election was made under section 2032A, then 
gain on such transfer shall be recognized to the estate only to the 
extent that, on the date of such transfer, the fair market value of such 
property exceeds the value of such property for purposes of chapter 11 
(determined without regard to section 2032A).

(b) Similar rule for certain trusts

    To the extent provided in regulations prescribed by the Secretary, a 
rule similar to the rule provided in subsection (a) shall apply where 
the trustee of a trust (any portion of which is included in the gross 
estate of the decedent) transfers property with respect to which an 
election was made under section 2032A.

(c) Basis of property acquired in transfer described in subsection (a) 
        or (b)

    The basis of property acquired in a transfer with respect to which 
gain realized is not recognized by reason of subsection (a) or (b) shall 
be the basis of such property immediately before the transfer increased 
by the amount of the gain recognized to the estate or trust on the 
transfer.

(Added Pub. L. 94-455, title XX, Sec. 2005(b), Oct. 4, 1976, 90 Stat. 
1877; amended Pub. L. 95-600, title VII, Sec. 702(d)(3), Nov. 6, 1978, 
92 Stat. 2929; Pub. L. 96-222, title I, Sec. 105(a)(5)(A), Apr. 1, 1980, 
94 Stat. 219; Pub. L. 96-223, title IV, Sec. 401(c)(2)(A), Apr. 2, 1980, 
94 Stat. 300; Pub. L. 97-34, title IV, Sec. 421(j)(2)(B), Aug. 13, 1981, 
95 Stat. 312; Pub. L. 97-448, title I, Sec. 104(b)(3)(A), (B), Jan. 12, 
1983, 96 Stat. 2381.)


                               Amendments

    1983--Subsec. (a). Pub. L. 97-448, Sec. 104(b)(3)(A), substituted 
``on the date of such transfer'' for ``on the date of such exchange''.
    Subsec. (c). Pub. L. 97-448, Sec. 104(b)(3)(B), substituted 
references to ``transfer'', ``a transfer'', and ``the transfer'' for 
references to ``exchange'', ``an exchange'', and ``the exchange'', 
respectively, wherever appearing in heading and text.
    1981--Pub. L. 97-34 substituted ``Transfer of certain farm, etc., 
real property'' for ``Use of farm, etc., real property to satisfy 
pecuniary bequest'' in section catchline.
    Subsec. (a). Pub. L. 97-34 revised subsec. (a) generally, 
substituting ``transfers to a qualified heir (within the meaning of 
section 2032A(e)(1)) any property'' for ``satisfies the right of a 
qualified heir (within the meaning of section 2032A(e)(1)) to receive a 
pecuniary bequest with property'' and ``such transfer'' for ``such 
exchange'' before ``shall be recognized''.
    Subsec. (b). Pub. L. 97-34 substituted ``shall apply where the 
trustee of a trust (any portion of which is included in the gross estate 
of the decedent) transfers property with respect to which an election 
was made under section 2032A'' for ``shall apply where--
        ``(1) by reason of the death of the decedent, a qualified heir 
    has a right to receive from a trust a specific dollar amount which 
    is the equivalent of a pecuniary bequest, and
        ``(2) the trustee of the trust satisfies such right with 
    property with respect to which an election was made under section 
    2032A''.
    1980--Pub. L. 96-223 substituted ``Use of farm, etc., property to 
satisfy pecuniary bequest'' for ``Use of certain appreciated carryover 
basis property to satisfy pecuniary request'' in section catchline, 
generally revised subsecs. (a) and (b) to reflect the repeal elsewhere 
in the Code of carryover basis provisions, and struck out subsec. (d) 
which had provided that, for purposes of this section, references to 
carryover basis property should be treated as including a reference to 
property the valuation of which is determined under section 2032A. Pub. 
L. 96-222 added subsec. (d).
    1978--Subsec. (a). Pub. L. 95-600 substituted ``chapter 11 
(determined without regard to section 2032A)'' for ``chapter 11''.


                    Effective Date of 1983 Amendment

    Amendment by Pub. L. 97-448 effective, except as otherwise provided, 
as if it had been included in the provision of the Economic Recovery Tax 
Act of 1981, Pub. L. 97-34, to which such amendment relates, see section 
109 of Pub. L. 97-448, set out as a note under section 1 of this title.


                    Effective Date of 1981 Amendment

    Amendment by Pub. L. 97-34 applicable with respect to the estates of 
decedents dying after Dec. 31, 1976, upon compliance with certain 
conditions relating to timely election requirement, reinstatement of 
elections, and statute of limitations, see section 421(k)(5) of Pub. L. 
97-34, set out as a note under section 2032A of this title.


                    Effective Date of 1980 Amendments

    Amendment by Pub. L. 96-223 applicable in respect of decedents dying 
after Dec. 31, 1976, see section 401(e) of Pub. L. 96-223, set out as a 
note under section 1023 of this title.
    Section 105(a)(5)(B) of Pub. L. 96-222, as amended by Pub. L. 99-
514, Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: 
``Notwithstanding section 515 of the Revenue Act of 1978 [section 515 of 
Pub. L. 95-600 which deferred carryover basis rules until Dec. 31, 
1979], section 1040 of the Internal Revenue Code of 1986 [formerly 
I.R.C. 1954] (as amended by subparagraph (A) [amending this section]) 
shall apply with respect to the estates of decedents dying after 
December 31, 1976.''


                    Effective Date of 1978 Amendment

    Amendment by Pub. L. 95-600 applicable to estates of decedents dying 
after Dec. 31, 1976, see section 702(d)(6) of Pub. L. 95-600, set out as 
a note under section 2032A of this title.


                             Effective Date

    Section applicable in respect of decedents dying after Dec. 31, 
1976, see section 2005(f)(1) of Pub. L. 94-455, set out as a note under 
section 1015 of this title.

                  Section Referred to in Other Sections

    This section is referred to in section 1223 of this title.
