
From the U.S. Code Online via GPO Access
[wais.access.gpo.gov]
[Laws in effect as of January 2, 2001]
[Document affected by Public Law 107-16 Section 551(a),]
[Document affected by Public Law 107-16 Section 551(c)]
[CITE: 26USC2031]

 
                     TITLE 26--INTERNAL REVENUE CODE
 
                    Subtitle B--Estate and Gift Taxes
 
                         CHAPTER 11--ESTATE TAX
 
             Subchapter A--Estates of Citizens or Residents
 
                         PART III--GROSS ESTATE
 
Sec. 2031. Definition of gross estate


(a) General

    The value of the gross estate of the decedent shall be determined by 
including to the extent provided for in this part, the value at the time 
of his death of all property, real or personal, tangible or intangible, 
wherever situated.

(b) Valuation of unlisted stock and securities

    In the case of stock and securities of a corporation the value of 
which, by reason of their not being listed on an exchange and by reason 
of the absence of sales thereof, cannot be determined with reference to 
bid and asked prices or with reference to sales prices, the value 
thereof shall be determined by taking into consideration, in addition to 
all other factors, the value of stock or securities of corporations 
engaged in the same or a similar line of business which are listed on an 
exchange.

(c) Estate tax with respect to land subject to a qualified conservation 
        easement

                           (1) In general

        If the executor makes the election described in paragraph (6), 
    then, except as otherwise provided in this subsection, there shall 
    be excluded from the gross estate the lesser of--
            (A) the applicable percentage of the value of land subject 
        to a qualified conservation easement, reduced by the amount of 
        any deduction under section 2055(f) with respect to such land, 
        or
            (B) the exclusion limitation.

                      (2) Applicable percentage

        For purposes of paragraph (1), the term ``applicable 
    percentage'' means 40 percent reduced (but not below zero) by 2 
    percentage points for each percentage point (or fraction thereof) by 
    which the value of the qualified conservation easement is less than 
    30 percent of the value of the land \1\ (determined without regard 
    to the value of such easement and reduced by the value of any 
    retained development right (as defined in paragraph (5)).
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    \1\ So in original. No closing parenthesis was enacted.
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                      (3) Exclusion limitation

        For purposes of paragraph (1), the exclusion limitation is the 
    limitation determined in accordance with the following table:

  In the case of estates of                                The exclusion
    decedents dying during:                               limitation is:
            1998................................               $100,000 
            1999................................               $200,000 
            2000................................               $300,000 
            2001................................               $400,000 
            2002 or thereafter..................               $500,000.
                (4) Treatment of certain indebtedness

        (A) In general

            The exclusion provided in paragraph (1) shall not apply to 
        the extent that the land is debt-financed property.

        (B) Definitions

            For purposes of this paragraph--
            (i) Debt-financed property

                The term ``debt-financed property'' means any property 
            with respect to which there is an acquisition indebtedness 
            (as defined in clause (ii)) on the date of the decedent's 
            death.
            (ii) Acquisition indebtedness

                The term ``acquisition indebtedness'' means, with 
            respect to debt-financed property, the unpaid amount of--
                    (I) the indebtedness incurred by the donor in 
                acquiring such property,
                    (II) the indebtedness incurred before the 
                acquisition of such property if such indebtedness would 
                not have been incurred but for such acquisition,
                    (III) the indebtedness incurred after the 
                acquisition of such property if such indebtedness would 
                not have been incurred but for such acquisition and the 
                incurrence of such indebtedness was reasonably 
                foreseeable at the time of such acquisition, and
                    (IV) the extension, renewal, or refinancing of an 
                acquisition indebtedness.

             (5) Treatment of retained development right

        (A) In general

            Paragraph (1) shall not apply to the value of any 
        development right retained by the donor in the conveyance of a 
        qualified conservation easement.

        (B) Termination of retained development right

            If every person in being who has an interest (whether or not 
        in possession) in the land executes an agreement to extinguish 
        permanently some or all of any development rights (as defined in 
        subparagraph (D)) retained by the donor on or before the date 
        for filing the return of the tax imposed by section 2001, then 
        any tax imposed by section 2001 shall be reduced accordingly. 
        Such agreement shall be filed with the return of the tax imposed 
        by section 2001. The agreement shall be in such form as the 
        Secretary shall prescribe.

        (C) Additional tax

            Any failure to implement the agreement described in 
        subparagraph (B) not later than the earlier of--
                (i) the date which is 2 years after the date of the 
            decedent's death, or
                (ii) the date of the sale of such land subject to the 
            qualified conservation easement,

        shall result in the imposition of an additional tax in the 
        amount of the tax which would have been due on the retained 
        development rights subject to such agreement. Such additional 
        tax shall be due and payable on the last day of the 6th month 
        following such date.

        (D) Development right defined

            For purposes of this paragraph, the term ``development 
        right'' means any right to use the land subject to the qualified 
        conservation easement in which such right is retained for any 
        commercial purpose which is not subordinate to and directly 
        supportive of the use of such land as a farm for farming 
        purposes (within the meaning of section 2032A(e)(5)).

                            (6) Election

        The election under this subsection shall be made on or before 
    the due date (including extensions) for filing the return of tax 
    imposed by section 2001 and shall be made on such return. Such an 
    election, once made, shall be irrevocable.

                  (7) Calculation of estate tax due

        An executor making the election described in paragraph (6) 
    shall, for purposes of calculating the amount of tax imposed by 
    section 2001, include the value of any development right (as defined 
    in paragraph (5)) retained by the donor in the conveyance of such 
    qualified conservation easement. The computation of tax on any 
    retained development right prescribed in this paragraph shall be 
    done in such manner and on such forms as the Secretary shall 
    prescribe.

                           (8) Definitions

        For purposes of this subsection--

        (A) Land subject to a qualified conservation easement

            The term ``land subject to a qualified conservation 
        easement'' means land--
                (i) which is located--
                    (I) in or within 25 miles of an area which, on the 
                date of the decedent's death, is a metropolitan area (as 
                defined by the Office of Management and Budget),
                    (II) in or within 25 miles of an area which, on the 
                date of the decedent's death, is a national park or 
                wilderness area designated as part of the National 
                Wilderness Preservation System (unless it is determined 
                by the Secretary that land in or within 25 miles of such 
                a park or wilderness area is not under significant 
                development pressure), or
                    (III) in or within 10 miles of an area which, on the 
                date of the decedent's death, is an Urban National 
                Forest (as designated by the Forest Service),

                (ii) which was owned by the decedent or a member of the 
            decedent's family at all times during the 3-year period 
            ending on the date of the decedent's death, and
                (iii) with respect to which a qualified conservation 
            easement has been made by an individual described in 
            subparagraph (C), as of the date of the election described 
            in paragraph (6).

        (B) Qualified conservation easement

            The term ``qualified conservation easement'' means a 
        qualified conservation contribution (as defined in section 
        170(h)(1)) of a qualified real property interest (as defined in 
        section 170(h)(2)(C)), except that clause (iv) of section 
        170(h)(4)(A) shall not apply, and the restriction on the use of 
        such interest described in section 170(h)(2)(C) shall include a 
        prohibition on more than a de minimis use for a commercial 
        recreational activity.

        (C) Individual described

            An individual is described in this subparagraph if such 
        individual is--
                (i) the decedent,
                (ii) a member of the decedent's family,
                (iii) the executor of the decedent's estate, or
                (iv) the trustee of a trust the corpus of which includes 
            the land to be subject to the qualified conservation 
            easement.

        (D) Member of family

            The term ``member of the decedent's family'' means any 
        member of the family (as defined in section 2032A(e)(2)) of the 
        decedent.

           (9) Treatment of easements granted after death

        In any case in which the qualified conservation easement is 
    granted after the date of the decedent's death and on or before the 
    due date (including extensions) for filing the return of tax imposed 
    by section 2001, the deduction under section 2055(f) with respect to 
    such easement shall be allowed to the estate but only if no 
    charitable deduction is allowed under chapter 1 to any person with 
    respect to the grant of such easement.

          (10) Application of this section to interests in 
                   partnerships, corporations, and trusts

        This section shall apply to an interest in a partnership, 
    corporation, or trust if at least 30 percent of the entity is owned 
    (directly or indirectly) by the decedent, as determined under the 
    rules described in section 2057(e)(3).

(d) Cross reference

            For executor's right to be furnished on request a statement 
        regarding any valuation made by the Secretary within the gross 
        estate, see section 7517.

(Aug. 16, 1954, ch. 736, 68A Stat. 380; Pub. L. 87-834, Sec. 18(a)(1), 
Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94-455, title XX, 
Sec. 2008(a)(2)(A), Oct. 4, 1976, 90 Stat. 1891; Pub. L. 105-34, title 
V, Sec. 508(a), Aug. 5, 1997, 111 Stat. 857; Pub. L. 105-206, title VI, 
Sec. 6007(g), July 22, 1998, 112 Stat. 810; Pub. L. 105-277, div. J, 
title IV, Sec. 4006(c)(3), Oct. 21, 1998, 112 Stat. 2681-913.)


                               Amendments

    1998--Subsec. (c)(6). Pub. L. 105-206, Sec. 6007(g)(2), substituted 
``on or before the due date (including extensions) for filing the return 
of tax imposed by section 2001 and shall be made on such return.'' for 
``on the return of the tax imposed by section 2001.''
    Subsec. (c)(9). Pub. L. 105-206, Sec. 6007(g)(1), added par. (9). 
Former par. (9) redesignated (10).
    Subsec. (c)(10). Pub. L. 105-277, Sec. 4006(c)(3), substituted 
``section 2057(e)(3)'' for ``section 2033A(e)(3)''.
    Pub. L. 105-206, Sec. 6007(g)(1), redesignated par. (9) as (10).
    1997--Subsecs. (c), (d). Pub. L. 105-34 added subsec. (c) and 
redesignated former subsec. (c) as (d).
    1976--Subsec. (c). Pub. L. 94-455 added subsec. (c).
    1962--Subsec. (a). Pub. L. 87-834 struck out provisions which 
excepted real property situated outside the United States.


                    Effective Date of 1998 Amendment

    Amendment by Pub. L. 105-206 effective, except as otherwise 
provided, as if included in the provisions of the Taxpayer Relief Act of 
1997, Pub. L. 105-34, to which such amendment relates, see section 6024 
of Pub. L. 105-206, set out as a note under section 1 of this title.


                    Effective Date of 1997 Amendment

    Amendment by Pub. L. 105-34 applicable to estates of decedents dying 
after Dec. 31, 1997, see section 508(e)(1) of Pub. L. 105-34, set out as 
a note under section 1014 of this title.


                    Effective Date of 1962 Amendment

    Section 18(b) of Pub. L. 87-834 provided that:
    ``(1) Except as provided in paragraph (2), the amendments made by 
subsection (a) [amending this section and sections 2033, 2034, 2035, 
2036, 2037, 2038, 2040, and 2041 of this title] shall apply to the 
estates of decedents dying after the date of the enactment of this Act 
[Oct. 16, 1962].
    ``(2) In the case of a decedent dying after the date of the 
enactment of this Act [Oct. 16, 1962] and before July 1, 1964, the value 
of real property situated outside of the United States shall not be 
included in the gross estate (as defined in section 2031(a)) of the 
decedent--
        ``(A) under section 2033, 2034, 2035(a), 2036(a), 2037(a), or 
    2038(a) to the extent the real property, or the decedent's interest 
    in it, was acquired by the decedent before February 1, 1962;
        ``(B) under section 2040 to the extent such property or interest 
    was acquired by the decedent before February 1, 1962, or was held by 
    the decedent and the survivor in a joint tenancy or tenancy by the 
    entirety before February 1, 1962; or
        ``(C) under section 2041(a) to the extent that before February 
    1, 1962, such property or interest was subject to a general power of 
    appointment (as defined in section 2041) possessed by the decedent.
In the case of real property, or an interest therein, situated outside 
of the United States (including a general power of appointment in 
respect of such property or interest, and including property held by the 
decedent and the survivor in a joint tenancy or tenancy by the entirety) 
which was acquired by the decedent after January 31, 1962, by gift 
within the meaning of section 2511, or from a prior decedent by devise 
or inheritance, or by reason of death, form of ownership, or other 
conditions (including the exercise or nonexercise of a power of 
appointment), for purposes of this paragraph such property or interest 
therein shall be deemed to have been acquired by the decedent before 
February 1, 1962, if before that date the donor or prior decedent had 
acquired the property or his interest therein or had possessed a power 
of appointment in respect of the property or interest.''

                  Section Referred to in Other Sections

    This section is referred to in sections 1014, 2103, 7520 of this 
title; title 43 section 1620.
