
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 106-554 Section 1(a)(7)]
[CITE: 26USC2035]

 
                     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. 2035. Adjustments for certain gifts made within 3 years of 
        decedent's death
        

(a) Inclusion of certain property in gross estate

    If--
        (1) the decedent made a transfer (by trust or otherwise) of an 
    interest in any property, or relinquished 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,

the value of the gross estate shall include the value of any property 
(or interest therein) which would have been so included.

(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 
subsection) 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 distributions 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.

                 (2) Coordination with section 6166

        An estate shall be treated as meeting the 35 percent of adjusted 
    gross estate requirement of section 6166(a)(1) only if the estate 
    meets such requirement both with and without the application of 
    subsection (a).

                   (3) Marital and small transfers

        Paragraph (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 decedent 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) and paragraph (1) of subsection (c) 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 revocable 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 treated as a 
transfer made directly by the decedent.

(Aug. 16, 1954, ch. 736, 68A Stat. 381; Pub. L. 87-834, 
Sec. 18(a)(2)(C), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94-455, title 
XX, Sec. 2001(a)(5), Oct. 4, 1976, 90 Stat. 1848; Pub. L. 95-600, title 
VII, Sec. 702(f)(1), Nov. 6, 1978, 92 Stat. 2930; Pub. L. 97-34, title 
IV, Secs. 403(b)(3)(B), 424(a), Aug. 13, 1981, 95 Stat. 301, 317; Pub. 
L. 97-448, title I, Sec. 104(a)(9), (d)(1)(A), (C), (2), Jan. 12, 1983, 
96 Stat. 2381, 2383; Pub. L. 105-34, title XIII, Sec. 1310(a), Aug. 5, 
1997, 111 Stat. 1043; Pub. L. 106-554, Sec. 1(a)(7) [title III, 
Sec. 319(14)], Dec. 21, 2000, 114 Stat. 2763, 2763A-646.)


                               Amendments

    2000--Subsec. (c)(2). Pub. L. 106-554, Sec. 1(a)(7) [title III, 
Sec. 319(14)(A)], substituted ``subsection (a)'' for ``paragraph (1)''.
    Subsec. (d). Pub. L. 106-554, Sec. 1(a)(7) [title III, 
Sec. 319(14)(B)], inserted ``and paragraph (1) of subsection (c)'' after 
``Subsection (a)''.
    1997--Pub. L. 105-34 amended section catchline and text generally. 
Prior to amendment, section consisted of subsecs. (a) to (d) relating to 
adjustments for gifts made within 3 years of decedent's death.
    1983--Subsec. (b)(2). Pub. L. 97-448, Sec. 104(a)(9), substituted 
``section 6019(2)'' for ``section 6019(a)(2)''.
    Subsec. (d)(2). Pub. L. 97-448, Sec. 104(d)(2), inserted ``of this 
subsection and paragraph (2) of subsection (b)'' after ``Paragraph 
(1)'', and struck out ``2041,'' after ``2038,''.
    Subsec. (d)(3)(C), (D). Pub. L. 97-448, Sec. 104(d)(1)(C), 
redesignated subpar. (D) as (C). Former subpar. (C), which referred to 
section 6166 (relating to extension of time for payment of estate tax 
where estate consists largely of interest in closely held business), was 
struck out.
    Subsec. (d)(4). Pub. L. 97-448, Sec. 104(d)(1)(A), added par. (4).
    1981--Subsec. (b)(2). Pub. L. 97-34, Sec. 403(b)(3)(B), inserted 
``(other than by reason of section 6019(a)(2))'' after ``section 6019''.
    Subsec. (d). Pub. L. 97-34, Sec. 424(a), added subsec. (d).
    1978--Subsec. (b). Pub. L. 95-600 substituted in par. (2) provisions 
relating to gifts for which donee was not required by section 6019 to 
file gift tax returns for provisions relating to gifts excludable in 
computing taxable gifts by reason of section 2503(b) and inserted 
provisions following par. (2) relating to inapplicability of par. (2) to 
transfers respecting life insurance policies.
    1976--Pub. L. 94-455 substituted provisions covering adjustments for 
gifts made within 3 years of decedent's death for provisions under which 
transfers by the decedent within 3 years of the decedent's death were 
deemed to have been made in contemplation of death and included in the 
value of the gross estate.
    1962--Subsec. (a). Pub. L. 87-834 struck out provisions which 
excepted real property situated outside of the United States.


                    Effective Date of 1997 Amendment

    Section 1310(c) of Pub. L. 105-34 provided that: ``The amendments 
made by this section [amending this section] shall apply to the estates 
of decedents dying after the date of the enactment of this Act [Aug. 5, 
1997].''


                    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 section 403(b)(3)(B) of Pub. L. 97-34 applicable to 
estates of decedents dying after Dec. 31, 1981, see section 403(e) of 
Pub. L. 97-34, set out as a note under section 2056 of this title.
    Section 424(b) of Pub. L. 97-34 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply to the estates of 
decedents dying after December 31, 1981.''


                    Effective Date of 1978 Amendment

    Section 702(f)(2) of Pub. L. 95-600 provided that: ``The amendment 
made by paragraph (1) [amending this section] shall apply to the estates 
of decedents dying after December 31, 1976, except that it shall not 
apply to transfers made before January 1, 1977.''


                    Effective Date of 1976 Amendment

    Amendment by Pub. L. 94-455 applicable to estates of decedents dying 
after Dec. 31, 1976, but not to transfers made before Jan. 1, 1977, see 
section 2001(d)(1) of Pub. L. 94-455, set out as a note under section 
2001 of this title.


                    Effective Date of 1962 Amendment

    Amendment by Pub. L. 87-834 applicable to estates of decedents dying 
after Oct. 16, 1962, except as otherwise provided, see section 18(b) of 
Pub. L. 87-834, set out as a note under section 2031 of this title.


 Transfers Made by Decedent During 1977; Election Available to Executor 
           On or Before Due Date for Filing Estate Tax Return

    Pub. L. 96-222, title I, Sec. 107(a)(2)(F), Apr. 1, 1980, 94 Stat. 
223, as amended by Pub. L. 99-514, Sec. 2, Oct. 22, 1986, 100 Stat. 
2095, provided that:
        ``(i) If the executor elects the benefits of this subparagraph 
    with respect to any estate, section 2035(b) of the Internal Revenue 
    Code of 1986 [formerly I.R.C. 1954] (relating to adjustments for 
    gifts made within 3 years of decedent's death) shall be applied with 
    respect to transfers made by the decedent during 1977 as if 
    paragraph (2) of such section 2035(b) read as follows:
    `` `(2) to any gift to a donee made during 1977 to the extent of the 
amount of such gift which was excludable in computing taxable gifts by 
reason of section 2503(b) (relating to $3,000 annual exclusion for 
purposes of the gift tax) determined without regard to section 2513(a).'
        ``(ii) The election under clause (i) with respect to any estate 
    shall be made on or before the later of--
            ``(I) the due date for filing the estate tax return, or
            ``(II) the day which is 120 days after the date of the 
        enactment of this Act [Apr. 1, 1980].''

                  Section Referred to in Other Sections

    This section is referred to in sections 2001, 2036, 2041, 2043, 
2045, 2056, 2104, 2107, 2642, 6166, 6324 of this title.
