
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: 26USC2036]

 
                     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. 2036. Transfers with retained life estate


(a) General rule

    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 (except in case of a bona fide sale for an 
adequate and full consideration in money or money's worth), by trust or 
otherwise, under which he has retained for his life or for any period 
not ascertainable without reference to his death or for any period which 
does not in fact end before his death--
        (1) the possession or enjoyment of, or the right to the income 
    from, the property, or
        (2) the right, either alone or in conjunction with any person, 
    to designate the persons who shall possess or enjoy the property or 
    the income therefrom.

(b) Voting rights

                           (1) In general

        For purposes of subsection (a)(1), the retention of the right to 
    vote (directly or indirectly) shares of stock of a controlled 
    corporation shall be considered to be a retention of the enjoyment 
    of transferred property.

                     (2) Controlled corporation

        For purposes of paragraph (1), a corporation shall be treated as 
    a controlled corporation if, at any time after the transfer of the 
    property and during the 3-year period ending on the date of the 
    decedent's death, the decedent owned (with the application of 
    section 318), or had the right (either alone or in conjunction with 
    any person) to vote, stock possessing at least 20 percent of the 
    total combined voting power of all classes of stock.

                 (3) Coordination with section 2035

        For purposes of applying section 2035 with respect to paragraph 
    (1), the relinquishment or cessation of voting rights shall be 
    treated as a transfer of property made by the decedent.

(c) Limitation on application of general rule

    This section shall not apply to a transfer made before March 4, 
1931; nor to a transfer made after March 3, 1931, and before June 7, 
1932, unless the property transferred would have been includible in the 
decedent's gross estate by reason of the amendatory language of the 
joint resolution of March 3, 1931 (46 Stat. 1516).

(Aug. 16, 1954, ch. 736, 68A Stat. 382; Pub. L. 87-834, 
Sec. 18(a)(2)(D), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94-455, title 
XX, Sec. 2009(a), Oct. 4, 1976, 90 Stat. 1893; Pub. L. 95-600, title 
VII, Sec. 702(i)(1), (2), Nov. 6, 1978, 92 Stat. 2931; Pub. L. 100-203, 
title X, Sec. 10402(a), Dec. 22, 1987, 101 Stat. 1330-431; Pub. L. 100-
647, title III, Sec. 3031(a)(1), (b)-(e), (g), Nov. 10, 1988, 102 Stat. 
3634-3638; Pub. L. 101-508, title XI, Sec. 11601(a), Nov. 5, 1990, 104 
Stat. 1388-490.)


                               Amendments

    1990--Subsecs. (c), (d). Pub. L. 101-508 redesignated subsec. (d) as 
(c) and struck out former subsec. (c) which enunciated a rule that 
retention of retained interest would be considered to be a retention of 
enjoyment of transferred property if a person held a substantial 
interest in an enterprise, and such person in effect transferred after 
Dec. 17, 1987, property having a disproportionately large share of the 
potential appreciation in such person's interest in the enterprise while 
retaining an interest in the income of, or rights in, the enterprise.
    1988--Subsec. (c)(1)(B). Pub. L. 100-647, Sec. 3031(e), substituted 
``an interest'' for ``a disproportionately large share'' after ``whole 
retaining''.
    Subsec. (c)(2). Pub. L. 100-647, Sec. 3031(g)(1), substituted 
``consideration furnished by'' for ``sales to'' in heading, and amended 
text generally. Prior to amendment, text read as follows: ``The 
exception contained in subsection (a) for a bona fide sale shall not 
apply to a transfer described in paragraph (1) if such transfer is to a 
member of the transferor's family.''
    Subsec. (c)(3)(C). Pub. L. 100-647, Sec. 3031(d), substituted 
``Except as provided in regulations, an'' for ``An''.
    Subsec. (c)(4). Pub. L. 100-647, Sec. 3031(a)(1), amended par. (4) 
generally, substituting provisions relating to treatment of certain 
transfers for provisions relating to coordination with section 2035.
    Subsec. (c)(5). Pub. L. 100-647, Sec. 3031(g)(2), amended par. (5) 
generally, substituting provisions relating to the making of appropriate 
adjustments in amounts included in gross estate for provisions relating 
to coordination with section 2043.
    Subsec. (c)(6). Pub. L. 100-647, Sec. 3031(b), added par. (6).
    Subsec. (c)(7), (8). Pub. L. 100-647, Sec. 3031(b)[(c)], added pars. 
(7) and (8).
    1987--Subsecs. (c), (d). Pub. L. 100-203 added subsec. (c) and 
redesignated former subsec. (c) as (d).
    1978--Subsec. (a). Pub. L. 95-600, Sec. 702(i)(2), struck out 
provision following par. (2) relating to the retention of voting rights 
in retained stock.
    Subsecs. (b), (c). Pub. L. 95-600, Sec. 702(i)(1), added subsec. (b) 
and redesignated former subsec. (b) as (c).
    1976--Subsec. (a). Pub. L. 94-455 provided that, for purposes of 
par. (1), the retention of voting rights in retained stock be considered 
to be a retention of the enjoyment of that stock.
    1962--Subsec. (a). Pub. L. 87-834 struck out provisions which 
excepted real property situated outside of the United States.


                    Effective Date of 1990 Amendment

    Section 11601(c) of Pub. L. 101-508 provided that: ``The amendments 
made by this section [amending this section and sections 2207B and 2501 
of this title] shall apply in the case of property transferred after 
December 17, 1987.''


                    Effective Date of 1988 Amendment

    Section 3031(h) of Pub. L. 100-647 provided that:
    ``(1) In general.--Except as provided in this subsection, any 
amendment made by this section [enacting section 2207B of this title and 
amending this section and section 2501 of this title] shall take effect 
as if included in the provisions of the Revenue Act of 1987 [Pub. L. 
100-203, title X] to which such amendment relates.
    ``(2) Subsection (a).--The amendments made by subsection (a) 
[amending this section and section 2501 of this title] shall apply in 
cases where the transfer referred to in section 2036(c)(1)(B) of the 
1986 Code is on or after June 21, 1988.
    ``(3) Subsection (f).--If an amount is included in the gross estate 
of a decedent under section 2036 of the 1986 Code other than solely by 
reason of section 2036(c) of the 1986 Code, the amendments made by 
subsection (f) [enacting section 2207B of this title] shall apply to 
such amount only with respect to property transferred after the date of 
the enactment of this Act [Nov. 10, 1988].
    ``(4) Correction period.--If section 2036(c)(1) of the 1986 Code 
would (but for this paragraph) apply to any interest arising from a 
transaction entered into during the period beginning after December 17, 
1987, and ending before January 1, 1990, such section shall not apply to 
such interest if--
        ``(A) during such period, such actions are taken as are 
    necessary to have such section 2036(c)(1) not apply to such 
    transaction (and any such interest), or
        ``(B) the original transferor and his spouse on January 1, 1990 
    (or, if earlier, the date of the original transferor's death), does 
    not hold any interest in the enterprise involved.
    ``(5) Clarification of effective date.--For purposes of section 
10402(b) of the Revenue Act of 1987 [Pub. L. 100-203, set out as an 
Effective Date of 1987 Amendment note below], with respect to property 
transferred on or before December 17, 1987--
        ``(A) any failure to exercise a right of conversion,
        ``(B) any failure to pay dividends, and
        ``(c) [sic] failures to exercise other rights specified in 
    regulations,
shall not be treated as a subsequent transfer.''


                    Effective Date of 1987 Amendment

    Section 10402(b) of Pub. L. 100-203 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply with respect 
to estates of decedents dying after December 31, 1987, but only in the 
case of property transferred after December 17, 1987.'' [For 
clarification of this note, see section 3031(h)(5) of Pub. L. 100-647, 
set out as an Effective Date of 1988 Amendment note above.]


                    Effective Date of 1978 Amendment

    Section 702(i)(3) of Pub. L. 95-600 provided that: ``The amendments 
made by this subsection [amending this section] shall apply to transfers 
made after June 22, 1976.''


                    Effective Date of 1976 Amendment

    Section 2009(e)(1) of Pub. L. 94-455 provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply to transfers 
made after June 22, 1976.''


                    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.

                  Section Referred to in Other Sections

    This section is referred to in sections 2035, 2041, 2043, 2045, 
2104, 2107, 2207B, 2501, 6324 of this title.
