
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: 26USC2039]

 
                     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. 2039. Annuities


(a) General

    The gross estate shall include the value of an annuity or other 
payment receivable by any beneficiary by reason of surviving the 
decedent under any form of contract or agreement entered into after 
March 3, 1931 (other than as insurance under policies on the life of the 
decedent), if, under such contract or agreement, an annuity or other 
payment was payable to the decedent, or the decedent possessed the right 
to receive such annuity or payment, either alone or in conjunction with 
another 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.

(b) Amount includible

    Subsection (a) shall apply to only such part of the value of the 
annuity or other payment receivable under such contract or agreement as 
is proportionate to that part of the purchase price therefor contributed 
by the decedent. For purposes of this section, any contribution by the 
decedent's employer or former employer to the purchase price of such 
contract or agreement (whether or not to an employee's trust or fund 
forming part of a pension, annuity, retirement, bonus or profit sharing 
plan) shall be considered to be contributed by the decedent if made by 
reason of his employment.

(Aug. 16, 1954, ch. 736, 68A Stat. 384; Pub. L. 85-866, title I, 
Secs. 23(e), 67(a), Sept. 2, 1958, 72 Stat. 1622, 1658; Pub. L. 87-792, 
Sec. 7(i), Oct. 10, 1962, 76 Stat. 830; Pub. L. 89-365, Sec. 2(a), Mar. 
8, 1966, 80 Stat. 33; Pub. L. 91-172, title I, Sec. 101(j)(23), Dec. 30, 
1969, 83 Stat. 528; Pub. L. 92-580, Sec. 2(a), Oct. 27, 1972, 86 Stat. 
1276; Pub. L. 93-406, title II, Sec. 2007(b)(4), Sept. 2, 1974, 88 Stat. 
994; Pub. L. 94-455, title XX, Sec. 2009(c)(1)-(3), Oct. 4, 1976, 90 
Stat. 1894, 1895; Pub. L. 95-600, title I, Secs. 142(a), (b), 156(c)(4), 
title VII, Sec. 702(j)(1), Nov. 6, 1978, 92 Stat. 2796, 2803, 2931; Pub. 
L. 96-222, title I, Sec. 101(a)(8)(B), Apr. 1, 1980, 94 Stat. 201; Pub. 
L. 97-34, title III, Secs. 311(d)(1), (h)(4), 313(b)(3), Aug. 13, 1981, 
95 Stat. 280, 282, 286; Pub. L. 97-248, title II, Sec. 245(a), (b), 
Sept. 3, 1982, 96 Stat. 524; Pub. L. 97-448, title I, Sec. 103(c)(9), 
Jan. 12, 1983, 96 Stat. 2377; Pub. L. 98-369, div. A, title IV, 
Sec. 491(d)(34), title V, Sec. 525(a), July 18, 1984, 98 Stat. 851, 873; 
Pub. L. 99-514, title XVIII, Secs. 1848(d), 1852(e)(1)(A), Oct. 22, 
1986, 100 Stat. 2857, 2868.)


                               Amendments

    1986--Subsec. (c). Pub. L. 99-514, Sec. 1852(e)(1), struck out 
subsec. (c) which provided an exclusion from gross estate of certain 
annuity interests created by community property laws.
    Subsec. (e). Pub. L. 99-514, Sec. 1848(d), struck out ``or a bond 
described in paragraph (3)'' after ``an annuity described in paragraph 
(2)'' in concluding provisions as such provisions were applicable to 
obligations issued after Dec. 31, 1983, and prior to repeal of subsec. 
(e) by Pub. L. 98-369, Sec. 525(a), see Effective Date of 1984 Amendment 
note below.
    1984--Subsec. (c). Pub. L. 98-369, Sec. 525(a), substituted 
provisions relating to exception of certain annuity interests created by 
community property laws for provisions which related to exemption of 
annuities under certain trusts and plans.
    Subsec. (d). Pub. L. 98-369, Sec. 525(a), struck out subsec. (d) 
which related to exemption of certain annuity interests created by 
community property laws. See subsec. (c) of this section.
    Subsec. (e). Pub. L. 98-369, Sec. 525(a), struck out subsec. (e) 
which related to exclusion of individual retirement accounts.
    Pub. L. 98-369, Sec. 491(d)(34), inserted ``or'' at end of par. (1), 
substituted a period for ``, or'' at end of par. (2), struck out par. 
(3) which excluded from the value of the gross estate the value of an 
annuity receivable by any beneficiary, other than the executor, under a 
retirement bond described in section 409(a), and substituted in 
provision following par. (2) ``or 408(d)(3)'' for ``405(d)(3), 
408(d)(3), or 409(b)(3)(C)'', and substituted ``or annuity'' for ``, 
annuity, or bond'' wherever appearing.
    Subsecs. (f), (g). Pub. L. 98-369, Sec. 525(a), struck out subsec. 
(f) which related to lump sum distributions and an exception where the 
recipient elects not to take 10-year averaging, and subsec. (g) which 
related to a $100,000 limitation on the exclusions under subsecs. (c) 
and (e).
    1983--Subsec. (f)(1). Pub. L. 97-448, Sec. 103(c)(9)(A), designated 
existing provisions as subpar. (A), substituted ``without regard to the 
third sentence of section 402(e)(4)(A))'' for ``without regard to the 
next to the last sentence of section 402(e)(4)(A)'' in subpar. (A) as so 
designated, and added subpar. (B).
    Subsec. (f)(2). Pub. L. 97-448, Sec. 103(c)(9)(B), substituted ``An 
amount described'' for ``A lump sum distribution described''.
    1982--Subsec. (c). Pub. L. 97-248, Sec. 245(b), substituted 
``Subject to the limitation of subsection (g), notwithstanding any other 
provision of this section'' for ``Notwithstanding the provisions of this 
section''.
    Subsec. (e). Pub. L. 97-248, Sec. 245(b), substituted ``Subject to 
the limitation of subsection (g), notwithstanding any other provision of 
this section'' for ``Notwithstanding the provisions of this section''.
    Subsec. (g). Pub. L. 97-248, Sec. 245(a), added subsec. (g).
    1981--Subsec. (c). Pub. L. 97-34, Sec. 311(d)(1), provided that for 
purposes of subsec. (c), any deductible employee contributions, within 
the meaning of par. (5) of section 72(o), shall be considered as made by 
a person other than the decedent.
    Subsec. (e). Pub. L. 97-34, Sec. 313(b)(3), inserted reference to 
rollover contribution described in section 405(d)(3).
    Pub. L. 97-34, Sec. 311(h)(4), substituted ``section 219'' for 
``section 219 or 220''.
    1980--Subsec. (f)(2). Pub. L. 96-222 substituted ``(without the 
application of paragraph (2) thereof), except to the extent that section 
402(e)(4)(J) applies to such distribution'' for ``without the 
application of paragraph (2) thereof''.
    1978--Subsec. (c). Pub. L. 95-600, Sec. 142(a), substituted ``(other 
than an amount described in subsection (f))'' for ``(other than a lump 
sum distribution described in section 402(e)(4), determined without 
regard to the next to the last sentence of section 402(e)(4)(A))'' in 
provisions preceding par. (1).
    Subsec. (e). Pub. L. 95-600, Secs. 156(c)(4), 702(j)(1), inserted 
``section 403(b)(8) (but only to the extent such contribution is 
attributed to a distribution from a contract described in subsection 
(c)(3)),'' after ``403(a)(4)'' and inserted ``or 220'' after ``section 
219'' wherever appearing in provisions following par. (3).
    Subsec. (f). Pub. L. 95-600, Sec. 142(b), added subsec. (f).
    1976--Subsec. (c). Pub. L. 94-455, Sec. 2009(c)(2), (3), substituted 
``other payment (other than a lump sum distribution described in section 
402(e)(4), determined without regard to the next to the last sentence of 
section 402(e)(4)(A)) receivable by any beneficiary'' for ``other 
payment receivable by any beneficiary'' in provisions preceding par. (1) 
and substituted ``For purposes of this subsection, contributions or 
payments on behalf of the decedent while he was an employee within the 
meaning of section 401(c)(1) made under a trust or plan described in 
paragraph (1) or (2) shall, to the extent allowable as a deduction under 
section 404, be considered to be made by a person other than the 
decedent and, to the extent not so allowable, shall be considered to be 
made by the decedent'' for ``For purposes of this subsection, 
contributions or payments on behalf of the decedent while he was an 
employee within the meaning of section 401(c)(1) made under a trust or 
plan described in paragraph (1) or (2) shall be considered to be 
contributions or payments made by the decedent'' in provisions following 
par. (4).
    Subsec. (e). Pub. L. 94-455, Sec. 2009(c)(1), added subsec. (e).
    1974--Subsec. (c). Pub. L. 93-406 inserted reference to section 
1452(d) in provisions following par. (4).
    1972--Subsec. (d). Pub. L. 92-580 added subsec. (d).
    1969--Subsec. (c)(3). Pub. L. 91-172 substituted ``section 
170(b)(1)(A)(ii) or (vi), or which is a religious organization (other 
than a trust),'' for ``section 503(b) (1), (2), or (3),''.
    1966--Subsec. (c). Pub. L. 89-365 added par. (4), inserted reference 
to chapter 73 of title 10 of the United States Code in the enumeration 
of the plans and contracts set out in the prohibition against allowance 
of exclusion for that part of the value of the amount payable under the 
plan or contract in the proportion that the total payments or 
contributions made by the decedent bear to the total payments or 
contributions made, and provided that, for purposes of this section, 
amounts payable under chapter 73 of title 10 are attributable to 
payments or contributions made by the decedent only to the extent of 
amounts deposited by him pursuant to section 1438 of title 10.
    1962--Subsec. (c). Pub. L. 87-792 substituted ``was a plan described 
in section 403(a)'' for ``met the requirements of section 401(a)(3), 
(4), (5), and (6)'' in par. (2), and inserted sentence providing, for 
purposes of this subsection, that contributions or payments on behalf of 
the decedent while he was an employee within the meaning of section 
401(c)(1) made under a trust or plan described in paragraph (1) or (2) 
shall be considered to be contributions or payments made by the 
decedent.
    1958--Subsec. (c)(2). Pub. L. 85-866, Sec. 67(a), inserted ``(4), 
(5), and (6)'' after ``section 401(a)(3)''.
    Subsec. (c)(3) and closing sentences. Pub. L. 85-866, Sec. 23(e), 
added par. (3), inserted ``or under contract described in paragraph 
(3)'' in second sentence of subsec. (c) and substituted ``paragraph (1) 
or (2) shall not be considered to be contributed by the decedent, and 
contributions or payments made by the decedent's employer or former 
employer toward the purchase of an annuity contract described in 
paragraph (3) shall, to the extent excludable from gross income under 
section 403(b),'' for ``this subsection shall'' in third sentence of 
subsec. (c).


                    Effective Date of 1986 Amendment

    Section 1852(e)(1)(B) of Pub. L. 99-514 provided that: ``The 
amendment made by subparagraph (A) [amending this section] shall apply 
to estates of decedents dying after the date of the enactment of this 
Act [Oct. 22, 1986].''
    Amendment by section 1848(d) of Pub. L. 99-514 effective, except as 
otherwise provided, as if included in the provisions of the Tax Reform 
Act of 1984, Pub. L. 98-369, div. A, to which such amendment relates, 
see section 1881 of Pub. L. 99-514, set out as a note under section 48 
of this title.


                    Effective Date of 1984 Amendment

    Amendment by section 491(d)(34) of Pub. L. 98-369 applicable to 
obligations issued after Dec. 31, 1983, see section 491(f)(1) of Pub. L. 
98-369, set out as a note under section 62 of this title.
    Section 525(b)(1), (2), (4) of Pub. L. 98-369, as amended by Pub. L. 
99-514, title XVIII, Sec. 1852(e)(3), Oct. 22, 1986, 100 Stat. 2868, 
provided that:
    ``(1) In general.--The amendments made by this section [amending 
this section] shall apply to the estates of decedents dying after 
December 31, 1984.
    ``(2) Exception for participants in pay status.--The amendments made 
by this section shall not apply to the estate of any decedent who--
        ``(A) was a participant in any plan who was in pay status on 
    December 31, 1984, and
        ``(B) irrevocably elected the form of the benefit before the 
    date of the enactment of this Act [July 18, 1984].
    ``(4) Irrevocable election.--For purposes of paragraph (2) [set out 
above] and section 245(c) of the Tax Equity and Fiscal Responsibility 
Act of 1982 [see Effective Date of 1982 Amendment note below], an 
individual who--
        ``(A) separated from service before January 1, 1985, with 
    respect to paragraph (2), or January 1, 1983, with respect to 
    section 245(c) of the Tax Equity and Fiscal Responsibility Act of 
    1982, and
        ``(B) meets the requirements of such paragraph or such section 
    other than the requirement that there be an irrevocable election, 
    and that the individual be in pay status,
shall be treated as having made an irrevocable election and as being in 
pay status within the time prescribed with respect to a form of benefit 
if such individual does not change such form of benefit before death.''


                    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 1982 Amendment

    Section 245(c) of Pub. L. 97-248, as amended by Pub. L. 98-369, div. 
A, title V, Sec. 525(b)(3), July 18, 1984, 98 Stat. 874, provided that: 
``The amendments made by this section [amending this section] shall 
apply to the estates of decedents dying after December 31, 1982, except 
that such amendments shall not apply to the estate of any decedent who 
was a participant in any plan who was in pay status on December 31, 
1982, and irrevocably elected before January 1, 1983, the form of 
benefit.''


                    Effective Date of 1981 Amendment

    Amendment by section 311(d)(1), (h)(4) of Pub. L. 97-34 applicable 
to taxable years beginning after Dec. 31, 1981, see section 311(i)(1) of 
Pub. L. 97-34, set out as a note under section 219 of this title.
    Amendment by section 313(b)(3) of Pub. L. 97-34 applicable to 
redemptions after Aug. 13, 1981, in taxable years ending after such 
date, see section 313(c) of Pub. L. 97-34, set out as a note under 
section 219 of this title.


                    Effective Date of 1980 Amendment

    Amendment by Pub. L. 96-222 applicable with respect to the estates 
of decedents dying after Apr. 1, 1980, see section 101(b)(1)(D) of Pub. 
L. 96-222, set out as a note under section 691 of this title.


                    Effective Date of 1978 Amendment

    Section 142(c) of Pub. L. 95-600 provided that: ``The amendments 
made by this section [amending this section] shall apply with respect to 
the estates of decedents dying after December 31, 1978.''
    Amendment by section 156(c)(4) of Pub. L. 95-600 applicable to 
distributions or transfers made after Dec. 31, 1977, in taxable years 
beginning after such date, see section 156(d) of Pub. L. 95-600, set out 
as a note under section 403 of this title.
    Section 702(j)(3)(A) 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.''


                    Effective Date of 1976 Amendment

    Section 2009(e)(3)(A) of Pub. L. 94-455 provided that: ``The 
amendments made by paragraphs (1), (2), and (3) of subsection (c) 
[amending this section] shall apply to the estates of decedents dying 
after December 31, 1976.''


                    Effective Date of 1974 Amendment

    Amendment by Pub. L. 93-406 applicable to taxable years ending on or 
after Sept. 21, 1972, with respect to individuals dying on or after 
Sept. 21, 1972, see section 2007(c) of Pub. L. 93-406, set out as a note 
under section 122 of this title.


                    Effective Date of 1972 Amendment

    Section 2(b) of Pub. L. 92-580, as amended by Pub. L. 99-514, 
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that: ``The amendment 
made by subsection (a) [amending this section] shall apply with respect 
to estate of decedents for which the period prescribed by the Internal 
Revenue Code of 1986 [formerly I.R.C. 1954] for filing of a claim for 
credit or refund of an overpayment of estate tax ends on or after the 
date of enactment of this Act [Oct. 27, 1972]. No interest shall be 
allowed or paid on any overpayment of estate tax resulting from the 
application of the amendment made by subsection (a) for any period prior 
to the expiration of the one hundred and eightieth day following the 
date of the enactment of this Act.''


                    Effective Date of 1969 Amendment

    Amendment by Pub. L. 91-172 effective Jan. 1, 1970, see section 
101(k)(1) of Pub. L. 91-172, set out as an Effective Date note under 
section 4940 of this title.


                    Effective Date of 1966 Amendment

    Section 2(c) of Pub. L. 89-365 provided that: ``The amendments made 
by subsection (a) [amending this section] shall apply with respect to 
decedents dying after December 31, 1965. The amendments made by 
subsection (b) [amending section 2517 of this title] shall apply with 
respect to calendar years after 1965.''


                    Effective Date of 1962 Amendment

    Amendment by Pub. L. 87-792 applicable to taxable years beginning 
after Dec. 31, 1962, see section 8 of Pub. L. 87-792, set out as a note 
under section 22 of this title.


                    Effective Date of 1958 Amendment

    Amendment by section 23(e) of Pub. L. 85-866 applicable with respect 
to estates of decedents dying after Dec. 31, 1957, see section 23(g) of 
Pub. L. 85-866, set out as a note under section 403 of this title.
    Section 67(b) of Pub. L. 85-866 provided that: ``The amendment made 
by subsection (a) [amending this section] shall apply with respect to 
estates of decedents dying after December 31, 1953.''


           Plan Amendments Not Required Until January 1, 1989

    For provisions directing that if any amendments made by subtitle A 
or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or title XVIII 
[Secs. 1800-1899A] of Pub. L. 99-514 require an amendment to any plan, 
such plan amendment shall not be required to be made before the first 
plan year beginning on or after Jan. 1, 1989, see section 1140 of Pub. 
L. 99-514, as amended, set out as a note under section 401 of this 
title.

                  Section Referred to in Other Sections

    This section is referred to in sections 406, 407, 2045, 2056, 6324 
of this title.
