26 U.S.C. § 2654 — Special rules
submitted 40 years ago by Pub. L. 99-514 to r/title-26-INTERNAL-REVENUE-CODE · 456 words · no verdicts yet
This section provides special rules for adjusting property basis, treating certain trust portions as separate trusts, qualified disclaimers, and trustee liability.
(a) Basis adjustment. (1) If property is transferred in a generation-skipping transfer*, its basis is increased by the part of the section 2601 tax attributable to the excess of the property’s fair market value over its adjusted basis immediately before transfer. The basis may not be increased above fair market value, and this rule applies after any section 1015 adjustment. (2) If property is transferred in a taxable termination* occurring at the same time as and because of an individual’s death, its basis is adjusted in a way similar to section 1014(a). If its inclusion ratio is below 1, any increase or decrease is limited by multiplying it by that ratio.
(b) Separate trusts. For this chapter, portions attributable to different transferors, and substantially separate and independent shares* of different beneficiaries, are treated as separate trusts. Otherwise, this chapter does not authorize treating one trust* as two or more trusts. A trust is treated as part of an estate during a period when section 645 treats it that way.
(c) Disclaimers. Section 2518 contains the rules about the effect of a qualified disclaimer for this chapter.
(d) Trustee’s personal liability. A trustee* is not personally liable for an increase in section 2601 tax caused by section 2642(c) not applying to a lifetime transfer for which no gift-tax return was filed, or by the trust’s inclusion ratio being higher than the ratio shown, or treated as shown, on the return allocating GST exemption to the transferred property. This protection does not apply if the trustee knows enough facts to reasonably conclude that a gift-tax return was required or that the inclusion ratio was wrong.
Except as provided in paragraph (2), if property is transferred in a generation-skipping transfer*, the basis of such property shall be increased (but not above the fair market value of such property) by an amount equal to that portion of the tax imposed by section 2601 with respect to the transfer which is attributable to the excess of the fair market value of such property over its adjusted basis immediately before the transfer. The preceding shall be applied after any basis adjustment under section 1015 with respect to the transfer.
If property is transferred in a taxable termination* which occurs at the same time as and as a result of the death of an individual, the basis of such property shall be adjusted in a manner similar to the manner provided under section 1014(a); except that, if the inclusion ratio with respect to such property is less than 1, any increase or decrease in basis shall be limited by multiplying such increase or decrease (as the case may be) by the inclusion ratio.
For purposes of this chapter—
the portions of a trust* attributable to transfers from different transferors shall be treated as separate trusts, and
substantially separate and independent shares* of different beneficiaries in a trust shall be treated as separate trusts.
Except as provided in the preceding sentence, nothing in this chapter shall be construed as authorizing a single trust to be treated as 2 or more trusts. For purposes of this subsection, a trust shall be treated as part of an estate during any period that the trust is so treated under section 645.
For provisions relating to the effect of a qualified disclaimer for purposes of this chapter, see section 2518.
A trustee shall not be personally liable for any increase in the tax imposed by section 2601 which is attributable to the fact that—
section 2642(c) (relating to exemption of certain nontaxable gifts) does not apply to a transfer to the trust which was made during the life of the transferor and for which a gift tax return was not filed, or
the inclusion ratio with respect to the trust is greater than the amount of such ratio as computed on the basis of the return on which was made (or was deemed made) an allocation of the GST exemption to property transferred to such trust.
The preceding sentence shall not apply if the trustee has knowledge of facts sufficient reasonably to conclude that a gift tax return was required to be filed or that the inclusion ratio was erroneous.
Source credit: (Added Pub. L. 99–514, title XIV, § 1431(a), Oct. 22, 1986, 100 Stat. 2727; amended Pub. L. 100–647, title I, § 1014(g)(12), (13), Nov. 10, 1988, 102 Stat. 3565, 3566; Pub. L. 101–239, title VII, § 7811(j)(2), Dec. 19, 1989, 103 Stat. 2411; Pub. L. 105–206, title VI, § 6013(a)(4)(B), July 22, 1998, 112 Stat. 819; Pub. L. 113–295, div. A, title II, § 221(a)(95)(B)(iii), Dec. 19, 2014, 128 Stat. 4051.)
- 1986Enacted · Pub. L. 99-514 · 100 Stat. 2727
- 1988Amended · Pub. L. 100-647 · 102 Stat. 3565, 3566
- 1989Amended · Pub. L. 101-239 · 103 Stat. 2411
- 1998Amended · Pub. L. 105-206 · 112 Stat. 819
- 2014Amended · Pub. L. 113-295 · 128 Stat. 4051
A history note hasn’t been published yet. The record shows enactment by Pub. L. 99-514 on 1986-10-22.
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