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

(a) Inclusion of gifts made by decedent

Except as provided in subsection (b), 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.

(b) Exceptions

Subsection (a) shall not apply-

(1) to any bona fide sale for an adequate and full consideration in money or money's worth, and

(2) to any gift to a donee made during a calendar year 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 gifts to such donee.

Paragraph (2) shall not apply to any transfer with respect to a life insurance policy.

(c) Inclusion of gift tax on certain 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 after December 31, 1976, and during the 3-year period ending on the date of the decedent's death.

(d) Decedents dying after 1981

(1) In general

Except as otherwise provided in this subsection, subsection (a) shall not apply to the estate of a decedent dying after December 31, 1981.

(2) Exceptions for certain transfers

Paragraph (1) of this subsection and paragraph (2) of subsection (b) shall not apply to a transfer of an interest in property which is included in the value of the gross estate under section 2036, 2037, 2038, or 2042 or would have been included under any of such sections if such interest had been retained by the decedent.

(3) 3-year rule retained for certain purposes

Paragraph (1) shall not apply 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 farm, etc., real property), and

(C) subchapter C of chapter 64 (relating to lien for taxes).

(4) Coordination of 3-year rule with section 6166(a)(1)

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 paragraph (1).

(Aug. 16, 1954, ch. 736, 68A Stat. 381 ; Oct. 16, 1962, Pub. L. 87–834, §18(a)(2)(C), 76 Stat. 1052 ; Oct. 4, 1976, Pub. L. 94–455, title XX, §2001(a)(5), 90 Stat. 1848 ; Nov. 6, 1978, Pub. L. 95–600, title VII, §702(f)(1), 92 Stat. 2930 ; Aug. 13, 1981, Pub. L. 97–34, title IV, §§403(b)(3)(B), 424(a), 95 Stat. 301 , 317; Jan. 12, 1983, Pub. L. 97–448, title I, §104(a)(9), (d)(1)(A), (C), (2), 96 Stat. 2381 , 2383.)

Amendments

1983-Subsec. (b)(2). Pub. L. 97–448, §104(a)(9), substituted "section 6019(2)" for "section 6019(a)(2)".

Subsec. (d)(2). Pub. L. 97–448, §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, §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, §104(d)(1)(A), added par. (4).

1981-Subsec. (b)(2). Pub. L. 97–34, §403(b)(3)(B), inserted "(other than by reason of section 6019(a)(2))" after "section 6019".

Subsec. (d). Pub. L. 97–34, §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 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, §107(a)(2)(F), Apr. 1, 1980, 94 Stat. 223 , as amended by Pub. L. 99–514, §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]."

Cross References

Estates of nonresidents not citizens, see section 2104 of this title.

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.