Subpart F—Miscellaneous

        

Amendment of Analysis

Pub. L. 107–16, title V, §542(e)(1)(D), (f)(2), title IX, §901, June 7, 2001, 115 Stat. 85, 86, 150, provided that, applicable to transfers after Dec. 31, 2009, item 684 is temporarily amended by inserting "and nonresident aliens" after "estates".

Amendments

1997—Pub. L. 105–34, title XI, §1131(c)(6), title XIII, §1309(b), Aug. 5, 1997, 111 Stat. 980, 1043, added items 684 and 685.

1976—Pub. L. 94–455, title XXI, §2131(e)(2), Oct. 4, 1976, 90 Stat. 1924, substituted "Use of trust as an exchange fund" for "Applicability of provisions" in item 683.

§681. Limitation on charitable deduction

(a) Trade or business income

In computing the deduction allowable under section 642(c) to a trust, no amount otherwise allowable under section 642(c) as a deduction shall be allowed as a deduction with respect to income of the taxable year which is allocable to its unrelated business income for such year. For purposes of the preceding sentence, the term "unrelated business income" means an amount equal to the amount which, if such trust were exempt from tax under section 501(a) by reason of section 501(c)(3), would be computed as its unrelated business taxable income under section 512 (relating to income derived from certain business activities and from certain property acquired with borrowed funds).

(b) Cross reference

For disallowance of certain charitable, etc., deductions otherwise allowable under section 642(c), see sections 508(d) and 4948(c)(4).

(Aug. 16, 1954, ch. 736, 68A Stat. 232; Pub. L. 90–630, §6(b), Oct. 22, 1968, 82 Stat. 1330; Pub. L. 91–172, title I, §§101(j)(18), (19), 121(d)(2)(B), Dec. 30, 1969, 83 Stat. 528, 547.)

Amendments

1969—Subsec. (a). Pub. L. 91–172, §121(d)(2)(B), substituted reference to certain property acquired with borrowed funds for reference to certain leases.

Subsec. (b). Pub. L. 91–172, §101(j)(18), (19), redesignated subsec. (d) as (b) and substituted "sections 518(d) and 4948(c)(4)" for "section 503(e)". Former subsec. (b), dealing generally with the operation of trusts, was struck out.

Subsec. (c). Pub. L. 91–172, §101(j)(18), struck out subsec. (c) dealing with accumulated income.

Subsec. (d). Pub. L. 91–172, §101(j)(19), redesignated subsec. (d) as (b).

1968—Subsec. (c). Pub. L. 90–630 inserted provision that par. (1) does not apply to income attributable to property transferred to a trust before January 1, 1951, by the creator thereof if the trust was irrevocable on such date and if the income is required to be accumulated pursuant to the mandatory terms of the instrument creating the trust.

Effective Date of 1969 Amendment

Amendment by section 101(j)(18), (19) of 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.

Amendment by section 121(d)(2)(B) of Pub. L. 91–172 applicable to taxable years beginning after Dec. 31, 1969, see section 121(g) of Pub. L. 91–172, set out as a note under section 511 of this title.

Effective Date of 1968 Amendment

Section 6(c) of Pub. L. 90–630 provided that: "The amendments made by subsection (a) [amending section 504 of this title] and (b) [amending this section] shall apply with respect to taxable years beginning after December 31, 1953, and ending after August 16, 1954. For purposes of sections 3814 and 162(g)(4) of the Internal Revenue Code of 1939, provisions having the same effect as such amendments shall be treated as included in such sections effective with respect to taxable years beginning after December 31, 1950."

§682. Income of an estate or trust in case of divorce, etc.

(a) Inclusion in gross income of wife

There shall be included in the gross income of a wife who is divorced or legally separated under a decree of divorce or of separate maintenance (or who is separated from her husband under a written separation agreement) the amount of the income of any trust which such wife is entitled to receive and which, except for this section, would be includible in the gross income of her husband, and such amount shall not, despite any other provision of this subtitle, be includible in the gross income of such husband. This subsection shall not apply to that part of any such income of the trust which the terms of the decree, written separation agreement, or trust instrument fix, in terms of an amount of money or a portion of such income, as a sum which is payable for the support of minor children of such husband. In case such income is less than the amount specified in the decree, agreement, or instrument, for the purpose of applying the preceding sentence, such income, to the extent of such sum payable for such support, shall be considered a payment for such support.

(b) Wife considered a beneficiary

For purposes of computing the taxable income of the estate or trust and the taxable income of a wife to whom subsection (a) applies, such wife shall be considered as the beneficiary specified in this part.

(c) Cross reference

For definitions of "husband" and "wife", as used in this section, see section 7701(a)(17).

(Aug. 16, 1954, ch. 736, 68A Stat. 234; Pub. L. 98–369, div. A, title IV, §422(d)(2), July 18, 1984, 98 Stat. 798.)

Amendments

1984—Subsec. (b). Pub. L. 98–369 struck out "or section 71" after "subsection (a)" and struck out provision that a periodic payment under section 71 to any portion of which this part applied shall be included in the gross income of the beneficiary in the taxable year in which under this part such portion is required to be included.

Effective Date of 1984 Amendment

Amendment by Pub. L. 98–369 applicable with respect to divorce or separation instruments executed after Dec. 31, 1984, or executed before Jan. 1, 1985, but modified on or after Jan. 1, 1985, with express provision for application of amendment to modification, see section 422(e)(1), (2) of Pub. L. 98–369, set out as a note under section 71 of this title.

§683. Use of trust as an exchange fund

(a) General rule

Except as provided in subsection (b), if property is transferred to a trust in exchange for an interest in other trust property and if the trust would be an investment company (within the meaning of section 351) if it were a corporation, then gain shall be recognized to the transferor.

(b) Exception for pooled income funds

Subsection (a) shall not apply to any transfer to a pooled income fund (within the meaning of section 642(c)(5)).

(Aug. 16, 1954, ch. 736, 68A Stat. 235; Pub. L. 94–455, title XXI, §2131(e)(1), Oct. 4, 1976, 90 Stat. 1924.)

Amendments

1976—Pub. L. 94–455 substituted provisions relating to use of trust as an exchange fund for provisions setting forth rule that this part applies only to taxable years beginning after Dec. 31, 1953, and ending after the date of the enactment of this title and exceptions thereto.

Effective Date of 1976 Amendment

Amendment of section by Pub. L. 94–455 effective on Apr. 8, 1976, in taxable years ending on or after such date, see section 2131(f)(6) of Pub. L. 94–455, set out as a note under section 584 of this title.

§684. Recognition of gain on certain transfers to certain foreign trusts and estates

(a) In general

Except as provided in regulations, in the case of any transfer of property by a United States person to a foreign estate or trust, for purposes of this subtitle, such transfer shall be treated as a sale or exchange for an amount equal to the fair market value of the property transferred, and the transferor shall recognize as gain the excess of—

(1) the fair market value of the property so transferred, over

(2) the adjusted basis (for purposes of determining gain) of such property in the hands of the transferor.

(b) Exception

Subsection (a) shall not apply to a transfer to a trust by a United States person to the extent that any person is treated as the owner of such trust under section 671.

(c) Treatment of trusts which become foreign trusts

If a trust which is not a foreign trust becomes a foreign trust, such trust shall be treated for purposes of this section as having transferred, immediately before becoming a foreign trust, all of its assets to a foreign trust.

(Added Pub. L. 105–34, title XI, §1131(b), Aug. 5, 1997, 111 Stat. 978; amended Pub. L. 107–16, title V, §542(e)(1)(A)–(C), June 7, 2001, 115 Stat. 84, 85.)

Amendment of Section

Pub. L. 107–16, title V, §542(e)(1)(A)–(C), (f)(2), title IX, §901, June 7, 2001, 115 Stat. 84–86, 150, provided that, applicable to transfers after Dec. 31, 2009, this section is temporarily amended as follows:

(1) in section catchline, by inserting "and nonresident aliens" after "estates";

(2) in subsection (a), by inserting "or to a nonresident alien" after "or trust" in introductory provisions; and

(3) by amending subsection (b) to read as follows:

(b) Exceptions

(1) Transfers to certain trusts

Subsection (a) shall not apply to a transfer to a trust by a United States person to the extent that any United States person is treated as the owner of such trust under section 671.

(2) Lifetime transfers to nonresident aliens

Subsection (a) shall not apply to a lifetime transfer to a nonresident alien.

See Effective and Termination Dates of 2001 Amendment note below.

Codification

Another section 1131(b) of Pub. L. 105–34 amended sections 367, 721, and 1035 of this title.

Effective and Termination Dates of 2001 Amendment

Amendment by Pub. L. 107–16 applicable to transfers after Dec. 31, 2009, see section 542(f)(2) of Pub. L. 107–16, set out as a note under section 121 of this title.

Amendment by Pub. L. 107–16 inapplicable to estates of decedents dying, gifts made, or generation skipping transfers, after Dec. 31, 2010, and the Internal Revenue Code of 1986 to be applied and administered to such estates, gifts, and transfers as if such amendment had never been enacted, see section 901 of Pub. L. 107–16, set out as a note under section 1 of this title.

§685. Treatment of funeral trusts

(a) In general

In the case of a qualified funeral trust—

(1) subparts B, C, D, and E shall not apply, and

(2) no deduction shall be allowed by section 642(b).

(b) Qualified funeral trust

For purposes of this subsection, the term "qualified funeral trust" means any trust (other than a foreign trust) if—

(1) the trust arises as a result of a contract with a person engaged in the trade or business of providing funeral or burial services or property necessary to provide such services,

(2) the sole purpose of the trust is to hold, invest, and reinvest funds in the trust and to use such funds solely to make payments for such services or property for the benefit of the beneficiaries of the trust,

(3) the only beneficiaries of such trust are individuals with respect to whom such services or property are to be provided at their death under contracts described in paragraph (1),

(4) the only contributions to the trust are contributions by or for the benefit of such beneficiaries,

(5) the trustee elects the application of this subsection, and

(6) the trust would (but for the election described in paragraph (5)) be treated as owned under subpart E by the purchasers of the contracts described in paragraph (1).

A trust shall not fail to be treated as meeting the requirement of paragraph (6) by reason of the death of an individual but only during the 60-day period beginning on the date of such death.

(c) Dollar limitation on contributions

(1) In general

The term "qualified funeral trust" shall not include any trust which accepts aggregate contributions by or for the benefit of an individual in excess of $7,000.

(2) Related trusts

For purposes of paragraph (1), all trusts having trustees which are related persons shall be treated as 1 trust. For purposes of the preceding sentence, persons are related if—

(A) the relationship between such persons is described in section 267 or 707(b),

(B) such persons are treated as a single employer under subsection (a) or (b) of section 52, or

(C) the Secretary determines that treating such persons as related is necessary to prevent avoidance of the purposes of this section.

(3) Inflation adjustment

In the case of any contract referred to in subsection (b)(1) which is entered into during any calendar year after 1998, the dollar amount referred to paragraph (1) shall be increased by an amount equal to—

(A) such dollar amount, multiplied by

(B) the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, by substituting "calendar year 1997" for "calendar year 1992" in subparagraph (B) thereof.

If any dollar amount after being increased under the preceding sentence is not a multiple of $100, such dollar amount shall be rounded to the nearest multiple of $100.

(d) Application of rate schedule

Section 1(e) shall be applied to each qualified funeral trust by treating each beneficiary's interest in each such trust as a separate trust.

(e) Treatment of amounts refunded to purchaser on cancellation

No gain or loss shall be recognized to a purchaser of a contract described in subsection (b)(1) by reason of any payment from such trust to such purchaser by reason of cancellation of such contract. If any payment referred to in the preceding sentence consists of property other than money, the basis of such property in the hands of such purchaser shall be the same as the trust's basis in such property immediately before the payment.

(f) Simplified reporting

The Secretary may prescribe rules for simplified reporting of all trusts having a single trustee and of trusts terminated during the year.

(Added Pub. L. 105–34, title XIII, §1309(a), Aug. 5, 1997, 111 Stat. 1042; amended Pub. L. 105–206, title VI, §6013(b), July 22, 1998, 112 Stat. 820.)

Limitation on Contributions Received By Trust During Calendar Year 2008

For limitation on aggregate contributions received by qualified funeral trust by or for the benefit of an individual for contracts entered into during calendar year 2008, see section 3.28 of Revenue Procedure 2007–66, set out as a note under section 1 of this title.

Amendments

1998—Subsec. (b). Pub. L. 105–206, §6013(b)(1), inserted concluding provisions.

Subsec. (f). Pub. L. 105–206, §6013(b)(2), inserted "and of trusts terminated during the year" before period at end.

Effective Date of 1998 Amendment

Amendment by Pub. L. 105–206 effective, except as otherwise provided, as if included in the provisions of the Taxpayer Relief Act of 1997, Pub. L. 105–34, to which such amendment relates, see section 6024 of Pub. L. 105–206, set out as a note under section 1 of this title.

Effective Date

Section 1309(c) of Pub. L. 105–34 provided that: "The amendments made by this section [enacting this section] shall apply to taxable years ending after the date of the enactment of this Act [Aug. 5, 1997]."