Instructions For Form 706 - 2016 Page 28
ADVERTISEMENT
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
51
52
53
54Any transfer within 3 years of death of
transfers of stock in a controlled
subject to a power of disposition by the
a retained section 2036 life estate,
corporation made after June 22, 1976, if
decedent. It does not matter if the right
section 2037 reversionary interest, or
the decedent retained or acquired
arises by the express terms of the
section 2038 power to revoke, etc., if
voting rights in the stock. If the decedent
instrument of transfer or by operation of
the property subject to the life estate,
retained direct or indirect voting rights in
law. For this purpose, reversionary
interest, or power would have been
a controlled corporation, the decedent is
interest does not include the possibility
included in the gross estate had the
considered to have retained enjoyment
that the income alone from the property
decedent continued to possess the life
of the transferred property. A
may return to the decedent or become
estate, interest, or power until death.
corporation is a controlled corporation if
subject to the decedent's power of
the decedent owned (actually or
disposition.
These transfers are reported on
constructively) or had the right (either
Schedule G, regardless of whether a gift
5. Revocable transfers (section
alone or with any other person) to vote
tax return was required to be filed for
2038). The gross estate includes the
at least 20% of the total combined
them when they were made. However,
value of any transferred property which
voting power of all classes of stock. See
the amount includible and the
was subject to the decedent's power to
section 2036(b)(2). If these voting rights
information required to be shown for the
alter, amend, revoke, or terminate the
ceased or were relinquished within 3
transfers are determined:
transfer at the time of the decedent's
years of the decedent's death, the
For insurance on the life of the
death. A decedent's power to change
corporate interests are included in the
decedent using the instructions to
beneficiaries and to increase any
gross estate as if the decedent had
Schedule D (attach Forms 712);
beneficiary's enjoyment of the property
actually retained the voting rights until
For insurance on the life of another
are examples of this.
death.
using the instructions to Schedule F
It does not matter whether the power
(attach Forms 712); and
The amount includible in the gross
was reserved at the time of the transfer,
For sections 2036, 2037, and 2038
estate is the value of the transferred
whether it arose by operation of law, or
transfers, using paragraphs (3), (4), and
property at the time of the decedent's
whether it was later created or
(5) of these instructions.
death. If the decedent kept or reserved
conferred. The rule applies regardless
an interest or right to only a part of the
3. Transfers with retained life estate
of the source from which the power was
transferred property, the amount
(section 2036). These are transfers by
acquired, and regardless of whether the
includible in the gross estate is a
the decedent in which the decedent
power was exercisable by the decedent
corresponding part of the entire value of
retained an interest in the transferred
alone or with any person (and
the property.
property. The transfer can be in trust or
regardless of whether that person had a
otherwise, but excludes bona fide sales
A retained life estate does not have
substantial adverse interest in the
for adequate and full consideration.
to be legally enforceable. What matters
transferred property).
is that a substantial economic benefit
Interests or rights. Section 2036
The capacity in which the decedent
was retained. For example, if a mother
applies to the following retained
could use a power has no bearing. If the
transferred title to her home to her
interests or rights:
decedent gave property in trust and was
daughter but with the informal
The right to income from the
the trustee with the power to revoke the
understanding that she was to continue
transferred property;
trust, the property would be included in
living there until her death, the value of
The right to the possession or
his or her gross estate. For transfers or
the home would be includible in the
enjoyment of the property; and
additions to an irrevocable trust after
mother's estate even if the agreement
The right, either alone or with any
October 28, 1979, the transferred
would not have been legally
person, to designate the persons who
property is includible if the decedent
enforceable.
shall receive the income from, possess,
reserved the power to remove the
or enjoy, the property.
4. Transfers taking effect at
trustee at will and appoint another
death (section 2037). A transfer that
trustee.
Retained annuity, unitrust, and
takes effect at the decedent's death is
other income interests in trusts. If a
If the decedent relinquished within 3
one under which possession or
decedent transferred property into a
years of death any of the includible
enjoyment can be obtained only by
trust and retained or reserved the right
powers described above, figure the
surviving the decedent. A transfer is not
to use the property, or the right to an
gross estate as if the decedent had
treated as one that takes effect at the
annuity, unitrust, or other interest in
actually retained the powers until death.
decedent's death unless the decedent
such trust for the property for
Only the part of the transferred
retained a reversionary interest (defined
decedent's life, any period not
property that is subject to the
later) in the property that immediately
ascertainable without reference to the
decedent's power is included in the
before the decedent's death had a value
decedent's death, or for a period that
gross estate.
of more than 5% of the value of the
does not, in fact, end before the
For more detailed information on
transferred property. If the transfer was
decedent's death, then the decedent's
which transfers are includible in the
made before October 8, 1949, the
right to use the property or the retained
gross estate, see Regulations section
reversionary interest must have arisen
annuity, unitrust, or other interest
20.2038-1.
by the express terms of the instrument
(whether payable from income and/or
of transfer.
principal) is the retention of the
Special Valuation Rules for
possession or enjoyment of, or the right
A reversionary interest is, generally,
Certain Lifetime Transfers
to the income from, the property for
any right under which the transferred
Sections 2701 through 2704 provide
purposes of section 2036. See
property will or may be returned to the
rules for valuing certain transfers to
Regulations section 20.2036-1(c)(2).
decedent or the decedent's estate. It
family members.
also includes the possibility that the
Retained voting rights. Transfers
transferred property may become
with a retained life estate also include
-28-
Part Instructions
ADVERTISEMENT
0 votes
Related Articles
Related forms
Related Categories
Parent category: Financial