Sec. 404. Certain transfer tax rules applicable to grantor trusts
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/bill/116/s/787/is/section-404A research copy — for the controlling text, always check the official state or federal source. Not legal advice.
Subtitle B is amended by adding at the end the following new chapter: Sec. 2901. Application of transfer taxes. In the case of any portion of a trust to which this section applies— the value of the gross estate of the deceased deemed owner of such portion shall include all assets attributable to that portion at the time of the death of such owner, any distribution from such portion to one or more beneficiaries during the life of the deemed owner of such portion shall be treated as a transfer by gift for purposes of chapter 12, and if at any time during the life of the deemed owner of such portion, such owner ceases to be treated as the owner of such portion under subpart E of part 1 of subchapter J of chapter 1, all assets attributable to such portion at such time shall be treated for purposes of chapter 12 as a transfer by gift made by the deemed owner.
This section shall apply to— the portion of a trust with respect to which the grantor is the deemed owner, and the portion of the trust to which a person who is not the grantor is a deemed owner by reason of the rules of subpart E of part 1 of subchapter J of chapter 1, and such deemed owner engages in a sale, exchange, or comparable transaction with the trust that is disregarded for purposes of subtitle A. For purposes of paragraph (2), the portion of the trust described with respect to a transaction is the portion of the trust attributable to the property received by the trust in such transaction, including all retained income therefrom, appreciation thereon, and reinvestments thereof, net of the amount of consideration received by the deemed owner in such transaction.
This section shall not apply to— any trust that is includible in the gross estate of the deemed owner (without regard to subsection (a)(1)), and any other type of trust that the Secretary determines by regulations or other guidance does not have as a significant purpose the avoidance of transfer taxes. For purposes of this section, the term deemed owner means any person who is treated as the owner of a portion of a trust under subpart E of part 1 of subchapter J of chapter 1.
The amount to which subsection
(a)applies shall be reduced by the value of any transfer by gift by the deemed owner to the trust previously taken into account by the deemed owner under chapter 12. Any tax imposed pursuant to subsection
(a)shall be a liability of the trust. . The table of chapters for subtitle B is amended by adding at the end the following new item: Chapter 16. Special rules for grantor trusts . The amendments made by this section shall apply— to trusts created on or after the date of the enactment of this Act; to any portion of a trust established before the date of the enactment of this Act which is attributable to a contribution made on or after such date; and to any portion of a trust established before the date of the enactment of this Act to which section 2901(a) of the Internal Revenue Code of 1986 (as added by subsection (a)) applies by reason of a transaction described in section 2901(b)(2) of such Code on or after such date.