Internal Revenue Code · 26 U.S.C.

§ 2702. Special valuation rules in case of transfers of interests in trusts

In force Text current through Public Law 119-121 (October 9, 2026) release point 119-121

Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).

Cite as 26 U.S.C. § 2702

At a glance

Read from the text, the source credit and the official notes. Not part of the law.

Status: In force
Added: November 5, 1990 by Pub. L. 101–508
Last amended: August 20, 1996 by Pub. L. 104–188
Amendments: 1 dated changes in the source credit
Length: 5 subsections · 679 words · about 3 min to read
Defines: 4 terms
Cross-references: cites 3; cited by 0 Code sections and 16 other regulations
Regulations: 8 issued under this section

¶(a) Valuation rules

¶(1) In general

Solely for purposes of determining whether a transfer of an interest in trust to (or for the benefit of) a member of the transferor’s family is a gift (and the value of such transfer), the value of any interest in such trust retained by the transferor or any applicable family member (as defined in section 2701(e)(2)) shall be determined as provided in paragraph (2).

¶(2) Valuation of retained interests

¶(A) In general

The value of any retained interest which is not a qualified interest shall be treated as being zero.

¶(B) Valuation of qualified interest

The value of any retained interest which is a qualified interest shall be determined under section 7520.

¶(3) Exceptions

¶(A) In general This subsection shall not apply to any transfer—

¶(i) if such transfer is an incomplete gift,

¶(ii) if such transfer involves the transfer of an interest in trust all the property in which consists of a residence to be used as a personal residence by persons holding term interests in such trust, or

¶(iii) to the extent that regulations provide that such transfer is not inconsistent with the purposes of this section.

¶(B) Incomplete gift

For purposes of subparagraph (A), the term “incomplete gift” means any transfer which would not be treated as a gift whether or not consideration was received for such transfer.

¶(b) Qualified interest For purposes of this section, the term “qualified interest” means—

¶(1) any interest which consists of the right to receive fixed amounts payable not less frequently than annually,

¶(2) any interest which consists of the right to receive amounts which are payable not less frequently than annually and are a fixed percentage of the fair market value of the property in the trust (determined annually), and

¶(3) any noncontingent remainder interest if all of the other interests in the trust consist of interests described in paragraph (1) or (2).

¶(c) Certain property treated as held in trust For purposes of this section—

¶(1) In general

The transfer of an interest in property with respect to which there is 1 or more term interests shall be treated as a transfer of an interest in a trust.

¶(2) Joint purchases

If 2 or more members of the same family acquire interests in any property described in paragraph (1) in the same transaction (or a series of related transactions), the person (or persons) acquiring the term interests in such property shall be treated as having acquired the entire property and then transferred to the other persons the interests acquired by such other persons in the transaction (or series of transactions). Such transfer shall be treated as made in exchange for the consideration (if any) provided by such other persons for the acquisition of their interests in such property.

¶(3) Term interest The term “term interest” means—

¶(A) a life interest in property, or

¶(B) an interest in property for a term of years.

¶(4) Valuation rule for certain term interests If the nonexercise of rights under a term interest in tangible property would not have a substantial effect on the valuation of the remainder interest in such property—

¶(A) subparagraph (A) of subsection (a)(2) shall not apply to such term interest, and

¶(B) the value of such term interest for purposes of applying subsection (a)(1) shall be the amount which the holder of the term interest establishes as the amount for which such interest could be sold to an unrelated third party.

¶(d) Treatment of transfers of interests in portion of trust

In the case of a transfer of an income or remainder interest with respect to a specified portion of the property in a trust, only such portion shall be taken into account in applying this section to such transfer.

¶(e) Member of the family

For purposes of this section, the term “member of the family” shall have the meaning given such term by section 2704(c)(2).

(Added Pub. L. 101–508, title XI, § 11602(a), Nov. 5, 1990, 104 Stat. 1388–497; amended Pub. L. 104–188, title I, § 1702(f)(11), Aug. 20, 1996, 110 Stat. 1872.)

Terms defined here

Where the text says “the term … means”. Select a term to jump to its definition.

incomplete gift § 2702(a)(3)(B)
member of the family § 2702(e)
qualified interest § 2702(b)
term interest § 2702(c)(3)

Regulations under this section

Treasury regulations (26 CFR) issued under § 2702

Cross-references

Computed from the citations in the text of Title 26 and 26 CFR.

This section cites 3 other sections

Cited in 16 regulations not issued under it

Amendment history

From the source credit and the official notes, newest first.

August 20, 1996Amended by Pub. L. 104–188Parts changed in 1996: (a)(3)(A)(i) (a)(3)(A)(ii) (a)(3)(A)(iii) (a)(3)(B)
November 5, 1990Added by Pub. L. 101–508

Where it sits in the Code

Nearby sections

§ 2701 Special valuation rules in case of transfers of certain interests in corporations or partnerships
§ 2702 Special valuation rules in case of transfers of interests in trusts
§ 2703 Certain rights and restrictions disregarded
§ 2704 Treatment of certain lapsing rights and restrictions

Official notes

Show the Law Revision Counsel's notes (amendments, effective dates)

Editorial Notes

Amendments

1996—Subsec. (a)(3)(A)(i). Pub. L. 104–188, § 1702(f)(11)(A)(i), (ii), (B)(i), substituted “if” for “to the extent” and “incomplete gift” for “incomplete transfer”, and struck out “or” at end.

Subsec. (a)(3)(A)(ii). Pub. L. 104–188, § 1702(f)(11)(A)(iii), substituted “, or” for period at end.

Subsec. (a)(3)(A)(iii). Pub. L. 104–188, § 1702(f)(11)(A)(iv), added cl. (iii).

Subsec. (a)(3)(B). Pub. L. 104–188, § 1702(f)(11)(B), substituted “incomplete gift” for “incomplete transfer” in heading and text.

Effective Date of 1996 Amendment

Amendment by Pub. L. 104–188 effective, except as otherwise expressly provided, as if included in the provision of the Revenue Reconciliation Act of 1990, Pub. L. 101–508, title XI, to which such amendment relates, see section 1702(i) of Pub. L. 104–188, set out as a note under section 38 of this title.