26 U.S.C. § 2702: Special valuation rules in case of transfers of interests in trusts

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). The value of any retained interest which is not a qualified interest shall be treated as being zero. The value of any retained interest which is a qualified interest shall be determined under section 7520. if such transfer is an incomplete gift, 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 to the extent that regulations provide that such transfer is not inconsistent with the purposes of this section. 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. any interest which consists of the right to receive fixed amounts payable not less frequently than annually, 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 any noncontingent remainder interest if all of the other interests in the trust consist of interests described in paragraph (1) or (2). 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. 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. a life interest in property, or an interest in property for a term of years. subparagraph (A) of subsection (a)(2) shall not apply to such term interest, and 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. 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. For purposes of this section, the term “member of the family” shall have the meaning given such term by section 2704(c)(2).