Page:United States Statutes at Large Volume 102 Part 4.djvu/664

 102 STAT. 3634

PUBLIC LAW 100-647—NOV. 10, 1988 his delegate shall issue such rules as may be necessary to carry out the provisions of section 89 of the 1986 Code.

26 USC 89 note.

(d) EFFECTIVE D A T E S. — (1) SUBSECTION (a).—The

amendments made by subsection (a) shall take effect as if included in the amendments made by section 1151 of the Tax Reform Act of 1986; except that the amendment made by subsection (a)(8) shall apply to testing years beginning after December 31, 1989. (2) SUBSECTION (b).—The amendments made by subsection (b) shall apply to years beginning after December 31, 1986.

Subtitle D—Estate and Gift Taxes SEC. 3031. ESTATE TAX VALUATION FREEZES. (a) DEEMED GIFT.—

(1) IN GENERAL.—Paragraph (4) of section 2036(c) of the 1986 Code is amended to read as follows: "(4) TREATMENT OF CERTAIN TRANSFERS.—

"(A) IN GENERAL.—For purposes of this subtitle, if, before the death of the original transferor— "(i) the original transferor transfers all (or any portion of) the retained interest referred to in paragraph (1), or "(ii) the original transferee transfers all (or any portion of) the transferred property referred to in paragraph (1) to a person who is not a member of the original transferor's family, the original transferor shall be treated as having made a transfer by gift of property to the original transferee equal to the paragraph (1) inclusion (or proportionate amount thereof). Proper adjustments shall be made in the amount treated as a gift by reason of the preceding sentence to take into account prior transfers to which this subparagraph applied and take into account any right of recovery (whether or not exercised) under section 2207B. "(B) COORDINATION WITH PARAGRAPH ( D.—In any case to which subparagraph (A) applies, nothing in paragraph (1) or section 2035(d)(2) shall require the inclusion of the transferred property (or proportionate amount thereof). "(C) SPECIAL RULE WHERE PROPERTY RETRANSFERRED.—In

the case of a transfer described in subparagraph (A)(ii) from the original transferee to the original transferor, the paragraph (1) inclusion (or proportion thereof) shall be reduced by the excess (if any) of— "(i) the fair market value of the property so transferred, over "(ii) the amount of the consideration paid by the original transferor in exchange for such property. "(D) DEFINITIONS.—For purposes of this paragraph— "(i) ORIGINAL TRANSFEROR.—The term 'original transferor' means the person making the transfer referred to in paragraph (1). "(ii) ORIGINAL TRANSFEREE.—The term 'original ,. transferee' means the person to whom the transfer referred to in paragraph (1) is made. Such term in-

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