26 U.S.C. § 2036

Transfers with retained life estate

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(a) General ruleThe value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money’s worth), by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death—(1) the possession or enjoyment of, or the right to the income from, the property, or(2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom.(b) Voting rights(1) In general

For purposes of subsection (a)(1), the retention of the right to vote (directly or indirectly) shares of stock of a controlled corporation shall be considered to be a retention of the enjoyment of transferred property.

(2) Controlled corporation

For purposes of paragraph (1), a corporation shall be treated as a controlled corporation if, at any time after the transfer of the property and during the 3-year period ending on the date of the decedent’s death, the decedent owned (with the application of section 318), or had the right (either alone or in conjunction with any person) to vote, stock possessing at least 20 percent of the total combined voting power of all classes of stock.

(3) Coordination with section 2035

For purposes of applying section 2035 with respect to paragraph (1), the relinquishment or cessation of voting rights shall be treated as a transfer of property made by the decedent.

This section shall not apply to a transfer made before March 4, 1931; nor to a transfer made after March 3, 1931, and before June 7, 1932, unless the property transferred would have been includible in the decedent’s gross estate by reason of the amendatory language of the joint resolution of March 3, 1931 (46 Stat. 1516).

(Aug. 16, 1954, ch. 736, 68A Stat. 382; Pub. L. 87–834, § 18(a)(2)(D), Oct. 16, 1962, 76 Stat. 1052; Pub. L. 94–455, title XX, § 2009(a), Oct. 4, 1976, 90 Stat. 1893; Pub. L. 95–600, title VII, § 702(i)(1), (2), Nov. 6, 1978, 92 Stat. 2931; Pub. L. 100–203, title X, § 10402(a), Dec. 22, 1987, 101 Stat. 1330–431; Pub. L. 100–647, title III, § 3031(a)(1), (b)–(e), (g), Nov. 10, 1988, 102 Stat. 3634–3638; Pub. L. 101–508, title XI, § 11601(a), Nov. 5, 1990, 104 Stat. 1388–490.)Editorial NotesAmendments

1990—Subsecs. (c), (d). Pub. L. 101–508 redesignated subsec. (d) as (c) and struck out former subsec. (c) which enunciated a rule that retention of retained interest would be considered to be a retention of enjoyment of transferred property if a person held a substantial interest in an enterprise, and such person in effect transferred after Dec. 17, 1987, property having a disproportionately large share of the potential appreciation in such person’s interest in the enterprise while retaining an interest in the income of, or rights in, the enterprise.

1988—Subsec. (c)(1)(B). Pub. L. 100–647, § 3031(e), substituted “an interest” for “a disproportionately large share” after “whole retaining”.

Subsec. (c)(2). Pub. L. 100–647, § 3031(g)(1), substituted “consideration furnished by” for “sales to” in heading, and amended text generally. Prior to amendment, text read as follows: “The exception contained in subsection (a) for a bona fide sale shall not apply to a transfer described in paragraph (1) if such transfer is to a member of the transferor’s family.”

Subsec. (c)(3)(C). Pub. L. 100–647, § 3031(d), substituted “Except as provided in regulations, an” for “An”.

Subsec. (c)(4). Pub. L. 100–647, § 3031(a)(1), amended par. (4) generally, substituting provisions relating to treatment of certain transfers for provisions relating to coordination with section 2035.

Subsec. (c)(5). Pub. L. 100–647, § 3031(g)(2), amended par. (5) generally, substituting provisions relating to the making of appropriate adjustments in amounts included in gross estate for provisions relating to coordination with section 2043.

Subsec. (c)(6). Pub. L. 100–647, § 3031(b), added par. (6).

Subsec. (c)(7), (8). Pub. L. 100–647, § 3031(b)[(c)], added pars. (7) and (8).

1987—Subsecs. (c), (d). Pub. L. 100–203 added subsec. (c) and redesignated former subsec. (c) as (d).

1978—Subsec. (a). Pub. L. 95–600, § 702(i)(2), struck out provision following par. (2) relating to the retention of voting rights in retained stock.

Subsecs. (b), (c). Pub. L. 95–600, § 702(i)(1), added subsec. (b) and redesignated former subsec. (b) as (c).

1976—Subsec. (a). Pub. L. 94–455 provided that, for purposes of par. (1), the retention of voting rights in retained stock be considered to be a retention of the enjoyment of that stock.

1962—Subsec. (a). Pub. L. 87–834 struck out provisions which excepted real property situated outside of the United States.

Statutory Notes and Related SubsidiariesEffective Date of 1990 Amendment

Pub. L. 101–508, title XI, § 11601(c), Nov. 5, 1990, 104 Stat. 1388–491, provided that: “The amendments made by this section [amending this section and sections 2207B and 2501 of this title] shall apply in the case of property transferred after December 17, 1987.”

Effective Date of 1988 Amendment

Pub. L. 100–647, title III, § 3031(h), Nov. 10, 1988, 102 Stat. 3639, provided that:“(1)In general.—Except as provided in this subsection, any amendment made by this section [enacting section 2207B of this title and amending this section and section 2501 of this title] shall take effect as if included in the provisions of the Revenue Act of 1987 [Pub. L. 100–203, title X] to which such amendment relates.“(2)Subsection (a).—The amendments made by subsection (a) [amending this section and section 2501 of this title] shall apply in cases where the transfer referred to in section 2036(c)(1)(B) of the 1986 Code is on or after June 21, 1988.“(3)Subsection (f).—If an amount is included in the gross estate of a decedent under section 2036 of the 1986 Code other than solely by reason of section 2036(c) of the 1986 Code, the amendments made by subsection (f) [enacting section 2207B of this title] shall apply to such amount only with respect to property transferred after the date of the enactment of this Act [Nov. 10, 1988].“(4)Correction period.—If section 2036(c)(1) of the 1986 Code would (but for this paragraph) apply to any interest arising from a transaction entered into during the period beginning after December 17, 1987, and ending before January 1, 1990, such section shall not apply to such interest if—“(A) during such period, such actions are taken as are necessary to have such section 2036(c)(1) not apply to such transaction (and any such interest), or“(B) the original transferor and his spouse on January 1, 1990 (or, if earlier, the date of the original transferor’s death), does not hold any interest in the enterprise involved.“(5)Clarification of effective date.—For purposes of section 10402(b) of the Revenue Act of 1987 [Pub. L. 100–203, set out as an Effective Date of 1987 Amendment note below], with respect to property transferred on or before December 17, 1987—“(A) any failure to exercise a right of conversion,“(B) any failure to pay dividends, and“(c) [sic] failures to exercise other rights specified in regulations,shall not be treated as a subsequent transfer.”

Effective Date of 1987 Amendment

Pub. L. 100–203, title X, § 10402(b), Dec. 22, 1987, 101 Stat. 1330–432, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to estates of decedents dying after December 31, 1987, but only in the case of property transferred after December 17, 1987.” [For clarification of this note, see section 3031(h)(5) of Pub. L. 100–647, set out as an Effective Date of 1988 Amendment note above.]

Effective Date of 1978 Amendment

Pub. L. 95–600, title VII, § 702(i)(3), Nov. 6, 1978, 92 Stat. 2931, provided that: “The amendments made by this subsection [amending this section] shall apply to transfers made after June 22, 1976.”

Effective Date of 1976 Amendment

Pub. L. 94–455, title XX, § 2009(e)(1), Oct. 4, 1976, 90 Stat. 1896, provided that: “The amendment made by subsection (a) [amending this section] shall apply to transfers made after June 22, 1976.”

Effective Date of 1962 Amendment

Amendment by Pub. L. 87–834 applicable to estates of decedents dying after Oct. 16, 1962, except as otherwise provided, see section 18(b) of Pub. L. 87–834, set out as a note under section 2031 of this title.

Notes of Decisions

Cited in 113 cases (1 in the last 5 years), 1959–2022 · leading case: Est. of Stewart v. Comm'r, 617 F.3d 148 (2d Cir. 2010).

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Est. of Stewart v. Comm'r, 617 F.3d 148 (2d Cir. 2010). · cites it 18× “Upon Margot Stewart's death, the Internal Revenue Service sought to include this gift in Margot Stewart's estate under 26 U.S.C. § 2036 (a)(1), reasoning that Margot Stewart had "retained for [her] life .”

Est. of Theodore Thompson, Deceased, Betsy T. Turner v. Comm'r of Internal Revenue, 382 F.3d 367 (3rd Cir. 2004). · cites it 6× “This case involves the application of § 2036(a) of the Internal Revenue Code, 26 U.S.C. § 2036 (a), to assets transferred inter vivos to family limited partnerships.”

Est. of Abraham v. Comm'r, 408 F.3d 26 (1st Cir. 2005). · cites it 6× “Applying 26 U.S.C. § 2036 (a), the Tax Court concluded that the Estate had underre-ported the taxes due because the decedent had an interest in certain property purportedly transferred to her children by gift and purchase, that the purchase of the decedent’s interests by the…”

Rosen v. Wells Fargo Bank Texas, N.A., 114 S.W.3d 145 (Tex. App. 2003). · cites it 4× “See 26 U.S.C.A. § 2036 (West 2002). In June 2001, appellant filed an application for declaratory judgment, seeking a declaration that, because there was no residuary estate from which to pay the taxes, the taxes should be apportioned under section 322A of the probate code.”

Kimbell v. United States, 371 F.3d 257 (5th Cir. 2004). · cites it 4× “26 U.S.C. § 2036 (a). The statute recognizes that some assets transferred prior to death must be recaptured into the estate.”

United States v. Byrum, 408 U.S. 125 (1972). · cites it 6× “Following Byrum's death, the Commissioner of Internal Revenue determined that the transferred stock was properly included within Byrum's gross estate under § 2036 (a) of the Internal Revenue Code of 1954, 26 U. S. C. § 2036 (a). That section provides for the inclusion in a…”

Judith Badgley v. United States, 957 F.3d 969 (9th Cir. 2020). · cites it 3× “At issue in this appeal was whether, under 26 U.S.C. § 2036 (a)(1), a grantor’s interest in a grantor-retained annuity trust (GRAT) is a sufficient “string” that requires the property interest to be included in the gross estate.”

Est. of Bigelow v. Comm'r, 503 F.3d 955 (9th Cir. 2007). · cites it 4× “We consider the applicability of § 2036(a) of the Internal Revenue Code, 26 U.S.C. § 2036 (a), which recaptures in a decedent’s gross estate the value of certain assets transferred inter vivos.”

Est. of Lydia G. Maxwell, Deceased First Nat'l Bank of Long Island Victor C. McCuaig Jr., Executors v. Comm'r of Internal Revenue, 3 F.3d 591 (1st Cir. 1993). · cites it 4× “Maxwell, contends that the tax court erred in holding that the transaction at issue (a) was a transfer with retained life estate within the meaning of 26 U.S.C. § 2036 and (b) was not a bona fide sale for adequate and full consideration under that statute.”

Est. Sheppard Ex Rel. McMorrow v. Schleis, 2010 WI 32 (Wis. 2010). · cites it 11× “Section 2207B states that if the value of property is included in the gross estate on which estate tax has been paid, by reason of 26 U.S.C § 2036, then the decedent's estate has a right of recovery from the person receiving the property equal to the same ratio that the value of…”

In Re Est. of Hjersted, 175 P.3d 810 (Kan. 2008). · cites it 2× “95, 126-29 [, 2005 WL 590670 ] (2005) (transfer of stock to a limited partnership does not satisfy bona fide sale exception to 26 U.S.C. § 2036 [a] [2000]); " Where, as here, the artificiality or illusory nature of the partnership entity is manifest by its disregard in…”

Whiteley v. United States, 214 F. Supp. 489 (W.D. Wash. 1963). · cites it 11× “27, on deposit with the Equitable Life Assurance Society and Mutual Life Insurance Company of New York under policies and supplemental contracts, as having been transferred by decedent during her life, retaining to herself a life estate, and therefore includable in her gross…”

Show all 113 citing cases →

— 26 U.S.C. § 2036(a) — 2 cases

Delancey v. United States, 264 F. Supp. 904 (W.D. Ark. 1967).

Kimbell v. United States, 244 F. Supp. 2d 700 (N.D. Tex. 2003).

— 26 U.S.C. § 2036(a)(1) — 1 case

Est. of Stewart v. Comm'r, 617 F.3d 148 (2d Cir. 2010). “Upon Margot Stewart's death, the Internal Revenue Service sought to include this gift in Margot Stewart's estate under 26 U.S.C. § 2036 (a)(1), reasoning that Margot Stewart had "retained for [her] life .”

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