[Code of Federal Regulations]
[Title 26, Volume 8]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR1.691(a)-4]

[Page 334]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 1_INCOME TAXES--Table of Contents
 
Sec. 1.691(a)-4  Transfer of right to income in respect of a decedent.

    (a) Section 691(a)(2) provides the rules governing the treatment of 
income in respect of a decedent (or a prior decedent) in the event a 
right to receive such income is transferred by the estate or person 
entitled thereto by bequest, devise, or inheritance, or by reason of the 
death of the decedent. In general, the transferor must include in his 
gross income for the taxable period in which the transfer occurs the 
amount of the consideration, if any, received for the right or the fair 
market value of the right at the time of the transfer, whichever is 
greater. Thus, upon a sale of such right by the estate or person 
entitled to receive it, the fair market value of the right or the amount 
received upon the sale, whichever is greater, is included in the gross 
income of the vendor. Similarly, if such right is disposed of by gift, 
the fair market value of the right at the time of the gift must be 
included in the gross income of the donor. In the case of a satisfaction 
of an installment obligation at other than face value, which is likewise 
considered a transfer under section 691(a)(2), see Sec. 1.691(a)-5.
    (b) If the estate of a decedent or any person transmits the right to 
income in respect of a decedent to another who would be required by 
section 691(a)(1) to include such income when received in his gross 
income, only the transferee will include such income when received in 
his gross income. In this situation, a transfer within the meaning of 
section 691(a)(2) has not occurred. This paragraph may be illustrated by 
the following:
    (1) If a person entitled to income in respect of a decedent dies 
before receiving such income, only his estate or other person entitled 
to such income by bequest, devise, or inheritance from the latter 
decedent, or by reason of the death of the latter decedent, must include 
such amount in gross income when received.
    (2) If a right to income in respect of a decedent is transferred by 
an estate to a specific or residuary legatee, only the specific or 
residuary legatee must include such income in gross income when 
received.
    (3) If a trust to which is bequeathed a right of a decedent to 
certain payments of income terminates and transfers the right to a 
beneficiary, only the beneficiary must include such income in gross 
income when received.

If the transferee described in subparagraphs (1), (2), and (3) of this 
paragraph transfers his right to receive the amounts in the manner 
described in paragraph (a) of this section, the principles contained in 
paragraph (a) are applied to such transfer. On the other hand, if the 
transferee transmits his right in the manner described in this 
paragraph, the principles of this paragraph are again applied to such 
transfer.