[Code of Federal Regulations]
[Title 26, Volume 14]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR25.2702-1]

[Page 650-651]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 25_GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954--Table of Contents
 
Sec.  25.2702-1  Special valuation rules in the case of transfers of interests in trust.

    (a) Scope of section 2702. Section 2702 provides special rules to 
determine the amount of the gift when an individual makes a transfer in 
trust to (or for the benefit of) a member of the individual's family and 
the individual or an applicable family member retains an interest in the 
trust. Section 25.2702-4 treats

[[Page 651]]

certain transfers of property as transfers in trust. Certain transfers, 
including transfers to a personal residence trust, are not subject to 
section 2702. See paragraph (c) of this section. Member of the family is 
defined in Sec.  25.2702-2(a)(1). Applicable family member is defined in 
Sec.  25.2701-1(d)(2).
    (b) Effect of section 2702. If section 2702 applies to a transfer, 
the value of any interest in the trust retained by the transferor or any 
applicable family member is determined under Sec.  25.2702-2(b). The 
amount of the gift, if any, is then determined by subtracting the value 
of the interests retained by the transferor or any applicable family 
member from the value of the transferred property. If the retained 
interest is not a qualified interest (as defined in Sec.  25.2702-3), 
the retained interest is generally valued at zero, and the amount of the 
gift is the entire value of the property.
    (c) Exceptions to section 2702. Section 2702 does not apply to the 
following transfers.
    (1) Incomplete gift. A transfer no portion of which would be treated 
as a completed gift without regard to any consideration received by the 
transferor. If a transfer is wholly incomplete as to an undivided 
fractional share of the property transferred (without regard to any 
consideration received by the transferor), for purposes of this 
paragraph the transfer is treated as incomplete as to that share.
    (2) Personal residence trust. A transfer in trust that meets the 
requirements of Sec.  25.2702-5.
    (3) Charitable remainder trust. (i) For transfers made on or after 
May 19, 1997, a transfer to a pooled income fund described in section 
642(c)(5); a transfer to a charitable remainder annuity trust described 
in section 664(d)(1); a transfer to a charitable remainder unitrust 
described in section 664(d)(2) if under the terms of the governing 
instrument the unitrust amount can be computed only under section 
664(d)(2)(A); and a transfer to a charitable remainder unitrust if under 
the terms of the governing instrument the unitrust amount can be 
computed under section 664(d)(2) and (3) and either there are only two 
consecutive noncharitable beneficial interests and the transferor holds 
the second of the two interests, or the only permissible recipients of 
the unitrust amount are the transferor, the transferor's U.S. citizen 
spouse, or both the transferor and the transferor's U.S. citizen spouse.
    (ii) For transfers made before May 19, 1997, a transfer in trust if 
the remainder interest in the trust qualifies for a deduction under 
section 2522.
    (4) Pooled income fund. A transfer of property to a pooled income 
fund (as defined in section 642(c)(5)).
    (5) Charitable lead trust. A transfer in trust if the only interest 
in the trust, other than the remainder interest or a qualified annuity 
or unitrust interest, is an interest that qualifies for deduction under 
section 2522.
    (6) Certain assignments of remainder interests. The assignment of a 
remainder interest if the only retained interest of the transferor or an 
applicable family member is as the permissible recipient of 
distributions of income in the sole discretion of an independent trustee 
(as defined in section 674(c)).
    (7) Certain property settlements. A transfer in trust if the 
transfer of an interest to a spouse is deemed to be for full and 
adequate consideration by reason of section 2516 (relating to certain 
property settlements) and the remaining interests in the trust are 
retained by the other spouse.
    (8) Transfer or assignment to a Qualified Domestic Trust. A transfer 
or assignment (as described in section 2056(d)(2)(B)) by a noncitizen 
surviving spouse of property to a Qualified Domestic Trust under the 
circumstances described in Sec.  20.2056A-4(b) of this chapter, where 
the surviving spouse retains an interest in the transferred property 
that is not a qualified interest and the transfer is not described in 
sections 2702(a)(3)(A)(ii) or 2702(c)(4).

[T.D. 8395, 57 FR 4265, Feb. 4, 1992, as amended by T.D. 8612, 60 FR 
43554, Aug. 22, 1995; T.D. 8791, 63 FR 68194, Dec. 10, 1998]