Sec. 1000. Imposition of tax.

Sec. 1000. (a) For the calendar year 1940 and each calendar year thereafter a tax, computed as provided in section 1001, shall be imposed upon the transfer during such calendar year by any individual, resident or nonresident, of property by gift. Gift taxes for the calendar years 1932-1939, inclusive, shall not be affected by the provisions of this chapter, but shall remain subject to the applicable provisions of the Revenue Act of 1932, except as such provisions are modified by legislation enacted subsequent to the Revenue Act of 1932.

Sec. 1000. (b) The tax shall apply whether the transfer is in trust or otherwise, whether the gift is direct or indirect, and whether the property is real or personal, tangible or intangible; but, in the case of a nonresident not a citizen of the United States, shall apply to a transfer only if the property is situated within the United States.

Sec. 1000 (a), (b), I. R. C., supra, originated
1924 as Sec. 319, R. A. of 1924.

For any amendments prior to 1944, see-
Eighth Edition, p. 555, 545,

Ninth Edition, p. 1070.

See fn. 20, p. 747.

Sec. 1000. (c) Powers of appointment.—An exercise or release of a power of appointment shall be deemed a transfer of property by the individual possessing such power. For the purposes of this subsection the term "power of appointment" means any power to appoint exercisable by an individual either alone or in conjunction with any person, except―

Sec. 1000. (c) (1) a power to appoint within a class which does not include any others than the spouse of such individual, spouse of the creator of the power, descendants of such individual or his spouse, descendants (other than such individual) of the creator of the power or his spouse, spouses of such descendants, donees described in section 1004 (a) (2), and donees described in section 1004 (b). As used in this paragraph, the term "descendant" includes adopted and illegitimate descendants, and the term "spouse" includes former spouse; and

Sec. 1000. (c) (2) a power to appoint within a restricted class if such individual did not receive any beneficial interest, vested or contingent, in the property from the creator of the power or thereafter acquire any such interest, and if the power is not exercisable to any extent for the benefit of such individual, his estate, his creditors, or the creditors of his

estate.

If a power to appoint is exercised by creating another power to appoint, such first power shall not be considered excepted under paragraph (1) or (2) from the definition of power of appointment to the extent of the value of the property subject to such second power to appoint. For the purposes of the preceding sentence the value of the property subject to such

775

second power to appoint shall be its value unreduced by any precedent or subsequent interest not subject to such power to appoint.

Sec. 1000 (c), I. R. C., supra, originated 1942 as
Sec. 1000 (c), I. R. C.

For any amendments prior to 1944, see-
Ninth Edition, p. 1070.

Sec. 1000. (d) Community property.-All gifts of property held as community property under the law of any State, Territory, or possession of the United States, or any foreign country shall be considered to be the gifts of the husband except that gifts of such property as may be shown to have been received as compensation for personal services actually rendered by the wife or derived originally from such compensation or from separate property of the wife shall be considered to be gifts of the wife. This subsection shall be applicable only to gifts made after the calendar year 1942 and on or before the date of the enactment of the Revenue Act of 1948.

Sec. 1000 (d), I. R. C., supra, amended by Sec.
371, R. A. of 1948, by adding language in italics.
Sec. 1000 (d), I. R. C., supra, originated 1942 as
Sec. 1000 (d), I. R. C.

For any amendments prior to 1944, see-
Ninth Edition, p. 1072.

Sec. 1000. (e) Certain discretionary trusts.-In the case of property in a trust created prior to January 1, 1939, if on and after January 1, 1939, no power to revest title to such property in the grantor could be exercised either by the grantor alone, or by the grantor in conjunction with any other person not having a substantial adverse interest in the disposition of such property or the income therefrom, then a relinquishment by the grantor on or after January 1, 1940, and prior to January 1, 1945, on or before December 31, 1947 (or on a later date in any case where it is shown to the satisfaction of the Commissioner, in accordance with regulations prescribed by him with the approval of the Secretary, that failure to relinquish prior to such later date was for reasonable cause), of power or control with respect to the distribution of such property or the income therefrom by an exercise or other termination of such power or control shall not be deemed a transfer of property for the purposes of this Chapter. If such property was transferred in trust, the grantor not retaining such power to revest title thereto in himself, or if such power to revest title to such property in the grantor was relinquished, while a law was in effect imposing a tax upon the transfer of property by gift, this subsection shall apply only if (1) gift tax was paid with respect to such transfer or relinquishment, and not credited or refunded, or a gift tax return was made within the time prescribed on account of such transfer or relinquishment but no gift tax was paid with respect to such transfer or relinquishment because of the deductions and exclusions claimed on such return, and (2) the grantor consents, in accordance with regulations

prescribed by the Commissioner with the approval of the Secretary, for all purposes of this Chapter to treat such transfer or relinquishment in the calendar year in which effected, and for all periods thereafter, as having been a transfer of property subject to tax under this Chapter. This subsection shall not apply to any payment or other disposition of income occurring prior to the termination of power or control with respect to the future disposition of income from the trust property.

Sec. 1000 (e), I. R. C., supra, added to I. R. C. by Sec. 502 (a), R. A. of 1943, enacted on Feb. 25, 1944. Sec. 502 (c) of said Act provides that

"No interest shall be allowed or paid on any overpayment resulting from the application of this section.'

Second amendment

Sec. 1000 (e), I. R. C., supra, amended by Sec. 2 (a), Act of June 25, 1947 (61 Stat. 178), by striking out language shown in stricken through type and adding language in underlined italics. Sec. (b) of said Act reads as follows:

If any amount paid prior to the date of the enactment of this joint resolution constitutes an overpayment of gift tax solely by reason of the amendment made by this section, no interest shall be allowed or paid with respect to the amount of such overpayment.

Sec. 1000. (f) Gift of husband or wife to third party.

Sec. 1000. (f) (1) Considered as made one-half by each.

(A) In General.—A gift made after the date of the enactment of the Revenue Act of 1948 by one spouse to any person other than his spouse shall, for the purposes of this chapter, be considered as made one-half by him and one-half by his spouse, but only if at the time of the gift each spouse is a citizen or resident of the United States. This subparagraph shall not apply with respect to a gift by a spouse of an interest in property if he creates in his spouse a power of appointment, as defined in subsection (c) of this section, over such interest. For the purposes of this subsection an individual shall be considered as the spouse of another individual only if he is married to such individual at the time of the gift and does not remarry during the remainder of the calendar year.

(B) Consent of Both Spouses.-Subparagraph (A) shall be applicable only if both spouses have signified (in accordance with the regulations provided for in paragraph (2)) their consent to the application of subparagraph (A) in the case of all such gifts made during the calendar year by either while married to the other.

Sec. 1000 (f) (2) Manner and time of signifying consent.

(A) Manner.-A consent under this subsection shall be signified in such manner as is provided under regulations prescribed by the Commissioner with the approval of the Secretary.

21c Sec. 6 (b), Act of Oct. 25, 1949, reads as follows: Sec. 6 (b). Section 501 of the Revenue Act of 1932 (imposing a gift tax) is hereby amended by adding at the end thereof the following new subsection:

"(d) CERTAIN RECIPROCAL TRUSTS.-In the case of property transferred in trust prior to January 1, 1940, if and to

(B) Time.-Such consent may be so signified at any time after the close of the calendar year in which the gift was made, subject to the following limitations

(i) the consent may not be signified after the 15th day of March following the close of such year, unless before such 15th day no return has been filed for such year by either spouse, in which case the consent may not be signified after a return for such year is filed by either spouse;

(ii) the consent may not be signified after a notice of deficiency with respect to the tax for such year has been sent to either spouse in accordance with section 1012 (a).

Sec. 1000. (f) (3) Revocation of consent.-Revocation of a consent previously signified shall be made in such manner as is provided under regulations prescribed by the Commissioner with the approval of the Secretary, but the right to revoke a consent previously signified with respect to a calendar year—

(A) shall not exist after the 15th day of March following the close of such year if the consent was signified on or before such 15th day; and

(B) shall not exist if the consent was not signified until after such 15th day.

Sec. 1000. (f) (4) Joint and several liability for tax. If the consent required by paragraph (1) (B) is signified with respect to a gift made in any calendar year the liability with respect to the entire tax imposed by this chapter of each spouse for such year shall be joint and several.

Sec. 1000 (f), I. R. C., supra, added to I. R. C. by
Sec. 374, R. A. of 1948, enacted April 2, 1948.

Sec. 1000. (g) Certain reciprocal trusts.-In the case of property in a trust created prior to January 1, 1940, if and to the extent that such property may be deemed to have been transferred to such trust by a person other than the nominal grantor of such property (by reason of the fact that such person has made a reciprocal transfer of property in trust), then a relinquishment by such person on or before December 31, 1950, of any power over such property or over the income therefrom shall not be deemed a transfer of property for the purposes of this chapter. In the event of such relinquishment, the reciprocal transfer made by the person relinquishing such power shall be deemed, for the purposes of this chapter, to have been a completed gift at the time such reciprocal transfer was made. This subsection shall apply only if, at the time such person made the aforesaid reciprocal transfer of property, a law was in effect imposing a tax upon the transfer of property by gift and a gift tax was paid with respect to such reciprocal transfer, and not credited or refunded.

Sec. 1000 (g), I. R. C., supra, added to I. R. C. by Sec. 6 (a), Act of Oct. 25, 1949.

the extent that such property may be deemed to have been so transferred by a person other than the nominal grantor of such property (by reason of the fact that such person has made a reciprocal transfer of property in trust), then a relinquishment by such person of any power over such property or over the income therefrom shall not be deemed a transfer

Retroactivity

Sec. 6 (c) of said Act provides that amendment shall be applicable to estates of decedents dying after Feb. 10, 1939.

See fn. 21c for amendment of Sec. 501, Act of 1932, and relinquishment of power on or before Dec. 31, 1950.

Sec. 1001. Computation of tax.

Sec. 1001. (a) The tax for each calendar year shall be an amount equal to the excess of

Sec. 1001. (a) (1) a tax, computed in accordance with the Rate Schedule hereinafter set forth, on the aggregate sum of the net gifts for such calendar year and for each of the preceding calendar years, over

Sec. 1001. (a) (2) a tax, computed in accordance with the said Rate Schedule, on the aggregate sum of the net gifts for each of the preceding calendar years.

RATE SCHEDULE

of property for the purposes of this title. In the event of such relinquishment on or before December 31, 1950, the reciprocal transfer made by the person relinquishing such power shall be deemed, for the purposes of this title, to have been a completed gift at the time such reciprocal transfer was made.

The tax shall be: $947,400, plus 42% of excess over $3,000,000. $1,157,400, plus 444% of excess over $3,500,000. $1,378,650, plus 474% of excess over $4,000,000. $1,851,150, plus 50% of excess over $5,000,000. $2,353,650, plus 52% of excess over $6,000,000. $2,878,650, plus 5434% of excess over $7,000,000. $3,426,150, plus 57% of over $8,000,

excess

000. $4,566,150, plus 57%

of excess over $10,000,000.

Sec. 1001. (b) For the purpose of this section the term "preceding calendar years" means the calendar year 1932 and all calendar years intervening between the calendar year 1932 and the calendar year for which the tax is being computed.

Sec. 1001. (c) Cross reference.

For definition of "calendar year," see section 1030 (a).

Sec. 1001, I. R. C., supra, originated 1924 as Sec.
319, R. A. of 1924.

For any amendments prior to 1944, see-
Eighth Edition, p. 555, 545,
Ninth Edition, p. 1072.

Sec. 1002. Transfer for less than adequate and full consideration,

Where property is transferred for less than an adequate and full consideration in money or money's worth, then the amount by which the value of the property exceeded the value of the consideration shall, for the purpose of the tax imposed by this chapter, be deemed a gift, and shall be included in computing the amount of gifts made during the calendar year.

Sec. 1002, I. R. C., supra, originated 1924 as Sec.
320, R. A. of 1924.

For any amendments prior to 1944, see-
Eighth Edition, p. 556, 547,

Ninth Edition, p. 1080.

Sec. 1003. Net gifts.

Sec. 1003. (a) General definition.-The term "net gifts" means the total amount of gifts made during the calendar year, less the deduction provided in section 1004.

This subsection shall apply only if, at the time such person made the aforesaid reciprocal transfer of property, a law was in effect imposing a tax upon the transfer of property by gift and a gift tax was paid with the respect to such reciprocal transfer, and not credited or refunded."

Sec. 1003 (a), I. R. C., supra, originated 1932 as Sec. 504 (a), R. A. of 1932.

For any amendments prior to 1944, see

Eighth Edition, p. 547,

Ninth Edition, p. 1080.

Sec. 1003. (b) Exclusions from gifts.

Sec. 1003. (b) (1) Gifts prior to 1939.-In the case of gifts (other than of future interests in property) made to any person by the donor during the calendar year 1938 and previous calendar years, the first $5,000 of such gifts to such person shall not, for the purposes of subsection (a), be included in the total amount of gifts made during such year.

Sec. 1003. (b) (2) Gifts after 1938 and prior to 1943.-In the case of gifts (other than gifts in trust or of future interests in property) made to any person by the donor during the calendar year 1939 and subsequent calendar years prior to 1943, the first $4,000 of such gifts to such person shall not, for the purposes of subsection (a), be included in the total amount of gifts made during such year.

Sec. 1003. (b) (3) Gifts after 1942.-In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year 1943 and subsequent calendar years, the first $3,000 of such gifts to such person shall not, for the purposes of subsection (a), be included in the total amount of gifts made during such year.

Sec. 1003 (b), I. R. C., supra, originated 1924 as
Sec. 321 (a) (3), R. A. of 1924.

For any amendments prior to 1944, see-
Eighth Edition, p. 556, 547,

Ninth Edition, p. 1080.

Sec. 1004. Deductions.

In computing net gifts for the calendar year 1942 and preceding calendar years, there shall be allowed (except as otherwise provided in paragraph (1) of subsection (a)) such deductions as are provided for under the gift tax laws applicable to the years in which the gifts were made.

In computing net gifts for the calendar year 1943 and subsequent calendar years, there shall be allowed as deductions:

Sec. 1004. (a) Residents.-In the case of a citizen or resident

Sec. 1004. (a) (1) Specific exemption.—An exemption of $30,000, less the aggregate of the amounts claimed and allowed as specific exemption in the computation of gift taxes for the calendar year 1932 and all calendar years intervening between that calendar year and the calendar year for which the tax is being computed under the laws applicable to such years. This exemption shall be applied in all computations in respect of the calendar year 1942 and previous calendar years for the purpose of computing the tax for the calendar year 1943 or any calendar year thereafter.

Sec. 1004 (a) (1), I. R. C., supra, originated 1924 as Sec. 321 (a) (1), R. A. of 1924.

For any amendments prior to 1944, see

Sec. 1004. (a) (2) Charitable, etc., gifts.-The amount of all gifts made during such year to or for the use of

(A) the United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public purposes;

(B) a corporation, or trust, or community chest, fund, or foundation, organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals; no part of the net earnings of which inures to the benefit of any private shareholder or individual, and no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation;

(C) a fraternal society, order, or association, operating under the lodge system, but only if such gifts are to be used exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the prevention of cruelty to children or animals;

(D) posts or organizations of war veterans, or auxiliary units or societies of any such posts or organizations, if such posts, organizations, units, or societies are organized in the United States or any of its possessions, and if no part of their net earnings inures to the benefit of any private shareholder or individual;

(E) the special fund for vocational rehabilitation authorized by section 12 of the World War Veterans Act, 1924, 43 Stat. 611 (U. S. C., title 38 § 440);

(F) the United Nations, but only if such gifts (i) are to be used exclusively for the acquisition of a site in the city of New York for its headquarters, and (ii) are made after December 1, 1946, and before December 2, 1947.

Sec. 1004 (a) (2), I. R. C., supra, amended by Sec. 3, Act of Feb. 26, 1947 (61 Stat. 6), by adding subsection (F).

Sec. 1004 (a) (2), supra, originated 1924 as Sec.
321 (a) (2), R. A. of 1924.

For any amendments prior to 1944, see-
Eighth Edition, p. 556, 548,
Ninth Edition, p. 1082.

Sec. 1004. (a) (3) Gift to spouse.— (A) In General.—Where the donor transfers during the calendar year (and after the date of the enactment of the Revenue Act of 1948) by gift an interest in property to a donee who at the time of the gift is the donor's spouse-an amount with respect to such interest equal to one-half of its value. (B) Life Estate or Other Terminable Interest.Where, upon the lapse of time, upon the occurrence of an event or contingency, or upon the failure of an event or contingency to occur, such interest transferred to the spouse will terminate or fail, no deduction shall be allowed with respect to such interest

(i) if the donor retains in himself, or transfers or has transferred (for less than an adequate and full consideration in money or money's worth) to any person other than such donee spouse (or the estate of such spouse), an interest in such property, and if by reason of such retention or transfer the donor (or his heirs or assigns) or such person (or his heirs or

assigns) may possess or enjoy any part of such property after such termination or failure of the interest transferred to the donee spouse; or

(ii) if the donor immediately after the transfer to the donee spouse has a power to appoint an interest in such property which he can exercise (either alone or in conjunction with any person) in such manner that the appointee may possess or enjoy any part of such property after such termination or failure of the interest transferred to the donee spouse. For the purposes of this clause the donor shall be considered as having immediately after the transfer to the donee spouse such power to appoint even though such power cannot be exercised until after the lapse of time, upon the occurrence of an event or contingency, or upon the failure of an event or contingency to occur.

An exercise or release at any time by the donor, either alone or in conjunction with any person, of a power to appoint an interest in property, even though not otherwise a transfer, shall, for the purposes of clause (i) of this subparagraph, be considered as a transfer by him. Except as provided in subparagraph (E), where at the time of the transfer it is impossible to ascertain the particular person or persons who may receive from the donor an interest in property so transferred by him, such interest shall, for the purposes of clause (i) of this subparagraph, be considered as transferred to a person other than the donee spouse.

(C) Where the assets out of which, or the proceeds of which, the interest transferred to the donee spouse may be satisfied include a particular asset or assets with respect to which no deduction would be allowed if such asset or assets were transferred from the donor to such spouse, then the value of the interest transferred to such spouse shall, for the purposes of subparagraph (A), be reduced by the aggregate value of such particular assets.

(D) Joint Interests. If the interest is transferred to the donee spouse as sole joint tenant with the donor or as tenant by the entirely, the interest of the donor in the property which exists solely by reason of the possibility that the donor may survive the donee spouse, or that there may occur a severance of the tenancy, shall not be considered for the purposes of subparagraph (B) as an interest retained by the donor in himself.

(E) Trust with Power of Appointment in Donee Spouse. Where the donor transfers in trust an interest in property, if under the terms of the trust his spouse is entitled for life to all the income from the corpus of the trust, payable annually or at more frequent intervals, with power in the donee spouse to appoint the entire corpus free of the trust (exercisable in favor of such donee spouse, or of the estate of such donee spouse, or in favor of either, whether or not in each case the power is exercisable in favor of others), and with no power in any other person to appoint any part of the corpus to any person other than the donee spouse

(i) the interest so transferred in trust shall, for the purposes of subparagraph (A), be considered as transferred to the donee spouse, and

(ii) no part of the interest so transferred in trust shall, for the purposes of subparagraph (B) (i), be considered as retained in the donor or transferred to any person other than the donee spouse.

This subparagraph shall be applicable only if, under the terms of the trust, such power in the donee spouse to appoint the corpus, whether exercisable by will or during life, is exercisable by such spouse alone and in all events.

(F) Community Property.

(i) A deduction otherwise allowable under this paragraph shall be allowed only to the extent that the transfer can be shown to represent a gift of property which is not, at the time of the gift, held as community property under the law of any State, Territory, or possession of the United States, or of any foreign country.

(ii) For the purposes of clause (i), community property (except property which is considered as community property solely by reason of the provisions of clause (iii) shall not be considered as “held as community property" if the entire value of such property (and not merely one-half thereof) is treated as the amount of the gift.

(iii) If during the calendar year 1942 or after the date of the enactment of the Revenue Act of 1948, property held as such community property (unless considered by reason of clause (ii) as not so held) was by the donor and the donee spouse converted, by one transaction or a series of transactions, into separate property of the donor and such spouse (including any form of co-ownership by them), the separate property so acquired by the donor and any property acquired at any time by the donor in exchange therefor (by one exchange or a series of exchanges) shall, for the purposes of clause (i), be considered as "held as community property."

(iv) Where the value (at the time of such conversion) of the separate property so acquired by the donor exceeded the value (at such time) of the separate property so acquired by such spouse, the rule in clause (iii) shall be applied only with respect to the same portion of such separate property of the donor as the portion which the value (as of such time) of such separate property so acquired by such spouse is of the value (as of such time) of the separate property so acquired by the donor.

Sec. 1004 (a) (3), I. R. C., supra, added to I. R. C. by Sec. 372, R. A. of 1948, enacted April 2, 1948.

Sec. 1004. (b) Nonresidents.-In the case of a nonresident not a citizen of the United States, the amount of all gifts made during such year to or for the use of

Sec. 1004. (b) (1) the United States, any State, Territory, or any political subdivision thereof, or the District of Columbia, for exclusively public pur

poses;

Sec. 1004. (b) (2) a domestic corporation organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes, including the encouragement of art and the preven