Subchapter A - Determination of Tax Liability

26 USC 2501 - Imposition of tax

(a) Taxable transfers

(1) General rule
A tax, computed as provided in section 2502, is hereby imposed for each calendar year on the transfer of property by gift during such calendar year by any individual resident or nonresident.

(2) Transfers of intangible property
Except as provided in paragraph (3), paragraph (1) shall not apply to the transfer of intangible property by a nonresident not a citizen of the United States.

(3) Exception

(A) Certain individuals
Paragraph (2) shall not apply in the case of a donor to whom section 877 (b) applies for the taxable year which includes the date of the transfer.

(B) Credit for foreign gift taxes
The tax imposed by this section solely by reason of this paragraph shall be credited with the amount of any gift tax actually paid to any foreign country in respect of any gift which is taxable under this section solely by reason of this paragraph.

(4) Transfers to political organizations
Paragraph (1) shall not apply to the transfer of money or other property to a political organization (within the meaning of section 527 (e)(1)) for the use of such organization.

(5) Transfers of certain stock

(A) In general
In the case of a transfer of stock in a foreign corporation described in subparagraph (B) by a donor to whom section 877 (b) applies for the taxable year which includes the date of the transfer

(i) section 2511 (a) shall be applied without regard to whether such stock is situated within the United States, and

(ii) the value of such stock for purposes of this chapter shall be its U.S.-asset value determined under subparagraph (C).

(B) Foreign corporation described
A foreign corporation is described in this subparagraph with respect to a donor if

(i) the donor owned (within the meaning of section 958 (a)) at the time of such transfer 10 percent or more of the total combined voting power of all classes of stock entitled to vote of the foreign corporation, and

(ii) such donor owned (within the meaning of section 958 (a)), or is considered to have owned (by applying the ownership rules of section 958 (b)), at the time of such transfer, more than 50 percent of

(I) the total combined voting power of all classes of stock entitled to vote of such corporation, or

(II) the total value of the stock of such corporation.

(C) U.S.-asset value
For purposes of subparagraph (A), the U.S.-asset value of stock shall be the amount which bears the same ratio to the fair market value of such stock at the time of transfer as

(i) the fair market value (at such time) of the assets owned by such foreign corporation and situated in the United States, bears to

(ii) the total fair market value (at such time) of all assets owned by such foreign corporation.

(b) Certain residents of possessions considered citizens of the United States
A donor who is a citizen of the United States and a resident of a possession thereof shall, for purposes of the tax imposed by this chapter, be considered a citizen of the United States within the meaning of that term wherever used in this title unless he acquired his United States citizenship solely by reason of

(1) his being a citizen of such possession of the United States, or

(2) his birth or residence within such possession of the United States.

(c) Certain residents of possessions considered nonresidents not citizens of the United States
A donor who is a citizen of the United States and a resident of a possession thereof shall, for purposes of the tax imposed by this chapter, be considered a nonresident not a citizen of the United States within the meaning of that term wherever used in this title, but only if such donor acquired his United States citizenship solely by reason of

(1) his being a citizen of such possession of the United States, or

(2) his birth or residence within such possession of the United States.

(d) Cross references

(1) For increase in basis of property acquired by gift for gift tax paid, see section 1015 (d).

(2) For exclusion of transfers of property outside the United States by a nonresident who is not a citizen of the United States, see section 2511 (a).

26 USC 2502 - Rate of tax

(a) Computation of tax
The tax imposed by section 2501 for each calendar year shall be an amount equal to the excess of

(1) a tentative tax, computed under section 2001 (c), on the aggregate sum of the taxable gifts for such calendar year and for each of the preceding calendar periods, over

(2) a tentative tax, computed under such section, on the aggregate sum of the taxable gifts for each of the preceding calendar periods.

(b) Preceding calendar period
Whenever used in this title in connection with the gift tax imposed by this chapter, the term preceding calendar period means

(1) calendar years 1932 and 1970 and all calendar years intervening between calendar year 1932 and calendar year 1970,

(2) the first calendar quarter of calendar year 1971 and all calendar quarters intervening between such calendar quarter and the first calendar quarter of calendar year 1982, and

(3) all calendar years after 1981 and before the calendar year for which the tax is being computed.

For purposes of paragraph (1), the term calendar year 1932 includes only that portion of such year after June 6, 1932.

26 USC 2503 - Taxable gifts

(a) General definition
The term taxable gifts means the total amount of gifts made during the calendar year, less the deductions provided in subchapter C (section 2522 and following).

(b) Exclusions from gifts

(1) In general
In the case of gifts (other than gifts of future interests in property) made to any person by the donor during the calendar year, the first $10,000 of such gifts to such person shall not, for purposes of subsection (a), be included in the total amount of gifts made during such year. Where there has been a transfer to any person of a present interest in property, the possibility that such interest may be diminished by the exercise of a power shall be disregarded in applying this subsection, if no part of such interest will at any time pass to any other person.

(2) Inflation adjustment
In the case of gifts made in a calendar year after 1998, the $10,000 amount contained in paragraph (1) shall be increased by an amount equal to

(A) $10,000, multiplied by

(B) the cost-of-living adjustment determined under section 1 (f)(3) for such calendar year by substituting calendar year 1997 for calendar year 1992 in subparagraph (B) thereof.

If any amount as adjusted under the preceding sentence is not a multiple of $1,000, such amount shall be rounded to the next lowest multiple of $1,000.

(c) Transfer for the benefit of minor
No part of a gift to an individual who has not attained the age of 21 years on the date of such transfer shall be considered a gift of a future interest in property for purposes of subsection (b) if the property and the income therefrom

(1) may be expended by, or for the benefit of, the donee before his attaining the age of 21 years, and

(2) will to the extent not so expended

(A) pass to the donee on his attaining the age of 21 years, and

(B) in the event the donee dies before attaining the age of 21 years, be payable to the estate of the donee or as he may appoint under a general power of appointment as defined in section 2514 (c).

[(d) Repealed. Pub. L. 97–34, title III, § 311(h)(5), Aug. 13, 1981, 95 Stat. 282]

(e) Exclusion for certain transfers for educational expenses or medical expenses

(1) In general
Any qualified transfer shall not be treated as a transfer of property by gift for purposes of this chapter.

(2) Qualified transfer
For purposes of this subsection, the term qualified transfer means any amount paid on behalf of an individual

(A) as tuition to an educational organization described in section 170 (b)(1)(A)(ii) for the education or training of such individual, or

(B) to any person who provides medical care (as defined in section 213 (d)) with respect to such individual as payment for such medical care.

(f) Waiver of certain pension rights
If any individual waives, before the death of a participant, any survivor benefit, or right to such benefit, under section 401 (a)(11) or 417, such waiver shall not be treated as a transfer of property by gift for purposes of this chapter.

(g) Treatment of certain loans of artworks

(1) In general
For purposes of this subtitle, any loan of a qualified work of art shall not be treated as a transfer (and the value of such qualified work of art shall be determined as if such loan had not been made) if

(A) such loan is to an organization described in section 501 (c)(3) and exempt from tax under section 501 (c) (other than a private foundation), and

(B) the use of such work by such organization is related to the purpose or function constituting the basis for its exemption under section 501.

(2) Definitions
For purposes of this section

(A) Qualified work of art
The term qualified work of art means any archaeological, historic, or creative tangible personal property.

(B) Private foundation
The term private foundation has the meaning given such term by section 509, except that such term shall not include any private operating foundation (as defined in section 4942 (j)(3)).

26 USC 2504 - Taxable gifts for preceding calendar periods

(a) In general
In computing taxable gifts for preceding calendar periods for purposes of computing the tax for any calendar year

(1) there shall be treated as gifts such transfers as were considered to be gifts under the gift tax laws applicable to the calendar period in which the transfers were made,

(2) there shall be allowed such deductions as were provided for under such laws, and

(3) the specific exemption in the amount (if any) allowable under section 2521 (as in effect before its repeal by the Tax Reform Act of 1976) shall be applied in all computations in respect of preceding calendar periods ending before January 1, 1977, for purposes of computing the tax for any calendar year.

(b) Exclusions from gifts for preceding calendar periods
In the case of gifts made to any person by the donor during preceding calendar periods, the amount excluded, if any, by the provisions of gift tax laws applicable to the periods in which the gifts were made shall not, for purposes of subsection (a), be included in the total amount of the gifts made during such preceding calendar periods.

(c) Valuation of gifts
If the time has expired under section 6501 within which a tax may be assessed under this chapter 12 (or under corresponding provisions of prior laws) on

(1) the transfer of property by gift made during a preceding calendar period (as defined in section 2502 (b)); or

(2) an increase in taxable gifts required under section 2701 (d),

the value thereof shall, for purposes of computing the tax under this chapter, be the value as finally determined (within the meaning of section 2001 (f)(2)) for purposes of this chapter.

(d) Net gifts
The term net gifts as used in the corresponding provisions of prior laws shall be read as taxable gifts for purposes of this chapter.

26 USC 2505 - Unified credit against gift tax

(a) General rule
In the case of a citizen or resident of the United States, there shall be allowed as a credit against the tax imposed by section 2501 for each calendar year an amount equal to

(1) the applicable credit amount in effect under section 2010 (c) for such calendar year (determined as if the applicable exclusion amount were $1,000,000), reduced by

(2) the sum of the amounts allowable as a credit to the individual under this section for all preceding calendar periods.

(b) Adjustment to credit for certain gifts made before 1977
The amount allowable under subsection (a) shall be reduced by an amount equal to 20 percent of the aggregate amount allowed as a specific exemption under section 2521 (as in effect before its repeal by the Tax Reform Act of 1976) with respect to gifts made by the individual after September 8, 1976.

(c) Limitation based on amount of tax
The amount of the credit allowed under subsection (a) for any calendar year shall not exceed the amount of the tax imposed by section 2501 for such calendar year.