Castle Estate Planning: irs estate tax code 2001b
IRS Estate Tax Code: 26 USCS 2013-2032
26 USCS § 2012 (2005)
§ 2012. Credit for gift tax [Caution: See prospective amendment note below.].
(a) In general. If a tax on a gift has been paid under chapter 12 (sec. 2501 and following), or under corresponding provisions of prior laws, and thereafter on the death of the donor any amount in respect of such gift is required to be included in the value of the gross estate of the decedent for purposes of this chapter [26 USCS § § 2001 et seq.], then there shall be credited against the tax imposed by section 2001 [26 USCS § 2001] the amount of the tax paid on a gift under chapter 12 [26 USCS § § 2501 et seq.], or under corresponding provisions of prior laws, with respect to so much of the property which constituted the gift as is included in the gross estate, except that the amount of such credit shall not exceed an amount which bears the same ratio to the tax imposed by section 2001 [26 USCS § 2001] (after deducting from such tax the unified credit provided by section 2010 [26 USCS § 2010]) as the value (at the time of the gift or at the time of the death, whichever is lower) of so much of the property which constituted the gift as is included in the gross estate bears to the value of the entire gross estate reduced by the aggregate amount of the charitable and marital deductions allowed under sections 2055, 2056, and 2106(a)(2) [26 USCS § § 2055, 2056, and 2106(a)(2)].
(b) Valuation reductions. In applying, with respect to any gift, the ratio stated in subsection (a), the value at the time of the gift or at the time of the death, referred to in such ratio, shall be reduced--
(1) by such amount as will properly reflect the amount of such gift which was excluded in determining (for purposes of section 2503(a) [26 USCS § 2503(a)]), or of corresponding provisions of prior laws, the total amount of gifts made during the calendar quarter (or calendar year if the gift was made before January 1, 1971) in which the gift was made;
(2) if a deduction with respect to such gift is allowed under section 2056(a) [26 USCS § 2056(a)] (relating to marital deduction), then by the amount of such value, reduced as provided in paragraph (1); and
(3) if a deduction with respect to such gift is allowed under sections 2055 or 2106(a)(2) [26 USCS § 2055 or 2106(a)(2)] (relating to charitable deduction), then by the amount of such value, reduced as provided in paragraph (1) of this subsection.
(c) Where gift considered made one-half by spouse. Where the decedent was the donor of the gift but, under the provisions of section 2513 [26 USCS § 2513], or corresponding provisions of prior laws, the gift was considered as made one-half by his spouse--
(1) the term "the amount of the tax paid on a gift under chapter 12", as used in subsection (a), includes the amounts paid with respect to each half of such gift, the amount paid with respect to each being computed in the manner provided in subsection (d); and
(2) in applying, with respect to such gift, the ratio stated in subsection (a), the value at the time of the gift or at the time of the death, referred to in such ratio, includes such value with respect to each half of such gift, each such value being reduced as provided in paragraph (1) of subsection (b).
(d) Computation of amount of gift tax paid.
(1) Amount of tax. For purposes of subsection (a), the amount of tax paid on a gift under chapter 12 [26 USCS § § 2501 et seq.], or under corresponding provisions of prior laws, with respect to any gift shall be an amount which bears the same ratio to the total tax paid for the calendar quarter (or calendar year if the gift was made before January 1, 1971) in which the gift was made as the amount of such gift bears to the total amount of taxable gifts (computed without deduction of the specific exemption) for such quarter or year.
(2) Amount of gift. For purposes of paragraph (1), the "amount of such gift" shall be the amount included with respect to such gift in determining (for the purposes of section 2503(a) [26 USCS § 2503(a)], or of corresponding provisions of prior laws) the total amount of gifts made during such quarter or year, reduced by the amount of any deduction allowed with respect to such gift under section 2522 [26 USCS § 2522], or under corresponding provisions of prior laws (relating to charitable deduction), or under section 2523 [26 USCS § 2523] (relating to marital deduction).
(e) Section inapplicable to gifts made after December 31, 1976. No credit shall be allowed under this section with respect to the amount of any tax paid under chapter 12 [26 USCS § § 2501 et seq.] on any gift made after December 31, 1976.
26 USCS § 2013 (2005)
§ 2013. Credit for tax on prior transfers [Caution: See prospective amendment note below.].
(a) General rule. The tax imposed by section 2001 [26 USCS § 2001] shall be credited with all or a part of the amount of the Federal estate tax paid with respect to the transfer of property (including property passing as a result of the exercise or non-exercise of a power of appointment) to the decedent by or from a person (herein designated as a "transferor") who died within 10 years before, or within 2 years after, the decedent's death. If the transferor died within 2 years of the death of the decedent, the credit shall be the amount determined under subsections (b) and (c). If the transferor predeceased the decedent by more than 2 years, the credit shall be the following percentage of the amount so determined--
(1) 80 percent, if within the third or fourth years preceding the decedent's death;
(2) 60 percent, if within the fifth or sixth years preceding the decedent's death;
(3) 40 percent, if within the seventh or eighth years preceding the decedent's death; and
(4) 20 percent, if within the ninth or tenth years preceding the decedent's death.
(b) Computation of credit. Subject to the limitation prescribed in subsection (c), the credit provided by this section shall be an amount which bears the same ratio to the estate tax paid (adjusted as indicated hereinafter) with respect to the estate of the transferor as the value of the property transferred bears to the taxable estate of the transferor (determined for purposes of the estate tax) decreased by any death taxes paid with respect to such estate. For purposes of the preceding sentence, the estate tax paid shall be the Federal estate tax paid increased by any credits allowed against such estate tax under section 2012 [26 USCS § 2012], or corresponding provisions of prior laws, on account of gift tax, and for any credits allowed against such estate tax under this section on account of prior transfers where the transferor acquired property from a person who died within 10 years before the death of the decedent.
(c) Limitation on credit.
(1) In general. The credit provided in this section shall not exceed the amount by which--
(A) the estate tax imposed by section 2001 [26 USCS § 2001] or section 2101 [26 USCS § 2101] (after deducting the credits provided for in sections 2010, 2012, and 2014 [26 USCS § § 2010, 2012, and 2014]) computed without regard to this section, exceeds
(B) such tax computed by excluding from the decedent's gross estate the value of such property transferred and, if applicable, by making the adjustment hereinafter indicated.
If any deduction is otherwise allowable under section 2055 [26 USCS § 2055] or section 2106(a)(2) [26 USCS § 2106(a)(2)] (relating to charitable deduction) then, for the purpose of the computation indicated in subparagraph (B), the amount of such deduction shall be reduced by that part of such deduction which the value of such property transferred bears to the decedent's entire gross estate reduced by the deductions allowed under sections 2053 and 2054 [26 USCS § § 2053 and 2054], or section 2106(a)(1) [26 USCS § 2106(a)(1)] (relating to deduction for expenses, losses, etc.). For purposes of this section, the value of such property transferred shall be the value as provided for in subsection (d) of this section.
(2) Two or more transferors. If the credit provided in this section relates to property received from 2 or more transferors, the limitation provided in paragraph (1) of this subsection shall be computed by aggregating the value of the property so transferred to the decedent. The aggregate limitation so determined shall be apportioned in accordance with the value of the property transferred to the decedent by each transferor.
(d) Valuation of property transferred. The value of property transferred to the decedent shall be the value used for the purpose of determining the Federal estate tax liability of the estate of the transferor but--
(1) there shall be taken into account the effect of the tax imposed by section 2001 or 2101 [26 USCS § 2001 or 2101], or any estate, succession, legacy, or inheritance tax, on the net value to the decedent of such property;
(2) where such property is encumbered in any manner, or where the decedent incurs any obligation imposed by the transferor with respect to such property, such encumbrance or obligation shall be taken into account in the same manner as if the amount of a gift to the decedent of such property was being determined; and
(3) if the decedent was the spouse of the transferor at the time of the transferor's death, the net value of the property transferred to the decedent shall be reduced by the amount allowed under section 2056 [26 USCS § 2056] (relating to marital deductions) as a deduction from the gross estate of the transferor.
(e) Property defined. For purposes of this section, the term "property" includes any beneficial interest in property, including a general power of appointment (as defined in section 2041 [26 USCS § 2041]).
(f) Treatment of additional tax imposed under section 2032A. If section 2032A [26 USCS § 2032A] applies to any property included in the gross estate of the transferor and an additional tax is imposed with respect to such property under section 2032A(c) [26 USCS § 2032A(c)] before the date which is 2 years after the date of the decedent's death, for purposes of this section--
(1) the additional tax imposed by section 2032A(c) [26 USCS § 2032A(c)] shall be treated as a Federal estate tax payable with respect to the estate of the transferor; and
(2) the value of such property and the amount of the taxable estate of the transferor shall be determined as if section 2032A [26 USCS § 2032A] did not apply with respect to such property.
26 USCS § 2014 (2005)
§ 2014. Credit for foreign death taxes [Caution: See prospective amendment note below.].
(a) In general. The tax imposed by section 2001 [26 USCS § 2001] shall be credited with the amount of any estate, inheritance, legacy, or succession taxes actually paid to any foreign country in respect of any property situated within such foreign country and included in the gross estate (not including any such taxes paid with respect to the estate of a person other than the decedent). The determination of the country within which property is situated shall be made in accordance with the rules applicable under subchapter B (sec. 2101 and following) in determining whether property is situated within or without the United States.
(b) Limitations on credit. The credit provided in this section with respect to such taxes paid to any foreign country--
(1) shall not, with respect to any such tax, exceed an amount which bears the same ratio to the amount of such tax actually paid to such foreign country as the value of property which is--
(A) situated within such foreign country,
(B) subjected to such tax, and
(C) included in the gross estate
bears to the value of all property subjected to such tax; and
(2) shall not, with respect to all such taxes, exceed an amount which bears the same ratio to the tax imposed by section 2001 [26 USCS § 2001] (after deducting from such tax the credits provided by sections 2010 and 2012 [26 USCS § § 2010 and 2012]) as the value of property which is--
(A) situated within such foreign country,
(B) subjected to the taxes of such foreign country, and
(C) included in the gross estate
bears to the value of the entire gross estate reduced by the aggregate amount of the deductions allowed under sections 2055 and 2056 [26 USCS § § 2055 and 2056].
(c) Valuation of property.
(1) The values referred to in the ratio stated in subsection (b)(1) are the values determined for purposes of the tax imposed by such foreign country.
(2) The values referred to in the ratio stated in subsection (b)(2) are the values determined under this chapter [26 USCS § § 2001 et seq.]; but, in applying such ratio, the value of any property described in subparagraphs (A), (B), and (C) thereof shall be reduced by such amount as will properly reflect, in accordance with regulations prescribed by the Secretary, the deductions allowed in respect of such property under sections 2055 and 2056 [26 USCS § § 2055 and 2056] (relating to charitable and marital deductions).
(d) Proof of credit. The credit provided in this section shall be allowed only if the taxpayer establishes to the satisfaction of the Secretary--
(1) the amount of taxes actually paid to the foreign country,
(2) the amount and date of each payment thereof,
(3) the description and value of the property in respect of which such taxes are imposed, and
(4) all other information necessary for the verification and computation of the credit.
(e) Period of limitation. The credit provided in this section shall be allowed only for such taxes as were actually paid and credit therefor claimed within 4 years after the filing of the return required by section 6018 [26 USCS § 6018], except that--
(1) If a petition for redetermination of a deficiency has been filed with the Tax Court within the time prescribed in section 6213(a) [26 USCS § 6213(a)], then within such 4-year period or before the expiration of 60 days after the decision of the Tax Court becomes final.
(2) If, under section 6161 [26 USCS § 6161], an extension of time has been granted for payment of the tax shown on the return, or of a deficiency, then within such 4-year period or before the date of the expiration of the period of the extension.
Refund based on such credit may (despite the provisions of sections 6511 and 6512 [26 USCS § § 6511 and 6512]) be made if claim therefor is filed within the period above provided. Any such refund shall be made without interest.
(f) Additional limitation in cases involving a deduction under section 2053(d). In any case where a deduction is allowed under section 2053(d) [26 USCS § 2053(d)] for an estate, succession, legacy, or inheritance tax imposed by and actually paid to any foreign country upon a transfer by the decedent for public, charitable, or religious uses described in section 2055 [26 USCS § 2055], the property described in subparagraphs (A), (B), and (C) of paragraphs (1) and (2) of subsection (b) of this section shall not include any property in respect of which such deduction is allowed under section 2053(d) [26 USCS § 2053(d)].
(g) Possession of United States deemed a foreign country. For purposes of the credits authorized by this section, each possession of the United States shall be deemed to be a foreign country.
(h) Similar credit required for certain alien residents. Whenever the President finds that--
(1) a foreign country, in imposing estate, inheritance, legacy, or succession taxes, does not allow to citizens of the United States resident in such foreign country at the time of death a credit similar to the credit allowed under subsection (a),
(2) such foreign country, when requested by the United States to do so has not acted to provide such a similar credit in the case of citizens of the United States resident in such foreign country at the time of death, and
(3) it is in the public interest to allow the credit under subsection (a) in the case of citizens or subjects of such foreign country only if it allows such a similar credit in the case of citizens of the United States resident in such foreign country at the time of death,
the President shall proclaim that, in the case of citizens or subjects of such foreign country dying while the proclamation remains in effect, the credit under subsection (a) shall be allowed only if such foreign country allows such a similar credit in the case of citizens of the United States resident in such foreign country at the time of death.
26 USCS § 2015 (2005)
§ 2015. Credit for death taxes on remainders [Caution: See prospective amendment note below.].
Where an election is made under section 6163(a) [26 USCS § 6163(a)] to postpone payment of the tax imposed by section 2001, or 2101 [26 USCS § 2001 or 2101], such part of any estate, inheritance, legacy, or succession taxes allowable as a credit under section 2014 [26 USCS § 2014], as is attributable to a reversionary or remainder interest may be allowed as a credit against the tax attributable to such interest, subject to the limitations on the amount of the credit contained in such sections, if such part is paid, and credit therefor claimed, at any time before the expiration of the time for payment of the tax imposed by section 2001 or 2101 [26 USCS § 2001 or 2101] as postponed and extended under section 6163 [26 USCS § 6163].
26 USCS § 2016 (2005)
§ 2016. Recovery of taxes claimed as credit [Caution: See prospective amendment note below.].
If any tax claimed as a credit under section 2014 [26 USCS § 2014] is recovered from any foreign country, the executor, or any other person or persons recovering such amount, shall give notice of such recovery to the Secretary at such time and in such manner as may be required by regulations prescribed by him, and the Secretary shall (despite the provisions of section 6501 [26 USCS § 6501]) redetermine the amount of the tax under this chapter [26 USCS § § 2001 et seq.] and the amount, if any, of the tax due on such redetermination, shall be paid by the executor or such person or persons, as the case may be, on notice and demand. No interest shall be assessed or collected on any amount of tax due on any redetermination by the Secretary resulting from a refund to the executor of tax claimed as a credit under section 2014 [26 USCS § 2014], for any period before the receipt of such refund, except to the extent interest was paid by the foreign country on such refund.
26 USCS § 2017 (2005)
§ 2017--2030. [Reserved for future use.]
26 USCS § 2031 (2005)
§ 2031. Definition of gross estate [Caution: See prospective amendment note below.].
(a) General. The value of the gross estate of the decedent shall be determined by including to the extent provided for in this part [26 USCS § § 2031 et seq.], the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated.
(b) Valuation of unlisted stock and securities. In the case of stock and securities of a corporation the value of which, by reason of their not being listed on an exchange and by reason of the absence of sales thereof, cannot be determined with reference to bid and asked prices or with reference to sales prices, the value thereof shall be determined by taking into consideration, in addition to all other factors, the value of stock or securities of corporations engaged in the same or a similar line of business which are listed on an exchange.
(c) Estate tax with respect to land subject to a qualified conservation easement.
(1) In general. If the executor makes the election described in paragraph (6), then, except as otherwise provided in this subsection, there shall be excluded from the gross estate the lesser of--
(A) the applicable percentage of the value of land subject to a qualified conservation easement, reduced by the amount of any deduction under section 2055(f) [26 USCS § 2055(f)] with respect to such land, or
(B) the exclusion limitation.
(2) Applicable percentage. For purposes of paragraph (1), the term "applicable percentage" means 40 percent reduced (but not below zero) by 2 percentage points for each percentage point (or fraction thereof) by which the value of the qualified conservation easement is less than 30 percent of the value of the land (determined without regard to the value of such easement and reduced by the value of any retained development right (as defined in paragraph (5)). The values taken into account under the preceding sentence shall be such values as of the date of the contribution referred to in paragraph (8)(B).
(3) Exclusion limitation. For purposes of paragraph (1), the exclusion limitation is the limitation determined in accordance with the following table:
In the case of estates of The exclusion
decedents dying during: limitation is:
1998....................... $ 100,000
1999....................... $ 200,000
2000....................... $ 300,000
2001....................... $ 400,000
2002 or thereafter................ $ 500,000
(4) Treatment of certain indebtedness.
(A) In general. The exclusion provided in paragraph (1) shall not apply to the extent that the land is debt-financed property.
(B) Definitions. For purposes of this paragraph--
(i) Debt-financed property. The term "debt-financed property" means any property with respect to which there is an acquisition indebtedness (as defined in clause (ii)) on the date of the decedent's death.
(ii) Acquisition indebtedness. The term "acquisition indebtedness" means, with respect to debt-financed property, the unpaid amount of--
(I) the indebtedness incurred by the donor in acquiring such property,
(II) the indebtedness incurred before the acquisition of such property if such indebtedness would not have been incurred but for such acquisition,
(III) the indebtedness incurred after the acquisition of such property if such indebtedness would not have been incurred but for such acquisition and the incurrence of such indebtedness was reasonably foreseeable at the time of such acquisition, and
(IV) the extension, renewal, or refinancing of an acquisition indebtedness.
(5) Treatment of retained development right.
(A) In general. Paragraph (1) shall not apply to the value of any development right retained by the donor in the conveyance of a qualified conservation easement.
(B) Termination of retained development right. If every person in being who has an interest (whether or not in possession) in the land executes an agreement to extinguish permanently some or all of any development rights (as defined in subparagraph (D)) retained by the donor on or before the date for filing the return of the tax imposed by section 2001 [26 USCS § 2001], then any tax imposed by section 2001 [26 USCS § 2001] shall be reduced accordingly. Such agreement shall be filed with the return of the tax imposed by section 2001 [26 USCS § 2001]. The agreement shall be in such form as the Secretary shall prescribe.
(C) Additional tax. Any failure to implement the agreement described in subparagraph (B) not later than the earlier of--
(i) the date which is 2 years after the date of the decedent's death, or
(ii) the date of the sale of such land subject to the qualified conservation easement,
shall result in the imposition of an additional tax in the amount of the tax which would have been due on the retained development rights subject to such agreement. Such additional tax shall be due and payable on the last day of the 6th month following such date.
(D) Development right defined. For purposes of this paragraph, the term "development right" means any right to use the land subject to the qualified conservation easement in which such right is retained for any commercial purpose which is not subordinate to and directly supportive of the use of such land as a farm for farming purposes (within the meaning of section 2032A(e)(5) [26 USCS § 2032A(e)(5)]).
(6) Election. The election under this subsection shall be made on or before the due date (including extensions) for filing the return of tax imposed by section 2001 [26 USCS § 2001] and shall be made on such return. Such an election, once made, shall be irrevocable.
(7) Calculation of estate tax due. An executor making the election described in paragraph (6) shall, for purposes of calculating the amount of tax imposed by section 2001 [26 USCS § 2001], include the value of any development right (as defined in paragraph (5)) retained by the donor in the conveyance of such qualified conservation easement. The computation of tax on any retained development right prescribed in this paragraph shall be done in such manner and on such forms as the Secretary shall prescribe.
(8) Definitions. For purposes of this subsection--
(A) Land subject to a qualified conservation easement. The term "land subject to a qualified conservation easement" means land--
(i) which is located in the United States or any possession of the United States,
(ii) which was owned by the decedent or a member of the decedent's family at all times during the 3-year period ending on the date of the decedent's death, and
(iii) with respect to which a qualified conservation easement has been made by an individual described in subparagraph (C), as of the date of the election described in paragraph (6).
(B) Qualified conservation easement. The term "qualified conservation easement" means a qualified conservation contribution (as defined in section 170(h)(1) [26 USCS § 170(h)(1)]) of a qualified real property interest (as defined in section 170(h)(2)(C) [26 USCS § 170(h)(2)(C)]), except that clause (iv) of section 170(h)(4)(A) [26 USCS § 170(h)(4)(A)] shall not apply, and the restriction on the use of such interest described in section 170(h)(2)(C) [26 USCS § 170(h)(2)(C)] shall include a prohibition on more than a de minimis use for a commercial recreational activity.
(C) Individual described. An individual is described in this subparagraph if such individual is--
(i) the decedent,
(ii) a member of the decedent's family,
(iii) the executor of the decedent's estate, or
(iv) the trustee of a trust the corpus of which includes the land to be subject to the qualified conservation easement.
(D) Member of family. The term "member of the decedent's family" means any member of the family (as defined in section 2032A(e)(2) [26 USCS § 2032A(e)(2)]) of the decedent.
(9) Treatment of easements granted after death. In any case in which the qualified conservation easement is granted after the date of the decedent's death and on or before the due date (including extensions) for filing the return of tax imposed by section 2001 [26 USCS § 2001], the deduction under section 2055(f) [26 USCS § 2055(f)] with respect to such easement shall be allowed to the estate but only if no charitable deduction is allowed under chapter 1 [26 USCS § § 1 et seq.] to any person with respect to the grant of such easement.
(10) Application of this section to interests in partnerships, corporations, and trusts. This section shall apply to an interest in a partnership, corporation, or trust if at least 30 percent of the entity is owned (directly or indirectly) by the decedent, as determined under the rules described in section 2057(e)(3) [26 USCS § 2057(e)(3)].
(d) Cross reference. For executor's right to be furnished on request a statement regarding any valuation made by the Secretary within the gross estate, see section 7517 [26 USCS § 7517].
26 USCS § 2032 (2005)
(a) General. The value of the gross estate may be determined, if the executor so elects, by valuing all the property included in the gross estate as follows:
(1) In the case of property distributed, sold, exchanged, or otherwise disposed of, within 6 months after the decedent's death such property shall be valued as of the date of distribution, sale, exchange, or other disposition.
(2) In the case of property not distributed, sold, exchanged, or otherwise disposed of, within 6 months after the decedent's death such property shall be valued as of the date 6 months after the decedent's death.
(3) Any interest or estate which is affected by mere lapse of time shall be included at its value as of the time of death (instead of the later date) with adjustment for any difference in its value as of the later date not due to mere lapse of time.
(b) Special rules. No deduction under this chapter [26 USCS § § 2001 et seq.] of any item shall be allowed if allowance for such item is in effect given by the alternate valuation provided by this section. Wherever in any other subsection or section of this chapter [26 USCS § § 2001 et seq.] reference is made to the value of property at the time of the decedent's death, such reference shall be deemed to refer to the value of such property used in determining the value of the gross estate. In case of an election made by the executor under this section, then--
(1) for purposes of the charitable deduction under section 2055 or 2106(a)(2) [26 USCS § 2055 or 2106(a)(2)], any bequest, legacy, devise, or transfer enumerated therein, and
(2) for the purpose of the marital deduction under section 2056 [26 USCS § 2056], any interest in property passing to the surviving spouse,
shall be valued as of the date of the decedent's death with adjustment for any difference in value (not due to mere lapse of time or the occurrence or nonoccurrence of a contingency) of the property as of the date 6 months after the decedent's death (substituting, in the case of property distributed by the executor or trustee, or sold, exchanged, or otherwise disposed of, during such 6-month period, the date thereof).
(c) Election must decrease gross estate and estate tax. No election may be made under this section with respect to an estate unless such election will decrease--
(1) the value of the gross estate, and
(2) the sum of the tax imposed by this chapter [26 USCS § § 2001 et seq.] and the tax imposed by chapter 13 [26 USCS § § 2601 et seq.] with respect to property includible in the decedent's gross estate (reduced by credits allowable against such taxes).
(d) Election.
(1) In general. The election provided for in this section shall be made by the executor on the return of the tax imposed by this chapter [26 USCS § § 2001 et seq.]. Such election, once made, shall be irrevocable.
(2) Exception. No election may be made under this section if such return is filed more than 1 year after the time prescribed by law (including extensions) for filing such return.
26 USCS § 2032A (2005)
§ 2032A. Valuation of certain farm, etc., real property.
(a) Value based on use under which property qualifies.
(1) General rule. If--
(A) the decedent was (at the time of his death) a citizen or resident of the United States, and
(B) the executor elects the application of this section and files the agreement referred to in subsection (d)(2),
then, for purposes of this chapter [26 USCS § § 2001 et seq.], the value of qualified real property shall be its value for the use under which it qualifies, under subsection (b), as qualified real property.
(2) Limitation on aggregate reduction in fair market value [Caution: See § 3.27 of Rev. Proc. 2004-71(26 USCS § 1 note) for provision that, for an estate of a decedent dying in calendar year 2005, if the executor elects to use the special use valuation method under this section for qualified real property, the aggregate decrease in the value of qualified real property resulting from electing to use this section that is taken into account for purposes of the estate tax may not exceed $ 870,000.]. The aggregate decrease in the value of qualified real property taken into account for purposes of this chapter [26 USCS § § 2001 et seq.] which results from the application of paragraph (1) with respect to any decedent shall not exceed $ 750,000.
(3) Inflation adjustment. In the case of estates of decedents dying in a calendar year after 1998, the $ 750,000 amount contained in paragraph (2) shall be increased by an amount equal to--
(A) $ 750,000, 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 $ 10,000, such amount shall be rounded to the next lowest multiple of $ 10,000.
(b) Qualified real property.
(1) In general. For purposes of this section, the term "qualified real property" means real property located in the United States which was acquired from or passed from the decedent to a qualified heir of the decedent and which, on the date of the decedent's death, was being used for a qualified use by the decedent or a member of the decedent's family, but only if--
(A) 50 percent or more of the adjusted value of the gross estate consists of the adjusted value of real or personal property which--
(i) on the date of the decedent's death, was being used for a qualified use by the decedent or a member of the decedent's family, and
(ii) was acquired from or passed from the decedent to a qualified heir of the decedent.
(B) 25 percent or more of the adjusted value of the gross estate consists of the adjusted value of real property which meets the requirements of subparagraphs (A)(ii) and (C),
(C) during the 8-year period ending on the date of the decedent's death there have been periods aggregating 5 years or more during which--
(i) such real property was owned by the decedent or a member of the decedent's family and used for a qualified use by the decedent or a member of the decedent's family, and
(ii) there was material participation by the decedent or a member of the decedent's family in the operation of the farm or other business, and
(D) such real property is designated in the agreement referred to in subsection (d)(2).
(2) Qualified use. For purposes of this section, the term "qualified use" means the devotion of the property to any of the following:
(A) use as a farm for farming purposes, or
(B) use in a trade or business other than the trade or business of farming.
(3) Adjusted value. For purposes of paragraph (1), the term "adjusted value" means--
(A) in the case of the gross estate, the value of the gross estate for purposes of this chapter [26 USCS § § 2001 et seq.] (determined without regard to this section), reduced by any amounts allowable as a deduction under paragraph (4) of section 2053(a) [26 USCS § 2053(a)], or
(B) in the case of any real or personal property, the value of such property for purposes of this chapter [26 USCS § § 2001 et seq.] (determined without regard to this section), reduced by any amounts allowable as a deduction in respect of such property under paragraph (4) of section 2053(a) [26 USCS § 2053(a)].
(4) Decedents who are retired or disabled.
(A) In general. If, on the date of the decedent's death, the requirements of paragraph (1)(C)(ii) with respect to the decedent for any property are not met, and the decedent--
(i) was receiving old-age benefits under title II of the Social Security Act [42 USCS § § 401 et seq.] for a continuous period ending on such date, or
(ii) was disabled for a continuous period ending on such date,
then paragraph (1)(C)(ii) shall be applied with respect to such property by substituting "the date on which the longer of such continuous periods began" for "the date of the decedent's death" in paragraph (1)(C).
(B) Disabled defined. For purposes of subparagraph (A), an individual shall be disabled if such individual has a mental or physical impairment which renders him unable to materially participate in the operation of the farm or other business.
(C) Coordination with recapture. For purposes of subsection (c)(6)(B)(i), if the requirements of paragraph (1)(C)(ii) are met with respect to any decedent by reason of subparagraph (A), the period ending on the date on which the continuous period taken into account under subparagraph (A) began shall be treated as the period immediately before the decedent's death.
(5) Special rules for surviving spouses.
(A) In general. If property is qualified real property with respect to a decedent (hereinafter in this paragraph referred to as the "first decedent") and such property was acquired from or passed from the first decedent to the surviving spouse of the first decedent, for purposes of applying this subsection and subsection (c) in the case of the estate of such surviving spouse, active management of the farm or other business by the surviving spouse shall be treated as material participation by such surviving spouse in the operation of such farm or business.
(B) Special rule. For the purposes of subparagraph (A), the determination of whether property is qualified real property with respect to the first decedent shall be made without regard to subparagraph (D) of paragraph (1) and without regard to whether an election under this section was made.
(C) Coordination with paragraph (4). In any case in which to do so will enable the requirements of paragraph (1)(C)(ii) to be met with respect to the surviving spouse, this subsection and subsection (c) shall be applied by taking into account any application of paragraph (4).
(c) Tax treatment of dispositions and failures to use for qualified use.
(1) Imposition of additional estate tax. If, within 10 years after the decedent's death and before the death of the qualified heir--
(A) the qualified heir disposes of any interest in qualified real property (other than by a disposition to a member of his family), or
(B) the qualified heir ceases to use for the qualified use the qualified real property which was acquired (or passed) from the decedent,
then there is hereby imposed an additional estate tax.
(2) Amount of additional tax.
(A) In general. The amount of the additional tax imposed by paragraph (1) with respect to any interest shall be the amount equal to the lesser of--
(i) the adjusted tax difference attributable to such interest, or
(ii) the excess of the amount realized with respect to the interest (or, in any case other than a sale or exchange at arm's length, the fair market value of the interest) over the value of the interest determined under subsection (a).
(B) Adjusted tax difference attributable to interest. For purposes of subparagraph (A), the adjusted tax difference attributable to an interest is the amount which bears the same ratio to the adjusted tax difference with respect to the estate (determined under subparagraph (C)) as--
(i) the excess of the value of such interest for purposes of this chapter [26 USCS § § 2001 et seq.] (determined without regard to subsection (a)) over the value of such interest determined under subsection (a), bears to
(ii) a similar excess determined for all qualified real property.
(C) Adjusted tax difference with respect to the estate. For purposes of subparagraph (B), the term "adjusted tax difference with respect to the estate" means the excess of what would have been the estate tax liability but for subsection (a) over the estate tax liability. For purposes of this subparagraph, the term "estate tax liability" means the tax imposed by section 2001 [26 USCS § 2001] reduced by the credits allowable against such tax.
(D) Partial dispositions. For purposes of this paragraph, where the qualified heir disposes of a portion of the interest acquired by (or passing to) such heir (or a predecessor qualified heir) or there is a cessation of use of such a portion--
(i) the value determined under subsection (a) taken into account under subparagraph (A)(ii) with respect to such portion shall be its pro rata share of such value of such interest, and
(ii) the adjusted tax difference attributable to the interest taken into account with respect to the transaction involving the second or any succeeding portion shall be reduced by the amount of the tax imposed by this subsection with respect to all prior transactions involving portions of such interest.
(E) Special rule for disposition of timber. In the case of qualified woodland to which an election under subsection (e)(13)(A) applies, if the qualified heir disposes of (or severs) any standing timber on such qualified woodland--
(i) such disposition (or severance) shall be treated as a disposition of a portion of the interest of the qualified heir in such property, and
(ii) the amount of the additional tax imposed by paragraph (1) with respect to such disposition shall be an amount equal to the lesser of--
(I) the amount realized on such disposition (or, in any case other than a sale or exchange at arm's length, the fair market value of the portion of the interest disposed or severed), or
(II) the amount of additional tax determined under this paragraph (without regard to this subparagraph) if the entire interest of the qualified heir in the qualified woodland had been disposed of, less the sum of the amount of the additional tax imposed with respect to all prior transactions involving such woodland to which this subparagraph applied.
For purposes of the preceding sentence, the disposition of a right to sever shall be treated as the disposition of the standing timber. The amount of additional tax imposed under paragraph (1) in any case in which a qualified heir disposes of his entire interest in the qualified woodland shall be reduced by any amount determined under this subparagraph with respect to such woodland.
(3) Only 1 additional tax imposed with respect to any 1 portion. In the case of an interest acquired from (or passing from) any decedent, if subparagraph (A) or (B) of paragraph (1) applies to any portion of an interest, subparagraph (B) or (A), as the case may be, of paragraph (1) shall not apply with respect to the same portion of such interest.
(4) Due date. The additional tax imposed by this subsection shall become due and payable on the day which is 6 months after the date of the disposition or cessation referred to in paragraph (1).
(5) Liability for tax; furnishing of bond. The qualified heir shall be personally liable for the additional tax imposed by this subsection with respect to his interest unless the heir has furnished bond which meets the requirements of subsection (e)(11).
(6) Cessation of qualified use. For purposes of paragraph (1)(B), real property shall cease to be used for the qualified use if--
(A) such property ceases to be used for the qualified use set forth in subparagraph (A) or (B) of subsection (b)(2) under which the property qualified under subsection (b), or
(B) during any period of 8 years ending after the date of the decedent's death and before the date of the death of the qualified heir, there had been periods aggregating more than 3 years during which--
(i) in the case of periods during which the property was held by the decedent, there was no material participation by the decedent or any member of his family in the operation of the farm or other business, and
(ii) in the case of periods during which the property was held by any qualified heir, there was no material participation by such qualified heir or any member of his family in the operation of the farm or other business.
(7) Special rules.
(A) No tax if use begins within 2 years. If the date on which the qualified heir begins to use the qualified real property (hereinafter in this subparagraph referred to as the commencement date) is before the date 2 years after the decedent's death--
(i) no tax shall be imposed under paragraph (1) by reason of the failure by the qualified heir to so use such property before the commencement date, and
(ii) the 10-year period under paragraph (1) shall be extended by the period after the decedent's death and before the commencement date.
(B) Active management by eligible qualified heir treated as material participation. For purposes of paragraph (6)(B)(ii), the active management of a farm or other business by--
(i) an eligible qualified heir, or
(ii) a fiduciary of an eligible qualified heir described in clause (ii) or (iii) of subparagraph (C),
shall be treated as material participation by such eligible qualified heir in the operation of such farm or business. In the case of an eligible qualified heir described in clause (ii), (iii), or (iv) of subparagraph (C), the preceding sentence shall apply only during periods during which such heir meets the requirements of such clause.
(C) Eligible qualified heir. For purposes of this paragraph, the term "eligible qualified heir" means a qualified heir who--
(i) is the surviving spouse of the decedent,
(ii) has not attained the age of 21,
(iii) is disabled (within the meaning of subsection (b)(4)(B)), or
(iv) is a student.
(D) Student. For purposes of subparagraph (C), an individual shall be treated as a student with respect to periods during any calendar year if (and only if) such individual is a student (within the meaning of section 152(f)(2) [26 USCS § 152(f)(2)]) for such calendar year.
(E) Certain rents treated as qualified use. For purposes of this subsection, a surviving spouse or lineal descendant of the decedent shall not be treated as failing to use qualified real property in a qualified use solely because such spouse or descendant rents such property to a member of the family of such spouse or descendant on a net cash basis. For purposes of the preceding sentence, a legally adopted child of an individual shall be treated as the child of such individual by blood.
(8) Qualified conservation contribution is not a disposition. A qualified conservation contribution (as defined in section 170(h)) by gift or otherwise shall not be deemed a disposition under subsection (c)(1)(A).
(d) Election; agreement.
(1) Election. The election under this section shall be made on the return of the tax imposed by section 2001 [26 USCS § 2001]. Such election shall be made in such manner as the Secretary shall by regulations prescribe. Such an election, once made, shall be irrevocable.
(2) Agreement. The agreement referred to in this paragraph is a written agreement signed by each person in being who has an interest (whether or not in possession) in any property designated in such agreement consenting to the application of subsection (c) with respect to such property.
(3) Modification of election and agreement to be permitted. The Secretary shall prescribe procedures which provide that in any case in which the executor makes an election under paragraph (1) (and submits the agreement referred to in paragraph (2)) within the time prescribed therefor, but--
(A) the notice of election, as filed, does not contain all required information, or
(B) signatures of 1 or more persons required to enter into the agreement described in paragraph (2) are not included on the agreement as filed, or the agreement does not contain all required information,
the executor will have a reasonable period of time (not exceeding 90 days) after notification of such failures to provide such information or signatures.
(e) Definitions; special rules. For purposes of this section--
(1) Qualified heir. The term "qualified heir" means, with respect to any property, a member of the decedent's family who acquired such property (or to whom such property passed) from the decedent. If a qualified heir disposes of any interest in qualified real property to any member of his family, such member shall thereafter be treated as the qualified heir with respect to such interest.
(2) Member of family. The term "member of the family" means, with respect to any individual, only--
(A) an ancestor of such individual,
(B) the spouse of such individual,
(C) a lineal descendant of such individual, of such individual's spouse, or of a parent of such individual, or
(D) the spouse of any lineal descendant described in subparagraph (C).
For purposes of the preceding sentence, a legally adopted child of an individual shall be treated as the child of such individual by blood.
(3) Certain real property included. In the case of real property which meets the requirements of subparagraph (C) of subsection (b)(1), residential buildings and related improvements on such real property occupied on a regular basis by the owner or lessee of such real property or by persons employed by such owner or lessee for the purpose of operating or maintaining such real property, and roads, buildings, and other structures and improvements functionally related to the qualified use shall be treated as real property devoted to the qualified use.
(4) Farm. The term "farm" includes stock, dairy, poultry, fruit, furbearing animal, and truck farms, plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards and woodlands.
(5) Farming purposes. The term "farming purposes" means--
(A) cultivating the soil or raising or harvesting any agricultural or horticultural commodity (including the raising, shearing, feeding, caring for, training, and management of animals) on a farm;
(B) handling, drying, packing, grading, or storing on a farm any agricultural or horticultural commodity in its unmanufactured state, but only if the owner, tenant, or operator of the farm regularly produces more than one-half of the commodity so treated; and
(C) (i) the planting, cultivating, caring for, or cutting of trees, or
(ii) the preparation (other than milling) of trees for market.
(6) Material participation. Material participation shall be determined in a manner similar to the manner used for purposes of paragraph (1) of section 1402(a) [26 USCS § 1402(a)] (relating to net earnings from self-employment).
(7) Method of valuing farms.
(A) In general. Except as provided in subparagraph (B), the value of a farm for farming purposes shall be determined by dividing--
(i) the excess of the average annual gross cash rental for comparable land used for farming purposes and located in the locality of such farm over the average annual State and local real estate taxes for such comparable land, by
(ii) the average annual effective interest rate for all new Federal Land Bank loans.
For purposes of the preceding sentence, each average annual computation shall be made on the basis of the 5 most recent calendar years ending before the date of the decedent's death.
(B) Value based on net share rental in certain cases.
(i) In general. If there is no comparable land from which the average annual gross cash rental may be determined but there is comparable land from which the average net share rental may be determined, subparagraph (A)(i) shall be applied by substituting "average annual net share rental" for "average annual gross cash rental".
(ii) Net share rental. For purposes of this paragraph, the term "net share rental" means the excess of--
(I) the value of the produce received by the lessor of the land on which such produce is grown, over
(II) the cash operating expenses of growing such produce which, under the lease, are paid by the lessor.
(C) Exception. The formula provided by subparagraph (A) shall not be used--
(i) where it is established that there is no comparable land from which the average annual gross cash rental may be determined, or
(ii) where the executor elects to have the value of the farm for farming purposes determined and that there is no comparable land from which the average net share rental may be determined under paragraph (8).
(8) Method of valuing closely held business interests, etc. In any case to which paragraph (7)(A) does not apply, the following factors shall apply in determining the value of any qualified real property:
(A) The capitalization of income which the property can be expected to yield for farming or closely held business purposes over a reasonable period of time under prudent management using traditional cropping patterns for the area, taking into account soil capacity, terrain configuration, and similar factors,
(B) The capitalization of the fair rental value of the land for farm land or closely held business purposes,
(C) Assessed land values in a State which provides a differential or use value assessment law for farmland or closely held business,
(D) Comparable sales of other farm or closely held business land in the same geographical area far enough removed from a metropolitan or resort area so that nonagricultural use is not a significant factor in the sales price, and
(E) Any other factor which fairly values the farm or closely held business value of the property.
(9) Property acquired from decedent. Property shall be considered to have been acquired from or to have passed from the decedent if--
(A) such property is so considered under section 1014(b) [26 USCS § 1014(b)] (relating to basis of property acquired from a decedent),
(B) such property is acquired by any person from the estate, or
(C) such property is acquired by any person from a trust (to the extent such property is includible in the gross estate of the decedent).
(10) Community property. If the decedent and his surviving spouse at any time held qualified real property as community property, the interest of the surviving spouse in such property shall be taken into account under this section to the extent necessary to provide a result under this section with respect to such property which is consistent with the result which would have obtained under this section if such property had not been community property.
(11) Bond in lieu of personal liability. If the qualified heir makes written application to the Secretary for determination of the maximum amount of the additional tax which may be imposed by subsection (c) with respect to the qualified heir's interest, the Secretary (as soon as possible, and in any event within 1 year after the making of such application) shall notify the heir of such maximum amount. The qualified heir, on furnishing a bond in such amount and for such period as may be required, shall be discharged from personal liability for any additional tax imposed by subsection (c) and shall be entitled to a receipt or writing showing such discharge.
(12) Active management. The term "active management" means the making of the management decisions of a business (other than the daily operating decisions).
(13) Special rules for woodlands.
(A) In general. In the case of any qualified woodland with respect to which the executor elects to have this subparagraph apply, trees growing on such woodland shall not be treated as a crop.
(B) Qualified woodland. The term "qualified woodland" means any real property which--
(i) is used in timber operations, and
(ii) is an identifiable area of land such as an acre or other area for which records are normally maintained in conducting timber operations.
(C) Timber operations. The term "timber operations" means--
(i) the planting, cultivating, caring for, or cutting of trees, or
(ii) the preparation (other than milling) of trees for market.
(D) Election. An election under subparagraph (A) shall be made on the return of the tax imposed by section 2001 [26 USCS § 2001]. Such election shall be made in such manner as the Secretary shall by regulations prescribe. Such an election, once made, shall be irrevocable.
(14) Treatment of replacement property acquired in section 1031 or 1033 transactions.
(A) In general. In the case of any qualified replacement property, any period during which there was ownership, qualified use, or material participation with respect to the replaced property by the decedent or any member of his family shall be treated as a period during which there was such ownership, use, or material participation (as the case may be) with respect to the qualified replacement property.
(B) Limitation. Subparagraph (A) shall not apply to the extent that the fair market value of the qualified replacement property (as of the date of its acquisition) exceeds the fair market value of the replaced property (as of the date of its disposition).
(C) Definitions. For purposes of this paragraph--
(i) Qualified replacement property. The term "qualified replacement property" means any real property which is--
(I) acquired in an exchange which qualifies under section 1031 [26 USCS § 1031], or
(II) the acquisition of which results in the nonrecognition of gain under section 1033 [26 USCS § 1033].
Such term shall only include property which is used for the same qualified use as the replaced property was being used before the exchange.
(ii) Replaced property. The term "replaced property" means--
(I) the property transferred in the exchange which qualifies under section 1031 [26 USCS § 1031], or
(II) the property compulsorily or involuntarily converted (within the meaning of section 1033) [26 USCS § 1033].
(f) Statute of limitations. If qualified real property is disposed of or ceases to be used for a qualified use, then--
(1) the statutory period for the assessment of any additional tax under subsection (c) attributable to such disposition or cessation shall not expire before the expiration of 3 years from the date the Secretary is notified (in such manner as the Secretary may by regulations prescribe) of such disposition or cessation (or if later in the case of an involuntary conversion or exchange to which subsection (h) or (i) applies, 3 years from the date the Secretary is notified of the replacement of the converted property or of an intention not to replace or of the exchange of property), and
(2) such additional tax may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(g) Application of this section and section 6324B to interests in partnerships, corporations, and trusts. The Secretary shall prescribe regulations setting forth the application of this section and section 6324B [26 USCS § 6324B] in the case of an interest in a partnership, corporation, or trust which, with respect to the decedent, is an interest in a closely held business (within the meaning of paragraph (1) of section 6166(b) [26 USCS § 6166(b)]). For purposes of the preceding sentence, an interest in a discretionary trust all the beneficiaries of which are qualified heirs shall be treated as a present interest.
(h) Special rules for involuntary conversions of qualified real property.
(1) Treatment of converted property.
(A) In general. If there is an involuntary conversion of an interest in qualified real property--
(i) no tax shall be imposed by subsection (c) on such conversion if the cost of the qualified replacement property equals or exceeds the amount realized on such conversion, or
(ii) if clause (i) does not apply, the amount of the tax imposed by subsection (c) on such conversion shall be the amount determined under subparagraph (B).
(B) Amount of tax where there is not complete reinvestment. The amount determined under this subparagraph with respect to any involuntary conversion is the amount of the tax which (but for this subsection) would have been imposed on such conversion reduced by an amount which--
(i) bears the same ratio to such tax, as
(ii) the cost of the qualified replacement property bears to the amount realized on the conversion.
(2) Treatment of replacement property. For purposes of subsection (c)--
(A) any qualified replacement property shall be treated in the same manner as if it were a portion of the interest in qualified real property which was involuntarily converted; except that with respect to such qualified replacement property the 10-year period under paragraph (1) of subsection (c) shall be extended by any period, beyond the 2-year period referred to in section 1033(a)(2)(B)(i) [26 USCS § 1033(a)(2)(B)(i)], during which the qualified heir was allowed to replace the qualified real property,
(B) any tax imposed by subsection (c) on the involuntary conversion shall be treated as a tax imposed on a partial disposition, and
(C) paragraph (6) of subsection (c) shall be applied--
(i) by not taking into account periods after the involuntary conversion and before the acquisition of the qualified replacement property, and
(ii) by treating material participation with respect to the converted property as material participation with respect to the qualified replacement property.
(3) Definitions and special rules. For purposes of this subsection--
(A) Involuntary conversion. The term "involuntary conversion" means a compulsory or involuntary conversion within the meaning of section 1033 [26 USCS § 1033].
(B) Qualified replacement property. The term "qualified replacement property" means--
(i) in the case of an involuntary conversion described in section 1033(a)(1) [26 USCS § 1033(a)(1)], any real property into which the qualified real property is converted, or
(ii) in the case of an involuntary conversion described in section 1033(a)(2) [26 USCS § 1033(a)(2)], any real property purchased by the qualified heir during the period specified in section 1033(a)(2)(B) [26 USCS § 1033(a)(2)(B)] for purposes of replacing the qualified real property.
Such term only includes property which is to be used for the qualified use set forth in subparagraph (A) or (B) of subsection (b)(2) under which the qualified real property qualified under subsection (a).
(4) Certain rules made applicable. The rules of the last sentence of section 1033(a)(2)(A) [26 USCS § 1033(a)(2)(A)] shall apply for purposes of paragraph (3)(B)(ii).
(i) Exchanges of qualified real property.
(1) Treatment of property exchanged.
(A) Exchanges solely for qualified exchange property. If an interest in qualified real property is exchanged solely for an interest in qualified exchange property in a transaction which qualifies under section 1031 [26 USCS § 1031], no tax shall be imposed by subsection (c) by reason of such exchange.
(B) Exchanges where other property received. If an interest in qualified real property is exchanged for an interest in qualified exchange property and other property in a transaction which qualifies under section 1031 [26 USCS § 1031], the amount of the tax imposed by subsection (c) by reason of such exchange shall be the amount of tax which (but for this subparagraph) would have been imposed on such exchange under subsection (c)(1), reduced by an amount which--
(i) bears the same ratio to such tax, as
(ii) the fair market value of the qualified exchange property bears to the fair market value of the qualified real property exchanged.
For purposes of clause (ii) of the preceding sentence, fair market value shall be determined as of the time of the exchange.
(2) Treatment of qualified exchange property. For purposes of subsection (c)--
(A) any interest in qualified exchange property shall be treated in the same manner as if it were a portion of the interest in qualified real property which was exchanged,
(B) any tax imposed by subsection (c) by reason of the exchange shall be treated as a tax imposed on a partial disposition, and
(C) paragraph (6) of subsection (c) shall be applied by treating material participation with respect to the exchanged property as material participation with respect to the qualified exchange property.
(3) Qualified exchange property. For purposes of this subsection, the term "qualified exchange property" means real property which is to be used for the qualified use set forth in subparagraph (A) or (B) of subsection (b)(2) under which the real property exchanged therefor originally qualified under subsection (a).