Title 26 — Internal Revenue CodeRelease 119-73
§2036 Transfers with retained life estate
Title 26 › Subtitle Subtitle B— - Estate and Gift Taxes › Chapter CHAPTER 11— - ESTATE TAX › Subchapter Subchapter A— - Estates of Citizens or Residents › Part PART III— - GROSS ESTATE › § 2036
Summary
Put into the value of a person’s estate any property they had transferred but still kept an interest in when they died, unless they really sold it for full fair money. This includes property they kept for their life, kept for a time that can only be measured by their death, or kept for any period that did not end before they died. It covers keeping possession or enjoyment, the right to the income, or the power to name who will possess or get the income. Keeping the right to vote stock of a controlled corporation counts as keeping enjoyment. A corporation is “controlled” if, at any time after the transfer and during the 3-year period ending on the date of death, the person owned (applying section 318 rules) or could vote stock having at least 20 percent of the combined voting power. Giving up voting rights is treated as if the person transferred the property for purposes of section 2035. The rule does not apply to transfers made before March 4, 1931, nor to transfers made after March 3, 1931 and before June 7, 1932, unless the property would have been included because of the amendatory language of the joint resolution of March 3, 1931 (46 Stat. 1516).
Full Legal Text
Title 26, §2036
Internal Revenue Code — Source: USLM XML via OLRC
(a)The value of the gross estate shall include the value of all property to the extent of any interest therein of which the decedent has at any time made a transfer (except in case of a bona fide sale for an adequate and full consideration in money or money’s worth), by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death—
(1)the possession or enjoyment of, or the right to the income from, the property, or
(2)the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom.
(b)(1)For purposes of subsection (a)(1), the retention of the right to vote (directly or indirectly) shares of stock of a controlled corporation shall be considered to be a retention of the enjoyment of transferred property.
(2)For purposes of paragraph (1), a corporation shall be treated as a controlled corporation if, at any time after the transfer of the property and during the 3-year period ending on the date of the decedent’s death, the decedent owned (with the application of section 318), or had the right (either alone or in conjunction with any person) to vote, stock possessing at least 20 percent of the total combined voting power of all classes of stock.
(3)For purposes of applying section 2035 with respect to paragraph (1), the relinquishment or cessation of voting rights shall be treated as a transfer of property made by the decedent.
(c)This section shall not apply to a transfer made before March 4, 1931; nor to a transfer made after March 3, 1931, and before June 7, 1932, unless the property transferred would have been includible in the decedent’s gross estate by reason of the amendatory language of the joint resolution of March 3, 1931 (46 Stat. 1516).
Legislative History
Notes & Related Subsidiaries
Editorial Notes
Amendments
1990—Subsecs. (c), (d). Pub. L. 101–508 redesignated subsec. (d) as (c) and struck out former subsec. (c) which enunciated a rule that retention of retained interest would be considered to be a retention of enjoyment of transferred property if a person held a substantial interest in an enterprise, and such person in effect transferred after Dec. 17, 1987, property having a disproportionately large share of the potential appreciation in such person’s interest in the enterprise while retaining an interest in the income of, or rights in, the enterprise. 1988—Subsec. (c)(1)(B). Pub. L. 100–647, § 3031(e), substituted “an interest” for “a disproportionately large share” after “whole retaining”. Subsec. (c)(2). Pub. L. 100–647, § 3031(g)(1), substituted “consideration furnished by” for “sales to” in heading, and amended text generally. Prior to amendment, text read as follows: “The exception contained in subsection (a) for a bona fide sale shall not apply to a transfer described in paragraph (1) if such transfer is to a member of the transferor’s family.” Subsec. (c)(3)(C). Pub. L. 100–647, § 3031(d), substituted “Except as provided in
Regulations
, an” for “An”. Subsec. (c)(4). Pub. L. 100–647, § 3031(a)(1), amended par. (4) generally, substituting provisions relating to treatment of certain transfers for provisions relating to coordination with section 2035. Subsec. (c)(5). Pub. L. 100–647, § 3031(g)(2), amended par. (5) generally, substituting provisions relating to the making of appropriate adjustments in amounts included in gross estate for provisions relating to coordination with section 2043. Subsec. (c)(6). Pub. L. 100–647, § 3031(b), added par. (6). Subsec. (c)(7), (8). Pub. L. 100–647, § 3031(b)[(c)], added pars. (7) and (8). 1987—Subsecs. (c), (d). Pub. L. 100–203 added subsec. (c) and redesignated former subsec. (c) as (d). 1978—Subsec. (a). Pub. L. 95–600, § 702(i)(2), struck out provision following par. (2) relating to the retention of voting rights in retained stock. Subsecs. (b), (c). Pub. L. 95–600, § 702(i)(1), added subsec. (b) and redesignated former subsec. (b) as (c). 1976—Subsec. (a). Pub. L. 94–455 provided that, for purposes of par. (1), the retention of voting rights in retained stock be considered to be a retention of the enjoyment of that stock. 1962—Subsec. (a). Pub. L. 87–834 struck out provisions which excepted real property situated outside of the United States.
Statutory Notes and Related Subsidiaries
Effective Date
of 1990 Amendment Pub. L. 101–508, title XI, § 11601(c), Nov. 5, 1990, 104 Stat. 1388–491, provided that: “The
Amendments
made by this section [amending this section and section 2207B and 2501 of this title] shall apply in the case of property transferred after December 17, 1987.”
Effective Date
of 1988 Amendment Pub. L. 100–647, title III, § 3031(h), Nov. 10, 1988, 102 Stat. 3639, provided that: “(1) In general.—Except as provided in this subsection, any amendment made by this section [enacting section 2207B of this title and amending this section and section 2501 of this title] shall take effect as if included in the provisions of the Revenue Act of 1987 [Pub. L. 100–203, title X] to which such amendment relates. “(2) Subsection (a).—The
Amendments
made by subsection (a) [amending this section and section 2501 of this title] shall apply in cases where the transfer referred to in section 2036(c)(1)(B) of the 1986 Code is on or after June 21, 1988. “(3) Subsection (f).—If an amount is included in the gross estate of a decedent under section 2036 of the 1986 Code other than solely by reason of section 2036(c) of the 1986 Code, the
Amendments
made by subsection (f) [enacting section 2207B of this title] shall apply to such amount only with respect to property transferred after the date of the enactment of this Act [Nov. 10, 1988]. “(4) Correction period.—If section 2036(c)(1) of the 1986 Code would (but for this paragraph) apply to any interest arising from a transaction entered into during the period beginning after
December 17, 1987, and ending before
January 1, 1990, such section shall not apply to such interest if—“(A) during such period, such actions are taken as are necessary to have such section 2036(c)(1) not apply to such transaction (and any such interest), or “(B) the original transferor and his spouse on
January 1, 1990 (or, if earlier, the date of the original transferor’s death), does not hold any interest in the enterprise involved. “(5) Clarification of
Effective Date
.—For purposes of section 10402(b) of the Revenue Act of 1987 [Pub. L. 100–203, set out as an
Effective Date
of 1987 Amendment note below], with respect to property transferred on or before December 17, 1987—“(A) any failure to exercise a right of conversion, “(B) any failure to pay dividends, and“(c) [sic] failures to exercise other rights specified in
Regulations
, shall not be treated as a subsequent transfer.”
Effective Date
of 1987 Amendment Pub. L. 100–203, title X, § 10402(b), Dec. 22, 1987, 101 Stat. 1330–432, provided that: “The amendment made by subsection (a) [amending this section] shall apply with respect to estates of decedents dying after
December 31, 1987, but only in the case of property transferred after
December 17, 1987.” [For clarification of this note, see section 3031(h)(5) of Pub. L. 100–647, set out as an
Effective Date
of 1988 Amendment note above.]
Effective Date
of 1978 Amendment Pub. L. 95–600, title VII, § 702(i)(3), Nov. 6, 1978, 92 Stat. 2931, provided that: “The
Amendments
made by this subsection [amending this section] shall apply to transfers made after June 22, 1976.”
Effective Date
of 1976 Amendment Pub. L. 94–455, title XX, § 2009(e)(1), Oct. 4, 1976, 90 Stat. 1896, provided that: “The amendment made by subsection (a) [amending this section] shall apply to transfers made after June 22, 1976.”
Effective Date
of 1962 AmendmentAmendment by Pub. L. 87–834 applicable to estates of decedents dying after Oct. 16, 1962, except as otherwise provided, see section 18(b) of Pub. L. 87–834, set out as a note under section 2031 of this title.
Reference
Citations & Metadata
Citation
26 U.S.C. § 2036
Title 26 — Internal Revenue Code
Last Updated
Apr 6, 2026
Release point: 119-73