Question

Describe Code Section 2702 and its effect.

Answer 1

The IRC section 2702 contains the minimum valuation regulations about the transfer of asets in the trust. Section 2702 is one of the section out of four section which require the transfer of assets within the families to comply with the minimum valuation rules. It povides special rules to calculate the amount of the gift when an individual makes a transfer to the trust or to the member of the individual's family or when an applicable family member retains an interest in the trust.

The Effect of this code section is

If this section applies to a transfer of assets of a trust the value of the interest in the trust which is retained by the transferor or as applicable family member is determined according to section 2702-2b. The amount of gift is than calculated by reducing the value of the interests retained as above from the value of the property which is transferred. If the interest which is retained is not qualified interest, than this interest is generally valued at zero and the amount of the gift is the entire value of the property.