[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 479 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 479

To amend the Internal Revenue Code of 1986 to clarify the treatment of 
                            funeral trusts.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            January 21, 1997

  Mr. Herger introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to clarify the treatment of 
                            funeral trusts.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. TREATMENT OF FUNERAL TRUSTS.

    (a) In General.--Subpart F of part I of subchapter J of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 684. TREATMENT OF FUNERAL TRUSTS.

    ``(a) In General.--In the case of a qualified funeral trust--
            ``(1) subparts B, C, D, and E shall not apply, and
            ``(2) no deduction shall be allowed by section 642(b).
    ``(b) Qualified Funeral Trust.--For purposes of this subsection, 
the term `qualified funeral trust' means any trust (other than a 
foreign trust) if--
            ``(1) the trust arises as a result of a contract with a 
        person engaged in the trade or business of providing funeral or 
        burial services or property necessary to provide such services,
            ``(2) the sole purpose of the trust is to hold, invest, and 
        reinvest funds in the trust and to use such funds solely to 
        make payments for such services or property for the benefit of 
        the beneficiaries of the trust,
            ``(3) the only beneficiaries of such trust are individuals 
        who have entered into contracts described in paragraph (1) to 
        have such services or property provided at their death,
            ``(4) the only contributions to the trust are contributions 
        by or for the benefit of such beneficiaries,
            ``(5) the trustee elects the application of this 
        subsection, and
            ``(6) the trust would (but for the election described in 
        paragraph (5)) be treated as owned by the beneficiaries under 
        subpart E.
    ``(c) Dollar Limitation on Contributions.--
            ``(1) In general.--The term `qualified funeral trust' shall 
        not include any trust which accepts aggregate contributions by 
        or for the benefit of an individual in excess of $7,000.
            ``(2) Related trusts.--For purposes of paragraph (1), all 
        trusts having trustees which are related persons shall be 
        treated as 1 trust. For purposes of the preceding sentence, 
        persons are related if--
                    ``(A) the relationship between such persons would 
                result in the disallowance of losses under section 267 
                or 707(b),
                    ``(B) such persons are treated as a single employer 
                under subsection (a) or (b) of section 52, or
                    ``(C) the Secretary determines that treating such 
                persons as related is necessary to prevent avoidance of 
                the purposes of this section.
            ``(3) Inflation adjustment.--In the case of any contract 
        referred to in subsection (b)(1) which is entered into during 
        any calendar year after 1997, the dollar amount referred to 
        paragraph (1) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year, by 
                substituting `calendar year 1996' for `calendar year 
                1992' in subparagraph (B) thereof.
        If any dollar amount after being increased under the preceding 
        sentence is not a multiple of $100, such dollar amount shall be 
        rounded to the nearest multiple of $100.
    ``(d) Application of Rate Schedule.--Section 1(e) shall be applied 
to each qualified funeral trust by treating each beneficiary's interest 
in each such trust as a separate trust.
    ``(e) Treatment of Amounts Refunded to Beneficiary on 
Cancellation.--No gain or loss shall be recognized to a beneficiary 
described in subsection (b)(3) of any qualified funeral trust by reason 
of any payment from such trust to such beneficiary by reason of 
cancellation of a contract referred to in subsection (b)(1). If any 
payment referred to in the preceding sentence consists of property 
other than money, the basis of such property in the hands of such 
beneficiary shall be the same as the trust's basis in such property 
immediately before the payment.
    ``(f) Simplified Reporting.--The Secretary may prescribe rules for 
simplified reporting of all trusts having a single trustee.''
    (b) Clerical Amendment.--The table of sections for subpart F of 
part I of subchapter J of chapter 1 is amended by adding at the end the 
following new item:

                              ``Sec. 684. Treatment of funeral 
                                        trusts.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years ending after the date of the enactment of this 
Act.
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