PUBLIC LAW 104-188—AUG. 20, 1996 110 STAT. 1909 SEC. 1902. COMPARABLE PENALTIES FOR FAILURE TO FILE RETURN RELATING TO TRANSFERS TO FOREIGN ENTITIES. (a) IN GENERAL.—Section 1494 is amended by adding at the end the following new subsection: "(c) PENALTY.—In the case of any failure to file a return required by the Secretary with respect to any transfer described in section 1491, the person required to file such return shall be liable for the penalties provided in section 6677 in the same manner as if such failure were a failure to file a notice under section 6048(a). ". (b) EFFECTIVE DATE. —The amendment made by subsection (a) 26 USC 1494 shall apply to transfers after the date of the enactment of this i^ote. Act. SEC. 1903. MODIFICATIONS OF RULES RELATING TO FOREIGN TRUSTS HAVING ONE OR MORE UNITED STATES BENEFICIARIES. (a) TREATMENT OF TRUST OBLIGATIONS, ETC. — (1) Paragraph (2) of section 679(a) is amended by striking subparagraph (B) and inserting the following: "(B) TRANSFERS AT FAIR MARKET VALUE. —To any transfer of property to a trust in exchange for consideration of at least the fair market value of the transferred property. For purposes of the preceding sentence, consideration other than cash shall be taken into account at its fair market value.". (2) Subsection (a) of section 679 (relating to foreign trusts having one or more United States beneficiaries) is amended by adding at the end the following new paragraph: "(3) CERTAIN OBLIGATIONS NOT TAKEN INTO ACCOUNT UNDER FAIR MARKET VALUE EXCEPTION.— "(A) IN GENERAL.—In determining whether paragraph (2)(B) applies to any transfer by a person described in clause (ii) or (iii) of subparagraph (C), there shall not be taken into account— "(i) except as provided in regulations, any obligation of a person described in subparagraph (C), and "(ii) to the extent provided in regulations, any obligation which is guaranteed by a person described in subparagraph (C). " (B) TREATMENT OF PRINCIPAL PAYMENTS ON OBLIGA- TION. — Principal payments by the trust on any obligation referred to in subparagraph (A) shall be taken into account on and after the date of the payment in determining the portion of the trust attributable to the property transferred. "(C) PERSONS DESCRIBED. —The persons described in this subparagraph are— "(i) the trust, "(ii) any grantor or beneficiary of the trust, and "(iii) any person who is related (within the meaning of section 643(i)(2)(B)) to any grantor or beneficiary of the trust.". (b) EXEMPTION OF TR/USTSFERS TO CHARITABLE TRUSTS. — Subsection (a) of section 679 is amended by striking "section 404(a)(4) or 404A" and inserting "section 6048(a)(3)(B)(ii)". (c) OTHER MODIFICATIONS.— Subsection (a) of section 679 is amended by adding at the end the following new paragraphs:
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