Finance Act, 1965
21.—(1) In this section—
“beneficiary” means a person who is an object of the trust referred to in subsection (2) of this section;
“market value” means the price which, in the opinion of the Revenue Commissioners, the property to which subsection (5) of this section relates would fetch if sold in the open market;
“payment” includes any disposition of property in favour of a beneficiary;
“relevant period” means, in relation to a deceased person, the period of five years prior to the date of his death or the period from the date of the commencement of the discretionary trust up to the date of his death, whichever is the shorter.
(2) Where property is vested in a trustee upon trusts under which the income or capital of the property may be paid to one or more of a number or of a class of persons as the trustee or any other person may, at his discretion, select and one or more of those persons dies or die during the continuance of the discretionary trust and after the passing of this Act, any person so dying shall, for all purposes of estate duty, be deemed to have had an interest limited to cease on his death in the property.
(3) The interest to which subsection (2) of this section refers shall be deemed to have been an annuity equivalent to the average annual amount of the aggregate of all payments made out of the capital or income of the property to the deceased person or received or enjoyed by him during the relevant period or made to or received or disposed of by any other person on his behalf during that period, subject however to the following subsections of this section.
(4) A payment out of the capital of the trust property shall not be treated as a payment for the purpose of subsection (3) of this section save where there is a trust or power to accumulate income as an addition to the capital of the trust property and then only to the extent to which the payment does not exceed the amount of income accumulated to the date of such payment.
(5) If at any time during the relevant period the deceased person had been in occupation or possession of land or chattels subject to the discretionary trust otherwise than for full consideration in money or money's worth given by him and, after the termination of the occupation or possession, the land or chattels, or property representing the land or chattels, continues to be subject to the discretionary trust, the following provision shall have effect for the purpose of determining the amount of the annuity referred to in subsection (3) of this section:
For each year or part of a year during which the deceased person was the only beneficiary in occupation or possession, the occupation or possession shall be deemed to have been a payment of income at the annual rate of six per cent. of the market value of the land or chattels (as the case may be) at the date of the termination of the occupation or possession. For each year or part of a year during which a number of beneficiaries including the deceased person was in occupation or possession, the deceased person's occupation or possession shall be deemed to have been a payment of income at an annual rate of six (divided by the number of beneficiaries including the deceased person) per cent. of such market value.
(6) In relation to property in which an interest is by this section deemed to have subsisted, paragraph (b) of subsection (1) of section 2 of the Finance Act, 1894 , shall have effect as if the words “holder of an office, or” were omitted.