Ill STAT. 1042 PUBLIC LAW 105-34—AUG. 5, 1997 "(3) except in the case of a sale or exchange in satisfaction of a pecuniary bequest, an executor of an estate and a beneficiary of such estate.". 26 USC 267 note. (c) EFFECTIVE DATE. —The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act. SEC. 1309. TREATMENT OF FUNERAL TRUSTS. (a) IN GENERAL. —Subpart F of part I of subchapter J of chapter 1 is amended by adding at the end the following new section: "SEC. 685. 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 with respect to whom such services or property are to be provided at their death under contracts described in paragraph (1), "(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 under subpart E by the purchasers of the contracts described in paragraph (1). "(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 is described in 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 1998, the dollar amount referred to paragraph (1) shall be increased by an amount equal to— "(A) such dollar amount, multiplied by
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