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TITLE 26-INTERNAL REVENUE CODE § 102. Gifts and Inheritances (a) General rule Gross income does not include the value of property acquired by gift, bequest, devise, or in- heritance. (b) Income Subsection (a) shall not exclude from gross Income- (1) the income from any property referred to in subsection (a); or (2) where the gift, bequest, devise, or inheri- tance is of income from property, the amount of such income. Where, under the terms of the gift, bequest, devise, or inheritance, the payment, crediting, or distribution thereof is to be made at inter- vals, then, to the extent that it is paid or cred- ited or to be distributed out of income from property, it shall be treated for purposes of paragraph (2) as a gift, bequest, devise, or in- heritance of income from property. Any amount included in the gross income of a bene- ficiary under subchapter J shall be treated for purposes of paragraph (2) as a gift, bequest, devise, or Inheritance of income from property. (Aug. 16, 1954, ch. 736, 68A Stat. 28.) CROSS REFERENCES Estate tax, see section 2001 et seq. of this title. Gift tax, see section 2501 et seq. of this title. SECTION REFERRED TO IN OTHER SECTIONS This section is referred to in section 274 of this title. § 103. Interest on certain governmental obligations (a) General rule Gross income does not include interest on- (1) the obligations of a State, a Territory, or a possession of the United States, or any po- litical subdivision of any of the foregoing, or of the District of Columbia; and (2) qualified scholarship funding bonds. (b) Industrial development bonds (1) Subsection (a)(1) or (2) not to apply Except as otherwise provided in this subsec- tion, any industrial development bond shall be treated as an obligation not described in subsection (a)(1) or (2). (2) Industrial development bond For purposes of this subsection, the term "industrial development bond" means any ob- ligation- (A) which is issued as part of an issue all or a major portion of the proceeds of which are to be used directly or indirectly in any trade or business carried on by any person who is not an exempt person (within the meaning of paragraph (3)), and (B) the payment of the principal or inter- est on which (under the terms of such obli- gation or any underlying arrangement) is, in whole or in major part- (i) secured by any interest in property used or to be used in a trade or business or in payments in respect of such proper- ty, or (ii) to be derived from payments in re- spect of property, or borrowed money, used or to be used in a trade or business. (3) Exempt person For purposes of paragraph (2)(A), the term "exempt person" means- (A) a governmental unit, or (B) an organization described in section 501(c)(3) and exempt from tax under sec- tion 501(a) (but only with respect to a trade or business carried on by such organization which is not an unrelated trade or business, determined by applying section 513(a) to such organization). (4) Certain exempt activities Paragraph (1) shall not apply to any obliga- tion which is issued as part of an issue sub- stantially all of the proceeds of which are to be used to provide- (A) residential real property for family units, (B) sports facilities, (C) convention or trade show facilities, (D) airports, docks, wharves, mass com- muting facilities, parking facilities, or stor- age or training facilities directly related to any of the foregoing, (E) sewage or solid waste disposal facili- ties or facilities for the local furnishing of electric energy or gas, (F) air or water pollution control facili- ties, or (G) facilities for the furnishing of water, if available on reasonable demand to mem- bers of the general public. (5) Industrial parks Paragraph (1) shall not apply to any obliga- tion issued as part of an issue substantially all of the proceeds of which are to be used for the acquisition or development of land as the site for an industrial park. For purposes of the preceding sentence, the term "develop- ment of land" includes the provision of water, sewage, drainage, or similar facilities, or of transportation, power, or communication fa- cilities, which are incidental to use of the site as an industrial park, but, except with respect to such facilities, does not include the provi- sion of structures or buildings. (6) Exemption for certain small issues (A) In general Paragraph (1) shall not apply to any obli- gation issued as part of an issue the aggre- gate authorized face amount of which is $1,000,000 or less and substantially all of the proceeds of which are to be used (I) for the acquisition, construction, reconstruc- tion, or improvement of land or property of a character subject to the allowance for de- preciation, or (ii) to redeem part or all of a prior issue which was issued for purposes described in clause (I) or this clause. (B) Certain prior issues taken into account If- (i) the proceeds of two or more issues of obligations (whether or not the issuer of each such issue is the same) are or will be used primarily with respect to facilities lo- cated in the same incorporated municipal- ity or located in the same county (but not in any incorporated municipality), § 102 Page 112