as the owner under this chapter, (ii) such property is distributed to any person other than the owner, or (iii) the property would no longer be included in the owner’s gross estate under chapter 11, or (B) on the date of the death of the owner. (3) Applicable grantor trust For purposes of this subsection— (A) In general The term applicable grantor trust means the portion of any trust with respect to which an applicable taxpayer is considered the owner under subpart E of part I of subchapter J. (B) Exceptions The Secretary shall provide for appropriate exceptions to the treatment of categories of trusts as applicable grantor trusts under subparagraph (A), including arrangements which are ordinarily used in the course of a trade or business, employee benefit arrangements, and arrangements for securitization transactions. (c) Exceptions (1) Spousal exception (A) In general Subsection (a) shall not apply to any transfer if such transfer— (i) is— (I) made to the spouse or the surviving spouse of the transferor, or (II) made to a former spouse of the transferor if the transfer is incident to divorce, or (ii) is a transfer of qualified terminable interest property or of property to which section 2056(b)(5) or 2523(e) applies. (B) Certain remainder interests treated as transferred by spouse Property described in subparagraph (A)(ii) shall be treated as sold by the spouse or surviving spouse on the earlier of the date of the disposition of such property by such spouse or surviving spouse or the date of the death of such spouse or surviving spouse. (C) Qualified terminable interest property For purposes of this paragraph, the term qualified terminable interest property means any property described in section 2056(b)(7) or 2523(f)(2). (D) Disallowance of spousal exception where spouse or surviving spouse not United States citizen or long-term resident (i) In general Subparagraph (A) shall not apply if the spouse or surviving spouse of the decedent is not a citizen or long-term resident of the United States. (ii) Long-term