Divided Tax Court now allows estate tax marital deduction for QTIP property contingent on executor's QTIP election for estates of decedents dying before Mar. 2, 1994.In Est. of Clack, 106 TC No. 6 (1996), the decedent's will gave his surviving spouse an income interest in certain marital trust Marital trust A trust created to allow one spouse to transfer, during life or upon death, an unlimited amount of property to his/her spouse without incurring gift or estate tax. property, but provided that if the decedent's co-executors did not elect to treat the property as qualified terminable interest Noun 1. terminable interest - an interest in property that terminates under specific conditions stake, interest - (law) a right or legal share of something; a financial involvement with something; "they have interests all over the world"; "a stake in the company's property (QTIP QTIP Qualified Terminable Interest Property QTIP Quit Taking It Personally QTIP Quantum Theory Integral Package ) within the meaning of Sec. 2056(b) (7), such property would instead be administered under the terms of a nonmarital family trust. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the Tax Court, the marital trust property is QTIP within the meaning of Sec. 2056(b) (7). The court will no longer follow its opinions in Est. of Robertson, 98 TC 678 (1992), rev'd, 15 F3d 779 (8th Cir. 1994); Est. of Clayton, 97 TC 327 (1991), rev'd, 976 F2d 1486 (5th Cir. 1992); and Est. of Spencer, TC Memo 1992-579, rev'd, 43 F3d 226 (6th Cir. 1995). Caution Regs. Sec. 20.2056(b)-7(d) (3) reads as follows: Contingent income interests. An income interest granted for a term of years, or a life estate subject to termination upon the occurrence of a specified event (e.g., remarriage Re`mar´riage n. 1. A second or repeated marriage. Noun 1. remarriage - the act of marrying again ), is not a qualifying income interest for life. In addition, an income interest (or life estate) that is contingent upon Adj. 1. contingent upon - determined by conditions or circumstances that follow; "arms sales contingent on the approval of congress" contingent on, dependant on, dependant upon, dependent on, dependent upon, depending on, contingent the executor's election under section 2056(b) (7) (B) (v) is not a qualifying income interest for life, regardless of whether the election is actually made. (Emphasis added.) This regulation is effective for estates of decedents dying after Mar. 1, 1994. Consequently, the Tax Court's decision concluded as follows: One caveat to our holding is in order. Section 20.2056 (b)-7(d) (3), Estate Tax Regs., provides that the marital deduction marital deduction n. when one spouse dies, the survivor may take a tax deduction of half of the value of the estate of the dying spouse. Thus, the minimum value of the estate before there is a possible federal estate tax rises from $600,000 to $1,200,000 at the death is not available under the circumstances of the instant case. Because the regulation is effective for estates of decedents dying after March 1, 1994 (see section 20.2056(b)-10...), it is not applicable to the instant case. Consequently, we leave for another day the issue of the validity of that regulation. Obviously, if the regulation were held to be valid, there might be a different result for estates of decedents dying after March 1, 1994. (Footnote omitted.) |
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