QTIP property need not be precisely designated
Article Abstract:
A recent Tax Court case considered the issue of whether a homestead right was a qualified terminable interest property (QTIP) and thus eligible for the marital deduction. In cases where the interests of a surviving spouse in a trust is terminable, the interest is not a QTIP and is not eligible for the marital deduction. To qualify for a marital deduction for a QTIP interest, a taxpayer must pass an income interest to the spouse for life in which the spouse retains the right to all the income and no one has the power to give an interest to any other person within the spouse's lifetime. The possibility that an interest will terminate determines whether an interest is a QTIP, and since a homestead right conveys a terminable power by a spouse, the Court held that it does not qualify as a QTIP. A recent Technical Advice Memorandum concluded that the specific part of an estate qualifying as a QTIP did not have to be specified precisely as a percentage of the corpus of the estate when obtaining a marital deduction.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1990
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Duty of consistency mandates trust's inclusion
Article Abstract:
A decedent's estate does include the value of terminable interest property that is covered by the predeceasing spouse's estate tax marital deduction, according to the duty of consistency. The definition stands even though the predeceasing spouse did not deem the property as qualified terminable interest property (QTIP) nor a request for a QTIP election was made. In the Estate of Letts case, a will was created by the decedent's predeceasing husband, which will benefit the decedent and their two children. Following the decedent's death, her estate argued that the trust must not be included in her estate. Citing the duty of consistency, however, the IRS contended that the value of the trust should be included in the decedent's gross estate, although no QTIP election was made. The Tax Court agreed with the IRS.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1998
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Tax Court concedes executor discretion OK for QTIP trust
Article Abstract:
The Tax Court decided in the 'Clack Estate' case to give its permission to the estate involved to make a qualified terminable interest property (QTIP) election for a trust despite the fact that the receipt of a qualifying income interest of the surviving spouse is dependent on the election of the personal representatives. This means that the Tax Court accepted the reversal by the Fifth, Sixth and Eighth Circuit Courts although it did not explain why it decided to accept this outcome. Nevertheless, estate planners should take note that this decision does not pass on the validity of Regulation 20.2056(b)-7(d)(3), which holds that an income interest contingent on the QTIP election by an executor is not a qualifying income interest without considering whether the election is made.
Publication Name: Taxation for Accountants
Subject: Business
ISSN: 0040-0165
Year: 1996
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