However an exception exists when the interest passes

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However, an exception exists when the interest passes to the noncitizen spouse through a qualified domestic trust, or QDT. In order to qualify for the marital deduction, the requirements of IRC § 2056(b) must be met. The marital deduction is generally disallowed for the value of property passing to noncitizen spouse. The first $100,000 per year of gifts from a U.S. citizen or resident to a noncitizen spouse, however, is not subject to gift tax. Part II
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1. a) Jim’s estate will include $300,000 of the $400,000. Under IRC § 2039, the value of the amount receivable by the beneficiary due to the fact that they are survivors of the decedent will be included in the decedent’s gross estate. According to Treasury Regulation 20.2039-1(c), the amount to be included in a decedent's gross estate under IRC § 2039(a) and (b) is an amount which bears the same ratio to the value at the decedent's death of the annuity or other payment receivable by the beneficiary as the contribution made by the decedent to the cost of the contract or agreement bears to its total cost. In this example there are also potential gift tax consequences at the time the annuity was purchased. Any interest in the policy retained by the donor will reduce the gift tax value of the policy. This will be the amount of the transfer. b) When Maude dies five years after Jim, nothing regarding the annuity will be included in her estate due to the fact that there is no additional value at her death. § 2039(b) specifies that the amount actually includable in the decedent's gross estate under § 2039 is to be determined by reference to the following two factors: (1) the value of what is payable to survivors and (2) the portion of the purchase price of the annuity or other contract that was paid by the decedent. Under the annuity rule, only values that can be said to have been transmitted to other by the decedent will be taxed. 2. a) In this scenario, none will be included under § 2042 due to the fact that it is not applicable in this scenario. § 2042 includes two rules of inclusion. Proceeds from an insurance policy on a decedent’s life will be included in the gross estate of the insured individual if: 1) receivable by the executor 2) receivable by the other beneficiaries and the decedent had any incidents of ownership in the policy of death In this scenario Burton, who is the decedent, owns an insurance policy on the life of Suzanna but dies before her. When this happens, § 2042 is not applicable. This property will still be included in the decedent’s estate under IRC § 2033 because it is property owned by Burton at his death. b) There are two rules to § 2042. Insurance policy proceeds on a decedent's life are included in the insured's gross estate if they are (1) receivable by the executor or (2) receivable by other beneficiaries and the decedent had any incidents of ownership in the policy at death. Whatever amount is paid to Burton’s estate is included in his estate under § 2042.
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  • Spring '13
  • Neumark
  • Taxation in the United States, Concurrent estate, Gross Estate

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