Estate Entitled to Marital Deduction for Contingent QTIP Election

Abstract

The US Court of Appeals for the Eighth Circuit has reversed the Tax Court's decision in 'Estate of Robertson v. Commissioner' and allowed the estate a marital deduction for the interest of the decedent's surviving spouse in two residuary trusts. The appellate court reasoned that the estate was entitled to the deduction because the executor's qualified terminable interest property (QTIP) election was in full compliance with the requirements specified in IRC Sec. 2056(b)(7). The Tax Court's argument was that a non-marital trust could be funded by the possibility property since the executor's option to pass up a QTIP election enables them to appoint the property, thereby hindering the interest from meeting requirements that would make it a qualified income interest for life. The Eight Circuit Court followed the reasoning of the Fifth Circuit and rejected this argument.