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Accordingly, an interest in the nature of a life estate,
generally, is ineligible for the marital deduction. See Estate
of Nicholson v. Commissioner, 94 T.C. 666, 671 (1990); Estate of
Higgins v. Commissioner, 91 T.C. 61, 66 (1988), affd. 897 F.2d
856 (6th Cir. 1990). However, section 2056(b)(7),3 added by the
3
Sec. 2056(b)(7) provides:
(A) IN GENERAL.--In the case of qualified terminable
interest property--
(i) for purposes of subsection (a), such property
shall be treated as passing to the surviving spouse, and
(ii) for purposes of paragraph (1)(A), no part of such
property shall be treated as passing to any person other
than the surviving spouse.
(B) Qualified terminable interest property defined.--For
purposes of this paragraph--
(i) IN GENERAL.--The term "qualified terminable interest
property" means property--
(I) which passes from the decedent,
(II) in which the surviving spouse has a qualifying
income interest for life, and
(III) to which an election under this paragraph
applies.
(ii) Qualifying income interest for life.--
The surviving spouse has a qualifying income interest for
life if--
(I) the surviving spouse is entitled to all the
income from the property, payable annually or at more
frequent intervals, or has a usufruct interest for life
in the property, and
(II) no person has a power to appoint any part of
the property to any person other than the surviving
spouse.
Subclause (II) shall not apply to a power exercisable only
at or after the death of the surviving spouse. To the
extent provided in regulations, an annuity shall be treated
in a manner similar to an income interest in property
(regardless of whether the property from which the annuity
is payable can be separately identified).
(iii) Property includes interest therein.--The term
"property" includes an interest in property.
(iv) Specific portion treated as separate property.--A
specific portion of property shall be treated as separate
property.
(continued...)
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