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2056(b)(7)(B)(v), while a critical part of the definition of
"qualified terminable interest property", is not part of the
definition of "qualifying income interest for life" in section
2056(b)(7)(B)(ii). If Congress had intended the election by the
executor to cure all other defects, I think it would have said
so. While an election is necessary for QTIP, I think the
election can only be made as to property in which the surviving
spouse otherwise possesses a "qualifying income interest for
life". The executor can elect whether or not the property in
which the surviving spouse has a qualifying income interest for
life is going to be taxable in the decedent's estate (no QTIP
election) or deducted from his estate and later taxed in the
surviving spouse's estate (QTIP election). An election under
this paragraph cannot apply unless the property is otherwise
qualifying; namely property passing from the decedent and
property in which the surviving spouse has a qualifying income
interest for life.
Section 2056(b)(7)(B)(ii) defines the term "qualifying
income interest for life" as follows:
(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, * * * and
(II) no person has a power to appoint any part of
the property to any person other than the surviving
spouse.
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