6
spouse as a tenant by the entireties with decedent was included
in the gross estate of decedent's spouse by virtue of section
2035; rather, that estate included the value of decedent's
spouse's one-half of the split gift as an adjusted taxable gift
made during the lifetime of decedent's spouse under section
2001(b).
Under section 2040, property held at death by two spouses as
tenants by the entireties is subject to estate taxation upon
death of one, to the extent of one-half the value. Sec. 2040(b).
Petitioner argues that because decedent received the property (as
tenant by the entireties) from decedent's spouse in 1974 for no
consideration from decedent, upon the death of decedent's spouse,
the full amount of the value of the property should have been
included in decedent's spouse's estate pursuant to section 2040.
Section 2040 applies only to property held by a decedent and
another person at the time of death. Glaser v. United States,
306 F.2d 57 (7th Cir. 1962). In the case at bar, decedent's
spouse did not have an interest in the real property at the time
of his death because decedent and decedent's spouse, as tenants
by the entireties, gifted away their interest in 1986 to Edward
F. and Frederick, as life tenants, with the remainder to the
donors' grandchildren. Petitioner asserts on brief that the
whole interest held by decedent and decedent's spouse should have
been included in the estate of decedent's spouse. Where a gift
is made within 3 years of death, and comes back into the estate
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