- 17 -
1977) (citing Beam v. Bank of America, 490 P.2d 257 (Cal. 1971)).
Where one spouse exchanges his separate property for new
property, the new property remains his separate property. Nace
v. Nace, 448 P.2d 76, 79 (Ariz. 1968) ("Property purchased during
marriage with separate property remains such.").
B. The Federal Estate Tax
The Federal estate tax law requires that there shall be
included in the value of the gross estate the value of all
property to the extent of the decedent’s interest therein at the
time of his death. Sec. 2033. In determining the value of the
taxable estate, there is allowed a deduction for the value of any
interest in property that is included in the gross estate and
that passes from the decedent to the surviving spouse. Sec.
2056(a). One-half of the value of property held in community
(that being the decedent's interest in the property) is
includable in a decedent's gross estate. Ahmanson Foundation v.
United States, 674 F.2d 761, 773 (9th Cir. 1981) ("The surviving
spouse's [one-half interest in] community property is excluded
from the gross estate".); see also Estate of Lepoutre v.
Commissioner, 62 T.C. 84, 88 (1974); Estate of Vandenhoeck v.
Commissioner, 4 T.C. 125, 135-136 (1944). Property passing to
the surviving spouse by intestate succession qualifies for the
deduction provided for in section 2056(a) (the marital
deduction). Sec. 20.2056(c)-1(a)(5), Estate Tax Regs. Thus, if
we find that the Bard property was decedent’s separate property,
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