- 33 -
allowance to account for the fact that less than the entire
interest is being included.14
As a result of this artificial inclusion, we conclude that
section 2040 is not concerned with quantifying the value of the
fractional interest held by the decedent (as would be the case
under section 2033). The fractional interest discount, as
applied in section 2033, is based on the notion that the interest
is worth less than its proportionate share, due in part to the
problems of concurrent ownership. These problems are created by
the unity of interest and unity of possession. However, at the
moment of death, the co-ownership in joint tenancy is severed,
thus alleviating the problems associated with co-ownership. We
14 Similarly, sec. 2040(b) also provides its own rules. It
provides that the value included in the gross estate is "one-half
of the value of such qualified joint interest." Once the parties
have determined the value of the qualified joint interest, then
this is merely divided in half to determine the amount included
in decedent's gross estate.
Under sec. 2040(b), an estate would not argue that a market
discount applied due to the interplay of the marital deduction
and the step-up in basis. While one-half of the value of the
joint tenancy is included in the gross estate, there is an
accompanying marital deduction in the same amount. The marital
deduction sec. 2056 provides that in determining the value of
decedent's gross estate, there is allowed a deduction for the
value of any interest that is included in gross estate and that
passes from the decedent to the surviving spouse. Under sec.
1014, the surviving spouse has a step-up in basis for the portion
of the joint tenancy included in decedent's gross estate. On the
other hand, the marital deduction is inapplicable when the
surviving spouse is not a citizen of the United States. At the
same time, sec. 2040(b) is inapplicable in that situation.
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