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Commissioner, 91 T.C. 61 (1988), affd. sub nom. Manufacturers
Natl. Bank v. Commissioner, 897 F.2d 856 (6th Cir. 1990). That
result was changed by section 2056(b)(7), which provides:
(7) Election with respect to life estate for surviving
spouse.--
(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 other person other
than the surviving spouse.
For the surviving spouse’s income interest in the trust to
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