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“terminable interest”. Estate of Nicholson v. Commissioner,
supra at 671. A “terminable interest”, generally, is a property
interest that will terminate or fail “on the lapse of time, on
the occurrence of an event or contingency, or on the failure of
an event or contingency to occur”. Sec. 2056(b)(1). An interest
in the nature of a life estate, therefore, is ineligible for the
marital deduction pursuant to section 2056(b)(5). Estate of
Nicholson v. Commissioner, supra at 671-672.
The Economic Recovery Tax Act of 1981 (ERTA), Pub. L. 97-34,
95 Stat. 172, modified the rules for the marital deduction
relating to terminable interests. ERTA sec. 403(d)(1), 95 Stat.
302, added section 2056(b)(7), which allows a marital deduction
for qualified terminable interest property (QTIP) interests.
Estate of Nicholson v. Commissioner, supra at 672.
Section 2056(b)(7)(B) provides in pertinent part:
(7) Election with respect to life estate for surviving
spouse.--
* * * * * * *
(B) * * * 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
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