Magazine article The CPA Journal

QTIP Property and Personal Residences

Magazine article The CPA Journal

QTIP Property and Personal Residences

Article excerpt

The difficulty that the courts experience in determining whether a right given to a spouse to occupy a principal residence will qualify for the marital deduction as Qualified Terminable Interest Property (QTIP) under IRC Sec. 2056(b)(7)(B)(ii) is demonstrated in a recent court decision.

The U.S. District Court in September 1989 heard the case of Estate of Mary Edwards Helms Peacock, deceased, Wilbur T. Edwards, Jr., Executor, Plaintiff v. United States of America, Defendant (U.S. District Court for the Northern District of Alabama, Southern Division, No. CV 89-P-0496-S, September 1989) and decided that there was no Qualified Terminable Interest. According to the Court, the surviving spouse had the right only to occupy the residence for his life; he did not have the right to rent the house to others should he no longer desire to live there. Further, there were too many other limitations for the Court to recognize the life estate as a "qualifying income interest for life" that would qualify for the marital deduction under Sec. 2056(b)(7) noted above.

The estate of Mary Edwards Helms Peacock appealed this decision in the U. …

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