Form 706 (Draft) - United States Estate (And Generation-Skipping Transfer) Tax Return - 2016 Page 36
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55Property Interests That You
4. The full value of a property
Property interests that are
interest that passes to the surviving
considered to pass to a person other
May List on Schedule M
spouse subject to a mortgage or other
than the surviving spouse are any
Generally, you may list on Schedule M
encumbrance or an obligation of the
property interest that: (a) passes under
all property interests that pass from the
surviving spouse. Include on
a decedent's will or intestacy; (b) was
decedent to the surviving spouse and
Schedule M only the net value of the
transferred by a decedent during life; or
are included in the gross estate.
interest after reducing it by the amount
(c) is held by or passed on to any
However, do not list any nondeductible
of the mortgage or other debt;
person as a decedent's joint tenant, as
terminable interests (described later) on
DRAFT AS OF
appointee under a decedent's exercise
5. Nondeductible terminable
Schedule M unless you are making a
of a power, as taker in default at a
interests (described later); or
QTIP election. The property for which
decedent's release or nonexercise of a
6. Any property interest disclaimed
you make this election must be included
power, or as a beneficiary of insurance
by the surviving spouse.
on Schedule M. See Qualified
on the decedent's life. See Regulations
terminable interest property, later.
section 20.2056(c)-3.
Terminable Interests
June 16, 2016
For example, a decedent devised
For the rules on common disaster
Certain interests in property passing
real property to his wife for life, with
and survival for a limited period, see
from a decedent to a surviving spouse
remainder to his children. The life
section 2056(b)(3).
are referred to as terminable interests.
interest that passed to the wife does not
These are interests that will terminate or
You may list on Schedule M only
qualify for the marital deduction
fail after the passage of time, or on the
those interests that the surviving spouse
because it will terminate at her death
occurrence or nonoccurrence of a
takes:
and the children will thereafter possess
designated event. Examples are: life
or enjoy the property.
estates, annuities, estates for terms of
1. As the decedent's legatee,
years, and patents.
devisee, heir, or donee;
However, if the decedent purchased
a joint and survivor annuity for himself
2. As the decedent's surviving
The ownership of a bond, note, or
and his wife who survived him, the value
tenant by the entirety or joint tenant;
other contractual obligation, which when
of the survivor's annuity, to the extent
discharged would not have the effect of
3. As an appointee under the
that it is included in the gross estate,
an annuity for life or for a term, is not
decedent's exercise of a power or as a
qualifies for the marital deduction
considered a terminable interest.
taker in default at the decedent's
because even though the interest will
nonexercise of a power;
Nondeductible terminable interests.
terminate on the wife's death, no one
Unless you are making a QTIP election,
4. As a beneficiary of insurance on
else will possess or enjoy any part of the
do not enter a terminable interest on
the decedent's life;
property.
Schedule M if:
5. As the surviving spouse taking
The marital deduction is not allowed
1. Another interest in the same
under dower or curtesy (or similar
for an interest that the decedent
property passed from the decedent to
statutory interest); and
directed the executor or a trustee to
some other person for less than
convert, after death, into a terminable
6. As a transferee of a transfer
adequate and full consideration in
interest for the surviving spouse. The
made by the decedent at any time.
money or money's worth; and
marital deduction is not allowed for such
an interest even if there was no interest
Property Interests That You
2. By reason of its passing, the
in the property passing to another
other person or that person's heirs may
May Not List on Schedule M
person and even if the terminable
enjoy part of the property after the
Do not list on Schedule M:
interest would otherwise have been
termination of the surviving spouse's
deductible under the exceptions
1. The value of any property that
interest.
described later for life estates, life
does not pass from the decedent to the
This rule applies even though the
insurance, and annuity payments with
surviving spouse;
interest that passes from the decedent
powers of appointment. For more
2. Property interests that are not
to a person other than the surviving
information, see Regulations sections
included in the decedent's gross estate;
spouse is not included in the gross
20.2056(b)-1(f) and 20.2056(b)-1(g),
3. The full value of a property
estate, and regardless of when the
Example (7).
interest for which a deduction was
interest passes. The rule also applies
If any property interest passing from
claimed on Schedules J through L. The
regardless of whether the surviving
the decedent to the surviving spouse
value of the property interest should be
spouse's interest and the other person's
may be paid or otherwise satisfied out of
reduced by the deductions claimed with
interest pass from the decedent at the
any of a group of assets, the value of
respect to it;
same time.
Example—Listing Property Interests on Schedule M
Item
Description of property interests passing to surviving spouse.
Amount
number
For securities, give CUSIP number. If trust, partnership, or closely-held entity, give EIN.
All other property:
B1
One-half the value of a house and lot, 256 South West Street, held by decedent and surviving spouse as joint tenants
with right of survivorship under deed dated July 15, 1975 (Schedule E, Part I, item 1)
$182,500
. . . . . . . . . . . . . . . . . .
B2
Proceeds of Metropolitan Life Insurance Company policy No. 104729, payable in one sum to surviving spouse
(Schedule D, item 3)
200,000
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B3
Cash bequest under Paragraph Six of will
100,000
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part Instructions
-35-
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