Estate and Gift Tax Marital Deduction

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 20

[REG-209830-96]

RIN 1545-AU27

Estate and Gift Tax Marital Deduction

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary

regulations and notice of public hearing.

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SUMMARY: In the Rules and Regulations section of this issue of the

Federal Register, the IRS is issuing temporary regulations relating to

the estate tax marital deduction to conform the Estate Tax Regulations

to recent court decisions. The text of those temporary regulations also

serves as the text of these proposed regulations. This document also

provides notice of a public hearing on these proposed regulations.

DATES: Comments must be received by May 19, 1997. Outlines of topics to

be discussed at the public hearing scheduled for June 3, 1997, at 10

a.m. must be received by May 13, 1997.

ADDRESSES: Send submissions to: CC:DOM:CORP:R (REG-209830-96), room

5228, Internal Revenue Service, POB 7604, Ben Franklin Station,

Washington, DC 20044. Submissions may also be hand delivered between

the hours of 8 a.m. and 5 p.m. to: CC:DOM:CORP:R (REG-209830-96),

Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW.,

Washington, DC. Alternatively, taxpayers may submit comments

electronically via the internet by selecting the ``Tax Regs'' option on

the IRS Home Page, or by submitting comments directly to the IRS

internet site at http://www.irs.ustreas.gov/prod/tax____ regs/

comments.html. The public hearing will be held in the Commissioner's

Conference Room, room 3313, Internal Revenue Building, 1111

Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Susan B.

Hurwitz, (202) 622-3090; concerning submissions and the hearing,

Evangelista Lee, (202) 622-7190 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Background

Temporary regulations in the Rules and Regulations section of this

issue of the Federal Register amend the Estate Tax Regulations (26 CFR

part 20) relating to sections 2044 and 2056. The temporary regulations

conform the estate tax marital deduction regulations to recent court

decisions in Estate of Clayton v. Commissioner, 976 F.2d 1486 (5th Cir.

1992), rev'g 97 T.C. 327 (1991); Estate of Robertson v. Commissioner,

15 F.3d 779 (8th Cir. 1994), rev'g 98 T.C. 678 (1992); Estate of

Spencer v. Commissioner, 43 F.3d 226 (6th Cir. 1995), rev'g T.C. Memo.

1992-579; and Estate of Clack v. Commissioner, 106 T.C. 131 (1996).

The text of those temporary regulations also serves as the text of

these proposed regulations. The preamble to the temporary regulations

explains the temporary regulations.

Special Analyses

It has been determined that this notice of proposed rulemaking is

not a significant regulatory action as defined in EO 12866. Therefore,

a regulatory assessment is not required. It has also been determined

that section 553(b) of the Administrative Procedure Act (5 U.S.C.

chapter 5) does not apply to these regulations and, because these

regulations do not impose on small entities a collection of information

requirement, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does

not apply. Therefore, a Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of the Internal Revenue Code,

this notice of proposed rulemaking will be submitted to the Chief

Counsel for Advocacy of the Small Business Administration for comment

on its impact on small business.

Comments and Public Hearing

Before these proposed regulations are adopted as final regulations,

consideration will be given to any comments that are submitted timely

(in the manner described in ADDRESSES) to the IRS. All comments will be

available for public inspection and copying.

A public hearing has been scheduled for June 3, 1997, at 10 a.m. in

the Commissioner's Conference Room, room 3313, Internal Revenue

Building, 1111 Constitution Avenue NW., Washington, DC. Because of

access restrictions, visitors will not be admitted beyond the building

lobby more than 15 minutes before the hearing starts.

The rules of 26 CFR 601.601(a)(3) apply to the hearing. Persons

that wish to present oral comments at the hearing must submit comments

by May 19, 1997 and submit an outline of the topics to be discussed and

the time to be devoted to each topic by May 13, 1997.

A period of 10 minutes will be allotted to each person for making

comments.

An agenda showing the scheduling of the speakers will be prepared

after the deadline for receiving outlines has passed.

Copies of the agenda will be available free of charge at the

hearing.

Drafting Information

The principal author of the proposed regulations is Susan B.

Hurwitz, Office of Assistant Chief Counsel (Passthroughs and Special

Industries). However, other personnel from the IRS and the Treasury

Department participated in their development.

List of Subjects in 26 CFR Part 20

Estate taxes, Reporting and recordkeeping requirements.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 20 is proposed to be amended as follows:

PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16,

1954

Paragraph 1. The authority citation for part 20 continues to read

in part as follows:

Authority: 26 U.S.C. 7805 * * *

Par. 2. In Sec. 20.2044-1, paragraph (e) Example 8 is added to read

as follows:

Sec. 20.2044-1 Certain property for which marital deduction was

previously allowed.

[The text of paragraph (e) Example 8 as proposed is the same as the

text of Sec. 20.2044-1T(e) Example 8 published elsewhere in this issue

of the Federal Register].

Par. 3. Section 20.2056(b)-7 is amended to read as follows:

Sec. 20.2056(b)-7 Election with respect to life estate for surviving

spouse.

[The text of paragraphs (d)(3), and (h) Example 6 is the same as

the text of Sec. 20.2056(b)-7T(d)(3) (ii), and (h) Example 6 published

elsewhere in this issue of the Federal Register].

[[Page 7189]]

Par. 4. Section 20.2056(b)-10 is revised to read as follows:

Sec. 20.2056(b)-10 Effective dates.

Except as specifically provided in Secs. 20.2056(b)-5(c)(3)(ii) and

(iii), 20.2056(b)-7T(d)(3), 20.2056(b)-7(e)(5), and 20.2056(b)-8(b),

the provisions of Secs. 20.2056(b)-5(c), 20.2056(b)-7, 20.2056(b)-8,

and 20.2056(b)-9 are effective with respect to estates of decedents

dying after March 1, 1994. With respect to decedents dying on or before

March 1, 1994, the executor of the decedent's estate may rely on any

reasonable interpretation of the statutory provisions. For these

purposes, the provisions of Secs. 20.2056(b)-5(c), 20.2056(b)-7,

20.2056(b)-8, and 20.2056(b)-9 (as well as project LR-211-76 (1984-1

C.B. 598), see Sec. 601.601(d)(2)(ii)(b) of this chapter), are

considered a reasonable interpretation of the statutory provisions.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

[FR Doc. 97-3399 Filed 2-14-97; 8:45 am]

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