Reg. § 20.2056A-7 Allowance of prior transfer credit under section 2013.
(a) Property subject to QDOT election Section provides special rules for computing the section credit allowed with respect to property subject to a QDOT election. In computing the credit under section , the amount of the credit is determined under section and the regulations thereunder, except that—
(1) The first limitation as described in section and is the amount of the estate tax imposed under section , with respect to distributions during the spouse's life, and under section , with respect to the value of the QDOT assets on the spouse's death;
(2) In computing the second limitation as described in section and , the value of the property transferred to the decedent (as defined in section and ) is deemed to be the value of the QDOT assets on the date of death of the surviving spouse. The value as so determined is not reduced by the section estate tax imposed at the time of the spouse's death; and
(3) The amount of the credit is determined without regard to the percentage limitations contained in section .
(b) Property not subject to QDOT election If property includible in a decedent's gross estate passes to a noncitizen surviving spouse (the transferee) and no deduction is allowed to the decedent's estate for that interest in property under section solely because the requirements of section are not satisfied, and the transferee spouse dies with an estate that is subject to tax under section or , as the case may be, any credit for tax on prior transfers allowable to the estate of the transferee spouse under section with respect to such interest in property is determined in accordance with the rules of section and the regulations thereunder, except that the amount of the credit is determined without regard to the percentage limitations contained in section .
(c) Example The application of this section may be illustrated by the following example:
Example.
The facts are the same as in , Example 2(ii). D, a United States citizen, dies in 1994, a resident of State X, with a gross estate of $2,000,000. Under D's will, a pecuniary bequest of $700,000 passes to a QDOT for the benefit of D's spouse S, who is a resident but not a citizen of the United States. S dies in 1997 at which time S is still a resident of the United States and the value of the assets of the QDOT is $800,000. There were no taxable events during S's lifetime. An estate tax of $304,800 is imposed under section . S's taxable estate, including the value of the QDOT ($800,000), is $1,500,000.
(i) Under of this section, the first limitation for purposes of section is $304,800, the amount of the section estate tax.
(ii) Under of this section, the second limitation for purposes of section is computed as follows:
(A) S's net estate tax payable under , as modified under of this section, is computed as follows:
| Taxable estate | $1,500,000 | |
| Gross estate tax | 555,800 | |
| Less: Unified credit | $192,800 | |
| Credit for state death taxes | 64,400 | 257,200 |
| Pre-2013 net estate tax payable | $298,600 |
(B) S's net estate tax payable under , as modified under of this section, is computed as follows:
| Taxable estate | $700,000 | |
| Gross estate tax | 229,800 | |
| Less: Unified credit | $192,800 | |
| Credit for state death taxes | 18,000 | 210,800 |
| Net tax payable | $19,000 | |
| (C) Second Limitation: | ||
| Paragraph (ii)(A) of this Example | $298,600 | |
| Less: Paragraph (ii)(B) of this Example | 19,000 | |
| $279,600 |
(iii) Credit for tax on prior transfers = $279,600 (lesser of paragraphs (i) or (ii) of this Example.
[T.D. 8612, 60 FR 43549, Aug. 22, 1995]