Case: Surviving Spouse Made No Taxable Gift When QTIP Trust Was Commuted, But Children Made Taxable Gifts of Remainder Interests (T.C.)

The commutation of a qualified terminable interest property (QTIP) trust and the distribution of all assets to the surviving spouse pursuant to an agreement among the spouse and remainder beneficiaries resulted in taxable gifts by the beneficiaries but not the spouse, held the U.S. Tax Court, granting in part and denying in part cross-motions for summary judgment and partial summary judgment. Petitioner spouse, the income beneficiary of a QTIP trust under his deceased wife’s will, and their Petitioner children held remainder interests. In 2016, Petitioners entered into an agreement to commute the trust and distribute all its assets to Petitioner ...