INCREASE IN LIMITATIONS ON MARITAL DEDUCTIONS; FRACTIONAL INTERESTS OF SPOUSE.

SEC. 2002. INCREASE IN LIMITATIONS ON MARITAL DEDUCTIONS; FRACTIONAL INTERESTS OF SPOUSE. (a) Increase in Estate Tax Marital Deduction.— Paragraph (1) of section 2056(c) (relating to limitation on marital deduction) is amended to read as follows: “(1) Limitation.— “(A) In general.— The aggregate amount of the deductions allowed under this section (computed without regard to this subsection) shall not exceed the greater of— “(i) $250,000, or “(ii) 50 percent of the value of the adjusted gross estate (as defined in paragraph (2)). “(B) Adjustment for certain gifts to spouse.— If a deduction is allowed to the decedent under section 2523 with respect to any gift made to his spouse after December 31, 1976, the limitation provided by subparagraph (A)(determined without regard to this subparagraph) shall be reduced (but not below zero) by the excess (if any) of— “(i) the aggregate of the deductions allowed to the decedent under section 2523 with respect to gifts made after December 31, 1976, over “(ii) the aggregate of the deductions which would have been allowable under section 2523 with respect to gifts made after December 31, 1976, if the amount deductible under such section with respect to any gift were 50 percent of its value. “(C) Community property adjustment.— The $250,000 amount set forth in subparagraph (A)(i) shall be reduced by the excess (if any) of— “(i) the amount of the subtraction determined under clauses (i), (ii), and (iii) of paragraph (2)(B), over “(ii) the excess of the aggregate of the deductions allowed under sections 2053 and 2054 over the amount taken into account with respect to such deductions under clause (iv) of paragraph (2)(B).” (b) Increase in Gift Tax Marital Deduction.— Subsection (a) of section 2523 (relating to deduction for gift to spouse) is amended to read as follows: “(a) Allowance of Deduction.— “(1) In general.— Where a donor who is a citizen or resident transfers during the calendar quarter by gift an interest in property to a donee who at the time of the gift is the donor’s spouse, there shall be allowed as a deduction in computing taxable gifts for the calendar quarter an amount with respect to such interest equal to its value. “(2) Limitation.— The aggregate of the deductions allowed under paragraph (1) for any calendar quarter shall not exceed the sum of— 90 STAT. 1855 “(A) $100,000 reduced (but not below zero) by the aggregate of the deductions allowed under this section for preceding calendar quarters beginning after December 31, 1976; plus “(B) 50 percent of the lesser of— “(i) the amount of the deductions allowable under paragraph (1) for such calendar quarter (determined without regard to this paragraph); or “(ii) the amount (if any) by which the aggregate of the amounts determined under clause (i) for the calendar quarter and for each preceding calendar quarter beginning after December 31, 1976, exceeds $200,000.” (c) Fractional Interest of Spouse.— (1) In general.— Section 2040 (relating to joint interests) is amended by adding at the end thereof the following new subsection: “(b) Certain Joint Interests of Husband and Wife.— “(1) Interests of spouse excluded from gross estate.— Notwithstanding subsection (a), in the ease of any qualified joint interest, the value included tn the gross estate with respect to such interest by reason of this section is one-half of the value of such qualified joint interest. “(2) Qualified joint interest defined.— For purposes of paragraph (1), the term ‘qualified joint interest’ means any interest in property held by the decedent and the decedent’s spouse as joint tenants or as tenants by the entirety, but only if— “(A) such joint interest was created by the decedent, the decedent ’s spouse, or both, “(B) (i) in the case of personal property, the creation of such joint interest constituted in whole or in part a gift for purposes of chapter 12, or “(ii) in the case of real property, an election under section 2515 applies with respect to the creation of such joint interest, and “(C) in the case of a joint tenancy, only the decedent and the decedent’s spouse are joint tenants.” (2) Amendment of related gift tax provision.— Subsection (c) of section 2515 (relating to election with respect to tenancies by the entirety) is amended to read as follows: “(c) Exercise of Election.— “(1) In general.— The election provided by subsection (a) shall be exercised by including such creation of a tenancy by the entirety as a transfer by gift, to the extent such transfer constitutes a gift-(determined without regard to this section), in the gift, tax return of the donor for the calendar quarter in which such tenancy by the entirety was created, filed within the time prescribed by law, irrespective of whether or not the gift exceeds the exclusion provided by section 2503(b). “(2) Subsequent additions in value.— t f the election provided by subsection (a) has been made with respect to the creation of any tenancy by the entirety, such election shall also apply to each addition made to the value of such tenancy by the entirety. “(3) Certain actuarial computations not required.— In the case of any election under subsection (a) with respect to any property, the retained interest of each spouse shall be treated as one-half of the value of their joint interest.” 90 STAT. 1856 (3) Clerical amendment.— Section 2040 is amended by striking out “The value” and inserting in lieu thereof the following: “(a) General Rule.— The value”. (d) Effective Dates.— (1) (A) Except as provided in subparagraph (B), the amendment made by subsection (a) shall apply with respect, to the estates of decedents dying after December 31, 1976. (B) If— (i) the decedent dies after December 31, 1976, and before January 1, 1979, (ii) by reason of the death of the decedent property passes from the decedent or is acquired from the decedent under a will executed before January 1, 1977, or a trust created before such date, which contains a formula expressly providing that the spouse is to receive the maximum amount of property qualifying for the marital deduction allowable by Federal law. (iii) the formula referred to in clause (ii) was not amended at any time after December 31, 1976, and before the death of the decedent, and (iv) the State does not enact a statute applicable to such estate which construes this type of formula as referring to the marital deducton allowable by Federal law as amended by subsection (a), then the amendment made by subsection (a) shall not apply to the estate of such decedent. (2) The amendment made by subsection (b) shall apply to gifts made after December 31, 1976. (3) The amendments made by subsection (c) shall apply to joint interests created after December 31, 1976.