CLARIFICATION OF TREATMENT OF JOINT AND SURVIVOR ANNUITIES UNDER QTIP RULES.

SEC. 6152. CLARIFICATION OF TREATMENT OF JOINT AND SURVIVOR ANNUITIES UNDER QTIP RULES. (a) Estate Tax.—Paragraph (7) of section 2056(b) of the 1986 Code is amended by adding at the end thereof the following new subparagraph: “(C) Treatment of survivor annuities.—In the case of an annuity where only the surviving spouse has the right to receive payments before the death of such surviving spouse— “(i) the interest of such surviving spouse shall be treated as a qualifying income interest for life, and “(ii) the executor shall be treated as having made an election under this subsection with respect to such annuity unless the executor otherwise elects on the return of tax imposed by section 2001. An election under clause (ii), once made, shall be irrevocable.” (b) Gift Tax.—Subsection (f) of section 2523 of the 1986 Code is amended by adding at the end thereof the following new paragraph: “(6) Treatment of joint and survivor annuities.— In the case of a joint and survivor annuity where only the donor spouse and donee spouse have the right to receive payments before the death of the last spouse to die— “(A) the donee spouse’s interest shall be treated as a qualifying income interest for life, “(B) the donor spouse shall be treated as having made an election under this subsection with respect to such annuity unless the donor spouse otherwise elects on or before the date specified in paragraph (4)(A), “(C) paragraph (5) and section 2519 shall not apply to the donor spouse’s interest in the annuity, and “(D) if the donee spouse dies before the donor spouse, no amount shall be includible in the gross estate of the donee spouse under section 2044 with respect to such annuity. An election under subparagraph (B), once made, shall be irrevocable.” (c) Effective Dates.— (1) In general.— Except as otherwise provided in this subsection— (A) the amendment made by subsection (a) shall apply with respect to decedents dying after December 31, 1981, and (B) the amendment made by subsection (b) shall apply to transfers after December 31, 1981. 102 STAT. 3726 (2) Not to apply to extent inconsistent with prior return.—In the case of any estate or gift tax return filed before the date of the enactment of this Act, the amendments made by this section shall not apply to the extent such amendments would be inconsistent with the treatment of the annuity on such return unless the executor or donor (as the case may be) otherwise elects under this paragraph before the day 2 years after the date of the enactment of this Act. (3) Extension of time for election out.—The time for making an election under section 2056(b)(7)(C)(ii) or 2523(f)(6)(B) of the 1986 Code (as added by this subsection) shall not expire before the day 2 years after the date of the enactment of this Act (and, if such election is made within the time permitted under this paragraph, the requirement of such section 2056ib)(7)(C)(ii) that it be made on the return shall not apply).