288

ESTATE OF LUCIEN J. LE CAER, DECEASED, LORRAINE LE

CAER-DOMINI, CO-TRUSTEE AND DENISE LE CAER STAGNER, 

CO-TRUSTEE, PETITIONER v. COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT

ESTATE OF MARIE L. LE CAER, DECEASED, LORRAINE LE

CAER-DOMINI, CO-TRUSTEE AND DENISE LE CAER STAGNER, 

CO-TRUSTEE, PETITIONER v. COMMISSIONER OF INTERNAL

REVENUE, RESPONDENT

Docket Nos. 29631–07, 30041–07. Filed September 7, 2010. 

Husband (H) and wife (W) established an inter vivos trust 

that was to be split into four shares upon the death of the 

first spouse to die. After H’s death the trustees made a qualified terminable interest property (QTIP) election with respect 

to a portion of one share of the trust. W received a life estate 

in the remaining portion of that share, but this portion 

purposefully did not qualify for a marital deduction. H’s estate 

paid Federal and State estate taxes. W died less than 3 

months after H died. On W’s Federal estate tax return W’s 

estate claimed the amounts that H’s estate paid as Federal 

and State estate taxes as a credit for tax on prior transfers 

under sec. 2013, I.R.C. Three years after H’s estate filed the 

return, it filed with R an additional protective QTIP election. 

In the notice of deficiency R disallowed the credit for tax on 

prior transfers on the ground that sec. 2013, I.R.C., provides 

that the amount of the credit is subject to the limitations of 

sec. 2013(b) and (c), I.R.C. R also contends the protective 

QTIP election was untimely. Held: The limitations of sec. 

2013(b) and (c), I.R.C., apply. Held, further, the amount of 

‘‘the taxable estate of the transferor’’ for the purposes of sec. 

2013(b), I.R.C., is not reduced by the applicable exclusion 

amount. Held, further, W’s estate may not claim a sec. 2013, 

I.R.C., credit with respect to the State estate tax that H’s 

estate paid. Held, further, because the property interest W 

received from H was a life estate, the value of that property 

interest for purposes of the sec. 2013, I.R.C., credit is determined under valuation principles in accordance with sec. 

20.2013–4, Estate Tax Regs. Held, further, the QTIP protective election is untimely when filed 3 years after the estate 

tax return is filed. 

(288) ESTATE OF LE CAER v. COMMISSIONER 289

1We consolidated these cases for purposes of trial, briefing, and opinion under Rule 141(a). 

Unless otherwise indicated, all section references are to the Internal Revenue Code (Code) in 

effect for the dates of decedents’ deaths, and all Rule references are to the Tax Court Rules of 

Practice and Procedure. Monetary amounts are rounded to the nearest dollar. 

2 Respondent concedes the adjustments to taxable gifts with respect to both estates. Respondent agrees with the computation of the State death tax credit allowable to both estates. Respondent also states on brief that he does not challenge the validity of the sec. 6166 elections 

that the estates made. 

3The cotrustees had a mailing address in Nevada when the petitions were filed. The record 

does not disclose where the cotrustees resided when the petitions were filed. 

Nick A. Moschetti, Jr., for petitioners. 

Wesley J. Wong, for respondent. 

OPINION 

MARVEL, Judge: Respondent determined a $2,400 deficiency in the Federal estate tax of the Estate of Lucien Le 

Caer (Mr. Le Caer) and a $227,399 deficiency in the Federal 

estate tax of the Estate of Marie L. Le Caer (Mrs. Le Caer). 1

After concessions, 2 the issues for decision are: (1) Whether 

and to what extent Mrs. Le Caer’s estate may claim a credit 

under section 2013 for Federal estate tax paid on the 

transfer of property to Mrs. Le Caer from Mr. Le Caer’s 

estate; (2) whether Mrs. Le Caer’s estate may decrease the 

gross estate by or claim as an allowable deduction the 

amount of the Federal and State estate tax paid with respect 

to Mr. Le Caer’s estate; and (3) whether the trustees of Mr. 

Le Caer’s estate filed a valid qualified terminable interest 

property (QTIP) protective election and whether such election 

may apply to the Rule 155 computations. 

Background 

The parties submitted this case fully stipulated under Rule 

122. We incorporate the stipulated facts into our findings by 

this reference. Mr. Le Caer was a resident of Nevada when 

he died testate on January 19, 2004. Mrs. Le Caer also was 

a resident of Nevada when she died testate on March 29, 

2004. 3 For purposes of this Opinion the estates and the cotrustees are referred to as petitioners. 

Mr. Le Caer was born in 1924, and Mrs. Le Caer was born 

in 1923. The couple had two daughters, Lorraine Le CaerDomini and Denise Le Caer Stagner. 

On April 21, 1992, Mr. and Mrs. Le Caer, as settlors and 

cotrustees, executed the Lucien and Marie Louise Le Caer 

290 135 UNITED STATES TAX COURT REPORTS (288) 

4The phrase ‘‘surviving spouse’’ refers to the second spouse to die. 

5The restated trust agreement defines ‘‘trust fund’’ as all property subject to the restated 

trust agreement. 

1992 Family Trust Agreement. Mr. and Mrs. Le Caer subsequently executed several amendments to the trust. On February 19, 2002, Mr. and Mrs. Le Caer executed the Restated 

Lucien and Marie Louise Le Caer 1992 Family Trust Agreement (restated trust agreement), which governed the disposition and management of trust assets when Mr. and Mrs. Le 

Caer died. As settlors, Mr. and Mrs. Le Caer transferred to 

the trust certain property, including real estate, several 

accounts at Nevada State Bank, and vehicles. The restated 

trust agreement addressed the administration and distribution of the trust during Mr. and Mrs. Le Caer’s lifetime and 

on the death of either spouse, irrespective of whose death 

occurs first. The restated trust agreement also provided for 

the disposition of assets upon the death of the second spouse 

to die. 

According to the restated trust agreement, upon the death 

of the first spouse to die the corpus of the trust, including 

any additions to the trust from the will of that spouse, was 

to be divided into four shares (share A, share B, share C, and 

share D). Share A was to receive the surviving spouse’s 4

separate property of the trust fund 5 and his or her interest 

in the community property of the trust fund. During the lifetime of the surviving spouse, the trustee would pay all or 

part of the net income and, in the trustee’s discretion, the 

principal of share A, for the benefit of the surviving spouse, 

the couple’s children, or their issue. The surviving spouse 

had the power of appointment over share A, and if she failed 

to exercise it, share A would follow the disposition of share 

B upon her death. 

With respect to share B, the settlors intended that share 

B or a portion thereof would qualify for a marital deduction 

under section 2056. Share B was to receive property as follows: 

(a) Share B shall consist of property of the trust fund in an amount 

equal to the maximum marital deduction as finally determined for federal 

estate tax purposes which is allowable under Section 2056 of the Internal 

Revenue Code * * * reduced by the aggregate value as finally determined 

for federal estate tax purposes of any property (other than property 

passing under this Share B) included in the * * * [estate of the first 

(288) ESTATE OF LE CAER v. COMMISSIONER 291

spouse to die] for federal estate tax purposes with respect to which a marital deduction is allowable; provided, however, that such amount shall be 

further reduced by the amount, if any, needed to increase * * * [the taxable estate of the first spouse to die] to the largest amount which will, 

after application of the unified credit against the federal estate tax and the 

credit for state death taxes * * *, not result in any federal estate tax being 

imposed * * *

The trustee was to pay or apply for the benefit of the surviving spouse the income and, in the trustee’s discretion, the 

principal, of share B. The surviving spouse had the right to 

invade the principal of share B in amounts not exceeding a 

certain annual limit. Upon the death of the surviving spouse, 

any accumulated share B income was to be distributed to 

share A. 

The settlors intended that share C of the trust was to consist of any amount that would otherwise have passed under 

share B of the trust but which the surviving spouse disclaimed or renounced. Share D was to consist of all of the 

remainder of the trust fund property. The trustee was to pay 

the income and, in the trustee’s discretion, the principal, of 

share D for the benefit of the surviving spouse, the couple’s 

children, or their issue. Upon the death of the surviving 

spouse, the trustee was to divide shares B, C, and D among 

the settlors’ children. 

Also on April 21, 1992, in conjunction with the trust, Mr. 

and Mrs. Le Caer executed wills. Each will disposed of the 

testator’s separate property and a one-half interest in the 

community property. After enumerated bequests, each testator devised the remainder of his or her estate to the trust. 

Each testator directed in the respective will that all estate 

taxes be paid out of the residuary estate. 

In accordance with the restated trust agreement, after Mr. 

Le Caer died on January 19, 2004, share B was funded in the 

amount of $1,900,295. Share C was not funded. Share D was 

funded in the amount of $1,500,000. 

On February 18, 2004, Mr. Le Caer’s estate and Mrs. Le 

Caer sold vacant land and, after paying off the mortgage 

loan, received $489,288. On February 23, 2004, Mr. Le Caer’s 

estate and Mrs. Le Caer sold an apartment building and, 

after paying off the mortgage loan, received $217,470. 

On March 29, 2004, Mrs. Le Caer died. 

292 135 UNITED STATES TAX COURT REPORTS (288) 

6Mr. Le Caer’s estate included in the gross estate a one-half community property interest in 

the vacant land and the apartment building valued consistent with the sale prices. The values 

herein refer to the values of the one-half community property interests in the assets. 

7Mrs. Le Caer’s estate reported the real estate using the same values used by Mr. Le Caer’s 

estate. 

On October 19, 2004, Mr. Le Caer’s estate timely filed the 

Form 706, United States Estate (and Generation-Skipping 

Transfer) Tax Return. The return reported a gross estate of 

$3,553,224, consisting of a one-half community property 

interest in various real estate valued at $1,925,879, 6 five 

bank accounts at Nevada State Bank totaling $64,474, and 

an account at Western National Trust Co. (Western) valued 

at $1,562,871. The trustees made a QTIP election under section 2056(b)(7) with respect to $1,405,295 of the assets 

included in Mr. Le Caer’s gross estate. Accordingly, a portion 

of share B in the amount of $1,405,295 qualified for a marital deduction, and a portion of share B in the amount of 

$495,000 did not qualify for a marital deduction. Mr. Le 

Caer’s estate reported a taxable estate of $1,995,000. After 

an allowable unified credit of $555,800 and a credit for State 

death taxes of $24,810, the estate reported tax payable of 

$200,190, which it enclosed with the return. Mr. Le Caer’s 

estate also mailed a $24,810 check for the payment of the 

Nevada estate tax to the Nevada Department of Taxation. 

The estate simultaneously filed a notice of protective election 

under section 6166. 

On November 4, 2004, a Form 706 for Mrs. Le Caer’s 

estate was signed, and on December 7, 2004, it was mailed. 

The return reported a $4,976,586 gross estate consisting of 

Mrs. Le Caer’s interest in real estate valued at $1,572,500, 7

three bank accounts at Nevada State Bank totaling $354,039, 

and the Western account valued at $1,639,752. Her gross 

estate also included personal property valued at $5,000 and 

the QTIP remainder of $1,405,295. Mrs. Le Caer’s estate 

claimed a credit for tax on prior transfers of $225,000. The 

estate reported tax due of $1,259,596, which it enclosed with 

the return. The estate filed a notice of protective election 

under section 6166. 

On December 29, 2004, an amended Form 706 for Mrs. Le 

Caer’s estate was signed, and it was subsequently mailed. On 

the amended Form 706 Mrs. Le Caer’s estate reported the 

same gross estate and credit for tax on prior transfers as it 

(288) ESTATE OF LE CAER v. COMMISSIONER 293

8 After the concessions respondent does not assert any deficiency with respect to Mr. Le Caer’s 

estate. 

had on the original Form 706. However, on the amended 

Form 706 Mrs. Le Caer’s estate claimed a $225,000 deduction as part of Schedule K, Debts of the Decedent, and Mortgages and Liens. The estate included the following narrative: 

Federal Estate Taxes of decedents [sic] predeceased spouse, Lucien Jean 

Le Caer * * *, who died on 1/19/2004, which taxes were fully paid by 

decedent, and the gross estate of Lucien Jean Le Caer was not reduced by 

his $225,000 Federal Estate tax liability/debt and no deduction was taken 

on the 706 Federal Estate Tax Return filed for Lucien Jean Le Caer. 

Mrs. Le Caer’s estate claimed an overpayment of $101,700. 

Respondent audited both estates’ returns and on September 18, 2007, issued notices of deficiency. With respect to 

each estate respondent increased taxable gifts by $5,000 and 

determined the maximum allowable credit for State death 

taxes. By stipulation and on brief, however, respondent conceded the taxable gift adjustments and agreed with the 

estates’ computations of the allowable State death credits. 8

See supra note 2. With respect to the amended Form 706 

filed by Mrs. Le Caer’s estate, respondent disallowed the 

entire credit for tax on prior transfers under section 2013. 

Respondent also denied the claim for refund in the amended 

Form 706 of Mrs. Le Caer’s estate on the ground that a 

deduction for Mr. Le Caer’s estate taxes is not allowable 

under section 2053. 

On October 19, 2007, Mr. Le Caer’s estate filed with 

respondent a ‘‘Notice of Section 2056 Schedule M Protective 

Claim’’. Mr. Le Caer’s estate made the protective claim ‘‘to 

preserve * * * the placing of and claiming of the personal 

residence on * * * [Mr. Le Caer’s] Schedule M’’. 

On December 21, 2007, both estates timely filed petitions. 

Discussion 

I. Contentions of the Parties

The dispute in these consolidated cases arises from the 

close-in-time deaths of Mr. and Mrs. Le Caer. Mr. Le Caer’s 

estate reported and paid Federal and State estate taxes of 

$225,000. Mrs. Le Caer’s estate contends that it is entitled 

to claim this full amount as a credit for tax on prior transfers 

294 135 UNITED STATES TAX COURT REPORTS (288) 

under section 2013. Mrs. Le Caer’s estate also claims in the 

amended Form 706 that it is entitled to reduce her taxable 

estate by $225,000 through an increase in allowable deductions. It asserts that after paying Mr. Le Caer’s Federal and 

State estate taxes, Mrs. Le Caer received $225,000 less than 

her estate reported on the original Form 706 after she died. 

Petitioners also argue that the parties can use the QTIP election that Mr. Le Caer’s estate filed as a part of the Rule 155 

computations. 

Respondent agrees that Mrs. Le Caer’s estate is entitled to 

claim a credit for tax on prior transfers under section 2013. 

However, respondent disputes the credit amount of $225,000 

and contends that because of the limitations prescribed by 

section 2013(b) and (c), only a portion of that amount is 

allowable. Respondent also disagrees that the State estate 

tax that Mr. Le Caer’s estate paid qualifies for the credit. 

Respondent also disallowed the overpayment claim of Mrs. 

Le Caer’s estate for lack of substantiation and on the ground 

that the claimed deduction for Mr. Le Caer’s Federal and 

State estate taxes is not an allowable deduction under section 2053. 

II. Analysis

Generally, the Commissioner’s determination is presumed 

correct, and the taxpayer bears the burden of proving that it 

is incorrect. Rule 142(a)(1); INDOPCO, Inc. v. Commissioner, 

503 U.S. 79, 84 (1992); Welch v. Helvering, 290 U.S. 111, 115 

(1933). Petitioners do not assert that the burden of proof 

shifts to respondent under section 7491(a), and the record 

does not allow us to conclude that the requirements of section 7491(a)(2) are met. Accordingly, the burden of proof 

remains with petitioners.

A. Section 2013 Issues

Section 2001(a) imposes a tax on the transfer of the taxable estate of every decedent who is a citizen or resident of 

the United States. Sections 2010 through 2015 allow an 

estate to claim certain credits against the estate tax. 

One of the allowable credits is the credit for tax on prior 

transfers under section 2013. Section 2013(a) provides for a 

credit against estate tax liability of a decedent’s estate where 

(288) ESTATE OF LE CAER v. COMMISSIONER 295

9 In our sec. 2013 discussion, Mr. Le Caer’s estate is the transferor’s estate and Mrs. Le Caer 

is the decedent. 

10Sec. 2013(b) provides:

SEC. 2013(b). COMPUTATION OF CREDIT.—Subject to the limitation prescribed in subsection(c), 

the credit provided by this section shall be an amount which bears the same ratio to the estate 

tax paid * * * with respect to the estate of the transferor as the value of the property transferred bears to the taxable estate of the transferor (determined for purposes of the estate tax) 

decreased by any death taxes paid with respect to such estate. * * *

the decedent received property in a transfer from a person 

who died within 10 years before or 2 years after the 

decedent’s death and the transfer is subject to estate tax in 

the transferor’s estate. 9 See also Estate of Harrison v. 

Commissioner, 115 T.C. 161, 164 (2000); sec. 20.2013–1(a), 

Estate Tax Regs. The purpose of the credit is ‘‘ ‘to prevent the 

diminution of an estate by the imposition of successive taxes 

on the same property within a brief period.’ ’’ Estate of Harrison v. Commissioner, supra at 164–165 (quoting S. Rept. 

1622, 83d Cong., 2d Sess. 122 (1954)). The amount of the 

credit depends, in part, on the length of time that elapsed 

between the deaths of the decedent and the transferor. See 

sec. 2013(a). If the transferor died within 2 years of the 

death of the decedent, the decedent’s estate may claim as a 

credit the amount determined under section 2013(b) and (c). 

Id. If the transferor predeceased the decedent by more than 

2 years but within 10 years, the credit is determined as a 

percentage of the amount determined under section 2013(b) 

and (c). See id. The percentage gradually decreases as the 

time between deaths increases. See id.

The parties agree that Mrs. Le Caer’s estate is entitled to 

claim a credit under section 2013 but disagree as to the 

amount. Respondent believes that the limitations of section 

2013(b) and (c) apply and also believes that Nevada estate 

tax does not qualify for the credit. We agree with respondent. 

Section 2013(b) and (c) sets forth two limitations on the 

allowable credit. The first limitation is the amount of the 

Federal estate tax attributable to the transferred property in 

the transferor’s estate. 10 See sec. 2013(b); secs. 20.2013–

1(b)(1), 20.2013–2, Estate Tax Regs. This limitation equals 

the value of transferred property multiplied by the transferor’s adjusted Federal estate tax divided by the transferor’s 

adjusted taxable estate. See sec. 2013(b); sec. 20.2013–2(a), 

Estate Tax Regs. For purposes of this limitation, the phrase 

‘‘adjusted Federal estate tax’’ means the amount of Federal 

296 135 UNITED STATES TAX COURT REPORTS (288) 

11The parties do not contend any of these credits are relevant. 

12The regulations also provide that the amount of exemption allowed in computing the transferor’s taxable estate must be added to the transferor’s taxable estate. See sec. 20.2013–2(c)(1), 

Estate Tax Regs. Unlike sec. 2013, sec. 20.2013–2(c), Estate Tax Regs., does not reflect the repeal of sec. 2052, I.R.C. 1954, that had provided for such exemption. See Tax Reform Act of 

1976, Pub. L. 94–455, sec. 2001(a)(4), (c)(1)(C)(i), 90 Stat. 1848, 1850 (repealing specific exemption under sec. 2052 and amending sec. 2013(b)). 

13The Code sets out the second limitation in sec. 2013(c)(1):

SEC. 2013(c). LIMITATION ON CREDIT.—

(1) IN GENERAL.—The credit provided in this section shall not exceed the amount by which—

(A) the estate tax imposed by section 2001 or section 2101 (after deducting the credits 

provided for in sections 2010, 2012, and 2014) computed without regard to this section, exceeds 

(B) such tax computed by excluding from the decedent’s gross estate the value of such 

property transferred and, if applicable, by making the adjustment hereinafter indicated. 

estate tax paid with respect to the transferor’s estate plus 

certain credits allowed the transferor’s estate. 11 See sec. 

2013(b); sec. 20.2013–2(b), Estate Tax Regs. The phrase 

‘‘transferor’s adjusted taxable estate’’ means the amount of 

the transferor’s taxable estate decreased by the amount of 

any ‘‘death taxes’’, including Federal and State estate taxes, 

paid with respect to the transferor’s gross estate. 12 See sec. 

20.2013–2(c)(1), Estate Tax Regs. 

The second limitation is the amount of the Federal estate 

tax attributable to the transferred property in the decedent’s 

estate. See sec. 2013(c); secs. 20.2013–1(b)(2), 20.2013–3, 

Estate Tax Regs. The credit is limited to the difference 

between (1) the net estate tax payable with respect to the 

decedent’s estate, determined without regard to any credit 

under section 2013, and (2) the net estate tax determined as 

described immediately above but computed by subtracting 

from the decedent’s gross estate the value of the property 

transferred adjusted by any charitable deduction, if 

applicable. 13 See sec. 20.2013–3(a), Estate Tax Regs. The 

credit for tax on prior transfers is limited to the smaller of 

the two limitations. Sec. 20.2013–1(b), Estate Tax Regs. 

On both the original and the amended Forms 706, Mrs. Le 

Caer’s estate claimed as a credit against prior transfers 

$225,000, which equals the sum of the Federal and State 

estate taxes that Mr. Le Caer’s estate paid. Mrs. Le Caer’s 

estate calculated the credit amount without taking into 

account section 2013(b) and (c). Petitioners contend that the 

only portion of Mr. Le Caer’s estate that was subject to 

estate tax was the nonmarital portion of share B in the 

amount of $495,000. In petitioners’ view, the limitations on 

(288) ESTATE OF LE CAER v. COMMISSIONER 297

14Petitioners apparently refer to the exclusion amount of $1,500,000 applicable in the case 

of estates of decedents dying during 2004. See sec. 2010(c). Such applicable exclusion amount 

corresponds to the applicable credit amount of $550,800. See secs. 2010(c), 2001(c). 

the tax credit are not triggered when Mr. Le Caer passed no 

other property subject to the estate tax. We disagree. Section 

2013(a) provides: ‘‘If the transferor died within 2 years of the 

death of the decedent, the credit shall be the amount determined under subsections (b) and (c).’’ (Emphasis added.) 

Nothing in section 2013 or the regulations thereunder conditions the application of the limitations of section 2013(b) and 

(c) as proffered by petitioners, and we conclude both limitations apply. 

Petitioners also challenge respondent’s method of calculating the limitation amount on the ground that by using the 

amount of the taxable estate respondent effectively denies 

the full amount of credit. We understand petitioners’ argument to focus on the mechanics of calculating the first limitation, specifically, the amount used as the denominator in the 

formula. In petitioners’ view, for purposes of the calculation, 

Mr. Le Caer’s taxable estate should be reduced by the 

‘‘$1,500,000 applicable credit amount’’ 14 because this amount 

bore no estate tax ‘‘[yielding] the reality of only $495,000 

being taxed’’. 

We reject petitioners’ argument. To compute the first 

limitation, section 2013(b), as interpreted by section 20.2013–

2, Estate Tax Regs., uses as the denominator the amount of 

‘‘the taxable estate of the transferor (determined for purposes 

of the estate tax)’’ minus death taxes paid with respect to 

such estate. Section 2051 defines ‘‘taxable estate’’ as the 

gross estate minus certain enumerated deductions (for 

example, a marital deduction). Section 2013(b) does not 

authorize deducting from the taxable estate of the transferor 

the applicable exclusion amount or any other amount besides 

death taxes. 

Our conclusion finds support in the changes that section 

2013(b) underwent in 1976. Before 1976 section 2013 was 

titled ‘‘Credit for Tax on Prior Transfers’’ and section 2013(b) 

described a limitation on the amount of the credit. Section 

2013(b) of the 1954 Code provided that the taxable estate of 

the transferor should be decreased by any death taxes paid 

with respect to such estate. This portion of the formula was 

similar to that set forth in the current section 2013(b). HowVerDate 0ct 09 2002 13:00 May 29, 2013 Jkt 372897 PO 20009 Frm 00010 Fmt 3851 Sfmt 3851 V:\FILES\LECAER.135 SHEILA
298 135 UNITED STATES TAX COURT REPORTS (288) 

15The U.S. Department of the Treasury did not amend sec. 20.2013–2(c), Estate Tax Regs., 

which was promulgated before 1976, see T.D. 6296, 1958–2 C.B. 432, 456, to reflect the repeal 

of sec. 2052. 

16 In 1997 Congress amended sec. 2010(a). See Taxpayer Relief Act of 1997 (TRA 1997), Pub. 

L. 105–34, sec. 501, 111 Stat. 845. Before TRA 1997, sec. 2010(a) allowed each estate a credit 

of a specified amount. See sec. 2010(a), I.R.C. 1986. After TRA 1997, sec. 2010(a) allows each 

estate ‘‘a credit of the applicable credit amount’’ which is determined by reference to the applicable exclusion amount specified in sec. 2010(c). See sec. 2010(a), (c). Our analysis is not affected 

by the change in sec. 2010(a). 

17 A pickup or sponge tax is a State death tax that is levied in an amount equal to the Federal 

estate tax credit. See Black’s Law Dictionary 1596 (9th ed. 2009). 

ever, section 2013(b) of the 1954 Code provided that the taxable estate should then be increased by the exemption provided by section 2052 or 2106(a)(3) or by the corresponding 

provisions of prior laws. In 1976 Congress repealed the 

exemption under section 2052 and enacted section 2010, 

which introduced a unified credit. See Tax Reform Act of 

1976, Pub. L. 94–455, sec. 2001(a)(2), (4), 90 Stat. 1848. By 

the same public law Congress amended section 2013(b) to 

strike out the phrase ‘‘and increased by the exemption provided for by section 2052 or section 2106(a)(3).’’ 15 Id. sec. 

2001(c)(1)(C)(i), 90 Stat. 1850. Notably, Congress did not 

amend section 2013(b) to reflect the newly enacted unified 

credit in the calculation. 16 Accordingly, we conclude that in 

computing the taxable estate of the transferor Mrs. Le Caer’s 

estate is not entitled to subtract the applicable exclusion 

amount from her taxable estate. 

Mrs. Le Caer’s estate also contends that it is entitled to 

claim a section 2013 credit with respect to the Nevada estate 

tax that Mr. Le Caer’s estate paid. Mrs. Le Caer’s estate 

argues that Nevada estate tax is a pure pickup or sponge 

tax 17 consisting of actual Federal estate tax but allocated to 

Nevada and accordingly it qualifies for credit under section 

2013. 

We first consider the nature of the Nevada estate tax. Generally, estates of decedents dying before December 31, 2004, 

can credit the Federal estate tax with the amount of any 

State death taxes. Sec. 2011(f). Nevada imposes a tax on the 

transfer of the taxable estate of a Nevada resident in the 

amount of the maximum credit allowable against the Federal 

estate tax for the payment of State death taxes. See Nev. 

Rev. Stat. Ann. sec. 375A.100 (LexisNexis 2007). Therefore, 

Nevada estate tax is a pickup or sponge tax, as petitioners 

correctly point out. However, the method of calculating 

(288) ESTATE OF LE CAER v. COMMISSIONER 299

Nevada estate tax does not make it a Federal estate tax. 

Although estates compute the amount of Nevada estate tax 

by reference to the available Federal estate tax credit, it is 

the State of Nevada that imposes the tax. See id. On the 

other hand, the Federal estate tax is imposed by section 2001 

of the Code. 

Section 2013(a), however, allows a credit only for Federal 

estate tax paid, regardless of whether the State tax is calculated by reference to the Federal tax. If Congress desired 

to extend the credit to amounts paid as State death taxes, it 

would not have used the phrase ‘‘Federal estate tax’’. The 

phrase ‘‘Federal estate tax’’ in section 2013(a) contrasts with 

the broader wording of section 2013(b), which addresses the 

computation of the first limitation. Section 2013(b) provides 

that in calculating the denominator, ‘‘any death taxes’’ paid 

should be subtracted from the taxable estate of the transferor. Death taxes include Federal estate tax and all other 

death taxes imposed by any taxing authority, within or without the United States. See sec. 20.2013–2(c)(1), Estate Tax 

Regs. Section 2013(a), on the other hand, refers only to the 

Federal estate tax. We conclude that Mrs. Le Caer’s estate 

may not claim a section 2013 credit with respect to the State 

estate tax. 

Petitioners argue that the application of the credit under 

section 2013 amounts to a denial of due process and a taking 

without just compensation, results in double taxation, contradicts the legislative intent of section 2013, and is discriminatory. Petitioners do not explain these arguments, nor do 

they cite any authority for the propositions. Although petitioners’ argument is not entirely clear, we understand petitioners’ argument to raise a challenge to respondent’s 

application of the limitations contained in section 2013(b) 

and (c) and not to section 2013 or the Federal estate tax in 

general. Petitioners are contending, in effect, that respondent’s calculation of the credit under section 2013 results in 

double taxation and contradicts the legislative intent of section 2013. 

Generally, the plain meaning of statutory language is 

conclusive, and we normally examine the statute’s legislative 

history only if the statute is ambiguous. See Burlington N. 

R.R. v. Okla. Tax Commn., 481 U.S. 454, 461 (1987). Petitioners, however, do not identify any ambiguity in section 

300 135 UNITED STATES TAX COURT REPORTS (288) 

18The $495,000 amount is the amount of share B of the trust that did not qualify for the marital deduction. 

2013. Instead, they complain about the unfairness of section 2013 as enacted and assert that this Court should 

remedy the unfairness by giving the estate a credit for which 

there is no statutory foundation. We reject this argument for 

several reasons. First, petitioners have failed to identify any 

unfairness in the application of section 2013 that would 

render the limitations under section 2031(b) and (c) unconstitutional; and second, petitioners’ concern about unfairness is 

more appropriately addressed to Congress than to this Court, 

which is required to apply the statute as written. 

Petitioners argue, alternatively, that in the event we hold 

that the limitations of section 2013(b) and (c) apply, as we 

do, the value of the property interest transferred to Mrs. Le 

Caer by Mr. Le Caer’s estate for purposes of calculating the 

section 2013 credit should be $495,000 18 and not the present 

value of a life estate. Petitioners point out that Mr. Le Caer’s 

estate paid estate tax on the $495,000 amount and not on the 

present value of the life estate received by Mrs. Le Caer. In 

making this argument, petitioners ignore the language of 

section 20.2013–4, Estate Tax Regs. Mrs. Le Caer received a 

limited property interest in the form of a life estate in share 

B. Section 20.2013–4(a), Estate Tax Regs., provides that if 

the decedent receives a limited interest such as a life estate 

in property that was included in a transferor’s gross estate, 

the value of the interest is determined as of the date of the 

transferor’s death on the basis of recognized valuation principles. 

Petitioners do not dispute that Mrs. Le Caer received a life 

estate, and they have offered no credible evidence that 

respondent incorrectly determined the value of the life estate 

in calculating the section 2013(b) and (c) limitations or the 

allowable section 2013 credit. Consequently, we sustain 

respondent’s determination regarding the amount of the 

credit allowable under section 2013. 

B. Overpayment Claim

In the amended return Mrs. Le Caer’s estate increased 

allowable deductions by $225,000 and claimed an overpayment of $101,700. The estate contended that Mrs. Le Caer 

(288) ESTATE OF LE CAER v. COMMISSIONER 301

19On brief petitioners insist that $225,000 is a reduction of the gross estate rather than a 

deduction, whereas in the amended Form 706 Mrs. Le Caer’s estate claimed a $225,000 increase 

in allowable deductions. Generally, sec. 2053(a) allows as deductions from the value of the gross 

estate amounts for (1) funeral expenses, (2) administration expenses, (3) claims against the estate, and (4) unpaid mortgages or any indebtedness in respect of property, where the value of 

the decedent’s interest therein is included in the value of the gross estate undiminished by such 

indebtedness or mortgage. Mrs. Le Caer, as a transferee of Mr. Le Caer’s estate, could have become personally liable for any unpaid estate tax with respect to Mr. Le Caer’s estate. See sec. 

6324(a)(2). However, such liability would have arisen only if the estate tax imposed on Mr. Le 

Caer’s estate was not paid when due. See id. Mr. Le Caer’s estate’s Federal estate liability was 

paid on Oct. 19, 2004, and the payment was timely. Accordingly, Mrs. Le Caer’s estate is not 

entitled to increase allowable deductions by $225,000. 

The record contains a jointly stipulated Form 843, Claim for Refund and Request for Abatement, that the trustees filed with respect to the Estate of Mr. Le Caer, dated Oct. 5, 2007. Petitioners argue on brief that the Form 843 sets forth a reduction of Mrs. Le Caer’s gross estate. 

The Form 843, however, was filed with respect to Mr. Le Caer’s gross estate. 

had paid $225,000 of Federal and State taxes with respect to 

Mr. Le Caer’s estate and that his estate was not reduced by 

the tax liabilities. Respondent disallowed the overpayment 

claim on the ground that a deduction for Federal estate taxes 

of Mrs. Le Caer’s predeceased spouse’s estate was not an 

allowable deduction under section 2053. On brief petitioners 

contend that in the original Form 706 Mrs. Le Caer’s gross 

estate was overstated by $225,000 because Mr. Le Caer’s 

estate paid estate taxes for his estate totaling $225,000. Petitioners claim: ‘‘Marie did not receive such $225,000 she only 

received the balance of the nonmarital property $270,000 

($495,000 – 225,000). Accordingly, her gross estate was overstated by $225,000’’. Respondent counters that this version of 

petitioners’ overpayment claim should be disallowed because 

of lack of substantiation. 

Regardless of whether petitioners seek to reduce the 

overall estate tax burden on Mrs. Le Caer’s estate by 

reducing the gross estate by $225,000, as their opening brief 

suggests, or by increasing the allowable deductions by 

$225,000, as the amended Form 706 reports, 19 the overpayment claim is not allowable. Petitioners failed to prove that 

the value of Mrs. Le Caer’s estate was overstated. Petitioners 

did not introduce any evidence to show that the Federal and 

State estate taxes with respect to Mr. Le Caer’s estate were 

in fact paid with assets of Mrs. Le Caer or of her estate or 

that the Form 706 filed on behalf of Mrs. Le Caer’s estate 

incorrectly reported the estate’s assets. Moreover, a review of 

the cashflow resulting from the sale of real estate by Mr. Le 

Caer’s estate and Mrs. Le Caer suggests that Mr. Le Caer’s 

estate’s share of the sale proceeds from the sale of real estate 

302 135 UNITED STATES TAX COURT REPORTS (288) 

was most likely the source of payment of the estate taxes 

and, to the extent so used, was not transferred to or otherwise included in Mrs. Le Caer’s estate. 

The pertinent timeline supports our conclusion. Mr. Le 

Caer’s estate filed the Form 706 on October 19, 2004. The 

return reported a Federal estate tax liability of $200,190. 

The checks that paid the Federal and Nevada estate tax 

liabilities were dated October 12, 2004. A representative of 

Mrs. Le Caer’s estate signed the original Form 706 on 

November 4, 2004. As of November 4, 2004, the trustees 

knew the value of Mr. Le Caer’s estate that passed, net of 

estate taxes, to Mrs. Le Caer and the remaindermen. 

C. QTIP Protective Election

Petitioners contend that Mr. Le Caer’s estate filed a marital deduction, or QTIP, protective claim that can be applied 

as part of the Rule 155 calculations. Respondent contends 

the ‘‘protective claim’’ is invalid. 

Generally, an estate may deduct from the value of the 

gross estate the value of property passing from the decedent 

to his or her surviving spouse (marital deduction). See sec. 

2056(a); sec. 20.2056(a)–1(a), Estate Tax Regs. The Code does 

not allow a marital deduction for terminable interest property passing from a decedent to his or her surviving spouse 

(terminable interest rule). Sec. 2056(b). A terminable interest 

is an interest passing from a decedent to his or her surviving 

spouse that will end on the lapse of time, on the occurrence 

of an event or contingency, or on the failure of an event or 

contingency to occur. Sec. 2056(b)(1). The terminable interest 

rule denies a marital deduction if (1) an interest passing to 

the surviving spouse is a terminable interest, (2) an interest 

in such property passes from the decedent to someone other 

than his or her surviving spouse for less than full or adequate consideration in money or money’s worth, and (3) the 

third person will possess or enjoy the property after the 

termination or failure of the interest passing to the surviving 

spouse. Id.

Section 2056(b)(7) provides for an exception to the terminable interest rule for QTIP. It allows a marital deduction 

for QTIP although the surviving spouse receives only an 

income interest. Under section 2056(b)(7) a decedent may 

(288) ESTATE OF LE CAER v. COMMISSIONER 303

pass to his or her surviving spouse an income interest in 

property for his or her spouse’s lifetime. After the death of 

the surviving spouse the property passes to the beneficiaries 

designated by the first spouse to die. Three requirements 

must be met for terminable interest property to qualify as 

QTIP: (1) The property passes from the decedent, (2) the surviving spouse has a qualifying income interest for life in the 

property, and (3) the executor of the estate of the first spouse 

to die makes an affirmative election to designate the property as QTIP. Sec. 2056(b)(7)(B). Upon the death of the surviving spouse, the value of his or her gross estate includes 

the value of QTIP. 

The executor of the estate must make the QTIP election 

with respect to property on the decedent’s ‘‘return of tax 

imposed by section 2001.’’ Sec. 2056(b)(7)(B)(v). A ‘‘return of 

tax imposed by section 2001’’ means the last estate tax 

return filed by the executor on or before the due date of the 

return, including any extensions. Sec. 20.2056(b)–7(b)(4)(i), 

Estate Tax Regs. If the estate does not file a timely return, 

this phrase means the first estate tax return filed by the 

executor after the due date. Id.

An executor of the estate of the first spouse to die may 

make a protective election to treat property as QTIP if the 

executor reasonably believes that there is a bona fide issue 

when the Federal estate tax return is filed and it concerns 

whether an asset is includable in the decedent’s gross estate 

or the amount or nature of the property the surviving spouse 

is to receive. Sec. 20.2056(b)–7(c)(1), Estate Tax Regs. The 

protective election must identify the specific asset, group of 

assets, or trust to which the election applies and the specific 

basis for the protective election. Id.

The regulations explain in detail the time and manner for 

making the QTIP election and do not specify a different time 

and manner for a protective QTIP election. It is reasonable to 

conclude, therefore, that a timely protective election is one 

that is made with respect to property on a decedent’s return 

of tax imposed by section 2001 as required by section 

2056(b)(7)(B)(v) and section 20.2056(b)–7(b)(4)(i), Estate Tax 

Regs. This conclusion is consistent with section 20.2056(b)–

7(c)(2), Estate Tax Regs., which provides that ‘‘The protective 

election, once made on the return of tax imposed by section 

2001, cannot be revoked.’’ (Emphasis added.) Applying the 

304 135 UNITED STATES TAX COURT REPORTS (288) 

definition of the ‘‘return of tax imposed by section 2001’’ 

under section 20.2056(b)–7(b)(4)(i), Estate Tax Regs., in the 

case of a timely filed return, such as Mr. Le Caer’s Form 706, 

the executor of the estate may make a protective election no 

later than the due date of the return. Generally, the due date 

of the return is 9 months after the date of the decedent’s 

death. Sec. 6075(a). 

Mr. Le Caer died on January 19, 2004. The due date of his 

return was October 19, 2004, which is when the Form 706 

was mailed. The trustees of Mr. Le Caer’s estate made an 

election under section 2056(b)(7) with respect to $1,405,295 

of the assets that were a part of share B, thereby qualifying 

that property for a marital deduction. The trustees did so by 

filing Schedule M, Bequests, etc., to Surviving Spouse, along 

with the Form 706. On October 19, 2007, the attorney for 

Mr. Le Caer’s estate filed a document entitled ‘‘Notice of Section 2056 Schedule M Protective Claim’’. Because the protective election was filed 3 years after October 19, 2004, and 

was not made on the Form 706 as required by section 2056, 

we conclude the protective election was untimely. 

We have considered all of the arguments raised by either 

party, and to the extent not discussed, we find them to be 

irrelevant or without merit. 

To reflect the foregoing, 

Decision will be entered for petitioner in 

docket No. 29631–07.

Decision will be entered under Rule 155 in 

docket No. 30041–07. 

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