Removing the Scaffolding: The QTIP Provisions and the Ownership Fiction

This article evaluates the Qualified Terminable Interest Property (QTIP) Taxing Provisions and the QTIP Rulings. Part II explains that in doing so, it relies on the theory of legal fictions. This theory provides a conceptual tool by which to understand all aspects of the QTIP Provisions. Part III provides background for the analysis that follows by reviewing the marital deduction provisions, the Terminable Interest Rule, and the QTIP Provisions.

Part IV demonstrates that the decision to grant the marital deduction for QTIP Property can be explained by means of a legal fiction that treats QTIP Property as passing in its entirety to the surviving spouse ("Ownership Fiction"). The Ownership Fiction ensures that the QTIP Property will ultimately be taxed in the surviving spouse's transfer tax base. This taxation is the topic of Parts V and VI, which address the QTIP Taxing Provisions and the QTIP Rulings, respectively. This Article concludes that the QTIP Taxing Provisions lead to equitable results when applied by their terms, but inequitable and inconsistent results when extended beyond their terms by the QTIP Rulings.