(a) Property subject to QDOT election. Section 2056(d)(3) provides special rules for computing the section 2013 credit allowed with respect to property subject to a QDOT election. In computing the credit under section 2013, the amount of the credit is determined under section 2013 and the regulations thereunder, except that—

(1) The first limitation as described in section 2013(b) and § 20.2013-2 is the amount of the estate tax imposed under section 2056A(b)(1)(A), with respect to distributions during the spouse's life, and under section 2056A(b)(1)(B), with respect to the value of the QDOT assets on the spouse's death;

(2) In computing the second limitation as described in section 2013(c) and § 20.2013-3, the value of the property transferred to the decedent (as defined in section 2013(d) and § 20.2013-4) is deemed to be the value of the QDOT assets on the date of death of the surviving spouse. The value as so determined is not reduced by the section 2056A estate tax imposed at the time of the spouse's death; and

(3) The amount of the credit is determined without regard to the percentage limitations contained in section 2013(a).

(b) Property not subject to QDOT election. If property includible in a decedent's gross estate passes to a noncitizen surviving spouse (the transferee) and no deduction is allowed to the decedent's estate for that interest in property under section 2056(a) solely because the requirements of section 2056(d)(2) are not satisfied, and the transferee spouse dies with an estate that is subject to tax under section 2001 or 2101, as the case may be, any credit for tax on prior transfers allowable to the estate of the transferee spouse under section 2013 with respect to such interest in property is determined in accordance with the rules of section 2013 and the regulations thereunder, except that the amount of the credit is determined without regard to the percentage limitations contained in section 2013(a).

(c) Example. The application of this section may be illustrated by the following example:

Example.The facts are the same as in § 20.2056A-6, Example 2(ii). D, a United States citizen, dies in 1994, a resident of State X, with a gross estate of $2,000,000. Under D's will, a pecuniary bequest of $700,000 passes to a QDOT for the benefit of D's spouse S, who is a resident but not a citizen of the United States. S dies in 1997 at which time S is still a resident of the United States and the value of the assets of the QDOT is $800,000. There were no taxable events during S's lifetime. An estate tax of $304,800 is imposed under section 2056A(b)(1)(B). S's taxable estate, including the value of the QDOT ($800,000), is $1,500,000.

(i) Under paragraph (a)(1) of this section, the first limitation for purposes of section 2013(b) is $304,800, the amount of the section 2056A estate tax.

(ii) Under paragraph (a)(2) of this section, the second limitation for purposes of section 2013(c) is computed as follows:

(A) S's net estate tax payable under § 20.2013-3(a)(1), as modified under paragraph (a)(2) of this section, is computed as follows:

Taxable estate

$1,500,000

Gross estate tax

555,800

Less: Unified credit

$192,800

Credit for state death taxes

64,400

257,200

Pre-2013 net estate tax payable

$298,600

(B) S's net estate tax payable under § 20.2013-3(a)(2), as modified under paragraph (a)(2) of this section, is computed as follows:

Taxable estate

$700,000

Gross estate tax

229,800

Less: Unified credit

$192,800

Credit for state death taxes

18,000

210,800

Net tax payable

$19,000

(C) Second Limitation:

Paragraph (ii)(A) of this Example

$298,600

Less: Paragraph (ii)(B) of this Example

19,000

$279,600

(iii) Credit for tax on prior transfers = $279,600 (lesser of paragraphs (i) or (ii) of this Example. [T.D. 8612, 60 FR 43549, Aug. 22, 1995]