Which statement about the reverse QTIP election under IRC§2652(a)(3) is TRUE?

Which statement about the reverse QTIP election under IRC§2652(a)(3) is TRUE?

• A. It eliminates estate tax on QTIP property at the surviving spouse's death.
• B. It converts QTIP property into outright ownership by the surviving spouse.
• C. It treats the first spouse to die as the transferor for GST purposes at the death of the surviving spouse.
• D. It allows the surviving spouse to be treated as the transferor for GST purposes.

Answer: (C)

Understanding reverse QTIP elections involves how generation-skipping transfer (GST) tax is allocated when the surviving spouse dies. This election changes who is treated as the transferor for GST purposes at the death of the surviving spouse. Specifically, it makes the transferor be the first spouse to die, for GST purposes, at the time the surviving spouse dies. That means the GST tax basis and exemptions are applied as if the first death established the transfer, even though the actual tax event occurs at the survivor’s death. This is why the statement that the first spouse to die is treated as the transferor for GST purposes at the death of the surviving spouse is true. The other options describe outcomes that don’t reflect how GST treatment is handled under this election—it doesn’t eliminate estate tax at the second death, it doesn’t convert QTIP property into outright ownership, and it doesn’t treat the surviving spouse as the transferor for GST purposes.

Understanding reverse QTIP elections involves how generation-skipping transfer (GST) tax is allocated when the surviving spouse dies. This election changes who is treated as the transferor for GST purposes at the death of the surviving spouse. Specifically, it makes the transferor be the first spouse to die, for GST purposes, at the time the surviving spouse dies. That means the GST tax basis and exemptions are applied as if the first death established the transfer, even though the actual tax event occurs at the survivor’s death. This is why the statement that the first spouse to die is treated as the transferor for GST purposes at the death of the surviving spouse is true. The other options describe outcomes that don’t reflect how GST treatment is handled under this election—it doesn’t eliminate estate tax at the second death, it doesn’t convert QTIP property into outright ownership, and it doesn’t treat the surviving spouse as the transferor for GST purposes.