324 / Will the value of payments to a deceased partner’s spouse, under a partnership income continuation agreement, be includable in the partner’s estate?
Yes.
This is the result whether payments are of a guaranteed amount or a share of partnership profits for a certain number of years.1 The value of guaranteed payments is their present value at date of death. The value of a share in future partnership profits is based on past profits referred to as the valuation date.2 The payments are income in respect of a decedent.3 Consequently, a beneficiary will be entitled to an income tax deduction for any estate tax attributable to including the value of payments in a decedent’s gross estate.4
1. Rev. Rul. 66-20, 1966-1 CB 214; Rev. Rul. 71-507, 1971-2 CB 331; Est. of Riegelman v. Commissioner, 253 F.2d 315 (2d Cir. 1958); McClennen v. Commissioner, 131 F.2d 165 (1st Cir. 1942); Est. of Beal v. Commissioner, 47 TC 269 (1966); Winkle v. U.S., 160 F. Supp. 348 (W.D. Pa. 1958).
2. Est. of Hull v. Commissioner, 38 TC 512 (1962).