Rev. Rul. 72-332

Advice has been requested concerning the treatment for Federal estate tax purposes of a survivor annuity payable under the Retired Serviceman's Family Protection Plan, Title 10, United States Code, sections 1431-1446.

The decedent was a retired member of the Armed Forces of the United States. Upon retirement in 1965, he elected to receive a reduced amount of retired pay in order to provide an annuity payable after his death to his widow. He made no deposits pursuant to section 1438 of Title 10 of the United States Code. Upon his death in 1968, his widow became entitled to an annuity payable for life or until her remarriage.

Revenue Ruling 59-254, C.B. 1959-2, 33, holds that the value of the annuity payable to the widow or other survivors of a retired member of the uniformed services, the entire cost of which was borne by such retired member through the reduction in his own annuity, is includible in his gross estate under the provisions of section 2039 of the Internal Revenue Code of 1954.

Public Law 89-365, C.B. 1966-1, 377, amended section 2039(c) of the Code (relating to exclusion from gross estate of annuities under certain trusts and plans) to exclude from the gross estate the value of an annuity payable under the Retired Serviceman's Family Protection Plan. This exclusion does not apply to the extent any of the value of the annuity for the survivor is attributable to deposits made by the deceased serviceman pursuant to section 1438 of Title 10, United States Code. This amendment applies with respect to decedents dying after December 31, 1965.

Accordingly, since no deposits were made by the decedent under section 1438 of Title 10 of the United States Code, it is held that no part of the value of the survivor annuity payable to the decedent's widow under the Retired Serviceman's Family Protection Plan is includible in his gross estate for Federal estate tax purposes.

Revenue Ruling 59-254 is hereby modified to limit its application, for Federal estate tax purposes, to estates of decedents dying before January 1, 1966.