Rev. Rul. 73-316

The Internal Revenue Service has given further consideration to Revenue Ruling 60-70, 1960-1 C.B. 372, insofar as it concludes that the value of all residual lump-sum payments made under section 5(f)(2) of the Railroad Retirement Act of 1937, as amended, 45 U.S.C. 228(e)(f)(2), to survivors of a deceased railroad employee is includible in the employee's gross estate for Federal estate tax purposes. This conclusion was based upon a determination that a decedent's power to designate the beneficiaries of such lump-sum payments constitutes a property interest under section 2033 of the Internal Revenue Code of 1954.

An analysis of section 5(f)(2) of the Act, as amended, reveals that where a decedent leaves a surviving spouse or parent who may upon attaining age 60 at a future date be entitled to further benefits under that section, the lump sum shall not be paid unless the survivor makes an irrevocable election to receive such payment instead of all benefits to which he might otherwise be entitled. Thus, in such cases, the survivor has rights of such a substantial nature that the decedent's interest in the lump-sum benefits is not deemed sufficient to constitute an interest in property under section 2033 of the Code.

Accordingly, Revenue Ruling 60-70 is hereby modified to conclude that where lump-sum benefits are payable to a surviving spouse or parent under age 60 pursuant to section 5(f)(2), as amended, of the Railroad Retirement Act of 1937, the value of such benefits is not includible in a decedent's gross estate under section 2033 of the Code. However, under all other circumstances, the value of the lump-sum benefits payable pursuant to this section of the Act is includible in a decedent's gross estate under section 2033 of the Code.