Rev. Rul. 75-176

Advice has been requested concerning the amount includible in the gross estate of a decedent under section 2039 of the Internal Revenue Code of 1954 by reason of a survivor annuity payable under the Survivor Benefit Plan, Title 10, United States Code, sections 1447-1455.

The decedent was a retired member of the Armed Forces of the United States. Upon retirement on January 1, 1973, he became entitled 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 1452(d) of Title 10 of the United States Code. Upon his death on January 1, 1974, his widow became entitled to an annuity payable for life or until her remarriage.

A decedent's gross estate includes under section 2039(a) and (b) of the Code the value of an annuity or other payment receivable by any beneficiary by reason of surviving the decedent under certain agreements or plans to the extent that the value of the annuity or other payment is attributable to contributions made by the decedent or his employer.

The amount to be included in a decedent's gross estate under section 2039(a) and (b) of the Code is an amount which bears the same ratio to the value at the decedent's death of the annuity or other payment receivable by the beneficiary as the contribution made by the decedent, or made by his employer (or former employer) for any reason connected with his employment, to the cost of the contract or agreement bears to its total cost.

Section 2039(c) of the Code provides an exception to the inclusion requirements of section 2039(a) and (b) in the case of annuities or other payments received under certain "trusts" and "plans" except to the extent that the value of such payments is attributable to contributions made by the decedent.

Paragraph 4 of section 2039(c) of the Code provides that there shall be excluded from the value of the decedent's gross estate an annuity or other payment receivable by a beneficiary under the plan described in chapter 73 of title 10 of the United States Code. Paragraph 4 was added to the Code by Public Law 89-365, 1966-1 C.B. 377, and is effective with respect to decedents dying after December 31, 1965. Until September 21, 1972, chapter 73 of title 10 of the United States Code contained only the Retired Serviceman's Family Protection Plan ("RSFPP"). Amounts payable after the death of the decedent pursuant to such plan were excludable from the decedent's gross estate except to the extent of amounts deposited by him pursuant to section 1438 of such title 10. See Rev. Rul. 72-332, 1972-2 C.B. 527. However, effective September 21, 1972, Public Law 92-425, amended chapter 73 of title 10, to establish, in addition to "RSFPP", a Survivor Benefit Plan. Public Law 93-406, 1974-3 C.B. 1, 163, amended section 2039(c) to reflect inclusion of the Survivor Benefit Plan in chapter 73 of title 10 of the United States Code.

Congress intended to continue the same tax treatment for servicemen and former servicemen of the United States under the Survivor Benefit Plan as formerly was available for them under the Retired Serviceman's Family Protection plan. See H.R. Rep. No. 93-298, 93d Cong., 1st Sess. 1 (1973), 1974-3 C.B. 207. Thus, pursuant to section 2039(c)(4) of the Code there shall be excluded from the value of the decedent's gross estate an annuity or other payment receivable by a beneficiary under the Survivor's Benefit Plan except to the extent of the amounts deposited by him pursuant to section 1452(d) of chapter 73 of title 10 of the United States Code.

Accordingly, since no deposits were made by the decedent under section 1452(d) 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 Survivor Benefit Plan is includible in his gross estate for Federal estate tax purposes.

Rev. Rul. 72-332, 1972-2 C.B. 527, is hereby modified to reflect the amendment of Chapter 73 of title 10 of the U.S. Code, establishing, in addition to the Retired Serviceman's Family Protection Plan, a Survivor Benefit Plan.