Rev. Rul. 76-380

Advice has been requested whether benefits accruing under a qualified employee's retirement plan can be considered together with the benefits accruing under a nonqualified survivor's income plan for purposes of determining the includibility of the value of the survivor's benefits in the decedent's gross estate under section 2039 of the Internal Revenue Code of 1954.

The decedent died while employed by the R corporation. Upon decedent's death, the decedent's surviving spouse became entitled to receive 1x dollars per month for five years or until death or remarriage.

R corporation has two employee benefit plans: the Retirement Plan that is qualified under section 401(a) of the Code, and the Survivors Income Benefit Plan that is not qualified.

The Retirement Plan provides a monthly annuity for the employee upon retirement. The Survivors Income Benefit Plan covers all regular employees and a monthly annuity is payable in the event of an employee's death to eligible beneficiaries determined under the plan. The total amount of the benefit and the method of payment are stipulated in the plan and cannot be changed by the employee. If no eligible beneficiary survives the employee, no benefit is payable. Both plans are noncontributory. 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 the decedent's employer. However, for the value of the benefits receivable by a beneficiary under a contract or agreement to be included in the decedent's gross estate, there must have been payable to the decedent under the same contract or agreement an annuity or other payment or the decedent must have possessed the right to receive the annuity or payment, either alone or in conjunction with another, for life or for any period not ascertainable without reference to the decedent's death or for any period which does not end in fact before death.

Section 20.2039-1(b) of the Estate Tax Regulations, with respect to plans to which section 2039(a) and (b) applies, states that the term "contract or agreement" includes any arrangement, understanding, or plan, or any combination of arrangements, understandings or plans arising by reason of the decedent's employment. Section 20.2039-1(b), Example (6) states that all rights and benefits accruing to an employee and to others by reason of the employment (except rights and benefits accruing under certain plans meeting the requirements of section 401(a) (qualified plans)) are considered together in determining whether or not section 2039(a) and (b) applies.

The meaning of the statement in Example (6) of section 20.2039-1(b) of the regulations is that rights and benefits accruing under plans meeting the requirements of section 401(a) of the Code are not to be considered together with rights and benefits accruing under plans not meeting the requirements of section 401(a). See Estate of Harold S. Brooks, 50 T.C. 585 (1968), acq., 1969-1 C.B. 20.

In view of the foregoing, the two plans under which decedent in the instant case had accrued rights and benefits cannot be read together as a single contract or agreement, thereby satisfying all the requirements of section 2039(a) of the Code. Accordingly, the value of the survivor's benefits is not includible in the decedent's gross estate.