Rev. Rul. 64-101

Advice has been requested whether, under the circumstances described below, a dower interest received pursuant to the laws of the State of Florida is includible in the widow's gross income under sections 661 and 662 of the Internal Revenue Code of 1954, or whether it is subject only to the general provisions of section 102 of the Code relating to gifts and inheritances.

The decedent, a resident of the State of Florida, died leaving a will which contained no provision for his widow. She elected to take dower under section 731.34 of the Florida Statutes, 1959, which provides, in part, that whenever the widow of any decedent shall not be satisfied with the portion of the estate of her husband to which she is entitled under the law of descent and distribution or under the will of her husband, or both, she may elect in the manner provided by law to take dower. Such dower shall be one-third part in fee simple of the real property which was owned by her husband at the time of his death or which he had before conveyed, whereof she had not relinquished her right of dower as provided by law, and one-third part absolutely of the personal property owned by her husband at the time of his death. In all cases the widow's dower shall be free from liability for all debts of the decedent and all costs, charges, and expenses of administration.

Section 733.12(2) of the Florida Statutes, 1959, further provides that on any petition for assignment of dower, the right of dower as well as the admeasurement thereof shall be determined, and mesne profits from the date of death of the decedent shall be included in the judgment.

As settlement of her dower interest, the widow was assigned assets having a value of 52 x dollars, 50 x dollars of which represented her dower interest at the date of the decedent's death and 2 x dollars the mesne profits earned by the assets prior to the date of the distribution. She included the 2 x dollars in her gross income in the year of the distribution.

The decedent's estate received total income of 6 x dollars during such year, including the 2 x dollars earned by the assets distributed to the widow, and made no other distributions. It deducted the 6 x dollars on its fiduciary return as a distribution to the widow pursuant to section 661(a) of the Code.

Section 102(a) of the Code provides that gross income does not include the value of property acquired by gift, bequest, devise, or inheritance. However, section 102(b) of the Code provides that income from property referred to in section 102(a) of the Code and gifts, bequests, devises, and inheritances of income from property may not be excluded from gross income. Section 102(b) of the Code also provides that any amount included in the gross income of a beneficiary under subchapter J of chapter 1, subtitle A, of the Code shall be treated as a gift, bequest, devise, or inheritance of income from property.

Sections 661 and 662, under subchapter J of chapter 1, subtitle A, of the Code determine the deductions allowable to an estate for distributions to its beneficiaries and the consequent inclusion of such amounts in the income of beneficiaries.

Section 1.661(a)-2(e) of the Income Tax Regulations excepts from amounts falling under sections 661 and 662 of the Code support payments to a decedent's widow for a limited period pursuant to court order, and interests in real estate owned by the decedent, title to which passes directly to the heirs or devisees under local law. These exceptions are not dependent upon section 663 of the Code, which also provides for certain exceptions to insure that gifts and legacies of specific property will be considered as being made from corpus.

The dower interest provided by the laws of Florida is similar in purpose and effect to the support allowance described in section 1.661(a)-2(e) of the regulations. Moreover, under Florida law, dower vests in the widow a fee simple estate in lands and the absolute ownership of the personal property allotted free from all debts of the decedent and all costs, charges, and expenses of administration. Thus, the dower interest is also similar in legal characteristics to the real property exception provided in the above-mentioned regulations. In fact, in some respects, the dower interest might be even more absolute than real property, title to which passes directly from the decedent to the heirs, since real property, in some jurisdictions, might be liable for the debts of the estate.

Accordingly, it is held that the value of the assets transferred to the widow as dower is not includible in her gross income under sections 661 and 662 of the Code. Such transfer is governed only by the general provisions of section 102 of the Code.

Thus, of the 52 x dollars of assets received by the widow, 50 x dollars is excludable from her gross income under section 102(a) of the Code. The 2 x dollars of mesne profits earned by the dower assets is includible in her gross income under section 102(b) of the Code.

The estate is not entitled to deduct any amount under section 661 of the Code, with respect to the distribution of dower assets to the widow. The 2 x dollars distributed to her should not have been included in the estate's gross income. The fiduciary return should show gross income of 4 x dollars.