Estate of Carl I. Heim, Deceased, Isabelle J. Heim v. Commissioner of Internal Revenue

The estate appeals the Tax Court’s determination that a bequest to Isabelle J. Heim, surviving spouse of the deceased, was a nondeductible terminable interest under section 2056 of the Internal Revenue Code (26 U.S.C.); that section 1036 of the California Probate Code did not apply to save the bequest from the terminable interest rules; and that the estate therefore was not entitled to a marital deduction. We affirm the decision of the Tax Court.

I. FACTS

On November 12, 1981, Carl I. Heim (hereinafter “Mr. Heim” or “decedent”) died testate, a resident of California, leaving a will wherein he bequeathed all of his estate “of whatsoever kind and nature and wheresoever situated to my wife, ISABELLE J. HEIM.” The decedent’s will provided that, in the alternative, the gift would pass to the children of his wife if she “should predecease me or fail to survive distribution.” His wife, Isabelle J. Heim (hereinafter “Mrs. Heim” or “surviving spouse”), survived the decedent.

On January 3, 1984, the Superior Court for the State of California for the County of Orange entered its final order distributing the estate as provided in decedent’s will. The superior court found that “[a]ll of the…