Cir

The Estate of Anne W. Morgens (“the Estate”) appeals the United States Tax Court’s decision that it owed additional estate taxes. This case presents the question whether gift taxes paid by the donee trustees of a Qualifying Terminable Interest in Property (QTIP) trust, based on a 26 U.S.C. § 2519 deemed inter vivos transfer of the QTIP property within three years of the donor’s death, must be included in the transferor’s gross estate under the so-called “gross-up rule” of § 2035(b). We hold that it does. We have jurisdiction under § 7482, and we affirm.

I. Statutory Background

This case turns on two statutory schemes within the Internal Revenue Code. The first is § 2035(b), the “gross-up rule,” which requires that a gross estate be increased by the amount of gift taxes paid by the decedent or her estate within three years of her death. Section 2035 states, in relevant part:

(emphasis added). We have explained before the purpose and structure of the gross-up rule of § 2035(b).

Brown v. United States, 329 F.3d 664, 667-68 (9th Cir.2003) (citations omitted).

The second statutory scheme in this case is the QTIP regime. The QTIP is an exception to an exception to an…