The FMV of all QTIP property previously qualifying for the marital deduction is included in the surviving spouse's estate.

• A. Decedent's estate
• B. Surviving spouse's estate
• C. Beneficiary's estate
• D. Spouse's estate

Answer: (B)

The main idea being tested is how QTIP property interacts with the marital deduction and the timing of estate tax inclusion. When property passes to a surviving spouse with a QTIP election, the transfer can qualify for the unlimited marital deduction at the first death, so the value is not included in that decedent’s gross estate. However, the tax protection is not permanent—the property remains within the survivor’s control and is included in the surviving spouse’s gross estate when the survivor dies. This means the fair market value of all QTIP property that qualified for the marital deduction is added to the surviving spouse’s estate for estate tax purposes at the second death.

So the correct concept is that the FMV of QTIP property is included in the surviving spouse’s estate, not in the decedent’s estate or in a non-spouse beneficiary’s estate.