Shaffer v. Commissioner of Revenue, 148 N.E.3d 1197

Decedent Adelaide P. Chuckrow (surviving spouse) died domiciled in Massachusetts in 2011; her predeceasing husband Robert had created a QTIP trust in New York at his death in 1993.
The QTIP trust consisted entirely of intangible assets (stocks, a limited partnership interest); trustees were the decedent's adult daughters, who were remainder beneficiaries; decedent had only a qualifying income interest for life and no power of appointment.
Robert’s estate claimed the full marital (QTIP) deduction on its Federal and New York returns; Robert’s estate did not file a Massachusetts return or make a Massachusetts QTIP election.
The surviving spouse’s estate included QTIP assets on the Federal estate tax return but excluded them from the Massachusetts estate tax return; Massachusetts audited and assessed an additional $1,809,141.88 based on the Federal gross estate.
The Appellate Tax Board upheld the assessment; one commissioner dissented. The Supreme Judicial Court granted direct review and affirmed the board.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Massachusetts may tax intangible QTIP assets when the QTIP was created by a predeceasing spouse domiciled in another state	Shaffer (the estate) argued there was only one transfer—at the predeceasing spouse's death—so MA lacks constitutional nexus to tax the QTIP assets	Commissioner argued QTIP treatment creates a second transfer at the surviving spouse's death and decedent's MA domicile supplies nexus	Held: Two transfers occur for estate tax purposes (creation/election and later transfer at surviving spouse's death); MA domicile of surviving spouse permits taxation of intangibles under Fourteenth Amendment and art. 10
Whether G. L. c. 65C, § 1(f) (definition of "Massachusetts gross estate") excludes QTIP assets here because no Massachusetts QTIP election was made	Shaffer argued § 1(f) excludes QTIP property unless a MA QTIP election was made for the predeceasing spouse, so the assets should not be includable under § 2A	Commissioner argued § 2A governs and requires inclusion of assets reported in the Federal gross estate; § 1(f)/§ 3A apply only when a Massachusetts QTIP election exists	Held: § 1(f) and § 3A do not apply where no MA QTIP election was made; § 2A requires inclusion of assets reported on the Federal gross estate, so QTIP assets are taxable in MA

Fernandez v. Wiener, 326 U.S. 340 (1945) (broad definition of "transfer" for estate tax purposes; death can effect changes in legal/economic relationships)
Curry v. McCanless, 307 U.S. 357 (1939) (domicil supports state taxation of intangible assets)
Graves v. Schmidlapp, 315 U.S. 657 (1942) (intangibles associated with owner are taxable at place of domicile)
Frick v. Pennsylvania, 268 U.S. 473 (1925) (limitations on taxing tangible property located outside state)
Knowlton v. Moore, 178 U.S. 41 (1900) (estate tax characterized as tax on transfer at death)
Estate of Brooks v. Commissioner of Revenue Servs., 325 Conn. 705 (2017) (Connecticut Supreme Court upheld taxing QTIP assets where surviving spouse died domiciled in Connecticut)
Estate of Morgens v. Commissioner, 678 F.3d 769 (9th Cir. 2012) (describing QTIP regime as treating surviving spouse as deemed to receive and then give entire QTIP property)
Estate of Clayton v. Commissioner, 976 F.2d 1486 (5th Cir. 1992) (historical discussion of marital deduction and QTIP)