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Subclause (II) shall not apply to a power exercisable
only at or after the death of the surviving spouse. To
the extent provided in regulations, an annuity shall be
treated in a manner similar to an income interest in
property (regardless of whether the property from which
the annuity is payable can be separately identified).
We concluded in Estate of Clayton v. Commissioner, supra, that,
when the surviving spouse's income interest in the property is
contingent upon the executor's making a QTIP election, the
executor possesses the ability to control and to direct the
assets to someone other than the surviving spouse. We held that
the executor's ability to control and direct the assets was
tantamount to a power to appoint the property to someone other
than the surviving spouse. The statute expressly provides that
no person can have the power to appoint the property to anyone
other than the surviving spouse. Sec. 2056(b)(7)(B)(ii)(II).
The only exception to that prohibition is that it "shall not
apply to a power exercisable only at or after the death of the
surviving spouse." Sec. 2056(b)(7)(B)(ii)(II) (flush language).
Congress did not include within that exception a power
exercisable by the executor or a power exercisable prior to the
executor's making the election on the estate tax return.
I see no distinction between the situation in which the
executor is given such power during the period prior to the
filing of the estate tax return and the situation in which an
individual who is not the executor is given such power during
that period. The testator's coupling the power with the
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