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supplemented and reconsideration denied T.C. Memo. 1994-221,
affd. 68 F.3d 1027 (7th Cir. 1995). The lapse of such a power
during the lifetime of the person possessing the power is
considered a release of the power. In regard to the lapse of
such a power, section 2041(b)(2) provides:
The lapse of a power of appointment created after
October 21, 1942, during the life of the individual
possessing the power shall be considered a release of
such power. The preceding sentence shall apply with
respect to the lapse of powers during any calendar year
only to the extent that the property, which could have
been appointed by exercise of such lapsed powers,
exceeded in value, at the time of such lapse, the
greater of the following amounts:
(A) $5,000, or
(B) 5 percent of the aggregate value, at
the time of such lapse, of the assets out of
which, or the proceeds of which, the exercise
of the lapsed powers could have been
satisfied.
Decedent had the right to withdraw funds from the principal
of the trust. This power to consume in favor of decedent herself
was a general power of appointment. Decedent never exercised her
power. Decedent's right to withdraw was noncumulative, and thus
her failure to exercise her right by the end of each calendar
year prior to her death was a lapse of the power over the amount
available to her for that year. As the amounts over which
decedent's power lapsed each year before the year of her death
did not exceed those specified in section 2041(b)(2), those
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