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amounts were not subjected to the gift tax during her life nor
required to be included in her gross estate upon her death.2
It is the treatment of the amount over which decedent
possessed the power during the year of her death (the final
year's amount) that is at issue. It is respondent's position
that decedent's power had not lapsed at the time of her death,
making the exception under section 2041(b)(2) of the greater of
$5,000 or 5 percent of the value of assets (the section
2041(b)(2) exception) unavailable, and thereby subjecting the
final year's amount to the general rule of inclusion under
section 2041(a)(2).
It is the estate's position that the section 2041(b)(2)
exception extends to the final year's amount. The estate argues
that the example given in section 20.2041-3(d)(3), Estate Tax
Regs., is inconsistent with the language of section 2041(b)(2).
The estate also argues that the section 2041(b)(2) exception was
designed as a de minimis exception and that to include the final
year's amount in decedent's gross estate would defeat the purpose
of that section. Further, the estate argues that the final
year's amount should not be included because the estate has no
dominion or control over the trust property.
2 Sec. 2514(e) contains a similar provision for purposes of
gift tax.
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Last modified: May 25, 2011