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Throughout the estate's brief, the estate speaks of section
2041(b)(2) applying to lapsed powers in all years, including
those in the year of a taxpayer's death. The estate cites Estate
of Noland v. Commissioner, T.C. Memo. 1984-209, for this
proposition. We agree that section 2041(b)(2) applies to lapsed
powers in all years. Our holding in Estate of Noland v.
Commissioner is in accordance with that. In that case we held
that "under section 2041(b)(2), the amount includible in the
gross estate in this case for each of the years 1973 through 1978
is limited to the amount, if any, by which the lapsed portion of
the power exceeded $5,000."3 Id. (Emphasis added.) What the
estate fails to grasp in the instant case is that, at the time of
decedent's death on July 12, 1992, her power over the final
year's amount had not yet lapsed.
Section 20.2041-3(d)(3), Estate Tax Regs.
Respondent's treatment of the final year's amount follows an
example given in section 20.2041-3(d)(3), Estate Tax Regs., which
the estate says is inconsistent with section 2041(b)(2). That
example reads:
For example, assume that A transferred $200,000 worth
of securities in trust providing for payment of income
3 In that case the year of decedent's death was 1978, and
respondent did not determine any deficiency in estate tax (nor
seek any increased deficiency from the Tax Court) in regard to
the 1978 amount that had not lapsed at the time of her death in
1978. Thus we did not directly address the issue that is
presented in the instant case.
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