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for purposes of subsection (a), be
considered as passing to the
surviving spouse, and
(B) no part of the interest so
passing shall, for purposes of
paragraph (1)(A), be considered as
passing to any person other than
the surviving spouse.
This paragraph shall apply only if such power
in the surviving spouse to appoint the entire
interest, or such specific portion thereof,
whether exercisable by will or during life,
is exercisable by such spouse alone and in
all events.
Respondent determined and argues that the property passing
to Trust A does not qualify for the marital deduction because the
property is a terminable interest. Respondent reaches this
result mainly because, in respondent's view, the Agreement
revokes the surviving spouses's right to receive income from the
Trust, or to appoint the Trust's property, upon incompetency.
The estate argues primarily that the property is not a terminable
interest because the surviving spouse has a general power of
appointment over the Trust's assets that allows the surviving
spouse to dispose of these assets any time before the Trust
terminates on account of the surviving spouse's death or
incompetency. The estate asserts that the Agreement states
clearly that the intent of the Trust's settlors was to qualify
Trust A for the marital deduction. If the property is a
terminable interest, the estate argues alternatively, the
decedent's estate tax liability must be computed as if no
completed gift of property was made to the Trust before the
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Last modified: May 25, 2011