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A marital deduction generally is not allowable for a
“terminable interest”, which is a property interest that will
terminate or fail “on the lapse of time, on the occurrence of an
event or contingency, or on the failure of an event or
contingency to occur”. Sec. 2056(b)(1); see Estate of Clack v.
Commissioner, supra. An interest in the nature of a life estate
generally is not eligible for the marital deduction. Estate of
Doherty v. Commissioner, 95 T.C. 446 (1990), revd. on other
grounds 982 F.2d 450 (10th Cir. 1992); see Estate of Kyle v.
Commissioner, 94 T.C. 829 (1990); see also Estate of Nicholson v.
Commissioner, 94 T.C. 666 (1990).
Section 2056(b)(5) is an exception to the section 2056(b)(1)
terminable interest rule. Section 2056(b)(5) provides:
SEC. 2056(b) Limitation in the Case of Life Estate or Other
Terminable Interest.--
* * * * * * *
(5) Life estate with power of appointment in surviving
spouse.–-In the case of an interest in property passing from
the decedent, if his surviving spouse is entitled for life
to all the income from the entire interest, or all the
income from a specific portion thereof, payable annually or
at more frequent intervals, with power in the surviving
spouse to appoint the entire interest, or such specific
portion (exercisable in favor of such surviving spouse, or
of the estate of such surviving spouse, or in favor of
either, whether or not in each case the power is exercisable
in favor of others), and with no power in any other person
to appoint any part of the interest, or such specific
portion, to any person other than the surviving spouse–-
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