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(b) Special Rules.--
* * * * *
(2) Exceptions.--The amendments made by this subtitle
shall not apply to--
(A) any generation-skipping transfer under a trust
which was irrevocable on September 25, 1985, but only
to the extent that such transfer is not made out of
corpus added to the trust after September 25, 1985 (or
out of income attributable to corpus so added),
September 25, 1985, apparently was selected as the effective date
for irrevocable trusts because the House Committee on Ways and
Means held a markup session on these matters on September 26,
1985. See Staff of the Joint Comm. on Taxation, 99th Cong., Tax
Reform Proposals in Connection with Committee on Ways and Means
Markup (JCS-44-85) (Sept. 26, 1985).
II. Caselaw
Before section 26.2601-1(b)(1)(i), GST Tax Regs. (discussed
below) was promulgated, this Court and others opined on the
applicability of the transitional or effective date provisions of
TRA 1986 section 1433(b)(2)(A).
A. Peterson Marital Trust v. Commissioner
In Peterson Marital Trust v. Commissioner, 102 T.C. 790
(1994), affd. 78 F.3d 795 (2d Cir. 1996), we were asked to decide
the validity of a regulation which provided that the lapse of a
general power of appointment resulted in a “constructive”
addition to the trust after the effective date of the GST tax.
In that case, E. Norman Peterson died in 1974 and left a will
providing for the creation of a marital trust under which his
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