Estate of Eleanor R. Gerson, Deceased, Allan D. Kleinman, Executor - Page 10

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          wife (Mrs. Peterson) was entitled to receive all of the income              
          and to withdraw one-half of the trust principal during her                  
          lifetime.  Mrs. Peterson also was given a testamentary general              
          power of appointment over the corpus of the marital trust.  Under           
          Mr. Peterson’s will, if Mrs. Peterson did not exercise her power            
          of appointment, the trust principal would be set aside in equal             
          shares for Mr. Peterson’s grandchildren.                                    
               Mrs. Peterson did not exercise her right to withdraw from              
          the principal of the trust, and she did not exercise her general            
          power of appointment over the trust corpus (except as to an                 
          amount necessary to pay estate tax attributable to the trust).              
          As a result, at the time of Mrs. Peterson’s death, most of the              
          trust property passed to Mr. Peterson’s grandchildren.                      
               The Commissioner determined the transfers to Mr. Peterson’s            
          grandchildren were subject to GST tax.  The Peterson Marital                
          Trust (the taxpayer) challenged the Commissioner’s determination            
          and asserted the transfers qualified for transitional relief from           
          GST under TRA 1986 section 1433(b)(2)(A).  The taxpayer argued              
          “Because the Marital Trust was irrevocable on September 25, 1985            
          * * * the subsequent transfers from that trust upon Mrs.                    
          Peterson’s death are exempt from the GST tax.”  Peterson Marital            
          Trust v. Commissioner, 102 T.C. at 796.  The Commissioner                   
          maintained the taxpayer was not eligible for transitional relief            
          under TRA 1986 section 1433(b)(2)(A) because the lapse of Mrs.              
          Peterson’s general power of appointment resulted in a                       




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