Estate of Eleanor R. Gerson, Deceased, Allan D. Kleinman, Executor - Page 14

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          1433(b)(2)(A).  Holding that the constructive addition principle            
          embodied in section 26.2601-1(b)(1)(v)(A), Temporary GST Tax                
          Regs., supra, was a reasonable construction of the statute, the             
          Court of Appeals rejected the taxpayer’s argument the word                  
          “added” in TRA 1986 section 1433(b)(2)(A) should be interpreted             
          according to its ordinary, literal meaning (thus requiring an               
          actual increase in the size of the trust as opposed to a                    
          constructive addition to the trust).  Peterson Marital Trust v.             
          Commissioner, 78 F.3d at 800.                                               
               The Court of Appeals also rejected the taxpayer’s argument             
          the regulation in question was invalid because it did not comport           
          with the purpose of the effective date provisions.  The taxpayer            
          argued Mrs. Peterson allowed her power of appointment to lapse in           
          an innocent effort to honor her husband’s wishes and no elaborate           
          legal maneuvers were employed in carrying out the transfers.  The           
          Court of Appeals responded as follows:                                      
               The [effective date] rule was not enacted to allow                     
               taxpayers who, in good faith and without intent to                     
               evade taxes, seek to continue benefitting from a tax                   
               advantage that Congress has eliminated.  It was                        
               designed, instead, to protect those taxpayers who, on                  
               the basis of pre-existing rules, made arrangements from                
               which they could not reasonably escape and which, in                   
               retrospect had become singularly undesirable.6  By                     
               giving Mrs. Peterson a general power of appointment                    
               over the trust, Mr. Peterson created an arrangement                    
               which was desirable under then-existing tax laws and                   
               which could be reworked completely should the laws                     
               change, as they in fact did.  There is no reason to                    
               “grandfather” such a mutable arrangement, and Congress                 
               has given no indication that it wished to do so.                       
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