Estate of Eleanor R. Gerson, Deceased, Allan D. Kleinman, Executor - Page 19

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               Section 26.2601-1(b)(1)(i), GST Tax Regs., now states in               
          pertinent part:                                                             
                    (b) Exceptions.  (1) Irrevocable trusts.  (i) In                  
               general.  The provisions of chapter 13 do not apply to                 
               any generation-skipping transfer under a trust (as                     
               defined in section 2652(b)) that was irrevocable on                    
               September 25, 1985.  * * *  Further, the rule in the                   
               first sentence of this paragraph (b)(1)(i) does not                    
               apply to a transfer of property pursuant to the                        
               exercise, release, or lapse of a general power of                      
               appointment that is treated as a taxable transfer under                
               chapter 11 or chapter 12.  The transfer is made by the                 
               person holding the power at the time the exercise,                     
               release, or lapse of the power becomes effective, and                  
               is not considered a transfer under a trust that was                    
               irrevocable on September 25, 1985. * * *                               
          In sum, section 26.2601-1(b)(1)(i), GST Tax Regs., recites the              
          general transitional rule set forth in TRA 1986 section                     
          1433(b)(2)(A) and excepts from the rule a transfer of property              
          pursuant to the exercise, release, or lapse of a general power of           
          appointment if that transfer is treated as a taxable transfer by            
          the power holder for purposes of Federal estate or gift taxes.              
          Section 26.2601-1(c), GST Tax Regs., provides that the amended              
          portion of the regulation is applicable on and after November 18,           
          1999.5                                                                      
          IV.  The Parties’ Positions                                                 
               Petitioner relies on the Eighth and Ninth Circuit cases,               
          Simpson and Bachler, for the proposition that the plain and                 
          unambiguous language of TRA 1986 section 1433(b)(2)(A) excepts              


               5  We note that decedent last amended and restated the                 
          Eleanor Gerson Trust on Sept. 13, 2000, some 10 months after the            
          Secretary first proposed to amend the regulation in dispute.                




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