- 21 -
proposition the transitional relief provided in section
1433(b)(2) was intended to protect taxpayers who “relying on pre-
existing rules, made arrangements from which they could not
reasonably escape”, respondent asserts section 26.2601-
1(b)(1)(i), GST Tax Regs., is a reasonable interpretation of TRA
1986 section 1433(b)(2)(A). In respondent’s view, the regulation
correctly focuses on whether a generation-skipping transfer was
mandated under a trust that was irrevocable on September 25,
1985, not (as petitioner contends) on whether the trust was
irrevocable on September 25, 1985. Respondent reasons that,
because the disputed generation-skipping transfers in this case
were not required or mandated under the trust, but were made at
the decedent’s election and pursuant to the exercise of a general
power of appointment under which decedent was deemed to be the
owner of the property for purposes of the Federal estate tax, the
transfers are not eligible for exemption from the GST tax under
TRA 1986 section 1433(b)(2)(A).
V. Analysis
This case presents a question of first impression concerning
the validity of section 26.2601-1(b)(1)(i), GST Tax Regs. We
evaluate the validity of the regulation against the plain
language of TRA 1986 section 1433(b)(2)(A), its origin, and its
purpose. Our analysis is informed in part by caselaw
interpreting the statute. This case is appealable to the Court
of Appeals for the Sixth Circuit, which to our knowledge has not
Page: Previous 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 NextLast modified: May 25, 2011