- 28 -
treated as the “transferor” of that property for purposes of GST
tax. Secs. 2603(a)(3), 2652(a)(1); 5 Bittker & Lokken, Federal
Taxation of Income, Estates & Gifts, par. 133.2.2 at 133-6 to
133-7 (2d ed. 1993). The regulation also promotes uniformity by
ensuring that generation-skipping transfers arising from the
lapse of a power of appointment on the one hand, and generation-
skipping transfers arising from the exercise of a power of
appointment on the other, are taxed in a similar manner.8
We also must not lose sight of the particular purpose of the
statute. As the Second Circuit discussed in Peterson Marital
Trust v. Commissioner, 78 F.3d at 801-802 n.6, the transitional
rules set forth in section 1433(b)(2) are so-called grandfather
provisions designed to protect taxpayers who, on the basis of
pre-existing rules, made estate-planning arrangements from which
they could not reasonably escape and which would otherwise
generate GST tax liability. The generation-skipping transfers in
the present case are not transfers the transitional rules were
8 In Simpson v. United States, 183 F.3d 812, 815-816 (8th
Cir. 1999), the Court of Appeals for the Eighth Circuit
distinguished Peterson Marital Trust v. Commissioner, 78 F.3d 795
(2d Cir. 1996), in part because the latter case concerned a lapse
of a power of appointment, which was treated as resulting in a
constructive addition to the trust. Considering that the holder
of general power of appointment is treated as having the same
outright “ownership” interest for purposes of Federal transfer
taxes, see secs. 2041 (estate tax), 2514(b) (gift tax), we fail
to see any meaningful difference for present purposes whether in
the end there is a lapse, exercise, or release of the power. See
Harrington et al., Generation Skipping Transfer Tax, par.
7.03[5][b][i] (2d ed. 2001) (questioning the Eighth Circuit’s
attempt at distinguishing Peterson Marital Trust).
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