Navigating Audit, Appeals and Litigation: The IRS’ Perspective

Power of Appointment Causes-Inclusion in Decedent’s Estate

Technical Advice Memorandum 200907025

(TAM 200907025)

Decedent was the sole beneficiary of a trust over which he was granted a power of appointment.  An issue arise as to whether the power of appointment was a general power of appointment for IRC section 2041 purposes.  The language of decedent’s trust stated that the decedent was entitled to discretionary distributions of the trust’s net earnings throughout his life, a right of distribution of the trust estate at the trust’s termination, and an equitable interest in the trust at his death.  The decedent did not have a right to the distribution of the trust corpus during the decedent’s lifetime.

The IRS ruled that because there is a presumption that appointment powers are presumed to be general in the absence of an expressed contrary intent, and since the language of the trust did not restrict decedents ability to exercise the power, the power of appointment was a general one.  The IRS noted that the trust document did not contain any language that limited the decedent’s power of appointment exclusively to the discretionary distributions.  The IRS also found that the fact that the decedent could not receive the corpus of the trust was irrelevant for purposes of determining the scope of the power of appointment.  Because the decedent had a power of appointment over his entire interest in the trust, the value of the trust was includible in the decedent’s gross estate.

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