Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 66-38

1966-1 C.B. 212

IRS Headnote

There is a transfer of a beneficial interest in property, as defined under section 2013(e) of the Internal Revenue Code of 1954, to a decedent-transferee if that property interest meets the requirements of a general power of appointment within the meaning of section 2041 of the Code at the time of the transferor's death.

Full Text

Rev. Rul. 66-38

Advice has been requested whether, under the circumstances described below, a prior decedent transferred to a decedent a power of appointment representing a beneficial interest in property in computing the credit for tax on prior transfers under section 2013 of the Internal Revenue Code of 1954.

The gross estate, for Federal estate tax purposes, of the transferor included an annuity contract wherein the insurance company agreed to retain the proceeds of the contract and to pay the income to the decedent's surviving spouse for life, and upon her death to pay the proceeds of the contract then held to their son. The settlement plan provided that during the first contractual year the original payee, the surviving spouse, had the right to withdraw all or any part of the amount retained under the settlement option. Since this power was exercisable only during the first contractual year it was not exercisable in all events within the meaning of section 2056(b)(5) of the Code. Accordingly, no marital deduction was allowed in respect of the property in determining the estate tax liability of the estate of the transferor-decedent.

Section 2013(a) of the Code provides that the Federal estate tax imposed upon a decedent's estate shall be credited with all or part of the amount of the Federal estate tax paid with respect to the transfer of property (including property passing as a result of the exercise or nonexercise of a power of appointment) to the decedent by or from a person who died within 10 years before, or within 2 years after the decedent's death.

Section 2013(d) of the Code provides further that the value of the property transferred is `* * * the value used for the purpose of determining the Federal estate tax liability of the estate of the transferor * * *.' Such value of the property is determined as of the date of the transferor-decedent's death. See  Revenue Ruling 59-9, C.B. 1959-1, 232.

Section 2013(e) of the Code defines the term `property' to include `any beneficial interest in property, including a general power of appointment (as defined in section 2041).'

Since the decedent-transferee had the power, on the date of death of the transferor, to withdraw in her favor the entire amount retained by the insurance company unlimited by an ascertainable standard, she had a general power of appointment within the meaning of section 2041 of the Code. For purposes of the credit for tax on prior transfers, it is not required that a general power of appointment be exercisable `in all events' as is provided under section 2056(b)(5) of the Code with respect to the allowance of the marital deduction.

Accordingly, it is held that regardless of the date of death of the decedent-transferee, the value of the entire amount retained by the insurance company under the settlement plan of the annuity contract represents a transfer of a beneficial interest in property, as defined in section 2013(e) of the Code, passing to the decedent-transferee from the transferor.