Opinion
Docket No. 2383-82.
1986-06-11
ESTATE OF DAVID DAVIS IV, DECEASED, DAVID DAVIS V, EXECUTOR, Petitioner v. COMMISSIONER OF INTERNAL REVENUE, Respondent
Robert M. Bellatti and David J. Duez, for the petitioner. Matthew J. Fritz, for the respondent.
Decedent was survived by a widow, two children by the widow, and one child by a previous marriage. After making certain outright gifts, decedent's will disposed of balance of estate to two trusts, disposed of balance of estate to two trusts, the first for the the first for the widow and the second containing certain farm property for the primary benefit of all three children. The two children by the widow were named trustees of both trusts. The will also provided that (1) ‘the entire net income‘ of first trust was to be distributed to the widow annually; (2) widow had general power of appointment exercisable by will over corpus of first trust but if she exercised such power in such manner as to favor her children over decedent's child by previous marriage the trustees of second trust were directed to offset such favor in the distribution of the corpus of second trust; and (3) second trust was to terminate on death of last of three children, and on termination, corpus was to be distributed to surviving descendants of children, but if there were no surviving descendants of children, to three institutions, which are admittedly not ‘qualified heirs‘ under section 2032(A)(e)(1).
HELD, estate qualifies for special valuation under section 2032A with respect to farm property given to second trust because requirement in section 20.2032A-8(a)(2) of the Estate Tax Regulations that if successive interests are created by decedent in otherwise qualified property the special use valuation is not available unless all of the successive interests including de minimis amounts are received by qualified heirs is plainly inconsistent with the underlying statute and is invalid.
HELD, FURTHER, trust for widow is not disqualified for marital deduction under section 2056(b)(5) by (1) limiting widow's annual distribution to ‘the entire net income‘ as opposed to ‘all income,‘ (2) grant of broad administrative powers to trustees, including power to borrow money, pledge trust assets and determine whether a trust receipt was income or corpus, and (3) direction to trustees to offset any favor she might create for her children over decedent's other child in the exercise of her power of appointment. Robert M. Bellatti and David J. Duez, for the petitioner. Matthew J. Fritz, for the respondent.
SHIELDS, JUDGE:
Respondent determined a deficiency in petitioner's Federal estate tax in the amount of $1,332,388.48. The issues for decision are: (1) whether petitioner is entitled to use the special use valuation for certain farm properties under section 2032A; and (2) whether the testamentary trust created by decedent for his surviving wife qualifies for the marital deduction under section 2056(b)(5).
FINDINGS OF FACT
Some of the facts have been stipulated and are so found. The stipulation of facts and exhibits attached thereto are incorporated herein by reference.
David Davis IV (hereinafter referred to as decedent) died testate on April 14, 1978, a resident of Bloomington, Illinois. His son, David Davis V, thereafter qualified before a local court as the executor of his estate (petitioner). The son also resided in Bloomington when the petition herein was filed. A timely estate tax return was filed for petitioner with the District Director of Internal Revenue at Springfield, Illinois.
Decedent was an attorney and a former member of the Illinois State Legislature. He was survived by his widow, Nancy S. Davis, and their two children, a daughter, Elizabeth Davis Kater, and the son, David Davis V. He was also survived by another daughter, Alice Davis Cates, from a previous marriage, and by five grandchildren.
Decedent drafted his own will which contained two trusts. The first, a trust for Nancy, is set forth in the eighth clause of the will as follows:
I give, devise and bequeath unto my son, DAVID DAVIS, V., and my daughter, ELIZABETH DAVIS KATER, as Trustees and their successors, such portion of the rest, residue and remainder of my estate as will when added to the value of our residence devised to my wife pursuant to clause SECOND of this Will have a value, as finally determined for Federal Estate Tax purposes, of two million, three hundred thousand dollars ($2,300,000.00). Said Trustees shall hold such property in trust for the uses and purposes hereinafter set forth. My Executor shall assign, convey and distribute to said Trustees the cash, securities and other property including real estate and interests therein which shall constitute this gift. The assets to be distributed in satisfaction of this clause shall be selected in such manner that the cash and other property distributed will have an aggregate fair market value fairly representative of the distributees' proportionate share of the appreciation of all property then available for distribution. Any property included in my estate at the time of my death and assigned or conveyed in kind to satisfy said bequest, shall be valued for that purpose at the value thereof as finally determined for Federal Estate Tax purposes; and any other property so assigned and conveyed shall be valued for that purpose at its cost. No asset nor the proceeds of any asset shall be included in said bequest as to which a marital deduction is not allowable if included. Said bequest shall abate to the extent that it cannot be satisfied in the manner herein provided.
POWERS OF TRUSTEES: Said Trustees shall have the powers and authority given them by law and in addition thereto, shall have the powers and authority hereinafter, by this instrument, provided. The enunciation of powers in this instrument shall not be construed as a limitation upon the powers of the Trustees conferred by law, but as in addition thereto.
DISTRIBUTION OF INCOME: I direct that my said Trustees shall pay at least annually the entire net income from this trust to my wife, NANCY S. DAVIS, for and during the term of her natural life.
Should it be at any time necessary, in order to provide for unusual medical expenses or to enable my said wife to live in the manner to which she has been accustomed during my lifetime, I authorize the Trustees to pay to her or to use for her benefit such portion of the principal of this trust as said Trustees in their judgment shall deem necessary for that purpose.
POWER OF APPOINTMENT: I give to my said wife the power to appoint and direct, by Will, the disposition upon her death of the entire corpus of this trust or any part or portion thereof, free and clear of the limitations and provisions of the trust.
DISTRIBUTION OF PRINCIPAL: In the event, however, that my said wife shall fail to exercise the power of appointment given her by the foregoing paragraph or shall exercise such power with respect to a portion of the corpus of this trust only, then I direct that upon her death my Trustees aforesaid shall convey all corpus of this trust not disposed of by direction of my wife as above provided to the then acting Trustees or Trustee of the trust provided for by clause NINTH of this Will, to be held according to the uses and purposes of that trust, and thereupon this trust shall cease and determine.
The second trust, which is for the primary use and benefit of the decedent's children, appears in the ninth clause of the will as follows:
The rest, residue and remainder of my estate, whether real, personal or mixed, and wherever situate, I give, devise and bequeath unto my son, DAVID DAVIS, V., and my daughter, ELIZABETH DAVIS KATER, as Trustees, in trust, however, for the following uses and purposes:
POWERS OF TRUSTEES: Said Trustees shall have the powers and authority given them by law and in addition thereto, shall have the powers and authority hereinafter, by this instrument, provided. The enunciation of powers in this instrument shall not be construed as a limitation upon the powers of the Trustees conferred by law, but as in addition thereto.
DISTRIBUTION OF INCOME: I direct said Trustees to pay on or about July 29th of each year the sum of $1,000.00 to my daughter-in-law, Geneta B. Davis, and an equal amount to my son- in-law, James Kater, such payments to continue to each so long as she or he remains married to my son or daughter as the case may be, but to terminate upon divorce or the death of the spouse. Such payments shall be made from the net income of the trust. These payments shall begin in the third year following my death.
I direct said Trustees to pay twenty-six per cent (26%) of the net income of this trust not otherwise distributed to my daughter, ALICE DAVIS CATES, thirty-seven per cent (37%) thereof to my son, DAVID DAVIS, V., and thirty-seven per cent (37%) thereof to my daughter, ELIZABETH DAVIS KATER. Distribution of income shall be made annually or more frequently.
Upon the death of my daughter, Alice, my son, David, or my daughter, Elizabeth, during the term of this trust, the share of income of such decedent shall be paid as follows:
(a) If there is a spouse and a child or children of such decedent surviving, then one-half to the spouse and one-half to be used for the benefit of the children, in equal shares.
(b) If there is a spouse and no child surviving such decedent, then one-half to such spouse and the remaining one- half to my other descendants, per stirpes.
(c) If there is no spouse, but there is a child or are children surviving such decedent, then the decedent's share of income shall be distributed equally among his or her surviving descendants, per stirpes.
(d) If no spouse nor descendants survive the decedent, then the decedent's share shall be paid to my other descendants, per stripes.
Upon the death or remarriage of the spouse of any of my said children who has died, distribution of income to such spouse shall cease and distribution of income thereafter shall be made as if such spouse had predeceased my deceased child.
Should it become necessary for the reasonable and comfortable support, education or medical care of any descendant of mine, then I authorize said Trustees, in their sole discretion, to use such portion of the principal for the benefit of such descendant as they may determine to be necessary. Principal so used shall be treated as an advance distribution to such descendant and shall be credited against the share of the trust to which he or she would be entitled, if any, upon final distribution.
This trust shall cease and determine upon the death of whichever of my three children last survives me.
During the term of the trust any one of my said children may at any time, or from time to time, by written instrument or by Will require the Trustees to convey and deliver to him or to her or to such other person or persons as he or she may designate a portion of the principal not exceeding in aggregate value the following to wit: with respect to Alice D. Cates 13% of the net value of the corpus of the trust; with respect to each of David Davis, V. and Elizabeth D. Kater 19% of the net value of the corpus of the trust. The Trustees shall have nine months from the date that demand in writing in this regard is made to them in which to make such conveyance and delivery. Income payable to any child requiring such distribution shall abate proportionately.
DISTRIBUTION OF PRINCIPAL: Upon termination of this trust the Trustees shall make division of all of the assets of the trust and shall convey and deliver them as follows:
To the descendants of Alice D. Cates 26% thereof, less any amount previously paid over or distributed pursuant to the direction of my said daughter; to the descendants of my son David Davis, V. 37% of such assets, less any amount previously paid over or distributed pursuant to the direction of my said son, and; 37% to the descendants of my daughter, Elizabeth D. Kater, less any amount previously paid over or distributed pursuant to the direction of my said daughter.
In the event that my wife, Nancy S. Davis, has exercised the ‘POWER OF APPOINTMENT‘ granted her under the EIGHTH clause of this Will in such manner as to create a preference in favor of our daughter, Elizabeth, our son, David, or one or more of their descendants, thereby reducing the share distributable to descendants of my daughter, Alice, below the amount which would be distributable to them if such appointment had not been made, then, in that event, there shall be distributed to the descendants of my said daughter, Alice, a portion of this trust which will in the best judgment of the Trustees making final distribution provide said descendants with substantially the same share of my total estate as they would have received if my said wife had not exercised the power of appointment so granted to her by the EIGHTH clause of this Will, and in that event the balance of the corpus of this trust shall be divided equally between the descendants of my son, David, and
If there is no descendant of mine living at the time of termination of this trust, then the assets of this trust shall be apportioned and distributed as follows:
One-Fourth to the Trustees of the Second Presbyterian Church of Bloomington, Illinois, for the use of said Church as said Trustees may determine.
One-Fourth to the University of South Dakota Law School Foundation to endow a professorship at said Law School.
The remaining one-half to The National Bank of Bloomington, Illinois, to be held in trust by said bank, the principal to be kept invested and the income used to maintain and operate the Judge David Davis residence, now the property of the people of the State of Illinois. If said residence shall cease to exist or shall no longer be used as a public display, the Trustee shall use said income to support such charitable, religious and educational projects of the community as it may deem to be of greatest benefit to the people of the City of Bloomington and the surrounding communities.
In addition to the powers given to the trustees under the eighth and ninth clauses of the will, decedent also included trustee powers in the thirteenth clause as follows:
The provisions of this section shall apply equally to the trusts created by clauses EIGHTH and NINTH of this Will unless otherwise specifically provided. The Trustees thereof shall stand seized of all of the real estate, with full power to sell and convey or encumber the same; and shall manage, rent and control such real estate in all respects as a prudent owner would his own. They shall keep the major buildings on any real estate insured against loss by fire or windstorm and shall pay all taxes and assessments levied against the property of the trust before penalty accrued thereon. They shall have power to make such leases or other agreements for the operation of the land, as I might make, if living, and shall not be restricted to the lifetime of any beneficiary in fixing the term of any such lease or agreement.
I further authorize my Trustees to borrow money secured by the lien of either trust fund or by mortgage upon all or any part of the trust property, real or personal, at any time when in the judgment of the Trustee or Trustees affected the best interests of the trust estate will be thereby promoted.
I authorize said Trustees to determine what is income with respect to each trust and what is principal, and to use income to pay any interest or principal due or payable on any indebtedness of either trust estate. I direct that dividends payable in stock shall be considered as an increment to the trust and not distributable as income to the beneficiaries.
Division of the corpus of the ‘CHILDREN'S TRUST‘ at the time of final distribution shall be left to the sole discretion of the Trustees whose judgment shall, in the absence of bad faith, be final. During the concurrence of terms of both trusts the Trustees of either trust may hold my property or any part or parcel thereof as tenant in common with the other trust or with another person or persons if such Trustees see fit so to do.
On the estate tax return, petitioner elected to use the special use value under section 2032A(a)(2) for certain farm property passing to the children's trust. At decedent's death the fair market value of this farm property was $704,344.98 and its special use value was $204,344.98. Respondent disallowed the election because the ultimate remainder beneficiaries of the trust are admittedly not qualified heirs of the decedent under section 2032A(e)(1). The parties agree that the actuarial probability that none of decedent's descendants will survive his three children and the termination of the trust so as to permit the trust property to pass to the contingent remainder beneficiaries is only .0152.
Respondent also determined that the trust for Nancy did not qualify for the marital deduction under section 2056.
OPINION
SPECIAL VALUATION UNDER SECTION 2032A
In order to qualify for special use valuation under section 2032A(a)(2) real property must meet the requirements of section 2032A(b)(1), which provides that ‘(f)or purposes of this section, the term 'qualified real property’ means real property located in the United States which was acquired from or passed from the decedent to a qualified heir of the decedent * * *.‘ A qualified heir of the decedent is defined in section 2032A(e)(1) as being ‘a member of the decedent's family who acquired such property (or to whom such property passed) from the decedent.‘
With respect to successive interests in property, section 20.2032A-8(a)(2), Estate Tax Regs., provides in pertinent part as follows:
IF SUCCESSIVE INTERESTS (E.G. LIFE ESTATES AND REMAINDER INTERESTS) ARE CREATED BY A DECEDENT IN OTHERWISE QUALIFIED PROPERTY, AN ELECTION UNDER SECTION 2032A IS AVAILABLE ONLY WITH RESPECT TO THAT PROPERTY (OR PORTION THEREOF) IN WHICH QUALIFIED HEIRS OF THE DECEDENT RECEIVE ALL OF THE SUCCESSIVE INTERESTS, and such an election must include the interests of all of those heirs. For example, if a surviving spouse receives a life estate in otherwise qualified property and the spouse's brother receives a remainder interest in fee, no part of the property may be valued pursuant to an election under section 2032A. WHERE SUCCESSIVE INTERESTS IN SPECIALLY VALUED PROPERTY ARE CREATED, REMAINDER INTERESTS ARE TREATED AS BEING RECEIVED BY QUALIFIED HEIRS ONLY IF SUCH REMAINDER INTERESTS ARE NOT CONTINGENT UPON SURVIVING A NONFAMILY MEMBER OR ARE NOT SUBJECT TO DIVESTMENT IN FAVOR OF A NONFAMILY MEMBER. (Emphasis added.) It is the interpretation and validity of section 20.2032A-8(a)(2), Estate Tax Regs., which is at issue in this case.
Section 2032A was enacted as part of the Tax Reform Act of 1976. The legislative history accompanying new section 2032A clearly stated that the intended purpose of the statute was as a relief provision to permit continued farming or business operations by the decedent's family. This purpose was explained in the House Ways and Means Committee Report which provided, in pertinent part:
Your committee believes that, when land is actually used for farming purposes or in other closely held businesses (both before and after the decedent's death), it is inappropriate to value the land on the basis of its potential ‘highest and best use‘ especially since it is desirable to encourage the continued use of property for farming and other small business purposes. Valuation on the basis of highest and best use, rather than actual use, may result in the imposition of substantially higher estate taxes. In some cases, the greater estate tax burden makes continuation of farming, or the closely held business activities, not feasible because the income potential from these activities is insufficient to service extended tax payments or loans obtained to pay the tax. Thus heirs may be forced to sell the land for development purposes.
However, your committee recognizes that it would be a windfall to the beneficiaries of an estate to allow real property used for farming or closely held business purposes to be valued for estate tax purposes at its farm or business value unless the beneficiaries continue to use the property for farm or business purposes, at least for a reasonable period of time after the decedent's death. * * *
For these reasons, your committee has provided for special use valuation in situations involving real property used in farming or in certain other trades or businesses, but has further provided for recapture of the estate tax benefit where the land is prematurely sold or is converted to nonqualifying uses. H. Rept. No. 94-1380 (1976), 1976-3 C.B. (Vol. 3) 735, 755-756. This explanation was reiterated in both the Senate Finance Committee Report and the Joint Committee Report. Staff of Joint Comm. on Taxation, 94th Cong., 2d Sess., General Explanation of the Tax Reform Act of 1976 (1976), 1976-3 C.B (Vol. 2) 1, 549; S. Rept. No. 94-938 (1976), 1976-3 C.B. (Vol. 3) 49, 657. Congressional desire to preserve family farms and businesses was again expressed in the legislative history of the Economic Recovery Tax Act of 1981. Staff of Joint Comm. on Taxation, 97th Cong., lst Sess., General Explanation of the Economic Recovery Tax Act of 1981 at 244 (J. Comm. Print 1981); S. Rept. No. 97-144 (1981), 1981-2 C.B. 412, 463; H. Rept. No. 97-201 (1981), 1981-2 C.B. 352, 381.
In 1984 Congress expressed concern that the Internal Revenue Service was interpreting section 2032A in a more restrictive manner than contemplated by Congress. In a Senate floor amendment in which he proposed the perfection provision now contained in section 2032A(d)(3), Senator Dixon stated his views on Internal Revenue Service administrative policy under section 2032A:
The law and the report (the 1976 House Ways and Means Committee Report) both state the public policy issue directly and forcefully. Congress wants to continue the family farm and small family-owned enterprises. Congress does not want the death of the owner of a family farm or a small family-operated business to force the sale of that farm or business if the family wants to stay in farming or the small business. The idea was to not permit the Federal estate tax to destroy farms or small businesses.
There seems to be people at the IRS, however, who are not interested in preserving family farms and small businesses, and who want to use the slightest technicality to prevent an estate from being valued under the provisions of section 2032A.
130 Cong. Rec. S4318 (1984).
Section 2032A, as enacted and amended, did not specifically provide for the situation in which property passed from the decedent to successive interest holders in a trust. However, the legislative history of the statute clearly indicates that Congress intended section 2032A to apply where there were successive interests. Both the Joint Committee Report and the House Ways and Means Committee Report refer to successive interests in their discussion of liability for recapture ax. The Joint Committee Report provides, in pertinent part:
In general, if the qualified heir dies without having disposed of the property or converted it to a nonqualified use or a period of 15 years from the decedent's death lapses, the potential liability for recapture will cease. * * * However, if the decedent leaves qualified real property to two or more qualified heirs with successive interests in the property and the special use valuation is elected, potential liability for the recapture tax is not diminished, and none of the property is to be released from potential liability for the recapture tax, until the death of the last of the qualified heirs (or, if earlier, upon the expiration of 18 years from the date of the death of the decedent). Staff of Joint Committee on Taxation, 94th Cong., 2d Sess., General Explanation of the Tax Reform Act of 1976 (1976), 1976-3 C.B. (Vol. 2) 1, 553-554. The House Ways and Means Committee Report is substantially identical to the Joint Committee Report. H. Rept. No. 94- 1380 (1976), 1976-3 C.B. (Vol. 3) 735, 760. The legislative history further provides that in a trust situation property is ‘deemed to have passed from the decedent to a qualified heir to the extent that the qualified heir has a PRESENT interest in that trust property. ‘ (Emphasis added.) Staff of Joint Committee on Taxation, 94th Cong., 2d Sess., General Explanation of the Tax Reform Act of 1976 (1976), 1976-3 C.B. (Vol. 2) 1, 551; S. Rept. No. 94-1236 (1976), 1976-3 C.B. (Vol. 3) 807, 960.
‘Present interest‘ was not defined in the legislative history of the Tax Reform Act of 1976. However, in the Economic Recovery Tax Act of 1981 Congress cited the definition of ‘present interest‘ used in the gift tax regulations. These regulations provided that a present interest was ‘(a)n unrestricted right to the immediate use, possession, or enjoyment of property or income from property.‘ Sec. 25.2503-3(b), Gift Tax Regs. Staff of Joint Comm. on Taxation, 97th Cong., lst Sess., General Explanation of the Economic Recovery Tax Act of 1981 at 251 (J. Comm. Print 1981); H. Rept. 97-218 (Conf.) (1981), 1981-2 C.B. 481, 510; H. Rept. No. 97-201 (1981), 1981-2 C.B. 352, 380 n. 8. In the same legislation Congress clarified that an election under section 2032A was available where property passed to a discretionary trust in which no qualified heir had a present interest if ‘ALL of the beneficiaries of (the trust) are qualified heirs.‘ Sec. 2032A(g). See also Staff of Joint Comm. Taxation, 97th Cong., lst Sess., General Explanation of the Economic Recovery Tax Act of 1981 at 251 (J. Comm. Print 1981); H. Rept. 97-215 (Conf.) (1981), 1981-2 C.B. 481, 510; H. Rept. No. 97-201 (1981), 1981-2 C.B. 352, 380 n. 8. Neither the statute nor the legislative history requires that all successive beneficiaries be qualified heirs. However, the Secretary has added this requirement in section 20.2032A-8(a)(2), Estate Tax Regs.
Here, petitioner claims that section 20.2032A-8(a)(2), Estate Tax Regs., is invalid as applied to the property subject to testamentary disposition in this case. The testamentary disposition in the decedent's will which might result in a nonqualified taker, i.e., the charitable beneficiaries, was obviously added to prevent the ultimate disposition of the property to unintended takers, including the state by escheat. Until a disposition to the charitable beneficiaries occurs which is, in effect, a default to prevent disposition to unintended takers, the scheme of the statute is complied with. Only when the default occurs, which is an event of remote possibility, is there a problem, if at all then. Any estate planner ‘worth his salt‘ will insert a provision to cure default by providing for a taker in default to prevent disposition of the property by intestacy. However, in order to comply with the requirement imposed by the Secretary, the estate planner must ignore prevailing wisdom in testamentary planning.
MARITAL DEDUCTION
We now turn to the question of whether the trust created under decedent's will for the benefit of his widow qualifies for the marital deduction under section 2056(b)(5). In this connection we will focus primarily upon three of the will clauses: the eighth, which establishes a trust for decedent's wife, Nancy (the marital trust); the ninth, which establishes a trust for decedent's children (the children's trust); and the thirteenth, which details the powers of the trustees of both trusts.
Two of decedent's children, David and Elizabeth, are designated as trustees of the marital trust. The trustees are to pay ‘the entire net income‘ from the trust to the surviving wife, Nancy, ‘at least annually‘ during her natural life. Nancy is also granted the power to appoint by will the corpus of the marital trust free of any of the limitations and provisions of the trust. The ninth clause provides, however, that if Nancy exercises the power of appointment in her trust in such a way as to create a preference in favor of Elizabeth or David, over Alice (a third child of decedent from a previous marriage), the property in the children's trust is to be distributed in such a manner as to provide decedent's three children or their descendants with substantially the same share of the decedent's total estate as they would have received if Nancy had not exercised her power of appointment.
David and Elizabeth are also designated as trustees of the children's trust. The ‘net income‘ and the corpus of this trust is to pass to decedent's three children, 26 percent to Alice, 37 percent to David, and 37 percent to Elizabeth.
Under the will the trustees of each trust have all trust powers provided by law plus certain specific powers set forth in the thirteenth clause including the power to encumber properties in both trusts and to borrow money secured by a lien on either trust fund; or any trust property. In addition, the trustees are empowered to determine what is income and what is principal with respect to the trusts and to use income ‘to pay any interest or principal due or payable on any indebtedness of either trust estate.‘
Respondent views the disposition in the eighth clause of ‘the entire net income‘ of the trust to decedent's wife as not being equivalent to a bequest of ‘all the income‘ as required by section 2056(b). He points out that decedent's intention with respect to the term ‘income‘ is not clear because he used the term in at least three different ways in the will. Respondent further contends that the income the widow is to receive under the marital trust could be diverted with the powers decedent granted to the trustees in the thirteenth clause. In this respect, respondent notes that while the trustees of Nancy's trust are her children and normally would be expected to be sympathetic to her needs, the children still have a conflicting interest under their own trust and might favor their interest at the expense of Nancy. Respondent also argues that Nancy's power of appointment is limited by the provision in the ninth clause that if she acts to favor the children of decedent and herself, over Alice, decedent's child from the previous marriage, then the assets of the children's trust are to be distributed so far as possible in such a manner as to treat Alice or her descendants in the same manner as they would have been treated without the exercise of the power. Respondent alternatively argues that 26 percent of the property passing into the marital trust is not eligible for the marital deduction because the ninth clause deprives the widow of the right to exercise alone and in all events the power to appoint that amount (equal to Alice's portion of the children's trust). Respondent concludes that all of these factors serve to indicate that while decedent may have intended to take advantage of the marital deduction provisions, he did not give his widow sufficient rights to satisfy the requirements of section 2056.
Petitioner contends that decedent's will evidences a well- reasoned estate plan designed by decedent to leave his widow with her share of their combined income prior to decedent's death and insists that the eighth clause can only be interpreted as providing that all the income of the marital trust passes to decedent's widow.