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Section 302(a) of the Revenue Act of 1926, 44 Stat. 9, 70, provides that the value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated to the extent of the interest therein of the decedent at the time of his death.
At the time of decedent's passing, he was beneficiary of three trusts. Each of the trusts gave the decedent a general testamentary power of appointment over the trust property; in default of exercise of the power the properties were to go to his descendants, or if he had none, to his brother and sisters and their issue. The petitioner commissioner included all the trust property within the decedent's gross estate for the purpose of computing the federal estate tax. The board and the court of appeals, however, held that no part of the trust property should have been included. On review, the government argued that at the time of his death the decedent had an interest in the trust properties that should have been included in his gross estate, because he, to the exclusion of all other persons, could enjoy the income from them. The beneficiaries denied that the rights of the decedent with respect to any of the three trusts were substantially equivalent to ownership in fee.
Should the properties subject to a general testamentary power of appointment unexercised by the decedent be included as part of the decedent’s gross estate?
The court held that the words “interest of the decedent at the time of his death” were not intended by Congress to include property subject to a general testamentary power of appointment unexercised by the decedent. In fact, Congress specified that only the property subject to exercised powers should be included as part of the decedent’s gross estate.