t c memo united_states tax_court estate of charles n aronson deceased barney p aronson executor petitioner v commissioner of internal revenue respondent docket no filed date roger b simon for petitioner jennifer s mcginty for respondent memorandum findings_of_fact and opinion vasquez judge respondent determined a deficiency of dollar_figure in the federal estate_tax of the estate of charles n aronson decedent unless otherwise indicated all section references are to the internal_revenue_code in effect for the date of decedent’s death the sole issue for decision is whether an interest in the trust created by decedent’s will qualifies for the estate_tax_marital_deduction as qualified_terminable_interest_property qtip within the meaning of sec_2056 findings_of_fact some of the facts have been stipulated and are so found the stipulation of facts and the attached exhibits are incorporated herein by this reference at the time of his death on date decedent resided in cattaraugus county new york at the time of decedent’s death decedent and josephine r aronson jo were married--and had been married years--and they were u s citizens and residents decedent was survived by among others jo barney r aronson barney who is jo’s son and decedent’s adopted son and barney p aronson bar who is barney’s son and decedent’s grandson bar is the executor of decedent’s estate at the time the petition was filed bar resided in arcade new york decedent was born in near lincoln nebraska decedent was a knowledgeable businessman decedent founded and ran aronson machine co he retired in decedent was a strong-willed bullheaded man he was self made and even though he had only a high school education he felt superior to everyone else in general decedent disliked attorneys he felt attorneys were out to get his money at the time decedent died bar and decedent lived pincite0 bixby hill road arcade new york hundred acres there were two houses on hundred acres decedent and jo lived in the big house and bar and his wife charlene voit aronson charlene lived in the little house while living on hundred acres bar took care of decedent jo and hundred acres bar was responsible for maintaining hundred acres decedent met with bar once a week to discuss the maintenance of hundred acres to inform bar of anything that required attention and to chastise bar if he did not get things done in a timely fashion decedent had conversations with bar regarding estate_taxes and jo’s income decedent however never discussed leaving a qtip to jo on date decedent executed a will will the will revoked all prior wills and codicils in the first article of the will decedent gave all of his personal effects household effects motor vehicles works_of_art and tangible_personal_property to jo the will also provided second if my wife survives me i hereby create a marital trust there shall be allocated to the marital trust that amount if any which when added to any other sums allowable in determining the marital around bar had moved into the little house on hundred acres deduction in the federal estate_tax proceeding relating to my estate shall equal the maximum marital_deduction allowable in such proceeding notwithstanding the foregoing such amount shall not exceed that minimum sum which when added to such other sums will have the effect of reducing to zero the federal estate_tax after giving effect to all credits against tax determined in such proceeding the marital trust which is an amount and not a fractional share shall be established with cash or any other assets qualifying for the marital_deduction first preference to be given to assets not subject under the internal_revenue_code to a credit_for_foreign_death_taxes all assets allocated to the marital trust shall be valued as of their respective dates of distribution the marital trust shall be held upon the following terms a the entire net_income of the marital trust shall be paid to my wife josephine r aronson at least quarter-annually during her lifetime third if my wife survives me i give all the rest of my property real and personal wherever situated herein called my residuary_estate to my trustee to hold as a family_trust upon the following terms a the entire net_income of the family_trust shall be paid to my wife josephine r aronson at least quarter-annually during her lifetime fifth as my wife and i in no way want to try to impose the will of the dead hand it will be up to our heirs to determine who lives in the big house and the little house on hundred acres it is our wish that hundred acres will always belong to aronsons that an aronson live in the big house and that charles j aronson have the use of the little house as long as he wishes it is also our wish that our heirs see to it that the property taxes and utility bills are paid so that the big house will be kept from freezing up or passing from aronsons through tax default on date decedent executed a new will will the will revoked all prior wills and codicils the will was virtually identical to the will except in pertinent part the fifth article of the will provided that bar instead of charles j aronson should have use of the little house the will and the will were drawn by a law firm in buffalo new york decedent remarked that his experience with this law firm was less than successful and he eventually fired those attorneys robert c newman has been an attorney since he first met with decedent in date after decedent contacted him via a letter dated date decedent contacted mr newman because decedent knew mr newman’s parents and decedent was dissatisfied with his then-current attorneys at the law firm in buffalo new york most of decedent’s communications with mr newman and vice versa were in writing at first mr newman thought decedent was seeking tax_advice however it quickly became clear to mr newman that decedent did what decedent wanted to do furthermore decedent stated to mr newman that he decedent would rather pay estate_taxes than draw up his will in a way other than what he wanted additionally because decedent and jo were recluses decedent wanted someone close by who could come to hundred acres decedent received financial and tax_advice from c p a s at the accounting firm of seidman seidman mr newman never had any contact with accountants at seidman seidman decedent prepared a will dated date proposed will decedent mailed a copy of the proposed will to mr newman in the letter to mr newman accompanying the proposed will decedent informed mr newman that it was a serious mistake to underestimate his abilities and that what he wanted was an attorney who could sign the following statement i have closely examined this will and have found it to be a legal document that should have no difficulty in probate decedent would have considered changes to the proposed will if it had meant mr newman would sign the aforementioned statement decedent however was not looking for any changes at all frankly but if there is a glaring error we’ll want that corrected decedent also wrote i do not expect you to know everything but i do expect you to know where to find out whatever we need to know to do the job better than it has ever been done before the proposed will revoked all former wills and codicils and provided in relevant parts as follows decedent included this language at the end of the proposed will along with a space underneath it for mr newman to sign first i hereby create a_trust and give into it all my personal effects household effects motor vehicles works_of_art and other tangible_personal_property all my stocks and bonds my personal checking account such to be held secure for equal division among jo’s biologic descendants if she survive s me and if so jo is to receive all the dividend and interest_income from such assets as long as she lives and upon her death the real_property known as hundred acres and the buildings thereon will be added to this trust as spelled out in jo’s will and this trust will then be liquidated and the proceeds divided equally among jo’s biologic descendants as administered by the two executors barney r aronson and barney p aronson or if one is dead the remaining named executor will name a replacement and these executors will have arranged the trust to be effectuated at central trust arcade or such as they choose and the distribution of assets made among jo’s biologic descendants which at this writing are barney r aronson scott haley aronson charles j aronson barney p aronson heather aronson rozlyn jo aronson jeff aronson charles j aronson jr or if jo predeceases me her will will have added hundred acres to the assets of the trust and division will proceed as ordered d upon jo’s death if she survives me all my estate now including hundred acres shall be distributed to the eight biologic descendants as named above or such of them as shall then be surviving in equal shares per capita third the process of liquidating the assets of my estate for distribution to the eight biologic descendants as heretofore decreed may take up to three years after my death to allow proper advertising for example and to avoid flooding the market with art for instance and until hundred acres has been sold decedent signed the proposed will which he prepared and jo bar and charlene signed the proposed will as witnesses on date decedent wrote a letter to mr newman regarding their meeting on date decedent decided that he wanted mr newman to be his attorney decedent requested mr newman to inform him as soon as possible of all the subtractions from an estate of approx dollar_figure decedent approved changing the proposed will to make bar and barney executors and trustees decedent requested mr newman’s business identification_number so he could fill out forms on date decedent wrote a letter to mr newman decedent explained that bar and his wife charlene had come to live in the little house on hundred acres in the early 1980s to take care of decedent and jo although he felt they were not worth a damn the first years they lived on hundred acres they had smartened up decedent stated that bar wanted to live on hundred acres until he bar died so jo and decedent wanted bar to inherit hundred acres the buildings thereon and the vehicles and machinery decedent owned in addition to his being executor and trustee and an equal recipient of the residual estate after taxes and expenses decedent instructed mr newman to draft his will to reflect this change and to provide him with a copy so he could study the draft make notes on the draft and finalize the will on date mr newman wrote a letter to decedent mr newman acknowledged receiving decedent’s letters dated february and mr newman briefly reviewed the proposed will mr newman raised one major problem with the proposed will--some of the witnesses were beneficiaries under the proposed will and the proposed will might not be upheld under new york law mr newman recommended that two uninvolved witnesses be used when the new wills were executed mr newman also informed decedent that he would have the estate reducing figures and possible tax related suggestions to decedent soon mr newman provided decedent with his tax identification_number on date decedent wrote a letter to mr newman decedent advised mr newman that he decedent wrote the proposed will in order to cancel his then-current will drafted by the law firm in buffalo new york and so he could wave it in the law firm’s face decedent wrote i do not pretend to teach anyone law but protected as i am from an avalanche of law books it is sometimes easier for me to see justice and intent than might be true of a lawyer decedent continued by explaining the law to mr newman decedent concluded the letter as i say i do not want us to get into a debate about law frankly it is too disgusting a subject for an old man to waste time on and i wanted mainly to void the wills macleod had and i think i did just that bob let’s quickly get good binding incontestable wills affectuated sic quickly or if you like add lines to what i made and bring legal witnesses and jo and i will sign again dash up to the big house and we’ll make it all legit if that will do it for us all i still want newmanmade wills asap on date decedent wrote a letter to mr newman decedent was disappointed in what seemed to him much too long to look in the statute books and write to us what the federal and state taxes will be and the fees and commissions as spelled out by law given that at the time he wa sec_75 years old decedent wanted his will completed witnessed and safely stored in his safe room as quickly as possible on date mr newman wrote a letter to decedent mr newman listed the expenses that would be incurred on an estate of dollar_figure million mr newman explained that the delay was not in computing the figures but rather trying to come up with an acceptable way of avoiding the estate_tax which is quite significant mr newman listed the potential federal estate_tax as dollar_figure and potential new york estate_tax as dollar_figure mr newman wrote that he had some ideas that i would like you to examine but i will present these to you at a later time mr newman advised decedent that he had a draft of the will which would be sent to decedent that friday for his examination on date decedent wrote a letter to mr newman he wrote yes the taxes are confiscatory i’m not wearing a closed mind about ideas but i do have limitations in no way will i ever give up any direct control of my assets i have been through a lot of this and it appears to me that any_tax saved tends to end up as fees and commissions to the people who save me the taxes on date mr newman mailed decedent a copy of a draft will for decedent to review mr newman kept as much of the original language written by decedent from the proposed will as possible in the new draft on date decedent wrote a letter to mr newman the new draft looked good and right to decedent and he thanked mr newman for providing him with information on the costs of dying with property decedent instructed mr newman to come up to the big house with witnesses as soon as possible so he could execute his new will on date mr newman wrote a letter to decedent mr newman enclosed executed proofs of will with the letter mr newman recommended that decedent make available to barney his original adoption papers in order that the new will would withstand challenges mr newman also suggested that decedent should destroy his prior wills on date decedent wrote a letter to mr newman decedent expressed his satisfaction with mr newman’s work decedent advised mr newman that no one had the original adoption papers for barney decedent instructed mr newman to obtain copies of the adoption papers on date decedent wrote a letter to barney and bar decedent expressed a clear understanding of finances and the stock market decedent advised bar and barney that decedent’s c p a was norman c joseph at seidman seidman in buffalo new york decedent also gave barney and bar several instructions including bar should have jo show him bar where her squirreled-away caches were to keep decedent’s custodial_account after he died to transfer his two now accounts to a new now account after he died if in their opinion a property asset had been valued too high then have mr newman fight it that mr newman should probate his will and act as the estate’s attorney if they had any questions they should put them in writing and decedent would write another letter to them to cremate decedent as soon after his death as possible not to save the ashes from his cremation there was to be no funeral ceremony no viewing of decedent although this letter is dated date it is clear from the testimony at trial the contents of the letter and the fact that the letter bears a received stamp dated date that this date is merely a typographical error and the letter was written in not to make his death public no obituary or publicity and not tell anyone of his death--especially the media not to obtain a headstone or stainless steel cross for decedent to mark his death the family and no one else should gather at the big house after his death except grandson lars who could come only if jo predeceased decedent--otherwise he was not permitted on hundred acres decedent directed bar to use mr newman because decedent trusted mr newman on date mr newman wrote a letter to decedent enclosed with the letter were two certified copies of the order of adoption of barney mr newman also apprised decedent that he had had an additional opportunity to examine the estate_tax situation however in order to reduce the taxes mr newman advised decedent that he decedent was going to have to divest himself of control_over his property mr newman also informed decedent that he could make gifts in the amount of dollar_figure-per- year to reduce his estate but we get back to the same problem that you must give up control basically the amount of the tax is the cost of this control on date decedent wrote a letter to mr newman he thanked mr newman for the copies of barney’s adoption papers decedent further wrote yeah i know all about dollar_figure to a slew of folks no gift_tax and it saves me taxes i have a one-word response to that and it has only four letters the first two are n u and the last two are t s i’m not saying nuts to you bob but to the idea which has been given to me by a lot of folks i like your succinctness ‘the only way to reduce the taxes on my estate is for me to divest myself of control_over the property ’ that same four-letter word applies here too i’ve spent years--less a few years as a crawling baby--working hard diligently totally honestly in the golden rule way to acquire what i have and if my total wealth is incinerated with me when i’m dead that’s all right with me compared to giving anyone any control at all over what i have earned on date mr joseph from seidman seidman wrote a letter to decedent mr joseph in response to decedent’s request informed decedent that the consequences of a tax-free gift of dollar_figure per year would be to reduce decedent’s taxable_income and would serve to reduce your estate and save the very high estate_taxes on each dollar_figure that you give away the estate_tax rates start pincite for assets over dollar_figure mr joseph recommended that decedent make these gifts on date mr joseph wrote another letter to decedent mr joseph further explained the estate and gift_tax and that the tax_rate of percent rapidly accelerated to percent mr joseph also informed decedent that in addition to estate_and_gift_taxes we now have a new tax a generation skipping transfer_tax the tax basically is imposed to discourage the gifting of assets to a second generation below the transferor thus it is an attempt to prevent a grandparent from giving his assets to his grandchild while leaving his children to enjoy the benefits of ownership of the property without having the property included in their estates on their death or when they transfer the property by gift to their children on date decedent wrote a letter to mr newman decedent wanted to make a codicil to his will decedent decided to make a dollar_figure gift each year to barney barney’s wife ruth m and bar decedent informed mr newman that mr joseph who decedent identified as his c p a had explained the dollar_figure-per- year gifts and the tax consequences to him bar intended to use the dollar_figure-per-year gift to help him bar maintain hundred acres after decedent died decedent however felt that the dollar_figure-per-year gift would not give bar enough money to maintain hundred acres decedent decided that the other heirs did not deserve equal shares of his estate so he wanted to change his will to distribute his residuary_estate as follows percent each to bar and barney percent each to two of decedent’s other grandchildren and percent each to four of decedent’s great-grandchildren decedent decided on these amounts because as of now there will be approximately dollar_figure left after taxes and costs this is dollar_figure ‘residual estate ’ barney and bar get or dollar_figure decedent believed that bar could invest his inheritance in a bond yielding to percent and this would provide bar enough money to pay the taxes and upkeep on hundred acres on date decedent wrote a letter to mr newman decedent wrote it struck me that bar’s wife charlene remodeled the little house and ruined it and when her husband owns hundred acres and the big house she is likely to rip out all the pittsburgh twindows and put in sash windows as she did in the little house i know the implication of ‘the dead hand ’ but the big house is more my monument than the washington monument is george’s i designed and built my monument charlene would somehow hang lace curtains on the washington monument if she could or put up awnings where there aren’t any windows in light of this decedent wanted his will to include the following language no changes or alterations in the structure or the general make-up of the big house on hundred acres shall ever be made decedent further wrote i know that when i am dead ‘they’ can do things to the big house and i’ll never know it but lying in bed trying to go to sleep at night while i live and visualizing the horrors that woman can perpetrate on my monument keeps me awake and in terror knowing that my family lawyer has made it impossible for any such desecration will be a welcome and effective soporific on date mr newman wrote a letter to decedent mr newman informed decedent that he had made changes to decedent’s will regarding restricting changes to the big house and the percentage inheritances of the residuary_estate mr newman advised decedent that when the new wills were typed he would forward them to decedent for him to review on date mr newman mailed decedent a revised draft of decedent’s new will for decedent’s review and approval on date decedent executed the revised will date will the date will revoked all former wills and codicils and provided in relevant parts as follows second i hereby give devise and bequeath my real_property which shall include my residence which i refer to as hundred acres should my wife josephine r aronson hereinafter referred to as jo predecease me my vehicles and machinery to my grandson barney p aronson it is hereby stipulated that no changes or alterations in the structure or the general make-up of the big house on hundred acres shall ever be made third i hereby create a_trust and give into it all the rest residue and remainder of my property of every kind and nature and wheresoever situate such to be held secure for division among jo’s biologic descendants as described below if she survives me and if so jo is to receive all the dividends and interest_income from such assets as long as she lives and upon her death this trust will then be liquidated and the proceeds divided as described below among jo’s biologic surviving descendants as administered by the two executors barney r aronson and barney p aronson or if one is dead the remaining named executor may name a replacement and these executors will have arranged the trust to be effectuated at central trust arcade or such as they choose and the distribution of assets made as follows of residual estate to my son barney r aronson of residual estate to my grandson barney p aronson of residual estate to my grandson scott haley aronson of residual estate to my grandson charles j aronson 7½ of residual estate to my great grandaughter sic heather aronson 7½ of residual estate to my great grandaughter sic roslyn jo aronson 7½ of residual estate to my great grandson jeffrey aronson and 7½ of residual estate to my great grandson charles j aronson jr or if jo predeceases me division will proceed as ordered above on date decedent executed a new will will the will revoked all former wills and codicils and it provided for the distribution of the residuary_estate as follows percent to barney percent to bar percent to scott haley aronson and percent to charles j aronson by eliminating his great-grandchildren decedent also removed the sections of the date will that dealt with distributions to minors in all other respects the will was essentially identical to the date will decedent did not care whether the estate would be able to claim a marital_deduction under the terms of the will because decedent did not want to relinquish control_over his assets on date decedent wrote a letter to mr newman decedent wanted a new will decedent wanted bar to inherit hundred acres and to be able to earn enough income from his inheritance so that bar could maintain hundred acres decedent asked mr newman some questions regarding the generation-skipping_transfer gst tax selling his art collection to bar in order to remove the art collection from his estate and the amount of estate_tax on a dollar_figure million taxable_estate decedent told mr newman that when decedent had the answers to his questions he decedent would prepare a new will on date decedent wrote a letter to mr newman decedent understood that there would be gst tax if he made bar his sole heir and that there would be gift_taxes associated with giving his art to bar so he decided not to do this decedent’s c p a had given decedent round numbers on what bar would inherit after taxes on the basis of the numbers his c p a provided decedent felt that bar would be able to generate enough income from his inheritance after taxes to maintain hundred acres its buildings and its contents decedent however wanted a second opinion from mr newman on how much bar would inherit after taxes to make sure bar would have enough to maintain hundred acres decedent wanted a new will as soon as possible to ensure that hundred acres would not be lost on date decedent wrote a letter to mr newman decedent wrote i’ll sure be glad when we have our two wills finalized so bar can keep hundred acres and the big house a kind of monument to me instead of a stone in a cemetery on date decedent wrote a document entitled my will - an explanation this document is similar to his date letter to bar and barney it stated as follows i have been an asset to everyone who has been associated with me in any way i have been good for the world i am more than average and i want a more than average monument to my life more than a slab in a cemetery aronson machine company is not a monument to me the big house on hundred acres is i designed the big house--invented it--and was its architect and builder it is unique it is my monument it is my wish that my monument the big house and hundred acres be preserved pretty much as it is as long as possible no changes shall be made in the big house that would alter its true basic concept bar barney peter aronson has been my back up and right hand man since date i have been training him to manage my estate after my death no other family_member has done anything for me and my monument therefore i leave all my worldly goods after death taxes to barney peter aronson this involves skipping a generation and adds to the tax burden my son barney roman aronson is only years months younger than i and won’t live long enough to preserve my monument very long after my death barney peter aronson i sec_42 years younger than i can be expected to preserve my monument a long time after my death death taxes will take so much of my estate that bar inheriting hundred acres will not have enough income to maintain hundred acres and the big house if my estate is divided among several members of the family if my estate amounts to dollar_figure when i die and bar is my sole heir he will inherit approximately dollar_figure including hundred acres building and contents thus to assure preservation of my monument for a fairly long term barney peter aronson is my sole heir on date mr newman wrote a letter to decedent mr newman had redrawn decedent’s will per decedent’s request and enclosed a copy for his review on date decedent wrote a letter to mr newman decedent wrote i was trying to show how and why grandson barney peter aronson let’s use his full name instead of his middle initial would inherit so as to maintain my monument the previous wills--1991--needed to be changed to show one executor and one inheritor grandson barney peter aronson decedent enclosed a revised copy of the will with alterations decedent made to the language of the will as a guide for mr newman decedent instructed mr newman to prepare him a new will incorporating decedent’s changes and to submit it to him to review decedent’s revisions to the will in relevant part were as follows second i hereby give devise and bequeath my real_property which shall include my residence which i refer to as hundred acres should my wife josephine r aronson hereinafter referred to as jo predecease me my vehicles and machinery to my grandson barney p aronson it is hereby stipulated that no changes or alterations in the structure or the general make-up of the big house on hundred acres shall ever be made third i hereby create a_trust and give into it all the rest residue and remainder of my property of every kind and nature and wheresoever situate such to be held secure for division among jo’s biologic descendants as described below if she survives me and if so jo is to receive all the dividends and interest_income from such assets as long as she lives and upon her death this trust will then be liquidated and the proceeds divided as described below among jo’s biologic surviving descendants as administered by the two executors barney r aronson and barney p aronson or if one is dead the remaining named executor may name a replacement and these executors will have arranged the trust to be effectuated at central trust arcade or such as they choose and the distribution of assets made as follows of residual estate to my son barney r aronson of residual estate to my grandson barney p aronson of residual estate to my grandson scott haley aronson of residual estate to my grandson charles j aronson the remainder of the third article of the will had a line through it and the word redone written next to it decedent also attached a sheet of paper with the following language to the revised copy of the will third i hereby create a_trust and give into it all the rest residue and remainder of my property of every kind and nature and wheresoever situate such to be held secure for my grandson barney peter aronson if she sic survives me and if so jo is to receive as much income from such assets as she needs for as long as she lives and upon her death this trust will then be liquidated and the proceeds given to my grandson barney peter aronson as administered by the executor barney peter aronson or if he be dead by alternate executor son barney roman aronson or third if he also be dead by grandson scott haley aronson or if barney peter aronson predecease me scott haley aronson shal sic take his place as my heir and as executor or if jo predeceases me division will proceed as ordered above a the executor will be paid the established legal executors commission which at this writing is understood to be of the first dollar_figure of the next dollar_figure of the next dollar_figure and 2½ of the next of the next dollar_figure million and thereafter b the executor will see that jo if she survives me receives interest and dividend income sufficient to her needs c if an emergency requires jo to have some of the assets in the trust the executor will allot such funds as he determines jo needs d upon jo’s death if she survives me all the estate shall go to barney peter aronson as described above e in my personal effects are chuck aronson’s journals which the executor will keep safe and secure in perpetutity sic to be used as seen fit but in no way destroyed on date mr newman wrote a letter to decedent mr newman wrote i have received your letter to me dated may 12th and have redrawn your wills per your request copies of which i have enclosed please advise if they are satisfactory with you on date decedent wrote a letter to mr newman decedent pointed out a few typographical errors in the new draft of his will and instructed mr newman to correct them the new will otherwise looked fine to decedent but decedent noted that he was not an expert about estates and the law for that he depended on mr newman decedent continued i am satisfied with the wills after the typos are corrected and if you too are satisfied these wills will go through probate and all with no trouble or successful contesting please have the final wills prepared and witnessed and all as we did before on date mr newman wrote a letter to decedent mr newman informed decedent that he had finalized decedent’s new will and wanted to come to the big house on date for decedent to execute the new will on date decedent executed a new will will the will revoked all former wills and codicils and provided in relevant parts as follows second i hereby give devise and bequeath my real_property which shall include my residence which i refer to as hundred acres should my wife josephine r aronson hereinafter referred to as jo predecease me my vehicles and machinery to my grandson barney peter aronson it is hereby stipulated that no changes or alterations in the structure or the general make-up of the big house on hundred acres shall ever be made third i hereby create a_trust and give into it all the rest residue and remainder of my property of every kind and nature and wheresoever situate such to be held secure for my grandson barney peter aronson if he survives me and if so jo is to receive as much income from such assets as she needs for as long as she lives and upon her death this trust will then be liquidated and the proceeds given to my grandson barney peter aronson as administered by the executor barney peter aronson or if he be dead by alternate executor my son barney roman aronson or third if he also be dead my grandson scott haley aronson or if barney peter aronson predecease me scott haley aronson shall take his place as my heir and as executor or if jo predeceases me division will proceed as ordered above b the executor will see that jo if she survives me receives interest and dividend income sufficient to her needs c if an emergency requires jo to have some of the assets in the trust the executor will allot such funds as he determines jo needs d upon jo’s death if she survives me all the estate shall go to barney peter aronson as described above e in my personal effects are chuck aronson’s journal’s which the executor will keep safe and secure in perpetutity sic to be used as seen fit but in no way destroyed fifth i hereby direct that all inheritance estate transfer succession or other taxes including any interest or penalties shall be paid out of my residual estate and that all beneficiaries under this will shall receive legacies bequests and devises free and exempt from any and all such tax payment lastly i hereby nominate and appoint my grandson barney peter aronson to be the executor of this my last will and testament and the trustee of any trust herein created i further direct that the said executor and trustee shall act as such without bond or other security in either event and have all the powers contained in the new york fiduciary powers act mr newman provided a proof of will to decedent on date decedent died testate on date mr newman probated the will in the surrogate’s court state of new york county of cattaraugus surrogate’s court around this time mr newman advised bar that once decedent had died and the will had been probated it could not be changed on date bar wrote a letter to mr newman bar wrote due to the complexities of the interpretation of my grandfather chuck’s will and the need for creative estate_planning i have retained the services of an estate specialist mr roger simon mr simon was more experienced in estate_planning than mr newman decedent had not known mr simon seidman seidman referred bar to mr simon after talking to mr simon bar thought there was a possibility that the will could be changed mr simon suggested that bar file a petition in the surrogate’s court bar petitioned the surrogate’s court in order to decrease the amount of estate_tax owed on date bar filed a petition under spca a for construction and reformation of will regarding the will petition in the surrogate’s court the petition referred to the will as home-drawn and drawn by the testator himself the petition sought to reform and construe the third article of the will as requiring that all income of the trust be paid to jo and to sever the trust holding the residue of decedent’s estate into three separate trusts--a credit_shelter_trust a reverse qtip_trust and a residuary_trust the petition states the sole purpose and effect of the proposed construction restructuring and severing of the trust would be to insure that decedent’s estate receives a full marital_deduction fully utilizes the decedent’s credit shelter amount and reduces substantially the generation-skipping_transfer gst tax that will be payable by reason of distributions from the trust the petition asserts that decedent always intended to minimize the estate_tax and gst tax on his estate the petition further states your petitioner believes that if this court will reform and construe article third of the will to sever the residue of decedent’s estate into three trusts as set forth this will insure the foregoing potentially considerable estate_tax and gst tax savings on date jo filed a waiver and consent to the petition waiving service and consenting in full to the relief requested in the petition on date scott haley aronson filed a waiver and consent to the petition waiving service and consenting in full to the relief requested in the petition on date bar filed an amended petition under spca a for construction and reformation of will regarding the will amended petition in the surrogate’s court the amended petition was virtually identical to the original petition and contained only a few changes--such as adding scott haley aronson as a beneficiary if bar predeceased jo on date jo and scott haley aronson each filed a waiver and consent to the amended petition waiving service and consenting in full to the relief requested in the amended petition on date the surrogate’s court entered a decree granting the relief sought in the amended petition surrogate’s court decree the surrogate’s court construed the will to require that all income of the trust be paid to jo at least semi- annually the surrogate’s court further ordered and decreed that article third of the said last will and testament of charles n aronson be reformed to read as follows third a in the event that my wife josephine r aronson survives me i give and bequeath an amount equal to the exemption equivalent amount as hereinafter defined to my trustee hereinafter named in trust for the following uses and purposes my trustee shall invest and reinvest the same and shall collect and receive the income thereof and after deducting the necessary and proper expenses therewith shall pay over said net_income to my wife josephine r aronson in monthly quarterly or other convenient payments of nearly equal amounts as possible during her lifetime provided however that in no event shall such payments be made less frequently than semi-annually i hereby authorize my trustee in his sole discretion in the event that both the principal of the residuary_trust and the principal of the reverse q-tip trust shall at any time become exhausted to withdraw from the principal of this trust and pay over to my said wife josephine r aronson or for her benefit such amount or amounts as may be deemed necessary or desirable for medical surgical hospital nursing or other expenses relating to any illness of accident to or emergency affecting my said wife or as may be determined necessary or desirable for her maintenance and support upon the death of my said wife josephine r aronson after my death or if she shall have predeceased me then at the time of my death the then remaining principal of this trust or the amount which would have constituted the principal of this trust as the case may be shall be paid over and distributed to my grandson barney p aronson if he is living at the time to be his absolutely in the event that the said barney p aronson shall predecease the said josephine r aronson the same shall be paid over and distributed to my grandson scott haley aronson the exemption equivalent amount referred to above shall equal the largest amount if any by which my taxable_estate for federal estate_tax purposes determined without regard to this article could be increased without increasing the federal_estate_taxes payable by reason of my death after taking into account the unified_credit and credit_for_state_death_taxes available against such tax provided that the credit_for_state_death_taxes shall not be taken into account if i die a resident of a state whose estate or other death_tax is limited to the federal estate_tax credit for state death_tax i direct my executor to make the special election under sec_2652 of the internal_revenue_code with respect to this trust so that i shall be treated as the transferor of such trust for gst tax purposes b in the event that my wife josephine r aronson survives me i give and bequeath an amount equal to the excess gst_exemption amount as hereinafter defined to my trustee hereinafter named in trust for the following uses and purposes my trustee shall invest and reinvest the same and shall collect and receive the income thereof and after deducting the necessary and proper expenses therewith shall pay over said net_income to my said wife josephine r aronson in monthly quarterly or other convenient periodic_payments of as nearly equal amounts as possible during her lifetime provided however that in no event shall such payments be made less frequently than semi-annually i hereby authorize my trustee in the event that the residuary_trust set forth hereinafter shall be exhausted to withdraw from the principal of this trust and pay over to my said wife josephine r aronson or for her benefit such amount or amounts as in the sole discretion of my trustee may be deemed necessary or desirable for medical surgical hospital nursing or other expenses relating to illness of accident to or emergency affecting my said wife or as may be determined necessary desirable for her maintenance and support in the event that the principal of this trust contains unproductive property not likely to produce income during her lifetime my said wife josephine r aronson shall have the power to require the trustee either to make such property productive or to convert it within a reasonable_time to income producing property a written_statement signed by my said wife and delivered to my trustee shall be sufficient for this purpose upon the death of my said wife josephine r aronson after my death or in the event my said wife has predeceased me then at the time of my death the entire remaining principal of this trust or the amount which would have constituted the principal of this trust as the case may be shall be paid over and distributed to my said grandson barney p aronson if he is living at the time to be his absolutely in the event that the said barney p aronson shall predecease the said josephine r aronson the same shall be paid over and distributed to my grandson scott haley aronson i hereby authorize my executor in his sole discretion to elect that any part or all of the amount passing under this article third b be treated as qualified_terminable_interest_property for the purposes of qualifying for the marital_deduction allowable in determining the federal estate_tax upon my death the excess gst_exemption amount shall equal the amount by which my unused gst_exemption as that term is used in sec_2631 of the internal_revenue_code available at the time of my death exceeds the value of the property disposed of under articles second and third a above of this my last will and testament i direct my executor to make the special election under sec_2652 of the internal_revenue_code with respect to this trust so that i shall be treated as the transferor of such trust for gst tax purposes c all of the rest residue and remainder of my estate real personal and mixed of whatever nature and wherever situate which i may own or have the right to dispose_of at the time of my death hereinafter referred to as my residuary_estate i give devise and bequeath to my trustee hereinafter named in trust hereinafter referred to as the residuary_trust for the following uses and purposes my trustee shall invest and reinvest the same and shall collect and receive the income thereof and after deducting the necessary and proper expenses therewith shall pay over said net_income to my said wife josephine r aronson in monthly quarterly or other convenient periodic_payments of nearly equal amounts as possible during her lifetime provided however that in no event shall such payments be made less frequently than semi-annually i hereby authorize my trustee to withdraw from the principal of this trust and pay over to my said wife josephine r aronson or for her benefit such amount or amounts as in the sole discretion of my trustee may be deemed necessary or desirable for medical surgical hospital nursing or other expenses relating to illness of accident to or emergency affecting my said wife or as may be determined necessary desirable for her maintenance and support in the event that the principal of this trust contains unproductive property not likely to produce income during her lifetime my said wife josephine r aronson shall have the power to require the trustee either to make such property productive or to convert it within a reasonable_time to income producing property a written_statement signed by my said wife and delivered to my trustee shall be sufficient for this purpose upon the death of my said wife josephine r aronson after my death or in the event my said wife has predeceased me then at the time of my death the entire remaining principal of this trust or the amount which would have constituted the principal of this trust as the case may be shall be paid over and distributed to my said grandson barney p aronson if he is living at the time to be his absolutely in the event that the said barney p aronson shall predecease the said josephine r aronson the same shall be paid over and distributed to my grandson scott haley aronson i hereby authorize my executor in his sole discretion to elect that any part or all of the amount passing under this article third c be treated as qualified terminal sic interest property for the purposes of qualifying for the marital_deduction allowable in determining the federal estate_tax upon my death d i hereby direct that the for the purpose of calculating annual trustee commissions hereunder and solely for that purpose the trusts created under paragraphs a b and c above shall be aggregated and treated as one trust and such commissions shall be charged to each such trust on a pro-rata basis the surrogate’s court entered the surrogate’s court decree without holding any hearings--no witnesses were called to testify no affidavits were submitted and no evidence was received by the surrogate’s court on date bar as executor timely filed a federal estate_tax_return on behalf of decedent’s estate the return on page of the return in the schedule for individuals other than the surviving_spouse trusts_and_estates who received benefits from the estate the sole person listed was bar in the amount of dollar_figure million schedule e jointly owned property of the return listed dollar_figure of qualified joint_interests schedule f other miscellaneous property not reportable under any other schedule of the return listed two safe deposit boxes that decedent and jo held jointly on schedule m bequests etc to surviving_spouse of the return the no box was checked next to election out of qtip treatment of annuities on form_712 life_insurance statement attached to the return jo was listed as the owner and beneficiary of life_insurance on decedent’s life opinion sec_2001 imposes a tax on the transfer of the taxable_estate of all decedents who are citizens or residents of the united_states the amount of the tax is determined in part by the value of the taxable_estate sec_2001 sec_2051 defines the value of the taxable_estate as the gross_estate less deductions for estate_taxes as for income taxes ‘deductions are a matter of legislative grace and a taxpayer seeking the benefit of a deduction must show that every condition which congress has seen fit to impose has been fully satisfied ’ for the first time in the reply brief the estate raises the issue of respondent’s bearing the burden_of_proof pursuant to sec_7491 as amended generally we will not consider an issue that is raised for the first time on brief see 92_tc_376 affd 920_f2d_1196 5th cir 64_tc_989 continued 94_tc_666 citations omitted pursuant to sec_2056 the estate may claim as a marital_deduction the value of property passing to the surviving_spouse as a general_rule the marital_deduction is denied for a terminable_interest estate of nicholson v commissioner supra pincite a terminable_interest generally is a property interest that will terminate or fail on the lapse of time on the occurrence of an event or contingency or on the failure of an event or contingency to occur sec_2056 an interest in the nature of a life_estate therefore is ineligible for the marital_deduction pursuant to sec_2056 estate of nicholson v commissioner supra pincite the economic_recovery_tax_act_of_1981 erta publaw_97_34 95_stat_172 modified the rules for the marital_deduction relating to terminable interests erta sec_403 95_stat_302 added sec_2056 which allows a marital_deduction continued in the context of sec_7491 by failing to raise the sec_7491 argument at or before trial petitioner prejudiced respondent’s ability to present evidence that petitioner did not meet the requirements of sec_7491 a --eg that petitioner did not comply with the substantiation requirements or that petitioner was not cooperative we note however because we make our determination on the basis of the evidence in the record rather than on a failure to carry the burden_of_proof by a party bearing the burden our decision in this case does not depend on which party bears the burden_of_proof for qtip interests estate of nicholson v commissioner supra pincite a qtip interest is one in which a decedent passes to the surviving_spouse a qualifying_income_interest_for_life and for which an election has been made sec_2056 estate of nicholson v commissioner supra generally when the surviving_spouse has a qualifying_income_interest_for_life she sec_2056 in pertinent part provides election with respect to life_estate for surviving_spouse -- b for purposes of this paragraph-- i in general --the term qualified_terminable_interest_property means property- i which passes from the decedent ii in which the surviving_spouse has a qualifying_income_interest_for_life and iii to which an election under this paragraph applies ii qualifying_income_interest_for_life --the surviving_spouse has a qualifying_income_interest_for_life if-- i the surviving_spouse is entitled to all the income from the property payable annually or at more frequent intervals and ii no person has a power to appoint any part of the property to any person other than the surviving_spouse is entitled to all the income from the property payable annually or at more frequent intervals sec_2056 a qtip interest must meet the requirements of sec_20_2056_b_-5 estate_tax regs estate of nicholson v commissioner supra pincite sec_20_2056_b_-7 estate_tax regs see h rept pincite 1981_2_cb_352 sec_20_2056_b_-5 estate_tax regs provides that a surviving_spouse is entitled to all the income from the property if the effect of the trust is to give her the equivalent beneficial_enjoyment of the trust estate as one who is unqualifiedly designated as the life_beneficiary under the principles of the law of trusts generally absent indications to the contrary the designation of the spouse as sole income_beneficiary for life of the entire_interest or a specific_portion of the entire_interest will be sufficient sec b - f estate_tax regs an interest passing in trust however does not provide that the surviving_spouse is entitled to all the income to the extent that the income may be accumulated in the discretion of any person other than the surviving_spouse or to the extent that the consent of any person other than the surviving_spouse is required for distribution of the income sec b - f estate_tax regs additionally the terms entitled_for_life and payable annually or more frequent intervals require that under the terms of the trust the income referred to must be currently at least annually distributable to the spouse or that she must have such command over the income that it is virtually hers sec_20_2056_b_-5 estate_tax regs a determination of the nature of the interest that passes to the surviving_spouse is made pursuant to the law of the jurisdiction under which the interest passes estate of nicholson v commissioner supra pincite in the instant case that is the law of new york although we will look to local law to determine the nature of the interests provided under a_trust document we are not bound to give effect to a local court order that modifies that document after the commissioner has acquired rights to tax revenues under its terms e g id pincite the law is clear that we are not bound by the action of a state trial_court such as the surrogate’s court that has not been affirmed by the state’s highest court 387_us_456 i n construing a will the intention of the testator must be our ‘absolute guide’ in re bieley n e 2d n y citations omitted see in re selner n y s 2d app div affd n e 2d n y the prime consideration is the intention of the testator as expressed in the will all rules of interpretation are subordinated to the requirement that the actual purpose of the testator be sought and effectuated as far as is consonant with principles of law and public policy in re fabbri n e 2d n y it is the duty_of the court to carry out the testator’s purpose notwithstanding that general rules of interpretation might point to a different result in re bieley supra in re fabbri supra pincite the testator’s intent is to be ascertained not from a single word or phrase but from a sympathetic reading of the will as an entirety and in view of all the facts and circumstances under which the provisions of the will were framed in re bieley supra in re fabbri supra see in re selner supra a sympathetic reading of the will in its entirety in light of the surrounding facts and circumstances however is distinguishable from the use of extrinsic evidence to gauge testamentary intent extrinsic evidence is inadmissible in the absence of an ambiguity in the will in re bieley supra pincite n in re fabbri supra pincite if a dominant purpose or plan of distribution is discernable from the will the individual parts of the will must be read in relation to that purpose and given effect accordingly in re fabbri supra pincite under the terms of the trust at issue ie in the will jo is not entitled to all the income from the property payable annually or at more frequent intervals as is required by sec_2056 see estate of nicholson v commissioner t c pincite estate of rapp v commissioner tcmemo_1996_10 affd 140_f3d_1211 9th cir see also sec b - f estate_tax regs the unambiguous language of the will allows her only as much income from such assets as she needs for as long as she lives emphasis added the will does not mention the marital_deduction nor is there any evidence from the language of the will that decedent intended the trust property to qualify for the marital_deduction in the context of the trust at issue the provision for as much income from such assets as she needs for as long as she lives gives jo only such income as she may reasonably need but not necessarily all the income that she may demand see estate of nicholson v commissioner supra pincite the will reveals decedent’s intention that jo have neither the obligation nor the right to demand all the income or any particular amount of income from the trust the implication of this language is that jo’s requirements for income from the trust were to be evaluated in light of her assets and income from other sources--such as from the dollar_figure of joint property listed on the estate_tax_return the availability of income from other sources her squirreled-away caches the life_insurance_proceeds the contents of the two safe deposit boxes and the sizable value of her assets would lower the amount of trust income she might otherwise need again indicating that she is not entitled to all the income from the trust created by the will see id pincite the fact that the will does not make specific provision for the disposition of the income in excess of the amount jo needed does not establish decedent’s intention that there would be no excess income see id pincite the will provides that upon jo’s death the trust will then be liquidated and the proceeds given to my grandson barney peter aronson or if barney peter aronson predecease me scott haley aronson shall take his place as my heir this bequest makes no distinction between trust corpus and trust income it is therefore clear that decedent intended a gift of the corpus and the undistributed_income component of the trust to bar or scott haley aronson if bar was deceased after jo died see id the will as executed by decedent and as in existence at the time of his death fails to establish that jo is unqualifiedly designated as the life_beneficiary furthermore the will does not designate jo as the sole income_beneficiary for life sec_20_2056_b_-5 estate_tax regs instead the will limits jo’s trust income to the amount she would need any excess would go to the remainderman under the trust at issue jo is not entitled to all the income from the property within the meaning of sec_2056 and her interest in the trust does not qualify for the marital_deduction the estate contends that the language of the will is ambiguous even if the estate is correct and we are permitted to look at extrinsic evidence the extrinsic evidence does not support the estate’s contention that decedent intended to leave his wife all the income from the trust to enable the estate to qualify for the marital_deduction under the terms of the will or to minimize the estate’s tax_liability before the time that decedent executed the will the record shows that decedent was aware of the qtip provisions and the marital_deduction before the will decedent had a will which contained a qtip provision mr newman was aware of the marital_deduction when he prepared decedent’s wills mr newman received specific directions from decedent regarding the provisions and language to be used in the will as well as decedent’s prior wills that mr newman worked on the directions were detailed and explicit in order to follow decedent’s directions mr newman was careful to make sure he used decedent’s words mr newman did not draft the following language contained in the will ‘jo’ is to receive as much in light of our holding we need not address the issue of whether the trust fails to qualify as a qtip interest and for the marital_deduction because jo was not entitled to receive distributions payable annually or at more frequent intervals income from such assets as she needs for as long as she lives the language was chosen by decedent and reflected his directions mr newman merely had the words decedent chose typed bar testified that during decedent’s later years many of decedent’s investment decisions were made to ensure bar would be able to maintain hundred acres and the big house decedent’s intent that hundred acres and the big house be maintained after his death is also evident from the succession of wills he had prepared and the letters he wrote accompanying the preparation of those wills in the will decedent did not leave bar the big house or the little house after bar moved to hundred acres decedent changed his will the will to leave bar the use of the little house in the proposed will the big house was distributed to decedent’s eight descendants per capita later in decedent decided to give hundred acres and the big house solely to bar at that time decedent was also concerned that changes would be made to the big house so he had his will rewritten the date will to prevent that from happening in decedent eliminated his great-grandchildren from his will and increased bar’s share to make sure bar would have enough money to maintain hundred acres and the big house in decedent eliminated his only child and all his grandchildren other than bar to make sure bar would have enough money to maintain hundred acres and the big house decedent also repeatedly asked mr newman and his c p a to provide him figures on what his estate would be worth after taxes to ensure that there would be enough money left over after taxes for bar to maintain hundred acres and the big house additionally the language of the will will proposed will date will and will provided that all the income from the trusts created in those wills was to be paid to jo decedent when drafting the will specifically deleted the language providing that all the income from the trust was to be paid to jo decedent when drafting the will substituted the language limiting the distributions from the trust to the amount of income jo needed furthermore decedent specifically contemplated and expressly indicated that estate_taxes would be paid he asked numerous questions about the estate_tax he was informed of the gst tax decedent repeatedly and explicitly indicated that he would rather pay estate_tax than give up control_over how his estate was distributed decedent repeatedly and explicitly indicated that he expected that estate_taxes would be paid the fact that the will made provisions for the payment of estate_taxes reflected decedent’s expectation that there would be estate_taxes that would need to be paid decedent’s date explanation of the will also contemplated a sizable estate_tax and gst tax burden decedent’s other major concern other than maintaining hundred acres and the big house as a monument to him was that his estate pass through probate with no difficulties decedent included language in the proposed will which he wrote for mr newman to sign indicating that the will would pass through probate with no difficulties decedent restated this concern in when he wrote to mr newman and sought assurance that his will would go through probate successfully and would withstand any challenges the extrinsic evidence shows that mr newman did exactly as decedent wished he used the language decedent wanted he prepared a will that was probated successfully and he prepared a will in which decedent set_aside money after taxes for bar to maintain hundred acres and the big house decedent specifically did not have the will drafted with an intention to maximize the marital_deduction or minimize the estate_tax accordingly there is no reason to contort the language decedent used to achieve that result see 914_f2d_1322 9th cir affg tcmemo_1988_433 estate of nicholson v commissioner t c pincite accordingly the extrinsic evidence fails to show that decedent intended that jo be entitled to all the income from the trust the estate argues that after giving proper regard to the surrogate’s court decree the trust qualifies as a qtip interest we disagree the surrogate’s court decree did not merely clarify the will the will did not require that all the income go to jo the surrogate’s court decree however required all the income to go to her the will did not require payments to be made at any specific time the surrogate’s court decree however mandated monthly quarterly or other convenient payments of nearly equal amounts as possible during her lifetime provided however that in no event shall such payments be made less frequently than semi-annually the surrogate’s court decree also made voluminous other changes to the trust provided for by decedent in the will the surrogate’s court decree is more than a mere clarification it is a substantial change in the will and the trust created therein made after respondent had secured rights under the will accordingly we will not give it effect see estate of nicholson v commissioner supra pincite see also 387_us_456 additionally the surrogate’s court decree was not a bona_fide evaluation of the rights of jo because there was not a genuine and active contest in the surrogate’s court--the decree was rendered by consent see estate of rapp v commissioner tcmemo_1996_10 sec_20_2056_c_-2 estate_tax regs bar petitioned the surrogate’s court for the specific purpose of directly affecting federal estate_tax liability bar wanted to reduce the amount of taxes due from the estate that were a consequence of the will executed by decedent see commissioner v estate of bosch supra pincite bar filed the petition and the amended petition in an attempt to engage in postdeath creative estate_planning and to ensure considerable estate_tax and gst tax savings furthermore the surrogate’s court decree was based on incorrect information ie that decedent intended to minimize the estate_tax and gst tax on his estate provided by bar had the surrogate’s court heard the testimony of mr newman or been provided the letters that decedent wrote it would have been clear to the surrogate’s court that decedent’s intention was not to minimize the estate_taxes or gst taxes on his estate we make no finding regarding whether bar intentionally provided information he knew to be incorrect to the surrogate’s court in order to obtain a result that would significantly reduce the amount of taxes owed by the estate and thereby increase the amount of his inheritance that does not change the fact however that the surrogate’s court based its actions on incorrect information the estate contends that new york law and public policy favor the marital_deduction and presume that taxpayers wish to take advantage of it the estate relies on in re choate n y s 2d sur ct initially we note that this case is a decision of a lower court that was not affirmed by new york’s highest court accordingly this decision is not binding on us commissioner v estate of bosch supra even so choate is distinguishable in choate the court found that the proposed reformation did not alter the testator’s dispositive scheme under the testator’s will the court found that the testator in choate intended to take full advantage of the available tax deductions and exemptions that is not the case herein additionally in choate there was a change in law the imposition of the gst tax that was not in effect when the testator executed his will again that is not the case herein the estate also cites n y est powers trusts law eptl section mckinney for support n y eptl section provides the order in which assets are abated in paying the expenses of an estate the order of abatement provided for in this section does not however apply to estate_taxes n y eptl sec d estate_taxes are apportioned under n y eptl section mckinney n y eptl section does not support petitioner’s position either n y eptl section applies to apportion the estate_tax except in a case where a testator otherwise directs in his will n y eptl sec a decedent provided for the payment of estate_taxes in the fifth article of the will accordingly n y eptl section is inapplicable furthermore the estate relies on a presumption even if the law and public policy favor the marital_deduction and presume that taxpayers wish to take advantage of it the taxpayer’s express direction overrides this presumption decedent expressly stated on numerous occasions that he would rather pay tax than give up control of his estate whereas decedent indicated in that bar should fight any valuation of the estate that he felt was excessive and decedent was willing to make dollar_figure-per- year gifts although it is not clear that decedent still felt this way when he drafted the will decedent wanted control_over the property each beneficiary would receive and was not willing to give up this control in order to minimize estate_tax decedent when he rewrote his own will eliminated language referring to the marital_deduction and eliminated qtip provisions from his wills the estate also argues that n y eptl section mckinney provides that bar was required to distribute all the income of the trust to jo we disagree n y eptl section provides except in the case of a_trust which is revocable by such person during lifetime a power conferred upon a person in his or her capacity as trustee of an express trust to make discretionary distribution of either principal or income to himself or herself or to make discretionary allocations in his or her own favor of receipts or expenses as between principal and income cannot be exercised by him or her if there is no trustee qualified to execute the power its execution devolves on the supreme court or the surrogate’s court except that if the power is created by will its execution devolves on the surrogate’s court having jurisdiction of the estate of the donor of the power the trust in the will did not give bar discretionary power to make distributions of income or principal to himself or allocations in his own favor even if it did this power would devolve on the surrogate’s court furthermore n y eptl section does not give bar or the surrogate’s court the power to pay jo any more than she needs we conclude that the interest in the trust created by the will does not qualify for the estate_tax_marital_deduction as qualified_terminable_interest_property within the meaning of sec_2056 in reaching our holding herein we have considered all arguments made by the parties and to the extent not mentioned above we find them to be irrelevant or without merit even if n y est powers trusts law sec mckinney required bar to pay all the income of the trust to jo it does not require him to pay it to her annually or at more frequent intervals to reflect the foregoing decision will be entered for respondent


of f i c e of c h i ef c ou n sel department of the treasury i n t e r n al r e v e n u e s e r v i c e w ashington d c date number info release date uil conex-124002-07 the honorable john warner united_states senate washington dc attention ---------------- dear senator warner this letter responds to your inquiry dated ---------------- on behalf of your constituents --- --- -----------------------and ---------------------------------- they asked for information on the tax treatment of transactions involving their retirement accounts unfortunately their correspondence does not include enough information to address their specific situation however i am enclosing publication individual_retirement_arrangements iras and publication pension and annuity income which provide plain language explanations of the rules applicable to distributions from iras and other qualified_retirement_plans i hope this information is helpful i apologize for the frustration --- ------------and ----- ----- -------------- experienced because their earlier letters were not answered if you or ---- --- --------- and --------------------have further questions please call me or ----------------of my staff at ----- ------------- sincerely michael j roach chief qualified_plans branch employee_benefits tax exempt and government entities enclosures


internal_revenue_service number release date index number ------------------------------------ ------------------------------------- --------------------- ----------------------------- ------------------------------- - department of the treasury washington dc person to contact --------------------------- id no ------------- telephone number ---------------------- - refer reply to cc fip plr-105815-04 date date ------------------ ------------------------------ --------------------------------------------------------- legend company a ------------------------------------------------------------ company b ------------------------------------------------------------ operating partnership ------------------------------- state law firm year date date date x dear ------------------ requesting an extension of time under sec_301_9100-1 of the procedure and -------------------------------------- ----------------------- -------------------- ------------------ ------- ---- this responds to your letter submitted on behalf of company a and company b company a a state corporation has elected to be taxed as a real_estate administration regulations to make an election under sec_856 of the internal_revenue_code to treat company b as a taxable_reit_subsidiary of company a facts investment_trust reit through operating partnership company a owns various properties either in their entirety or through joint ventures in date company a formed company b as a vehicle to invest with an unrelated joint_venture partner in property located in state company b also a state corporation is owned indirectly by company a through operating partnership operating partnership owns a x percent interest in company b and the remaining interest is owned by an unrelated third party company a intended for company b to qualify as a taxable_reit_subsidiary and for a taxable reit election to be filed effective date an officer and general counsel for company a represents that when company b was formed he had stated that company b would need to comply with the applicable_requirements for being a taxable_reit_subsidiary the officer and general counsel further represents that he intended for company b to be a taxable_reit_subsidiary law firm has provided legal services to company a since year while planning the formation of company b law firm advised that company a and company b would need to make a taxable_reit_subsidiary election however no one at law firm assumed responsibility for insuring that the election had been signed and filed respect to company a and company b after company a discovered the failure_to_file the form_8875 and prior to discovery by the internal_revenue_service company a and company b submitted a request for an extension of time to file a form_8875 to elect to treat company b as a taxable_reit_subsidiary of company a law and analysis included a change for tax years beginning after date to the reit provisions of sec_856 this change allows a reit to form a taxable_reit_subsidiary that can perform activities that otherwise would result in impermissible income the election under sec_856 is made on form_8875 taxable_reit_subsidiary election officers of both the reit and the taxable_reit_subsidiary must jointly sign the form which is filed with the irs service_center in ogden ut jointly elect to treat the corporation as a taxable_reit_subsidiary to be eligible for treatment as a taxable_reit_subsidiary sec_856 provides that the reit must the ticket to work and work incentives improvement act of p l sec_856 provides that a reit and a corporation other than a reit may in date company a discovered that a form_8875 had not been filed with in announcement 2001_1_cb_716 the service announced the sec_301_9100-1 provides that the commissioner has discretion to grant a directly or indirectly own stock in the corporation and the reit and the corporation must jointly elect such treatment the election is irrevocable once made unless both the reit and the subsidiary consent to its revocation in addition sec_856 specifically provides that the election and any revocation thereof may be made without the consent of the secretary availability of a new form_8875 taxable_reit_subsidiary election according to the announcement this form is to be used for tax years beginning after for eligible entities to elect treatment as a taxable_reit_subsidiary the instructions to form_8875 provide that the subsidiary and the reit can make the election at any time during the tax_year the effective date of the election however depends on when the form_8875 is filed the instructions further provide that the effective date on the form cannot be more than months and days prior to the date of filing the election or months after the date of filing the election if no date is specified on the form the election is effective on the date the form is filed with the service reasonable extension of time to make a regulatory election defined in sec_301_9100-1 as an election whose due_date is prescribed by regulations or by a revenue_ruling a revenue_procedure a notice or an announcement published in the internal_revenue_bulletin or a statutory election but no more than months except in the case of a taxpayer who is abroad under all subtitles of the internal_revenue_code except subtitles e g h and i will use to determine whether under the particular facts and circumstance of each situation the commissioner will grant an extension of time for regulatory elections that do not meet the requirements of sec_301_9100-2 sec_301_9100-3 provides that subject_to paragraphs b i through iii of sec_301_9100-3 when a taxpayer applies for relief under this section before the failure to make the regulatory election is discovered by the service the taxpayer will be deemed to have acted reasonably and in good_faith sec_301_9100-3 provides that the interests of the government are prejudiced if granting relief would result in the taxpayer having a lower tax_liability in the aggregate for all years to which the regulatory election applies than the taxpayer would have had if the election had been timely made taking into account the time_value_of_money conclusion based on the information submitted and representations made we conclude that company a and company b have satisfied the requirements for granting a reasonable sec_301_9100-3 through c i set forth rules that the service generally no opinion is expressed regarding whether the tax_liability of company a and this ruling is directed only to the taxpayers who requested it sec_6110 extension of time to elect under sec_856 to treat company b as a taxable_reit_subsidiary of company a as of date therefore company a and company b are granted a period of time not to exceed days from the date of this letter to submit the form_8875 this ruling is limited to the timeliness of the filing of the form_8875 this ruling’s application is limited to the facts representations code sections and regulations cited herein no opinion is expressed with regard to whether company a qualifies as a reit under subchapter_m of the code company b is not lower in the aggregate for all years to which the election applies than such tax_liability would have been if the election had been timely made taking into account the time_value_of_money upon audit of the federal_income_tax returns involved the director’s office will determine the tax_liability for the years involved if the director’s office determines that the tax_liability is lower that office will determine the federal_income_tax effect provides that it may not be used or cited as precedent enclosures cc ____________________________ elizabeth a handler chief branch office of associate chief_counsel financial institutions products copy of this letter copy for sec_6110 purposes sincerely


internal_revenue_service department of the treasury number release date index number u i l no washington dc person to contact telephone number refer reply to cc psi plr-112998-01 date date legend company state shareholder a b dear this letter responds to a letter dated date requesting a ruling on behalf of company under sec_1362 of the internal_revenue_code the information submitted discloses that company was incorporated on a in state company has one shareholder shareholder it is represented that company has intended to be an s_corporation since b however company discovered that its s election had not been filed timely company requests a ruling under sec_1362 that its sec_1362 election will be treated as timely made for its taxable_year that began on b sec_1362 provides that a small_business_corporation may elect to be an s_corporation sec_1362 provides when an s election will be effective generally if an s election is made within the first two and one half months of a corporation's taxable_year then that corporation will be treated as an s_corporation for the year in which the election is made sec_1362 provides that if an s election is made after the first two and one half months of a corporation's taxable_year then that corporation will not be treated as an s_corporation until the taxable_year following the year in which the s election is made plr-112998-01 sec_1362 provides that if no sec_1362 election is made for any taxable_year and the secretary determines that there was reasonable_cause for the failure to timely make such election then the secretary may treat such an election as timely made for such taxable_year and sec_1362 shall not apply based on the facts submitted and representations made we conclude that company has established reasonable_cause for failing to make a timely s election for its taxable_year that began on b accordingly we conclude that company's sec_1362 election will be treated as timely made for its taxable_year that began on b however this ruling is contingent on company filing form_2553 election by a small_business_corporation with an effective date of b with the appropriate service_center within days from the date of this ruling a copy of this letter should be attached to the form_2553 except as specifically set forth above we express or imply no opinion concerning the federal tax consequences of the foregoing facts specifically we express or imply no opinion on whether company otherwise qualifies as an s_corporation pursuant to a power_of_attorney on file with this office a copy of this letter is being sent to company’s authorized representative this ruling is directed only to the taxpayer who requested it sec_6110 provides that it may not be used or cited as precedent sincerely yours christine ellison chief branch office of the associate chief_counsel passthroughs and special industries enclosure copy for sec_6110 purposes