                          T.C. Memo. 2003-55



                     UNITED STATES TAX COURT



   ESTATE OF RALPH H. DAVIS, DECEASED, EVELYN DAVIS, PERSONAL
                 REPRESENTATIVE, Petitioners v.
          COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 210-02.               Filed February 28, 2003.



     Richard S. Calone, Robin Klomparens, and Jason W. Harrell,

for petitioners.

     Kathryn K. Vetter, for respondent.



                          MEMORANDUM OPINION


     WELLS, Chief Judge:     Respondent determined a deficiency in

the Federal estate tax of the Estate of Ralph H. Davis (estate)

in the amount of $220,593.    Unless otherwise indicated, all

section references are to the Internal Revenue Code in effect on
                                - 2 -

the date of death of Ralph H. Davis (decedent), and all Rule

references are to the Tax Court Rules of Practice and Procedure.

The issue to be decided in the instant case is whether the

interest received by decedent’s surviving spouse in certain

property qualifies for the marital deduction pursuant to section

2056.

                          Background

     The parties submitted the instant case, fully stipulated,

without trial, pursuant to Rule 122.    The parties’ stipulations

of facts are hereby incorporated by this reference and are found

as facts in the instant case.

     Decedent was born on June 1, 1919, and died testate on July

14, 1997, at the age of 78, in Stockton, California.   At the time

of his death, decedent was a resident of San Joaquin County,

California, and a citizen of the United States.   During his

lifetime, decedent worked for 44 years as an electrical engineer

for Westinghouse Corporation.

     Decedent was survived by his wife, Evelyn L. Kimball Davis

(Evelyn Davis).   Evelyn Davis, who resides in Stockton,

California, is the personal representative of the estate.

Decedent was also survived by his two daughters, Carol Tawney

Pencke and Mary Martha Bennett.

     On February 24, 1993, decedent executed a will (1993 will).

The 1993 will names decedent’s daughters, Carol Tawney Pencke and
                               - 3 -

Mary Martha Bennett, as personal representatives of his estate.

In Section 1.1 of the 1993 will, decedent indicated his intent to

create another instrument which would dispose of his tangible

personal property.   Except as might otherwise be provided in such

an instrument, the will left his tangible personal property to

his daughters Carol Tawney Pencke and Mary Martha Bennett.

     Article One, section 1.2, of the 1993 will provides for the

care and transport of decedent’s personal property and also

provides for the disposition of insurance on such property.

Article Two, section 2.1, of the 1993 will provides:

     I give all the residue of my estate, to the Trustee
     under my Declaration of Trust dated the same date as
     this Will or if my said Declaration of Trust is not in
     existence or is not effective at the time of my death,
     to be held in trust on the same terms and conditions
     specified therein as it existed at the time of the
     execution of this Will or if [sic] the last Codicil
     hereto, with like effect as if the terms and conditions
     were set forth herein verbatim.

     Article Three of the 1993 will appoints decedent’s two

daughters as personal representatives under the 1993 will.    In

the event that neither daughter can serve as personal

representative, decedent appointed PNC Trust Company of Florida,

N.A., to serve as the representative of his estate.    Article Four

of the 1993 will provides generally and specifically for the

powers of the fiduciary or fiduciaries under the 1993 will.

Article Five of the 1993 will provides for the payment of taxes,
                                - 4 -

to be paid by the personal representative of the estate out of

the principal of the estate.

      On February 24, 1993, pursuant to a “Declaration of Trust”,

decedent established a trust (1993 trust) naming himself as

grantor, trustee, and lifetime beneficiary (grantor and decedent

being one and the same, grantor will hereinafter sometimes be

referred to as “decedent”).    Section 1.1 of Article One of the

1993 trust, entitled “Distribution of Income and Principal”,

provides:

     During the grantor’s lifetime, while he is serving as
     trustee, he shall be entitled to all of the net income
     (“Income”) from the trust estate, payable in convenient
     installments, and he may withdraw such sums as he desires
     from principal at any time or times.

     Section 1.2 of Article One of the 1993 trust provides:

     [If] at any time or times the grantor shall be unable
     to manage his affairs, the successor trustee shall use
     such sums from the income and principal of the trust as
     the successor trustee deems necessary or advisable for
     his care, support and comfort, or for any other purpose
     the successor trustee considers to be for the grantor’s
     best interests, adding to principal any income not so
     used.

     Section 3.1 of Article Three of the 1993 trust provides:

     Upon the grantor’s death, the successor trustee shall
     distribute the residue of the trust estate as follows:

          (a) The sum of TWENTY FIVE THOUSAND DOLLARS
     ($25,000.00) shall be paid by the successor trustee to the
     grantor’s sister, MARIAN FRANCES DAVIS, if she survives the
     grantor.

          (b) The rest of the Trust Estate shall be transferred
     and delivered in equal shares to the grantor’s two
     daughters, CAROL TAWNEY PENCKE and MARY MARTHA BENNETT, the
                                - 5 -

     share of either of them who is deceased to go to her then
     living descendants, per stirpes or, if she has none, to be
     added to the share of the grantor’s other daughter, or if
     she is deceased, to her descendants, per stirpes.

                  *   *    *    *       *   *     *

          (d) The interest of any beneficiary hereunder,
     including a remainderman, in Income or principal, shall not
     be subject to assignment, alienation, pledge, attachment or
     claim of creditors until after payment has actually been
     made by the successor trustee as hereinbefore provided.

     Article Four of the 1993 trust provides for the powers of a

trustee.   Article Five of the 1993 trust names decedent’s two

daughters as successor trustees, and Article Five also provides

that in the event that neither can serve as trustee, PNC Trust

Company of Florida, N.A., shall serve as the successor trustee.

Article Six of the 1993 trust provides for the grantor’s powers,

and Article Seven of the 1993 trust indicates that Florida law

governs the trust.    The 1993 trust was initially funded with

securities with a total cost of $124,013 and a total market value

of $207,637.73.

     Decedent later married Evelyn Davis.       On April 9, 1996,

decedent executed a “First Codicil to Last Will” (codicil) and

amended the trust by executing an “Amendment to Declaration of

Trust of Ralph H. Davis” (amended trust)(the 1993 trust and the

amended trust are collectively hereinafter sometimes referred to

as the “testamentary trust”).

     The codicil modified the 1993 will and provided for the

transfer of remainder of decedent’s estate to the amended trust
                               - 6 -

upon his death.1   In the codicil, the decedent indicated that

trustee of the amended trust would receive all of the residue of

his estate.   The amended trust named Evelyn Davis as the

successor trustee, whereupon surviving the decedent, she would

become trustee of the amended trust.

     The first paragraph of the codicil provides:

     I hereby revoke paragraph Article Two, Section 2.1 of my
     Last Will and Testament dated February 24, 1993, and in its
     place, substitute the following:

          I give all of the rest, residue and remainder of
          my estate to the trustee under my Declaration of
          Trust Dated February 24, 1993 as amended April 9,
          1996 or if my said declaration of trust are not in
          existence or are ineffective at the date of my
          death, to be held in trust on the same terms and
          conditions as specified in the trust declaration
          and amendment to trust declaration as they existed
          at the date of execution of this Codicil to my
          Last Will and Testament. [Reproduced literally.]

     The second paragraph of the codicil provides that all

personal property found in decedent’s residence shall remain in

the surviving spouse’s possession for her lifetime or so long as

she uses the residence.   The third paragraph of the codicil

revoked the appointment of PNC Trust Company of Florida, N.A., as

alternate representative under the will, and nominated the Bank

of Stockton, California, as the alternate representative.    The

fourth paragraph confirmed and republished the provisions of the

will not changed by the codicil.


     1
      This arrangement is commonly referred to as a “pour-over”
trust.
                              - 7 -

     Section Two of the amended trust provides:

     Life Estate to Surviving Spouse of Trustor: After the death
     of trustor survived by his spouse and during the lifetime of
     his surviving spouse, the trustee shall pay to or apply for
     the benefit of the surviving spouse, in quarter annual or
     more frequent installments, all of the net income from the
     trust estate as the trustee, in the trustee’s reasonable
     discretion, shall determine to be proper for the health,
     education, or support, maintenance, comfort and welfare of
     grantor’s surviving spouse in accordance with the surviving
     spouse’s accustomed manner of living.

     Section Three of the amended trust provides:

     Designation of Successor Trustees: The first successor
     trustee of the Ralph H. Davis Trust shall be his spouse,
     Evelyn L. Davis.

          In the event Evelyn L. Davis shall   die, become
     incapacitated or otherwise be unable to   administer the trust
     estate, then grantor’s daughters, Carol   Tawney Pencke and
     Mary Martha Bennett, or the survivor of   them shall serve as
     co-trustees without bond.

     Section Four of the amended trust provides:

     Guideline - Other Sources: Beneficiary: In making
     distributions to grantor’s surviving spouse, the trustee, in
     her reasonable discretion, may consider any other income or
     resources of the beneficiary known to the trustee and
     reasonably available.

     Section Five of the amended trust provides:

     Invasion of Principal for Surviving Spouse - Narrow
     Standard: If the trustee shall determine that the income
     from this trust and that the income and principal from the
     surviving spouse’s own trust2 shall be insufficient to
     maintain surviving spouse’s health, support, and




     2
      This trust is not directly in issue in the instant case,
and shall sometimes hereinafter be referred to as the “Evelyn L.
Davis trust”. The trust in issue is the testamentary trust.
                              - 8 -

     maintenance, the trustee may, after surviving spouse has
     exhausted all assets of her own trust, invade the principal
     of this trust for the benefit of surviving spouse, in the
     trustee’s reasonable discretion. [Fn. ref. added.]

     Section Six of the amended trust indicates that the

appropriate Superior Court of the State of California shall have

jurisdiction for all purposes over the testamentary trust.

Section Nine expressly reaffirms and ratifies the 1993 trust, to

the extent that it was not modified or amended by the amended

trust.

     On October 13, 1998, the estate filed a Form 706, United

States Estate (and Generation-Skipping Transfer) Tax Return with

the Internal Revenue Service Center in Ogden, Utah.    On the

Federal estate tax return, the trustee made the election under

section 2056(b)(7) for the entire trust amount.3   The taxable

estate was computed as follows:

     Gross Estate
     Add:
          Real Estate                             $0
          Stocks and Bonds                   129,363
          Mortgages, Notes, Cash               5,000
          Insurance on decedent’s life         8,354
          Jointly owned property                   0
          Other miscellaneous property        24,500
          Transfers during decedent's life   554,812
          Powers of Appointment                    0
          Annuities                          458,794




     3
      Estate did not elect out of sec. 2056(b)(7) treatment on
Schedule M (Bequests, etc., to Surviving Spouse) of Form 706.
                                 - 9 -

     Less:
             Funeral expenses                     6,500
             Debts                                1,107
             Mortgages and Liens                      0
             Specific bequest to spouse         573,216

     Total allowable deductions                 580,823

     Taxable Estate                             600,000

     The total gross estate, as reflected on the estate’s Form

706, is $1,180,823.     The estate claimed a total marital deduction

of $573,216,4 and total deductions of $580,823 from the gross

estate.     The marital deduction was computed on Schedule M of the

estate’s Form 706, which primarily reflected the transfer of

assets, including securities, life insurance policies, and

individual retirement accounts, from the estate to the trust.

     The estate reported a gross estate tax of $192,800 and

claimed the maximum unified credit against estate tax for 1997,

$192,800.    Respondent determined that the claimed marital

deduction should be reduced by $564,862, resulting in a reduction

of the marital deduction from $573,216 to $8,354. Respondent

determined that the insurance payment of $8,354 was the only item

to qualify for the marital deduction because it was paid directly

to the surviving spouse.     On September 13, 2001, Respondent

determined a deficiency in the estate’s Federal estate tax of




     4
      Section Five of Part Four of Form 706 reports that the
testamentary trust received $586,670 from the estate.
                               - 10 -

$220,593 and issued a statutory notice of deficiency to the

estate.

     On October 1, 2001, Evelyn L. Davis filed a “NOTICE OF

IRREVOCABLE EXERCISE OF GENERAL POWER OF APPOINTMENT”, which

provides:

          I, EVELYN DAVIS, the holder of the power to distribute
     income under the RALPH H. DAVIS DECLARATION OF TRUST DATED
     FEBRUARY 24, 1993 as amended April 9, 1996, pursuant to
     Paragraph 2 of said Amendment, do hereby irrevocably
     exercise my right to receive all of the income from this
     trust for the balance of my life.

          I do hereby exercise this instruction irrevocably, and
     hereby order that all of the income [be] paid to me quarter-
     annually or more frequently if necessary.

          This exercise is effective as of the date of death of
     my husband, RALPH H. DAVIS, pursuant to his instructions and
     intent as expressed to me.

                           Discussion

     Section 2001 imposes a tax on the transfer of the taxable

estate of all persons who are citizens or residents of the United

States at the time of death.   The amount of the tax depends on

the size of the taxable estate, sec. 2001(b), which is equal to

the value of the gross estate less deductions.   Sec. 2051; see

Estate of Armstrong v. Commissioner, 119 T.C. 220 (2002).

Section 2056(a) allows a marital deduction from a decedent’s

gross estate for the value of the property interests passing from

the decedent to a decedent’s surviving spouse.   Estate of Clack

v. Commissioner, 106 T.C. 131, 137 (1996).
                                  - 11 -

     A marital deduction generally is not allowable for a

“terminable interest”, which 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(b)(1); see Estate of Clack v.

Commissioner, supra.     An interest in the nature of a life estate

generally is not eligible for the marital deduction.       Estate of

Doherty v. Commissioner, 95 T.C. 446 (1990), revd. on other

grounds 982 F.2d 450 (10th Cir. 1992); see Estate of Kyle v.

Commissioner, 94 T.C. 829 (1990); see also Estate of Nicholson v.

Commissioner, 94 T.C. 666 (1990).

     Section 2056(b)(5) is an exception to the section 2056(b)(1)

terminable interest rule.       Section 2056(b)(5) provides:

     SEC. 2056(b) Limitation in the Case of Life Estate or Other

Terminable Interest.--

               *    *       *      *    *    *    *

          (5) Life estate with power of appointment in surviving
     spouse.–-In the case of an interest in property passing from
     the decedent, if his surviving spouse is entitled for life
     to all the income from the entire interest, or all the
     income from a specific portion thereof, payable annually or
     at more frequent intervals, with power in the surviving
     spouse to appoint the entire interest, or such specific
     portion (exercisable in favor of such surviving spouse, or
     of the estate of such surviving spouse, or in favor of
     either, whether or not in each case the power is exercisable
     in favor of others), and with no power in any other person
     to appoint any part of the interest, or such specific
     portion, to any person other than the surviving spouse–-
                              - 12 -

               (A) the interest or such portion thereof so
          passing shall, for purposes of subsection (a), be
          considered as passing to the surviving spouse, and

               (B) no part of the interest so passing shall, for
          purposes of paragraph (1)(A), be considered as passing
          to any person other than the surviving spouse.

     This paragraph shall apply only if such power in   the
     surviving spouse to appoint the entire interest,   or such
     specific portion thereof, whether exercisable by   will or
     during life, is exercisable by such spouse alone   and in all
     events.

     To fit within the section 2056(b)(5) exception to the

section 2056(b)(1) terminable interest rule, the surviving spouse

must be entitled to all of the income from the testamentary trust

(or from a specific portion thereof) for life and also have a

general power of appointment over the testamentary trust.    Sec.

2056(b)(5); see Estate of Walsh v. Commissioner, 110 T.C. 393,

398 (1998); see also Estate of Meeske v. Commissioner, 72 T.C. 73

(1979), affd. sub nom. Estate of Laurin v. Commissioner, 645 F.2d

8 (6th Cir. 1981).   In Estate of Meeske v. Commissioner, supra at

78, this Court observed:

          By its terms, section 2056(b)(5) provides a fivefold
     test for the deductibility of life estates coupled with
     powers of appointment: (1) The surviving spouse must be
     entitled for life to all the income from the entire interest
     or to all the income from a specific portion thereof. (2)
     The income must be payable annually or at more frequent
     intervals. (3) The surviving spouse must have a power to
     appoint the entire interest or such specific portion to
     either herself or her estate. (4) The entire interest or
     the specific portion must not be subject to a power in any
     other person to appoint any part to anyone other than the
                                - 13 -

     surviving spouse. (5) The power in the surviving spouse
     (whether exercisable by will or during life) must be
     exercisable by her alone and in all events. [Emphasis
     added.]

     Regulations promulgated pursuant to section 2056(b)(5)

require the surviving spouse to be entitled for life to all of

the income from either the entire interest or from a specific

portion of the entire interest.5    Sec. 20.2056(b)-5(a)(1), Estate

Tax Regs.; see Estate of Wisely v. United States, 703 F. Supp.

474, 476 (W.D. Va. 1988).   Moreover, the income must be payable

to the surviving spouse annually or at more frequent intervals.

Sec. 20.2056(b)-5(a)(2), Estate Tax Regs.; see Estate of Meeske

v. Commissioner, supra at 78.

     The surviving spouse’s command over the income from the

trust must be such that the income is “virtually hers”.    Estate

of Wilson v. Commissioner, T.C. Memo. 1992-479, citing sec.

20.2056(b)-5(f)(8), Estate Tax Regs., which provides:

     In the case of an interest passing in trust, the terms
     “entitled for life” and “payable annually or at more
     frequent intervals,” as used in the conditions set forth in
     paragraph (a)(1) and (2) of this section, require that under
     the terms of the trust the income referred to must be
     currently (at least annually; see paragraph (e) of this
     section) distributable to the spouse or that she may have
     such command over the income that it is virtually hers.
     Thus, the conditions in paragraph (a)(1) and (2) of this
     section are satisfied in this respect if, under the terms of
     the trust instrument, the spouse has the right exercisable
     annually (or more frequently) to require distribution to



     5
      The estate has not contended that the surviving spouse’s
interest relates to a specific portion of the trust principal.
                             - 14 -

     herself of the trust income, and otherwise the trust income
     is to be accumulated and added to corpus.

     For purposes of the marital deduction and in considering the

interests passing to a surviving spouse, this Court applies the

law of jurisdiction under which the interest passes.    Estate of

Bosch v. Commissioner, 387 U.S. 456 (1967); see Estate of

Nicholson v. Commissioner, supra; see also Estate of Doherty v.

Commissioner, supra; Estate of Bowling v. Commissioner, 93 T.C.

286 (1989); sec. 20.2056(b)-5(e), Estate Tax Regs.    In the

instant case, the parties do not dispute that the applicable law

is that of the State of California, and we therefore apply the

law of the State of California.     Lassiter v. Commissioner, T.C.

Memo. 2000-324.

     In Estate of Dodge v. Stone, 491 P.2d 385, 394 (Cal. 1971)

(citing Estate of Wilson v. Doolittle, 193 P. 581 (Cal. 1920)),

the Supreme Court of California held that “The paramount rule in

the construction of wills, to which all other rules must yield,

is that a will is to be construed according to the intention of

the testator as expressed therein, and this intention will be

given effect as far as possible.”    The intent of a testator is

found by examining the document as a whole.    Estate of Heim v.

Commissioner, 914 F.2d 1322, 1329-1330 (9th Cir. 1990), affg.

T.C. Memo. 1988-433; see Estate of Rapp v. Commissioner, 140 F.3d

1211 (9th Cir. 1998), affg. T.C. Memo. 1996-10 (applying

California law); see also Estate of Dodge v. Stone, supra; Estate
                             - 15 -

of Russell v. Quinn, 444 P.2d 353 (Cal. 1968).   In Estate of Heim

v. Commissioner, supra at 1329-1330, the Court of Appeals for the

Ninth Circuit observed:

     Furthermore, we cannot avoid the statutory directive
     that a “marital deduction gift” is “a gift that is
     intended to qualify for the marital deduction,” Probate
     Code section 1030(d), and that “whether the will
     contains a marital deduction gift depends upon the
     intention of the testator at the time the will is
     executed.” Prob. Code sec. 1032(a) (West 1991).6

     California Probate Code section 215227 acts to conform any

“power, duty, or discretionary authority” in a testamentary

instrument to comport with the requirements of a marital

deduction, if the instrument contains a marital deduction gift.

California Probate Code section 21520 (West 1991)8 defines a


     6
      Cal. Prob. Code secs. 1030, 1032 (repealed) are the
predecessors to Cal. Prob. Code secs. 21520 and 21522 (West
1991). Estate of Heim v. Commissioner, 914 F.2d 1322, 1329-1330
(9th Cir. 1990), affg. T.C. Memo. 1988-433.
     7
      Sec. 21522. MARITAL DEDUCTION GIFTS

          If an instrument contains a marital deduction gift:

          (a) The provisions of the instrument, including any
     power, duty, or discretionary authority given to a
     fiduciary, shall be construed to comply with the marital
     deduction provisions of the Internal Revenue Code.

          (b) The fiduciary shall not take any action or have any
     power that impairs the deduction as applied to the marital
     deduction gift.

          (c) The marital deduction gift may be satisfied only
     with property that qualifies for the marital deduction.
     8
      Cal. Prob. Code sec. 21520 provides:
                                                    (continued...)
                              - 16 -

marital deduction gift as a transfer that is intended to qualify

for the marital deduction.   Accordingly, we inquire whether

decedent evinced the intention that the property transferred to

his testamentary trust would qualify for the marital deduction.

Id.; see Estate of Heim v. Commissioner, supra.

     In the instant case, we must interpret Section Two of the

amended trust, which provides that the trustee shall pay:

     all of the net income from the trust estate as the
     trustee, in the trustee’s reasonable discretion, shall
     determine to be proper for the health, education, or
     support, maintenance, comfort and welfare of grantor’s
     surviving spouse in accordance with the surviving
     spouse’s accustomed manner of living.

     Pursuant to Section Two of the amended trust, the surviving

spouse’s right to receive income is significantly restricted.     In

determining the appropriate amount of income to distribute to the

surviving spouse, Section Two of the amended trust charges the

trustee to consider, in the trustee’s reasonable discretion, the

surviving spouse’s health, education, support, maintenance,


     8
      (...continued)
     SEC. 21520. DEFINITIONS.--

               *    *    *     *    *    *    *

          (a) “Marital deduction” means the federal estate
     tax deduction allowed for transfers under Section 2056
     of the Internal Revenue Code or the federal gift tax
     deduction allowed for transfers under Section 2523 of
     the Internal Revenue Code.

          (b) “Marital deduction gift” means a transfer of
     property that is intended to qualify for the marital
     deduction.
                               - 17 -

comfort, and welfare, in light of her accustomed manner of

living.

     The expression, “in accordance with the surviving spouse’s

accustomed manner of living” modifies and limits the expression

that precedes it: “all of the net income from the trust estate as

the trustee, in the trustee’s reasonable discretion, shall

determine to be proper for the health, education, or support,

maintenance, comfort and welfare”.      In Estate of Ellingson v.

Commissioner, 964 F.2d 959, 964-965 (9th Cir. 1992), revg. 96

T.C. 760 (1991), the Court of Appeals for the Ninth Circuit, the

circuit to which any appeal of the instant case would lie, stated

that,

     the language used by the Nicholson trust [in Estate of
     Nicholson v. Commissioner, 94 T.C. 666 (1990)]--‘usual
     and customary standard of living’--is much narrower and
     more specific than that used in this
     case--‘best interests.’ Interpreting the Nicholson
     trust as qualifying for the QTIP deduction would have
     required the Tax Court to ‘rewrite the trust
     instrument.’

     The “usual and customary standard of living” clause under

consideration in the instant case is analogous to the clause in

Estate of Nicholson v. Commissioner, supra, and distinguishable

from the “best interests” clause directly considered by the court

in Estate of Ellingson v. Commissioner, supra.      The language in

the amended trust is more restrictive than the “best interests”

language in the trust in Estate of Ellingson v. Commissioner,

supra.    The use of the word “comfort” in the amended trust is
                               - 18 -

limited by the expression, “in accordance with the surviving

spouse’s accustomed manner of living.”    Accordingly, we interpret

the language of the amended trust to mean that the surviving

spouse does not have such “command over the income that it is

virtually hers”.    See sec. 20.2056(b)-5(f)(8), Estate Tax Regs.9

In the instant case, Section Four of the amended trust provides

that the trustee, in exercising reasonable discretion, may

consider “any other income or resources of the beneficiary known

to the trustee and reasonably available.”10   In the instant case,

Section Two of the amended trust limits the surviving spouse’s

entitlement to income without using the term “best interests”.

Moreover, in the instant case, the clause under consideration is

much narrower and more specific than the “best interests” clause

considered by the court in Estate of Nicholson v. Commissioner,

supra.    We conclude that the foregoing limitations prevent the

surviving spouse from being entitled to the entire income from

the trust.

     Moreover, the surviving spouse’s role as sole trustee under

the trust does not assure her the requisite control over the


     9
      The court in Estate of Ellingson v. Commissioner, 964 F.2d
959 (9th Cir. 1992), revg. 96 T.C. 260 (1991), concluded that to
effectuate the decedent’s intent, paying the surviving spouse
such amount of the income necessary for her “best interests”
meant paying her all of the trust income.
     10
      In the instant case, the decedent did not include in the
amended trust the “best interests” language that appeared in the
1993 trust. Article One, Sections 1.1 and 1.2 of the 1993 trust
were amended by Section Two of the amended trust.
                               - 19 -

trust income for life, because, by the terms of the amended

trust, decedent’s daughters could become sole or cotrustees of

the trust, in the event of the surviving spouse’s resignation or

her incapacity to serve as a trustee.      Estate of Ellingson v.

Commissioner, supra at 962 (citing Estate of Kyle v.

Commissioner, 94 T.C. 829 (1990)).      Additionally, unlike the

“Marital Deduction Trust” in   Estate of Ellingson v.

Commissioner, supra, there is no language in the amended trust

which explicitly refers to a marital deduction under section

2056.   Accordingly, we conclude that the decedent did not intend

to grant the surviving spouse the entire income interest for life

from the surviving spouse’s interest in the estate.

     We also consider whether the amended trust qualifies for the

section 2056(b)(5) exception to the terminable interest rule.       In

order to qualify for the exception, the surviving spouse must

have the sole power to appoint her entire interest, exercisable

by her alone and at all events, with no power in any other person

to appoint any part of her interest to anyone but the surviving

spouse.   Sec. 2056(b)(5); see sec. 20.2056(b)-5(g)(1) and (3),

Estate Tax Regs.   Section 20.2056(b)-5(g)(3), Estate Tax Regs.,

provides:

          (3) A power is not considered to be a power
     exercisable by a surviving spouse alone and in all
     events as required by paragraph (a)(4) of this section
     if the exercise of the power in the surviving spouse to
     appoint the entire interest or a specific portion of it
     to herself or to her estate requires the joinder or
                              - 20 -

     consent of any other person. * * * Likewise, if there
     are any restrictions, either by the terms of the
     instrument or under applicable local law, on the
     exercise of a power to consume property (whether or not
     held in trust) for the benefit of the spouse, the power
     is not exercisable in all events. Thus, if a power of
     invasion is exercisable only for the spouse’s support,
     or only for her limited use, the power is not
     exercisable in all events. In order for a power of
     invasion to be exercisable in all events, the surviving
     spouse must have the unrestricted power exercisable at
     any time during her life to use all or any part of the
     property subject to the power, and to dispose of it in
     any manner, including the power to dispose of it by
     gift (whether or not she has power to dispose of it by
     will). [Emphasis added.]

     Section 2056(b)(5) requires the surviving spouse to “receive

an unlimited power to appoint the underlying property to himself

or to his estate.”   Estate of Smith v. Commissioner, 79 T.C. 974,

977 (1982)(citing Estate of Field v. Commissioner, 40 T.C. 802

(1963)); see Estate of Meeske v. Commissioner, 72 T.C. 73 (1979);

see also Estate of May v. Commissioner, 32 T.C. 386 (1959), affd.

283 F.2d 853 (2d Cir. 1960); sec. 20.2056(b)-5(d), Estate Tax

Regs.   The power must be exercisable alone and in all events.

Estate of Brantingham v. United States, 631 F.2d 542 (7th Cir.

1980); see Estate of May v. Commissioner, supra.

     In deciding whether decedent’s trust created a power of

appointment over the entire interest, we must consider whether

the trust documents created a general power of appointment under

California law.   Estate of Robertson v. United States, 310 F.2d

199 (5th Cir. 1962); Estate of Opal v. Commissioner, 54 T.C. 154

(1970), affd. 450 F.2d 1085 (2d Cir. 1971); Estate of Comer v.
                              - 21 -

Commissioner, 31 T.C. 1193 (1959); Estate of Boydstun v.

Commissioner, T.C. Memo. 1984-312.     Unless the language used by

the testator in creating the trust creates an unambiguous general

power of appointment, “the ascertainment of the breadth of the

trustee’s power is to be ascertained with reference to the intent

of the trust’s creator.”   Estate of Smith v. Smith, 172 Cal.

Rptr. 788, 792 (Ct. App. 1981).

     A power of appointment is not considered a general power of

appointment if it is limited by an ascertainable standard.

Estate of Nunn v. Beverly Hills Natl. Bank, 518 P.2d 1151 (Cal.

1974).   A power of appointment that is limited by an

ascertainable standard relating to the person’s health,

education, support, or maintenance is not a general power of

appointment.   Cal. Prob. sec. 611(b); see Estate of Nunn v.

Beverly Hills Natl. Bank, supra (applying a predecessor of sec.

611(a) and (b) (West 2002)); see also Estate of Smith v. Smith,

supra.   Section Five of the amended trust permits invasion of the

principal of the trust only if the Evelyn L. Davis trust is

insufficient to provide for the surviving spouse’s health,

support and maintenance.   In the instant case, we conclude that

the trustee may only invade the principal of the trust for the

surviving spouse’s health, support, and maintenance, as the power

to invade is predicated on those needs, and the trustee may only

appoint the principal to meet those needs.    Furthermore, the
                             - 22 -

title of Section Five of the amended trust, “Invasion of

Principal for Surviving Spouse-Narrow Standard”, indicates that

decedent did not intend to provide the surviving spouse with an

unrestricted power of appointment.    We conclude that the

trustee’s power to invade the principal is not exercisable in all

events, and, accordingly, the trustee’s power is not a qualifying

power of appointment for purposes of section 2056(b)(5).     See

sec. 20.2056(b)-5(g)(3), Estate Tax Regs.    Consequently, we hold

that the testamentary trust fails to qualify for the section

2056(b)(5) exception to the terminable interest rule.

     Petitioner contends that Section Two of the amended trust

created a general power of appointment over the income from the

testamentary trust, under section 2041 and section 20.2041-

1(c)(1) and (2), Estate Tax Regs., and that a general power of

appointment under section 2041 is sufficient to qualify the

surviving spouse’s interest income in the testamentary trust for

section 2056(b)(5) treatment, relying on Sec. Peoples Trust Co.

v. United States, 238 F. Supp. 40, 51 (W.D. Penn 1965).      The

requirements of section 2041 and section 2056(b)(5) are distinct.

A power of appointment may not be broad enough to qualify under

section 2056 even though it qualifies as a general power of

appointment for purposes of section 2041.    Estate of Brantingham

v. United States, supra (no indication that section 2041 and

section 2056 apply in pari materia); see Estate of May v.
                             - 23 -

Commissioner, 283 F.2d 853 (2d Cir. 1960); see also Estate of

Duvall v. Commissioner, T.C. Memo. 1993-319; Condon Natl. Bank v.

United States, 349 F. Supp. 755 (D. Kan. 1972).

     Section Two of the amended trust may have been sufficient to

create a power of appointment for purposes of section 2041,11 but

we have found that the terms of that provision, and other

provisions relevant in discerning testator’s intent, failed to

satisfy the conditions set forth in section 2056(b)(5) because

the surviving spouse is not entitled to all of the income from

the property and because her power to invade the trust corpus is

not exercisable at all events.   Sec. 2056(b)(5); see also Estate

of Meeske v. Commissioner, supra; Estate of Lassiter, T.C. Memo.

2000-324.

     We also consider whether the trust qualifies for the section

2056(b)(7) qualified terminable interest property exception to

the section 2056(b)(1) terminable interest rule.   Section

2056(b)(7) was enacted as part of the Economic Recovery Tax Act

of 1981, Pub. L. 97-34, sec. 403(d)(1), 95 Stat. 172, 302.    Prior

to 1981, a life estate without a power of appointment was

considered a terminable property.   Estate of Clack v.

Commissioner, 106 T.C. 131 (1996); see Estate of Nicholson v.

Commissioner, 94 T.C. 666 (1990); see also Estate of Higgins v.


     11
      We do not consider whether a power of appointment was
created by the trust document, for purposes of sec. 2041,
because that issue is not directly before us.
                             - 24 -

Commissioner, 91 T.C. 61 (1988), affd. sub nom. Manufacturers

Natl. Bank v. Commissioner, 897 F.2d 856 (6th Cir. 1990).     That

result was changed by section 2056(b)(7), which provides:

     (7) Election with respect to life estate for surviving
spouse.--

          (A) In general.–-In the case of qualified terminable
     interest property–-

               (i) for purposes of subsection (a), such property
          shall be treated as passing to the surviving spouse,
          and

               (ii) for purposes of paragraph (1)(A), no part of
          such property shall be treated as passing to any person
          other than the surviving spouse.

          (B) Qualified terminable interest property defined.–-
     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, or has a usufruct
               interest for life in the property, and

                    (II) no person has a power to appoint any
               part of the property to any other person other
               than the surviving spouse.

     For the surviving spouse’s income interest in the trust to
                                 - 25 -

qualify as qualified terminable interest property under section

2056(b)(7)(B),12 the surviving spouse must be entitled to the

entire income interest for life in the property.     Sec.

2056(b)(7)(B)(ii)(I); see Estate of Nicholson v. Commissioner,

supra.     The regulations under section 20.2056(b)-5(f), Estate Tax

Regs., apply in determining whether the surviving spouse is

entitled to the entire income interest from the testamentary

trust for purposes of section 2056(b)(7)(B)(ii)(I).     Lassiter v.

Commissioner, supra; see sec. 20.2056(b)-7(d)(2), Estate Tax

Regs.13     Having concluded above that the decedent’s surviving

spouse is not entitled to all of the income for life from the

amended trust, we also conclude that in the instant case the

requirements under section 2056(b)(7) have not been satisfied.




     12
      The parties do not dispute that a sec. 2056(b)(7) election
was made.
     13
          Sec. 20.2056(b)-7(d)(2), Estate Tax Regs., provides:

          Entitled for life to all income. The principles
     of §20.2056(b)-5(f), relating to whether the spouse is
     entitled for life to all of the income from the entire
     interest, or a specific portion of the entire interest,
     apply in determining whether the surviving spouse is
     entitled for life to all of the income from the
     property regardless of whether the interest passing to
     the spouse is in trust.
                             - 26 -

     Based on the foregoing, we find that the amended trust

property in the instant case does not qualify for either the

section 2056(b)(5) or the section 2056(b)(7) exception to the

section 2056(b)(1) terminable interest rule.

     We have considered all of the contentions and arguments of

the parties that are not discussed herein, and we find them to be

without merit, irrelevant, or moot.

     To reflect the foregoing,


                                      Decision will be entered

                                 for respondent.
