                         T.C. Memo. 2004-112



                       UNITED STATES TAX COURT



         ESTATE OF ROSE B. POSNER, DECEASED, DAVID B. POSNER,
              PERSONAL REPRESENTATIVE, Petitioner v.
           COMMISSIONER OF INTERNAL REVENUE, Respondent



     Docket No. 12780-01.             Filed May 10, 2004.


     Mark T. Willen and Peter E. Keith, for petitioner.

     C. Teddy Li, for respondent.



             MEMORANDUM FINDINGS OF FACT AND OPINION


     THORNTON, Judge:    Respondent determined a $1,114,795 Federal

estate tax deficiency with respect to the Estate of Rose B.

Posner (the estate).    The parties have resolved all issues raised

in the notice of deficiency.   The estate contends, however, that

it is entitled to a $2,909,000 estate tax refund because certain

marital trust property was erroneously included in the gross
                                 - 2 -

estate.     Resolution of this issue turns upon these two subissues:

(1) Whether Rose B. Posner (decedent) possessed a general power

of appointment over the marital trust property in question under

section 2041; and (2) whether the duty of consistency requires

the estate to treat decedent as possessing a general power of

appointment under section 2041.1     Finally, if we determine that

the estate is entitled to a refund of an estate tax overpayment,

we must decide whether this Court has jurisdiction at this

juncture to award interest on the overpayment.

                           FINDINGS OF FACT

     The parties have stipulated most of the facts, which we

incorporate along with the associated exhibits into our findings

of fact.     On October 28, 1996, decedent died in Baltimore County,

Maryland.    When the petition was filed, David B. Posner (David),

the personal representative of the estate, resided in

Reisterstown, Maryland.

Mr. Posner’s Will

         Decedent was formerly married to Nathan Posner (Mr.

Posner).     On April 21, 1975, Mr. Posner died.   He was survived by

decedent and their three children, David, Judith Geduldig, and

Carol Jean Posner Gordon.




     1
       Unless otherwise indicated, all section references are to
the Internal Revenue Code as amended, and all Rule references are
to the Tax Court Rules of Practice and Procedure.
                              - 3 -

     Mr. Posner’s will devised half of his estate to a marital

trust (the marital trust) for decedent’s benefit.   Item II of Mr.

Posner’s will created the marital trust, and item XIV set forth

provisions for its administration.    Specifically, item II of Mr.

Posner’s will provided:

          If my wife, Rose B. Posner, shall survive me, I
     give, devise and bequeath to my Trustees, hereinafter
     named, in trust and confidence, nevertheless, for the
     uses and purposes hereinafter set forth, an amount
     equal to one-half (½) of the value of my adjusted gross
     estate as finally determined for federal estate tax
     purposes, less an amount equal to the value of all
     property which passes or has passed to my said wife
     either under other provisions of this Will, or outside
     of this Will and which qualifies for the marital
     deduction allowable for federal estate tax purposes;
     provided, however, no assets shall be made a part of
     this trust estate which do not qualify for said marital
     deduction. This trust estate shall be administered by
     my Trustees as a separate trust. * * *

Item XIV of Mr. Posner’s will provided:

          Anything in this Will to the contrary
     notwithstanding, and whether or not any reference is
     made in any other provision of this Will to the
     limitations imposed by this Section XIV, my Trustee
     shall not have or exercise any authority, power or
     discretion over the Marital Trust or the income
     thereof, or the property constituting the same, nor
     shall any payment or distribution by my Trustee be
     limited or restricted by any provision of this Will,
     which would in any way (a) adversely affect the
     qualification of the Marital Trust, (b) prevent my
     estate from receiving the benefit of the maximum
     marital deduction, or (c) affect the right of my said
     wife to all income therefrom or her right to dispose of
     the principal and income thereof in the amount and to
     the extent necessary to qualify the Marital Trust for
     the marital deduction for Federal estate tax purposes under
     the provisions of the law applicable to my estate.
                                - 4 -

     The parties have stipulated that Mr. Posner’s will included

none of the substantive dispositions, such as for income

beneficiaries, remaindermen, and powers of appointment, normally

found in a document establishing a testamentary trust.

     In 1976, Mr. Posner’s estate filed a Federal estate tax

return, attaching thereto a copy of Mr. Posner’s will.   On that

return, Mr. Posner’s estate claimed a marital deduction with

respect to the marital trust property.   Respondent audited this

estate tax return and allowed the claimed marital deduction.

Decedent’s Will

     Before her death, decedent and her two daughters (the

daughters) had a falling out.   In her will, dated January 3,

1996, decedent effectively disinherited the daughters, leaving

most of her estate to her son David, his family, and three

charities.2   In her will, decedent directed the marital trust

property, valued at approximately $5 million, to be paid into a

revocable trust (the revocable trust).   To one daughter decedent

left $100; to the other daughter she left only a photograph.     The

daughters unsuccessfully challenged the will’s validity.3


     2
       After her death, decedent’s son, David B. Posner (David)
was appointed personal representative of her estate. David was
not a personal representative of Mr. Posner’s estate.
     3
       In the Circuit Court for Baltimore County, Md. (Baltimore
County circuit court), the daughters attempted to have decedent’s
will and revocable trust declared invalid, alleging fraud, undue
influence, and tortious interference by their brother, David.
                                                   (continued...)
                               - 5 -

Power of Appointment Case

     While the daughters’ challenge to the validity of decedent’s

will was ongoing, decedent’s children disputed ownership of the

marital trust property.   The daughters contended that decedent

had possessed no power of appointment over the marital trust

property and that, therefore, the property should revert to Mr.

Posner’s estate to be distributed equally to the three children

pursuant to the residuary clause in Mr. Posner’s will.    David, as

decedent’s personal representative and trustee of decedent’s

revocable trust, contended that decedent possessed and exercised

a general power of appointment over the marital trust property

and, therefore, the property should be distributed to the various

charitable organizations and other beneficiaries named in

decedent’s revocable trust instrument.

     Seeking to resolve this matter, the trustee of Mr. Posner’s

estate filed a complaint for declaratory judgment in the Circuit

Court for Baltimore County, Maryland (Baltimore County circuit

court), naming decedent’s three children as defendants.     On

August 11, 1997, the Baltimore County circuit court granted


     3
      (...continued)
The Baltimore County circuit court granted summary judgment
against the daughters. On appeal, the Maryland Court of Special
Appeals (court of special appeals) found a triable issue of fact
and remanded the case for a jury trial. See Geduldig v. Posner,
743 A.2d 247 (Md. Ct. Spec. App. 1999). On remand, the jury
found in favor of David and decedent’s estate on all counts,
upholding the validity of decedent’s will and rejecting the
daughters’ claims.
                               - 6 -

summary judgment for the daughters, ruling that the marital trust

property was not part of decedent’s estate but instead reverted

to Mr. Posner’s estate:

          The Court finds as a matter of law that, when Mr.
     Posner’s Will is read in its entirety, Item XIV grants
     Mrs. Posner power over the Marital Trust. However,
     this power is limited to inter vivos because ambiguous
     granting language must be construed only as broadly as
     is necessary to fulfill the testator’s intent. See
     Hutchinson v. Farmer, 190 Md. 411 [58 A.2d 638] (1948).
     Furthermore, the fact that the IRS approved the marital
     deduction did not establish that Mrs. Posner’s powers
     were greater than inter vivos because the Trust would
     have qualified for the deduction if Mrs. Posner had
     either inter vivos or testamentary power.

          As Mrs. Posner’s powers over the Marital Trust
     were limited to inter vivos, her attempt to fund the
     Revocable Trust with assets from the Marital Trust
     fails. The Revocable Trust, by its terms, is not an
     exercise of inter vivos power because it could not vest
     until Mrs. Posner’s death. Accordingly, Mrs. Posner’s
     Revocable Trust was an attempt to exercise a
     testamentary power that she did not possess.

          The Court concludes that the assets from the
     Marital Trust therefore revert to Mr. Posner’s estate
     to be distributed according to the residuary clause in
     his Will. [McDonagh v. Geduldig, No. C-97-001002
     (Baltimore County Cir. Ct. Aug. 11, 1997).]

     The Maryland Court of Special Appeals (court of special

appeals) affirmed the Baltimore County circuit court’s ruling

that Mr. Posner’s will granted decedent no testamentary power of

appointment.   Posner v. McDonagh, No. 3C971002 (Md. Ct. Spec.

App. Mar. 11, 1997).   The court of special appeals was

unpersuaded that references in Mr. Posner’s will to the Federal
                                - 7 -

estate tax marital deduction evinced his intention to grant

decedent a testamentary power of appointment:

          The statements in Item XIV of Nathan Posner’s will
     are very general; they simply demonstrate that he
     wanted to qualify the marital trust for the marital
     deduction. In light of the broadness of these
     pronouncements, and in light of the fact that a marital
     trust will qualify for the marital deduction if the
     surviving spouse is given either an inter vivos power
     of appointment or a testamentary power of appointment,
     it is not at all clear that the statements in Item XIV
     of Nathan Posner’s will evince an intent to grant Rose
     Posner a testamentary power of disposition over the
     marital trust’s assets. Given the generality of the
     statements, it is almost as easy to conclude that
     Nathan Posner intended to grant Rose Posner a solely
     inter vivos power of appointment as it is to conclude
     that he intended to grant her a testamentary power of
     appointment. Thus, the language in Item XIV of the
     will does not provide conclusive proof of Nathan
     Posner’s intent with respect to Rose Posner’s power of
     appointment over the marital trust’s assets.

     Furthermore, the court of special appeals stated that under

applicable Maryland caselaw, the language in Mr. Posner’s will

“is insufficient to grant Rose Posner either an inter vivos or a

testamentary power of appointment over the marital trust’s

assets.”   Id.4   The court of special appeals stated its holding

as follows:   “Accordingly, we hold that Nathan Posner’s will did

not grant Rose Posner a testamentary power of appointment over

the assets of the marital trust.”       Id.




     4
       In a subsequent case involving tax apportionment issues
relating to the marital trust property, see infra note 5, the
court of special appeals characterized this statement as dicta.
Gordon v. Posner, 790 A.2d 675, 679 (Md. Ct. Spec. App. 2002).
                              - 8 -

     By order dated June 30, 1999, the Maryland Court of Appeals,

Maryland’s highest court, declined to hear the appeal of the

court of special appeals’ decision.

The Estate’s Federal Estate Tax Return

     While the above-described litigation was pending, David, as

personal representative of decedent’s estate, filed a request for

an extension of time to file the estate’s Federal estate tax

return and remitted estate tax of $6.5 million.   On July 30,

1998, notwithstanding the uncertainty of the outcome of the State

court litigation, David filed the estate’s Federal estate tax

return, wherein the marital trust property was included in

decedent’s gross estate.5

     On July 12, 2000, the estate filed a claim for an estate tax

refund of $2,909,000, on the ground that the litigation in the

Maryland State courts had proved the inclusion of the marital



     5
       These actions triggered more litigation. In July 1999,
the daughters filed a complaint in the Circuit Court for
Baltimore City, Md. (Baltimore City circuit court), against David
and the trustee of the marital trust. They sought declaratory
relief, asking the court to rule that David was not entitled to
claim any contribution from the marital trust for the estate
taxes he had paid. On cross-motions for summary judgment, the
Baltimore City circuit court held that decedent’s three children
had to bear responsibility for the estate taxes paid on the
marital trust assets and that any future IRS refund of these
taxes should be distributed equally among decedent’s three
children. Gordon v. Posner, No. 24-C-99-03489 (Baltimore City
Cir. Ct. Oct. 24, 2000). The court of special appeals affirmed
this decision. Gordon v. Posner, 790 A.2d at 675. By order
dated Jan. 31, 2002, the Maryland Court of Appeals declined to
hear the appeal of the court of special appeals’ decision.
                                - 9 -

trust property in decedent’s gross estate (as reported on the

estate’s estate tax return) to have been in error.      On July 10,

2001, respondent issued a notice of deficiency disallowing the

refund claim.6

                               OPINION

I.   Introduction

     Section 2001 imposes an estate tax determined, in part, by

the value of the taxable estate.    Sec. 2001(b).    The taxable

estate is defined as the gross estate less deductions.      Sec.

2051.    The gross estate generally includes the value of any

property with respect to which the decedent has a general power

of appointment at the time of his or her death.      Sec. 2041(a)(2).

With exceptions inapplicable here, a general power of appointment

is defined as a power that is exercisable in favor of the

decedent, the decedent’s estate, the decedent’s creditors, or the

creditors of the decedent’s estate.      Sec. 2041(b)(1).

     A power to make an inter vivos appointment of property is a

general power of appointment if it is exercisable in favor of the

decedent or the decedent’s creditors, regardless of whether the

power is also exercisable in favor of the decedent’s estate or

the creditors of the decedent’s estate.      Jenkins v. United



     6
       Respondent made a number of adjustments to the estate’s
estate tax return and determined an estate tax deficiency. The
parties have resolved all issues except respondent’s disallowance
of the claimed refund.
                               - 10 -

States, 428 F.2d 538, 544-545 (5th Cir. 1970); Estate of Edelman

v. Commissioner, 38 T.C. 972, 976-977 (1962); see also Martin v.

United States, 780 F.2d 1147, 1148 n.1 (4th Cir. 1986); Condon

Natl. Bank v. United States, 349 F. Supp. 755, 759-760 (D. Kan.

1972); sec. 20.2041-1(c), Estate Tax Regs.

II.   Did Decedent Possess a General Power of Appointment Over the
      Marital Trust Property?

      A.   The Parties’ Positions

      As discussed below, the court of special appeals has ruled

that Mr. Posner’s will granted decedent no testamentary power of

appointment over the marital trust property.    Respondent does not

dispute that ruling.    Respondent contends, however, that Mr.

Posner’s will granted decedent an inter vivos general power of

appointment over the marital trust property so as to make it

includable in her gross estate pursuant to section 2041(a).      The

estate argues that under applicable Maryland law, as adjudicated

by the court of special appeals, decedent possessed no power of

appointment over the marital trust property.    Accordingly, the

estate contends, inclusion of the marital trust property in

decedent’s gross estate, as reported on the estate’s estate tax

return, was in error.

      B.    Decisions of the Maryland Courts

      State law, which creates legal interests and rights in

property, including powers of appointment, determines the nature,

scope, and validity of such legal interests and rights.    See
                              - 11 -

Morgan v. Commissioner, 309 U.S. 78, 80 (1940); Estate of

Pierpont v. Commissioner, 336 F.2d 277, 281 (4th Cir. 1964),

affg. T.C. Memo. 1962-286; Estate of Allen v. Commissioner, 29

T.C. 465, 467-468 (1957).   Federal law, in turn, determines the

Federal taxation of such interests or rights.    Morgan v.

Commissioner, supra.7

     “[T]he highest court of the state is the final arbiter of

what is state law.   When it has spoken, its pronouncement is to

be accepted by federal courts as defining state law”.    West v.

Am. Tel. & Tel. Co., 311 U.S. 223, 236 (1940).   On the other

hand, we are not necessarily bound to follow decisions of State

intermediate appellate courts.   Commissioner v. Estate of Bosch,

387 U.S. 456, 465 (1967); Estate of Rapp v. Commissioner, 140

F.3d 1211, 1216 (9th Cir. 1998), affg. and remanding on another

ground T.C. Memo. 1996-10; Estate of Harper v. Commissioner, 93

T.C. 368, 374 (1989); Estate of Pangas v. Commissioner, 52 T.C.

99, 101 (1969).   Instead, we give “proper regard” to decisions of

State intermediate appellate courts if these decisions are on



     7
       “If it is found in a given case that an interest or right
created by local law was the object intended to be taxed, the
federal law must prevail no matter what name is given to the
interest or right by state law.” Morgan v. Commissioner, 309
U.S. 78, 81 (1940). To this same end, the term “power of
appointment” includes all powers that are in substance and effect
powers of appointment regardless of the nomenclature used in
creating the power and regardless of local property law
connotations. Sec. 20.2041-1(b)(1), Estate Tax Regs.; see also
Martin v. United States, 780 F.2d 1147, 1148 (4th Cir. 1986).
                               - 12 -

point.    See Commissioner v. Estate of Bosch, supra; Estate of

Casey v. Commissioner, 948 F.2d 895, 898 (4th Cir. 1991), revg.

T.C. Memo. 1989-511; Ward v. Commissioner, 87 T.C. 78, 91-92

(1986); Estate of Fulmer v. Commissioner, 83 T.C. 302, 306

(1984).    Therefore, in deciding whether decedent possessed a

general power of appointment, relevant decisions of the Maryland

Court of Appeals are binding on this Court.    Decisions of the

court of special appeals, on the other hand, are not binding;

these decisions, if on point, are entitled to “proper regard”.

     In Posner v. McDonagh, No. 3C971002 (Md. Ct. Spec. App. Mar.

11, 1999), the court of special appeals held that decedent

possessed no testamentary power of appointment.    The estate

relies heavily on the statement in the court of special appeals’

unreported opinion that Mr. Posner’s will was “insufficient to

grant Rose Posner either an inter vivos or a testamentary power

of appointment over the marital trust’s assets.”    Id.   This

statement, however, is dicta; the only issue before the court of

special appeals was whether decedent possessed a testamentary

power of appointment.    Indeed, in a subsequent published opinion

involving the apportionment of taxes relating to the marital

trust property, the court of special appeals characterized its

prior statement as dicta:

          On appeal, this Court held that Rose did not have
     a testamentary power of appointment over the assets of
     the Marital Trust, and affirmed the trial court. In
     dicta, we also stated that the language of Nathan’s
                              - 13 -

     will was “insufficient to grant Rose Posner either an
     inter vivos or a testamentary power of appointment
     . . . .” [Gordon v. Posner, 790 A.2d 675, 679 (Md. Ct.
     Spec. App. 2002); emphasis added.]

     Consequently, although we give the decisions of the court of

special appeals proper regard, those decisions do not squarely

answer the question whether decedent possessed an inter vivos

power of appointment over the marital trust property.

     On reply brief, respondent argues that the only Maryland

decision that is “legally effective” with respect to this

question is the ruling of the Baltimore County circuit court,

which held that decedent lacked a testamentary power of

appointment over the marital trust property and stated in part:

“when Mr. Posner’s Will is read in its entirety, Item XIV grants

Mrs. Posner power over the Marital Trust.    However, this power is

limited to inter vivos”.   McDonagh v. Geduldig, No. C-97-001002

(Baltimore County Cir. Ct. Aug. 11, 1997).

     As a threshold matter, we note that the Baltimore County

circuit court is a State trial court, not an intermediate State

appellate court.   Although decisions of a State trial court are

given some weight and proper regard if on point, see Commissioner

v. Estate of Bosch, supra at 465, we must carefully consider the

nature of the trial court litigation, see Estate of Ahlstrom v.

Commissioner, 52 T.C. 220, 229 (1969), and the subsequent

proceedings on appeal.
                              - 14 -

     In ruling that Mr. Posner’s will gave decedent no

testamentary power, the Baltimore County circuit court stated

that item XIV of Mr. Posner’s will was a granting clause that

granted decedent only an inter vivos power of appointment.8    In

its affirmance, the court of special appeals relied on the lack

of specificity in Mr. Posner’s will regarding the claimed

testamentary power of appointment.     The court of special appeals

did not endorse the circuit court’s statement that item XIV was a

granting clause that granted decedent an inter vivos power of

appointment.

     To the contrary, as previously discussed, in holding that

Mr. Posner’s will gave decedent no testamentary power of

appointment, the court of special appeals stated in dicta that

Mr. Posner’s will was “insufficient to grant Rose Posner either

an inter vivos or a testamentary power of appointment over the

marital trust's assets.”   Posner v. McDonagh, supra.    In light of

this statement, and considering the basis on which the court of

special appeals affirmed the circuit court’s ruling, we are

reluctant to assign much weight to the Baltimore County circuit

court’s statement that Mr. Posner’s will granted decedent an



     8
       In the Baltimore County circuit court proceeding, the
daughters argued that item XIV of Mr. Posner’s will was only a
saving clause and thus granted no powers. In the alternative,
the daughters argued that if item XIV was a granting clause, the
clause granted only inter vivos, not testamentary, power. The
Baltimore County circuit court accepted this latter argument.
                                - 15 -

inter vivos power of appointment over the marital trust property.

To the contrary, we believe that the Baltimore County circuit

court’s conclusions in this regard were effectively set aside by

the court of special appeals.    Cf. Hudson v. Commissioner, 100

T.C. 590, 594 (1993) (stating that for purposes of applying

collateral estoppel, “where a trial court’s conclusions of law or

findings of fact are not passed on by the appellate court, the

trial court’s conclusions of law or findings of fact are

effectively set aside”).

     Finding no other rulings of Maryland courts that are

dispositive in determining whether Mr. Posner’s will granted

decedent an inter vivos general power of appointment, we must

make our best effort to determine how Maryland’s highest court

would decide the issue.    See Commissioner v. Estate of Bosch, 387

U.S. at 465; West v. Am. Tel. & Tel. Co., 311 U.S. at 237; Estate

of Casey v. Commissioner, supra at 898.

     C.   Analysis

     A threshold issue is whether Mr. Posner’s will conferred

upon decedent any sort of a power of appointment--testamentary or

inter vivos, general or limited.    The parties have stipulated

that Mr. Posner’s will “did not include any of the substantive

dispositions, such as income beneficiaries, remaindermen, and

powers of appointment, normally found in a document establishing

a testamentary trust.”    (Emphasis added.)   The holding of both
                              - 16 -

Maryland courts to adjudicate the issue was that Mr. Posner’s

will created no testamentary power of appointment.     Inasmuch as

Mr. Posner’s will contains no substantive provisions regarding

powers of appointment of any sort, we are persuaded that Mr.

Posner’s will also failed to create an inter vivos power of

appointment (as the court of special appeals stated in dicta).

     Respondent argues that the failure of item II of Mr.

Posner’s will to provide substantive dispositions of income and

principal is a “scrivener’s error” and that items II and XIV of

Mr. Posner’s will, when read together, clearly establish his

intent to create a trust and grant decedent “a right to all trust

income, and a general power of appointment over the trust, such

that the trust would qualify for the Federal estate tax marital

deduction.”   We are unpersuaded that the absence of substantive

dispositions should be regarded as a mere scrivener’s error.

Rather, we believe that because of the lack of such dispositions,

the will fails to confer on decedent a power of appointment with

respect to the marital trust property.   We discern in Mr.

Posner’s will a directive that the marital trust property should

qualify for the Federal estate tax marital deduction.    The will

does not provide, however, the necessary terms for satisfying

this directive.   Reading Mr. Posner’s will as respondent suggests

would be tantamount to rewriting Mr. Posner’s will to include

these provisions, which we are not at liberty to do.    See Gaither
                                - 17 -

v. Fidelity-Baltimore Natl. Bank & Trust Co., 115 A.2d 711 (Md.

1955).9

     Items II and XIV of Mr. Posner’s will refer to the Federal

estate tax marital deduction.    On this basis, respondent argues

that this case comes squarely within the rationale of Guiney v.

United States, 425 F.2d 145 (4th Cir. 1970).    In Guiney v. United

States, supra at 147, the testator used the words “general power

of appointment” to describe the power given to his wife and

referenced “the marital deduction as provided by the Internal

Revenue Code of 1954”.   The Court of Appeals for the Fourth

Circuit found that this “unmistakably precise language”

manifested “a clear and forthright desire to clothe his widow

with the ‘general power of appointment’ necessary to accomplish

the marital deduction and by express reference brought the power

he created squarely within the Code’s requirements.”    Id. at 149.

The Court of Appeals concluded:

     Thus, the widow here is given specific authorization to
     appoint to herself or her estate, as the testator


     9
       Moreover, we do not construe item XIV of Mr. Posner’s will
as a granting clause giving decedent a general power of
appointment. Instead, we agree with the statement of the court
of special appeals in Gordon v. Posner, 790 A.2d at 678, that
item XIV is more in the nature of a “marital deduction ‘savings
clause.’” Cf. Estate of Fine v. Commissioner, 90 T.C. 1068
(1988) (holding that a will provision precluding the executor
from taking any discretionary action that would diminish the
marital deduction did not affect the means or order of
distribution of the estate as set forth in other will
provisions), affd. without published opinion 885 F.2d 879 (11th
Cir. 1989).
                              - 18 -

     obviously was not referring to a Maryland (limited)
     general power of appointment. By his use of the words
     “general power of appointment,” coupled with his
     expressed “intention to take advantage of the marital
     deduction as provided by the Internal Revenue Code of
     1954,” the testator was clearly referring to the
     general power of appointment provisions of section 2041
     of the Code, which empower the donee to appoint to
     herself or her estate. [Id. at 150.]

     Unlike the will in Guiney, Mr. Posner’s will contains no

language referring to a “general power of appointment” and,

indeed, contains no substantive dispositions of the marital trust

property.   Item II of Mr. Posner’s will does not expressly

provide for the disposition of income or principal of the marital

trust, and it contains no direction regarding the distribution of

principal upon termination of the trust.    It refers only to the

Federal estate tax marital deduction.    Item XIV also refers to

the marital deduction but contains no language that we might

reasonably interpret to grant decedent a general power of

appointment.   The references to the marital deduction alone in

items II and XIV are insufficient to create a general power of

appointment in decedent’s favor.   See Estate of Pierpont v.

Commissioner, 336 F.2d at 281.

     D.   Conclusion

     In conclusion, we defer to the ruling of the court of

special appeals that Mr. Posner’s will gave decedent no

testamentary power of appointment.     Moreover, we believe that the

Maryland Court of Appeals would conclude, as the court of special
                                 - 19 -

appeals stated in dicta, that the language in Mr. Posner’s will

was also insufficient to give decedent an inter vivos power of

appointment over the marital trust property.     Consequently, we

hold that decedent possessed no general power of appointment for

purposes of section 2041(a)(2).

III.    Duty of Consistency

       On its estate tax return, Mr. Posner’s estate claimed a

marital deduction for the marital trust property.10     In doing so,

respondent contends, Mr. Posner’s estate represented that

decedent possessed a general power of appointment over the

marital trust property.11     Respondent argues that the duty of


       10
       Sec. 2056(a) allows a marital deduction from a decedent’s
gross estate for the value of any interest in property passing to
the decedent’s surviving spouse. Sec. 2056(c), as in effect at
the time of Mr. Posner’s death, limited the aggregate amount of
the marital deduction to 50 percent of the value of the adjusted
gross estate.
       11
       A marital deduction is generally not allowable for any
“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); Estate of Davis v.
Commissioner, T.C. Memo. 2003-55. Sec. 2056(b)(5) modifies this
general rule by allowing a marital deduction for property with
respect to which the surviving spouse is given a life estate with
a general power of appointment.

     We point out that Mr. Posner died before the 1981 enactment
of the qualified terminable interest property (QTIP) rules of
sec. 2056(b)(7). See Economic Recovery Tax Act of 1981, Pub. L.
97-34, sec. 403(d), 95 Stat. 302 (effective generally for estates
of decedents dying after Dec. 31, 1981). Pursuant to the QTIP
rules, if certain conditions are met, property with respect to
which the spouse has a qualifying life interest may qualify for
                                                   (continued...)
                                - 20 -

consistency precludes decedent’s estate from now taking the

contrary position, upon which its claim for refund is predicated,

that decedent possessed no general power of appointment.12    As

explained below, we disagree.

     As developed in caselaw, the duty of consistency (sometimes

called quasi-estoppel) prevents a taxpayer from benefiting in a

later year from an error or omission in an earlier year that

cannot be corrected because the time to assess tax for the

earlier year has expired.   Estate of Letts v. Commissioner, 109

T.C. 290, 296 (1997), affd. without published opinion 212 F.3d

600 (11th Cir. 2000).   The duty of consistency may apply if:      (1)

The taxpayer made a representation of fact or reported an item

for tax purposes in one tax year; (2) the Commissioner acquiesced



     11
      (...continued)
the marital deduction even though the spouse is given no power
over the property’s ultimate disposition. H. Rept. 97-201, at
159-160 (1981), 1981-2 C.B. 352, 377-378; see Estate of Cavenaugh
v. Commissioner, 100 T.C. 407, 415 (1993), affd. in part, revd.
in part on other grounds and remanded 51 F.3d 597 (5th Cir.
1995). The Internal Revenue Code specifically requires that if
the spouse still holds the QTIP at death, its value must be
included in the spouse’s gross estate. Sec. 2044. By contrast,
the Internal Revenue Code contains no specific provision (apart
from the general rule of sec. 2041(a)(2), which brings into the
gross estate property with respect to which the decedent has a
general power of appointment) requiring property transferred
pursuant to sec. 2056(b)(5) to be included in the spouse’s gross
estate.
     12
       Respondent raised the duty of consistency as an
affirmative defense and consequently has the burden of showing
that it applies. See Rule 142(a); Hull v. Commissioner, 87 F.2d
260, 262 (4th Cir. 1937), revg. 33 B.T.A. 178 (1935).
                              - 21 -

in or relied on that fact for that year; and (3) the taxpayer

desires to change the representation previously made in a later

tax year after the earlier year has been closed by the statute of

limitations.   Id. at 297; LeFever v. Commissioner, 103 T.C. 525,

543 (1994), affd. 100 F.3d 778 (10th Cir. 1996).

     Spouses, as well as their estates, may have sufficient

identity of interests so that one may be estopped under the duty

of consistency by a prior representation of the other.     Estate of

Letts v. Commissioner, supra at 298; Cluck v. Commissioner, 105

T.C. 324, 333-336 (1995).   Respondent contends that Mr. Posner’s

estate and decedent’s estate have sufficient identity of

interests that the duty of consistency is applicable.    For

purposes of this discussion, we assume, without deciding, that

there was privity of interest between Mr. Posner’s estate and

decedent’s estate.

     On brief, respondent acknowledges that the duty of

consistency applies “if the inconsistency is a question of fact

or a mixed question of fact and law.   It does not apply to mutual

mistake on the part of a taxpayer and the Service concerning a

pure question of law.”   See LeFever v. Commissioner, 100 F.3d at

788; Herrington v. Commissioner, 854 F.2d 755, 758 (5th Cir.

1988), affg. Glass v. Commissioner, 87 T.C. 1087 (1986); S. Pac.

Transp. Co. v. Commissioner, 75 T.C. 497, 560 (1980); Unvert v.

Commissioner, 72 T.C. 807, 816 (1979), affd. 656 F.2d 483 (9th
                               - 22 -

Cir. 1981).13   With little elaboration, respondent contends on

brief that the inconsistency in question here is a “mixed

question of fact and law”, so that the duty of consistency

applies.   We disagree.

     In Crosley Corp. v. United States, 229 F.2d 376, 380 (6th

Cir. 1956), the Court of Appeals for the Sixth Circuit noted that

the duty of consistency “is probably applicable in cases where

the factual situation is such as to justify the taxpayer in

taking either of two possible positions” but generally does not

apply “when the error is one of law arising out of a definite



     13
       In Bennet v. Helvering, 137 F.2d 537, 539 (2d Cir. 1943),
Judge Learned Hand considered and rejected the application of a
duty of consistency based purely on a legal inconsistency, which
he referred to as “a kind of estoppel as to the law”:

     That theory is, not that the taxpayer was here
     “estopped” as to any fact by his earlier return, but
     that if the earlier assessment were made upon one
     theory of law, the same theory must be consistently
     followed thereafter * * * . With deference * * * [this
     theory] seems to us, not only to have all the vices of
     an estoppel as to the facts, but not to have even the
     excuse which that doctrine has: i.e., that in making
     his return a taxpayer does represent that it contains
     his complete gross income; something which the
     Commissioner cannot know. * * *

See also Ross v. Commissioner, 169 F.2d 483, 493-494 (1st Cir.
1948). For a contrary view that the “fact versus law”
distinction should be eliminated from the duty of consistency
doctrine, see Johnson, “The Taxpayer’s Duty of Consistency,” 46
Tax L. Rev. 537, 552-553 (1991). Inasmuch as respondent has
conceded that the duty of consistency does not apply to a “mutual
mistake on the part of a taxpayer and the Service concerning a
pure question of law,” we need not delve deeper into these
matters here.
                              - 23 -

factual situation”.   In the instant case, the inconsistency arose

because of a mutual mistake in deciding how Mr. Posner’s will

should be construed under Maryland law--a purely legal issue.

See McIntyre v. Byrne, 141 A.2d 692, 695 (Md. 1958) (“The

construction of a will is a matter of law for the court to

determine”).   Mr. Posner’s estate did not misrepresent the

property or type of property that Mr. Posner had devised to

decedent.   Respondent has not alleged any facts to show that the

estate has been inconsistent with respect to any factual

positions or to suggest that the inconsistency in question arose

from anything other than a purely legal error in the context of

“a definite factual situation”.   Crosley Corp. v. United States,

supra at 380.14

     Moreover, the duty of consistency “does not apply where all

pertinent facts are known to both the Commissioner and the



     14
       In Estate of Letts v. Commissioner, 109 T.C. 290, 302-303
(1997), affd. without published opinion 212 F.3d 600 (11th Cir.
2000), we concluded that the inconsistency at issue involved a
mixed question of fact and law as to whether certain property
that the decedent’s husband devised to her in trust was
“terminable interest” property; i.e., an interest passing to the
decedent that would end on the lapse of time, on the occurrence
of an event or contingency, or on the failure of an event or
contingency to occur. See sec. 2056(b). In Estate of Letts,
unlike the instant case, a copy of the predeceased spouse’s will
was not attached to the earlier estate tax return, nor did the
Commissioner audit the earlier estate tax return. Thus the
Commissioner did not know or have reason to know the operative
facts and circumstances underlying the position taken on that
return. For these reasons, Estate of Letts is distinguishable
from the instant case.
                               - 24 -

taxpayer”, especially if “the crucial facts are known to both

parties and the erroneous deductions are due to a mutual mistake

of law.”   S. Pac. Transp. Co. v. Commissioner, supra at 560; cf.

Interlochen Co. v. Commissioner, 232 F.2d 873 (4th Cir. 1956),

affg. 24 T.C. 1000 (1955); Hull v. Commissioner, 87 F.2d 260, 262

(4th Cir. 1937) (stating that “a party either knowing the facts,

or in a position to know them, cannot claim the benefit of

estoppel”), revg. 33 B.T.A. 178 (1935).   In the instant case,

respondent had reason to know all the relevant facts.   When Mr.

Posner’s estate filed its estate tax return, it adequately

disclosed the relevant facts and documents, attaching a copy of

Mr. Posner’s will.15   Respondent audited the estate tax return of

Mr. Posner’s estate and allowed the marital deduction.16



     15
       Respondent claims that when Mr. Posner’s estate filed the
estate tax return, it made a “factual representation” that
decedent possessed a general power of appointment over the
marital trust property. We are not convinced that this is a
factual representation; rather, it is a legal conclusion. In
attaching Mr. Posner’s will to the estate tax return, Mr.
Posner’s estate disclosed all underlying facts necessary to reach
this conclusion or an alternative conclusion. Cf. Estate of
Ashman v. Commissioner, T.C. Memo. 1998-145 (“The Commissioner
may rely on representations in a return signed under penalties of
perjury absent sufficient facts that provide actual or
constructive knowledge to the contrary.” (Emphasis added.)),
affd. 231 F.3d 541 (9th Cir. 2000).
     16
       Cf. Estate of Letts v. Commissioner, supra at 300 (“The
Commissioner acquiesces in or relies on a fact if a taxpayer
files a return that contains an inadequately disclosed item of
which the Commissioner was not otherwise aware, the Commissioner
accepts that return, and the time to assess tax expires without
an audit of that return.” (Emphasis added.)).
                               - 25 -

Respondent has not alleged any facts to suggest that this audit

was insufficient in any regard other than in the failure to apply

the law correctly.   Under these circumstances, respondent cannot

be viewed as justifiably relying on the legal representation on

the estate tax return of Mr. Posner’s estate.

      The executor of Mr. Posner’s estate and the executor of

decedent’s estate, as well as respondent’s agents upon audit of

Mr. Posner’s estate’s estate tax return, all acted in accordance

with the mutual mistake of law that Mr. Posner’s will gave

decedent a general power of appointment.     Indeed, when he filed

the estate tax return of decedent’s estate, decedent’s executor

included the marital trust property in decedent’s gross estate

and paid the resulting estate tax.      He steadfastly maintained in

the State court litigation that decedent possessed a testamentary

power of appointment over the marital trust property.     Only after

the court of special appeals rejected this position and the

Maryland Court of Appeals declined to hear the appeal did he file

the refund claim.    Respondent has not carried his burden to show

that the duty of consistency should apply in these circumstances.

      Accordingly, we hold that the marital trust property is not

includable in decedent’s gross estate.

IV.   Accrued Interest on the Overpayment

      The estate requests that we award it interest on its

overpayment of estate tax pursuant to sections 6611 and 6621.
                                - 26 -

This Court generally does not have jurisdiction to enter a

decision for interest upon an overpayment.    Estate of Baumgardner

v. Commissioner, 85 T.C. 445, 452-453 (1985); Harrison v.

Commissioner, T.C. Memo. 1994-614; see sec. 6512(b)(1).     As an

exception to this general rule, however, section 6512(b)(2)

provides that if the Secretary fails “to refund the overpayment

determined by the Tax Court, together with the interest thereon

as provided in subchapter B of chapter 67, then the Tax Court

upon motion by the taxpayer, shall have jurisdiction to order the

refund of such overpayment and interest.”

       The estate makes no allegation that it paid the interest it

claims or that this interest is part of its overpayment of estate

tax.    Cf. Estate of Baumgardner v. Commissioner, supra.   On the

contrary, the claimed interest appears to be interest that has

accrued upon its overpayment.    Likewise, this case does not

involve interest on an overpayment that the Commissioner has

credited or refunded.    Cf. Sunoco, Inc. & Subs. v. Commissioner,

122 T.C. 88 (2004) (holding that under certain circumstances this

Court has overpayment jurisdiction under section 6512(b) with

regard to overpayment interest in the case of overpayments

credited or refunded by the Commissioner).

       We hold that we do not have jurisdiction at this juncture to

enter a decision for interest upon the estate’s overpayment of

estate tax.
                             - 27 -

     Because of concessions by the parties and the fact that the

estate is claiming an overpayment,


                                             Decision will be

                                        entered under Rule 155.
