Defines income, gift, and estate tax treatment of family trust powers

Plain-English summary

A grantor created an irrevocable domestic trust for himself, his spouse, descendants, parents, and another individual. A committee that included the grantor and other beneficiaries or their representatives could direct distributions, and the grantor retained additional lifetime and testamentary appointment powers. The IRS ruled that neither the grantor nor committee members would be treated as owners of the trust under the specified grantor-trust provisions while the trust remained domestic and the committee continued to serve, although treatment under section 675 would depend on how the trust was actually administered. The grantor's contribution was an incomplete gift because he retained control over the trust's beneficial interests, and distributions back to him would be returns of his property. Distributions to other beneficiaries would be gifts by the grantor, not by committee members. The committee members' joint powers were not general powers of appointment, so those powers would not cause trust property to be included in their estates.

Ruling snapshot

• Question: How would the trust's committee and retained powers affect grantor-trust status, completed-gift treatment, and estate inclusion for committee members?
• Outcome: Approved as requested, with section 675 treatment deferred as a factual examination issue.
• Key authorities: IRC §§ 671-679, 2041, 2501, 2511, and 2514; Treas. Reg. §§ 20.2041-3, 25.2511-2, and 25.2514-1 through 25.2514-3

Full text (IRS public release)

Internal Revenue Service                                       Department of the Treasury
                                                               Washington, DC 20224

Number: 201832005                                              Third Party Communication: None
Release Date: 8/10/2018                                        Date of Communication: Not Applicable
Index Number: 2501.00-00, 2514.00-00,
              671.00-00, 671.02-00                             Person To Contact:
                                                               --------------------, ID No. -------
----------------------------                                   Telephone Number:
---------------------------------                              ----------------------
 ----------------------------------------                      Refer Reply To:
                                                               CC:PSI:B04
                                                               PLR-133676-17
         Re: ---------------                                   Date:
                                                               April 24, 2018


Legend

Grantor                    = -------------------------------------------------------
Spouse                     = -----------------------
Child 1                    = ---------------------
Child 2                    = -----------------------
Father                     = ----------------------
Mother                     = ----------------------------
Individual                 = ------------------
Trustee                    = ----------------------------------------
Representative 1 = --------------------
Representative 2 = ---------------------
Trust                      = -------------------------------------------------------
Date                       = ------------------------
State 1                    = --------------
State 2                    = ------------
Committee                  = -------------------------------------------------------------
------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------
----------------------------------------------
-------------------------------------

Dear ---------------:

       This letter responds to your authorized representative’s letter dated November 3,
2017, requesting rulings under §§ 671, 2501, 2514, and 2041 of the Internal Revenue
Code.

      The facts submitted and representations made are as follows. On Date, Grantor
created an irrevocable trust, Trust, for the benefit of himself, his wife (Spouse), his
descendants, his parents (Father and Mother), and Individual (collectively referred to as
PLR-133676-17                                 2

Beneficiaries). Grantor is the only donor and all property contributed to Trust will be
Grantor’s separate property under State 1 law. The trustee, Trustee, is a trust company
with its headquarter in State 2. Trust is governed by the laws of State 2. Currently,
Grantor and Spouse have two minor children, Child 1 and Child 2.

        During Grantor’s lifetime, at any time or times, Trustee, pursuant to an
appointment of the Committee or Grantor, while the Committee is in existence, shall
distribute to the Beneficiaries such amounts of net income or principal of Trust as the
Committee or Grantor determines. Any appointment, determination, or action by the
Committee requires either (i) The unanimous written consent of the then serving
members of the Committee, other than Grantor (Unanimous Member Power), or (ii) The
written consent of Grantor and a majority of the other then serving members of the
Committee (Grantor’s Consent Power). In addition, Grantor, in a non-fiduciary capacity,
may appoint such amounts of principal to one or more persons in the group consisting
of Grantor’s descendants, Father, Mother, and Individual, as Grantor deems advisable
to provide for such person’s health, support, and education. (Grantor’s Sole Power).
Such power may not be exercised to discharge or satisfy Grantor’s legal obligations.
Any net income not distributed shall be accumulated and added to the principal of Trust.

       If at any time a Committee member fails or ceases to serve then the position of
such Committee member shall remain vacant; subject to exception for the appointment
of representatives with legal authority to act on behalf of another Committee member.

        The Trust agreement provides that if there is no Committee, the trustee (other
than a beneficiary-trustee) may pay any one or more of the beneficiaries such amount
or amounts of the net income and principal for any purpose, even to the extent of all or
none, at any time and from time to time, as the trustee determines in his discretion and
only with Grantor’s written consent, and in making such determinations, the trustee may
consider or ignore, in the trustee’s discretion, the beneficiaries’ other financial resources
of any kind.

       Initially, Committee consists of Grantor, Representative 1, Representative 2,
Father, and Mother. Representatives 1 and 2 act on behalf of Child 1 and Child 2,
respectively, until each child reaches majority age. As each of the minor children,
Child 1 and Child 2, reaches majority age, that child will become a member of the
Committee, replacing his representative. Trust provides that, at any time, members of
the Committee, may by unanimous vote add one or more members to the Committee
(other than Spouse) provided that such members are beneficiaries of Trust. The Trust
agreement, as amended, states that Committee shall be deemed not to exist at any
time there are fewer than two members other than Grantor. The Committee shall also
be dissolved and cease to exist upon Grantor’s death.

      Upon Grantor’s death, the trustee shall distribute such amounts of trust property
as Grantor appoint to or in favor of any one person or more persons or entities, other
PLR-133676-17                                 3

than Grantor, Grantor’s estate, the creditors of Grantor, or the creditors of Grantor’s
estate, as Grantor may appoint by will (Grantor’s Testamentary Power). Such power
may not be exercised to discharge or satisfy Grantor’s legal obligations.

        Upon Grantor’s death, the trustee shall divide the then remaining trust property
into as many separate shares of equal value as necessary to dispose of the property.
Any balance which is not distributed pursuant to Grantor’s Testamentary Power shall be
distributed as follows: (1) one such equal share to Father, if he is then living; (2) one
such equal share to Mother, if she is then living; (3) one such equal share to Individual,
if he is then living, and (4) seven such equal shares to Grantor’s then living
descendants, by right of representation, to be held in further trust for such descendants.
If none of the remainder beneficiaries is living upon Grantor’s death, any balance which
is not distributed pursuant to Grantor’s Testamentary Power shall be distributed in equal
shares in further trust for the benefit of individuals named in Trust.

       Trust also provides that a person or corporate fiduciary shall not serve as a
fiduciary of a trust created under Trust if such service would cause the trust to fail to be
a “U.S. person,” as defined in § 7701(a)(30).

   You have requested the following rulings:

    1. As long as the Committee is serving, no portion of the items of income,
      deductions, and credits against tax of the Trust shall be included in computing
      under § 671 the taxable income, deductions, and credits of Grantor or of any
      member of the Committee.

    2. The contribution of property to Trust by Grantor will not be a completed gift
      subject to federal gift tax.

    3. Any distribution of property by the Committee from Trust to Grantor will not be a
      completed gift, subject to federal gift tax, by any member of the Committee.

    4. Any distribution of property by the Committee from Trust to any Beneficiary of
      Trust, other than Grantor, will not be a completed gift, subject to federal gift tax,
      by any member of the Committee.

    5. No member of the Committee upon his or her death will include in his or her
      estate any property held in Trust because such member is deemed to have a
      general power of appointment within the meaning of § 2041 and § 2514 over
      property held in Trust.
PLR-133676-17                                 4

RULING 1

        Section 671 provides that where it is specified in subpart E of part I of subchapter
J that the grantor or another person shall be treated as the owner of any portion of a
trust, there shall then be included in computing the taxable income and credits of the
grantor or the other person those items of income, deductions, and credits against tax of
the trust which are attributable to that portion of the trust to the extent that such items
would be taken into account under chapter 1 in computing taxable income or credits
against the tax of an individual.

      Section 672(a) provides, for purposes of subpart E, the term “adverse party”
means any person having a substantial beneficial interest in the trust which would be
adversely affected by the exercise or nonexercise of the power which he possesses
respecting the trust.

       Sections 673 through 677 specify the circumstances under which the grantor is
treated as the owner of a portion of a trust.

       Section 673(a) provides that the grantor shall be treated as the owner of any
portion of a trust in which the grantor has a reversionary interest in either the corpus or
the income therefrom, if, as of the inception of that portion of the trust, the value of such
interest exceeds five (5) percent of the value of such portion.

       Section 674(a) provides, in general, that the grantor shall be treated as the owner
of any portion of a trust in respect of which the beneficial enjoyment of the corpus or the
income therefrom is subject to a power of disposition, exercisable by the grantor or a
nonadverse party, or both, without the approval or consent of any adverse party.

      Section 674(b) provides that § 674(a) shall not apply to the powers described in
§ 674(b) regardless of by whom held.

       Section 674(b)(3) provides that § 674(a) shall not apply to a power exercisable
only by will, other than a power in the grantor to appoint by will the income of the trust
where the income is accumulated for such disposition by the grantor or may be so
accumulated in the discretion of the grantor or a nonadverse party, or both, without the
approval or consent of any adverse party.

      Section 674(b)(5) provides that § 674(a) shall not apply to a power to distribute
corpus to or for a beneficiary, provided that the power is limited by a reasonably definite
standard.

      Under § 675 and applicable regulations, the grantor is treated as the owner of
any portion of a trust if, under the terms of the trust agreement or circumstances
PLR-133676-17                                 5

attendant on its operation, administrative control is exercisable primarily for the benefit
of the grantor rather than the beneficiary of the trust.

         Section 676(a) provides that the grantor shall be treated as the owner of any
portion of a trust, whether or not he is treated as such owner under any other provision
of part I, subchapter J, chapter 1, where at any time the power to revest in the grantor
title to such portion is exercisable by the grantor or a nonadverse party, or both.

        Section 677(a) provides, in general, that the grantor shall be treated as the owner
of any portion of a trust, whether or not he is treated as such owner under § 674, whose
income without the approval or consent of any adverse party is, or, in the discretion of
the grantor or a nonadverse party, or both, may be (1) distributed to the grantor or the
grantor's spouse; (2) held or accumulated for future distribution to the grantor or the
grantor's spouse; or (3) applied to the payment of premiums on policies of insurance on
the life of the grantor or the grantor's spouse.

       Section 678(a) provides that a person other than the grantor shall be treated as
the owner of any portion of a trust with respect to which: (1) such person has a power
exercisable solely by himself to vest the corpus or the income therefrom in himself, or
(2) such person has previously partially released or otherwise modified such a power
and after the release or modification retains such control as would, within the principles
of §§ 671-677, inclusive, subject a grantor of a trust to treatment as the owner thereof.

       Section 679(a) provides that a United States person who directly or indirectly
transfers property to a foreign trust shall be treated as the owner for his taxable year of
the portion of such trust attributable to such property if for such year there is a United
States beneficiary of any portion of such trust.

       Based on the facts submitted and representations made, we conclude that an
examination of Trust reveals none of the circumstances that would cause Grantor to be
treated as the owner of any portion of Trust under §§ 673, 674, 676, 677 or 679 as long
as Trust is a domestic trust and the Committee remains in existence and serving.
Because none of the members of Committee have a power exercisable by himself to
vest trust income or corpus in himself, none shall be treated as the owner of Trust under
§ 678(a).

       We further conclude that an examination of Trust reveals none of the
circumstances that would cause administrative controls to be considered exercisable
primarily for the benefit of Grantor under § 675. Thus, the circumstances attendant on
the operation of Trust will determine whether Grantor will be treated as the owner of any
portion of Trust under § 675. This is a question of fact, the determination of which must
be deferred until the federal income tax returns of the parties involved have been
examined by the office with responsibility for such examination.
PLR-133676-17                                 6

RULINGS 2 AND 3

       Section 2501(a)(1) provides that a tax is imposed for each calendar year on the
transfer of property by gift during such calendar year by any individual, resident or
nonresident. Section 2511(a) provides that the gift tax applies whether the transfer is in
trust or otherwise, whether the gift is direct or indirect, and whether the property is real
or personal, tangible or intangible.

      Section 25.2511-2(b) of the Gift Tax Regulations provides that a gift is complete
as to any property, or part thereof or interest therein, of which the donor has so parted
with dominion and control as to leave in the donor no power to change its disposition,
whether for his own benefit or for the benefit of another. But if upon a transfer of
property (whether in trust or otherwise) the donor reserves any power over its
disposition, the gift may be wholly incomplete, or may be partially complete and partially
incomplete, depending upon all the facts in the particular case. Accordingly, in every
case of a transfer of property subject to a reserved power, the terms of the power must
be examined and its scope determined.

      Section 25.2511-2(b) provides an example, where the donor transfers property to
another in trust to pay the income to the donor or accumulate it in the discretion of the
trustee, and the donor retains a testamentary power to appoint the remainder among
the donor's descendants. The regulation concludes that no portion of the transfer is a
completed gift. However, if the donor had not retained a testamentary power of
appointment, but instead provided that the remainder should go to X or his heirs, the
entire transfer would be a completed gift.

       Section 25.2511-2(c) provides that a gift is incomplete in every instance in which
a donor reserves the power to revest the beneficial title in himself or herself. A gift is
also incomplete if and to the extent that a reserved power gives the donor the power to
name new beneficiaries or to change the interests of the beneficiaries as between
themselves unless the power is a fiduciary power limited by a fixed or ascertainable
standard.

        Under § 25.2511-2(e), a donor is considered as himself having a power if it is
exercisable by the donor in conjunction with any person not having a substantial
adverse interest in the disposition of the transferred property or the income therefrom.
A trustee, as such, is not a person having an adverse interest in the disposition of the
trust property or its income.

       Section 25.2511-2(f) provides that the relinquishment or termination of a power to
change the beneficiaries of transferred property, occurring otherwise than by death of
the donor, is regarded as the event which completes the gift and causes the gift tax to
apply.
PLR-133676-17                                7

       Section 25.2511-2(g) provides that if a donor transfers property to himself as
trustee (or to himself and some other person, not possessing a substantial adverse
interest, as trustees), and retains no beneficial interest in the trust property and no
power over it except fiduciary powers, the exercise or nonexercise of which is limited by
a fixed or ascertainable standard, to change the beneficiaries of the transferred
property, the donor has made a completed gift and the entire value of the transferred
property is subject to the gift tax.

        Section 25.2511-2(e) does not define "substantial adverse interest." Section
25.2514-3(b)(2) provides, in part, that a taker in default of appointment under a power
has an interest that is adverse to an exercise of the power. Section 25.2514-3(b)(2)
also provides that a co-holder of a power is considered as having an adverse interest
where he may possess the power after the possessor's death and may exercise it at
that time in favor of himself, his estate, his creditors, or the creditors of his estate.

       In Estate of Sanford v. Commissioner, 308 U.S. 39 (1939), the taxpayer created a
trust for the benefit of named beneficiaries and reserved the power to revoke the trust in
whole or in part, and to designate new beneficiaries other than himself. Six years later,
in 1919, the taxpayer relinquished the power to revoke the trust, but retained the right to
change the beneficiaries. In 1924, the taxpayer relinquished the right to change the
beneficiaries. The Court stated that the taxpayer’s gift is not complete, for purposes of
the gift tax, when the donor has reserved the power to determine those others who
would ultimately receive the property. Accordingly, the Court held that the taxpayer's
gift was complete in 1924, when he relinquished his right to change the beneficiaries of
the trust. A’s retention of a power to change the beneficial interests in a trust causes
the transfer to the trust to be incomplete for gift tax purposes, even though the power
may be defeated by the actions of third parties. Goldstein v. Commisisoner, 37 T.C.
897 (1962). See also Estate of Goelet v. Commissioner, 51 T.C. 352 (1968).

       In this case, Grantor retained the Grantor’s Consent Power over the net income
and principal of Trust. Under § 25.2511-2(e), a donor is considered as himself having a
power if it is exercisable by him in conjunction with any person not having a substantial
adverse interest in the disposition of the transferred property or the income therefrom.
The Committee members are not takers in default for purposes of § 25.2514-3(b)(2).
They are merely co-holders of the power. Under § 25.2514-3(b)(2), a co-holder of a
power is only considered as having an adverse interest where he may possess the
power after the possessor's death and may exercise it at that time in favor of himself,
his estate, his creditors, or the creditors of his estate. In this case, the Committee
ceases to exist upon the death of Grantor. Accordingly, the Committee members do not
have interests adverse to Grantor under § 25.2514-3(b)(2) and for purposes of
§ 25.2511-2(e). Therefore, Grantor is considered as possessing the power to distribute
net income and principal to any beneficiary himself because he retained the Grantor’s
Consent Power.
PLR-133676-17                                 8

       If the Committee ceases to exist, the Trustee has the power to distribute net
income to a beneficiary. However, the Trustee’s power is not a condition precedent to
each Grantor’s Consent Power. Each Grantor’s Consent Power over income is
presently exercisable and not subject to a condition precedent. Thus, the Trustee’s
power to distribute net income does not cause the transfer of property to be complete
with respect to the income interest in Trust for federal gift tax purposes. Therefore,
each Grantor is considered as possessing the power to distribute income to any
beneficiary himself or herself because he or she retained the Grantor’s Consent Power.

       Grantor also retained the Grantor’s Sole Power over the principal of Trust. Under
§ 25.2511-2(c), a gift is incomplete if and to the extent that a reserved power gives the
donor the power to name new beneficiaries or to change the interests of the
beneficiaries as between themselves unless the power is a fiduciary power limited by a
fixed or ascertainable standard. In this case, the Grantor’s Sole Power gives Grantor
the power to change the interests of the beneficiaries. Even though Grantor's power is
limited by an ascertainable standard, i.e., health, education, and support, Grantor's
power is not a fiduciary power. Accordingly, the retention of the Grantor’s Consent
Power and the Grantor’s Sole Power causes the transfer of property to Trust to be
incomplete for federal gift tax purposes.

        If the Committee ceases to exist, the Trustee, in its fiduciary capacity, also has
the power to distribute principal to one or more beneficiaries. The powers of the
Trustee are not conditions precedent to the Grantor’s powers. Grantor’s Sole Power
over principal is presently exercisable and not subject to a condition precedent.
Accordingly, Grantor retains dominion and control over the principal of Trust until the
Trustee exercises his or her power to appoint principal. See Goldstein v.
Commissioner, 37 T.C. 897 (1962). Thus, the Trustee’s powers to distribute principal
do not cause the transfer of property to be complete with respect to the remainder in
Trust for federal gift tax purposes. Accordingly, the retention of Grantor’s Consent
Power and Grantor’s Sole Power causes the transfer of property to Trust to be wholly
incomplete for federal gift tax purposes.

       Further, Grantor retained the Grantor’s Testamentary Power to appoint the
property in Trust to any persons, other than to the Grantor’s estate, Grantor’s creditors,
or the creditors of Grantor’s estate. Under § 25.2511-2(b), the retention of a
testamentary power to appoint the remainder of a trust is considered a retention of
dominion and control over the remainder. Accordingly, the retention of this power
causes the transfer of property to Trust to be incomplete with respect to the remainder
for federal tax purposes.

       Finally, the Committee members possess the Unanimous Member Power over
net income and principal. This power is not a condition precedent to Grantor’s powers.
Grantor’s powers over the net income and principal are presently exercisable and not
subject to a condition precedent. Grantor retains dominion and control over the net
PLR-133676-17                                 9

income and principal of Trust until the Committee members exercise their Unanimous
Member Power. Accordingly, the Unanimous Member Power does not cause the
transfer of property to be complete with respect to the income interest for federal gift tax
purposes. See Goldstein v. Commissioner, 37 T.C. 897 (1962); Estate of Goelet v.
Commissioner, 51 T.C. 352 (1968).

       Accordingly, based on the facts submitted and the representations made, we
conclude that the contribution of property to Trust by Grantor is not a completed gift
subject to federal gift tax. Any distribution from Trust to Grantor is merely a return of
Grantor’s property. Therefore, we conclude that any distribution of property from Trust
by the Committee to Grantor will not be a completed gift subject to federal gift tax, by
any member of the Committee. Further, upon the death of Grantor, the fair market
value of the property in Trust is includible in his gross estate for federal estate tax
purposes.

RULINGS 4 AND 5

       Section 2514(b) provides that the exercise or release of a general power of
appointment created after October 21, 1942, shall be deemed a transfer of property by
the individual possessing such power.

      Section 2514(c) provides that the term "general power of appointment" means a
power which is exercisable in favor of the individual possessing the power (possessor),
the possessor's estate, the possessor's creditors, or the creditors of the possessor's
estate.

      Section 25.2514-1(c)(1) provides that a power of appointment is not a general
power if by its terms it is exercisable only in favor of one or more designated persons or
classes other than the possessor or his creditors, or the possessor's estate or the
creditors of the estate or expressly not exercisable in favor or the possessor or his
creditors, or the possessor’s estate or the creditors of his estate.

      Section 2514(c)(3)(A) provides that, in the case of a power of appointment
created after October 21, 1942, if the power is exercisable by the possessor only in
conjunction with the creator of the power, such power is not deemed a general power of
appointment.

       Section 2514(c)(3)(B) provides, that in the case of a power of appointment
created after October 21, 1942, if the power is not exercisable by the possessor except
in conjunction with a person having a substantial interest in the property subject to the
power, which is adverse to the exercise of the power in favor of the possessor, such
power shall not be deemed a general power of appointment. For purposes of
§ 2514(c)(3)(B), a person who, after the death of the possessor, may be possessed of a
power of appointment (with respect to the property subject to the possessor's power)
PLR-133676-17                                 10

which he may exercise in his own favor shall be deemed as having an interest in the
property and such interest shall be deemed adverse to such exercise of the possessor’s
power.
         Section 25.2514-3(b)(2) provides, in part, that a co-holder of a power has no
adverse interest merely because of his joint possession of the power nor merely
because he is a permissible appointee under a power. However, a co-holder of a power
is considered as having an adverse interest where he may possess the power after the
possessor's death and may exercise it at that time in favor of himself, his estate, his
creditors, or the creditors of his estate. Thus, for example, if X, Y, and Z held a power
jointly to appoint among a group of persons which includes themselves and if on the
death of X the power will pass to Y and Z jointly, then Y and Z are considered to have
interests adverse to the exercise of the power in favor of X. Similarly, if on Y's death the
power will pass to Z, Z is considered to have an interest adverse to the exercise of the
power in favor of Y.

        Section 2041(a)(2) provides that the value of the gross estate shall include the
value of all property to the extent of any property with respect to which the decedent has
at the time of death a general power of appointment created after October 21, 1942, or
with respect to which the decedent has at any time exercised or released such a power
by a disposition which is of such nature that if it were a transfer of property owned by
the decedent, such property would be includible in the decedent's gross estate under
§§ 2035 to 2038, inclusive.

       Under § 2041(b)(1), the term "general power of appointment" is defined, in
relevant part, to mean a power which is exercisable in favor of the decedent, his estate,
his creditors, or the creditors of his estate.

      Section 2041(b)(1)(C)(i) provides, however, that in the case of a power of
appointment created after October 21, 1942, if the power is not exercisable by the
decedent except in conjunction with the creator of the power, such power is not deemed
a general power of appointment.

       Section 2041(b)(1)(C)(ii) provides, however, that in the case of a power of
appointment created after October 21, 1942, if the power is not exercisable by the
decedent except in conjunction with a person having a substantial interest in the
property, subject to the power, which is adverse to the exercise of the power in favor of
the decedent -- such power shall not be deemed a general power of appointment. For
purposes of § 2041(b)(1)(C)(ii), a person who, after the death of the decedent, may be
possessed of a power of appointment (with respect to the property subject to the
decedent's power) which he may exercise in his own favor shall be deemed as having
an interest in the property and such interest shall be deemed adverse to such exercise
of the decedent's power.
PLR-133676-17                                  11

       Section 20.2041-3(c)(2) of the Estate Tax Regulations provides, in part, that a
co-holder of a power of appointment has no adverse interest merely because of his joint
possession of the power nor merely because he is a permissible appointee under a
power. However, a co-holder of a power is considered as having an adverse interest
where he may possess the power after the decedent's death and may exercise it at that
time in favor of himself, his estate, his creditors, or the creditors of his estate. Thus, for
example, if X, Y, and Z held a power jointly to appoint among a group of persons which
includes themselves and if on the death of X the power will pass to Y and Z jointly, then
Y and Z are considered to have interests adverse to the exercise of the power in favor
of X. Similarly, if on Y's death the power will pass to Z, Z is considered to have an
interest adverse to the exercise of the power in favor of Y.

        The power held by the Committee members under the Grantor’s Consent Power
is a power that is exercisable only in conjunction with the creator, Grantor. Accordingly,
under §§ 2514(b) and 2041(a)(2), the Committee members do not possess general
powers of appointment by virtue of possessing this power. Further, the power held by
the Committee members under the Unanimous Member Power is not a general power
of appointment for purposes of §§ 2514(b) and 2041(a)(2). As in the examples in
§§ 25.2514-3(b)(2) and 20.2041-3(c)(2), the Committee members have substantial
adverse interests in the property subject to this power. Accordingly, any distribution
made from Trust to a beneficiary, other than to Grantor, pursuant to the exercise of
these powers, the Grantor's Consent Power and the Unanimous Member Power, are
not gifts by the Committee members. Instead, such distributions are gifts by Grantor.

        Based on the facts submitted and representations made, we conclude that any
distribution of property by the Committee from Trust to any Beneficiary of Trust, other
than Grantor, will not be a completed gift subject to federal gift tax, by any member of
the Committee. Accordingly, any distribution of property from Trust to a beneficiary,
other than to Grantor, will be completed gifts by Grantor. Finally, we conclude that the
powers held by the Committee are not general powers of appointment for purposes of
§ 2041(a)(2) and, accordingly, no member of the Committee upon his or her death will
include in his or her estate any property held in Trust because such member is deemed
to have a general power of appointment within the meaning of § 2041 over property
held in Trust.

       Except as specifically ruled herein, we express no opinion on the federal tax
consequences of the transaction under the cited provisions or under any other
provisions of the Code. Specifically, we express no opinion on the trust provisions
permitting Trustee to distribute income or principal to trustees of other trusts
(decanting).
PLR-133676-17                                 12

      This ruling is directed only to the taxpayer requesting it. Section 6110(k)(3) of
the Code provides that it may not be used or cited as precedent.



                                      Sincerely,

                                      Lorraine E. Gardner

                                      Lorraine E. Gardner
                                      Senior Counsel, Branch 4
                                      Office of Associate Chief Counsel
                                      (Passthroughs & Special Industries)



Enclosures (2)
      Copy for section 6110 purposes
      Copy of this letter