[Code of Federal Regulations]
[Title 26, Volume 14]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 26CFR25.2514-2]

[Page 555-556]
 
                       TITLE 26--INTERNAL REVENUE
 
    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)
 
PART 25_GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954--Table of Contents
 
Sec.  25.2514-2  Powers of appointment created on or before October 21, 1942.

    (a) In general. The exercise of a general power of appointment 
created on or before October 21, 1942, is deemed to be a transfer of 
property by the individual possessing the power.
    (b) Joint powers created on or before October 21, 1942. Section 
2514(c)(2) provides that a power created on or before October 21, 1942, 
which at the time of the exercise is not exercisable by the possessor 
except in conjunction with another person, is not deemed a general power 
of appointment.
    (c) Release or lapse. A failure to exercise a general power of 
appointment created on or before October 21, 1942, or a complete release 
of such a power is not considered to be an exercise of a general power 
of appointment. The phrase ``a complete release'' means a release of all 
powers over all or a portion of the property subject to a power of 
appointment, as distinguished from

[[Page 556]]

the reduction of a power of appointment to a lesser power. Thus, if the 
possessor completely relinquished all powers over one-half of the 
property subject to a power of appointment, the power is completely 
released as to that one-half. If at or before the time a power of 
appointment is relinquished, the holder of the power exercises the power 
in such a manner or to such an extent that the relinquishment results in 
the reduction, enlargement, or shift in a beneficial interest in 
property, the relinquishment will be considered to be an exercise and 
not a release of the power. For example, assume that A created a trust 
in 1940 providing for payment of the income to B for life with the power 
in B to amend the trust, and for payment of the remainder to such 
persons as B shall appoint or, upon default of appointment, to C. If B 
amended the trust in 1948 by providing that upon his death the remainder 
was to be paid to D, and if he further amended the trust in 1955 by 
deleting his power to amend the trust, such relinquishment will be 
considered an exercise and not a release of a general power of 
appointment. On the other hand, if the 1948 amendment became ineffective 
before or at the time of the 1955 amendment, or if B in 1948 merely 
amended the trust by changing the purely ministerial powers of the 
trustee, his relinquishment of the power in 1955 will be considered as 
release of a power of appointment.
    (d) Partial release. If a general power of appointment created on or 
before October 21, 1942, is partially released so that it is not 
thereafter a general power of appointment, a subsequent exercise of the 
partially released power is not an exercise of a general power of 
appointment if the partial release occurs before whichever is the later 
of the following dates:
    (1) November 1, 1951; or
    (2) If the possessor was under a legal disability to release the 
power on October 21, 1942, the day after the expiration of 6 months 
following the termination of such legal disability.

However, if a general power created on or before October 21, 1942, is 
partially released on or after the later of those dates, a subsequent 
exercise of the power will constitute an exercise of a general power of 
appointment. The legal disability referred to in this paragraph is 
determined under local law and may include the disability of an insane 
person, a minor, or an unborn child. The fact that the type of general 
power of appointment possessed by the holder actually was not generally 
releasable under the local law does not place the holder under a legal 
disability within the meaning of this paragraph. In general, however, it 
is assumed that all general powers of appointment are releasable, unless 
the local law on the subject is to the contrary, and it is presumed that 
the method employed to release the power is effective, unless it is not 
in accordance with the local law relating specifically to releases or, 
in the absence of such local law, is not in accordance with the local 
law relating to similar transactions.
    (e) Partial exercise. If a general power of appointment created on 
or before October 21, 1942, is exercised only as to a portion of the 
property subject to the power, the exercise is considered to be a 
transfer only as to the value of that portion.