dissenting: In my judgment, there are sound and persuasive reasons for sustaining the definition of "specific portion” in section 20.2056(b)-5(c), Estate Tax Regs., at least as applied to the power of appointment over the corpus of a trust, and consequently, I must dissent from the holding of the majority.
It is well settled that the proper judicial attitude in reviewing regulations is one of deference. Congress has delegated to the Commissioner the authority to promulgate "all needful rules and regulations for the enforcement” of the revenue laws. Sec. . 7805(a). "The role of the judiciary in cases of this sort begins and énds with assuring that the Commissioner’s regulations fall within his authority to implement the congressional mandate in some reasonable manner.” United States v. Correll, 389 U.S. 299, 307 (1967). If the challenged regulation harmonizes with the plain language of the statute, its origin, and purpose, the regulation must stand. See generally Commissioner v. Portland Cement Co. of Utah, 450 U.S. 156 (1981); National Muffler Dealers Assn., Inc. v. United States, 440 U.S. 472 (1979); Bingler v. Johnson, 394 U.S. 741 (1969); Commissioner v. South Texas Lumber Co., 333 U.S. 496 (1948).
The estate tax marital deduction was enacted in 1948 to equalize the incidence of the estate tax in common law and community property jurisdictions. Sec. 361, Revenue Act of 1948, ch. 168, 62 Stat. 117; S. Rept. 1013, 80th Cong., 2d Sess. (1948), 1948-1 C.B. 285, 303-306. Congress permitted an interest in trust to qualify for the marital deduction if the surviving spouse was entitled for life to all the income from the trust corpus with a power in the surviving spouse to appoint the entire trust corpus. Sec. 361, Revenue Act of 1948, supra, 62 Stat. at 118. Congress allowed an interest that was less than a fee to qualify for the marital deduction in "recognition of one of the customary modes of transfer of property in common-law States” (S. Rept. 1013, supra, 1948-1 C.B. at 305) and because the surviving spouse "by reason of her right to the income and a power of appointment, is the virtual owner of the property” (S. Rept. 1013, supra, 1948-1 C.B. at 342).
The issue in the present case could not have arisen under the 1948 statute because such law required that the surviving spouse receive "all the income from the corpus” and a power of appointment over the "entire corpus.” Thus, the value of the entire trust corpus on the date of the death of the surviving spouse was. includable in her gross estate by virtue of the power of appointment. Under the 1948 amendment, a single trust could not be used if only a part of the corpus was to be set aside for the benefit of the surviving spouse and part was to be used for the benefit of other beneficiaries; a separate trust had to be created to qualify for the marital deduction. In 1954, the law was changed to allow a decedent to use a single trust and to claim a marital deduction for the portion given to the surviving spouse.1
The 1954 amendment provided that a bequest of the right to all the income from a specific portion of the corpus and a power to appoint such specific portion of the corpus would qualify such specific portion for the marital deduction. An illustrative example in the Ways and Means Committee report provided:
if the decedent in his will provided for the creation of a trust under the terms of which the income from one-half of the trust property is payable to this surviving spouse with uncontrolled power in the spouse to appoint such one-half of the trust property by will, such interest will qualify as an exception from the terminable interest rule. * * *[2] [H. Rept. 1337, to accompany H.R. 8300 (Pub. L. 591), 83d Cong., 2d Sess. A319 (1954).]
The 1954 amendment was purely technical; it was not designed to alter the balance struck in 1948 between common law and community property jurisdictions, and it should not now be construed to do so. See generally Note, "Qualification of a Specific Portion of a Trust for the Marital Deduction,” 19 Stan. L. Rev. 468 (1967).
Section 20.2056(b)-5(c), Estate Tax Regs., was adopted on June 23, 1958, and requires that, in order to qualify for the marital deduction, the "specific portion” of the trust corpus that is subject to the surviving spouse’s life estate and power of appointment must be expressed as a "fractional or percentile share” of the total corpus, "so that such interest or share in the surviving spouse reflects its proportionate share of the increment or decline in the whole of the property interest to which the income rights and the power relate.” The regulation assures that if there is appreciation in the value of the corpus of a trust after the death of the decedent, the appreciation in value will not escape the estate tax. Justice Stewart pointed out the consequences of not applying such a rule:
Assume a trust estate of $200,000, with the widow receiving the right to the income from $100,000 of its corpus and a power of appointment over that $100,000, and the children of the testator receiving income from the balance of the corpus during the widow’s life, their remainders to vest when she dies. Now suppose that when the widow dies the trust corpus has doubled in value to $400,000. The wife’s power of appointment over $100,000 applies only to make $100,000 taxable to her estate. The remaining $300,000 passes tax free to the children. Contrast the situation in a community property State. The wife’s 50% interest in the community property places $200,000 of the expanded assets in her estate and taxable as such; only $200,000, therefore, passes directly to the children. * * * [Northeastern Pa. Nat. B. & T. Co. v. United States, 387 U.S. 213, 227 (1967) (Stewart, J., dissenting); fn. ref. omitted.]
Such a result would allow the residents of common law States to create a trust giving a specific amount to a surviving spouse thereby avoiding the estate tax on the appreciation in value of the trust corpus. An interpretation of the statute which confers such a substantial tax benefit on the residents of common law States is clearly inconsistent with the 1948 and 1954 amendments. In summary, the regulation represents a contemporaneous construction of the statute by those personally and directly familiar with the legislative purpose; it constitutes an attempt to maintain the equality of treatment between residents of common law and community property States; and it is certainly harmonious with the words of the statute ánd the legislative history. Consequently, I believe that the regulation, as it pertains to the power of appointment over corpus, should be sustained.
In Northeastern Pa. Nat. B. & T. Co. v. United States, supra, the Supreme Court held that a bequest to a specific dollar amount per month from a trust was a bequest of all the income from a specific portion of trust corpus. The Court determined that section 20.2056(b)-5(c), Estate Tax Regs., "improperly restricts the scope of the congressionally granted deduction.” 387 U.S. at 218. A majority of this Court apparently concludes that the Supreme Court’s decision precludes us from sustaining the challenged regulation as applied to a power of appointment over, corpus. With this conclusion, I am unable to agree.
It is said that "logical and practical consistency” (Nims, J., concurring) requires that "specific portion” be given one interpretation for both income and corpus. In the Northeastern opinion, the Supreme Court stated that "nothing we hold in this opinion has reference to” the "quite different problem” of whether a power of appointment of a specific dollar amount of corpus satisfies the specific portion requirement. 387 U.S. at 225. In the Northeastern case, the Court considered a bequest of the income from a specific amount of corpus, and its decision did not result in any of the appreciation of the value of the corpus escaping the estate tax since the power extended to the entire corpus. The Court was aware that in considering a limited power over corpus, different questions would arise, and the Court, explicitly and directly, told us that it was not deciding the corpus question and in effect directed us to consider that question separately on its merits.
It is not necessarily true that "specific portion” must have the same meaning wherever used: "A word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used.” Towne v. Eisner, 245 U.S. 418, 425 (1918) (Holmes, J.). In their work on estate and gift taxation, Stephens, Maxfield, and Lind observed that the reasons for construing "specific portion” in the manner of the regulations, when applied to a power over corpus, are so persuasive that "the courts may adopt divergent views.” R. Stephens, G. Maxfield & S. Lind, Federal Estate and Gift Taxation 5-100 (5th ed. 1983); see also H. Dubroff & D. Kahn, Federal Taxation of Estates, Gifts, and Trusts 242-243 (3d ed. 1980). We have not hesitated to ascribe different meanings to the same word used twice in one sentence of a section when necessary to effectuate the congressional intent. See State of Washington v. Commissioner, 77 T.C. 656 (1981), affd. 692 F.2d 128 (D.C. Cir. 1982). We must construe "specific portion” in the light of the objectives of the statute, and those objectives make it abundantly clear that we cannot adopt a single or consistent meaning of the term. Permitting a bequest of the income from a specific amount of corpus to qualify for the marital deduction does no violence to the congressional scheme of equality, but applying a similar rule to the corpus of a trust will frustrate the clear and important objective of equality of treatment of residents of community property and common law States. To carry out that objective, we must construe "specific portion,” when applied to a power over corpus, to be limited in the manner prescribed by the regulations.
Our decisions are too important to rest upon speculation over the implications of the reservation of an issue by the Supreme Court; a decision should be based on "harder stuff.” Compare Crane v. Commissioner , 331 U.S. 1, 14 n. 37 (1947), with Tufts v. Commissioner, 70 T.C. 756 (1978), revd. 651 F.2d 1058 (5th Cir. 1981), revd. 461 U.S._(1983). Let us take the Supreme Court for what it actually said — no more and no less; and then let us carry out our assigned responsibility and make a decision by exercising our best judgment.
Dawson and Parker, JJ., agree with this dissent.See Fleming, "Present Status of the Marital Deduction,” 33 Taxes 167, 168 (1955).
The Supreme Court has stated that such example illustrated, but did not limit, the meaning of the term "specific portion.” Northeastern Pa. Nat B. & T. Co. v. United States, 387 U.S. 213, 221 n. 11 (1967).