Before L. HAND, CHASE and FRANK, Circuit Judges.
Under § 302(f) of the 1926 Revenue Act,*fn1 there was included in a decedent's gross estate the value of all property "To the extent of any property passing under a general power of appointment exercised by the decedent (1) by will * * *." This required three elements: (1) the existence of such a power, (2) an exercise of that power, and (3) the passing of that property by means of that exercise. Construing that section, the Supreme Court, in Helvering v. Grinnell, 294 U.S. 153, 157, 55 S. Ct. 354, 79 L. Ed. 825, decided in 1935, distinguished between (a) an exercise of a power and (b) the passing of property pursuant to the exercise. This distinction was again recognized in Helvering v. Safe Deposit Co., 316 U.S. 56, 65, 62 S. Ct. 925, 86 L. Ed. 1266, decided April 13, 1942. We take it that those decisions established this rule: If the exercise of the power merely echoed the limitations over upon default (and especially if the appointee renounced the appointment), there was no "passing" under the power within § 302(f).
Subsequent to those decisions, Congress, by the Revenue Act of October 21, 1942, amended the provisions relating to powers of appointment, 26 U.S.C. § 811(f), by substituting § 403(a) of the 1942 Act*fn2 for § 302(f) of the 1926 Act. The new section includes in the gross estate the value of property "To the extent of any property (A) with respect to which the decedent has at the time of his death a power of appointment * * *." By § 403(d) (3) of the 1942 Act, this new provision was made inapplicable, and old § 302(f) was left intact, if, inter alia, "the decedent dies before January 1, 1943 * * * and such power is not exercised."*fn3 On December 17, 1942, by an amendment, this date was changed to July 1, 1943.*fn4 On March 10, 1943, a Treasury Regulation issued, which read.*fn5 "A power to appoint is exercised where the property subject thereto is appointed to the taker in default of appointment, regardless of whether or not the appointed interest and the interest in default of appointment are identical, and regardless of whether or not the appointee renounced any right to take under the appointment." Some three months later, on June 9, 1943, by an amendment, Congress changed the date in § 403(d) (3) to March 1, 1944.*fn6 The decedent died January 12, 1944. By subsequent amendments, Congress several times put forward the date in § 403(d) (3).*fn7
After the issuance of the Regulation, the Supreme Court, on December 6, 1943, in Estate of Rogers v. Commissioner, 320 U.S. 410, 415, 64 S. Ct. 172, 174, 88 L. Ed. 134, in construing § 302(f), said, in a dictum, "Where a donee of a power merely echoes the limitations over upon a default of appointment he may well be deemed not to have exercised his power, and therefore not to have passed any property under such a power." On the basis of this dictum, taxpayer argues that the words "and such power is not exercised" in § 403(d) (3) must be so interpreted that a power is not to be regarded as exercised if it merely echoes the limitations over upon default of appointment.
We do not agree. Before the enactment of § 403(d) (3), the Supreme Court, as above noted, had carefully differentiated (1) the exercise of a power from (2) an exercise which effectively passed the property. In those circumstances, it was not unreasonable to interpret § 403(d) (3) to include a mere echoing exercise. The Treasury Regulation, which thus interpreted it, was therefore not unreasonable, and, consequently, was valid. The dictum in the subsequent Rogers case - a dictum relating to "passing" under § 302(f) - has no bearing on the validity of the Regulation. Moreover, with this Regulation outstanding, Congress repeatedly amended § 403(d) (3) without altering the words "such power is not exercised." See Helvering v. R.J. Reynolds Tobacco Co., 306 U.S. 110, 59 S. Ct. 423, 83 L. Ed. 536. Accordingly, the decedent's will exercised the power within the meaning of § 403(d) (3).*fn8
While it is not necessary for our decision, we add that we think the appointment here was not of an echoing kind. For the decedent exercised the power to make five money bequests, aggregating $21,501.00, to individuals not mentioned by his mother, and, of the property subject to the power, gave only the balance to his daughter, who would have taken in default of appointment. See Guaranty Trust Co. of New York v. Johnson, 2 Cir., 165 F.2d 298.