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(b) Qualified Interest.--For purposes of this
section, the term “qualified interest” means--
(1) any interest which consists of the right
to receive fixed amounts payable not less
frequently than annually,
(2) any interest which consists of the right
to receive amounts which are payable not less
frequently than annually and are a fixed
percentage of the fair market value of the
property in the trust (determined annually), and
(3) any noncontingent remainder interest if
all of the other interests in the trust consist of
interests described in paragraph (1) or (2).
Regulations promulgated under section 2702 define, and
expand upon, certain of the terms employed in section 2702.
“Retained” denotes “held by the same individual both before and
after the transfer in trust.” Sec. 25.2702-2(a)(3), Gift Tax
Regs. The statutory definition of “qualified interest” is
likewise elucidated in the following manner: “Qualified interest
means a qualified annuity interest, a qualified unitrust
interest, or a qualified remainder interest.” Sec. 25.2702-
2(a)(5), Gift Tax Regs. A “qualified annuity interest”, in turn,
is “an interest that meets all the requirements of � 25.2702-3(b)
and (d).” Sec. 25.2702-2(a)(6), Gift Tax Regs.
The above-referenced paragraph (b) of section 25.2702-3,
Gift Tax Regs., requires that a “qualified annuity interest”
consist of “an irrevocable right to receive a fixed amount”,
“payable to (or for the benefit of) the holder of the annuity
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Last modified: May 25, 2011