William A. and Gayle T. Cook, Donors - Page 9




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          determination that the value of the annuity retained by each                
          grantor should be calculated based on the shorter of a fixed term           
          or the earlier death of the grantor.                                        
                                     Discussion                                       
          I.  General Rules                                                           
               Section 2501 imposes a tax for each calendar year on the               
          transfer of property by gift by any taxpayer.  Pursuant to                  
          section 2512, the value of the transferred property as of the               
          date of the gift “shall be considered the amount of the gift”.              
          Generally, where property is transferred in trust but the donor             
          retains an interest in such property, the value of the gift is              
          the value of the property transferred, less the value of the                
          donor’s retained interest.  See sec. 25.2512-5A(e), Gift Tax                
          Regs.; sec. 25.2512-5T(d)(2), Temporary Gift Tax Regs., 64 Fed.             
          Reg. 23224 (Apr. 30, 1999).  However, if the gift in trust is to            
          a family member (as defined in section 2704(c)(2)), the value of            
          the gift is determined subject to the limitations of section                
          2702.  See id.                                                              
               In the case at bar, petitioners assert that each grantor’s             
          retained interest is to be valued as a single annuity based on              
          two lives, referred to as a dual-life annuity.  Respondent                  
          asserts that each grantor’s retained interest is to be valued as            
          a single-life annuity.  Valuation of a retained interest as a               
          dual-life annuity produces a greater retained value than                    






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