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fixed amounts which are payable at least annually, as required by
section 2702(b)(1), and that the remainder interest created for
the son (a “member of the family” under sections 2702(e) and
2704(c)(2)), is noncontingent, as required by section 2702(b)(3).
Consequently, the value of any interest retained by the grantor
or “any applicable family member” must be determined under the
special valuation rules of section 2702. As provided in section
2702(a)(2)(A), the value of any retained interest “which is not a
qualified interest shall be treated as being zero.”
Respondent agrees that each grantor’s retained annuity to
the extent it is for a term of years or the grantor’s earlier
death constitutes a qualified interest. Respondent, however,
challenges the provision of each trust which continues the
annuity for the spouse, if the spouse survives the grantor, for
the remaining term of the trust or until the spouse’s earlier
death.
We agree with respondent that as to each trust, the interest
retained in favor of the grantor’s spouse, whether viewed as an
independent interest or as an expansion of the grantor’s
interest, is not qualified and therefore must be valued at zero.
Thus, we reject petitioners’ contention that they are entitled to
value each grantor’s retained interest as an annuity based on two
lives.
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Last modified: May 25, 2011