William A. and Gayle T. Cook, Donors - Page 18




                                       - 18 -                                         
               Example 7.  The facts are the same as in Example 6,                    
               except that both the term interest retained by A and                   
               the interest transferred to A’s spouse (subject to A’s                 
               right of revocation) are qualified annuity or unitrust                 
               interests.  The amount of the gift is the fair market                  
               value of the property transferred to the trust reduced                 
               by the value of both A’s qualified interest and the                    
               value of the qualified interest transferred to A’s                     
               spouse (subject to A’s power to revoke).                               
               In Example 6, the transfer of property to the trust is not             
          incomplete as to all interests in the property and section 2702             
          therefore applies (i.e., the gift of the remainder is a completed           
          gift), but the retained interests--both A’s and the spouse’s--are           
          nevertheless not qualified interests because the retained rights            
          are rights to receive trust income, not annuity or unitrust                 
          amounts.                                                                    
               Conversely, in Example 7, A’s interest and the revocable               
          spousal interest are deemed to meet the requirements for                    
          qualified status.  Under section 25.2702-2(a)(5), Gift Tax Regs.,           
          A’s power to revoke the spouse’s interest is treated as an                  
          interest retained by A.  The interests of both A and his or her             
          spouse, at the creation of the trust, are fixed and                         
          ascertainable, and not contingent upon A’s death.  A is deemed to           
          have retained interests, the total term of which is 20 years.               
          Both interests are thus properly taken into account in valuing              
          the remainder.                                                              
               Therefore, because the spousal interests in each GRAT in the           
          case before us are not fixed and ascertainable at the inception             






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