115 T.C. No. 41
UNITED STATES TAX COURT
AUDREY J. WALTON, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 3824-99. Filed December 22, 2000.
P established and funded with corporate stock two
substantially identical grantor retained annuity trusts
(GRAT’s). Each GRAT had a 2-year term during which P
retained the right to receive an annuity. In the event
that P died prior to expiration of the 2-year term, the
remaining scheduled annuity payments were to be made to
her estate. The balance of the trust property would
then be paid to the remainder beneficiaries.
Held: For purposes of determining the value under
sec. 2702, I.R.C., of the gift effected upon creation
of each GRAT, P’s retained qualified interest is to be
valued as an annuity for a specified term of years,
rather than as an annuity for the shorter of a term
certain or the period ending upon P’s death.
Held, further, Sec. 25.2702-3(e), Example (5),
Gift Tax Regs., is an invalid interpretation of sec.
2702, I.R.C.
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