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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.
As pertinent herein, section 2702 provides:
SEC. 2702. SPECIAL VALUATION RULES IN CASE OF
TRANSFERS OF INTERESTS IN TRUSTS.
(a) Valuation Rules.--
(1) In general.--Solely for purposes of
determining whether a transfer of an interest in
trust to (or for the benefit of) a member of the
transferor’s family is a gift (and the value of
such transfer), the value of any interest in such
trust retained by the transferor or any applicable
family member * * * shall be determined as
provided in paragraph (2).
(2) Valuation of retained interests.--
(A) In general.--The value of any
retained interest which is not a qualified
interest shall be treated as being zero.
(B) Valuation of qualified interest.--
The value of any retained interest which is a
qualified interest shall be determined under
section 7520 [providing for use of valuation
tables prescribed by the Secretary for
annuities, life interests, etc.].
* * * * * * *
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