Audrey J. Walton - Page 7

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                    (b) Qualified Interest.--For purposes of this                     
               section, the term “qualified interest” means--                         
                         (1) any interest which consists of the right                 
                    to receive fixed amounts payable not less                         
                    frequently than annually,                                         
                         (2) any interest which consists of the right                 
                    to receive amounts which are payable not less                     
                    frequently than annually and are a fixed                          
                    percentage of the fair market value of the                        
                    property in the trust (determined annually), and                  
                         (3) any noncontingent remainder interest if                  
                    all of the other interests in the trust consist of                
                    interests described in paragraph (1) or (2).                      
               Regulations promulgated under section 2702 define, and                 
          expand upon, certain of the terms employed in section 2702.                 
          “Retained” denotes “held by the same individual both before and             
          after the transfer in trust.”  Sec. 25.2702-2(a)(3), Gift Tax               
          Regs.  The statutory definition of “qualified interest” is                  
          likewise elucidated in the following manner:  “Qualified interest           
          means a qualified annuity interest, a qualified unitrust                    
          interest, or a qualified remainder interest.”  Sec. 25.2702-                
          2(a)(5), Gift Tax Regs.  A “qualified annuity interest”, in turn,           
          is “an interest that meets all the requirements of � 25.2702-3(b)           
          and (d).”  Sec. 25.2702-2(a)(6), Gift Tax Regs.                             
               The above-referenced paragraph (b) of section 25.2702-3,               
          Gift Tax Regs., requires that a “qualified annuity interest”                
          consist of “an irrevocable right to receive a fixed amount”,                
          “payable to (or for the benefit of) the holder of the annuity               

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Last modified: May 25, 2011