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interests in the 2-year term annuities set forth in the trust
documents. Such interests thus were, as required by the
regulations, “held by the same individual both before and after
the transfer in trust.” Sec. 25.2702-2(a)(3), Gift Tax Regs.
B. The Extent of the Qualified Interest
Having therefore decided that petitioner, either
individually or through her estate, retained the 2-year annuities
in their entirety, we next consider the extent to which these
interests are “qualified”. In this connection, section 2702
itself provides only that “qualified interest” means “any
interest which consists of the right to receive fixed amounts
payable not less frequently than annually”. Sec. 2702(b)(1).
Since a simple 2-year annuity would appear to fall within this
definition, we turn to whether relevant regulations set forth
additional restrictions.
The regulatory provision which enumerates the permissible
terms for a qualified annuity mandates that the term be “for the
life of the term holder, for a specified term of years, or for
the shorter (but not the longer) of those periods.” Sec.
25.2702-3(d)(3), Gift Tax Regs. Petitioner thus contends that
her 2-year annuities are sanctioned by the second of these three
options and may be valued as such. Respondent, however, asserts
that petitioner’s annuities are in fact of the third listed type
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