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interests. Moreover, the foregoing language reflects that the
statute was designed primarily to restrict a donor’s ability to
calculate the amount of a gift by subtracting certain elements of
actuarial value that would or might in fact pass to the donee. A
fixed-term annuity, payable to the grantor or the grantor’s
estate, would therefore appear to fall within the statute’s
permissible parameters, as elucidated by the legislative history.
Such an interest would further seem to fall within the class of
easily valued rights which the final sentence in the passage
above indicates Congress envisioned would not be afforded a
lesser value under the new rules.
Respondent, however, characterizes the annuities at issue
here as equivalent to the reversionary rights referenced by
Congress as nonqualified, rather than to the fixed-term interests
approved by the lawmakers. In respondent’s view, the
congressional concern underlying section 2702 reaches
petitioner’s annuities.
Respondent alleges that Congress sought to curb the then-
current practice of dividing trusts into numerous interests and
selectively retaining interests based on mortality, such as
reversions. Respondent points out the common estate planning
device of creating a trust, with a term short enough that the
grantor’s risk of dying during the term would be minimal, in
which the grantor retained both an income interest and a
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