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context is it possible for a donor to create strictly an annuity
for a term of years and a noncontingent remainder. Hence, it is
only that kind of situation which respondent claims is sanctioned
by the mention of an annuity “for a specified term of years” in
section 25.2702-3(d)(3), Gift Tax Regs., with the result that
there exists no inconsistency between Example 5 and such
regulatory section.
In response to this latter argument, we would simply point
out that the statute does not contemplate a transfer of the lead
annuity to a perpetual-life entity. See secs. 2702(e),
2704(c)(2) (defining “member of the family” for purposes of
bringing a transaction within the section 2702 rules). We
therefore turn to respondent’s broader contentions regarding
Example 5’s consistency with the underlying purpose of section
2702. On this issue, we conclude that the annuities here are
more akin to the fixed-term interests cited with approval in the
legislative history than to the reversionary interests identified
as leading to undervaluation. We base our conclusions on the
statutory text, on the above-quoted policy concerns, and on the
comparable situation in the section 664 context (dealing with
valuation of split-interest gifts to charity), to which the
legislative history alludes.
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