Audrey J. Walton - Page 21

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               With respect to the text itself, the short answer is that an           
          annuity for a specified term of years is consistent with the                
          section 2702(b) definition of a qualified interest; a contingent            
          reversion is not.                                                           
               As regards policy, permitting reduction to gift value for              
          reversionary interests was resulting in arbitrary and abusive               
          elimination of value which was intended to, and typically did,              
          pass to the donee.  Donors were subtracting the full actuarial              
          value of a reversionary interest in the trust corpus and were not           
          merely treating their retained interests as an annuity for a                
          fixed term of years.  Although we acknowledge that, in the case             
          of a reversion, at least the equivalent of the term annuity’s               
          value would be payable to the grantor or the grantor’s estate in            
          all events, Congress was entitled to require that interests be              
          cast in one of three specified forms to receive the favorable               
          treatment afforded qualified interests.  Accordingly, the                   
          Commissioner is equally justified in assigning a zero value to              
          reversionary interests outside the scope of the statutory                   
          definition and refusing to consider whether such interests can              
          have the practical effect of a different form of interest not               
          chosen by the grantor.  See sec. 25.2702-3(e), Example (1), Gift            
          Tax Regs.                                                                   
               In contrast, there exists no rationale for refusing to take            
          into account for valuation purposes a retained interest of which            

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