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and an invalid extension of section 27022, and we need not reach
the issue of whether it was adopted in violation of the
Administrative Procedures Act. Accordingly, the qualified
interest retained by petitioner in each GRAT here is an annuity
payable for a specified term of 2 years.
C. The Actuarial Value of the Qualified Interests
Having decided the nature and extent of the qualified
interests retained by petitioner, we say a few words regarding
the calculation of their actuarial value. In compliance with
section 2702(a)(2)(B), these interests are to be valued under
section 7520. There appears, however, to be some disagreement
between the parties as to the mechanics of this computation.
They seem to differ with respect to how properly to account for
the timing of the payments and the partial years involved where a
GRAT is established other than on January 1. Because we believe
2 We note that sec. 25.2702-3(e), Example (5), Gift Tax
Regs. (hereinafter Example 5), was cited and its alleged
underlying rationale was alluded to in support of our holding in
Cook v. Commissioner, 115 T.C. 15 (2000). In that case, neither
party challenged the validity of any regulations promulgated
under sec. 2702, and it is not the typical practice of this Court
to raise such issues sua sponte. Suffice it to say at this point
that we would have reached the same result absent any reliance on
Example 5. The spousal interests at issue there were in fact
contingent in a sense violative of the policy behind sec. 2702.
They would never take effect if the spouse were to predecease the
grantor, and any value attributable thereto would pass to the
donee. The statute does not sanction treatment of such interests
as qualified.
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