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Lastly, we comment that section 20.7520-3(b)(1)(ii), Estate
Tax Regs., cited by the estate, does not cause us to reach a
different conclusion. Section 20.7520-3(b)(1)(ii), Estate Tax
Regs., deals with an exception to section 7520 for certain
restricted beneficial interests and states:
A restricted beneficial interest is an annuity, income,
remainder, or reversionary interest that is subject to
any contingency, power, or other restriction, whether
the restriction is provided for by the terms of the
trust, will, or other governing instrument or is caused
by other circumstances. In general, a standard section
7520 annuity, income, or remainder factor may not be
used to value a restricted beneficial interest. * * *
The regulation then goes on to cite two examples where its
provisions would be applicable, one of which involves a power to
invade corpus that could diminish the income interest to be
valued and the other of which addresses an annuity payment
measured by the life of one with a terminal illness. See id.;
sec. 20.7520-3(b)(2)(v), Example (4), Estate Tax Regs.; sec.
20.7520-3(b)(4), Example (1), Estate Tax Regs.
In light of the examples given and the previously quoted
preamble of T.D. 8630, 1996-1 C.B. 339, we are satisfied that the
intent of this provision was to formalize the existing case law
regarding the validity of the tabular assumptions in situations
where facts show a clear risk that the payee will not receive the
anticipated return. Thus, a restriction within the meaning of
the regulation is one which jeopardizes receipt of the payment
stream, not one which merely impacts on the ability of the payee
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