Patricia A. Schott - Page 4

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          died and the spouse received the annuity, distribution of income            
          or principal could not be made to any person other than the                 
          spouse during the life of the spouse.  Each GRAT was irrevocable            
          except that the grantor retained the right to revoke the                    
          successor interest of his or her spouse in the annuity.                     
               Each GRAT provided that the grantor intended to create a               
          “qualified interest”, as defined in section 2702(b)(1), and that            
          the provisions of the GRAT document were to be construed in                 
          accord with that intent.  Each GRAT document further provided               
          that, if the initial fair market value of the assets that were              
          contributed was incorrectly determined, the trustee would either            
          pay to or recover from the grantor or his or her spouse the                 
          amount necessary to account for the undervaluation or                       
          overvaluation of the assets within a reasonable period after the            
          final Federal tax determination of the correct value.  Each GRAT            
          document also prohibited commutation of the annuity interest and            
          additional contributions to the GRAT’s, after the initial                   
               Petitioners assert that the interests in the annuities that            
          were given to each spouse are qualified interests under section             
          2702 and that the retained interests are single annuities based             
          on two lives, referred to as dual-life annuities.  Petitioners              
          contend that the retained interests in the annuities should be              

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Last modified: May 25, 2011