Patricia A. Schott - Page 5

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          valued as interests for the term of 15 years or for the lives of            
          the grantor and spouse, whichever is shorter.  Respondent asserts           
          that the interests in the annuities that were given to each                 
          spouse are not qualified interests and that the retained                    
          interests are single-life annuities.  Respondent contends that              
          the retained interests in the annuities should be valued as                 
          interests for the term of 15 years or for the life of the                   
          grantor, whichever is shorter.  Valuation of a retained interest            
          as a dual-life annuity produces a greater retained value than               
          valuation as a single-life annuity and, correspondingly, reduces            
          the amount of the taxable gift of the remainder.                            
               Section 2501 imposes a tax for each calendar year on the               
          transfer of property by gift.  A gift of property is valued as of           
          the date of the transfer.  See sec. 2512(a).  Generally, where              
          property is transferred in trust but the donor retains an                   
          interest in such property, the value of the gift is the value of            
          the property that is transferred, less the value of the donor’s             
          retained interest.  See sec. 25.2512-5A(e), Gift Tax Regs.                  
          However, if the gift in trust is to a family member (as defined             
          in section 2704(c)(2)), the value of the gift is determined                 
          subject to the limitations of section 2702.                                 

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Last modified: May 25, 2011