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Regulations promulgated under section 2702 expand the
definition of “qualified interest” in the following manner:
Qualified interest means a qualified annuity interest,
a qualified unitrust interest, or a qualified remainder
interest. Retention of a power to revoke a qualified
annuity interest * * * of the transferor’s spouse is
treated as the retention of a qualified annuity
interest * * *. [Sec. 25.2702-2(a)(5), Gift Tax Regs.;
emphasis added.]
“A qualified annuity interest is an irrevocable right to
receive a fixed amount * * * payable to (or for the benefit of)
the holder of the annuity interest for each taxable year of the
term.” Sec. 25.2702-3(b)(1)(i), Gift Tax Regs. The term of a
qualified annuity interest must be fixed and ascertainable at the
creation of a GRAT. See Cook v. Commissioner, 115 T.C. 15, 23
(2000); sec. 25.2702-3(e), Example (6), Gift Tax Regs. A
qualified annuity interest cannot be a contingent interest that
may in fact never take effect. See id. A fixed amount is either
a stated dollar amount or a fixed fraction or percentage (not to
exceed 120 percent of the fixed fraction or percentage payable in
the preceding year) of the initial fair market value of the
property that is being transferred to the trust as finally
determined for Federal tax purposes. See sec. 25.2702-
3(b)(1)(ii), Gift Tax Regs. In either case, a fixed amount must
be payable periodically but not less frequently than annually.
See id.
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Last modified: May 25, 2011