Patricia A. Schott - Page 8

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               The trust instrument must also prohibit distributions from             
          the trust to or for the benefit of any person other than the                
          holder of the qualified annuity interest during the term of the             
          qualified interest.  See sec. 25.2702-3(d)(2), Gift Tax Regs.               
          The term of the annuity interest must be fixed by the trust                 
          instrument “for the life of the term holder, for a specified term           
          of years, or for the shorter (but not the longer) of those                  
          periods.”  Sec. 25.2702-3(d)(3), Gift Tax Regs.                             
               For purposes of section 2702, a transfer of an interest in             
          property with respect to which there are one or more term                   
          interests is treated as a transfer in trust.  See sec.                      
          2702(c)(1).  “A term interest is one of a series of successive              
          (as contrasted with concurrent) interests.”  Sec. 25.2702-4(a),             
          Gift Tax Regs.                                                              
               Petitioners’ argument, that the retained interests in the              
          annuities should be valued as interests for the term of 15 years            
          or for the lives of the grantor and spouse, is essentially the              
          same as the argument we rejected in Cook v. Commissioner, supra,            
          a case with nearly identical facts to those of the cases at hand.           
          In Cook, the taxpayers, husband and wife, each created two                  
          GRAT’s.  The grantor of each GRAT retained an annuity for a                 
          stated term of years.  If the grantor died before the expiration            
          of the stated term of years and was survived by the spouse, the             
          annuity continued for the spouse until the earlier of his or her            

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