- 11 -
the trust reduced by the value of both A’s qualified
interest and the value of the qualified interest
transferred to A’s spouse (subject to A’s power to
revoke).
The Court noted that, in Example (7), the revocable spousal
interest is treated as an interest retained by A and that A’s
direct interest and the revocable spousal interest are both
qualified interests pursuant to section 2702(b). The interests
of both A and his or her spouse, at the creation of the trust,
are fixed and ascertainable for specified 10-year terms and are
not contingent upon A’s death or the spouse’s death.
Furthermore, the Court noted that, because the interests were for
a collective 20-year specified term, Example (7) was an
illustration of how a grantor could retain a power of revocation
over a spousal interest that did not extend beyond the life of
the term holder, a specified term of years, or the shorter (but
not the longer) of those periods. See Cook v. Commissioner,
supra at 25-26.
Petitioners claim that the holding in Cook is inconsistent
with Example (7). Petitioners argue that Example (7) provides
that the spouse’s receipt of payments from the trust is
contingent upon the spouse’s living beyond the 10-year period of
A’s interest, i.e., the grantor’s interest. Petitioners contend
that there is a possibility that the spouse in Example (7) will
receive nothing, and, yet, Example (7) holds that the interest of
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Next
Last modified: May 25, 2011