Patricia A. Schott - Page 11

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               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                     
               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           

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