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the spouse is a qualified interest. Thus, petitioners claim that
the requirement in section 25.2702-3(b)(1)(i), Gift Tax Regs.,
that an interest be fixed was only intended to prevent interests
such as the interest in section 25.2702-3(e), Example (6), Gift
Tax Regs., from satisfying the definition of a qualified
interest. Section 25.2702-3(e), Examples (5) and (6), Gift Tax
Regs., incorporates the same factual scenario:
Example 5. A transfers property to an irrevocable
trust, retaining the right to receive 5 percent of the
net fair market value of the trust property, valued
annually, for 10 years. If A dies within the 10-year
term, the unitrust amount is to be paid to A’s estate
for the balance of the term. A’s interest is a
qualified unitrust interest to the extent of the right
to receive the unitrust payment for 10 years or until
A’s prior death.
Example 6. The facts are the same as Example 5,
except that if A dies within the 10-year term the
unitrust amount will be paid to A’s estate for an
additional 35 years. The result is the same as in
Example 5, because the 10-year term is the only term
that is fixed and ascertainable at the creation of the
interest.
Reliance by petitioners on section 25.2702-2(d)(1),
Example (7), Gift Tax Regs., for the proposition that a
contingent interest can be a qualified interest under section
2702(b) is misplaced. Petitioners misread Example (7) to include
a nonfixed, contingent spousal interest, on the premise that the
trust will only make payments to the spouse if the spouse is
living at the end of the grantor’s 10-year term interest.
Petitioners’ interpretation of the example concentrates on the
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