Patricia A. Schott - Page 13




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          language that reads:  “Upon expiration of [A’s] 10 years, the               
          income of the trust is payable to A’s spouse for 10 years if                
          living.”  Sec. 25.2702-2(d), Example (6), Gift Tax Regs.                    
          (Emphasis added.)  However, the spousal interest in Examples (6)            
          and (7) is a fixed, noncontingent spousal interest for a term of            
          10 years, and the spouse or the estate of the spouse will receive           
          payments from the GRAT whether or not the spouse is living at the           
          end of the 10-year term of the grantor.                                     
               To hold that Examples (6) and (7) contain a contingent                 
          spousal interest would ignore other language in the examples that           
          states:  “Upon expiration of the spouse’s interest, the trust               
          terminates and the trust corpus is payable to A’s child.”                   
          Sec. 25.2702-2(d), Example (6), Gift Tax Regs. (Emphasis added.)            
          This sentence reflects that the remainder interest of the child             
          will vest only after the expiration of the 10-year term of the              
          spouse.  The “if living” language in Example (6), relied on by              
          petitioners, should be interpreted to read that, if the spouse is           
          living at the end of the grantor’s 10-year term, annuity payments           
          shall be payable to the spouse, but, if the spouse is not living            
          at the end of the grantor’s 10-year term, the spouse’s 10-year              
          term interest is payable to the estate of the spouse.                       
               Petitioners also argue that dual-life annuities should be              
          treated as qualified interests in valuing remainder interests in            
          GRAT’s because dual-life annuities are respected in valuing                 





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