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interest. However, the regulations under section 2702 state that
the term of a qualified annuity “must be 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. (Emphasis added.) The term restrictions that are
found in the regulations are consistent with the purpose of
section 2702, which is to deter the potential valuation abuse
that is inherent in using actuarial tables by making unfavorable
assumptions regarding certain retained rights. See 136 Cong.
Rec. S15629, S15680-S15681 (daily ed. Oct. 18, 1990); Cook v.
Commissioner, supra at 24. Thus, the general intent of Congress
to conform qualified interests in valuing GRAT’s with charitable
split interest trusts did not include dual-life annuities.
Our holding, that the spousal interest in each GRAT that was
created by petitioners is not a qualified interest under
section 2702(b), is distinguishable from the previous decision of
the Court in Walton v. Commissioner, 115 T.C. 589 (2000). In
Walton, the taxpayer established two GRAT’s in which the taxpayer
retained annuity rights. In the event that the taxpayer died
prior to the expiration of the annuity term, the remaining
scheduled annuity payments were to be made to the estate of the
taxpayer. The balance of the GRAT property would then be paid to
the remainder beneficiaries at the expiration of the annuity
term. See id. at 590-591.
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