-2-
estate’s Federal gift tax for 1996 and 1997, respectively. In
docket No. 3130-03, Nina M. Focardi (Focardi) petitioned the
Court to redetermine respondent’s determination of deficiencies
of $824,019 and $3,123 in Focardi’s Federal gift tax for 1996 and
1997, respectively. The cases resulting from these petitions
were consolidated for purposes of trial, briefing, and opinion.
Following the parties’ stipulation of the applicable value
of the stock discussed herein1 and the submission of these cases
under Rule 122, we now decide whether the respective revocable
spousal interests contained in four grantor retained annuity
trusts (GRATs) are qualified interests under section 2702(b).2
We hold they are not. We also decide whether the GRATs created
annuities that are valued on the basis of their stated term of
years (as opposed to annuities that are valued on the basis of
the actuarial life of the particular grantor) in that the
documents establishing the GRATs state that the spousal interests
1 The parties’ stipulation as to the applicable value of the
relevant stock resulted from their submission of that issue to
binding arbitration. The arbitrator concluded that the
applicable value of each share of that stock was $4.46.
2 Unless otherwise indicated, section references are to the
applicable versions of the Internal Revenue Code, Rule references
are to the Tax Court Rules of Practice and Procedure, and
references to the regulations under sec. 2702 are to those
regulations before amendment by T.D. 9181, 70 Fed. Reg. 9222
(Feb. 25, 2005). The amendments to those regulations are not
applicable here in that they apply to trusts created on or after
July 26, 2004 (the date the amendments were published in proposed
form in the Federal Register). See sec. 25.2702-7, Gift Tax
Regs., as amended by T.D. 9181, supra.
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