-11-
(3) any noncontingent remainder interest if all of
the other interests in the trust consist of interests
described in paragraph (1) or (2).
The regulations interpret this definition to include “a qualified
annuity interest, a qualified unitrust interest, or a qualified
remainder interest” and state that the “Retention of a power to
revoke a qualified annuity interest (or unitrust interest) of the
transferor’s spouse is treated as the retention of a qualified
annuity interest (or unitrust interest).”4 Sec. 25.2702-2(a)(5),
Gift Tax Regs. The regulations explain that a qualified annuity
interest is “an irrevocable right to receive a fixed amount * * *
payable to (or for the benefit of) the holder of the annuity
interest" for each taxable year of the term and that a qualified
unitrust interest is “an irrevocable right to receive payment
periodically, but not less frequently than annually, of a fixed
percentage of the net fair market value of the trust assets,
determined annually.” Sec. 25.2702-3(b)(1)(i) and (c)(1)(i),
Gift Tax Regs. See generally sec. 25.2702-3(f), Gift Tax Regs.,
(defines the term “qualified remainder interest”). The
regulations also explain that in the case of a qualified annuity
interest, a fixed amount is either a set dollar amount or a set
4 This latter statement reflects a taxpayer-favorable rule
that was added to the regulations without comment. The rule is
not required by either the statute or the legislative history
thereunder. See 136 Cong. Rec. 30485, 30536-30540 (1990). See
generally Bogdanski, “GRAT Valuation: The Ninth Circuit Takes
its Schott”, 30 Est. Plan. 304, 306 (June 2003).
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