-14-
this Court and the Court of Appeals for the Seventh Circuit in
Cook v. Commissioner, 115 T.C. 15 (2000), affd. 269 F.3d 854 (7th
Cir. 2001), held that the GRATs there, which were similar to the
GRATs here, were not qualified interests because they were
contingent. Petitioners argue that Cook is factually
distinguishable from this case and Schott in that the GRATs in
Cook, unlike the GRATs here and in Schott, involved a further
contingency that the grantor and spouse remain married.
We agree with respondent that the spousal interests at issue
are not qualified interests. The spouse in no case will ever
receive any payments from the GRATs if the grantor survives the
applicable 2- or 4-year term, because the interests by their
terms are payable only if the grantor predeceases the spouse
during the applicable term. The interests, therefore, are not
fixed and ascertainable upon the inception of the trusts, as is
5(...continued)
A’s power to revoke the spouse’s term interest is
treated as a retained interest for purposes of section
2702. Because no interest retained by A is a qualified
interest, the amount of the gift is the fair market
value of the property transferred to the trust.
Example (7). The facts are the same as in Example
6, except that both the term interest retained by A and
the interest transferred to A’s spouse (subject to A’s
right of revocation) are qualified annuity or unitrust
interests. The amount of the gift is the fair market
value of the property transferred to the trust reduced
by the value of both A’s qualified interest and the
value of the qualified interest transferred to A’s
spouse (subject to A’s power to revoke).
Page: Previous 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 NextLast modified: May 25, 2011