Estate of Claude C. Focardi, Deceased, Nina M. Focardi, Personal Representative - Page 14

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          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).                               





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