-17-
the grantor’s death or 15 years. If the grantor died before the
end of the 15-year term and the grantor’s spouse survived the
grantor, the annuity was to be paid to the spouse for the
remainder of the 15-year term. The grantor retained the right to
revoke the spouse’s interest.
The case of Schott v. Commissioner, supra, does not require
that we accept petitioners’ conclusion that the spousal interests
in issue were qualified interests. We do not believe that the
ability to easily value a spousal interest is the linchpin for a
finding that the spousal interest is a qualified interest. The
legislative history under section 2702 indicates that Congress
enacted section 2702 intending to “curb potential valuation abuse
associated with intrafamily transfers of wealth”. Cook v.
Commissioner, 269 F.3d at 858; see also 136 Cong. Rec. at
30537-30538 (1990). The possibility of such an abuse is present
where, as here, it is not certain at the outset of the trusts
that payments will ever be made under a survivorship annuity. We
understand the lawmaker’s intent for section 2702 is to ensure
that a retained interest be fixed and ascertainable at the
creation of a trust in order to reduce the value of the gift of a
remainder interest. See Cook v. Commissioner, 269 F.3d at 858.
If, as petitioners claim, gifts in trust could be reduced by the
value of spousal interests which are contingent and which never
take effect, the retained interests would have the potential for
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011