-19-
This Court held that the spousal interests in Cook v.
Commissioner, supra, were not qualified interests because, among
other reasons, they were neither fixed nor ascertainable upon the
inception of the trusts. On appeal, the Court of Appeals for the
Seventh Circuit agreed. That court noted that the spouse’s
interest might never vest and stated that allowing a reduction
for tax purposes of a gift made in trust for an “ephemeral
interest” would invite abuse. Cook v. Commissioner, 269 F.3d at
858. That court concluded that the spousal interests were
contingent, and not fixed and ascertainable, because the spouse
was entitled to receive the interest only if the spouse survived
the grantor, and only then, if the spouse and grantor remained
married. Given the fact that marital trusts are present both
here and in Cook, and that the opinions in Schott did not mention
a marital trust there, we believe that the decision in Cook
applies here with more vigor and force than the decision in
Schott v. Commissioner, 319 F.3d 1203 (9th Cir. 2003). Such is
especially so given our reading of the instruments establishing
the GRATs at issue to reveal a strong implicit understanding of a
marriage contingency for any payment under the spousal
interests.6
6 We also note that sec. 25.2702-2(a)(5), Gift Tax Regs.,
requires that the successor annuitant be the grantor’s spouse in
order to apply the rule that the grantor’s retention of a power
to revoke a qualified annuity interest (or unitrust interest) is
(continued...)
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