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(ii) Accordingly, the amount of the gift is the
fair market value of the property transferred to the
trust reduced by the value of A's qualified interest
(A's right to receive the stated annuity for 10 years
or until A's prior death). B's interest is not a
qualified interest and is thus valued at zero under
section 2702.
Petitioners argue alternatively that this Court, if we
conclude that the spousal interests in the GRATs are not
qualified interests, must disregard those interests in that the
instruments establishing the GRATs state as much. Petitioners
point the Court to Article Five D, which states that “No power,
right, or duty under the agreement will be effective or
exercisable to the extent that it would cause my retained annuity
interest (or my wife’s [husband’s] interest, if any) hereunder to
fail to qualify as a ‘qualified annuity interest’ under I.R.C.
� 2702(b)(1)”. Petitioners assert that the quoted text operates
to invalidate the spousal interests in that those interests are
not qualified interests. Petitioners conclude that each GRAT is
now simply a GRAT for a set term of either 2 or 4 years, as the
case may be, and should be treated as such.
We reject petitioners’ alternative argument. We do not
believe that petitioners are entitled at this time to treat each
GRAT in issue as one of a set term of years simply because the
GRATs state that our determination that the spousal interests are
not qualified interests essentially means that the spousal gift
is revoked. Such a “savings clause” is ineffective for Federal
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