¹Audrey J. Walton, 115 TC 589 (2000), acq., Notice 2003-72, IRB 2003-44, 964.

²The Sec. 7520 rate is determined monthly and represents 120% of the applicable Federal mid-term rate.

³See IRS Letter Rulings 9451056 (9/26/94), 9345035 (8/13/93), 9707027 (2/14/97), Rev. Rul. 82-105, 1982-1 CB 133, and IRS Letter Ruling (TAM) 200210009 (11/19/01).

⁴The decedents adjusted taxable gifts are defined in Sec. 2001(b) as the total amount of the taxable gifts (within the meaning of section 2503) made by the decedent after December 31, 1976, other than gifts which are includible in the gross estate of the decedent. (Emphasis added.) In the case of a grantor dying before the end of the term, a portion of the GRAT is added to the value of the taxable estate under Secs. 2036(a)(1) and 2039; thus, the value of the GRAT includible in the gross estate would not be added to adjusted taxable gifts. The spouse who elects gift-splitting, however, cannot reduce adjusted taxable gifts, because the GRATs value is includible in the donors estate, not the spouses. The value of the gift would be included in the spouses Sec. 2001(b) adjusted taxable gifts, without reduction for the amount of the transfer included in the donors estate due to death before the term.

⁵If the percentage method is used, Regs. Sec. 25.2702-3(b)(2) requires provisions in the governing instrument that reflect Regs. Sec. 1.664-2(a)(1)(iii)adjustments for any incorrect determination of the FMV of the property in a charitable remainder annuity trust. Regs. Sec. 1.664-2(a)(1)(iii) generally requires an adjustment in the amount equal to the difference between the amount which the trust should have paid the recipient if the correct value were used and the amount which the trust actually paid the recipient. Such payments or repayments must be made within a reasonable period after the final determination of such value.

⁶See Regs. Sec. 25.2702-3(b)(5) and -3(d)(2).

⁷Walton, note 1 supra.

⁸Notice 2003-72, note 1 supra.

⁹Rev. Rul. 77-454, 1977-2 CB 351.

¹⁰See BNA Estate and Gift Tax Planner (BNA Software, Tax Management, Inc.), Kugler Estate Analyzer (Brentmark Software) and NumberCruncher (Leimberg & LeClair, Inc.).

¹¹The grantor would be treated as the owner of the trust under Regs. Sec. 1.671-3(b); accordingly, the trustee would report the S income, deductions and credits to the grantor as prescribed in Regs. Sec. 1.671-4(a) (i.e., in a separate statement). The grantor reports the items on his or her individual income tax return, under Regs. Sec. 1.671-3(a)(2). There appears to be no prohibition against the grantor being the trustee, although care should be exercised as to the grantors control over the trust assets. In Letter Ruling 9707027, note 3 supra, the donor and his spouse were co-trustees; this did not affect the GRATs qualified interests.

¹²See Secs. 1361(b) and 1362(d)(2) and Regs. Sec. 1.1362-2(b)(1).

¹³See, e.g., IRS Letter Rulings 9519029 (2/10/95), 9504021 (1/27/95), 9451056 (12/23/94), 9449012 (12/9/94) and 9449013 (12/9/94).

¹⁴See Rev. Rul. 85-132, 1985-1 CB 184.

¹⁵See Secs. 1368(e)(1) and 1367.

¹⁶See Regs. Secs. 20.2031-2(f) and -3 and 25.2512-2(f) and -3.

¹⁷Rev. Rul. 93-12, 1993-1 CB 202.

¹⁸Joseph H. Lauder, TC Memo 1994-527.

¹⁹Jane O. Kosman, TC Memo 1996-112.

²⁰See, e.g., Rev. Rul. 2004-54, IRB 2004-23, 1024, Table 5.