Final GRAT Regulations Discussed

Prof. Wendy Gerzog has recently published an article entitled The Final GRAT Regulations: Schott Shot Down, 107 Tax Notes 1175 (May 30, 2005).  In her words, the main point of the article is:

“[I]t seems artificial and illogical to distinguish between the two examples [in the final regulations] and to allow the interest in Example 8 to constitute ‘‘a qualified interest’’ while disqualifying the interest in Example 9. It’s not that, in a very narrow sense, the regulation cannot state that it’s acceptable to allow a revocable interest to merge into the grantor’s life interest and then to deny ‘‘qualified interest’’ treatment to what otherwise would be a very common type of dual retained interest, that is, a retained life interest for both the grantor and his spouse. However, it doesn’t make much sense in terms of the policy behind section 2702 to make such a fine distinction when the consequences of the power of revocation can be accounted for by additional gifts.”