Patricia A. Schott, Stephen C. Schott v. Commissioner of Internal Revenue

NOONAN, Circuit Judge.

Stephen C. Schott and Patricia A. Schott petition for review of a judgment of the Tax Court sustaining a deficiency in gift tax assessed by the Commissioner of Internal Revenue (the Commissioner). The question presented is whether the two-life annuity retained by the Schotts in their grantor-retained annuity trusts (GRATs) is an interest qualified under 26 U.S.C. § 2702 and so to be subtracted from the value of the gift. We hold that the interest does qualify under Treasury Regulations § 25.2702 and so reverse the Tax Court.

FACTS

On May 31, 1994, Patricia A. Schott, aged…