Use of Actuarial Tables in Valuing Annuities, Interests for Life or Terms of Years, and Remainder or Reversionary Interests, 21438-21518 [E9-10111]
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21438
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
Applicability Date: These regulations
apply on May 1, 2009.
FOR FURTHER INFORMATION CONTACT:
Mayer R. Samuels, (202) 622–3090 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 20, and 25
[TD 9448]
RIN 1545–BH96; RIN 1545–BI56
Use of Actuarial Tables in Valuing
Annuities, Interests for Life or Terms
of Years, and Remainder or
Reversionary Interests
AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final and temporary
regulations.
SUMMARY: This document contains
regulations relating to the use of
actuarial tables in valuing annuities,
interests for life or terms of years, and
remainder or reversionary interests.
These regulations will affect the
valuation of inter vivos and
testamentary transfers of interests
dependent on one or more measuring
lives. These regulations are necessary
because section 7520(c)(3) directs the
Secretary to update the actuarial tables
to reflect the most recent mortality
experience available. The text of the
temporary regulations also serves as the
text of the proposed regulations set forth
in the notice of proposed rulemaking on
this subject elsewhere in this issue of
the Federal Register.
DATES: Effective Date: These regulations
are effective on May 1, 2009.
Background
This document contains amendments
to the regulations revising certain tables
used for the valuation of partial interests
in property under section 7520 of the
Internal Revenue Code of 1986 (Code) to
reflect the most recent mortality
experience available.
In General
Section 7520, effective for transfers
for which the valuation date is after
April 30, 1989, provides generally that
the value of an annuity, an interest for
life or a term of years, and a remainder
or reversionary interest is to be
determined under tables published by
the Secretary by using an interest rate
(rounded to the nearest two-tenths of
one percent) equal to 120 percent of the
Federal midterm rate in effect under
section 1274(d)(1) for the month in
which the valuation date falls. Section
7520(c)(3) directed the Secretary to
issue tables not later than December 31,
1989, utilizing the then most recent
mortality experience. Thereafter, the
Secretary is directed to revise these
tables not less frequently than once each
10 years to take into account the most
recent mortality experience available as
of the time of the revision.
These temporary regulations, REG–
107845–08, incorporate revised Table S
(Single Life Remainder Factors) and
Table U(1) (Unitrust Single Life
Remainder Factors), effective for
transfers for which the valuation date is
on or after May 1, 2009, based on data
compiled from the 2000 census as set
forth in Life Table 2000CM, and make
conforming amendments to various
sections to reflect the revised tables. At
the same time, in the portions of these
regulations that are final regulations,
REG–105643–09, the current tables,
effective for transfers for which the
valuation date is after April 30, 1999,
and before May 1, 2009, are moved to
sections containing actuarial material
for historical reference. Table B, Table
D, Tables F(4.2) through F(14.0), Table
J, and Table K, which are not based on
mortality experience, are not changed.
Internal Revenue Service Publications
1457 ‘‘Actuarial Valuations Version 3A’’
(forthcoming 2009), 1458 ‘‘Actuarial
Valuations Version 3B’’ (forthcoming
2009), and 1459 ‘‘Actuarial Valuations
Version 3C’’ (forthcoming 2009) will
contain a complete set of actuarial tables
that include factors not contained in the
temporary regulations (for example,
annuity and life interest factors). These
publications will be available beginning
May 1, 2009, at no charge, electronically
via the IRS Internet site at https://
www.irs.gov.
The following chart summarizes the
applicable interest rates and the
citations to textual materials and tables
for the various periods covered under
the current regulations:
CROSS REFERENCE TO REGULATION SECTIONS
Valuation period
Interest rate
Section 642:
Valuation, in general .....................
before 01/01/52 ............................
01/01/52–12/31/70 ........................
01/01/71–11/30/83 ........................
12/01/83–04/30/89 ........................
05/01/89–04/30/99 ........................
05/01/99–04/30/09 ........................
on or after 05/01/09 ......................
Section 664:
Valuation, in general .....................
before 01/01/52 ............................
01/01/52–12/31/70 ........................
01/01/71–11/30/83 ........................
12/01/83–04/30/89 ........................
05/01/89–04/30/99 ........................
05/01/99–04/30/09 ........................
on or after 05/01/09 ......................
Section 2031:
Valuation, in general .....................
before 01/01/52 ............................
01/01/52–12/31/70 ........................
01/01/71–11/30/83 ........................
12/01/83–04/30/89 ........................
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Regulation section
........................................
4% .................................
3.5% ..............................
6% .................................
10% ...............................
§ 7520 ............................
§ 7520 ............................
§ 7520 ............................
1.642(c)–6.
1.642(c)–6A(a).
1.642(c)–6A(b).
1.642(c)–6A(c).
1.642(c)–6A(d) ...................................
1.642(c)–6A(e) ...................................
1.642(c)–6A(f) ....................................
1.642(c)–6T(e) ...................................
Table
Table
Table
Table
G.
S (5/1/89–4/30/99).
S (5/1/99–04/30/09).
S (on or after 05/01/09).
........................................
4% .................................
3.5% ..............................
6% .................................
10% ...............................
§ 7520 ............................
§ 7520 ............................
§ 7520 ............................
1.664–4.
1.664–4A(a).
1.664–4A(b).
1.664–4A(c).
1.664–4A(d) .......................................
1.664–4A(e) .......................................
1.664–4A(f) ........................................
1.664–4T(e) .......................................
1.664–4(e) .........................................
Table
Table
Table
Table
Table
E, Table F(1).
U(1) (5/1/89–4/30/99).
U(1) (5/1/99–04/30/09).
U(1) (on or after 05/01/09).
D and Tables F(4.2)–F (14.0).
........................................
4% .................................
3.5% ..............................
6% .................................
10% ...............................
20.2031–7.
20.2031–7A(a).
20.2031–7A(b).
20.2031–7A(c).
20.2031–7A(d) ...................................
Table A, Table B, Table LN.
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Table
07MYR2
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
21439
CROSS REFERENCE TO REGULATION SECTIONS—Continued
Valuation period
Interest rate
Regulation section
Table
05/01/89–04/30/99 ........................
§ 7520 ............................
20.2031–7A(e) ...................................
05/01/99–04/30/09 ........................
§ 7520 ............................
20.2031–7A(f) ....................................
on or after 05/01/09 ......................
§ 7520 ............................
20.2031–7T(d) ...................................
Table S (5/1/89–4/30/99) and Life
Table 80CNSMT.
Table S (5/1/99–05/01/09) and Life
Table 90CM.
Table S (on or after 05/01/09) and
Life Table 2000CM.
Table B, Table J, Table K.
20.2031–7(d) .....................................
Section 2512:
Valuation, in general .....................
before 01/01/52 ............................
01/01/52–12/31/70 ........................
01/01/71–11/30/83 ........................
12/01/83–04/30/89 ........................
05/01/89–04/30/99 ........................
05/01/99–04/30/09 ........................
on or after 05/01/09 ......................
........................................
4% .................................
3.5% ..............................
6% .................................
10% ...............................
§ 7520 ............................
§ 7520 ............................
§ 7520 ............................
Effective Dates
These regulations are applicable in
the case of annuities, interests for life or
terms of years, and remainder or
reversionary interests valued as of a date
on or after May 1, 2009.
Transitional Rules
The regulations provide certain
transitional rules intended to alleviate
any adverse consequences resulting
from the proposed regulatory change.
For gift tax purposes, if the date of a
transfer is on or after May 1, 2009, but
before July 1, 2009, the donor may
choose to determine the value of the gift
(and/or any applicable charitable
deduction) under tables based on either
Life Table 90CM or Table 2000CM.
Similarly, for estate tax purposes, if the
decedent dies on or after May 1, 2009,
but before July 1, 2009, the value of any
interest (and/or any applicable
charitable deduction) may be
determined in the discretion of the
decedent’s executor under tables based
on either Life Table 90CM or Table
2000CM. However, the section 7520
interest rate to be utilized is the
appropriate rate for the month in which
the valuation date occurs, subject to the
following special rule for certain
charitable transfers. Specifically, in
accordance with this transitional rule
and the rules contained in §§ 1.7520–
2(a)(2), 20.7520–2(a)(2) and 25.7520–
2(a)(2), in cases involving a charitable
deduction, if the valuation date occurs
on or after May 7, 2009, and before July
1, 2009, and the executor or donor elects
under section 7520(a) to use the section
7520 interest rate for March 2009 or
April 2009, then the mortality
experience contained in 90CM must be
used. If the executor or donor uses the
section 7520 interest rate for May 2009
or for June 2009, then the tables based
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25.2512–5.
25.2512–5A(a).
25.2512–5A(b).
25.2512–5A(c).
25.2512–5A(d).
25.2512–5A(e).
25.2512–5A(f).
25.2512–5T(d).
on either Table 90CM or Table 2000CM
may be used. However, if the valuation
date occurs after June 30, 2009, the
executor or donor must use the new
mortality experience contained in Table
2000CM even if the use of a prior
month’s interest rate is elected under
section 7520(a).
In addition, for estate tax purposes,
the estate of a mentally incompetent
decedent may elect to value the
property interest included in the gross
estate either under the mortality table
and interest rate in effect at the time the
decedent became mentally incompetent
or under the mortality table and interest
rate in effect on the decedent’s date of
death if the decedent was under a
mental incapacity that existed on May 1,
2009, and continued uninterrupted until
the decedent’s death, or the decedent
died within 90 days after regaining
competency on or after May 1, 2009.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in EO
12866. Therefore, a regulatory
assessment is not required. For
applicability of the Regulatory
Flexibility Act please refer to the crossreferenced notice of proposed
rulemaking published elsewhere in this
Federal Register. Pursuant to section
7805(f) of the Internal Revenue Code,
these regulations have been submitted
to the Chief Counsel for Advocacy of the
Small Business Administration for
comment on its impact on small
business.
Drafting Information
The principal author of these
regulations is Mayer R. Samuels, Office
of the Associate Chief Counsel
(Passthroughs and Special Industries),
IRS. However, other personnel from the
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IRS and Treasury Department
participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
26 CFR Part 20
Estate taxes, Reporting and
recordkeeping requirements.
26 CFR Part 25
Gift taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR parts 1, 20, and
25 are amended as follows:
■
PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 is amended by adding entries
in numerical order to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *.
Section 1.170A–12T also issued under 26
U.S.C. 170(f)(4).
Section 1.642(c)–6T also issued under 26
U.S.C. 642(c)(5).
Section 1.664–4T also issued under 26
U.S.C. 664(a).
Section 1.7520–1T also issued under 26
U.S.C. 7520(c)(2).
Par. 2. Sections 1.170A–12 is
amended by revising paragraphs (b)(2)
and (b)(3) and adding paragraph (f) to
read as follows:
■
§ 1.170A–12 Valuation of a remainder
interest in real property for contributions
made after July 31, 1969.
*
*
*
*
*
(b)(2) and (b)(3) [Reserved]. For
further guidance, see § 1.170A–12T(b)(2)
and (b)(3).
*
*
*
*
*
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07MYR2
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Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
(f) Effective/applicability date. This
section applies to contributions made
after July 31, 1969.
■ Par. 3. Section 1.170A–12T is added
to read as follows:
§ 1.170A–12T Valuation of a remainder
interest in real property for contributions
made after July 31, 1969 (temporary).
(a) through (b)(1) [Reserved]. For
further guidance see § 1.170A–12(a)
through (b)(1).
(b)(2) Computation of depreciation
factor. If the valuation of the remainder
interest in depreciable property is
dependent upon the continuation of one
life, a special factor must be used. The
factor determined under this paragraph
(b)(2) is carried to the fifth decimal
place. The special factor is to be
computed on the basis of the interest
rate and life contingencies prescribed in
§ 20.2031–7T (or for periods before May
1, 2009, § 20.2031–7A) and on the
assumption that the property
depreciates on a straight-line basis over
its estimated useful life. For transfers for
which the valuation date is on or after
May 1, 2009, special factors for
determining the present value of a
remainder interest following one life
and an example describing the
computation are contained in Internal
Revenue Service Publication 1459,
‘‘Actuarial Valuations Version 3C’’
(2009). This publication will be
available beginning May 1, 2009, at no
charge, electronically via the IRS
Internet site at https://www.irs.gov. For
transfers for which the valuation date is
after April 30, 1999, and before May 1,
2009, special factors for determining the
present value of a remainder interest
following one life and an example
describing the computation are
contained in Internal Revenue Service
Publication 1459, ‘‘Actuarial Values,
Book Gimel,’’ (7–99). For transfers for
which the valuation date is after April
30, 1989, and before May 1, 1999,
special factors for determining the
present value of a remainder interest
following one life and an example
describing the computation are
contained in Internal Revenue Service
Publication 1459, ‘‘Actuarial Values,
Gamma Volume,’’ (8–89). These
publications are no longer available for
purchase from the Superintendent of
Documents, United States Government
Printing Office. However, they may be
obtained by requesting a copy from:
CC:PA:LPD:PR (IRS Publication 1459),
Room 5205, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. See, however,
§ 1.7520–3(b) (relating to exceptions to
the use of prescribed tables under
certain circumstances). Otherwise, in
the case of the valuation of a remainder
interest following one life, the special
factor may be obtained through use of
the following formula:
l x+t +1 ⎞ ⎛
l x+t ⎞ ⎤ ⎛
1
t⎞
i ⎞ n −1 t +1 ⎡⎛
⎛
− ⎟
⎟ − ⎜1 −
⎟ ⎥ ⎜1 −
⎜ 1 + ⎟ ∑ v ⎢⎜ 1 −
2n
n⎠
2 ⎠ t =0
lx ⎠ ⎝
lx ⎠ ⎦ ⎝
⎝
⎥
⎢
⎣⎝
Where:
n = the estimated number of years of useful
life,
i = the applicable interest rate under section
7520 of the Internal Revenue Code,
v = 1 divided by the sum of 1 plus the
applicable interest rate under section
7520 of the Internal Revenue Code,
x = the age of the life tenant, and
lx = number of persons living at age x as set
forth in Table 2000CM of § 20.2031–7T
(or, for periods before May 1, 2009, the
tables set forth under § 20.2031–7A).
(3) The following example illustrates
the provisions of this paragraph
(b): Example. A, who is 62, donates to Y
University a remainder interest in a personal
residence, consisting of a house and land,
subject to a reserved life estate in A. At the
time of the gift, the land has a value of
$30,000 and the house has a value of
$100,000 with an estimated useful life of 45
years, at the end of which period the value
of the house is expected to be $20,000. The
portion of the property considered to be
depreciable is $80,000 (the value of the house
($100,000) less its expected value at the end
of 45 years ($20,000)). The portion of the
property considered to be nondepreciable is
$50,000 (the value of the land at the time of
the gift ($30,000) plus the expected value of
the house at the end of 45 years ($20,000)).
At the time of the gift, the interest rate
prescribed under section 7520 is 8.4 percent.
Based on an interest rate of 8.4 percent, the
remainder factor for $1.00 prescribed in
§ 20.2031–7T(d) for a person age 62 is
0.26534. The value of the nondepreciable
remainder interest is $13,267.00 (0.26534
times $50,000). The value of the depreciable
remainder interest is $15,053.60 (0.18817,
computed under the formula described in
paragraph (b)(2) of this section, times
$80,000). Therefore, the value of the
remainder interest is $28,320.60.
(c) through (e) [Reserved]. For further
guidance see § 1.170A–12(c) through (e).
(f) Effective/applicability date.
Paragraphs (b)(2) and (b)(3) apply to all
contributions made on or after May 1,
2009.
(g) Expiration date. Paragraphs (b)(2)
and (b)(3) expire on or before May 1,
2012.
■ Par. 4. Section 1.642(c)–6 is amended
as follows:
■ 1. Paragraph (d) is removed.
■ 2. Paragraph (e) is redesignated as
paragraph (f) of § 1.642(c)–6A.
■ 3. New paragraphs (d) and (e) are
added.
■ 4. Paragraph (f) is revised.
The revisions and addition read as
follows:
§ 1.642(c)–6 Valuation of a remainder
interest in property transferred to a pooled
income fund.
*
*
*
*
*
(d) and (e) [Reserved]. For further
guidance, see § 1.642(c)–6T(d) and (e).
(f) Effective/applicability dates. This
section applies after April 30, 1999, and
before May 1, 2009.
Par. 5. Section 1.642(c)–6T is added
to read as follows:
■
§ 1.642(c)–6T Valuation of a remainder
interest in property transferred to a pooled
income fund (temporary).
(a) through (c) [Reserved]. For further
guidance, see § 1.642(c)–6(a) through
(c).
(d) Valuation. The present value of
the remainder interest in property
transferred to a pooled income fund on
or after May 1, 2009, is determined
under paragraph (e) of this section. The
present value of the remainder interest
in property transferred to a pooled
income fund for which the valuation
date is before May 1, 2009, is
determined under the following
sections:
Valuation dates
Applicable regulations
Before
12–31–51 ..........................................................................
01–01–52 .........................................................................
01–01–71 .........................................................................
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1.642(c)–6A(a).
1.642(c)–6A(b).
ER07MY09.000</MATH>
After
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
21441
Valuation dates
Applicable regulations
After
12–31–70
11–30–83
04–30–89
04–30–99
Before
..........................................................................
..........................................................................
..........................................................................
..........................................................................
(e) Present value of the remainder
interest in the case of transfers to pooled
income funds for which the valuation
date is on or after May 1, 2009—(1) In
general. In the case of transfers to
pooled income funds for which the
valuation date is on or after May 1,
2009, the present value of a remainder
interest is determined under this
section. See, however, § 1.7520–3(b)
(relating to exceptions to the use of
prescribed tables under certain
circumstances). The present value of a
remainder interest that is dependent on
the termination of the life of one
individual is computed by the use of
Table S in paragraph (e)(6) of this
section. For purposes of the
computations under this section, the age
of an individual is the age at the
individual’s nearest birthday.
(2) Transitional rules for valuation of
transfers to pooled income funds. (i) For
purposes of sections 2055, 2106, or
2624, if on May 1, 2009, the decedent
was mentally incompetent so that the
disposition of the property could not be
changed, and the decedent died on or
after May 1, 2009, without having
regained competency to dispose of the
decedent’s property, or the decedent
died within 90 days of the date that the
decedent first regained competency on
or after May 1, 2009, the present value
of a remainder interest is determined as
if the valuation date with respect to the
decedent’s gross estate is either before
or after May 1, 2009, at the option of the
decedent’s executor.
(ii) For purposes of sections 170,
2055, 2106, 2522, or 2624, in the case
of transfers to a pooled income fund for
which the valuation date is on or after
May 1, 2009, and before July 1, 2009,
the present value of the remainder
interest under this section is determined
by use of the section 7520 interest rate
for the month in which the valuation
date occurs (see §§ 1.7520–1(b) and
1.7520–2(a)(2)) and the appropriate
actuarial tables under either paragraph
(e)(6) of this section or § 1.642(c)–
6A(f)(6), at the option of the donor or
the decedent’s executor, as the case may
be.
(iii) For purposes of paragraphs
(e)(2)(i) and (e)(2)(ii) of this section,
where the donor or decedent’s executor
is given the option to use the
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12–01–83
05–01–89
05–01–99
05–01–09
.........................................................................
.........................................................................
.........................................................................
.........................................................................
appropriate actuarial tables under either
paragraph (e)(6) of this section or
§ 1.642(c)–6A(f)(6), the donor or
decedent’s executor must use the same
actuarial table with respect to each
individual transaction and with respect
to all transfers occurring on the
valuation date (for example, gift and
income tax charitable deductions with
respect to the same transfer must be
determined based on the same tables,
and all assets includible in the gross
estate and/or estate tax deductions
claimed must be valued based on the
same tables).
(3) Present value of a remainder
interest. The present value of a
remainder interest in property
transferred to a pooled income fund is
computed on the basis of—
(i) Life contingencies determined from
the values of lx that are set forth in
Table 2000CM in § 20.2031–7T(d)(7)
(see § 20.2031–7A for certain prior
periods); and
(ii) Discount at a rate of interest,
compounded annually, equal to the
highest yearly rate of return of the
pooled income fund for the 3 taxable
years immediately preceding its taxable
year in which the transfer of property to
the fund is made. For purposes of this
paragraph (e), the yearly rate of return
of a pooled income fund is determined
as provided in § 1.642(c)–6(c) unless the
highest rate of return is deemed to be
the rate described in paragraph (e)(4) of
this section for funds in existence less
than 3 taxable years. For purposes of
this paragraph (e)(3)(ii), the first taxable
year of a pooled income fund is
considered a taxable year even though
the taxable year consists of less than 12
months. However, appropriate
adjustments must be made to annualize
the rate of return earned by the fund for
that period. Where it appears from the
facts and circumstances that the highest
yearly rate of return of the fund for the
3 taxable years immediately preceding
the taxable year in which the transfer of
property is made has been purposely
manipulated to be substantially less
than the rate of return that would
otherwise be reasonably anticipated
with the purpose of obtaining an
excessive charitable deduction, that rate
of return may not be used. In that case,
the highest yearly rate of return of the
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1.642(c)–6A(c).
1.642(c)–6A(d).
1.642(c)–6A(e).
1.642(c)–6A(f).
fund is determined by treating the fund
as a pooled income fund that has been
in existence for less than 3 preceding
taxable years.
(4) Pooled income funds in existence
less than 3 taxable years. If a pooled
income fund has been in existence less
than 3 taxable years immediately
preceding the taxable year in which the
transfer is made to the fund and the
transfer to the fund is made after April
30, 1989, the highest rate of return is
deemed to be the interest rate (rounded
to the nearest two-tenths of one percent)
that is 1 percent less than the highest
annual average of the monthly section
7520 rates for the 3 calendar years
immediately preceding the calendar
year in which the transfer to the pooled
income fund is made. The deemed rate
of return for transfers to new pooled
income funds is recomputed each
calendar year using the monthly section
7520 rates for the 3-year period
immediately preceding the calendar
year in which each transfer to the fund
is made until the fund has been in
existence for 3 taxable years and can
compute its highest rate of return for the
3 taxable years immediately preceding
the taxable year in which the transfer of
property to the fund is made in
accordance with the rules set forth in
the first sentence of paragraph (e)(3)(ii)
of this section.
(5) Computation of value of remainder
interest. (i) The factor that is used in
determining the present value of a
remainder interest that is dependent on
the termination of the life of one
individual is the factor from Table S in
paragraph (e)(6) of this section under
the appropriate yearly rate of return
opposite the number that corresponds to
the age of the individual upon whose
life the value of the remainder interest
is based (See § 1.642(c)–6A for certain
prior periods). The tables in paragraph
(e)(6) of this section include factors for
yearly rates of return from 0.2 to 14
percent. Many actuarial factors not
contained in the tables in paragraph
(e)(6) of this section are contained in
Table S in Internal Revenue Service
Publication 1457, ‘‘Actuarial Valuations
Version 3A’’ (2009). This publication
will be available beginning May 1, 2009,
at no charge, electronically via the IRS
Internet site at https://www.irs.gov. For
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other situations, see § 1.642(c)–6(b). If
the yearly rate of return is a percentage
that is between the yearly rates of return
for which factors are provided, a linear
interpolation must be made. The present
value of the remainder interest is
determined by multiplying the fair
market value of the property on the
valuation date by the appropriate
remainder factor.
(ii) This paragraph (e)(5) may be
illustrated by the following example:
years is 9.47 percent. In Table S, the
remainder factor opposite 55 years under 9.4
percent is .16192 and under 9.6 percent is
.15755. The present value of the remainder
interest is $16,039.00, computed as follows:
Factor at 9.4 percent for age
55 ..........................................
Less: Interpolation adjustment
.16192
.00153
Interpolated factor ...................
.16039
Factor at 9.4 percent for age 55 ......
Factor at 9.6 percent for age 55 ......
.16192
.15755
Present value of remainder interest:
($100,000 × .16039) = $16,039.00.
Difference .........................................
Interpolation adjustment:
.00437
(6) Actuarial tables. In the case of
transfers for which the valuation date is
on or after May 1, 2009, the present
value of a remainder interest dependent
on the termination of one life in the case
of a transfer to a pooled income fund is
determined by use of the following
Table S:
Example. A, who is 54 years and 8 months,
transfers $100,000 to a pooled income fund,
and retains a life income interest in the
property. The highest yearly rate of return
earned by the fund for its 3 preceding taxable
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9.47% − 9.4%
x
=
0.2%
.00437
x = .00153
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BILLING CODE 4830–01–C
21464
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
(f) Effective/applicability date. This
section applies on or after May 1, 2009.
(g) Expiration date. This section
expires on or before May 1, 2012.
■ Par. 6. The undesignated center
heading immediately preceding
§ 1.642(c)–6A is revised to read as
follows:
Pooled Income Fund Actuarial Tables
Applicable Before May 1, 2009
Par. 7. Section 1.642(c)–6A is
amended by:
■ 1. Revising the section heading.
■ 2. Amending newly-designated
paragraph (f) as follows:
■ a. Paragraph (f) heading is revised.
■ b. Paragraphs (f)(1), (f)(2), (f)(3), (f)(4),
and (f)(5) are revised.
■ c. The introductory text in paragraph
(f)(6) and the heading preceding Table S
are revised.
■ d. Paragraph (f)(7) is added.
■ The revisions and addition read as
follows:
■
§ 1.642(c)–6A Valuation of charitable
remainder interests for which the valuation
date is before May 1, 2009.
*
*
*
*
*
(f) Present value of the remainder
interest in the case of transfers to pooled
income funds for which the valuation
date is after April 30, 1999, and before
May 1, 2009—(1) In general. In the case
of transfers to pooled income funds for
which the valuation date is after April
30, 1999, and before May 1, 2009, the
present value of a remainder interest is
determined under this section. See,
however, § 1.7520–3(b) (relating to
exceptions to the use of prescribed
tables under certain circumstances). The
present value of a remainder interest
that is dependent on the termination of
the life of one individual is computed
by the use of Table S in paragraph (f)(6)
of this section. For purposes of the
computations under this section, the age
of an individual is the age at the
individual’s nearest birthday.
(2) Transitional rules for valuation of
transfers to pooled income funds. (i) For
purposes of sections 2055, 2106, or
2624, if on May 1, 1999, the decedent
was mentally incompetent so that the
disposition of the property could not be
changed, and the decedent died after
April 30, 1999, without having regained
competency to dispose of the decedent’s
property, or the decedent died within 90
days of the date that the decedent first
regained competency after April 30,
1999, the present value of a remainder
interest is determined as if the valuation
date with respect to the decedent’s gross
estate is either before May 1, 1999, or
after April 30, 1999, at the option of the
decedent’s executor.
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(ii) For purposes of sections 170,
2055, 2106, 2522, or 2624, in the case
of transfers to a pooled income fund for
which the valuation date is after April
30, 1999, and before July 1, 1999, the
present value of the remainder interest
under this section is determined by use
of the section 7520 interest rate for the
month in which the valuation date
occurs (see §§ 1.7520–1(b) and 1.7520–
2(a)(2)) and the appropriate actuarial
tables under either paragraph (e)(5) or
(f)(6) of this section, at the option of the
donor or the decedent’s executor, as the
case may be.
(iii) For purposes of paragraphs
(f)(2)(i) and (f)(2)(ii) of this section,
where the donor or decedent’s executor
is given the option to use the
appropriate actuarial tables under either
paragraph (e)(5) or (f)(6) of this section,
the donor or decedent’s executor must
use the same actuarial table with respect
to each individual transaction and with
respect to all transfers occurring on the
valuation date (for example, gift and
income tax charitable deductions with
respect to the same transfer must be
determined based on the same tables,
and all assets includible in the gross
estate and/or estate tax deductions
claimed must be valued based on the
same tables).
(3) Present value of a remainder
interest. The present value of a
remainder interest in property
transferred to a pooled income fund is
computed on the basis of—
(i) Life contingencies determined from
the values of lx that are set forth in
Table 90CM in § 20.2031–7A(f)(4); and
(ii) Discount at a rate of interest,
compounded annually, equal to the
highest yearly rate of return of the
pooled income fund for the 3 taxable
years immediately preceding its taxable
year in which the transfer of property to
the fund is made. The provisions of
§ 1.642(c)–6(c) apply for determining
the yearly rate of return. However,
where the taxable year is less than 12
months, the provisions of § 1.642(c)–
6T(e)(3)(ii) apply for the determining
the yearly rate of return.
(4) Pooled income funds in existence
less than 3 taxable years. The
provisions of § 1.642(c)–6T(e)(4) apply
for determining the highest yearly rate
of return when the pooled income fund
has been in existence less than 3 taxable
years.
(5) Computation of value of remainder
interest. The factor that is used in
determining the present value of a
remainder interest that is dependent on
the termination of the life of one
individual is the factor from Table S in
paragraph (f)(6) of this section under the
appropriate yearly rate of return
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opposite the number that corresponds to
the age of the individual upon whose
life the value of the remainder interest
is based. Table S in paragraph (f)(6) of
this section includes factors for yearly
rates of return from 4.2 to 14 percent.
Many actuarial factors not contained in
Table S in paragraph (f)(6) of this
section are contained in Table S in
Internal Revenue Service Publication
1457, ‘‘Actuarial Values, Book Aleph,’’
(7–99). Publication 1457 is no longer
available for purchase from the
Superintendent of Documents, United
States Government Printing Office.
However, pertinent factors in this
publication may be obtained by a
written request to: CC:PA:LPD:PR (IRS
Publication 1457), Room 5205, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC
20044. For other situations, see
§ 1.642(c)–6(b). If the yearly rate of
return is a percentage that is between
the yearly rates of return for which
factors are provided, a linear
interpolation must be made. The present
value of the remainder interest is
determined by multiplying the fair
market value of the property on the
valuation date by the appropriate
remainder factor. For an example of a
computation of the present value of a
remainder interest requiring a linear
interpolation adjustment, see § 1.642(c)–
6T(e)(5).
(6) Actuarial tables. In the case of
transfers for which the valuation date is
after April 30, 1999, and before May 1,
2009, the present value of a remainder
interest dependent on the termination of
one life in the case of a transfer to a
pooled income fund is determined by
use of the following tables:
TABLE S.—BASED ON LIFE TABLE
90CM SINGLE LIFE REMAINDER
FACTORS
[Applicable After April 30, 1999, and
Before May 1, 2009]
*
*
*
*
*
(7) Effective/applicability dates.
Paragraphs (f)(1) through (f)(6) apply
after April 30, 1999, and before May 1,
2009.
■ Par. 8. Section 1.664–2 is amended by
revising paragraph (c) and adding
paragraph (e) to read as follows:
§ 1.664–2
trust.
Charitable remainder annuity
*
*
*
*
*
(c) Calculation of the fair market
value of the remainder interest of a
charitable remainder annuity trust. For
purposes of sections 170, 2055, 2106,
and 2522, the fair market value of the
remainder interest of a charitable
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remainder annuity trust (as described in
this section) is the net fair market value
(as of the appropriate valuation date) of
the property placed in trust less the
present value of the annuity. For
purposes of this section, valuation date
means, in general, the date on which the
property is transferred to the trust by the
donor regardless of when the trust is
created. In the case of transfers to a
charitable remainder annuity trust for
which the valuation date is after April
30, 1999, if an election is made under
section 7520 and § 1.7520–2(b) to
compute the present value of the
charitable interest by use of the interest
rate component for either of the 2
months preceding the month in which
the transfer is made, the month so
elected is the valuation date for
purposes of determining the interest rate
and mortality tables. For purposes of
section 2055 or 2106, the valuation date
is the date of death unless the alternate
valuation date is elected in accordance
with section 2032 in which event, and
within the limitations set forth in
section 2032 and the regulations
thereunder, the valuation date is the
alternate valuation date. If the
decedent’s estate elects the alternate
valuation date under section 2032 and
also elects, under section 7520 and
§ 1.7520–2(b), to use the interest rate
component for one of the 2 months
preceding the alternate valuation date,
the month so elected is the valuation
date for purposes of determining the
interest rate and mortality tables. The
present value of an annuity is computed
under § 20.2031–7T(d) for transfers for
which the valuation date is on or after
May 1, 2009, or under § 20.2031–7A(a)
through (f), whichever is applicable, for
transfers for which the valuation date is
before May 1, 2009. See, however,
§ 1.7520–3(b) (relating to exceptions to
the use of prescribed tables under
certain circumstances).
*
*
*
*
*
(e) Effective/applicability date.
Paragraph (c)(1) applies after April 30,
1989.
Par. 9. Section 1.664–4 is amended as
follows:
■ 1. Paragraph (a)(1) is revised.
■ 2. Paragraph (d) is removed.
■ 3. The heading for paragraph (e) is
redesignated as the heading for § 1.664–
4A(f).
■ 4. Paragraphs (e)(1), (e)(2), (e)(5), and
(e)(7) are redesignated as § 1.664–
4A(f)(1), (f)(2), (f)(5) and (f)(6),
respectively.
■ 5. New paragraphs (d), (e)(1), (e)(2),
and (e)(5) are added.
■ 6. The heading and introductory text
of paragraph (e)(6), preceding Table D,
is revised.
■ 7. New paragraph (e)(7) is added.
■ 8. Paragraph (f) is revised.
The additions and revision read as
follows:
■
§ 1.664–4 Calculation of the fair market
value of the remainder interest in a
charitable remainder unitrust.
(a) * * *
(1) [Reserved]. For further guidance,
see § 1.664–4T(a)(1).
*
*
*
*
*
(d) through (e)(2) [Reserved]. For
further guidance, see § 1.664–4T(d)
through (e)(2).
*
*
*
*
*
(5) [Reserved]. For further guidance,
see § 1.664–4T(e)(5).
(6) Actuarial Table D and F (4.2
through 14.0) for transfers for which the
valuation date is after April 30, 1989.
For transfers for which the valuation
date is after April 30, 1989, the present
value of a charitable remainder unitrust
interest that is dependent upon a term
of years is determined by using the
section 7520 rate and the tables in this
paragraph (e)(6). For transfers for which
the valuation date is on or after May 1,
2009, where the present value of a
charitable remainder unitrust interest is
dependent on the termination of a life
interest, see § 1.664–4T(e)(5). See,
however, § 1.7520–3(b) (relating to
exceptions to the use of prescribed
tables under certain circumstances).
Many actuarial factors not contained in
21465
the following tables are contained in
Internal Revenue Service Publication
1458, ‘‘Actuarial Valuations Version
3B’’ (2009). This publication will be
available beginning May 1, 2009, at no
charge, electronically via the IRS
Internet site at https://www.irs.gov.
*
*
*
*
*
(7) [Reserved]. For further guidance,
see § 1.664–4T(e)(7).
(f) Effective/applicability dates. This
section applies after April 30, 1999, and
before May 1, 2009.
Par. 10. Section 1.664–4T is added to
read as follows:
■
§ 1.664–4T Calculation of the fair market
value of the remainder interest in a
charitable remainder unitrust (temporary).
(a) [Reserved]. For further guidance,
see § 1.664–4(a).
(1) Life contingencies determined as
to each life involved, from the values of
lx set forth in Table 2000CM contained
in § 20.2031–7T(d)(7) in the case of
transfers for which the valuation date is
on or after May 1, 2009; or from Table
90CM contained in § 20.2031–7A(f)(4)
in the case of transfer for which the
valuation date is after April 30, 1999,
and before May 1, 2009. See § 20.2031–
7A(a) through (e), whichever is
applicable, for transfers for which the
valuation date is before May 1, 1999;
(a)(2) through (c) [Reserved]. For further
guidance, see § 1.664–4(a)(2) through
(c).
(d) Valuation. The fair market value of
a remainder interest in a charitable
remainder unitrust (as described in
§ 1.664–3) for transfers for which the
valuation date is on or after May 1,
2009, is its present value determined
under paragraph (e) of this section. The
fair market value of a remainder interest
in a charitable remainder unitrust (as
described in § 1.664–3) for transfers for
which the valuation date is before May
1, 2009, is its present value determined
under the following sections:
Valuation dates
Applicable regulations
After
12–31–51
12–31–70
11–30–83
04–30–89
04–30–99
Before
..........................................................................
..........................................................................
..........................................................................
..........................................................................
..........................................................................
(e) Valuation of charitable remainder
unitrusts having certain payout
sequences for transfers for which the
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01–01–52
01–01–71
12–01–83
05–01–89
05–01–99
05–01–09
.........................................................................
.........................................................................
.........................................................................
.........................................................................
.........................................................................
.........................................................................
valuation date is on or after May 1,
2009—(1) In general. Except as
otherwise provided in paragraph (e)(2)
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1.664–4A(a).
1.664–4A(b).
1.664–4A(c).
1.664–4A(d).
1.664–4A(e).
1.664–4A(f).
of this section, in the case of transfers
for which the valuation date is on or
after May 1, 2009, the present value of
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a remainder interest is determined
under paragraphs (e)(3) through (e)(7) of
this section, provided that the amount
of the payout as of any payout date
during any taxable year of the trust is
not larger than the amount that the trust
could distribute on such date under
§ 1.664–3(a)(1)(v) if the taxable year of
the trust were to end on such date. See,
however, § 1.7520–3(b) (relating to
exceptions to the use of the prescribed
tables under certain circumstances).
(2) Transitional rules for valuation of
charitable remainder unitrusts. (i) For
purposes of sections 2055, 2106, or
2624, if on May 1, 2009, the decedent
was mentally incompetent so that the
disposition of the property could not be
changed, and the decedent died on or
after May 1, 2009, without having
regained competency to dispose of the
decedent’s property, or the decedent
died within 90 days of the date that the
decedent first regained competency on
or after May 1, 2009, the present value
of a remainder interest under this
section is determined as if the valuation
date with respect to the decedent’s gross
estate is either before or after May 1,
2009, at the option of the decedent’s
executor.
(ii) For purposes of sections 170,
2055, 2106, 2522, or 2624, in the case
of transfers to a charitable remainder
unitrust for which the valuation date is
on or after May 1, 2009, and before July
1, 2009, the present value of a
remainder interest based on one or more
measuring lives is determined under
this section by use of the section 7520
interest rate for the month in which the
valuation date occurs (see §§ 1.7520–
1(b) and 1.7520–2(a)(2)) and the
appropriate actuarial tables under either
paragraph (e)(7) of this section or
§ 1.664–4A(f)(6), at the option of the
donor or the decedent’s executor, as the
case may be.
(iii) For purposes of paragraphs
(e)(2)(i) and (e)(2)(ii) of this section,
where the donor or decedent’s executor
is given the option to use the
appropriate actuarial tables under either
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paragraph (e)(7) of this section or
§ 1.664–4A(f)(6), the donor or
decedent’s executor must use the same
actuarial table with respect to each
individual transaction and with respect
to all transfers occurring on the
valuation date (for example, gift and
income tax charitable deductions with
respect to the same transfer must be
determined based on the same tables,
and all assets includible in the gross
estate and/or estate tax deductions
claimed must be valued based on the
same tables).
(3) and (4) [Reserved]. For further
guidance, see § 1.664–4(e)(3) and (e)(4).
(5) Period is the life of one individual.
(i) If the period described in § 1.664–
3(a)(5) is the life of one individual, the
factor that is used in determining the
present value of the remainder interest
for transfers for which the valuation
date is on or after May 1, 2009, is the
factor in Table U(1) in paragraph (e)(7)
of this section under the appropriate
adjusted payout. For purposes of the
computations described in this
paragraph (e)(5), the age of an
individual is the age of that individual
at the individual’s nearest birthday. If
the adjusted payout rate is an amount
that is between adjusted payout rates for
which factors are provided in the
appropriate table, a linear interpolation
must be made. The present value of the
remainder interest is determined by
multiplying the net fair market value (as
of the valuation date as determined in
§ 1.664–4(e)(4)) of the property placed
in trust by the factor determined under
this paragraph (e)(5). If the adjusted
payout rate is between 4.2 and 14
percent, see paragraph (e)(7) of this
section. If the adjusted payout rate is
below 4.2 percent or greater than 14
percent, see § 1.664–4(b).
(ii) The application of paragraph
(e)(5)(i) of this section may be illustrated
by the following example:
Example. A, who is 44 years and 11
months old, transfers $100,000 to a charitable
remainder unitrust on January 1st. The trust
instrument requires that the trust pay to A
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semiannually (on June 30 and December 31)
8 percent of the fair market value of the trust
assets as of January 1st during A’s life. The
section 7520 rate for January is 6.6 percent.
Under Table F(6.6) in § 1.664–4(e)(6), the
appropriate adjustment factor is .953317 for
semiannual payments payable at the end of
the semiannual period. The adjusted payout
rate is 7.627% (8% × .953317). Based on the
remainder factors in Table U(1) in this
section, the present value of the remainder
interest is $11,075.00, computed as follows:
Factor at 7.6 percent at age 45 ....
.11141
Factor at 7.8 percent at age 45 ....
.10653
Difference .....................................
.00488
Interpolation adjustment:
7.627% − 7.6%
x
=
0.2%
.00488
x = .00066
Factor at 7.6 percent at age 45
Less: Interpolation adjustment
Interpolated Factor ..................
Present value of remainder interest:
($100,000 × .11075) ..........
.11141
.00066
.11075
$11,075.00
(6) [Reserved]. For further guidance,
see § 1.664–4(e)(6).
(7) Actuarial Table U(1) for transfers
for which the valuation date is on or
after May 1, 2009. For transfers for
which the valuation date is on or after
May 1, 2009, the present value of a
charitable remainder unitrust interest
that is dependent on the termination of
a life interest is determined by using the
section 7520 rate, Table U(1) in this
paragraph (e)(7) and Table F(4.2)
through (14.0) in § 1.664–4(e)(6). See,
however, § 1.7520–3(b) (relating to
exceptions to the use of prescribed
tables under certain circumstances).
Many actuarial factors not contained in
the following tables are contained in
Internal Revenue Service Publication
1458, ‘‘Actuarial Valuations Version
3B’’ (2009). This publication will be
available beginning May 1, 2009, at no
charge, electronically via the IRS
Internet site at https://www.irs.gov.
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BILLING CODE 4830–01–C
21482
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
(f) Effective/applicability date. This
section applies on or after May 1, 2009.
(g) Expiration date. This section
expires on or before May 1, 2012.
■ Par. 11. The undesignated center
heading immediately preceding § 1.664–
4A is revised to read as follows:
Unitrust Actuarial Tables Applicable
Before May 1, 2009
Par. 12. Section 1.664–4A is amended
as follows:
■ 1. The section heading is revised.
■ 2. The heading of newly-designated
paragraph (f) is revised.
■ 3. Newly-designated paragraphs (f)(1)
and (f)(2) are revised.
■ 4. New paragraphs (f)(3) and (f)(4) are
added.
■ 5. Newly-designated paragraph (f)(5)
is revised.
■ 6. In newly-designated paragraph
(f)(6), the heading and the first
paragraph are revised.
■ 7. The heading of Table U(1) is
revised.
■ 8. Paragraph (f)(7) is added.
The additions and revisions read as
follows:
■
§ 1.664–4A Valuation of charitable
remainder interests for which the valuation
date is before May 1, 2009.
*
*
*
*
*
(f) Valuation of charitable remainder
unitrusts having certain payout
sequences for transfers for which the
valuation date is after April 30, 1999,
and before May 1, 2009—(1) In general.
Except as otherwise provided in
paragraph (f)(2) of this section, in the
case of transfers for which the valuation
date is after April 30, 1999, and before
May 1, 2009, the present value of a
remainder interest is determined under
paragraphs (f)(3) through (f)(6) of this
section, provided that the amount of the
payout as of any payout date during any
taxable year of the trust is not larger
than the amount that the trust could
distribute on such date under § 1.664–
3(a)(1)(v) if the taxable year of the trust
were to end on such date. See, however,
§ 1.7520–3(b) (relating to exceptions to
the use of the prescribed tables under
certain circumstances).
(2) Transitional rules for valuation of
charitable remainder unitrusts. (i) For
purposes of sections 2055, 2106, or
2624, if on May 1, 1999, the decedent
was mentally incompetent so that the
disposition of the property could not be
changed, and the decedent died after
April 30, 1999, without having regained
competency to dispose of the decedent’s
property, or the decedent died within 90
days of the date that the decedent first
regained competency after April 30,
1999, the present value of a remainder
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18:14 May 06, 2009
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interest under this section is determined
as if the valuation date with respect to
the decedent’s gross estate is either
before May 1, 1999, or after April 30,
1999, at the option of the decedent’s
executor.
(ii) For purposes of sections 170,
2055, 2106, 2522, or 2624, in the case
of transfers to a charitable remainder
unitrust for which the valuation date is
after April 30, 1999, and before July 1,
1999, the present value of a remainder
interest based on one or more measuring
lives is determined under this section
by use of the section 7520 interest rate
for the month in which the valuation
date occurs (see §§ 1.7520–1(b) and
1.7520–2(a)(2)) and the appropriate
actuarial tables under either paragraph
(e)(6) or (f)(6) of this section, at the
option of the donor or the decedent’s
executor, as the case may be.
(iii) For purposes of paragraphs
(f)(2)(i) and (f)(2)(ii) of this section,
where the donor or decedent’s executor
is given the option to use the
appropriate actuarial tables under either
paragraph (e)(6) or (f)(6) of this section,
the donor or decedent’s executor must
use the same actuarial table with respect
to each individual transaction and with
respect to all transfers occurring on the
valuation date (for example, gift and
income tax charitable deductions with
respect to the same transfer must be
determined based on the same tables,
and all assets includible in the gross
estate and/or estate tax deductions
claimed must be valued based on the
same tables).
(3) Adjusted payout rate. For transfers
for which the valuation date is after
April 30, 1999, and before May 1, 2009,
the adjusted payout rate is determined
by using the appropriate Table F,
contained in § 1.664–4(e)(6), for the
section 7520 interest rate applicable to
the transfer. If the interest rate is
between 4.2 and 14 percent, see § 1.664–
4(e)(6). If the interest rate is below 4.2
percent or greater than 14 percent, see
§ 1.664–4(b). See § 1.664–4(e) for rules
applicable in determining the adjusted
payout rate.
(4) Period is a term of years. If the
period described in § 1.664–3(a)(5) is a
term of years, the factor that is used in
determining the present value of the
remainder interest for transfers for
which the valuation date is after April
30, 1999, and before May 1, 2009, is the
factor under the appropriate adjusted
payout rate in Table D in § 1.664–4(e)(6)
corresponding to the number of years in
the term. If the adjusted payout rate is
an amount that is between adjusted
payout rates for which factors are
provided in Table D, a linear
interpolation must be made. The present
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value of the remainder interest is
determined by multiplying the net fair
market value (as of the appropriate
valuation date) of the property placed in
trust by the factor determined under this
paragraph. Generally, for purposes of
this section, the valuation date is, in the
case of an inter vivos transfer, the date
on which the property is transferred to
the trust by the donor, and, in the case
of a testamentary transfer under sections
2055, 2106, or 2624, the valuation date
is the date of death. See § 1.664–4(e)(4)
for additional rules regarding the
valuation date. See § 1.664–4(e)(4) for an
example that illustrates the application
of this paragraph (f)(4).
(5) Period is the life of one individual.
If the period described in § 1.664–3(a)(5)
is the life of one individual, the factor
that is used in determining the present
value of the remainder interest for
transfers for which the valuation date is
after April 30, 1999, and before May 1,
2009, is the factor in Table U(1) in
paragraph (f)(6) of this section under the
appropriate adjusted payout. For
purposes of the computations described
in this paragraph (f)(5), the age of an
individual is the age of that individual
at the individual’s nearest birthday. If
the adjusted payout rate is an amount
that is between adjusted payout rates for
which factors are provided in the
appropriate table, a linear interpolation
must be made. The rules provided in
§ 1.664–4T(e)(5) apply for determining
the present value of the remainder
interest. See § 1.664–4T(e)(5) for an
example illustrating the application of
this paragraph (f)(5) (using current
actuarial tables).
(6) Actuarial Table U(1) for transfers
for which the valuation date is after
April 30, 1999, and before May 1, 2009.
For transfers for which the valuation
date is after April 30, 1999, and before
May 1, 2009, the present value of a
charitable remainder unitrust interest
that is dependent on the termination of
a life interest is determined by using the
section 7520 rate, Table U(1) in this
paragraph (f)(6), and Tables F(4.2)
through F(14.0) in § 1.664–4(e)(6). See,
however, § 1.7520–3(b) (relating to
exceptions to the use of prescribed
tables under certain circumstances).
Many actuarial factors not contained in
the following tables are contained in
Internal Revenue Service Publication
1458, ‘‘Actuarial Values, Book Beth,’’
(7–1999). Publication 1458 is no longer
available for purchase from the
Superintendent of Documents, United
States Government Printing Office.
However, pertinent factors in this
publication may be obtained by a
written request to: CC:PA:LPD:PR (IRS
Publication 1458), Room 5205, Internal
E:\FR\FM\07MYR2.SGM
07MYR2
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
Revenue Service, P.O.Box 7604, Ben
Franklin Station, Washington, DC
20044.
TABLE U(1)—BASED ON LIFE TABLE
90CM UNITRUST SINGLE LIFE
REMAINDER FACTORS
[Applicable After April 30, 1999, and
Before May 1, 2009]
*
*
*
*
*
(7) Effective/applicability dates.
Paragraphs (f)(1) through (f)(6) apply
after April 30, 1999, and before May 1,
2009.
■ Par. 13. Section 1.7520–1 is amended
by:
■ 1. Revising the section heading.
■ 2. Revising paragraphs (a)(1) and
(a)(2).
■ 3. Removing the last two sentences of
paragraph (b)(2) and adding a new
sentence at the end of the paragraph.
■ 4. Revising paragraph (c)(1).
■ 5. Revising the heading and
introductory text of paragraph (c)(2).
■ 6. Revising paragraph (d).
The revisions and additions read as
follows:
§ 1.7520–1 Valuation of annuities, unitrust
interests, interests for life or terms of years,
and remainder or reversionary interests
prior to May 1, 2009.
(a) General actuarial valuations. (1)
Except as otherwise provided in this
section and in § 1.7520–3 (relating to
exceptions to the use of prescribed
tables under certain circumstances), in
the case of certain transactions after
April 30, 1989, subject to income tax,
the fair market value of annuities,
interests for life or for a term of years
(including unitrust interests),
remainders, and reversions is their
present value determined under this
section. For periods prior to May 1,
2009, see § 20.2031–7A for the
computation of the value of annuities,
unitrust interests, life estates, terms for
years, remainders, and reversions, other
than interests described in paragraphs
(a)(2) and (a)(3) of this section.
(2) For a transfer to a pooled income
fund prior to May 1, 2009, see
§ 1.642(c)–6A with respect to the
valuation of the remainder interest.
*
*
*
*
*
(b) * * *
(2) * * * For transactions with
valuation dates after April 30, 1989, and
before May 1, 2009, the mortality
component tables are contained in
§ 20.2031–7A.
(c) * * *
(1) [Reserved]. For further guidance,
see § 1.7520–1T(c)(1).
(2) Internal Revenue Service
publications containing tables with
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18:14 May 06, 2009
Jkt 217001
interest rates between 2.2 and 22
percent for valuation dates after April
30, 1999, and before May 1, 2009. The
following publications are no longer
available for purchase from the
Superintendent of Documents, United
States Government Printing Office;
however, they may be obtained from
CC:PA:LPD:PR, Room 5205, Internal
Revenue Service, P.O.Box 7604, Ben
Franklin Station, Washington, DC
20044:
*
*
*
*
*
(d) Effective/applicability dates. This
section applies after April 30, 1989, and
before May 1, 2009.
■ Par. 14. Section 1.7520–1T is added to
read as follows:
§1.7520–1T Valuation of annuities,
unitrust interests, interests for life or
terms of years, and remainder or
reversionary interests on or after May 1,
2009 (temporary).
(a) General actuarial valuations. (1)
Except as otherwise provided in this
section and in § 1.7520–3 (relating to
exceptions to the use of prescribed
tables under certain circumstances), in
the case of certain transactions after
April 30, 1989, subject to income tax,
the fair market value of annuities,
interests for life or for a term of years
(including unitrust interests),
remainders, and reversions is their
present value determined under this
section. See § 20.2031–7T(d) (and, for
certain prior periods, § 20.2031–7A) for
the computation of the value of
annuities, unitrust interests, life estates,
terms for years, remainders, and
reversions, other than interests
described in paragraphs (a)(2) and (a)(3)
of this section.
(2) For a transfer to a pooled income
fund on or after May 1, 2009, see
§ 1.642(c)–6T(e) (or, for certain prior
periods, § 1.642(c)–6A) with respect to
the valuation of the remainder interest.
(3) [Reserved]. For further guidance,
see § 1.7520–1(a)(3).
(b)(1) [Reserved]. For further
guidance, see § 1.7520–1(b)(1).
(2) Mortality component. The
mortality component reflects the
mortality data most recently available
from the United States census. As new
mortality data becomes available after
each decennial census, the mortality
component described in this section
will be revised periodically and the
revised mortality component tables will
be published in the regulations at that
time. For transactions with valuation
dates on or after May 1, 2009, the
mortality component table (Table
2000CM) is contained in § 20.2031–
7T(d)(7). See § 20.2031–7A for mortality
component tables applicable to
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21483
transactions for which the valuation
date falls before May 1, 2009.
(c) [Reserved]. For further guidance,
see § 1.7520–1(c).
(1) Regulation sections containing
tables with interest rates between 0.2
and 14 percent for valuation dates on or
after May 1, 2009. Section 1.642(c)–
6T(e)(6) contains Table S used for
determining the present value of a
single life remainder interest in a pooled
income fund as defined in § 1.642(c)–5.
See § 1.642(c)–6A for actuarial factors
for one life applicable to valuation dates
before May 1, 2009. Section 1.664–
4(e)(6) contains Table F (payout factors)
and Table D (actuarial factors used in
determining the present value of a
remainder interest postponed for a term
of years). Section 1.664–4T(e)(7)
contains Table U(1) (unitrust single life
remainder factors). These tables are
used in determining the present value of
a remainder interest in a charitable
remainder unitrust as defined in
§ 1.664–3. See § 1.664–4A for unitrust
single life remainder factors applicable
to valuation dates before May 1, 2009.
Section 20.2031–7(d)(6) contains Table
B (actuarial factors used in determining
the present value of an interest for a
term of years), Table K (annuity end-ofinterval adjustment factors), and Table J
(term certain annuity beginning-ofinterval adjustment factors). Section
20.2031–7T(d)(7) contains Table S
(single life remainder factors), and Table
2000CM (mortality components). These
tables are used in determining the
present value of annuities, life estates,
remainders, and reversions. See
§ 20.2031–7A for single life remainder
factors for one life and mortality
components applicable to valuation
dates before May 1, 2009.
(2) Internal Revenue Service
publications containing tables with
interest rates between 0.2 and 22
percent for valuation dates on or after
May 1, 2009. The following documents
are available beginning May 1, 2009, at
no charge, electronically via the IRS
Internet site at https://www.irs.gov:
(i) Internal Revenue Service
Publication 1457, ‘‘Actuarial Valuations
Version 3A’’ (2009). This publication
includes tables of valuation factors, as
well as examples that show how to
compute other valuation factors, for
determining the present value of
annuities, life estates, terms of years,
remainders, and reversions, measured
by one or two lives. These factors may
also be used in the valuation of interests
in a charitable remainder annuity trust
as defined in § 1.664–2 and a pooled
income fund as defined in § 1.642(c)–5.
(ii) Internal Revenue Service
Publication 1458, ‘‘Actuarial Valuations
E:\FR\FM\07MYR2.SGM
07MYR2
21484
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
Version 3B’’ (2009). This publication
includes term certain tables and tables
of one and two life valuation factors for
determining the present value of
remainder interests in a charitable
remainder unitrust as defined in
§ 1.664–3.
(iii) Internal Revenue Service
Publication 1459, ‘‘Actuarial Valuations
Version 3C’’
(2009). This publication includes
tables for computing depreciation
adjustment factors. See § 1.170A–12T.
(d) Effective/applicability date. This
section applies on or after May 1, 2009.
(e) Expiration date. This section
expires on or before May 1, 2012.
PART 20—ESTATE TAX; ESTATES OF
DECEDENTS DYING AFTER AUGUST
16, 1954
Par. 15. The authority citation for part
20 is amended by adding entries in
numerical order to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Section 20.2031–7T also issued under 26
U.S.C. 7520(c)(2).
Section 20.7520–1T also issued under 26
U.S.C. 7520(c)(2). * * *
Par. 16. Section 20.2031–0 is revised
to read as follows:
■
§ 20.2031–0
Table of contents.
This section lists the section headings
and undesignated center headings that
appear in the regulations under section
2031.
§ 20.2031–1 Definition of gross estate;
valuation of property.
§ 20.2031–2 Valuation of stocks and bonds.
§ 20.2031–3 Valuation of interests in
businesses.
§ 20.2031–4 Valuation of notes.
§ 20.2031–5 Valuation of cash on hand or
on deposit.
§ 20.2031–6 Valuation of household and
personal effects.
§ 20.2031–7 Valuation of annuities,
interests for life or term of years, and
remainder or reversionary interests.
§ 20.2031–7T Valuation of annuities,
interests for life or term of years, and
remainder or reversionary interests
(temporary).
§ 20.2031–8 Valuation of certain life
insurance and annuity contracts;
valuation of shares in an open-end
investment company.
§ 20.2031–9 Valuation of other property.
Actuarial Tables Applicable Before May 1,
2009
§ 20.2031–7A Valuation of annuities,
interests for life or term of years, and
remainder or reversionary interests for
estates of decedents for which the
valuation date of the gross estate is
before May 1, 2009.
Par. 17. Section 20.2031–7 is
amended as follows:
■ 1. Revising paragraphs (c), (d)(1),
(d)(2), (d)(3), (d)(4), (d)(5), and (e).
■ 2. Redesignating paragraph (d)(7) as
paragraph (f)(4) of § 20.2031–7A.
■ 3. Adding new paragraph (d)(7).
The revisions and additions read as
follows:
■
§ 20.2031–7 Valuation of annuities,
interests for life or term of years, and
remainder or reversionary interests.
*
*
*
*
*
(c) through (d)(5) [Reserved]. For
further guidance, see § 20.2031–7T(c)
through (d)(5).
*
*
*
*
*
(7) [Reserved]. For further guidance,
see § 20.2031–7T(d)(7).
(e) Effective/applicability dates. This
section applies after April 30, 1999, and
before May 1, 2009.
Par. 18. Section 20.2031–7T is added
to read as follows:
■
§ 20.2031–7T Valuation of annuities,
interests for life or term of years, and
remainder or reversionary interests
(temporary).
(a) through (b) [Reserved]. For further
information see § 20.2031–7(a) through
(b).
(c) Actuarial valuations. The present
value of annuities, life estates, terms of
years, remainders, and reversions for
estates of decedents for which the
valuation date of the gross estate is on
or after May 1, 2009, is determined
under paragraph (d) of this section. The
present value of annuities, life estates,
terms of years, remainders, and
reversions for estates of decedents for
which the valuation date of the gross
estate is before May 1, 2009, is
determined under the following
sections:
Valuation date
Applicable regulations
After
12–31–51
12–31–70
11–30–83
04–30–89
04–30–99
Before
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(d) Actuarial valuations on or after
May 1, 2009—(1) In general. Except as
otherwise provided in paragraph (b) of
this section and § 20.7520–3(b)
(pertaining to certain limitations on the
use of prescribed tables), if the valuation
date for the gross estate of the decedent
is on or after May 1, 2009, the fair
market value of annuities, life estates,
terms of years, remainders, and
reversionary interests is the present
value determined by use of standard or
special section 7520 actuarial factors.
These factors are derived by using the
appropriate section 7520 interest rate
and, if applicable, the mortality
component for the valuation date of the
interest that is being valued. For
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01–01–52
01–01–71
12–01–83
05–01–89
05–01–99
05–01–09
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purposes of the computations described
in this section, the age of an individual
is the age of that individual at the
individual’s nearest birthday. See
§§ 20.7520–1 through 20.7520–4.
(2) Specific interests—(i) Charitable
remainder trusts. The fair market value
of a remainder interest in a pooled
income fund, as defined in § 1.642(c)–5,
is its value determined under
§ 1.642(c)–6T(e). The fair market value
of a remainder interest in a charitable
remainder annuity trust, as defined in
§ 1.664–2(a), is the present value
determined under § 1.664–2(c). The fair
market value of a remainder interest in
a charitable remainder unitrust, as
defined in § 1.664–3, is its present value
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20.2031–7A(a).
20.2031–7A(b).
20.2031–7A(c).
20.2031–7A(d).
20.2031–7A(e).
20.2031–7A(f).
determined under § 1.664–4T(e). The
fair market value of a life interest or
term of years in a charitable remainder
unitrust is the fair market value of the
property as of the date of valuation less
the fair market value of the remainder
interest on that date determined under
§ 1.664–4T(e)(4) and (5).
(ii) Ordinary remainder and
reversionary interests. If the interest to
be valued is to take effect after a definite
number of years or after the death of one
individual, the present value of the
interest is computed by multiplying the
value of the property by the appropriate
remainder interest actuarial factor (that
corresponds to the applicable section
7520 interest rate and remainder interest
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period) in Table B (for a term certain) or
the appropriate Table S (for one
measuring life), as the case may be.
Table B is contained in § 20.2031–
7(d)(6) and Table S (for one measuring
life when the valuation date is on or
after May 1, 2009) is contained in
paragraph (d)(7) of this section and in
Internal Revenue Service Publication
1457. See § 20.2031–7A containing
Table S for valuation of interests before
May 1, 2009. For information about
obtaining actuarial factors for other
types of remainder interests, see
paragraph (d)(4) of this section.
(iii) Ordinary term-of-years and life
interests. If the interest to be valued is
the right of a person to receive the
income of certain property, or to use
certain nonincome-producing property,
for a term of years or for the life of one
individual, the present value of the
interest is computed by multiplying the
value of the property by the appropriate
term-of-years or life interest actuarial
factor (that corresponds to the
applicable section 7520 interest rate and
term-of-years or life interest period).
Internal Revenue Service Publication
1457 includes actuarial factors for a
remainder interest after a term of years
in Table B and after the life of one
individual in Table S (for one measuring
life when the valuation date is on or
after May 1, 2009). However, term-ofyears and life interest actuarial factors
are not included in Table B in
§ 20.2031–7(d)(6) or Table S in
paragraph (d)(7) of this section (or in
§ 20.2031–7A). If Internal Revenue
Service Publication 1457 (or any other
reliable source of term-of-years and life
interest actuarial factors) is not
conveniently available, an actuarial
factor for the interest may be derived
mathematically. This actuarial factor
may be derived by subtracting the
correlative remainder factor (that
corresponds to the applicable section
7520 interest rate and the term of years
or the life) in Table B (for a term of
years) in § 20.2031–7(d)(6) or in Table S
(for the life of one individual) in
paragraph (d)(7) of this section, as the
case may be, from 1.000000. For
information about obtaining actuarial
factors for other types of term-of-years
and life interests, see paragraph (d)(4) of
this section.
(iv) Annuities. (A) If the interest to be
valued is the right of a person to receive
an annuity that is payable at the end of
each year for a term of years or for the
life of one individual, the present value
of the interest is computed by
multiplying the aggregate amount
payable annually by the appropriate
annuity actuarial factor (that
corresponds to the applicable section
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7520 interest rate and annuity period).
Internal Revenue Publication 1457
includes actuarial factors for a
remainder interest in Table B (after an
annuity payable for a term of years) and
in Table S (after an annuity payable for
the life of one individual when the
valuation date is on or after May 1,
2009). However, annuity actuarial
factors are not included in Table B in
§ 20.2031–7(d)(6) or Table S in
paragraph (d)(7) of this section (or in
§ 20.2031–7A). If Internal Revenue
Service Publication 1457 (or any other
reliable source of annuity actuarial
factors) is not conveniently available, a
required annuity factor for a term of
years or for one life may be
mathematically derived. This annuity
factor may be derived by subtracting the
applicable remainder factor (that
corresponds to the applicable section
7520 interest rate and annuity period) in
Table B (in the case of a term-of-years
annuity) in § 20.2031–7(d)(6) or in Table
S (in the case of a one-life annuity when
the valuation date is on or after May 1,
2009) in paragraph (d)(7) of this section,
as the case may be, from 1.000000 and
then dividing the result by the
applicable section 7520 interest rate
expressed as a decimal number.
(B) If the annuity is payable at the end
of semiannual, quarterly, monthly, or
weekly periods, the product obtained by
multiplying the annuity factor by the
aggregate amount payable annually is
then multiplied by the applicable
adjustment factor as contained in Table
K in § 20.2031–7(d)(6) for payments
made at the end of the specified periods.
The provisions of this paragraph
(d)(2)(iv)(B) are illustrated by the
following example:
Example. At the time of the decedent’s
death, the survivor/annuitant, age 72, is
entitled to receive an annuity of $15,000 a
year for life payable in equal monthly
installments at the end of each period. The
section 7520 rate for the month in which the
decedent died is 5.6 percent. Under Table S
in paragraph (d)(7) of this section, the
remainder factor at 5.6 percent for an
individual aged 72 is .53243. By converting
the remainder factor to an annuity factor, as
described above, the annuity factor at 5.6
percent for an individual aged 72 is 8.3495
(1.00000 minus .53243, divided by .056).
Under Table K in § 20.2031–7(d)(6), the
adjustment factor under the column for
payments made at the end of each monthly
period at the rate of 5.6 percent is 1.0254.
The aggregate annual amount, $15,000, is
multiplied by the factor 8.3495 and the
product multiplied by 1.0254. The present
value of the annuity at the date of the
decedent’s death is, therefore, $128,423.66
($15,000 × 8.3495 × 1.0254).
(C) If an annuity is payable at the
beginning of annual, semiannual,
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quarterly, monthly, or weekly periods
for a term of years, the value of the
annuity is computed by multiplying the
aggregate amount payable annually by
the annuity factor described in
paragraph (d)(2)(iv)(A) of this section;
and the product so obtained is then
multiplied by the adjustment factor in
Table J in § 20.2031–7(d)(6) at the
appropriate interest rate component for
payments made at the beginning of
specified periods. If an annuity is
payable at the beginning of annual,
semiannual, quarterly, monthly, or
weekly periods for one or more lives,
the value of the annuity is the sum of
the first payment plus the present value
of a similar annuity, the first payment
of which is not to be made until the end
of the payment period, determined as
provided in this paragraph (d)(2)(iv).
(v) Annuity and unitrust interests for
a term of years or until the prior death
of an individual. See § 25.2512–
5T(d)(2)(v) for examples explaining how
to compute the present value of an
annuity or unitrust interest that is
payable until the earlier of the lapse of
a specific number of years or the death
of an individual.
(3) Transitional rule. (i) If a decedent
dies on or after May 1, 2009, and if on
May 1, 2009, the decedent was mentally
incompetent so that the disposition of
the decedent’s property could not be
changed, and the decedent dies without
having regained competency to dispose
of the decedent’s property or dies
within 90 days of the date on which the
decedent first regains competency, the
fair market value of annuities, life
estates, terms for years, remainders, and
reversions included in the gross estate
of the decedent is their present value
determined either under this section or
under the corresponding section
applicable at the time the decedent
became mentally incompetent, at the
option of the decedent’s executor. For
examples, see § 20.2031–7A(d).
(ii) If a decedent dies on or after May
1, 2009, and before July 1, 2009, the fair
market value of annuities, life estates,
remainders, and reversions based on
one or more measuring lives included in
the gross estate of the decedent is their
present value determined under this
section by use of the section 7520
interest rate for the month in which the
valuation date occurs (see §§ 20.7520–
1(b) and 20.7520–2(a)(2)) and the
appropriate actuarial tables under either
paragraph (d)(7) of this section or
§ 20.2031–7A(f)(4), at the option of the
decedent’s executor.
(iii) For purposes of paragraphs
(d)(3)(i) and (d)(3)(ii) of this section,
where the decedent’s executor is given
the option to use the appropriate
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actuarial tables under either paragraph
(d)(7) of this section or § 20.2031–
7A(f)(4), the decedent’s executor must
use the same actuarial table with respect
to each individual transaction and with
respect to all transfers occurring on the
valuation date (for example, gift and
income tax charitable deductions with
respect to the same transfer must be
determined based on the same tables,
and all assets includible in the gross
estate and/or estate tax deductions
claimed must be valued based on the
same tables).
(4) Publications and actuarial
computations by the Internal Revenue
Service. Many standard actuarial factors
not included in § 20.2031–7(d)(6) or in
paragraph (d)(7) of this section are
included in Internal Revenue Service
Publication 1457, ‘‘Actuarial Valuations
Version 3A’’ (2009). Publication 1457
also includes examples that illustrate
how to compute many special factors for
more unusual situations. This
publication will be available beginning
May 1, 2009, at no charge, electronically
via the Internal Revenue Service
Internet site at https://www.irs.gov. If a
special factor is required in the case of
an actual decedent, the Internal
Revenue Service may furnish the factor
to the executor upon a request for a
ruling. The request for a ruling must be
accompanied by a recitation of the facts
including a statement of the date of
birth for each measuring life, the date of
the decedent’s death, any other
applicable dates, and a copy of the will,
trust, or other relevant documents. A
request for a ruling must comply with
the instructions for requesting a ruling
published periodically in the Internal
Revenue Bulletin (see §§ 601.201 and
601.601(d)(2)(ii)(b)) and include
payment of the required user fee.
(5) Examples. The provisions of this
section are illustrated by the following
examples:
Example 1. Remainder payable at an
individual’s death. The decedent, or the
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decedent’s estate, was entitled to receive
certain property worth $50,000 upon the
death of A, to whom the income was
bequeathed for life. At the time of the
decedent’s death, A was 47 years and 5
months old. In the month in which the
decedent died, the section 7520 rate was 6.2
percent. Under Table S in paragraph (d)(7) of
this section, the remainder factor at 6.2
percent for determining the present value of
the remainder interest due at the death of a
person aged 47, the number of years nearest
A’s actual age at the decedent’s death, is
.18672. The present value of the remainder
interest at the date of the decedent’s death is,
therefore, $9,336.00 ($50,000 × .18672).
Example 2. Income payable for an
individual’s life. A’s parent bequeathed an
income interest in property to A for life, with
the remainder interest passing to B at A’s
death. At the time of the parent’s death, the
value of the property was $50,000 and A was
30 years and 10 months old. The section
7520 rate at the time of the parent’s death
was 6.2 percent. Under Table S in paragraph
(d)(7) of this section, the remainder factor at
6.2 percent for determining the present value
of the remainder interest due at the death of
a person aged 31, the number of years closest
to A’s age at the decedent’s death, is .08697.
Converting this remainder factor to an
income factor, as described in paragraph
(d)(2)(iii) of this section, the factor for
determining the present value of an income
interest for the life of a person aged 31 is
.91303. The present value of A’s interest at
the time of the parent’s death is, therefore,
$45,651.50 ($50,000 × .91303).
Example 3. Annuity payable for an
individual’s life. A purchased an annuity for
the benefit of both A and B. Under the terms
of the annuity contract, at A’s death, a
survivor annuity of $10,000 per year payable
in equal semiannual installments made at the
end of each interval is payable to B for life.
At A’s death, B was 45 years and 7 months
old. Also, at A’s death, the section 7520 rate
was 4.8 percent. Under Table S in paragraph
(d)(7) of this section, the factor at 4.8 percent
for determining the present value of the
remainder interest at the death of a person
age 46 (the number of years nearest B’s actual
age) is .24774. By converting the factor to an
annuity factor, as described in paragraph
(d)(2)(iv)(A) of this section, the factor for the
present value of an annuity payable until the
death of a person age 46 is 15.6721 (1.00000
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minus .24774, divided by .048). The
adjustment factor from Table K in § 20.2031–
7(d)(6) at an interest rate of 4.8 percent for
semiannual annuity payments made at the
end of the period is 1.0119. The present
value of the annuity at the date of A’s death
is, therefore, $158,585.98 ($10,000 × 15.6721
× 1.0119).
Example 4. Annuity payable for a term of
years. The decedent, or the decedent’s estate,
was entitled to receive an annuity of $10,000
per year payable in equal quarterly
installments at the end of each quarter
throughout a term certain. At the time of the
decedent’s death, the section 7520 rate was
9.8 percent. A quarterly payment had just
been made prior to the decedent’s death and
payments were to continue for 5 more years.
Under Table B in § 20.2031–7(d)(6) for the
interest rate of 9.8 percent, the factor for the
present value of a remainder interest due
after a term of 5 years is .626597. Converting
the factor to an annuity factor, as described
in paragraph (d)(2)(iv)(A) of this section, the
factor for the present value of an annuity for
a term of 5 years is 3.8102 (1.00000 minus
.626597, divided by .098). The adjustment
factor from Table K in § 20.2031–7(d)(6) at an
interest rate of 9.8 percent for quarterly
annuity payments made at the end of the
period is 1.0360. The present value of the
annuity is, therefore, $39,473.67 ($10,000 ×
3.8102 × 1.0360).
(6) [Reserved]. For further guidance,
see § 20.2031–7(d)(6).
(7) Actuarial Table S and Table
2000CM where the valuation date is on
or after May 1, 2009. Except as provided
in § 20.7520–2(b) (pertaining to certain
limitations on the use of prescribed
tables), for determination of the present
value of an interest that is dependent on
the termination of a life interest, Table
2000CM and Table S (single life
remainder factors applicable where the
valuation date is on or after May 1,
2009) contained in this paragraph (d)(7)
and Table J and Table K contained in
§ 20.2031–7(d)(6), must be used in the
application of the provisions of this
section when the section 7520 interest
rate component is between 0.2 and 14
percent.
BILLING CODE 4830–01–P
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BILLING CODE 4830–01–C
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
(e) Effective/applicability date. This
section applies on or after May 1, 2009.
(f) Expiration date. This section
expires on or before May 1, 2012.
■ Par. 19. The undesignated center
heading immediately preceding
§ 20.2031–7A is revised to read as
follows:
Actuarial Tables Applicable Before
May 1, 2009
Par. 20. Section 20.2031–7A is
amended by:
■ 1. Revising the section heading.
■ 2. Adding paragraphs (f)(1), (f)(2), and
(f)(3).
■ 3. In newly-designated paragraph
(f)(4), the heading and introductory text
paragraph is revised.
■ 4. The heading of Table S in newlydesignated paragraph (f)(4) is revised.
■ 5. The heading of Table 90CM in
newly-designated paragraph (f)(4) is
revised.
■ 6. Paragraph (f)(5) is added.
The revisions and additions read as
follows:
■
§ 20.2031–7A Valuation of annuities,
interests for life or term of years, and
remainder or reversionary interests for
estates of decedents for which the
valuation date of the gross estate is before
May 1, 2009.
*
*
*
*
*
(f) Valuation of annuities, interests for
life or term of years, and remainder or
reversionary interests for estates of
decedents for which the valuation date
of the gross estate is after April 30,1999,
and before May 1, 2009—(1) In general.
Except as otherwise provided in
§ 20.2031–7(b) and § 20.7520–3(b)
(pertaining to certain limitations on the
use of prescribed tables), if the valuation
date for the gross estate of the decedent
is after April 30, 1999, and before May
1, 2009, the fair market value of
annuities, life estates, terms of years,
remainders, and reversionary interests is
the present value of the interests
determined by use of standard or special
section 7520 actuarial factors and the
valuation methodology described in
§ 20.2031–7T(d). These factors are
derived by using the appropriate section
7520 interest rate and, if applicable, the
mortality component for the valuation
date of the interest that is being valued.
See §§ 20.7520–1 through 20.7520–4.
See paragraph (f)(4) of this section for
determination of the appropriate table
for use in valuing these interests.
(2) Transitional rule. (i) If a decedent
dies after April 30, 1999, and if on May
1, 1999, the decedent was mentally
incompetent so that the disposition of
the decedent’s property could not be
changed, and the decedent dies without
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having regained competency to dispose
of the decedent’s property or dies
within 90 days of the date on which the
decedent first regains competency, the
fair market value of annuities, life
estates, terms for years, remainders, and
reversions included in the gross estate
of the decedent is their present value
determined either under this section or
under the corresponding section
applicable at the time the decedent
became mentally incompetent, at the
option of the decedent’s executor. For
example, see paragraph (d) of this
section.
(ii) If a decedent dies after April 30,
1999, and before July 1, 1999, the fair
market value of annuities, life estates,
remainders, and reversions based on
one or more measuring lives included in
the gross estate of the decedent is their
present value determined under this
section by use of the section 7520
interest rate for the month in which the
valuation date occurs (see §§ 20.7520–
1(b) and 20.7520–2(a)(2)) and the
appropriate actuarial tables under either
paragraph (e)(4) or paragraph (f)(4) of
this section, at the option of the
decedent’s executor.
(iii) For purposes of paragraphs
(f)(2)(i) and (f)(2)(ii) of this section,
where the decedent’s executor is given
the option to use the appropriate
actuarial tables under either paragraph
(e)(4) or paragraph (f)(4) of this section,
the decedent’s executor must use the
same actuarial table with respect to each
individual transaction and with respect
to all transfers occurring on the
valuation date (for example, gift and
income tax charitable deductions with
respect to the same transfer must be
determined based on the same tables,
and all assets includible in the gross
estate and/or estate tax deductions
claimed must be valued based on the
same tables).
(3) Publications and actuarial
computations by the Internal Revenue
Service. Many standard actuarial factors
not included in paragraph (f)(4) of this
section or in § 20.2031–7(d)(6) are
included in Internal Revenue Service
Publication 1457, ‘‘Actuarial Values,
Book Aleph,’’ (7–99). Publication 1457
also includes examples that illustrate
how to compute many special factors for
more unusual situations. Publication
1457 is no longer available for purchase
from the Superintendent of Documents,
United States Government Printing
Office. However, pertinent factors in
this publication may be obtained from:
CC:PA:LPD:PR (IRS Publication 1457),
Room 5205, Internal Revenue Service,
P.O. Box 7604, Ben Franklin Station,
Washington, DC 20044. If a special
factor is required in the case of an actual
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decedent, the Internal Revenue Service
may furnish the factor to the executor
upon a request for a ruling. The request
for a ruling must be accompanied by a
recitation of the facts including a
statement of the date of birth for each
measuring life, the date of the
decedent’s death, any other applicable
dates, and a copy of the will, trust, or
other relevant documents. A request for
a ruling must comply with the
instructions for requesting a ruling
published periodically in the Internal
Revenue Bulletin (see §§ 601.201 and
601.601(d)(2)(ii)(b)) and include
payment of the required user fee.
(4) Actuarial tables. Except as
provided in § 20.7520–3(b) (pertaining
to certain limitations on the use of
prescribed tables), Life Table 90CM and
Table S (Single life remainder factors
applicable where the valuation date is
after April 30, 1999, and before May 1,
2009), contained in this paragraph (f)(4),
and Table B, Table J, and Table K set
forth in § 20.2031–7(d)(6) must be used
in the application of the provisions of
this section when the section 7520
interest rate component is between 4.2
and 14 percent. Table S and Table 90CM
are as follows:
Table S.—Based on Life on Life Table
90CM Single Life Remainder Factors
[Applicable After April 30, 1999, and
Before May 1, 2009]
*
*
*
*
*
Table 90 CM.—Applicable After April
30, 1999, and Before May 1, 2009
*
*
*
*
*
(5) Effective/applicability dates.
Paragraphs (f)(1) through (f)(4) apply
after April 30, 1999, and before May 1,
2009.
§ 20.2032–1
Alternate valuation.
*
*
*
*
*
(f) * * *
(1) [Reserved]. For further guidance,
see § 20.2032–1T(f)(1).
*
*
*
*
*
■ Par. 22. Section 20.2032–1T is added
to read as follows:
§ 20.2032–1T
(temporary).
Alternate valuation
(a) through (e) [Reserved]. For further
guidance, see § 20.2032–1(a) through (e).
(f) [Reserved]. For further guidance,
see § 20.2032–1(f).
(1) Life estates, remainders, and
similar interests. The values of life
estates, remainders, and similar
interests are to be obtained by applying
the methods prescribed in § 20.2031–7,
using (i) the age of each person, the
duration of whose life may affect the
value of the interest, as of the date of the
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decedent’s death, and (ii) the value of
the property as of the alternate valuation
date. For example, assume that the
decedent, or the decedent’s estate, was
entitled to receive certain property
worth $50,000 upon the death of A, who
was entitled to the income for life. At
the time of the decedent’s death, on or
after May 1, 2009, A was 47 years and
5 months old. In the month in which the
decedent died, the section 7520 rate was
6.2 percent. The value of the decedent’s
remainder interest at the date of the
decedent’s death would, as illustrated in
Example 1 of § 20.2031–7T(d)(5), be
$9,336.00 ($50,000 × .18672). If, because
of economic conditions, the property
declined in value and was worth only
$40,000 on the date that was 6 months
after the date of the decedent’s death,
the value of the remainder interest
would be $7,468.80 ($40,000 × .18672),
even though A would be 48 years old on
the alternate valuation date.
(f)(2) through (g) [Reserved]. For
further guidance, see § 20.2032–1(f)(2)
through (g).
(h) Effective/applicability date.
Paragraph (f)(1) applies on or after May
1, 2009.
(i) Expiration date. Paragraph (f)(1)
expires on or before May 1, 2012.
■ Par. 23. Section 20.2055–2 is
amended by revising the heading in
paragraph (e)(3) and revising paragraphs
(e)(3)(iii) and (f)(4) to read as follows:
§ 20.2055–2 Transfers not exclusively for
charitable purposes.
*
*
*
*
*
(e) * * *
(3) Effective/applicability date. * * *
(iii) [Reserved]. For further guidance,
see § 20.2055–2T(e)(3)(iii).
*
*
*
*
*
(f) * * *
(4) [Reserved]. For further guidance,
see § 20.2055–2T(f)(4).
*
*
*
*
*
■ Par. 24. Section 20.2055–2T is added
to read as follows:
§ 20.2055–2T Transfers not exclusively for
charitable purposes (temporary).
(a) through (e)(3)(ii). [Reserved]. For
further guidance see § 20.2055–2(a)
through (e)(3)(ii).
(e)(3)(iii) The rule in paragraphs
(e)(2)(vi)(a) and (e)(2)(vii)(a) of this
section that guaranteed annuity interests
or unitrust interests, respectively, may
be payable for a specified term of years
or for the life or lives of only certain
individuals is generally effective in the
case of transfers pursuant to wills and
revocable trusts when the decedent dies
on or after April 4, 2000. Two
exceptions from the application of this
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rule in paragraphs (e)(2)(vi)(a) and
(e)(2)(vii)(a) of this section are provided
in the case of transfers pursuant to a
will or revocable trust executed on or
before April 4, 2000. One exception is
for a decedent who dies on or before
July 5, 2001, without having
republished the will (or amended the
trust) by codicil or otherwise. The other
exception is for a decedent who was on
April 4, 2000, under a mental disability
that prevented a change in the
disposition of the decedent’s property,
and who either does not regain
competence to dispose of such property
before the date of death, or dies prior to
the later of 90 days after the date on
which the decedent first regains
competence, or July 5, 2001, without
having republished the will (or
amended the trust) by codicil or
otherwise. If a guaranteed annuity
interest or unitrust interest created
pursuant to a will or revocable trust
when the decedent dies on or after April
4, 2000, uses an individual other than
one permitted in paragraphs (e)(2)(vi)(a)
and (vii)(a) of this section, and the
interest does not qualify for this
transitional relief, the interest may be
reformed into a lead interest payable for
a specified term of years. The term of
years is determined by taking the factor
for valuing the annuity or unitrust
interest for the named individual
measuring life and identifying the term
of years (rounded up to the next whole
year) that corresponds to the equivalent
term of years factor for an annuity or
unitrust interest. For example, in the
case of an annuity interest payable for
the life of an individual age 40 at the
time of the transfer on or after May 1,
2009, assuming an interest rate of 7.4
percent under section 7520, the annuity
factor from column 1 of Table S(7.4),
contained in IRS Publication 1457,
Actuarial Valuations Version 3A, for the
life of an individual age 40 is 12.1519
(1.00000 minus .10076, divided by
.074). Based on Table B(7.4), contained
in Publication 1457, Actuarial
Valuations Version 3A, the factor
12.1519 corresponds to a term of years
between 32 and 33 years. Accordingly,
the annuity interest must be reformed
into an interest payable for a term of 33
years. A judicial reformation must be
commenced prior to the later of July 5,
2001, or the date prescribed by section
2055(e)(3)(C)(iii). Any judicial
reformation must be completed within a
reasonable time after it is commenced.
A non-judicial reformation is permitted
if effective under state law, provided it
is completed by the date on which a
judicial reformation must be
commenced. In the alternative, if a
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court, in a proceeding that is
commenced on or before July 5, 2001,
declares any transfer made pursuant to
a will or revocable trust where the
decedent dies on or after April 4, 2000,
and on or before March 6, 2001, null
and void ab initio, the Internal Revenue
Service will treat such transfers in a
manner similar to that described in
section 2055(e)(3)(J).
(e)(4) through (f)(3). [Reserved]. For
further guidance see § 20.2055–2(e)(4)
through (f)(3).
(f)(4) Other decedents. The present
value of an interest not described in
paragraph (f)(2) of this section is to be
determined under § 20.2031–7T(d) in
the case of decedents where the
valuation date of the gross estate is on
or after May 1, 2009, or under
§ 20.2031–7A in the case of decedents
where the valuation date of the gross
estate is before May 1, 2009.
(f)(5) [Reserved]. For further guidance
see § 20.2055–2(f)(5).
(f)(6) Effective/applicability date.
Paragraphs (e)(3)(iii) and (f)(4) apply on
or after May 1, 2009.
(f)(7) Expiration date. Paragraphs
(e)(3)(iii) and (f)(4) expire on or before
May 1, 2012.
■ Par. 25. Section 20.2056A–4 is
amended by revising paragraph
(c)(4)(ii)(B) and Example 4 of paragraph
(d).
The revisions reads as follows:
§ 20.2056A–4 Procedures for conforming
marital trusts and nontrust marital transfers
to the requirements of a qualified domestic
trust.
*
*
*
*
*
(c) * * *
(4) * * *
(ii) * * *
(B) [Reserved]. For further guidance,
see § 20.2056A–4T(c)(4)(ii)(B).
(d) * * *
Example 4. [Reserved]. For further
guidance, see § 20.2056A–4T(d) Example 4.
*
*
*
*
*
Par. 26. Section 20.2056A–4T is
added to read as follows:
■
§ 20.2056A–4T Procedures for conforming
marital trusts and nontrust marital transfers
to the requirements of a qualified domestic
trust (temporary).
(a) through (c)(4)(ii)(A). [Reserved].
For further guidance see § 20.2056A–
4(a) through (c)(4)(ii)(A).
(c)(4)(ii)(B) The total present value of
the annuity or other payment is the
present value of the nonassignable
annuity or other payment as of the date
of the decedent’s death, determined in
accordance with the interest rates and
mortality data prescribed by section
7520. The expected annuity term is the
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number of years that would be required
for the scheduled payments to exhaust
a hypothetical fund equal to the present
value of the scheduled payments. This
is determined by first dividing the total
present value of the payments by the
annual payment. From the quotient so
obtained, the expected annuity term is
derived by identifying the term of years
that corresponds to the annuity factor
equal to the quotient. This is
determined by using column 1 of Table
B, for the applicable interest rate,
contained in Publication 1457, Actuarial
Valuations Version 3A. A copy of this
publication is available beginning May
1, 2009, at no charge, electronically via
the IRS Internet site at https://
www.irs.gov. If the quotient obtained
falls between two terms, the longer term
is used.
(c)(5) through (c)(7). [Reserved]. For
further guidance see § 20.2056A–4(c)(5)
through (c)(7).
(d) Examples 1 through 3. [Reserved].
For further guidance see § 20.2056A–
4(d) Examples 1 through 3.
of 19 years into the present value of the
hypothetical fund as follows:
Corpus amount of annual payment:
$818,164.80/19 = $43,061.31
(v) In the fourth step, the corpus portion
of each annuity payment is determined by
dividing the corpus amount of each annual
payment by the annual annuity payment
(adjusted for payments more frequently than
annually as in (i) of this Example 4) as
follows:
Corpus portion of each annuity payment:
$43,061.31/$73,958.40 = .58
(vi) Accordingly, 58 percent of each
payment to S is deemed to be a distribution
of corpus. A marital deduction is allowed for
$818,164.80, the present value of the annuity
as of D’s date of death, if either: S agrees to
roll over the corpus portion of each payment
to a QDOT and the executor files the
Information Statement described in
paragraph (c)(5) of this section and the Roll
Over Agreement described in paragraph (c)(7)
of this section; or S agrees to pay the tax due
on the corpus portion of each payment and
the executor files the Information Statement
described in paragraph (c)(5) of this section
and the Payment Agreement described in
paragraph (c)(6) of this section.
Example 4. Computation of corpus portion
of annuity payment. (i) At the time of D’s
death on or after May 1, 2009, D is a
participant in an employees’ pension plan
described in section 401(a). On D’s death, D’s
spouse S, a resident of the United States,
becomes entitled to receive a survivor’s
annuity of $72,000 per year, payable
monthly, for life. At the time of D’s death, S
is age 60. Assume that under section 7520,
the appropriate discount rate to be used for
valuing annuities in the case of this decedent
is 6.0 percent. The annuity factor at 6.0
percent for a person age 60 is 11.0625 (1.0000
minus .33625, divided by .06). The
adjustment factor at 6.0 percent in Table K
for monthly payments is 1.0272.
Accordingly, the right to receive $72,000 per
year on a monthly basis is equal to the right
to receive $73,958.40 ($72,000 × 1.0272) on
an annual basis.
(ii) The corpus portion of each annuity
payment received by S is determined as
follows. The first step is to determine the
annuity factor for the number of years that
would be required to exhaust a hypothetical
fund that has a present value and a payout
corresponding to S’s interest in the payments
under the plan, determined as follows:
(A) Present value of S’s annuity: $73,958.40
× 11.0625 = $818,164.80.
(B) Annuity Factor for Expected Annuity
Term: $818,164.80/$73,958.40 = 11.0625
(iii) The second step is to determine the
number of years that would be required for
S ’s annuity to exhaust a hypothetical fund
of $818,164.80. The term certain annuity
factor of 11.0625 falls between the annuity
factors for 18 and 19 years in a 6.0 percent
term certain annuity table (Column 1 of Table
B, Publication 1457 Actuarial Valuations
Version 3A, which may be obtained on the
IRS Internet site). Accordingly, the expected
annuity term is 19 years.
(iv) The third step is to determine the
corpus amount by dividing the expected term
Example 5. [Reserved]. For further
guidance see § 20.2056A–4(d) Example 5.
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(e) Effective/applicability date.
Paragraph (c)(4)(ii)(B) and Example 4 in
paragraph (d) of this section are
applicable with respect to decedents
dying on or after May 1, 2009.
(f) Expiration date. Paragraph
(c)(4)(ii)(B) and Example 4 in paragraph
(d) of this section expire on or before
May 1, 2012.
■ Par. 27. Section 20.7520–1 is
amended by:
■ 1. Revising the section heading.
■ 2. Revising the second sentence of
paragraph (a)(1) and revising paragraph
(a)(2).
■ 3. Removing the last two sentences of
paragraph (b)(2) and adding a new
sentence at the end of the paragraph.
■ 4. Revising paragraphs (c)(1), (c)(2),
and (d).
The revisions and additions read as
follows:
§ 20.7520–1 Valuation of annuities,
unitrust interests, interests for life or terms
of years, and remainder or reversionary
interests prior to May 1, 2009.
*
*
*
*
*
(a) * * *(1) * * * For periods prior
to May 1, 2009, see § 20.2031–7A for the
computation of the value of annuities,
unitrust interests, life estates, terms for
years, remainders, and reversions, other
than interests described in paragraphs
(a)(2) and (a)(3) of this section.
(2) For a transfer to a pooled income
fund prior to May 1, 2009, see
§ 1.642(c)–6A (Income Tax Regulations)
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with respect to the valuation of the
remainder interest.
*
*
*
*
*
(b) * * *
(2) * * * For decedents’ estates with
valuation dates after April 30, 1989, and
before May 1, 2009, the mortality
component tables are contained in
§ 20.2031–7A.
(c) * * *
(1) [Reserved]. For further guidance,
see § 20.7520–1T(c)(1).
(2) Internal Revenue Service
publications containing tables with
interest rates between 2.2 and 22
percent for valuation dates after April
30, 1999, and before May 1, 2009. The
following publications are no longer
available for purchase from the
Superintendent of Documents, United
States Government Printing Office;
however, they may be obtained from
CC:PA:LPD:PR, Room 5205, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC
20044:
*
*
*
*
*
(d) Effective/applicability dates. This
section applies after April 30, 1989, and
before May 1, 2009.
■ Par. 28. Section 20.7520–1T is added
to read as follows:
§ 20.7520–1T Valuation of annuities,
unitrust interests, interests for life or terms
of years, and remainder or reversionary
interests on or after May 1, 2009
(temporary).
(a) General actuarial valuations. (1)
Except as otherwise provided in this
section and in § 20.7520–3 (relating to
exceptions to the use of prescribed
tables under certain circumstances), in
the case of estates of decedents with
valuation dates after April 30, 1989, the
fair market value of annuities, interests
for life or for a term of years (including
unitrust interests), remainders, and
reversions is their present value
determined under this section. See
§ 20.2031–7T(d) (and, for certain prior
periods, § 20.2031–7A) for the
computation of the value of annuities,
unitrust interests, life estates, terms for
years, remainders, and reversions, other
than interests described in paragraphs
(a)(2) and (a)(3) of this section.
(2) In the case of a transfer to a pooled
income fund with a valuation date on or
after May 1, 2009, see § 1.642(c)–6T(e),
Income Tax Regulations, (or, for certain
prior periods, § 1.642(c)–6A) with
respect to the valuation of the remainder
interest.
(3) [Reserved]. For further guidance,
see § 20.7520–1(a)(3).
(b)(1) [Reserved]. For further
guidance, see § 20.7520–1(b)(1).
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(2) Mortality component. The
mortality component reflects the
mortality data most recently available
from the United States census. As new
mortality data becomes available after
each decennial census, the mortality
component described in this section
will be revised periodically and the
revised mortality component tables will
be published in the regulations at that
time. For decedent’s estates with
valuation dates on or after May 1, 2009,
the mortality component table (Table
2000CM) is contained in § 20.2031–
7T(d)(7). See § 20.2031–7A for mortality
component tables applicable to
decedent’s estates with valuation dates
before May 1, 2009.
(c) [Reserved]. For further guidance,
see § 20.7520–1(c).
(1) Regulation sections containing
tables with interest rates between 0.2
and 14 percent for valuation dates on or
after May 1, 2009. Section 1.642(c)–
6T(e)(6) contains Table S used for
determining the present value of a
single life remainder interest in a pooled
income fund as defined in § 1.642(c)–5.
See § 1.642(c)–6A for single life
remainder factors applicable to
valuation dates before May 1, 2009.
Section 1.664–4(e)(6) contains Table F
(payout factors) and Table D (actuarial
factors used in determining the present
value of a remainder interest postponed
for a term of years). Section1.664–
4T(e)(7) contains Table U(1) (unitrust
single life remainder factors). These
tables are used in determining the
present value of a remainder interest in
a charitable remainder unitrust as
defined in § 1.664–3. See § 1.664–4A for
unitrust single life remainder factors
applicable to valuation dates before May
1, 2009. Section 20.2031–7(d)(6)
contains Table B (actuarial factors used
in determining the present value of an
interest for a term of years), Table K
(annuity end-of-interval adjustment
factors), and Table J (term certain
annuity beginning-of-interval
adjustment factors). Section 20.2031–
7T(d)(7) contains Table S (single life
remainder factors), and Table 2000CM
(mortality components). These tables are
used in determining the present value of
annuities, life estates, remainders, and
reversions. See § 20.2031–7A for single
life remainder factors applicable to
valuation dates before May 1, 2009.
(2) Internal Revenue Service
publications containing tables with
interest rates between 0.2 and 22
percent for valuation dates on or after
May 1, 2009. The following documents
are available beginning May 1, 2009, at
no charge, electronically via the IRS
Internet site at https://www.irs.gov:
(i) Internal Revenue Service
Publication 1457, ‘‘Actuarial Valuations
Version 3A’’ (2009). This publication
includes tables of valuation factors, as
well as examples that show how to
compute other valuation factors, for
determining the present value of
annuities, life estates, terms of years,
remainders, and reversions, measured
by one or two lives. These factors may
also be used in the valuation of interests
in a charitable remainder annuity trust
as defined in § 1.664–2 and a pooled
income fund as defined in § 1.642(c)–5.
(ii) Internal Revenue Service
Publication 1458, ‘‘Actuarial Valuations
Version 3B’’ (2009). This publication
includes term certain tables and tables
of one and two life valuation factors for
determining the present value of
remainder interests in a charitable
remainder unitrust as defined in
§ 1.664–3.
(iii) Internal Revenue Service
Publication 1459, ‘‘Actuarial Valuations
Version 3C’’ (2009). This publication
includes tables for computing
depreciation adjustment factors. See
§ 1.170A–12T.
(d) Effective/applicability date. This
section applies on or after May 1, 2009.
(e) Expiration date. This section
expires on or before May 1, 2012.
PART 25—GIFT TAX; GIFTS MADE
AFTER DECEMBER 31, 1954
Par. 29. The authority citation for part
25 is amended by adding entries in
numerical order to read in part as
follows:
■
Authority: 26 U.S.C. 7805 * * *
Section 25.2512–5T also issued under 26
U.S.C. 7520(c)(2).
Section 25.7520–1T also issued under 26
U.S.C. 7520(c)(2). * * *
Par. 30. Section 25.2512–0 is revised
to read as follows:
■
§ 25.2512–0
Table of contents.
This section lists the section headings
that appear in the regulations under
section 2512.
§ 25.2512–1 Valuation of property; in
general.
§ 25.2512–2 Stocks and bonds.
§ 25.2512–3 Valuation of interests in
businesses.
§ 25.2512–4 Valuation of notes.
§ 25.2512–5 Valuation of annuities, unitrust
interests, interests for life or term of
years, and remainder or reversionary
interests.
§ 25.2512–5T Valuation of annuities,
unitrust interests, interests for life or
term of years, and remainder or
reversionary interests (temporary).
§ 25.2512–6 Valuation of certain life
insurance and annuity contracts;
valuation of shares in an open-end
investment company.
§ 25.2512–7 Effect of excise tax.
§ 25.2512–8 Transfers for insufficient
consideration.
Actuarial Tables Applicable Before May 1,
2009
§ 25.2512–5A Valuation of annuities,
unitrust interests, interests for life or
term of years, and remainder or
reversionary interests transferred before
May 1, 2009.
Par. 31. Section 25.2512–5 is
amended by revising paragraphs (c), (d),
and (e) to read as follows:
The revised provisions read as
follows:
■
§ 25.2512–5 Valuation of annuities,
unitrust interests, interests for life or term
of years, and remainder or reversionary
interests.
*
*
*
*
*
(c) and (d) [Reserved]. For further
guidance, see § 25.2512–5T(c) and (d).
(e) Effective/applicability dates. This
section applies after April 30, 1999, and
before May 1, 2009.
Par. 32. Section 25.2512–5T is added
to read as follows:
■
§ 25.2512–5T Valuation of annuities,
unitrust interests, interests for life or term
of years, and remainder or reversionary
interests (temporary).
(a) and (b) [Reserved]. For further
guidance, see § 25.2512–5(a) and (b).
(c) Actuarial valuations. The present
value of annuities, unitrust interests, life
estates, terms of years, remainders, and
reversions transferred by gift on or after
May 1, 2009, is determined under
paragraph (d) of this section. The
present value of annuities, unitrust
interests, life estates, terms of years,
remainders, and reversions transferred
by gift before May 1, 2009, is
determined under the following
sections:
Transfers
Applicable regulations
After
Before
12–31–51 ..........................................................................
01–01–52 .........................................................................
01–01–71 .........................................................................
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25.2512–5A(a).
25.2512–5A(b).
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21513
Transfers
Applicable regulations
After
12–31–70
11–30–83
04–30–89
04–30–99
Before
..........................................................................
..........................................................................
..........................................................................
..........................................................................
(d) Actuarial valuations on or after
May 1, 2009—(1) In general. Except as
otherwise provided in paragraph (b) of
this section and § 25.7520–3(b) (relating
to exceptions to the use of prescribed
tables under certain circumstances), if
the valuation date for the gift is on or
after May 1, 2009, the fair market value
of annuities, life estates, terms of years,
remainders, and reversions transferred
on or after May 1, 2009, is the present
value of such interests determined
under paragraph (d)(2) of this section
and by use of standard or special section
7520 actuarial factors. These factors are
derived by using the appropriate section
7520 interest rate and, if applicable, the
mortality component for the valuation
date of the interest that is being valued.
See §§ 25.7520–1 through 25.7520–4.
The fair market value of a qualified
annuity interest described in section
2702(b)(1) and a qualified unitrust
interest described in section 2702(b)(2)
is the present value of such interests
determined under § 25.7520–1(c).
(2) Specific interests. When the donor
transfers property in trust or otherwise
and retains an interest therein,
generally, the value of the gift is the
value of the property transferred less the
value of the donor’s retained interest.
However, if the donor transfers property
after October 8, 1990, to or for the
benefit of a member of the donor’s
family, the value of the gift is the value
of the property transferred less the value
of the donor’s retained interest as
determined under section 2702. If the
donor assigns or relinquishes an
annuity, life estate, remainder, or
reversion that the donor holds by virtue
of a transfer previously made by the
donor or another, the value of the gift
is the value of the interest transferred.
However, see section 2519 for a special
rule in the case of the assignment of an
income interest by a person who
received the interest from a spouse.
(i) Charitable remainder trusts. The
fair market value of a remainder interest
in a pooled income fund, as defined in
§ 1.642(c)–5, is its value determined
under § 1.642(c)–6T(e) (see § 1.642(c)–
6A for certain prior periods). The fair
market value of a remainder interest in
a charitable remainder annuity trust, as
described in § 1.664–2(a), is its present
value determined under § 1.664–2(c).
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05–01–89
05–01–99
05–01–09
.........................................................................
.........................................................................
.........................................................................
.........................................................................
The fair market value of a remainder
interest in a charitable remainder
unitrust, as defined in § 1.664–3, is its
present value determined under
§ 1.664–4T(e). The fair market value of
a life interest or term for years in a
charitable remainder unitrust is the fair
market value of the property as of the
date of transfer less the fair market value
of the remainder interest, determined
under § 1.664–4T(e)(4) and (5).
(ii) Ordinary remainder and
reversionary interests. If the interest to
be valued is to take effect after a definite
number of years or after the death of one
individual, the present value of the
interest is computed by multiplying the
value of the property by the appropriate
remainder interest actuarial factor (that
corresponds to the applicable section
7520 interest rate and remainder interest
period) in Table B (for a term certain) or
the appropriate Table S (for one
measuring life), as the case may be.
Table B is contained in § 20.2031–
7(d)(6) and Table S (for one measuring
life when the valuation date is on or
after May 1, 2009) is included in
§ 20.2031–7T(d)(7) and Internal
Revenue Service Publication 1457. See
§ 20.2031–7A containing Table S for
valuation of interests before May 1,
2009. For information about obtaining
actuarial factors for other types of
remainder interests, see paragraph (d)(4)
of this section.
(iii) Ordinary term-of-years and life
interests. If the interest to be valued is
the right of a person to receive the
income of certain property, or to use
certain nonincome-producing property,
for a term of years or for the life of one
individual, the present value of the
interest is computed by multiplying the
value of the property by the appropriate
term-of-years or life interest actuarial
factor (that corresponds to the
applicable section 7520 interest rate and
term-of-years or life interest period).
Internal Revenue Service Publication
1457 includes actuarial factors for a
remainder interest after a term of years
in Table B and after the life of one
individual in Table S (for one measuring
life when the valuation date is on or
after May 1, 2009). However, term-ofyears and life interest actuarial factors
are not included in Table B in
§ 20.2031–7(d)(6) or Table S in
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25.2512–5A(c).
25.2512–5A(d).
25.2512–5A(e).
25.2512–5A(f).
§ 20.2031–7T(d)(7) (or in § 20.2031–7A).
If Internal Revenue Service Publication
1457 (or any other reliable source of
term-of-years and life interest actuarial
factors) is not conveniently available, an
actuarial factor for the interest may be
derived mathematically. This actuarial
factor may be derived by subtracting the
correlative remainder factor (that
corresponds to the applicable section
7520 interest rate) in Table B (for a term
of years) in § 20.2031–7(d)(6) or in Table
S (for the life of one individual) in
§ 20.2031–7T(d)(7), as the case may be,
from 1.000000. For information about
obtaining actuarial factors for other
types of term-of-years and life interests,
see paragraph (d)(4) of this section.
(iv) Annuities. (A) If the interest to be
valued is the right of a person to receive
an annuity that is payable at the end of
each year for a term of years or for the
life of one individual, the present value
of the interest is computed by
multiplying the aggregate amount
payable annually by the appropriate
annuity actuarial factor (that
corresponds to the applicable section
7520 interest rate and annuity period).
Internal Revenue Service Publication
1457 includes actuarial factors in Table
B (for a remainder interest after an
annuity payable for a term of years) and
in Table S (for a remainder interest after
an annuity payable for the life of one
individual when the valuation date is
on or after May 1, 2009). However,
annuity actuarial factors are not
included in Table B in § 20.2031–7(d)(6)
or Table S in § 20.2031–7T(d)(7) (or in
§ 20.2031–7A). If Internal Revenue
Service Publication 1457 (or any other
reliable source of annuity actuarial
factors) is not conveniently available, an
annuity factor for a term of years or for
one life may be derived mathematically.
This annuity factor may be derived by
subtracting the applicable remainder
factor (that corresponds to the
applicable section 7520 interest rate and
annuity period) in Table B (in the case
of a term-of-years annuity) in § 20.2031–
7(d)(6) or in Table S (in the case of a
one-life annuity) in § 20.2031–7T(d)(7),
as the case may be, from 1.000000 and
then dividing the result by the
applicable section 7520 interest rate
expressed as a decimal number. See
§ 20.2031–7T(d)(2)(iv) for an example
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that illustrates the computation of the
present value of an annuity.
(B) If the annuity is payable at the end
of semiannual, quarterly, monthly, or
weekly periods, the product obtained by
multiplying the annuity factor by the
aggregate amount payable annually is
then multiplied by the applicable
adjustment factor set forth in Table K in
§ 20.2031–7(d)(6) at the appropriate
interest rate component for payments
made at the end of the specified periods.
The provisions of this paragraph
(d)(2)(iv)(B) are illustrated by the
following example:
Example. In July of a year after 2008, the
donor agreed to pay the annuitant the sum
of $10,000 per year, payable in equal
semiannual installments at the end of each
period. The semiannual installments are to
be made on each December 31st and June
30th. The annuity is payable until the
annuitant’s death. On the date of the
agreement, the annuitant is 68 years and 5
months old. The donee annuitant’s age is
treated as 68 for purposes of computing the
present value of the annuity. The section
7520 rate on the date of the agreement is 6.6
percent. Under Table S in § 20.2031–7T(d)(7),
the factor at 6.6 percent for determining the
present value of a remainder interest payable
at the death of an individual aged 68 is
.42001. Converting the remainder factor to an
annuity factor, as described above, the
annuity factor for determining the present
value of an annuity transferred to an
individual age 68 is 8.7877 (1.00000 minus
.42001 divided by .066). The adjustment
factor from Table K in § 20.2031–7(d)(6) in
the column for payments made at the end of
each semiannual period at the rate of 6.6
percent is 1.0162. The aggregate annual
amount of the annuity, $10,000, is multiplied
by the factor 8.7877 and the product is
multiplied by 1.0162. The present value of
the donee’s annuity is, therefore, $89,300.61
($10,000 × 8.7877 × 1.0162).
(C) If an annuity is payable at the
beginning of annual, semiannual,
quarterly, monthly, or weekly periods
for a term of years, the value of the
annuity is computed by multiplying the
aggregate amount payable annually by
the annuity factor described in
paragraph (d)(2)(iv)(A) of this section;
and the product so obtained is then
multiplied by the adjustment factor in
Table J in § 20.2031–7(d)(6) at the
appropriate interest rate component for
payments made at the beginning of
specified periods. If an annuity is
payable at the beginning of annual,
semiannual, quarterly, monthly, or
weekly periods for one or more lives,
the value of the annuity is the sum of
the first payment and the present value
of a similar annuity, the first payment
of which is not to be made until the end
of the payment period, determined as
provided in paragraph (d)(2)(iv)(B) of
this section.
(v) Annuity and unitrust interests for
a term of years or until the prior death
of an individual—(A) Annuity interests.
The present value of an annuity interest
that is payable until the earlier to occur
of the lapse of a specific number of
years or the death of an individual may
be computed with values from the tables
in §§ 20.2031–7(d)(6) and 20.2031–
7T(d)(7) as described in the following
example:
Example. The donor transfers $100,000
into a trust on or after May 1, 2009, and
retains the right to receive an annuity from
the trust in the amount of $6,000 per year,
payable in equal semiannual installments at
the end of each period. The semiannual
installments are to be made on each June
30th and December 31st. The annuity is
payable for 10 years or until the donor’s prior
death. At the time of the transfer, the donor
is 59 years and 6 months old. The donor’s age
is deemed to be 60 for purposes of computing
the present value of the retained annuity. The
section 7520 rate for the month in which the
transfer occurred is 5.8 percent. The present
value of the donor’s retained interest is
$42,575.65, determined as follows
TABLE S value at 5.8 percent, age 60 ......................
.34656
TABLE S value at 5.8 percent, age 70 ......................
.49025
TABLE 2000CM value at
age 70 ................................
74794
TABLE 2000CM value at
age 60 ................................
87595
TABLE B value at 5.8 percent, 10 years ...................
.569041
TABLE K value at 5.8 percent ...................................
1.0143
Factor for donor’s retained
interest at 5.8 percent:
(1.00000 − .34656) − (.569041× (74794 / 87595) × (1.00000 − .49025)) = 6.9959
.058
Present value of donor’s retained interest:
($6,000 × 6.9959 × 1.0143)
$42,575.65:
(B) Unitrust interests. The present
value of a unitrust interest that is
payable until the earlier to occur of the
lapse of a specific number of years or
the death of an individual may be
computed with values from the tables in
§§ 1.664–4(e)(6) and 1.664–4T(e)(7) as
described in the following example:
Example. The donor who, as of the nearest
birthday, is 60 years old, transfers $100,000
to a unitrust on January 1st of a year after
2009. The trust instrument requires that each
year the trust pay to the donor, in equal
semiannual installments on June 30th and
December 31st, 6 percent of the fair market
value of the trust assets, valued as of January
1st each year, for 10 years or until the prior
death of the donor. The section 7520 rate for
the January in which the transfer occurred is
6.6 percent. Under Table F(6.6) in § 1.664–
4(e)(6), the appropriate adjustment factor is
.953317 for semiannual payments payable at
the end of the semiannual period. The
adjusted payout rate is 5.720 percent (6% ×
.953317). The present value of the donor’s
retained interest is $41,920.00 determined as
follows:
TABLE U(1) value at 5.6 percent,
age 60 ........................................
.33970
TABLE U(1) value at 5.6 percent,
age 70 ........................................
.48352
TABLE 2000CM value at age 70
74794
TABLE 2000CM value at age 60
87595
TABLE D value at 5.6 percent,
10 years ....................................
.561979
Factor for donor’s retained interest at 5.6 percent:
(1.000000 ¥ .33970) ¥ (.561979 × (74794/87595) × (1.000000 ¥ .48352)) = .41247
TABLE U(1) value at 5.8 percent,
age 60 ............................................
.32846
TABLE U(1) value at 5.8 percent,
age 70 ............................................
TABLE 2000CM value at age 70 .....
.47241
74794
TABLE 2000CM value at age 60 .....
TABLE D value at 5.8 percent, 10
years ..............................................
87595
550185
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Factor for donor’s retained interest at 5.8 percent:
(1.000000 ¥ .32846) ¥ (.550185 × (74974/87595) × (1.000000 ¥ .47241)) = .42369
Difference¥.01122
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations
5.720% − 5.6%
x
=
0.2%
.01122
x = .00673
Factor at 5.6 percent, age 60
Plus: Interpolation adjustment ..................................
Interpolated Factor ..............
Present value of donor’s retained interest:
($100,000 × .41920) ......
(e) Effective/applicability date. This
section applies on or after May 1, 2009.
(f) Expiration date. This section
expires on or before May 1, 2012.
■ Par. 33. The undesignated center
heading immediately preceding
§ 25.2512–5A is revised to read as
.41247
follows:
.00673
.41920
Actuarial Tables Applicable Before
May 1, 2009
Par. 34. Section 25.2512–5A is
amended by revising the section
41,920.00 heading and adding paragraph (f) to
read as follows:
(3) Transitional rule. If the valuation
date of a transfer of property by gift is
§ 25.2512–5A Valuation of annuities,
on or after May 1, 2009, and before July
unitrust interests, interests for life or term
1, 2009, the fair market value of the
of years, and remainder or reversionary
interest transferred is determined by use interests transferred before May 1, 2009.
of the section 7520 interest rate for the
*
*
*
*
*
month in which the valuation date
(f) Valuation of annuities, unitrust
occurs (see §§ 25.7520–1(b) and
interests, interests for life or term of
25.7520–2(a)(2)) and the appropriate
years, and remainder or reversionary
actuarial tables under either § 20.2031–
interests transferred after April 30,
7T(d)(7) or § 20.2031–7A(f)(4), at the
1999, and before May 1, 2009—(1) In
option of the donor. However, with
general. Except as otherwise provided
respect to each individual transaction
in §§ 25.2512–5(b) and 25.7520–3(b)
and with respect to all transfers
(pertaining to certain limitations on the
occurring on the valuation date, the
use of prescribed tables), if the valuation
donor must use the same actuarial tables date of the transferred interest is after
(for example, gift and income tax
April 30, 1999, and before May 1, 2009,
charitable deductions with respect to
the fair market value of annuities,
the same transfer must be determined
unitrust interests, life estates, terms of
based on the same tables, and all
years, remainders, and reversions
transfers made on the same date must be transferred by gift is the present value
valued based on the same tables).
of the interests determined by use of
(4) Publications and actuarial
standard or special section 7520
computations by the Internal Revenue
actuarial factors and the valuation
Service. Many standard actuarial factors methodology described in § 25.2512–
not included in § 20.2031–7(d)(6) or
5T(d). Sections 20.2031–7(d)(6) and
§ 20.2031–7T(d)(7) are included in
20.2031–7A(f)(4) and related sections
Internal Revenue Service Publication
provide tables with standard actuarial
1457, ‘‘Actuarial Valuations Version
factors and examples that illustrate how
3A’’ (2009). Internal Revenue Service
to use the tables to compute the present
Publication 1457 also includes
value of ordinary annuity, life, and
examples that illustrate how to compute remainder interests in property. These
many special factors for more unusual
sections also refer to standard and
situations. A copy of this publication is
special actuarial factors that may be
available beginning May 1, 2009, at no
necessary to compute the present value
charge, electronically via the IRS
of similar interests in more unusual fact
Internet site at https://www.irs.gov. If a
situations. These factors and examples
special factor is required in the case of
are also generally applicable for gift tax
a completed gift, the Internal Revenue
purposes in computing the values of
Service may furnish the factor to the
taxable gifts.
donor upon a request for a ruling. The
(2) Transitional rule. If the valuation
request for a ruling must be
date of a transfer of property by gift is
accompanied by a recitation of the facts after April 30, 1999, and before July 1,
including a statement of the date of
1999, the fair market value of the
birth for each measuring life, the date of interest transferred is determined by use
the gift, any other applicable dates, and
of the section 7520 interest rate for the
a copy of the will, trust, or other
month in which the valuation date
relevant documents. A request for a
occurs (see §§ 25.7520–1(b) and
ruling must comply with the
25.7520–2(a)(2)) and the appropriate
instructions for requesting a ruling
actuarial tables under either § 20.2031–
published periodically in the Internal
7A(e)(4) or § 20.2031–7A(f)(4), at the
Revenue Bulletin (see §§ 601.201 and
option of the donor. However, with
601.601(d)(2)(ii)(b)) and include
respect to each individual transaction
payment of the required user fee.
and with respect to all transfers
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■
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occurring on the valuation date, the
donor must use the same actuarial tables
(for example, gift and income tax
charitable deductions with respect to
the same transfer must be determined
based on the same tables, and all
transfers made on the same date must be
valued based on the same tables).
(3) Publications and actuarial
computations by the Internal Revenue
Service. Many standard actuarial factors
not included in §§ 20.2031–7(d)(6) and
20.2031–7A(f)(4) are included in
Internal Revenue Service Publication
1457, ‘‘Actuarial Values, Book Aleph,’’
(7–99). Internal Revenue Service
Publication 1457 also includes
examples that illustrate how to compute
many special factors for more unusual
situations. Publication 1457 is no longer
available for purchase from the
Superintendent of Documents, United
States Government Printing Office.
However, pertinent factors in this
publication may be obtained from:
CC:PA:LPD:PR (IRS Publication 1457),
Room 5205, Internal Revenue Service,
P.O.Box 7604, Ben Franklin Station,
Washington, DC 20044. If a special
factor is required in the case of a
completed gift, the Internal Revenue
Service may furnish the factor to the
donor upon a request for a ruling. The
request for a ruling must be
accompanied by a recitation of the facts
including a statement of the date of
birth for each measuring life, the date of
the gift, any other applicable dates, and
a copy of the will, trust, or other
relevant documents. A request for a
ruling must comply with the
instructions for requesting a ruling
published periodically in the Internal
Revenue Bulletin (see §§ 601.201 and
601.601(d)(2)(ii)(b)) and include
payment of the required user fee.
(4) Effective/applicability dates.
Paragraphs (f)(1) through (f)(3) apply
after April 30, 1999, and before May 1,
2009.
■ Par. 35. Section 25.2522(c)–3 is
amended by revising paragraph (e) to
read as follows:
§ 25.2522(c)–3 Transfers not exclusively
for charitable, etc., purposes in the case of
gifts made after July 31, 1969.
*
*
*
*
*
(e) [Reserved]. For further guidance,
see § 25.2522(c)–3T(e).
■ Par. 36. Section 25.2522(c)–3T is
added as follows:
§ 25.2522(c)–3T Transfers not exclusively
for charitable, etc., purposes in the case of
gifts made after July 31, 1969 (temporary).
(a) through (d) [Reserved]. For further
guidance, see § 25.2522(c)–3(a) through
(d).
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(e) Effective/applicability date. This
section applies only to gifts made after
July 31, 1969. In addition, the rule in
paragraphs (c)(2)(vi)(a) and (c)(2)(vii)(a)
of this section that guaranteed annuity
interests or unitrust interests,
respectively, may be payable for a
specified term of years or for the life or
lives of only certain individuals applies
to transfers made on or after April 4,
2000. If a transfer is made on or after
April 4, 2000, that uses an individual
other than one permitted in paragraphs
(c)(2)(vi)(a) and (c)(2)(vii)(a) of this
section, the interest may be reformed
into a lead interest payable for a
specified term of years. The term of
years is determined by taking the factor
for valuing the annuity or unitrust
interest for the named individual
measuring life and identifying the term
of years (rounded up to the next whole
year) that corresponds to the equivalent
term of years factor for an annuity or
unitrust interest. For example, in the
case of an annuity interest payable for
the life of an individual age 40 at the
time of the transfer on or after May 1,
2009, assuming an interest rate of 7.4
percent under section 7520, the annuity
factor from column 1 of Table S(7.4),
contained in IRS Publication 1457,
Actuarial Valuations Version 3A, for the
life of an individual age 40 is 12.1519
(1—.10076/.074). Based on Table B(7.4),
contained in Publication 1457, Actuarial
Valuations Version 3A, the factor
12.1519 corresponds to a term of years
between 32 and 33 years. Accordingly,
the annuity interest must be reformed
into an interest payable for a term of 33
years. A judicial reformation must be
commenced prior to October 15th of the
year following the year in which the
transfer is made and must be completed
within a reasonable time after it is
commenced. A non-judicial reformation
is permitted if effective under state law,
provided it is completed by the date on
which a judicial reformation must be
commenced. In the alternative, if a
court, in a proceeding that is
commenced on or before July 5, 2001,
declares any transfer, made on or after
April 4, 2000, and on or before March
6, 2001, null and void ab initio, the
Internal Revenue Service will treat such
transfers in a manner similar to that
described in section 2055(e)(3)(J).
■ Par. 37. Section 25.7520–1 is
amended by:
■ 1. Revising the section heading.
■ 2. Revising the second sentence of
paragraph (a)(1) and revising paragraph
(a)(2).
■ 3. Removing the last two sentences of
paragraph (b)(2) and adding a new
sentence at the end.
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4. Revising paragraphs (c)(1), (c)(2),
and (d).
■ The revisions and additions read as
follows:
■
§ 25.7520–1 Valuation of annuities,
unitrust interests, interests for life or terms
of years, and remainder or reversionary
interests prior to May 1, 2009.
*
*
*
*
*
(a) * * *(1) * * * For periods prior
to May 1, 2009, see § 20.2031–7A for the
computation of the value of annuities,
unitrust interests, life estates, terms for
years, remainders, and reversions, other
than interests described in paragraphs
(a)(2) and (a)(3) of this section.
(2) For a gift to a pooled income fund
prior to May 1, 2009, see § 1.642(c)–6A
(Income Tax Regulations) with respect
to the valuation of the remainder
interest.
*
*
*
*
*
(b) * * *
(2) * * * For transactions with
valuation dates after April 30, 1989, and
before May 1, 2009, the mortality
component tables are contained in
§ 20.2031–7A.
(c) * * *
(1) [Reserved]. For further guidance,
see § 25.7520–1T(c)(1).
(2) Internal Revenue Service
publications containing tables with
interest rates between 2.2 and 22
percent for valuation dates after April
30, 1999, and before May 1, 2009. The
following publications are no longer
available for purchase from the
Superintendent of Documents, United
States Government Printing Office;
however, they may be obtained from
CC:PA:LPD:PR, Room 5205, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC
20044:
*
*
*
*
*
(d) Effective/applicability dates. This
section applies after April 30, 1989, and
before May 1, 2009.
■ Par. 38. Section 25.7520–1T is added
to read as follows:
§ 25.7520–1T Valuation of annuities,
unitrust interests, interests for life or terms
of years, and remainder or reversionary
interests on or after May 1, 2009
(temporary).
(a) General actuarial valuations. (1)
Except as otherwise provided in this
section and in § 25.7520–3 (relating to
exceptions to the use of prescribed
tables under certain circumstances), in
the case of certain gifts after April 30,
1989, the fair market value of annuities,
interests for life or for a term of years
(including unitrust interests),
remainders, and reversions is their
present value determined under this
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section. See § 20.2031–7T(d) (and, for
certain prior periods, § 20.2031–7A) for
the computation of the value of
annuities, unitrust interests, life estates,
terms for years, remainders, and
reversions, other than interests
described in paragraphs (a)(2) and (a)(3)
of this section.
(2) In the case of a gift to a beneficiary
of a pooled income fund on or after May
1, 2009, see § 1.642(c)–6T(e) (or, for
certain prior periods, § 1.642(c)–6A)
with respect to the valuation of the
remainder interest.
(3) [Reserved]. For further guidance,
see § 25.7520–1(a)(3).
(b)(1) [Reserved]. For further
guidance, see § 25.7520–1(b)(1).
(2) Mortality component. The
mortality component reflects the
mortality data most recently available
from the United States census. As new
mortality data becomes available after
each decennial census, the mortality
component described in this section
will be revised periodically and the
revised mortality component tables will
be published in the regulations at that
time. For gifts with valuation dates on
or after May 1, 2009, the mortality
component table (Table 2000CM) is
contained in § 20.2031–7T(d)(7). See
§ 20.2031–7A for mortality component
tables applicable to gifts for which the
valuation date falls before May 1, 2009.
(c) [Reserved]. For further guidance,
see § 25.7520–1(c).
(1) Regulation sections containing
tables with interest rates between 0.2
and 14 percent for valuation dates on or
after May 1, 2009. Section 1.642(c)–
6T(e)(6) contains Table S used for
determining the present value of a
single life remainder interest in a pooled
income fund as defined in § 1.642(c)–5.
See § 1.642(c)–6A for single life
remainder factors applicable to
valuation dates before May 1, 2009.
Section 1.664–4(e)(6) contains Table F
(payout factors) and Table D (actuarial
factors used in determining the present
value of a remainder interest postponed
for a term of years). Section 1.664–
4T(e)(7) contains Table U(1) (unitrust
single life remainder factors). These
tables are used in determining the
present value of a remainder interest in
a charitable remainder unitrust as
defined in § 1.664–3. See § 1.664–4A for
unitrust single life remainder factors
applicable to valuation dates before May
1, 2009. Section 20.2031–7(d)(6)
contains Table B (actuarial factors used
in determining the present value of an
interest for a term of years), Table K
(annuity end-of-interval adjustment
factors), and Table J (term certain
annuity beginning-of-interval
adjustment factors). Section 20.2031–
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7T(d)(7) contains Table S (single life
remainder factors), and Table 2000CM
(mortality components). These tables are
used in determining the present value of
annuities, life estates, remainders, and
reversions. See § 20.2031–7A for single
life remainder factors and mortality
components applicable to valuation
dates before May 1, 2009.
(2) Internal Revenue Service
publications containing tables with
interest rates between 0.2 and 22
percent for valuation dates on or after
May 1, 2009. The following documents
are available beginning May 1, 2009, at
no charge, electronically via the IRS
Internet site at https://www.irs.gov:
(i) Internal Revenue Service
Publication 1457, ‘‘Actuarial Valuations
Version 3A’’ (2009). This publication
includes tables of valuation factors, as
well as examples that show how to
compute other valuation factors, for
determining the present value of
annuities, life estates, terms of years,
remainders, and reversions, measured
by one or two lives. These factors may
also be used in the valuation of interests
in a charitable remainder annuity trust
as defined in § 1.664–2 and a pooled
income fund as defined in § 1.642(c)–5.
(ii) Internal Revenue Service
Publication 1458, ‘‘Actuarial Valuations
Version 3B’’ (2009). This publication
includes term certain tables and tables
of one and two life valuation factors for
determining the present value of
remainder interests in a charitable
remainder unitrust as defined in
§ 1.664–3.
(iii) Internal Revenue Service
Publication 1459, ‘‘Actuarial Valuations
Version 3C’’ (2009). This publication
includes tables for computing
depreciation adjustment factors. See
§ 1.170A–12T.
(d) Effective/applicability date. This
section applies on or after May 1, 2009.
(e) Expiration date. This section
expires on or before May 1, 2012.
■ Par. 39. Section 25.7520–3 is
amended by revising paragraph (b)(2)(v),
Example 5 and paragraph (b)(4) to read
as follows:
§ 25.7520–3 Limitation on the application
of section 7520.
*
*
*
(b) * * *
(2) * * *
(v) * * *
*
*
Example 5. [Reserved]. For further
guidance, see § 25.7520–3T(b)(2)(v) Example
5.
*
*
*
*
*
(4) [Reserved]. For further guidance,
see § 25.7520–3T(b)(4).
*
*
*
*
*
21517
■ Par. 40. Section 25.7520–3T is added
as follows:
§ 25.7520–3T Limitation on the application
of section 7520 (temporary).
(a) through (b)(2)(iv) [Reserved]. For
further guidance, see § 25.7520–3(a)
through (b)(2)(iv).
(b)(2)(v) Examples 1 through 4.
[Reserved]. For further guidance, see
§ 25.7520–3(b)(2)(v) Examples 1 through
4.
Example 5. Eroding corpus in an annuity
trust. (i) The donor, who is age 60 and in
normal health, transfers property worth
$1,000,000 to a trust on or after May 1, 2009.
The trust will pay a 10 percent ($100,000 per
year) annuity to a charitable organization for
the life of the donor, payable annually at the
end of each period, and the remainder then
will be distributed to the donor’s child. The
section 7520 rate for the month of the transfer
is 6.8 percent. First, it is necessary to
determine whether the annuity may exhaust
the corpus before all annuity payments are
made. Because it is assumed that any
measuring life may survive until age 110, any
life annuity could require payments until the
measuring life reaches age 110. Based on a
section 7520 interest rate of 6.8 percent, the
determination of whether the annuity may
exhaust the corpus before the annuity
payments are made is computed as follows:
Age to which life annuity may continue ........................................................................................................................................
Less: Age of measuring life at date of transfer ...............................................................................................................................
110
60
Number of years annuity may continue ...........................................................................................................................
Annual annuity payment ...................................................................................................................................................
Times: Annuity factor for 50 years derived from Table B (1—.037277/.068) ..............................................................................
50
$100,000.00
14.1577
Present value of term certain annuity ...............................................................................................................................
$1,415,770.00
(ii) Because the present value of an annuity
for a term of 50 years exceeds the corpus, the
annuity may exhaust the trust before all
payments are made. Consequently, the
annuity must be valued as an annuity
payable for a term of years or until the prior
death of the annuitant, with the term of years
determined by when the fund will be
exhausted by the annuity payments.
(iii) The annuity factor for a term of years
at 6.8 percent is derived by subtracting the
applicable remainder factor in Table B (see
§ 20.2031–7(d)(6)) from 1.000000 and then
dividing the result by .068. An annuity of
$100,000 payable at the end of each year for
a period that has an annuity factor of 10.0
would have a present value exactly equal to
the principal available to pay the annuity
over the term. The annuity factor for 17 years
is 9.8999 and the annuity factor for 18 years
is 10.2059. Thus, it is determined that the
$1,000,000 initial transfer will be sufficient
to make 17 annual payments of $100,000, but
not to make the entire 18th payment. The
present value of an annuity of $100,000
payable at the end of each year for 17 years
certain is $100,000 times 9.8999 or $989,990.
The remaining amount is $10,010.00. Of the
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initial corpus amount, $10,010.00 is not
needed to make payments for 17 years, so
this amount, as accumulated for 18 years,
will be available for the final payment. The
18-year accumulation factor is (1 + 0.068) 18
or 3.268004. Then the amount available in 18
years is $10,010.00 times 3.268004 or
$32,712.72. Therefore, for purposes of
analysis we consider the annuity payments
as being composed of two distinct annuity
components. The two annuity components
taken together must equal the total annual
amount of $100,000. The first annuity is the
exact amount that the trust will have
available for the final payment, $32,712.72.
The second annuity component then must be
$100,000 minus $32,712.72, or $67,287.28.
Specifically, the initial corpus will be able to
make payments of $67,287.28 per year for 17
years plus payments of $32,712.72 per year
for 18 years. The total annuity is valued by
adding the value of the two separate
temporary component annuities.
(iv) Based on Table H of Publication 1457,
Actuarial Valuations Version 3A, which may
be obtained from the IRS Internet site, the
present value of an annuity of $67,287.28 per
year payable for 17 years or until the prior
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death of a person aged 60 is $597,013.12
($67,287.28 × 8.8726). The present value of
an annuity of $32,712.72 per year payable for
18 years or until the prior death of a person
aged 60 is $296,887.56 ($32,712.72 × 9.0756).
Thus, the present value of the charitable
annuity interest is $893,900.68 ($597,013.12
+ $296,887.56).
(3) [Reserved]. For further guidance, see
§ 25.7520–3(b)(3).
(4) Example. The provisions of
paragraph (b)(3) of this section are
illustrated by the following example:
Example. Terminal illness. The donor
transfers property worth $1,000,000 to a
child on or after May 1, 2009, in exchange
for the child’s promise to pay the donor
$80,000 per year for the donor’s life, payable
annually at the end of each period. The
donor is age 75 but has been diagnosed with
an incurable illness and has at least a 50
percent probability of dying within 1 year.
The section 7520 interest rate for the month
of the transfer is 7.6 percent, and the
standard annuity factor at that interest rate
for a person age 75 in normal health is 6.6493
(1¥.49465/.076). Thus, if the donor were not
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terminally ill, the present value of the
annuity would be $531,944.00 ($80,000 ×
6.6493). Assuming the presumption provided
in paragraph (b)(3) of this section does not
apply, because there is at least a 50 percent
probability that the donor will die within 1
year, the standard section 7520 annuity factor
may not be used to determine the present
value of the donor’s annuity interest. Instead,
a special section 7520 annuity factor must be
computed that takes into account the
projection of the donor’s actual life
expectancy.
(5) [Reserved]. For further guidance,
see § 25.7520–3(b)(5).
(c) Effective/applicability dates.
Section 25.7520–3(a) is effective as of
May 1, 1989. The provisions of
paragraph (b) of this section, except
Example 5 in paragraph (b)(2)(v) and
paragraph (b)(4), are effective with
Section
Remove
§ 1.170A–12(e)(2) following the formula ............
§ 1.170A–14(h)(4), Example 2 fourth sentence
§ 1.664–1(a)(6) introductory text ........................
Table 90CNSMT in § 20.2031–7 ......................
May 1, 1999 .....................................................
§§ 1.664–4(e) and 1.664–4A(d) and (e) ..........
respect to gifts made after December 13,
1995. Example 5 in paragraph (b)(2)(v)
and paragraph (b)(4) are effective with
respect to gifts made on or after May 1,
2009.
■ Par. 41. For each section listed in the
table below, remove the language in the
‘‘Remove’’ column and add in its place
the language in the ‘‘Add’’ column as set
forth below:
Add
Table 2000CM in § 20.2031–7T.
May 1, 2009.
§§ 1.664–4T(e) and 1.664-4A.
Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
Approved: April 23, 2009.
Bernard J. Knight, Jr.,
Acting General Counsel of the Treasury.
[FR Doc. E9–10111 Filed 5–1–09; 4:15 pm]
BILLING CODE 4830–01–P
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]]>Agencies
[Federal Register Volume 74, Number 87 (Thursday, May 7, 2009)]
[Rules and Regulations]
[Pages 21438-21518]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-10111]
[[Page 21437]]
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Part II
Department of the Treasury
-----------------------------------------------------------------------
Internal Revenue Service
-----------------------------------------------------------------------
26 CFR Parts 1, 20, and 25
Use of Actuarial Tables in Valuing Annuities, Interests for Life or
Terms of Years, and Remainder or Reversionary Interests; Final Rule and
Proposed Rule
Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules
and Regulations
[[Page 21438]]
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 20, and 25
[TD 9448]
RIN 1545-BH96; RIN 1545-BI56
Use of Actuarial Tables in Valuing Annuities, Interests for Life
or Terms of Years, and Remainder or Reversionary Interests
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final and temporary regulations.
-----------------------------------------------------------------------
SUMMARY: This document contains regulations relating to the use of
actuarial tables in valuing annuities, interests for life or terms of
years, and remainder or reversionary interests. These regulations will
affect the valuation of inter vivos and testamentary transfers of
interests dependent on one or more measuring lives. These regulations
are necessary because section 7520(c)(3) directs the Secretary to
update the actuarial tables to reflect the most recent mortality
experience available. The text of the temporary regulations also serves
as the text of the proposed regulations set forth in the notice of
proposed rulemaking on this subject elsewhere in this issue of the
Federal Register.
DATES: Effective Date: These regulations are effective on May 1, 2009.
Applicability Date: These regulations apply on May 1, 2009.
FOR FURTHER INFORMATION CONTACT: Mayer R. Samuels, (202) 622-3090 (not
a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the regulations revising
certain tables used for the valuation of partial interests in property
under section 7520 of the Internal Revenue Code of 1986 (Code) to
reflect the most recent mortality experience available.
In General
Section 7520, effective for transfers for which the valuation date
is after April 30, 1989, provides generally that the value of an
annuity, an interest for life or a term of years, and a remainder or
reversionary interest is to be determined under tables published by the
Secretary by using an interest rate (rounded to the nearest two-tenths
of one percent) equal to 120 percent of the Federal midterm rate in
effect under section 1274(d)(1) for the month in which the valuation
date falls. Section 7520(c)(3) directed the Secretary to issue tables
not later than December 31, 1989, utilizing the then most recent
mortality experience. Thereafter, the Secretary is directed to revise
these tables not less frequently than once each 10 years to take into
account the most recent mortality experience available as of the time
of the revision.
These temporary regulations, REG-107845-08, incorporate revised
Table S (Single Life Remainder Factors) and Table U(1) (Unitrust Single
Life Remainder Factors), effective for transfers for which the
valuation date is on or after May 1, 2009, based on data compiled from
the 2000 census as set forth in Life Table 2000CM, and make conforming
amendments to various sections to reflect the revised tables. At the
same time, in the portions of these regulations that are final
regulations, REG-105643-09, the current tables, effective for transfers
for which the valuation date is after April 30, 1999, and before May 1,
2009, are moved to sections containing actuarial material for
historical reference. Table B, Table D, Tables F(4.2) through F(14.0),
Table J, and Table K, which are not based on mortality experience, are
not changed. Internal Revenue Service Publications 1457 ``Actuarial
Valuations Version 3A'' (forthcoming 2009), 1458 ``Actuarial Valuations
Version 3B'' (forthcoming 2009), and 1459 ``Actuarial Valuations
Version 3C'' (forthcoming 2009) will contain a complete set of
actuarial tables that include factors not contained in the temporary
regulations (for example, annuity and life interest factors). These
publications will be available beginning May 1, 2009, at no charge,
electronically via the IRS Internet site at https://www.irs.gov.
The following chart summarizes the applicable interest rates and
the citations to textual materials and tables for the various periods
covered under the current regulations:
Cross Reference to Regulation Sections
----------------------------------------------------------------------------------------------------------------
Valuation period Interest rate Regulation section Table
----------------------------------------------------------------------------------------------------------------
Section 642:
Valuation, in general............ ....................... 1.642(c)-6.............
before 01/01/52.................. 4%..................... 1.642(c)-6A(a).........
01/01/52-12/31/70................ 3.5%................... 1.642(c)-6A(b).........
01/01/71-11/30/83................ 6%..................... 1.642(c)-6A(c).........
12/01/83-04/30/89................ 10%.................... 1.642(c)-6A(d)......... Table G.
05/01/89-04/30/99................ Sec. 7520............ 1.642(c)-6A(e)......... Table S (5/1/89-4/30/
99).
05/01/99-04/30/09................ Sec. 7520............ 1.642(c)-6A(f)......... Table S (5/1/99-04/30/
09).
on or after 05/01/09............. Sec. 7520............ 1.642(c)-6T(e)......... Table S (on or after 05/
01/09).
Section 664:
Valuation, in general............ ....................... 1.664-4................
before 01/01/52.................. 4%..................... 1.664-4A(a)............
01/01/52-12/31/70................ 3.5%................... 1.664-4A(b)............
01/01/71-11/30/83................ 6%..................... 1.664-4A(c)............
12/01/83-04/30/89................ 10%.................... 1.664-4A(d)............ Table E, Table F(1).
05/01/89-04/30/99................ Sec. 7520............ 1.664-4A(e)............ Table U(1) (5/1/89-4/30/
99).
05/01/99-04/30/09................ Sec. 7520............ 1.664-4A(f)............ Table U(1) (5/1/99-04/
30/09).
on or after 05/01/09............. Sec. 7520............ 1.664-4T(e)............ Table U(1) (on or after
05/01/09).
1.664-4(e)............. Table D and Tables
F(4.2)-F (14.0).
Section 2031:
Valuation, in general............ ....................... 20.2031-7..............
before 01/01/52.................. 4%..................... 20.2031-7A(a)..........
01/01/52-12/31/70................ 3.5%................... 20.2031-7A(b)..........
01/01/71-11/30/83................ 6%..................... 20.2031-7A(c)..........
12/01/83-04/30/89................ 10%.................... 20.2031-7A(d).......... Table A, Table B, Table
LN.
[[Page 21439]]
05/01/89-04/30/99................ Sec. 7520............ 20.2031-7A(e).......... Table S (5/1/89-4/30/
99) and Life Table
80CNSMT.
05/01/99-04/30/09................ Sec. 7520............ 20.2031-7A(f).......... Table S (5/1/99-05/01/
09) and Life Table
90CM.
on or after 05/01/09............. Sec. 7520............ 20.2031-7T(d).......... Table S (on or after 05/
01/09) and Life Table
2000CM.
20.2031-7(d)........... Table B, Table J, Table
K.
Section 2512:
Valuation, in general............ ....................... 25.2512-5..............
before 01/01/52.................. 4%..................... 25.2512-5A(a)..........
01/01/52-12/31/70................ 3.5%................... 25.2512-5A(b)..........
01/01/71-11/30/83................ 6%..................... 25.2512-5A(c)..........
12/01/83-04/30/89................ 10%.................... 25.2512-5A(d)..........
05/01/89-04/30/99................ Sec. 7520............ 25.2512-5A(e)..........
05/01/99-04/30/09................ Sec. 7520............ 25.2512-5A(f)..........
on or after 05/01/09............. Sec. 7520............ 25.2512-5T(d)..........
----------------------------------------------------------------------------------------------------------------
Effective Dates
These regulations are applicable in the case of annuities,
interests for life or terms of years, and remainder or reversionary
interests valued as of a date on or after May 1, 2009.
Transitional Rules
The regulations provide certain transitional rules intended to
alleviate any adverse consequences resulting from the proposed
regulatory change. For gift tax purposes, if the date of a transfer is
on or after May 1, 2009, but before July 1, 2009, the donor may choose
to determine the value of the gift (and/or any applicable charitable
deduction) under tables based on either Life Table 90CM or Table
2000CM. Similarly, for estate tax purposes, if the decedent dies on or
after May 1, 2009, but before July 1, 2009, the value of any interest
(and/or any applicable charitable deduction) may be determined in the
discretion of the decedent's executor under tables based on either Life
Table 90CM or Table 2000CM. However, the section 7520 interest rate to
be utilized is the appropriate rate for the month in which the
valuation date occurs, subject to the following special rule for
certain charitable transfers. Specifically, in accordance with this
transitional rule and the rules contained in Sec. Sec. 1.7520-2(a)(2),
20.7520-2(a)(2) and 25.7520-2(a)(2), in cases involving a charitable
deduction, if the valuation date occurs on or after May 7, 2009, and
before July 1, 2009, and the executor or donor elects under section
7520(a) to use the section 7520 interest rate for March 2009 or April
2009, then the mortality experience contained in 90CM must be used. If
the executor or donor uses the section 7520 interest rate for May 2009
or for June 2009, then the tables based on either Table 90CM or Table
2000CM may be used. However, if the valuation date occurs after June
30, 2009, the executor or donor must use the new mortality experience
contained in Table 2000CM even if the use of a prior month's interest
rate is elected under section 7520(a).
In addition, for estate tax purposes, the estate of a mentally
incompetent decedent may elect to value the property interest included
in the gross estate either under the mortality table and interest rate
in effect at the time the decedent became mentally incompetent or under
the mortality table and interest rate in effect on the decedent's date
of death if the decedent was under a mental incapacity that existed on
May 1, 2009, and continued uninterrupted until the decedent's death, or
the decedent died within 90 days after regaining competency on or after
May 1, 2009.
Special Analyses
It has been determined that this Treasury decision is not a
significant regulatory action as defined in EO 12866. Therefore, a
regulatory assessment is not required. For applicability of the
Regulatory Flexibility Act please refer to the cross-referenced notice
of proposed rulemaking published elsewhere in this Federal Register.
Pursuant to section 7805(f) of the Internal Revenue Code, these
regulations have been submitted to the Chief Counsel for Advocacy of
the Small Business Administration for comment on its impact on small
business.
Drafting Information
The principal author of these regulations is Mayer R. Samuels,
Office of the Associate Chief Counsel (Passthroughs and Special
Industries), IRS. However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 20
Estate taxes, Reporting and recordkeeping requirements.
26 CFR Part 25
Gift taxes, Reporting and recordkeeping requirements.
Adoption of Amendments to the Regulations
0
Accordingly, 26 CFR parts 1, 20, and 25 are amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1. The authority citation for part 1 is amended by adding
entries in numerical order to read in part as follows:
Authority: 26 U.S.C. 7805 * * *.
Section 1.170A-12T also issued under 26 U.S.C. 170(f)(4).
Section 1.642(c)-6T also issued under 26 U.S.C. 642(c)(5).
Section 1.664-4T also issued under 26 U.S.C. 664(a).
Section 1.7520-1T also issued under 26 U.S.C. 7520(c)(2).
0
Par. 2. Sections 1.170A-12 is amended by revising paragraphs (b)(2) and
(b)(3) and adding paragraph (f) to read as follows:
Sec. 1.170A-12 Valuation of a remainder interest in real property for
contributions made after July 31, 1969.
* * * * *
(b)(2) and (b)(3) [Reserved]. For further guidance, see Sec.
1.170A-12T(b)(2) and (b)(3).
* * * * *
[[Page 21440]]
(f) Effective/applicability date. This section applies to
contributions made after July 31, 1969.
0
Par. 3. Section 1.170A-12T is added to read as follows:
Sec. 1.170A-12T Valuation of a remainder interest in real property
for contributions made after July 31, 1969 (temporary).
(a) through (b)(1) [Reserved]. For further guidance see Sec.
1.170A-12(a) through (b)(1).
(b)(2) Computation of depreciation factor. If the valuation of the
remainder interest in depreciable property is dependent upon the
continuation of one life, a special factor must be used. The factor
determined under this paragraph (b)(2) is carried to the fifth decimal
place. The special factor is to be computed on the basis of the
interest rate and life contingencies prescribed in Sec. 20.2031-7T (or
for periods before May 1, 2009, Sec. 20.2031-7A) and on the assumption
that the property depreciates on a straight-line basis over its
estimated useful life. For transfers for which the valuation date is on
or after May 1, 2009, special factors for determining the present value
of a remainder interest following one life and an example describing
the computation are contained in Internal Revenue Service Publication
1459, ``Actuarial Valuations Version 3C'' (2009). This publication will
be available beginning May 1, 2009, at no charge, electronically via
the IRS Internet site at https://www.irs.gov. For transfers for which
the valuation date is after April 30, 1999, and before May 1, 2009,
special factors for determining the present value of a remainder
interest following one life and an example describing the computation
are contained in Internal Revenue Service Publication 1459, ``Actuarial
Values, Book Gimel,'' (7-99). For transfers for which the valuation
date is after April 30, 1989, and before May 1, 1999, special factors
for determining the present value of a remainder interest following one
life and an example describing the computation are contained in
Internal Revenue Service Publication 1459, ``Actuarial Values, Gamma
Volume,'' (8-89). These publications are no longer available for
purchase from the Superintendent of Documents, United States Government
Printing Office. However, they may be obtained by requesting a copy
from: CC:PA:LPD:PR (IRS Publication 1459), Room 5205, Internal Revenue
Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
See, however, Sec. 1.7520-3(b) (relating to exceptions to the use of
prescribed tables under certain circumstances). Otherwise, in the case
of the valuation of a remainder interest following one life, the
special factor may be obtained through use of the following formula:
[GRAPHIC] [TIFF OMITTED] TR07MY09.000
Where:
n = the estimated number of years of useful life,
i = the applicable interest rate under section 7520 of the Internal
Revenue Code,
v = 1 divided by the sum of 1 plus the applicable interest rate
under section 7520 of the Internal Revenue Code,
x = the age of the life tenant, and
lx = number of persons living at age x as set forth in Table 2000CM
of Sec. 20.2031-7T (or, for periods before May 1, 2009, the tables
set forth under Sec. 20.2031-7A).
(3) The following example illustrates the provisions of this
paragraph
(b): Example. A, who is 62, donates to Y University a remainder
interest in a personal residence, consisting of a house and land,
subject to a reserved life estate in A. At the time of the gift, the
land has a value of $30,000 and the house has a value of $100,000
with an estimated useful life of 45 years, at the end of which
period the value of the house is expected to be $20,000. The portion
of the property considered to be depreciable is $80,000 (the value
of the house ($100,000) less its expected value at the end of 45
years ($20,000)). The portion of the property considered to be
nondepreciable is $50,000 (the value of the land at the time of the
gift ($30,000) plus the expected value of the house at the end of 45
years ($20,000)). At the time of the gift, the interest rate
prescribed under section 7520 is 8.4 percent. Based on an interest
rate of 8.4 percent, the remainder factor for $1.00 prescribed in
Sec. 20.2031-7T(d) for a person age 62 is 0.26534. The value of the
nondepreciable remainder interest is $13,267.00 (0.26534 times
$50,000). The value of the depreciable remainder interest is
$15,053.60 (0.18817, computed under the formula described in
paragraph (b)(2) of this section, times $80,000). Therefore, the
value of the remainder interest is $28,320.60.
(c) through (e) [Reserved]. For further guidance see Sec. 1.170A-
12(c) through (e).
(f) Effective/applicability date. Paragraphs (b)(2) and (b)(3)
apply to all contributions made on or after May 1, 2009.
(g) Expiration date. Paragraphs (b)(2) and (b)(3) expire on or
before May 1, 2012.
0
Par. 4. Section 1.642(c)-6 is amended as follows:
0
1. Paragraph (d) is removed.
0
2. Paragraph (e) is redesignated as paragraph (f) of Sec. 1.642(c)-6A.
0
3. New paragraphs (d) and (e) are added.
0
4. Paragraph (f) is revised.
The revisions and addition read as follows:
Sec. 1.642(c)-6 Valuation of a remainder interest in property
transferred to a pooled income fund.
* * * * *
(d) and (e) [Reserved]. For further guidance, see Sec. 1.642(c)-
6T(d) and (e).
(f) Effective/applicability dates. This section applies after April
30, 1999, and before May 1, 2009.
0
Par. 5. Section 1.642(c)-6T is added to read as follows:
Sec. 1.642(c)-6T Valuation of a remainder interest in property
transferred to a pooled income fund (temporary).
(a) through (c) [Reserved]. For further guidance, see Sec.
1.642(c)-6(a) through (c).
(d) Valuation. The present value of the remainder interest in
property transferred to a pooled income fund on or after May 1, 2009,
is determined under paragraph (e) of this section. The present value of
the remainder interest in property transferred to a pooled income fund
for which the valuation date is before May 1, 2009, is determined under
the following sections:
----------------------------------------------------------------------------------------------------------------
Valuation dates
-------------------------------------------------------------------- Applicable regulations
After Before
----------------------------------------------------------------------------------------------------------------
01-01-52.................. 1.642(c)-6A(a).
12-31-51............................... 01-01-71.................. 1.642(c)-6A(b).
[[Page 21441]]
12-31-70............................... 12-01-83.................. 1.642(c)-6A(c).
11-30-83............................... 05-01-89.................. 1.642(c)-6A(d).
04-30-89............................... 05-01-99.................. 1.642(c)-6A(e).
04-30-99............................... 05-01-09.................. 1.642(c)-6A(f).
----------------------------------------------------------------------------------------------------------------
(e) Present value of the remainder interest in the case of
transfers to pooled income funds for which the valuation date is on or
after May 1, 2009--(1) In general. In the case of transfers to pooled
income funds for which the valuation date is on or after May 1, 2009,
the present value of a remainder interest is determined under this
section. See, however, Sec. 1.7520-3(b) (relating to exceptions to the
use of prescribed tables under certain circumstances). The present
value of a remainder interest that is dependent on the termination of
the life of one individual is computed by the use of Table S in
paragraph (e)(6) of this section. For purposes of the computations
under this section, the age of an individual is the age at the
individual's nearest birthday.
(2) Transitional rules for valuation of transfers to pooled income
funds. (i) For purposes of sections 2055, 2106, or 2624, if on May 1,
2009, the decedent was mentally incompetent so that the disposition of
the property could not be changed, and the decedent died on or after
May 1, 2009, without having regained competency to dispose of the
decedent's property, or the decedent died within 90 days of the date
that the decedent first regained competency on or after May 1, 2009,
the present value of a remainder interest is determined as if the
valuation date with respect to the decedent's gross estate is either
before or after May 1, 2009, at the option of the decedent's executor.
(ii) For purposes of sections 170, 2055, 2106, 2522, or 2624, in
the case of transfers to a pooled income fund for which the valuation
date is on or after May 1, 2009, and before July 1, 2009, the present
value of the remainder interest under this section is determined by use
of the section 7520 interest rate for the month in which the valuation
date occurs (see Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the
appropriate actuarial tables under either paragraph (e)(6) of this
section or Sec. 1.642(c)-6A(f)(6), at the option of the donor or the
decedent's executor, as the case may be.
(iii) For purposes of paragraphs (e)(2)(i) and (e)(2)(ii) of this
section, where the donor or decedent's executor is given the option to
use the appropriate actuarial tables under either paragraph (e)(6) of
this section or Sec. 1.642(c)-6A(f)(6), the donor or decedent's
executor must use the same actuarial table with respect to each
individual transaction and with respect to all transfers occurring on
the valuation date (for example, gift and income tax charitable
deductions with respect to the same transfer must be determined based
on the same tables, and all assets includible in the gross estate and/
or estate tax deductions claimed must be valued based on the same
tables).
(3) Present value of a remainder interest. The present value of a
remainder interest in property transferred to a pooled income fund is
computed on the basis of--
(i) Life contingencies determined from the values of lx that are
set forth in Table 2000CM in Sec. 20.2031-7T(d)(7) (see Sec. 20.2031-
7A for certain prior periods); and
(ii) Discount at a rate of interest, compounded annually, equal to
the highest yearly rate of return of the pooled income fund for the 3
taxable years immediately preceding its taxable year in which the
transfer of property to the fund is made. For purposes of this
paragraph (e), the yearly rate of return of a pooled income fund is
determined as provided in Sec. 1.642(c)-6(c) unless the highest rate
of return is deemed to be the rate described in paragraph (e)(4) of
this section for funds in existence less than 3 taxable years. For
purposes of this paragraph (e)(3)(ii), the first taxable year of a
pooled income fund is considered a taxable year even though the taxable
year consists of less than 12 months. However, appropriate adjustments
must be made to annualize the rate of return earned by the fund for
that period. Where it appears from the facts and circumstances that the
highest yearly rate of return of the fund for the 3 taxable years
immediately preceding the taxable year in which the transfer of
property is made has been purposely manipulated to be substantially
less than the rate of return that would otherwise be reasonably
anticipated with the purpose of obtaining an excessive charitable
deduction, that rate of return may not be used. In that case, the
highest yearly rate of return of the fund is determined by treating the
fund as a pooled income fund that has been in existence for less than 3
preceding taxable years.
(4) Pooled income funds in existence less than 3 taxable years. If
a pooled income fund has been in existence less than 3 taxable years
immediately preceding the taxable year in which the transfer is made to
the fund and the transfer to the fund is made after April 30, 1989, the
highest rate of return is deemed to be the interest rate (rounded to
the nearest two-tenths of one percent) that is 1 percent less than the
highest annual average of the monthly section 7520 rates for the 3
calendar years immediately preceding the calendar year in which the
transfer to the pooled income fund is made. The deemed rate of return
for transfers to new pooled income funds is recomputed each calendar
year using the monthly section 7520 rates for the 3-year period
immediately preceding the calendar year in which each transfer to the
fund is made until the fund has been in existence for 3 taxable years
and can compute its highest rate of return for the 3 taxable years
immediately preceding the taxable year in which the transfer of
property to the fund is made in accordance with the rules set forth in
the first sentence of paragraph (e)(3)(ii) of this section.
(5) Computation of value of remainder interest. (i) The factor that
is used in determining the present value of a remainder interest that
is dependent on the termination of the life of one individual is the
factor from Table S in paragraph (e)(6) of this section under the
appropriate yearly rate of return opposite the number that corresponds
to the age of the individual upon whose life the value of the remainder
interest is based (See Sec. 1.642(c)-6A for certain prior periods).
The tables in paragraph (e)(6) of this section include factors for
yearly rates of return from 0.2 to 14 percent. Many actuarial factors
not contained in the tables in paragraph (e)(6) of this section are
contained in Table S in Internal Revenue Service Publication 1457,
``Actuarial Valuations Version 3A'' (2009). This publication will be
available beginning May 1, 2009, at no charge, electronically via the
IRS Internet site at https://www.irs.gov. For
[[Page 21442]]
other situations, see Sec. 1.642(c)-6(b). If the yearly rate of return
is a percentage that is between the yearly rates of return for which
factors are provided, a linear interpolation must be made. The present
value of the remainder interest is determined by multiplying the fair
market value of the property on the valuation date by the appropriate
remainder factor.
(ii) This paragraph (e)(5) may be illustrated by the following
example:
Example. A, who is 54 years and 8 months, transfers $100,000 to
a pooled income fund, and retains a life income interest in the
property. The highest yearly rate of return earned by the fund for
its 3 preceding taxable years is 9.47 percent. In Table S, the
remainder factor opposite 55 years under 9.4 percent is .16192 and
under 9.6 percent is .15755. The present value of the remainder
interest is $16,039.00, computed as follows:
Factor at 9.4 percent for age 55............................... .16192
Factor at 9.6 percent for age 55............................... .15755
--------
Difference..................................................... .00437
Interpolation adjustment:
[GRAPHIC] [TIFF OMITTED] TR07MY09.001
Factor at 9.4 percent for age 55........................... .16192
Less: Interpolation adjustment............................. .00153
------------
Interpolated factor........................................ .16039
Present value of remainder interest:
($100,000 x .16039) = $16,039.00.
(6) Actuarial tables. In the case of transfers for which the
valuation date is on or after May 1, 2009, the present value of a
remainder interest dependent on the termination of one life in the case
of a transfer to a pooled income fund is determined by use of the
following Table S:
BILLING CODE 4380-01-P
[[Page 21443]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.002
[[Page 21444]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.003
[[Page 21445]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.004
[[Page 21446]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.005
[[Page 21447]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.006
[[Page 21448]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.007
[[Page 21449]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.008
[[Page 21450]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.009
[[Page 21451]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.010
[[Page 21452]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.011
[[Page 21453]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.012
[[Page 21454]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.013
[[Page 21455]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.014
[[Page 21456]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.015
[[Page 21457]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.016
[[Page 21458]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.017
[[Page 21459]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.018
[[Page 21460]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.019
[[Page 21461]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.020
[[Page 21462]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.021
[[Page 21463]]
[GRAPHIC] [TIFF OMITTED] TR07MY09.022
BILLING CODE 4830-01-C
[[Page 21464]]
(f) Effective/applicability date. This section applies on or after
May 1, 2009.
(g) Expiration date. This section expires on or before May 1, 2012.
0
Par. 6. The undesignated center heading immediately preceding Sec.
1.642(c)-6A is revised to read as follows:
Pooled Income Fund Actuarial Tables
Applicable Before May 1, 2009
0
Par. 7. Section 1.642(c)-6A is amended by:
0
1. Revising the section heading.
0
2. Amending newly-designated paragraph (f) as follows:
0
a. Paragraph (f) heading is revised.
0
b. Paragraphs (f)(1), (f)(2), (f)(3), (f)(4), and (f)(5) are revised.
0
c. The introductory text in paragraph (f)(6) and the heading preceding
Table S are revised.
0
d. Paragraph (f)(7) is added.
0
The revisions and addition read as follows:
Sec. 1.642(c)-6A Valuation of charitable remainder interests for
which the valuation date is before May 1, 2009.
* * * * *
(f) Present value of the remainder interest in the case of
transfers to pooled income funds for which the valuation date is after
April 30, 1999, and before May 1, 2009--(1) In general. In the case of
transfers to pooled income funds for which the valuation date is after
April 30, 1999, and before May 1, 2009, the present value of a
remainder interest is determined under this section. See, however,
Sec. 1.7520-3(b) (relating to exceptions to the use of prescribed
tables under certain circumstances). The present value of a remainder
interest that is dependent on the termination of the life of one
individual is computed by the use of Table S in paragraph (f)(6) of
this section. For purposes of the computations under this section, the
age of an individual is the age at the individual's nearest birthday.
(2) Transitional rules for valuation of transfers to pooled income
funds. (i) For purposes of sections 2055, 2106, or 2624, if on May 1,
1999, the decedent was mentally incompetent so that the disposition of
the property could not be changed, and the decedent died after April
30, 1999, without having regained competency to dispose of the
decedent's property, or the decedent died within 90 days of the date
that the decedent first regained competency after April 30, 1999, the
present value of a remainder interest is determined as if the valuation
date with respect to the decedent's gross estate is either before May
1, 1999, or after April 30, 1999, at the option of the decedent's
executor.
(ii) For purposes of sections 170, 2055, 2106, 2522, or 2624, in
the case of transfers to a pooled income fund for which the valuation
date is after April 30, 1999, and before July 1, 1999, the present
value of the remainder interest under this section is determined by use
of the section 7520 interest rate for the month in which the valuation
date occurs (see Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the
appropriate actuarial tables under either paragraph (e)(5) or (f)(6) of
this section, at the option of the donor or the decedent's executor, as
the case may be.
(iii) For purposes of paragraphs (f)(2)(i) and (f)(2)(ii) of this
section, where the donor or decedent's executor is given the option to
use the appropriate actuarial tables under either paragraph (e)(5) or
(f)(6) of this section, the donor or decedent's executor must use the
same actuarial table with respect to each individual transaction and
with respect to all transfers occurring on the valuation date (for
example, gift and income tax charitable deductions with respect to the
same transfer must be determined based on the same tables, and all
assets includible in the gross estate and/or estate tax deductions
claimed must be valued based on the same tables).
(3) Present value of a remainder interest. The present value of a
remainder interest in property transferred to a pooled income fund is
computed on the basis of--
(i) Life contingencies determined from the values of lx that are
set forth in Table 90CM in Sec. 20.2031-7A(f)(4); and
(ii) Discount at a rate of interest, compounded annually, equal to
the highest yearly rate of return of the pooled income fund for the 3
taxable years immediately preceding its taxable year in which the
transfer of property to the fund is made. The provisions of Sec.
1.642(c)-6(c) apply for determining the yearly rate of return. However,
where the taxable year is less than 12 months, the provisions of Sec.
1.642(c)-6T(e)(3)(ii) apply for the determining the yearly rate of
return.
(4) Pooled income funds in existence less than 3 taxable years. The
provisions of Sec. 1.642(c)-6T(e)(4) apply for determining the highest
yearly rate of return when the pooled income fund has been in existence
less than 3 taxable years.
(5) Computation of value of remainder interest. The factor that is
used in determining the present value of a remainder interest that is
dependent on the termination of the life of one individual is the
factor from Table S in paragraph (f)(6) of this section under the
appropriate yearly rate of return opposite the number that corresponds
to the age of the individual upon whose life the value of the remainder
interest is based. Table S in paragraph (f)(6) of this section includes
factors for yearly rates of return from 4.2 to 14 percent. Many
actuarial factors not contained in Table S in paragraph (f)(6) of this
section are contained in Table S in Internal Revenue Service
Publication 1457, ``Actuarial Values, Book Aleph,'' (7-99). Publication
1457 is no longer available for purchase from the Superintendent of
Documents, United States Government Printing Office. However, pertinent
factors in this publication may be obtained by a written request to:
CC:PA:LPD:PR (IRS Publication 1457), Room 5205, Internal Revenue
Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. For
other situations, see Sec. 1.642(c)-6(b). If the yearly rate of return
is a percentage that is between the yearly rates of return for which
factors are provided, a linear interpolation must be made. The present
value of the remainder interest is determined by multiplying the fair
market value of the property on the valuation date by the appropriate
remainder factor. For an example of a computation of the present value
of a remainder interest requiring a linear interpolation adjustment,
see Sec. 1.642(c)-6T(e)(5).
(6) Actuarial tables. In the case of transfers for which the
valuation date is after April 30, 1999, and before May 1, 2009, the
present value of a remainder interest dependent on the termination of
one life in the case of a transfer to a pooled income fund is
determined by use of the following tables:
TABLE S.--BASED ON LIFE TABLE 90CM SINGLE LIFE REMAINDER FACTORS
[Applicable After April 30, 1999, and Before May 1, 2009]
* * * * *
(7) Effective/applicability dates. Paragraphs (f)(1) through (f)(6)
apply after April 30, 1999, and before May 1, 2009.
0
Par. 8. Section 1.664-2 is amended by revising paragraph (c) and adding
paragraph (e) to read as follows:
Sec. 1.664-2 Charitable remainder annuity trust.
* * * * *
(c) Calculation of the fair market value of the remainder interest
of a charitable remainder annuity trust. For purposes of sections 170,
2055, 2106, and 2522, the fair market value of the remainder interest
of a charitable
[[Page 21465]]
remainder annuity trust (as described in this section) is the net fair
market value (as of the appropriate valuation date) of the property
placed in trust less the present value of the annuity. For purposes of
this section, valuation date means, in general, the date on which the
property is transferred to the trust by the donor regardless of when
the trust is created. In the case of transfers to a charitable
remainder annuity trust for which the valuation date is after April 30,
1999, if an election is made under section 7520 and Sec. 1.7520-2(b)
to compute the present value of the charitable interest by use of the
interest rate component for either of the 2 months preceding the month
in which the transfer is made, the month so elected is the valuation
date for purposes of determining the interest rate and mortality
tables. For purposes of section 2055 or 2106, the valuation date is the
date of death unless the alternate valuation date is elected in
accordance with section 2032 in which event, and within the limitations
set forth in section 2032 and the regulations thereunder, the valuation
date is the alternate valuation date. If the decedent's estate elects
the alternate valuation date under section 2032 and also elects, under
section 7520 and Sec. 1.7520-2(b), to use the interest rate component
for one of the 2 months preceding the alternate valuation date, the
month so elected is the valuation date for purposes of determining the
interest rate and mortality tables. The present value of an annuity is
computed under Sec. 20.2031-7T(d) for transfers for which the
valuation date is on or after May 1, 2009, or under Sec. 20.2031-7A(a)
through (f), whichever is applicable, for transfers for which the
valuation date is before May 1, 2009. See, however, Sec. 1.7520-3(b)
(relating to exceptions to the use of prescribed tables under certain
circumstances).
* * * * *
(e) Effective/applicability date. Paragraph (c)(1) applies after
April 30, 1989.
0
Par. 9. Section 1.664-4 is amended as follows:
0
1. Paragraph (a)(1) is revised.
0
2. Paragraph (d) is removed.
0
3. The heading for paragraph (e) is redesignated as the heading for
Sec. 1.664-4A(f).
0
4. Paragraphs (e)(1), (e)(2), (e)(5), and (e)(7) are redesignated as
Sec. 1.664-4A(f)(1), (f)(2), (f)(5) and (f)(6), respectively.
0
5. New paragraphs (d), (e)(1), (e)(2), and (e)(5) are added.
0
6. The heading and introductory text of paragraph (e)(6), preceding
Table D, is revised.
0
7. New paragraph (e)(7) is added.
0
8. Paragraph (f) is revised.
The additions and revision read as follows:
Sec. 1.664-4 Calculation of the fair market value of the remainder
interest in a charitable remainder unitrust.
(a) * * *
(1) [Reserved]. For further guidance, see Sec. 1.664-4T(a)(1).
* * * * *
(d) through (e)(2) [Reserved]. For further guidance, see Sec.
1.664-4T(d) through (e)(2).
* * * * *
(5) [Reserved]. For further guidance, see Sec. 1.664-4T(e)(5).
(6) Actuarial Table D and F (4.2 through 14.0) for transfers for
which the valuation date is after April 30, 1989. For transfers for
which the valuation date is after April 30, 1989, the present value of
a charitable remainder unitrust interest that is dependent upon a term
of years is determined by using the section 7520 rate and the tables in
this paragraph (e)(6). For transfers for which the valuation date is on
or after May 1, 2009, where the present value of a charitable remainder
unitrust interest is dependent on the termination of a life interest,
see Sec. 1.664-4T(e)(5). See, however, Sec. 1.7520-3(b) (relating to
exceptions to the use of prescribed tables under certain
circumstances). Many actuarial factors not contained in the following
tables are contained in Internal Revenue Service Publication 1458,
``Actuarial Valuations Version 3B'' (2009). This publication will be
available beginning May 1, 2009, at no charge, electronically via the
IRS Internet site at https://www.irs.gov.
* * * * *
(7) [Reserved]. For further guidance, see Sec. 1.664-4T(e)(7).
(f) Effective/applicability dates. This section applies after April
30, 1999, and before May 1, 2009.
0
Par. 10. Section 1.664-4T is added to read as follows:
Sec. 1.664-4T Calculation of the fair market value of the remainder
interest in a charitable remainder unitrust (temporary).
(a) [Reserved]. For further guidance, see Sec. 1.664-4(a).
(1) Life contingencies determined as to each life involved, from
the values of lx set forth in Table 2000CM contained in Sec. 20.2031-
7T(d)(7) in the case of transfers for which the valuation date is on or
after May 1, 2009; or from Table 90CM contained in Sec. 20.2031-
7A(f)(4) in the case of transfer for which the valuation date is after
April 30, 1999, and before May 1, 2009. See Sec. 20.2031-7A(a) through
(e), whichever is applicable, for transfers for which the valuation
date is before May 1, 1999; (a)(2) through (c) [Reserved]. For further
guidance, see Sec. 1.664-4(a)(2) through (c).
(d) Valuation. The fair market value of a remainder interest in a
charitable remainder unitrust (as described in Sec. 1.664-3) for
transfers for which the valuation date is on or after May 1, 2009, is
its present value determined under paragraph (e) of this section. The
fair market value of a remainder interest in a charitable remainder
unitrust (as described in Sec. 1.664-3) for transfers for which the
valuation date is before May 1, 2009, is its present value determined
under the following sections:
----------------------------------------------------------------------------------------------------------------
Valuation dates
-------------------------------------------------------------------- Applicable regulations
After Before
----------------------------------------------------------------------------------------------------------------
01-01-52.................. 1.664-4A(a).
12-31-51............................... 01-01-71.................. 1.664-4A(b).
12-31-70............................... 12-01-83.................. 1.664-4A(c).
11-30-83............................... 05-01-89.................. 1.664-4A(d).
04-30-89............................... 05-01-99.................. 1.664-4A(e).
04-30-99............................... 05-01-09.................. 1.664-4A(f).
----------------------------------------------------------------------------------------------------------------
(e) Valuation of charitable remainder unitrusts having certain
payout sequences for transfers for which the valuation date is on or
after May 1, 2009--(1) In general. Except as otherwise provided in
paragraph (e)(2) of this section, in the case of transfers for which
the valuation date is on or after May 1, 2009, the present value of
[[Page 21466]]
a remainder interest is determined under paragraphs (e)(3) through
(e)(7) of this section, provided that the amount of the payout as of
any payout date during any taxable year of the trust is not larger than
the amount that the trust could distribute on such date under Sec.
1.664-3(a)(1)(v) if the taxable year of the trust were to end on such
date. See, however, Sec. 1.7520-3(b) (relating to exceptions to the
use of the prescribed tables under certain circumstances).
(2) Transitional rules for valuation of charitable remainder
unitrusts. (i) For purposes of sections 2055, 2106, or 2624, if on May
1, 2009, the decedent was mentally incompetent so that the disposition
of the property could not be changed, and the decedent died on or after
May 1, 2009, without having regained competency to dispose of the
decedent's property, or the decedent died within 90 days of the date
that the decedent first regained competency on or after May 1, 2009,
the present value of a remainder interest under this section is
determined as if the valuation date with respect to the decedent's
gross estate is either before or after May 1, 2009, at the option of
the decedent's executor.
(ii) For purposes of sections 170, 2055, 2106, 2522, or 2624, in
the case of transfers to a charitable remainder unitrust for which the
valuation date is on or after May 1, 2009, and before July 1, 2009, the
present value of a remainder interest based on one or more measuring
lives is determined under this section by use of the section 7520
interest rate for the month in which the valuation date occurs (see
Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the appropriate
actuarial tables under either paragraph (e)(7) of this section or Sec.
1.664-4A(f)(6), at the option of the donor or the decedent's executor,
as the case may be.
(iii) For purposes of paragraphs (e)(2)(i) and (e)(2)(ii) of this
section, where the donor or decedent's executor is given the option to
use the appropriate actuarial tables under either paragraph (e)(7) of
this section or Sec. 1.664-4A(f)(6), the donor or decedent's executor
must use the same actuarial table with respect to each individual
transaction and with respect to all transfers occurring on the
valuation date (for example, gift and income tax charitable deductions
with respect to the same transfer must be determined based on the same
tables, and all assets includible in the gross estate and/or estate tax
deductions claimed must be valued based on the same tables).
(3) and (4) [Reserved]. For further guidance, see Sec. 1.664-
4(e)(3) and (e)(4).
(5) Period is the life of one individual. (i) If the period
described in Sec. 1.664-3(a)(5) is the life of one individual, the
factor that is used in determining the present value of the remainder
interest for transfers for which the valuation date is on or after May
1, 2009, is the factor in Table U(1) in paragraph (e)(7) of this
section under the appropriate adjusted payout. For purposes of the
computations described in this paragraph (e)(5), the age of an
individual is the age of that individual at the individual's nearest
birthday. If the adjusted payout rate is an amount that is between
adjusted payout rates for which factors are provided in the appropriate
table, a linear interpolation must be made. The present value of the
remainder interest is determined by multiplying the net fair market
value (as of the valuation date as determined in Sec. 1.664-4(e)(4))
of the property placed in trust by the factor determined under this
paragraph (e)(5). If the adjusted payout rate is between 4.2 and 14
percent, see paragraph (e)(7) of this section. If the adjusted payout
rate is below 4.2 percent or greater than 14 percent, see Sec. 1.664-
4(b).
(ii) The application of paragraph (e)(5)(i) of this section may be
illustrated by the following example:
Example. A, who is 44 years and 11 months old, transfers
$100,000 to a charitable remainder unitrust on January 1st. The
trust instrument requires that the trust pay to A semiannually (on
June 30 and December 31) 8 percent of the fair market value of the
trust assets as of January 1st during A's life. The section 7520
rate for January is 6.6 percent. Under Table F(6.6) in Sec. 1.664-
4(e)(6), the appropriate adjustment factor is .953317 for semiannual
payments payable at the end of the semiannual period. The adjusted
payout rate is 7.627% (8% x .953317). Based on the remainder factors
in Table U(1) in this section, the present value of the remainder
interest is $11,075.00, computed as follows:
Factor at 7.6 percent at age 45.............................. .11141
Factor at 7.8 percent at age 45.............................. .10653
Difference................................................... .00488
Interpolation adjustment:
[GRAPHIC] [TIFF OMITTED] TR07MY09.023
Factor at 7.6 percent at age 45............................ .11141
Less: Interpolation adjustment............................. .00066
Interpolated Factor........................................ .11075
Present value of remainder interest:
($100,000 x .11075).................................... $11,075.00
(6) [Reserved]. For further guidance, see Sec. 1.664-4(e)(6).
(7) Actuarial Table U(1) for transfers for which the valuation date
is on or after May 1, 2009. For transfers for which the valuation date
is on or after May 1, 2009, the present value of a charitable remainder
unitrust interest that is dependent on the termination of a life
interest is determined by using the section 7520 rate, Table U(1) in
this paragraph (e)(7) and Table F(4.2) through (14.0) in Sec. 1.664-
4(e)(6). See, however, Sec. 1.7520-3(b) (relating to exceptions to the
use of prescribed tables under certain circumstances). Many actuarial
factors not contained in the following tables are contained in Internal
Revenue Service Publication 1458, ``Actuarial Valuations Version 3B''
(2009). This publication will be available beginning May 1, 2009, at no
charge, electronically via the IRS Internet site at https://www.irs.gov.
[[Page 21467]]
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BILLING CODE 4830-01-C
[[Page 21482]]
(f) Effective/applicability date. This section applies on or after
May 1, 2009.
(g) Expiration date. This section expires on or before May 1, 2012.
0
Par. 11. The undesignated center heading immediately preceding Sec.
1.664-4A is revised to read as follows:
Unitrust Actuarial Tables Applicable Before May 1, 2009
0
Par. 12. Section 1.664-4A is amended as follows:
0
1. The section heading is revised.
0
2. The heading of newly-designated paragraph (f) is revised.
0
3. Newly-designated paragraphs (f)(1) and (f)(2) are revised.
0
4. New paragraphs (f)(3) and (f)(4) are added.
0
5. Newly-designated paragraph (f)(5) is revised.
0
6. In newly-designated paragraph (f)(6), the heading and the first
paragraph are revised.
0
7. The heading of Table U(1) is revised.
0
8. Paragraph (f)(7) is added.
The additions and revisions read as follows:
Sec. 1.664-4A Valuation of charitable remainder interests for which
the valuation date is before May 1, 2009.
* * * * *
(f) Valuation of charitable remainder unitrusts having certain
payout sequences for transfers for which the valuation date is after
April 30, 1999, and before May 1, 2009--(1) In general. Except as
otherwise provided in paragraph (f)(2) of this section, in the case of
transfers for which the valuation date is after April 30, 1999, and
before May 1, 2009, the present value of a remainder interest is
determined under paragraphs (f)(3) through (f)(6) of this section,
provided that the amount of the payout as of any payout date during any
taxable year of the trust is not larger than the amount that the trust
could distribute on such date under Sec. 1.664-3(a)(1)(v) if the
taxable year of the trust were to end on such date. See, however, Sec.
1.7520-3(b) (relating to exceptions to the use of the prescribed tables
under certain circumstances).
(2) Transitional rules for valuation of charitable remainder
unitrusts. (i) For purposes of sections 2055, 2106, or 2624, if on May
1, 1999, the decedent was mentally incompetent so that the disposition
of the property could not be changed, and the decedent died after April
30, 1999, without having regained competency to dispose of the
decedent's property, or the decedent died within 90 days of the date
that the decedent first regained competency after April 30, 1999, the
present value of a remainder interest under this section is determined
as if the valuation date with respect to the decedent's gross estate is
either before May 1, 1999, or after April 30, 1999, at the option of
the decedent's executor.
(ii) For purposes of sections 170, 2055, 2106, 2522, or 2624, in
the case of transfers to a charitable remainder unitrust for which the
valuation date is after April 30, 1999, and before July 1, 1999, the
present value of a remainder interest based on one or more measuring
lives is determined under this section by use of the section 7520
interest rate for the month in which the valuation date occurs (see
Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the appropriate
actuarial tables under either paragraph (e)(6) or (f)(6) of this
section, at the option of the donor or the decedent's executor, as the
case may be.
(iii) For purposes of paragraphs (f)(2)(i) and (f)(2)(ii) of this
section, where the donor or decedent's executor is given the option to
use the appropriate actuarial tables under either paragraph (e)(6) or
(f)(6) of this section, the donor or decedent's executor must use the
same actuarial table with respect to each individual transaction and
with respect to all transfers occurring on the valuation date (for
example, gift and income tax charitable deductions with respect to the
same transfer must be determined based on the same tables, and all
assets includible in the gross estate and/or estate tax deductions
claimed must be valued based on the same tables).
(3) Adjusted payout rate. For transfers for which the valuation
date is after April 30, 1999, and before May 1, 2009, the adjusted
payout rate is determined by using the appropriate Table F, contained
in Sec. 1.664-4(e)(6), for the section 7520 interest rate applicable
to the transfer. If the interest rate is between 4.2 and 14 percent,
see Sec. 1.664-4(e)(6). If the interest rate is below 4.2 percent or
greater than 14 percent, see Sec. 1.664-4(b). See Sec. 1.664-4(e) for
rules applicable in determining the adjusted payout rate.
(4) Period is a term of years. If the period described in Sec.
1.664-3(a)(5) is a term of years, the factor that is used in
determining the present value of the remainder interest for transfers
for which the valuation date is after April 30, 1999, and before May 1,
2009, is the factor under the appropriate adjusted payout rate in Table
D in Sec. 1.664-4(e)(6) corresponding to the number of years in the
term. If the adjusted payout rate is an amount that is between adjusted
payout rates for which factors are provided in Table D, a linear
interpolation must be made. The present value of the remainder interest
is determined by multiplying the net fair market value (as of the
appropriate valuation date) of the property placed in trust by the
factor determined under this paragraph. Generally, for purposes of this
section, the valuation date is, in the case of an inter vivos transfer,
the date on which the property is transferred to the trust by the
donor, and, in the case of a testamentary transfer under sections 2055,
2106, or 2624, the valuation date is the date of death. See Sec.
1.664-4(e)(4) for additional rules regarding the valuation date. See
Sec. 1.664-4(e)(4) for an example that illustrates the application of
this paragraph (f)(4).
(5) Period is the life of one individual. If the period described
in Sec. 1.664-3(a)(5) is the life of one individual, the factor that
is used in determining the present value of the remainder interest for
transfers for which the valuation date is after April 30, 1999, and
before May 1, 2009, is the factor in Table U(1) in paragraph (f)(6) of
this section under the appropriate adjusted payout. For purposes of the
computations described in this paragraph (f)(5), the age of an
individual is the age of that individual at the individual's nearest
birthday. If the adjusted payout rate is an amount that is between
adjusted payout rates for which factors are provided in the appropriate
table, a linear interpolation must be made. The rules provided in Sec.
1.664-4T(e)(5) apply for determining the present value of the remainder
interest. See Sec. 1.664-4T(e)(5) for an example illustrating the
application of this paragraph (f)(5) (using current actuarial tables).
(6) Actuarial Table U(1) for transfers for which the valuation date
is after April 30, 1999, and before May 1, 2009. For transfers for
which the valuation date is after April 30, 1999, and before May 1,
2009, the present value of a charitable remainder unitrust interest
that is dependent on the termination of a life interest is determined
by using the section 7520 rate, Table U(1) in this paragraph (f)(6),
and Tables F(4.2) through F(14.0) in Sec. 1.664-4(e)(6). See, however,
Sec. 1.7520-3(b) (relating to exceptions to the use of prescribed
tables under certain circumstances). Many actuarial factors not
contained in the following tables are contained in Internal Revenue
Service Publication 1458, ``Actuarial Values, Book Beth,'' (7-1999).
Publication 1458 is no longer available for purchase from the
Superintendent of Documents, United States Government Printing Office.
However, pertinent factors in this publication may be obtained by a
written request to: CC:PA:LPD:PR (IRS Publication 1458), Room 5205,
Internal
[[Page 21483]]
Revenue Service, P.O.Box 7604, Ben Franklin Station, Washington, DC
20044.
TABLE U(1)--BASED ON LIFE TABLE 90CM UNITRUST SINGLE LIFE REMAINDER
FACTORS
[Applicable After April 30, 1999, and Before May 1, 2009]
* * * * *
(7) Effective/applicability dates. Paragraphs (f)(1) through (f)(6)
apply after April 30, 1999, and before May 1, 2009.
0
Par. 13. Section 1.7520-1 is amended by:
0
1. Revising the section heading.
0
2. Revising paragraphs (a)(1) and (a)(2).
0
3. Removing the last two sentences of paragraph (b)(2) and adding a new
sentence at the end of the paragraph.
0
4. Revising paragraph (c)(1).
0
5. Revising the heading and introductory text of paragraph (c)(2).
0
6. Revising paragraph (d).
The revisions and additions read as follows:
Sec. 1.7520-1 Valuation of annuities, unitrust interests, interests
for life or terms of years, and remainder or reversionary interests
prior to May 1, 2009.
(a) General actuarial valuations. (1) Except as otherwise provided
in this section and in Sec. 1.7520-3 (relating to exceptions to the
use of prescribed tables under certain circumstances), in the case of
certain transactions after April 30, 1989, subject to income tax, the
fair market value of annuities, interests for life or for a term of
years (including unitrust interests), remainders, and reversions is
their present value determined under this section. For periods prior to
May 1, 2009, see Sec. 20.2031-7A for the computation of the value of
annuities, unitrust interests, life estates, terms for years,
remainders, and reversions, other than interests described in
paragraphs (a)(2) and (a)(3) of this section.
(2) For a transfer to a pooled income fund prior to May 1, 2009,
see Sec. 1.642(c)-6A with respect to the valuation of the remainder
interest.
* * * * *
(b) * * *
(2) * * * For transactions with valuation dates after April 30,
1989, and before May 1, 2009, the mortality component tables are
contained in Sec. 20.2031-7A.
(c) * * *
(1) [Reserved]. For further guidance, see Sec. 1.7520-1T(c)(1).
(2) Internal Revenue Service publications containing tables with
interest rates between 2.2 and 22 percent for valuation dates after
April 30, 1999, and before May 1, 2009. The following publications are
no longer available for purchase from the Superintendent of Documents,
United States Government Printing Office; however, they may be obtained
from CC:PA:LPD:PR, Room 5205, Internal Revenue Service, P.O.Box 7604,
Ben Franklin Station, Washington, DC 20044:
* * * * *
(d) Effective/applicability dates. This section applies after April
30, 1989, and before May 1, 2009.
0
Par. 14. Section 1.7520-1T is added to read as follows:
Sec. 1.7520-1T Valuation of annuities, unitrust interests,
interests for life or terms of years, and remainder or reversionary
interests on or after May 1, 2009 (temporary).
(a) General actuarial valuations. (1) Except as otherwise provided
in this section and in Sec. 1.7520-3 (relating to exceptions to the
use of prescribed tables under certain circumstances), in the case of
certain transactions after April 30, 1989, subject to income tax, the
fair market value of annuities, interests for life or for a term of
years (including unitrust interests), remainders, and reversions is
their present value determined under this section. See Sec. 20.2031-
7T(d) (and, for certain prior periods, Sec. 20.2031-7A) for the
computation of the value of annuities, unitrust interests, life
estates, terms for years, remainders, and reversions, other than
interests described in paragraphs (a)(2) and (a)(3) of this section.
(2) For a transfer to a pooled income fund on or after May 1, 2009,
see Sec. 1.642(c)-6T(e) (or, for certain prior periods, Sec.
1.642(c)-6A) with respect t
