Use of Actuarial Tables in Valuing Annuities, Interests for Life or Terms of Years, and Remainder or Reversionary Interests, 21438-21518 [E9-10111]

Download as PDF 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 ........................ VerDate Nov<24>2008 18:14 May 06, 2009 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. Jkt 217001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 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). * * * * * E:\FR\FM\07MYR2.SGM 07MYR2 21440 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 ......................................................................... VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 19:16 May 06, 2009 Jkt 217001 PO 00000 9.47% − 9.4% x = 0.2% .00437 x = .00153 BILLING CODE 4380–01–P Frm 00006 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.001</MATH> 21442 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00007 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21443 ER07MY09.002</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00008 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.003</GPH> 21444 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00009 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21445 ER07MY09.004</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00010 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.005</GPH> 21446 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00011 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21447 ER07MY09.006</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00012 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.007</GPH> 21448 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00013 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21449 ER07MY09.008</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00014 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.009</GPH> 21450 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00015 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21451 ER07MY09.010</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00016 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.011</GPH> 21452 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00017 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21453 ER07MY09.012</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00018 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.013</GPH> 21454 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00019 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21455 ER07MY09.014</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00020 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.015</GPH> 21456 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00021 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21457 ER07MY09.016</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00022 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.017</GPH> 21458 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00023 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21459 ER07MY09.018</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00024 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.019</GPH> 21460 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00025 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21461 ER07MY09.020</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00026 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.021</GPH> 21462 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 21463 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00027 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.022</GPH> 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. VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 (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 PO 00000 Frm 00028 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 19:16 May 06, 2009 Jkt 217001 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) PO 00000 Frm 00029 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00030 Fmt 4701 Sfmt 4700 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. E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.023</MATH> 21466 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00031 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21467 ER07MY09.024</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00032 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.025</GPH> 21468 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00033 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21469 ER07MY09.026</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00034 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.027</GPH> 21470 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00035 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21471 ER07MY09.028</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00036 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.029</GPH> 21472 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00037 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21473 ER07MY09.030</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00038 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.031</GPH> 21474 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00039 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21475 ER07MY09.032</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00040 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.033</GPH> 21476 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00041 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21477 ER07MY09.034</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00042 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.035</GPH> 21478 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00043 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21479 ER07MY09.036</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00044 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.037</GPH> 21480 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 21481 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00045 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.038</GPH> 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00046 Fmt 4701 Sfmt 4700 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 VerDate Nov<24>2008 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 PO 00000 Frm 00047 Fmt 4701 Sfmt 4700 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 .......................................................................... .......................................................................... .......................................................................... .......................................................................... .......................................................................... (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 VerDate Nov<24>2008 19:36 May 06, 2009 Jkt 217001 01–01–52 01–01–71 12–01–83 05–01–89 05–01–99 05–01–09 ......................................................................... ......................................................................... ......................................................................... ......................................................................... ......................................................................... ......................................................................... 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 PO 00000 Frm 00048 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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, PO 00000 Frm 00049 Fmt 4701 Sfmt 4700 21485 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 E:\FR\FM\07MYR2.SGM 07MYR2 21486 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00050 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00051 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21487 ER07MY09.039</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00052 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.040</GPH> 21488 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00053 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21489 ER07MY09.041</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00054 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.042</GPH> 21490 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00055 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21491 ER07MY09.043</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00056 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.044</GPH> 21492 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00057 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21493 ER07MY09.045</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00058 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.046</GPH> 21494 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00059 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21495 ER07MY09.047</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00060 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.048</GPH> 21496 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00061 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21497 ER07MY09.049</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00062 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.050</GPH> 21498 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00063 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21499 ER07MY09.051</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00064 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.052</GPH> 21500 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00065 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21501 ER07MY09.053</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00066 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.054</GPH> 21502 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00067 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21503 ER07MY09.055</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00068 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.056</GPH> 21504 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00069 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21505 ER07MY09.057</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00070 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.058</GPH> 21506 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00071 Fmt 4701 Sfmt 4725 E:\FR\FM\07MYR2.SGM 07MYR2 21507 ER07MY09.059</GPH> Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 21508 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00072 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.060</GPH> 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00073 Fmt 4701 Sfmt 4700 21509 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 E:\FR\FM\07MYR2.SGM 07MYR2 21510 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00074 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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. VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 (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) PO 00000 Frm 00075 Fmt 4701 Sfmt 4700 21511 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). E:\FR\FM\07MYR2.SGM 07MYR2 21512 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations (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 ......................................................................... VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00076 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2 25.2512–5A(a). 25.2512–5A(b). Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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). VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 12–01–83 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 PO 00000 Frm 00077 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 21514 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 19:20 May 06, 2009 Jkt 217001 PO 00000 Frm 00078 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.061</MATH> 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 VerDate Nov<24>2008 19:36 May 06, 2009 ■ Jkt 217001 PO 00000 Frm 00079 Fmt 4701 Sfmt 4700 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). E:\FR\FM\07MYR2.SGM 07MYR2 ER07MY09.062</MATH> Interpolation adjustment: 21515 21516 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations (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. VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00080 Fmt 4701 Sfmt 4700 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– E:\FR\FM\07MYR2.SGM 07MYR2 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 19:16 May 06, 2009 Jkt 217001 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 PO 00000 Frm 00081 Fmt 4701 Sfmt 4700 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 E:\FR\FM\07MYR2.SGM 07MYR2 21518 Federal Register / Vol. 74, No. 87 / Thursday, May 7, 2009 / Rules and Regulations 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 VerDate Nov<24>2008 18:14 May 06, 2009 Jkt 217001 PO 00000 Frm 00082 Fmt 4701 Sfmt 4700 E:\FR\FM\07MYR2.SGM 07MYR2

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





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Internal Revenue Service



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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]]


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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.

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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

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