Use of Actuarial Tables in Valuing Annuities, Interests for Life or a Term of Years, and Remainder or Reversionary Interests, 37424-37466 [2023-11837]

Agencies

• Internal Revenue Service
• DEPARTMENT OF THE TREASURY

[Federal Register Volume 88, Number 109 (Wednesday, June 7, 2023)]
[Rules and Regulations]
[Pages 37424-37466]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-11837]



[[Page 37423]]

Vol. 88

Wednesday,

No. 109

June 7, 2023

Part IV





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 a 
Term of Years, and Remainder or Reversionary Interests; Final Rule

Federal Register / Vol. 88, No. 109 / Wednesday, June 7, 2023 / Rules 
and Regulations

[[Page 37424]]


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DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 20, and 25

[TD 9974]
RIN 1545-BP00


Use of Actuarial Tables in Valuing Annuities, Interests for Life 
or a Term of Years, and Remainder or Reversionary Interests

AGENCY: Internal Revenue Service (IRS), Treasury.

ACTION: Final regulations.

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SUMMARY: This document contains final regulations relating to the use 
of actuarial tables in valuing annuities, interests for life or a term 
of years in property, and remainder or reversionary interests in 
property. These regulations are necessary because applicable law 
requires that the actuarial tables be revised not less frequently than 
once each 10 years. These regulations will affect persons valuing inter 
vivos and testamentary transfers of interests in property dependent on 
one or more measuring lives.

DATES: 
    Effective date: These regulations are effective on June 1, 2023.
    Applicability date: These regulations apply on June 1, 2023.

FOR FURTHER INFORMATION CONTACT: Mayer R. Samuels at (202) 317-6859 
(not a toll-free number).

SUPPLEMENTARY INFORMATION: 

Background

    This document contains amendments to the Income Tax Regulations (26 
CFR part 1), the Estate Tax Regulations (26 CFR part 20), and the Gift 
Tax Regulations (26 CFR part 25) to reflect revisions to tables used 
for the valuation of certain interests in property under section 7520 
of the Internal Revenue Code of 1986 (Code) to incorporate the most 
recent mortality experience available.
    Section 7520, effective for transfers for which the valuation date 
is on or after May 1, 1989, generally provides that the value of an 
annuity, an interest in property for life or a term of years, (interest 
in property for life or a term of years), and a remainder or 
reversionary interest in property (remainder or reversionary interest) 
is to be determined under tables published by the Secretary of the 
Treasury or her delegate (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) of the Code for 
the month in which the valuation date falls. If a charitable 
contribution is allowable for any part of the property transferred, the 
taxpayer may elect under section 7520(a) to use such Federal midterm 
rate for either of the two months preceding the month in which the 
valuation date falls. As originally enacted, section 7520(c)(2) 
directed the Secretary to issue tables not later than December 31, 
1989, utilizing the most recent mortality experience as of the date of 
the issuance of those tables, and 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.
    On May 5, 2022, the Department of the Treasury (Treasury 
Department) and the IRS published proposed regulations (REG-122770-18) 
in the Federal Register (87 FR 26806) under sections 642, 664, 2031, 
2512, and 7520 of the Code (proposed regulations).\1\ The proposed 
regulations provided a revised mortality table, referred to as Table 
2010CM, which is based on data compiled from the 2010 census. The 
proposed regulations also provided actuarial formulas to allow 
taxpayers to compute the appropriate actuarial factors based on Table 
2010CM for transfers for which the valuation date is on or after the 
applicability date of the final regulations, which is June 1, 2023. 
However, for the convenience of taxpayers, the IRS has computed 
actuarial factors that can be found on IRS.gov and publications that 
are referenced in these regulations. The proposed regulations also made 
conforming amendments to various sections of the existing regulations 
to provide the references to these revised actuarial factors.
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    \1\ The proposed regulations were corrected on June 6, 2022 (87 
FR 34223).
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    The following charts summarize the applicable interest rates, the 
citations to regulatory sections in 26 CFR parts 1, 20, and 25, textual 
materials, and tables to use for the various valuation periods.

                       Cross Reference to Regulation Sections for Purposes of Section 642
----------------------------------------------------------------------------------------------------------------
              Valuation period                 Interest rate      Part 1 section               Table
----------------------------------------------------------------------------------------------------------------
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 (05/01/89-04/30/99).
05/01/99-04/30/09..........................        Sec.   7520     1.642(c)-6A(f)  Table S (05/01/99-04/30/09).
05/01/09-05/31/23..........................        Sec.   7520     1.642(c)-6A(g)  Table S (05/01/09-05/31/23).
on or after 06/01/23.......................        Sec.   7520      1.642(c)-6(e)  Table S (on or after 06/01/
                                                                                    23).
----------------------------------------------------------------------------------------------------------------


                       Cross Reference to Regulation Sections for Purposes of Section 664
----------------------------------------------------------------------------------------------------------------
              Valuation period                 Interest rate      Part 1 section               Table
----------------------------------------------------------------------------------------------------------------
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) (05/01/89-04/30/
                                                                                    99).
05/01/99-04/30/09..........................        Sec.   7520        1.664-4A(f)  Table U(1) (05/01/99-04/30/
                                                                                    09).
05/01/09-05/31/23..........................        Sec.   7520        1.664-4A(g)  Table U(1) (05/01/09-05/31/
                                                                                    23).

[[Page 37425]]

 
on or after 06/01/23.......................        Sec.   7520         1.664-4(e)  Table U(1) (on or after 06/01/
                                                                                    23), Table D, and Table F;
                                                                                    See Pub. 1458, ver. 4A (or
                                                                                    successor).
----------------------------------------------------------------------------------------------------------------


                       Cross Reference to Regulation Sections for Purposes of Section 2031
----------------------------------------------------------------------------------------------------------------
              Valuation period                 Interest rate     Part 20 section               Table
----------------------------------------------------------------------------------------------------------------
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)  Tables A, B, and LN.
05/01/89-04/30/99..........................        Sec.   7520      20.2031-7A(e)  Table S (05/01/89-04/30/99),
                                                                                    Table 80CNSMT.
05/01/99-04/30/09..........................        Sec.   7520      20.2031-7A(f)  Table S (05/01/99-04/30/09),
                                                                                    Table 90CM.
05/01/09-05/31/23..........................        Sec.   7520      20.2031-7A(g)  Table S (05/01/09-05/31/23),
                                                                                    Table 2000CM.
on or after 06/01/23.......................        Sec.   7520       20.2031-7(d)  Table S (on or after 06/01/
                                                                                    23), Table 2010CM, Tables B,
                                                                                    J, and K; See Pub. 1458,
                                                                                    ver. 4A (or successor).
----------------------------------------------------------------------------------------------------------------


   Cross Reference to Regulation Sections for Purposes of Section 2512
------------------------------------------------------------------------
         Valuation period             Interest rate     Part 25 section
------------------------------------------------------------------------
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)
05/01/09-05/31/23.................        Sec.   7520      25.2512-5A(g)
on or after 06/01/23..............        Sec.   7520       25.2512-5(d)
------------------------------------------------------------------------

    The Treasury Department and the IRS received a total of eight 
public comments in response to the request for comments set forth in 
the proposed regulations. After careful consideration of the comments 
received, the proposed regulations are adopted as revised by this 
Treasury decision.

Summary of Comments and Explanation of Revisions

I. Decimal Places

    Several commenters questioned the apparent lack of consistency with 
regard to the number of decimal places used in the calculation of 
different types of factors. Commenters also noted that a change from 
the three decimal places commonly used in some software could create 
problems, but others pointed out that a four decimal calculation would 
be more accurate.
    Historically, publications of the Treasury Department and the IRS 
have stated remainder factors and income interest factors for terms 
certain to six decimal places, and remainder factors and income 
interest factors dependent on surviving lives to five decimal places. 
Annuity factors, for both terms certain and annuities dependent on 
mortality, have been stated to four decimal places. In addition, the 
payout rate adjustment factors have been stated to six decimal places, 
and the adjusted payout rates have been stated to five decimal places. 
Tables for commutation factors largely have been stated with seven 
significant figures (that may include different numbers of decimal 
places). These practices have been in force at least since the 
publication of the 1951 tables. The tables published on the IRS website 
are largely consistent with these historic practices. There are 
technical reasons for the particular number of decimals used for 
several of these different factors, but all of the choices described in 
this paragraph conform to standard practice. The Treasury Department 
and the IRS have identified no policy or other reason to disrupt these 
standard practices that have been used consistently since 1951 and 
therefore have retained these same conventions in the final regulations 
and the tables referenced therein.
    Several commenters noted that the number of decimal places used for 
various factors is inconsistent in two of the proposed examples 
involving interpolation (that is, the estimation of intermediate values 
in a series based on the known values). In proposed Sec.  1.664-
4(e)(5)(iii), the charitable remainder unitrust example calculates the 
adjusted payout rate expressed as a percentage to four decimal places 
(which is equivalent to six decimal places when not stated as a 
percentage), while in proposed Sec.  25.2512-5(d)(2)(v)(B)(2), a 
unitrust example calculates the adjusted payout rate expressed as a 
percentage to three decimal places (which is equivalent to five decimal 
places when not stated as a percentage). That difference was 
unintended, and the inconsistency has been corrected in the final 
regulations. Specifically, the example in Sec.  1.664-4(e)(5)(iii) of 
the final regulations calculates the adjusted payout rate to three 
decimal places expressed as a percentage (equivalent to five decimal 
places when not stated as a percentage). Taxpayers may calculate any 
derived factors to additional decimal places (without rounding until 
the final result), as explained in more detail in part II of this 
Summary of Comments and

[[Page 37426]]

Explanation of Revisions.\2\ The proposed regulations, however, do not 
provide that taxpayers may use fewer decimal places than those in the 
published tables.
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    \2\ One commenter also pointed out that the links to Table U2 
incorrectly led to the R2 tables. That link was corrected upon 
receipt of that comment.
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II. Permissible Alternatives to Approximation Methods of Computation

    One commenter commented on the fact that the proposed regulations 
allow the use of an alternative method of deriving certain factors in 
place of the linear interpolation method retained from the regulations 
in effect prior to the publication of this Treasury decision (current 
regulations). Specifically, the proposed regulations confirmed that 
taxpayers may use an exact method of obtaining the applicable factors, 
such as through software using the actual rate of return and the 
actuarial formulas provided in the regulations, in place of the 
generally less accurate interpolation method. The commenter pointed out 
that using an exact method rather than the interpolation method, may 
produce a difference in actuarial values that is more than trivial. 
Another commenter raised a similar concern about a taxpayer using 
factors with more decimal places for greater precision than the factors 
published by the IRS. That difference could be significant in value, or 
it could mean the difference between passing or failing a 10 percent 
remainder requirement. Accordingly, the commenter suggested that 
taxpayers may prefer to determine these values using the same method 
the IRS uses in its review of tax returns.
    The provision in the proposed regulations permitting taxpayers to 
use actuarial formulas or to use more exact methods in place of the 
approximation methods provided allows taxpayers to produce factors with 
more accuracy. The Treasury Department and the IRS believe that 
taxpayers using software in place of using factors from the published 
tables will incur no additional burden in producing final factors to at 
least as many decimal places as are provided in the published tables. 
Therefore, the final regulations clarify that, if taxpayers use the 
formulas in place of factors from the tables, or use more exact methods 
than the approximation methods provided in the regulations, taxpayers 
must use at least as many decimal places in the final factors they 
compute as are provided for those factors in the final regulations. 
However, taxpayers are permitted to calculate the final actuarial 
factors to a greater number of decimal places than provided for in the 
published tables, as the additional decimal place(s) provide greater 
precision. Because taxpayers are given this option to use a more 
accurate calculation method or factors with greater precision than the 
factors in the IRS tables, the IRS will accept the method used by a 
taxpayer as long as the taxpayer complies with the requirements 
described in the final regulations, uses at least as many decimal 
places as are provided in the published tables, and applies the more 
accurate calculation method or more precise calculation consistently in 
valuing all interests in the same property. This consistency 
requirement will avoid a situation in which the value of a life 
interest, when added to the value of the remainder interest calculated 
to a different number of decimal places, does not equal 100% of the 
value of the property.

III. Transition Period To Include Transactions Occurring on or After 
May 1, 2019 and Before January 1, 2021

    The proposed regulations included a transition rule for valuation 
dates during the period beginning on January 1, 2021, and ending before 
June 1, 2023. For valuation dates during this period, taxpayers may 
choose to use either the actuarial factors in the current regulations 
that are based on Table 2000CM or the actuarial factors based on Table 
2010CM. Several commenters requested that the transition period instead 
begin on May 1, 2019, which was the tenth anniversary of the 
applicability date of the tables of actuarial factors based on Table 
2000CM. The commenters correctly pointed out that section 7520(c)(2) 
directs the Secretary to revise the tables prescribed under section 
7520 not less frequently than once every 10 years to reflect the most 
recent mortality experience available at the time of the revision.\3\ 
The commenters stated that the delay in issuing the revised actuarial 
factors was not the fault of taxpayers or the IRS but nevertheless that 
the unavailability of updated mortality data should not deprive 
taxpayers of the ability to use the actuarial factors based on that 
data, once the factors became available, with regard to transactions 
occurring on or after May 1, 2019.
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    \3\ The standard decennial mortality report based on the 2010 
census was not issued by the Centers for Disease Control (CDC) until 
late summer of 2020. The CDC's decennial report provides a standard 
of consistency that the Treasury Department and the IRS rely upon 
for purposes of section 7520. Had the Treasury Department and the 
IRS issued a timely revision to the actuarial tables in the current 
regulations, the most recent decennial report available at that time 
would have been the report issued in 2008 with Table 2000CM, which 
would have merely resulted in a republication of the same actuarial 
tables in the current regulations.
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    After careful thought and consideration of these comments as well 
as the administrative concerns of the IRS, the Treasury Department and 
the IRS have concluded that the issue of fairness to taxpayers in this 
circumstance outweighs the foreseeable administrative burdens on the 
IRS. As a result, the final regulations extend the proposed transition 
period to apply to transactions that occurred on or after May 1, 2019, 
and before June 2, 2023. For any transactions occurring during the 
transition period, a taxpayer may use actuarial factors based on Table 
2000CM or based on Table 2010CM. However, with respect to each 
individual transaction and with respect to all transfers occurring on 
the same valuation date, the taxpayer must be consistent in using the 
same mortality basis with respect to each interest (income, remainder, 
partial, etc.) in the same property, and with respect to all transfers 
occurring on that valuation date.

IV. Amended Returns for Transactions Occurring on or After May 1, 2019

    One commenter requested confirmation that taxpayers may file 
amended (or supplemental) tax returns for valuations in 2019, 2020, or 
2021 to apply the new actuarial factors. As explained in part III of 
this Summary of Comments and Explanation of Revisions, the final 
regulations allow a taxpayer to choose actuarial factors based on Table 
2000CM or Table 2010CM for any transaction occurring on or after May 1, 
2019, and before June 2, 2023. The transition rules therefore 
necessarily anticipate that taxpayers who have filed returns reporting 
a valuation date within the transition period may file an amended (or 
supplemental) return, provided that the taxpayer complies with the 
standards for filing amended (or supplemental) returns and/or filing 
claims for refund.
    Extending the transition period back to May 1, 2019, means that an 
applicable limitations period before which an amended or supplemental 
return may need to be filed may expire soon after the publication of 
this Treasury decision. Therefore, in the interests of efficient tax 
administration, and in order to allow the IRS to identify such an 
amended or supplemental return more easily, the final regulations 
require that the top of that return include the caption ``AMENDED 
PURSUANT TO TD 9974'' or

[[Page 37427]]

``SUPPLEMENTED PURSUANT TO TD 9974'', respectively.

V. Election To Use Actuarial Factors Based on Table 2010CM

    One commenter requested additional guidance regarding the process 
and effect of making an election to use the revised actuarial factors 
based on Table 2010CM for a transaction occurring during the transition 
period ending on June 1, 2023. Although the final regulations require 
that a taxpayer include the caption ``AMENDED PURSUANT TO TD 9974'' or 
``SUPPLEMENTED PURSUANT TO TD 9974'' at the top of any amended income 
tax return or supplemental gift or estate tax return, respectively, and 
that the selected tables be used consistently, no other affirmative 
statement is required to make the election. As on any return, taxpayers 
should show the relevant computations and factors used.
    The availability of the option to use the revised actuarial tables 
based on Table 2010CM for valuation dates during the transition period, 
whether or not exercised, is not a condition subsequent and does not 
limit or otherwise affect the validity of any formula or other 
condition in a document (even if created before the transition period) 
that is intended to determine the amount, value, character, or tax 
treatment of a transfer.

VI. Applicability 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 June 1, 2023.

Special Analyses

    These regulations are not subject to review under section 6(b) of 
Executive Order 12866 pursuant to the Memorandum of Agreement (April 
11, 2018) between the Treasury Department and the Office of Management 
and Budget (OMB) regarding review of tax regulations. Therefore, a 
regulatory impact assessment is not required. In addition, the Treasury 
Department and the IRS have assessed that these regulations do not 
establish a new collection of information nor modify an existing 
collection that requires the approval of OMB under the Paperwork 
Reduction Act (44 U.S.C. chapter 35).
    Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it 
is hereby certified that these regulations will not have a significant 
economic impact on a substantial number of small entities. The 
applicability of these regulations is limited to individuals (or their 
estates) and trusts, which are not small entities as defined by the 
Regulatory Flexibility Act (5 U.S.C. 601). This document implements 
statutorily required periodic revisions to actuarial tables used in 
valuing various interests in property that are affected by a person's 
life expectancy. The revisions would not impose any direct compliance 
requirements on any entities other than the time to read and understand 
the revisions. Accordingly, a regulatory flexibility analysis is not 
required.
    Pursuant to section 7805(f) of the Internal Revenue Code, the 
notice of proposed rulemaking preceding these regulations was submitted 
to the Chief Counsel for the Office of Advocacy of the Small Business 
Administration for comment on its impact on small business. No comments 
were received from the Chief Counsel for the Office of Advocacy of the 
Small Business Administration.

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 Treasury Department 
and the IRS 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.

Amendments to the Regulations

    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 continues to read in part 
as follows:

    Authority: 26 U.S.C. 7805 * * *

0
Par. 2. Section 1.170A-12 is amended by:
0
1. Revising paragraphs (b)(2) and (3).
0
2. Adding paragraph (b)(4).
0
3. Revising paragraphs (e)(2) and (f)
    The revisions and addition read as follows:


Sec.  1.170A-12  Valuation of a remainder interest in real property for 
contributions made after July 31, 1969.

* * * * *
    (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 contingency rates from the mortality table 
prescribed in Sec.  20.2031-7 of this chapter (or for periods before 
June 1, 2023, Sec. Sec.  20.2031-7(d)(3) and 20.2031-7A of this 
chapter) 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 June 1, 2023, special factors 
for determining the present value of a remainder interest following one 
life may be computed by taxpayers based on Table 2010CM, found in Sec.  
20.2031-7(d)(7)(ii) of this chapter, and using the formula provided in 
this paragraph (b)(2). Alternatively, taxpayers may use the actuarial 
factors provided in Table C to determine the special factor for the 
remainder interest following one life. Table C currently is available, 
at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL 
as may be updated from time to time). IRS Publication 1459, Actuarial 
Valuations Version 4C (2023), references and explains Table C and 
provides examples describing the computation. This publication will be 
available within a reasonable time after June 1, 2023. For transfers 
for which the valuation date is on or after May 1, 2009, and before 
June 1, 2023, special factors for determining the present value of a 
remainder interest following one life and an example describing the 
computation are contained in the previous version of Table C, which 
currently is available, at no charge, electronically via the IRS 
website at https://www.irs.gov/retirement-plans/actuarial-tables. IRS 
Publication 1459, Actuarial Valuations Version 3C (2009), references 
and explains this version of Table C and provides examples describing 
the computation. 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 formula in Figure 1 to this paragraph (b)(2). The prescribed 
mortality table is Table 2010CM as set forth in Sec.  20.2031-
7(d)(7)(ii) of this chapter, or for periods before June 1, 2023, the 
appropriate table found in

[[Page 37428]]

Sec.  20.2031-7A of this chapter. Table 2010CM is referenced by IRS 
Publication 1459, Actuarial Values Version 4C. The mortality tables 
prescribed for periods before June 1, 2023, are referenced by prior 
versions of IRS Publication 1459.

Figure 1 to paragraph (b)(2)--Formula for Determining Single Life 
Remainder Interest in Depreciable Property
[GRAPHIC] [TIFF OMITTED] TR07JN23.005

    (3) Sample factors from actuarial Table S. The present value of a 
remainder interest dependent on the termination of one life is 
determined by using the formula in Sec.  20.2031-7(d)(2)(ii)(B) of this 
chapter to derive a remainder factor expressed to at least five decimal 
places. For the convenience of taxpayers, actuarial factors have been 
computed by the IRS and appear in Table S. The complete Table S can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. For purposes of the example in paragraph (b)(4) of 
this section, the following factors from Table S will be used:

                                           Table 1 to Paragraph (b)(3)
----------------------------------------------------------------------------------------------------------------
                         Age                                Annuity           Life estate          Remainder
----------------------------------------------------------------------------------------------------------------
                                   Factors from Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
62..................................................            14.6131             0.46762             0.53238
----------------------------------------------------------------------------------------------------------------

    (4) Example. After June 1, 2023, 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 28 years, at the end of 
which period the value of the house is expected to be $10,000. The 
portion of the property considered to be depreciable is $90,000 (the 
value of the house ($100,000) less its expected value at the end of 28 
years ($10,000)). The portion of the property considered to be 
nondepreciable is $40,000 (the value of the land at the time of the 
gift ($30,000) plus the expected value of the house at the end of 28 
years ($10,000)). A chooses to use the interest rate prescribed under 
section 7520 for the month in which the gift was made (3.2 percent). 
Based on an interest rate of 3.2 percent, the remainder factor for 
$1.00 prescribed in Sec.  20.2031-7(d) and found in Table S for a 
person age 62 is 0.53238. The value of the nondepreciable remainder 
interest is $21,295.20 (0.53238 times $40,000). The factor for the 
remainder interest in depreciable property is computed under the 
formula described in paragraph (b)(2) of this section and is 0.19392. 
(This factor, 0.19392, may instead be determined by using Table C, 
which can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables, and following the method provided in 
IRS Publication 1459, Actuarial Values Version 4C.) The value of the 
depreciable remainder interest is $17,452.80 (0.19392 times $90,000). 
Therefore, the value of the remainder interest is $38,748.00 
($21,295.20 plus $17,452.80).
* * * * *
    (e) * * *
    (2) In the case of the valuation of a remainder interest following 
two lives, the special factor may be obtained through use of the 
formula in Figure 2 to this paragraph (e)(2). The prescribed mortality 
table is Table 2010CM as set forth in Sec.  20.2031-7(d)(7)(ii) of this 
chapter, or for periods before June 1, 2023, the appropriate table 
found in Sec.  20.2031-7A of this chapter. Table 2010CM is referenced 
by IRS Publication 1459, Actuarial Values

[[Page 37429]]

Version 4C. The mortality tables prescribed for periods before June 1, 
2023, are referenced by prior versions of IRS Publication 1459.

Figure 2 to Paragraph (e)(2)--Formula for Determining Two-Life 
Remainder Interest in Depreciable Property
[GRAPHIC] [TIFF OMITTED] TR07JN23.006

* * * * *
    (f) Applicability date. This section applies to contributions made 
after July 31, 1969, except that paragraphs (b)(2), (3), and (4) and 
(e)(2) of this section apply to all contributions made on or after June 
1, 2023.

0
Par. 3. Section 1.170A-14 is amended:
0
1. In paragraph (h)(4) by designating Example 1 through 12 as 
paragraphs (h)(4)(i) through (xii), respectively.
0
2. By revising newly designated paragraph (h)(4)(ii).
0
3. In newly designated paragraphs (h)(4)(iii) and (iv) by removing 
``Example 2'' and adding ``paragraph (h)(4)(ii) of this section 
(Example 2)'' in its place.
0
4. In newly designated paragraph (h)(4)(v) by removing ``Example 4'' 
and adding ``paragraph (h)(4)(iv) of this section (Example 4)'' in its 
place.
0
5. In newly designated paragraph (h)(4)(vi) by removing ``Example 2'' 
and adding ``paragraph (h)(2)(ii) of this section (Example 2)'' in its 
place.
0
6. In newly designated paragraph (h)(4)(viii) by removing ``Example 7'' 
and adding ``paragraph (h)(4)(vii) of this section (Example 7)'' in its 
place.
0
7. In newly designated paragraph (h)(4)(xi) by removing ``example 
(10)'' and adding ``paragraph (h)(4)(x) of this section (Example 10)'' 
in its place.
0
8. By revising paragraph (j).
    The revisions read as follows:


Sec.  1.170A-14  Qualified conservation contributions.

* * * * *
    (h) * * *
    (4) * * *
    (ii) Example 2. In 1984 B, who is 62, donates a remainder interest 
in Greenacre to a qualifying organization for conservation purposes, 
retaining an interest for B's life. Greenacre is a tract of 200 acres 
of undeveloped woodland that is valued at $200,000 at its highest and 
best use. Under Sec.  1.170A-12(b), the value of a remainder interest 
in real property following one life is determined under Sec.  25.2512-5 
of this chapter (Gift Tax Regulations). (See Sec.  25.2512-5A of this 
chapter with respect to the valuation of annuities, interests for life 
or a term of years, and remainder or reversionary interests transferred 
before June 1, 2023.) For transfers occurring after November 30, 1983, 
and before May 1, 1989, the single life remainder factors, valued at 10 
percent, can be found in Table A of Sec.  20.2031-7A(d)(6) of this 
chapter. The remainder factor under these facts is 0.27998. 
Accordingly, the value of the remainder interest, and thus the amount 
eligible for an income tax deduction under section 170(f), is $55,996 
($200,000 x 0.27998).
* * * * *
    (j) Applicability dates. Except as otherwise provided in paragraph 
(g)(4)(ii) and paragraph (i) of this section, this section applies only 
to contributions made on or after December 18, 1980. Paragraph 
(h)(4)(ii) of this section applies on and after June 1, 2023.

0
Par. 4. Section 1.642(c)-6 is amended by:
0
1. Revising paragraph (d).
0
2. Redesignating paragraph (e) as paragraph (g) of Sec.  1.642(c)-6A.
0
3. Adding new paragraph (e) and revising paragraph (f).
    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) Valuation. The present value of the remainder interest in 
property transferred to a pooled income fund on or after June 1, 2023, 
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 June 1, 2023, is determined 
(subject to paragraph (e)(2) of this section) under the following 
sections:

                        Table 6 to Paragraph (d)
------------------------------------------------------------------------
                   Valuation dates
------------------------------------------------------     Applicable
                  After                      Before       regulations
------------------------------------------------------------------------
                                             01-01-52   Sec.   1.642(c)-
                                                                   6A(a)
12-31-51................................     01-01-71     1.642(c)-6A(b)
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)
04-30-09................................     06-01-23     1.642(c)-6A(g)
------------------------------------------------------------------------


[[Page 37430]]

    (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 June 1, 2023--(1) In general. In the case of transfers to pooled 
income funds for which the valuation date is on or after June 1, 2023, 
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 using the formula in Sec.  
20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor 
from the appropriate mortality table to at least five decimal places. 
For the convenience of taxpayers, actuarial factors have been computed 
by the IRS and appear in Table S. Table S currently is available, at no 
charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be 
updated from time to time). Table S is referenced and explained by IRS 
Publication 1457, Actuarial Valuations Version 4A, which will be 
available within a reasonable time after June 1, 2023. For purposes of 
the computations under this section, the age of an individual is the 
age at the individual's nearest birthday.
    (2) Transitional rule for valuation of transfers to pooled income 
funds. For purposes of section 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, 2019, and on or before June 1, 2023, the present 
value of the remainder interest under this section is determined by 
using 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 factors derived from the selected 
mortality table, either Table 2010CM in Sec.  20.2031-7(d)(7)(ii) of 
this chapter or Table 2000CM in Sec.  20.2031-7A(g)(4) of this chapter, 
at the option of the donor or the decedent's executor, as the case may 
be. If any previously filed income tax return is amended to use the 
actuarial factors based on Table 2010CM, the amended return must state 
at the top ``AMENDED PURSUANT TO TD 9974.'' If any previously filed 
gift or estate tax return is supplemented to use the actuarial factors 
based on Table 2010CM, the supplemental return must state at the top 
``SUPPLEMENTED PURSUANT TO TD 9974.'' For the convenience of taxpayers, 
actuarial factors based on Table 2010CM appear in the current version 
of Table S, and actuarial factors based on Table 2000CM appear in the 
previous version of Table S. Both versions of Table S currently are 
available, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL 
as may be updated from time to time). The donor or decedent's executor 
must consistently use the same mortality basis with respect to each 
interest (income, remainder, partial, etc.) in the same property, and 
with respect to all transfers occurring on the same valuation date. For 
example, gift and income tax charitable deductions with respect to the 
same transfer must be determined based on factors with the same 
mortality basis, and all assets includible in the gross estate and/or 
estate tax deductions claimed must be valued based on factors with the 
same mortality basis.
    (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 2010CM in Sec.  20.2031-7(d)(7)(ii) of this 
chapter (see Sec.  20.2031-7A of this chapter 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 
three 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 paragraph (c) of this section 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 three 
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 otherwise would 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 three preceding taxable years.
    (4) Pooled income funds in existence less than three taxable years. 
If a pooled income fund has been in existence less than three taxable 
years immediately preceding the taxable year in which the transfer is 
made to the fund and the transfer to the fund is made on or after May 
1, 1989, the highest rate of return is deemed to be the interest rate 
(rounded to the nearest two-tenths of one percent) that is one percent 
less than the highest annual average of the monthly section 7520 rates 
for the three 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 three year 
period immediately preceding the calendar year in which each transfer 
to the fund is made until the fund has been in existence for three 
taxable years and can compute its highest rate of return for the three 
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) Factor. 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 obtained through use of the formula in Sec.  
20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor 
from the appropriate mortality table to at least five decimal places. 
For the convenience of taxpayers, actuarial factors have been computed 
by the IRS and appear in Table S. Table S currently is available, at no 
charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Table S is referenced and explained 
in IRS Publication 1457, Actuarial Valuations Version 4A, which will be 
available within a reasonable time after June 1, 2023. In using the 
section of Table S for the interest rate equal to the appropriate 
yearly rate of return, the appropriate remainder factor is 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 referenced by IRS Publication 1457, 
Actuarial Valuations Version 4A, include factors for yearly rates of 
return from 0.2 to 20 percent, inclusive, in

[[Page 37431]]

increments of two-tenths of one percent. For other situations, see 
paragraph (b) of this section. If the yearly rate of return is a 
percentage that is between the yearly rates of return for which factors 
are provided by Table S, an exact method of obtaining the applicable 
factors (such as through software using the actual rate of return and 
the actuarial formulas provided in Sec.  20.2031-7(d)(2)(ii)(B) of this 
chapter) or a linear interpolation must be used, provided whichever 
method used is applied consistently in valuing all interests in the 
same property. The applicable remainder factors derived by an exact 
method or by interpolation must be expressed to at least five decimal 
places. 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) Sample factors from actuarial Table S. For purposes of the 
example in paragraph (e)(5)(iii) of this section, the following factors 
from Table S will be used:

                                         Table 7 to Paragraph (e)(5)(ii)
----------------------------------------------------------------------------------------------------------------
                          Age                                 Annuity          Life estate         Remainder
----------------------------------------------------------------------------------------------------------------
                                   Factors from Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                             Interest at 5.4 Percent
----------------------------------------------------------------------------------------------------------------
55.....................................................            13.2515            0.71558            0.28442
----------------------------------------------------------------------------------------------------------------
                                             Interest at 5.6 Percent
----------------------------------------------------------------------------------------------------------------
55.....................................................            12.9710            0.72637            0.27363
----------------------------------------------------------------------------------------------------------------

    (iii) Example of interpolation. After June 1, 2023, A, whose age 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 5.43 
percent. In Table S, the remainder factor opposite 55 years under 5.4 
percent is 0.28442 and under 5.6 percent is 0.27363. The present value 
of the remainder interest is $28,280, computed as illustrated in Figure 
1 to this paragraph (e)(5)(iii).

Figure 1 to Paragraph (e)(5)(iii)--Illustration of Interpolation Method
[GRAPHIC] [TIFF OMITTED] TR07JN23.007

    (6) Actuarial tables. In the case of transfers for which the 
valuation date is on or after June 1, 2023, 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 using the 
formula in Sec.  20.2031-7(d)(2)(ii)(B) of this chapter to derive a 
remainder factor from the

[[Page 37432]]

appropriate mortality table to at least five decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in Table S. Table S currently is available, at no 
charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Table S is referenced and explained 
in IRS Publication 1457, Actuarial Valuations Version 4A, which will be 
available within a reasonable time after June 1, 2023.
    (f) Applicability date. This section applies on and after June 1, 
2023.

0
Par. 5. The undesignated center heading immediately preceding Sec.  
1.642(c)-6A is revised to read as follows:

Pooled Income Fund Actuarial Tables Applicable Before June 1, 2023

0
Par. 6. Section 1.642(c)-6A is amended by:
0
1. Revising the section heading.
0
2. In newly redesignated paragraph (g):
0
i. The heading and paragraphs (g)(1) through (5) and (g)(6) 
introductory text are revised.
0
ii. Paragraph (g)(7) is added.
    The revisions and addition read as follows:


Sec.  1.642(c)-6A  Valuation of charitable remainder interests for 
which the valuation date is before June 1, 2023.

* * * * *
    (g) 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, and before June 1, 2023--(1) In general. In the case 
of transfers to pooled income funds for which the valuation date is on 
or after May 1, 2009, and before June 1, 2023, 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 (g)(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 section 2055, 2106, or 2624, if on May 1, 
2009, the decedent was under a mental disability so that the 
disposition of the property could not be changed, and the decedent died 
on or after May 1, 2009, but before June 2, 2023, without having 
regained the ability to dispose of the decedent's property, or if the 
decedent died within 90 days of the date that the decedent first 
regained that ability on or after May 1, 2009, but before June 2, 2023, 
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, 2009, or after April 30, 2009, at the option of the 
decedent's executor.
    (ii) For purposes of section 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 using 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 (f)(6) or (g)(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 (g)(2)(i) and (ii) of this 
section, where the donor or decedent's executor is given the option to 
use the appropriate actuarial tables under either paragraph (f)(6) or 
(g)(6) of this section, the donor or decedent's executor must 
consistently use the same mortality basis with respect to each interest 
(income, remainder, partial, etc.) in the same property, and with 
respect to all transfers occurring on the same valuation date. For 
example, gift and income tax charitable deductions with respect to the 
same transfer must be determined based on factors with the same 
mortality basis, and all assets includible in the gross estate and/or 
estate tax deductions claimed must be valued based on factors with the 
same mortality basis.
    (iv) In the case of transfers to a pooled income fund for which the 
valuation date is after April 30, 2019, and before June 1, 2023, the 
present value of the remainder interest under this section is 
determined under Sec.  1.642(c)-6(e)(2).
    (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.  20.2031-7A(g)(4) of this 
chapter; 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 
three 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)-6(e)(3)(ii) apply for the determining the yearly rate of 
return.
    (4) Pooled income funds in existence less than three taxable years. 
The provisions of Sec.  1.642(c)-6(e)(4) apply for determining the 
highest yearly rate of return when the pooled income fund has been in 
existence less than three 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 (g)(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 (g)(6) of this section includes 
factors for yearly rates of return from 0.2 to 14 percent, inclusive, 
in increments of two-tenths of one percent. Actuarial factors that do 
not appear in paragraph (g)(6) of this section may be computed directly 
by using the formula in Sec.  20.2031-7(d)(2)(ii)(B) of this chapter to 
derive a remainder factor from the appropriate mortality table to at 
least five decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table S that is 
referenced and explained by IRS Publication 1457, Actuarial Valuations 
Version 3A (2009). The table is available at no charge, electronically 
via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). 
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 by Table S, an exact method of obtaining the 
applicable factors (such as through software using the actual rate of 
return and actuarial formulas provided in Sec.  20.2031-7(d)(2)(ii)(B) 
of this chapter) or a linear interpolation must be used, provided 
whichever method used is applied consistently in valuing all interests 
in the same property. 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)-6(e)(5).

[[Page 37433]]

    (6) Actuarial tables. In the case of transfers for which the 
valuation date is on or after May 1, 2009, and before June 1, 2023, and 
without regard to the headings in the tables in this paragraph (g)(6) 
that do not contain this termination date for the applicability of the 
tables, 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 using the following tables:
* * * * *
    (7) Applicability dates. Paragraphs (g)(1) through (6) of this 
section apply on and after May 1, 2009, and before June 1, 2023.

0
Par. 7. Section 1.664-2 is amended by revising paragraphs (c) and (e) 
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 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 using 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 in this part under 
section 2032, 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.  20.2031-7(d) of 
this chapter for transfers for which the valuation date is on or after 
June 1, 2023, or under Sec.  20.2031-7A(a) through (g) of this chapter, 
whichever is applicable, for transfers for which the valuation date is 
before June 1, 2023. See, however, Sec. Sec.  20.2031-7(d)(3) and 
25.2512-5(d)(3) (transition rules) and 1.7520-3(b) (relating to 
exceptions to the use of prescribed tables under certain 
circumstances).
* * * * *
    (e) Applicability date. Paragraph (c) of this section applies on 
and after June 1, 2023.

0
Par. 8. Section 1.664-4 is amended by:
0
1. Revising paragraphs (a)(1) and (d).
0
2. In paragraph (e):
0
i. Redesignating the heading and paragraphs (e)(1), (2), (5), and (7) 
as the heading for Sec.  1.664-4A(g) and paragraphs (g)(1), (2), (5), 
and (6), respectively.
0
ii. Adding a new heading and new paragraphs (e)(1), (2), and (5).
0
iii. Revising the heading for paragraph (e)(6).
0
iv. Redesignating the text of paragraph (e)(6) as paragraph 
(e)(6)(iii).
0
v. Adding paragraphs (e)(6)(i) and (ii).
0
vi. Revising the introductory text of newly redesignated paragraph 
(e)(6)(iii).
0
vii. Adding a new paragraph (e)(7).

0
3. Revising paragraph (f).
    The additions and revisions read as follows:


Sec.  1.664-4  Calculation of the fair market value of the remainder 
interest in a charitable remainder unitrust.

    (a) * * *
    (1) Life contingencies determined as to each life involved, from 
the values of lx set forth in Table 2010CM in Sec.  20.2031-
7(d)(7)(ii) of this chapter in the case of transfers for which the 
valuation date is on or after June 1, 2023; or from Table 2000CM 
contained in Sec.  20.2031-7A(g)(4) of this chapter in the case of 
transfers for which the valuation date is on or after May 1, 2009, and 
before June 1, 2023. See Sec.  20.2031-7A(a) through (f) of this 
chapter, whichever is applicable, for transfers for which the valuation 
date is before May 1, 2009;
* * * * *
    (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 June 1, 2023, 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 June 1, 2023, is its present value determined 
under the following sections:

                        Table 1 to Paragraph (d)
------------------------------------------------------------------------
                   Valuation dates
------------------------------------------------------     Applicable
                  After                      Before       regulations
------------------------------------------------------------------------
                                             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)
04-30-09................................     06-01-23        1.664-4A(g)
------------------------------------------------------------------------

    (e) Valuation of charitable remainder unitrusts having certain 
payout sequences for transfers for which the valuation date is on or 
after June 1, 2023--(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 June 1, 2023, the present value of a 
remainder interest is determined under paragraphs (e)(3) through (7) of 
this section, provided that, in a short taxable year, the trustee must 
prorate the unitrust amount as provided in Sec.  1.664-3(a)(1)(v). See, 
however, Sec.  1.7520-3(b) (relating to exceptions to the use of the 
prescribed tables under certain circumstances).
    (2) Transitional rule for valuation of charitable remainder 
unitrusts. For purposes of section 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, 2019, and on or before June 1, 2023, 
the present value of a remainder interest based on one or more 
measuring lives is determined under this section by using 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 factors derived from the selected mortality table, either 
Table 2010CM in Sec.  20.2031-7(d)(7)(ii) of this chapter or Table 
2000CM in Sec.  20.2031-7A(g)(4) of this chapter, at the option of the 
donor or the decedent's executor, as the case may be. If any previously 
filed income tax return is amended to use the actuarial factors based 
on Table 2010CM, the amended return must state at the top ``AMENDED 
PURSUANT TO TD 9974.'' If any previously filed gift or estate tax 
return is supplemented to use the actuarial factors based on Table 
2010CM, the supplemental return must state at the top ``SUPPLEMENTED 
PURSUANT TO TD 9974.'' For the

[[Page 37434]]

convenience of taxpayers, actuarial factors based on Table 2010CM 
appear in the current version of Table U(1), and actuarial factors 
based on Table 2000CM appear in the previous version of Table U(1). 
Both versions of Table U(1) currently are available, at no charge, 
electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from 
time to time). The donor or decedent's executor must consistently use 
the same mortality basis with respect to each interest (income, 
remainder, partial, etc.) in the same property, and with respect to all 
transfers occurring on the same valuation date. For example, gift and 
income tax charitable deductions with respect to the same transfer must 
be determined based on factors with the same mortality basis, and all 
assets includible in the gross estate and/or estate tax deductions 
claimed must be valued based on factors with the same mortality basis.
* * * * *
    (5) Period is the life of one individual--(i) Factor. 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 June 
1, 2023, is the factor obtained through the use of the formula in 
Figure 1 to this paragraph (e)(5)(i) to at least five decimal places. 
The prescribed mortality table is Table 2010CM as set forth in Sec.  
20.2031-7(d)(7)(ii) of this chapter, or for periods before June 1, 
2023, the appropriate table found in Sec.  20.2031-7A of this chapter. 
Table 2010CM is referenced by IRS Publication 1458, Actuarial Values 
Version 4B. The mortality tables prescribed for periods before June 1, 
2023, are referenced by prior versions of IRS Publication 1458. 
Alternatively, the remainder factors have been determined for the 
convenience of taxpayers and appear in Table U(1) under the appropriate 
adjusted payout rate. Table U(1) currently is available, at no charge, 
electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from 
time to time). Table U(1) is referenced and explained by IRS 
Publication 1458, Actuarial Valuations Version 4B, which will be 
available within a reasonable time after June 1, 2023. 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, an exact method of obtaining the applicable remainder factors 
(such as through software using the actual adjusted payout rate and the 
actuarial formula in this paragraph (e)(5)) or a linear interpolation 
must be used, provided whichever method used is applied consistently in 
valuing all interests in the same property. The applicable remainder 
factors derived by an exact method or by interpolation must be 
expressed to at least five decimal places. 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 from 0.2 to 20.0 
percent, inclusive, taxpayers may see the actuarial tables referenced 
and explained by IRS Publication 1458, Actuarial Valuations Version 4B. 
Alternatively, the Commissioner may supply a factor upon a request for 
a ruling. See paragraph (b) of this section.

Figure 1 to Paragraph (e)(5)(i)--Formula for Determining Unitrust 
Remainder Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.008

    (ii) Sample factors from actuarial Table U(1). For purposes of the 
example in paragraph (e)(5)(iii) of this section, the following factors 
from Table U(1) and Table F(3.2) (see paragraph (e)(6)(ii) of this 
section) will be used:

[[Page 37435]]



                                         Table 2 to Paragraph (e)(5)(ii)
                                 Factors From Table U(1)--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                              Adjusted payout rate
-----------------------------------------------------------------------------------------------------------------
                               Age                                     4.8%            5.0%            5.2%
----------------------------------------------------------------------------------------------------------------
77..............................................................         0.61491         0.60343         0.59223
----------------------------------------------------------------------------------------------------------------
                                            Factors from Table F(3.2)
                            Factors for Computing Adjusted Payout Rates for Unitrusts
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
                # of Months from Annual Valuation to First Payout     Adjustment Factors for
                                                                     Payments at End of Period
----------------------------------------------------------------------------------------------------------------
                            At Least                               But Less Than      Annual        Semiannual
----------------------------------------------------------------------------------------------------------------
6...............................................................               7        0.984374        0.976683
----------------------------------------------------------------------------------------------------------------

    (iii) Example of interpolation. After June 1, 2023, A, whose age is 
76 years and 11 months, 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) 5 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 3.2 percent. Under Table 
F(3.2), the appropriate adjustment factor is 0.976683 for semiannual 
payments payable at the end of the semiannual period. The adjusted 
payout rate is 4.883% (5% x 0.976683). Based on interpolating between 
the remainder factors in Table U(1), the present value of the remainder 
interest is $61,015, computed as illustrated in Figure 2 to this 
paragraph (e)(5)(iii).

Figure 2 to Paragraph (e)(5)(iii)--Illustration of Unitrust 
Interpolation Method
[GRAPHIC] [TIFF OMITTED] TR07JN23.009

    (6) Actuarial Table D and Tables F(0.2) through F(20.0) for 
transfers for which the valuation date is on or after May 1, 1989--(i) 
Remainder factors for charitable remainder unitrusts. For transfers for 
which the valuation date is on or after May 1, 1989, the present value 
of a charitable remainder unitrust interest that is dependent upon a 
term of years is determined by using the formula in Figure 3 to this 
paragraph (e)(6)(i) and calculating the final result to at least six 
decimal places. For the convenience of taxpayers, actuarial factors 
have been computed by the IRS

[[Page 37436]]

and appear in Table D. Table D can be found on the IRS website at 
https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). Table D is 
referenced and explained in IRS Publication 1458, Actuarial Valuations 
Version 4B, which will be available within a reasonable time after June 
1, 2023. The remainder factors from Table D also can be found in 
paragraph (e)(6)(iii) of this section, but only for adjusted payout 
rates from 4.2 to 14 percent, inclusive. For transfers for which the 
valuation date is on or after June 1, 2023, where the present value of 
a charitable remainder unitrust interest is dependent on the 
termination of a life interest, see paragraph (e)(5) of this section. 
See, however, Sec.  1.7520-3(b) (relating to exceptions to the use of 
prescribed tables under certain circumstances).

Figure 3 to Paragraph (e)(6)(i)--Formula for Determining Term Certain 
Unitrust Remainder Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.010

    (ii) Unitrust payout rate adjustment factors. For transfers for 
which the valuation date is on or after May 1, 1989, the unitrust 
payout rate adjustment factors are determined by using the formula in 
Figure 4 to this paragraph (e)(6)(ii) and calculating the final result 
to at least six decimal places. For the convenience of taxpayers, 
actuarial factors have been computed by the IRS, for interest rates 
from 0.2 to 20 percent, inclusive, and appear in Tables F(0.2) through 
F(20.0). Tables F(0.2) through F(20.0) can be found on the IRS website 
at https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). Tables F(0.2) 
through F(20.0) are referenced and explained in IRS Publication 1458, 
Actuarial Valuations Version 4B, which will be available within a 
reasonable time after June 1, 2023. The factors from Table F also can 
be found in paragraph (e)(6)(iii) of this section, but only for 
interest rates from 4.2 to 14 percent, inclusive.

Figure 4 to Paragraph (e)(6)(ii)--Formula for Determining Unitrust 
Payout Rate Adjustment Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.011

    (iii) Table D and Tables F(4.2) through F(14.0). The unitrust 
remainder factors from Table D, for interest rates from 4.2 to 14 
percent, inclusive, and the unitrust payout factors from Tables F(4.2) 
through F(14.0) are as follows:
* * * * *
    (7) Actuarial Table U(1) for transfers for which the valuation date 
is on or after June 1, 2023. The present value of a remainder interest 
in a charitable remainder unitrust that is dependent on the termination 
of a life interest is determined by using the section 7520 rate, Tables 
F(0.2) through (20.0) (see paragraph (e)(6)(ii) of this section), and 
the formula in paragraph (e)(5)(i) of this section to derive a 
remainder factor from the appropriate mortality table to at least five 
decimal places. For the convenience of taxpayers, actuarial factors 
have been computed by the IRS and appear in Table U(1). For transfers 
for which the valuation date is on or after June 1, 2023, the actuarial 
tables are currently available, at no charge, electronically via the 
IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. 
These actuarial tables are referenced and explained by IRS Publication 
1458, Actuarial Valuations Version 4B (2023). This publication will be 
available within a reasonable time after June 1, 2023. See, however, 
Sec.  1.7520-3(b) (relating to exceptions to the use of prescribed 
tables under certain circumstances).
    (f) Applicability date. This section applies on and after June 1, 
2023.


0
Par. 9. The undesignated center heading immediately preceding Sec.  
1.664-4A is revised to read as follows:

Unitrust Actuarial Tables Applicable Before June 1, 2023.

0
Par. 10. Section 1.664-4A is amended by:

[[Page 37437]]

0
1. Revising the section heading.
0
2. In newly redesignated paragraph (g):
0
i. Revising the heading and paragraphs (g)(1) and (2).
0
ii. Adding paragraphs (g)(3) and (4).
0
iii. Revising paragraph (g)(5).
0
iv. In paragraph (g)(6), revising the introductory text.
0
v. Adding paragraph (g)(7).
    The additions and revisions read as follows:


Sec.  1.664-4A  Valuation of charitable remainder interests for which 
the valuation date is before June 1, 2023.

* * * * *
    (g) Valuation of charitable remainder unitrusts having certain 
payout sequences for transfers for which the valuation date is on or 
after May 1, 2009, and before June 1, 2023--(1) In general. Except as 
otherwise provided in paragraph (g)(2) of this section, in the case of 
transfers for which the valuation date is on or after May 1, 2009, and 
before June 1, 2023, the present value of a remainder interest is 
determined under paragraphs (g)(3) through (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 section 2055, 2106, or 2624, if on May 
1, 2009, the decedent was under a mental disability so that the 
disposition of the property could not be changed, and the decedent died 
on or after May 1, 2009, but before June 2, 2023, without having 
regained the ability to dispose of the decedent's property, or if the 
decedent died within 90 days of the date that the decedent first 
regained that ability on or after May 1, 2009, but before June 2, 2023, 
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, 2009, or after April 30, 2009, at 
the option of the decedent's executor.
    (ii) For purposes of section 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 using 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 (f)(6) or (g)(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 (g)(2)(i) and (ii) of this 
section, where the donor or decedent's executor is given the option to 
use the appropriate actuarial tables under either paragraph (f)(6) or 
(g)(6) of this section, the donor or decedent's executor must 
consistently use the same mortality basis with respect to each interest 
(income, remainder, partial, etc.) in the same property, and with 
respect to all transfers occurring on the same valuation date. For 
example, gift and income tax charitable deductions with respect to the 
same transfer must be determined based on factors with the same 
mortality basis, and all assets includible in the gross estate and/or 
estate tax deductions claimed must be valued based on factors with the 
same mortality basis.
    (iv) In the case of transfers to a charitable remainder unitrust 
for which the valuation date is after April 30, 2019, and before June 
1, 2023, the present value of the remainder interest under this section 
is determined under Sec.  1.664(c)-4(e)(2).
    (3) Adjusted payout rate. The adjusted payout rate is determined by 
applying the formula in Sec.  1.664-4(e)(6)(ii) for the section 7520 
interest rate applicable to the transfer to derive a factor and 
calculating the final result to at least six decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS, for interest rates from 0.2 to 20 percent, inclusive, and appear 
in Tables F(0.2) through F(20.0). Tables F(0.2) through F(20.0) can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to 
time). Tables F(0.2) through F(20.0) are referenced and explained in 
IRS Publication 1458, Actuarial Valuations Version 3B. The payout 
adjustment factors from Table F can also be found in Sec.  1.664-
4(e)(6)(iii), but only for interest rates from 4.2 to 14 percent, 
inclusive. Alternatively, the Commissioner may supply a factor upon a 
request for a ruling. 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 is determined 
by applying the formula in Sec.  1.664-4(e)(6)(i) under the appropriate 
adjusted payout rate corresponding to the number of years in the term 
and calculating the final result to at least six decimal places. For 
the convenience of taxpayers, actuarial factors have been computed by 
the IRS and appear in Table D. Table D can be found on the IRS website 
at https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). Table D is 
referenced and explained in IRS Publication 1458, Actuarial Valuations 
Version 3B. The remainder factors from Table D also can be found in 
Sec.  1.664-4(e)(6)(iii), but only for adjusted payout rates from 4.2 
to 14 percent, inclusive. If the adjusted payout rate is a percentage 
that is between the adjusted payout rate for which factors are provided 
by Table D, an exact method of obtaining the applicable remainder 
factors (such as through software using the actual rate of return and 
the actuarial formula provided in Sec.  1.664-4(e)(6)(i)) or a linear 
interpolation must be used, provided whichever method used is applied 
consistently in valuing all interests in the same property. The 
applicable remainder factors derived by an exact method or by 
interpolation must be expressed to at least six decimal places. 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 
(g)(4). 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 section 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, and for an example that illustrates the 
application of this paragraph (g)(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 on or after May 1, 2009, and 
before June 1, 2023, may be computed directly by using the formula in 
Sec.  1.664-4(e)(5)(i) to derive a remainder factor from the 
appropriate mortality table and calculating the final result to at 
least five decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table U(1). Table 
U(1) can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding

[[Page 37438]]

URL as may be updated from time to time). Table U(1) is referenced and 
explained in IRS Publication 1458, Actuarial Valuations Version 3B. The 
remainder factors from Table U(1) also can be found in paragraph (g)(6) 
of this section, but only for adjusted payout rates from 4.2 to 14 
percent, inclusive. For purposes of the computations described in this 
paragraph (g)(5), the age of an individual is the age of that 
individual at the individual's nearest birthday. If the adjusted payout 
rate is a percentage that is between the adjusted payout rate for which 
factors are provided by Table U(1), an exact method of obtaining the 
applicable factors (such as through software using the actual rate of 
return and the actuarial formula provided in Sec.  1.664-4(e)(5)(i)) or 
a linear interpolation must be used, provided whichever method used is 
applied consistently in valuing all interests in the same property. The 
applicable remainder factors derived by an exact method or by 
interpolation must be expressed to at least five decimal places. The 
rules provided in Sec.  1.664-4(e)(5) apply for determining the present 
value of the remainder interest. See Sec.  1.664-4(e)(5) for an example 
illustrating the application of this paragraph (g)(5) (using current 
actuarial tables).
    (6) Actuarial Table U(1) for transfers for which the valuation date 
is on or after May 1, 2009, and before June 1, 2023. For transfers for 
which the valuation date is on or after May 1, 2009, and before June 1, 
2023, and without regard to the headings in the tables in this 
paragraph (g)(6) that do not contain this termination date for the 
applicability of the tables, 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 (g)(6), and Tables F(4.2) through F(14.0) in Sec.  
1.664-4(e)(6)(iii). See, however, Sec.  1.7520-3(b) (relating to 
exceptions to the use of prescribed tables under certain 
circumstances). Actuarial factors that do not appear in the following 
tables may be computed directly by using the formula in Sec.  1.664-
4(e)(5)(i) to derive remainder factors from the appropriate mortality 
table and calculating the result to at least five decimal places. For 
the convenience of taxpayers, actuarial factors have been computed by 
the IRS and appear in Table U(1) that is referenced and explained by 
IRS Publication 1458, Actuarial Valuations Version 3B (2009). The table 
is available at no charge, electronically via the IRS website at 
https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time).
* * * * *
    (7) Applicability dates. Paragraphs (g)(1) through (6) of this 
section apply on and after May 1, 2009, and before June 1, 2023.

0
Par. 11. Section 1.7520-1 is amended by revising paragraphs (a)(1) and 
(2), (b)(2), (c), and (d) and adding paragraphs (e) and (f) to read as 
follows:


Sec.  1.7520-1  Valuation of annuities, interests for life or a term of 
years, and remainder or reversionary interests.

    (a) * * * (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 a term of years (including unitrust 
interests), and remainder or reversionary interests is their present 
value determined under this section. See Sec.  20.2031-7(d) of this 
chapter (and, for periods prior to June 1, 2023, Sec. Sec.  20.2031-
7(d)(3) and 20.2031-7A of this chapter) for the computation of the 
value of annuities, interests for life or a term of years, and 
remainder or reversionary interests other than interests described in 
paragraphs (a)(2) and (3) of this section.
    (2) For a transfer to a pooled income fund, see Sec.  1.642(c)-6(e) 
(or, for periods prior to June 1, 2023, Sec.  1.642(c)-6A) with respect 
to the valuation of the remainder interest.
* * * * *
    (b) * * *
    (2) Mortality component. The mortality component reflects the 
mortality data in the most recently available decennial mortality 
report based on the United States census. As the appropriate new 
decennial mortality report becomes available after each decennial 
census, the Treasury Department and the IRS will revise the mortality 
component described in this section and will update the appropriate 
regulations to adopt the revised mortality component tables. For 
transactions with valuation dates on or after June 1, 2023, the 
mortality component table (Table 2010CM) is in Sec.  20.2031-
7(d)(7)(ii) of this chapter, is referenced by IRS Publication 1457, 
Actuarial Valuations Version 4A, and can be found on the IRS website at 
https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). See Sec.  
20.2031-7A of this chapter for mortality component tables applicable to 
transactions for which the valuation date falls before June 1, 2023.
    (c) Actuarial factors. The present value on the valuation date of 
an annuity, an interest for life or a term of years, and a remainder or 
reversionary interest is computed by using the section 7520 interest 
rate component that is described in paragraph (b)(1) of this section 
and the mortality component that is described in paragraph (b)(2) of 
this section. Actuarial factors for determining these present values 
may be calculated by taxpayers using the actuarial formulas in Sec.  
20.2031-7(d)(2) of this chapter but, for the convenience of taxpayers, 
are included in tables that are referenced and explained by 
publications of the Internal Revenue Service. If a factor for a 
particular situation is required in order to value an interest, that 
factor may be calculated by taxpayers using the actuarial formulas in 
Sec.  20.2031-7(d)(2) of this chapter or the taxpayer may request a 
ruling to obtain the factor from the Internal Revenue Service. The 
request for a ruling must be accompanied by a recitation of the facts, 
including the date of birth for each measuring life and copies of 
relevant instruments. A request for a ruling must comply with the 
instructions for requesting a ruling published periodically in the 
Internal Revenue Bulletin (see Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or 
successor revenue procedure(s), and Sec. Sec.  601.201 and 
601.601(d)(2)(ii)(b) of this chapter) and must include payment of the 
required user fee.
    (d) IRS publications referencing and explaining actuarial tables 
with rates from 0.2 to 20 percent, inclusive, at intervals of two-
tenths of one percent, for valuation dates on or after June 1, 2023. 
The publications listed in paragraphs (d)(1) through (3) of this 
section will be available within a reasonable time after June 1, 2023. 
The underlying actuarial tables referenced and explained by these 
publications currently are available, at no charge, electronically via 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables:
    (1) IRS Publication 1457, Actuarial Valuations Version 4A (2023). 
This publication references tables of valuation factors and provides 
examples that show how to compute other valuation factors, for 
determining the present value of annuities, interests for life or a 
term of years, and remainder or reversionary interests, measured by one 
or two lives. These factors may also be used in the valuation of 
interests in a charitable remainder annuity trust as

[[Page 37439]]

defined in Sec.  1.664-2 and a pooled income fund as defined in Sec.  
1.642(c)-5. This publication references and explains Table S (single 
life remainder factors), Table R(2) (two-life last-to-die remainder 
factors), Table B (actuarial factors used in determining the present 
value of an interest for a term of years), Table H (commutation 
factors), Table J (term certain annuity beginning-of-interval 
adjustment factors), and Table K (annuity end-of-interval adjustment 
factors). See earlier versions of the publication, Sec.  1.642(c)-6A, 
or Sec.  20.2031-7A of this chapter for Table S applicable to valuation 
dates before June 1, 2023. Earlier versions of the publication also 
contain earlier versions of Tables H and R(2). Tables B, J, and K also 
can be found in Sec.  20.2031-7(d)(6) of this chapter, but only for 
interest rates from 4.2 to 14 percent, inclusive.
    (2) IRS Publication 1458, Actuarial Valuations Version 4B (2023). 
This publication references and explains 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 
Sec.  1.664-3. This publication references Table U(1) (unitrust single 
life remainder factors), Table U(2) (unitrust two-life last-to-die 
remainder factors), Table D (actuarial factors used in determining the 
present value of a remainder interest postponed for a term of years), 
Table F (adjustment payout rate factors), and Table Z (unitrust 
commutation factors). See earlier versions of the publication or Sec.  
1.664-4A for Table U(1) applicable to valuation dates before June 1, 
2023. Earlier versions of the publication also contain earlier versions 
of Tables U(2) and Z. Table D also can be found in Sec.  1.664-
4(e)(6)(iii), but only for adjusted payout rates from 4.2 to 14 
percent, inclusive. Table F also can be found in Sec.  1.664-
4(e)(6)(iii), but only for interest rates from 4.2 to 14 percent, 
inclusive.
    (3) IRS Publication 1459, Actuarial Valuations Version 4C (2023). 
This publication references and explains Table C, which provides 
factors for making adjustments to the standard remainder factor for 
valuing gifts of depreciable property. See Sec.  1.170A-12.
    (4) The publications identified in paragraphs (d)(1) through (3) of 
this section also reference Table 2010CM, the mortality component 
table.
    (e) Use of approximation methods for obtaining factors when the 
required valuation rate falls between two listed rates. For certain 
cases, this part and IRS publications provide approximation methods 
(for example, interpolation) for obtaining factors when the required 
valuation rate falls between two listed rates (such as in the case of a 
pooled income fund's rate of return or a unitrust's adjusted payout 
rate). In general, exact methods of obtaining the applicable factors 
are allowed, such as through software using the applicable interest 
rate and the proper actuarial formula, provided such direct methods are 
applied consistently in valuing all interests in the same property. The 
actuarial formula in Sec.  20.2031-7(d)(2)(ii)(B) of this chapter is 
used to determine the remainder factor for pooled income funds and the 
actuarial formula in Sec.  1.664-4(e)(5)(i) is used to determine the 
remainder factor for unitrusts. The approximation method provided in 
this part, computed to at minimum the same number of decimal places as 
provided in this part, must be used if more exact methods are not 
available.
    (f) Applicability date. This section applies on and after June 1, 
2023.

PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 
1954

0
Par. 12. The authority citation for part 20 continues to read in part 
as follows:

    Authority: 26 U.S.C. 7805.
* * * * *

0
Par. 13. Section 20.2031-0 is revised to read as follows:


Sec.  20.2031-0  Table of contents.

    This section lists the section headings and undesignated center 
headings that appear in the regulations in this part 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 a term of 
years, and remainder or reversionary interests.
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 June 1, 2023

20.2031-7A Valuation of annuities, interests for life or a term of 
years, and remainder or reversionary interests for estates of 
decedents for which the valuation date of the gross estate is before 
June 1, 2023.



0
Par. 14. Section 20.2031-7 is amended by:
0
1. Revising paragraph (c), the heading of paragraph (d), and paragraphs 
(d)(1) through (5).
0
2. Redesignating paragraph (d)(7) as paragraph (g)(4) of Sec.  20.2031-
7A.
0
3. Adding new paragraph (d)(7).
0
4. Revising paragraph (e).
    The revisions and addition read as follows:


Sec.  20.2031-7  Valuation of annuities, interests for life or a term 
of years, and remainder or reversionary interests.

* * * * *
    (c) Actuarial valuations. The present value of annuities, interests 
for life or a term of years, and remainder or reversionary interests 
for estates of decedents for which the valuation date of the gross 
estate is on or after June 1, 2023, is determined under paragraph (d) 
of this section. The present value of annuities, interests for life or 
a term of years, and remainder or reversionary interests for estates of 
decedents for which the valuation date of the gross estate is before 
June 1, 2023, is determined (subject to paragraph (d)(3) of this 
section) under the following sections:

                        Table 1 to Paragraph (c)
------------------------------------------------------------------------
                   Valuation dates
------------------------------------------------------     Applicable
                  After                      Before       regulations
------------------------------------------------------------------------
                                             01-01-52    Sec.   20.2031-
                                                                   7A(a)
12-31-51................................     01-01-71      20.2031-7A(b)
12-31-70................................     12-01-83      20.2031-7A(c)
11-30-83................................     05-01-89      20.2031-7A(d)
04-30-89................................     05-01-99      20.2031-7A(e)
04-30-99................................     05-01-09    Sec.   20.2031-
                                                                   7A(f)
04-30-09................................     06-01-23      20.2031-7A(g)
------------------------------------------------------------------------

    (d) Actuarial valuations on or after June 1, 2023--(1) In general. 
Except as otherwise provided in paragraph (b) of this section and Sec.  
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 June 1, 2023, the fair market value of 
annuities, interests for life or a term of years, and remainder or 
reversionary interests is the present value determined by using 
standard or special section 7520 actuarial factors. Many of these 
standard factors are derived by using the actuarial formulas provided 
in paragraph (d)(2) of this section, the appropriate section 7520 
interest rate, and, if applicable, the mortality component for the 
valuation date of the interest that is being valued. For 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. For 
the convenience of taxpayers, paragraph

[[Page 37440]]

(d)(2) of this section provides for published tables of factors for 
specific types of interests. These published tables provide factors for 
rates from 0.2 to 20 percent, inclusive, at intervals of two-tenths of 
one percent. In general, appropriate factors instead may be computed 
directly from the actuarial formulas provided in paragraph (d)(2) of 
this section. In some cases, specific examples in this part and IRS 
publications illustrate approximation methods (for example, 
interpolation) for obtaining factors when the required valuation rate 
falls between two listed rates (such as in the case of a pooled income 
fund's rate of return or a unitrust's adjusted payout rate). Exact 
methods of obtaining the applicable actuarial factors are allowed, such 
as through software using the actual rate of return and the actuarial 
formulas provided in paragraph (d)(2) of this section, provided that 
the taxpayer uses at least the same number of decimal places as are 
provided in the published tables. The approximation method provided in 
this part, again using at least the same number of decimal places as 
provided in this part, must be used if more exact methods are not 
available. See Sec. Sec.  20.7520-1 through 20.7520-4. The selected 
method must be applied consistently in valuing all interests in the 
same property.
    (2) Specific interests--(i) Pooled income funds and charitable 
remainder trusts. The fair market value of a remainder interest in a 
pooled income fund, as defined in Sec.  1.642(c)-5 of this chapter, is 
its value determined under Sec.  1.642(c)-6(e) of this chapter. The 
fair market value of a remainder interest in a charitable remainder 
annuity trust, as defined in Sec.  1.664-2(a) of this chapter, is the 
present value determined under Sec.  1.664-2(c) of this chapter. The 
fair market value of a remainder interest in a charitable remainder 
unitrust, as defined in Sec.  1.664-3 of this chapter, is its present 
value determined under Sec.  1.664-4(e) of this chapter. The fair 
market value of a life interest or an interest for a 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 Sec.  1.664-4(e)(4) and (5) of 
this chapter.
    (ii) Ordinary remainder and reversionary interests--(A) Remainder 
and reversionary interests for a term of years. If the interest to be 
valued is a remainder or reversionary interest to take effect after a 
definite number of years, the present value of the interest is computed 
by multiplying the value of the property by the appropriate remainder 
factor (that corresponds to the applicable section 7520 interest rate 
and the stated term). The factor for an ordinary remainder interest 
following a term certain may be found using the formula in Figure 1 to 
this paragraph (d)(2)(ii)(A) and computing the result to at least six 
decimal places. For the convenience of taxpayers, actuarial factors 
have been computed by the IRS and appear in Table B. Table B can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to 
time). Table B is referenced and explained in IRS Publication 1457, 
Actuarial Valuations Version 4A, which will be available within a 
reasonable time after June 1, 2023. The remainder factors from Table B 
also can be found in paragraph (d)(6) of this section, but only for 
interest rates from 4.2 to 14 percent, inclusive. For information about 
obtaining special factors for other situations, see paragraph (d)(4) of 
this section.

Figure 1 to Paragraph (d)(2)(ii)(A)--Formula for Determining Term 
Certain Remainder Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.012

    (B) Remainder and reversionary interests dependent on the life of 
one individual. If the interest to be valued is a remainder or 
reversionary interest to take effect 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 factor (that corresponds 
to the applicable section 7520 interest rate and the age of the 
measuring life of the life interest that precedes the remainder 
interest). The factor for an ordinary remainder interest following the 
death of one individual may be found using the formula in Figure 2 to 
this paragraph (d)(2)(ii)(B) and computing the result to at least five 
decimal places. The prescribed mortality table is Table 2010CM as set 
forth in paragraph (d)(7)(ii) of this section, or for periods before 
June 1, 2023, the appropriate table found in Sec.  20.2031-7A. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in Table S. Table S currently is available, at no 
charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be 
updated from time to time). Table S is referenced and explained by IRS 
Publication 1457, Actuarial Valuations Version 4A, which will be 
available within a reasonable time after June 1, 2023. For information 
about obtaining special factors for other situations, see paragraph 
(d)(4) of this section.

Figure 2 to Paragraph (d)(2)(ii)(B)--Formula for Determining Single 
Life Remainder Factors

[[Page 37441]]

[GRAPHIC] [TIFF OMITTED] TR07JN23.013

    (iii) Ordinary interests for a term of years and ordinary interests 
for life. If the interest to be valued is the right of a person to 
receive the income of certain property, or to the use of certain 
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 actuarial factor for an interest for a 
term of years or for a life (that corresponds to the applicable section 
7520 interest rate and the durational period). The actuarial factor for 
an ordinary income interest for a term certain may be found by 
subtracting from 1.000000 the factor for an ordinary remainder interest 
following the same term certain that is determined under the formula in 
paragraph (d)(2)(ii)(A) of this section. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Income Interest'' column of Table B which can be found on the 
IRS website at https://www.irs.gov/retirement-plans/actuarial-tables 
(or a corresponding URL as may be updated from time to time). The 
actuarial factor for an ordinary income interest for the life of one 
individual may be found by subtracting from 1.00000 the factor for an 
ordinary remainder interest following the life of the same individual 
that is determined in paragraph (d)(2)(ii)(B) of this section. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in the ``Life Estate'' column of Table S. Table S 
(applicable when the valuation date is on or after June 1, 2023) can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Tables B and S are referenced and explained by IRS 
Publication 1457, Actuarial Valuations Version 4A. See Sec.  20.2031-7A 
or earlier versions of Publication 1457 for valuation of interests 
before June 1, 2023. For information about obtaining special factors 
for other situations, 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 factor (that corresponds to 
the applicable section 7520 interest rate and annuity period). The 
appropriate annuity factor for an annuity payable for a term of years 
is computed by subtracting from 1.000000 the factor for an ordinary 
remainder interest following the same term certain that is determined 
under the formula in paragraph (d)(2)(ii)(A) of this section and then 
dividing the result by the applicable section 7520 interest rate 
expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table B which can be found on the IRS 
website at https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). The appropriate 
annuity factor for an annuity payable for the life of one individual is 
computed by subtracting from 1.00000 the factor for an ordinary 
remainder interest following the life of the same individual that is 
determined under the formula in paragraph (d)(2)(ii)(B) of this section 
and then dividing the result by the applicable section 7520 interest 
rate expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table S. Table S (applicable when the 
valuation date is on or after June 1, 2023) can be found on the IRS 
website at https://www.irs.gov/retirement-plans/actuarial-tables. 
Tables B and S are referenced and explained in IRS Publication 1457, 
Actuarial Valuations Version 4A. See Sec.  20.2031-7A or earlier 
versions of Publication 1457 for valuation of interests before June 1, 
2023. For information about obtaining special factors for other 
situations, see paragraph (d)(4) of this section.
    (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 at the appropriate 
interest rate component for payments made at the end of the specified 
periods. The applicable adjustment factor may be found using the 
formula in Figure 3 to this paragraph (d)(2)(iv)(B) and calculating the 
result to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in Table K. Table K, which is referenced and explained by Publication 
1457, can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. The provisions of this paragraph 
(d)(2)(iv)(B) are illustrated by the example in paragraph 
(d)(2)(iv)(B)(2) of this section.

Figure 3 to Paragraph (d)(2)(iv)(B)--Formula for Determining Annuity 
Adjustment Factor at the End of the Specified Period

[[Page 37442]]

[GRAPHIC] [TIFF OMITTED] TR07JN23.014

    (1) Sample factors from actuarial Tables S and K. For purposes of 
the example in paragraph (d)(2)(iv)(B)(2) of this section, the 
following factors from Tables S and K will be used:

                                      Table 2 to Paragraph (d)(2)(iv)(B)(1)
                                   Factors From Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                          Age                                 Annuity          Life estate         Remainder
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
75.....................................................             9.4053            0.30097            0.69903
----------------------------------------------------------------------------------------------------------------
                                              Factors from Table K
                      Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
                     Interest rate                         Semi-annually        Quarterly           Monthly
----------------------------------------------------------------------------------------------------------------
3.2%...................................................             1.0079             1.0119             1.0146
----------------------------------------------------------------------------------------------------------------

    (2) Example. At the time of the decedent's death, the survivor/
annuitant, age 75, is entitled to receive an annuity of $15,000 per 
year for life payable in equal monthly installments at the end of each 
month. The section 7520 rate for the month in which the decedent died 
is 3.2 percent. Under Table S, the annuity factor at 3.2 percent for an 
individual aged 75 is 9.4053. Under Table K, the adjustment factor 
under the column for payments made at the end of each monthly period at 
the rate of 3.2 percent is 1.0146. The aggregate annual amount, 
$15,000, is multiplied by the factor 9.4053 and the product then is 
multiplied by 1.0146. The present value of the annuity at the date of 
the decedent's death is, therefore, $143,139.26 ($15,000 x 9.4053 x 
1.0146).
    (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 then is 
multiplied by the applicable adjustment factor at the appropriate 
interest rate component for payments made at the beginning of specified 
periods. The applicable adjustment factor may be found using the 
formula in Figure 4 to this paragraph (d)(2)(iv)(C) and calculating the 
result to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in Table J. Table J, which is referenced and explained by Publication 
1457, can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. 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 paragraph (d)(2)(iv)(B) of this section.

Figure 4 to Paragraph (d)(2)(iv)(C)--Formula for Determining Annuity 
Adjustment Factor at the Beginning of the Specified Period
[GRAPHIC] [TIFF OMITTED] TR07JN23.015


[[Page 37443]]


    (v) Annuity and unitrust interests for a term of years or until the 
prior death of an individual. See Sec.  25.2512-5(d)(2)(v) of this 
chapter 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 term of years or the death of an individual.
    (3) Transitional rule. If a decedent dies after April 30, 2019, and 
on or before June 1, 2023, the fair market value of annuities, 
interests for life or a term of years, and remainder or reversionary 
interests based on one or more measuring lives included in the gross 
estate of the decedent is their present value determined under this 
section by using the section 7520 interest rate for the month in which 
the valuation date occurs (see Sec. Sec.  20.7520-1(b) and 20.7520-
2(a)(2)) and factors derived from the selected mortality table, either 
Table 2010CM in paragraph (d)(7)(ii) of this section or Table 2000CM in 
Sec.  20.2031-7A(g)(4), at the option of the donor or the decedent's 
executor, as the case may be. If any previously filed estate tax return 
is supplemented to use the actuarial factors based on Table 2010CM, the 
supplemental return must state at the top ``AMENDED PURSUANT TO TD 
9974.'' For the convenience of taxpayers, actuarial factors based on 
Table 2010CM appear in the current version of Table S, and actuarial 
factors based on Table 2000CM appear in the previous version of Table 
S. Both versions of Table S will be available as provided in paragraph 
(d)(4) of this section. The decedent's executor must consistently use 
the same mortality basis with respect to each interest (income, 
remainder, partial, etc.) in the same property, and with respect to all 
transfers occurring on the same valuation date. For example, gift and 
income tax charitable deductions with respect to the same transfer must 
be determined based on factors with the same mortality basis, and all 
assets includible in the gross estate and/or estate tax deductions 
claimed must be valued based on factors with the same mortality basis.
    (4) Publications and actuarial computations by the Internal Revenue 
Service. The factor for determining the present value of a remainder 
interest that is dependent on the termination of the life of one 
individual may be computed by using the formula in paragraph 
(d)(2)(ii)(B) of this section to derive a remainder factor from the 
appropriate mortality table expressed to at least five decimal places. 
For the convenience of taxpayers, actuarial factors have been computed 
by the IRS and appear in Table S. The remainder factor for determining 
the present value of a remainder interest following a term certain may 
be computed by using the formula in paragraph (d)(2)(ii)(A) of this 
section expressed to at least six decimal places. For the convenience 
of taxpayers, actuarial factors have been computed by the IRS and 
appear in Table B. Adjustment factors for term certain annuities 
payable at the beginning of each interval may be computed by using the 
formula in paragraph (d)(2)(iv)(C) of this section expressed to at 
least four decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table J. Adjustment 
factors for annuities payable at the end of each interval may be 
computed by using the formula in paragraph (d)(2)(iv)(B) of this 
section expressed to at least four decimal places. For the convenience 
of taxpayers, actuarial factors have been computed by the IRS and 
appear in Table K. These tables currently are available, at no charge, 
electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from 
time to time). IRS Publication 1457, Actuarial Valuations Version 4A 
(2023), references and explains the factors contained in the actuarial 
tables and also includes examples that illustrate how to compute many 
special factors for more unusual situations. This publication will be 
available within a reasonable time after June 1, 2023. Tables B, J, and 
K also can be found in paragraph (d)(6) of this section, but only for 
interest rates from 4.2 to 14 percent, inclusive. If a special factor 
is required in the case of an actual decedent, the special factor may 
be calculated by the executor using the actuarial formulas in paragraph 
(d)(2) of this section or the executor may request a ruling to obtain 
the factor from the Internal Revenue Service. 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 Sec. Sec.  601.201 and 
601.601(d)(2)(ii)(b) of this chapter) and must include payment of the 
required user fee.
    (5) Examples. The provisions of this section are illustrated by the 
examples in this paragraph (d)(5). For purposes of these examples, the 
following factors from Tables S, B, and K will be used:

                                           Table 3 to Paragraph (d)(5)
----------------------------------------------------------------------------------------------------------------
                          Age                                 Annuity          Life estate         Remainder
----------------------------------------------------------------------------------------------------------------
                                   Factors From Table S--Based on Table 2010CM
                                             Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
31.....................................................            23.8334            0.76267            0.23733
46.....................................................            20.0146            0.64047            0.35953
----------------------------------------------------------------------------------------------------------------
                                             Interest at 4.6 Percent
----------------------------------------------------------------------------------------------------------------
65.....................................................            11.7691            0.54138            0.45862
----------------------------------------------------------------------------------------------------------------
                                              Factors from Table B
                           Annuity, Income, and Remainder Interests for a Term Certain
                                             Interest at 2.6 Percent
----------------------------------------------------------------------------------------------------------------
                         Years                                Annuity        Income interest       Remainder
----------------------------------------------------------------------------------------------------------------
5......................................................             4.6325           0.120445           0.879555
----------------------------------------------------------------------------------------------------------------

[[Page 37444]]

 
                                              Factors From Table K
                      Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
                     Interest Rate                         Semi-annually        Quarterly           Monthly
----------------------------------------------------------------------------------------------------------------
2.6%...................................................             1.0065             1.0097             1.0119
3.2%...................................................             1.0079             1.0119             1.0146
----------------------------------------------------------------------------------------------------------------

    (i) Example 1: Remainder payable at an individual's death. The 
decedent, or the 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 65 
years and 5 months old. In the month in which the decedent died, the 
section 7520 rate was 4.6 percent. Under Table S, the remainder factor 
at 4.6 percent for determining the present value of the remainder 
interest due at the death of a person aged 65, A's age at A's nearest 
birthday to the date of the decedent's death, is 0.45862. The present 
value of the remainder interest at the date of the decedent's death is, 
therefore, $22,931 ($50,000 times 0.45862).
    (ii) 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 3.2 percent. Under Table S, the factor at 3.2 
percent for determining the present value of the life estate given to a 
person aged 31, A's age at A's nearest birthday to the date of the 
decedent's death, is 0.76267. The present value of A's income interest 
at the time of the parent's death is, therefore, $38,133.50 ($50,000.00 
x 0.76267).
    (iii) 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 3.2 
percent. Under Table S, the factor at 3.2 percent for determining the 
present value of an annuity interest payable until the death of a 
person age 46 (B's age at B's nearest birthday to the date of A's 
death) is 20.0146. The adjustment factor from Table K at an interest 
rate of 3.2 percent for semiannual annuity payments made at the end of 
the period is 1.0079. The present value of the annuity at the date of 
A's death is, therefore, $201,727.15 ($10,000 x 20.0146 x 1.0079).
    (iv) 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 2.6 percent. A quarterly payment had been 
made immediately prior to the decedent's death and payments were to 
continue for 5 more years. Under Table B for the interest rate of 2.6 
percent, the factor for the present value of an annuity with a term of 
5 years is 4.6325. The adjustment factor from Table K at an interest 
rate of 2.6 percent for quarterly annuity payments made at the end of 
the quarter is 1.0097. The present value of the annuity is, therefore, 
$46,774.35 ($10,000 x 4.6325 x 1.0097).
* * * * *
    (7) Actuarial Table S and Table 2010CM where the valuation date is 
on or after June 1, 2023--(i) Determination of required factors. Except 
as provided in Sec.  20.7520-3(b) (pertaining to certain limitations on 
the use of prescribed tables), for determination of the present value 
of a remainder interest that is dependent on the termination of a life 
interest, where the valuation date is on or after June 1, 2023, 
actuarial remainder factors computed to at least five decimal places 
directly by using the formula in paragraph (d)(2)(ii)(B) of this 
section, Table 2010CM, and the section 7520 rate are used in the 
application of the provisions of this section. For the convenience of 
taxpayers, the actuarial factors, when the section 7520 interest rate 
component is from 0.2 to 20 percent, inclusive, have been computed by 
the IRS and can be found in Table S. Table S currently is available, at 
no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Table S is also referenced and 
explained by IRS Publication 1457, Actuarial Valuations Version 4A, 
which will be available within a reasonable time after June 1, 2023.

                                         Table 4 to Paragraph (d)(7)(ii)
----------------------------------------------------------------------------------------------------------------
            Age x                    lx              Age x             lx             Age x             lx
----------------------------------------------------------------------------------------------------------------
0............................      100,000.00  37..............       97,193.66  74.............       71,177.55
1............................       99,382.28  38..............       97,058.84  75.............       69,174.83
2............................       99,341.16  39..............       96,915.25  76.............       67,044.59
3............................       99,313.80  40..............       96,761.20  77.............       64,773.93
4............................       99,292.72  41..............       96,595.51  78.............       62,366.05
5............................       99,276.45  42..............       96,416.30  79.............       59,795.50
6............................       99,261.55  43..............       96,220.61  80.............       57,080.84
7............................       99,248.33  44..............       96,005.41  81.............       54,213.71
8............................       99,236.50  45..............       95,768.60  82.............       51,205.27
9............................       99,226.09  46..............       95,509.98  83.............       48,059.88
10...........................       99,217.03  47..............       95,229.06  84.............       44,808.51
11...........................       99,208.80  48..............       94,923.45  85.............       41,399.79
12...........................       99,199.98  49..............       94,589.88  86.............       37,895.25
13...........................       99,188.21  50..............       94,225.50  87.............       34,313.98

[[Page 37445]]

 
14...........................       99,170.64  51..............       93,828.33  88.............       30,700.82
15...........................       99,145.34  52..............       93,398.01  89.............       27,106.68
16...........................       99,111.91  53..............       92,934.52  90.............       23,586.75
17...........................       99,070.69  54..............       92,438.08  91.............       20,198.02
18...........................       99,021.50  55..............       91,907.95  92.............       16,996.17
19...........................       98,964.16  56..............       91,342.02  93.............       14,032.08
20...........................       98,898.61  57..............       90,737.24  94.............       11,348.23
21...........................       98,824.20  58..............       90,090.97  95.............       8,975.661
22...........................       98,741.32  59..............       89,401.06  96.............       6,931.559
23...........................       98,652.16  60..............       88,665.95  97.............       5,218.261
24...........................       98,559.87  61..............       87,883.66  98.............       3,823.642
25...........................       98,466.80  62..............       87,051.88  99.............       2,722.994
26...........................       98,373.71  63..............       86,167.86  100............       1,882.108
27...........................       98,280.09  64..............       85,226.77  101............       1,261.083
28...........................       98,185.51  65..............       84,221.59  102............        818.2641
29...........................       98,089.05  66..............       83,142.34  103............        513.7236
30...........................       97,989.90  67..............       81,978.28  104............        311.8784
31...........................       97,887.47  68..............       80,728.83  105............        183.0200
32...........................       97,781.58  69..............       79,387.95  106............        103.8046
33...........................       97,672.13  70..............       77,957.53  107............        56.91106
34...........................       97,559.20  71..............       76,429.84  108............        30.17214
35...........................       97,442.53  72..............       74,797.63  109............        15.47804
36...........................       97,321.14  73..............       73,049.33  110............        0.000000
----------------------------------------------------------------------------------------------------------------

    (e) Applicability date. This section applies on and after June 1, 
2023.

0
Par. 15. The undesignated center heading immediately preceding Sec.  
20.2031-7A is revised to read as follows:

Actuarial Tables Applicable Before June 1, 2023

0
Par. 16. Section 20.2031-7A is amended by:
0
1. Revising the section heading.
0
2. Adding paragraphs (g) heading and (g)(1) through (3).
0
3. In newly redesignated paragraph (g)(4), revising the heading and 
introductory text.
0
4. Adding paragraph (g)(5).
    The revisions and additions read as follows:


Sec.  20.2031-7A  Valuation of annuities, interests for life or a term 
of years, and remainder or reversionary interests for estates of 
decedents for which the valuation date of the gross estate is before 
June 1, 2023.

* * * * *
    (g) Valuation of annuities, interests for life or a term of years, 
and remainder or reversionary interests for estates of decedents for 
which the valuation date of the gross estate is on or after May 1, 
2009, and before June 1, 2023--(1) In general. Except as otherwise 
provided in Sec. Sec.  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 on or after May 1, 2009, 
and before June 1, 2023, the fair market value of annuities, interests 
for life or a term of years, and remainder or reversionary interests is 
the present value of the interests determined by using standard or 
special section 7520 actuarial factors and the valuation methodology 
described in Sec.  20.2031-7(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 Sec. Sec.  20.7520-1 through 20.7520-4. See paragraph 
(g)(4) of this section for determination of the appropriate table for 
use in valuing these interests.
    (2) Transitional rules. (i) If a decedent dies on or after May 1, 
2009, and if, on May 1, 2009, the decedent was under a mental 
disability so that the disposition of the decedent's property could not 
be changed, and the decedent dies on or before June 1, 2023, either 
without having regained the ability to dispose of the decedent's 
property or within 90 days of the date on which the decedent first 
regains that ability, the fair market value of annuities, interests for 
life or a term of years, and remainder or reversionary interests 
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 first became subject to the mental 
disability, at the option of the decedent's executor. For example, see 
paragraph (d) of this section.
    (ii) If a decedent dies on or after May 1, 2009, and before July 1, 
2009, the fair market value of annuities, interests for life or a term 
of years, and remainder or reversionary interests based on one or more 
measuring lives included in the gross estate of the decedent is their 
present value determined under this section by using the section 7520 
interest rate for the month in which the valuation date occurs (see 
Sec. Sec.  20.7520-1(b) and 20.7520-2(a)(2)) and the appropriate 
actuarial tables under either paragraph (f)(4) or (g)(4) of this 
section, at the option of the decedent's executor.
    (iii) For purposes of paragraphs (g)(2)(i) and (ii) of this 
section, where the decedent's executor is given the option to use the 
appropriate actuarial tables under either paragraph (f)(4) or (g)(4) of 
this section, the decedent's executor must consistently use the same 
mortality basis with respect to each interest (income, remainder, 
partial, etc.) in the same property, and with respect to all transfers 
occurring on the same valuation date. For example, gift and income tax 
charitable deductions with respect to the same transfer must be 
determined based on factors with the same mortality basis, and all 
assets includible in the gross estate and/or estate tax deductions 
claimed must be valued based on factors with the same mortality basis.
    (iv) If a decedent dies after April 30, 2019, and before June 1, 
2023, the fair market value of annuities, interests for life or a term 
of years, and remainder or reversionary interests based on one or more 
measuring lives included in the gross estate is their present value 
determined under Sec.  20.2031-7(d)(3).
    (3) Publications and actuarial computations by the Internal Revenue 
Service. The factor for determining the

[[Page 37446]]

present value of a remainder interest that is dependent on the 
termination of the life of one individual may be computed by using the 
formula in Sec.  20.2031-7(d)(2)(ii)(B) to derive a remainder factor 
from the appropriate mortality table expressed to at least five decimal 
places. For the convenience of taxpayers, actuarial factors have been 
computed by the IRS and appear in Table S. The factor for determining 
the present value of a remainder interest following a term certain may 
be computed by using the formula in Sec.  20.2031-7(d)(2)(ii)(A) 
expressed to at least six decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in Table B. Adjustment factors for term certain annuities payable at 
the beginning of each interval may be computed by using the formula in 
Sec.  20.2031-7(d)(2)(iv)(C) expressed to at least four decimal places. 
For the convenience of taxpayers, actuarial factors have been computed 
by the IRS and appear in Table J. Adjustment factors for annuities 
payable at the end of each interval may be computed by using the 
formula in Sec.  20.2031-7(d)(2)(iv)(B) expressed to at least four 
decimal places. For the convenience of taxpayers, actuarial factors 
have been computed by the IRS and appear in Table K. These tables are 
referenced and explained by IRS Publication 1457, Actuarial Values 
Version 3A (2009). Publication 1457 includes examples that illustrate 
how to compute many special factors for more unusual situations. The 
actuarial tables are available, at no charge, electronically via the 
IRS website at https://www.irs.gov/retirement-plans/actuarial-tables 
(or a corresponding URL as may be updated from time to time). Table S 
also can be found in paragraph (g)(4) of this section, but only for 
interest rates from 0.2 to 14 percent, inclusive. Tables B, J, and K 
also can be found in Sec.  20.2031-7(d)(6), but only for interest rates 
from 4.2 to 14 percent, inclusive. If a special factor is required in 
the case of an actual decedent, the special factor may be calculated by 
the executor using the actuarial formulas in Sec.  20.2031-7(d)(2) or 
the executor may request a ruling to obtain the factor from the 
Internal Revenue Service. 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 Sec. Sec.  601.201 and 601.601(d)(2)(ii)(b) of this 
chapter) and must include payment of the required user fee.
    (4) Actuarial tables. Except as provided in Sec.  20.7520-3(b) 
(pertaining to certain limitations on the use of prescribed tables), 
actuarial factors based on Table 2000CM must be used in the application 
of the provisions of this section. The factor for determining the 
present value of a remainder interest that is dependent on the 
termination of the life of one individual may be computed by using the 
formula in Sec.  20.2031-7(d)(2)(ii)(B) to derive a remainder factor 
from the appropriate mortality table to at least five decimal places. 
For the convenience of taxpayers, actuarial factors, when the section 
7520 interest rate component is from 0.2 to 20 percent, inclusive, have 
been computed by the IRS and appear in Table S (applicable on and after 
May 1, 2009, and before June 1, 2023). These actuarial tables, as 
referenced and explained by IRS Publication 1457, Actuarial Valuations 
Version 3A, are available, at no charge, electronically via the IRS 
website at https://www.irs.gov/retirement-plans/actuarial-tables. Table 
S (notwithstanding the lack of the applicable termination date in its 
heading), where the section 7520 interest rate component is from 0.2 to 
14 percent, inclusive, and Table 2000CM are as follows:
* * * * *
    (5) Applicability dates. Paragraphs (g)(1) through (4) of this 
section apply on and after May 1, 2009, and before June 1, 2023.

0
Par. 17. Section 20.2032-1 is amended by revising paragraphs (f)(1) and 
(h) to read as follows:


Sec.  20.2032-1  Alternate valuation.

* * * * *
    (f) * * *
    (1) Life estates, remainders, and similar interests--(i) In 
general. The values of life estates, remainders, and similar interests 
are to be obtained by applying the methods prescribed in Sec.  20.2031-
7, using the age of each person, the duration of whose life may affect 
the value of the interest, as of the date of the decedent's death, and 
the value of the property as of the alternate valuation date.
    (ii) Sample factors from actuarial Table S. The present value of a 
remainder interest dependent on the termination of one life is 
determined by using the formula in Sec.  20.2031-7(d)(2)(ii)(B) to 
derive a remainder factor from the appropriate mortality table to at 
least five decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table S. Table S 
can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from 
time to time). For purposes of the example in paragraph (e)(5)(iii) of 
this section, the following relevant factors from Table S is used:

                                         Table 2 to Paragraph (f)(1)(ii)
                                         Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                          Age                                 Annuity          Life estate         Remainder
----------------------------------------------------------------------------------------------------------------
                                             Interest at 4.2 Percent
----------------------------------------------------------------------------------------------------------------
65.....................................................            12.2128            0.51294            0.48706
----------------------------------------------------------------------------------------------------------------
                                             Interest at 4.6 Percent
----------------------------------------------------------------------------------------------------------------
65.....................................................            11.7691            0.54138            0.45862
----------------------------------------------------------------------------------------------------------------

    (iii) 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, A was 65 years and 5 months old, and the section 7520 
rate was 4.6 percent. The value of the decedent's remainder interest at 
the date of the decedent's death would be, as illustrated in Sec.  
20.2031-7(d)(5)(i) (Example 1),

[[Page 37447]]

$22,931.00 ($50,000 x 0.45862). On the date that is 6 months after the 
decedent's death, A was 65 years and 11 months old, and the section 
7520 rate was 4.2 percent. 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, and the decedent's 
executor elected to use the alternate valuation date, the value of the 
remainder interest would be $19,482.40 ($40,000 x 0.48706). When the 
alternate valuation date is elected, the age of A, and other aspects of 
valuation which change by reason of the mere passage of time, is 
determined as of the date of the decedent's death, while the value of 
the property and the relevant section 7520 interest rate is determined 
as of the alternate valuation date. Thus, the computation uses A's age 
of 65 years old at the date of the decedent's death, even though A 
would be closest to 66 years old on the alternate valuation date.
* * * * *
    (h) Applicability date. Paragraph (b) of this section is applicable 
to decedents dying on or after January 4, 2005. However, pursuant to 
section 7805(b)(7), taxpayers may elect to apply paragraph (b) of this 
section retroactively if the period of limitations for filing a claim 
for a credit or refund of Federal estate or generation-skipping 
transfer tax under section 6511 has not expired. Paragraph (f)(1) of 
this section applies on and after June 1, 2023.


Sec.  20.2032-1T  [Removed]

0
Par. 18. Section 20.2032-1T is removed.

0
Par. 19. Section 20.2036-1 is amended by:
0
1. In paragraph (c)(2)(iv), designating Examples 1 through 8 as 
paragraphs (c)(2)(iv)(A) through (H), respectively.
0
2. In newly designated paragraphs (c)(2)(iv)(A), (B), (C), (G), and 
(H), further redesignating the paragraphs in the first column as 
paragraphs in the second column:

------------------------------------------------------------------------
             Old paragraphs                       New paragraphs
------------------------------------------------------------------------
(c)(2)(iv)(A)(i) and (ii)..............  (c)(2)(iv)(A)(1) and (2)
(c)(2)(iv)(B)(i) and (ii)..............  (c)(2)(iv)(B)(1) and (2)
(c)(2)(iv)(C)(i), (ii), and (iii)......  (c)(2)(iv)(C)(1), (2), and (3)
(c)(2)(iv)(G)(i), (ii), and (iii)......  (c)(2)(iv)(G)(1), (2), and (3)
(c)(2)(iv)(G)(3)(A), (B), (C), (D),      (c)(2)(iv)(G)(3)(i), (ii),
 (E), and (F).                            (iii), (iv), (v), and (vi)
(c)(2)(iv)(G)(iv), (v), and (vi).......  (c)(2)(iv)(G)(4), (5), and (6)
(c)(2)(iv)(H)(i), (ii), (iii), (iv),     (c)(2)(iv)(H)(1), (2), (3),
 (v), (vi), and (vii).                    (4), (5), (6), and (7)
------------------------------------------------------------------------

0
3. Revising newly designated paragraph (c)(2)(iv)(C).
    The revision reads as follows:


Sec.  20.2036-1  Transfers with retained life estate.

* * * * *
    (c) * * *
    (2) * * *
    (iv) * * *
    (C) Example 3. (1) D created a CRUT within the meaning of section 
664(d)(2). The trust instrument directs the trustee to hold, invest, 
and reinvest the corpus of the trust and to pay to D for D's life, and 
then to D's child (C) for C's life, in equal quarterly installments 
payable at the end of each calendar quarter, an amount equal to 6 
percent of the fair market value of the trust as valued on December 15 
of the prior taxable year of the trust. At the termination of the 
trust, the then-remaining corpus, together with any and all accrued 
income, is to be distributed to N, a charitable organization described 
in sections 170(c), 2055(a), and 2522(a). D dies six years later, 
survived by C, who was then age 55. The value of the trust assets on 
D's death was $300,000. D's executor does not elect to use the 
alternate valuation date and D's executor does not choose to use the 
section 7520 interest rate for either of the two months prior to D's 
death.
    (2) The amount of the corpus with respect to which D retained the 
right to the income, and thus the amount includible in D's gross estate 
under section 2036(a)(1), is that amount of corpus necessary to yield 
the unitrust payments as interest on the corpus. In this case, such 
amount of corpus is determined by dividing the trust's equivalent 
income interest rate by the section 7520 rate (which was 5.4 percent at 
the time of D's death). The equivalent income interest rate is 
determined by dividing the trust's adjusted payout rate by the excess 
of 1 over the adjusted payout rate. Based on Table F(5.4) in Sec.  
1.664-4(e)(6)(iii) of this chapter, the appropriate adjusted payout 
rate for the trust at D's death is 5.807 percent (6 percent x 
0.967769). Thus, the equivalent income interest rate is 6.165 percent 
(5.807 percent/(1--5.807 percent)). The ratio of the equivalent 
interest rate to the assumed interest rate under section 7520 is 114.17 
percent (6.165 percent/5.4 percent). Because this exceeds 100 percent, 
D's retained payout interest exceeds a full income interest in the 
trust, and D effectively retained the income from all the assets 
transferred to the trust. Accordingly, because D retained for life an 
interest at least equal to the right to all income from all the 
property transferred by D to the CRUT, the entire value of the corpus 
of the CRUT is includible in D's gross estate under section 2036(a)(1). 
(The result would be the same if D had retained, instead, an interest 
in the CRUT for a term of years and had died during the term.) Under 
the facts presented, section 2039 does not apply to include any amount 
in D's gross estate by reason of D's retained unitrust interest. See 
Sec.  20.2039-1(e).
    (3) If, instead, D had retained the right to a unitrust amount 
having an adjusted payout for which the corresponding equivalent 
interest rate would have been less than the 5.4 percent assumed 
interest rate of section 7520, then a correspondingly reduced 
proportion of the trust corpus would be includible in D's gross estate 
under section 2036(a)(1). Alternatively, if the interest retained by D 
was instead only one-half of the 6 percent unitrust interest, then the 
amount included in D's estate would be the amount needed to produce a 3 
percent unitrust interest. All of the results in this paragraph 
(c)(2)(iv)(C)(3) (Example 3) would be the same if the trust had been a 
grantor retained unitrust instead of a CRUT.
* * * * *

0
Par. 20. Section 20.2055-2 is amended by revising paragraphs 
(e)(3)(iii) and (f)(4) and (6) to read as follows:


Sec.  20.2055-2  Transfers not exclusively for charitable purposes.

* * * * *
    (e) * * *
    (3) * * *
    (iii)(A) 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 generally is effective in the

[[Page 37448]]

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 the rule in paragraphs (e)(2)(vi)(a) and (e)(2)(vii)(a) 
of this section are provided for 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 
(e)(2)(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. 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 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).
    (B) The appropriate annuity factor for an annuity payable for a 
term of years is computed by subtracting from 1.000000 the factor for 
an ordinary remainder interest following the same term certain that is 
determined under the formula in Sec.  20.2031-7(d)(2)(ii)(A) and then 
dividing the result by the applicable section 7520 interest rate, 
expressing the annuity factor to at least four decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in the ``Annuity'' column of Table B. The appropriate 
annuity factor for an annuity payable for the life of one individual is 
computed by subtracting from 1.00000 the factor for an ordinary 
remainder interest following the life of the same individual that is 
determined under the formula in Sec.  20.2031-7(d)(2)(ii)(B) and then 
dividing the result by the applicable section 7520 interest rate 
expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table S. Tables B and S can be found on 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). 
For purposes of the example in paragraph (e)(3)(iii)(C) of this 
section, the following relevant factors from Tables B and S are used:

                                       Table 1 to Paragraph (e)(3)(iii)(B)
----------------------------------------------------------------------------------------------------------------
                         Years                                Annuity        Income interest       Remainder
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table B
----------------------------------------------------------------------------------------------------------------
                           Annuity, Income, and Remainder Interests for a Term Certain
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
37.....................................................            21.5068           0.688218           0.311782
38.....................................................            21.8089           0.697886           0.302114
----------------------------------------------------------------------------------------------------------------
                                   Factors from Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
                          Age                              Annuity            Life estate        Remainder
----------------------------------------------------------------------------------------------------------------
40.....................................................            21.7045            0.69454            0.30546
----------------------------------------------------------------------------------------------------------------

    (C) The following example illustrates how to determine the term of 
years for a reformed interest as discussed in paragraph (e)(3)(iii)(A) 
of this section. Assume an annuity interest payable for the life of an 
individual age 40 at the time of the transfer on or after June 1, 2023, 
with an interest rate of 3.2 percent under section 7520. Under Table S, 
the annuity factor at 3.2 percent for the life of an individual age 40 
is 21.7045. Based on Table B at 3.2 percent, the factor 21.7045 
corresponds to a term of years between 37 and 38 years. Accordingly, 
the annuity interest must be reformed into an interest payable for a 
term of 38 years.
* * * * *
    (f) * * *
    (4) Other decedents. The present value of an interest not described 
in paragraph (f)(2) of this section is to be determined under Sec.  
20.2031-7(d) in the case of decedents where the valuation date of the 
gross estate is on or after June 1, 2023, or under Sec.  20.2031-7A in 
the case of decedents where the valuation date of the gross estate is 
before June 1, 2023.
* * * * *
    (6) Applicability date. Paragraphs (e)(3)(iii) and (f)(4) of this 
section apply on and after June 1, 2023.

0
Par. 21. Section 20.2056A-4 is amended by:
0
1. Revising paragraph (c)(4)(ii)(B).
0
2. In paragraph (d), designating Examples 1 through 5 as paragraphs 
(d)(1) through (5), respectively.

[[Page 37449]]

0
3. Revising the headings in newly designated paragraphs (d)(1) through 
(3).
0
4. Revising newly designated paragraph (d)(4) and paragraph (e).
    The revisions read as follows:


Sec.  20.2056A-4  Procedures for conforming marital trusts and nontrust 
marital transfers to the requirements of a qualified domestic trust.

* * * * *
    (c) * * *
    (4) * * *
    (ii) * * *
    (B) The total present value of the nonassignable annuity or other 
payment is the present value of the annuity or other payment as of the 
date of the decedent's death, determined in accordance with the 
interest rates and mortality table prescribed by section 7520. The 
expected annuity term is the 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 lowest annuity 
factor that is equal to or greater than the quotient. The annuity 
factor is computed by subtracting from 1.000000 the factor for an 
ordinary remainder interest following the same term certain that is 
determined under the formula in Sec.  20.2031-7(d)(2)(ii)(A) and then 
dividing the result by the applicable section 7520 interest rate 
expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table B which can be found on the IRS 
website at https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). If the quotient 
obtained falls between two terms, the longer term is used.
* * * * *
    (d) * * *
    (1) Example 1. Transfer and assignment of probate and nonprobate 
property to QDOT. * * *
    (2) Example 2. Formula assignment. * * *
    (3) Example 3. Jointly owned property. * * *
    (4) Example 4. Computation of corpus portion of annuity payment. 
(i) The appropriate annuity factor for an annuity payable for the life 
of one individual is computed by subtracting from 1.00000 the factor 
for an ordinary remainder interest following the life of the same 
individual that is determined under the formula in Sec.  20.2031-
7(d)(2)(ii)(B) and then dividing the result by the applicable section 
7520 interest rate expressed to at least four decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in the ``Annuity'' column of Table S. The appropriate 
annuity factor for an annuity payable for a term of years is computed 
by subtracting from 1.000000 the factor for an ordinary remainder 
interest following the same term certain that is determined under the 
formula in Sec.  20.2031-7(d)(2)(ii)(A) and then dividing the result by 
the applicable section 7520 interest rate expressed to at least four 
decimal places. For the convenience of taxpayers, actuarial factors 
have been computed by the IRS and appear in the ``Annuity'' column of 
Table B. The applicable adjustment factor for annuities that are 
payable at the end of semiannual, quarterly, monthly, or weekly periods 
is computed by use of the formula in Sec.  20.2031-7(d)(2)(iv)(B) to at 
least four decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table K. These 
actuarial tables can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. For purposes of the 
example in this paragraph (d)(4), the relevant factors from Tables S, 
B, and K are:

                                         Table 2 to Paragraph (d)(4)(i)
                                   Factors From Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                          Age                                 Annuity          Life Estate         Remainder
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.6 Percent
----------------------------------------------------------------------------------------------------------------
60.....................................................            14.6908            0.52887            0.47113
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table B
----------------------------------------------------------------------------------------------------------------
                           Annuity, Income, and Remainder Interests for a Term Certain
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.6 Percent
----------------------------------------------------------------------------------------------------------------
                         Years                             Annuity            Income Interest    Remainder
----------------------------------------------------------------------------------------------------------------
21.....................................................            14.5605           0.524177           0.475823
22.....................................................            15.0198           0.540712           0.459288
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table K
                      Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
                     Interest Rate                         Semi-Annually      Quarterly          Monthly
----------------------------------------------------------------------------------------------------------------
3.6%...................................................             1.0089             1.0134             1.0164
----------------------------------------------------------------------------------------------------------------

    (ii) At the time of D's death, on or after June 1, 2023, 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 3.6 percent. Under 
Table S, the annuity factor at 3.6 percent for a person age 60 is 
14.6908. The adjustment factor at 3.6 percent in Table K for monthly 
payments is 1.0164. Accordingly, the right to receive $72,000 per year 
on a

[[Page 37450]]

monthly basis is equal to the right to receive $73,180.80 ($72,000 x 
1.0164) on an annual basis.
    (iii) The corpus portion of each annuity payment received by S is 
determined as follows:
    (A) The first step is to determine the present value of S's annuity 
payments under the plan ($73,180.80 x 14.6908 = $1,075,084.50).
    (B) The second step is to determine the number of years that would 
be required for S's annuity to exhaust a hypothetical fund of 
$1,075,084.50. The annuity factor of 14.6908 falls between the Table B 
term certain annuity factors for 21 and 22 years at an interest rate of 
3.6 percent. Accordingly, the expected annuity term is 22 years.
    (C) The third step is to determine the corpus amount of the annual 
payment by dividing the expected term of 22 years into the present 
value of the hypothetical fund ($1,075,084.50/22 = $48,867.48).
    (D) 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 paragraph (d)(4)(i) of this section) ($48,867.48/
73,180.80 = 0.67).
    (iv) Accordingly, 67 percent of each payment to S is deemed to be a 
distribution of corpus. A marital deduction is allowed for 
$1,075,084.50, 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.
* * * * *
    (e) Applicability date. Paragraphs (c)(4)(ii)(B) and (d)(4) of this 
section are applicable with respect to decedents dying on or after June 
1, 2023.

0
Par. 22. Section 20.7520-1 is amended by revising paragraphs (a)(1) and 
(2), (b)(2), (c), and (d) and adding paragraphs (e) and (f) to read as 
follows:


Sec.  20.7520-1   Valuation of annuities, interests for life or a term 
of years, and remainder or reversionary interests.

    (a) * * *(1) Except as otherwise provided in this section and in 
Sec.  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 a term of years (including unitrust 
interests), and remainder or reversionary interests is their present 
value determined under this section. See Sec.  20.2031-7(d) (and, for 
periods prior to June 1, 2023, Sec.  20.2031-7A) for the computation of 
the value of annuities, interests for life or a term of years, and 
remainder or reversionary interests, other than interests described in 
paragraphs (a)(2) and (3) of this section.
    (2) For a transfer to a pooled income fund, see Sec.  1.642(c)-6(e) 
of this chapter (or, for periods prior to June 1, 2023, Sec.  1.642(c)-
6A of this chapter) with respect to the valuation of the remainder 
interest.
* * * * *
    (b) * * *
    (2) Mortality component. The mortality component reflects the 
mortality data in the most recently available decennial mortality 
report based on the United States census. As the appropriate new 
decennial mortality report becomes available after each decennial 
census, the Treasury Department and the IRS will revise the mortality 
component described in this section and will update the regulations to 
adopt the revised mortality component tables. For decedents' estates 
with valuation dates on or after June 1, 2023, the mortality component 
table (Table 2010CM) is in Sec.  20.2031-7(d)(7)(ii) and is referenced 
by IRS Publication 1457, Actuarial Valuations Version 4A, and can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to 
time). See Sec.  20.2031-7A for mortality component tables applicable 
to decedents' estates with valuation dates before June 1, 2023.
    (c) Actuarial factors. The present value on the valuation date of 
an annuity, an interest for life or a term of years, and a remainder or 
reversionary interest is computed by using the section 7520 interest 
rate component that is described in paragraph (b)(1) of this section 
and the mortality component that is described in paragraph (b)(2) of 
this section. Actuarial factors for determining these present values 
may be calculated by using the formulas in Sec.  20.2031-7(d)(2). For 
the convenience of taxpayers, the IRS has computed actuarial factors 
and displayed them on tables that are referenced and explained by 
publications of the Internal Revenue Service. If a special factor is 
required in order to value an interest, the special factor may be 
calculated by the taxpayer using the actuarial formulas in Sec.  
20.2031-7(d)(2) or the taxpayer may request a ruling to obtain the 
factor from the Internal Revenue Service. The request for a ruling must 
be accompanied by a recitation of the facts, including the date of 
birth for each measuring life and copies of relevant instruments. A 
request for a ruling must comply with the instructions for requesting a 
ruling published periodically in the Internal Revenue Bulletin (see 
Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or successor revenue procedures, 
and Sec. Sec.  601.201 and 601.601(d)(2)(ii)(b) of this chapter) and 
must include payment of the required user fee.
    (d) IRS publications referencing and explaining actuarial tables 
with rates from 0.2 to 20 percent, inclusive, at intervals of two-
tenths of one percent, for valuation dates on and after June 1, 2023. 
The publications listed in paragraphs (d)(1) through (3) of this 
section will be available within a reasonable time after June 1, 2023. 
The underlying actuarial tables referenced and explained by these 
publications currently are available, at no charge, electronically via 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables:
    (1) IRS Publication 1457, Actuarial Valuations Version 4A (2023). 
This publication references tables of valuation factors and provides 
examples that show how to compute other valuation factors, for 
determining the present value of annuities, interests for life or a 
term of years, and remainder or reversionary interests, measured by one 
or two lives. These factors also may be used in the valuation of 
interests in a charitable remainder annuity trust as defined in Sec.  
1.664-2 of this chapter and a pooled income fund as defined in Sec.  
1.642(c)-5 of this chapter. This publication references and explains 
Tables S (single life remainder factors), R(2) (two-life last-to-die 
remainder factors), B (actuarial factors used in determining the 
present value of an interest for a term of years), H (commutation 
factors), J (term certain annuity beginning-of-interval adjustment 
factors), and K (annuity end-of-interval adjustment factors). See 
earlier versions of the publication, Sec.  1.642(c)-6A of this chapter, 
or Sec.  20.2031-7A for Table S applicable to valuation dates before 
June 1, 2023. See earlier versions of the publication for Table R(2) 
applicable to valuation dates before June 1, 2023. Earlier versions of 
the publication also contain earlier

[[Page 37451]]

versions of Tables H and R(2). Tables B, J, and K also can be found in 
Sec.  20.2031-7(d)(6), but only for interest rates from 4.2 to 14 
percent, inclusive.
    (2) IRS Publication 1458, Actuarial Valuations Version 4B (2023). 
This publication references and explains 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 
Sec.  1.664-3 of this chapter. This publication references Tables U(1) 
(unitrust single life remainder factors), U(2) (unitrust two-life last-
to-die remainder factors), D (actuarial factors used in determining the 
present value of a remainder interest postponed for a term of years), F 
(adjustment payout rate factors), and Z (unitrust commutation factors). 
See earlier versions of the publication or Sec.  1.664-4A of this 
chapter for Table U(1) applicable to valuation dates before June 1, 
2023. Earlier versions of the publication also contain earlier versions 
of Tables U(2) and Z. Table D also can be found in Sec.  1.664-
4(e)(6)(iii) of this chapter, but only for adjusted payout rates from 
4.2 to 14 percent, inclusive. Table F also can be found in Sec.  1.664-
4(e)(6)(iii) of this chapter, but only for interest rates from 4.2 to 
14 percent, inclusive.
    (3) IRS Publication 1459, Actuarial Valuations Version 4C (2023). 
This publication references and explains Table C, which provides 
factors for making adjustments to the standard remainder factor for 
valuing gifts of depreciable property. See Sec.  1.170A-12 of this 
chapter.
    (4) The publications identified in paragraphs (d)(1) through (3) of 
this section also reference Table 2010CM, the mortality component 
table.
    (e) Use of approximation methods for obtaining factors when the 
required valuation rate falls between two listed rates. For certain 
cases, this part and IRS publications provide approximation methods 
(for example, interpolation) for obtaining factors when the required 
valuation rate falls between two listed rates (such as in the case of a 
pooled income fund's rate of return or a unitrust's adjusted payout 
rate). In general, exact methods of obtaining the applicable factors 
are allowed, such as through software using the actual rate of return 
and the proper actuarial formulas used for the published factors at the 
listed rates, provided such direct methods are applied consistently in 
valuing all interests in the same property. The actuarial formula in 
Sec.  20.2031-7(d)(2)(ii)(B) is used to determine the remainder factor 
for pooled income funds and the actuarial formula in Sec.  1.664-
4(e)(5)(i) of this chapter is used to determine the remainder factor 
for unitrusts. When using either an exact method or the approximation 
method, the resulting actuarial factor must be expressed with at least 
the same number of decimal places as that used in this part. The 
approximation method provided in this part must be used if more exact 
methods are not available.
    (f) Applicability date. This section applies on and after June 1, 
2023.

PART 25--GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954

0
Par. 23. The authority citation for part 25 continues to read in part 
as follows:

    Authority: 26 U.S.C. 7805.
* * * * *
0
Par. 24. Section 25.2512-0 is revised to read as follows:


Sec.  25.2512-0  Table of contents.

    This section lists the section headings that appear in the 
regulations in this part 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, interests for life or a term of 
years, and remainder or reversionary interests.
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 June 1, 2023
25.2512-5A Valuation of annuities, interests for life or a term of 
years, and remainder or reversionary interests transferred before 
June 1, 2023.


0
Par. 25. Section 25.2512-5 is amended by revising paragraphs (c), (d), 
and (e) to read as follows:


Sec.  25.2512-5  Valuation of annuities, interests for life or a term 
of years, and remainder or reversionary interests.

* * * * *
    (c) Actuarial valuations. The present value of annuities, interests 
for life or a term of years, and remainder or reversionary interests 
transferred by gift on or after June 1, 2023, is determined under 
paragraph (d) of this section. The present value of annuities, 
interests for life or a term of years, and remainder or reversionary 
interests transferred by gift before June 1, 2023, is determined 
(subject to paragraph (d)(3) of this section) under the following 
sections:

                        Table 1 to Paragraph (c)
------------------------------------------------------------------------
                      Transfers
------------------------------------------------------     Applicable
                  After                      Before       regulations
------------------------------------------------------------------------
                                             01-01-52    Sec.   25.2512-
                                                                   5A(a)
12-31-51................................     01-01-71      25.2512-5A(b)
12-31-70................................     12-01-83      25.2512-5A(c)
11-30-83................................     05-01-89      25.2512-5A(d)
04-30-89................................     05-01-99      25.2512-5A(e)
04-30-99................................     05-01-09      25.2512-5A(f)
04-30-09................................     06-01-23      25.2512-5A(g)
------------------------------------------------------------------------

    (d) Actuarial valuations on or after June 1, 2023--(1) In general. 
Except as otherwise provided in paragraph (b) of this section and Sec.  
25.7520-3(b) (relating to exceptions to the use of prescribed tables 
under certain circumstances), the fair market value of annuities, 
interests for life or a term of years, and remainder or reversionary 
interests transferred on or after June 1, 2023, is the present value of 
such interests determined under paragraph (d)(2) of this section and by 
using standard or special section 7520 actuarial factors. Many of these 
factors are derived by using the actuarial formulas provided in Sec.  
20.2031-7(d)(2) of this chapter, appropriate section 7520 interest 
rate, and, if applicable, the mortality component for the valuation 
date of the interest that is being valued. For 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. For the 
convenience of taxpayers, paragraph (d)(2) of this section provides for 
published tables of factors for specific types of interests. These 
published tables provide factors for rates from 0.2 to 20 percent, 
inclusive, at intervals of two-tenths of one percent. In general, 
appropriate factors instead may be computed directly from the actuarial 
formulas provided in Sec.  20.2031-7(d)(2) of this chapter. In some 
cases, specific examples in this part and IRS publications illustrate 
approximation methods (for example, interpolation) for obtaining 
factors when the required valuation rate falls between two listed rates 
(such as in the case of a pooled income fund's rate of return or a 
unitrust's adjusted payout rate). Exact methods of obtaining the 
applicable actuarial factors are allowed, such as through software 
using the actual rate of return and the actuarial formulas provided in 
Sec.  20.2031-7(d)(2) of this chapter. When using either an exact 
method or the approximation method, the resulting actuarial factor must 
be expressed with at least the same number of decimal places as that 
used in this part. The approximation method provided in this part must 
be used if more exact methods are not available.

[[Page 37452]]

See Sec. Sec.  25.7520-1 through 25.7520-4. The selected method must be 
applied consistently in valuing all interests in the same property. 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 
Sec.  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, an 
interest for life or a term of years, a remainder or reversionary 
interest 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) Pooled income funds and charitable remainder trusts. The fair 
market value of a remainder interest in a pooled income fund, as 
defined in Sec.  1.642(c)-5 of this chapter, is its value determined 
under Sec.  1.642(c)-6(e) of this chapter (see Sec.  1.642(c)-6A of 
this chapter for certain prior periods). The fair market value of a 
remainder interest in a charitable remainder annuity trust, as 
described in Sec.  1.664-2(a) of this chapter, is its present value 
determined under Sec.  1.664-2(c) of this chapter. The fair market 
value of a remainder interest in a charitable remainder unitrust, as 
defined in Sec.  1.664-3 of this chapter, is its present value 
determined under Sec.  1.664-4(e) of this chapter. The fair market 
value of a life interest or term for years interest 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 Sec.  1.664-4(e)(4) and (5) of this chapter.
    (ii) Ordinary remainder and reversionary interests--(A) Remainder 
and reversionary interests after a term of years. If the interest to be 
valued is a remainder or reversionary interest to take effect after a 
definite number of years, the present value of the interest is computed 
by multiplying the value of the property by the appropriate remainder 
factor (that corresponds to the applicable section 7520 interest rate 
and the stated term). The factor for an ordinary remainder interest 
following a term certain may be found using the formula in Sec.  
20.2031-7(d)(2)(ii)(A) of this chapter and computing the result to at 
least six decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table B. Table B 
can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from 
time to time). Table B is referenced and explained in IRS Publication 
1457, Actuarial Valuations Version 4A, which will be available within a 
reasonable time after June 1, 2023. The remainder factors from Table B 
also can be found in paragraph (d)(6) of this section, but only for 
interest rates from 4.2 to 14 percent, inclusive. For information about 
obtaining special factors for other situations, see paragraph (d)(4) of 
this section.
    (B) Remainder and reversionary interests dependent on the life of 
one individual. If the interest to be valued is a remainder or 
reversionary interest to take effect 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 factor (that corresponds 
to the applicable section 7520 interest rate and the age of the 
measuring life of the life interest that precedes the remainder 
interest). The factor for an ordinary remainder interest following the 
death of one individual may be found by using the formula in Sec.  
20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor 
from the appropriate mortality table to at least five decimal places. 
For the convenience of taxpayers, actuarial factors have been computed 
by the IRS and appear in Table S. Table S currently is available, at no 
charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be 
updated from time to time). Table S is referenced and explained by IRS 
Publication 1457, Actuarial Valuations Version 4A, which will be 
available within a reasonable time after June 1, 2023. For information 
about obtaining special factors for other situations, see paragraph 
(d)(4) of this section.
    (iii) Ordinary interests for a 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 the use of certain 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 actuarial factor for an interest for a term of years or 
for a life interest (that corresponds to the applicable section 7520 
interest rate and the durational period). The actuarial factor for an 
ordinary income interest for a term certain may be found by subtracting 
from 1.000000 the factor for an ordinary remainder interest following 
the same term certain that is determined under the formula in Sec.  
20.2031-7(d)(2)(ii)(A) of this chapter. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Income Interest'' column of Table B which can be found on the 
IRS website at https://www.irs.gov/retirement-plans/actuarial-tables 
(or a corresponding URL as may be updated from time to time). The 
actuarial factor for an ordinary income interest for the life of one 
individual may be found by subtracting from 1.00000 the factor for an 
ordinary remainder interest following the life of the same individual 
that is determined in Sec.  20.2031-7(d)(2)(ii)(B) of this chapter. For 
the convenience of taxpayers, actuarial factors have been computed by 
the IRS and appear in the ``Life Estate'' column of Table S. Table S 
(applicable when the valuation date is on or after June 1, 2023) can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Tables B and S are referenced and explained by IRS 
Publication 1457, Actuarial Valuations Version 4A. See Sec.  20.2031-7A 
of this chapter or earlier versions of Publication 1457 for valuation 
of interests before June 1, 2023. For information about obtaining 
special factors for other situations, 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 factor (that corresponds to 
the applicable section 7520 interest rate and annuity period). The 
appropriate annuity factor for an annuity payable for a term of years 
is computed by subtracting from 1.000000 the factor for an ordinary 
remainder interest following the same term certain that is determined 
under the formula in Sec.  20.2031-7(d)(2)(ii)(A) of this chapter and 
then dividing the result by the applicable section 7520 interest rate 
expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table B which

[[Page 37453]]

can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from 
time to time). The appropriate annuity factor for an annuity payable 
for the life of one individual is computed by subtracting from 1.00000 
the factor for an ordinary remainder interest following the life of the 
same individual that is determined in Sec.  20.2031-7(d)(2)(ii)(B) of 
this chapter and then dividing the result by the applicable section 
7520 interest rate expressed to at least four decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in the ``Annuity'' column of Table S. Table S 
(applicable when the valuation date is on or after June 1, 2023) can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Tables B and S are referenced and explained in IRS 
Publication 1457, Actuarial Valuations Version 4A. See Sec.  20.2031-7A 
of this chapter or earlier versions of Publication 1457 for valuation 
of interests before June 1, 2023. For information about obtaining 
special factors for other situations, see paragraph (d)(4) of this 
section.
    (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 then is 
multiplied by the applicable adjustment factor at the appropriate 
interest rate component for payments made at the end of the specified 
period. The applicable adjustment factor may be found using the formula 
in Sec.  20.2031-7(d)(2)(iv)(B) of this chapter expressed to at least 
four decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table K. Table K, 
which is referenced and explained by Publication 1457, can be found on 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. The provisions of this paragraph (d)(2)(iv)(B) are illustrated 
by the example in paragraph (d)(2)(iv)(B)(2) of this section.
    (1) Sample factors from actuarial Tables S and K. For purposes of 
the example in paragraph (d)(2)(iv)(B)(2) of this section, the relevant 
factors from Tables S and K are:

                                      Table 2 to Paragraph (d)(2)(iv)(B)(1)
----------------------------------------------------------------------------------------------------------------
                         Age                                Annuity           Life estate          Remainder
----------------------------------------------------------------------------------------------------------------
                                   Factors From Table S--Based on Table 2010CM
                                             Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
68..................................................            12.2552             0.39217             0.60783
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table K
                       Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
                    Interest rate                        Semi-annually         Quarterly            Monthly
----------------------------------------------------------------------------------------------------------------
3.2%................................................             1.0079              1.0119              1.0146
----------------------------------------------------------------------------------------------------------------

    (2) Example. On July 1 of a year after 2021, the donor agrees 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 3.2 percent. Under Table S, the factor at 3.2 percent for 
determining the present value of an annuity payable until the death of 
a person aged 68 is 12.2552. The adjustment factor from Table K in the 
column for payments made at the end of each semiannual period at the 
rate of 3.2 percent is 1.0079. The aggregate annual amount of the 
annuity, $10,000, is multiplied by the factor 12.2552 and the product 
is multiplied by 1.0079. The present value of the donee's annuity is, 
therefore, $123,520.16 ($10,000 x 12.2552 x 1.0079).
    (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 then is 
multiplied by the applicable adjustment factor at the appropriate 
interest rate component for payments made at the beginning of specified 
periods. The applicable adjustment factor may be found using the 
formula in Sec.  20.2031-7(d)(2)(iv)(C) of this chapter expressed to at 
least four decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table J. Table J, 
which is referenced and explained by Publication 1457, can be found on 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. 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--(1) In general. 
(i) 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 the use of commutation 
factors and an applicable adjustment factor. The commutation factors 
are computed directly with the set of formulas in Figure 1 to this 
paragraph (d)(2)(v)(A)(1)(i). The prescribed mortality table is Table 
2010CM as set forth in Sec.  20.2031-7(d)(7)(ii) of this chapter, or 
for periods before June 1, 2023, the appropriate table found in Sec.  
20.2031-7A of this chapter. For the convenience of taxpayers, 
commutation factors have been computed by the IRS and appear in Table 
H. Table H currently is available, at no charge, electronically via the 
IRS website at https://www.irs.gov/retirement-plans/actuarial-tables 
(or a corresponding URL as may be updated from time to time). Table H 
is referenced and explained by IRS Publication 1457, Actuarial 
Valuations Version 4A, which

[[Page 37454]]

will be available within a reasonable time after June 1, 2023.
BILLING CODE 4830-01-P

Figure 1 to Paragraph (d)(2)(v)(A)(1)(i)--Formulas for Determining 
Commutation Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.016

    (ii) The applicable adjustment factor for annuities that are 
payable at the end of semiannual, quarterly, monthly, or weekly periods 
is computed by use of the formula in Sec.  20.2031-7(d)(2)(iv)(B) of 
this chapter expressed to at least four decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in Table K. Table K can be found on the IRS website at 
https://www.irs.gov/retirement-plans/actuarial-tables. For purposes of 
the example in paragraph (d)(2)(v)(A)(2) of this section, the relevant 
factors from Tables H(2.8) and K are:

                                    Table 3 to Paragraph (d)(2)(v)(A)(1)(ii)
----------------------------------------------------------------------------------------------------------------
                        Age (x)                                  Dx             Nx-factor          Mx-factor
----------------------------------------------------------------------------------------------------------------
                                            Factors From Table H(2.8)
                                   Commutation Factors--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                          Interest Rate of 2.8 Percent
----------------------------------------------------------------------------------------------------------------
60.....................................................          16,911.03          271,994.3          9,295.187
70.....................................................          11,280.80          133,677.8          7,537.826
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table K
                      Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
                     Interest rate                         Semi-annually        Quarterly           Monthly
----------------------------------------------------------------------------------------------------------------
2.8%...................................................             1.0070             1.0104             1.0128
----------------------------------------------------------------------------------------------------------------


[[Page 37455]]

    (2) Example. The donor transfers $100,000 into a trust on January 
1, 2022 and retains the right to receive an annuity from the trust in 
the amount 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 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. If the section 7520 rate for the month in which the 
transfer occurred is 2.8 percent, the present value of the donor's 
retained annuity interest for the shorter of life or term would be is 
$82,363.54, determined in Figure 2 to this paragraph (d)(2)(v)(A)(2).

Figure 2 to Paragraph (d)(2)(v)(A)(2)--Illustration of Calculation of 
Present Value of the Donor's Retained Annuity Interest for the Shorter 
of Life or Term
[GRAPHIC] [TIFF OMITTED] TR07JN23.017

    (B) Unitrust interests--(1) In general. (i) 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 the use of an adjusted payout rate factor and unitrust 
commutation factors. The payout rate adjustment factor is determined by 
applying the formula in Sec.  1.664-4(e)(6)(ii) of this chapter for the 
section 7520 interest rate applicable to the transfer and computing the 
result to at least six decimal places. For the convenience of 
taxpayers, payout rate adjustment factors have been computed by the 
IRS, for interest rates from 0.2 to 20 percent, inclusive, and appear 
in Tables F(0.2) through F(20.0). The unitrust commutation factors may 
be computed directly with the set of formulas in Figure 3 to this 
paragraph (d)(2)(v)(B)(1)(i). For the convenience of taxpayers, 
actuarial factors have been computed by the IRS and appear in Table Z. 
Tables F and Z can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables.

[[Page 37456]]

Figure 3 to Paragraph (d)(2)(v)(B)(1)(i)--Formulas for Determining 
Unitrust Commutation Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.018

    (ii) For purposes of the example in paragraph (d)(2)(v)(B)(2) of 
this section, the relevant factors from Tables F(3.4), Z(4.8), and 
Z(5.0) are:

[[Page 37457]]



                                    Table 4 to Paragraph (d)(2)(v)(B)(1)(ii)
----------------------------------------------------------------------------------------------------------------
          Number of months from annual valuation to first payout             Adjustment factors for payments at
---------------------------------------------------------------------------             end of period
                                                                           -------------------------------------
                        At least                           But less than          Annual           Semiannual
----------------------------------------------------------------------------------------------------------------
                                            Factors From Table F(3.4)
                            Factors for Computing Adjusted Payout Rates for Unitrusts
----------------------------------------------------------------------------------------------------------------
                                             Interest at 3.4 Percent
----------------------------------------------------------------------------------------------------------------
6......................................................                  7           0.983422           0.975270
----------------------------------------------------------------------------------------------------------------
                                            Factors From Table Z(4.8)
                               Unitrust Commutation Factors--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                       Adjusted Payout Rate of 4.8 Percent
----------------------------------------------------------------------------------------------------------------
                        Age (x)                                \U\Dx           \U\Nx-factor       \U\Mx-factor
----------------------------------------------------------------------------------------------------------------
60.....................................................          4,634.189          58,509.09          1,684.151
70.....................................................          2,491.406          24,541.74          1,254.007
----------------------------------------------------------------------------------------------------------------
                                            Factors From Table Z(5.0)
                               Unitrust Commutation Factors--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                       Adjusted Payout Rate of 5.0 Percent
----------------------------------------------------------------------------------------------------------------
                        Age (x)                                \U\Dx           \U\Nx-factor       \U\Mx-factor
----------------------------------------------------------------------------------------------------------------
60.....................................................          4,084.822          50,451.77          1,429.466
70.....................................................          2,150.356          20,823.44          1,054.386
----------------------------------------------------------------------------------------------------------------

    (2) Example of interpolation. 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 2021. The trust instrument requires that each year 
the trust pay to the donor, in equal semiannual installments on June 
30th and December 31st, 5 percent of the fair market value of the trust 
assets, valued as of January 1st of that 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 3.4 percent. Under Table F(3.4), the 
appropriate adjustment factor is 0.975270 for semiannual payments 
payable at the end of the semiannual period. The adjusted payout rate 
is 4.876 percent (5% x 0.975270). The present value of the donor's 
retained interest is $37,419.00 determined in paragraphs 
(d)(2)(v)(B)(2)(i) through (iii) of this section. Using Table Z, the 
method required is to prepare two computations, one at a payout rate of 
4.8 percent, and one at 5.0 percent, and interpolate between these two 
in order to get the result at the adjusted payout rate of 4.876 
percent. As an alternative to using an interpolation method, it also is 
acceptable to compute the remainder factor directly from the root 
actuarial formulas using the actual adjusted payout rate of 4.876%.
    (i) Determine the terminal age, as illustrated in Figure 4 to this 
paragraph (d)(2)(v)(B)(2)(i).

Figure 4 to Paragraph (d)(2)(v)(B)(2)(i)--Illustration of Determination 
of Terminal Age
[GRAPHIC] [TIFF OMITTED] TR07JN23.019

    (ii) Determine the Payout Interest Factor at the Table Z payout 
rates immediately below and above the adjusted payout rate, as 
illustrated in Figure 5 to this paragraph (d)(2)(v)(B)(2)(ii).

[[Page 37458]]

Figure 5 to Paragraph (d)(2)(v)(B)(2)(ii)--Illustration of 
Determination of Payout Interest Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.020

    (iii) Interpolate between the Payout Interest Factors at 4.8% and 
5.0% to determine the Payout Interest Factor at the adjusted rate of 
4.876%, as illustrated in Figure 6 to this paragraph 
(d)(2)(v)(B)(2)(iii).

Figure 6 to Paragraph (d)(2)(v)(B)(2)(iii)--Illustration of 
Interpolation
[GRAPHIC] [TIFF OMITTED] TR07JN23.021

BILLING CODE 4830-01-C
    (3) Transitional rule. If the valuation date of a transfer of 
property by gift is after April 30, 2019, and on or before June 1, 
2023, the fair market value of the interest transferred is determined 
by using the section 7520 interest rate for the month in which the 
valuation date occurs (see Sec. Sec.  25.7520-1(b) and 25.7520-2(a)(2)) 
and the appropriate actuarial factors derived from the selected 
mortality table, either Table 2010CM in Sec.  20.2031-7(d)(7)(ii) of 
this chapter or Table 2000CM in Sec.  20.2031-7A(g)(4) of this chapter, 
at the option of the donor or the decedent's executor, as the case may 
be. If any previously filed gift tax return is supplemented to use the 
actuarial factors based on Table 2010CM, the supplemental return must 
state at the top ``AMENDED PURSUANT TO TD 9974.'' For the convenience 
of taxpayers, actuarial factors based on Table 2010CM appear in the 
current

[[Page 37459]]

version of Table S, and actuarial factors based on Table 2000CM appear 
in the previous version of Table S. Both versions of Table S will be 
available as provided in paragraph (d)(4) of this section. With respect 
to each individual transaction, the donor must consistently use the 
same mortality basis with respect to each interest (income, remainder, 
partial, etc.) in the same property, and with respect to all transfers 
occurring on the same valuation date. For example, gift and income tax 
charitable deductions with respect to the same transfer must be 
determined based on factors with the same mortality basis, and all 
assets includible in the gross estate and/or estate tax deductions 
claimed must be valued based on factors with the same mortality basis.
    (4) Publications and actuarial computations by the Internal Revenue 
Service. The factor for determining the present value of a remainder 
interest that is dependent on the termination of the life of one 
individual may be computed by using the formula in Sec.  20.2031-
7(d)(2)(ii)(B) of this chapter to derive a remainder factor from the 
appropriate mortality table expressed to at least five decimal places. 
For the convenience of taxpayers, actuarial factors have been computed 
by the IRS and appear in Table S. The factor for determining the 
present value of a remainder interest following a term certain may be 
computed by using the formula in Sec.  20.2031-7(d)(2)(ii)(A) of this 
chapter expressed to at least six decimal places. For the convenience 
of taxpayers, actuarial factors have been computed by the IRS and 
appear in Table B. Adjustment factors for term certain annuities 
payable at the beginning of each interval may be computed by using the 
formula in Sec.  20.2031-7(d)(2)(iv)(C) of this chapter expressed to at 
least four decimal places. For the convenience of taxpayers, actuarial 
factors have been computed by the IRS and appear in Table J. Adjustment 
factors for annuities payable at the end of each interval may be 
computed by using the formula in Sec.  20.2031-7(d)(2)(iv)(B) of this 
chapter expressed to at least four decimal places. For the convenience 
of taxpayers, actuarial factors have been computed by the IRS and 
appear in Table K. These tables currently are available, at no charge, 
electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from 
time to time). IRS Publication 1457, Actuarial Valuations Version 4A 
(2023), references and explains the factors contained in the actuarial 
tables and also includes examples that illustrate how to compute many 
special factors for more unusual situations. This publication will be 
available within a reasonable time after June 1, 2023. Tables B, J, and 
K also can be found in Sec.  20.2031-7(d)(6) of this chapter, but only 
for interest rates from 4.2 to 14 percent, inclusive. If a particular 
factor is required, that factor may be calculated by the taxpayer using 
the actuarial formula in Sec.  20.2031-7(d)(2) of this chapter or the 
taxpayer may request a ruling to obtain the factor from the Internal 
Revenue Service. 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 Rev. Proc. 
2023-1, 2023-1 I.R.B. 1, or successor revenue procedures, and 
Sec. Sec.  601.201 and 601.601(d)(2)(ii)(b) of this chapter) and must 
include payment of the required user fee.
    (e) Applicability date. This section applies on and after June 1, 
2023.


0
Par. 26. The undesignated center heading immediately preceding Sec.  
25.2512-5A is revised to read as follows:

Actuarial Tables Applicable Before June 1, 2023


0
Par. 27. Section 25.2512-5A is amended by revising the section heading 
and adding paragraph (g) to read as follows:


Sec.  25.2512-5A  Valuation of annuities, interests for life or a term 
of years, and remainder or reversionary interests transferred before 
June 1, 2023.

* * * * *
    (g) Valuation of annuities, interests for life or a term of years, 
and remainder or reversionary interests transferred on or after May 1, 
2009, and before June 1, 2023--(1) In general. Except as otherwise 
provided in Sec. Sec.  25.2512-5(b) and 25.7520-3(b) (pertaining to 
certain limitations on the use of prescribed tables), if the valuation 
date of the transferred interest is on or after May 1, 2009, and before 
June 1, 2023, the fair market value of annuities, interests for life or 
a term of years, and remainder or reversionary interests transferred by 
gift is the present value of the interests determined by using standard 
or special section 7520 actuarial factors and the valuation methodology 
described in Sec.  25.2512-5(d). Sections 20.2031-7(d)(6) and 20.2031-
7A(g)(4) of this chapter and related sections provide tables with 
standard actuarial factors and examples that illustrate how to use the 
tables to compute the present value of ordinary annuity, life, term, 
and remainder interests in property. Sections 20.2031-7(d)(6) and 
20.2031-7A(g)(4) of this chapter also refer to standard and special 
actuarial factors that may be necessary to compute the present value of 
similar interests in more unusual fact situations. These factors and 
examples also generally are applicable for gift tax purposes in 
computing the values of taxable gifts.
    (2) Transitional rule. (i) If the valuation date of a transfer of 
property by gift is on or after May 1, 2009, and before July 1, 2009, 
the fair market value of the interest transferred is determined by 
using the section 7520 interest rate for the month in which the 
valuation date occurs (see Sec. Sec.  25.7520-1(b) and 25.7520-2(a)(2)) 
and the appropriate actuarial tables under either Sec.  20.2031-
7A(f)(4) or (g)(4) of this chapter, at the option of the donor.
    (ii) For purposes of paragraph (g)(2)(i) of this section, where the 
donor is given the option to use either of two appropriate actuarial 
tables, the donor must consistently use the same mortality basis with 
respect to each interest (income, remainder, partial, etc.) in the same 
property, and with respect to all transfers occurring on the same 
valuation date. For example, gift and income tax charitable deductions 
with respect to the same transfer must be determined based on factors 
with the same mortality basis, and all assets includible in the gross 
estate and/or estate tax deductions claimed must be valued based on 
factors with the same mortality basis.
    (iii) If the valuation date of a transfer of property by gift is 
after April 30, 2019, and before June 1, 2023, the fair market value of 
the interest transferred is determined under Sec.  25.2512-5(d)(3).
    (3) Publications and actuarial computations by the Internal Revenue 
Service. The factor for determining the present value of a remainder 
interest that is dependent on the termination of the life of one 
individual may be computed by using the formula in Sec.  20.2031-
7(d)(2)(ii)(B) of this chapter to derive a remainder factor from the 
appropriate mortality table to at least five decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in Table S. The factor for determining the present value 
of a remainder interest following a term

[[Page 37460]]

certain may be computed by using the formula in Sec.  20.2031-
7(d)(2)(ii)(A) of this chapter expressed to at least six decimal 
places. For the convenience of taxpayers, actuarial factors have been 
computed by the IRS and appear in Table B. Adjustment factors for term 
certain annuities payable at the beginning of each interval may be 
computed by using the formula in Sec.  20.2031-7(d)(2)(iv)(C) of this 
chapter expressed to at least four decimal places. For the convenience 
of taxpayers, actuarial factors have been computed by the IRS and 
appear in Table J. Adjustment factors for annuities payable at the end 
of each interval may be computed by using the formula in Sec.  20.2031-
7(d)(2)(iv)(B) of this chapter expressed to at least four decimal 
places. For the convenience of taxpayers, actuarial factors have been 
computed by the IRS and appear in Table K. These tables are referenced 
and explained by IRS Publication 1457, Actuarial Values Version 3A, 
(2009). Publication 1457 includes examples that illustrate how to 
compute many special factors for more unusual situations. The actuarial 
tables are available, at no charge, electronically via the IRS website 
at https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). Table S also 
can be found in Sec.  20.2031-7A(g)(4) of this chapter, but only for 
interest rates from 0.2 to 14 percent, inclusive. Tables B, J, and K 
also can be found in Sec.  20.2031-7(d)(6) of this chapter, but only 
for interest rates from 4.2 to 14 percent, inclusive. If a particular 
factor is required in the case of a completed gift, that factor may be 
calculated by the donor using the actuarial formulas in Sec.  20.2031-
7(d)(2) of this chapter or the donor may request a ruling to obtain the 
factor from the Internal Revenue Service. 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 Sec. Sec.  601.201 and 
601.601(d)(2)(ii)(b) of this chapter) and must include payment of the 
required user fee.
    (4) Applicability dates. Paragraphs (g)(1) through (3) of this 
section apply on and after May 1, 2009, and before June 1, 2023.


0
Par. 28. Section 25.2522(c)-3 is amended by:
0
1. In paragraph (d)(2)(iv), designating Examples 1 through 3 as 
paragraphs (d)(2)(iv)(A) through (C), respectively.
0
2. Revising the headings for newly designated paragraphs (d)(2)(iv)(A) 
and (B), newly designated paragraph (d)(2)(iv)(C), and paragraph (e).
0
3. Adding paragraph (f).
    The revisions and addition read as follows:


Sec.  25.2522(c)-3  Transfers not exclusively for charitable, etc., 
purposes in the case of gifts made after July 31, 1969.

* * * * *
    (d) * * *
    (2) * * *
    (iv) * * *
    (A) Example 1. * * *
    (B) Example 2. * * *
    (C) Example 3--(1) Factors. The appropriate annuity factor for an 
annuity payable for a term of years is computed by subtracting from 
1.000000 the factor for an ordinary remainder interest following the 
same term certain that is determined under the formula in Sec.  
20.2031-7(d)(2)(ii)(A) of this chapter and then dividing the result by 
the applicable section 7520 interest rate expressed to at least four 
decimal places. For the convenience of taxpayers, annuity factors have 
been computed by the IRS and appear in the ``Annuity'' column of Table 
B. The actuarial commutation factors can be computed directly by using 
the formulas in Sec.  25.2512-5(d)(2)(v)(A)(1), the section 7520 rate, 
and Table 2010CM as set forth in Sec.  20.2031-7(d)(7)(ii) of this 
chapter. For the convenience of taxpayers, actuarial factors have been 
computed by the IRS and appear in Table H. Tables B and H can be found 
on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). 
For purposes of the example in paragraph (d)(2)(iv)(C)(2) of this 
section, the relevant factors from Tables B and H are:

                                      Table 1 to Paragraph (d)(2)(iv)(C)(1)
----------------------------------------------------------------------------------------------------------------
                         Years                                Annuity        Income interest       Remainder
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table B
                           Annuity, Income, and Remainder Interests for a Term Certain
----------------------------------------------------------------------------------------------------------------
                                             Interest at 2.8 Percent
----------------------------------------------------------------------------------------------------------------
10.....................................................             8.6179           0.241302           0.758698
----------------------------------------------------------------------------------------------------------------
                                            Factors from Table H(2.8)
                                   Commutation Factors--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                          Interest Rate of 2.8 Percent
----------------------------------------------------------------------------------------------------------------
                        Age (x)                                  Dx             Nx-factor          Mx-factor
----------------------------------------------------------------------------------------------------------------
60.....................................................          16,911.03          271,994.3          9,295.187
70.....................................................          11,280.80          133,677.8          7,537.826
----------------------------------------------------------------------------------------------------------------

    (2) Application. In a year after 2023, D transfers $65,000 in trust 
with the requirement that a guaranteed annuity interest (as defined in 
paragraph (c)(2)(vi) of this section) of $5,000 a year, payable 
annually at the end of each year, be paid to Y Charity for a period of 
10 years and that a guaranteed annuity interest (as defined in 
paragraph (c)(2)(vi) of this section) of $5,000 a year, payable 
annually at the end of each year, be paid to W, D's wife, aged 60, for 
10 years or until her prior death. The annuities are to be paid 
simultaneously, and the remainder is to be paid to D's children. The 
section 7520 interest rate for the date of transfer is 2.8 percent, and 
the taxpayer elects

[[Page 37461]]

not to use the interest rate from either of the two preceding months. 
The fair market value of the private annuity is $40,895.50 ($5,000 x 
8.1791), as determined pursuant to Sec.  25.2512-5(d)(2)(v)(A) and by 
the use of factors derived from Table H and illustrated in paragraph 
(d)(2)(iv)(C)(3) of this section. The fair market value of the 
charitable annuity is $43,089.50 ($5,000 x 8.6179), determined using 
the annuity factor from Table B. It is not evident from the governing 
instrument of the trust or from local law that the trustee would be 
required to apportion the trust fund between the wife and charity in 
the event the fund were insufficient to pay both annuities in a given 
year. Accordingly, the deduction with respect to the charitable annuity 
will be limited to $24,104.50 ($65,000 less $40,895.50 [the value of 
the private annuity]), which is the minimum amount it is evident the 
charity will receive.
    (3) Actuarial factor. In paragraph (d)(2)(iv)(C)(2) of this 
section, the actuarial factor for determining the value of the private 
annuity is derived by the use of factors involving one life and a term 
of years. The factor is determined as illustrated in Figure 1 to this 
paragraph (d)(2)(iv)(C)(3).

Figure 1 to Paragraph (d)(2)(iv)(C)(3)--Illustration of Calculation of 
Annuity Factor for Shorter of Term or Life
[GRAPHIC] [TIFF OMITTED] TR07JN23.022

* * * * *
    (e) Guaranteed annuity and unitrust interests reformed as an 
interest for a term of years--(1) In general. The rules 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. See paragraph 
(e)(4) of this section for an example.
    (2) Judicial and non-judicial reformations. 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).
    (3) Sample factors from actuarial Tables B and S. The appropriate 
annuity factor for an annuity payable for a term of years is computed 
by subtracting from 1.000000 the factor for an ordinary remainder 
interest following the same term certain that is determined under the 
formula in Sec.  20.2031-7(d)(2)(ii)(A) of this chapter and then 
dividing the result by the applicable section 7520 interest rate 
expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table B. The appropriate annuity factor 
for an annuity payable for the life of one individual is computed by 
subtracting from 1.00000 the factor for an ordinary remainder interest 
following the life of the same individual that is determined under the 
formula in Sec.  20.2031-7(d)(2)(ii)(B) of this chapter and then 
dividing the result by the applicable section 7520 interest rate 
expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table S. Tables B and S can be found on 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. For purposes of the example in paragraph (e)(4) of this 
section, the relevant factors from Tables B and S are:

[[Page 37462]]



                                           Table 2 to Paragraph (e)(3)
----------------------------------------------------------------------------------------------------------------
                         Years                                Annuity        Income interest       Remainder
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table B
                           Annuity, Income, and Remainder Interests for a Term Certain
----------------------------------------------------------------------------------------------------------------
                                             Interest at 2.4 Percent
----------------------------------------------------------------------------------------------------------------
38.....................................................            24.7471           0.593929           0.406071
39.....................................................            25.1436           0.603447           0.396553
----------------------------------------------------------------------------------------------------------------
                                   Factors From Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                             Interest at 2.4 Percent
----------------------------------------------------------------------------------------------------------------
                          Age                                 Annuity          Life Estate         Remainder
----------------------------------------------------------------------------------------------------------------
40.....................................................            24.9063            0.59775            0.40225
----------------------------------------------------------------------------------------------------------------

    (4) Example. An annuity interest payable for the life of an 
individual age 40 at the time of the transfer that occurs on or after 
June 1, 2023, assuming an interest rate of 2.4 percent under section 
7520, has an annuity factor reported in Table S of 24.9063. Based on 
Table B at 2.4 percent, the factor 24.9063 corresponds to a term of 
years between 38 and 39 years. Accordingly, the annuity interest must 
be reformed into an interest payable for a term of 39 years. (To 
determine the value of a charitable remainder interest payable after 
this annuity interest, the taxpayer then must satisfy the test 
illustrated in Sec.  25.7520-3(b)(2)(v)(E).)
    (f) Applicability date. This section applies only to gifts made 
after July 31, 1969.


0
Par. 29. Section 25.7520-1 is amended by revising paragraphs (a)(1) and 
(2), (b)(2), (c), and (d) and adding paragraphs (e) and (f) to read as 
follows:


Sec.  25.7520-1  Valuation of annuities, interests for life or a term 
of years, and remainder or reversionary interests.

    (a) * * *(1) Except as otherwise provided in this section and in 
Sec.  25.7520-3(b) (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 a term of years (including unitrust interests), and remainder or 
reversionary interests is their present value determined under this 
section. See Sec.  20.2031-7(d) of this chapter (and, for periods prior 
to June 1, 2023, Sec. Sec.  20.2031-7(d)(3) and 20.2031-7A of this 
chapter) for the computation of the value of annuities, interests for 
life or a term of years, and remainder or reversionary interests, other 
than interests described in paragraphs (a)(2) and (3) of this section.
    (2) In the case of a gift to a pooled income fund on or after June 
1, 2023, see Sec.  1.642(c)-6(e) of this chapter (or, for periods prior 
to June 1, 2023, Sec.  1.642(c)-6A of this chapter) with respect to the 
valuation of the remainder interest.
* * * * *
    (b) * * *
    (2) Mortality component. The mortality component reflects the 
mortality data most recently available from the United States census. 
As the appropriate new mortality report becomes available after each 
decennial census, the Treasury Department and the IRS will revise the 
mortality component described in this section and will update the 
appropriate regulations to adopt the revised mortality component 
tables. For gifts with valuation dates on or after June 1, 2023, the 
mortality component table (Table 2010CM) is in Sec.  20.2031-
7(d)(7)(ii) of this chapter, and is referenced by IRS Publication 1457, 
Actuarial Valuations Version 4A, and can be found on the IRS website at 
https://www.irs.gov/retirement-plans/actuarial-tables (or a 
corresponding URL as may be updated from time to time). See Sec.  
20.2031-7A of this chapter for mortality component tables applicable to 
gifts for which the valuation date falls before June 1, 2023.
    (c) Actuarial factors. The present value on the valuation date of 
an annuity, an interest for life or a term of years, and a remainder or 
reversionary interest is computed by using the section 7520 interest 
rate component that is described in paragraph (b)(1) of this section 
and the mortality component that is described in paragraph (b)(2) of 
this section. Actuarial factors for determining these present values 
may be calculated using the formulas in Sec.  20.2031-7(d)(2) of this 
chapter. For the convenience of taxpayers, the IRS has computed 
actuarial factors and displayed them on tables that are referenced and 
explained by publications of the Internal Revenue Service. If a 
particular factor is required in order to value an interest, that 
factor may be calculated by the taxpayer using the actuarial formulas 
in Sec.  20.2031-7(d)(2) of this chapter or the taxpayer may request a 
ruling to obtain the factor from the Internal Revenue Service. The 
request for a ruling must be accompanied by a recitation of the facts, 
including the date of birth for each measuring life and copies of 
relevant instruments. A request for a ruling must comply with the 
instructions for requesting a ruling published periodically in the 
Internal Revenue Bulletin (see Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or 
successor revenue procedures, and Sec. Sec.  601.201 and 
601.601(d)(2)(ii)(b) of this chapter) and must include payment of the 
required user fee.
    (d) IRS publications referencing and explaining actuarial tables 
with rates from 0.2 to 20 percent, inclusive, at intervals of two-
tenths of one percent, for valuation dates on or after June 1, 2023. 
The publications listed in paragraphs (d)(1) through (3) of this 
section will be available within a reasonable time after June 1, 2023. 
The underlying actuarial tables referenced and explained by these 
publications currently are available, at no charge, electronically via 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables:
    (1) IRS Publication 1457, Actuarial Valuations Version 4A (2023). 
This publication references tables of valuation factors and provides 
examples that show how to compute other valuation factors, for 
determining the present value of annuities, interests for life or a 
term of years, and remainder or reversionary interests, measured by one 
or two lives. These factors may also be used in the valuation of 
interests in a

[[Page 37463]]

charitable remainder annuity trust as defined in Sec.  1.664-2 of this 
chapter and a pooled income fund as defined in Sec.  1.642(c)-5 of this 
chapter. This publication references and explains Tables S (single life 
remainder factors), R(2) (two-life last-to-die remainder factors), B 
(actuarial factors used in determining the present value of an interest 
for a term of years), H (commutation factors), J (term certain annuity 
beginning-of-interval adjustment factors), and K (annuity end-of-
interval adjustment factors). See earlier versions of the publication, 
Sec.  1.642(c)-6A of this chapter, or Sec.  20.2031-7A of this chapter 
for Table S applicable to valuation dates before June 1, 2023. Earlier 
versions of the publication also contain earlier versions of Tables H 
and R(2). Tables B, J, and K also can be found in Sec.  20.2031-7(d)(6) 
of this chapter, but only for interest rates from 4.2 to 14 percent, 
inclusive.
    (2) IRS Publication 1458, Actuarial Valuations Version 4B (2023). 
This publication references and explains 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 
Sec.  1.664-3 of this chapter. This publication references Tables U(1) 
(unitrust single life remainder factors), U(2) (unitrust two-life last-
to-die remainder factors), D (actuarial factors used in determining the 
present value of a remainder interest postponed for a term of years), F 
(adjustment payout rate factors), and Z (unitrust commutation factors). 
See earlier versions of the publication or Sec.  1.664-4A of this 
chapter for Table U(1) applicable to valuation dates before June 1, 
2023. Earlier versions of the publication also contain earlier versions 
of Tables U(2) and Z. Table D also can be found in Sec.  1.664-
4(e)(6)(iii) of this chapter, but only for adjusted payout rates from 
4.2 to 14 percent, inclusive. Table F also can be found in Sec.  1.664-
4(e)(6)(iii) of this chapter, but only for interest rates from 4.2 to 
14 percent, inclusive.
    (3) IRS Publication 1459, Actuarial Valuations Version 4C (2023). 
This publication references and explains Table C, which provides 
factors for making adjustments to the standard remainder factor for 
valuing gifts of depreciable property. See Sec.  1.170A-12 of this 
chapter.
    (4) The publications identified in paragraphs (d)(1) through (3) of 
this section also reference Table 2010CM, the mortality component 
table.
    (e) Use of approximation methods for obtaining factors when the 
required valuation rate falls between two listed rates. For certain 
cases, this part and IRS publications provide approximation methods 
(for example, interpolation) for obtaining factors when the required 
valuation rate falls between two listed rates (such as in the case of a 
pooled income fund's rate of return or a unitrust's adjusted payout 
rate). In general, exact methods of obtaining the applicable factors 
are allowed, such as through software using the actual rate of return 
and the proper actuarial formula, provided such direct methods are 
applied consistently in valuing all interests in the same property. The 
actuarial formula in Sec.  20.2031-7(d)(2)(ii)(B) of this chapter is 
used to determine the remainder factor for pooled income funds and the 
actuarial formula in Sec.  1.664-4(e)(5)(i) of this chapter is used to 
determine the remainder factor for unitrusts. When using either an 
exact method or the approximation method, at least the same number of 
decimal places as that used in this part must be used for the resulting 
actuarial factor. The approximation method provided in this part must 
be used if more exact methods are not available.
    (f) Applicability date. This section applies on and after June 1, 
2023.

0
Par. 30. Section 25.7520-3 is amended by:
0
1. Redesignating paragraph (b)(2)(v) as paragraph (b)(2)(vi).
0
2. Adding new paragraph (b)(2)(v).
0
3. In newly redesignated paragraph (b)(2)(vi), designating Examples 1 
through 5 as paragraphs (b)(2)(vi)(A) through (E), respectively.
0
4. Revising the heading of newly designated paragraph (b)(2)(vi)(A).
0
5. In newly designated paragraph (b)(2)(vi)(B):
0
i. Revising the heading.
0
ii. Removing ``Example 1'' and ``this paragraph'' and adding in their 
places ``paragraph (b)(2)(vi)(A) of this section (Example 1)'' and 
``this paragraph (b)(2)(vi)(B)'', respectively.
0
6. Revising the heading for newly designated paragraph (b)(2)(vi)(C).
0
7. In newly designated paragraph (b)(2)(vi)(D):
0
i. Revising the heading.
0
ii. Removing ``Example 3'' and adding ``paragraph (b)(2)(vi)(C) of this 
section (Example 3)'' in its place.
0
8. Revising newly designated paragraph (b)(2)(vi)(E) and paragraphs 
(b)(4) and (c).
    The revisions read as follows:


Sec.  25.7520-3  Limitation on the application of section 7520.

* * * * *
    (b) * * *
    (2) * * *
    (v) Annuity payable from a trust or other limited fund. The present 
value of an annuity interest (the subject annuity) payable from a trust 
or other limited fund (the fund) must be determined by taking into 
account the possibility of exhaustion of the fund. Thus, the present 
value of any such annuity that will exhaust the fund (and of any other 
interest dependent on the present value of such an annuity) is 
determined by using actuarial factors, under the applicable section 
7520 mortality and interest rate assumptions, reflecting the term 
certain period to the exhaustion of the fund. Because it is assumed 
under the prescribed mortality component, Table 2010CM, that any 
measuring life may survive past age 109 and until just before age 110, 
any life annuity could require payments in the person's 110th year. To 
determine whether a subject annuity that is payable as a level amount 
paid annually at the end of each year for a life, will exhaust the 
fund, the annuitant's age must be subtracted from 110 to determine the 
longest possible duration of the annuity (maximum number of years) 
under the prescribed mortality table. If the present value of an 
annuity for the same level payments, payable for a term certain equal 
to that maximum number of years, is greater than the value of the fund, 
the annuity is determined to exhaust the fund before the end of that 
maximum number of years (under the prescribed assumptions), and the 
present value of the subject annuity is determined on the basis of life 
annuity factors limited by the period to exhaustion. The period to 
exhaustion is the shortest period for which the present value of that 
same annuity payable for a term certain is greater than or equal to the 
value of the fund, under the prescribed section 7520 interest rate. If 
the subject annuity is for life (or for a period depending in part on 
life) and the period to exhaustion is shorter than the longest possible 
life period, the present value of the subject annuity is determined as 
the present value of an annuity for the shorter of life or a term of 
years limited by the period to exhaustion, and the actuarial 
commutation factors may be used in determining the present value. The 
actuarial commutation factors can be computed directly by using the 
formulas in Sec.  25.2512-5(d)(2)(v)(A)(1), the section 7520 rate, and 
Table 2010CM as set forth in Sec.  20.2031-7(d)(7)(ii) of this chapter. 
For the convenience of taxpayers, actuarial commutation factors have 
been computed by the IRS and appear in Table H. The appropriate annuity 
factors for an annuity payable for a term of years certain is computed

[[Page 37464]]

by subtracting from 1.000000 the factor for an ordinary remainder 
interest following the same term certain that is determined under the 
formula in Sec.  20.2031-7(d)(2)(ii)(A) of this chapter and then 
dividing the result by the applicable section 7520 interest rate 
expressed to at least four decimal places. For the convenience of 
taxpayers, actuarial factors have been computed by the IRS and appear 
in the ``Annuity'' column of Table B. Tables B and H can be found on 
the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). 
For an annuity payable for the longer of a life (or lives) or a term of 
years, the year of the last possible annuity payment is determined 
based on the later of the end of the term period or the year the 
youngest measuring life would reach age 110. For an annuity payable for 
the shorter of a life (or lives) or a term of years, the year of the 
last possible payment is determined based on the earlier of the end of 
the term period or the year the youngest measuring life would reach age 
110. After determining the point of exhaustion of funds, the 
approximation method for determining the present value of annuity 
payments for a life or lives so limited by exhaustion illustrated in 
the example in paragraph (b)(2)(vi)(E) of this section is to be used if 
a more exact method (for example, computing the year-by-year present 
value of each payment until the fund is exhausted) is not used. The 
selected method must be applied consistently in valuing all interests 
in the same property.
    (vi) * * *
    (A) Example 1. Unproductive property. * * *
    (B) Example 2. Beneficiary's right to make trust productive. * * *
    (C) Example 3. Annuity trust funded with unproductive property. * * 
*
    (D) Example 4. Unitrust funded with unproductive property. * * *
    (E) Example 5. Annuity exhausting a trust or other limited fund. 
(1) The donor, who is age 60 and in normal health, transfers property 
worth $1,000,000 to a trust created for this purpose on or after June 
1, 2023. 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 year, and the remainder then will be distributed to 
the donor's child. The trust has no other beneficial interests payable 
before the end of the annuity. The section 7520 rate for the month of 
the transfer is 4.4 percent. Under section 7520(a)(2) of the Code, the 
donor has elected to use the section 7520 rate for the month of 
transfer. For purposes of this example, the relevant factors from 
Tables B and H(4.4) are:

                                      Table 1 to Paragraph (b)(2)(vi)(E)(1)
----------------------------------------------------------------------------------------------------------------
                         Years                                Annuity        Income interest       Remainder
----------------------------------------------------------------------------------------------------------------
                                              Factors From Table B
                           Annuity, Income, and Remainder Interests for a Term Certain
----------------------------------------------------------------------------------------------------------------
                                             Interest at 4.4 Percent
----------------------------------------------------------------------------------------------------------------
13.....................................................             9.7423           0.428661           0.571339
14.....................................................            10.2896           0.452741           0.547259
50.....................................................            20.0878           0.883862           0.116138
----------------------------------------------------------------------------------------------------------------
                                            Factors From Table H(4.4)
                                   Commutation Factors--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                                          Interest Rate of 4.4 Percent
----------------------------------------------------------------------------------------------------------------
                        Age (x)                                  Dx             Nx-factor          Mx-factor
----------------------------------------------------------------------------------------------------------------
60.....................................................          6,694.636          90,259.34          2,723.225
73.....................................................          3,151.228          29,432.25          1,856.209
74.....................................................          2,941.075          26,452.50          1,777.165
----------------------------------------------------------------------------------------------------------------

    (2) First, it is necessary to determine whether the annuity may 
exhaust the corpus before all planned annuity payments are made. This 
determination is made by using values from Table B as illustrated in 
Figure 1 to this paragraph (b)(2)(vi)(E)(2).
BILLING CODE 4830-01-P

Figure 1 to Paragraph (b)(2)(vi)(E)(2)--Illustration of Determining 
Present Value of Term Certain Annuity
[GRAPHIC] [TIFF OMITTED] TR07JN23.023


[[Page 37465]]


    (3) 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 the number of years to 
exhaustion of the fund, assuming earnings at the section 7520 rate of 
4.4 percent.
    (4) If an annuity of $100,000 payable at the end of each year for a 
period had an annuity factor of 10.0, it would have a present value 
exactly equal to the principal available to pay the annuity over the 
term. The annuity factor for 13 years at 4.4 percent in Table B is 
9.7423, so the present value of an annuity of $100,000 at 4.4 percent, 
payable at the end of each year for 13 years certain, is $100,000 times 
9.7423 or $974,230. The annuity factor for 14 years at 4.4 percent is 
10.2896, so the present value of an annual annuity of $100,000 per year 
at 4.4 percent for 14 years certain is $100,000 times 10.2896, or 
$1,028,960. Therefore, 14 years is the shortest term for which a term 
certain annuity of $100,000 per year is greater than the fund of 
$1,000,000. Thus, it is determined, under the prescribed assumptions, 
that the $1,000,000 initial transfer will be sufficient to make 13 
annual payments of $100,000, but not to make the entire 14th payment. 
Subtracting the present value of the 13-year term certain annuity, 
$974,230, from the fund of $1,000,000 leaves a remainder of $25,770. Of 
the initial transfer amount, $25,770 is not needed to make payments for 
13 years, so this amount, as accumulated for 14 years, will be 
available for the final payment. The 14-year accumulation factor at 4.4 
percent is 1.827288 ((1 + 0.044)\14\ = 1.827288), so the amount 
available in 14 years is $25,770 times 1.827288 or $47,089.21. 
Therefore, for purposes of this present value determination, the 
subject annuity is treated as being composed of two distinct annuity 
components. The two annuity components taken together must equal the 
total annual amount of $100,000. The annual amount of the first annuity 
component is the exact amount that the trust will have available for 
the final payment, $47,089.21. The annual amount of the second annuity 
component then must be $100,000 minus $47,089.21, or $52,910.79. Under 
the section 7520 assumptions, the initial corpus will be able to make 
payments of $52,910.79 per year for 13 years, as well as payments of 
$47,089.21 per year for 14 years. The present value of the subject 
annuity is computed by adding together the present values of two 
separate component annuities payable for the shorter of a life or a 
term.
    (5) The actuarial factor for determining the value of the annuity 
of $52,910.79 per year payable for 13 years or until the prior death of 
a person aged 60 is derived by the use of factors involving one life 
and a term of years, derived from Table H. The factor is determined as 
illustrated in Figure 2 to this paragraph (b)(2)(vi)(E)(5).

Figure 2 to Paragraph (b)(2)(vi)(E)(5)--Illustration of Determining 
Annuity Factor for Shorter of Life or 13 Years
[GRAPHIC] [TIFF OMITTED] TR07JN23.024

    (6) The actuarial factor for determining the value of the annuity 
$47,089.21 per year payable for 14 years or until the prior death of a 
person aged 60 is derived by the use of factors involving one life and 
a term of years, derived from Table H. The factor is determined as 
illustrated in Figure 3 to this paragraph (b)(2)(vi)(E)(6).

[[Page 37466]]

Figure 3 to Paragraph (b)(2)(vi)(E)(6)--Illustration of Determining 
Annuity Factor for Shorter of Life or 14 Years
[GRAPHIC] [TIFF OMITTED] TR07JN23.025

    (7) Based on the calculations of paragraph (b)(2)(vi)(E)(5) of this 
section, the present value of an annuity of $52,910.79 per year payable 
for 13 years or until the prior death of a person aged 60 is 
$480,742.15 ($52,910.79 x 9.0859). Based on the calculations of 
paragraph (b)(2)(vi)(E)(6) of this section, the present value of an 
annuity of $47,089.21 per year payable for 14 years or until the prior 
death of a person aged 60 is $448,807.26 ($47,089.21 x 9.5310). Thus, 
the present value of the charitable annuity interest is the sum of the 
two component annuities, $929,549.41 ($480,742.15 + $448,807.26).
* * * * *
    (4) Example--terminal illness--(i) Sample factors from actuarial 
Table S. The provisions of paragraph (b)(3) of this section are 
illustrated by the example in paragraph (b)(4)(ii) of this section. The 
appropriate annuity factor for an annuity payable for the life of one 
individual is computed by subtracting from 1.00000 the factor for an 
ordinary remainder interest following the life of the same individual 
that is determined under the formula in Sec.  20.2031-7(d)(2)(ii)(B) of 
this chapter and then dividing the result by the applicable section 
7520 interest rate expressed to at least four decimal places. For the 
convenience of taxpayers, actuarial factors have been computed by the 
IRS and appear in the ``Annuity'' column of Table S. Table S can be 
found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. For purposes of the example in paragraph (b)(4)(ii) 
of this section, the relevant factor from Table S is:

                                         Table 2 to Paragraph (b)(4)(i)
                                   Factors From Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
                         Age                                Annuity           Life estate          Remainder
----------------------------------------------------------------------------------------------------------------
                                             Interest at 4.4 Percent
----------------------------------------------------------------------------------------------------------------
75..................................................             8.6473             0.38048             0.61952
----------------------------------------------------------------------------------------------------------------

    (ii) Example of donor with terminal illness. The donor transfers 
property worth $1,000,000 to a child on or after June 1, 2023, 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 
section 7520 interest rate for the month of the transfer is 4.4 
percent. 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. Under Table S, the annuity factor at 4.4 percent for a person age 
75 in normal health is 8.6473. Thus, if the donor were not terminally 
ill, the present value of the annuity would be $691,784 ($80,000 x 
8.6473). 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.
* * * * *
    (c) Applicability dates. Paragraph (a) of this section is 
applicable as of May 1, 1989. The provisions of paragraph (b) of this 
section, except paragraphs (b)(2)(v), (b)(2)(vi)(E), and (b)(4) of this 
section, are applicable to gifts made after December 13, 1995. 
Paragraphs (b)(2)(v), (b)(2)(vi)(E), and (b)(4) of this section are 
applicable to gifts made on or after June 1, 2023.

Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.

    Approved: May 23, 2023.
Lily L. Batchelder,
Assistant Secretary of the Treasury (Tax Policy).
[FR Doc. 2023-11837 Filed 6-1-23; 4:15 pm]
BILLING CODE 4830-01-C