Federal Register, Volume 87 Issue 87 (Thursday, May 5, 2022)
[Federal Register Volume 87, Number 87 (Thursday, May 5, 2022)]
[Proposed Rules]
[Pages 26806-26848]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02303]
[[Page 26805]]
Vol. 87
Thursday,
No. 87
May 5, 2022
Part II
Department of the Treasury
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Internal Revenue Service
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26 CFR Parts 1, 20, and 25
Use of Actuarial Tables in Valuing Annuities, Interests for Life or a
Term of Years, and Remainder or Reversionary Interests; Proposed Rule
Federal Register / Vol. 87, No. 87 / Thursday, May 5, 2022 / Proposed
Rules
[[Page 26806]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 20, and 25
[REG-122770-18]
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: Notice of proposed rulemaking.
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SUMMARY: This document contains proposed regulations relating to the
use of actuarial tables in valuing annuities, interests for life or a
term of years, and remainder or reversionary interests. These
regulations will affect the valuation of inter vivos and testamentary
transfers of interests dependent on one or more measuring lives. These
regulations are necessary because applicable law requires the actuarial
tables to be updated to reflect the most recent mortality experience
available.
DATES: Written or electronic comments and requests for a public hearing
must be received by July 5, 2022. Requests for a public hearing must be
submitted as prescribed in the ``Comments and Requests for a Public
Hearing'' section.
ADDRESSES: Commenters are strongly encouraged to submit public comments
electronically. Submit electronic submissions via the Federal
eRulemaking Portal at www.regulations.gov (indicate IRS and REG-122770-
18) by following the online instructions for submitting comments. Once
submitted to the Federal eRulemaking Portal, comments cannot be edited
or withdrawn. The IRS expects to have limited personnel available to
process public comments that are submitted on paper through mail. Until
further notice, any comments submitted on paper will be considered to
the extent practicable. The Department of the Treasury (Treasury
Department) and the IRS will publish for public availability any
comment submitted electronically, and to the extent practicable on
paper, to its public docket. Send paper submissions to: CC:PA:LPD:PR
(REG-122770-18), Room 5203, Internal Revenue Service, P.O. Box 7604,
Ben Franklin Station, Washington, DC 20044.
FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations,
Mayer R. Samuels of the Office of Associate Chief Counsel (Passthroughs
and Special Industries), (202) 317-6859; concerning the submission of
comments or requests for a public hearing, Regina L. Johnson, (202)
317-5177 (not toll-free numbers).
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 certain tables
used for the valuation of interests in property under section 7520 of
the Internal Revenue Code of 1986 (Code) to reflect the most recent
mortality experience available.
In General
Section 7520, effective for transfers for which the valuation date
is on or after May 1, 1989, generally provides that the value of an
annuity, an interest for life or a term of years, and a remainder or
reversionary interest is to be determined under tables published by the
Secretary 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) 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. Section 7520(c)(2), as it existed on
May 1, 1989, directed the Secretary to issue tables not later than
December 31, 1989, utilizing the then most recent mortality experience.
Thereafter, the Secretary is directed to revise these tables not less
frequently than once each 10 years to take into account the most recent
mortality experience available as of the time of the revision.
These proposed regulations contain Table 2010CM that is based on
data compiled from the 2010 census. For transfers for which the
valuation date is on or after the applicability date of the Treasury
decision adopting these regulations as final regulations (published as
the final rule in the Federal Register), the appropriate actuarial
factors based on Table 2010CM may be computed by taxpayers. However,
for the convenience of taxpayers, actuarial factors may be found on IRS
websites and publications referenced in these proposed regulations.
These proposed regulations also make conforming amendments to various
sections of the existing regulations to provide the references to these
revised actuarial factors. The updated actuarial tables will be
available beginning May 5, 2022, at no charge, electronically via the
IRS website at https://www.irs.gov/retirement-plans/actuarial-tables.
IRS Publications 1457 ``Actuarial Valuations Version 4A'' (forthcoming
2022), 1458 ``Actuarial Valuations Version 4B'' (forthcoming 2022), and
1459 ``Actuarial Valuations Version 4C'' (forthcoming 2022) will
provide additional references and explanations to the actuarial tables
that are published on the IRS website. These publications will be
available after the applicability date of the Treasury decision
adopting these regulations as final regulations. Table S (Single Life
Remainder Factors) and Table U(1) (Unitrust Single Life Remainder
Factors), which are referenced and explained in Publications 1457 and
1458, respectively, will no longer be published in these regulations.
Furthermore, the current Table S and Table U(1), effective for
transfers for which the valuation date is after April 30, 2009, and
before the applicability date of the Treasury decision adopting these
regulations as final regulations is published in the Federal Register,
will be moved to sections containing actuarial material for historical
reference. Table B, Table D, Tables F(0.2) through F(20.0), Table J,
and Table K, which are not based on mortality experience, are not
changed.
The following chart summarizes the applicable interest rates and
the citations to textual materials and tables for the various periods
covered under the current regulations. For purposes of this chart,
``DPAD'' is the day prior to the applicability date of the Treasury
decision adopting these regulations as final regulations and ``AD'' is
the applicability date of the Treasury decision adopting these
regulations as final regulations.
[[Page 26807]]
Cross Reference to Regulation Sections
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Interest
Valuation period rate Regulation section Table
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Section 642:
Valuation, in general............... ......... 1.642(c)-6................
before 01/01/52..................... 4% 1.642(c)-6A(a)............
01/01/52--12/31/70.................. 3.5% 1.642(c)-6A(b)............
01/01/71--11/30/83.................. 6% 1.642(c)-6A(c)............
12/01/83--04/30/89.................. 10% 1.642(c)-6A(d)............ Table G.
05/01/89--04/30/99.................. 7520 1.642(c)-6A(e)............ Table S (5/1/89-4/30/99).
05/01/99--04/30/09.................. 7520 1.642(c)-6A(f)............ Table S (5/1/99-4/30/09).
05/01/09--DPAD...................... 7520 1.642(c)-6A(g)............ Table S (5/1/09-DPAD).
on or after AD...................... 7520 1.642(c)-6(e)............. Table S (on or after AD).
Section 664:
Valuation, in general............... ......... 1.664-4...................
before 01/01/52..................... 4% 1.664-4A(a)...............
01/01/52-12/31/70................... 3.5% 1.664-4A(b)...............
01/01/71-11/30/83................... 6% 1.664-4A(c)...............
12/01/83-04/30/89................... 10% 1.664-4A(d)............... Table E, Table F(1).
05/01/89-04/30/99................... 7520 1.664-4A(e)............... Table U(1) (5/1/89-4/30/99).
05/01/99-04/30/09................... 7520 1.664-4A(f)............... Table U(1) (5/1/99-4/30/09).
05/01/09-DPAD....................... 7520 1.664-4A(g)............... Table U(1) (5/1/09-DPAD).
on or after AD...................... 7520 1.664-4(e)................ Table U(1) (on or after AD),
Table D, and Table F See Pub.
1458, ver. 4A
Section 2031:
Valuation, in general............... ......... 20.2031-7.................
before 01/01/52..................... 4% 20.2031-7A(a).............
01/01/52-12/31/70................... 3.5% 20.2031-7A(b).............
01/01/71-11/30/83................... 6% 20.2031-7A(c).............
12/01/83-04/30/89................... 10% 20.2031-7A(d)............. Table A, Table B, Table LN
05/01/89-04/30/99................... 7520 20.2031-7A(e)............. Table S (5/1/89-4/30/99), Table
80CNSMT.
05/01/99-04/30/09................... 7520 20.2031-7A(f)............. Table S (5/1/99-4/30/09), Table
90CM.
05/01/09-DPAD....................... 7520 20.2031-7A(g)............. Table S (5/1/09-DPAD), Table
2000CM.
on or after AD...................... 7520 20.2031-7(d).............. Table S (on or after AD) Table
2010CM, Table B, Table J,
Table K see Pub. 1457, ver.
4A.
Section 2512:
Valuation, in general............... ......... 25.2512-5.................
before 01/01/52..................... 4% 25.2512-5A(a).............
01/01/52-12/31/70................... 3.5% 25.2512-5A(b).............
01/01/71-11/30/83................... 6% 25.2512-5A(c).............
12/01/83-04/30/89................... 10% 25.2512-5A(d).............
05/01/89-04/30/99................... 7520 25.2512-5A(e).............
05/01/99-04/30/09................... 7520 25.2512-5A(f).............
05/01/09-DPAD....................... 7520 25.2512-5A(g).............
on or after AD...................... 7520 25.2512-5(d)..............
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Applicability Dates
These regulations are proposed to be applicable in the case of
annuities, interests for life or a term of years, and remainder or
reversionary interests that are valued as of a date on or after the
first day of the month following the date on which the Treasury
decision adopting these regulations as final regulations is published
in the Federal Register.
Transitional Rules
The regulations provide certain rules to facilitate the transition
to the new actuarial tables. For gift tax purposes, if the date of a
transfer is on or after January 1, 2021, and before the applicability
date of the Treasury decision adopting these regulations as final
regulations, the donor may choose to determine the value of the gift
(and/or any applicable charitable deduction) under tables based on
either Table 2000CM or Table 2010CM. Similarly, for estate tax
purposes, if the decedent dies on or after January 1, 2021, and before
the applicability date of the Treasury decision adopting these
regulations as final regulations, the value of any interest (and/or any
applicable charitable deduction) may be determined in the discretion of
the decedent's executor under tables based on either Table 2000CM or
Table 2010CM, provided that the decedent's executor must use the same
mortality table to value all interests in the same property. However,
the section 7520 interest rate to be utilized is the appropriate rate
for the month in which the valuation date occurs, subject to the
following special rule for certain charitable transfers. Specifically,
in accordance with this transitional rule and the rules contained in
Sec. Sec. 1.7520-2(a)(2), 20.7520-2(a)(2), and 25.7520-2(a)(2), in
cases involving a charitable deduction, if the valuation date occurs on
or after January 1, 2021, but before the applicability date of the
Treasury decision adopting these regulations as final regulations, and
the executor or donor elects under section 7520(a) to use the section
7520 interest rate for a month that is prior to January 1, 2021, then
the mortality experience contained in Table 2000CM must be used. If the
executor or donor uses the section 7520 interest rate for a month that
is on or after January 1, 2021, but before the applicability date of
the Treasury decision adopting these regulations as final regulations,
then the tables based on either Table 2000CM or Table 2010CM may be
used. However, if the valuation date occurs on or after the
applicability date of the Treasury decision adopting these regulations
as
[[Page 26808]]
final regulations, the executor or donor must use the new mortality
experience contained in Table 2010CM even if the use of a prior month's
interest rate is elected under section 7520(a).
In addition, the regulations no longer will provide that the estate
of a decedent who was under a mental disability that prevented a change
in the disposition of the decedent's property may elect to value the
property interest included in the gross estate either under the
mortality table and interest rate in effect at the time the decedent
first became subject to the mental disability or under the mortality
table and interest rate in effect on the decedent's date of death. The
taxpayer decedent, during life and before the advent of the mental
disability, would not know, beforehand, what the market interest rate
would be at his or her future date of death, but can reasonably be
expected to have understood that the property interest would be valued
at the then-applicable market rate, whatever it might be. Becoming
incapacitated should not alter the effect of that understanding.
Therefore, a special rule permitting an election to use the interest
rate in effect at the time the decedent first became subject to the
mental disability is not necessary. The same is true with respect to
mortality rates. Accordingly, estates of decedents with a mental
disability who die after the applicability date of the Treasury
decision adopting these regulations as final regulations will be
required to use the mortality table and interest rate in effect on the
decedent's date of death or the alternate valuation date under section
2032, if elected.
Special Analyses
These proposed 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.
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that this proposed rule will not have a significant
economic impact on a substantial number of small entities. This
document proposes to implement statutorily required periodic updates to
actuarial tables used in valuing various interests in property that are
affected by a person's life expectancy. The updates would not impose
any direct compliance requirements on any entities other than the time
to read and understand the proposed updates. Notwithstanding this
certification, the Treasury Department and the IRS invite comment on
the impact this proposed rule would have on small entities.
The Treasury Department and the IRS have assessed that the proposed
regulations do not establish a new collection of information nor modify
an existing collection that requires the approval of the Office of
Management and Budget under the Paperwork Reduction Act (44 U.S.C.
chapter 35). The Treasury Department and the IRS seek comments on this
assessment.
Pursuant to section 7805(f), this notice of proposed rulemaking has
been submitted to the Chief Counsel for the Office of Advocacy of the
Small Business Administration for comment on its impact on small
business.
Statement of Availability of IRS Documents
IRS Revenue Procedures, Revenue Rulings, Notices, and other
guidance cited in this preamble are published in the Internal Revenue
Bulletin (or Cumulative Bulletin) and are available from the
Superintendent of Documents, U.S. Government Publishing Office,
Washington, DC 20402, or by visiting the IRS website at https://www.irs.gov.
Comments and Requests for Public Hearing
The Treasury Department and the IRS request comments on all aspects
of the proposed rules.
Before these proposed amendments to the regulations are adopted as
final regulations, consideration will be given to comments that are
submitted timely to the IRS as prescribed in the preamble under the
ADDRESSES section. Any electronic comments submitted, and to the extent
practicable any paper comments submitted, will be made available at
www.regulations.gov or upon request.
A public hearing will be scheduled if requested in writing by any
person who timely submits electronic or written comments. Requests for
a public hearing also are encouraged to be made electronically. If a
public hearing is scheduled, notice of the date and time for the public
hearing will be published in the Federal Register. Announcement 2020-4,
2020-17 I.R.B 1, provides that, until further notice, public hearings
conducted by the IRS will be held telephonically. Any telephonic
hearing will be made accessible to people with disabilities.
Drafting Information
The principal author of these regulations is Mayer R. Samuels,
Office of the Associate Chief Counsel (Passthroughs and Special
Industries), IRS. However, other personnel from the IRS and Treasury
Department participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 20
Estate taxes, Reporting and recordkeeping requirements.
26 CFR Part 25
Gift taxes, Reporting and recordkeeping requirements.
Proposed Amendments to the Regulations
Accordingly, 26 CFR parts 1, 20, and 25 are proposed to be 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
[applicability date of the Treasury decision adopting these regulations
as final regulations], Sec. 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 [applicability date of the Treasury decision adopting
these regulations as final regulations], 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
[[Page 26809]]
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 will be available
beginning May 5, 2022, 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'' (2022), references and
explains Table C and provides examples describing the computation. This
publication will be available after [date of publication of the final
rule in the in the Federal Register]. For transfers for which the
valuation date is on or after May 1, 2009, and before [applicability
date of the Treasury decision adopting these regulations as final
regulations], 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 is
currently 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 [applicability date
of the Treasury decision adopting these regulations as final
regulations], the appropriate table found in 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 [applicability date of the Treasury decision adopting
these regulations as final regulations] are referenced by prior
versions of IRS Publication 1459.
[GRAPHIC] [TIFF OMITTED] TP05MY22.000
(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 factors from the appropriate mortality table. For the
convenience of taxpayers, actuarial factors have been computed by 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:
[[Page 26810]]
Table 1 to Paragraph (b)(3)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
------------------------------------------------------------------------
Interest at 3.2 Percent
------------------------------------------------------------------------
Age Annuity Life Estate Remainder
------------------------------------------------------------------------
62 14.6131 0.46762 0.53238
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(4) Example. After [applicability date of the Treasury decision
adopting these regulations as final regulations], 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)). At the time of the gift, the interest rate
prescribed under section 7520 is 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 [applicability date of the Treasury
decision adopting these regulations as final regulations], the
appropriate table found in 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
[applicability date of the Treasury decision adopting these regulations
as final regulations] are referenced by prior versions of IRS
Publication 1459.
[GRAPHIC] [TIFF OMITTED] TP05MY22.002
[[Page 26811]]
* * * * *
(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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
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.
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 [applicability
date of the Treasury decision adopting these regulations as final
regulations].) 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. 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 [applicability date of
the Treasury decision adopting these regulations as final regulations].
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 [applicability
date of the Treasury decision adopting these regulations as final
regulations], 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
[applicability date of the Treasury decision adopting these regulations
as final regulations] is determined under the following sections:
Table 6 to Paragraph (d)
------------------------------------------------------------------------
Valuation dates
--------------------------------------------------- Applicable
After Before regulations
------------------------------------------------------------------------
01-01-52......... 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....................... AD............... 1.642(c)-6A(g)
------------------------------------------------------------------------
AD = [applicability date of the Treasury decision adopting these
regulations as final regulations].
(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 [applicability date of the Treasury decision adopting these
regulations as final regulations]--(1) In general. In the case of
transfers to pooled income funds for which the valuation date is on or
after [applicability date of the Treasury decision adopting these
regulations as final regulations], 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 factors from the appropriate mortality table. For the
convenience of taxpayers, actuarial factors have been computed by IRS
and appear in Table S. Table S will be available beginning May 5, 2022,
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 after [date of publication of the final rule in
the in the Federal Register]. 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 on or after January 1, 2021, and before [applicability date of the
Treasury decision adopting these regulations as final regulations], 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. For the convenience of taxpayers, actuarial factors
based on Table 2010CM appear in the proposed version of Table S, and
actuarial factors based on Table 2000CM appear in the current version
of Table S, which will be available beginning May 5, 2022, 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
[[Page 26812]]
property, and with respect to all transfers occurring on the valuation
date. For example, gift and income tax charitable deductions with
respect to the same transfer must be determined based on 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 factors from the
appropriate mortality table. For the convenience of taxpayers,
actuarial factors have been computed by IRS and appear in Table S.
Table S will be available beginning May 5, 2022, 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 after [date of publication of the final rule in the Federal
Register]. 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 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. 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 [applicability date of the
Treasury decision adopting these regulations as final regulations], 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
[[Page 26813]]
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).
[GRAPHIC] [TIFF OMITTED] TP05MY22.004
(6) Actuarial tables. In the case of transfers for which the
valuation date is on or after [applicability date of the Treasury
decision adopting these regulations as final regulations], 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 factors from the appropriate mortality table. For the
convenience of taxpayers, actuarial factors have been computed by IRS
and appear in Table S. Table S will be available beginning May 5, 2022,
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 after [date of publication of the final
rule in the Federal Register].
(f) Applicability date. This section applies on and after
[applicability date of the Treasury decision adopting these regulations
as final regulations].
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 [Applicability Date of the Treasury Decision
Adopting These Regulations as Final Regulations]
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 [applicability date of the Treasury
decision adopting these regulations as final regulations].
* * * * *
(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 [applicability date of the Treasury
decision adopting these regulations as final regulations]--(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 [applicability
date of the Treasury decision adopting these regulations as final
regulations], 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 [applicability date of the Treasury
decision adopting these regulations as final regulations] without
having regained the ability to dispose of the
[[Page 26814]]
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 [applicability date of the Treasury decision adopting these
regulations as final regulations], 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 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 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 factors from the appropriate mortality table. For the
convenience of taxpayers, actuarial factors have been computed by 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. 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).
(6) Actuarial tables. In the case of transfers for which the
valuation date is on or after May 1, 2009, and before [applicability
date of the Treasury decision adopting these regulations as final
regulations], 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 [applicability date
of the Treasury decision adopting these regulations as final
regulations].
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
[applicability date of the Treasury decision adopting these
[[Page 26815]]
regulations as final regulations], or under Sec. 20.2031-7A(a) through
(g) of this chapter, whichever is applicable, for transfers for which
the valuation date is before [applicability date of the Treasury
decision adopting these regulations as final regulations]. See,
however, Sec. 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 [applicability date of the Treasury decision adopting these
regulations as final regulations].
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 paragraph heading as the heading for Sec. 1.664-
4A(g) and paragraphs (e)(1), (2), (5), and (7) as Sec. 1.664-4A(g)(1),
(2), (5), and (6), respectively.
0
ii. Adding a new paragraph 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), preceding Table D.
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 [applicability date of the Treasury
decision adopting these regulations as final regulations]; 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 [applicability date of the Treasury decision adopting
these regulations as final regulations]. 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 [applicability
date of the Treasury decision adopting these regulations as final
regulations], 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 [applicability date of
the Treasury decision adopting these regulations as final regulations],
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....................... AD............... 1.664-4A(g)
------------------------------------------------------------------------
AD = [applicability date of the Treasury decision adopting these
regulations as final regulations].
(e) Valuation of charitable remainder unitrusts having certain
payout sequences for transfers for which the valuation date is on or
after [applicability date of the Treasury decision adopting these
regulations as final regulations]--(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 [applicability date of the
Treasury decision adopting these regulations as final regulations], 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 shall 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 on or after January 1, 2021, and before
[applicability date of the Treasury decision adopting these regulations
as final regulations], 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. For the convenience of taxpayers, actuarial factors based on Table
2010CM appear in the proposed version of Table U(1), and actuarial
factors based on Table 2000CM appear in the current version of Table
U(1), which will be available beginning May 5, 2022, 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 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
[insert the applicability date of the Treasury decision adopting these
regulations as final regulations] is the factor obtained through the
use of the formula in Figure 1 to this paragraph (e)(5)(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
[applicability date of the Treasury decision adopting these regulations
as final regulations], 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 [applicability date of the Treasury decision adopting
these regulations as final regulations] 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) will
be available beginning May 5, 2022, at no charge, electronically via
the IRS website at https://www.irs.gov/
[[Page 26816]]
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 after [date of publication of the final rule in the Federal
Register]. 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
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. 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.
[GRAPHIC] [TIFF OMITTED] TP05MY22.005
(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:
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
------------------------------------------------------------------------
[[Page 26817]]
(iii) Example of interpolation. After [applicability date of the
Treasury decision adopting these regulations as final regulations], 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 4.8834% (5% x 0.976683). Based on interpolating between
the remainder factors in Table U(1), the present value of the remainder
interest is $61,012, computed as illustrated in Figure 2 to this
paragraph (e)(5)(iii).
[GRAPHIC] [TIFF OMITTED] TP05MY22.007
(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). For the convenience of taxpayers, actuarial
factors have been computed by 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 4B,'' which will be available after
[date of publication of the final rule in the Federal Register]. 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 [applicability date of the Treasury decision
adopting these regulations as final regulations], 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
(1-r)\N\
where:
n = the term in years or fractions of a year; and
r = the adjusted payout rate.
(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). For the convenience of
taxpayers, actuarial factors have been computed by 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 after
[date of publication of the final rule in the Federal Register]. The
factors from Table F also can be found in paragraph (e)(6)(iii) of this
section, but only for
[[Page 26818]]
interest rates from 4.2 to 14 percent, inclusive.
[GRAPHIC] [TIFF OMITTED] TP05MY22.008
(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 [applicability date of the Treasury decision adopting
these regulations as final regulations]. 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 factors from the appropriate mortality table.
For the convenience of taxpayers, actuarial factors have been computed
by IRS and appear in Table U(1). For transfers for which the valuation
date is on or after [applicability date of the Treasury decision
adopting these regulations as final regulations], the actuarial tables
will be available beginning May 5, 2022, 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'' (2022). This
publication will be available after [date of publication of the final
rule in the Federal Register]. 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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
0
Par. 9. The undesignated center heading immediately preceding Sec.
1.664-4A is revised to read as follows:
Unitrust Actuarial Tables Applicable Before [Applicability Date of
the Treasury Decision Adopting These Regulations as Final Regulations]
0
Par. 10. Section 1.664-4A is amended by:
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 [applicability date of the Treasury
decision adopting these regulations as final regulations].
* * * * *
(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 [applicability date of the Treasury
decision adopting these regulations as final regulations]--(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 [applicability date of the Treasury
decision adopting these regulations as final regulations], 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 sections 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 [applicability date of the Treasury
decision adopting these regulations as final regulations], without
having regained the ability to dispose of the
[[Page 26819]]
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 [applicability date of the Treasury decision adopting these
regulations as final regulations], 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 sections 170, 2055, 2106, 2522, or 2624, in
the case of transfers to a charitable remainder unitrust for which the
valuation date is on or after May 1, 2009, and before July 1, 2009, the
present value of a remainder interest based on one or more measuring
lives is determined under this section by 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 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) 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. For the
convenience of taxpayers, actuarial factors have been computed by 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.
For the convenience of taxpayers, actuarial factors have been computed
by 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 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.
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 sections 2055, 2106, or 2624,
the valuation date is the date of death. See Sec. 1.664-4(e)(4) for
additional rules regarding the valuation date, 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 [applicability date of the Treasury decision adopting these
regulations as final regulations], may be computed directly by using
the formula in Sec. 1.664-4(e)(5)(i) to derive factors from the
appropriate mortality table. For the convenience of taxpayers,
actuarial factors have been computed by 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 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. 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 [applicability date of the
Treasury decision adopting these regulations as final regulations]. For
transfers for which the valuation date is on or after May 1, 2009, and
before [applicability date of the Treasury decision adopting these
regulations as final regulations], 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 factors from the appropriate mortality table. For
the convenience of taxpayers, actuarial factors have been computed by
IRS and appear in Table U(1) that is referenced and explained by IRS
Publication 1458, ``Actuarial
[[Page 26820]]
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 [applicability date
of the Treasury decision adopting these regulations as final
regulations].
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 [applicability date of the Treasury
decision adopting these regulations as final regulations], Sec.
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 [applicability date of the Treasury decision
adopting these regulations as final regulations], 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 most recently available from the United States census.
As new mortality data becomes available after each decennial census,
the mortality component described in this section will be revised and
the revised mortality component tables will be published in the IRS
publications at that time. For transactions with valuation dates on or
after [applicability date of the Treasury decision adopting these
regulations as final regulations], 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 [applicability date of the Treasury decision adopting these
regulations as final regulations].
(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 special factor is
required in order to value an interest, the special 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. 2021-1, 2021-1 I.R.B. 1, and subsequent updates, 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 [applicability
date of the Treasury decision adopting these regulations as final
regulations]. The publications listed in paragraphs (d)(1) through (3)
of this section will be available after [date of publication of the
final rule in the Federal Register]. The underlying actuarial tables
referenced and explained by these publications will be available May 5,
2022, 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''
(2022). 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 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 [applicability date of
the Treasury decision adopting these regulations as final regulations].
Earlier versions of the publication also contain earlier versions of
Table R(2). Table B, Table J, and Table 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''
(2022). 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
[applicability date of the Treasury decision adopting these regulations
as final regulations]. Earlier versions of the publication also contain
earlier versions of Table U(2). 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.
[[Page 26821]]
(3) IRS Publication 1459, ``Actuarial Valuations Version 4C''
(2022). 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. 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 must be used
if more exact methods are not available.
(f) Applicability date. This section applies on and after
[applicability date of the Treasury decision adopting these regulations
as final regulations].
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 under section 2031.
Sec. 20.2031-1 Definition of gross estate; valuation of property.
Sec. 20.2031-2 Valuation of stocks and bonds.
Sec. 20.2031-3 Valuation of interests in businesses.
Sec. 20.2031-4 Valuation of notes.
Sec. 20.2031-5 Valuation of cash on hand or on deposit.
Sec. 20.2031-6 Valuation of household and personal effects.
Sec. 20.2031-7 Valuation of annuities, interests for life or a term
of years, and remainder or reversionary interests.
Sec. 20.2031-8 Valuation of certain life insurance and annuity
contracts; valuation of shares in an open-end investment company.
Sec. 20.2031-9 Valuation of other property.
Actuarial Tables Applicable Before [Applicability Date of the
Treasury Decision Adopting These Regulations as Final Regulations]
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 [applicability date of the Treasury decision adopting these
regulations as final regulations].
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 [applicability date of the Treasury decision
adopting these regulations as final regulations], 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 [applicability date of the Treasury decision
adopting these regulations as final regulations], is determined under
the following sections:
Table 1 to Paragraph (c)
------------------------------------------------------------------------
Valuation dates
--------------------------------------------------- Applicable
After Before regulations
------------------------------------------------------------------------
01-01-52......... 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......... 20.2031-7A(f)
04-30-09....................... AD............... 20.2031-7A(g)
------------------------------------------------------------------------
AD = [applicability date of the Treasury decision adopting these
regulations as final regulations].
(d) Actuarial valuations on or after [applicability date of the
Treasury decision adopting these regulations as final regulations]--(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 [applicability date of the
Treasury decision adopting these regulations as final regulations], 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. These
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 (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; the approximation method provided in
this part must be used if more exact methods are not available. See
Sec. Sec. 20.7520-1 through 20.7520-4.
(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). The fair market value
of a remainder interest in a charitable remainder annuity trust, as
defined in Sec. 1.664-2(a), is the present value determined under
Sec. 1.664-2(c). The fair market value of a remainder interest in
[[Page 26822]]
a charitable remainder unitrust, as defined in Sec. 1.664-3, is its
present value determined under Sec. 1.664-4(e). 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).
(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). For the convenience of taxpayers,
actuarial factors have been computed by 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 after [date of publication of the final rule in the Federal
Register]. 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.
[GRAPHIC] [TIFF OMITTED] TP05MY22.009
(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). The prescribed mortality table is Table
2010CM as set forth in paragraph (d)(7)(ii) of this section, or for
periods before [applicability date of the Treasury decision adopting
these regulations as final regulations], the appropriate table found in
Sec. 20.2031-7A. For the convenience of taxpayers, actuarial factors
have been computed by IRS and appear in Table S. Table S will be
available beginning May 5, 2022, 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 after [date of
publication of the final rule in the Federal Register]. For information
about obtaining special factors for other situations, see paragraph
(d)(4) of this section.
[[Page 26823]]
[GRAPHIC] [TIFF OMITTED] TP05MY22.010
(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 paragraph
(d)(2)(ii)(A) of this section. For the convenience of taxpayers,
actuarial factors have been computed by 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 IRS
and appear in the ``Life Estate'' column of Table S. Table S
(applicable when the valuation date is on or after [applicability date
of the Treasury decision adopting these regulations as final
regulations]) can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Table B and Table 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 [applicability date of the Treasury
decision adopting these regulations as final regulations]. 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 as a number with at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by 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 as a number with four
decimal places. For the convenience of taxpayers, actuarial factors
have been computed by IRS and appear in the ``Annuity'' column of Table
S. Table S (applicable when the valuation date is on or after
[applicability date of the Treasury decision adopting these regulations
as final regulations]) can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Table B and Table 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 [applicability date of the
Treasury decision adopting these regulations as final regulations]. 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
[[Page 26824]]
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). For the
convenience of taxpayers, actuarial factors have been computed by 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.
[GRAPHIC] [TIFF OMITTED] TP05MY22.011
(1) Sample factors from actuarial Table S and Table K. For purposes
of the example in paragraph (d)(2)(iv)(B)(2) of this section, the
following factors from Table S and Table K will be used:
Table 2 to Paragraph (d)(2)(iv)(B)(1)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
Interest at 3.2 Percent
------------------------------------------------------------------------
Age Annuity Life Estate Remainder
------------------------------------------------------------------------
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). For the
convenience of taxpayers, actuarial factors have been computed by 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.
[[Page 26825]]
[GRAPHIC] [TIFF OMITTED] TP05MY22.012
(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 specific number of years or the death of an individual.
(3) Transitional rule. If a decedent dies on or after January 1,
2021, and before [applicability date of the Treasury decision adopting
these regulations as final regulations], 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. For the convenience of
taxpayers, actuarial factors based on Table 2010CM appear in the
proposed version of Table S, and actuarial factors based on Table
2000CM appear in the current version of Table S, which 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 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 factors from the appropriate
mortality table. For the convenience of taxpayers, actuarial factors
have been computed by 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 paragraph (d)(2)(ii)(A)
of this section. For the convenience of taxpayers, actuarial factors
have been computed by 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. For the convenience of taxpayers, actuarial factors have been
computed by 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. For the convenience
of taxpayers, actuarial factors have been computed by IRS and appear in
Table K. These tables will be available beginning May 5, 2022, 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'' (2022), 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 after [date the Treasury
decision adopting these regulations as final regulations is published
in the Federal Register]. Table B, Table J, and Table 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 Table S, Table B, and Table K will be used:
[[Page 26826]]
Table 3 to Paragraph (d)(5)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
Interest at 3.2 Percent
------------------------------------------------------------------------
Age Annuity Life Estate Remainder
------------------------------------------------------------------------
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
------------------------------------------------------------------------
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 [applicability date of the Treasury decision adopting these
regulations as final regulations]--(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
[applicability date of the Treasury decision adopting these regulations
as final regulations], actuarial factors computed 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 IRS and can be found in Table
S. Table S will be available beginning May 5, 2022, 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 after [date the Treasury decision adopting these regulations
as
[[Page 26827]]
final regulations is published in the Federal Register].
(ii) Table 2010CM.
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
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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
Par. 15. The undesignated center heading immediately preceding
Sec. 20.2031-7A is revised to read as follows:
Actuarial Tables Applicable Before [Applicability Date of the Treasury
Decision Adopting These Regulations as Final Regulations]
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), the heading and introductory
text are revised.
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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
* * * * *
(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 [applicability date of the Treasury decision adopting
these regulations as final regulations]--(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 [applicability date of the Treasury decision
adopting these regulations as final regulations], 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 before [applicability date of the
Treasury decision adopting these regulations as final regulations]
either without having regained the ability to dispose of the decedent's
property or within 90 days of
[[Page 26828]]
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 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) 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) to derive factors from the appropriate mortality table.
For the convenience of taxpayers, actuarial factors have been computed
by 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). For the
convenience of taxpayers, actuarial factors have been computed by 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). For the convenience of
taxpayers, actuarial factors have been computed by 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). For the convenience of taxpayers, actuarial factors
have been computed by 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.
Table B, Table J, and Table 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 factors from the
appropriate mortality table. 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 IRS and appear
in Table S (applicable on and after May 1, 2009, and before
[applicability date of the Treasury decision adopting these regulations
as final regulations]). 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 [applicability date
of the Treasury decision adopting these regulations as final
regulations].
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 factors from the appropriate mortality table. For the
convenience of taxpayers, actuarial factors have been computed by 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:
[[Page 26829]]
Table 2 to Paragraph (f)(1)(ii)
------------------------------------------------------------------------
------------------------------------------------------------------------
Table S--Based on Table 2010CM
Interest at 4.2
Percent
------------------------------------------------------------------------
Age Annuity Life Estate Remainder
65 12.2128 0.51294 0.48706
------------------------------------------------------------------------
Interest at 4.6 Percent
------------------------------------------------------------------------
Age Annuity Life Estate Remainder
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, as illustrated in Example 1 of
Sec. 20.2031-7(d)(5)(i), be $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 [applicability date of the Treasury
decision adopting these regulations as final regulations].
Section 20.2032-1T [Removed]
0
Par. 18. Section 20.2032-1T is removed.
0
Par. 19. Section 20.2036-1 is amended:
0
1. In paragraph (c)(2)(iv) by 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)
by 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. By 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
[[Page 26830]]
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
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
expressed as a number with at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by 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 as a number with four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by IRS and appear in
the ``Annuity'' column of Table S. Table B and 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)(3)(iii)(C) of this
section, the following relevant factors from Table B and Table S are
used:
Table 1 to Paragraph (e)(3)(iii)(B)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table B
Annuity, Income, and Remainder Interests for a Term Certain
Interest at 3.2 Percent
------------------------------------------------------------------------
Years Annuity Income Interest Remainder
------------------------------------------------------------------------
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
------------------------------------------------------------------------
[[Page 26831]]
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
[applicability date of the Treasury decision adopting these regulations
as final regulations], 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 [applicability date of the Treasury
decision adopting these regulations as final regulations], or under
Sec. 20.2031-7A in the case of decedents where the valuation date of
the gross estate is before [applicability date of the Treasury decision
adopting these regulations as final regulations].
* * * * *
(6) Applicability date. Paragraphs (e)(3)(iii) and (f)(4) of this
section apply on and after [applicability date of the Treasury decision
adopting these regulations as final regulations].
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.
0
3. Revising the headings in newly designated paragraphs (d)(1) through
(3).
0
4. Revising newly designated paragraph (d)(4), newly designated
paragraph (d)(5) heading, 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 as a number with at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by 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 as a number with four decimal places. For
the convenience of taxpayers, actuarial factors have been computed by
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 as a number with at
least four decimal places. For the convenience of taxpayers, actuarial
factors have been computed by 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). For
the convenience of taxpayers, actuarial factors have been computed by
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 Table S, Table B, and Table K are:
Table 2 to Paragraph (d)(4)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
Interest at 3.6 Percent
------------------------------------------------------------------------
Age Annuity Life Estate Remainder
------------------------------------------------------------------------
60 14.6908 0.52887 0.47113
------------------------------------------------------------------------
[[Page 26832]]
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 [applicability date of
the Treasury decision adopting these regulations as final regulations],
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 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.
(5) Example 5. Transfer to QDOT subject to gift tax. * * *
* * * * *
(e) Applicability date. Paragraphs (c)(4)(ii)(B) and (d)(4) of this
section are applicable with respect to decedents dying on or after
[applicability date of the Treasury decision adopting these regulations
as final regulations].
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 [applicability date of the Treasury decision adopting
these regulations as final regulations], 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 [applicability date of the
Treasury decision adopting these regulations as final regulations],
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 most recently available from the United States census.
As new mortality data becomes available after each decennial census,
the mortality component described in this section will be revised and
the revised mortality component tables will be published in IRS
publications at that time. For decedents' estates with valuation dates
on or after [applicability date of the Treasury decision adopting these
regulations as final regulations], 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 [applicability date of
the Treasury decision adopting these regulations as final regulations].
(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
[[Page 26833]]
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. 2021-1, 2021-1 I.R.B. 1, and subsequent updates, 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 [applicability
date of the Treasury decision adopting these regulations as final
regulations]. The publications listed in paragraphs (d)(1) through (3)
of this section will be available after [date the Treasury decision
adopting these regulations as final regulations is published in the
Federal Register]. The underlying actuarial tables reference and
explained by these publications will be available beginning May 5,
2022, 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''
(2022). 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
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 of this chapter, or Sec. 20.2031-7A for Table S applicable
to valuation dates before [applicability date of the Treasury decision
adopting these regulations as final regulations]. See earlier versions
of the publication for Table R(2) applicable to valuation dates before
[applicability date of the Treasury decision adopting these regulations
as final regulations]. Earlier versions of the publication also contain
earlier versions of Table R(2). Table B, Table J, and Table 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''
(2022). 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 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 of this chapter for Table
U(1) applicable to valuation dates before [applicability date of the
Treasury decision adopting these regulations as final regulations].
Earlier versions of the publication also contain earlier versions of
Table U(2). 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''
(2022). 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.
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. 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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
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 under section 2512.
Sec. 25.2512-1 Valuation of property; in general.
Sec. 25.2512-2 Stocks and bonds.
Sec. 25.2512-3 Valuation of interests in businesses.
Sec. 25.2512-4 Valuation of notes.
Sec. 25.2512-5 Valuation of annuities, interests for life or a term
of years, and remainder or reversionary interests.
Sec. 25.2512-6 Valuation of certain life insurance and annuity
contracts; valuation of shares in an open-end investment company.
Sec. 25.2512-7 Effect of excise tax.
Sec. 25.2512-8 Transfers for insufficient consideration.
Actuarial Tables Applicable Before [Applicability Date of the
Treasury Decision Adopting These Regulations as Final Regulations]
Sec. 25.2512-5A Valuation of annuities, interests for life or a
term of years, and remainder or reversionary interests transferred
before [applicability date of
[[Page 26834]]
the Treasury decision adopting these regulations as final
regulations].
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 [applicability date of the Treasury
decision adopting these regulations as final regulations], 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 [applicability date
of the Treasury decision adopting these regulations as final
regulations], is determined under the following sections:
Table 1 to Paragraph (c)
------------------------------------------------------------------------
Transfers
--------------------------------------------------- Applicable
After Before regulations
------------------------------------------------------------------------
01-01-52......... 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....................... AD............... 25.2512-5A(g)
------------------------------------------------------------------------
AD = [applicability date of the Treasury decision adopting these
regulations as final regulations].
(d) Actuarial valuations on or after [applicability date of the
Treasury decision adopting these regulations as final regulations]--(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 [applicability date of
the Treasury decision adopting these regulations as final regulations],
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. 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; the approximation
method provided in this part must be used if more exact methods are not
available. See Sec. Sec. 25.7520-1 through 25.7520-4. The fair market
value of a qualified annuity interest described in section 2702(b)(1)
and a qualified unitrust interest described in section 2702(b)(2) is
the present value of such interests determined under 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 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 Sec.
20.2031-7(d)(2)(ii)(A) of this chapter. For the convenience of
taxpayers, actuarial factors have been computed by 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 after [date the Treasury decision adopting
these regulations as final regulations is published in the Federal
Register]. 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 factors from the
[[Page 26835]]
appropriate mortality table. For the convenience of taxpayers,
actuarial factors have been computed by IRS and appear in Table S.
Table S will be available beginning May 5, 2022, 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 after
[date of publication of the final rule in the Federal Register]. 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 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 IRS
and appear in the ``Life Estate'' column of Table S. Table S
(applicable when the valuation date is on or after [applicability date
of the Treasury decision adopting these regulations as final
regulations]) can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Table B and Table 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 [applicability date
of the Treasury decision adopting these regulations as final
regulations]. 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 as a number with at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by 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 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 as a number with four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by IRS
and appear in the ``Annuity'' column of Table S. Table S (applicable
when the valuation date is on or after [applicability date of the
Treasury decision adopting these regulations as final regulations]) can
be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. Table B and Table 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 [applicability date of the Treasury
decision adopting these regulations as final regulations]. 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. For the convenience of
taxpayers, actuarial factors have been computed by 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 Table S and Table K. For purposes
of the example in paragraph (d)(2)(iv)(B)(2) of this section, the
relevant factors from Table S and Table K are:
Table 2 to Paragraph (d)(2)(iv)(B)(1)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
Interest at 3.2 Percent
------------------------------------------------------------------------
Age Annuity Life Remainder
Estate
------------------------------------------------------------------------
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- Quarterly Monthly
Annually
------------------------------------------------------------------------
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
[[Page 26836]]
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. For the
convenience of taxpayers, actuarial factors have been computed by 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 [applicability date of the Treasury decision
adopting these regulations as final regulations], the appropriate table
found in Sec. 20.2031-7A of this chapter. For the convenience of
taxpayers, actuarial factors have been computed by IRS and appear in
Table H. Table H will be available May 5, 2022, 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 will be available after
[date of publication of the final rule in the Federal Register].
[GRAPHIC] [TIFF OMITTED] TP05MY22.013
[[Page 26837]]
(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. For the convenience of taxpayers, actuarial factors have
been computed by 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 Table H(2.8) and Table K are:
Table 3 to Paragraph (d)(2)(v)(A)(1)(ii)
------------------------------------------------------------------------
------------------------------------------------------------------------
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
------------------------------------------------------------------------
Factors from Table K
Adjustment Factors for Annuities Payable at the End of Each Interval
------------------------------------------------------------------------
Interest Rate Semi- Quarterly Monthly
Annually
------------------------------------------------------------------------
2.8%................................... 1.0070 1.0104 1.0128
------------------------------------------------------------------------
(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).
[GRAPHIC] [TIFF OMITTED] TP05MY22.014
(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 a
unitrust commutation factor. The adjusted payout rate 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.
For the convenience of taxpayers, actuarial factors have been computed
by 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 are 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 IRS and appear in Table Z.
Table F and Table Z can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables.
[[Page 26838]]
[GRAPHIC] [TIFF OMITTED] TP05MY22.015
(ii) For purposes of the example in paragraph (d)(2)(v)(B)(2) of
this section, the relevant factors from Table F(3.4), Table Z(4.8), and
Table Z(5.0) are:
Table 4 to Paragraph (d)(2)(v)(B)(1)(ii)
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Factors From Table F(3.4)
Factors for Computing Adjusted Payout Rates for Unitrusts
Interest at 3.4 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 0.983422 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
----------------------------------------------------------------------------------------------------------------
[[Page 26839]]
Table 4 to Paragraph (d)(2)(v)(B)(1)(ii)--Continued
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
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).
[GRAPHIC] [TIFF OMITTED] TP05MY22.016
(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).
[GRAPHIC] [TIFF OMITTED] TP05MY22.017
[[Page 26840]]
(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).
[GRAPHIC] [TIFF OMITTED] TP05MY22.018
(3) Transitional rule. If the valuation date of a transfer of
property by gift is on or after January 1, 2021, and before
[applicability date of the Treasury decision adopting these regulations
as final regulations], 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. For the convenience of taxpayers,
actuarial factors based on Table 2010CM appear in the proposed version
of Table S, and actuarial factors based on Table 2000CM appear in the
current version of Table S, which 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
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 factors from the appropriate
mortality table. For the convenience of taxpayers, actuarial factors
have been computed by 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. For the convenience of taxpayers,
actuarial factors have been computed by 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. For the convenience of taxpayers,
actuarial factors have been computed by 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. For the convenience of taxpayers, actuarial factors have
been computed by IRS and appear in Table K. These tables will be
available beginning May 5, 2022, 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'' (2022),
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
after [date of publication of the final rule in the Federal Register].
Table B, Table J, and Table K also can be found in Sec. 20.2031-
[[Page 26841]]
7(d)(6) of this chapter, but only for interest rates from 4.2 to 14
percent, inclusive. If a special factor is required, the special 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 Sec. Sec. 601.201 and
601.601(d)(2)(ii)(b) of this chapter and Rev. Proc. 2021-1, 2021-1
I.R.B. 1, and subsequent updates) and must include payment of the
required user fee.
(e) Applicability date. This section applies on and after
[applicability date of the Treasury decision adopting these regulations
as final regulations].
0
Par. 26. The undesignated center heading immediately preceding Sec.
25.2512-5A is revised to read as follows:
Actuarial Tables Applicable Before [Applicability Date of the
Treasury Decision Adopting These Regulations]
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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
* * * * *
(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 [applicability date of the Treasury decision adopting
these regulations as final regulations]--(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 [applicability date of the Treasury decision adopting
these regulations as final regulations], 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)
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. 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.
However, with respect to each individual transaction and with respect
to all transfers occurring on the valuation date, 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 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) 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 factors from the appropriate
mortality table. For the convenience of taxpayers, actuarial factors
have been computed by 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. For the convenience of taxpayers,
actuarial factors have been computed by 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. For the convenience of taxpayers,
actuarial factors have been computed by 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. For the convenience of taxpayers, actuarial factors have
been computed by 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. Table B, Table J, and
Table 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 special
factor is required in the case of a completed gift, the special 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 [applicability date
of the Treasury decision adopting these regulations as final
regulations].
0
Par. 28. Section 25.2522(c)-3 is amended by:
0
1. Designating Examples 1 through 3 of paragraph (d)(2)(iv) 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:
[[Page 26842]]
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 as a number with at
least four decimal places. For the convenience of taxpayers, actuarial
factors have been computed by 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 IRS and appear in Table H. Table B and Table 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 Table B and
Table H are:
Table 1 to Paragraph (d)(2)(iv)(C)(1)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table B
Annuity, Income, and Remainder Interests for a Term Certain
Interest at 2.8 Percent
------------------------------------------------------------------------
Years Annuity Income Interest Remainder
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 2021, 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 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) 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).
[[Page 26843]]
[GRAPHIC] [TIFF OMITTED] TP05MY22.019
* * * * *
(e) Guaranteed annuity and unitrust interests reformed as an
interest for a term of years--(1) In general. The rule in paragraphs
(c)(2)(vi)(a) and (c)(2)(vii)(a) of this section that guaranteed
annuity interests or unitrust interests, respectively, may be payable
for a specified term of years or for the life or lives of only certain
individuals applies to transfers made on or after April 4, 2000. If a
transfer is made on or after April 4, 2000, that uses an individual
other than one permitted in paragraphs (c)(2)(vi)(a) and (c)(2)(vii)(a)
of this section, the interest may be reformed into a lead interest
payable for a specified term of years. The term of years is determined
by taking the factor for valuing the annuity or unitrust interest for
the named individual measuring life and identifying the term of years
(rounded up to the next whole year) that corresponds to the equivalent
term of years factor for an annuity or unitrust interest. 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 Table B and 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) of this chapter and
then dividing the result by the applicable section 7520 interest rate
expressed as a number with at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by 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 as a number with four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by IRS
and appear in the ``Annuity'' column of Table S. Table B and 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 (e)(4)
of this section, the relevant factors from Table B and Table S are:
Table 2 to Paragraph (e)(3)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table B
Annuity, Income, and Remainder Interests for a Term Certain
Interest at 2.4 Percent
------------------------------------------------------------------------
Years Annuity Income Interest Remainder
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
------------------------------------------------------------------------
[[Page 26844]]
(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
[applicability date of the Treasury decision adopting these regulations
as final regulations] 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 [applicability date of the Treasury decision adopting these
regulations as final regulations], Sec. 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
[applicability date of the Treasury decision adopting these regulations
as final regulations], see Sec. 1.642(c)-6(e) of this chapter (or, for
periods prior to [applicability date of the Treasury decision adopting
these regulations as final regulations], 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 new mortality data becomes available after each decennial census,
the mortality component described in this section will be revised and
the revised mortality component tables will be published in the IRS
publications at that time. For gifts with valuation dates on or after
[applicability date of the Treasury decision adopting these regulations
as final regulations], 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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
(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 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) 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. 2021-1, 2021-1 I.R.B. 1, and subsequent
updates, 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 [applicability
date of the Treasury decision adopting these regulations as final
regulations]. The publications listed in paragraphs (d)(1) through (3)
of this section will be available after [date of publication of the
final rule in the Federal Register]. The underlying actuarial tables
referenced and explained by these publications will be available
beginning May 5, 2022, 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''
(2022). 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 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
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 of this chapter, or Sec. 20.2031-7A of this chapter for
Table S applicable to valuation dates before [applicability date of the
Treasury decision adopting these regulations as final regulations].
Earlier versions of the publication also contain earlier versions of
Table R(2). Table B, Table J, and Table 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''
(2022). 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 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 of this chapter for Table
U(1) applicable to valuation dates before
[[Page 26845]]
[applicability date of the Treasury decision adopting these regulations
as final regulations]. Earlier versions of the publication also contain
earlier versions of Table U(2). 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''
(2022). 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. 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. 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
[applicability date of the Treasury decision adopting these regulations
as final regulations].
0
Par. 30. Section 25.7520-3 is amended by:
0
1. Designating Examples 1 through 5 of paragraph (b)(2)(v) as
paragraphs (b)(2)(v)(A) through (E), respectively.
0
2. Revising the heading of newly designated paragraphs (b)(2)(v)(A).
0
3. In newly designated paragraph (b)(2)(v)(B):
0
i. Revising the heading.
0
ii. Removing ``Example 1'' and ``this paragraph'' and adding in their
places ``paragraph (b)(2)(v)(A) of this section (Example 1)'' and
``this paragraph (b)(2)(v)(B)'', respectively.
0
4. Revising the heading for newly designated paragraph (b)(2)(v)(C).
0
5. In newly designated paragraph (b)(2)(v)(D):
0
i. Revising the heading.
0
ii. Removing ``Example 3'' and adding ``paragraph (b)(2)(v)(C) of this
section (Example 3)'' in its place.
0
6. Revising newly designated paragraph (b)(2)(v)(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) * * *
(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: Eroding corpus in an annuity payable from a trust or
other limited fund. (1) The present value of an annuity interest (and
any other interest dependent on the present value of an annuity), when
the annuity is paid from an eroding and limited fund, is determined by
actuarial factors reflecting the term certain period to the exhaustion
of the fund, as shown in Table 1 to this paragraph (b)(2)(v)(E)(1). The
period to exhaustion is determined using annuity factors. The
appropriate annuity factors 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 as a number with at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by IRS
and appear in the ``Annuity'' column of Table B. If the annuity is for
life (or for a period depending in part on life) and the period to
exhaustion is shorter than the possible life period, 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 factors have been computed
by IRS and appear in Table H. Table B and Table 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). After
determining the point of exhaustion of funds, the approximation method
for determining the present value of annuity payments so limited by
exhaustion in the example in Table 1 to this paragraph (b)(2)(v)(E)(1)
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. For purposes of this example, the relevant factors from Table
B and Table H(4.4) are:
Table 1 to Paragraph (b)(2)(v)(E)(1)
------------------------------------------------------------------------
------------------------------------------------------------------------
Factors from Table B
Annuity, Income, and Remainder Interests for a Term Certain
Interest at 4.4 Percent
------------------------------------------------------------------------
Years Annuity Income Interest Remainder
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
[[Page 26846]]
74 2,941.075 26,452.50 1,777.165
------------------------------------------------------------------------
(2) The donor, who is age 60 and in normal health, transfers
property worth $1,000,000 to a trust on or after [applicability date of
the Treasury decision adopting these regulations as final regulations].
The trust will pay a 10 percent ($100,000 per year) annuity to a
charitable organization for the life of the donor, payable annually at
the end of each period, and the remainder then will be distributed to
the donor's child. The section 7520 rate for the month of the transfer
is 4.4 percent. First, it is necessary to determine whether the annuity
may exhaust the corpus before all annuity payments are made. Because it
is assumed under the prescribed mortality component, Table 2010CM, that
any measuring life may survive until age 110, any life annuity could
require payments until the measuring life reaches age 110. The
determination of whether the annuity may exhaust the corpus before the
annuity payments terminate is computed with values from Table B as
illustrated in Figure 1 to this paragraph (b)(2)(v)(E)(2).
[GRAPHIC] [TIFF OMITTED] TP05MY22.020
(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 when the fund will be
exhausted by the annuity payments, 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 and the annuity factor for 14 years at 4.4 percent is 10.2896.
Thus, it is determined 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. The present value of an annuity of $100,000
payable at the end of each year for 13 years certain is $100,000 times
9.7423 or $974,230. The remaining amount is $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 is 1.8273 ((1 +
0.044)\14\ = 1.8273), so the amount available in 14 years is $25,770
times 1.8273 or $47,089.52. Therefore, for purposes of this present
value determination, the annuity obligation 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
first annuity component is the exact amount that the trust will have
available for the final payment, $47,089.52. The second annuity
component then must be $100,000 minus $47,089.52, or $52,910.48.
Specifically, the initial corpus will be able to make payments of
$52,910.48 per year for 13 years plus payments of $47,089.52 per year
for 14 years. The total annuity is valued by adding the present value
of the two separate temporary component annuities.
(5) The actuarial factor for determining the value of the annuity
of $52,910.48 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)(v)(E)(5).
[[Page 26847]]
[GRAPHIC] [TIFF OMITTED] TP05MY22.021
(6) The actuarial factor for determining the value of the annuity
$47,089.52 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)(v)(E)(6).
[GRAPHIC] [TIFF OMITTED] TP05MY22.022
(7) Based on the calculations of paragraph (b)(2)(v)(E)(5) of this
section, the present value of an annuity of $52,910.48 per year payable
for 13 years or until the prior death of a person aged 60 is
$480,739.33 ($52,910.48 x 9.0859). Based on the calculations of
paragraph (b)(2)(v)(E)(6) of this section, the present value of an
annuity of $47,089.52 per year payable for 14 years or until the prior
death of a person aged 60 is $448,810.22 ($47,089.52 x 9.5310). Thus,
the present value of the charitable annuity interest is the sum of the
two component annuities, $929,549.55 ($480,739.33 + $448,810.22).
* * * * *
(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 as a number with four decimal places. For
the convenience of taxpayers, actuarial factors have been computed by
IRS and appear in the ``Annuity'' column of Table S. Table S can be
found on the IRS website at https://www.irs.gov/
[[Page 26848]]
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
Interest at 4.4 Percent
------------------------------------------------------------------------
Age Annuity Life Remainder
Estate
------------------------------------------------------------------------
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 [applicability date of
the Treasury decision adopting these regulations as final regulations],
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. Section 25.7520-3(a) is applicable as of
May 1, 1989. The provisions of paragraph (b) of this section, except
paragraphs (b)(2)(v)(E) and (b)(4) of this section, are applicable to
gifts made after December 13, 1995. Paragraphs (b)(2)(v)(E) and (b)(4)
of this section are applicable to gifts made on or after [applicability
date of the Treasury decision adopting these regulations as final
regulations].
Douglas W. O'Donnell,
Deputy Commissioner for Services and Enforcement.
[FR Doc. 2022-02303 Filed 5-4-22; 8:45 am]
BILLING CODE 4830-01-P
