Rule2023-11837
Use of Actuarial Tables in Valuing Annuities, Interests for Life or a Term of Years, and Remainder or Reversionary Interests
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 7, 2023
Effective
June 1, 2023
Issuing agencies
Treasury DepartmentInternal Revenue Service
Abstract
This document contains final regulations relating to the use of actuarial tables in valuing annuities, interests for life or a term of years in property, and remainder or reversionary interests in property. These regulations are necessary because applicable law requires that the actuarial tables be revised not less frequently than once each 10 years. These regulations will affect persons valuing inter vivos and testamentary transfers of interests in property dependent on one or more measuring lives.
Full Text
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[Federal Register Volume 88, Number 109 (Wednesday, June 7, 2023)]
[Rules and Regulations]
[Pages 37424-37466]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-11837]
[[Page 37423]]
Vol. 88
Wednesday,
No. 109
June 7, 2023
Part IV
Department of the Treasury
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Internal Revenue Service
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26 CFR Parts 1, 20, and 25
Use of Actuarial Tables in Valuing Annuities, Interests for Life or a
Term of Years, and Remainder or Reversionary Interests; Final Rule
Federal Register / Vol. 88, No. 109 / Wednesday, June 7, 2023 / Rules
and Regulations
[[Page 37424]]
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DEPARTMENT OF THE TREASURY
Internal Revenue Service
26 CFR Parts 1, 20, and 25
[TD 9974]
RIN 1545-BP00
Use of Actuarial Tables in Valuing Annuities, Interests for Life
or a Term of Years, and Remainder or Reversionary Interests
AGENCY: Internal Revenue Service (IRS), Treasury.
ACTION: Final regulations.
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SUMMARY: This document contains final regulations relating to the use
of actuarial tables in valuing annuities, interests for life or a term
of years in property, and remainder or reversionary interests in
property. These regulations are necessary because applicable law
requires that the actuarial tables be revised not less frequently than
once each 10 years. These regulations will affect persons valuing inter
vivos and testamentary transfers of interests in property dependent on
one or more measuring lives.
DATES:
Effective date: These regulations are effective on June 1, 2023.
Applicability date: These regulations apply on June 1, 2023.
FOR FURTHER INFORMATION CONTACT: Mayer R. Samuels at (202) 317-6859
(not a toll-free number).
SUPPLEMENTARY INFORMATION:
Background
This document contains amendments to the Income Tax Regulations (26
CFR part 1), the Estate Tax Regulations (26 CFR part 20), and the Gift
Tax Regulations (26 CFR part 25) to reflect revisions to tables used
for the valuation of certain interests in property under section 7520
of the Internal Revenue Code of 1986 (Code) to incorporate the most
recent mortality experience available.
Section 7520, effective for transfers for which the valuation date
is on or after May 1, 1989, generally provides that the value of an
annuity, an interest in property for life or a term of years, (interest
in property for life or a term of years), and a remainder or
reversionary interest in property (remainder or reversionary interest)
is to be determined under tables published by the Secretary of the
Treasury or her delegate (Secretary) by using an interest rate (rounded
to the nearest two-tenths of one percent) equal to 120 percent of the
Federal midterm rate in effect under section 1274(d)(1) of the Code for
the month in which the valuation date falls. If a charitable
contribution is allowable for any part of the property transferred, the
taxpayer may elect under section 7520(a) to use such Federal midterm
rate for either of the two months preceding the month in which the
valuation date falls. As originally enacted, section 7520(c)(2)
directed the Secretary to issue tables not later than December 31,
1989, utilizing the most recent mortality experience as of the date of
the issuance of those tables, and to revise these tables not less
frequently than once each 10 years to take into account the most recent
mortality experience available as of the time of the revision.
On May 5, 2022, the Department of the Treasury (Treasury
Department) and the IRS published proposed regulations (REG-122770-18)
in the Federal Register (87 FR 26806) under sections 642, 664, 2031,
2512, and 7520 of the Code (proposed regulations).\1\ The proposed
regulations provided a revised mortality table, referred to as Table
2010CM, which is based on data compiled from the 2010 census. The
proposed regulations also provided actuarial formulas to allow
taxpayers to compute the appropriate actuarial factors based on Table
2010CM for transfers for which the valuation date is on or after the
applicability date of the final regulations, which is June 1, 2023.
However, for the convenience of taxpayers, the IRS has computed
actuarial factors that can be found on <a href="http://IRS.gov">IRS.gov</a> and publications that
are referenced in these regulations. The proposed regulations also made
conforming amendments to various sections of the existing regulations
to provide the references to these revised actuarial factors.
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\1\ The proposed regulations were corrected on June 6, 2022 (87
FR 34223).
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The following charts summarize the applicable interest rates, the
citations to regulatory sections in 26 CFR parts 1, 20, and 25, textual
materials, and tables to use for the various valuation periods.
Cross Reference to Regulation Sections for Purposes of Section 642
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Valuation period Interest rate Part 1 section Table
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Valuation, in general...................... ................. 1.642(c)-6
before 01/01/52............................ 4% 1.642(c)-6A(a)
01/01/52-12/31/70.......................... 3.5% 1.642(c)-6A(b)
01/01/71-11/30/83.......................... 6% 1.642(c)-6A(c)
12/01/83-04/30/89.......................... 10% 1.642(c)-6A(d) Table G.
05/01/89-04/30/99.......................... Sec. 7520 1.642(c)-6A(e) Table S (05/01/89-04/30/99).
05/01/99-04/30/09.......................... Sec. 7520 1.642(c)-6A(f) Table S (05/01/99-04/30/09).
05/01/09-05/31/23.......................... Sec. 7520 1.642(c)-6A(g) Table S (05/01/09-05/31/23).
on or after 06/01/23....................... Sec. 7520 1.642(c)-6(e) Table S (on or after 06/01/
23).
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Cross Reference to Regulation Sections for Purposes of Section 664
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Valuation period Interest rate Part 1 section Table
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Valuation, in general...................... ................. 1.664-4
before 01/01/52............................ 4% 1.664-4A(a)
01/01/52-12/31/70.......................... 3.5% 1.664-4A(b)
01/01/71-11/30/83.......................... 6% 1.664-4A(c)
12/01/83-04/30/89.......................... 10% 1.664-4A(d) Table E, Table F(1).
05/01/89-04/30/99.......................... Sec. 7520 1.664-4A(e) Table U(1) (05/01/89-04/30/
99).
05/01/99-04/30/09.......................... Sec. 7520 1.664-4A(f) Table U(1) (05/01/99-04/30/
09).
05/01/09-05/31/23.......................... Sec. 7520 1.664-4A(g) Table U(1) (05/01/09-05/31/
23).
[[Page 37425]]
on or after 06/01/23....................... Sec. 7520 1.664-4(e) Table U(1) (on or after 06/01/
23), Table D, and Table F;
See Pub. 1458, ver. 4A (or
successor).
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Cross Reference to Regulation Sections for Purposes of Section 2031
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Valuation period Interest rate Part 20 section Table
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Valuation, in general...................... ................. 20.2031-7
before 01/01/52............................ 4% 20.2031-7A(a)
01/01/52-12/31/70.......................... 3.5% 20.2031-7A(b)
01/01/71-11/30/83.......................... 6% 20.2031-7A(c)
12/01/83-04/30/89.......................... 10% 20.2031-7A(d) Tables A, B, and LN.
05/01/89-04/30/99.......................... Sec. 7520 20.2031-7A(e) Table S (05/01/89-04/30/99),
Table 80CNSMT.
05/01/99-04/30/09.......................... Sec. 7520 20.2031-7A(f) Table S (05/01/99-04/30/09),
Table 90CM.
05/01/09-05/31/23.......................... Sec. 7520 20.2031-7A(g) Table S (05/01/09-05/31/23),
Table 2000CM.
on or after 06/01/23....................... Sec. 7520 20.2031-7(d) Table S (on or after 06/01/
23), Table 2010CM, Tables B,
J, and K; See Pub. 1458,
ver. 4A (or successor).
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Cross Reference to Regulation Sections for Purposes of Section 2512
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Valuation period Interest rate Part 25 section
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Valuation, in general............. ................. 25.2512-5
before 01/01/52................... 4% 25.2512-5A(a)
01/01/52-12/31/70................. 3.5% 25.2512-5A(b)
01/01/71-11/30/83................. 6% 25.2512-5A(c)
12/01/83-04/30/89................. 10% 25.2512-5A(d)
05/01/89-04/30/99................. Sec. 7520 25.2512-5A(e)
05/01/99-04/30/09................. Sec. 7520 25.2512-5A(f)
05/01/09-05/31/23................. Sec. 7520 25.2512-5A(g)
on or after 06/01/23.............. Sec. 7520 25.2512-5(d)
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The Treasury Department and the IRS received a total of eight
public comments in response to the request for comments set forth in
the proposed regulations. After careful consideration of the comments
received, the proposed regulations are adopted as revised by this
Treasury decision.
Summary of Comments and Explanation of Revisions
I. Decimal Places
Several commenters questioned the apparent lack of consistency with
regard to the number of decimal places used in the calculation of
different types of factors. Commenters also noted that a change from
the three decimal places commonly used in some software could create
problems, but others pointed out that a four decimal calculation would
be more accurate.
Historically, publications of the Treasury Department and the IRS
have stated remainder factors and income interest factors for terms
certain to six decimal places, and remainder factors and income
interest factors dependent on surviving lives to five decimal places.
Annuity factors, for both terms certain and annuities dependent on
mortality, have been stated to four decimal places. In addition, the
payout rate adjustment factors have been stated to six decimal places,
and the adjusted payout rates have been stated to five decimal places.
Tables for commutation factors largely have been stated with seven
significant figures (that may include different numbers of decimal
places). These practices have been in force at least since the
publication of the 1951 tables. The tables published on the IRS website
are largely consistent with these historic practices. There are
technical reasons for the particular number of decimals used for
several of these different factors, but all of the choices described in
this paragraph conform to standard practice. The Treasury Department
and the IRS have identified no policy or other reason to disrupt these
standard practices that have been used consistently since 1951 and
therefore have retained these same conventions in the final regulations
and the tables referenced therein.
Several commenters noted that the number of decimal places used for
various factors is inconsistent in two of the proposed examples
involving interpolation (that is, the estimation of intermediate values
in a series based on the known values). In proposed Sec. 1.664-
4(e)(5)(iii), the charitable remainder unitrust example calculates the
adjusted payout rate expressed as a percentage to four decimal places
(which is equivalent to six decimal places when not stated as a
percentage), while in proposed Sec. 25.2512-5(d)(2)(v)(B)(2), a
unitrust example calculates the adjusted payout rate expressed as a
percentage to three decimal places (which is equivalent to five decimal
places when not stated as a percentage). That difference was
unintended, and the inconsistency has been corrected in the final
regulations. Specifically, the example in Sec. 1.664-4(e)(5)(iii) of
the final regulations calculates the adjusted payout rate to three
decimal places expressed as a percentage (equivalent to five decimal
places when not stated as a percentage). Taxpayers may calculate any
derived factors to additional decimal places (without rounding until
the final result), as explained in more detail in part II of this
Summary of Comments and
[[Page 37426]]
Explanation of Revisions.\2\ The proposed regulations, however, do not
provide that taxpayers may use fewer decimal places than those in the
published tables.
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\2\ One commenter also pointed out that the links to Table U2
incorrectly led to the R2 tables. That link was corrected upon
receipt of that comment.
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II. Permissible Alternatives to Approximation Methods of Computation
One commenter commented on the fact that the proposed regulations
allow the use of an alternative method of deriving certain factors in
place of the linear interpolation method retained from the regulations
in effect prior to the publication of this Treasury decision (current
regulations). Specifically, the proposed regulations confirmed that
taxpayers may use an exact method of obtaining the applicable factors,
such as through software using the actual rate of return and the
actuarial formulas provided in the regulations, in place of the
generally less accurate interpolation method. The commenter pointed out
that using an exact method rather than the interpolation method, may
produce a difference in actuarial values that is more than trivial.
Another commenter raised a similar concern about a taxpayer using
factors with more decimal places for greater precision than the factors
published by the IRS. That difference could be significant in value, or
it could mean the difference between passing or failing a 10 percent
remainder requirement. Accordingly, the commenter suggested that
taxpayers may prefer to determine these values using the same method
the IRS uses in its review of tax returns.
The provision in the proposed regulations permitting taxpayers to
use actuarial formulas or to use more exact methods in place of the
approximation methods provided allows taxpayers to produce factors with
more accuracy. The Treasury Department and the IRS believe that
taxpayers using software in place of using factors from the published
tables will incur no additional burden in producing final factors to at
least as many decimal places as are provided in the published tables.
Therefore, the final regulations clarify that, if taxpayers use the
formulas in place of factors from the tables, or use more exact methods
than the approximation methods provided in the regulations, taxpayers
must use at least as many decimal places in the final factors they
compute as are provided for those factors in the final regulations.
However, taxpayers are permitted to calculate the final actuarial
factors to a greater number of decimal places than provided for in the
published tables, as the additional decimal place(s) provide greater
precision. Because taxpayers are given this option to use a more
accurate calculation method or factors with greater precision than the
factors in the IRS tables, the IRS will accept the method used by a
taxpayer as long as the taxpayer complies with the requirements
described in the final regulations, uses at least as many decimal
places as are provided in the published tables, and applies the more
accurate calculation method or more precise calculation consistently in
valuing all interests in the same property. This consistency
requirement will avoid a situation in which the value of a life
interest, when added to the value of the remainder interest calculated
to a different number of decimal places, does not equal 100% of the
value of the property.
III. Transition Period To Include Transactions Occurring on or After
May 1, 2019 and Before January 1, 2021
The proposed regulations included a transition rule for valuation
dates during the period beginning on January 1, 2021, and ending before
June 1, 2023. For valuation dates during this period, taxpayers may
choose to use either the actuarial factors in the current regulations
that are based on Table 2000CM or the actuarial factors based on Table
2010CM. Several commenters requested that the transition period instead
begin on May 1, 2019, which was the tenth anniversary of the
applicability date of the tables of actuarial factors based on Table
2000CM. The commenters correctly pointed out that section 7520(c)(2)
directs the Secretary to revise the tables prescribed under section
7520 not less frequently than once every 10 years to reflect the most
recent mortality experience available at the time of the revision.\3\
The commenters stated that the delay in issuing the revised actuarial
factors was not the fault of taxpayers or the IRS but nevertheless that
the unavailability of updated mortality data should not deprive
taxpayers of the ability to use the actuarial factors based on that
data, once the factors became available, with regard to transactions
occurring on or after May 1, 2019.
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\3\ The standard decennial mortality report based on the 2010
census was not issued by the Centers for Disease Control (CDC) until
late summer of 2020. The CDC's decennial report provides a standard
of consistency that the Treasury Department and the IRS rely upon
for purposes of section 7520. Had the Treasury Department and the
IRS issued a timely revision to the actuarial tables in the current
regulations, the most recent decennial report available at that time
would have been the report issued in 2008 with Table 2000CM, which
would have merely resulted in a republication of the same actuarial
tables in the current regulations.
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After careful thought and consideration of these comments as well
as the administrative concerns of the IRS, the Treasury Department and
the IRS have concluded that the issue of fairness to taxpayers in this
circumstance outweighs the foreseeable administrative burdens on the
IRS. As a result, the final regulations extend the proposed transition
period to apply to transactions that occurred on or after May 1, 2019,
and before June 2, 2023. For any transactions occurring during the
transition period, a taxpayer may use actuarial factors based on Table
2000CM or based on Table 2010CM. However, with respect to each
individual transaction and with respect to all transfers occurring on
the same valuation date, the taxpayer must be consistent in using the
same mortality basis with respect to each interest (income, remainder,
partial, etc.) in the same property, and with respect to all transfers
occurring on that valuation date.
IV. Amended Returns for Transactions Occurring on or After May 1, 2019
One commenter requested confirmation that taxpayers may file
amended (or supplemental) tax returns for valuations in 2019, 2020, or
2021 to apply the new actuarial factors. As explained in part III of
this Summary of Comments and Explanation of Revisions, the final
regulations allow a taxpayer to choose actuarial factors based on Table
2000CM or Table 2010CM for any transaction occurring on or after May 1,
2019, and before June 2, 2023. The transition rules therefore
necessarily anticipate that taxpayers who have filed returns reporting
a valuation date within the transition period may file an amended (or
supplemental) return, provided that the taxpayer complies with the
standards for filing amended (or supplemental) returns and/or filing
claims for refund.
Extending the transition period back to May 1, 2019, means that an
applicable limitations period before which an amended or supplemental
return may need to be filed may expire soon after the publication of
this Treasury decision. Therefore, in the interests of efficient tax
administration, and in order to allow the IRS to identify such an
amended or supplemental return more easily, the final regulations
require that the top of that return include the caption ``AMENDED
PURSUANT TO TD 9974'' or
[[Page 37427]]
``SUPPLEMENTED PURSUANT TO TD 9974'', respectively.
V. Election To Use Actuarial Factors Based on Table 2010CM
One commenter requested additional guidance regarding the process
and effect of making an election to use the revised actuarial factors
based on Table 2010CM for a transaction occurring during the transition
period ending on June 1, 2023. Although the final regulations require
that a taxpayer include the caption ``AMENDED PURSUANT TO TD 9974'' or
``SUPPLEMENTED PURSUANT TO TD 9974'' at the top of any amended income
tax return or supplemental gift or estate tax return, respectively, and
that the selected tables be used consistently, no other affirmative
statement is required to make the election. As on any return, taxpayers
should show the relevant computations and factors used.
The availability of the option to use the revised actuarial tables
based on Table 2010CM for valuation dates during the transition period,
whether or not exercised, is not a condition subsequent and does not
limit or otherwise affect the validity of any formula or other
condition in a document (even if created before the transition period)
that is intended to determine the amount, value, character, or tax
treatment of a transfer.
VI. Applicability Dates
These regulations are applicable in the case of annuities,
interests for life or terms of years, and remainder or reversionary
interests valued as of a date on or after June 1, 2023.
Special Analyses
These regulations are not subject to review under section 6(b) of
Executive Order 12866 pursuant to the Memorandum of Agreement (April
11, 2018) between the Treasury Department and the Office of Management
and Budget (OMB) regarding review of tax regulations. Therefore, a
regulatory impact assessment is not required. In addition, the Treasury
Department and the IRS have assessed that these regulations do not
establish a new collection of information nor modify an existing
collection that requires the approval of OMB under the Paperwork
Reduction Act (44 U.S.C. chapter 35).
Pursuant to the Regulatory Flexibility Act (5 U.S.C. chapter 6), it
is hereby certified that these regulations will not have a significant
economic impact on a substantial number of small entities. The
applicability of these regulations is limited to individuals (or their
estates) and trusts, which are not small entities as defined by the
Regulatory Flexibility Act (5 U.S.C. 601). This document implements
statutorily required periodic revisions to actuarial tables used in
valuing various interests in property that are affected by a person's
life expectancy. The revisions would not impose any direct compliance
requirements on any entities other than the time to read and understand
the revisions. Accordingly, a regulatory flexibility analysis is not
required.
Pursuant to section 7805(f) of the Internal Revenue Code, the
notice of proposed rulemaking preceding these regulations was submitted
to the Chief Counsel for the Office of Advocacy of the Small Business
Administration for comment on its impact on small business. No comments
were received from the Chief Counsel for the Office of Advocacy of the
Small Business Administration.
Drafting Information
The principal author of these regulations is Mayer R. Samuels,
Office of the Associate Chief Counsel (Passthroughs and Special
Industries), IRS. However, other personnel from the Treasury Department
and the IRS participated in their development.
List of Subjects
26 CFR Part 1
Income taxes, Reporting and recordkeeping requirements.
26 CFR Part 20
Estate taxes, Reporting and recordkeeping requirements.
26 CFR Part 25
Gift taxes, Reporting and recordkeeping requirements.
Amendments to the Regulations
Accordingly, 26 CFR parts 1, 20, and 25 are amended as follows:
PART 1--INCOME TAXES
0
Paragraph 1.The authority citation for part 1 continues to read in part
as follows:
Authority: 26 U.S.C. 7805 * * *
0
Par. 2. Section 1.170A-12 is amended by:
0
1. Revising paragraphs (b)(2) and (3).
0
2. Adding paragraph (b)(4).
0
3. Revising paragraphs (e)(2) and (f)
The revisions and addition read as follows:
Sec. 1.170A-12 Valuation of a remainder interest in real property for
contributions made after July 31, 1969.
* * * * *
(b) * * *
(2) Computation of depreciation factor. If the valuation of the
remainder interest in depreciable property is dependent upon the
continuation of one life, a special factor must be used. The factor
determined under this paragraph (b)(2) is carried to the fifth decimal
place. The special factor is to be computed on the basis of the
interest rate and life contingency rates from the mortality table
prescribed in Sec. 20.2031-7 of this chapter (or for periods before
June 1, 2023, Sec. Sec. 20.2031-7(d)(3) and 20.2031-7A of this
chapter) and on the assumption that the property depreciates on a
straight-line basis over its estimated useful life. For transfers for
which the valuation date is on or after June 1, 2023, special factors
for determining the present value of a remainder interest following one
life may be computed by taxpayers based on Table 2010CM, found in Sec.
20.2031-7(d)(7)(ii) of this chapter, and using the formula provided in
this paragraph (b)(2). Alternatively, taxpayers may use the actuarial
factors provided in Table C to determine the special factor for the
remainder interest following one life. Table C currently is available,
at no charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL
as may be updated from time to time). IRS Publication 1459, Actuarial
Valuations Version 4C (2023), references and explains Table C and
provides examples describing the computation. This publication will be
available within a reasonable time after June 1, 2023. For transfers
for which the valuation date is on or after May 1, 2009, and before
June 1, 2023, special factors for determining the present value of a
remainder interest following one life and an example describing the
computation are contained in the previous version of Table C, which
currently is available, at no charge, electronically via the IRS
website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. IRS
Publication 1459, Actuarial Valuations Version 3C (2009), references
and explains this version of Table C and provides examples describing
the computation. See, however, Sec. 1.7520-3(b) (relating to
exceptions to the use of prescribed tables under certain
circumstances). Otherwise, in the case of the valuation of a remainder
interest following one life, the special factor may be obtained through
use of the formula in Figure 1 to this paragraph (b)(2). The prescribed
mortality table is Table 2010CM as set forth in Sec. 20.2031-
7(d)(7)(ii) of this chapter, or for periods before June 1, 2023, the
appropriate table found in
[[Page 37428]]
Sec. 20.2031-7A of this chapter. Table 2010CM is referenced by IRS
Publication 1459, Actuarial Values Version 4C. The mortality tables
prescribed for periods before June 1, 2023, are referenced by prior
versions of IRS Publication 1459.
Figure 1 to paragraph (b)(2)--Formula for Determining Single Life
Remainder Interest in Depreciable Property
[GRAPHIC] [TIFF OMITTED] TR07JN23.005
(3) Sample factors from actuarial Table S. The present value of a
remainder interest dependent on the termination of one life is
determined by using the formula in Sec. 20.2031-7(d)(2)(ii)(B) of this
chapter to derive a remainder factor expressed to at least five decimal
places. For the convenience of taxpayers, actuarial factors have been
computed by the IRS and appear in Table S. The complete Table S can be
found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. For purposes of the example in paragraph (b)(4) of
this section, the following factors from Table S will be used:
Table 1 to Paragraph (b)(3)
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Age Annuity Life estate Remainder
----------------------------------------------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
62.................................................. 14.6131 0.46762 0.53238
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(4) Example. After June 1, 2023, A, who is 62, donates to Y
University a remainder interest in a personal residence, consisting of
a house and land, subject to a reserved life estate in A. At the time
of the gift, the land has a value of $30,000 and the house has a value
of $100,000 with an estimated useful life of 28 years, at the end of
which period the value of the house is expected to be $10,000. The
portion of the property considered to be depreciable is $90,000 (the
value of the house ($100,000) less its expected value at the end of 28
years ($10,000)). The portion of the property considered to be
nondepreciable is $40,000 (the value of the land at the time of the
gift ($30,000) plus the expected value of the house at the end of 28
years ($10,000)). A chooses to use the interest rate prescribed under
section 7520 for the month in which the gift was made (3.2 percent).
Based on an interest rate of 3.2 percent, the remainder factor for
$1.00 prescribed in Sec. 20.2031-7(d) and found in Table S for a
person age 62 is 0.53238. The value of the nondepreciable remainder
interest is $21,295.20 (0.53238 times $40,000). The factor for the
remainder interest in depreciable property is computed under the
formula described in paragraph (b)(2) of this section and is 0.19392.
(This factor, 0.19392, may instead be determined by using Table C,
which can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>, and following the method provided in
IRS Publication 1459, Actuarial Values Version 4C.) The value of the
depreciable remainder interest is $17,452.80 (0.19392 times $90,000).
Therefore, the value of the remainder interest is $38,748.00
($21,295.20 plus $17,452.80).
* * * * *
(e) * * *
(2) In the case of the valuation of a remainder interest following
two lives, the special factor may be obtained through use of the
formula in Figure 2 to this paragraph (e)(2). The prescribed mortality
table is Table 2010CM as set forth in Sec. 20.2031-7(d)(7)(ii) of this
chapter, or for periods before June 1, 2023, the appropriate table
found in Sec. 20.2031-7A of this chapter. Table 2010CM is referenced
by IRS Publication 1459, Actuarial Values
[[Page 37429]]
Version 4C. The mortality tables prescribed for periods before June 1,
2023, are referenced by prior versions of IRS Publication 1459.
Figure 2 to Paragraph (e)(2)--Formula for Determining Two-Life
Remainder Interest in Depreciable Property
[GRAPHIC] [TIFF OMITTED] TR07JN23.006
* * * * *
(f) Applicability date. This section applies to contributions made
after July 31, 1969, except that paragraphs (b)(2), (3), and (4) and
(e)(2) of this section apply to all contributions made on or after June
1, 2023.
0
Par. 3. Section 1.170A-14 is amended:
0
1. In paragraph (h)(4) by designating Example 1 through 12 as
paragraphs (h)(4)(i) through (xii), respectively.
0
2. By revising newly designated paragraph (h)(4)(ii).
0
3. In newly designated paragraphs (h)(4)(iii) and (iv) by removing
``Example 2'' and adding ``paragraph (h)(4)(ii) of this section
(Example 2)'' in its place.
0
4. In newly designated paragraph (h)(4)(v) by removing ``Example 4''
and adding ``paragraph (h)(4)(iv) of this section (Example 4)'' in its
place.
0
5. In newly designated paragraph (h)(4)(vi) by removing ``Example 2''
and adding ``paragraph (h)(2)(ii) of this section (Example 2)'' in its
place.
0
6. In newly designated paragraph (h)(4)(viii) by removing ``Example 7''
and adding ``paragraph (h)(4)(vii) of this section (Example 7)'' in its
place.
0
7. In newly designated paragraph (h)(4)(xi) by removing ``example
(10)'' and adding ``paragraph (h)(4)(x) of this section (Example 10)''
in its place.
0
8. By revising paragraph (j).
The revisions read as follows:
Sec. 1.170A-14 Qualified conservation contributions.
* * * * *
(h) * * *
(4) * * *
(ii) Example 2. In 1984 B, who is 62, donates a remainder interest
in Greenacre to a qualifying organization for conservation purposes,
retaining an interest for B's life. Greenacre is a tract of 200 acres
of undeveloped woodland that is valued at $200,000 at its highest and
best use. Under Sec. 1.170A-12(b), the value of a remainder interest
in real property following one life is determined under Sec. 25.2512-5
of this chapter (Gift Tax Regulations). (See Sec. 25.2512-5A of this
chapter with respect to the valuation of annuities, interests for life
or a term of years, and remainder or reversionary interests transferred
before June 1, 2023.) For transfers occurring after November 30, 1983,
and before May 1, 1989, the single life remainder factors, valued at 10
percent, can be found in Table A of Sec. 20.2031-7A(d)(6) of this
chapter. The remainder factor under these facts is 0.27998.
Accordingly, the value of the remainder interest, and thus the amount
eligible for an income tax deduction under section 170(f), is $55,996
($200,000 x 0.27998).
* * * * *
(j) Applicability dates. Except as otherwise provided in paragraph
(g)(4)(ii) and paragraph (i) of this section, this section applies only
to contributions made on or after December 18, 1980. Paragraph
(h)(4)(ii) of this section applies on and after June 1, 2023.
0
Par. 4. Section 1.642(c)-6 is amended by:
0
1. Revising paragraph (d).
0
2. Redesignating paragraph (e) as paragraph (g) of Sec. 1.642(c)-6A.
0
3. Adding new paragraph (e) and revising paragraph (f).
The revisions and addition read as follows:
Sec. 1.642(c)-6 Valuation of a remainder interest in property
transferred to a pooled income fund.
* * * * *
(d) Valuation. The present value of the remainder interest in
property transferred to a pooled income fund on or after June 1, 2023,
is determined under paragraph (e) of this section. The present value of
the remainder interest in property transferred to a pooled income fund
for which the valuation date is before June 1, 2023, is determined
(subject to paragraph (e)(2) of this section) under the following
sections:
Table 6 to Paragraph (d)
------------------------------------------------------------------------
Valuation dates
------------------------------------------------------ Applicable
After Before regulations
------------------------------------------------------------------------
01-01-52 Sec. 1.642(c)-
6A(a)
12-31-51................................ 01-01-71 1.642(c)-6A(b)
12-31-70................................ 12-01-83 1.642(c)-6A(c)
11-30-83................................ 05-01-89 1.642(c)-6A(d)
04-30-89................................ 05-01-99 1.642(c)-6A(e)
04-30-99................................ 05-01-09 1.642(c)-6A(f)
04-30-09................................ 06-01-23 1.642(c)-6A(g)
------------------------------------------------------------------------
[[Page 37430]]
(e) Present value of the remainder interest in the case of
transfers to pooled income funds for which the valuation date is on or
after June 1, 2023--(1) In general. In the case of transfers to pooled
income funds for which the valuation date is on or after June 1, 2023,
the present value of a remainder interest is determined under this
section. See, however, Sec. 1.7520-3(b) (relating to exceptions to the
use of prescribed tables under certain circumstances). The present
value of a remainder interest that is dependent on the termination of
the life of one individual is computed by using the formula in Sec.
20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor
from the appropriate mortality table to at least five decimal places.
For the convenience of taxpayers, actuarial factors have been computed
by the IRS and appear in Table S. Table S currently is available, at no
charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be
updated from time to time). Table S is referenced and explained by IRS
Publication 1457, Actuarial Valuations Version 4A, which will be
available within a reasonable time after June 1, 2023. For purposes of
the computations under this section, the age of an individual is the
age at the individual's nearest birthday.
(2) Transitional rule for valuation of transfers to pooled income
funds. For purposes of section 170, 2055, 2106, 2522, or 2624, in the
case of transfers to a pooled income fund for which the valuation date
is after April 30, 2019, and on or before June 1, 2023, the present
value of the remainder interest under this section is determined by
using the section 7520 interest rate for the month in which the
valuation date occurs (see Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2))
and the appropriate actuarial factors derived from the selected
mortality table, either Table 2010CM in Sec. 20.2031-7(d)(7)(ii) of
this chapter or Table 2000CM in Sec. 20.2031-7A(g)(4) of this chapter,
at the option of the donor or the decedent's executor, as the case may
be. If any previously filed income tax return is amended to use the
actuarial factors based on Table 2010CM, the amended return must state
at the top ``AMENDED PURSUANT TO TD 9974.'' If any previously filed
gift or estate tax return is supplemented to use the actuarial factors
based on Table 2010CM, the supplemental return must state at the top
``SUPPLEMENTED PURSUANT TO TD 9974.'' For the convenience of taxpayers,
actuarial factors based on Table 2010CM appear in the current version
of Table S, and actuarial factors based on Table 2000CM appear in the
previous version of Table S. Both versions of Table S currently are
available, at no charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL
as may be updated from time to time). The donor or decedent's executor
must consistently use the same mortality basis with respect to each
interest (income, remainder, partial, etc.) in the same property, and
with respect to all transfers occurring on the same valuation date. For
example, gift and income tax charitable deductions with respect to the
same transfer must be determined based on factors with the same
mortality basis, and all assets includible in the gross estate and/or
estate tax deductions claimed must be valued based on factors with the
same mortality basis.
(3) Present value of a remainder interest. The present value of a
remainder interest in property transferred to a pooled income fund is
computed on the basis of--
(i) Life contingencies determined from the values of l<INF>x</INF>
that are set forth in Table 2010CM in Sec. 20.2031-7(d)(7)(ii) of this
chapter (see Sec. 20.2031-7A of this chapter for certain prior
periods); and
(ii) Discount at a rate of interest, compounded annually, equal to
the highest yearly rate of return of the pooled income fund for the
three taxable years immediately preceding its taxable year in which the
transfer of property to the fund is made. For purposes of this
paragraph (e), the yearly rate of return of a pooled income fund is
determined as provided in paragraph (c) of this section unless the
highest rate of return is deemed to be the rate described in paragraph
(e)(4) of this section for funds in existence less than 3 taxable
years. For purposes of this paragraph (e)(3)(ii), the first taxable
year of a pooled income fund is considered a taxable year even though
the taxable year consists of less than 12 months. However, appropriate
adjustments must be made to annualize the rate of return earned by the
fund for that period. Where it appears from the facts and circumstances
that the highest yearly rate of return of the fund for the three
taxable years immediately preceding the taxable year in which the
transfer of property is made has been purposely manipulated to be
substantially less than the rate of return that otherwise would be
reasonably anticipated with the purpose of obtaining an excessive
charitable deduction, that rate of return may not be used. In that
case, the highest yearly rate of return of the fund is determined by
treating the fund as a pooled income fund that has been in existence
for less than three preceding taxable years.
(4) Pooled income funds in existence less than three taxable years.
If a pooled income fund has been in existence less than three taxable
years immediately preceding the taxable year in which the transfer is
made to the fund and the transfer to the fund is made on or after May
1, 1989, the highest rate of return is deemed to be the interest rate
(rounded to the nearest two-tenths of one percent) that is one percent
less than the highest annual average of the monthly section 7520 rates
for the three calendar years immediately preceding the calendar year in
which the transfer to the pooled income fund is made. The deemed rate
of return for transfers to new pooled income funds is recomputed each
calendar year using the monthly section 7520 rates for the three year
period immediately preceding the calendar year in which each transfer
to the fund is made until the fund has been in existence for three
taxable years and can compute its highest rate of return for the three
taxable years immediately preceding the taxable year in which the
transfer of property to the fund is made in accordance with the rules
set forth in the first sentence of paragraph (e)(3)(ii) of this
section.
(5) Computation of value of remainder interest--(i) Factor. The
factor that is used in determining the present value of a remainder
interest that is dependent on the termination of the life of one
individual is the factor obtained through use of the formula in Sec.
20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor
from the appropriate mortality table to at least five decimal places.
For the convenience of taxpayers, actuarial factors have been computed
by the IRS and appear in Table S. Table S currently is available, at no
charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. Table S is referenced and explained
in IRS Publication 1457, Actuarial Valuations Version 4A, which will be
available within a reasonable time after June 1, 2023. In using the
section of Table S for the interest rate equal to the appropriate
yearly rate of return, the appropriate remainder factor is opposite the
number that corresponds to the age of the individual upon whose life
the value of the remainder interest is based (See Sec. 1.642(c)-6A for
certain prior periods). The tables referenced by IRS Publication 1457,
Actuarial Valuations Version 4A, include factors for yearly rates of
return from 0.2 to 20 percent, inclusive, in
[[Page 37431]]
increments of two-tenths of one percent. For other situations, see
paragraph (b) of this section. If the yearly rate of return is a
percentage that is between the yearly rates of return for which factors
are provided by Table S, an exact method of obtaining the applicable
factors (such as through software using the actual rate of return and
the actuarial formulas provided in Sec. 20.2031-7(d)(2)(ii)(B) of this
chapter) or a linear interpolation must be used, provided whichever
method used is applied consistently in valuing all interests in the
same property. The applicable remainder factors derived by an exact
method or by interpolation must be expressed to at least five decimal
places. The present value of the remainder interest is determined by
multiplying the fair market value of the property on the valuation date
by the appropriate remainder factor.
(ii) Sample factors from actuarial Table S. For purposes of the
example in paragraph (e)(5)(iii) of this section, the following factors
from Table S will be used:
Table 7 to Paragraph (e)(5)(ii)
----------------------------------------------------------------------------------------------------------------
Age Annuity Life estate Remainder
----------------------------------------------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
Interest at 5.4 Percent
----------------------------------------------------------------------------------------------------------------
55..................................................... 13.2515 0.71558 0.28442
----------------------------------------------------------------------------------------------------------------
Interest at 5.6 Percent
----------------------------------------------------------------------------------------------------------------
55..................................................... 12.9710 0.72637 0.27363
----------------------------------------------------------------------------------------------------------------
(iii) Example of interpolation. After June 1, 2023, A, whose age is
54 years and 8 months, transfers $100,000 to a pooled income fund, and
retains a life income interest in the property. The highest yearly rate
of return earned by the fund for its 3 preceding taxable years is 5.43
percent. In Table S, the remainder factor opposite 55 years under 5.4
percent is 0.28442 and under 5.6 percent is 0.27363. The present value
of the remainder interest is $28,280, computed as illustrated in Figure
1 to this paragraph (e)(5)(iii).
Figure 1 to Paragraph (e)(5)(iii)--Illustration of Interpolation Method
[GRAPHIC] [TIFF OMITTED] TR07JN23.007
(6) Actuarial tables. In the case of transfers for which the
valuation date is on or after June 1, 2023, the present value of a
remainder interest dependent on the termination of one life in the case
of a transfer to a pooled income fund is determined by using the
formula in Sec. 20.2031-7(d)(2)(ii)(B) of this chapter to derive a
remainder factor from the
[[Page 37432]]
appropriate mortality table to at least five decimal places. For the
convenience of taxpayers, actuarial factors have been computed by the
IRS and appear in Table S. Table S currently is available, at no
charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. Table S is referenced and explained
in IRS Publication 1457, Actuarial Valuations Version 4A, which will be
available within a reasonable time after June 1, 2023.
(f) Applicability date. This section applies on and after June 1,
2023.
0
Par. 5. The undesignated center heading immediately preceding Sec.
1.642(c)-6A is revised to read as follows:
Pooled Income Fund Actuarial Tables Applicable Before June 1, 2023
0
Par. 6. Section 1.642(c)-6A is amended by:
0
1. Revising the section heading.
0
2. In newly redesignated paragraph (g):
0
i. The heading and paragraphs (g)(1) through (5) and (g)(6)
introductory text are revised.
0
ii. Paragraph (g)(7) is added.
The revisions and addition read as follows:
Sec. 1.642(c)-6A Valuation of charitable remainder interests for
which the valuation date is before June 1, 2023.
* * * * *
(g) Present value of the remainder interest in the case of
transfers to pooled income funds for which the valuation date is on or
after May 1, 2009, and before June 1, 2023--(1) In general. In the case
of transfers to pooled income funds for which the valuation date is on
or after May 1, 2009, and before June 1, 2023, the present value of a
remainder interest is determined under this section. See, however,
Sec. 1.7520-3(b) (relating to exceptions to the use of prescribed
tables under certain circumstances). The present value of a remainder
interest that is dependent on the termination of the life of one
individual is computed by the use of Table S in paragraph (g)(6) of
this section. For purposes of the computations under this section, the
age of an individual is the age at the individual's nearest birthday.
(2) Transitional rules for valuation of transfers to pooled income
funds. (i) For purposes of section 2055, 2106, or 2624, if on May 1,
2009, the decedent was under a mental disability so that the
disposition of the property could not be changed, and the decedent died
on or after May 1, 2009, but before June 2, 2023, without having
regained the ability to dispose of the decedent's property, or if the
decedent died within 90 days of the date that the decedent first
regained that ability on or after May 1, 2009, but before June 2, 2023,
the present value of a remainder interest is determined as if the
valuation date with respect to the decedent's gross estate is either
before May 1, 2009, or after April 30, 2009, at the option of the
decedent's executor.
(ii) For purposes of section 170, 2055, 2106, 2522, or 2624, in the
case of transfers to a pooled income fund for which the valuation date
is on or after May 1, 2009, and before July 1, 2009, the present value
of the remainder interest under this section is determined by using the
section 7520 interest rate for the month in which the valuation date
occurs (see Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the
appropriate actuarial tables under either paragraph (f)(6) or (g)(6) of
this section, at the option of the donor or the decedent's executor, as
the case may be.
(iii) For purposes of paragraphs (g)(2)(i) and (ii) of this
section, where the donor or decedent's executor is given the option to
use the appropriate actuarial tables under either paragraph (f)(6) or
(g)(6) of this section, the donor or decedent's executor must
consistently use the same mortality basis with respect to each interest
(income, remainder, partial, etc.) in the same property, and with
respect to all transfers occurring on the same valuation date. For
example, gift and income tax charitable deductions with respect to the
same transfer must be determined based on factors with the same
mortality basis, and all assets includible in the gross estate and/or
estate tax deductions claimed must be valued based on factors with the
same mortality basis.
(iv) In the case of transfers to a pooled income fund for which the
valuation date is after April 30, 2019, and before June 1, 2023, the
present value of the remainder interest under this section is
determined under Sec. 1.642(c)-6(e)(2).
(3) Present value of a remainder interest. The present value of a
remainder interest in property transferred to a pooled income fund is
computed on the basis of--
(i) Life contingencies determined from the values of l<INF>x</INF>
that are set forth in Table 2000CM in Sec. 20.2031-7A(g)(4) of this
chapter; and
(ii) Discount at a rate of interest, compounded annually, equal to
the highest yearly rate of return of the pooled income fund for the
three taxable years immediately preceding its taxable year in which the
transfer of property to the fund is made. The provisions of Sec.
1.642(c)-6(c) apply for determining the yearly rate of return. However,
where the taxable year is less than 12 months, the provisions of Sec.
1.642(c)-6(e)(3)(ii) apply for the determining the yearly rate of
return.
(4) Pooled income funds in existence less than three taxable years.
The provisions of Sec. 1.642(c)-6(e)(4) apply for determining the
highest yearly rate of return when the pooled income fund has been in
existence less than three taxable years.
(5) Computation of value of remainder interest. The factor that is
used in determining the present value of a remainder interest that is
dependent on the termination of the life of one individual is the
factor from Table S in paragraph (g)(6) of this section under the
appropriate yearly rate of return opposite the number that corresponds
to the age of the individual upon whose life the value of the remainder
interest is based. Table S in paragraph (g)(6) of this section includes
factors for yearly rates of return from 0.2 to 14 percent, inclusive,
in increments of two-tenths of one percent. Actuarial factors that do
not appear in paragraph (g)(6) of this section may be computed directly
by using the formula in Sec. 20.2031-7(d)(2)(ii)(B) of this chapter to
derive a remainder factor from the appropriate mortality table to at
least five decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table S that is
referenced and explained by IRS Publication 1457, Actuarial Valuations
Version 3A (2009). The table is available at no charge, electronically
via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from time to time).
For other situations, see Sec. 1.642(c)-6(b). If the yearly rate of
return is a percentage that is between the yearly rates of return for
which factors are provided by Table S, an exact method of obtaining the
applicable factors (such as through software using the actual rate of
return and actuarial formulas provided in Sec. 20.2031-7(d)(2)(ii)(B)
of this chapter) or a linear interpolation must be used, provided
whichever method used is applied consistently in valuing all interests
in the same property. The present value of the remainder interest is
determined by multiplying the fair market value of the property on the
valuation date by the appropriate remainder factor. For an example of a
computation of the present value of a remainder interest requiring a
linear interpolation adjustment, see Sec. 1.642(c)-6(e)(5).
[[Page 37433]]
(6) Actuarial tables. In the case of transfers for which the
valuation date is on or after May 1, 2009, and before June 1, 2023, and
without regard to the headings in the tables in this paragraph (g)(6)
that do not contain this termination date for the applicability of the
tables, the present value of a remainder interest dependent on the
termination of one life in the case of a transfer to a pooled income
fund is determined by using the following tables:
* * * * *
(7) Applicability dates. Paragraphs (g)(1) through (6) of this
section apply on and after May 1, 2009, and before June 1, 2023.
0
Par. 7. Section 1.664-2 is amended by revising paragraphs (c) and (e)
as follows:
Sec. 1.664-2 Charitable remainder annuity trust.
* * * * *
(c) Calculation of the fair market value of the remainder interest
of a charitable remainder annuity trust. For purposes of sections 170,
2055, 2106, and 2522, the fair market value of the remainder interest
of a charitable remainder annuity trust (as described in this section)
is the net fair market value (as of the appropriate valuation date) of
the property placed in trust less the present value of the annuity. For
purposes of this section, valuation date means, in general, the date on
which the property is transferred to the trust by the donor regardless
of when the trust is created. In the case of transfers to a charitable
remainder annuity trust for which the valuation date is after April 30,
1999, if an election is made under section 7520 and Sec. 1.7520-2(b)
to compute the present value of the charitable interest by using the
interest rate component for either of the 2 months preceding the month
in which the transfer is made, the month so elected is the valuation
date for purposes of determining the interest rate and mortality
tables. For purposes of section 2055 or 2106, the valuation date is the
date of death unless the alternate valuation date is elected in
accordance with section 2032 in which event, and within the limitations
set forth in section 2032 and the regulations in this part under
section 2032, the valuation date is the alternate valuation date. If
the decedent's estate elects the alternate valuation date under section
2032 and also elects, under section 7520 and Sec. 1.7520-2(b), to use
the interest rate component for one of the 2 months preceding the
alternate valuation date, the month so elected is the valuation date
for purposes of determining the interest rate and mortality tables. The
present value of an annuity is computed under Sec. 20.2031-7(d) of
this chapter for transfers for which the valuation date is on or after
June 1, 2023, or under Sec. 20.2031-7A(a) through (g) of this chapter,
whichever is applicable, for transfers for which the valuation date is
before June 1, 2023. See, however, Sec. Sec. 20.2031-7(d)(3) and
25.2512-5(d)(3) (transition rules) and 1.7520-3(b) (relating to
exceptions to the use of prescribed tables under certain
circumstances).
* * * * *
(e) Applicability date. Paragraph (c) of this section applies on
and after June 1, 2023.
0
Par. 8. Section 1.664-4 is amended by:
0
1. Revising paragraphs (a)(1) and (d).
0
2. In paragraph (e):
0
i. Redesignating the heading and paragraphs (e)(1), (2), (5), and (7)
as the heading for Sec. 1.664-4A(g) and paragraphs (g)(1), (2), (5),
and (6), respectively.
0
ii. Adding a new heading and new paragraphs (e)(1), (2), and (5).
0
iii. Revising the heading for paragraph (e)(6).
0
iv. Redesignating the text of paragraph (e)(6) as paragraph
(e)(6)(iii).
0
v. Adding paragraphs (e)(6)(i) and (ii).
0
vi. Revising the introductory text of newly redesignated paragraph
(e)(6)(iii).
0
vii. Adding a new paragraph (e)(7).
0
3. Revising paragraph (f).
The additions and revisions read as follows:
Sec. 1.664-4 Calculation of the fair market value of the remainder
interest in a charitable remainder unitrust.
(a) * * *
(1) Life contingencies determined as to each life involved, from
the values of l<INF>x</INF> set forth in Table 2010CM in Sec. 20.2031-
7(d)(7)(ii) of this chapter in the case of transfers for which the
valuation date is on or after June 1, 2023; or from Table 2000CM
contained in Sec. 20.2031-7A(g)(4) of this chapter in the case of
transfers for which the valuation date is on or after May 1, 2009, and
before June 1, 2023. See Sec. 20.2031-7A(a) through (f) of this
chapter, whichever is applicable, for transfers for which the valuation
date is before May 1, 2009;
* * * * *
(d) Valuation. The fair market value of a remainder interest in a
charitable remainder unitrust (as described in Sec. 1.664-3) for
transfers for which the valuation date is on or after June 1, 2023, is
its present value determined under paragraph (e) of this section. The
fair market value of a remainder interest in a charitable remainder
unitrust (as described in Sec. 1.664-3) for transfers for which the
valuation date is before June 1, 2023, is its present value determined
under the following sections:
Table 1 to Paragraph (d)
------------------------------------------------------------------------
Valuation dates
------------------------------------------------------ Applicable
After Before regulations
------------------------------------------------------------------------
01-01-52 1.664-4A(a)
12-31-51................................ 01-01-71 1.664-4A(b)
12-31-70................................ 12-01-83 1.664-4A(c)
11-30-83................................ 05-01-89 1.664-4A(d)
04-30-89................................ 05-01-99 1.664-4A(e)
04-30-99................................ 05-01-09 1.664-4A(f)
04-30-09................................ 06-01-23 1.664-4A(g)
------------------------------------------------------------------------
(e) Valuation of charitable remainder unitrusts having certain
payout sequences for transfers for which the valuation date is on or
after June 1, 2023--(1) In general. Except as otherwise provided in
paragraph (e)(2) of this section, in the case of transfers for which
the valuation date is on or after June 1, 2023, the present value of a
remainder interest is determined under paragraphs (e)(3) through (7) of
this section, provided that, in a short taxable year, the trustee must
prorate the unitrust amount as provided in Sec. 1.664-3(a)(1)(v). See,
however, Sec. 1.7520-3(b) (relating to exceptions to the use of the
prescribed tables under certain circumstances).
(2) Transitional rule for valuation of charitable remainder
unitrusts. For purposes of section 170, 2055, 2106, 2522, or 2624, in
the case of transfers to a charitable remainder unitrust for which the
valuation date is after April 30, 2019, and on or before June 1, 2023,
the present value of a remainder interest based on one or more
measuring lives is determined under this section by using the section
7520 interest rate for the month in which the valuation date occurs
(see Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the appropriate
actuarial factors derived from the selected mortality table, either
Table 2010CM in Sec. 20.2031-7(d)(7)(ii) of this chapter or Table
2000CM in Sec. 20.2031-7A(g)(4) of this chapter, at the option of the
donor or the decedent's executor, as the case may be. If any previously
filed income tax return is amended to use the actuarial factors based
on Table 2010CM, the amended return must state at the top ``AMENDED
PURSUANT TO TD 9974.'' If any previously filed gift or estate tax
return is supplemented to use the actuarial factors based on Table
2010CM, the supplemental return must state at the top ``SUPPLEMENTED
PURSUANT TO TD 9974.'' For the
[[Page 37434]]
convenience of taxpayers, actuarial factors based on Table 2010CM
appear in the current version of Table U(1), and actuarial factors
based on Table 2000CM appear in the previous version of Table U(1).
Both versions of Table U(1) currently are available, at no charge,
electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from
time to time). The donor or decedent's executor must consistently use
the same mortality basis with respect to each interest (income,
remainder, partial, etc.) in the same property, and with respect to all
transfers occurring on the same valuation date. For example, gift and
income tax charitable deductions with respect to the same transfer must
be determined based on factors with the same mortality basis, and all
assets includible in the gross estate and/or estate tax deductions
claimed must be valued based on factors with the same mortality basis.
* * * * *
(5) Period is the life of one individual--(i) Factor. If the period
described in Sec. 1.664-3(a)(5) is the life of one individual, the
factor that is used in determining the present value of the remainder
interest for transfers for which the valuation date is on or after June
1, 2023, is the factor obtained through the use of the formula in
Figure 1 to this paragraph (e)(5)(i) to at least five decimal places.
The prescribed mortality table is Table 2010CM as set forth in Sec.
20.2031-7(d)(7)(ii) of this chapter, or for periods before June 1,
2023, the appropriate table found in Sec. 20.2031-7A of this chapter.
Table 2010CM is referenced by IRS Publication 1458, Actuarial Values
Version 4B. The mortality tables prescribed for periods before June 1,
2023, are referenced by prior versions of IRS Publication 1458.
Alternatively, the remainder factors have been determined for the
convenience of taxpayers and appear in Table U(1) under the appropriate
adjusted payout rate. Table U(1) currently is available, at no charge,
electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from
time to time). Table U(1) is referenced and explained by IRS
Publication 1458, Actuarial Valuations Version 4B, which will be
available within a reasonable time after June 1, 2023. For purposes of
the computations described in this paragraph (e)(5), the age of an
individual is the age of that individual at the individual's nearest
birthday. If the adjusted payout rate is an amount that is between
adjusted payout rates for which factors are provided in the appropriate
table, an exact method of obtaining the applicable remainder factors
(such as through software using the actual adjusted payout rate and the
actuarial formula in this paragraph (e)(5)) or a linear interpolation
must be used, provided whichever method used is applied consistently in
valuing all interests in the same property. The applicable remainder
factors derived by an exact method or by interpolation must be
expressed to at least five decimal places. The present value of the
remainder interest is determined by multiplying the net fair market
value (as of the valuation date as determined in Sec. 1.664-4(e)(4))
of the property placed in trust by the factor determined under this
paragraph (e)(5). If the adjusted payout rate is from 0.2 to 20.0
percent, inclusive, taxpayers may see the actuarial tables referenced
and explained by IRS Publication 1458, Actuarial Valuations Version 4B.
Alternatively, the Commissioner may supply a factor upon a request for
a ruling. See paragraph (b) of this section.
Figure 1 to Paragraph (e)(5)(i)--Formula for Determining Unitrust
Remainder Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.008
(ii) Sample factors from actuarial Table U(1). For purposes of the
example in paragraph (e)(5)(iii) of this section, the following factors
from Table U(1) and Table F(3.2) (see paragraph (e)(6)(ii) of this
section) will be used:
[[Page 37435]]
Table 2 to Paragraph (e)(5)(ii)
Factors From Table U(1)--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
Adjusted payout rate
-----------------------------------------------------------------------------------------------------------------
Age 4.8% 5.0% 5.2%
----------------------------------------------------------------------------------------------------------------
77.............................................................. 0.61491 0.60343 0.59223
----------------------------------------------------------------------------------------------------------------
Factors from Table F(3.2)
Factors for Computing Adjusted Payout Rates for Unitrusts
----------------------------------------------------------------------------------------------------------------
Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
# of Months from Annual Valuation to First Payout Adjustment Factors for
Payments at End of Period
----------------------------------------------------------------------------------------------------------------
At Least But Less Than Annual Semiannual
----------------------------------------------------------------------------------------------------------------
6............................................................... 7 0.984374 0.976683
----------------------------------------------------------------------------------------------------------------
(iii) Example of interpolation. After June 1, 2023, A, whose age is
76 years and 11 months, transfers $100,000 to a charitable remainder
unitrust on January 1st. The trust instrument requires that the trust
pay to A semiannually (on June 30 and December 31) 5 percent of the
fair market value of the trust assets as of January 1st during A's
life. The section 7520 rate for January is 3.2 percent. Under Table
F(3.2), the appropriate adjustment factor is 0.976683 for semiannual
payments payable at the end of the semiannual period. The adjusted
payout rate is 4.883% (5% x 0.976683). Based on interpolating between
the remainder factors in Table U(1), the present value of the remainder
interest is $61,015, computed as illustrated in Figure 2 to this
paragraph (e)(5)(iii).
Figure 2 to Paragraph (e)(5)(iii)--Illustration of Unitrust
Interpolation Method
[GRAPHIC] [TIFF OMITTED] TR07JN23.009
(6) Actuarial Table D and Tables F(0.2) through F(20.0) for
transfers for which the valuation date is on or after May 1, 1989--(i)
Remainder factors for charitable remainder unitrusts. For transfers for
which the valuation date is on or after May 1, 1989, the present value
of a charitable remainder unitrust interest that is dependent upon a
term of years is determined by using the formula in Figure 3 to this
paragraph (e)(6)(i) and calculating the final result to at least six
decimal places. For the convenience of taxpayers, actuarial factors
have been computed by the IRS
[[Page 37436]]
and appear in Table D. Table D can be found on the IRS website at
<a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a
corresponding URL as may be updated from time to time). Table D is
referenced and explained in IRS Publication 1458, Actuarial Valuations
Version 4B, which will be available within a reasonable time after June
1, 2023. The remainder factors from Table D also can be found in
paragraph (e)(6)(iii) of this section, but only for adjusted payout
rates from 4.2 to 14 percent, inclusive. For transfers for which the
valuation date is on or after June 1, 2023, where the present value of
a charitable remainder unitrust interest is dependent on the
termination of a life interest, see paragraph (e)(5) of this section.
See, however, Sec. 1.7520-3(b) (relating to exceptions to the use of
prescribed tables under certain circumstances).
Figure 3 to Paragraph (e)(6)(i)--Formula for Determining Term Certain
Unitrust Remainder Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.010
(ii) Unitrust payout rate adjustment factors. For transfers for
which the valuation date is on or after May 1, 1989, the unitrust
payout rate adjustment factors are determined by using the formula in
Figure 4 to this paragraph (e)(6)(ii) and calculating the final result
to at least six decimal places. For the convenience of taxpayers,
actuarial factors have been computed by the IRS, for interest rates
from 0.2 to 20 percent, inclusive, and appear in Tables F(0.2) through
F(20.0). Tables F(0.2) through F(20.0) can be found on the IRS website
at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a
corresponding URL as may be updated from time to time). Tables F(0.2)
through F(20.0) are referenced and explained in IRS Publication 1458,
Actuarial Valuations Version 4B, which will be available within a
reasonable time after June 1, 2023. The factors from Table F also can
be found in paragraph (e)(6)(iii) of this section, but only for
interest rates from 4.2 to 14 percent, inclusive.
Figure 4 to Paragraph (e)(6)(ii)--Formula for Determining Unitrust
Payout Rate Adjustment Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.011
(iii) Table D and Tables F(4.2) through F(14.0). The unitrust
remainder factors from Table D, for interest rates from 4.2 to 14
percent, inclusive, and the unitrust payout factors from Tables F(4.2)
through F(14.0) are as follows:
* * * * *
(7) Actuarial Table U(1) for transfers for which the valuation date
is on or after June 1, 2023. The present value of a remainder interest
in a charitable remainder unitrust that is dependent on the termination
of a life interest is determined by using the section 7520 rate, Tables
F(0.2) through (20.0) (see paragraph (e)(6)(ii) of this section), and
the formula in paragraph (e)(5)(i) of this section to derive a
remainder factor from the appropriate mortality table to at least five
decimal places. For the convenience of taxpayers, actuarial factors
have been computed by the IRS and appear in Table U(1). For transfers
for which the valuation date is on or after June 1, 2023, the actuarial
tables are currently available, at no charge, electronically via the
IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>.
These actuarial tables are referenced and explained by IRS Publication
1458, Actuarial Valuations Version 4B (2023). This publication will be
available within a reasonable time after June 1, 2023. See, however,
Sec. 1.7520-3(b) (relating to exceptions to the use of prescribed
tables under certain circumstances).
(f) Applicability date. This section applies on and after June 1,
2023.
0
Par. 9. The undesignated center heading immediately preceding Sec.
1.664-4A is revised to read as follows:
Unitrust Actuarial Tables Applicable Before June 1, 2023.
0
Par. 10. Section 1.664-4A is amended by:
[[Page 37437]]
0
1. Revising the section heading.
0
2. In newly redesignated paragraph (g):
0
i. Revising the heading and paragraphs (g)(1) and (2).
0
ii. Adding paragraphs (g)(3) and (4).
0
iii. Revising paragraph (g)(5).
0
iv. In paragraph (g)(6), revising the introductory text.
0
v. Adding paragraph (g)(7).
The additions and revisions read as follows:
Sec. 1.664-4A Valuation of charitable remainder interests for which
the valuation date is before June 1, 2023.
* * * * *
(g) Valuation of charitable remainder unitrusts having certain
payout sequences for transfers for which the valuation date is on or
after May 1, 2009, and before June 1, 2023--(1) In general. Except as
otherwise provided in paragraph (g)(2) of this section, in the case of
transfers for which the valuation date is on or after May 1, 2009, and
before June 1, 2023, the present value of a remainder interest is
determined under paragraphs (g)(3) through (6) of this section,
provided that the amount of the payout as of any payout date during any
taxable year of the trust is not larger than the amount that the trust
could distribute on such date under Sec. 1.664-3(a)(1)(v) if the
taxable year of the trust were to end on such date. See, however, Sec.
1.7520-3(b) (relating to exceptions to the use of the prescribed tables
under certain circumstances).
(2) Transitional rules for valuation of charitable remainder
unitrusts. (i) For purposes of section 2055, 2106, or 2624, if on May
1, 2009, the decedent was under a mental disability so that the
disposition of the property could not be changed, and the decedent died
on or after May 1, 2009, but before June 2, 2023, without having
regained the ability to dispose of the decedent's property, or if the
decedent died within 90 days of the date that the decedent first
regained that ability on or after May 1, 2009, but before June 2, 2023,
the present value of a remainder interest under this section is
determined as if the valuation date with respect to the decedent's
gross estate is either before May 1, 2009, or after April 30, 2009, at
the option of the decedent's executor.
(ii) For purposes of section 170, 2055, 2106, 2522, or 2624, in the
case of transfers to a charitable remainder unitrust for which the
valuation date is on or after May 1, 2009, and before July 1, 2009, the
present value of a remainder interest based on one or more measuring
lives is determined under this section by using the section 7520
interest rate for the month in which the valuation date occurs (see
Sec. Sec. 1.7520-1(b) and 1.7520-2(a)(2)) and the appropriate
actuarial tables under either paragraph (f)(6) or (g)(6) of this
section, at the option of the donor or the decedent's executor, as the
case may be.
(iii) For purposes of paragraphs (g)(2)(i) and (ii) of this
section, where the donor or decedent's executor is given the option to
use the appropriate actuarial tables under either paragraph (f)(6) or
(g)(6) of this section, the donor or decedent's executor must
consistently use the same mortality basis with respect to each interest
(income, remainder, partial, etc.) in the same property, and with
respect to all transfers occurring on the same valuation date. For
example, gift and income tax charitable deductions with respect to the
same transfer must be determined based on factors with the same
mortality basis, and all assets includible in the gross estate and/or
estate tax deductions claimed must be valued based on factors with the
same mortality basis.
(iv) In the case of transfers to a charitable remainder unitrust
for which the valuation date is after April 30, 2019, and before June
1, 2023, the present value of the remainder interest under this section
is determined under Sec. 1.664(c)-4(e)(2).
(3) Adjusted payout rate. The adjusted payout rate is determined by
applying the formula in Sec. 1.664-4(e)(6)(ii) for the section 7520
interest rate applicable to the transfer to derive a factor and
calculating the final result to at least six decimal places. For the
convenience of taxpayers, actuarial factors have been computed by the
IRS, for interest rates from 0.2 to 20 percent, inclusive, and appear
in Tables F(0.2) through F(20.0). Tables F(0.2) through F(20.0) can be
found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from time to
time). Tables F(0.2) through F(20.0) are referenced and explained in
IRS Publication 1458, Actuarial Valuations Version 3B. The payout
adjustment factors from Table F can also be found in Sec. 1.664-
4(e)(6)(iii), but only for interest rates from 4.2 to 14 percent,
inclusive. Alternatively, the Commissioner may supply a factor upon a
request for a ruling. See Sec. 1.664-4(b). See Sec. 1.664-4(e) for
rules applicable in determining the adjusted payout rate.
(4) Period is a term of years. If the period described in Sec.
1.664-3(a)(5) is a term of years, the factor that is used in
determining the present value of the remainder interest is determined
by applying the formula in Sec. 1.664-4(e)(6)(i) under the appropriate
adjusted payout rate corresponding to the number of years in the term
and calculating the final result to at least six decimal places. For
the convenience of taxpayers, actuarial factors have been computed by
the IRS and appear in Table D. Table D can be found on the IRS website
at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a
corresponding URL as may be updated from time to time). Table D is
referenced and explained in IRS Publication 1458, Actuarial Valuations
Version 3B. The remainder factors from Table D also can be found in
Sec. 1.664-4(e)(6)(iii), but only for adjusted payout rates from 4.2
to 14 percent, inclusive. If the adjusted payout rate is a percentage
that is between the adjusted payout rate for which factors are provided
by Table D, an exact method of obtaining the applicable remainder
factors (such as through software using the actual rate of return and
the actuarial formula provided in Sec. 1.664-4(e)(6)(i)) or a linear
interpolation must be used, provided whichever method used is applied
consistently in valuing all interests in the same property. The
applicable remainder factors derived by an exact method or by
interpolation must be expressed to at least six decimal places. The
present value of the remainder interest is determined by multiplying
the net fair market value (as of the appropriate valuation date) of the
property placed in trust by the factor determined under this paragraph
(g)(4). Generally, for purposes of this section, the valuation date is,
in the case of an inter vivos transfer, the date on which the property
is transferred to the trust by the donor, and, in the case of a
testamentary transfer under section 2055, 2106, or 2624, the valuation
date is the date of death. See Sec. 1.664-4(e)(4) for additional rules
regarding the valuation date, and for an example that illustrates the
application of this paragraph (g)(4).
(5) Period is the life of one individual. If the period described
in Sec. 1.664-3(a)(5) is the life of one individual, the factor that
is used in determining the present value of the remainder interest for
transfers for which the valuation date is on or after May 1, 2009, and
before June 1, 2023, may be computed directly by using the formula in
Sec. 1.664-4(e)(5)(i) to derive a remainder factor from the
appropriate mortality table and calculating the final result to at
least five decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table U(1). Table
U(1) can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding
[[Page 37438]]
URL as may be updated from time to time). Table U(1) is referenced and
explained in IRS Publication 1458, Actuarial Valuations Version 3B. The
remainder factors from Table U(1) also can be found in paragraph (g)(6)
of this section, but only for adjusted payout rates from 4.2 to 14
percent, inclusive. For purposes of the computations described in this
paragraph (g)(5), the age of an individual is the age of that
individual at the individual's nearest birthday. If the adjusted payout
rate is a percentage that is between the adjusted payout rate for which
factors are provided by Table U(1), an exact method of obtaining the
applicable factors (such as through software using the actual rate of
return and the actuarial formula provided in Sec. 1.664-4(e)(5)(i)) or
a linear interpolation must be used, provided whichever method used is
applied consistently in valuing all interests in the same property. The
applicable remainder factors derived by an exact method or by
interpolation must be expressed to at least five decimal places. The
rules provided in Sec. 1.664-4(e)(5) apply for determining the present
value of the remainder interest. See Sec. 1.664-4(e)(5) for an example
illustrating the application of this paragraph (g)(5) (using current
actuarial tables).
(6) Actuarial Table U(1) for transfers for which the valuation date
is on or after May 1, 2009, and before June 1, 2023. For transfers for
which the valuation date is on or after May 1, 2009, and before June 1,
2023, and without regard to the headings in the tables in this
paragraph (g)(6) that do not contain this termination date for the
applicability of the tables, the present value of a charitable
remainder unitrust interest that is dependent on the termination of a
life interest is determined by using the section 7520 rate, Table U(1)
in this paragraph (g)(6), and Tables F(4.2) through F(14.0) in Sec.
1.664-4(e)(6)(iii). See, however, Sec. 1.7520-3(b) (relating to
exceptions to the use of prescribed tables under certain
circumstances). Actuarial factors that do not appear in the following
tables may be computed directly by using the formula in Sec. 1.664-
4(e)(5)(i) to derive remainder factors from the appropriate mortality
table and calculating the result to at least five decimal places. For
the convenience of taxpayers, actuarial factors have been computed by
the IRS and appear in Table U(1) that is referenced and explained by
IRS Publication 1458, Actuarial Valuations Version 3B (2009). The table
is available at no charge, electronically via the IRS website at
<a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a
corresponding URL as may be updated from time to time).
* * * * *
(7) Applicability dates. Paragraphs (g)(1) through (6) of this
section apply on and after May 1, 2009, and before June 1, 2023.
0
Par. 11. Section 1.7520-1 is amended by revising paragraphs (a)(1) and
(2), (b)(2), (c), and (d) and adding paragraphs (e) and (f) to read as
follows:
Sec. 1.7520-1 Valuation of annuities, interests for life or a term of
years, and remainder or reversionary interests.
(a) * * * (1) Except as otherwise provided in this section and in
Sec. 1.7520-3 (relating to exceptions to the use of prescribed tables
under certain circumstances), in the case of certain transactions after
April 30, 1989, subject to income tax, the fair market value of
annuities, interests for life or a term of years (including unitrust
interests), and remainder or reversionary interests is their present
value determined under this section. See Sec. 20.2031-7(d) of this
chapter (and, for periods prior to June 1, 2023, Sec. Sec. 20.2031-
7(d)(3) and 20.2031-7A of this chapter) for the computation of the
value of annuities, interests for life or a term of years, and
remainder or reversionary interests other than interests described in
paragraphs (a)(2) and (3) of this section.
(2) For a transfer to a pooled income fund, see Sec. 1.642(c)-6(e)
(or, for periods prior to June 1, 2023, Sec. 1.642(c)-6A) with respect
to the valuation of the remainder interest.
* * * * *
(b) * * *
(2) Mortality component. The mortality component reflects the
mortality data in the most recently available decennial mortality
report based on the United States census. As the appropriate new
decennial mortality report becomes available after each decennial
census, the Treasury Department and the IRS will revise the mortality
component described in this section and will update the appropriate
regulations to adopt the revised mortality component tables. For
transactions with valuation dates on or after June 1, 2023, the
mortality component table (Table 2010CM) is in Sec. 20.2031-
7(d)(7)(ii) of this chapter, is referenced by IRS Publication 1457,
Actuarial Valuations Version 4A, and can be found on the IRS website at
<a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a
corresponding URL as may be updated from time to time). See Sec.
20.2031-7A of this chapter for mortality component tables applicable to
transactions for which the valuation date falls before June 1, 2023.
(c) Actuarial factors. The present value on the valuation date of
an annuity, an interest for life or a term of years, and a remainder or
reversionary interest is computed by using the section 7520 interest
rate component that is described in paragraph (b)(1) of this section
and the mortality component that is described in paragraph (b)(2) of
this section. Actuarial factors for determining these present values
may be calculated by taxpayers using the actuarial formulas in Sec.
20.2031-7(d)(2) of this chapter but, for the convenience of taxpayers,
are included in tables that are referenced and explained by
publications of the Internal Revenue Service. If a factor for a
particular situation is required in order to value an interest, that
factor may be calculated by taxpayers using the actuarial formulas in
Sec. 20.2031-7(d)(2) of this chapter or the taxpayer may request a
ruling to obtain the factor from the Internal Revenue Service. The
request for a ruling must be accompanied by a recitation of the facts,
including the date of birth for each measuring life and copies of
relevant instruments. A request for a ruling must comply with the
instructions for requesting a ruling published periodically in the
Internal Revenue Bulletin (see Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or
successor revenue procedure(s), and Sec. Sec. 601.201 and
601.601(d)(2)(ii)(b) of this chapter) and must include payment of the
required user fee.
(d) IRS publications referencing and explaining actuarial tables
with rates from 0.2 to 20 percent, inclusive, at intervals of two-
tenths of one percent, for valuation dates on or after June 1, 2023.
The publications listed in paragraphs (d)(1) through (3) of this
section will be available within a reasonable time after June 1, 2023.
The underlying actuarial tables referenced and explained by these
publications currently are available, at no charge, electronically via
the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>:
(1) IRS Publication 1457, Actuarial Valuations Version 4A (2023).
This publication references tables of valuation factors and provides
examples that show how to compute other valuation factors, for
determining the present value of annuities, interests for life or a
term of years, and remainder or reversionary interests, measured by one
or two lives. These factors may also be used in the valuation of
interests in a charitable remainder annuity trust as
[[Page 37439]]
defined in Sec. 1.664-2 and a pooled income fund as defined in Sec.
1.642(c)-5. This publication references and explains Table S (single
life remainder factors), Table R(2) (two-life last-to-die remainder
factors), Table B (actuarial factors used in determining the present
value of an interest for a term of years), Table H (commutation
factors), Table J (term certain annuity beginning-of-interval
adjustment factors), and Table K (annuity end-of-interval adjustment
factors). See earlier versions of the publication, Sec. 1.642(c)-6A,
or Sec. 20.2031-7A of this chapter for Table S applicable to valuation
dates before June 1, 2023. Earlier versions of the publication also
contain earlier versions of Tables H and R(2). Tables B, J, and K also
can be found in Sec. 20.2031-7(d)(6) of this chapter, but only for
interest rates from 4.2 to 14 percent, inclusive.
(2) IRS Publication 1458, Actuarial Valuations Version 4B (2023).
This publication references and explains term certain tables and tables
of one and two life valuation factors for determining the present value
of remainder interests in a charitable remainder unitrust as defined in
Sec. 1.664-3. This publication references Table U(1) (unitrust single
life remainder factors), Table U(2) (unitrust two-life last-to-die
remainder factors), Table D (actuarial factors used in determining the
present value of a remainder interest postponed for a term of years),
Table F (adjustment payout rate factors), and Table Z (unitrust
commutation factors). See earlier versions of the publication or Sec.
1.664-4A for Table U(1) applicable to valuation dates before June 1,
2023. Earlier versions of the publication also contain earlier versions
of Tables U(2) and Z. Table D also can be found in Sec. 1.664-
4(e)(6)(iii), but only for adjusted payout rates from 4.2 to 14
percent, inclusive. Table F also can be found in Sec. 1.664-
4(e)(6)(iii), but only for interest rates from 4.2 to 14 percent,
inclusive.
(3) IRS Publication 1459, Actuarial Valuations Version 4C (2023).
This publication references and explains Table C, which provides
factors for making adjustments to the standard remainder factor for
valuing gifts of depreciable property. See Sec. 1.170A-12.
(4) The publications identified in paragraphs (d)(1) through (3) of
this section also reference Table 2010CM, the mortality component
table.
(e) Use of approximation methods for obtaining factors when the
required valuation rate falls between two listed rates. For certain
cases, this part and IRS publications provide approximation methods
(for example, interpolation) for obtaining factors when the required
valuation rate falls between two listed rates (such as in the case of a
pooled income fund's rate of return or a unitrust's adjusted payout
rate). In general, exact methods of obtaining the applicable factors
are allowed, such as through software using the applicable interest
rate and the proper actuarial formula, provided such direct methods are
applied consistently in valuing all interests in the same property. The
actuarial formula in Sec. 20.2031-7(d)(2)(ii)(B) of this chapter is
used to determine the remainder factor for pooled income funds and the
actuarial formula in Sec. 1.664-4(e)(5)(i) is used to determine the
remainder factor for unitrusts. The approximation method provided in
this part, computed to at minimum the same number of decimal places as
provided in this part, must be used if more exact methods are not
available.
(f) Applicability date. This section applies on and after June 1,
2023.
PART 20--ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16,
1954
0
Par. 12. The authority citation for part 20 continues to read in part
as follows:
Authority: 26 U.S.C. 7805.
* * * * *
0
Par. 13. Section 20.2031-0 is revised to read as follows:
Sec. 20.2031-0 Table of contents.
This section lists the section headings and undesignated center
headings that appear in the regulations in this part under section
2031.
20.2031-1 Definition of gross estate; valuation of property.
20.2031-2 Valuation of stocks and bonds.
20.2031-3 Valuation of interests in businesses.
20.2031-4 Valuation of notes.
20.2031-5 Valuation of cash on hand or on deposit.
20.2031-6 Valuation of household and personal effects.
20.2031-7 Valuation of annuities, interests for life or a term of
years, and remainder or reversionary interests.
20.2031-8 Valuation of certain life insurance and annuity contracts;
valuation of shares in an open-end investment company.
20.2031-9 Valuation of other property.
Actuarial Tables Applicable Before June 1, 2023
20.2031-7A Valuation of annuities, interests for life or a term of
years, and remainder or reversionary interests for estates of
decedents for which the valuation date of the gross estate is before
June 1, 2023.
0
Par. 14. Section 20.2031-7 is amended by:
0
1. Revising paragraph (c), the heading of paragraph (d), and paragraphs
(d)(1) through (5).
0
2. Redesignating paragraph (d)(7) as paragraph (g)(4) of Sec. 20.2031-
7A.
0
3. Adding new paragraph (d)(7).
0
4. Revising paragraph (e).
The revisions and addition read as follows:
Sec. 20.2031-7 Valuation of annuities, interests for life or a term
of years, and remainder or reversionary interests.
* * * * *
(c) Actuarial valuations. The present value of annuities, interests
for life or a term of years, and remainder or reversionary interests
for estates of decedents for which the valuation date of the gross
estate is on or after June 1, 2023, is determined under paragraph (d)
of this section. The present value of annuities, interests for life or
a term of years, and remainder or reversionary interests for estates of
decedents for which the valuation date of the gross estate is before
June 1, 2023, is determined (subject to paragraph (d)(3) of this
section) under the following sections:
Table 1 to Paragraph (c)
------------------------------------------------------------------------
Valuation dates
------------------------------------------------------ Applicable
After Before regulations
------------------------------------------------------------------------
01-01-52 Sec. 20.2031-
7A(a)
12-31-51................................ 01-01-71 20.2031-7A(b)
12-31-70................................ 12-01-83 20.2031-7A(c)
11-30-83................................ 05-01-89 20.2031-7A(d)
04-30-89................................ 05-01-99 20.2031-7A(e)
04-30-99................................ 05-01-09 Sec. 20.2031-
7A(f)
04-30-09................................ 06-01-23 20.2031-7A(g)
------------------------------------------------------------------------
(d) Actuarial valuations on or after June 1, 2023--(1) In general.
Except as otherwise provided in paragraph (b) of this section and Sec.
20.7520-3(b) (pertaining to certain limitations on the use of
prescribed tables), if the valuation date for the gross estate of the
decedent is on or after June 1, 2023, the fair market value of
annuities, interests for life or a term of years, and remainder or
reversionary interests is the present value determined by using
standard or special section 7520 actuarial factors. Many of these
standard factors are derived by using the actuarial formulas provided
in paragraph (d)(2) of this section, the appropriate section 7520
interest rate, and, if applicable, the mortality component for the
valuation date of the interest that is being valued. For purposes of
the computations described in this section, the age of an individual is
the age of that individual at the individual's nearest birthday. For
the convenience of taxpayers, paragraph
[[Page 37440]]
(d)(2) of this section provides for published tables of factors for
specific types of interests. These published tables provide factors for
rates from 0.2 to 20 percent, inclusive, at intervals of two-tenths of
one percent. In general, appropriate factors instead may be computed
directly from the actuarial formulas provided in paragraph (d)(2) of
this section. In some cases, specific examples in this part and IRS
publications illustrate approximation methods (for example,
interpolation) for obtaining factors when the required valuation rate
falls between two listed rates (such as in the case of a pooled income
fund's rate of return or a unitrust's adjusted payout rate). Exact
methods of obtaining the applicable actuarial factors are allowed, such
as through software using the actual rate of return and the actuarial
formulas provided in paragraph (d)(2) of this section, provided that
the taxpayer uses at least the same number of decimal places as are
provided in the published tables. The approximation method provided in
this part, again using at least the same number of decimal places as
provided in this part, must be used if more exact methods are not
available. See Sec. Sec. 20.7520-1 through 20.7520-4. The selected
method must be applied consistently in valuing all interests in the
same property.
(2) Specific interests--(i) Pooled income funds and charitable
remainder trusts. The fair market value of a remainder interest in a
pooled income fund, as defined in Sec. 1.642(c)-5 of this chapter, is
its value determined under Sec. 1.642(c)-6(e) of this chapter. The
fair market value of a remainder interest in a charitable remainder
annuity trust, as defined in Sec. 1.664-2(a) of this chapter, is the
present value determined under Sec. 1.664-2(c) of this chapter. The
fair market value of a remainder interest in a charitable remainder
unitrust, as defined in Sec. 1.664-3 of this chapter, is its present
value determined under Sec. 1.664-4(e) of this chapter. The fair
market value of a life interest or an interest for a term of years in a
charitable remainder unitrust is the fair market value of the property
as of the date of valuation less the fair market value of the remainder
interest on that date determined under Sec. 1.664-4(e)(4) and (5) of
this chapter.
(ii) Ordinary remainder and reversionary interests--(A) Remainder
and reversionary interests for a term of years. If the interest to be
valued is a remainder or reversionary interest to take effect after a
definite number of years, the present value of the interest is computed
by multiplying the value of the property by the appropriate remainder
factor (that corresponds to the applicable section 7520 interest rate
and the stated term). The factor for an ordinary remainder interest
following a term certain may be found using the formula in Figure 1 to
this paragraph (d)(2)(ii)(A) and computing the result to at least six
decimal places. For the convenience of taxpayers, actuarial factors
have been computed by the IRS and appear in Table B. Table B can be
found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from time to
time). Table B is referenced and explained in IRS Publication 1457,
Actuarial Valuations Version 4A, which will be available within a
reasonable time after June 1, 2023. The remainder factors from Table B
also can be found in paragraph (d)(6) of this section, but only for
interest rates from 4.2 to 14 percent, inclusive. For information about
obtaining special factors for other situations, see paragraph (d)(4) of
this section.
Figure 1 to Paragraph (d)(2)(ii)(A)--Formula for Determining Term
Certain Remainder Factors
[GRAPHIC] [TIFF OMITTED] TR07JN23.012
(B) Remainder and reversionary interests dependent on the life of
one individual. If the interest to be valued is a remainder or
reversionary interest to take effect after the death of one individual,
the present value of the interest is computed by multiplying the value
of the property by the appropriate remainder factor (that corresponds
to the applicable section 7520 interest rate and the age of the
measuring life of the life interest that precedes the remainder
interest). The factor for an ordinary remainder interest following the
death of one individual may be found using the formula in Figure 2 to
this paragraph (d)(2)(ii)(B) and computing the result to at least five
decimal places. The prescribed mortality table is Table 2010CM as set
forth in paragraph (d)(7)(ii) of this section, or for periods before
June 1, 2023, the appropriate table found in Sec. 20.2031-7A. For the
convenience of taxpayers, actuarial factors have been computed by the
IRS and appear in Table S. Table S currently is available, at no
charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be
updated from time to time). Table S is referenced and explained by IRS
Publication 1457, Actuarial Valuations Version 4A, which will be
available within a reasonable time after June 1, 2023. For information
about obtaining special factors for other situations, see paragraph
(d)(4) of this section.
Figure 2 to Paragraph (d)(2)(ii)(B)--Formula for Determining Single
Life Remainder Factors
[[Page 37441]]
[GRAPHIC] [TIFF OMITTED] TR07JN23.013
(iii) Ordinary interests for a term of years and ordinary interests
for life. If the interest to be valued is the right of a person to
receive the income of certain property, or to the use of certain
property, for a term of years or for the life of one individual, the
present value of the interest is computed by multiplying the value of
the property by the appropriate actuarial factor for an interest for a
term of years or for a life (that corresponds to the applicable section
7520 interest rate and the durational period). The actuarial factor for
an ordinary income interest for a term certain may be found by
subtracting from 1.000000 the factor for an ordinary remainder interest
following the same term certain that is determined under the formula in
paragraph (d)(2)(ii)(A) of this section. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in the ``Income Interest'' column of Table B which can be found on the
IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>
(or a corresponding URL as may be updated from time to time). The
actuarial factor for an ordinary income interest for the life of one
individual may be found by subtracting from 1.00000 the factor for an
ordinary remainder interest following the life of the same individual
that is determined in paragraph (d)(2)(ii)(B) of this section. For the
convenience of taxpayers, actuarial factors have been computed by the
IRS and appear in the ``Life Estate'' column of Table S. Table S
(applicable when the valuation date is on or after June 1, 2023) can be
found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. Tables B and S are referenced and explained by IRS
Publication 1457, Actuarial Valuations Version 4A. See Sec. 20.2031-7A
or earlier versions of Publication 1457 for valuation of interests
before June 1, 2023. For information about obtaining special factors
for other situations, see paragraph (d)(4) of this section.
(iv) Annuities. (A) If the interest to be valued is the right of a
person to receive an annuity that is payable at the end of each year
for a term of years or for the life of one individual, the present
value of the interest is computed by multiplying the aggregate amount
payable annually by the appropriate annuity factor (that corresponds to
the applicable section 7520 interest rate and annuity period). The
appropriate annuity factor for an annuity payable for a term of years
is computed by subtracting from 1.000000 the factor for an ordinary
remainder interest following the same term certain that is determined
under the formula in paragraph (d)(2)(ii)(A) of this section and then
dividing the result by the applicable section 7520 interest rate
expressed to at least four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in the ``Annuity'' column of Table B which can be found on the IRS
website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a
corresponding URL as may be updated from time to time). The appropriate
annuity factor for an annuity payable for the life of one individual is
computed by subtracting from 1.00000 the factor for an ordinary
remainder interest following the life of the same individual that is
determined under the formula in paragraph (d)(2)(ii)(B) of this section
and then dividing the result by the applicable section 7520 interest
rate expressed to at least four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in the ``Annuity'' column of Table S. Table S (applicable when the
valuation date is on or after June 1, 2023) can be found on the IRS
website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>.
Tables B and S are referenced and explained in IRS Publication 1457,
Actuarial Valuations Version 4A. See Sec. 20.2031-7A or earlier
versions of Publication 1457 for valuation of interests before June 1,
2023. For information about obtaining special factors for other
situations, see paragraph (d)(4) of this section.
(B) If the annuity is payable at the end of semiannual, quarterly,
monthly, or weekly periods, the product obtained by multiplying the
annuity factor by the aggregate amount payable annually is then
multiplied by the applicable adjustment factor at the appropriate
interest rate component for payments made at the end of the specified
periods. The applicable adjustment factor may be found using the
formula in Figure 3 to this paragraph (d)(2)(iv)(B) and calculating the
result to at least four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in Table K. Table K, which is referenced and explained by Publication
1457, can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. The provisions of this paragraph
(d)(2)(iv)(B) are illustrated by the example in paragraph
(d)(2)(iv)(B)(2) of this section.
Figure 3 to Paragraph (d)(2)(iv)(B)--Formula for Determining Annuity
Adjustment Factor at the End of the Specified Period
[[Page 37442]]
[GRAPHIC] [TIFF OMITTED] TR07JN23.014
(1) Sample factors from actuarial Tables S and K. For purposes of
the example in paragraph (d)(2)(iv)(B)(2) of this section, the
following factors from Tables S and K will be used:
Table 2 to Paragraph (d)(2)(iv)(B)(1)
Factors From Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
Age Annuity Life estate Remainder
----------------------------------------------------------------------------------------------------------------
Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
75..................................................... 9.4053 0.30097 0.69903
----------------------------------------------------------------------------------------------------------------
Factors from Table K
Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
Interest rate Semi-annually Quarterly Monthly
----------------------------------------------------------------------------------------------------------------
3.2%................................................... 1.0079 1.0119 1.0146
----------------------------------------------------------------------------------------------------------------
(2) Example. At the time of the decedent's death, the survivor/
annuitant, age 75, is entitled to receive an annuity of $15,000 per
year for life payable in equal monthly installments at the end of each
month. The section 7520 rate for the month in which the decedent died
is 3.2 percent. Under Table S, the annuity factor at 3.2 percent for an
individual aged 75 is 9.4053. Under Table K, the adjustment factor
under the column for payments made at the end of each monthly period at
the rate of 3.2 percent is 1.0146. The aggregate annual amount,
$15,000, is multiplied by the factor 9.4053 and the product then is
multiplied by 1.0146. The present value of the annuity at the date of
the decedent's death is, therefore, $143,139.26 ($15,000 x 9.4053 x
1.0146).
(C) If an annuity is payable at the beginning of annual,
semiannual, quarterly, monthly, or weekly periods for a term of years,
the value of the annuity is computed by multiplying the aggregate
amount payable annually by the annuity factor described in paragraph
(d)(2)(iv)(A) of this section; and the product so obtained then is
multiplied by the applicable adjustment factor at the appropriate
interest rate component for payments made at the beginning of specified
periods. The applicable adjustment factor may be found using the
formula in Figure 4 to this paragraph (d)(2)(iv)(C) and calculating the
result to at least four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in Table J. Table J, which is referenced and explained by Publication
1457, can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. If an annuity is payable at the
beginning of annual, semiannual, quarterly, monthly, or weekly periods
for one or more lives, the value of the annuity is the sum of the first
payment plus the present value of a similar annuity, the first payment
of which is not to be made until the end of the payment period,
determined as provided in paragraph (d)(2)(iv)(B) of this section.
Figure 4 to Paragraph (d)(2)(iv)(C)--Formula for Determining Annuity
Adjustment Factor at the Beginning of the Specified Period
[GRAPHIC] [TIFF OMITTED] TR07JN23.015
[[Page 37443]]
(v) Annuity and unitrust interests for a term of years or until the
prior death of an individual. See Sec. 25.2512-5(d)(2)(v) of this
chapter for examples explaining how to compute the present value of an
annuity or unitrust interest that is payable until the earlier of the
lapse of a term of years or the death of an individual.
(3) Transitional rule. If a decedent dies after April 30, 2019, and
on or before June 1, 2023, the fair market value of annuities,
interests for life or a term of years, and remainder or reversionary
interests based on one or more measuring lives included in the gross
estate of the decedent is their present value determined under this
section by using the section 7520 interest rate for the month in which
the valuation date occurs (see Sec. Sec. 20.7520-1(b) and 20.7520-
2(a)(2)) and factors derived from the selected mortality table, either
Table 2010CM in paragraph (d)(7)(ii) of this section or Table 2000CM in
Sec. 20.2031-7A(g)(4), at the option of the donor or the decedent's
executor, as the case may be. If any previously filed estate tax return
is supplemented to use the actuarial factors based on Table 2010CM, the
supplemental return must state at the top ``AMENDED PURSUANT TO TD
9974.'' For the convenience of taxpayers, actuarial factors based on
Table 2010CM appear in the current version of Table S, and actuarial
factors based on Table 2000CM appear in the previous version of Table
S. Both versions of Table S will be available as provided in paragraph
(d)(4) of this section. The decedent's executor must consistently use
the same mortality basis with respect to each interest (income,
remainder, partial, etc.) in the same property, and with respect to all
transfers occurring on the same valuation date. For example, gift and
income tax charitable deductions with respect to the same transfer must
be determined based on factors with the same mortality basis, and all
assets includible in the gross estate and/or estate tax deductions
claimed must be valued based on factors with the same mortality basis.
(4) Publications and actuarial computations by the Internal Revenue
Service. The factor for determining the present value of a remainder
interest that is dependent on the termination of the life of one
individual may be computed by using the formula in paragraph
(d)(2)(ii)(B) of this section to derive a remainder factor from the
appropriate mortality table expressed to at least five decimal places.
For the convenience of taxpayers, actuarial factors have been computed
by the IRS and appear in Table S. The remainder factor for determining
the present value of a remainder interest following a term certain may
be computed by using the formula in paragraph (d)(2)(ii)(A) of this
section expressed to at least six decimal places. For the convenience
of taxpayers, actuarial factors have been computed by the IRS and
appear in Table B. Adjustment factors for term certain annuities
payable at the beginning of each interval may be computed by using the
formula in paragraph (d)(2)(iv)(C) of this section expressed to at
least four decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table J. Adjustment
factors for annuities payable at the end of each interval may be
computed by using the formula in paragraph (d)(2)(iv)(B) of this
section expressed to at least four decimal places. For the convenience
of taxpayers, actuarial factors have been computed by the IRS and
appear in Table K. These tables currently are available, at no charge,
electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from
time to time). IRS Publication 1457, Actuarial Valuations Version 4A
(2023), references and explains the factors contained in the actuarial
tables and also includes examples that illustrate how to compute many
special factors for more unusual situations. This publication will be
available within a reasonable time after June 1, 2023. Tables B, J, and
K also can be found in paragraph (d)(6) of this section, but only for
interest rates from 4.2 to 14 percent, inclusive. If a special factor
is required in the case of an actual decedent, the special factor may
be calculated by the executor using the actuarial formulas in paragraph
(d)(2) of this section or the executor may request a ruling to obtain
the factor from the Internal Revenue Service. The request for a ruling
must be accompanied by a recitation of the facts including a statement
of the date of birth for each measuring life, the date of the
decedent's death, any other applicable dates, and a copy of the will,
trust, or other relevant documents. A request for a ruling must comply
with the instructions for requesting a ruling published periodically in
the Internal Revenue Bulletin (see Sec. Sec. 601.201 and
601.601(d)(2)(ii)(b) of this chapter) and must include payment of the
required user fee.
(5) Examples. The provisions of this section are illustrated by the
examples in this paragraph (d)(5). For purposes of these examples, the
following factors from Tables S, B, and K will be used:
Table 3 to Paragraph (d)(5)
----------------------------------------------------------------------------------------------------------------
Age Annuity Life estate Remainder
----------------------------------------------------------------------------------------------------------------
Factors From Table S--Based on Table 2010CM
Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
31..................................................... 23.8334 0.76267 0.23733
46..................................................... 20.0146 0.64047 0.35953
----------------------------------------------------------------------------------------------------------------
Interest at 4.6 Percent
----------------------------------------------------------------------------------------------------------------
65..................................................... 11.7691 0.54138 0.45862
----------------------------------------------------------------------------------------------------------------
Factors from Table B
Annuity, Income, and Remainder Interests for a Term Certain
Interest at 2.6 Percent
----------------------------------------------------------------------------------------------------------------
Years Annuity Income interest Remainder
----------------------------------------------------------------------------------------------------------------
5...................................................... 4.6325 0.120445 0.879555
----------------------------------------------------------------------------------------------------------------
[[Page 37444]]
Factors From Table K
Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
Interest Rate Semi-annually Quarterly Monthly
----------------------------------------------------------------------------------------------------------------
2.6%................................................... 1.0065 1.0097 1.0119
3.2%................................................... 1.0079 1.0119 1.0146
----------------------------------------------------------------------------------------------------------------
(i) Example 1: Remainder payable at an individual's death. The
decedent, or the decedent's estate, was entitled to receive certain
property worth $50,000 upon the death of A, to whom the income was
bequeathed for life. At the time of the decedent's death, A was 65
years and 5 months old. In the month in which the decedent died, the
section 7520 rate was 4.6 percent. Under Table S, the remainder factor
at 4.6 percent for determining the present value of the remainder
interest due at the death of a person aged 65, A's age at A's nearest
birthday to the date of the decedent's death, is 0.45862. The present
value of the remainder interest at the date of the decedent's death is,
therefore, $22,931 ($50,000 times 0.45862).
(ii) Example 2: Income payable for an individual's life. A's parent
bequeathed an income interest in property to A for life, with the
remainder interest passing to B at A's death. At the time of the
parent's death, the value of the property was $50,000 and A was 30
years and 10 months old. The section 7520 rate at the time of the
parent's death was 3.2 percent. Under Table S, the factor at 3.2
percent for determining the present value of the life estate given to a
person aged 31, A's age at A's nearest birthday to the date of the
decedent's death, is 0.76267. The present value of A's income interest
at the time of the parent's death is, therefore, $38,133.50 ($50,000.00
x 0.76267).
(iii) Example 3: Annuity payable for an individual's life. A
purchased an annuity for the benefit of both A and B. Under the terms
of the annuity contract, at A's death, a survivor annuity of $10,000
per year, payable in equal semiannual installments made at the end of
each interval is payable to B for life. At A's death, B was 45 years
and 7 months old. Also, at A's death, the section 7520 rate was 3.2
percent. Under Table S, the factor at 3.2 percent for determining the
present value of an annuity interest payable until the death of a
person age 46 (B's age at B's nearest birthday to the date of A's
death) is 20.0146. The adjustment factor from Table K at an interest
rate of 3.2 percent for semiannual annuity payments made at the end of
the period is 1.0079. The present value of the annuity at the date of
A's death is, therefore, $201,727.15 ($10,000 x 20.0146 x 1.0079).
(iv) Example 4: Annuity payable for a term of years. The decedent,
or the decedent's estate, was entitled to receive an annuity of $10,000
per year payable in equal quarterly installments at the end of each
quarter throughout a term certain. At the time of the decedent's death,
the section 7520 rate was 2.6 percent. A quarterly payment had been
made immediately prior to the decedent's death and payments were to
continue for 5 more years. Under Table B for the interest rate of 2.6
percent, the factor for the present value of an annuity with a term of
5 years is 4.6325. The adjustment factor from Table K at an interest
rate of 2.6 percent for quarterly annuity payments made at the end of
the quarter is 1.0097. The present value of the annuity is, therefore,
$46,774.35 ($10,000 x 4.6325 x 1.0097).
* * * * *
(7) Actuarial Table S and Table 2010CM where the valuation date is
on or after June 1, 2023--(i) Determination of required factors. Except
as provided in Sec. 20.7520-3(b) (pertaining to certain limitations on
the use of prescribed tables), for determination of the present value
of a remainder interest that is dependent on the termination of a life
interest, where the valuation date is on or after June 1, 2023,
actuarial remainder factors computed to at least five decimal places
directly by using the formula in paragraph (d)(2)(ii)(B) of this
section, Table 2010CM, and the section 7520 rate are used in the
application of the provisions of this section. For the convenience of
taxpayers, the actuarial factors, when the section 7520 interest rate
component is from 0.2 to 20 percent, inclusive, have been computed by
the IRS and can be found in Table S. Table S currently is available, at
no charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. Table S is also referenced and
explained by IRS Publication 1457, Actuarial Valuations Version 4A,
which will be available within a reasonable time after June 1, 2023.
Table 4 to Paragraph (d)(7)(ii)
----------------------------------------------------------------------------------------------------------------
Age x lx Age x lx Age x lx
----------------------------------------------------------------------------------------------------------------
0............................ 100,000.00 37.............. 97,193.66 74............. 71,177.55
1............................ 99,382.28 38.............. 97,058.84 75............. 69,174.83
2............................ 99,341.16 39.............. 96,915.25 76............. 67,044.59
3............................ 99,313.80 40.............. 96,761.20 77............. 64,773.93
4............................ 99,292.72 41.............. 96,595.51 78............. 62,366.05
5............................ 99,276.45 42.............. 96,416.30 79............. 59,795.50
6............................ 99,261.55 43.............. 96,220.61 80............. 57,080.84
7............................ 99,248.33 44.............. 96,005.41 81............. 54,213.71
8............................ 99,236.50 45.............. 95,768.60 82............. 51,205.27
9............................ 99,226.09 46.............. 95,509.98 83............. 48,059.88
10........................... 99,217.03 47.............. 95,229.06 84............. 44,808.51
11........................... 99,208.80 48.............. 94,923.45 85............. 41,399.79
12........................... 99,199.98 49.............. 94,589.88 86............. 37,895.25
13........................... 99,188.21 50.............. 94,225.50 87............. 34,313.98
[[Page 37445]]
14........................... 99,170.64 51.............. 93,828.33 88............. 30,700.82
15........................... 99,145.34 52.............. 93,398.01 89............. 27,106.68
16........................... 99,111.91 53.............. 92,934.52 90............. 23,586.75
17........................... 99,070.69 54.............. 92,438.08 91............. 20,198.02
18........................... 99,021.50 55.............. 91,907.95 92............. 16,996.17
19........................... 98,964.16 56.............. 91,342.02 93............. 14,032.08
20........................... 98,898.61 57.............. 90,737.24 94............. 11,348.23
21........................... 98,824.20 58.............. 90,090.97 95............. 8,975.661
22........................... 98,741.32 59.............. 89,401.06 96............. 6,931.559
23........................... 98,652.16 60.............. 88,665.95 97............. 5,218.261
24........................... 98,559.87 61.............. 87,883.66 98............. 3,823.642
25........................... 98,466.80 62.............. 87,051.88 99............. 2,722.994
26........................... 98,373.71 63.............. 86,167.86 100............ 1,882.108
27........................... 98,280.09 64.............. 85,226.77 101............ 1,261.083
28........................... 98,185.51 65.............. 84,221.59 102............ 818.2641
29........................... 98,089.05 66.............. 83,142.34 103............ 513.7236
30........................... 97,989.90 67.............. 81,978.28 104............ 311.8784
31........................... 97,887.47 68.............. 80,728.83 105............ 183.0200
32........................... 97,781.58 69.............. 79,387.95 106............ 103.8046
33........................... 97,672.13 70.............. 77,957.53 107............ 56.91106
34........................... 97,559.20 71.............. 76,429.84 108............ 30.17214
35........................... 97,442.53 72.............. 74,797.63 109............ 15.47804
36........................... 97,321.14 73.............. 73,049.33 110............ 0.000000
----------------------------------------------------------------------------------------------------------------
(e) Applicability date. This section applies on and after June 1,
2023.
0
Par. 15. The undesignated center heading immediately preceding Sec.
20.2031-7A is revised to read as follows:
Actuarial Tables Applicable Before June 1, 2023
0
Par. 16. Section 20.2031-7A is amended by:
0
1. Revising the section heading.
0
2. Adding paragraphs (g) heading and (g)(1) through (3).
0
3. In newly redesignated paragraph (g)(4), revising the heading and
introductory text.
0
4. Adding paragraph (g)(5).
The revisions and additions read as follows:
Sec. 20.2031-7A Valuation of annuities, interests for life or a term
of years, and remainder or reversionary interests for estates of
decedents for which the valuation date of the gross estate is before
June 1, 2023.
* * * * *
(g) Valuation of annuities, interests for life or a term of years,
and remainder or reversionary interests for estates of decedents for
which the valuation date of the gross estate is on or after May 1,
2009, and before June 1, 2023--(1) In general. Except as otherwise
provided in Sec. Sec. 20.2031-7(b) and 20.7520-3(b) (pertaining to
certain limitations on the use of prescribed tables), if the valuation
date for the gross estate of the decedent is on or after May 1, 2009,
and before June 1, 2023, the fair market value of annuities, interests
for life or a term of years, and remainder or reversionary interests is
the present value of the interests determined by using standard or
special section 7520 actuarial factors and the valuation methodology
described in Sec. 20.2031-7(d). These factors are derived by using the
appropriate section 7520 interest rate and, if applicable, the
mortality component for the valuation date of the interest that is
being valued. See Sec. Sec. 20.7520-1 through 20.7520-4. See paragraph
(g)(4) of this section for determination of the appropriate table for
use in valuing these interests.
(2) Transitional rules. (i) If a decedent dies on or after May 1,
2009, and if, on May 1, 2009, the decedent was under a mental
disability so that the disposition of the decedent's property could not
be changed, and the decedent dies on or before June 1, 2023, either
without having regained the ability to dispose of the decedent's
property or within 90 days of the date on which the decedent first
regains that ability, the fair market value of annuities, interests for
life or a term of years, and remainder or reversionary interests
included in the gross estate of the decedent is their present value
determined either under this section or under the corresponding section
applicable at the time the decedent first became subject to the mental
disability, at the option of the decedent's executor. For example, see
paragraph (d) of this section.
(ii) If a decedent dies on or after May 1, 2009, and before July 1,
2009, the fair market value of annuities, interests for life or a term
of years, and remainder or reversionary interests based on one or more
measuring lives included in the gross estate of the decedent is their
present value determined under this section by using the section 7520
interest rate for the month in which the valuation date occurs (see
Sec. Sec. 20.7520-1(b) and 20.7520-2(a)(2)) and the appropriate
actuarial tables under either paragraph (f)(4) or (g)(4) of this
section, at the option of the decedent's executor.
(iii) For purposes of paragraphs (g)(2)(i) and (ii) of this
section, where the decedent's executor is given the option to use the
appropriate actuarial tables under either paragraph (f)(4) or (g)(4) of
this section, the decedent's executor must consistently use the same
mortality basis with respect to each interest (income, remainder,
partial, etc.) in the same property, and with respect to all transfers
occurring on the same valuation date. For example, gift and income tax
charitable deductions with respect to the same transfer must be
determined based on factors with the same mortality basis, and all
assets includible in the gross estate and/or estate tax deductions
claimed must be valued based on factors with the same mortality basis.
(iv) If a decedent dies after April 30, 2019, and before June 1,
2023, the fair market value of annuities, interests for life or a term
of years, and remainder or reversionary interests based on one or more
measuring lives included in the gross estate is their present value
determined under Sec. 20.2031-7(d)(3).
(3) Publications and actuarial computations by the Internal Revenue
Service. The factor for determining the
[[Page 37446]]
present value of a remainder interest that is dependent on the
termination of the life of one individual may be computed by using the
formula in Sec. 20.2031-7(d)(2)(ii)(B) to derive a remainder factor
from the appropriate mortality table expressed to at least five decimal
places. For the convenience of taxpayers, actuarial factors have been
computed by the IRS and appear in Table S. The factor for determining
the present value of a remainder interest following a term certain may
be computed by using the formula in Sec. 20.2031-7(d)(2)(ii)(A)
expressed to at least six decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in Table B. Adjustment factors for term certain annuities payable at
the beginning of each interval may be computed by using the formula in
Sec. 20.2031-7(d)(2)(iv)(C) expressed to at least four decimal places.
For the convenience of taxpayers, actuarial factors have been computed
by the IRS and appear in Table J. Adjustment factors for annuities
payable at the end of each interval may be computed by using the
formula in Sec. 20.2031-7(d)(2)(iv)(B) expressed to at least four
decimal places. For the convenience of taxpayers, actuarial factors
have been computed by the IRS and appear in Table K. These tables are
referenced and explained by IRS Publication 1457, Actuarial Values
Version 3A (2009). Publication 1457 includes examples that illustrate
how to compute many special factors for more unusual situations. The
actuarial tables are available, at no charge, electronically via the
IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>
(or a corresponding URL as may be updated from time to time). Table S
also can be found in paragraph (g)(4) of this section, but only for
interest rates from 0.2 to 14 percent, inclusive. Tables B, J, and K
also can be found in Sec. 20.2031-7(d)(6), but only for interest rates
from 4.2 to 14 percent, inclusive. If a special factor is required in
the case of an actual decedent, the special factor may be calculated by
the executor using the actuarial formulas in Sec. 20.2031-7(d)(2) or
the executor may request a ruling to obtain the factor from the
Internal Revenue Service. The request for a ruling must be accompanied
by a recitation of the facts including a statement of the date of birth
for each measuring life, the date of the decedent's death, any other
applicable dates, and a copy of the will, trust, or other relevant
documents. A request for a ruling must comply with the instructions for
requesting a ruling published periodically in the Internal Revenue
Bulletin (see Sec. Sec. 601.201 and 601.601(d)(2)(ii)(b) of this
chapter) and must include payment of the required user fee.
(4) Actuarial tables. Except as provided in Sec. 20.7520-3(b)
(pertaining to certain limitations on the use of prescribed tables),
actuarial factors based on Table 2000CM must be used in the application
of the provisions of this section. The factor for determining the
present value of a remainder interest that is dependent on the
termination of the life of one individual may be computed by using the
formula in Sec. 20.2031-7(d)(2)(ii)(B) to derive a remainder factor
from the appropriate mortality table to at least five decimal places.
For the convenience of taxpayers, actuarial factors, when the section
7520 interest rate component is from 0.2 to 20 percent, inclusive, have
been computed by the IRS and appear in Table S (applicable on and after
May 1, 2009, and before June 1, 2023). These actuarial tables, as
referenced and explained by IRS Publication 1457, Actuarial Valuations
Version 3A, are available, at no charge, electronically via the IRS
website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. Table
S (notwithstanding the lack of the applicable termination date in its
heading), where the section 7520 interest rate component is from 0.2 to
14 percent, inclusive, and Table 2000CM are as follows:
* * * * *
(5) Applicability dates. Paragraphs (g)(1) through (4) of this
section apply on and after May 1, 2009, and before June 1, 2023.
0
Par. 17. Section 20.2032-1 is amended by revising paragraphs (f)(1) and
(h) to read as follows:
Sec. 20.2032-1 Alternate valuation.
* * * * *
(f) * * *
(1) Life estates, remainders, and similar interests--(i) In
general. The values of life estates, remainders, and similar interests
are to be obtained by applying the methods prescribed in Sec. 20.2031-
7, using the age of each person, the duration of whose life may affect
the value of the interest, as of the date of the decedent's death, and
the value of the property as of the alternate valuation date.
(ii) Sample factors from actuarial Table S. The present value of a
remainder interest dependent on the termination of one life is
determined by using the formula in Sec. 20.2031-7(d)(2)(ii)(B) to
derive a remainder factor from the appropriate mortality table to at
least five decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table S. Table S
can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from
time to time). For purposes of the example in paragraph (e)(5)(iii) of
this section, the following relevant factors from Table S is used:
Table 2 to Paragraph (f)(1)(ii)
Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
Age Annuity Life estate Remainder
----------------------------------------------------------------------------------------------------------------
Interest at 4.2 Percent
----------------------------------------------------------------------------------------------------------------
65..................................................... 12.2128 0.51294 0.48706
----------------------------------------------------------------------------------------------------------------
Interest at 4.6 Percent
----------------------------------------------------------------------------------------------------------------
65..................................................... 11.7691 0.54138 0.45862
----------------------------------------------------------------------------------------------------------------
(iii) Example. Assume that the decedent, or the decedent's estate,
was entitled to receive certain property worth $50,000 upon the death
of A, who was entitled to the income for life. At the time of the
decedent's death, A was 65 years and 5 months old, and the section 7520
rate was 4.6 percent. The value of the decedent's remainder interest at
the date of the decedent's death would be, as illustrated in Sec.
20.2031-7(d)(5)(i) (Example 1),
[[Page 37447]]
$22,931.00 ($50,000 x 0.45862). On the date that is 6 months after the
decedent's death, A was 65 years and 11 months old, and the section
7520 rate was 4.2 percent. If, because of economic conditions, the
property declined in value and was worth only $40,000 on the date that
was 6 months after the date of the decedent's death, and the decedent's
executor elected to use the alternate valuation date, the value of the
remainder interest would be $19,482.40 ($40,000 x 0.48706). When the
alternate valuation date is elected, the age of A, and other aspects of
valuation which change by reason of the mere passage of time, is
determined as of the date of the decedent's death, while the value of
the property and the relevant section 7520 interest rate is determined
as of the alternate valuation date. Thus, the computation uses A's age
of 65 years old at the date of the decedent's death, even though A
would be closest to 66 years old on the alternate valuation date.
* * * * *
(h) Applicability date. Paragraph (b) of this section is applicable
to decedents dying on or after January 4, 2005. However, pursuant to
section 7805(b)(7), taxpayers may elect to apply paragraph (b) of this
section retroactively if the period of limitations for filing a claim
for a credit or refund of Federal estate or generation-skipping
transfer tax under section 6511 has not expired. Paragraph (f)(1) of
this section applies on and after June 1, 2023.
Sec. 20.2032-1T [Removed]
0
Par. 18. Section 20.2032-1T is removed.
0
Par. 19. Section 20.2036-1 is amended by:
0
1. In paragraph (c)(2)(iv), designating Examples 1 through 8 as
paragraphs (c)(2)(iv)(A) through (H), respectively.
0
2. In newly designated paragraphs (c)(2)(iv)(A), (B), (C), (G), and
(H), further redesignating the paragraphs in the first column as
paragraphs in the second column:
------------------------------------------------------------------------
Old paragraphs New paragraphs
------------------------------------------------------------------------
(c)(2)(iv)(A)(i) and (ii).............. (c)(2)(iv)(A)(1) and (2)
(c)(2)(iv)(B)(i) and (ii).............. (c)(2)(iv)(B)(1) and (2)
(c)(2)(iv)(C)(i), (ii), and (iii)...... (c)(2)(iv)(C)(1), (2), and (3)
(c)(2)(iv)(G)(i), (ii), and (iii)...... (c)(2)(iv)(G)(1), (2), and (3)
(c)(2)(iv)(G)(3)(A), (B), (C), (D), (c)(2)(iv)(G)(3)(i), (ii),
(E), and (F). (iii), (iv), (v), and (vi)
(c)(2)(iv)(G)(iv), (v), and (vi)....... (c)(2)(iv)(G)(4), (5), and (6)
(c)(2)(iv)(H)(i), (ii), (iii), (iv), (c)(2)(iv)(H)(1), (2), (3),
(v), (vi), and (vii). (4), (5), (6), and (7)
------------------------------------------------------------------------
0
3. Revising newly designated paragraph (c)(2)(iv)(C).
The revision reads as follows:
Sec. 20.2036-1 Transfers with retained life estate.
* * * * *
(c) * * *
(2) * * *
(iv) * * *
(C) Example 3. (1) D created a CRUT within the meaning of section
664(d)(2). The trust instrument directs the trustee to hold, invest,
and reinvest the corpus of the trust and to pay to D for D's life, and
then to D's child (C) for C's life, in equal quarterly installments
payable at the end of each calendar quarter, an amount equal to 6
percent of the fair market value of the trust as valued on December 15
of the prior taxable year of the trust. At the termination of the
trust, the then-remaining corpus, together with any and all accrued
income, is to be distributed to N, a charitable organization described
in sections 170(c), 2055(a), and 2522(a). D dies six years later,
survived by C, who was then age 55. The value of the trust assets on
D's death was $300,000. D's executor does not elect to use the
alternate valuation date and D's executor does not choose to use the
section 7520 interest rate for either of the two months prior to D's
death.
(2) The amount of the corpus with respect to which D retained the
right to the income, and thus the amount includible in D's gross estate
under section 2036(a)(1), is that amount of corpus necessary to yield
the unitrust payments as interest on the corpus. In this case, such
amount of corpus is determined by dividing the trust's equivalent
income interest rate by the section 7520 rate (which was 5.4 percent at
the time of D's death). The equivalent income interest rate is
determined by dividing the trust's adjusted payout rate by the excess
of 1 over the adjusted payout rate. Based on Table F(5.4) in Sec.
1.664-4(e)(6)(iii) of this chapter, the appropriate adjusted payout
rate for the trust at D's death is 5.807 percent (6 percent x
0.967769). Thus, the equivalent income interest rate is 6.165 percent
(5.807 percent/(1--5.807 percent)). The ratio of the equivalent
interest rate to the assumed interest rate under section 7520 is 114.17
percent (6.165 percent/5.4 percent). Because this exceeds 100 percent,
D's retained payout interest exceeds a full income interest in the
trust, and D effectively retained the income from all the assets
transferred to the trust. Accordingly, because D retained for life an
interest at least equal to the right to all income from all the
property transferred by D to the CRUT, the entire value of the corpus
of the CRUT is includible in D's gross estate under section 2036(a)(1).
(The result would be the same if D had retained, instead, an interest
in the CRUT for a term of years and had died during the term.) Under
the facts presented, section 2039 does not apply to include any amount
in D's gross estate by reason of D's retained unitrust interest. See
Sec. 20.2039-1(e).
(3) If, instead, D had retained the right to a unitrust amount
having an adjusted payout for which the corresponding equivalent
interest rate would have been less than the 5.4 percent assumed
interest rate of section 7520, then a correspondingly reduced
proportion of the trust corpus would be includible in D's gross estate
under section 2036(a)(1). Alternatively, if the interest retained by D
was instead only one-half of the 6 percent unitrust interest, then the
amount included in D's estate would be the amount needed to produce a 3
percent unitrust interest. All of the results in this paragraph
(c)(2)(iv)(C)(3) (Example 3) would be the same if the trust had been a
grantor retained unitrust instead of a CRUT.
* * * * *
0
Par. 20. Section 20.2055-2 is amended by revising paragraphs
(e)(3)(iii) and (f)(4) and (6) to read as follows:
Sec. 20.2055-2 Transfers not exclusively for charitable purposes.
* * * * *
(e) * * *
(3) * * *
(iii)(A) The rule in paragraphs (e)(2)(vi)(a) and (e)(2)(vii)(a) of
this section that guaranteed annuity interests or unitrust interests,
respectively, may be payable for a specified term of years or for the
life or lives of only certain individuals generally is effective in the
[[Page 37448]]
case of transfers pursuant to wills and revocable trusts when the
decedent dies on or after April 4, 2000. Two exceptions from the
application of the rule in paragraphs (e)(2)(vi)(a) and (e)(2)(vii)(a)
of this section are provided for transfers pursuant to a will or
revocable trust executed on or before April 4, 2000. One exception is
for a decedent who dies on or before July 5, 2001, without having
republished the will (or amended the trust) by codicil or otherwise.
The other exception is for a decedent who was, on April 4, 2000, under
a mental disability that prevented a change in the disposition of the
decedent's property, and who either does not regain competence to
dispose of such property before the date of death, or dies prior to the
later of 90 days after the date on which the decedent first regains
competence, or July 5, 2001, without having republished the will (or
amended the trust) by codicil or otherwise. If a guaranteed annuity
interest or unitrust interest created pursuant to a will or revocable
trust when the decedent dies on or after April 4, 2000, uses an
individual other than one permitted in paragraphs (e)(2)(vi)(a) and
(e)(2)(vii)(a) of this section, and the interest does not qualify for
this transitional relief, the interest may be reformed into a lead
interest payable for a specified term of years. The term of years is
determined by taking the factor for valuing the annuity or unitrust
interest for the named individual measuring life and identifying the
term of years (rounded up to the next whole year) that corresponds to
the equivalent term of years factor for an annuity or unitrust
interest. A judicial reformation must be commenced prior to the later
of July 5, 2001, or the date prescribed by section 2055(e)(3)(C)(iii).
Any judicial reformation must be completed within a reasonable time
after it is commenced. A non-judicial reformation is permitted if
effective under state law, provided it is completed by the date on
which a judicial reformation must be commenced. In the alternative, if
a court, in a proceeding that is commenced on or before July 5, 2001,
declares any transfer made pursuant to a will or revocable trust where
the decedent dies on or after April 4, 2000, and on or before March 6,
2001, null and void ab initio, the Internal Revenue Service will treat
such transfers in a manner similar to that described in section
2055(e)(3)(J).
(B) The appropriate annuity factor for an annuity payable for a
term of years is computed by subtracting from 1.000000 the factor for
an ordinary remainder interest following the same term certain that is
determined under the formula in Sec. 20.2031-7(d)(2)(ii)(A) and then
dividing the result by the applicable section 7520 interest rate,
expressing the annuity factor to at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by the
IRS and appear in the ``Annuity'' column of Table B. The appropriate
annuity factor for an annuity payable for the life of one individual is
computed by subtracting from 1.00000 the factor for an ordinary
remainder interest following the life of the same individual that is
determined under the formula in Sec. 20.2031-7(d)(2)(ii)(B) and then
dividing the result by the applicable section 7520 interest rate
expressed to at least four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in the ``Annuity'' column of Table S. Tables B and S can be found on
the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from time to time).
For purposes of the example in paragraph (e)(3)(iii)(C) of this
section, the following relevant factors from Tables B and S are used:
Table 1 to Paragraph (e)(3)(iii)(B)
----------------------------------------------------------------------------------------------------------------
Years Annuity Income interest Remainder
----------------------------------------------------------------------------------------------------------------
Factors From Table B
----------------------------------------------------------------------------------------------------------------
Annuity, Income, and Remainder Interests for a Term Certain
----------------------------------------------------------------------------------------------------------------
Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
37..................................................... 21.5068 0.688218 0.311782
38..................................................... 21.8089 0.697886 0.302114
----------------------------------------------------------------------------------------------------------------
Factors from Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
Age Annuity Life estate Remainder
----------------------------------------------------------------------------------------------------------------
40..................................................... 21.7045 0.69454 0.30546
----------------------------------------------------------------------------------------------------------------
(C) The following example illustrates how to determine the term of
years for a reformed interest as discussed in paragraph (e)(3)(iii)(A)
of this section. Assume an annuity interest payable for the life of an
individual age 40 at the time of the transfer on or after June 1, 2023,
with an interest rate of 3.2 percent under section 7520. Under Table S,
the annuity factor at 3.2 percent for the life of an individual age 40
is 21.7045. Based on Table B at 3.2 percent, the factor 21.7045
corresponds to a term of years between 37 and 38 years. Accordingly,
the annuity interest must be reformed into an interest payable for a
term of 38 years.
* * * * *
(f) * * *
(4) Other decedents. The present value of an interest not described
in paragraph (f)(2) of this section is to be determined under Sec.
20.2031-7(d) in the case of decedents where the valuation date of the
gross estate is on or after June 1, 2023, or under Sec. 20.2031-7A in
the case of decedents where the valuation date of the gross estate is
before June 1, 2023.
* * * * *
(6) Applicability date. Paragraphs (e)(3)(iii) and (f)(4) of this
section apply on and after June 1, 2023.
0
Par. 21. Section 20.2056A-4 is amended by:
0
1. Revising paragraph (c)(4)(ii)(B).
0
2. In paragraph (d), designating Examples 1 through 5 as paragraphs
(d)(1) through (5), respectively.
[[Page 37449]]
0
3. Revising the headings in newly designated paragraphs (d)(1) through
(3).
0
4. Revising newly designated paragraph (d)(4) and paragraph (e).
The revisions read as follows:
Sec. 20.2056A-4 Procedures for conforming marital trusts and nontrust
marital transfers to the requirements of a qualified domestic trust.
* * * * *
(c) * * *
(4) * * *
(ii) * * *
(B) The total present value of the nonassignable annuity or other
payment is the present value of the annuity or other payment as of the
date of the decedent's death, determined in accordance with the
interest rates and mortality table prescribed by section 7520. The
expected annuity term is the number of years that would be required for
the scheduled payments to exhaust a hypothetical fund equal to the
present value of the scheduled payments. This is determined by first
dividing the total present value of the payments by the annual payment.
From the quotient so obtained, the expected annuity term is derived by
identifying the term of years that corresponds to the lowest annuity
factor that is equal to or greater than the quotient. The annuity
factor is computed by subtracting from 1.000000 the factor for an
ordinary remainder interest following the same term certain that is
determined under the formula in Sec. 20.2031-7(d)(2)(ii)(A) and then
dividing the result by the applicable section 7520 interest rate
expressed to at least four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in the ``Annuity'' column of Table B which can be found on the IRS
website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a
corresponding URL as may be updated from time to time). If the quotient
obtained falls between two terms, the longer term is used.
* * * * *
(d) * * *
(1) Example 1. Transfer and assignment of probate and nonprobate
property to QDOT. * * *
(2) Example 2. Formula assignment. * * *
(3) Example 3. Jointly owned property. * * *
(4) Example 4. Computation of corpus portion of annuity payment.
(i) The appropriate annuity factor for an annuity payable for the life
of one individual is computed by subtracting from 1.00000 the factor
for an ordinary remainder interest following the life of the same
individual that is determined under the formula in Sec. 20.2031-
7(d)(2)(ii)(B) and then dividing the result by the applicable section
7520 interest rate expressed to at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by the
IRS and appear in the ``Annuity'' column of Table S. The appropriate
annuity factor for an annuity payable for a term of years is computed
by subtracting from 1.000000 the factor for an ordinary remainder
interest following the same term certain that is determined under the
formula in Sec. 20.2031-7(d)(2)(ii)(A) and then dividing the result by
the applicable section 7520 interest rate expressed to at least four
decimal places. For the convenience of taxpayers, actuarial factors
have been computed by the IRS and appear in the ``Annuity'' column of
Table B. The applicable adjustment factor for annuities that are
payable at the end of semiannual, quarterly, monthly, or weekly periods
is computed by use of the formula in Sec. 20.2031-7(d)(2)(iv)(B) to at
least four decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table K. These
actuarial tables can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. For purposes of the
example in this paragraph (d)(4), the relevant factors from Tables S,
B, and K are:
Table 2 to Paragraph (d)(4)(i)
Factors From Table S--Based on Table 2010CM
----------------------------------------------------------------------------------------------------------------
Age Annuity Life Estate Remainder
----------------------------------------------------------------------------------------------------------------
Interest at 3.6 Percent
----------------------------------------------------------------------------------------------------------------
60..................................................... 14.6908 0.52887 0.47113
----------------------------------------------------------------------------------------------------------------
Factors From Table B
----------------------------------------------------------------------------------------------------------------
Annuity, Income, and Remainder Interests for a Term Certain
----------------------------------------------------------------------------------------------------------------
Interest at 3.6 Percent
----------------------------------------------------------------------------------------------------------------
Years Annuity Income Interest Remainder
----------------------------------------------------------------------------------------------------------------
21..................................................... 14.5605 0.524177 0.475823
22..................................................... 15.0198 0.540712 0.459288
----------------------------------------------------------------------------------------------------------------
Factors From Table K
Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
Interest Rate Semi-Annually Quarterly Monthly
----------------------------------------------------------------------------------------------------------------
3.6%................................................... 1.0089 1.0134 1.0164
----------------------------------------------------------------------------------------------------------------
(ii) At the time of D's death, on or after June 1, 2023, D is a
participant in an employees' pension plan described in section 401(a).
On D's death, D's spouse S, a resident of the United States, becomes
entitled to receive a survivor's annuity of $72,000 per year, payable
monthly, for life. At the time of D's death, S is age 60. Assume that
under section 7520, the appropriate discount rate to be used for
valuing annuities in the case of this decedent is 3.6 percent. Under
Table S, the annuity factor at 3.6 percent for a person age 60 is
14.6908. The adjustment factor at 3.6 percent in Table K for monthly
payments is 1.0164. Accordingly, the right to receive $72,000 per year
on a
[[Page 37450]]
monthly basis is equal to the right to receive $73,180.80 ($72,000 x
1.0164) on an annual basis.
(iii) The corpus portion of each annuity payment received by S is
determined as follows:
(A) The first step is to determine the present value of S's annuity
payments under the plan ($73,180.80 x 14.6908 = $1,075,084.50).
(B) The second step is to determine the number of years that would
be required for S's annuity to exhaust a hypothetical fund of
$1,075,084.50. The annuity factor of 14.6908 falls between the Table B
term certain annuity factors for 21 and 22 years at an interest rate of
3.6 percent. Accordingly, the expected annuity term is 22 years.
(C) The third step is to determine the corpus amount of the annual
payment by dividing the expected term of 22 years into the present
value of the hypothetical fund ($1,075,084.50/22 = $48,867.48).
(D) In the fourth step, the corpus portion of each annuity payment
is determined by dividing the corpus amount of each annual payment by
the annual annuity payment (adjusted for payments more frequently than
annually as in paragraph (d)(4)(i) of this section) ($48,867.48/
73,180.80 = 0.67).
(iv) Accordingly, 67 percent of each payment to S is deemed to be a
distribution of corpus. A marital deduction is allowed for
$1,075,084.50, the present value of the annuity as of D's date of
death, if either: S agrees to roll over the corpus portion of each
payment to a QDOT and the executor files the Information Statement
described in paragraph (c)(5) of this section and the Roll Over
Agreement described in paragraph (c)(7) of this section; or S agrees to
pay the tax due on the corpus portion of each payment and the executor
files the Information Statement described in paragraph (c)(5) of this
section and the Payment Agreement described in paragraph (c)(6) of this
section.
* * * * *
(e) Applicability date. Paragraphs (c)(4)(ii)(B) and (d)(4) of this
section are applicable with respect to decedents dying on or after June
1, 2023.
0
Par. 22. Section 20.7520-1 is amended by revising paragraphs (a)(1) and
(2), (b)(2), (c), and (d) and adding paragraphs (e) and (f) to read as
follows:
Sec. 20.7520-1 Valuation of annuities, interests for life or a term
of years, and remainder or reversionary interests.
(a) * * *(1) Except as otherwise provided in this section and in
Sec. 20.7520-3 (relating to exceptions to the use of prescribed tables
under certain circumstances), in the case of estates of decedents with
valuation dates after April 30, 1989, the fair market value of
annuities, interests for life or a term of years (including unitrust
interests), and remainder or reversionary interests is their present
value determined under this section. See Sec. 20.2031-7(d) (and, for
periods prior to June 1, 2023, Sec. 20.2031-7A) for the computation of
the value of annuities, interests for life or a term of years, and
remainder or reversionary interests, other than interests described in
paragraphs (a)(2) and (3) of this section.
(2) For a transfer to a pooled income fund, see Sec. 1.642(c)-6(e)
of this chapter (or, for periods prior to June 1, 2023, Sec. 1.642(c)-
6A of this chapter) with respect to the valuation of the remainder
interest.
* * * * *
(b) * * *
(2) Mortality component. The mortality component reflects the
mortality data in the most recently available decennial mortality
report based on the United States census. As the appropriate new
decennial mortality report becomes available after each decennial
census, the Treasury Department and the IRS will revise the mortality
component described in this section and will update the regulations to
adopt the revised mortality component tables. For decedents' estates
with valuation dates on or after June 1, 2023, the mortality component
table (Table 2010CM) is in Sec. 20.2031-7(d)(7)(ii) and is referenced
by IRS Publication 1457, Actuarial Valuations Version 4A, and can be
found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from time to
time). See Sec. 20.2031-7A for mortality component tables applicable
to decedents' estates with valuation dates before June 1, 2023.
(c) Actuarial factors. The present value on the valuation date of
an annuity, an interest for life or a term of years, and a remainder or
reversionary interest is computed by using the section 7520 interest
rate component that is described in paragraph (b)(1) of this section
and the mortality component that is described in paragraph (b)(2) of
this section. Actuarial factors for determining these present values
may be calculated by using the formulas in Sec. 20.2031-7(d)(2). For
the convenience of taxpayers, the IRS has computed actuarial factors
and displayed them on tables that are referenced and explained by
publications of the Internal Revenue Service. If a special factor is
required in order to value an interest, the special factor may be
calculated by the taxpayer using the actuarial formulas in Sec.
20.2031-7(d)(2) or the taxpayer may request a ruling to obtain the
factor from the Internal Revenue Service. The request for a ruling must
be accompanied by a recitation of the facts, including the date of
birth for each measuring life and copies of relevant instruments. A
request for a ruling must comply with the instructions for requesting a
ruling published periodically in the Internal Revenue Bulletin (see
Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or successor revenue procedures,
and Sec. Sec. 601.201 and 601.601(d)(2)(ii)(b) of this chapter) and
must include payment of the required user fee.
(d) IRS publications referencing and explaining actuarial tables
with rates from 0.2 to 20 percent, inclusive, at intervals of two-
tenths of one percent, for valuation dates on and after June 1, 2023.
The publications listed in paragraphs (d)(1) through (3) of this
section will be available within a reasonable time after June 1, 2023.
The underlying actuarial tables referenced and explained by these
publications currently are available, at no charge, electronically via
the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>:
(1) IRS Publication 1457, Actuarial Valuations Version 4A (2023).
This publication references tables of valuation factors and provides
examples that show how to compute other valuation factors, for
determining the present value of annuities, interests for life or a
term of years, and remainder or reversionary interests, measured by one
or two lives. These factors also may be used in the valuation of
interests in a charitable remainder annuity trust as defined in Sec.
1.664-2 of this chapter and a pooled income fund as defined in Sec.
1.642(c)-5 of this chapter. This publication references and explains
Tables S (single life remainder factors), R(2) (two-life last-to-die
remainder factors), B (actuarial factors used in determining the
present value of an interest for a term of years), H (commutation
factors), J (term certain annuity beginning-of-interval adjustment
factors), and K (annuity end-of-interval adjustment factors). See
earlier versions of the publication, Sec. 1.642(c)-6A of this chapter,
or Sec. 20.2031-7A for Table S applicable to valuation dates before
June 1, 2023. See earlier versions of the publication for Table R(2)
applicable to valuation dates before June 1, 2023. Earlier versions of
the publication also contain earlier
[[Page 37451]]
versions of Tables H and R(2). Tables B, J, and K also can be found in
Sec. 20.2031-7(d)(6), but only for interest rates from 4.2 to 14
percent, inclusive.
(2) IRS Publication 1458, Actuarial Valuations Version 4B (2023).
This publication references and explains term certain tables and tables
of one and two life valuation factors for determining the present value
of remainder interests in a charitable remainder unitrust as defined in
Sec. 1.664-3 of this chapter. This publication references Tables U(1)
(unitrust single life remainder factors), U(2) (unitrust two-life last-
to-die remainder factors), D (actuarial factors used in determining the
present value of a remainder interest postponed for a term of years), F
(adjustment payout rate factors), and Z (unitrust commutation factors).
See earlier versions of the publication or Sec. 1.664-4A of this
chapter for Table U(1) applicable to valuation dates before June 1,
2023. Earlier versions of the publication also contain earlier versions
of Tables U(2) and Z. Table D also can be found in Sec. 1.664-
4(e)(6)(iii) of this chapter, but only for adjusted payout rates from
4.2 to 14 percent, inclusive. Table F also can be found in Sec. 1.664-
4(e)(6)(iii) of this chapter, but only for interest rates from 4.2 to
14 percent, inclusive.
(3) IRS Publication 1459, Actuarial Valuations Version 4C (2023).
This publication references and explains Table C, which provides
factors for making adjustments to the standard remainder factor for
valuing gifts of depreciable property. See Sec. 1.170A-12 of this
chapter.
(4) The publications identified in paragraphs (d)(1) through (3) of
this section also reference Table 2010CM, the mortality component
table.
(e) Use of approximation methods for obtaining factors when the
required valuation rate falls between two listed rates. For certain
cases, this part and IRS publications provide approximation methods
(for example, interpolation) for obtaining factors when the required
valuation rate falls between two listed rates (such as in the case of a
pooled income fund's rate of return or a unitrust's adjusted payout
rate). In general, exact methods of obtaining the applicable factors
are allowed, such as through software using the actual rate of return
and the proper actuarial formulas used for the published factors at the
listed rates, provided such direct methods are applied consistently in
valuing all interests in the same property. The actuarial formula in
Sec. 20.2031-7(d)(2)(ii)(B) is used to determine the remainder factor
for pooled income funds and the actuarial formula in Sec. 1.664-
4(e)(5)(i) of this chapter is used to determine the remainder factor
for unitrusts. When using either an exact method or the approximation
method, the resulting actuarial factor must be expressed with at least
the same number of decimal places as that used in this part. The
approximation method provided in this part must be used if more exact
methods are not available.
(f) Applicability date. This section applies on and after June 1,
2023.
PART 25--GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954
0
Par. 23. The authority citation for part 25 continues to read in part
as follows:
Authority: 26 U.S.C. 7805.
* * * * *
0
Par. 24. Section 25.2512-0 is revised to read as follows:
Sec. 25.2512-0 Table of contents.
This section lists the section headings that appear in the
regulations in this part under section 2512.
25.2512-1 Valuation of property; in general.
25.2512-2 Stocks and bonds.
25.2512-3 Valuation of interests in businesses.
25.2512-4 Valuation of notes.
25.2512-5 Valuation of annuities, interests for life or a term of
years, and remainder or reversionary interests.
25.2512-6 Valuation of certain life insurance and annuity contracts;
valuation of shares in an open-end investment company.
25.2512-7 Effect of excise tax.
25.2512-8 Transfers for insufficient consideration.
Actuarial Tables Applicable Before June 1, 2023
25.2512-5A Valuation of annuities, interests for life or a term of
years, and remainder or reversionary interests transferred before
June 1, 2023.
0
Par. 25. Section 25.2512-5 is amended by revising paragraphs (c), (d),
and (e) to read as follows:
Sec. 25.2512-5 Valuation of annuities, interests for life or a term
of years, and remainder or reversionary interests.
* * * * *
(c) Actuarial valuations. The present value of annuities, interests
for life or a term of years, and remainder or reversionary interests
transferred by gift on or after June 1, 2023, is determined under
paragraph (d) of this section. The present value of annuities,
interests for life or a term of years, and remainder or reversionary
interests transferred by gift before June 1, 2023, is determined
(subject to paragraph (d)(3) of this section) under the following
sections:
Table 1 to Paragraph (c)
------------------------------------------------------------------------
Transfers
------------------------------------------------------ Applicable
After Before regulations
------------------------------------------------------------------------
01-01-52 Sec. 25.2512-
5A(a)
12-31-51................................ 01-01-71 25.2512-5A(b)
12-31-70................................ 12-01-83 25.2512-5A(c)
11-30-83................................ 05-01-89 25.2512-5A(d)
04-30-89................................ 05-01-99 25.2512-5A(e)
04-30-99................................ 05-01-09 25.2512-5A(f)
04-30-09................................ 06-01-23 25.2512-5A(g)
------------------------------------------------------------------------
(d) Actuarial valuations on or after June 1, 2023--(1) In general.
Except as otherwise provided in paragraph (b) of this section and Sec.
25.7520-3(b) (relating to exceptions to the use of prescribed tables
under certain circumstances), the fair market value of annuities,
interests for life or a term of years, and remainder or reversionary
interests transferred on or after June 1, 2023, is the present value of
such interests determined under paragraph (d)(2) of this section and by
using standard or special section 7520 actuarial factors. Many of these
factors are derived by using the actuarial formulas provided in Sec.
20.2031-7(d)(2) of this chapter, appropriate section 7520 interest
rate, and, if applicable, the mortality component for the valuation
date of the interest that is being valued. For purposes of the
computations described in this section, the age of an individual is the
age of that individual at the individual's nearest birthday. For the
convenience of taxpayers, paragraph (d)(2) of this section provides for
published tables of factors for specific types of interests. These
published tables provide factors for rates from 0.2 to 20 percent,
inclusive, at intervals of two-tenths of one percent. In general,
appropriate factors instead may be computed directly from the actuarial
formulas provided in Sec. 20.2031-7(d)(2) of this chapter. In some
cases, specific examples in this part and IRS publications illustrate
approximation methods (for example, interpolation) for obtaining
factors when the required valuation rate falls between two listed rates
(such as in the case of a pooled income fund's rate of return or a
unitrust's adjusted payout rate). Exact methods of obtaining the
applicable actuarial factors are allowed, such as through software
using the actual rate of return and the actuarial formulas provided in
Sec. 20.2031-7(d)(2) of this chapter. When using either an exact
method or the approximation method, the resulting actuarial factor must
be expressed with at least the same number of decimal places as that
used in this part. The approximation method provided in this part must
be used if more exact methods are not available.
[[Page 37452]]
See Sec. Sec. 25.7520-1 through 25.7520-4. The selected method must be
applied consistently in valuing all interests in the same property. The
fair market value of a qualified annuity interest described in section
2702(b)(1) and a qualified unitrust interest described in section
2702(b)(2) is the present value of such interests determined under
Sec. 25.7520-1(c).
(2) Specific interests. When the donor transfers property in trust
or otherwise and retains an interest therein, generally, the value of
the gift is the value of the property transferred less the value of the
donor's retained interest. However, if the donor transfers property
after October 8, 1990, to or for the benefit of a member of the donor's
family, the value of the gift is the value of the property transferred
less the value of the donor's retained interest as determined under
section 2702. If the donor assigns or relinquishes an annuity, an
interest for life or a term of years, a remainder or reversionary
interest that the donor holds by virtue of a transfer previously made
by the donor or another, the value of the gift is the value of the
interest transferred. However, see section 2519 for a special rule in
the case of the assignment of an income interest by a person who
received the interest from a spouse.
(i) Pooled income funds and charitable remainder trusts. The fair
market value of a remainder interest in a pooled income fund, as
defined in Sec. 1.642(c)-5 of this chapter, is its value determined
under Sec. 1.642(c)-6(e) of this chapter (see Sec. 1.642(c)-6A of
this chapter for certain prior periods). The fair market value of a
remainder interest in a charitable remainder annuity trust, as
described in Sec. 1.664-2(a) of this chapter, is its present value
determined under Sec. 1.664-2(c) of this chapter. The fair market
value of a remainder interest in a charitable remainder unitrust, as
defined in Sec. 1.664-3 of this chapter, is its present value
determined under Sec. 1.664-4(e) of this chapter. The fair market
value of a life interest or term for years interest in a charitable
remainder unitrust is the fair market value of the property as of the
date of transfer less the fair market value of the remainder interest,
determined under Sec. 1.664-4(e)(4) and (5) of this chapter.
(ii) Ordinary remainder and reversionary interests--(A) Remainder
and reversionary interests after a term of years. If the interest to be
valued is a remainder or reversionary interest to take effect after a
definite number of years, the present value of the interest is computed
by multiplying the value of the property by the appropriate remainder
factor (that corresponds to the applicable section 7520 interest rate
and the stated term). The factor for an ordinary remainder interest
following a term certain may be found using the formula in Sec.
20.2031-7(d)(2)(ii)(A) of this chapter and computing the result to at
least six decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table B. Table B
can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from
time to time). Table B is referenced and explained in IRS Publication
1457, Actuarial Valuations Version 4A, which will be available within a
reasonable time after June 1, 2023. The remainder factors from Table B
also can be found in paragraph (d)(6) of this section, but only for
interest rates from 4.2 to 14 percent, inclusive. For information about
obtaining special factors for other situations, see paragraph (d)(4) of
this section.
(B) Remainder and reversionary interests dependent on the life of
one individual. If the interest to be valued is a remainder or
reversionary interest to take effect after the death of one individual,
the present value of the interest is computed by multiplying the value
of the property by the appropriate remainder factor (that corresponds
to the applicable section 7520 interest rate and the age of the
measuring life of the life interest that precedes the remainder
interest). The factor for an ordinary remainder interest following the
death of one individual may be found by using the formula in Sec.
20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor
from the appropriate mortality table to at least five decimal places.
For the convenience of taxpayers, actuarial factors have been computed
by the IRS and appear in Table S. Table S currently is available, at no
charge, electronically via the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be
updated from time to time). Table S is referenced and explained by IRS
Publication 1457, Actuarial Valuations Version 4A, which will be
available within a reasonable time after June 1, 2023. For information
about obtaining special factors for other situations, see paragraph
(d)(4) of this section.
(iii) Ordinary interests for a term of years and life interests. If
the interest to be valued is the right of a person to receive the
income of certain property, or to the use of certain property, for a
term of years or for the life of one individual, the present value of
the interest is computed by multiplying the value of the property by
the appropriate actuarial factor for an interest for a term of years or
for a life interest (that corresponds to the applicable section 7520
interest rate and the durational period). The actuarial factor for an
ordinary income interest for a term certain may be found by subtracting
from 1.000000 the factor for an ordinary remainder interest following
the same term certain that is determined under the formula in Sec.
20.2031-7(d)(2)(ii)(A) of this chapter. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in the ``Income Interest'' column of Table B which can be found on the
IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>
(or a corresponding URL as may be updated from time to time). The
actuarial factor for an ordinary income interest for the life of one
individual may be found by subtracting from 1.00000 the factor for an
ordinary remainder interest following the life of the same individual
that is determined in Sec. 20.2031-7(d)(2)(ii)(B) of this chapter. For
the convenience of taxpayers, actuarial factors have been computed by
the IRS and appear in the ``Life Estate'' column of Table S. Table S
(applicable when the valuation date is on or after June 1, 2023) can be
found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. Tables B and S are referenced and explained by IRS
Publication 1457, Actuarial Valuations Version 4A. See Sec. 20.2031-7A
of this chapter or earlier versions of Publication 1457 for valuation
of interests before June 1, 2023. For information about obtaining
special factors for other situations, see paragraph (d)(4) of this
section.
(iv) Annuities. (A) If the interest to be valued is the right of a
person to receive an annuity that is payable at the end of each year
for a term of years or for the life of one individual, the present
value of the interest is computed by multiplying the aggregate amount
payable annually by the appropriate annuity factor (that corresponds to
the applicable section 7520 interest rate and annuity period). The
appropriate annuity factor for an annuity payable for a term of years
is computed by subtracting from 1.000000 the factor for an ordinary
remainder interest following the same term certain that is determined
under the formula in Sec. 20.2031-7(d)(2)(ii)(A) of this chapter and
then dividing the result by the applicable section 7520 interest rate
expressed to at least four decimal places. For the convenience of
taxpayers, actuarial factors have been computed by the IRS and appear
in the ``Annuity'' column of Table B which
[[Page 37453]]
can be found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a> (or a corresponding URL as may be updated from
time to time). The appropriate annuity factor for an annuity payable
for the life of one individual is computed by subtracting from 1.00000
the factor for an ordinary remainder interest following the life of the
same individual that is determined in Sec. 20.2031-7(d)(2)(ii)(B) of
this chapter and then dividing the result by the applicable section
7520 interest rate expressed to at least four decimal places. For the
convenience of taxpayers, actuarial factors have been computed by the
IRS and appear in the ``Annuity'' column of Table S. Table S
(applicable when the valuation date is on or after June 1, 2023) can be
found on the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. Tables B and S are referenced and explained in IRS
Publication 1457, Actuarial Valuations Version 4A. See Sec. 20.2031-7A
of this chapter or earlier versions of Publication 1457 for valuation
of interests before June 1, 2023. For information about obtaining
special factors for other situations, see paragraph (d)(4) of this
section.
(B) If the annuity is payable at the end of semiannual, quarterly,
monthly, or weekly periods, the product obtained by multiplying the
annuity factor by the aggregate amount payable annually then is
multiplied by the applicable adjustment factor at the appropriate
interest rate component for payments made at the end of the specified
period. The applicable adjustment factor may be found using the formula
in Sec. 20.2031-7(d)(2)(iv)(B) of this chapter expressed to at least
four decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table K. Table K,
which is referenced and explained by Publication 1457, can be found on
the IRS website at <a href="https://www.irs.gov/retirement-plans/actuarial-tables">https://www.irs.gov/retirement-plans/actuarial-tables</a>. The provisions of this paragraph (d)(2)(iv)(B) are illustrated
by the example in paragraph (d)(2)(iv)(B)(2) of this section.
(1) Sample factors from actuarial Tables S and K. For purposes of
the example in paragraph (d)(2)(iv)(B)(2) of this section, the relevant
factors from Tables S and K are:
Table 2 to Paragraph (d)(2)(iv)(B)(1)
----------------------------------------------------------------------------------------------------------------
Age Annuity Life estate Remainder
----------------------------------------------------------------------------------------------------------------
Factors From Table S--Based on Table 2010CM
Interest at 3.2 Percent
----------------------------------------------------------------------------------------------------------------
68.................................................. 12.2552 0.39217 0.60783
----------------------------------------------------------------------------------------------------------------
Factors From Table K
Adjustment Factors for Annuities Payable at the End of Each Interval
----------------------------------------------------------------------------------------------------------------
Interest rate Semi-annually Quarterly Monthly
----------------------------------------------------------------------------------------------------------------
3.2%................................................ 1.0079 1.0119 1.0146
----------------------------------------------------------------------------------------------------------------
(2) Example. On July 1 of a year after 2021, the donor agrees to
pay the annuitant the sum of $10,000 per year, payable in equal
semiannual installments at the end of each period. The semiannual
installments are to be made on each December 31st and June 30th. The
annuity is payable until the annuitant's death. On the date of the
agreement, the annuitant is 68 years and 5 months old. The donee
annuitant's age is treated as 68 for purposes of computing the present
value of the annuity. The section 7520 rate on the date of the
agreement is 3.2 percent. Under Table S, the factor at 3.2 percent for
determining the present value of an annuity payable until the death of
a person aged 68 is 12.2552. The adjustment factor from Table K in the
column for payments made at the end of each semiannual period at the
rate of 3.2 percent is 1.0079. The aggregate annual amount of the
annuity, $10,000, is multiplied by the factor 12.2552 and the product
is multiplied by 1.0079. The present value of the donee's annuity is,
therefore, $123,520.16 ($10,000 x 12.2552 x 1.0079).
(C) If an annuity is payable at the beginning of annual,
semiannual, quarterly, monthly, or weekly periods for a term of years,
the value of the annuity is computed by multiplying the aggregate
amount payable annually by the annuity factor described in paragraph
(d)(2)(iv)(A) of this section; and the product so obtained then is
multiplied by the applicable adjustment factor at the appropriate
interest rate component for payments made at the beginning of specified
periods. The applicable adjustment factor may be found using the
formula in Sec. 20.2031-7(d)(2)(iv)(C) of this chapter expressed to at
least four decimal places. For the convenience of taxpayers, actuarial
factors have been computed by the IRS and appear in Table J. Table J,
which is referenced and explain
[…truncated; see source link]Indexed from Federal Register on June 7, 2023.
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