§ 20.7520-1 - Valuation of annuities, unitrust interests, interests for life or terms of years, and remainder or reversionary interests.

§ 20.7520-1 Valuation of annuities, unitrust interests, interests for life or terms of years, and remainder or reversionary interests.

(a) General actuarial valuations.

(1) Except as otherwise provided in this section and in § 20.7520–3 (relating to exceptions to the use of prescribed tables under certain circumstances), in the case of estates of decedents with valuation dates after April 30, 1989, the fair market value of annuities, interests for life or for a term of years (including unitrust interests), remainders, and reversions and remainder or reversionary interests is their present value determined under this section. See § 20.2031–7(d) (and, for periods prior to May June 1, 20092023, § 20.2031–7A) for the computation of the value of annuities, unitrust interests , life estates, terms for for life or a term of years, remainders, and reversionsand remainder or reversionary interests, other than interests described in paragraphs (a)(2) and (a)(3) of this section.

(2) In the case of For a transfer to a pooled income fund, see § 1.642(c)–6-6(e) of this chapter (or, for periods prior to May June 1, 20092023, § 1.642(c)–6A of this chapter) with respect to the valuation of the remainder interest.

(3) In the case of a transfer to a charitable remainder annuity trust with a valuation date after April 30, 1989, see § 1.664–2 of this chapter with respect to the valuation of the remainder interest. See § 1.664–4 of this chapter with respect to the valuation of the remainder interest in property transferred to a charitable remainder unitrust.

(b) Components of valuation —

(1) Interest rate component —

(i) Section 7520 Interest rate. The section 7520 interest rate is the rate of return, rounded to the nearest two-tenths of one percent, that is equal to 120 percent of the applicable Federal mid-term rate, compounded annually, for purposes of section 1274(d)(1), for the month in which the valuation date falls. In rounding the rate to the nearest two-tenths of a percent, any rate that is midway between one two-tenths of a percent and another is rounded up to the higher of those two rates. For example, if 120 percent of the applicable Federal mid-term rate is 10.30, the section 7520 interest rate component is 10.4. The section 7520 interest rate is published monthly by the Internal Revenue Service in the Internal Revenue Bulletin (See § 601.601(d)(2)(ii)(b) of this chapter).

(ii) Valuation date. Generally, the valuation date is the date on which the transfer takes place. For estate tax purposes, the valuation date is the date of the decedent's death, unless the executor elects the alternate valuation date in accordance with section 2032, in which event, and under the limitations prescribed in section 2032 and the regulations thereunder, the valuation date is the alternate valuation date. For special rules in the case of charitable transfers, see § 20.7520–2.

(2) Mortality component. The mortality component reflects the mortality data in the most recently available from decennial mortality report based on the United States census. As the appropriate new decennial mortality data report becomes available after each decennial census, the Treasury Department and the IRS will revise the mortality component described in this section and will be revised and the update the regulations to adopt the revised mortality component tables will be published in the regulations at that time. For decedentdecedents' s estates with valuation dates on or after May June 1, 20092023, the mortality component table (Table 2000CM2010CM) is contained in § 20.2031–7(d)(7)(ii) and is referenced by IRS Publication 1457, Actuarial Valuations Version 4A, and can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). See § 20.2031–7A for mortality component tables applicable to decedentdecedents' s estates with valuation dates before May June 1, 20092023.

(c) TablesActuarial factors. The present value on the valuation date of an annuity, life estate, an interest for life or a term of years, and a remainder , or reversion 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 are included in tables in these regulations and in publications by may be calculated by using the formulas in § 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 Internal Revenue Service will furnish the factor upon a request for a rulingspecial factor may be calculated by the taxpayer using the actuarial formulas in § 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. 94–12023–1, 1994–1 2023–1 I.R.B. 10, and the first Rev. Proc. published each year1, or successor revenue procedures, and §§ 601.201 and 601.601(d)(2)(ii)(b) of this chapter) and must include payment of the required user fee.

(

1)Regulation sections containing

d)IRS publications referencing and explaining actuarial tables with

interest

rates

between

from 0.2

and 14 percent

to 20 percent, inclusive, at intervals of two-tenths of one percent, for valuation dates on

or

and after

May

June 1,

2009. Section 1.642(c)–6(e)(6) of this chapter contains Table S used for determining the present value of a single life remainder interest in a pooled income fund as defined in § 1.642(c)–5. See § 1.642(c)–6A for single life remainder factors applicable to valuation dates before May 1, 2009. Section 1.664–4(e)(6) contains Table F (payout factors) and Table D (actuarial factors used in determining the present value of a remainder interest postponed for a term of years). Section 1.664–4(e)(7) contains Table U(1) (unitrust single life remainder factors). These tables are used in determining the present value of a remainder interest in a charitable remainder unitrust as defined in § 1.664–3. See § 1.664–4A for unitrust single life remainder factors applicable to valuation dates before May 1, 2009. Section 20.2031–7(d)(6) contains Table

2023. The publications listed in paragraphs (d)(1) through (3) of this section will be available within a reasonable time after June 1, 2023. The underlying actuarial tables referenced and explained by these publications currently are available, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables:

(1) IRS Publication 1457, Actuarial Valuations Version 4A (2023). This publication references tables of valuation factors and provides examples that show how to compute other valuation factors, for determining the present value of annuities, interests for life or a term of years, and remainder or reversionary interests, measured by one or two lives. These factors also may be used in the valuation of interests in a charitable remainder annuity trust as defined in § 1.664–2 of this chapter and a pooled income fund as defined in § 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),

Table K (annuity end

H (commutation factors), J (term certain annuity beginning-of-interval adjustment factors), and

Table J

K (

term certain

annuity

beginning

end-of-interval adjustment factors).

Section 20.2031–7(d)(7) contains Table S (single life remainder factors), and Table 2000CM (mortality components). These tables are used in determining the present value of annuities, life estates, remainders, and reversions. See

See earlier versions of the publication, § 1.642(c)-6A of this chapter, or § 20.2031–7A for

single life remainder factors

Table S applicable to valuation dates before

May

June 1,

2009.

(2) Internal Revenue Service publications containing tables with interest rates between 0.2 and 22 percent for valuation dates on or after May 1, 2009. The following documents are available, at no charge, electronically via the IRS Internet site at http://www.irs.gov:

(i) Internal Revenue Service Publication 1457, “Actuarial Valuations Version 3A” (2009). This publication includes tables of valuation factors, as well as examples that show how to compute other valuation factors, for determining the present value of annuities, life estates, terms of years, remainders, and reversions, measured by one or two lives. These factors may also be used in the valuation of interests in a charitable remainder annuity trust

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 versions of Tables H and R(2). Tables B, J, and K also can be found in § 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 § 1.

664–2

664–3 of this chapter

and a pooled income fund as defined in § 1.642(c)–5. (ii) Internal Revenue Service Publication 1458, “Actuarial Valuations Version 3B” (2009). This publication includes term certain tables and tables of one and two life valuation factors for

. 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

interests in a charitable remainder unitrust as defined in § 1.664–3 of this chapter. (iii) Internal Revenue Service Publication 1459, “Actuarial Valuations Version 3C” (2009). This publication includes tables for computing depreciation adjustment factors

interest postponed for a term of years), F (adjustment payout rate factors), and Z (unitrust commutation factors). See earlier versions of the publication or § 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 § 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 § 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 § 1.170A–12 of this chapter.

(

d)Effective/applicability

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 § 20.2031–7(d)(2)(ii)(B) is used to determine the remainder factor for pooled income funds and the actuarial formula in § 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

May

June 1,

2009

2023.

[T.D. 8540, 59 FR 30170, June 10, 1994, as amended by T.D. 8819, 64 FR 23222, 23229, Apr. 30, 1999; T.D. 8886, 65 FR 36939, June 12, 2000; T.D. 9448, 74 FR 21511, May 7, 2009; T.D. 9540, 76 FR 49637, Aug. 10, 2011; T.D. 9974, 88 FR 37450, June 7, 2023]