§2512 — Valuation of gifts

Statute Text — 26 U.S.C. §2512

Treasury Regulations

• Treas. Reg. §25.2512-0Table of contents Show full text ▾ Collapse ▴

  This section lists the section headings that appear in the regulations in this part under section 2512.

• Treas. Reg. §25.2512-1Valuation of property; in general Show full text ▾ Collapse ▴

  Section 2512 provides that if a gift is made in property, its value at the date of the gift shall be considered the amount of the gift. The value of the property is the price at which such property would change hands between a willing buyer and a willing seller, neither being under any compulsion to buy or to sell, and both having reasonable knowledge of relevant facts. The value of a particular item of property is not the price that a forced sale of the property would produce. Nor is the fair market value of an item of property the sale price in a market other than that in which such item is most commonly sold to the public, taking into account the location of the item wherever appropriate. Thus, in the case of an item of property made the subject of a gift, which is generally obtained by the public in the retail market, the fair market value of such an item of property is the price at which the item or a comparable item would be sold at retail. For example, the value of an automobile (an article generally obtained by the public in the retail market) which is the subject of a gift, is the price for which an automobile of the same or approximately the same description, make, model, age, condition, etc., could be purchased by a member of the general public and not the price for which the particular automobile of the donor would be purchased by a dealer in used automobiles. Examples of items of property which are generally sold to the public at retail may be found in § 25.2512-6. The value is generally to be determined by ascertaining as a basis the fair market value at the time of the gift of each unit of the property. For example, in the case of shares of stocks or bonds, such unit of property is generally a share or a bond. Property shall not be returned at the value at which it is assessed for local tax purposes unless that value represents the fair market value thereof on the date of the gift. All relevant facts and elements of value as of the time of the gift shall be considered. Where the subject of a gift is an interest in a business, the value of items of property in the inventory of the business generally should be reflected in the value of the business. For valuation of interests in businesses, see § 25.2512-3. See § 25.2512-2 and §§ 25.2512-4 through 25.2512-6 for further information concerning the valuation of other particular kinds of property. See § 25.2702-6 for an adjustment to the total amount of an individual's taxable gifts where the individual's current taxable gifts include the transfer of certain interests in trust that were previously valued under the provisions of section 2702.

• Treas. Reg. §25.2512-2Stocks and bonds Show full text ▾ Collapse ▴

  (a) In general. The value of stocks and bonds is the fair market value per share or bond on the date of the gift.

  (b) Based on selling prices. (1) In general, if there is a market for stocks or bonds, on a stock exchange, in an over-the-counter market or otherwise, the mean between the highest and lowest quoted selling prices on the date of the gift is the fair market value per share or bond. If there were no sales on the date of the gift but there were sales on dates within a reasonable period both before and after the date of the gift, the fair market value is determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the date of the gift. The average is to be weighted inversely by the respective numbers of trading days between the selling dates and the date of the gift. If the stocks or bonds are listed on more than one exchange, the records of the exchange where the stocks or bonds are principally dealt in should be employed if such records are available in a generally available listing or publication of general circulation. In the event that such records are not so available and such stocks or bonds are listed on a composite listing of combined exchanges available in a generally available listing or publication of general circulation, the records of such combined exchanges should be employed. In valuing listed securities, the donor should be careful to consult accurate records to obtain values as of the date of the gift. If quotations of unlisted securities are obtained from brokers, or evidence as to their sale is obtained from the officers of the issuing companies, copies of letters furnishing such quotations or evidence of sale should be attached to the return.

  (2) If it is established with respect to bonds for which there is a market on a stock exchange, that the highest and lowest selling prices are not available for the date of the gift in a generally available listing or publication of general circulation but that closing prices are so available, the fair market value per bond is the mean between the quoted closing selling price on the date of the gift and the quoted closing selling price on the trading day before the date of the gift. If there were no sales on the trading day before the date of the gift but there were sales on dates within a reasonable period before the date of the gift, the fair market value is determined by taking a weighted average of the quoted closing selling prices on the date of the gift and the nearest date before the date of the gift. The closing selling price for the date of the gift is to be weighted by the respective number of trading days between the previous selling date and the date of the gift. If there were no sales within a reasonable period before the date of the gift but there were sales on the date of the gift, the fair market value is the closing selling price on the date of the gift. If there were no sales on the date of the gift but there were sales within a reasonable period both before and after the date of the gift, the fair market value is determined by taking a weighted average of the quoted closing selling prices on the nearest date before and the nearest date after the date of the gift. The average is to be weighed inversely by the respective numbers of trading days between the selling dates and the date of the gift. If the bonds are listed on more than one exchange, the records of the exchange where the bonds are principally dealt in should be employed. In valuing listed securities, the donor should be careful to consult accurate records to obtain values as of the date of the gift.

  (3) The application of this paragraph may be illustrated by the following examples:

  (c) Based on bid and asked prices. If the provisions of paragraph (b) of this section are inapplicable because actual sales are not available during reasonable period beginning before and ending after the date of the gift, the fair market value may be determined by taking the mean between the bona fide bid and asked prices on the date of the gift, or if none, by taking a weighted average of the means between the bona fide bid and asked prices on the nearest trading date before and the nearest trading date after the date of the gift, if both such nearest dates are within a reasonable period. The average is to be determined in the manner described in paragraph (b) of this section.

  (d) Where selling prices and bid and asked prices are not available for dates both before and after the date of gift. If the provisions of paragraphs (b) and (c) of this section are inapplicable because no actual sale prices or quoted bona fide bid and asked prices are available on a date within a reasonable period before the date of the gift, but such prices are available on a date within a reasonable period after the date of the gift, or vice versa, then the mean between the highest and lowest available sale prices or bid and asked prices may be taken as the value.

  (e) Where selling prices or bid and asked prices do not represent fair market value. In cases in which it is established that the value per bond or share of any security determined on the basis of the selling or bid and asked prices as provided under paragraphs (b), (c), and (d) of this section does not represent the fair market value thereof, then some reasonable modification of the value determined on that basis or other relevant facts and elements of value shall be considered in determining fair market value. Where sales at or near the date of the gift are few or of a sporadic nature, such sales alone may not indicate fair market value. In certain exceptional cases, the size of the block of securities made the subject of each separate gift in relation to the number of shares changing hands in sales may be relevant in determining whether selling prices reflect the fair market value of the block of stock to be valued. If the donor can show that the block of stock to be valued, with reference to each separate gift, is so large in relation to the actual sales on the existing market that it could not be liquidated in a reasonable time without depressing the market, the price at which the block could be sold as such outside the usual market, as through an underwriter, may be a more accurate indication of value than market quotations. Complete data in support of any allowance claimed due to the size of the block of stock being valued should be submitted with the return. On the other hand, if the block of stock to be valued represents a controlling interest, either actual or effective, in a going business, the price at which other lots change hands may have little relation to its true value.

  (f) Where selling prices or bid and asked prices are unavailable. If the provisions of paragraphs (b), (c), and (d) of this section are inapplicable because actual sale prices and bona fide bid and asked prices are lacking, then the fair market value is to be determined by taking the following factors into consideration:

  (1) In the case of corporate or other bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors; and

  (2) In the case of shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors.

  Some of the “other relevant factors” referred to in subparagraphs (1) and (2) of this paragraph are: The goodwill of the business; the economic outlook in the particular industry; the company's position in the industry and its management; the degree of control of the business represented by the block of stock to be valued; and the values of securities of corporations engaged in the same or similar lines of business which are listed on a stock exchange. However, the weight to be accorded such comparisons or any other evidentiary factors considered in the determination of a value depends upon the facts of each case. Complete financial and other data upon which the valuation is based should be submitted with the return, including copies of reports of any examinations of the company made by accountants, engineers, or any technical experts as of or near the date of the gift.

• Treas. Reg. §25.2512-2(a)In general. Show full text ▾ Collapse ▴

  In general. The value of stocks and bonds is the fair market value per share or bond on the date of the gift.

• Treas. Reg. §25.2512-2(b)Based on selling prices. Show full text ▾ Collapse ▴

  Based on selling prices. (1) In general, if there is a market for stocks or bonds, on a stock exchange, in an over-the-counter market or otherwise, the mean between the highest and lowest quoted selling prices on the date of the gift is the fair market value per share or bond. If there were no sales on the date of the gift but there were sales on dates within a reasonable period both before and after the date of the gift, the fair market value is determined by taking a weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the date of the gift. The average is to be weighted inversely by the respective numbers of trading days between the selling dates and the date of the gift. If the stocks or bonds are listed on more than one exchange, the records of the exchange where the stocks or bonds are principally dealt in should be employed if such records are available in a generally available listing or publication of general circulation. In the event that such records are not so available and such stocks or bonds are listed on a composite listing of combined exchanges available in a generally available listing or publication of general circulation, the records of such combined exchanges should be employed. In valuing listed securities, the donor should be careful to consult accurate records to obtain values as of the date of the gift. If quotations of unlisted securities are obtained from brokers, or evidence as to their sale is obtained from the officers of the issuing companies, copies of letters furnishing such quotations or evidence of sale should be attached to the return.

  (2) If it is established with respect to bonds for which there is a market on a stock exchange, that the highest and lowest selling prices are not available for the date of the gift in a generally available listing or publication of general circulation but that closing prices are so available, the fair market value per bond is the mean between the quoted closing selling price on the date of the gift and the quoted closing selling price on the trading day before the date of the gift. If there were no sales on the trading day before the date of the gift but there were sales on dates within a reasonable period before the date of the gift, the fair market value is determined by taking a weighted average of the quoted closing selling prices on the date of the gift and the nearest date before the date of the gift. The closing selling price for the date of the gift is to be weighted by the respective number of trading days between the previous selling date and the date of the gift. If there were no sales within a reasonable period before the date of the gift but there were sales on the date of the gift, the fair market value is the closing selling price on the date of the gift. If there were no sales on the date of the gift but there were sales within a reasonable period both before and after the date of the gift, the fair market value is determined by taking a weighted average of the quoted closing selling prices on the nearest date before and the nearest date after the date of the gift. The average is to be weighed inversely by the respective numbers of trading days between the selling dates and the date of the gift. If the bonds are listed on more than one exchange, the records of the exchange where the bonds are principally dealt in should be employed. In valuing listed securities, the donor should be careful to consult accurate records to obtain values as of the date of the gift.

  (3) The application of this paragraph may be illustrated by the following examples:

• Treas. Reg. §25.2512-2(c)Based on bid and asked prices. Show full text ▾ Collapse ▴

  Based on bid and asked prices. If the provisions of paragraph (b) of this section are inapplicable because actual sales are not available during reasonable period beginning before and ending after the date of the gift, the fair market value may be determined by taking the mean between the bona fide bid and asked prices on the date of the gift, or if none, by taking a weighted average of the means between the bona fide bid and asked prices on the nearest trading date before and the nearest trading date after the date of the gift, if both such nearest dates are within a reasonable period. The average is to be determined in the manner described in paragraph (b) of this section.

• Treas. Reg. §25.2512-2(d)Where selling prices and bid and asked prices are not available for dates both before and after the date of gift. Show full text ▾ Collapse ▴

  Where selling prices and bid and asked prices are not available for dates both before and after the date of gift. If the provisions of paragraphs (b) and (c) of this section are inapplicable because no actual sale prices or quoted bona fide bid and asked prices are available on a date within a reasonable period before the date of the gift, but such prices are available on a date within a reasonable period after the date of the gift, or vice versa, then the mean between the highest and lowest available sale prices or bid and asked prices may be taken as the value.

• Treas. Reg. §25.2512-2(e)Where selling prices or bid and asked prices do not represent fair market value. Show full text ▾ Collapse ▴

  Where selling prices or bid and asked prices do not represent fair market value. In cases in which it is established that the value per bond or share of any security determined on the basis of the selling or bid and asked prices as provided under paragraphs (b), (c), and (d) of this section does not represent the fair market value thereof, then some reasonable modification of the value determined on that basis or other relevant facts and elements of value shall be considered in determining fair market value. Where sales at or near the date of the gift are few or of a sporadic nature, such sales alone may not indicate fair market value. In certain exceptional cases, the size of the block of securities made the subject of each separate gift in relation to the number of shares changing hands in sales may be relevant in determining whether selling prices reflect the fair market value of the block of stock to be valued. If the donor can show that the block of stock to be valued, with reference to each separate gift, is so large in relation to the actual sales on the existing market that it could not be liquidated in a reasonable time without depressing the market, the price at which the block could be sold as such outside the usual market, as through an underwriter, may be a more accurate indication of value than market quotations. Complete data in support of any allowance claimed due to the size of the block of stock being valued should be submitted with the return. On the other hand, if the block of stock to be valued represents a controlling interest, either actual or effective, in a going business, the price at which other lots change hands may have little relation to its true value.

• Treas. Reg. §25.2512-2(f)Where selling prices or bid and asked prices are unavailable. Show full text ▾ Collapse ▴

  Where selling prices or bid and asked prices are unavailable. If the provisions of paragraphs (b), (c), and (d) of this section are inapplicable because actual sale prices and bona fide bid and asked prices are lacking, then the fair market value is to be determined by taking the following factors into consideration:

  (1) In the case of corporate or other bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors; and

  (2) In the case of shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors.

  Some of the “other relevant factors” referred to in subparagraphs (1) and (2) of this paragraph are: The goodwill of the business; the economic outlook in the particular industry; the company's position in the industry and its management; the degree of control of the business represented by the block of stock to be valued; and the values of securities of corporations engaged in the same or similar lines of business which are listed on a stock exchange. However, the weight to be accorded such comparisons or any other evidentiary factors considered in the determination of a value depends upon the facts of each case. Complete financial and other data upon which the valuation is based should be submitted with the return, including copies of reports of any examinations of the company made by accountants, engineers, or any technical experts as of or near the date of the gift.

• Treas. Reg. §25.2512-3Valuation of interest in businesses Show full text ▾ Collapse ▴

  (a) Care should be taken to arrive at an accurate valuation of any interest in a business which the donor transfers without an adequate and full consideration in money or money's worth. The fair market value of any interest in a business, whether a partnership or a proprietorship, is the net amount which a willing purchaser, whether an individual or a corporation, would pay for the interest to a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. The net value is determined on the basis of all relevant factors including—

  (1) A fair appraisal as of the date of the gift of all the assets of the business, tangible and intangible, including good will;

  (2) The demonstrated earning capacity of the business; and

  (3) The other factors set forth in paragraph (f) of § 25.2512-2 relating to the valuation of corporate stock, to the extent applicable.

  Special attention should be given to determining an adequate value of the good will of the business. Complete financial and other data upon which the valuation is based should be submitted with the return, including copies of reports of examinations of the business made by accountants, engineers, or any technical experts as of or near the date of the gift.

  (b) [Reserved]

• Treas. Reg. §25.2512-3(a)Care should be taken to arrive at an accurate valuation of any interest in a business which the donor transfers without an adequate and full consideration in money or money's worth. Show full text ▾ Collapse ▴

  Care should be taken to arrive at an accurate valuation of any interest in a business which the donor transfers without an adequate and full consideration in money or money's worth. The fair market value of any interest in a business, whether a partnership or a proprietorship, is the net amount which a willing purchaser, whether an individual or a corporation, would pay for the interest to a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of the relevant facts. The net value is determined on the basis of all relevant factors including—

  (1) A fair appraisal as of the date of the gift of all the assets of the business, tangible and intangible, including good will;

  (2) The demonstrated earning capacity of the business; and

  (3) The other factors set forth in paragraph (f) of § 25.2512-2 relating to the valuation of corporate stock, to the extent applicable.

  Special attention should be given to determining an adequate value of the good will of the business. Complete financial and other data upon which the valuation is based should be submitted with the return, including copies of reports of examinations of the business made by accountants, engineers, or any technical experts as of or near the date of the gift.

• Treas. Reg. §25.2512-3(b)§25.2512-3(b) Show full text ▾ Collapse ▴

  [Reserved]

• Treas. Reg. §25.2512-4Valuation of notes Show full text ▾ Collapse ▴

  The fair market value of notes, secured or unsecured, is presumed to be the amount of unpaid principal, plus accrued interest to the date of the gift, unless the donor establishes a lower value. Unless returned at face value, plus accrued interest, it must be shown by satisfactory evidence that the note is worth less than the unpaid amount (because of the interest rate, or date of maturity, or other cause), or that the note is uncollectible in part (by reason of the insolvency of the party or parties liable, or for other cause), and that the property, if any, pledged or mortgaged as security is insufficient to satisfy it.

• Treas. Reg. §25.2512-5Valuation of annuities, unitrust interests, interests for life or term of years, and remainder or reversionary interests Show full text ▾ Collapse ▴

  (a) In general. Except as otherwise provided in paragraph (b) of this section and § 25.7520-3(b), the fair market value of annuities, unitrust interests, life estates, terms of years, remainders, and reversions transferred by gift is the present value of the interests determined under paragraph (d) of this section. Section 20.2031-7 of this chapter (Estate Tax Regulations) and related sections provide tables with standard actuarial factors and examples that illustrate how to use the tables to compute the present value of ordinary annuity, life, and remainder interests in property. These sections also refer to standard and special actuarial factors that may be necessary to compute the present value of similar interests in more unusual fact situations. These factors and examples are also generally applicable for gift tax purposes in computing the values of taxable gifts.

  (b) Commercial annuities and insurance contracts. The value of life insurance contracts and contracts for the payment of annuities issued by companies regularly engaged in their sale is determined under § 25.2512-6.

  (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:

  (d) Actuarial valuations on or after June 1, 2023—(1) In general. Except as otherwise provided in paragraph (b) of this section and § 25.7520-3(b) (relating to exceptions to the use of prescribed tables under certain circumstances), 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 § 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 § 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 § 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. See §§ 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 § 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 § 1.642(c)-5 of this chapter, is its value determined under § 1.642(c)-6(e) of this chapter (see § 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 § 1.664-2(a) of this chapter, is its present value determined under § 1.664-2(c) of this chapter. The fair market value of a remainder interest in a charitable remainder unitrust, as defined in § 1.664-3 of this chapter, is its present value determined under § 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 § 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 § 20.2031-7(d)(2)(ii)(A) of this chapter and computing the result to at least six decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table B. Table B can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). Table B is referenced and explained in IRS Publication 1457, Actuarial Valuations Version 4A, which will be available within a reasonable time after June 1, 2023. The remainder factors from Table B also can be found in paragraph (d)(6) of this section, but only for interest rates from 4.2 to 14 percent, inclusive. For information about obtaining special factors for other situations, see paragraph (d)(4) of this section.

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

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

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

  (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 × 12.2552 × 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 § 20.2031-7(d)(2)(iv)(C) of this chapter expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table J. Table J, which is referenced and explained by Publication 1457, can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables. If an annuity is payable at the beginning of annual, semiannual, quarterly, monthly, or weekly periods for one or more lives, the value of the annuity is the sum of the first payment and the present value of a similar annuity, the first payment of which is not to be made until the end of the payment period, determined as provided in paragraph (d)(2)(iv)(B) of this section.

  (v) Annuity and unitrust interests for a term of years or until the prior death of an individual—(A) Annuity interests—(1) In general. (i) The present value of an annuity interest that is payable until the earlier to occur of the lapse of a specific number of years or the death of an individual may be computed with the use of commutation factors and an applicable adjustment factor. The commutation factors are computed directly with the set of formulas in Figure 1 to this paragraph (d)(2)(v)(A)(1)(i). The prescribed mortality table is Table 2010CM as set forth in § 20.2031-7(d)(7)(ii) of this chapter, or for periods before June 1, 2023, the appropriate table found in § 20.2031-7A of this chapter. For the convenience of taxpayers, commutation factors have been computed by the IRS and appear in Table H. Table H currently is available, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). Table H is referenced and explained by IRS Publication 1457, Actuarial Valuations Version 4A, which will be available within a reasonable time after June 1, 2023.

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

  (2) Example. The donor transfers $100,000 into a trust on January 1, 2022 and retains the right to receive an annuity from the trust in the amount of $10,000 per year, payable in equal semiannual installments at the end of each period. The semiannual installments are to be made on each June 30th and December 31st. The annuity is payable for 10 years or until the donor's prior death. At the time of the transfer, the donor is 59 years and 6 months old. The donor's age is deemed to be 60 for purposes of computing the present value of the retained annuity. If the section 7520 rate for the month in which the transfer occurred is 2.8 percent, the present value of the donor's retained annuity interest for the shorter of life or term would be is $82,363.54, determined in Figure 2 to this paragraph (d)(2)(v)(A)(2).

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

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

  (2) Example of interpolation. The donor who, as of the nearest birthday, is 60 years old, transfers $100,000 to a unitrust on January 1st of a year after 2021. The trust instrument requires that each year the trust pay to the donor, in equal semiannual installments on June 30th and December 31st, 5 percent of the fair market value of the trust assets, valued as of January 1st of that year, for 10 years or until the prior death of the donor. The section 7520 rate for the January in which the transfer occurred is 3.4 percent. Under Table F(3.4), the appropriate adjustment factor is 0.975270 for semiannual payments payable at the end of the semiannual period. The adjusted payout rate is 4.876 percent (5% × 0.975270). The present value of the donor's retained interest is $37,419.00 determined in paragraphs (d)(2)(v)(B)(2)(i) through (iii) of this section. Using Table Z, the method required is to prepare two computations, one at a payout rate of 4.8 percent, and one at 5.0 percent, and interpolate between these two in order to get the result at the adjusted payout rate of 4.876 percent. As an alternative to using an interpolation method, it also is acceptable to compute the remainder factor directly from the root actuarial formulas using the actual adjusted payout rate of 4.876%.

  (i) Determine the terminal age, as illustrated in Figure 4 to this paragraph (d)(2)(v)(B)(2)(i).

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

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

  (3) Transitional rule. If the valuation date of a transfer of property by gift is after April 30, 2019, and on or before June 1, 2023, the fair market value of the interest transferred is determined by using the section 7520 interest rate for the month in which the valuation date occurs (see §§ 25.7520-1(b) and 25.7520-2(a)(2)) and the appropriate actuarial factors derived from the selected mortality table, either Table 2010CM in § 20.2031-7(d)(7)(ii) of this chapter or Table 2000CM in § 20.2031-7A(g)(4) of this chapter, at the option of the donor or the decedent's executor, as the case may be. If any previously filed gift tax return is supplemented to use the actuarial factors based on Table 2010CM, the supplemental return must state at the top “AMENDED PURSUANT TO TD 9974.” For the convenience of taxpayers, actuarial factors based on Table 2010CM appear in the current version of Table S, and actuarial factors based on Table 2000CM appear in the previous version of Table S. Both versions of Table S will be available as provided in paragraph (d)(4) of this section. With respect to each individual transaction, the donor must consistently use the same mortality basis with respect to each interest (income, remainder, partial, etc.) in the same property, and with respect to all transfers occurring on the same valuation date. For example, gift and income tax charitable deductions with respect to the same transfer must be determined based on factors with the same mortality basis, and all assets includible in the gross estate and/or estate tax deductions claimed must be valued based on factors with the same mortality basis.

  (4) Publications and actuarial computations by the Internal Revenue Service. The factor for determining the present value of a remainder interest that is dependent on the termination of the life of one individual may be computed by using the formula in § 20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor from the appropriate mortality table expressed to at least five decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table S. The factor for determining the present value of a remainder interest following a term certain may be computed by using the formula in § 20.2031-7(d)(2)(ii)(A) of this chapter expressed to at least six decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table B. Adjustment factors for term certain annuities payable at the beginning of each interval may be computed by using the formula in § 20.2031-7(d)(2)(iv)(C) of this chapter expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table J. Adjustment factors for annuities payable at the end of each interval may be computed by using the formula in § 20.2031-7(d)(2)(iv)(B) of this chapter expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table K. These tables currently are available, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). IRS Publication 1457, Actuarial Valuations Version 4A (2023), references and explains the factors contained in the actuarial tables and also includes examples that illustrate how to compute many special factors for more unusual situations. This publication will be available within a reasonable time after June 1, 2023. Tables B, J, and K also can be found in § 20.2031-7(d)(6) of this chapter, but only for interest rates from 4.2 to 14 percent, inclusive. If a particular factor is required, that factor may be calculated by the taxpayer using the actuarial formula in § 20.2031-7(d)(2) of this chapter or the taxpayer may request a ruling to obtain the factor from the Internal Revenue Service. The request for a ruling must be accompanied by a recitation of the facts including a statement of the date of birth for each measuring life, the date of the gift, any other applicable dates, and a copy of the will, trust, or other relevant documents. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (see Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or successor revenue procedures, and §§ 601.201 and 601.601(d)(2)(ii)(b) of this chapter) and must include payment of the required user fee.

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

• Treas. Reg. §25.2512-5(a)In general. Show full text ▾ Collapse ▴

  In general. Except as otherwise provided in paragraph (b) of this section and § 25.7520-3(b), the fair market value of annuities, unitrust interests, life estates, terms of years, remainders, and reversions transferred by gift is the present value of the interests determined under paragraph (d) of this section. Section 20.2031-7 of this chapter (Estate Tax Regulations) and related sections provide tables with standard actuarial factors and examples that illustrate how to use the tables to compute the present value of ordinary annuity, life, and remainder interests in property. These sections also refer to standard and special actuarial factors that may be necessary to compute the present value of similar interests in more unusual fact situations. These factors and examples are also generally applicable for gift tax purposes in computing the values of taxable gifts.

• Treas. Reg. §25.2512-5(b)Commercial annuities and insurance contracts. Show full text ▾ Collapse ▴

  Commercial annuities and insurance contracts. The value of life insurance contracts and contracts for the payment of annuities issued by companies regularly engaged in their sale is determined under § 25.2512-6.

• Treas. Reg. §25.2512-5(c)Actuarial valuations. Show full text ▾ Collapse ▴

  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:

• Treas. Reg. §25.2512-5(d)Actuarial valuations on or after June 1, 2023—(1) In general. Show full text ▾ Collapse ▴

  Actuarial valuations on or after June 1, 2023—(1) In general. Except as otherwise provided in paragraph (b) of this section and § 25.7520-3(b) (relating to exceptions to the use of prescribed tables under certain circumstances), 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 § 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 § 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 § 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. See §§ 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 § 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.

• Treas. Reg. §25.2512-5(e)Applicability date. Show full text ▾ Collapse ▴

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

• Treas. Reg. §25.2512-5(i)Determine the terminal age, as illustrated in Figure 4 to this paragraph (d)(2)(v)(B)(2)(i). Show full text ▾ Collapse ▴

  Determine the terminal age, as illustrated in Figure 4 to this paragraph (d)(2)(v)(B)(2)(i).

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

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

  (3) Transitional rule. If the valuation date of a transfer of property by gift is after April 30, 2019, and on or before June 1, 2023, the fair market value of the interest transferred is determined by using the section 7520 interest rate for the month in which the valuation date occurs (see §§ 25.7520-1(b) and 25.7520-2(a)(2)) and the appropriate actuarial factors derived from the selected mortality table, either Table 2010CM in § 20.2031-7(d)(7)(ii) of this chapter or Table 2000CM in § 20.2031-7A(g)(4) of this chapter, at the option of the donor or the decedent's executor, as the case may be. If any previously filed gift tax return is supplemented to use the actuarial factors based on Table 2010CM, the supplemental return must state at the top “AMENDED PURSUANT TO TD 9974.” For the convenience of taxpayers, actuarial factors based on Table 2010CM appear in the current version of Table S, and actuarial factors based on Table 2000CM appear in the previous version of Table S. Both versions of Table S will be available as provided in paragraph (d)(4) of this section. With respect to each individual transaction, the donor must consistently use the same mortality basis with respect to each interest (income, remainder, partial, etc.) in the same property, and with respect to all transfers occurring on the same valuation date. For example, gift and income tax charitable deductions with respect to the same transfer must be determined based on factors with the same mortality basis, and all assets includible in the gross estate and/or estate tax deductions claimed must be valued based on factors with the same mortality basis.

  (4) Publications and actuarial computations by the Internal Revenue Service. The factor for determining the present value of a remainder interest that is dependent on the termination of the life of one individual may be computed by using the formula in § 20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor from the appropriate mortality table expressed to at least five decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table S. The factor for determining the present value of a remainder interest following a term certain may be computed by using the formula in § 20.2031-7(d)(2)(ii)(A) of this chapter expressed to at least six decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table B. Adjustment factors for term certain annuities payable at the beginning of each interval may be computed by using the formula in § 20.2031-7(d)(2)(iv)(C) of this chapter expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table J. Adjustment factors for annuities payable at the end of each interval may be computed by using the formula in § 20.2031-7(d)(2)(iv)(B) of this chapter expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table K. These tables currently are available, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). IRS Publication 1457, Actuarial Valuations Version 4A (2023), references and explains the factors contained in the actuarial tables and also includes examples that illustrate how to compute many special factors for more unusual situations. This publication will be available within a reasonable time after June 1, 2023. Tables B, J, and K also can be found in § 20.2031-7(d)(6) of this chapter, but only for interest rates from 4.2 to 14 percent, inclusive. If a particular factor is required, that factor may be calculated by the taxpayer using the actuarial formula in § 20.2031-7(d)(2) of this chapter or the taxpayer may request a ruling to obtain the factor from the Internal Revenue Service. The request for a ruling must be accompanied by a recitation of the facts including a statement of the date of birth for each measuring life, the date of the gift, any other applicable dates, and a copy of the will, trust, or other relevant documents. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (see Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or successor revenue procedures, and §§ 601.201 and 601.601(d)(2)(ii)(b) of this chapter) and must include payment of the required user fee.

• Treas. Reg. §25.2512-5(v)Annuity and unitrust interests for a term of years or until the prior death of an individual—(A) Annuity interests—(1) In general. Show full text ▾ Collapse ▴

  Annuity and unitrust interests for a term of years or until the prior death of an individual—(A) Annuity interests—(1) In general. (i) The present value of an annuity interest that is payable until the earlier to occur of the lapse of a specific number of years or the death of an individual may be computed with the use of commutation factors and an applicable adjustment factor. The commutation factors are computed directly with the set of formulas in Figure 1 to this paragraph (d)(2)(v)(A)(1)(i). The prescribed mortality table is Table 2010CM as set forth in § 20.2031-7(d)(7)(ii) of this chapter, or for periods before June 1, 2023, the appropriate table found in § 20.2031-7A of this chapter. For the convenience of taxpayers, commutation factors have been computed by the IRS and appear in Table H. Table H currently is available, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). Table H is referenced and explained by IRS Publication 1457, Actuarial Valuations Version 4A, which will be available within a reasonable time after June 1, 2023.

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

  (2) Example. The donor transfers $100,000 into a trust on January 1, 2022 and retains the right to receive an annuity from the trust in the amount of $10,000 per year, payable in equal semiannual installments at the end of each period. The semiannual installments are to be made on each June 30th and December 31st. The annuity is payable for 10 years or until the donor's prior death. At the time of the transfer, the donor is 59 years and 6 months old. The donor's age is deemed to be 60 for purposes of computing the present value of the retained annuity. If the section 7520 rate for the month in which the transfer occurred is 2.8 percent, the present value of the donor's retained annuity interest for the shorter of life or term would be is $82,363.54, determined in Figure 2 to this paragraph (d)(2)(v)(A)(2).

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

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

  (2) Example of interpolation. The donor who, as of the nearest birthday, is 60 years old, transfers $100,000 to a unitrust on January 1st of a year after 2021. The trust instrument requires that each year the trust pay to the donor, in equal semiannual installments on June 30th and December 31st, 5 percent of the fair market value of the trust assets, valued as of January 1st of that year, for 10 years or until the prior death of the donor. The section 7520 rate for the January in which the transfer occurred is 3.4 percent. Under Table F(3.4), the appropriate adjustment factor is 0.975270 for semiannual payments payable at the end of the semiannual period. The adjusted payout rate is 4.876 percent (5% × 0.975270). The present value of the donor's retained interest is $37,419.00 determined in paragraphs (d)(2)(v)(B)(2)(i) through (iii) of this section. Using Table Z, the method required is to prepare two computations, one at a payout rate of 4.8 percent, and one at 5.0 percent, and interpolate between these two in order to get the result at the adjusted payout rate of 4.876 percent. As an alternative to using an interpolation method, it also is acceptable to compute the remainder factor directly from the root actuarial formulas using the actual adjusted payout rate of 4.876%.

• Treas. Reg. §25.2512-5AValuation of annuities, interests for life or a term of years, and remainder or reversionary interests transferred before June 1, 2023 Show full text ▾ Collapse ▴

  (a) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred before January 1, 1952. Except as otherwise provided in § 25.2512-5(b), if the transfer was made before January 1, 1952, the present value of annuities, life estates, terms of years, remainders, and reversions is their present value determined under this section. If the valuation of the interest involved is dependent upon the continuation or termination of one or more lives or upon a term certain concurrent with one or more lives, the factor for the present value is computed on the basis of interest at the rate of 4 percent a year, compounded annually, and life contingencies for each life involved from values that are based upon the “Actuaries' or Combined Experience Table of Mortality, as extended.” This table and many additional factors are described in former § 86.19 (as contained in the 26 CFR part 81 edition revised as of April 1, 1958). The present value of an interest measured by a term of years is computed on the basis of interest at the rate of 4 percent a year.

  (b) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred after December 31, 1951, and before January 1, 1971. Except as otherwise provided in § 25.2512-5(b), the present value of annuities, life estates, terms of years, remainders, and reversions transferred after December 31, 1951, and before January 1, 1971, is the present value of such interests determined under this section. If the value of the interest involved is dependent upon the continuation or termination of one or more lives, the factor for the present value is computed on the basis of interest at the rate of 3

  1/2 percent a year, compounded annually, and life contingencies for each life involved from U.S. Life Table 38. This table and many accompanying factors are set forth in former § 25.2512-5 (as contained in the 26 CFR part 25 edition revised as of April 1, 1984). Special factors involving one and two lives may be found in or computed with the use of tables contained in Internal Revenue Service Publication Number 11, “Actuarial Values for Estate and Gift Tax,” (Rev. 5-59). This publication is no longer available for purchase from the Superintendent of Documents. However, it may be obtained by requesting a copy from: CC:DOM:CORP:T:R (IRS Publication 11), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. The present value of an interest measured by a term of years is computed on the basis of interest at the rate of 3

  1/2 percent a year.

  (c) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred after December 31, 1970, and before December 1, 1983. Except as otherwise provided in § 25.2512-5(b), the present value of annuities, life estates, terms of years, remainders, and reversions transferred after December 31, 1970, and before December 1, 1983, is the present value of such interests determined under this section. If the interest to be valued is dependent upon the continuation or termination of one or more lives or upon a term certain concurrent with one or more lives, the factor for the present value is computed on the basis of interest at the rate of 6 percent a year, compounded annually, and life contingencies determined for each male and female life involved, from the values that are set forth in Table LN. Table LN contains values that are taken from the life table for total males and the life table for total females appearing as Tables 2 and 3, respectively, in United States Life Tables: 1959-61, published by the Department of Health and Human Services, Public Health Service. Table LN and accompanying factors are set forth in former § 25.2512-9 (as contained in the 26 CFR part 25 edition revised as of April 1, 1994). Special factors involving one and two lives may be found in or computed with the use of tables contained in Internal Revenue Service Publication 723, entitled “Actuarial Values I: Valuation of Last Survivor Charitable Remainders” (12-70), and Internal Revenue Service Publication 723A, entitled “Actuarial Values II: Factors at 6 Percent Involving One and Two Lives” (12-70). These publications are no longer available for purchase from the Superintendent of Documents. However, a copy of each may be obtained from: CC:DOM:CORP:T:R (IRS Publication 723/723A), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. The present value of an interest measured by a term of years is computed on the basis of interest at the rate of 6 percent a year.

  (d) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred after November 30, 1983, and before May 1, 1989—(1) In general. (i)(A) Except as otherwise provided in § 25.2512-5(b) and in this paragraph (d)(1)(i)(A), the fair market value of annuities, life estates, terms of years, remainders, and reversions transferred after November 30, 1983, and before May 1, 1989, is the present value of such interests determined under this section. The value of annuities issued by companies regularly engaged in their sale and of insurance policies issued by companies regularly engaged in their sale is determined under § 25.2512-6. The fair market value of a remainder interest in a charitable remainder unitrust, as defined in § 1.664-3, is its present value determined under § 1.664-4. The fair market value of a life interest or term for years in a charitable remainder unitrust is the fair market value of the property as of the date of transfer less the fair market value of the remainder interest on such date determined under § 1.664-4. The fair market value of interests in a pooled income fund, as defined in § 1.642(c)-5, is their value determined under § 1.642(c)-6. Where the donor transfers property in trust or otherwise and retains an interest therein, the value of the gift is the value of the property transferred less the value of the donor's retained interest. See section 2702 and the regulations at § 25.2702 for special rules for valuing transfers of interests in trust after October 8, 1990. See § 25.2512-9 with respect to the valuation of annuities, life estates, terms for years, remainders, and reversions transferred after December 31, 1970, and before December 1, 1983.

  (B) If the donor transfers in December of 1983, either—

  (1) A remainder or a reversion subject to a life interest or a term for years where the life interest or term for years was transferred by the donor after December 31, 1982, and before December 1, 1983, or

  (2) A life interest or term for years, the remainder interest of which was transferred by the donor after December 31, 1982, and before December 1, 1983,

  the donor shall make an election. The donor may elect to value both interests transferred in 1983 under § 25.2512-5A(c) as if such section applied to all transfers made before January 1, 1984, or the donor may elect to have both interests transferred valued under this section. The donor shall indicate the election being made in a statement attached to the donor's gift tax return for 1983.

  (C) If the donor transfers in calendar year 1984, either—

  (1) A remainder on a reversion subject to a life interest or a term for years where the life interest or term for years was transferred by the donor in the first eleven months of 1983, or

  (2) A life interest or term for years, the remainder interest of which was transferred by the donor in the first eleven months of 1983,

  the donor shall make an election. The donor may elect to value the interest transferred in 1984 under § 25.2512-5A(c) as if such section applied to all transfers made before January 1, 1985, or the donor may elect to have the transfer valued under this section. If the donor elects to value the interest transferred in 1984 under § 25.2512-5A(c), the donor shall indicate that the election is being made by attaching a statement to the donor's gift tax return for 1984. If the donor elects to value the interest transferred in 1984 under this section the election shall not be effective unless the donor declares, in a statement attached to the donor's gift tax return for 1984, that the donor has filed an amended gift tax return for 1983, in which the donor has revalued the transfers made in the first eleven months of 1983 under this section as if this section applied to transfers made after December 31, 1982.

  (ii) The present value of an annuity, life estate, remainder, or reversion determined under this section which is dependent on the continuation or termination of the life of one person is computed by the use of Table A in paragraph (d)(6) of this section. The present value of an annuity, term for years, remainder, or reversion dependent on a term certain is computed by the use of Table B in paragraph (d)(6) of this section. If the interest to be valued is dependent upon more than one life or there is a term certain concurrent with one or more lives, see paragraph (d)(5) of this section. For purposes of the computations described in this section, the age of the person is to be taken at his or her nearest birthday.

  (iii) In all examples set forth in this section, the interest is assumed to have been transferred after November 30, 1983, and before May 1, 1989.

  (2) Annuities. (i) If an annuity is payable annually at the end of each year during the life of an individual (as for example if the first payment is due one year after the date of the gift), the amount payable annually is multiplied by the figure in column 2 of Table A opposite the number of years in column 1 nearest the age of the individual whose life measures the duration of the annuity. If the annuity is payable annually at the end of each year for a definite number of years, the amount payable annually is multiplied by the figure in column 2 of Table B opposite the number of years in column 1 representing the duration of the annuity. The application of this paragraph (d)(2)(i) may be illustrated by the following examples:

  (ii) If an annuity is payable at the end of semiannual, quarterly, monthly, or weekly periods during the life of an individual (as for example if the first payment is due one month after the date of the gift), the aggregate amount to be paid within a year is first multiplied by the figure in column 2 of Table A opposite the number of years in column 1 nearest the age of the individual whose life measures the duration of the annuity. The product so obtained is then multiplied by whichever of the following factors is appropriate:

  If the annuity is payable at the end of semiannual, quarterly, monthly, or weekly periods for a definite number of years the aggregate amount to be paid within a year is first multiplied by the figure in column 2 of Table B opposite the number of years in column 1 representing the duration of the annuity. The product so obtained is then multiplied by whichever of the above factors is appropriate. The application of this paragraph (d)(2)(ii) may be illustrated by the following example:

  (iii)(A) If the first payment of an annuity for the life of an individual is due at the beginning of the annual or other payment period rather than at the end (as for example if the first payment is to be made immediately after the date of the gift), the value of the annuity is the sum of (A) the first payment plus (B) 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)(i) or (ii) of this section. The application of this paragraph (d)(2)(iii)(A) may be illustrated by the following example:

  (B) If the first payment of an annuity for a definite number of years is due at the beginning of the annual or other payment period, the applicable factor is the product of the factor shown in Table B multiplied by whichever of the following factors is appropriate:

  The application of this paragraph (d)(2)(iii)(B) may be illustrated by the following example:

  (3) Life estates and terms for years. If the interest to be valued is the right of a person for his or her life, or for the life of another person, to receive the income of certain property or to use non-income-producing property, the value of the interest is the value of the property multiplied by the figure in column 3 of Table A opposite the number of years nearest to the actual age of the measuring life. If the interest to be valued is the right to receive income of property or to use nonincome-producing property for a term of years, column 3 of Table B is used. The application of this paragraph (d)(3) may be illustrated by the following example:

  (4) Remainders or reversionary interests. If the interest to be valued is a remainder or reversionary interest subject to a life estate, the value of the interest should be obtained by multiplying the value of the property at the date of the gift by the figure in column 4 of Table A opposite the number of years nearest the age of the life tenant. If the remainder or reversion is to take effect at the end of a term for years, column 4 of Table B should be used. The application of this paragraph (d)(4) may be illustrated by the following example:

  (5) Actuarial computations by the Internal Revenue Service. If the interest to be valued is dependent upon the continuation or termination of more than one life, or there is a term certain concurrent with one or more lives, or if the retained interest of the donor is conditioned upon survivorship, a special factor is necessary. The factor is to be computed on the basis of interest at the rate of 10 percent a year, compounded annually, and life contingencies are determined for each person involved from the values of lx that are set forth in column 2 of Table LN in § 20.2031-7A(d)(6) of this chapter. Table LN contains values of lx taken from the life table for the total population appearing as Table 1 in United States Life Tables: 1969-71, published by the Department of Health and Human Services, Public Health Service. A copy of the publication containing many such special factors, may be purchased from the Superintendent of Documents, United States Government Printing Office, Washington, DC 20402. However, if a special factor is required in the case of an actual gift, the Commissioner will furnish the factor to the donor upon request. The request must be accompanied by a statement of the date of birth of each person the duration of whose life may affect the value of the interest, and by copies of the relevant instruments. Special factors are not furnished for prospective transfers.

  (6) Tables. (i) For actuarial factors showing the present worth at 10 percent of a single life annuity, a life interest, and a remainder interest postponed for a single life, see § 20.2031-7A(d)(6) of this chapter, Table A, of the Estate Tax Regulations.

  (ii) For actuarial factors showing the present worth at 10 percent of an annuity for a term certain, an income interest for a term certain, and a remainder interest postponed for a term certain, see § 20.2031-7A(d)(6) of this chapter, Table B, of the Estate Tax Regulations.

  (e) Valuation of annuities, unitrust interests, interests for life or term of years, and remainder or reversionary interests transferred after April 30, 1989, and before May 1, 1999—(1) In general. Except as otherwise provided in §§ 25.2512-5(b) and 25.7520-3(b) (pertaining to certain limitations on the use of prescribed tables), if the valuation date of the transferred interest is after April 30, 1989, and before May 1, 1999, the fair market value of annuities, unitrust interests, life estates, terms of years, remainders, and reversions transferred by gift is the present value of the interests determined by use of standard or special section 7520 actuarial factors and the valuation methodology described in § 25.2512-5(d). Sections 20.2031-7(d)(6) and 20.2031-7A(e)(4) of this chapter and related sections provide tables with standard actuarial factors and examples that illustrate how to use the tables to compute the present value of ordinary annuity, life, and remainder interests in property. These sections also refer to standard and special actuarial factors that may be necessary to compute the present value of similar interests in more unusual fact situations. These factors and examples are also generally applicable for gift tax purposes in computing the values of taxable gifts.

  (2) Transitional rule. (i) If the valuation date of a transfer of an interest in property by gift is after April 30, 1989, and before June 10, 1994, a donor can rely on Notice 89-24 (1989-1 C.B. 660), or Notice 89-60 (1989-1 C.B. 700), in valuing the transferred interest. (See § 601.601(d)(2)(ii)(b) of this chapter.)

  (ii) If a donor transferred an interest in property by gift after December 31, 1988, and before May 1, 1989, retaining an interest in the same property, and after April 30, 1989, and before January 1, 1990, transferred the retained interest in property, the donor may, at the option of the donor, value the transfer of the retained interest under this paragraph (e) or paragraph (d) of this section.

  (3) Publications and actuarial computations by the Internal Revenue Service. Many standard actuarial factors not included in §§ 20.2031-7(d)(6) and 20.2031-7A(e)(4) of this chapter are included in Internal Revenue Service Publication 1457, “Actuarial Values, Alpha Volume,” (8-89). Internal Revenue Service Publication 1457 also includes examples that illustrate how to compute many special factors for more unusual situations. Publication 1457 is no longer available for purchase from the Superintendent of Documents, United States Government Printing Office, Washington, DC 20402. However, pertinent factors in this publication may be obtained from: CC:DOM:CORP:R (IRS Publication 1457), room 5226, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. If a special factor is required in the case of a completed gift, the Internal Revenue Service may furnish the factor to the donor upon a request for a ruling. The request for a ruling must be accompanied by a recitation of the facts including a statement of the date of birth for each measuring life, the date of the gift, any other applicable dates, and a copy of the will, trust, or other relevant documents. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (see §§ 601.201 and 601.601(d)(2)(ii)(b) of this chapter) and include payment of the required user fee.

  (f) Valuation of annuities, unitrust interests, interests for life or term of years, and remainder or reversionary interests transferred after April 30, 1999, and before May 1, 2009—(1) In general. Except as otherwise provided in §§ 25.2512-5(b) and 25.7520-3(b) (pertaining to certain limitations on the use of prescribed tables), if the valuation date of the transferred interest is after April 30, 1999, and before May 1, 2009, the fair market value of annuities, unitrust interests, life estates, terms of years, remainders, and reversions transferred by gift is the present value of the interests determined by use of standard or special section 7520 actuarial factors and the valuation methodology described in § 25.2512-5(d). Sections 20.2031-7(d)(6) and 20.2031-7A(f)(4) and related sections provide tables with standard actuarial factors and examples that illustrate how to use the tables to compute the present value of ordinary annuity, life, and remainder interests in property. These sections also refer to standard and special actuarial factors that may be necessary to compute the present value of similar interests in more unusual fact situations. These factors and examples are also generally applicable for gift tax purposes in computing the values of taxable gifts.

  (2) Transitional rule. If the valuation date of a transfer of property by gift is after April 30, 1999, and before July 1, 1999, the fair market value of the interest transferred is determined by use of the section 7520 interest rate for the month in which the valuation date occurs (see §§ 25.7520-1(b) and 25.7520-2(a)(2)) and the appropriate actuarial tables under either § 20.2031-7A(e)(4) or § 20.2031-7A(f)(4), at the option of the donor. However, with respect to each individual transaction and with respect to all transfers occurring on the valuation date, the donor must use the same actuarial tables (for example, gift and income tax charitable deductions with respect to the same transfer must be determined based on the same tables, and all transfers made on the same date must be valued based on the same tables).

  (3) Publications and actuarial computations by the Internal Revenue Service. Many standard actuarial factors not included in §§ 20.2031-7(d)(6) and 20.2031-7A(f)(4) are included in Internal Revenue Service Publication 1457, “Actuarial Values, Book Aleph,” (7-99). Internal Revenue Service Publication 1457 also includes examples that illustrate how to compute many special factors for more unusual situations. Publication 1457 is no longer available for purchase from the Superintendent of Documents, United States Government Printing Office. However, pertinent factors in this publication may be obtained from: CC:PA:LPD:PR (IRS Publication 1457), Room 5205, Internal Revenue Service, P.O.Box 7604, Ben Franklin Station, Washington, DC 20044. If a special factor is required in the case of a completed gift, the Internal Revenue Service may furnish the factor to the donor upon a request for a ruling. The request for a ruling must be accompanied by a recitation of the facts including a statement of the date of birth for each measuring life, the date of the gift, any other applicable dates, and a copy of the will, trust, or other relevant documents. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (see §§ 601.201 and 601.601(d)(2)(ii)(b)) and include payment of the required user fee.

  (4) Effective/applicability dates. Paragraphs (f)(1) through (f)(3) apply after April 30, 1999, and before May 1, 2009.

  (g) Valuation of annuities, interests for life or a term of years, and remainder or reversionary interests transferred on or after May 1, 2009, and before June 1, 2023—(1) In general. Except as otherwise provided in §§ 25.2512-5(b) and 25.7520-3(b) (pertaining to certain limitations on the use of prescribed tables), if the valuation date of the transferred interest is on or after May 1, 2009, and before June 1, 2023, the fair market value of annuities, interests for life or a term of years, and remainder or reversionary interests transferred by gift is the present value of the interests determined by using standard or special section 7520 actuarial factors and the valuation methodology described in § 25.2512-5(d). Sections 20.2031-7(d)(6) and 20.2031-7A(g)(4) of this chapter and related sections provide tables with standard actuarial factors and examples that illustrate how to use the tables to compute the present value of ordinary annuity, life, term, and remainder interests in property. Sections 20.2031-7(d)(6) and 20.2031-7A(g)(4) of this chapter also refer to standard and special actuarial factors that may be necessary to compute the present value of similar interests in more unusual fact situations. These factors and examples also generally are applicable for gift tax purposes in computing the values of taxable gifts.

  (2) Transitional rule. (i) If the valuation date of a transfer of property by gift is on or after May 1, 2009, and before July 1, 2009, the fair market value of the interest transferred is determined by using the section 7520 interest rate for the month in which the valuation date occurs (see §§ 25.7520-1(b) and 25.7520-2(a)(2)) and the appropriate actuarial tables under either § 20.2031-7A(f)(4) or (g)(4) of this chapter, at the option of the donor.

  (ii) For purposes of paragraph (g)(2)(i) of this section, where the donor is given the option to use either of two appropriate actuarial tables, the donor must consistently use the same mortality basis with respect to each interest (income, remainder, partial, etc.) in the same property, and with respect to all transfers occurring on the same valuation date. For example, gift and income tax charitable deductions with respect to the same transfer must be determined based on factors with the same mortality basis, and all assets includible in the gross estate and/or estate tax deductions claimed must be valued based on factors with the same mortality basis.

  (iii) If the valuation date of a transfer of property by gift is after April 30, 2019, and before June 1, 2023, the fair market value of the interest transferred is determined under § 25.2512-5(d)(3).

  (3) Publications and actuarial computations by the Internal Revenue Service. The factor for determining the present value of a remainder interest that is dependent on the termination of the life of one individual may be computed by using the formula in § 20.2031-7(d)(2)(ii)(B) of this chapter to derive a remainder factor from the appropriate mortality table to at least five decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table S. The factor for determining the present value of a remainder interest following a term certain may be computed by using the formula in § 20.2031-7(d)(2)(ii)(A) of this chapter expressed to at least six decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table B. Adjustment factors for term certain annuities payable at the beginning of each interval may be computed by using the formula in § 20.2031-7(d)(2)(iv)(C) of this chapter expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table J. Adjustment factors for annuities payable at the end of each interval may be computed by using the formula in § 20.2031-7(d)(2)(iv)(B) of this chapter expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table K. These tables are referenced and explained by IRS Publication 1457, Actuarial Values Version 3A, (2009). Publication 1457 includes examples that illustrate how to compute many special factors for more unusual situations. The actuarial tables are available, at no charge, electronically via the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (or a corresponding URL as may be updated from time to time). Table S also can be found in § 20.2031-7A(g)(4) of this chapter, but only for interest rates from 0.2 to 14 percent, inclusive. Tables B, J, and K also can be found in § 20.2031-7(d)(6) of this chapter, but only for interest rates from 4.2 to 14 percent, inclusive. If a particular factor is required in the case of a completed gift, that factor may be calculated by the donor using the actuarial formulas in § 20.2031-7(d)(2) of this chapter or the donor may request a ruling to obtain the factor from the Internal Revenue Service. The request for a ruling must be accompanied by a recitation of the facts including a statement of the date of birth for each measuring life, the date of the gift, any other applicable dates, and a copy of the will, trust, or other relevant documents. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (see §§ 601.201 and 601.601(d)(2)(ii)(b) of this chapter) and must include payment of the required user fee.

  (4) Applicability dates. Paragraphs (g)(1) through (3) of this section apply on and after May 1, 2009, and before June 1, 2023.

• Treas. Reg. §25.2512-5A(a)Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred before January 1, 1952. Show full text ▾ Collapse ▴

  Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred before January 1, 1952. Except as otherwise provided in § 25.2512-5(b), if the transfer was made before January 1, 1952, the present value of annuities, life estates, terms of years, remainders, and reversions is their present value determined under this section. If the valuation of the interest involved is dependent upon the continuation or termination of one or more lives or upon a term certain concurrent with one or more lives, the factor for the present value is computed on the basis of interest at the rate of 4 percent a year, compounded annually, and life contingencies for each life involved from values that are based upon the “Actuaries' or Combined Experience Table of Mortality, as extended.” This table and many additional factors are described in former § 86.19 (as contained in the 26 CFR part 81 edition revised as of April 1, 1958). The present value of an interest measured by a term of years is computed on the basis of interest at the rate of 4 percent a year.

• Treas. Reg. §25.2512-5A(b)Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred after December 31, 1951, and before January 1, 1971. Show full text ▾ Collapse ▴

  Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred after December 31, 1951, and before January 1, 1971. Except as otherwise provided in § 25.2512-5(b), the present value of annuities, life estates, terms of years, remainders, and reversions transferred after December 31, 1951, and before January 1, 1971, is the present value of such interests determined under this section. If the value of the interest involved is dependent upon the continuation or termination of one or more lives, the factor for the present value is computed on the basis of interest at the rate of 3

  1/2 percent a year, compounded annually, and life contingencies for each life involved from U.S. Life Table 38. This table and many accompanying factors are set forth in former § 25.2512-5 (as contained in the 26 CFR part 25 edition revised as of April 1, 1984). Special factors involving one and two lives may be found in or computed with the use of tables contained in Internal Revenue Service Publication Number 11, “Actuarial Values for Estate and Gift Tax,” (Rev. 5-59). This publication is no longer available for purchase from the Superintendent of Documents. However, it may be obtained by requesting a copy from: CC:DOM:CORP:T:R (IRS Publication 11), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. The present value of an interest measured by a term of years is computed on the basis of interest at the rate of 3

  1/2 percent a year.

• Treas. Reg. §25.2512-5A(c)Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred after December 31, 1970, and before December 1, 1983. Show full text ▾ Collapse ▴

  Valuation of annuities, interests for life or term of years, and remainder or reversionary interests transferred after December 31, 1970, and before December 1, 1983. Except as otherwise provided in § 25.2512-5(b), the present value of annuities, life estates, terms of years, remainders, and reversions transferred after December 31, 1970, and before December 1, 1983, is the present value of such interests determined under this section. If the interest to be valued is dependent upon the continuation or termination of one or more lives or upon a term certain concurrent with one or more lives, the factor for the present value is computed on the basis of interest at the rate of 6 percent a year, compounded annually, and life contingencies determined for each male and female life involved, from the values that are set forth in Table LN. Table LN contains values that are taken from the life table for total males and the life table for total females appearing as Tables 2 and 3, respectively, in United States Life Tables: 1959-61, published by the Department of Health and Human Services, Public Health Service. Table LN and accompanying factors are set forth in former § 25.2512-9 (as contained in the 26 CFR part 25 edition revised as of April 1, 1994). Special factors involving one and two lives may be found in or computed with the use of tables contained in Internal Revenue Service Publication 723, entitled “Actuarial Values I: Valuation of Last Survivor Charitable Remainders” (12-70), and Internal Revenue Service Publication 723A, entitled “Actuarial Values II: Factors at 6 Percent Involving One and Two Lives” (12-70). These publications are no longer available for purchase from the Superintendent of Documents. However, a copy of each may be obtained from: CC:DOM:CORP:T:R (IRS Publication 723/723A), room 5228, Internal Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. The present value of an interest measured by a term of years is computed on the basis of interest at the rate of 6 percent a year.