[Code of Federal Regulations] [Title 26, Volume 14] [Revised as of April 1, 2004] From the U.S. Government Printing Office via GPO Access [CITE: 26CFR25.7520-1] [Page 684-686] TITLE 26--INTERNAL REVENUE CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED) PART 25_GIFT TAX; GIFTS MADE AFTER DECEMBER 31, 1954--Table of Contents Sec. 25.7520-1 Valuation of annuities, unitrust interests, interests for life or term of years, and remainder or reversionary interests. (a) General actuarial valuations. (1) Except as otherwise provided in this section and in Sec. 25.7520-3(b) (relating to exceptions to the use of prescribed tables under certain circumstances), in the case of gifts made after April 30, 1989, the fair market value of annuities, interests for life or for a term of years (including unitrust interests), remainders, and reversions is their present value determined under this section. See Sec. 20.2031-7(d) (and, for certain prior periods, Sec. 20.2031-7A) of this chapter, Estate Tax Regulations, for the computation of the value of annuities, unitrust interests, life estates, terms of years, remainders, and reversions, other than interests described in paragraphs (a)(2) and (a)(3) of this section. (2) In the case of a gift to a beneficiary of a pooled income fund after April 30, 1999, see Sec. 1.642(c)-6(e) (or, for certain prior periods, Sec. 1.642(c)-6A) of this chapter (Income Tax Regulations) with respect to the valuation of the remainder interest. (3) In the case of a gift to a beneficiary of a charitable remainder annuity trust after April 30, 1989, see Sec. 1.664-2 of this chapter with respect to the valuation of the remainder interest. See Sec. 1.664-4 of this chapter (Income Tax Regulations) with respect to the valuation of the remainder interest in property transferred to a charitable remainder unitrust. (b) Components of valuation--(1) Interest rate component--(i) Section 7520 Interest rate. The section 7520 interest rate is the rate of return, rounded to the nearest two-tenths of one percent, that is equal to 120 percent of the applicable Federal mid-term rate, compounded annually, for purposes of section 1274(d)(1), for the month in which the valuation date falls. In rounding the rate to the nearest two-tenths of a percent, any rate that is midway between one two-tenths of a percent and another is rounded up to the higher of those two rates. For example, if 120 percent of the applicable Federal mid-term rate is 10.30, the section 7520 interest rate component is 10.4. The section 7520 interest rate is published monthly by the Internal Revenue Service in the Internal Revenue Bulletin (See Sec. 601.601(d)(2)(ii)(b) of this chapter). (ii) Valuation date. Generally, the valuation date is the date on which the gift is made. For gift tax purposes, the valuation date is the date on which the gift is complete under Sec. 25.2511-2. For special rules in the case of charitable transfers, see Sec. 25.7520-2. (2) Mortality component. The mortality component reflects the mortality data most recently available from the United States Census. As new mortality data becomes available after each decennial census, the mortality component described in this section will be revised periodically and the mortality component tables will be published in the regulations at that time. For gifts with valuation dates after April 30, 1999, the mortality component table (Table 90CM) is included in Sec. 20.2031-7(d)(7) of this chapter. See Sec. 20.2031-7A of this chapter for mortality component tables applicable to decedent's estates with valuation dates before May 1, 1999. [[Page 685]] (c) Tables. The present value on the valuation date of an annuity, life estate, term of years, remainder, or reversion is computed by using the section 7520 interest rate component that is described in paragraph (b)(1) of this section and the mortality component that is described in paragraph (b)(2) of this section. Actuarial factors for determining these present values are included in tables in these regulations and in publications by the Internal Revenue Service. If a special factor is required in order to value an interest, the Internal Revenue Service will furnish the factor upon a request for a ruling. The request for a ruling must be accompanied by a recitation of the facts, including the date of birth for each measuring life and copies of relevant instruments. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (see Rev. Proc. 94-1, 1994-1 I.R.B. 10, and subsequent updates, and Sec. Sec. 601.201 and 601.601(d)(2)(ii)(b) of this chapter) and include payment of the required user fee. (1) Regulation sections containing tables with interest rates between 4.2 and 14 percent for valuation dates after April 30, 1999. Section 1.642(c)-6(e)(6) of this chapter contains Table S used for determining the present value of a single life remainder interest in a pooled income fund as defined in Sec. 1.642(c)-5 of this chapter. See Sec. 1.642(c)-6A for single life remainder factors applicable to valuation dates before May 1, 1999. Section 1.664-4(e)(6) of this chapter contains Table F (payout factors) and Table D (actuarial factors used in determining the present value of a remainder interest postponed for a term of years). Section 1.664-4(e)(7) of this chapter contains Table U(1) (unitrust single life remainder factors). These tables are used in determining the present value of a remainder interest in a charitable remainder unitrust as defined in Sec. 1.664-3 of this chapter. See Sec. 1.664-4A for unitrust single life remainder factors applicable to valuation dates before May 1, 1999. Section 20.2031- 7(d)(6) of this chapter contains Table B (actuarial factors used in determining the present value of an interest for a term of years), Table K (annuity end-of-interval adjustment factors), Table J (term certain annuity beginning-of-interval adjustment factors). Section 20.2031- 7(d)(7) of this chapter contains Table S (single life remainder factors) and Table 90CM (mortality components). These tables are used in determining the present value of annuities, life estates, remainders, and reversions. See Sec. 20.2031-7A of this chapter for single life remainder factors and mortality components applicable to valuation dates before May 1, 1999. (2) Internal Revenue Service publications containing tables with interest rates between 2.2 and 22 percent for valuation dates after April 30, 1999. The following documents are available for purchase from the Superintendent of Documents, United States Government Printing Office, Washington, DC 20402: (i) Internal Revenue Service Publication 1457, ``Actuarial Values, Book Aleph,'' (7-1999). This publication includes tables of valuation factors, as well as examples that show how to compute other valuation factors, for determining the present value of annuities, life estates, terms of years, remainders, and reversions, measured by one or two lives. These factors may also be used in the valuation of interests in a charitable remainder annuity trust as defined in Sec. 1.664-2 of this chapter and a pooled income fund as defined in Sec. 1.642(c)-5 of this chapter. See Sec. 25-2512-5A for publications containing tables for valuation dates before May 1, 1999. (ii) Internal Revenue Service Publication 1458, ``Actuarial Values, Book Beth,'' (7-1999). This publication includes term certain tables and tables of one and two life valuation factors for determining the present value of remainder interests in a charitable remainder unitrust as defined in Sec. 1.664-3 of this chapter. See Sec. 1.664-4A of this chapter for publications containing tables for valuation dates before May 1, 1999. (iii) Internal Revenue Service Publication 1459, ``Actuarial Values, Book Gimel,'' (7-1999). This publication includes tables for computing depreciation adjustment factors. See Sec. 1.170A-12 of this chapter. [[Page 686]] (d) Effective date. This section applies after April 30, 1989. [T.D. 8540, 59 FR 30177, June 10, 1994, as amended by T.D. 8819, 64 FR 23227, 23229, Apr. 30, 1999; 64 FR 33196, June 22, 1999; T.D. 8886, 65 FR 36943, June 12, 2000]