[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: 26CFR25.7520-2]

[Page 686-687]
 
                       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.  25.7520-2  Valuation of charitable interests.

    (a) In general--(1) Valuation. Except as otherwise provided in this 
section and in Sec.  25.7520-3 (relating to exceptions to the use of 
prescribed tables under certain circumstances), the fair market value of 
annuities, interests for life or for a term for years, remainders, and 
reversions for which a gift tax charitable deduction is allowable is the 
present value of such interests determined under Sec.  25.7520-1.
    (2) Prior-month election rule. If any part of the property interest 
transferred qualifies for a gift tax charitable deduction under section 
2522, the donor may elect to compute the present value of the interest 
transferred by use of the section 7520 interest rate for the month 
during which the gift is made or the section 7520 interest rate for 
either of the 2 months preceding the month during which the gift is 
made. Paragraph (b) of this section explains how a prior-month election 
is made. The interest rate for the month so elected is the applicable 
section 7520 interest rate. If the actuarial factor for either or both 
of the 2 months preceding the month during which the gift is made is 
based on a mortality experience that is different from the mortality 
experience at the date of the gift and if the donor elects to use the 
section 7520 rate for a prior month with the different mortality 
experience, the donor must use the actuarial factor derived from the 
mortality experience in effect during the month of the section 7520 rate 
elected. All actuarial computations relating to the gift must be made by 
applying the interest rate component and the mortality component of the 
month elected by the donor.
    (3) Gifts of more than one interest in the same property. If a donor 
makes a gift of more than one interest in the same property at the same 
time, the donor must, for purposes of valuing the gifts, use the same 
interest rate and mortality components for the gift of each interest in 
the property. If the donor has made gifts of more than one interest in 
the same property at different times, the donor must determine the value 
of the gift by the use of the interest rate component and mortality 
component in effect during the month of that gift or, if applicable 
under paragraph (a)(2) of this section, either of the two months 
preceding the month of the gift.
    (4) Information required with tax return. The following information 
must be attached to the gift tax return (or to the amended return) if 
the donor claims a charitable deduction for the present value of a 
temporary or remainder interest in property--
    (i) A complete description of the interest that is transferred, 
including a copy of the instrument of transfer;
    (ii) The valuation date of the transfer;
    (iii) The names and identification numbers of the beneficiaries of 
the transferred interest;
    (iv) The names and birthdates of any measuring lives, a description 
of any relevant terminal illness condition of any measuring life, and 
(if applicable) an explanation of how any terminal illness condition was 
taken into account in valuing the interest; and
    (v) A computation of the deduction showing the applicable section 
7520 interest rate that is used to value the transferred interest.
    (5) Place for filing returns. See section 6091 of the Internal 
Revenue Code and the regulations thereunder for the place for filing the 
return or other document required by this section.
    (b) Election of interest rate component--(1) Time for making 
election. A taxpayer makes a prior-month election under paragraph (a)(2) 
of this section by attaching the information described in paragraph 
(b)(2) of this section to the donor's gift tax return or to an amended 
return for that year that is filed within 24 months after the later of 
the date the original return for the year was filed or the due date for 
filing the return.
    (2) Manner of making election. A statement that the prior-month 
election under section 7520(a) of the Internal Revenue Code is being 
made and that identifies the elected month must be

[[Page 687]]

attached to the gift tax return (or to the amended return).
    (3) Revocability. The prior-month election may be revoked by filing 
an amended return within 24 months after the later of the date the 
original return of tax for that year was filed or the due date for 
filing the return. The revocation must be filed in the place referred to 
in paragraph (a)(5) of this section.
    (c) Effective dates. Paragraph (a) of this section is effective as 
of May 1, 1989. Paragraph (b) of this section is effective for elections 
made after June 10, 1994.