The IRS has issued proposed regs relating to the use of actuarial tables in valuing annuities, interests for life or a term of years, and remainder or reversionary interests. The proposed regs would affect the valuation of inter vivos and testamentary transfers of interests dependent on one or more measuring lives. The proposed regs are necessary because applicable law requires the actuarial tables to be updated to reflect the most recent mortality experience available.
The proposed regs contain Table 2010CM that is based on data compiled from the 2010 census. For transfers for which the valuation date is on or after the applicability date of the Treasury decision adopting the regs as final regs, the appropriate actuarial factors based on Table 2010CM may be computed by taxpayers. However, for the convenience of taxpayers, actuarial factors may be found on IRS websites and publications referenced in the proposed regs.
Transitional rule. The proposed regs provide certain rules to facilitate the transition to the new actuarial tables.
For gift tax purposes, if the date of a transfer is on or after January 1, 2021, and before the applicability date of the Treasury decision adopting these regs as final regs, the donor may choose to determine the value of the gift (and/or any applicable charitable deduction) under tables based on either Table 2000CM or Table 2010CM.
Similarly, for estate tax purposes, if the decedent dies on or after January 1, 2021, and before the applicability date of the Treasury decision adopting these regs as final regs, the value of any interest (and/or any applicable charitable deduction) may be determined in the discretion of the decedent’s executor under tables based on either Table 2000CM or Table 2010CM, provided that the decedent’s executor must use the same mortality table to value all interests in the same property.
However, the Code Sec. 7520 interest rate to be utilized is the appropriate rate for the month in which the valuation date occurs, subject to the following special rule for certain charitable transfers. Specifically, in accordance with this transitional rule and the rules contained in Reg §1.7520-2(a)(2), Reg §20.7520-2(a)(2), and Reg §25.7520-2(a)(2), in cases involving a charitable deduction, if the valuation date occurs on or after January 1, 2021, but before the applicability date of the Treasury decision adopting the regs as final regs, and the executor or donor elects under Code Sec. 7520(a) to use the Code Sec. 7520 interest rate for a month that is prior to January 1, 2021, then the mortality experience contained in Table 2000CM must be used.
If the executor or donor uses the Code Sec. 7520 interest rate for a month that is on or after January 1, 2021, but before the applicability date of the Treasury decision adopting the regs as final regs, then the tables based on either Table 2000CM or Table 2010CM may be used. However, if the valuation date occurs on or after the applicability date of the Treasury decision adopting the regs as final regs, the executor or donor must use the new mortality experience contained in Table 2010CM even if the use of a prior month’s interest rate is elected under Code Sec. 7520(a).
To continue your research on valuation of annuities, life estates, term interests, remainders, and reversions, see FTC 2d/FIN ¶P-6615.
