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POOLED INCOME FUNDSincome fund is made. 119 The deemed rate of return for transfers to a new pooledincome fund is recomputed each calendar year, using the monthly rates for thethree-year period immediately preceding the calendar year in which each transferto the fund is made; this rate must be used until the fund has been in existencefor three years and can compute its highest rate of return for the threeyears immediately preceding the year in which the transfer of property to thefund is made. 120The regulations set forth the process for requesting a ruling from the IRSsupplying an actuarial factor in the pooled income fund context. 121 Any claimfor a charitable deduction on any return for the value of the remainder interestin property transferred to a pooled income fund must be supported by a statementattached to the appropriate tax return and showing the computation of thepresent value of the interest. 122EXAMPLE 13.5X, an individual aged 66, makes a contribution of $50,000 to a pooled income fund. The giftis made in November 2004 (in that month, the Treasury Department’s interest rate a was 4.2percent). The highest rate of return experienced by the fund in the most recent three years was7 percent. (Thus, the estimated annual return to X is $3,500.) The life estimate factor is0.384960. The remainder interest is 38.4960 percent of the gift. X’s charitable deduction forthis gift is $19,248 (38.4960% of $50,000). baSee note 121 and Appendix J.bThis illustration is adapted from material provided by the Children’s Mercy Hospitals and Clinics, KansasCity, MO.119 Reg. § 1.642(c)-6(e)(3). In 1989, the IRS announced a method for determining the deemed yearly rate of returnfor new pooled income funds. Notice 89-60, 1989-1 C.B. 700. This method defined the deemed rate as thehighest annual average IRC § 7520 interest rate for the preceding three years, reduced by one percentage point.Regulations proposed in 1992 would have defined the deemed rate as the highest annual average IRC § 7520interest rate for the preceding three years, multiplied by 90 percent. Although both methods produced the sameresult for each of the years since the enactment of IRC § 7520, commentators indicated a strong preference forthe method promulgated in 1989 because the computation is simpler than the one proposed in 1992. The IRSwent along with these comments: the final regulations adopted the 1989 method.120 Reg. § 1.642(c)-6(e)(3). The IRS publishes the deemed rates of return for transfers to new pooled incomefunds. Rev. Rul. 94-41, 1994-1 C.B. 181; Rev. Rul. 96-1, 1996-1 C.B. 119; Rev. Rul. 98-4, 1998-1 C.B. 262;Rev. Rul. 2000-1, 2001-1 C.B. 250. A cumulative list of these rates for transfers to pooled income funds after1988 is in Appendix K.121 Reg. § 1.642(c)-6(b).122 Reg. § 1.642(c)-6(a)(3). For further reading about pooled income funds, see Appendix L. 496