Contents
Contents Contents
VALUATION OF PARTIAL INTERESTSthe IRS in the tax regulations or elsewhere. 6 The IRS publishes a revenue rulingeach month, stating the appropriate interest rate. 7Thus, an element of this valuation is made by means of tables prepared bythe IRS 8 using the most recent mortality experience available. 9 These tables mustbe revised at least once every 10 years to take into account the most current mortalityexperience available as of the time of the revision. 10One can make an election to have the present value of the charitable interest(for income, estate, or gift tax charitable contribution purposes) computed byuse of the federal midterm rate for either of the two months preceding themonth in which the transfer is made (or, more technically, in which the valuationdate falls). 11 This is known as the prior-month election rule. Otherwise, the interestrate used is the rate in effect in the month in which the gift is made.An individual makes the prior-month election by so indicating on the appropriatetax return and identifying the elected month. The IRS stated that failure toinclude with the return other information that is required to describe the transfer,whether or not the election is made, will ordinarily not invalidate this election.12 The tax regulations provide that the election is normally made on a timelyfiled tax return for the year of the transfer. 13 The election may also be made orchanged, however, on an amended or supplemented return that is made within24 months after the original return was filed. 14When a person transfers more than one interest in the same property, theperson must use the same rate with respect to each interest. 15§ 11.2 STANDARD ACTUARIAL FACTORSThe actuarial tables that have been set forth in the regulations from time to timehave (to date) listed only those factors most frequently needed by donors anddonees. Generally, these actuarial tables have included the one-life annuity,income, and remainder factors for ages 0 through 109; and the term-certainannuity, income, and remainder factors for periods of 1 through 60 years. Theseone-life and term-certain factors are known as standard actuarial factors or, sometimes,standard section 7520 actuarial factors. A beneficial interest in a pooledincome fund is not ordinarily valued using a standard income or remainderinterest factor; the present value of a beneficial interest in a pooled income fundis determined according to rules and special remainder factors. 16Other standard actuarial factors that are less frequently needed are includedin tables that the IRS publishes from time to time; these books of tables may be6 IRC § 7520(a). For income tax purposes, this rate is the subject of Reg. § 1.7520-1(b)(1)(i).7 Reg. § 601.601(d)(2)(ii)(b). A chart of these interest rates appears as Appendix H.8 IRC § 7520(a)(1).9 IRC § 7520(c)(3).10 Id.11 IRC § 7520(a), second sentence.12 Preamble to federal tax valuation regulations, T.D. 8540.13 Reg. § 1.7520-2(b).14 Reg. § 1.7520-2(b)(1).15 IRC § 7520(a), last sentence.16 See Chapter 13. If, however, the individual who is the measuring life is terminally ill at the time of the transfer,special rules apply (e.g., Reg. § 1.7520-3(b)(2)(iv)). See § 11.4. 396
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- Page 790: § 10.4 CONDITIONAL GIFTSthe costs
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- Page 798: § 10.5 EARMARKING OF GIFTS FOR IND
- Page 802: § 10.8 DENIAL OF DEDUCTION FOR LOB
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- Page 810: § 10.11 CHARITABLE GIVING AND FUND
- Page 814: § 10.13 CONCEPT OF TRUST INCOMEtru
- Page 818: § 10.14 PENALTIESin taxable gifts
- Page 822: § 10.14 PENALTIESrespect to any po
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- Page 830: PARTFOURPlanned Giving
- Page 838: § 11.3 GENERAL ACTUARIAL VALUATION
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VALUATION OF PARTIAL INTERESTSthe IRS in the tax regulations or elsewhere. 6 The IRS publishes a revenue rulingeach month, stating the appropriate interest rate. 7Thus, an element of this valuation is made by means of tables prepared bythe IRS 8 using the most recent mortality experience available. 9 These tables mustbe revised at least once every 10 years to take into account the most current mortalityexperience available as of the time of the revision. 10One can make an election to have the present value of the charitable interest(for income, estate, or gift tax charitable contribution purposes) computed byuse of the federal midterm rate for either of the two months preceding themonth in which the transfer is made (or, more technically, in which the valuationdate falls). 11 This is known as the prior-month election rule. Otherwise, the interestrate used is the rate in effect in the month in which the gift is made.An individual makes the prior-month election by so indicating on the appropriatetax return and identifying the elected month. The IRS stated that failure toinclude with the return other information that is required to describe the transfer,whether or not the election is made, will ordinarily not invalidate this election.12 The tax regulations provide that the election is normally made on a timelyfiled tax return for the year of the transfer. 13 The election may also be made orchanged, however, on an amended or supplemented return that is made within24 months after the original return was filed. 14When a person transfers more than one interest in the same property, theperson must use the same rate with respect to each interest. 15§ 11.2 STANDARD ACTUARIAL FACTORSThe actuarial tables that have been set forth in the regulations from time to timehave (to date) listed only those factors most frequently needed by donors anddonees. Generally, these actuarial tables have included the one-life annuity,income, and remainder factors for ages 0 through 109; and the term-certainannuity, income, and remainder factors for periods of 1 through 60 years. Theseone-life and term-certain factors are known as standard actuarial factors or, sometimes,standard section 7520 actuarial factors. A beneficial interest in a pooledincome fund is not ordinarily valued using a standard income or remainderinterest factor; the present value of a beneficial interest in a pooled income fundis determined according to rules and special remainder factors. 16Other standard actuarial factors that are less frequently needed are includedin tables that the IRS publishes from time to time; these books of tables may be6 IRC § 7520(a). For income tax purposes, this rate is the subject of Reg. § 1.7520-1(b)(1)(i).7 Reg. § 601.601(d)(2)(ii)(b). A chart of these interest rates appears as Appendix H.8 IRC § 7520(a)(1).9 IRC § 7520(c)(3).10 Id.11 IRC § 7520(a), second sentence.12 Preamble to federal tax valuation regulations, T.D. 8540.13 Reg. § 1.7520-2(b).14 Reg. § 1.7520-2(b)(1).15 IRC § 7520(a), last sentence.16 See Chapter 13. If, however, the individual who is the measuring life is terminally ill at the time of the transfer,special rules apply (e.g., Reg. § 1.7520-3(b)(2)(iv)). See § 11.4. 396