Contents

§ 11.3 GENERAL ACTUARIAL VALUATIONSpurchased from the government. The tables in these books include two-life actuarialfactors, as well as many one-life factors and term-certain factors not foundin the tables in the regulations. 17 These publications also include a number ofexamples that illustrate how to compute special actuarial factors, such as theannuity, income, or remainder factor for a period limited to the lesser of a termcertain or a lifetime. Special actuarial factors have, for many years, been referredto as such in the regulations. 18Special actuarial factors that may apply to more unusual situations may becomputed by the appropriate person or, upon request, by the IRS, using actuarialmethods consistent with those used to compute the standard actuarial factorsthat appear in the tables in the regulations and in the IRS’s publications. Examplesof these more unusual situations include an annuity payable for more thantwo lives, a right to income for a term certain or until the prior death of the firstto die of two individuals, and the right to receive a remainder after a term certainif an individual survives the term. 19 (There are computer programs that calculateincome and remainder interests.)In calculating a standard actuarial factor, certain assumptions are made.For all standard actuarial factors in the single-life and term-certain tables in theregulations, 20 the interest rate for enjoyment or the postponement of enjoymentis the applicable monthly interest rate. 21 In the case of a life annuity, income, orremainder factor, the basis for mortality rates for measuring lives is the data inan IRS mortality component table. 22 In unusual situations, however, when specialactuarial factors must be computed, one or more alternative assumptionsmay be appropriate. For example, if the actual income is known to be belowapplicable standards, the monthly interest rate may not be used to project thetrust income yield. Similarly, if a measuring life is that of a terminally ill individual,the standard mortality data from the mortality component table maynot be used as the mortality basis. Nevertheless, even though one or both ofthese exceptions is applicable in a case, the monthly interest rate will ordinarilybe used to discount the value of the right to any postponed enjoyment.§ 11.3 GENERAL ACTUARIAL VALUATIONSIn cases requiring the valuation of ordinary annuities, income interests, andremainder and reversionary interests, the courts have consistently recognizedthe need to use the standard actuarial factors prescribed by the federal taxregulations. 23The income tax regulations provide for general actuarial valuations in thisarea, applicable to certain transactions after April 30, 1989. 24 These regulationsstate that the fair market value of annuities, interests for life or for a term of17 See § 11.3, text accompanied by notes 39–42.18 See, e.g., Reg. § 20.2055-2(f)(5).19 See, e.g., Priv. Ltr. Rul. 8601033.20 Reg. § 20.2031-7(d).21 See § 11.1.22 Table 80CNSMT.23 See, e.g., Ithaca Trust v. United States, 279 U.S. 151 (1929).24 Reg. § 1.7520-1(a)(1). 397