Contents

§ 11.4 NONSTANDARD ACTUARIAL FACTORSimminent, the standard actuarial factors prescribed by the regulations may notbe used. 71Income, estate, and gift tax regulations contain exceptions to the use ofstandard valuation tables for valuing annuities, interests for life or a term ofyears, and remainder or reversionary interests. 72 These regulations apply in valuingall interests that would, but for the exceptions, be valued under the generalrules. 73These regulations set forth specific sections of the Internal Revenue Codethat are exempt from the standard valuation rules. The rules describe other areasin which the valuation methodology applicable to standard and special actuarialfactors is not to be used.Generally, if the interest in property that is to be valued is not an ordinaryannuity, income interest, or remainder interest, 74 the standard annuity, income,and remainder factors in the tables of factors set forth in the regulations and IRSpublications cannot be used. In some cases in which the standard factors fromthe regulations and publications tables cannot be used, a special factor may becomputed by the appropriate person or by the IRS. In other instances in whichthe standard or special factors may not be used, the property interest may be valuedusing other valuation techniques. Depending on the facts and circumstances,a property interest that cannot be valued using the standard or specialfactors may not have an ascertainable value.A standard interest factor for an ordinary remainder (or reversionary) interestmay not be used to determine the present value of the interest (whether intrust or otherwise) unless, consistent with the preservation and protection thatthe law of trusts would give a person who is unqualifiedly designated as theremainder beneficiary of a trust for a similar duration, the effect of the administrativeand dispositive provisions for the interest (or interests) that precede theremainder interest is to assure that the property will be adequately preservedand protected (such as from erosion, invasion, depletion, or damage) until theremainder interest takes effect in possession and enjoyment. 75 This degree ofpreservation and protection is provided only if it was the transferor’s intent, asmanifested by the provisions of the arrangement and the surrounding circumstances,that the entire disposition provide the remainder interest beneficiarywith an undiminished interest in the property transferred at the time of terminationof the prior interest. 7671 Rev. Rul. 80-80, 1980-1 C.B. 194. In Shapiro Estate v. Commissioner, 66 T.C.M. (CCH) 1067 (1993), theU.S. Tax Court allowed an individual to value an annuity with a standard one-life annuity actuarial factorfrom Table A in Reg. § 20.2031-7(f), in a situation in which the annuity could have exhausted the fund fromwhich the annuity was to be paid before the death of the annuitant. The IRS is of the view that the annuityfactor that should have been used in this case is a special annuity factor for the right to receive annual paymentsfor four years or until the prior death of the annuitant. See, e.g., Rev. Rul. 77-454, 1977-2 C.B. 351;see also Moffet v. Commissioner, 269 F.2d 738 (4th Cir 1959), and United States v. Dean, 224 F.2d 26 (1stCir. 1955). The IRS refuses to follow the result in Shapiro Estate.72 T.D. 8630.73 See § 11.1.74 These terms are defined in Reg. § 1.7520-3(b)(1). Identical regulations apply in the estate and gift tax contexts.Reg. §§ 20.7520-3, 25.7520-4. From this footnote through note 84, only the income tax regulation is cited.75 Reg. § 1.7520-3(b)(2)(iii).76 Id. 401