26 CFR Part 20 — Estate Tax; Estates of Decedents Dying After August 16, 1954

PART 20—ESTATE TAX; ESTATES OF DECEDENTS DYING AFTER AUGUST 16, 1954 Authority: 26 U.S.C. 7805. Section 20.2010-0 also issued under 26 U.S.C. 2010(c)(6). Section 20.2010-1 also issued under 26 U.S.C. 2001(g)(2) and 26 U.S.C. 2010(c)(6). Section 20.2010-2 also issued under 26 U.S.C. 2010(c)(6). Section 20.2010-3 also issued under 26 U.S.C. 2010(c)(6). Section 20.2031-7 also issued under 26 U.S.C. 7520(c)(2). Section 20.2031-7A also issued under 26 U.S.C. 7520(c)(2). Section 20.6060-1 also issued under 26 U.S.C. 6060(a). Section 20.6081-1 also issued under 26 U.S.C. 6081(a). Section 20.6109-1 also issued under 26 U.S.C. 6109(a). Section 20.6109-2 also issued under 26 U.S.C. 6109(a). Section 20.6302-1 also issued under 26 U.S.C. 6302(a) and (h). Section 20.6695-1 also issued under 26 U.S.C. 6695(b). Section 20.7520-1 also issued under 26 U.S.C. 7520(c)(2). Section 20.7520-2 also issued under 26 U.S.C. 7520(c)(2). Section 20.7520-3 also issued under 26 U.S.C. 7520(c)(2). Section 20.7520-4 also issued under 26 U.S.C. 7520(c)(2). Source: T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, unless otherwise noted. Introduction § 20.0-1 Introduction. (a) In general. (2) Section 2208 makes the provisions of chapter 11 of the Code apply to the transfer of the estates of certain decedents dying after September 2, 1958, who were citizens of the United States and residents of a possession thereof at the time of death. Section 2209 makes the provisions of chapter 11 apply to the transfer of the estates of certain other decedents dying after September 14, 1960, who were citizens of the United States and residents of a possession thereof at the time of death. See §§ 20.2208-1 and 20.2209-1. Except as otherwise provided in §§ 20.2208-1 and 20.2209-1, the provisions of these regulations do not apply to the estates of such decedents. (b) Scope of regulations Estates of citizens or residents. (2) Estates of nonresidents not citizens. (3) Miscellaneous substantive provisions. (4) Procedure and administration provisions. (c) Arrangement and numbering. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6526, 26 FR 414, Jan. 19, 1961; T.D. 7238, 37 FR 28717, Dec. 29, 1972; T.D. 7296, 38 FR 34191, Dec. 12, 1973; T.D. 7665, 45 FR 6089, Jan. 25, 1980; T.D. 8522, 59 FR 9646, Mar. 1, 1994; T.D. 9849, 84 FR 9238, Mar. 14, 2019] § 20.0-2 General description of tax. (a) Nature of tax. (b) Method of determining tax; estate of citizen or resident In general. (2) Gross estate. (3) Taxable estate. (4) Gross estate tax. (5) Net estate tax payable. (i) State death taxes paid in connection with the decedent's estate (section 2011); (ii) Gift taxes paid on inter-vivos transfers by the decedent of property included in his gross estate (section 2012); (iii) Foreign death taxes paid in connection with the decedent's estate (section 2014); and (iv) Federal estate taxes paid on transfers of property to the decedent (section 2013). Sections 25.2701-5 and 25.2702-6 of this chapter contain rules that provide additional adjustments to mitigate double taxation in cases where the amount of the decedent's gift was previously determined under the special valuation provisions of sections 2701 and 2702. For a detailed explanation of the credits against tax, see sections 201l through 2016 and the regulations thereunder. (c) Method of determining tax; estate of nonresident not a citizen. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6684, 28 FR 11408, Oct. 24, 1963; T.D. 7296, 38 FR 34191, Dec. 12, 1973; T.D. 8395, 57 FR 4254, Feb. 4, 1992] Estates of Citizens or Residents Tax Imposed § 20.2001-1 Valuation of adjusted taxable gifts and section 2701(d) taxable events. (a) Adjusted taxable gifts made prior to August 6, 1997. (b) Adjusted taxable gifts and section 2701(d) taxable events occurring after August 5, 1997. (c) Finally determined. (1) The amount of the taxable gift as shown on a gift tax return, or on a statement attached to the return, if the Internal Revenue Service does not contest such amount before the time has expired under section 6501 within which gift taxes may be assessed; (2) The amount as specified by the Internal Revenue Service before the time has expired under section 6501 within which gift taxes may be assessed on the gift, if such specified amount is not timely contested by the taxpayer; (3) The amount as finally determined by a court of competent jurisdiction; or (4) The amount as determined pursuant to a settlement agreement entered into between the taxpayer and the Internal Revenue Service. (d) Definitions. (e) Expiration of period of assessment. (f) Effective dates. [T.D. 8845, 64 FR 67769, Dec. 3, 1999] § 20.2001-2 Valuation of adjusted taxable gifts for purposes of determining the deceased spousal unused exclusion amount of last deceased spouse. (a) General rule. (b) Effective/applicability date. [T.D. 9725, 80 FR 34284, June 16, 2015] § 20.2002-1 Liability for payment of tax. The Federal estate tax imposed both with respect to the estates of citizens or residents and with respect to estates of nonresidents not citizens is payable by the executor or administrator of the decedent's estate. This duty applies to the entire tax, regardless of the fact that the gross estate consists in part of property which does not come within the possession of the executor or administrator. If there is no executor or administrator appointed, qualified and acting in the United States, any person in actual or constructive possession of any property of the decedent is required to pay the entire tax to the extent of the value of the property in his possession. See section 2203, defining the term “executor”. The personal liability of the executor or such other person is described in section 3467 of the Revised Statutes (31 U.S.C. 192) as follows: Every executor, administrator, or assignee, or other person, who pays, in whole or in part, any debt due by the person or estate for whom or for which he acts before he satisfies and pays the debts due to the United States from such person or estate, shall become answerable in his own person and estate to the extent of such payments for the debts so due to the United States, or for so much thereof as may remain due and unpaid. As used in said section, the word “debt” includes a beneficiary's distributive share of an estate. Thus, if the executor pays a debt due by the decedent's estate or distributes any portion of the estate before all the estate tax is paid, he is personally liable, to the extent of the payment or distribution, for so much of the estate tax as remains due and unpaid. In addition, section 6324(a)(2) provides that if the estate tax is not paid when due, then the spouse, transferee, trustee (except the trustee of an employee's trust which meets the requirements of section 401(a)), surviving tenant, person in possession of the property by reason of the exercise, nonexercise, or release of a power of appointment, or beneficiary, who receives, or has on the date of the decedent's death, property included in the gross estate under section 2034 through 2042, is personally liable for the tax to the extent of the value, at the time of the decedent's death, of such property. See also the following related sections of the Internal Revenue Code: Section 2204, discharge of executor from personal liability; section 2205, reimbursement out of estate; sections 2206 and 2207, liability of life insurance beneficiaries and recipients of property over which decedent had power of appointment; sections 6321 through 6325, concerning liens for taxes; and section 6901(a)(1), concerning the liabilities of transferees and fiduciaries. § 20.2010-0 Table of contents. This section lists the table of contents for §§ 20.2010-1 through 20.2010-3. § 20.2010-1 Unified credit against estate tax; in general. (a) General rule. (b) Special rule in case of certain gifts made before 1977. (c) Special rule in the case of a difference between the basic exclusion amount applicable to gifts and that applicable at the donor's date of death. (d) Credit limitation. (e) Explanation of terms. (1) Applicable credit amount. (2) Applicable exclusion amount. (3) Basic exclusion amount. (4) Deceased spousal unused exclusion (DSUE) amount. (5) Last deceased spouse. (f) Effective/applicability date. § 20.2010-2 Portability provisions applicable to estate of a decedent survived by a spouse. (a) Election required for portability. (1) Timely filing required. (2) Portability election upon filing of estate tax return. (3) Portability election not made; requirements for election not to apply. (4) Election irrevocable. (5) Estates eligible to make the election. (6) Persons permitted to make the election. (7) Requirements of return. (b) Requirement for DSUE computation on estate tax return. (c) Computation of the DSUE amount. (1) General rule. (2) Special rule to consider gift taxes paid by decedent. (3) Impact of applicable credits. (4) Special rule in case of property passing to qualified domestic trust. (5) Examples. (d) Authority to examine returns of decedent. (e) Effective/applicability date. § 20.2010-3 Portability provisions applicable to the surviving spouse's estate. (a) Surviving spouse's estate limited to DSUE amount of last deceased spouse. (1) In general. (2) No DSUE amount available from last deceased spouse. (3) Identity of last deceased spouse unchanged by subsequent marriage or divorce. (b) Special rule in case of multiple deceased spouses and previously-applied DSUE amount. (1) In general. (2) Example. (c) Date DSUE amount taken into consideration by surviving spouse's estate. (1) General rule. (2) Exception when surviving spouse not a U.S. citizen on date of deceased spouse's death. (3) Special rule when property passes to surviving spouse in a qualified domestic trust. (d) Authority to examine returns of deceased spouses. (e) Availability of DSUE amount for estates of nonresidents who are not citizens. (f) Effective/applicability date. [T.D. 9725, 80 FR 34285, June 16, 2015, as amended by T.D. 9884, 84 FR 64999, Nov. 26, 2019] § 20.2010-1 Unified credit against estate tax; in general. (a) General rule. applicable credit amount. (b) Special rule in case of certain gifts made before 1977. (c) Special rule in the case of a difference between the basic exclusion amount applicable to gifts and that applicable at the donor's date of death. (1) Computational rules. (i) In determining the amounts allowable as a credit: (A) The amount allowable as a credit in computing gift tax payable for any calendar period may not exceed the tentative tax on the gifts made during that period (section 2505(c)); and (B) The amount allowable as a credit in computing the estate tax may not exceed the net tentative tax on the taxable estate (section 2010(d)). (ii) In determining the extent to which an amount allowable as a credit in computing gift tax payable is based solely on the basic exclusion amount: (A) Any deceased spousal unused exclusion (DSUE) amount available to the decedent is deemed to be applied to gifts made by the decedent before the decedent's basic exclusion amount is applied to those gifts (see §§ 20.2010-3(b) and 25.2505-2(b)); (B) In a calendar period in which the applicable exclusion amount allowable with regard to gifts made during that period includes amounts other than the basic exclusion amount, the allowable basic exclusion amount may not exceed that necessary to reduce the tentative gift tax to zero; and (C) In a calendar period in which the applicable exclusion amount allowable with regard to gifts made during that period includes amounts other than the basic exclusion amount, the portion of the credit based solely on the basic exclusion amount is that which corresponds to the result of dividing the basic exclusion amount allocable to those gifts by the applicable exclusion amount allocable to those gifts. (iii) In determining the extent to which an amount allowable as a credit in computing the estate tax is based solely on the basic exclusion amount, the credit is computed as if the applicable exclusion amount were limited to the basic exclusion amount. (2) Examples. (i) Example 1. (ii) Example 2. Example 1 (iii) Example 3. (iv) Example 4. Example 3 (3) [Reserved] (d) Credit limitation. (e) Explanation of terms. (1) Applicable credit amount. applicable credit amount (2) Applicable exclusion amount. applicable exclusion amount (3) Basic exclusion amount. basic exclusion amount (i) For any decedent dying in calendar year 2011 or thereafter, $5,000,000; and (ii) For any decedent dying after calendar year 2011 and before calendar year 2018, $5,000,000 multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year of the decedent's death by substituting “calendar year 2010” for “calendar year 1992” in section 1(f)(3)(B) and by rounding to the nearest multiple of $10,000. For any decedent dying after calendar year 2017, $5,000,000 multiplied by the cost-of-living adjustment determined under section 1(f)(3) for the calendar year of the decedent's death by substituting “calendar year 2010” for “calendar year 2016” in section 1(f)(3)(A)(ii) and rounded to the nearest multiple of $10,000. (iii) For any decedent dying after calendar year 2017, and before calendar year 2026, paragraphs (e)(3)(i) and (ii) of this section will be applied by substituting “$10,000,000” for “$5,000,000.” (4) Deceased spousal unused exclusion (DSUE) amount. DSUE amount (5) Last deceased spouse. last deceased spouse (f) Applicability dates In general. (2) Exceptions. [T.D. 9725, 80 FR 34285, June 16, 2015, as amended by T.D. 9884, 84 FR 64999, Nov. 26, 2019] § 20.2010-2 Portability provisions applicable to estate of a decedent survived by a spouse. (a) Election required for portability. (1) Timely filing required. (2) Portability election upon filing of estate tax return. (3) Portability election not made; requirements for election not to apply. (i) The executor states affirmatively on a timely filed estate tax return, or in an attachment to that estate tax return, that the estate is not electing portability under section 2010(c)(5). The manner in which the executor may make this affirmative statement on the estate tax return is as set forth in the instructions issued with respect to such form (“Instructions for Form 706”). (ii) The executor does not timely file an estate tax return in accordance with paragraph (a)(1) of this section. (4) Election irrevocable. (5) Estates eligible to make the election. (6) Persons permitted to make the election Appointed executor. (ii) Non-appointed executor. (7) Requirements of return General rule. (ii) Reporting of value not required for certain property In general. b ( 1 ( 2 ( 3 ( 4 (B) Return requirements when reporting of value not required for certain property. (C) Examples. Example 1. (i) Facts. (ii) Application. Example 2. (i) Facts. (ii) Application. Example 3. (i) Facts. (ii) Application. (b) Requirement for DSUE computation on estate tax return. (c) Computation of the DSUE amount General rule. (i) The basic exclusion amount in effect in the year of the death of the decedent; or (ii) The excess of— (A) The decedent's applicable exclusion amount; over (B) The sum of the amount of the taxable estate and the amount of the adjusted taxable gifts of the decedent, which together is the amount on which the tentative tax on the decedent's estate is determined under section 2001(b)(1). (2) Special rule to consider gift taxes paid by decedent. (3) Impact of applicable credits. (4) Special rule in case of property passing to qualified domestic trust In general. (ii) Surviving spouse becomes a U.S. citizen. (5) Examples. Example 1. Computation of DSUE amount. Facts. (ii) Application. Example 2. Computation of DSUE amount when gift tax paid. Facts. Example 1 (ii) Application. Example 3. Computation of DSUE amount when QDOT created. Facts. (ii) Application. Example 4. Computation of DSUE amount when surviving spouse with QDOT becomes a U.S. citizen. Facts. Example 3 (ii) Application. (d) Authority to examine returns of decedent. (e) Effective/applicability date. [T.D. 9725, 80 FR 34285, June 16, 2015] § 20.2010-3 Portability provisions applicable to the surviving spouse's estate. (a) Surviving spouse's estate limited to DSUE amount of last deceased spouse In general. (i) Such decedent is the last deceased spouse of such surviving spouse within the meaning of § 20.2010-1(e)(5) on the date of the death of the surviving spouse; and (ii) The executor of the decedent's estate elected portability (see § 20.2010-2(a) and (b) for applicable requirements). (2) No DSUE amount available from last deceased spouse. (3) Identity of last deceased spouse unchanged by subsequent marriage or divorce. (b) Special rule in case of multiple deceased spouses and previously-applied DSUE amount In general. (i) The DSUE amount of the surviving spouse's last deceased spouse as described in paragraph (a)(1) of this section; and (ii) The DSUE amount of each other deceased spouse of the surviving spouse, to the extent that such amount was applied to one or more taxable gifts of the surviving spouse. (2) Example. Example. (i) Facts. (ii) Application. (c) Date DSUE amount taken into consideration by surviving spouse's estate General rule. (i) If the executor of the decedent's estate supersedes the portability election by filing a subsequent estate tax return in accordance with § 20.2010-2(a)(4); (ii) To the extent that the DSUE amount subsequently is reduced by a valuation adjustment or the correction of an error in calculation; or (iii) To the extent that the surviving spouse cannot substantiate the DSUE amount claimed on the surviving spouse's return. (2) Exception when surviving spouse not a U.S. citizen on date of deceased spouse's death. (3) Special rule when property passes to surviving spouse in a qualified domestic trust In general. (ii) Surviving spouse becomes a U.S. citizen. (d) Authority to examine returns of deceased spouses. (e) Availability of DSUE amount for estates of nonresidents who are not citizens. (f) Effective/applicability date. [T.D. 9725, 80 FR 34288, June 16, 2015, as amended by T.D. 9884, 84 FR 65000, Nov. 26, 2019] Credits Against Tax § 20.2011-1 Credit for State death taxes. (a) In general. (b) Amount of credit. Table for Computation of Maximum Credit for State Death Taxes (A)—Taxable estate equal to or more than— (B)—Taxable estate less than— (C)—Credit on amount in column (A) (D)—Rates of credit on excess over amount in column (A) (percent) $40,000 $90,000 0.8 90,000 140,000 $400 1.6 140,000 240,000 1,200 2.4 240,000 440,000 3,600 3.2 440,000 640,000 10,000 4.0 640,000 840,000 18,000 4.8 840,000 1,040,000 27,600 5.6 1,040,000 1,540,000 38,800 6.4 1,540,000 2,040,000 70,800 7.2 2,040,000 2,540,000 106,800 8.0 2,540,000 3,040,000 146,800 8.8 3,040,000 3,540,000 190,800 9.6 3,540,000 4,040,000 238,800 10.4 4,040,000 5,040,000 290,800 11.2 5,040,000 6,040,000 402,800 12.0 6,040,000 7,040,000 522,800 12.8 7,040,000 8,040,000 650,800 13.6 8,040,000 9,040,000 786,800 14.4 9,040,000 10,040,000 930,800 15.2 10,040,000 1,082,800 16.0 (2) Subparagraph (1) of this paragraph may be illustrated by the following example: Example. (i) The decedent died January 1, 1955, leaving a taxable estate of $150,000. On January 1, 1956, inheritance taxes totaling $2,500 were actually paid to a State with respect to property included in the decedent's gross estate. Reference to the table discloses that the specified amount in column (A) nearest to but less than the value of the decedent's taxable estate is $140,000. The maximum credit in respect of this amount, as indicated in column (C), is $1,200. The amount by which the taxable estate exceeds the same specified amount is $10,000. The maximum credit in respect of this amount, computed at the rate of 2.4 percent indicated in column (D), is $240. Thus, the maximum credit in respect of the decedent's taxable estate of $150,000 is $1,440, even though $2,500 in inheritance taxes was actually paid to the State. (ii) If, in subdivision (i) of this example, the amount actually paid to the State was $950, the credit for State death taxes would be limited to $950. If, in subdivision (i) of this example, the decedent's taxable estate was $35,000, no credit for State death taxes would be allowed. (c) Miscellaneous limitations and conditions to credit Period of limitations. (2) Submission of evidence. (d) Definition of “basic estate tax”. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6526, 26 FR 414, Jan. 19, 1961] § 20.2011-2 Limitation on credit if a deduction for State death taxes is allowed under section 2053(d). If a deduction is allowed under section 2053(d) for State death taxes paid with respect to a charitable gift, the credit for State death taxes is subject to special limitations. Under these limitations, the credit cannot exceed the least of the following: (a) The amount of State death taxes paid other than those for which a deduction is allowed under section 2053(d); (b) The amount indicated in section 2011(b) to be the maximum credit allowable with respect to the decedent's taxable estate; or (c) An amount, A, which bears the same ratio to B (the amount which would be the maximum credit allowable under section 2011(b) if the deduction under section 2053(d) for State death taxes were not allowed in computing the decedent's taxable estate) as C (the amount of State death taxes paid other than those for which a deduction is allowed under section 2053(d)) bears to D (the total amount of State death taxes paid). For the purpose of this computation, in determining what the decedent's taxable estate would be if the deduction for State death taxes under section 2053(d) were not allowed, adjustment must be made for the decrease in the deduction for charitable gifts under section 2055 or 2106(a)(2) (for estates of nonresidents not citizens) by reason of any increase in Federal estate tax which would be charged against the charitable gifts. The application of this section may be illustrated by the following example: Example. The decedent died January 1, 1955, leaving a gross estate of $925,000. Expenses, indebtedness, etc., amounted to $25,000. The decedent bequeathed $400,000 to his son with the direction that the son bear the State death taxes on the bequest. The residuary estate was left to a charitable organization. Except as noted above, all Federal and State death taxes were payable out of the residuary estate. The State imposed death taxes of $60,000 on the son's bequest and death taxes of $75,000 on the bequest to charity. No death taxes were imposed by a foreign country with respect to any property in the gross estate. The decedent's taxable estate (determined without regard to the limitation imposed by section 2011(e)(2)(B) is computed as follows: Gross estate $925,000.00 Expenses, indebtedness, etc. $25,000.00 Exemption 60,000.00 Deduction under section 2053(d) 75,000.00 Charitable deduction: Gross estate $925,000.00 Expenses, etc $25,000.00 Bequest to son 400,000.00 State death tax paid from residue 75,000.00 Federal estate tax paid from residue 122,916.67 622,916.67 302,083.33 462,083.33 Taxable estate 462,916.67 If the deduction under section 2053(d) were not allowed, the decedent's taxable estate would be computed as follows: Gross estate $925,000.00 Expenses, indebtedness, etc. $25,000.00 Exemption 60,000.00 Charitable deduction: Gross estate $925,000.00 Expenses, etc $25,000.00 Bequest to son 400,000.00 State death tax paid from residue 75,000.00 Federal estate tax paid from residue 155,000.00 655,000.00 270,000.00 355,000.00 Taxable estate 570,000.00 On a taxable estate of $570,000, the maximum credit allowable under section 2011(b) would be $15,200. Under these facts, the credit for State death taxes is determined as follows: (1) Amount of State death taxes paid other than those for which a deduction is allowed under section 2053(d) ($135,000−$75,000) $60,000.00 (2) Amount indicated in section 2011(b) to be the maximum credit allowable with respect to the decedent's taxable estate of $462,916.67 10,916.67 (3) Amount determined by use of the ratio described in paragraph (c) above [($60,000 ÷ $135,000) × $15,200] 6,755.56 (4) Credit for State death taxes (least of subparagraphs (1) through (3) above) 6,755.56 [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6600, 27 FR 4983, May 29, 1962] § 20.2012-1 Credit for gift tax. (a) In general. (b) Limitations on credit. (1) The amount of gift tax paid on the gift computed as set forth in paragraph (c) of this section, or (2) The amount of the estate tax attributable to the inclusion of the gift in the gross estate, computed as set forth in paragraph (d) of this section. When more than one gift is included in the gross estate, a separate computation of the two limitations on the credit is to be made for each gift. (c) “First limitation”. “Amount of the gift” (C) ÷ Total taxable gifts, plus specific exemption allowed (D) × Total gift tax paid (B). For purposes of the ratio stated above, the “amount of the gift” referred to as factor “C” is the value of the gift reduced by any portion excluded or deducted under sections 2503(b) (annual exclusion), 2522 (charitable deduction), or 2523 (marital deduction) of the Internal Revenue Code or corresponding provisions of prior law. In making the computations described in this paragraph, the values to be used are those finally determined for the purpose of the gift tax, irrespective of the values determined for the purpose of the estate tax. A similar computation is made in case only a portion of any gift is included in the decedent's gross estate. The application of this paragraph may be illustrated by the following example: Example. The donor made gifts during the calendar year 1955 on which a gift tax was determined as shown below: Gift of property to son on February 1 $13,000 Gift of property to wife on May 1 86,000 Gift of property to charitable organization on May 15 10,000 Total gifts 109,000 Less exclusions ($3,000 for each gift) 9,000 Total included amount of gifts 100,000 Marital deduction (for gift to wife) $43,000 Charitable deduction 7,000 Specific exemption ($30,000 less $20,000 used in prior years) 10,000 Total deductions 60,000 Taxable gifts 40,000 Total gift tax paid for calendar year 1955 3,600 The donor's gift to his wife was made in contemplation of death and was thereafter included in his gross estate. Under the “first limitation”, the credit with respect to that gift cannot exceed: [$86,000 − $3,000 − $43,000 (gift to wife, less annual exclusion and marital deduction)] ÷ [$40,000 + $10,000 (taxable gifts, plus specific exemption allowed)] × $3,600 (total gift tax paid) = $2,880. (d) “Second limitation”. “Value of the gift” (G) ÷ Value of gross estate, less marital and charitable deductions (H) × Gross estate tax, less credit for State death taxes (F). (2) For purposes of the ratio stated in subparagraph (1) of this paragraph, the “value of the gift” referred to as factor “G” is the value of the property transferred by gift and included in the gross estate, as determined for the purpose of the gift tax or for the purpose of the estate tax, whichever is lower, and adjusted as follows: (i) The appropriate value is reduced by all or a portion of any annual exclusion allowed for gift tax purposes under section 2503(b) of the Internal Revenue Code or corresponding provisions of prior law. If the gift tax value is lower than the estate tax value, it is reduced by the entire amount of the exclusion. If the estate tax value is lower than the gift tax value, it is reduced by an amount which bears the same ratio to the estate tax value as the annual exclusion bears to the total value of the property as determined for gift tax purposes. To illustrate: In 1955, a donor, in contemplation of death, transferred certain property to his five children which was valued at $300,000, for the purpose of the gift tax. Thereafter, the same property was included in his gross estate at a value of $270,000. In computing his gift tax, the donor was allowed annual exclusions totalling $15,000. The reduction provided for in this subdivision is: $15,000 (annual exclusions allowed) ÷ $300,000 (value of transferred property for the purpose of the gift tax) × $270,000 (value of transferred property for the purpose of the estate tax) = $13,500. (ii) The appropriate value is further reduced if any portion of the value of the property is allowed as a marital deduction under section 2056 or as a charitable deduction under section 2055 or section 2106(a)(2) (for estates of nonresidents not citizens). The amount of the reduction is an amount which bears the same ratio to the value determined under subdivision (i) of this subparagraph as the portion of the property allowed as a marital deduction or as a charitable deduction bears to the total value of the property as determined for the purpose of the estate tax. Thus, if a gift is made solely to the decedent's surviving spouse and is subsequently included in the decedent's gross estate as having been made in contemplation of death, but a marital deduction is allowed under section 2056 for the full value of the gift, no credit for gift tax on the gift will be allowed since the reduction under this subdivision together with the reduction under subdivision (i) of this subparagraph will have the effect of reducing the factor “G” of the ratio in subparagraph (1) of this paragraph to zero. (e) Credit for “split gifts”. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 7238, 37 FR 28718, Dec. 29, 1972; T.D. 8522, 59 FR 9646, Mar. 1, 1994] § 20.2013-1 Credit for tax on prior transfers. (a) In general. (b) Limitations on credit. (1) The amount of the Federal estate tax attributable to the transferred property in the transferor's estate, computed as set forth in § 20.2013-2; or (2) The amount of the Federal estate tax attributable to the transferred property in the decedent's estate, computed as set forth in § 20.2013-3. Rules for valuing property for purposes of the credit are contained in § 20.2013-4. (c) Percentage reduction. (1) 80 percent, if the transferor died within the third or fourth years preceding the present decedent's death; (2) 40 percent, if the transferor died within the fifth or sixth years preceding the present decedent's death; (3) 40 percent, if the transferor died within the seventh or eighth years preceding the present decedent's death; and (4) 20 percent, if the transferor died within the ninth or tenth years preceding the present decedent's death. The word “within” as used in this paragraph means “during”. Therefore, if a death occurs on the second anniversary of another death, the first death is considered to have occurred within the two years before the second death. If the credit for tax on prior transfers relates to property received from two or more transferors, the provisions of this paragraph are to be applied separately with respect to the property received from each transferor. See paragraph (d) of example (2) in § 20.2013-6. (d) Examples. § 20.2013-2 “First limitation”. (a) The amount of the Federal estate tax attributable to the transferred property in the transferor's estate is the “first limitation.” Thus, the credit is limited to an amount, A, which bears the same ratio to B (the “transferor's adjusted Federal estate tax”, computed as described in paragraph (b) of this section) as C (the value of the property transferred (see § 20.2013-4)) bears to D (the “transferor's adjusted taxable estate”, computed as described in paragraph (c) of this section). Stated algebraically, the “first limitation” (A) equals: Value of transferred property (C) ÷ “Transferor's adjusted taxable estate” (D) × “Transferor's adjusted Federal estate tax” (B). (b) For purposes of the ratio stated in paragraph (a) of this section, the “transferor's adjusted Federal estate tax” referred to as factor “B” is the amount of the Federal estate tax paid with respect to the transferor's estate plus: (1) Any credit allowed the transferor's estate for gift tax under section 2012, or the corresponding provisions of prior law; and (2) Any credit allowed the transferor's estate, under section 2013, for tax on prior transfers, but only if the transferor acquired property from a person who died within 10 years before the death of the present decedent. (c)(1) For purposes of the ratio stated in paragraph (a) of this section, the “transferor's adjusted taxable estate” referred to as factor “D” is the amount of the transferor's taxable estate (or net estate) decreased by the amount of any “death taxes” paid with respect to his gross estate and increased by the amount of the exemption allowed in computing his taxable estate (or net estate). The amount of the transferor's taxable estate (or net estate) is determined in accordance with the provisions of § 20.2051-1 in the case of a citizen or resident of the United States or of § 20.2106-1 in the case of a nonresident not a citizen of the United States (or the corresponding provisions of prior regulations). The term “death taxes” means the Federal estate tax plus all other estate, inheritance, legacy, succession, or similar death taxes imposed by, and paid to, any taxing authority, whether within or without the United States. However, only the net amount of such taxes paid is taken into consideration. (2) The amount of the exemption depends upon the citizenship and residence of the transferor at the time of his death. Except in the case of a decedent described in section 2209 (relating to certain residents of possessions of the United States who are considered nonresidents not citizens), if the decedent was a citizen or resident of the United States, the exemption is the $60,000 authorized by section 2052 (or the corresponding provisions of prior law). If the decedent was a nonresident not a citizen of the United States, or is considered under section 2209 to have been such a nonresident, the exemption is the $30,000 or $2,000, as the case may be, authorized by section 2106(a)(3) (or the corresponding provisions of prior law), or such larger amount as is authorized by section 2106(a)(3)(B) or may have been allowed as an exemption pursuant to the prorated exemption provisions of an applicable death tax convention. See § 20.2052-1 and paragraph (a)(3) of § 20.2106-1. (d) If the credit for tax on prior transfers relates to property received from two or more transferors, the provisions of this section are to be applied separately with respect to the property received from each transferor. See paragraph (b) of example (2) in § 20.2013-6. (e) For illustrations of the application of this section, see examples (1) and (2) set forth in § 20.2013-6. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7296, 38 FR 34191, Dec. 12, 1973] § 20.2013-3 “Second limitation”. (a) The amount of the Federal estate tax attributable to the transferred property in the present decedent's estate is the “second limitation”. Thus, the credit is limited to the difference between— (1) The net estate tax payable (see paragraph (b)(5) or (c), as the case may be, of § 20.0-2) with respect to the present decedent's estate, determined without regard to any credit for tax on prior transfers under section 2013 or any credit for foreign death taxes claimed under the provisions of a death tax convention, and (2) The net estate tax determined as provided in subparagraph (1) of this paragraph but computed by subtracting from the present decedent's gross estate the value of the property transferred (see § 20.2013-4), and by making only the adjustment indicated in paragraph (b) of this section if a charitable deduction is allowable to the estate of the present decedent. (b) If a charitable deduction is allowable to the estate of the present decedent under the provisions of section 2055 or section 2106 (a)(2) (for estates of nonresidents not citizens), for purposes of determining the tax described in paragraph (a)(2) of this section, the charitable deduction otherwise allowable is reduced by an amount, E, which bears the same ratio to F (the charitable deduction otherwise allowable) as G (the value of the transferred property (see § 20.2013-4)) bears to H (the value of the present decedent's gross estate reduced by the amount of the deductions for expenses, indebtedness, taxes, losses, etc., allowed under the provisions of sections 2053 and 2054 or section 2106(a)(1) (for estates of nonresidents not citizens)). See paragraph (c)(2) of example (1) and paragraph (c)(2) of example (2) in § 20.2013-6. (c) If the credit for tax on prior transfers relates to property received from two or more transferors, the property received from all transferors is aggregated in determining the limitation on credit under this section (the “second limitation”). However, the limitation so determined is apportioned to the property received from each transferor in the ratio that the property received from each transferor bears to the total property received from all transferors. See paragraph (c) of example (2) in § 20.2013-6. (d) For illustrations of the application of this section, see examples (1) and (2) set forth in § 20.2013-6. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7296, 38 FR 34191, Dec. 12, 1973] § 20.2013-4 Valuation of property transferred. (a) For purposes of section 2013 and §§ 20.2013-1 to 20.2013-6, the value of the property transferred to the decedent is the value at which the property was included in the transferor's gross estate for the purpose of the Federal estate tax (see sections 2031, 2032, 2103, and 2107, and the regulations thereunder) reduced as indicated in paragraph (b) of this section. If the decedent received a life estate or a remainder or other limited interest in property that was included in a transferor decedent's gross estate, the value of the interest is determined as of the date of the transferor's death on the basis of recognized valuation principles (see §§ 20.2031-7 (or, for certain prior periods, § 20.2031-7A) and 20.7520-1 through 20.7520-4). The application of this paragraph may be illustrated by the following examples: Example (1). A died on January 1, 1953, leaving Blackacre to B. The property was included in A's gross estate at a value of $100,000. On January 1, 1955, B sold Blackacre to C for $150,000. B died on February 1, 1955. For purposes of computing the credit against the tax imposed on B's estate, the value of the property transferred to B is $100,000. Example (2). A died on January 1, 1953, leaving Blackacre to B for life and, upon B's death, remainder to C. At the time of A's death, B was 56 years of age. The property was included in A's gross estate at a value of $100,000. The part of that value attributable to the life estate is $44,688 and the part of that value attributable to the remainder is $55,312 (see § 20.2031-7A(b)). B died on January 1, 1955, and C died on January 1, 1956. For purposes of computing the credit against the tax imposed on B's estate, the value of the property transferred to B is $44,688. For purposes of computing the credit against the tax imposed on C's estate, the value of the property transferred to C is $55,312. (b) In arriving at the value of the property transferred to the decedent, the value at which the property was included in the transferor's gross estate (see paragraph (a) of this section) is reduced as follows: (1) By the amount of the Federal estate tax and any other estate, inheritance, legacy, or succession taxes which were payable out of the property transferred to the decedent or which were payable by the decedent in connection with the property transferred to him. For example, if under the transferor's will or local law all death taxes are to be paid out of other property with the result that the decedent receives a bequest free and clear of all death taxes, no reduction is to be made under this subparagraph; (2) By the amount of any marital deduction allowed the transferor's estate under section 2056 (or under section 812(e) of the Internal Revenue Code of 1939) if the decedent was the spouse of the transferor at the time of the transferor's death; (3)(i) By the amount of administration expenses in accordance with the principles of § 20.2056(b)-4(d). (ii) This paragraph (b)(3) applies to transfers from estates of decedents dying on or after December 3, 1999; and (4)(i) By the amount of any encumbrance on the property or by the amount of any obligation imposed by the transferor and incurred by the decedent with respect to the property, to the extent such charges would be taken into account if the amount of a gift to the decedent of such property were being determined. (ii) For purposes of this subparagraph, an obligation imposed by the transferor and incurred by the decedent with respect to the property includes a bequest, etc., in lieu of the interest of the surviving spouse under community property laws, unless the interest was, immediately prior to the transferor's death, a mere expectancy. However, an obligation imposed by the transferor and incurred by the decedent with respect to the property does not include a bequest, devise, or other transfer in lieu of dower, curtesy, or of a statutory estate created in lieu of dower or curtesy, or of other marital rights in the transferor's property or estate. (iii) The application of this subparagraph may be illustrated by the following examples: Example (1). The transferor devised to the decedent real estate subject to a mortgage. The value of the property transferred to the decedent does not include the amount of the mortgage. If, however, the transferor by his will directs the executor to pay off the mortgage, such payment constitutes an additional amount transferred to the decedent. Example (2). The transferor bequeathed certain property to the decedent with a direction that the decedent pay $1,000 to X. The value of the property transferred to the decedent is the value of the property reduced by $1,000. Example (3). The transferor bequeathed certain property to his wife, the decedent, in lieu of her interest in property held by them as community property under the law of the State of their residence. The wife elected to relinquish her community property interest and to take the bequest. The value of the property transferred to the decedent is the value of the property reduced by the value of the community property interest relinquished by the wife. Example (4). The transferor bequeathed to the decedent his entire residuary estate, out of which certain claims were to be satisfied. The entire distributable income of the transferor's estate (during the period of its administration) was applied toward the satisfaction of these claims and the remaining portion of the claims was satisfied by the decedent out of his own funds. Thus, the decedent received a larger sum upon settlement of the transferor's estate than he was actually bequeathed. The value of the property transferred to the decedent is the value at which such property was included in the transferor's gross estate, reduced by the amount of the estate income and the decedent's own funds paid out in satisfaction of the claims. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 7077, 35 FR 18461, Dec. 4, 1970; T.D. 7296, 38 FR 34191, Dec. 12, 1973; T.D. 8522, 59 FR 9646, Mar. 1, 1994; T.D. 8540, 59 FR 30151, June 10, 1994; T.D. 8846, 64 FR 67764, Dec. 3, 1999] § 20.2013-5 “Property” and “transfer” defined. (a) For purposes of section 2013 and §§ 20.2013-1 to 20.2013-6, the term “property” means any beneficial interest in property, including a general power of appointment (as defined in section 2041) over property. Thus, the term does not include an interest in property consisting merely of a bare legal title, such as that of a trustee. Nor does the term include a power of appointment over property which is not a general power of appointment (as defined in section 2041). Examples of property, as described in this paragraph, are annuities, life estates, estates for terms of years, vested or contingent remainders and other future interests. (b) In order to obtain the credit for tax on prior transfers, there must be a transfer of property described in paragraph (a) of this section by or from the transferor to the decedent. The term “transfer” of property by or from a transferor means any passing of property or an interest in property under circumstances which were such that the property or interest was included in the gross estate of the transferor. In this connection, if the decedent receives property as a result of the exercise or nonexercise of a power of appointment, the donee of the power (and not the creator) is deemed to be the transferor of the property if the property subject to the power is includible in the donee's gross estate under section 2041 (relating to powers of appointment). Thus, notwithstanding the designation by local law of the capacity in which the decedent takes, property received from the transferor includes interests in property held by or devolving upon the decedent: (1) As spouse under dower or curtesy laws or laws creating an estate in lieu of dower or curtesy; (2) as surviving tenant of a tenancy by the entirety or joint tenancy with survivorship rights; (3) as beneficiary of the proceeds of life insurance; (4) as survivor under an annuity contract; (5) as donee (possessor) of a general power of appointment (as defined in section 2041); (6) as appointee under the exercise of a general power of appointment (as defined in section 2041); or (7) as remainderman under the release or nonexercise of a power of appointment by reason of which the property is included in the gross estate of the donee of the power under section 2041. (c) The application of this section may be illustrated by the following example: Example: A devises Blackacre to B, as trustee, with directions to pay the income therefore to C, his son, for life. Upon C's death. Blackacre is to be sold. C is given a general testamentary power, to appoint one-third of the proceeds, and a testamentary power, which is not a general power, to appoint the remaining two-thirds of the proceeds, to such of the issue of his sister D as he should choose. D has a daughter, E, and a son, F. Upon his death, C exercised his general power by appointing one-third of the proceeds to D and his special power by appointing two-thirds of the proceeds to E. Since B's interest in Blackacre as a trustee is not a beneficial interest, no part of it is “property” for purpose of the credit in B's estate. On the other hand, C's life estate and his testamentary power over the one-third interest in the remainder constitute “property” received from A for purpose of the credit in C's estate. Likewise, D's one-third interest in the remainder received through the exercise of C's general power of appointment is “property” received from C for purpose of the credit in D's estate. No credit is allowed E's estate for the property which passed to her from C since the property was not included in C's gross estate. On the other hand, no credit is allowed in E's estate for property passing to her from A since her interest was not susceptible of valuation at the time of A's death (see § 20.2013-4). § 20.2013-6 Examples. The application of §§ 20.2013-1 to 20.2013-5 may be further illustrated by the following examples: Example (1). (a) A died December 1, 1953, leaving a gross estate of $1,000,000. Expenses, indebtedness, etc., amounted to $90,000. A bequeathed $200,000 to B, his wife, $100,000 of which qualified for the marital deduction. B died November 1, 1954, leaving a gross estate of $500,000. Expenses, indebtedness, etc., amounted to $40,000. B bequeathed $150,000 to charity. A and B were both citizens of the United States. The estates of A and B both paid State death taxes equal to the maximum credit allowable for State death taxes. Death taxes were not a charge on the bequest to B. (b) “First limitation” on credit for B's estate (§ 20.2013-2): A's gross estate $1,000,000.00 Expenses, indebtedness, etc. 90,000.00 A's adjusted gross estate 910,000.00 Marital deduction $100,000.00 Exemption 60,000.00 160,000.00 A's taxable estate 750,000.00 A's gross estate tax 233,200.00 Credit for State death taxes 23,280.00 A's net estate tax payable 209,920.00 “First limitation” = $209,920.00 (§ 20.2013-2(b)) × [($200,000.00 − $100,000.00) (§ 20.2013-4) ÷ ($750,000.00 − $209,920.00 − $23,280.00 + $60,000.00) (§ 20.2013-2(c))] $36,393.90 (c) “Second limitation” on credit for B's estate (§ 20.2013-3): (1) B's net estate tax payable as described in § 20.2013-3(a)(1) (previously taxed transfer included): B's gross estate $500,000.00 Expenses, indebtedness, etc. $40,000.00 Charitable deduction 150,000.00 Exemption 60,000.00 250,000.00 B's taxable estate 250,000.00 B's gross estate tax $65,700.00 Credit for State death taxes 3,920.00 B's net estate tax payable 61,780.00 (2) B's net estate tax payable as described in § 20.2013-3(a)(2) (previously taxed transfer excluded): B's gross estate $400,000.00 Expenses, indebtedness, etc $40,000.00 Charitable deduction (§ 20.2013-3(b)) = $150,000.00 − [$150,000.00 × ($200,000.00 − $100,000.00 ÷ $500,000.00 − $40,000.00)] 117,391.30 Exemption 60,000.00 217,391.30 B's taxable estate 182,608.70 B's gross estate tax 45,482.61 Credit for State death taxes 2,221.61 B's net estate tax payable 43,260.00 (3) “Second limitation”: Subparagraph (1) $61,780.00 Less: Subparagraph (2) 43,260.00 $18,520.00 (d) Credit of B's estate for tax on prior transfers (§ 20.2013-1(c)): Credit for tax on prior transfers = $18,520.00 (lower of paragraphs (b) and (c)) × 100 percent (percentage to be taken into account under § 20.2013-1(c)) $18,520.00 Example (2). (a) The facts are the same as those contained in example (1) of this paragraph with the following additions. C died December 1, 1950, leaving a gross estate of $250,000. Expenses, indebtedness, etc., amounted to $50,000. C bequeathed $50,000 to B. C was a citizen of the United States. His estate paid State death taxes equal to the maximum credit allowable for State death taxes. Death taxes were not a charge on the bequest to B. (b) “First limitation” on credit for B's estate (§ 20.2013-2(d))− (1) With respect to the property received from A: “First limitation” = $36,393.90 (this computation is identical with the one contained in paragraph (b) of example (1) of this section). (2) With respect to the property received from C: C's gross estate $250,000.00 Expenses, indebtedness, etc. $50,000.00 Exemption $60,000.00 $110,000.00 C's taxable estate 140,000.00 C's gross estate tax 32,700.00 Credit for State death taxes 1,200.00 C's net estate tax payable 31,500.00 “First limitation” = $31,500.00 (§ 20.2013-2(b)) × [$50,000.00 (§ 20.2013-4) ÷ ($140,000.00 − $31,500.00 − $1,200.00 + $60,000.00) (§ 20.2013-2(c))] $9,414.23 (c) “Second limitation” on credit for B's estate (§ 20.2013-3(c)): (1) B's net estate tax payable as described in § 20.2013-3(a)(1) (previously taxed transfers included) = $61,780.00 (this computation is identical with the one contained in paragraph (c)(1) of example (1) of this section). (2) B's net estate tax payable as described in § 20.2013-3(a)(2) (previously taxed transfers excluded): B's gross estate $350,000.00 Expenses, indebtedness, etc $40,000.00 Charitable deduction (§ 20.2013-3(b)) = $150,000.00 − [$150,000.00 × ($200,000.00 − $100,000.00 + $50,000.00) ÷ ($500,000.00 − $40,000.00)] 101,086.96 Exemption 60,000.00 201,086.96 B's taxable estate 148,913.04 B's gross estate tax 35,373.91 Credit for State death taxes 1,413.91 B's net estate tax payable 33,960.00 (3) “Second limitation”: Subparagraph (1) $61,780.00 Less: Subparagraph (2) 33,960.00 $27,820.00 (4) Apportionment of “second limitation” on credit: Transfer from A (§ 20.2013-4) $100,000.00 Transfer from C (§ 20.2013-4) 50,000.00 Total 150,000.00 Portion of “second limitation” attributable to transfer from A (100/150 of $27,820.00) 18,546.67 Portion of “second limitation” attributable to transfer from C (50/150 of $27,820.00) 9,273.33 (d) Credit of B's estate for tax on prior transfers (§ 20.2013-1(c)): Credit for tax on transfer from A= $18,546.67 (lower of “first limitation” computed in paragraph (b)(1) and “second limitation” apportioned to A's transfer in paragraph (c)(4)) × 100 percent (percentage to be taken into account under § 20.2013-1(c)) $18,546.67 Credit for tax on transfer from C= $9,273.33 (lower of “first limitation” computed in paragraph (b)(2) and “second limitation” apportioned to B's transfer in paragraph (c)(4)) × 80 percent (percentage to be taken into account under § 20.2013-1(c)) 7,418.66 Total credit for tax on prior transfers 25,965.33 § 20.2014-1 Credit for foreign death taxes. (a) In general. (2) In addition to the credit for foreign death taxes under section 2014, similar credits are allowed under death tax conventions with certain foreign countries. If credits against the Federal estate tax are allowable under section 2014, or under section 2014 and one or more death tax conventions, for death taxes paid to more than one country, the credits are combined and the aggregate amount is credited against the Federal estate tax, subject to the limitation provided for in paragraph (c) of § 20.2014-4. For application of the credit in cases involving a death tax convention, see § 20.2014-4. (3) No credit is allowable under section 2014 in connection with property situated outside of the foreign country imposing the tax for which credit is claimed. However, such a credit may be allowable under certain death tax conventions. In the case of a tax imposed by a political subdivision of a foreign country, credit for the tax shall be allowed with respect to property having a situs in that foreign country, even though, under the principles described in this subparagraph, the property has a situs in a political subdivision different from the one imposing the tax. Whether or not particular property of a decedent is situated in the foreign country imposing the tax is determined in accordance with the same principles that would be applied in determining whether or not similar property of a nonresident decedent not a citizen of the United States is situated within the United States for Federal estate tax purposes. See §§ 20.2104-1 and 20.2105-1. For example, under § 20.2104-1 shares of stock are deemed to be situated in the United States only if issued by a domestic corporation. Thus, a share of corporate stock is regarded as situated in the foreign country imposing the tax only if the issuing corporation is incorporated in that country. Further, under § 20.2105-1 amounts receivable as insurance on the life of a nonresident not a citizen of the United States at the time of his death are not deemed situated in the United States. Therefore, in determining the credit under section 2014 in the case of a decedent who was a citizen or resident of the United States, amounts receivable as insurance on the life of the decedent and payable under a policy issued by a corporation incorporated in a foreign country are not deemed situated in such foreign country. In addition, under § 20.2105-1 in the case of an estate of a nonresident not a citizen of the United States who died on or after November 14, 1966, a debt obligation of a domestic corporation is not considered to be situated in the United States if any interest thereon would be treated under section 862(a)(1) as income from sources without the United States by reason of section 861(a)(1)(B) (relating to interest received from a domestic corporation less than 20 percent of whose gross income for a 3-year period was derived from sources within the United States). Accordingly, a debt obligation the primary obligor on which is a corporation incorporated in the foreign country imposing the tax is not considered to be situated in that country if, under circumstances corresponding to those described in § 20.2105-1 less than 20 percent of the gross income of the corporation for the 3-year period was derived from sources within that country. Further, under § 20.2104-1 in the case of an estate of a nonresident not a citizen of the United States who died before November 14, 1966, a bond for the payment of money is not situated within the United States unless it is physically located in the United States. Accordingly, in the case of the estate of a decedent dying before November 14, 1966, a bond is deemed situated in the foreign country imposing the tax only if it is physically located in that country. Finally, under § 20.2105-1 moneys deposited in the United States with any person carrying on the banking business by or for a nonresident not a citizen of the United States who died before November 14, 1966, and who was not engaged in business in the United States at the time of death are not deemed situated in the United States. Therefore, an account with a foreign bank in the foreign country imposing the tax is not considered to be situated in that country under corresponding circumstances. (4) Where a deduction is allowed under section 2053(d) for foreign death taxes paid with respect to a charitable gift, the credit for foreign death taxes is subject to further limitations as explained in § 20.2014-7. (b) Limitations on credit. (1) The amount of a particular foreign death tax attributable to property situated in the country imposing the tax and included in the decedent's gross estate for Federal estate tax purposes, computed as set forth in § 20.2014-2; or (2) The amount of the Federal estate tax attributable to particular property situated in a foreign country, subjected to foreign death tax in that country, and included in the decedent's gross estate for Federal estate tax purposes, computed as set forth in § 20.2014-3. (c) Credit allowable to estate of resident not a citizen. (2) In the case of an estate of a decedent dying on or after November 14, 1966, who was a resident but not a citizen of the United States, a credit is allowed to the estate under section 2014 without regard to the similar credit requirement of subparagraph (1) of this paragraph unless the decedent was a citizen or subject of a foreign country with respect to which there is in effect at the time of the decedent's death a Presidential proclamation, as authorized by section 2014(h), reinstating the similar credit requirement. In the case of an estate of a decedent who was a resident of the United States and a citizen or subject of a foreign country with respect to which such a proclamation has been made, and who dies while the proclamation is in effect, a credit is allowed under section 2014 only if that foreign country, in imposing foreign death taxes, allows a similar credit to the estates of citizens of the United States who were resident in that foreign country at the time of death. The proclamation authorized by section 2014(h) for the reinstatement of the similar credit requirement with respect to the estates of citizens or subjects of a specific foreign country may be made by the President whenever he finds that— (i) The foreign country, in imposing foreign death taxes, does not allow a similar credit to the estates of citizens of the United States who were resident in the foreign country at the time of death, (ii) The foreign country, after having been requested to do so, has not acted to provide a similar credit to the estates of such citizens, and (iii) It is in the public interest to allow the credit under section 2014 to the estates of citizens or subjects of the foreign country only if the foreign country allows a similar credit to the estates of citizens of the United States who were resident in the foreign country at the time of death. The proclamation for the reinstatement of the similar credit requirement with respect to the estates of citizens or subjects of a specific foreign country may be revoked by the President. In that case, a credit is allowed under section 2014, to the estate of a decedent who was a citizen or subject of that foreign country and a resident of the United States at the time of death, without regard to the similar credit requirement if the decedent dies after the proclamation reinstating the similar credit requirement has been revoked. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6526, 26 FR 415, Jan. 19, 1961; T.D. 6600, 27 FR 4983, May 29, 1962; T.D. 7296, 38 FR 34192, Dec. 12, 1973] § 20.2014-2 “First limitation”. (a) The amount of a particular foreign death tax attributable to property situated in the country imposing the tax and included in the decedent's gross estate for Federal estate tax purposes is the “first limitation.” Thus, the credit for any foreign death tax is limited to an amount, A, which bears the same ratio to B (the amount of the foreign death tax without allowance of credit, if any, for Federal estate tax), as C (the value of the property situated in the country imposing the foreign death tax, subjected to the foreign death tax, included in the gross estate and for which a deduction is not allowed under section 2053(d)) bears to D (the value of all property subjected to the foreign death tax). Stated algebraically, the “first limitation” (A) equals— Value of property in foreign country subjected to foreign death tax, included in gross estate and for which a deduction is not allowed under section 2053(d)(C) ÷ Value of all property subjected to foreign death tax (D) × Amount of foreign death tax (B) The values used in this proportion are the values determined for the purpose of the foreign death tax. The amount of the foreign death tax for which credit is allowable must be converted into United States money. The application of this paragraph may be illustrated by the following example: Example. At the time of his death on June 1, 1966, the decedent, a citizen of the United States, owned stock in X Corporation (a corporation organized under the laws of Country Y) valued at $80,000. In addition, he owned bonds issued by Country Y valued at $80,000. The stock and bond certificates were in the United States. Decedent left by will $20,000 of the stock and $50,000 of the Country Y bonds to his surviving spouse. He left the rest of the stock and bonds to his son. Under the situs rules referred to in paragraph (a)(3) of § 20.2014-1 the stock is deemed situated in Country Y while the bonds are deemed to have their situs in the United States. (The bonds would be deemed to have their situs in Country Y if the decedent had died on or after November 14, 1966.) There is not death tax convention in existence between the United States and Country Y. The laws of Country Y provide for inheritance taxes computed as follows: Inheritance tax of surviving spouse: Value of stock $20,000 Value of bonds 50,000 Total value 70,000 Tax (16 percent rate) 11,200 Inheritance tax of son: Value of stock 60,000 Value of bonds $30,000 Total value 90,000 Tax (16 percent rate) 14,400 The “first limitation” on the credit for foreign death taxes is: $20,000 + $60,000 (factor C of the ratio stated at § 20.2014−2(a)) ÷ $70,000 + $90,000 (factor D of the ratio stated at § 20.2014−2(a)) × ($11,200 + $14,400) (factor B of the ratio stated at § 20.2014-2(a)) = $12,800 (b) If a foreign country imposes more than one kind of death tax or imposes taxes at different rates upon the several shares of an estate, or if a foreign country and a political subdivision or possession thereof each imposes a death tax, a “first limitation” is to be computed separately for each tax or rate and the results added in order to determine the total “first limitation.” The application of this paragraph may be illustrated by the following example: Example. The facts are the same as those contained in the example set forth in paragraph (a) of this section, except that the tax of the surviving spouse was computed at a 10 percent rate and amounted to $7,000, and the tax of the son was computed at a 20 percent rate and amounted to $18,000. In this case, the “first limitation” on the credit for foreign death taxes is computed as follows: “First limitation” with respect to inheritance tax of surviving spouse: [$20,000 (factor C of the ratio stated at § 20.2014-2(a)) ÷ $70,000 (factor D of the ratio stated at § 20.2014-2(a))] × $7,000 (factor B of the ratio stated at § 20.2014-2(a)) = $2,000. “First limitation” with respect to inheritance tax of son: [$60,000 (factor C of the ratio stated at § 20.2014-2(a)) ÷ $90,000 (factor D of the ratio stated at § 20.2014-2(a))] × $18,000 (factor B of the ratio stated at § 20.2014-2(a)) = 12,000. Total “first limitation” on the credit for foreign death taxes 14,000 [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6600, 27 FR 4984, May 29, 1962; T.D. 6684, 28 FR 11408, Oct. 24, 1963; T.D. 7296, 38 FR 34193, Dec. 12, 1973; 39 FR 2090, Jan. 17, 1974] § 20.2014-3 “Second limitation”. (a) The amount of the Federal estate tax attributable to particular property situated in a foreign country, subjected to foreign death tax in that country, and included in the decedent's gross estate for Federal estate tax purposes is the “second limitation.” Thus, the credit is limited to an amount, E, which bears the same ratio to F (the gross Federal estate tax, reduced by any credit for State death taxes under section 2011 and by any credit for gift tax under section 2012) as G (the “adjusted value of the property situated in the foreign country, subjected to foreign death tax, and included in the gross estate”, computed as described in paragraph (b) of this section) bears to H (the value of the entire gross estate, reduced by the total amount of the deductions allowed under sections 2055 (charitable deduction) and 2056 (marital deduction)). Stated algebraically, the “second limitation” (E) equals: “Adjusted value of the property situated in the foreign country, subjected to foreign death taxes, and included in the gross estate” (G) ÷ Value of entire gross estate, less charitable and marital deductions (H) × Gross Federal estate tax, less credits for State death taxes and gift tax (F) The values used in this proportion are the values determined for the purpose of the Federal estate tax. (b) Adjustment is required to factor “G” of the ratio stated in paragraph (a) of this section if a deduction for foreign death taxes under section 2053(d), a charitable deduction under section 2055, or a marital deduction under section 2056 is allowed with respect to the foreign property. If a deduction for foreign death taxes is allowed, the value of the property situated in the foreign country, subjected to foreign death tax, and included in the gross estate does not include the value of any property in respect of which the deduction for foreign death taxes is allowed. See § 20.2014-7. If a charitable deduction or a marital deduction is allowed, the value of such foreign property (after exclusion of the value of any property in respect of which the deduction for foreign death taxes is allowed) is reduced as follows: (1) If a charitable deduction or a marital deduction is allowed to a decedent's estate with respect to any part of the foreign property, except foreign property in respect of which a deduction for foreign death taxes is allowed, specifically bequeathed, devised, or otherwise specifically passing to a charitable organization or to the decedent's spouse, the value of the foreign property is reduced by the amount of the charitable deduction or marital deduction allowed with respect to such specific transfer. See example (1) of paragraph (c) of this section. (2) If a charitable deduction or a marital deduction is allowed to a decedent's estate with respect to a bequest, devise or other transfer of an interest in a group of assets including both the foreign property and other property, the value of the foreign property is reduced by an amount, I, which bears the same ratio to J (the amount of the charitable deduction or marital deduction allowed with respect to such transfer of an interest in a group of assets) as K (the value of the foreign property, except foreign property in respect of which a deduction for foreign death taxes is allowed, included in the group of assets) bears to L (the value of the entire group of assets). As used in this subparagraph, the term “group of assets” has reference to those assets which, under applicable law, are chargeable with the charitable or marital transfer. See example (2) of paragraph (c) of this section. Any reduction described in paragraph (b)(1) or (b)(2) of this section on account of the marital deduction must proportionately take into account, if applicable, the limitation on the aggregate amount of the marital deduction contained in § 20.2056(a)-1(c). See § 20.2014-3(c), Example 3. (c) The application of paragraphs (a) and (b) of this section may be illustrated by the following examples. In each case, the computations relate to the amount of credit under section 2014 without regard to the amount of credit which may be allowable under an applicable death tax convention. Example (1). (i) Decedent, a citizen and resident of the United States at the time of his death on February 1, 1967, left a gross estate of $1,000,000 which includes the following: shares of stock issued by a domestic corporation, valued at $750,000; bonds issued in 1960 by the United States and physically located in foreign Country X, valued at $50,000; and shares of stock issued by a Country X corporation, valued at $200,000, with respect to which death taxes were paid to Country X. Expenses, indebtedness, etc., amounted to $60,000. Decedent specifically bequeathed $40,000 of the stock issued by the Country X corporation to a U.S. charity and left the residue of his estate, in equal shares, to his son and daughter. The gross Federal estate tax is $266,500, and the credit for State death taxes is $27,600. Under the situs rules referred to in paragraph (a)(3) of § 20.2014-1, the shares of stock issued by the Country X corporation comprise the only property deemed to be situated in Country X. (The bonds also would be deemed to have their situs in Country X if the decedent had died before November 14, 1966.) (ii) The “second limitation” on the credit for foreign death taxes is: [($200,000 − $40,000 (factor G of the ratio stated at § 20.2014-3(a); see also § 20.2014-3(b)(1))) ÷ ($1,000,000 − $40,000 (factor H of the ratio stated at § 20.2014-3(a)))] × ($266,500 − $27,600) (factor F of the ratio stated at § 20.2014-3(a)) = $39,816.67. The lesser of this amount and the amount of the “first limitation” (computed under § 20.2014-2) is the credit for foreign death taxes. Example (2). (i) Decedent, a citizen and resident of the United States at the time of his death, left a gross estate of $1,000,000 which includes: shares of stock issued by a United States corporation, valued at $650,000; shares of stock issued by a Country X corporation, valued at $200,000; and life insurance, in the amount of $150,000, payable to a son. Expenses, indebtedness, etc., amounted to $40,000. The decedent made a specific bequest of $25,000 of the Country X corporation stock to Charity A and a general bequest of $100,000 to Charity B. The residue of his estate was left to his daughter. The gross Federal estate tax is $242,450 and the credit for State death taxes is $24,480. Under these facts and applicable law, neither the stock of the Country X corporation specifically bequeathed to Charity A nor the insurance payable to the son could be charged with satisfying the bequest to Charity B. Therefore, the “group of assets” which could be so charged is limited to stock of the Country X corporation valued at $175,000 and stock of the United States corporation valued at $650,000. (ii) Factor “G” of the ratio which is used in determining the “second limitation” is computed as follows: Value of property situated in Country X $200,000.00 Less: Reduction described in § 20.2014-3(b)(1) $25,000.00 Reduction described in § 20.2014-3(b)(2) = [$175,000 (factor K of the ratio stated at § 20.2014-3 (b)(2)) ÷ ($175,000 + $650,000 (factor L of the ratio stated at § 20.2014-3 (b)(2)))] × $100,000 (factor J of the ratio stated at § 20.2014-3(b)(2)) = 21,212.12 46,212.12 Factor “G” of the ratio 153,787.88 (iii) In this case, the “second limitation” on the credit for foreign death taxes is: [$153,787.88 (factor G of the ratio stated at § 20.2014-3(a); see also subdivision (ii) above) ÷ ($1,000,000 − $125,000 (factor H of the ratio stated at § 20.2014-3(a)))] × ($242,450 − $24,480) (factor F of the ratio stated at § 20.2014-3(a)) = $38,309.88. Example (3). (i) Decedent, a citizen and resident of the United States at the time of his death, left a gross estate of $850,000 which includes: shares of stock issued by United States corporations, valued at $440,000; real estate located in the United States, valued at $110,000; and shares of stock issued by Country X corporations, valued at $300,000. Expenses, indebtedness, etc., amounted to $50,000. Decedent devised $40,000 in real estate to a United States charity. In addition, he bequeathed to his wife $200,000 in United States stocks and $300,000 in Country X stocks. The residue of his estate passed to his children. The gross Federal estate tax is $81,700 and the credit for State death taxes is $5,520. (ii) Decedent's adjusted gross estate is $800,000 (i.e., the $850,000, gross estate less $50,000, expenses, indebtedness, etc.). Assume that the limitation imposed by section 2056(c), as in effect before 1982, is applicable so that the aggregate allowable marital deduction is limited to one-half the adjusted gross estate, or $400,000 (which is 50 percent of $800,000). Factor “G” of the ratio which is used in determining the “second limitation” is computed as follows: Value of property situated in Country X. $300,000 Less: Reduction described in § 20.2014-3 (b)(1) determined as follows (see also end of § 20.2014-3(b))— Total amount of bequests which qualify for the marital deduction: Specific bequest of Country X stock $300,000 Specific bequest of United States stock 200,000 500,000 Limitation on aggregate marital deduction under section 2056(c) 400,000 Part of specific bequest of Country X stock with respect to which the marital deduction is allowed—($400,000 ÷ $500,000 × $300,000) 240,000 Factor “G” of the ratio 60,000 (iii) Thus, the “second limitation” on the credit for foreign death taxes is: [$60,000 (factor G of the ratio stated at § 20.2014-3(a); see also subdivision (ii) above) ÷ ($850,000 − $40,000 − $400,000 (factor H of the ratio stated at § 20.2014-3(a)))] × ($81,700 − $5,520) (factor F of the ratio stated at § 20.2014-3(a)) = $11,148.29. (d) If the foreign country imposes more than one kind of death tax or imposes taxes at different rates upon the several shares of an estate, or if the foreign country and a political subdivision or possession thereof each imposes a death tax, the “second limitation” is still computed by applying the ratio set forth in paragraph (a) of this section. Factor “G” of the ratio is determined by taking into consideration the combined value of the foreign property which is subjected to each different tax or different rate. The combined value, however, cannot exceed the value at which such property was included in the gross estate for Federal estate tax purposes. Thus, if Country X imposes a tax on the inheritance of a surviving spouse at a 10-percent rate and on the inheritance of a son at a 20-percent rate, the combined value of their inheritances is taken into consideration in determining factor “G” of the ratio, which is then used in computing the “second limitation.” However, the “first limitation” is computed as provided in paragraph (b) of § 20.2014-2. The lesser of the “first limitation” and the “second limitation” is the credit for foreign death taxes. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6600, 27 FR 4984, May 29, 1962; T.D. 7296, 38 FR 34193, Dec. 12, 1973; T.D. 8522, 59 FR 9646, Mar. 1, 1994] § 20.2014-4 Application of credit in cases involving a death tax convention. (a) In general. Example. (i) Decedent, a citizen of the United States and a domiciliary of foreign Country X at the time of his death on December 1, 1966, left a gross estate of $1 million which includes the following: Shares of stock issued by a Country X corporation, valued at $400,000; bonds issued in 1962 by the United States and physically located in Country X, valued at $350,000; and real estate located in the United States, valued at $250,000. Expenses, indebtedness, etc., amounted to $50,000. Decedent left his entire estate to his son. There is in effect a death tax convention between the United States and Country X which provides for the allowance of credit by the United States for succession duties imposed by the national government of Country X. The gross Federal estate tax is $307,200, and the credit for State death taxes is $33,760. Country X imposed a net succession duty on the stocks and bonds of $180,000. Under the situs rules referred to in paragraph (a)(3) of § 20.2014-1, the shares of stock comprise the only property deemed to be situated in Country X. (If the decedent has died before November 14, 1966, the bonds also would be deemed to have their situs in Country X.) Under the convention, both the stocks and the bonds are deemed to be situated in Country X. In this example all figures are rounded to the nearest dollar. (ii)( a ( 1 $180,000 ( 2 205,080 ( 3 1 2 180,000 ( b ( 1 $96,000 ( 2 109,376 ( 3 1 2 96,000 (iii) On the basis of the facts contained in this example, the credit of $180,000 authorized by the convention is the more beneficial to the estate. (2) It should be noted that the greater of the treaty credit and the statutory credit is not necessarily the more beneficial to the estate. Such is the situation, for example, in those cases which involve both a foreign death tax credit and a credit under section 2013 for tax on prior transfers. The reason is that the amount of the credit for tax on prior transfers may differ depending upon whether the credit for foreign death tax is taken under the treaty or under the statute. Therefore, under certain circumstances, the advantage of taking the greater of the treaty credit and the statutory credit may be more than offset by a resultant smaller credit for tax on prior transfers. The solution is to compute the net estate tax payable first on the assumption that the treaty credit will be taken and then on the assumption that the statutory credit will be taken. Such computations will indicate whether the treaty credit or the statutory credit is in fact the more beneficial to the estate. (b) Taxes imposed by both a foreign country and a political subdivision thereof. (1) A credit for the combined death taxes paid to the foreign country and its political subdivisions or possessions as provided for by the convention, or (2) A credit for the combined death taxes paid to the foreign country and its political subdivisions or possessions as determined under section 2014, or (3)(i) A credit for that amount of the combined death taxes paid to the foreign country and its political subdivisions or possessions as is allowable under the convention, and (ii) A credit under section 2014 for the death taxes paid to each political subdivision or possession, but only to the extent such death taxes are not directly or indirectly creditable under the convention. whichever is the most beneficial to the estate. The application of this paragraph may be illustrated by the following example: Example. (1) Decedent, a citizen of the United States and a domiciliary of Province Y of foreign Country X at the time of his death on February 1, 1966, left a gross estate of $250,000 which includes the following: Bonds issued by Country X physically located in Province Y, valued at $75,000; bonds issued by Province Z of Country X and physically located in the United States, valued at $50,000; and shares of stock issued by a domestic corporation, valued at $125,000. Decedent left his entire estate to his son. Expenses, indebtedness etc., amounted to $26,000. The Federal estate tax after allowance of the credit for State death taxes is $38,124. Province Y imposed a death tax of 8 percent on the Country X bonds located therein which amounted to $6,000. No death tax was imposed by Province Z. Country X imposed a death tax of 15 percent on the Country X bonds and the Province Z bonds which amounted to $18,750 before allowance of any credit for the death tax of Province Y. Country X allows against its death taxes a credit for death taxes paid to any of its provinces on property which it also taxes, but only to the extent of one-half of the Country X death tax attributable to the property, or the amount of death taxes paid to its province, whichever is less. Country X, therefore, allowed a credit of $5,625 for the death taxes paid to Province Y. There is in effect a death tax convention between the United States and Country X which provides for allowance of credit by the United States for death taxes imposed by the national government of Country X. The death tax convention provides that in computing the “first limitation” for the credit under the convention, the tax of Country X is not to be reduced by the amount of the credit allowed for provincial taxes. Under the situs rules described in paragraph (a)(3) of § 20.2014-1, only the Country X bonds located in Province Y are deemed situated in Country X. (The bonds issued by Province Z also would be deemed to have their situs in Country X if the decedent had died on or after November 14, 1966.) Under the convention, both the Country X bonds and the Province Z bonds are deemed to be situated in Country X. In this example all figures are rounded to the nearest dollar. (2)(i) The credit authorized by section 2014 for death taxes imposed by Country X (which includes death taxes imposed by Province Y according to § 20.2014-1(a)(1)) is computed as follows: ( a ( 1 $11,250 ( 2 5,625 ( 3 5,625 ( b 6,000 ( c 11,625 ( d 11,437 $( e c d 11,437 (ii) The credit authorized under the death tax convention between the United States and Country X is computed as follows: ( a $18,750 ( b 19,062 ( c a b 18,750 (3) If the estate takes a credit for death taxes under the convention, it would receive a credit of $18,750 which would include an indirect credit of $5,625 for death taxes paid to Province Y. The death tax of Province Y which was not directly or indirectly creditable under the convention is $375 ($6,000− $5,625). A credit for this tax would also be allowed under section 2014 but only to the extent of $187, as the amount of credit for the combined foreign death taxes is limited to the amount of Federal estate tax attributable to the property, determined in accordance with the rules prescribed for computing the “second limitation” under section 2014. In this case, the “second limitation” under section 2014 on the taxes attributable to the Country X bonds is $11,437 (see computation set forth in (2)(i)( d (c) Taxes imposed by two foreign countries with respect to the same property. Example. The decedent, a citizen of the United States and a domiciliary of Country X at the time of his death on May 1, 1967, left a taxable estate which included bonds issued by Country Z and physically located in Country X. Each of the three countries involved imposed death taxes on the Country Z bonds. Assume that under the provisions of a treaty between the United States and Country X the estate is entitled to a credit against the Federal estate tax for death taxes imposed by Country X on the bonds in the maximum amount of $20,000. Assume, also, that since the decedent died after November 13, 1966, so that under the situs rules referred to in paragraph (a)(3) of § 20.2014-1 the bonds are deemed to have their situs in Country Z, the estate is entitled to a credit against the Federal estate tax for death taxes imposed by Country Z on the bonds in the maximum amount of $10,000. Finally, assume that the Federal estate tax attributable to the bonds is $25,000. Under these circumstances, the credit allowed the estate with respect to the bonds would be limited to $25,000. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6742, 29 FR 7928, June 23, 1964; T.D. 7296, 38 FR 34193, Dec. 12, 1973] § 20.2014-5 Proof of credit. (a) If the foreign death tax has not been determined and paid by the time the Federal estate tax return required by section 6018 is filed, credit may be claimed on the return in an estimated amount. However, before credit for the foreign death tax is finally allowed, satisfactory evidence, such as a statement by an authorized official of each country, possession or political subdivision thereof imposing the tax, must be submitted on Form 706CE certifying: (1) The full amount of the tax (exclusive of any interest or penalties), as computed before allowance of any credit, remission, or relief; (2) The amount of any credit, allowance, remission, or relief, and other pertinent information, including the nature of the allowance and a description of the property to which it pertains; (3) The net foreign death tax payable after any such allowance; (4) The date on which the death tax was paid, or if not all paid at one time, the date and amount of each partial payment; and (5) A list of the property situated in the foreign country and subjected to its tax, showing a description and the value of the property. Satisfactory evidence must also be submitted showing that no refund of the death tax is pending and none is authorized or, if any refund is pending or has been authorized, its amount and other pertinent information. See also section 2016 and § 20.2016-1 for requirements if foreign death taxes claimed as a credit are subsequently recovered. (b) The following information must also be submitted whenever applicable: (1) If any of the property subjected to the foreign death tax was situated outside of the country imposing the tax, the description of each item of such property and its value. (2) If more than one inheritance or succession is involved with respect to which credit is claimed, or if the foreign country, possession or political subdivision thereof imposes more than one kind of death tax, or if both the foreign country and a possession or political subdivision thereof each imposes a death tax, a separate computation with respect to each inheritance or succession tax. (c) In addition to the information required under paragraphs (a) and (b) of this section, the district director may require the submission of any further proof deemed necessary to establish the right to the credit. § 20.2014-6 Period of limitations on credit. The credit for foreign death taxes under section 2014 is limited to those taxes which were actually paid and for which a credit was claimed within four years after the filing of the estate tax return for the decedent's estate. If, however, a petition has been filed with the Tax Court of the United States for the redetermination of a deficiency within the time prescribed in section 6213(a), the credit is limited to those taxes which were actually paid and for which a credit was claimed within four years after the filing of the return, or before the expiration of 60 days after the decision of the Tax Court becomes final, whichever period is the last to expire. Similarly, if an extension of time has been granted under section 6161 for payment of the tax shown on the return, or of a deficiency, the credit is limited to those taxes which were actually paid and for which a credit was claimed within four years after the filing of the return, or before the date of the expiration of the period of the extension, whichever period is the last to expire. See section 2015 for the applicable period of limitations for credit for foreign death taxes on reversionary or remainder interests if an election is made under section 6163(a) to postpone payment of the estate tax attributable to reversionary or remainder interests. If a claim for refund based on the credit for foreign death taxes is filed within the applicable period described in this section, a refund may be made despite the general limitation provisions of sections 6511 and 6512. Any refund based on the credit for foreign death taxes shall be made without interest. § 20.2014-7 Limitation on credit if a deduction for foreign death taxes is allowed under section 2053(d). If a deduction is allowed under section 2053(d) for foreign death taxes paid with respect to a charitable gift, the credit for foreign death taxes is subject to special limitations. In such a case the property described in subparagraphs (A), (B), and (C) of paragraphs (1) and (2) of section 2014(b) shall not include any property with respect to which a deduction is allowed under section 2053(d). The application of this section may be illustrated by the following example: Example. The decedent, a citizen of the United States, died July 1, 1955, leaving a gross estate of $1,200,000 consisting of: Shares of stock issued by United States corporations, valued at $600,000; bonds issued by the United States Government physically located in the United States, valued at $300,000; and shares of stock issued by a Country X corporation, valued at $300,000. Expenses, indebtedness, etc., amounted to $40,000. The decedent made specific bequests of $400,000 of the United States corporation stock to a niece and $100,000 of the Country X corporation stock to a nephew. The residue of his estate was left to charity. There is no death tax convention in existence between the United States and Country X. The Country X tax imposed was at a 50-percent rate on all beneficiaries. A State inheritance tax of $20,000 was imposed on the niece and nephew. The decedent did not provide in his will for the payment of the death taxes, and under local law the Federal estate tax is payable from the general estate, the same as administration expenses. Distribution of the Estate Gross estate $1,200,000.00 Debts and charges $40,000.00 Bequest of U.S. corporation stock to niece 400,000.00 Bequest of country X corporation stock to nephew 100,000.00 Net Federal estate tax 136,917.88 676,917.88 Residue before country X tax 523,082.12 Country X succession tax on charity 100,000.00 Charitable deduction 423,082.12 Taxable Estate and Federal Estate Tax Gross estate 1,200,000.00 Debts and charges 40,000.00 Deduction of foreign death tax under section 2053(d) 100,000.00 Charitable deduction 423,082.12 Exemption 60,000.00 623,082.12 Taxable estate 576,917.88 Gross estate tax 172,621.26 Credit for State death taxes 15,476.72 Gross estate tax less credit for State death taxes 157,144.54 Credit for foreign death taxes 20,226.66 Net Federal estate tax 136,917.88 Credit for Foreign Death Taxes country x tax Succession tax on nephew: Value of stock of country X corporation 100,000 Tax (50% rate) $50,000 Succession tax on charity: Value of stock of country X corporation 200,000 Tax (50% rate) 100,000 computation of exclusion under section 2014(b) Value of situated in country X 300,000 Value of property in respect of which a deduction is allowed under section 2053(d) 200,000 Value of property situated within country X, subjected to tax, and included in gross estate as limited by section 2014(f) 100,000 First Limitation, § 28.2014-2( a $100,000 (factor C of the ratio stated at § 20.2014-2(a)) ÷ $100,000 + $200,000 (factor D of the ratio stated at § 20.2014 2(a) × $50,000 + $100,000) (factor B of the ratio stated at § 20.2014-2(a)) = $50,000.00 Second Limitation, § 28.2014-3( a $100,000 (factor G of the ratio stated at § 20.2014-3(a)) (as limited by section 2014(f)) ÷ $1,200,000 − $423,082.12 (factor H of the ratio stated at § 20.2014 3(a) × $172,621.26 − $15,476.72) (factor F of the ratio stated at § 20.2014-3(a)) = $20,226.66Z [T.D. 6600, 27 FR 4984, May 27, 1962] § 20.2015-1 Credit for death taxes on remainders. (a) If the executor of an estate elects under section 6163(a) to postpone the time for payment of any portion of the Federal estate tax attributable to a reversionary or remainder interest in property, credit is allowed under sections 2011 and 2014 against that portion of the Federal estate tax for State death taxes and foreign death taxes attributable to the reversionary or remainder interest if the State death taxes or foreign death taxes are paid and if credit therefor is claimed either— (1) Within the time provided for in sections 2011 and 2014, or (2) Within the time for payment of the tax imposed by section 2001 or 2101 as postponed under section 6163(a) and as extended under section 6163(b) (on account of undue hardship) or, if the precedent interest terminated before July 5, 1958, within 60 days after the termination of the preceding interest or interests in the property. The allowance of credit, however, is subject to the other limitations contained in sections 2011 and 2014 and, in the case of the estate of a decedent who was a nonresident not a citizen of the United States, in section 2102(b). (b) In applying the rule stated in paragraph (a) of this section, credit for State death taxes or foreign death taxes paid within the time provided in sections 2011 and 2014 is applied first to the portion of the Federal estate tax payment of which is not postponed, and any excess is applied to the balance of the Federal estate tax. However, credit for State death taxes or foreign death taxes not paid within the time provided in section 2011 and 2014 is allowable only against the portion of the Federal estate tax attributable to the reversionary or remainder interest, and only for State or foreign death taxes attributable to that interest. If a State death tax or a foreign death tax is imposed upon both a reversionary or remainder interest and upon other property, without a definite apportionment of the tax, the amount of the tax deemed attributable to the reversionary or remainder interest is an amount which bears the same ratio to the total tax as the value of the reversionary or remainder interest bears to the value of the entire property with respect to which the tax was imposed. In applying this ratio, adjustments consistent with those required under paragraph (c) of § 20.6163-1 must be made. (c) The application of this section may be illustrated by the following examples: Example (1). One-third of the Federal estate tax was attributable to a remainder interest in real property located in State Y, and two-thirds of the Federal estate tax was attributable to other property located in State X. The payment of the tax attributable to the remainder interest was postponed under the provisions of section 6163(a). The maximum credit allowable for State death taxes under the provisions of section 2011 is $12,000. Therefore, of the maximum credit allowable, $4,000 is attributable to the remainder interest and $8,000 is attributable to the other property. Within the 4-year period provided for in section 2011, inheritance tax in the amount of $9,000 was paid to State X in connection with the other property. With respect to this $9,000, $8,000 (the maximum amount allowable) is allowed as a credit against the Federal estate tax attributable to the other property, and $1,000 is allowed as a credit against the postponed tax. The life estate or other precedent interest expired after July 4, 1958. After the expiration of the 4-year period but before the expiration of the period of postponment elected under section 6163(a) and of the period of extension granted under section 6163(b) for payment of the tax, inheritance tax in the amount of $5,000 was paid to State Y in connection with the remainder interest. As the maximum credit allowable with respect to the remainder interest is $4,000 and $1,000 has already been allowed as a credit, an additional $3,000 will be credited against the Federal estate tax attributable to the remainder interest. It should be noted that if the life estate or other precedent interest had expired after the expiration of the 4-year period but before July 5, 1958, the same result would be reached only if the inheritance tax had been paid to State Y before the expiration of 60 days after the termination of the life estate or other precedent interest. Example (2). The facts are the same as in example (1), except that within the 4-year period inheritance tax in the amount of $2,500 was paid to State Y with respect to the remainder interest and inheritance tax in the amount of $7,500 was paid to State X with respect to the other property. The amount of $8,000 is allowed as a credit against the Federal estate tax attributable to the other property and the amount of $2,000 is allowed as a credit against the postponed tax. The life estate or other precedent interest expired after July 4, 1958. After the expiration of the 4-year period but before the expiration of the period of postponement elected under section 6163(a) and of the period of extension granted under section 6163(b) for payment of the tax, inheritance tax in the amount of $5,000 was paid to State Y in connection with the remainder interest. As the maximum credit allowable with respect to the remainder interest is $4,000 and $2,000 already has been allowed as a credit, an additional $2,000 will be credited against the Federal estate tax attributable to the remainder interest. It should be noted that if the life estate or other precedent interest had expired after the expiration of the 4-year period but before July 5, 1958, the same result would be reached only if the inheritance tax had been paid to State Y before the expiration of 60 days after the termination of the life estate or other precedent interest. Example (3). The facts are the same as in example (2), except that no payment was made to State Y within the 4-year period. The amount of $7,500 is allowed as a credit against the Federal estate tax attributable to the other property. After termination of the life interest additional credit will be allowed in the amount of $4,000 against the Federal estate tax attributable to the remainder interest. Since the payment of $5,000 was made to State Y following the expiration of the 4-year period, no part of the payment may be allowed as a credit against the Federal estate tax attributable to the other property. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6526, 26 FR 415, Jan. 19, 1961; T.D. 7296, 38 FR 34194, Dec. 12, 1973] § 20.2016-1 Recovery of death taxes claimed as credit. In accordance with the provisions of section 2016, the executor (or any other person) receiving a refund of any State death taxes or foreign death taxes claimed as a credit under section 2011 or section 2014 shall notify the district director of the refund within 30 days of its receipt. The notice shall contain the following information: (a) The name of the decedent; (b) The date of the decedent's death; (c) The property with respect to which the refund was made; (d) The amount of the refund, exclusive of interest; (e) The date of the refund; and (f) The name and address of the person receiving the refund. If the refund was in connection with foreign death taxes claimed as a credit under section 2014, the notice shall also contain a statement showing the amount of interest, if any, paid by the foreign country on the refund. Finally, the person filing the notice shall furnish the district director such additional information as he may request. Any Federal estate tax found to be due by reason of the refund is payable by the person or persons receiving it, upon notice and demand, even though the refund is received after the expiration of the period of limitations set forth in section 6501 (see section 6501(c)(5)). If the tax found to be due results from a refund of foreign death tax claimed as a credit under section 2014, such tax shall not bear interest for any period before the receipt of the refund, except to the extent that interest was paid by the foreign country on the refund. Gross Estate § 20.2031-0 Table of contents. This section lists the section headings and undesignated center headings that appear in the regulations in this part under section 2031. 20.2031-1 Definition of gross estate; valuation of property. 20.2031-2 Valuation of stocks and bonds. 20.2031-3 Valuation of interests in businesses. 20.2031-4 Valuation of notes. 20.2031-5 Valuation of cash on hand or on deposit. 20.2031-6 Valuation of household and personal effects. 20.2031-7 Valuation of annuities, interests for life or a term of years, and remainder or reversionary interests. 20.2031-8 Valuation of certain life insurance and annuity contracts; valuation of shares in an open-end investment company. 20.2031-9 Valuation of other property. Actuarial Tables Applicable Before June 1, 2023 20.2031-7A Valuation of annuities, interests for life or a term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is before June 1, 2023. [T.D. 9974, 88 FR 37439, June 7, 2023] § 20.2031-1 Definition of gross estate; valuation of property. (a) Definition of gross estate. (1) Sections 2033 and 2034 are concerned mainly with interests in property passing through the decedent's probate estate. Section 2033 includes in the decedent's gross estate any interest that the decedent had in property at the time of his death. Section 2034 provides that any interest of the decedent's surviving spouse in the decedent's property, such as dower or curtesy, does not prevent the inclusion of such property in the decedent's gross estate. (2) Sections 2035 through 2038 deal with interests in property transferred by the decedent during his life under such circumstances as to bring the interests within the decedent's gross estate. Section 2035 includes in the decedent's gross estate property transferred in contemplation of death, even though the decedent had not interest in, or control over, the property at the time of his death. Section 2036 provides for the inclusion of transferred property with respect to which the decedent retained the income or the power to designate who shall enjoy the income. Section 2037 includes in the decedent's gross estate certain transfers under which the beneficial enjoyment of the property could be obtained only by surviving the decedent. Section 2038 provides for the inclusion of transferred property if the decedent had at the time of his death the power to change the beneficial enjoyment of the property. It should be noted that there is considerable overlap in the application of sections 2036 through 2038 with respect to reserved powers, so that transferred property may be includible in the decedent's gross estate in varying degrees under more than one of those sections. (3) Sections 2039 through 2042 deal with special kinds of property and powers. Sections 2039 and 2040 concern annuities and jointly held property respectively. Section 2041 deals with powers held by the decedent over the beneficial enjoyment of property not originating with the decedent. Section 2042 concerns insurance under policies on the life of the decedent. (4) Section 2043 concerns the sufficiency of consideration for transfers made by the decedent during his life. This has a bearing on the amount to be included in the decedent's gross estate under sections 2035 through 2038, and 2041. Section 2044 deals with retroactivity. (b) Valuation of property in general. (c) Real property situated outside the United States; gross estate of decedent dying after October 16, 1962, and before July 1, 1964 In general. (i) Under section 2033, 2034, 2035(a), 2036(a), 2037(a), or 2038(a) to the extent the real property, or the decedent's interest in it, was acquired by the decedent before February 1, 1962; (ii) Under section 2040 to the extent such property or interest was acquired by the decedent before February 1, 1962, or was held by the decedent and the survivor in a joint tenancy or tenancy by the entirety before February 1, 1962; or (iii) Under section 2041(a) to the extent that before February 1, 1962, such property or interest was subject to a general power of appointment (as defined in section 2041) possessed by the decedent. (2) Certain property treated as acquired before February 1, 1962. (i) Such property, interest, or power was acquired by the decedent by gift within the meaning of section 2511, or from a prior decedent by devise or inheritance, or by reason of death, form of ownership, or other conditions (including the exercise or nonexercise of a power of appointment); and (ii) Before February 1, 1962, the donor or prior decedent had acquired the property or his interest therein or had possessed a power of appointment in respect thereof. (3) Certain property treated as acquired after January 31, 1962. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6684, 28 FR 11408, Oct. 24, 1963; T.D. 6826, 30 FR 7708, June 15, 1965] § 20.2031-2 Valuation of stocks and bonds. (a) In general. (b) Based on selling prices. (2) If it is established with respect to bonds for which there is a market on a stock exchange, that the highest and lowest selling prices are not available for the valuation date in a generally available listing or publication of general circulation but that closing selling prices are so available, the fair market value per bond is the mean between the quoted closing selling price on the valuation date and the quoted closing selling price on the trading day before the valuation date. If there were no sales on the trading day before the valuation date but there were sales on a date within a reasonable period before the valuation date, the fair market value is determined by taking a weighted average of the quoted closing selling price on the valuation date and the quoted closing selling price on the nearest date before the valuation date. The closing selling price for the valuation date is to be weighted by the number of trading days between the previous selling date and the valuation date. If there were no sales within a reasonable period before the valuation date but there were sales on the valuation date, the fair market value is the closing selling price on such valuation date. If there were no sales on the valuation date but there were sales on dates within a reasonable period both before and after the valuation date, the fair market value is determined by taking a weighted average of the quoted closing selling prices on the nearest date before and the nearest date after the valuation date. The average is to be weighted inversely by the respective numbers of trading days between the selling dates and the valuation date. If the bonds are listed on more than one exchange, the records of the exchange where the bonds are principally dealt in should be employed. In valuing listed securities, the executor should be careful to consult accurate records to obtain values as of the applicable valuation date. (3) The application of this paragraph may be illustrated by the following examples: Example (1). Assume that sales of X Company common stock nearest the valuation date (Friday, June 15) occurred two trading days before (Wednesday, June 13) and three trading days after (Wednesday, June 20) and on these days the mean sale prices per share were $10 and $15, respectively. The price of $12 is taken as representing the fair market value of a share of X Company common stock as of the valuation date Example (2). Assume the same facts as in example (1) except that the mean sale prices per share on June 13, and June 20 were $15 and $10, respectively. The price of $13 is taken as representing the fair market value of a share of X Company common stock as of the valuation date Example (3). Assume the decedent died on Sunday, October 7, and that Saturday and Sunday were not trading days. If sales of X Company common stock occurred on Friday, October 5, at mean sale prices per share of $20 and on Monday, October 8, at mean sale prices per share of $23, the price of $21.50 is taken as representing the fair market value of a share of X Company common stock as of the valuation date Example (4). Assume that on the valuation date (Tuesday, April 3, 1973) the closing selling price of a listed bond was $25 per bond and that the highest and lowest selling prices are not available in a generally available listing or publication of general circulation for that date. Assume further, that the closing selling price of the same listed bond was $21 per bond on the day before the valuation date (Monday, April 2, 1973). Thus, under paragraph (b)(2) of this section the price of $23 is taken as representing the fair market value per bond as of the valuation date Example (5). Assume the same facts as in example (4) except that there were no sales on the day before the valuation date. Assume further, that there were sales on Thursday, March 29, 1973, and that the closing selling price on that day was $23. The price of $24.50 is taken as representing the fair market value per bond as of the valuation date Example (6). Assume that no bonds were traded on the valuation date (Friday, April 20). Assume further, that sales of bonds nearest the valuation date occurred two trading days before (Wednesday, April 18) and three trading days after (Wednesday, April 25) the valuation date and that on these two days the closing selling prices per bond were $29 and $22, respectively. The highest and lowest selling prices are not available for these dates in a generally available listing or publication of general circulation. Thus, under paragraph (b)(2) of this section, the price of $26.20 is taken as representing the fair market value of a bond as of the valuation date (c) Based on bid and asked prices. (d) Based on incomplete selling prices or bid and asked prices. (e) Where selling prices or bid and asked prices do not reflect fair market value. (f) Where selling prices or bid and asked prices are unavailable. (1) In the case of corporate or other bonds, the soundness of the security, the interest yield, the date of maturity, and other relevant factors; and (2) In the case of shares of stock, the company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. Some of the “other relevant factors” referred to in subparagraphs (1) and (2) of this paragraph are: The good will of the business; the economic outlook in the particular industry; the company's position in the industry and its management; the degree of control of the business represented by the block of stock to be valued; and the values of securities of corporations engaged in the same or similar lines of business which are listed on a stock exchange. However, the weight to be accorded such comparisons or any other evidentiary factors considered in the determination of a value depends upon the facts of each case. In addition to the relevant factors described above, consideration shall also be given to nonoperating assets, including proceeds of life insurance policies payable to or for the benefit of the company, to the extent such nonoperating assets have not been taken into account in the determination of net worth, prospective earning power and dividend-earning capacity. Complete financial and other data upon which the valuation is based should be submitted with the return, including copies of reports of any examinations of the company made by accountants, engineers, or any technical experts as of or near the applicable valuation date. (g) Pledged securities. (h) Securities subject to an option or contract to purchase. (i) Stock sold “ex-dividend.” (j) Application of chapter 14. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7312, 39 FR 14948, Apr. 29, 1974; T.D. 7327, 39 FR 35354, Oct. 1, 1974; T.D. 7432, 41 FR 38769, Sept. 13, 1976; T.D. 8395, 57 FR 4254, Feb. 4, 1992] § 20.2031-3 Valuation of interests in businesses. The fair market value of any interest of a decedent in a business, whether a partnership or a proprietorship, is the net amount which a willing purchaser whether an individual or a corporation, would pay for the interest to a willing seller, neither being under any compulsion to buy or to sell and both having reasonable knowledge of relevant facts. The net value is determined on the basis of all relevant factors including— (a) A fair appraisal as of the applicable valuation date of all the assets of the business, tangible and intangible, including good will; (b) The demonstrated earning capacity of the business; and (c) The other factors set forth in paragraphs (f) and (h) of § 20.2031-2 relating to the valuation of corporate stock, to the extent applicable. Special attention should be given to determining an adequate value of the good will of the business in all cases in which the decedent has not agreed, for an adequate and full consideration in money or money's worth, that his interest passes at his death to, for example, his surviving partner or partners. Complete financial and other data upon which the valuation is based should be submitted with the return, including copies of reports of examinations of the business made by accountants, engineers, or any technical experts as of or near the applicable valuation date. See section 2701 and the regulations at § 25.2701 of this chapter for special rules for valuing the transfer of an interest in a partnership and for the treatment of unpaid qualified payments at the death of the transferor or an applicable family member. See section 2703 and the regulations at § 25.2703 of this chapter for special rules involving options and agreements (including contracts to purchase) entered into (or substantially modified after) October 8, 1990. See section 2704(b) and the regulations at § 25.2704-2 of this chapter for special valuation rules involving certain restrictions on liquidation rights created after October 8, 1990. [T.D. 8395, 57 FR 4254, Feb. 4, 1992] § 20.2031-4 Valuation of notes. The fair market value of notes, secured or unsecured, is presumed to be the amount of unpaid principal, plus interest accrued to the date of death, unless the executor establishes that the value is lower or that the notes are worthless. However, items of interest shall be separately stated on the estate tax return. If not returned at face value, plus accrued interest, satisfactory evidence must be submitted that the note is worth less than the unpaid amount (because of the interest rate, date of maturity, or other cause), or that the note is uncollectible, either in whole or in part (by reason of the insolvency of the party or parties liable, or for other cause), and that any property pledged or mortgaged as security is insufficient to satisfy the obligation. § 20.2031-5 Valuation of cash on hand or on deposit. The amount of cash belonging to the decedent at the date of his death, whether in his possession or in the possession of another, or deposited with a bank, is included in the decedent's gross estate. If bank checks outstanding at the time of the decedent's death and given in discharge of bona fide legal obligations of the decedent incurred for an adequate and full consideration in money or money's worth are subsequently honored by the bank and charged to the decedent's account, the balance remaining in the account may be returned, but only if the obligations are not claimed as deductions from the gross estate. § 20.2031-6 Valuation of household and personal effects. (a) General rule. (b) Special rule in cases involving a substantial amount of valuable articles. (c) Disposition of household effects prior to investigation. (d) Additional rules if an appraisal involved. § 20.2031-7 Valuation of annuities, interests for life or term of years, and remainder or reversionary interests. (a) In general. (b) Commercial annuities and insurance contracts. (c) Actuarial valuations. Table 1 to Paragraph ( c Valuation dates Applicable After Before 01-01-52 § 20.2031-7A(a) 12-31-51 01-01-71 20.2031-7A(b) 12-31-70 12-01-83 20.2031-7A(c) 11-30-83 05-01-89 20.2031-7A(d) 04-30-89 05-01-99 20.2031-7A(e) 04-30-99 05-01-09 § 20.2031-7A(f) 04-30-09 06-01-23 20.2031-7A(g) (d) Actuarial valuations on or after June 1, 2023 In general. (2) Specific interests Pooled income funds and charitable remainder trusts. (ii) Ordinary remainder and reversionary interests Remainder and reversionary interests for a term of years. https://www.irs.gov/retirement-plans/actuarial-tables Actuarial Valuations Version 4A, Figure 1 to Paragraph (d)(2)(ii)(A) (B) Remainder and reversionary interests dependent on the life of one individual. https://www.irs.gov/retirement-plans/actuarial-tables Actuarial Valuations Version 4A, Figure 2 to Paragraph (d)(2)(ii)(B) (iii) Ordinary interests for a term of years and ordinary interests for life. https://www.irs.gov/retirement-plans/actuarial-tables https://www.irs.gov/retirement-plans/actuarial-tables Actuarial Valuations Version 4A (iv) Annuities. https://www.irs.gov/retirement-plans/actuarial-tables https://www.irs.gov/retirement-plans/actuarial-tables Actuarial Valuations Version 4A (B) If the annuity is payable at the end of semiannual, quarterly, monthly, or weekly periods, the product obtained by multiplying the annuity factor by the aggregate amount payable annually is then multiplied by the applicable adjustment factor at the appropriate interest rate component for payments made at the end of the specified periods. The applicable adjustment factor may be found using the formula in Figure 3 to this paragraph (d)(2)(iv)(B) and calculating the result to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table K. Table K, which is referenced and explained by Publication 1457, can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables 2 Figure 3 to Paragraph (d)(2)(iv)(B) ( 1 Sample factors from actuarial Tables S and K. 2 Table 2 to Paragraph (d)(2)(iv)(B) 1 Factors From Table S—Based on Table 2010CM Age Annuity Life estate Remainder Interest at 3.2 Percent 75 9.4053 0.30097 0.69903 Factors from Table K Adjustment Factors for Annuities Payable at the End of Each Interval Interest rate Semi-annually Quarterly Monthly 3.2% 1.0079 1.0119 1.0146 ( 2 Example. (C) If an annuity is payable at the beginning of annual, semiannual, quarterly, monthly, or weekly periods for a term of years, the value of the annuity is computed by multiplying the aggregate amount payable annually by the annuity factor described in paragraph (d)(2)(iv)(A) of this section; and the product so obtained then is multiplied by the applicable adjustment factor at the appropriate interest rate component for payments made at the beginning of specified periods. The applicable adjustment factor may be found using the formula in Figure 4 to this paragraph (d)(2)(iv)(C) and calculating the result to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table J. Table J, which is referenced and explained by Publication 1457, can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables Figure 4 to Paragraph (d)(2)(iv)(C) (v) Annuity and unitrust interests for a term of years or until the prior death of an individual. (3) Transitional rule. (4) Publications and actuarial computations by the Internal Revenue Service. https://www.irs.gov/retirement-plans/actuarial-tables Actuarial Valuations Version 4A b (5) Examples. Table 3 to Paragraph (d)(5) Age Annuity Life estate Remainder Factors From Table S—Based on Table 2010CM Interest at 3.2 Percent 31 23.8334 0.76267 0.23733 46 20.0146 0.64047 0.35953 Interest at 4.6 Percent 65 11.7691 0.54138 0.45862 Factors from Table B Annuity, Income, and Remainder Interests for a Term Certain Interest at 2.6 Percent Years Annuity Income interest Remainder 5 4.6325 0.120445 0.879555 Factors From Table K Adjustment Factors for Annuities Payable at the End of Each Interval Interest Rate Semi-annually Quarterly Monthly 2.6% 1.0065 1.0097 1.0119 3.2% 1.0079 1.0119 1.0146 (i) Example 1: Remainder payable at an individual's death. (ii) Example 2: Income payable for an individual's life. (iii) Example 3: Annuity payable for an individual's life. (iv) Example 4: Annuity payable for a term of years. (6) Actuarial Table B, Table J, and Table K where the valuation date is after April 30, 1989. Table B—Term Certain Remainder Factors Applicable After April 30, 1989 Years Interest rate 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 6.0% 1 .959693 .957854 .956023 .954198 .952381 .950570 .948767 .946970 .945180 .943396 2 .921010 .917485 .913980 .910495 .907029 .903584 .900158 .896752 .893364 .889996 3 .883887 .878817 .873786 .868793 .863838 .858920 .854040 .849197 .844390 .839619 4 .848260 .841779 .835359 .829001 .822702 .816464 .810285 .804163 .798100 .792094 5 .814069 .806302 .798623 .791031 .783526 .776106 .768771 .761518 .754348 .747258 6 .781257 .772320 .763501 .754801 .746215 .737744 .729384 .721135 .712994 .704961 7 .749766 .739770 .729925 .720230 .710681 .701277 .692015 .682893 .673908 .665057 8 .719545 .708592 .697825 .687242 .676839 .666613 .656561 .646679 .636964 .627412 9 .690543 .678728 .667137 .655765 .644609 .633663 .622923 .612385 .602045 .591898 10 .662709 .650122 .637798 .625730 .613913 .602341 .591009 .579910 .569041 .558395 11 .635997 .622722 .609750 .597071 .584679 .572568 .560729 .549157 .537846 .526788 12 .610362 .596477 .582935 .569724 .556837 .544266 .532001 .520035 .508361 .496969 13 .585760 .571339 .557299 .543630 .530321 .517363 .504745 .492458 .480492 .468839 14 .562150 .547259 .532790 .518731 .505068 .491790 .478885 .466343 .454151 .442301 15 .539491 .524195 .509360 .494972 .481017 .467481 .454350 .441612 .429255 .417265 16 .517746 .502102 .486960 .472302 .458112 .444374 .431072 .418194 .405723 .393646 17 .496877 .480941 .465545 .450670 .436297 .422408 .408987 .396017 .383481 .371364 18 .476849 .460671 .445071 .430028 .415521 .401529 .388033 .375016 .362458 .350344 19 .457629 .441256 .425498 .410332 .395734 .381681 .368153 .355129 .342588 .330513 20 .439183 .422659 .406786 .391538 .376889 .362815 .349291 .336296 .323807 .311805 21 .421481 .404846 .388897 .373605 .358942 .344881 .331396 .318462 .306056 .294155 22 .404492 .387783 .371794 .356494 .341850 .327834 .314417 .301574 .289278 .277505 23 .388188 .371440 .355444 .340166 .325571 .311629 .298309 .285581 .273420 .261797 24 .372542 .355785 .339813 .324586 .310068 .296225 .283025 .270437 .258431 .246979 25 .357526 .340791 .324869 .309719 .295303 .281583 .268525 .256096 .244263 .232999 26 .343115 .326428 .310582 .295533 .281241 .267664 .254768 .242515 .230873 .219810 27 .329285 .312670 .296923 .281998 .267848 .254434 .241715 .229654 .218216 .207368 28 .316012 .299493 .283866 .269082 .255094 .241857 .229331 .217475 .206253 .195630 29 .303275 .286870 .271382 .256757 .242946 .229902 .217582 .205943 .194947 .184557 30 .291051 .274780 .259447 .244997 .231377 .218538 .206434 .195021 .184260 .174110 31 .279319 .263199 .248038 .233776 .220359 .207736 .195858 .184679 .174158 .164255 32 .268061 .252106 .237130 .223069 .209866 .197468 .185823 .174886 .164611 .154957 33 .257256 .241481 .226702 .212852 .199873 .187707 .176303 .165612 .155587 .146186 34 .246887 .231304 .216732 .203103 .190355 .178429 .167270 .156829 .147058 .137912 35 .236935 .221556 .207201 .193801 .181290 .169609 .158701 .148512 .138996 .130105 36 .227385 .212218 .198089 .184924 .172657 .161225 .150570 .140637 .131376 .122741 37 .218220 .203274 .189377 .176454 .164436 .153256 .142856 .133179 .124174 .115793 38 .209424 .194707 .181049 .168373 .156605 .145681 .135537 .126116 .117367 .109239 39 .200983 .186501 .173087 .160661 .149148 .138480 .128593 .119428 .110933 .103056 40 .192882 .178641 .165475 .153302 .142046 .131635 .122004 .113095 .104851 .097222 41 .185107 .171112 .158198 .146281 .135282 .125128 .115754 .107098 .099103 .091719 42 .177646 .163900 .151241 .139581 .128840 .118943 .109823 .101418 .093670 .086527 43 .170486 .156992 .144590 .133188 .122704 .113064 .104197 .096040 .088535 .081630 44 .163614 .150376 .138231 .127088 .116861 .107475 .098858 .090947 .083682 .077009 45 .157019 .144038 .132152 .121267 .111297 .102163 .093793 .086124 .079094 .072650 46 .150690 .137968 .126340 .115713 .105997 .097113 .088988 .081557 .074758 .068538 47 .144616 .132153 .120784 .110413 .100949 .092312 .084429 .077232 .070660 .064658 48 .138787 .126583 .115473 .105356 .096142 .087749 .080103 .073136 .066786 .060998 49 .133193 .121248 .110395 .100530 .091564 .083412 .075999 .069258 .063125 .057546 50 .127824 .116138 .105540 .095926 .087204 .079289 .072106 .065585 .059665 .054288 51 .122672 .111243 .100898 .091532 .083051 .075370 .068411 .062107 .056394 .051215 52 .117728 .106555 .096461 .087340 .079096 .071644 .064907 .058813 .053302 .048316 53 .112982 .102064 .092219 .083340 .075330 .068103 .061581 .055695 .050380 .045582 54 .108428 .097763 .088164 .079523 .071743 .064737 .058426 .052741 .047618 .043001 55 .104058 .093642 .084286 .075880 .068326 .061537 .055433 .049944 .045008 .040567 56 .099864 .089696 .080580 .072405 .065073 .058495 .052593 .047296 .042541 .038271 57 .095839 .085916 .077036 .069089 .061974 .055604 .049898 .044787 .040208 .036105 58 .091976 .082295 .073648 .065924 .059023 .052855 .047342 .042412 .038004 .034061 59 .088268 .078826 .070409 .062905 .056212 .050243 .044916 .040163 .035921 .032133 60 .084710 .075504 .067313 .060024 .053536 .047759 .042615 .038033 .033952 .030314 Table B—Term Certain Remainder Factors Applicable After April 30, 1989 Years Interest rate 6.2% 6.4% 6.6% 6.8% 7.0% 7.2% 7.4% 7.6% 7.8% 8.0% 1 .941620 .939850 .938086 .936330 .934579 .932836 .931099 .929368 .927644 .925926 2 .886647 .883317 .880006 .876713 .873439 .870183 .866945 .863725 .860523 .857339 3 .834885 .830185 .825521 .820892 .816298 .811738 .807211 .802718 .798259 .793832 4 .786144 .780249 .774410 .768626 .762895 .757218 .751593 .746021 .740500 .735030 5 .740248 .733317 .726464 .719687 .712986 .706360 .699808 .693328 .686920 .680583 6 .697032 .689208 .681486 .673864 .666342 .658918 .651590 .644357 .637217 .630170 7 .656339 .647752 .639292 .630959 .622750 .614662 .606694 .598845 .591111 .583490 8 .618022 .608789 .599711 .590786 .582009 .573379 .564892 .556547 .548340 .540269 9 .581942 .572170 .562581 .553170 .543934 .534868 .525971 .517237 .508664 .500249 10 .547968 .537754 .527750 .517950 .508349 .498944 .489731 .480704 .471859 .463193 11 .515977 .505408 .495075 .484972 .475093 .465433 .455987 .446750 .437717 .428883 12 .485854 .475007 .464423 .454093 .444012 .434173 .424569 .415196 .406046 .397114 13 .457490 .446436 .435669 .425181 .414964 .405012 .395316 .385870 .376666 .367698 14 .430781 .419582 .408695 .398109 .387817 .377810 .368078 .358615 .349412 .340461 15 .405632 .394344 .383391 .372762 .362446 .352434 .342717 .333285 .324130 .315242 16 .381951 .370624 .359654 .349028 .338735 .328763 .319103 .309745 .300677 .291890 17 .359653 .348331 .337386 .326805 .316574 .306682 .297117 .287867 .278921 .270269 18 .338656 .327379 .316498 .305997 .295864 .286084 .276645 .267534 .258739 .250249 19 .318885 .307687 .296902 .286514 .276508 .266870 .257584 .248638 .240018 .231712 20 .300268 .289179 .278520 .268272 .258419 .248946 .239836 .231076 .222651 .214548 21 .282739 .271785 .261276 .251191 .241513 .232225 .223311 .214755 .206541 .198656 22 .266232 .255437 .245099 .235197 .225713 .216628 .207925 .199586 .191596 .183941 23 .250689 .240073 .229924 .220222 .210947 .202078 .193598 .185489 .177733 .170315 24 .236054 .225632 .215689 .206201 .197147 .188506 .180259 .172387 .164873 .157699 25 .222273 .212060 .202334 .193072 .184249 .175845 .167839 .160211 .152943 .146018 26 .209297 .199305 .189807 .180779 .172195 .164035 .156275 .148895 .141877 .135202 27 .197078 .187317 .178056 .169269 .160930 .153017 .145507 .138379 .131611 .125187 28 .185572 .176049 .167031 .158491 .150402 .142740 .135482 .128605 .122088 .115914 29 .174739 .165460 .156690 .148400 .140563 .133153 .126147 .119521 .113255 .107328 30 .164537 .155507 .146989 .138951 .131367 .124210 .117455 .111079 .105060 .099377 31 .154932 .146154 .137888 .130104 .122773 .115868 .109362 .103233 .097458 .092016 32 .145887 .137362 .129351 .121820 .114741 .108085 .101827 .095942 .090406 .085200 33 .137370 .129100 .121342 .114064 .107235 .100826 .094811 .089165 .083865 .078889 34 .129350 .121335 .113830 .106802 .100219 .094054 .088278 .082867 .077797 .073045 35 .121798 .114036 .106782 .100001 .093663 .087737 .082196 .077014 .072168 .067635 36 .114688 .107177 .100171 .093634 .087535 .081844 .076532 .071574 .066946 .062625 37 .107992 .100730 .093969 .087673 .081809 .076347 .071259 .066519 .062102 .057986 38 .101688 .094671 .088151 .082090 .076457 .071219 .066349 .061821 .057609 .053690 39 .095751 .088977 .082693 .076864 .071455 .066436 .061778 .057454 .053440 .049713 40 .090161 .083625 .077573 .071970 .066780 .061974 .057521 .053396 .049573 .046031 41 .084897 .078595 .072770 .067387 .062412 .057811 .053558 .049625 .045987 .042621 42 .079941 .073867 .068265 .063097 .058329 .053929 .049868 .046120 .042659 .039464 43 .075274 .069424 .064038 .059079 .054513 .050307 .046432 .042862 .039572 .036541 44 .070880 .065248 .060074 .055318 .050946 .046928 .043233 .039835 .036709 .033834 45 .066742 .061323 .056354 .051796 .047613 .043776 .040254 .037021 .034053 .031328 46 .062845 .057635 .052865 .048498 .044499 .040836 .037480 .034406 .031589 .029007 47 .059176 .054168 .049592 .045410 .041587 .038093 .034898 .031976 .029303 .026859 48 .055722 .050910 .046522 .042519 .038867 .035535 .032493 .029717 .027183 .024869 49 .052469 .047848 .043641 .039812 .036324 .033148 .030255 .027618 .025216 .023027 50 .049405 .044970 .040939 .037277 .033948 .030922 .028170 .025668 .023392 .021321 51 .046521 .042265 .038405 .034903 .031727 .028845 .026229 .023855 .021699 .019742 52 .043805 .039722 .036027 .032681 .029651 .026907 .024422 .022170 .020129 .018280 53 .041248 .037333 .033796 .030600 .027711 .025100 .022739 .020604 .018673 .016925 54 .038840 .035087 .031704 .028652 .025899 .023414 .021172 .019149 .017322 .015672 55 .036572 .032977 .029741 .026828 .024204 .021842 .019714 .017796 .016068 .014511 56 .034437 .030993 .027900 .025119 .022621 .020375 .018355 .016539 .014906 .013436 57 .032427 .029129 .026172 .023520 .021141 .019006 .017091 .015371 .013827 .012441 58 .030534 .027377 .024552 .022023 .019758 .017730 .015913 .014285 .012827 .011519 59 .028751 .025730 .023032 .020620 .018465 .016539 .014817 .013276 .011899 .010666 60 .027073 .024183 .021606 .019307 .017257 .015428 .013796 .012339 .011038 .009876 Table B—Term Certain Remainder Factors Applicable After April 30, 1989 Years Interest rate 8.2% 8.4% 8.6% 8.8% 9.0% 9.2% 9.4% 9.6% 9.8% 10.0% 1 .924214 .922509 .920810 .919118 .917431 .915751 .914077 .912409 .910747 .909091 2 .854172 .851023 .847892 .844777 .841680 .838600 .835536 .832490 .829460 .826446 3 .789438 .785077 .780747 .776450 .772183 .767948 .763744 .759571 .755428 .751315 4 .729610 .724241 .718920 .713649 .708425 .703250 .698121 .693039 .688003 .683013 5 .674316 .668119 .661989 .655927 .649931 .644001 .638136 .632335 .626597 .620921 6 .623213 .616346 .609566 .602874 .596267 .589745 .583305 .576948 .570671 .564474 7 .575982 .568585 .561295 .554112 .547034 .540059 .533186 .526412 .519737 .513158 8 .532331 .524524 .516846 .509294 .501866 .494560 .487373 .480303 .473349 .466507 9 .491988 .483879 .475917 .468101 .460428 .452894 .445496 .438233 .431101 .424098 10 .454703 .446383 .438230 .430240 .422411 .414738 .407218 .399848 .392624 .385543 11 .420243 .411792 .403526 .395441 .387533 .379797 .372228 .364824 .357581 .350494 12 .388394 .379882 .371571 .363457 .355535 .347799 .340245 .332869 .325666 .318631 13 .358960 .350445 .342147 .334060 .326179 .318497 .311010 .303713 .296599 .289664 14 .331756 .323288 .315052 .307040 .299246 .291664 .284287 .277110 .270127 .263331 15 .306613 .298236 .290103 .282206 .274538 .267092 .259860 .252838 .246017 .239392 16 .283376 .275126 .267130 .259381 .251870 .244589 .237532 .230691 .224059 .217629 17 .261901 .253806 .245976 .238401 .231073 .223983 .217123 .210485 .204061 .197845 18 .242052 .234139 .226497 .219119 .211994 .205113 .198467 .192048 .185848 .179859 19 .223708 .215995 .208561 .201396 .194490 .187832 .181414 .175226 .169260 .163508 20 .206754 .199257 .192045 .185107 .178431 .172007 .165826 .159878 .154153 .148644 21 .191085 .183817 .176837 .170135 .163698 .157516 .151578 .145874 .140395 .135131 22 .176604 .169573 .162834 .156374 .150182 .144245 .138554 .133097 .127864 .122846 23 .163220 .156432 .149939 .143726 .137781 .132093 .126649 .121439 .116452 .111678 24 .150850 .144310 .138065 .132101 .126405 .120964 .115767 .110802 .106058 .101526 25 .139418 .133128 .127132 .121416 .115968 .110773 .105820 .101097 .096592 .092296 26 .128852 .122811 .117064 .111596 .106393 .101441 .096727 .092241 .087971 .083905 27 .119087 .113295 .107794 .102570 .097608 .092894 .088416 .084162 .080119 .076278 28 .110062 .104515 .099258 .094274 .089548 .085068 .080819 .076790 .072968 .069343 29 .101721 .096416 .091398 .086649 .082155 .077901 .073875 .070064 .066456 .063039 30 .094012 .088945 .084160 .079640 .075371 .071338 .067527 .063927 .060524 .057309 31 .086887 .082053 .077495 .073199 .069148 .065328 .061725 .058327 .055122 .052099 32 .080302 .075694 .071358 .067278 .063438 .059824 .056422 .053218 .050202 .047362 33 .074216 .069829 .065708 .061837 .058200 .054784 .051574 .048557 .045722 .043057 34 .068592 .064418 .060504 .056835 .053395 .050168 .047142 .044304 .041641 .039143 35 .063394 .059426 .055713 .052238 .048986 .045942 .043092 .040423 .037924 .035584 36 .058589 .054821 .051301 .048013 .044941 .042071 .039389 .036882 .034539 .032349 37 .054149 .050573 .047239 .044130 .041231 .038527 .036005 .033652 .031457 .029408 38 .050045 .046654 .043498 .040560 .037826 .035281 .032911 .030704 .028649 .026735 39 .046253 .043039 .040053 .037280 .034703 .032309 .030083 .028015 .026092 .024304 40 .042747 .039703 .036881 .034264 .031838 .029587 .027498 .025561 .023763 .022095 41 .039508 .036627 .033961 .031493 .029209 .027094 .025136 .023322 .021642 .020086 42 .036514 .033789 .031271 .028946 .026797 .024811 .022976 .021279 .019711 .018260 43 .033746 .031170 .028795 .026605 .024584 .022721 .021002 .019415 .017951 .016600 44 .031189 .028755 .026515 .024453 .022555 .020807 .019197 .017715 .016349 .015091 45 .028825 .026527 .024415 .022475 .020692 .019054 .017548 .016163 .014890 .013719 46 .026641 .024471 .022482 .020657 .018984 .017449 .016040 .014747 .013561 .012472 47 .024622 .022575 .020701 .018986 .017416 .015978 .014662 .013456 .012351 .011338 48 .022756 .020825 .019062 .017451 .015978 .014632 .013402 .012277 .011248 .010307 49 .021031 .019212 .017552 .016039 .014659 .013400 .012250 .011202 .010244 .009370 50 .019437 .017723 .016163 .014742 .013449 .012271 .011198 .010221 .009330 .008519 51 .017964 .016350 .014883 .013550 .012338 .011237 .010236 .009325 .008497 .007744 52 .016603 .015083 .013704 .012454 .011319 .010290 .009356 .008508 .007739 .007040 53 .015345 .013914 .012619 .011446 .010385 .009423 .008552 .007763 .007048 .006400 54 .014182 .012836 .011620 .010521 .009527 .008629 .007817 .007083 .006419 .005818 55 .013107 .011841 .010699 .009670 .008741 .007902 .007146 .006463 .005846 .005289 56 .012114 .010923 .009852 .008888 .008019 .007237 .006532 .005897 .005324 .004809 57 .011196 .010077 .009072 .008169 .007357 .006627 .005971 .005380 .004849 .004371 58 .010347 .009296 .008354 .007508 .006749 .006069 .005458 .004909 .004416 .003974 59 .009563 .008576 .007692 .006901 .006192 .005557 .004989 .004479 .004022 .003613 60 .008838 .007911 .007083 .006343 .005681 .005089 .004560 .004087 .003663 .003284 Table B—Term Certain Remainder Factors Applicable After April 30, 1989 Years Interest rate 10.2% 10.4% 10.6% 10.8% 11.0% 11.2% 11.4% 11.6% 11.8% 12.0% 1 .907441 .905797 .904159 .902527 .900901 .899281 .897666 .896057 .894454 .892857 2 .823449 .820468 .817504 .814555 .811622 .808706 .805804 .802919 .800049 .797194 3 .747232 .743178 .739153 .735158 .731191 .727253 .723343 .719461 .715607 .711780 4 .678069 .673168 .668312 .663500 .658731 .654005 .649321 .644679 .640078 .635518 5 .615307 .609754 .604261 .598827 .593451 .588134 .582873 .577669 .572520 .567427 6 .558355 .552313 .546348 .540457 .534641 .528897 .523225 .517625 .512093 .506631 7 .506674 .500284 .493985 .487777 .481658 .475627 .469682 .463821 .458044 .452349 8 .459777 .453156 .446641 .440232 .433926 .427722 .421617 .415610 .409700 .403883 9 .417221 .410467 .403835 .397322 .390925 .384642 .378472 .372411 .366458 .360610 10 .378603 .371800 .365131 .358593 .352184 .345901 .339741 .333701 .327780 .321973 11 .343560 .336775 .330137 .323640 .317283 .311062 .304974 .299016 .293184 .287476 12 .311760 .305050 .298496 .292094 .285841 .279732 .273765 .267935 .262240 .256675 13 .282904 .276313 .269888 .263623 .257514 .251558 .245749 .240085 .234561 .229174 14 .256719 .250284 .244022 .237927 .231995 .226221 .220601 .215130 .209804 .204620 15 .232957 .226706 .220634 .214735 .209004 .203436 .198026 .192769 .187661 .182696 16 .211395 .205350 .199489 .193804 .188292 .182946 .177761 .172732 .167854 .163122 17 .191828 .186005 .180369 .174914 .169633 .164520 .159570 .154778 .150138 .145644 18 .174073 .168483 .163083 .157864 .152822 .147950 .143241 .138690 .134291 .130040 19 .157961 .152612 .147453 .142477 .137678 .133048 .128582 .124274 .120117 .116107 20 .143340 .138235 .133321 .128589 .124034 .119648 .115424 .111357 .107439 .103667 21 .130073 .125213 .120543 .116055 .111742 .107597 .103612 .099782 .096100 .092560 22 .118033 .113418 .108990 .104743 .100669 .096760 .093009 .089410 .085957 .082643 23 .107108 .102733 .098544 .094533 .090693 .087014 .083491 .080117 .076884 .073788 24 .097195 .093056 .089100 .085319 .081705 .078250 .074947 .071789 .068770 .065882 25 .088198 .084289 .080560 .077003 .073608 .070369 .067278 .064327 .061511 .058823 26 .080035 .076349 .072839 .069497 .066314 .063281 .060393 .057641 .055019 .052521 27 .072627 .069157 .065858 .062723 .059742 .056908 .054213 .051650 .049212 .046894 28 .065905 .062642 .059547 .056609 .053822 .051176 .048665 .046281 .044018 .041869 29 .059804 .056741 .053840 .051091 .048488 .046022 .043685 .041470 .039372 .037383 30 .054269 .051396 .048680 .046111 .043683 .041386 .039214 .037160 .035216 .033378 31 .049246 .046554 .044014 .041617 .039354 .037218 .035201 .033297 .031500 .029802 32 .044688 .042169 .039796 .037560 .035454 .033469 .031599 .029836 .028175 .026609 33 .040552 .038196 .035982 .033899 .031940 .030098 .028365 .026735 .025201 .023758 34 .036798 .034598 .032533 .030595 .028775 .027067 .025463 .023956 .022541 .021212 35 .033392 .031339 .029415 .027613 .025924 .024341 .022857 .021466 .020162 .018940 36 .030301 .028387 .026596 .024921 .023355 .021889 .020518 .019235 .018034 .016910 37 .027497 .025712 .024047 .022492 .021040 .019684 .018418 .017236 .016131 .015098 38 .024952 .023290 .021742 .020300 .018955 .017702 .016533 .015444 .014428 .013481 39 .022642 .021096 .019658 .018321 .017077 .015919 .014841 .013839 .012905 .012036 40 .020546 .019109 .017774 .016535 .015384 .014316 .013323 .012400 .011543 .010747 41 .018645 .017309 .016071 .014923 .013860 .012874 .011959 .011111 .010325 .009595 42 .016919 .015678 .014531 .013469 .012486 .011577 .010735 .009956 .009235 .008567 43 .015353 .014201 .013138 .012156 .011249 .010411 .009637 .008922 .008260 .007649 44 .013932 .012864 .011879 .010971 .010134 .009362 .008651 .007994 .007389 .006830 45 .012642 .011652 .010740 .009902 .009130 .008419 .007765 .007163 .006609 .006098 46 .011472 .010554 .009711 .008937 .008225 .007571 .006971 .006419 .005911 .005445 47 .010410 .009560 .008780 .008065 .007410 .006809 .006257 .005752 .005287 .004861 48 .009447 .008659 .007939 .007279 .006676 .006123 .005617 .005154 .004729 .004340 49 .008572 .007844 .007178 .006570 .006014 .005506 .005042 .004618 .004230 .003875 50 .007779 .007105 .006490 .005929 .005418 .004952 .004526 .004138 .003784 .003460 51 .007059 .006435 .005868 .005351 .004881 .004453 .004063 .003708 .003384 .003089 52 .006406 .005829 .005306 .004830 .004397 .004005 .003647 .003322 .003027 .002758 53 .005813 .005280 .004797 .004359 .003962 .003601 .003274 .002977 .002708 .002463 54 .005275 .004783 .004337 .003934 .003569 .003238 .002939 .002668 .002422 .002199 55 .004786 .004332 .003922 .003551 .003215 .002912 .002638 .002390 .002166 .001963 56 .004343 .003924 .003546 .003205 .002897 .002619 .002368 .002142 .001938 .001753 57 .003941 .003554 .003206 .002892 .002610 .002355 .002126 .001919 .001733 .001565 58 .003577 .003220 .002899 .002610 .002351 .002118 .001908 .001720 .001550 .001398 59 .003246 .002916 .002621 .002356 .002118 .001905 .001713 .001541 .001387 .001248 60 .002945 .002642 .002370 .002126 .001908 .001713 .001538 .001381 .001240 .001114 Table B—Term Certain Remainder Factors Applicable After April 30, 1989 Years Interest rate 12.2% 12.4% 12.6% 12.8% 13.0% 13.2% 13.4% 13.6% 13.8% 14.0% 1 .891266 .889680 .888099 .886525 .884956 .883392 .881834 .880282 .878735 .877193 2 .794354 .791530 .788721 .785926 .783147 .780382 .777632 .774896 .772175 .769468 3 .707981 .704208 .700462 .696743 .693050 .689383 .685742 .682127 .678536 .674972 4 .630999 .626520 .622080 .617680 .613319 .608996 .604711 .600464 .596254 .592080 5 .562388 .557402 .552469 .547589 .542760 .537982 .533255 .528577 .523949 .519369 6 .501237 .495909 .490648 .485451 .480319 .475249 .470242 .465297 .460412 .455587 7 .446735 .441200 .435744 .430364 .425061 .419831 .414676 .409592 .404580 .399637 8 .398160 .392527 .386984 .381529 .376160 .370876 .365675 .360557 .355518 .350559 9 .354866 .349223 .343680 .338235 .332885 .327629 .322465 .317391 .312406 .307508 10 .316280 .310697 .305222 .299853 .294588 .289425 .284361 .279394 .274522 .269744 11 .281889 .276421 .271068 .265827 .260698 .255676 .250759 .245945 .241232 .236617 12 .251238 .245926 .240735 .235663 .230706 .225862 .221128 .216501 .211979 .207559 13 .223920 .218795 .213797 .208921 .204165 .199525 .194998 .190582 .186273 .182069 14 .199572 .194658 .189873 .185213 .180677 .176258 .171956 .167766 .163685 .159710 15 .177872 .173183 .168626 .164196 .159891 .155705 .151637 .147681 .143835 .140096 16 .158531 .154077 .149757 .145564 .141496 .137549 .133718 .130001 .126393 .122892 17 .141293 .137080 .132999 .129046 .125218 .121510 .117917 .114438 .111066 .107800 18 .125930 .121957 .118116 .114403 .110812 .107341 .103984 .100737 .097598 .094561 19 .112237 .108503 .104899 .101421 .098064 .094824 .091696 .088677 .085762 .082948 20 .100033 .096533 .093161 .089912 .086782 .083767 .080861 .078061 .075362 .072762 21 .089156 .085883 .082736 .079709 .076798 .073999 .071306 .068716 .066224 .063826 22 .079462 .076408 .073478 .070664 .067963 .065370 .062880 .060489 .058193 .055988 23 .070821 .067979 .065255 .062646 .060144 .057747 .055450 .053247 .051136 .049112 24 .063121 .060480 .057953 .055537 .053225 .051014 .048898 .046873 .044935 .043081 25 .056257 .053807 .051468 .049235 .047102 .045065 .043119 .041261 .039486 .037790 26 .050140 .047871 .045709 .043648 .041683 .039810 .038024 .036321 .034698 .033149 27 .044688 .042590 .040594 .038695 .036888 .035168 .033531 .031973 .030490 .029078 28 .039829 .037892 .036052 .034304 .032644 .031067 .029569 .028145 .026793 .025507 29 .035498 .033711 .032017 .030411 .028889 .027444 .026075 .024776 .023544 .022375 30 .031638 .029992 .028435 .026960 .025565 .024244 .022994 .021810 .020689 .019627 31 .028198 .026684 .025253 .023901 .022624 .021417 .020277 .019199 .018180 .017217 32 .025132 .023740 .022427 .021189 .020021 .018920 .017881 .016900 .015975 .015102 33 .022399 .021121 .019917 .018785 .017718 .016714 .015768 .014877 .014038 .013248 34 .019964 .018791 .017689 .016653 .015680 .014765 .013905 .013096 .012336 .011621 35 .017793 .016718 .015709 .014763 .013876 .013043 .012261 .011528 .010840 .010194 36 .015858 .014873 .013951 .013088 .012279 .011522 .010813 .010148 .009525 .008942 37 .014134 .013233 .012390 .011603 .010867 .010178 .009535 .008933 .008370 .007844 38 .012597 .011773 .011004 .010286 .009617 .008992 .008408 .007864 .007355 .006880 39 .011227 .010474 .009772 .009119 .008510 .007943 .007415 .006922 .006463 .006035 40 .010007 .009319 .008679 .008084 .007531 .007017 .006538 .006093 .005679 .005294 41 .008919 .008291 .007708 .007167 .006665 .006199 .005766 .005364 .004991 .004644 42 .007949 .007376 .006845 .006354 .005898 .005476 .005085 .004722 .004386 .004074 43 .007084 .006562 .006079 .005633 .005219 .004837 .004484 .004157 .003854 .003573 44 .006314 .005838 .005399 .004993 .004619 .004273 .003954 .003659 .003386 .003135 45 .005628 .005194 .004795 .004427 .004088 .003775 .003487 .003221 .002976 .002750 46 .005016 .004621 .004258 .003924 .003617 .003335 .003075 .002835 .002615 .002412 47 .004470 .004111 .003782 .003479 .003201 .002946 .002711 .002496 .002298 .002116 48 .003984 .003658 .003359 .003084 .002833 .002602 .002391 .002197 .002019 .001856 49 .003551 .003254 .002983 .002734 .002507 .002299 .002108 .001934 .001774 .001628 50 .003165 .002895 .002649 .002424 .002219 .002031 .001859 .001702 .001559 .001428 51 .002821 .002576 .002353 .002149 .001963 .001794 .001640 .001499 .001370 .001253 52 .002514 .002292 .002089 .001905 .001737 .001585 .001446 .001319 .001204 .001099 53 .002241 .002039 .001856 .001689 .001538 .001400 .001275 .001161 .001058 .000964 54 .001997 .001814 .001648 .001497 .001361 .001237 .001124 .001022 .000930 .000846 55 .001780 .001614 .001463 .001327 .001204 .001093 .000991 .000900 .000817 .000742 56 .001586 .001436 .001300 .001177 .001066 .000965 .000874 .000792 .000718 .000651 57 .001414 .001277 .001154 .001043 .000943 .000853 .000771 .000697 .000631 .000571 58 .001260 .001136 .001025 .000925 .000835 .000753 .000680 .000614 .000554 .000501 59 .001123 .001011 .000910 .000820 .000739 .000665 .000600 .000540 .000487 .000439 60 .001001 .000900 .000809 .000727 .000654 .000588 .000529 .000476 .000428 .000385 Table J—Adjustment Factors for Term Certain Annuities Payable at the Beginning of Each Interval Applicable After April 30, 1989 [Frequency of payments] Interest rate Annually Semi Quarterly Monthly Weekly 4.2 1.0420 1.0314 1.0261 1.0226 1.0213 4.4 1.0440 1.0329 1.0274 1.0237 1.0223 4.6 1.0460 1.0344 1.0286 1.0247 1.0233 4.8 1.0480 1.0359 1.0298 1.0258 1.0243 5.0 1.0500 1.0373 1.0311 1.0269 1.0253 5.2 1.0520 1.0388 1.0323 1.0279 1.0263 5.4 1.0540 1.0403 1.0335 1.0290 1.0273 5.6 1.0560 1.0418 1.0348 1.0301 1.0283 5.8 1.0580 1.0433 1.0360 1.0311 1.0293 6.0 1.0600 1.0448 1.0372 1.0322 1.0303 6.2 1.0620 1.0463 1.0385 1.0333 1.0313 6.4 1.0640 1.0478 1.0397 1.0343 1.0323 6.6 1.0660 1.0492 1.0409 1.0354 1.0333 6.8 1.0680 1.0507 1.0422 1.0365 1.0343 7.0 1.0700 1.0522 1.0434 1.0375 1.0353 7.2 1.0720 1.0537 1.0446 1.0386 1.0363 7.4 1.0740 1.0552 1.0458 1.0396 1.0373 7.6 1.0760 1.0567 1.0471 1.0407 1.0383 7.8 1.0780 1.0581 1.0483 1.0418 1.0393 8.0 1.0800 1.0596 1.0495 1.0428 1.0403 8.2 1.0820 1.0611 1.0507 1.0439 1.0413 8.4 1.0840 1.0626 1.0520 1.0449 1.0422 8.6 1.0860 1.0641 1.0532 1.0460 1.0432 8.8 1.0880 1.0655 1.0544 1.0471 1.0442 9.0 1.0900 1.0670 1.0556 1.0481 1.0452 9.2 1.0920 1.0685 1.0569 1.0492 1.0462 9.4 1.0940 1.0700 1.0581 1.0502 1.0472 9.6 1.0960 1.0715 1.0593 1.0513 1.0482 9.8 1.0980 1.0729 1.0605 1.0523 1.0492 10.0 1.1000 1.0744 1.0618 1.0534 1.0502 10.2 1.1020 1.0759 1.0630 1.0544 1.0512 10.4 1.1040 1.0774 1.0642 1.0555 1.0521 10.6 1.1060 1.0788 1.0654 1.0565 1.0531 10.8 1.1080 1.0803 1.0666 1.0576 1.0541 11.0 1.1100 1.0818 1.0679 1.0586 1.0551 11.2 1.1120 1.0833 1.0691 1.0597 1.0561 11.4 1.1140 1.0847 1.0703 1.0607 1.0571 11.6 1.1160 1.0862 1.0715 1.0618 1.0581 11.8 1.1180 1.0877 1.0727 1.0628 1.0590 12.0 1.1200 1.0892 1.0739 1.0639 1.0600 12.2 1.1220 1.0906 1.0752 1.0649 1.0610 12.4 1.1240 1.0921 1.0764 1.0660 1.0620 12.6 1.1260 1.0936 1.0776 1.0670 1.0630 12.8 1.1280 1.0950 1.0788 1.0681 1.0639 13.0 1.1300 1.0965 1.0800 1.0691 1.0649 13.2 1.1320 1.0980 1.0812 1.0701 1.0659 13.4 1.1340 1.0994 1.0824 1.0712 1.0669 13.6 1.1360 1.1009 1.0836 1.0722 1.0679 13.8 1.1380 1.1024 1.0849 1.0733 1.0688 14.0 1.1400 1.1039 1.0861 1.0743 1.0698 Table K—Adjustment Factors For Annuities Payable At The End Of Each Interval Applicable After April 30, 1989 [Frequency of Payments] Interest Rate Annually Semi Quarterly Monthly Weekly 4.2 1.0000 1.0104 1.0156 1.0191 1.0205 4.4 1.0000 1.0109 1.0164 1.0200 1.0214 4.6 1.0000 1.0114 1.0171 1.0209 1.0224 4.8 1.0000 1.0119 1.0178 1.0218 1.0234 5.0 1.0000 1.0123 1.0186 1.0227 1.0243 5.2 1.0000 1.0128 1.0193 1.0236 1.0253 5.4 1.0000 1.0133 1.0200 1.0245 1.0262 5.6 1.0000 1.0138 1.0208 1.0254 1.0272 5.8 1.0000 1.0143 1.0215 1.0263 1.0282 6.0 1.0000 1.0148 1.0222 1.0272 1.0291 6.2 1.0000 1.0153 1.0230 1.0281 1.0301 6.4 1.0000 1.0158 1.0237 1.0290 1.0311 6.6 1.0000 1.0162 1.0244 1.0299 1.0320 6.8 1.0000 1.0167 1.0252 1.0308 1.0330 7.0 1.0000 1.0172 1.0259 1.0317 1.0339 7.2 1.0000 1.0177 1.0266 1.0326 1.0349 7.4 1.0000 1.0182 1.0273 1.0335 1.0358 7.6 1.0000 1.0187 1.0281 1.0344 1.0368 7.8 1.0000 1.0191 1.0288 1.0353 1.0378 8.0 1.0000 1.0196 1.0295 1.0362 1.0387 8.2 1.0000 1.0201 1.0302 1.0370 1.0397 8.4 1.0000 1.0206 1.0310 1.0379 1.0406 8.6 1.0000 1.0211 1.0317 1.0388 1.0416 8.8 1.0000 1.0215 1.0324 1.0397 1.0425 9.0 1.0000 1.0220 1.0331 1.0406 1.0435 9.2 1.0000 1.0225 1.0339 1.0415 1.0444 9.4 1.0000 1.0230 1.0346 1.0424 1.0454 9.6 1.0000 1.0235 1.0353 1.0433 1.0463 9.8 1.0000 1.0239 1.0360 1.0442 1.0473 10.0 1.0000 1.0244 1.0368 1.0450 1.0482 10.2 1.0000 1.0249 1.0375 1.0459 1.0492 10.4 1.0000 1.0254 1.0382 1.0468 1.0501 10.6 1.0000 1.0258 1.0389 1.0477 1.0511 10.8 1.0000 1.0263 1.0396 1.0486 1.0520 11.0 1.0000 1.0268 1.0404 1.0495 1.0530 11.2 1.0000 1.0273 1.0411 1.0503 1.0539 11.4 1.0000 1.0277 1.0418 1.0512 1.0549 11.6 1.0000 1.0282 1.0425 1.0521 1.0558 11.8 1.0000 1.0287 1.0432 1.0530 1.0568 12.0 1.0000 1.0292 1.0439 1.0539 1.0577 12.2 1.0000 1.0296 1.0447 1.0548 1.0587 12.4 1.0000 1.0301 1.0454 1.0556 1.0596 12.6 1.0000 1.0306 1.0461 1.0565 1.0605 12.8 1.0000 1.0310 1.0468 1.0574 1.0615 13.0 1.0000 1.0315 1.0475 1.0583 1.0624 13.2 1.0000 1.0320 1.0482 1.0591 1.0634 13.4 1.0000 1.0324 1.0489 1.0600 1.0643 13.6 1.0000 1.0329 1.0496 1.0609 1.0652 13.8 1.0000 1.0334 1.0504 1.0618 1.0662 14.0 1.0000 1.0339 1.0511 1.0626 1.0671 (7) Actuarial Table S and Table 2010CM where the valuation date is on or after June 1, 2023 Determination of required factors. https://www.irs.gov/retirement-plans/actuarial-tables. Actuarial Valuations Version 4A, (ii) Table 4 to Paragraph (d)(7)(ii) Age x l x Age x l x Age x l x 0 100,000.00 37 97,193.66 74 71,177.55 1 99,382.28 38 97,058.84 75 69,174.83 2 99,341.16 39 96,915.25 76 67,044.59 3 99,313.80 40 96,761.20 77 64,773.93 4 99,292.72 41 96,595.51 78 62,366.05 5 99,276.45 42 96,416.30 79 59,795.50 6 99,261.55 43 96,220.61 80 57,080.84 7 99,248.33 44 96,005.41 81 54,213.71 8 99,236.50 45 95,768.60 82 51,205.27 9 99,226.09 46 95,509.98 83 48,059.88 10 99,217.03 47 95,229.06 84 44,808.51 11 99,208.80 48 94,923.45 85 41,399.79 12 99,199.98 49 94,589.88 86 37,895.25 13 99,188.21 50 94,225.50 87 34,313.98 14 99,170.64 51 93,828.33 88 30,700.82 15 99,145.34 52 93,398.01 89 27,106.68 16 99,111.91 53 92,934.52 90 23,586.75 17 99,070.69 54 92,438.08 91 20,198.02 18 99,021.50 55 91,907.95 92 16,996.17 19 98,964.16 56 91,342.02 93 14,032.08 20 98,898.61 57 90,737.24 94 11,348.23 21 98,824.20 58 90,090.97 95 8,975.661 22 98,741.32 59 89,401.06 96 6,931.559 23 98,652.16 60 88,665.95 97 5,218.261 24 98,559.87 61 87,883.66 98 3,823.642 25 98,466.80 62 87,051.88 99 2,722.994 26 98,373.71 63 86,167.86 100 1,882.108 27 98,280.09 64 85,226.77 101 1,261.083 28 98,185.51 65 84,221.59 102 818.2641 29 98,089.05 66 83,142.34 103 513.7236 30 97,989.90 67 81,978.28 104 311.8784 31 97,887.47 68 80,728.83 105 183.0200 32 97,781.58 69 79,387.95 106 103.8046 33 97,672.13 70 77,957.53 107 56.91106 34 97,559.20 71 76,429.84 108 30.17214 35 97,442.53 72 74,797.63 109 15.47804 36 97,321.14 73 73,049.33 110 0.000000 (e) Applicability date. [T.D. 8540, 59 FR 30152, June 10, 1994, as amended by T.D. 8819, 64 FR 23212, Apr. 30, 1999; T.D. 8886, 65 FR 36929, June 12, 2000; T.D. 9448, 74 FR 21484, May 7, 2009; T.D. 9540, 76 FR 49612, Aug. 10, 2011; T.D. 9974, 88 FR 37439, June 7, 2023] § 20.2031-8 Valuation of certain life insurance and annuity contracts; valuation of shares in an open-end investment company. (a) Valuation of certain life insurance and annuity contracts. (2) As valuation of an insurance policy through sale of comparable contracts is not readily ascertainable when, at the date of the decedent's death, the contract has been in force for some time and further premium payments are to be made, the value may be approximated by adding to the interpolated terminal reserve at the date of the decedent's death the proportionate part of the gross premium last paid before the date of the decedent's death which covers the period extending beyond that date. If, however, because of the unusual nature of the contract such an approximation is not reasonably close to the full value of the contract, this method may not be used. (3) The application of this section may be illustrated by the following examples. In each case involving an insurance contract, it is assumed that there are no accrued dividends or outstanding indebtedness on the contract. Example (1). X purchased from a life insurance company a joint and survivor annuity contract under the terms of which X was to receive payments of $1,200 annually for his life and, upon X's death, his wife was to receive payments of $1,200 annually for her life. Five years after such purchase, when his wife was 50 years of age, X died. The value of the annuity contract at the date of X's death is the amount which the company would charge for an annuity providing for the payment of $1,200 annually for the life of a female 50 years of age. Example (2). Y died holding the incidents of ownership in a life insurance policy on the life of his wife. The policy was one on which no further payments were to be made to the company (e.g., a single premium policy or a paid-up policy). The value of the insurance policy at the date of Y's death is the amount which the company would charge for a single premium contract of the same specified amount on the life of a person of the age of the insured. Example (3). Z died holding the incidents of ownership in a life insurance policy on the life of his wife. The policy was an ordinary life policy issued nine years and four months prior to Z's death and at a time when Z's wife was 35 years of age. The gross annual premium is $2,811 and the decedent died four months after the last premium due date. The value of the insurance policy at the date of Z's death is computed as follows: Terminal reserve at end of tenth year $14,601.00 Terminal reserve at end of ninth year 12,965.00 Increase 1,636.00 One-third of such increase (Z having died four months following the last preceding premium date) is 545.33 Terminal reserve at end of ninth year 12,965.00 Interpolated terminal reserve at date of Z's death 13,510.33 Two-thirds of gross premium ( 2 3 1,874.00 Value of the insurance policy 15,384.33 (b) Valuation of shares in an open-end investment company. (2) The provisions of this paragraph shall apply with respect to estates of decedents dying after August 16, 1954. [T.D. 6680, 28 FR 10872, Oct. 10, 1963, as amended by T.D. 7319, 39 FR 26723, July 23, 1974] § 20.2031-9 Valuation of other property. The valuation of any property not specifically described in §§ 20.2031-2 to 20.2031-8 is made in accordance with the general principles set forth in § 20.2031-1. For example, a future interest in property not subject to valuation in accordance with the actuarial principles set forth in § 20.2031-7 is to be valued in accordance with the general principles set forth in § 20.2031-1. § 20.2032-1 Alternate valuation. (a) In general. (1) Any property distributed, sold, exchanged, or otherwise disposed of within 6 months (1 year, if the decedent died on or before December 31, 1970) after the decedent's death is valued as of the date on which it is first distributed, sold, exchanged, or otherwise disposed of; (2) Any property not distributed, sold, exchanged, or otherwise disposed of within 6 months (1 year, if the decedent died on or before December 31, 1970) after the decedent's death is valued as of the date 6 months (1 year, if the decedent died on or before December 31, 1970) after the date of the decedent's death; (3) Any property, interest, or estate which is affected by mere lapse of time is valued as of the date of the decedent's death, but adjusted for any difference in its value not due to mere lapse of time as of the date 6 months (1 year, if the decedent died on or before December 31, 1970) after the decedent's death, or as of the date of its distribution, sale, exchange, or other disposition, whichever date first occurs. (b) Method and effect of election In general. return of tax imposed by section 2001 (2) Protective election. (3) Requests for extension of time to make the election. (c) Meaning of “distributed, sold, exchanged, or otherwise disposed of”. (2) Property may be “distributed” either by the executor, or by a trustee of property included in the gross estate under section 2035 through 2038, or section 2041. Property is considered as “distributed” upon the first to occur of the following: (i) The entry of an order or decree of distribution, if the order or decree subsequently becomes final; (ii) The segregation or separation of the property from the estate or trust so that it becomes unqualifiedly subject to the demand or disposition of the distributee; or (iii) The actual paying over or delivery of the property to the distributee. (3) Property may be “sold, exchanged, or otherwise disposed of” by: (i) The executor; (ii) A trustee or other donee to whom the decedent during his lifetime transferred property included in his gross estate under sections 2035 through 2038, or section 2041; (iii) An heir or devisee to whom title to property passes directly under local law; (iv) A surviving joint tenant or tenant by the entirety; or (v) Any other person. If a binding contract for the sale, exchange, or other disposition of property is entered into, the property is considered as sold, exchanged, or otherwise disposed of on the effective date of the contract, unless the contract is not subsequently carried out substantially in accordance with its terms. The effective date of a contract is normally the date it is entered into (and not the date it is consummated, or the date legal title to the property passes) unless the contract specifies a different effective date. (d) “Included property” and “excluded property”. (1) Interest-bearing obligations. (2) Leased property. (3) Noninterest-bearing obligations. (4) Stock of a corporation. (e) Illustrations of “included property” and “excluded property”. Description Subsequent valuation date Alternate value Value at date of death Bond, par value $1,000, bearing interest at 4 percent payable quarterly on Feb. 1, May 1, Aug. 1, and Nov. 1. Bond distributed to legatee on Mar. 1, 1955 Mar. 1, 1955 $1,000.00 $1,000.00 Interest coupon of $10 attached to bond and not cashed at date of death although due and payable Nov. 1, 1954. Cashed by executor on Feb. 1, 1955 Feb. 1, 1955 10.00 10.00 Interest accrued from Nov. 1, 1954, to Jan. 1, 1955, collected on Feb. 1, 1955 Feb. 1, 1955 6.67 6.67 Real estate, not disposed of within year following death. Rent of $300 due at the end of each quarter, Feb. 1, May 1, Aug. 1, and Nov. 1 Jan. 1, 1956 11,000.00 12,000.00 Rent due for quarter ending Nov. 1, 1954, but not collected until Feb. 1, 1955 Feb. 1, 1955 300.00 300.00 Rent accrued for November and December 1954, collected on Feb. 1, 1955 Feb. 1, 1955 200.00 200.00 Common stock, X Corporation, 500 shares, not disposed of within year following decedent's death Jan. 1, 1956 47,500.00 50,000.00 Dividend of $2 per share declared Dec. 10, 1954, and paid on Jan. 10, 1955, to holders of record on Dec. 30, 1954 Jan. 10, 1955 1,000.00 1,000.00 (f) Mere lapse of time. (1) Life estates, remainders, and similar interests In general. (ii) Sample factors from actuarial Table S. https://www.irs.gov/retirement-plans/actuarial-tables Table 2 to Paragraph (f)(1)(ii) Table S—Based on Table 2010CM Age Annuity Life estate Remainder Interest at 4.2 Percent 65 12.2128 0.51294 0.48706 Interest at 4.6 Percent 65 11.7691 0.54138 0.45862 (iii) Example. Example 1 (2) Patents. (g) Effect of election on deductions. (h) Applicability date. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 7238, 37 FR 28718, Dec. 29, 1972; T.D. 7955, 49 FR 19995, May 11, 1984; T.D. 8540, 59 FR 30103, June 10, 1994; T.D. 8819, 64 FR 23229, Apr. 30, 1999; T.D. 9172, 70 FR 296, Jan. 4, 2005; 74 FR 27080, June 8, 2009; T.D. 9974, 88 FR 37446, June 7, 2023] § 20.2032A-3 Material participation requirements for valuation of certain farm and closely-held business real property. (a) In general. (b) Types of qualified property In general. See (2) Structures and other real property improvements. (c) Period material participation must last. (1) For periods totalling 5 years or more during the 8 years immediately preceding the date of the decedent's death; and (2) For periods totalling 5 years or more during any 8 year period ending after the date of the decedent's death (up to a maximum of 15 years after decedent's death, when the additional estate tax provisions of section 2032A(c) cease to apply). In determining whether the material participation requirement is satisfied, no exception is made for periods during which real property is held by the decedent's estate. Additionally, contemporaneous material participation by 2 or more family members during a period totalling a year will not result in that year being counted as 2 or more years for purposes of satisfying the requirements of this paragraph (c). Death of a qualified heir (as defined in section 2032A(e)(1)) before the requisite time has passed ends any material participation requirement for that heir's portion of the property as to the origninal decedent's estate if the heir received a separate, joint or other undivided property interest from the decedent. If qualified heirs receive successive interests in specially valued property (e.g. life estate and remainder interests) from the decedent, the material participation requirement does not end with respect to any part of the property until the death of the last qualified heir (or, if earlier, the expiration of 15 years from the date of the decedent's death). The requirements of section 2032A will fully apply to an heir's estate if an election under this section is made for the same property by the heir's executor. In general, to determine whether the required participation has occurred, brief periods (e.g., periods of 30 days or less) during which there was no material participation may be disregarded. This is so only if these periods were both preceded and followed by substantial periods (e.g. periods of more than 120 days) in which there was uninterrupted material participation. See (d) Period property must be owned by decedent and family members. (e) Required activities In general. (2) Factors considered. (f) Special rules for corporations, partnerships, and trusts Required arrangement. (2) Required activities. (g) Examples. Example (1). A, the decedent, actively operated his 100-acre farm on a full-time basis for 20 years. He then leased it to B for the 10 years immediately preceding his death. By the terms of the lease, A was to consult with B on where crops were to be planted, to supervise marketing of the crop, and to share equally with B in expenses and earnings. A was present on the farm each spring for consultation; however, once planting was completed, he left for his retirement cottage where he remained until late summer, at which time he returned to the farm to supervise the marketing operation. A at all times maintained the farm home in which he had lived for the time he had owned the farm and lived there when at the farm. In light of his activities, assumption of risks, and valuable knowledge of proper techniques for the particular land gained over 20 years of full-time farming on the land involved, A is deemed to have materially participated in the farming business. Example (2). D is the 70-year old widow of farmer C. She lives on a farm for which special valuation has been elected and has lived there for 20 years. D leases the land to E under an arrangement calling for her participation in the operation of the farm. D annually raises a vegetable garden, chickens, and hogs. She also inspects the tobacco fields (which produce approximately 50 percent of farm income) weekly and informs E if she finds any work that needs to be done. D and E share expenses and income equally. Other decisions such as what fields to plant and when to plant and harvest crops are left to E, but D does occasionally make suggestions. During the harvest season, D prepares and serves meals for all temporary farm help. D is deemed to participate materially in the farm operations based on her farm residence and her involvement with the main money crop. Example (3). Assume that D in example (2) moved to a nursing home 1 year after her husband's death. E completely operated the farm for her for 6 years following her move. If E is not a member of D's family, material participation ceases when D moves; however, if E is a member of D's family, E's material participation will prevent disqualification even if D owns the property. Further, upon D's death, the section 2032A valuation could be elected for her estate if E were a member of her family and the other requirements of section 203A were satisfied. Example (4). F, a qualified heir, owned a specially valued farm. He contracted with G to manage the farm for him as F, a lawyer, lived and worked 15 miles away in a nearby town. F supplied all machinery and equipment and assumed financial responsiblity for the expenses of the farm operation. The contract specified that G was to submit a crop plan and a list of expenses and earnings for F's approval. It also called for F to inspect the farm regularly and to approve all expenditures over $100. In practice, F visited the farm weekly during the growing season to inspect and discuss operations. He actively participated in making important management decisions such as what fields to plant or pasture and how to utilize the subsidy program. F is deemed to have materially participated in the farm operation as his personal involvement amounted to more than managing an investment. Had F not regularly inspected the farm and participated in management decisions, however, he would not be considered to be materially participating. This would be true even though F did assume financial responsibility for the operation and did review annual crop plans. Example (5). Decedent I owned 90 percent of all outstanding stock of X Corporation, a qualified closely-held business which owns real property to be specially valued. I held no formal position in the corporation and there was no arrangement for him to participate in daily business operations. I regularly spent several hours each day at the corporate offices and made decisions on many routine matters. I is not deemed to have materially participated in the X Corporation despite his activity because there was no arrangement requiring him to act in the manner in which he did. Example (6). Decedent J was a senior partner in the law firm of X, Y, and Z, which is a qualified closely held business owning the building in which its offices are located. J ceased to practice law actively 5 years before his death in 1977; however, he remained a full partner and annually received a share of firm profits. J is not deemed to have materially participated under section 2032A even though he still may have reported his distributive share of partnership income for self-employment income tax purposes if the payments were not made pursuant to any retirement agreement. This is so because J does not meet the requirement of actual personal material participation. Example (7). K, the decedent, owned a tree farm. He contracted with L, a professional forester, to manage the property for him as K, a doctor, lived and worked in a town 50 miles away. The activities of L are not considered in determining whether K materially participated in the tree farm operation. During the 5 years preceding K's death, there was no need for frequent inspections of the property or consultation concerning it, inasmuch as most of the land had been reforested and the trees were in the beginning stages of their growing cycle. However, once every year, L submitted for K's approval a proposed plan for the management of the property over the next year. K actively participated in making important management decisions, such as where and whether a pre-commercial thinning should be conducted, whether the timber was adequately protected from fire and disease, whether fire lines needed to be plowed around the new trees, and whether boundary lines were properly maintained around the property. K inspected the property at least twice every year and assumed financial responsibility for the expenses of the tree farm. K also reported his income from the tree farm as earned income for purposes of the tax on self-employment income. Over a period of several years, K had harvested and marketed timber from certain tracts of the tree farm and had supervised replanting of the areas where trees were removed. K's history of harvesting, marketing, and replanting of trees showed him to be in the business of tree farming rather than merely passively investing in timber land. If the history of K's tree farm did not show such an active business operation, however, the tree farm would not qualify for special use valuation. In light of all these facts, K is deemed to have materially participated in the farm as his personal involvement amounted to more than managing an investment. Example (8). Decedent M died on January 1, 1978, owning a farm for which special use valuation under section 2032A has been elected. M owned the farm real property for 15 years before his death. During the 4 years preceding M's death (January 1, 1974 through December 31, 1977), the farm was rented to N, a non-family member, and neither M nor any member of his family materially participated in the farming operation. From January 1, 1970, until December 31, 1973, both M and his daughter, O, materially participated in the farming operation. The material participation requirement of section 2032A(b)(1)(C)(ii) is not satisfied because material participation did not occur for periods aggregating at least 5 different years of the 8 years preceding M's death. [T.D. 7710, 45 FR 50739, July 31, 1980, as amended by T.D. 7786, 46 FR 43037, Aug. 26, 1981] § 20.2032A-4 Method of valuing farm real property. (a) In general. (1) Subtracting the average annual state and local real estate taxes on actual tracts of comparable real property in the same locality from the average annual gross cash rental for that same comparable property, and (2) Dividing the result so obtained by the average annual effective interest rate charged on new Federal land bank loans. The computation of each average annual amount is to be based on the 5 most recent calendar years ending before the date of the decedent's death. (b) Gross cash rental Generally. See, (2) Special rules Documentation required of executor. See, (ii) Arm's-length transaction required. (iii) In-kind rents, statements of appraised rental value, and area averages. i.e., (iv) Period for which comparable real property must have been rented solely for cash. (v) Leases under which rental of personal property is included. (c) State and local real estate taxes. (d) Comparable real property defined. (1) Similarity of soil as determined by any objective means, including an official soil survey reflected in a soil productivity index; (2) Whether the crops grown are such as would deplete the soil in a similar manner; (3) The types of soil conservation techniques that have been practiced on the two properties; (4) Whether the two properties are subject to flooding; (5) The slope of the land; (6) In the case of livestock operations, the carrying capacity of the land; (7) Where the land is timbered, whether the timber is comparable to that on the subject property; (8) Whether the property as a whole is unified or whether it is segmented, and where segmented, the availability of the means necessary for movement among the different segments; (9) The number, types, and conditions of all buildings and other fixed improvements located on the properties and their location as it affects efficient management and use of property and value per se; and (10) Availability of, and type of, transportation facilities in terms of costs and of proximity of the properties to local markets. (e) Effective interest rate defined Generally. (2) Adjustment to billing rate of interest. (3) Example. Example. District X of the Federal land bank system charged an 8 percent billed interest rate on new agricultural loans for 8 months of the year, 1976, and an 8.75 percent rate for 4 months of the year. The average billing rate was, therefore, 8.25 percent [(1.08 × 8/12) + (1.0875 × 4/12) = 1.0825]. The district required stock equal to 5 percent of the face amount of the loan to be purchased as a precondition to receiving a loan. Thus, the borrower only received 95 percent of the funds upon which he paid interest. The applicable annual interest rate for 1976 of 8.68 percent is computed as follows: 8.25 percent × 1.00 (total loan amount) = 8.25 percent (billed interest rate) divided by 0.95 (percent of loan proceeds received by borrower) = 8.68 percent (effective interest rate for 1976). [T.D. 7710, 45 FR 50742, July 31, 1980] § 20.2032A-8 Election and agreement to have certain property valued under section 2032A for estate tax purposes. (a) Election of special use valuation In general. (2) Elections to specially value less than all qualified real property included in an estate. (3) Time and manner of making election. (i) The decedent's name and taxpayer identification number as they appear on the estate tax return; (ii) The relevant qualified use; (iii) The items of real property shown on the estate tax return to be specially valued pursuant to the election (identified by schedule and item number); (iv) The fair market value of the real property to be specially valued under section 2032A and its value based on its qualified use (both values determined without regard to the adjustments provided by section 2032A(b)(3)(B)); (v) The adjusted value (as defined in section 2032A(b)(3)(B)) of all real property which is used in a qualified use and which passes from the decedent to a qualified heir and the adjusted value of all real property to be specially valued; (vi) The items of personal property shown on the estate tax return that pass from the decedent to a qualified heir and are used in a qualified use under section 2032A (identified by schedule and item number) and the total value of such personal property adjusted as provided under section 2032A(b)(3)(B); (vii) The adjusted value of the gross estate, as defined in section 2032A(b)(3)(A); (viii) The method used in determining the special value based on use; (ix) Copies of written appraisals of the fair market value of the real property; (x) A statement that the decedent and/or a member of his or her family has owned all specially valued real property for at least 5 years of the 8 years immediately preceding the date of the decedent's death; (xi) Any periods during the 8-year period preceding the date of the decedent's death during which the decedent or a member of his or her family did not own the property, use it in a qualified use, or materially participate in the operation of the farm or other business within the meaning of section 2032A(e)(6); (xii) The name, address, taxpayer identification number, and relationship to the decedent of each person taking an interest in each item of specially valued property, and the value of the property interests passing to each such person based on both fair market value and qualified use; (xiii) Affidavits describing the activities constituting material participation and the identity of the material participant or participants; and (xiv) A legal description of the specially valued property. If neither an election nor a protective election is timely made, special use valuation is not available to the estate. See (b) Protective election. (1) The decedent's name and taxpayer identification number as they appear on the estate tax return; (2) The relevant qualified use; and (3) The items of real and personal property shown on the estate tax return which are used in a qualified use, and which pass to qualified heirs (identified by schedule and item number). If it is found that the estate qualifies for special use valuation based upon values as finally determined (or agreed to following examination of a return), an additional notice of election must be filed within 60 days after the date of such determination. This notice must set forth the information required under paragraph (a)(3) of this section and is to be attached, together with the agreement described in paragraph (c)(1) of this section, to an amended estate tax return. The new return is to be filed with the Internal Revenue Service office where the original return was filed. (c) Agreement to special valuation by persons with an interest in property In general. See (2) Persons having an interest in designated property. (3) Consent on behalf of interested party. (4) Duties of agent designated in agreement. (d) Special rule for estates for which elections under section 2032A are made on or before August 30, 1980. [T.D. 7710, 45 FR 50743, July 31, 1980, as amended by T.D. 7786, 46 FR 43037, Aug. 26, 1981] § 20.2033-1 Property in which the decedent had an interest. (a) In general. (b) Miscellaneous examples. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6684, 28 FR 11409, Oct. 24, 1963] § 20.2034-1 Dower or curtesy interests. A decedent's gross estate includes under section 2034 any interest in property of the decedent's surviving spouse existing at the time of the decedent's death as dower or curtesy, or any interest created by statute in lieu thereof (although such other interest may differ in character from dower or curtesy). Thus, the full value of property is included in the decedent's gross estate, without deduction of such an interest of the surviving husband or wife, and without regard to when the right to such an interest arose. § 20.2036-1 Transfers with retained life estate. (a) In general. (1) For his life; (2) For any period not ascertainable without reference to his death (if the transfer was made after June 6, 1932); or (3) For any period which does not in fact end before his death: (i) The use, possession, right to income, or other enjoyment of the transferred property. (ii) The right, either alone or in conjunction with any other person or persons, to designate the person or persons who shall possess or enjoy the transferred property or its income (except that, if the transfer was made before June 7, 1932, the right to designate must be retained by or reserved to the decedent alone). (b) Meaning of terms. (i) A decedent reserved the right to receive the income from transferred property in quarterly payments, with the proviso that no part of the income between the last quarterly payment and the date of the decedent's death was to be received by the decedent or his estate; and (ii) A decedent reserved the right to receive the income, annuity, or other payment from transferred property after the death of another person who was in fact enjoying the income, annuity, or other payment at the time of the decedent's death. In such a case, the amount to be included in the decedent's gross estate under this section does not include the value of the outstanding interest of the other person as determined in paragraphs (c)(1)(i) and (c)(2)(ii) of this section. See also, paragraphs (c)(1)(ii) Example 1 Example 8 (2) The “use, possession, right to the income, or other enjoyment of the transferred property” is considered as having been retained by or reserved to the decedent to the extent that the use, possession, right to the income, or other enjoyment is to be applied toward the discharge of a legal obligation of the decedent, or otherwise for his pecuniary benefit. The term “legal obligation” includes a legal obligation to support a dependent during the decedent's lifetime. (3) The phrase “right * * * to designate the person or persons who shall possess or enjoy the transferred property or the income therefrom” includes a reserved power to designate the person or persons to receive the income from the transferred property, or to possess or enjoy nonincome-producing property, during the decedent's life or during any other period described in paragraph (a) of this section. With respect to such a power, it is immaterial (i) whether the power was exercisable alone or only in conjunction with another person or persons, whether or not having an adverse interest; (ii) in what capacity the power was exercisable by the decedent or by another person or persons in conjunction with the decedent; and (iii) whether the exercise of the power was subject to a contingency beyond the decedent's control which did not occur before his death (e.g., the death of another person during the decedent's lifetime). The phrase, however, does not include a power over the transferred property itself which does not affect the enjoyment of the income received or earned during the decedent's life. (See, however, section 2038 for the inclusion of property in the gross estate on account of such a power.) Nor does the phrase apply to a power held solely by a person other than the decedent. But, for example, if the decedent reserved the unrestricted power to remove or discharge a trustee at any time and appoint himself as trustee, the decedent is considered as having the powers of the trustee. (c) Retained or reserved interest Amount included in gross estate In general. (ii) Examples. Example 1. Decedent (D) creates an irrevocable inter vivos trust. The terms of the trust provide that all of the trust income is to be paid to D and D's child, C, in equal shares during their joint lives and, on the death of the first to die of D and C, all of the trust income is to be paid to the survivor. On the death of the survivor of D and C, the remainder is to be paid to another individual, F. Subsequently, D dies survived by C. Fifty percent of the value of the trust corpus is includible in D's gross estate under section 2036(a)(1) because, under the terms of the trust, D retained the right to receive one-half of the trust income for D's life. In addition, the excess (if any) of the value of the remaining 50 percent of the trust corpus, over the present value of C's outstanding life estate in that 50 percent of trust corpus, also is includible in D's gross estate under section 2036(a)(1), because D retained the right to receive all of the trust income for such time as D survived C. If C had predeceased D, then 100 percent of the trust corpus would have been includible in D's gross estate. Example 2. D transferred D's personal residence to D's child (C), but retained the right to use the residence for a term of years. D dies during the term. At D's death, the fair market value of the personal residence is includible in D's gross estate under section 2036(a)(1) because D retained the right to use the residence for a period that did not in fact end before D's death. (2) Retained annuity, unitrust, and other income interests in trusts In general. Examples 1, 2, 3 (ii) Decedent's retained annuity following a current annuity interest of another person. (A) Step 1: (B) Step 2: (C) Step 3: (D) Step 4: (E) Step 5: (F) Step 6: (iii) Graduated retained interests In general. graduated retained interest (B) Other definitions 1 Base amount. base amount ( 2 Periodic addition. periodic addition (1) (2) Prior (1−2) Year 3 144,000 120,000 24,000 Year 4 172,800 144,000 28,800 Year 5 207,360 172,800 34,560 ( 3 Corpus amount. corpus amount ( i ( ii (C) Amount includible. (iv) Examples. (A) Example 1. 1 ( 2 (B) Example 2. 1 ( 2 (C) Example 3. 1 ( 2 ( 3 3 Example 3 (D) Example 4. (E) Example 5. b (F) Example 6. (G) Example 7. 1 ( 2 ( 3 ( i Column A. ( ii Column B. ( iii Column C. ( iv Columns D through G for year 3. ( v Columns D through G for years 4 and 5. 3 ( vi Column G total. ( 4 ( 5 3 ( 6 3 (H) Example 8. 1 ( 2 Step 1: $120,000 ( 3 Step 2: 71,429 ( 4 Step 3: 142,857 ( 5 Step 4: 40,000 ( 6 Step 5: 102,857 ( 7 Step 6: 102,857 (3) Effective/applicability dates. Example 7, Example 8 Example 1 Example 7, Example 8 [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6501, 25 FR 10869, Nov. 16, 1960; T.D. 9414, 73 FR 40177, July 14, 2008; 73 FR 44648, July 31, 2008; T.D. 9555, 76 FR 69128, Nov. 8, 2011; T.D. 9974, 88 FR 37447, June 7, 2023] § 20.2037-1 Transfers taking effect at death. (a) In general. (1) Possession or enjoyment of the property could, through ownership of the interest, have been obtained only by surviving the decedent, (2) The decedent had retained a possibility (referred to in this section as a “reversionary interest”) that the property, other than the income alone, would return to the decedent or his estate or would be subject to a power of disposition by him, and (3) The value of the reversionary interest immediately before the decedent's death exceeded 5 percent of the value of the entire property. However, if the transfer was made before October 8, 1949, section 2037 is applicable only if the reversionary interest arose by the express terms of the instrument of transfer and not by operation of law (see paragraph (f) of this section). See also paragraph (g) of this section with respect to transfers made between November 11, 1935, and January 29, 1940. The provisions of section 2037 do not apply to transfers made before September 8, 1916. (b) Condition of survivorship. (c) Retention of reversionary interest. (2) For purposes of section 2037, the term “reversionary interest” includes a possibility that property transferred by the decedent may return to him or his estate and a possibility that property transferred by the decedent may become subject to a power of disposition by him. The term is not used in a technical sense, but has reference to any reserved right under which the transferred property shall or may be returned to the grantor. Thus, it encompasses an interest arising either by the express terms of the instrument of transfer or by operation of law. (See, however, paragraph (f) of this section with respect to transfers made before October 8, 1949.) The term “reversionary interest” does not include rights to income only, such as the right to receive the income from a trust after the death of another person. (However, see section 2036 for the inclusion of property in the gross estate on account of such rights.) Nor does the term “reversionary interest” include the possibility that the decedent during his lifetime might have received back an interest in transferred property by inheritance through the estate of another person. Similarly, a statutory right of a spouse to receive a portion of whatever estate a decedent may leave at the time of his death is not a “reversionary interest”. (3) For purposes of this section, the value of the decedent's reversionary interest is computed as of the moment immediately before his death, without regard to whether or not the executor elects the alternate valuation method under section 2032 and without regard to the fact of the decedent's death. The value is ascertained in accordance with recognized valuation principles for determining the value for estate tax purposes of future or conditional interests in property. (See §§ 20.2031-1, 20.2031-7, and 20.2031-9). For example, if the decedent's reversionary interest was subject to an outstanding life estate in his wife, his interest is valued according to the actuarial rules set forth in § 20.2031-7. On the other hand, if the decedent's reversionary interest was contingent on the death of his wife without issue surviving and if it cannot be shown that his wife is incapable of having issue (so that his interest is not subject to valuation according to the actuarial rules in § 20.2031-7), his interest is valued according to the general rules set forth in § 20.2031-1. A possibility that the decedent may be able to dispose of property under certain conditions is considered to have the same value as a right of the decedent to the return of the property under those same conditions. (4) In order to determine whether or not the decedent retained a reversionary interest in transferred property of a value in excess of 5 percent, the value of the reversionary interest is compared with the value of the transferred property, including interests therein which are not dependent upon survivorship of the decedent. For example, assume that the decedent, A, transferred property in trust with the income payable to B for life and with the remainder payable to C if A predeceases B, but with the property to revert to A if B predeceases A. Assume further that A does, in fact, predecease B. The value of A's reversionary interest immediately before his death is compared with the value of the trust corpus, without deduction of the value of B's outstanding life estate. If, in the above example, A had retained a reversionary interest in one-half only of the trust corpus, the value of his reversionary interest would be compared with the value of one-half of the trust corpus, again without deduction of any part of the value of B's outstanding life estate. (d) Transfers partly taking effect at death. (e) Examples. Example (1). The decedent transferred property in trust with the income payable to his wife for life and, at her death, remainder to the decedent's then surviving children, or if none, to the decedent or his estate. Since each beneficiary can possess or enjoy the property without surviving the decedent, no part of the property is includible in the decedent's gross estate under section 2037, regardless of the value of the decedent's reversionary interest. (However, see section 2033 for inclusion of the value of the reversionary interest in the decedent's gross estate.) Example (2). The decedent transferred property in trust with the income to be accumulated for the decedent's life, and at his death, principal and accumulated income to be paid to the decedent's then surviving issue, or, if none, to A or A's estate. Since the decedent retained no reversionary interest in the property, no part of the property is includible in the decedent's gross estate, even though possession or enjoyment of the property could be obtained by the issue only by surviving the decedent. Example (3). The decedent transferred property in trust with the income payable to his wife for life and with the remainder payable to the decedent or, if he is not living at his wife's death, to his daughter or her estate. The daughter cannot obtain possession or enjoyment of the property without surviving the decedent. Therefore, if the decedent's reversionary interest immediately before his death exceeded 5 percent of the value of the property, the value of the property, less the value of the wife's outstanding life estate, is includible in the decedent's gross estate. Example (4). The decedent transferred property in trust with the income payable to his wife for life and with the remainder payable to his son or, if the son is not living at the wife's death, to the decedent or, if the decedent is not then living, to X or X's estate. Assume that the decedent was survived by his wife, his son, and X. Only X cannot obtain possession or enjoyment of the property without surviving the decedent. Therefore, if the decedent's reversionary interest immediately before his death exceeded 5 percent of the value of the property, the value of X's remainder interest (with reference to the time immediately after the decedent's death) is includible in the decedent's gross estate. Example (5). The decedent transferred property in trust with the income to be accumulated for a period of 20 years or until the decedent's prior death, at which time the principal and accumulated income was to be paid to the decedent's son if then surviving. Assume that the decedent does, in fact, die before the expiration of the 20-year period. If, at the time of the transfer, the decedent was 30 years of age, in good health, etc., the son will be considered able to possess or enjoy the property without surviving the decedent. If, on the other hand, the decedent was 70 years of age at the time of the transfer, the son will not be considered able to possess or enjoy the property without surviving the decedent. In this latter case, if the value of the decedent's reversionary interest (arising by operation of law) immediately before his death exceeded 5 percent of the value of the property, the value of the property is includible in the decedent's gross estate. Example (6). The decedent transferred property in trust with the income to be accumulated for his life and, at his death, the principal and accumulated income to be paid to the decedent's then surviving children. The decedent's wife was given the unrestricted power to alter, amend, or revoke the trust. Assume that the wife survived the decedent but did not, in fact, exercise her power during the decedent's lifetime. Since possession or enjoyment of the property could have been obtained by the wife during the decedent's lifetime under the exercise of a general power of appointment, which was, in fact, exercisable immediately before the decedent's death, no part of the property is includible in the decedent's gross estate. (f) Transfers made before October 8, 1949. (2) The decedent's reversionary interest will be considered to have arisen by the express terms of the instrument of transfer and not by operation of law if the instrument contains an express disposition which affirmatively creates the reversionary interest, even though the terms of the disposition do not refer to the decedent or his estate, as such. For example, where the disposition is, in its terms, to the next of kin of the decedent and such a disposition, under applicable local law, constitute a reversionary interest in the decedent's estate, the decedent's reversionary interest will be considered to have arisen by the express terms of the instrument of transfer and not by operation of law. (g) Transfers made after November 11, 1935, and before January 29, 1940. Helvering St. Louis Union Trust Co. Becker St. Louis Union Trust Co. Helvering Hallock (1) The Commissioner, whose determination shall be final, determines that the transfer is classifiable with the transfers involved in the St. Louis Union Trust Co. Klein United States (2) The transfer shall have been finally treated for all gift tax purposes, both as to the calendar year of the transfer and as to subsequent calendar years, as a gift in an amount measured by the value of the property undiminished by reason of a provision in the instrument of transfer by which the property, in whole or in part, is to revert to the decedent should he survive the donee or another person, or the reversion is conditioned upon some other contingency terminable by the decedent's death. § 20.2038-1 Revocable transfers. (a) In general. (1) To the extent that the transfer was for an adequate and full consideration in money or money's worth (see § 20.2043-1); (2) If the decedent's power could be exercised only with the consent of all parties having an interest (vested or contingent) in the transferred property, and if the power adds nothing to the rights of the parties under local law; or (3) To a power held solely by a person other than the decedent. But, for example, if the decedent had the unrestricted power to remove or discharge a trustee at any time and appoint himself trustee, the decedent is considered as having the powers of the trustee. However, this result would not follow if he only had the power to appoint himself trustee under limited conditions which did not exist at the time of his death. (See last two sentences of paragraph (b) of this section.) Except as provided in this paragraph, it is immaterial in what capacity the power was exercisable by the decedent or by another person or persons in conjunction with the decedent; whether the power was exercisable alone or only in conjunction with another person or persons, whether or not having an adverse interest (unless the transfer was made before June 2, 1924; see paragraph (d) of this section); and at what time or from what source the decedent acquired his power (unless the transfer was made before June 23, 1936; see paragraph (c) of this section). Section 2038 is applicable to any power affecting the time or manner of enjoyment of property or its income, even though the identity of the beneficiary is not affected. For example, section 2038 is applicable to a power reserved by the grantor of a trust to accumulate income or distribute it to A, and to distribute corpus to A, even though the remainder is vested in A or his estate, and no other person has any beneficial interest in the trust. However, only the value of an interest in property subject to a power to which section 2038 applies is included in the decedent's gross estate under section 2038. (b) Date of existence of power. (c) Transfers made before June 23, 1936. (d) Transfers made before June 2, 1924. (e) Powers relinquished in contemplation of death In general. (2) Transfers before June 23, 1936. (f) Effect of disability to relinquish power in certain cases. (1) The relinquishment on or after January 1, 1940, and on or before December 31, 1947, of the power would, by reason of section 1000(e), of the Internal Revenue Code of 1939, be deemed not a transfer of property for the purpose of the gift tax under chapter 4 of the Internal Revenue Code of 1939, and (2) The decedent was, for a continuous period beginning on or before September 30, 1947, and ending with his death, after August 16, 1954, under a mental disability to relinquish a power. For the purpose of the foregoing provision, the term “mental disability” means mental incompetence, in fact, to release the power whether or not there was an adjudication of incompetence. Such provision shall apply even though a guardian could have released the power for the decedent. No interest shall be allowed or paid on any overpayment allowable under section 2038(c) with respect to amounts paid before August 7, 1959. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6600, 27 FR 4985, May 29, 1962] § 20.2039-1 Annuities. (a) In general. The fact that an annuity or other payment is not includible in a decedent's gross estate under section 2039(a) and (b) does not mean that it is not includible under some other section of part III of subchapter A of chapter 11. However, see section 2039(c) and (d) and § 20.2039-2 for rules relating to the exclusion from a decedent's gross estate of annuities and other payments under certain “qualified plans.” Further, the fact that an annuity or other payment may be includible under section 2039(a) will not preclude the application of another section of chapter 11 with regard to that interest. For annuity interests in trust, see paragraph (e)(1) of this section. (b) Agreements or plans to which section 2039 (a) and (b) applies. (i) An annuity or other payment was payable to the decedent, either alone or in conjunction with another person or persons, for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death, or (ii) The decedent possessed, for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death, the right to receive such an annuity or other payment, either alone or in conjunction with another person or persons. The term “annuity or other payment” as used with respect to both the decedent and the beneficiary has reference to one or more payments extending over any period of time. The payments may be equal or unequal, conditional or uncondititional, periodic or sporadic. The term “contract or agreement” includes any arrangement, understanding or plan, or any combination of arrangements, understandings or plans arising by reason of the decedent's employment. An annuity or other payment “was payable” to the decedent if, at the time of his death, the decedent was in fact receiving an annuity or other payment, whether or not he had an enforceable right to have payments continued. The decedent “possessed the right to receive” an annuity or other payment if, immediately before his death, the decedent had an enforceable right to receive payments at some time in the future, whether or not, at the time of his death, he had a present right to receive payments. In connection with the preceding sentence, the decedent will be regarded as having had “an enforceable right to receive payments at some time in the future” so long as he had complied with his obligations under the contract or agreement up to the time of his death. For the meaning of the phrase “for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death”, see section 2036 and § 20.2036-1. (2) The application of this paragraph is illustrated and more fully explained in the following examples. In each example: (i) It is assumed that all transactions occurred after March 3, 1931, and (ii) the amount stated to be includible in the decedent's gross estate is determined in accordance with the provisions of paragraph (c) of this section. Example (1). The decedent purchased an annuity contract under the terms of which the issuing company agreed to pay an annuity to the decedent for his life and, upon his death, to pay a specified lump sum to his designated beneficiary. The decedent was drawing his annuity at the time of his death. The amount of the lump sum payment to the beneficiary is includible in the decedent's gross estate under section 2039 (a) and (b). Example (2). Pursuant to a retirement plan, the employer made contributions to a fund which was to provide the employee, upon his retirement at age 60, with an annuity for life, and which was to provide the employee's wife, upon his death after retirement, with a similar annuity for life. The benefits under the plan were completely forfeitable during the employee's life, but upon his death after retirement, the benefits to the wife were forfeitable only upon her remarriage. The employee had no right to originally designate or to ever change the employer's designation of the surviving beneficiary. The retirement plan at no time met the requirements of section 401(a) (relating to qualified plans). Assume that the employee died at age 61 after the employer started payment of his annuity as described above. The value of the wife's annuity is includible in the decedent's gross estate under section 2039 (a) and (b). Includibility in this case is based on the fact that the annuity to the decedent “was payable” at the time of his death. The fact that the decedent's annuity was forfeitable is of no consequence since, at the time of his death, he was in fact receiving payments under the plan. Nor is it important that the decedent had no right to choose the surviving beneficiary. The element of forfeitability in the wife's annuity may be taken into account only with respect to the valuation of the annuity in the decedent's gross estate. Example (3). Pursuant to a retirement plan, the employer made contributions to a fund which was to provide the employee, upon his retirement at age 60, with an annuity of $100 per month for life, and which was to provide his designated beneficiary, upon the employee's death after retirement, with a similar annuity for life. The plan also provided that (a) upon the employee's separation from service before retirement, he would have a nonforfeitable right to receive a reduced annuity starting at age 60, and (b) upon the employee's death before retirement, a lump sum payment representing the amount of the employer's contributions credited to the employee's account would be paid to the designated beneficiary. The plan at no time met the requirements of section 401(a) (relating to qualified plans). Assume that the employee died at age 49 and that the designated beneficiary was paid the specified lump sum payment. Such amount is includible in the decedent's gross estate under section 2039 (a) and (b). Since immediately before his death, the employee had an enforceable right to receive an annuity commencing at age 60, he is considered to have “possessed the right to receive” an annuity as that term is used in section 2039 (a). If, in this example, the employee would not be entitled to any benefits in the event of his separation from service before retirement for any reason other than death, the result would be the same so long as the decedent had complied with his obligations under the contract up to the time of his death. In such case, he is considered to have had, immediately before his death, an enforceable right to receive an annuity commencing at age 60. Example (4). Pursuant to a retirement plan, the employee made contributions to a fund which was to provide the employee, upon his retirement at age 60, with an annuity for life, and which was to provide his designated beneficiary, upon the employee's death after retirement, with a similar annuity for life. The plan provided, however, that no benefits were payable in the event of the employee's death before retirement. The retirement plan at no time met the requirements of section 401(a) (relating to qualified plans). Assume that the employee died at age 59 but that the employer nevertheless started payment of an annuity in a slightly reduced amount to the designated beneficiary. The value of the annuity is not includible in the decedent's gross estate under section 2039 (a) and (b). Since the employee died before reaching the retirement age, the employer was under no obligation to pay the annuity to the employee's designated beneficiary. Therefore, the annuity was not paid under a “contract or agreement” as that term is used in section 2039 (a). If, however, it can be established that the employer has consistently paid an annuity under such circumstances, the annuity will be considered as having been paid under a “contract or agreement”. Example (5). The employer made contributions to a retirement fund which were credited to the employee's individual account. Under the plan, the employee was to receive one-half the amount credited to his account upon his retirement at age 60, and his designated beneficiary was to receive the other one-half upon the employee's death after retirement. If the employee should die before reaching the retirement age, the entire amount credited to his account at such time was to be paid to the designated beneficiary. The retirement plan at no time met the requirements of section 401(a) (relating to qualified plans). Assume that the employee received one-half the amount credited to his account upon reaching the retirement age and that he died shortly thereafter. Since the employee received all that he was entitled to receive under the plan before his death, no amount was payable to him for his life or for any period not ascertainable without reference to his death, or for any period which did not in fact end before his death. Thus, the amount of the payment to the designated beneficiary is not includible in the decedent's gross estate under section 2039 (a) and (b). If, in this example, the employee died before reaching the retirement age, the amount of the payment to the designated beneficiary would be includible in the decedent's gross estate under section 2039 (a) and (b). In this latter case, the decedent possessed the right to receive lump sum payment for a period which did not in fact end before his death. Example (6). The employer made contributions to two different funds set up under two different plans. One plan was to provide the employee upon his retirement at age 60, with an annuity for life, and the other plan was to provide the employee's designated beneficiary, upon the employee's death, with a similar annuity for life. Each plan was established at a different time and each plan was administered separately in every respect. Neither plan at any time met the requirements of section 401(a) (relating to qualified plans). The value of the designated beneficiary's annuity is includible in the employee's gross estate. All rights and benefits accruing to an employee and to others by reason of the employment (except rights and benefits accruing under certain plans meeting the requirements of section 401(a) (see § 20.2039-2)) are considered together in determining whether or not section 2039 (a) and (b) applies. The scope of section 2039 (a) and (b) cannot be limited by indirection. (c) Amount includible in the gross estate. Example (1). On January 1, 1945, the decedent and his wife each contributed $15,000 to the purchase price of an annuity contract under the terms of which the issuing company agreed to pay an annuity to the decedent and his wife for their joint lives and to continue the annuity to the survivor for his life. Assume that the value of the survivor's annuity at the decedent's death (computed under § 20.2031-8) is $20,000. Since the decedent contributed one-half of the cost of the contract, the amount to be included in his gross estate under section 2039 (a) and (b) is $10,000. Example (2). Under the terms of an employment contract entered into on January 1, 1945, the employer and the employee made contributions to a fund which was to provide the employee, upon his retirement at age 60, with an annuity for life, and which was to provide his designated beneficiary, upon the employee's death after retirement, with a similar annuity for life. The retirement fund at no time formed part of a plan meeting the requirements of section 401(a) (relating to qualified plans). Assume that the employer and the employee each contributed $5,000 to the retirement fund. Assume further, that the employee died after retirement at which time the value of the survivor's annuity was $8,000. Since the employer's contributions were made by reason of the decedent's employment, the amount to be included in his gross estate under section 2039 (a) and (b) is the entire $8,000. If, in the above example, only the employer made contributions to the fund, the amount to be included in the gross estate would still be $8,000. (d) Insurance under policies on the life of the decedent. Example. Pursuant to a retirement plan established January 1, 1945, the employer purchased a contract from an insurance company which was to provide the employee, upon his retirement at age 65, with an annuity of $100 per month for life, and which was to provide his designated beneficiary, upon the employee's death after retirement, with a similar annuity for life. The contract further provided that if the employee should die before reaching the retirement age, a lump sum payment of $20,000 would be paid to his designated beneficiary in lieu of the annuity described above. The plan at no time met the requirements of section 401(a) (relating to qualified plans). Assume that the reserve value of the contract at the retirement age would be $20,000. If the employee died after reaching the retirement age, the death benefit to the designated beneficiary would constitute an annuity, the value of which would be includable in the employee's gross estate under section 2039 (a) and (b). If, on the other hand, the employee died before reaching his retirement age, the death benefit to the designated beneficiary would constitute insurance under a policy on the life of the decedent since the reserve value would be less than the death benefit. Accordingly, its includability would depend upon section 2042 and § 20.2042-1. (e) No application to certain trusts. (f) Effective/applicability dates. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7416, 41 FR 14514, Apr. 6, 1976; T.D. 9414, 73 FR 40178, July 14, 2008] § 20.2039-1T Limitations and repeal of estate tax exclusion for qualified plans and individual retirement plans (IRAs) (temporary). Q-1: Are there any exceptions to the general effective dates of the $100,000 limitation and the repeal of the estate tax exclusion for the value of interests under qualified plans and IRAs described in section 2039 (c) and (e)? A-1: (a) Yes. Section 245 of the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) limited the estate tax exclusion to $100,000 for estates of decedents dying after December 31, 1982. Section 525 of the Tax Reform Act of 1984 (TRA of 1984) repealed the exclusion for estates of decedents dying after December 31, 1984. (b) Section 525(b)(3) of the TRA of 1984 amended section 245 of TEFRA to provide that the $100,000 limitation on the exclusion for the value of a decedent's interest in a plan or IRA will not apply to the estate of any decedent dying after December 31, 1982, to the extent that the decedent-participant was in pay status on December 31, 1982, with respect to such interest and irrevocably elected the form of benefit payable under the plan or IRA (including the form of any survivor benefits) with respect to such interest before January 1, 1983. (c) Similarly, the TRA of 1984 provides that the repeal of the estate tax exclusion for the value of a decedent's interest in a plan or IRA will not apply to the estate of a decedent dying after December 31, 1984, to the extent that the decedent-participant was in pay status on December 31, 1984, with respect to such interest and irrevocably elected the form of benefit payable under the plan or IRA (including the form of any survivor benefits) with respect to such interest before July 18, 1984. Q-2: What is the meaning of “in pay status” on the applicable date? A-2: A participant was in pay status on the applicable date with respect to a portion of his or her interest in a plan or IRA if such portion is to be paid in a benefit form that has been elected on or before such date and the participant has received, on or before such date, at least one payment under such benefit form. Q-3: What is required for an election of the form of benefit payable under the plan to have been irrevocable as of any applicable date? A-3: As of any applicable date, an election of the form of benefit payable under a plan is irrevocable if, as of such date, it was a written irrevocable election that, with respect to all payments to be received after such date, specified the form of distribution (e.g., lump sum, level dollar annuity, formula annuity) and the period over which the distribution would be made (e.g., single life, joint and survivor, term certain). An election is not irrevocable as of any applicable date if, on or after such date, the form or period of the distribution could be determined or altered by any person or persons. An election does not fail to be irrevocable as of an applicable date merely because the beneficiaries were not designated as of such date or could be changed after such date. If any interest in any IRA may not, by law or contract, be subject to an irrevocable election described in this section, any election of the form of benefit payable under the IRA does not satisfy the requirement that an irrevocable election have been made. [T.D. 8073, 51 FR 4335, Feb. 4, 1986] § 20.2039-2 Annuities under “qualified plans” and section 403(b) annuity contracts. (a) Section 2039(c) exclusion. (b) Plans and annuity contracts to which section 2039(c) applies. (1) An employees' trust (or under a contract purchased by an employees' trust) forming part of a pension, stock bonus, or profit-sharing plan which, at the time of the decedent's separation from employment (whether by death or otherwise), or at the time of the earlier termination of the plan, met the requirements of section 401(a); (2) A retirement annuity contract purchased by an employer (and not by an employees' trust) pursuant to a plan which, at the time of decedent's separation from employment (by death or otherwise), or at the time of the earlier termination of the plan, was a plan described in section 403(a); (3) In the case of a decedent dying after December 31, 1957, a retirement annuity contract purchased for an employee by an employer which, for its taxable year in which the purchase occurred, is an organization referred to in section 170(b)(1)(A) (ii) or (iv) or which is a religious organization (other than a trust) and is exempt from tax under section 501(a); (4) In the case of a decedent dying after December 31, 1965, an annuity under Chapter 73 of title 10 of the United States Code (10 U.S.C. 1431, et seq. (5) In the case of a decedent dying after December 31, 1962, a bond purchase plan described in section 405. For the meaning of the term “annuity or other payment”, see paragraph (b) of § 20.2039-1. For the meaning of the phrase “receivable by or for the benefit of the decedent's estate”, see paragraph (b) of § 20.2042-1. The application of this paragraph may be illustrated by the following examples in each of which it is assumed that the amount stated to be excludable from the decedent's gross estate is determined in accordance with paragraph (c) of this section: Example (1). Pursuant to a pension plan, the employer made contributions to a trust which was to provide the employee, upon his retirement at age 60, with an annuity for life, and which was to provide his wife, upon the employee's death after retirement, with a similar annuity for life. At the time of the employee's retirement, the pension trust formed part of a plan meeting the requirements of section 401(a). Assume that the employee died at age 61 after the trustee started payment of his annuity as described above. Since the wife's annuity was receivable under a qualified pension plan, no part of the value of such annuity is includable in the decedent's gross estate by reason of the provisions of section 2039(c). If, in this example, the employer provided other benefits under nonqualified plans, the result would be the same since the exclusion under section 2039(c) is confined to the benefits provided for under the qualified plan. Example (2). Pursuant to a profit-sharing plan, the employer made contributions to a trust which were allocated to the employee's individual account. Under the plan, the employee would, upon retirement at age 60, receive a distribution of the entire amount credited to the account. If the employee should die before reaching retirement age, the amount credited to the account would be distributed to the employee's designated beneficiary. Assume that the employee died before reaching the retirement age and that at such time the plan met the requirements of section 401(a). Since the payment to the designated beneficiary is receivable under a qualified profit-sharing plan, the provisions of section 2039(c) apply. However, if the payment is a lump sum distribution to which § 20.2039-3 or § 20.2039-4 applies, the payment is excludable from the decedent's gross estate only as provided in such section. Example (3). Pursuant to a pension plan, the employer made contributions to a trust which were used by the trustee to purchase a contract from an insurance company for the benefit of an employee. The contract was to provide the employee, upon retirement at age 65, with an annuity of $100 per month for life, and was to provide the employee's designated beneficiary upon the employee's death after retirement, with a similar annuity for life. The contract further provided that if the employee should die before reaching retirement age, a lump sum payment equal to the greater of (a) $10,000 or (b) the reserve value of the policy would be paid to the designated beneficiary in lieu of the annuity. Assume that the employee died before reaching the retirement age and that at such time the plan met the requirements of section 401(a). Since the payment to the designated beneficiary is receivable under a qualified pension plan, the provisions of section 2039(c) apply. However, if the payment is a lump sum distribution to which § 20.2039-3 or § 20.2039-4 applies, the payment is excludable from the decedent's gross estate only as provided in such section. It should be noted that for purposes of the exclusion under section 2039(c) it is immaterial whether or not the payment constitutes the proceeds of life insurance under the principles set forth in § 20.2039-1(d). Example (4). Pursuant to a profit-sharing plan, the employer made contributions to a trust which were allocated to the employee's individual account. Under the plan, the employee would, upon his retirement at age 60, be given the option to have the amount credited to his account (a) paid to him in a lump sum, (b) used to purchase a joint and survivor annuity for him and his designated beneficiary, or (c) left with the trustee under an arrangement whereby interest would be paid to him for his lifetime with the principal to be paid, at his death, to his designated beneficiary. The plan further provided that if the third method of settlement were selected, the employee would retain the right to have the principal paid to himself in a lump sum up to the time of his death. At the time of the employee's retirement, the profit-sharing plan met the requirements of section 401(a). Assume that the employee, upon reaching his retirement age, elected to have the amount credited to his account left with the trustee under the interest arrangement. Assume, further, that the employee did not exercise his right to have such amount paid to him before his death. Under such circumstances, the employee is considered as having constructively received the amount credited to his account upon his retirement. Thus, such amount is not considered as receivable by the designated beneficiary under the profit-sharing plan and the exclusion of section 2039(c) is not applicable. Example (5). An employer purchased a retirement annuity contract for an employee which was to provide the employee, upon his retirement at age 60, with an annuity for life and which was to provide his wife, upon the employee's death after retirement, with a similar annuity for life. The employer, for its taxable year in which the annuity contract was purchased, was an organization referred to in section 170(b)(1)(ii), and was exempt from tax under section 501(a). The entire amount of the purchase price of the annuity contract was excluded from the employee's gross income under section 403(b). No part of the value of the survivor annuity payable after the employee's death is includible in the decedent's gross estate by reason of the provisions of section 2039(c). (c) Amounts excludable from the gross estate. (i) Payments or contributions made by or on behalf of the employer towards the purchase of an annuity contract described in paragraph (b)(3) of this section are considered to include only such payments or contributions as are, or were, excludable from the employee's gross income under section 403(b). (ii) In the case of a decedent dying before January 1, 1977, payments or contributions made under a plan described in paragraph (b) (1), (2) or (5) of this section on behalf of the decedent for a period for which the decedent was self-employed, within the meaning of section 401(c)(1), with respect to the plan are considered payments or contributions made by the decedent and not by the employer. (iii) In the case of a decedent dying after December 31, 1976, however, payments or contributions made under a plan described in paragraph (b) (1), (2) or (5) of this section on behalf of the decedent for a period for which the decedent was self-employed, within the meaning of section 401(c)(1), with respect to the plan are considered payments or contributions made by the employer to the extent the payments or contributions are, or were, deductible under section 404 or 405(c). Contributions or payments attributable to that period which are not, or were not, so deductible are considered made by the decedent. (iv) In the case of a plan described in paragraph (b) (1) or (2) of this section, a rollover contribution described in section 402(a)(5), 403(a)(4), 409(d)(3)(A)(ii) or 409(b)(3)(C) is considered an amount contributed by the employer. (v) In the case of an annuity contract described in paragraph (b)(3) of this section, a rollover contribution described in section 403(b)(8) is considered an amount contributed by the employer. (vi) In the case of a plan described in paragraph (b) (1), (2) or (5) of this section, an amount includable in the gross income of an employee under section 1379(b) (relating to shareholder-employee beneficiaries under certain qualified plans) is considered an amount paid or contributed by the decedent. (vii) Amounts payable under paragraph (b)(4) of this section are attributable to payments or contributions made by the decedent only to the extent of amounts deposited by the decedent pursuant to section 1438 or 1452(d) of title 10 of the United States Code. (viii) The value at the decedent's death of the annuity or other payment is determined under the rules of §§ 20.2031-1 and 20.2031-7 or, for certain prior periods, § 20.2031-7A. (2) In certain cases, the employer's contribution (or a contribution made on his behalf) to a plan on the employee's account and thus the total contributions to the plan on the employee's account cannot be readily ascertained. In order to apply the ratio stated in subparagraph (1) of this paragraph in such a case, the method outlined in the following two sentences must be used unless a more precise method is presented. In such a case, the total contributions to the plan on the employee's account is the value of any annuity or other payment payable to the decedent and his survivor computed as of the time the decedent's rights first mature (or as of the time the survivor's rights first mature if the decedent's rights never mature) and computed in accordance with the rules set forth in §§ 20.2031-1, 20.2031-7, 20.2031-8, and 20.2031-9. By subtracting from such value the amount of the employee's contribution to the plan, the amount of the employer's contribution to the plan on the employee's account may be obtained. The application of this paragraph may be illustrated by the following example. Example. Pursuant to a pension plan, the employer and the employee contributed to a trust which was to provide the employee, upon his retirement at age 60, with an annuity for life, and which was to provide his wife, upon the employee's death after retirement, with a similar annuity for life. At the time of the employee's retirement, the pension trust formed part of a plan meeting the requirements of section 401(a). Assume the following: (i) That the employer's contributions to the fund were not credited to the accounts of individual employees; (ii) that the value of the employee's annuity and his wife's annuity, computed as of the time of the decedent's retirement, was $40,000; (iii) that the employee contributed $10,000 to the plan; and (iv) that the value at the decedent's death of the wife's annuity was $16,000. On the basis of these facts, the total contributions to the fund on the employee's account are presumed to be $40,000 and the employer's contribution to the plan on the employee's account is presumed to be $30,000 ($40,000 less $10,000). Since the wife's annuity was receivable under a qualified pension plan, that part of the value of such annuity which is attributable to the employer's contributions ($30,000 ÷ $40,000 × $16,000), or $12,000 is excludable from the decedent's gross estate by reason of the provisions of section 2039(c). Compare this result with the results reached in the examples set forth in paragraph (b) of this section in which all contributions to the plans were made by the employer. (d) Exclusion of certain annuity interests created by community property laws. (i) Is attributable to such contributions or payments, and (ii) Arises solely by reason of such spouse's interest in community income under the community property laws of a State. (2) Section 2039(d) and this paragraph do not provide any exclusion for such spouse's property interest in the plan, trust or contract to the extent it is attributable to the contributions of the employee spouse. Thus, the decedent's community property interest in the plan, trust, or contract which is attributable to contributions made by the employee spouse are includible in the decendent's gross estate. See paragraph (c) of this section. (3) Section 2039(d) and this paragraph apply to the estate of a decedent who dies on or after October 27, 1972, and to the estate of a decedent who died before October 27, 1972, if the period for filing a claim for credit or refund of an overpayment of the estate tax ends on or after October 27, 1972. Interest will not be allowed or paid on any overpayment of tax resulting from the application of section 2039(d) and this paragraph for any period prior to April 26, 1973. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6526, 26 FR 416, Jan. 19, 1961; T.D. 7043, 35 FR 8480, June 2, 1970; T.D. 7416, 41 FR 14514, Apr. 6, 1976; T.D. 7428, 41 FR 34628, Aug. 16, 1976; T.D. 7562, 43 FR 38820, Aug. 31, 1978; T.D. 7761, 46 FR 7303, Jan. 23, 1981; T.D. 8540, 59 FR 30103, June 10, 1994] § 20.2039-3 Lump sum distributions under “qualified plans;” decedents dying after December 31, 1976, and before January 1, 1979. (a) Limitation of section 2039(c) exclusion. (b) “Lump sum distribution” defined. (c) Amounts payable as a lump sum distribution. (d) Filing date. (1) The date the estate tax return is actually filed, or (2) The date nine months after the decedent's death, plus any extension of time for filing the estate tax return granted under section 6081. [T.D. 7761, 46 FR 7304, Jan. 23, 1981] § 20.2039-4 Lump sum distributions from “qualified plans;” decedents dying after December 31, 1978. (a) Limitation on section 2039(c) exclusion. (b) “ Lump sum distribution” defined; treatment of annuity contracts. (c) Recipient's section 402(a)/403(a) taxation election. (1) Taxable under section 402(a), without regard to section 402(a)(2), to the extent includable in gross income (in the case of a distribution under a qualified plan described in § 20.2039-2(b)(1)), (2) Taxable under section 403(a), without regard to section 403(a)(2), to the extent includable in gross income (in the case of a distribution under a qualified annuity contract described in § 20.2039-2(b)(2)), or (3) A rollover contribution, in whole or in part, under section 402(a)(7) (relating to rollovers by a decedent's surviving spouse). Accordingly, if a recipient makes the election, no portion of the distribution is taxable to the recipient under the 10-year averaging provisions of section 402(e) or as long-term capital gain under section 402(a)(2). However, a recipient's election under this paragraph (c) does not preclude the application of section 402(e)(4)(J) to any securities of the employer corporation included in the distribution. (d) Method of election General rule. (i) Determining the income tax liability on the income tax return (or amended return) for the taxable year of the distribution in a manner consistent with paragraph (c) (1) or (2) of this section, (ii) Rolling over all or any part of the distribution under section 402(a)(7), or (iii) Filing a section 2039(f)(2) election statement described in paragraph (d)(2) of this section. (2) Election statement. (3) Effect on estate tax return. (e) Election irrevocable. (f) Lump sum distribution to multiple recipients. (g) Distributions of annuity contracts included in multiple distributions. [T.D. 7761, 46 FR 7304, Jan. 23, 1981, as amended by T.D. 7956, 49 FR 20284, May 14, 1984] § 20.2039-5 Annuities under individual retirement plans. (a) Section 2039(e) exclusion In general. (i) An individual retirement account described in section 408(a). (ii) An individual retirement annuity described in section 408(b), or (iii) A retirement bond described in section 409(a). (2) Limitations. (ii) Section 2039(e) does not apply to an annuity receivable by or for the benefit of the decedent's estate. For the meaning of the term “receivable by or for the benefit of the decedent's estate,” see § 20.2042-1(b). (b) Qualifying annuity. (c) Amount excludible from gross estate In general. (2) Excess contribution. E = A − A(X ÷ C − R) Where: E = The amount excluded from the decedent's gross estate under section 2039(e), A = The value of the qualifying annuity at the decedent's death (as determined under §§ 20.2031-1 and 20.2031-7 or, for certain prior periods, § 20.2031-7A), X = The amount which is an excess contribution at the decedent's death (as determined under section 4973(b)), C = The total amount contributed by or on behalf of the decedent to the individual retirement plan, and R = The total of amounts paid or distributed from the individual retirement plan before the death of the decedent which were either includable in the gross income of the recipient under section 408(d)(1) and represented the payment or distribution of an excess contribution, or were payments or distributions described in section 408(d)(4) or (5) (relating to returned excess contributions). (3) Certain section 403(b)(8) rollover contributions. (4) Surviving spouse's rollover contribution. (5) Election under § 1.408-2(b)(7)(ii). (6) Plan-to-plan rollovers. (ii) If the decedent made a contribution described in subparagraph (3) or (4) to the transferor plan, the amount excluded from the decedent's gross estate with respect to the transferee plan is determined under the formula described in subparagraph (2), except that for purposes of that formula, X includes so much of the rollover amount as was attributable to the contribution to the transferor plan that was described in subparagraph (3) or (4). The extent to which a rollover amount is attributable to a contribution described in subparagraph (3) or (4) that was made to the transferor plan is determined by multiplying the rollover amount by a fraction, the numerator of which is the amount of such contribution, and the denominator of which is the sum of all amounts contributed by the decedent to the transferor plan (if not returned as described under R in subparagraph (2)), and any amount in the transferor plan to which the election described in subparagraph (5) applied. (iii) If the decedent made the election described in subparagraph (5) with respect to an amount in the transferor plan, the amount excluded from the decedent's gross estate with respect to the transferee plan is determined under the formula described in subparagraph (2), except that for purposes of that formula, X includes so much of the rollover amount as was attributable to the amount in the transferor plan to which the election applied. The extent to which a rollover amount is attributable to an amount in the transferor plan to which the election applied is determined by multiplying the rollover amount by a fraction, the numerator of which is the amount to which the election applied, and the denominator of which is the sum of all amounts contributed by the decedent to the transferor plan (if not returned as described under R in subparagraph (2)), and the amount in the transferor plan to which the election applied. (iv) If a transferor plan described in this subparagraph (6) was also a transferee plan, then the rules described in this subparagraph (6) are to be applied with respect to both the rollover amount paid to the plan and the rollover amount thereafter paid from the plan. (d) Examples. Example (1). (1) A establishes an individual retirement account described in section 408 (a) on January 1, 1976, when A is age 65. A's only contribution to the account is a rollover contribution described in section 402(a)(5). The trust agreement provides that A may at any time elect to have the balance in the account distributed in one of the following methods: (i) A single sum payment of the account, (ii) Equal or substantially equal semiannual payments over a period equal to A's life expectancy, or (iii) Equal or substantially equal semiannual payments over a period equal to the life expectancy of A and A's spouse. (2) The trust agreement further provides that although semiannual payments have commenced under option (ii) or (iii), A (or A's surviving spouse) may, by written notice to the trustee, receive all or a part of the balance remaining in the account. In addition, under option (ii), any balance remaining in the account at A's death is payable in a single sum to A's designated beneficiary. Under option (iii), any balance remaining in the account at the death of the survivor of A or A's spouse is payable in a single sum to a beneficiary designated by A or A's surviving spouse. (3) A elects option (iii), and the first semiannual payment is made to A on July 1, 1976. On that date, A's life expectancy is 15 years, and that of A's spouse is 22 years. Under option (iii), the semiannual payments to A or A's surviving spouse will continue until July 1, 1998. (4) A dies on November 20, 1978. On December 15, 1978, the trust agreement is modified so that A's surviving spouse no longer may elect to receive all or part of the balance remaining in the account. The value of the semiannual payments payable to A's spouse is excluded from A's gross estate under section 2039(e). (5) A's spouse dies July 12, 1981, and the single sum payment payable on account of the death of A's spouse is paid to the designated beneficiary on August 1, 1981. Notwithstanding that the balance in the account was paid to the designated beneficiary within 36 months after A's death, the value of the semiannual payments payable to A's spouse are excluded from A's gross estate, since at A's death those semiannual payments were to be paid over a period extending beyond 36 months. Section 2039(e) does not apply to exclude any amount from the estate of A's spouse, because A's spouse was only a beneficiary and not the individual on whose behalf the account was established. Example (2). Assume the same facts as in example (1), except that the trust agreement is not modified so that A's surviving spouse no longer may elect to receive all or part of the balance remaining in the account (see (2) and (4) in example (1)). Instead, the balance of the account is applied toward the purchase of a contract providing an immediate annuity, the contract is distributed to A's surviving spouse on December 15, 1978, and under section 408 the contract is not included in the gross income of the spouse upon its distribution. The value of the annuity contract is excluded from A's gross estate, if the contract provides for a series of substantially equal periodic payments (within the meaning of paragraph (b) of this section) to be made over the life of A's surviving spouse or over a period not ending before the date 36 months after A's death. Example (3). (1) B establishes an individual retirement plan described in section 408(a) (“IRA B”) on February 6, 1981, in order to receive a $220,000 rollover contribution from a qualified plan, as described in section 402(a)(5). B dies August 14, 1981. C, an individual, is the sole beneficiary under IRA B. The amount in IRA B ($238,000) is payable to C in whole or part as C may elect. Because the amount in IRA B is payable to C as other than a qualifying annuity, within the meaning of paragraph (b) of this section, no amount is excluded from B's gross estate under section 2039(e). (2) On October 17, 1981, C contributes $1,500 on C's own behalf to IRA B. Under § 1.408-2(b)(7)(ii), C's contribution will cause IRA B to be treated as being maintained by and on behalf of C (“IRA C”) and C's making the contribution constitutes an election to which paragraph (c)(5) of this section applies. The balance in IRA C immediately before C's contribution is $240,000. Accordingly, the amount with respect to which C made the election is $240,000. (3) C dies January 19, 1982. E, an individual, is the sole beneficiary under the plan, and the amounts payable to E ($242,000) are payable as a qualifying annuity, within the meaning of paragraph (b) of this section. (4) The rules described in section 2039(e) and this section are applied with respect to the gross estate of C without regard to whether amounts now payable under IRA C were or were not excluded from B's gross estate. Under paragraph (c) of this section, the amount not excluded from C's gross estate is the value of the qualifying annuity payable to E ($242,000), multiplied by the fraction $240,000/($240,000 + $1,500). Thus, the amount not excluded from C's gross estate is $240,497. [($242,000) ($240,000 ($240,000 + $1,500)) = $240,497.] The amount excluded is therefore $1,503 ($242,000−$240,497). Example (4). (1) F, an individual, establishes an individual retirement plan (“IRA F1”) in 1977 and makes $1,250 annual contributions for 1977, 1978, 1979 and 1980 (4 × $1,250 = $5,000), each of which is deducted by F under section 219. In February 1980, F receives an $85,000 distribution on account of the death of G, F's spouse, from the qualified plan of G's former employer, and rolls it over into IRA F1, under section 402(a)(7). Because IRA F1 includes a rollover contribution under section 402(a)(7), paragraph (c)(4) of this section applies. In 1981, F's entire interest in IRA F1, $100,000, is paid to F and contributed to another individual retirement plan (“IRA F2”) under section 408(d)(3)(A)(i). IRA F2 is a transferee plan to which paragraph (c)(6) of this section applies because of the rollover. F makes a $1,500 deductible contribution to IRA F2 for 1981. (2) F dies in 1984. The balance in IRA F2 ($146,000) is payable to G, an individual, as a qualifying annuity, within the meaning of paragraph (b) of this section. (3) Under paragraph (c) of this section, the amount not (4) The numerator of the fraction ($96,700) is determined by multiplying the amount rolled over from IRA F1 to IRA F2 ($100,000) by a fraction, the numerator of which is the amount of the rollover contribution to IRA F1 ($85,000), and the denominator of which is the total contributions to IRA F1 ($85,000 + $5,000 = $90,000). [($100,000) ($85,000/$90,000) = $96,700.] (5) The denominator of the fraction ($101,500) is the sum of the contributions to IRA F2 (the $100,000 rollover contribution from IRA F1, and the $1,500 annual contribution to IRA F2). [T.D. 7761, 46 FR 7305, Jan. 23, 1981; 46 FR 17191, Mar. 18, 1981, as amended by T.D. 8540, 59 FR 30103, June 10, 1994] § 20.2040-1 Joint interests. (a) In general. (1) To the extent that the property was acquired by the decedent and the other joint owner or owners by gift, devise, bequest, or inheritance, the decedent's fractional share of the property is included. (2) In all other cases, the entire value of the property is included except such part of the entire value as is attributable to the amount of the consideration in money or money's worth furnished by the other joint owner or owners. See § 20.2043-1 with respect to adequacy of consideration. Such part of the entire value is that portion of the entire value of the property at the decedent's death (or at the alternate valuation date described in section 2032 which the consideration in money or money's worth furnished by the other joint owner or owners bears to the total cost of acquisition and capital additions. In determining the consideration furnished by the other joint owner or owners, there is taken into account only that portion of such consideration which is shown not to be attributable to money or other property acquired by the other joint owner or owners from the decedent for less than a full and adequate consideration in money or money's worth. The entire value of jointly held property is included in a decedent's gross estate unless the executor submits facts sufficient to show that property was not acquired entirely with consideration furnished by the decedent, or was acquired by the decedent and the other joint owner or owners by gift, bequest, devise, or inheritance. (b) Meaning of “property held jointly”. (c) Examples. (1) If the decedent furnished the entire purchase price of the jointly held property, the value of the entire property is included in his gross estate; (2) If the decedent furnished a part only of the purchase price, only a corresponding portion of the value of the property is so included; (3) If the decedent furnished no part of the purchase price, no part of the value of the property is so included; (4) If the decedent, before the acquisition of the property by himself and the other joint owner, gave the latter a sum of money or other property which thereafter became the other joint owner's entire contribution to the purchase price, then the value of the entire property is so included, notwithstanding the fact that the other property may have appreciated in value due to market conditions between the time of the gift and the time of the acquisition of the jointly held property; (5) If the decedent, before the acquisition of the property by himself and the other joint owner, transferred to the latter for less than an adequate and full consideration in money or money's worth other income-producing property, the income from which belonged to and became the other joint owner's entire contribution to the purchase price, then the value of the jointly held property less that portion attributable to the income which the other joint owner did furnish is included in the decedent's gross estate; (6) If the property originally belonged to the other joint owner and the decedent purchased his interest from the other joint owner, only that portion of the value of the property attributable to the consideration paid by the decedent is included; (7) If the decedent and his spouse acquired the property by will or gift as tenants by the entirety, one-half of the value of the property is included in the decedent's gross estate; and (8) If the decedent and his two brothers acquired the property by will or gift as joint tenants, one-third of the value of the property is so included. § 20.2041-1 Powers of appointment; in general. (a) Introduction. (b) Definition of “power of appointment” In general. (2) Relation to other sections. (3) Powers over a portion of property. (c) Definition of “general power of appointment” In general. ( a ( b A decedent may have two powers under the same instrument, one of which is a general power of appointment and the other of which is not. For example, a beneficiary may have a power to withdraw trust corpus during his life, and a testamentary power to appoint the corpus among his descendants. The testamentary power is not a general power of appointment. (2) Powers limited by an ascertainable standard. (3) Certain powers under wills of decedents dying between January 1 and April 2, 1948. (d) Definition of “exercise”. (e) Time of creation of power. Example (1). A created a revocable trust before October 22, 1942, providing for payment of income to B for life with remainder as B shall appoint by will. Even though A dies after October 21, 1942, without having exercised his power of revocation, B's power of appointment is considered a power created before October 22, 1942. Example (2). C created an irrevocable inter vivos trust before October 22, 1942, naming T as trustee and providing for payment of income to D for life with remainder to E. T was given the power to pay corpus to D and the power to appoint a successor trustee. If T resigns after October 21, 1942, and appoints D as successor trustee, D is considered to have a power of appointment created before October 22, 1942. Example (3). F created an irrevocable inter vivos trust before October 22, 1942, providing for payment of income to G for life with remainder as G shall appoint by will, but in default of appointment income to H for life with remainder as H shall appoint by will. If G died after October 21, 1942, without having exercised his power of appointment, H's power of appointment is considered a power created before October 22, 1942, even though it was only a contingent interest until G's death. Example (4). If in example (3) above G had exercised his power of appointment by creating a similar power in J, J's power of appointment would be considered a power created after October 21, 1942. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6582, 26 FR 11861, Dec. 12, 1961] § 20.2041-2 Powers of appointment created on or before October 21, 1942. (a) In general. (b) Joint powers created on or before October 21, 1942. (c) Exercise during life. Example (1). A decedent in 1951 exercised a general power of appointment created in 1940, reserving no interest in or power over the property subject to the general power. The decedent died in 1956. Since the exercise was not made within three years before the decedent's death, no part of the property is includable in his gross estate. See section 2035(b), relating to transfers in contemplation of death. Example (2). S created a trust in 1930 to pay the income to A for life, remainder as B appoints by an instrument filed with the trustee during B's lifetime, and in default of appointment remainder to C. B exercised the power in 1955 by directing that after A's death the income be paid to himself for life with remainder to C. If B dies after A, the entire value of the trust property would be included in B's gross estate, since such a disposition if it were a transfer of property owned by B would cause the property to be included in his gross estate under section 2036(a)(1). If B dies before A, the value of the trust property less the value of A's life estate would be included in B's gross estate for the same reason. Example (3). S created a trust in 1940 to pay the income to A for life, remainder as A appoints by an instrument filed with the trustee during A's lifetime. A exercised the trustee during A's lifetime. A exercised the power in 1955, five years before his death, reserving the right of revocation. The exercise, if not revoked before death, will cause the property subject to the power to be included in A's gross estate under section 2041(a)(1), since such a disposition if it were a transfer of property owned by A would cause the property to be included in his gross estate under section 2038. However, if the exercise were completely revoked, so that A died still possessed of the power, the property would not be included in A's gross estate for the reason that the power will not be treated as having been exercised. Example (4). A decedent exercised a general power of appointment created in 1940 by making a disposition in trust under which possession or enjoyment of the property subject to the exercise could be obtained only by surviving the decedent and under which the decedent retained a reversionary interest in the property of a value of more than five percent. The exercise will cause the property subject to the power to be included in the decedent's gross estate, since such a disposition if it were a transfer of property owned by the decedent would cause the property to be included in his gross estate under section 2037. (d) Release or lapse. (e) Partial release. (1) November 1, 1951, or (2) If the decedent was under a legal disability to release the power on October 21, 1942, the day after the expiration of 6 months following the termination of such legal disability. However, if a general power created on or before October 21, 1942, is partially released on or after the later of these dates, a subsequent exercise of the power will cause the property subject to the power to be included in the holder's gross estate, if the exercise is such that if it were a disposition of property owned by the decedent it would cause the property to be included in his gross estate. The legal disability referred to in this paragraph is determined under local law and may include the disability of an insane person, a minor, or an unborn child. The fact that the type of general power of appointment possessed by the decedent actually was not generally releasable under the local law does not place the decedent under a legal disability within the meaning of this paragraph. In general, however, it is assumed that all general powers of appointment are releasable, unless the local law on the subject is to the contrary, and it is presumed that the method employed to release the power is effective, unless it is not in accordance with the local law relating specifically to releases or, in the absence of such local law, is not in accordance with the local law relating to similar transactions. (f) Partial exercise. § 20.2041-3 Powers of appointment created after October 21, 1942. (a) In general. (2) If the power is a general power of appointment, the value of an interest in property subject to such a power is includable in a decedent's gross estate under section 2041(a)(2) if either— (i) The decedent has the power at the time of his death (and the interest exists at the time of his death), or (ii) The decedent exercised or released the power, or the power lapsed, under the circumstances and to the extent described in paragraph (d) of this section. (3) If the power is not a general power of appointment, the value of property subject to the power is includable in the holder's gross estate under section 2041(a)(3) only if it is exercised to create a further power under certain circumstances (see paragraph (e) of this section). (b) Existence of power at death. (c) Joint powers created after October 21, 1942. (1) Such a power is not considered a general power of appointment if it is not exercisable by the decedent except with the consent or joinder of the creator of the power. (2) Such power is not considered a general power of appointment if it is not exercisable by the decedent except with the consent or joinder of a person having a substantial interest in the property subject to the power which is adverse to the exercise of the power in favor of the decedent, his estate, his creditors, or the creditors of his estate. An interest adverse to the exercise of a power is considered as substantial if its value in relation to the total value of the property subject to the power is not insignificant. For this purpose, the interest is to be valued in accordance with the actuarial principles set forth in § 20.2031-7 or, if it is not susceptible to valuation under those provisions, in accordance with the general principles set forth in § 20.2031-1. A taker in default of appointment under a power has an interest which is adverse to an exercise of the power. A coholder of the power has no adverse interest merely because of his joint possession of the power nor merely because he is a permissible appointee under a power. However, a coholder of a power is considered as having an adverse interest where he may possess the power after the decedent's death and may exercise it at that time in favor of himself, his estate, his creditors, or the creditors of his estate. Thus, for example, if X, Y, and Z held a power jointly to appoint among a group of persons which includes themselves and if on the death of X the power will pass to Y and Z jointly, then Y and Z are considered to have interests adverse to the exercise of the power in favor of X. Similarly, if on Y's death the power will pass to Z, Z is considered to have an interest adverse to the exercise of the power in favor of Y. The application of this subparagraph may be further illustrated by the following additional examples in each of which it is assumed that the value of the interest in question is substantial: Example (1). The decedent and R were trustees of a trust under the terms of which the income was to be paid to the decedent for life and then to M for life, and the remainder was to be paid to R. The trustees had power to distribute corpus to the decedent. Since R's interest was substantially adverse to an exercise of the power in favor of the decedent the latter did not have a general power of appointment. If M and the decedent were the trustees, M's interest would likewise have been adverse. Example (2). The decedent and L were trustees of a trust under the terms of which the income was to be paid to L for life and then to M for life, and the remainder was to be paid to the decedent. The trustees had power to distribute corpus to the decedent during L's life. Since L's interest was adverse to an exercise of the power in favor of the decedent, the decedent did not have a general power of appointment. If the decedent and M were the trustees, M's interest would likewise have been adverse. Example (3). The decedent and L were trustees of a trust under the terms of which the income was to be paid to L for life. The trustees could designate whether corpus was to be distributed to the decedent or to A after L's death. L's interest was not adverse to an exercise of the power in favor of the decedent, and the decedent therefore had a general power of appointment. (3) A power which is exercisable only in conjunction with another person, and which after application of the rules set forth in subparagraphs (1) and (2) of this paragraph constitutes a general power of appointment, will be treated as though the holders of the power who are permissible appointees of the property were joint owners of property subject to the power. The decedent, under this rule, will be treated as possessed of a general power of appointment over an aliquot share of the property to be determined with reference to the number of joint holders, including the decedent, who (or whose estates or creditors) are permissible appointees. Thus, for example, if X, Y, and Z hold an unlimited power jointly to appoint among a group of persons, including themselves, but on the death of X the power does not pass to Y and Z jointly, then Y and Z are not considered to have interests adverse to the exercise of the power in favor of X. In this case X is considered to possess a general power of appointment as to one-third of the property subject to the power. (d) Releases, lapses, and disclaimers of general powers of appointment. (2) Section 2041(a)(2) is not applicable to the complete release of a general power of appointment created after October 21, 1942, whether exercisable during life or by will, if the release was not made in contemplation of death within the meaning of section 2035, and if after the release the holder of the power retained no interest in or control over the property subject to the power which would cause the property to be included in his gross estate under sections 2036 through 2038 if the property had been transferred by the holder. (3) The failure to exercise a power of appointment created after October 21, 1942, within a specified time, so that the power lapses, constitutes a release of the power. However, section 2041(b)(2) provides that such a lapse of a power of appointment during any calendar year during the decedent's life is treated as a release for purposes of inclusion of property in the gross estate under section 2041(a)(2) only to the extent that the property which could have been appointed by exercise of the lapsed power exceeds the greater of (i) $5,000 or (ii) 5 percent of the aggregate value, at the time of the lapse, of the assets out of which, or the proceeds of which, the exercise of the lapsed power could have been satisfied. For example, assume that A transferred $200,000 worth of securities in trust providing for payment of income to B for life with remainder to B's issue. Assume further that B was given a noncumulative right to withdraw $10,000 a year from the principal of the trust fund (which neither increased nor decreased in value prior to B's death). In such case, the failure of B to exercise his right of withdrawal will not result in estate tax with respect to the power to withdraw $10,000 which lapses each year before the year of B's death. At B's death there will be included in his gross estate the $10,000 which he was entitled to withdraw for the year in which his death occurs less any amount which he may have taken during that year. However, if in the above example B had possessed the right to withdraw $15,000 of the principal annually, the failure to exercise such power in any year will be considered a release of the power to the extent of the excess of the amount subject to withdrawal over 5 percent of the trust fund (in this example, $5,000, assuming that the trust fund is worth $200,000 at the time of the lapse). Since each lapse is treated as though B had exercised dominion over the trust property by making a transfer of principal reserving the income therefrom for his life, the value of the trust property (but only to the extent of the excess of the amount subject to withdrawal over 5 percent of the trust fund) is includable in B's gross estate (unless before B's death he has disposed of his right to the income under circumstances to which sections 2035 through 2038 would not be applicable). The extent to which the value of the trust property is included in the decedent's gross estate is determined as provided in subparagraph (4) of this paragraph. (4) The purpose of section 2041(b)(2) is to provide a determination, as of the date of the lapse of the power, of the proportion of the property over which the power lapsed which is an exempt disposition for estate tax purposes and the proportion which, if the other requirements of sections 2035 through 2038 are satisfied, will be considered as a taxable disposition. Once the taxable proportion of any disposition at the date of lapse has been determined, the valuation of that proportion as of the date of the decedent's death (or, if the executor has elected the alternate valuation method under section 2032, the value as of the date therein provided), is to be ascertained in accordance with the principles which are applicable to the valuation of transfers of property by the decedent under the corresponding provisions of sections 2035 through 2038. For example, if the life beneficiary of a trust had a right exercisable only during one calendar year to draw down $50,000 from the corpus of a trust, which he did not exercise, and if at the end of the year the corpus was worth $800,000, the taxable portion over which the power lapsed is $10,000 (the excess of $50,000 over 5 percent of the corpus), or 1/80 1/80 1/80 (5) If the failure to exercise a power, such as a right of withdrawal, occurs in more than a single year, the proportion of the property over which the power lapsed which is treated as a taxable disposition will be determined separately for each such year. The aggregate of the taxable proportions for all such years, valued in accordance with the above principles, will be includable in the gross estate by reason of the lapse. The includable amount, however, shall not exceed the aggregate value of the assets out of which, or the proceeds of which, the exercise of the power could have been satisfied, valued as of the date of the decedent's death (or, if the executor has elected the alternate valuation method under section 2032, the value as of the date therein provided). (6)(i) A disclaimer or renunciation of a general power of appointment created in a transfer made after December 31, 1976, is not considered to be the release of the power if the disclaimer or renunciation is a qualified disclaimer as described in section 2518 and the corresponding regulations. For rules relating to when the transfer creating the power occurs, see § 25.2518-2(c)(3) of this chapter. If the disclaimer or renunciation is not a qualified disclaimer, it is considered a release of the power by the disclaimant. (ii) The disclaimer or renunication of a general power of appointment created in a taxable transfer before January 1, 1977, in the person disclaiming is not considered to be a release of the power. The disclaimer or renunciation must be unequivocal and effective under local law. A disclaimer is a complete and unqualified refusal to accept the rights to which one is entitled. There can be no disclaimer or renunciation of a power after its acceptance. In the absence of facts to the contrary, the failure to renounce or disclaim within a reasonable time after learning of its existence will be presumed to constitute an acceptance of the power. In any case where a power is purported to be disclaimed or renounced as to only a portion of the property subject to the power, the determination as to whether or not there has been a complete and unqualified refusal to accept the rights to which one is entitled will depend on all the facts and circumstances of the particular case, taking into account the recognition and effectiveness of such a disclaimer under local law. Such rights refer to the incidents of the power and not to other interests of the decedent in the property. If effective under local law, the power may be disclaimed or renounced without disclaiming or renouncing such other interests. (iii) The first and second sentences of paragraph (d)(6)(i) of this section are applicable for transfers creating the power to be disclaimed made on or after December 31, 1997. (e) Successive powers. (i) If the exercise is ( a b (ii) If the power is exercised by creating another power of appointment which, under the terms of the instruments creating and exercising the first power and under applicable local law, can be validly exercised so as to ( a b (2) For purposes of the application of section 2041(a)(3), the value of the property subject to the second power of appointment is considered to be its value unreduced by any precedent or subsequent interest which is not subject to the second power. Thus, if a decedent has a power to appoint by will $100,000 to a group of persons consisting of his children and grandchildren and exercises the power by making an outright appointment of $75,000 and by giving one appointee a power to appoint $25,000, no more than $25,000 will be includable in the decedent's gross estate under section 2041(a)(3). If, however, the decedent appoints the income from the entire fund to a beneficiary for life with power in the beneficiary to appoint the remainder by will, the entire $100,000 will be includable in the decedent's gross estate under section 2041(a)(3) if the exercise of the second power can validly postpone the vesting of any estate or interest in the property or can suspend the absolute ownership or power of alienation of the property for a period ascertainable without regard to the date of the creation of the first power. (f) Examples. Example (1). Income is directed to be paid to L during his lifetime at the end of each year, if living. L has an unrestricted power during his lifetime to cause the income to be distributed to any other person, but no power to cause it to be accumulated. At L's death, no part of the trust property is includable in L's gross estate since L had a power to dispose of only his income interest, a right otherwise possessed by him. Example (2). Income is directed to be accumulated during L's life but L has a noncumulative power to distribute $10,000 of each year's income to himself. Unless L's power is limited to himself. Unless L's power is limited by an ascertainable standard (relating to his health, etc.), as defined in paragraph (c)(2) of § 20.2041-1, he has a general power of appointment over $10,000 of each year's income, the lapse of which may cause a portion of any income not distriibuted to be included in his gross estate under section 2041. See subparagraphs (3), (4), and (5) of paragraph (d) of this section. Thus, if the trust income during the year amounts to $20,000, L's failure to distribute any of the income to himself constitutes a lapse as to $5,000 ( i.e., i.e., Example (3). L is entitled to all the income during his lifetime and has an unrestricted power to cause corpus to be distributed to himself. L had a general power of appointment over the corpus of the trust, and the entire corpus as of the time of his death is includable in his gross estate under section 2041. Example (4). Income was payable to L during his lifetime. R has an unrestricted power to cause corpus to be distributed to L. R dies before L. In such case, R has only a power to dispose of his remainder interest, the value of which is includable in his gross estate under section 2033, and nothing in addition would be includable under section 2041. If in this example R's remainder were contingent on his surviving L, nothing would be includable in his gross estate under either section 2033 or 2041. While R would have a power of appointment, it would not be a general power. Example (5). Income was payable to L during his lifetime. R has an unrestricted power to cause corpus to be distributed to himself. R dies before L. While the value of R's remainder interest is includable in his gross estate under section 2033, R also has a general power of appointment over the entire trust corpus. Under such circumstances, the entire value of the trust corpus is includable in R's gross estate under section 2041. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8095, 51 FR 28367, Aug. 7, 1986; T.D. 8744, 62 FR 68184, Dec. 31, 1997] § 20.2042-1 Proceeds of life insurance. (a) In general. (2) Proceeds of life insurance which are not includable in the gross estate under section 2042 may, depending upon the facts of the particular case, be includable under some other section of Part III of Subchapter A of Chapter 11. For example, if the decedent possessed incidents of ownership in an insurance policy on his life but gratuitously transferred all rights in the policy in contemplation of death, the proceeds would be includable under section 2035. Section 2042 has no application to the inclusion in the gross estate of the value of rights in an insurance policy on the life of a person other than the decedent, or the value of rights in a combination annuity contract and life insurance policy on the decedent's life ( i.e., (3) Except as provided in paragraph (c)(6), the amount to be included in the gross estate under section 2042 is the full amount receivable under the policy. If the proceeds of the policy are made payable to a beneficiary in the form of an annuity for life or for a term of years, the amount to be included in the gross estate is the one sum payable at death under an option which could have been exercised either by the insured or by the beneficiary, or if no option was granted, the sum used by the insurance company in determining the amount of the annuity. (b) Receivable by or for the benefit of the estate. (2) If the proceeds of an insurance policy made payable to the decedent's estate are community assets under the local community property law and, as a result, one-half of the proceeds belongs to the decedent's spouse, then only one-half of the proceeds is considered to be receivable by or for the benefit of the decedent's estate. (c) Receivable by other beneficiaries. (2) For purposes of this paragraph, the term “incidents of ownership” is not limited in its meaning to ownership of the policy in the technical legal sense. Generally speaking, the term has reference to the right of the insured or his estate to the economic benefits of the policy. Thus, it includes the power to change the beneficiary, to surrender or cancel the policy, to assign the policy, to revoke an assignment, to pledge the policy for a loan, or to obtain from the insurer a loan against the surrender value of the policy, etc. See subparagraph (6) of this paragraph for rules relating to the circumstances under which incidents of ownership held by a corporation are attributable to a decedent through his stock ownership. (3) The term “incidents of ownership” also includes a reversionary interest in the policy or its proceeds, whether arising by the express terms of the policy or other instrument or by operation of law, but only if the value of the reversionary interest immediately before the death of the decedent exceeded 5 percent of the value of the policy. As used in this subparagraph, the term “reversionary interest” includes a possibility that the policy or its proceeds may return to the decedent or his estate and a possibility that the policy or its proceeds may become subject to a power of disposition by him. In order to determine whether or not the value of a reversionary interest immediately before the death of the decedent exceeded 5 percent of the value of the policy, the principles contained in paragraph (c) (3) and (4) of § 20.2037-1, insofar as applicable, shall be followed under this subparagraph. In that connection, there must be specifically taken into consideration any incidents of ownership-held by others immediately before the decedent's death which would affect the value of the reversionary interest. For example, the decedent would not be considered to have a reversionary interest in the policy of a value in excess of 5 percent if the power to obtain the cash surrender value existed in some other person immediately before the decedent's death and was exercisable by such other person alone and in all events. The terms “reversionary interest” and “incidents of ownership” do not include the possibility that the decedent might receive a policy or its proceeds by inheritance through the estate of another person, or as a surviving spouse under a statutory right of election or a similar right. (4) A decedent is considered to have an “incident of ownership” in an insurance policy on his life held in trust if, under the terms of the policy, the decedent (either alone or in conjunction with another person or persons) has the power (as trustee or otherwise) to change the beneficial ownership in the policy or its proceeds, or the time or manner of enjoyment thereof, even though the decedent has no beneficial interest in the trust. Moreover, assuming the decedent created the trust, such a power may result in the inclusion in the decedent's gross estate under section 2036 or 2038 of other property transferred by the decedent to the trust if, for example, the decedent has the power to surrender the insurance policy and if the income otherwise used to pay premiums on the policy would become currently payable to a beneficiary of the trust in the event that the policy were surrendered. (5) As an additional step in determining whether or not a decedent possessed any incidents of ownership in a policy or any part of a policy, regard must be given to the effect of the State or other applicable law upon the terms of the policy. For example, assume that the decedent purchased a policy of insurance on his life with funds held by him and his surviving wife as community property, designating their son as beneficiary but retaining the right to surrender the policy. Under the local law, the proceeds upon surrender would have inured to the marital community. Assuming that the policy is not surrendered and that the son receives the proceeds on the decedent's death, the wife's transfer of her one-half interest in the policy was not considered absolute before the decedent's death. Upon the wife's prior death, one-half of the value of the policy would have been included in her gross estate. Under these circumstances, the power of surrender possessed by the decedent as agent for his wife with respect to one-half of the policy is not, for purposes of this section, an “incident of ownership”, and the decedent is, therefore, deemed to possess an incident of ownership in only one-half of the policy. (6) In the case of economic benefits of a life insurance policy on the decedent's life that are reserved to a corporation of which the decedent is the sole or controlling stockholders, the corporations' incidents of ownership will not be attributed to the decedent through his stock ownership to the extent the proceeds of the policy are payable to the corporation. Any proceeds payable to a third party for a valid business purpose, such as in satisfaction of a business debt of the corporation, so that the net worth of the corporation is increased by the amount of such proceeds, shall be deemed to be payable to the corporation for purposes of the preceding sentence. See § 20.2031-2(f) for a rule providing that the proceeds of certain life insurance policies shall be considered in determining the value of the decedent's stock. Except as hereinafter provided with respect to a group-term life insurance policy, if any part of the proceeds of the policy are not payable to or for the benefit of the corporation, and thus are not taken into account in valuing the decedent's stock holdings in the corporation for purposes of section 2031, any incidents of ownership held by the corporation as to that part of the proceeds will be attributed to the decedent through his stock ownership where the decedent is the sole or controlling stockholder. Thus, for example, if the decedent is the controlling stockholder in a corporation, and the corporation owns a life insurance policy on his life, the proceeds of which are payable to the decedent's spouse, the incidents of ownership held by the corporation will be attributed to the decedent through his stock ownership and the proceeds will be included in his gross estate under section 2042. If in this example the policy proceeds had been payable 40 percent to decedent's spouse and 60 percent to the corporation, only 40 percent of the proceeds would be included in decedent's gross estate under section 2042. For purposes of this subparagraph, the decedent will not be deemed to be the controlling stockholder of a corporation unless, at the time of his death, he owned stock possessing more than 50 percent of the total combined voting power of the corporation. Solely for purposes of the preceding sentence, a decedent shall be considered to be the owner of only the stock with respect to which legal title was held, at the time of his death, by (i) the decedent (or his agent or nominee); (ii) the decedent and another person jointly (but only the proportionate number of shares which corresponds to the portion of the total consideration which is considered to be furnished by the decedent for purposes of section 2040 and the regulations thereunder); and (iii) by a trustee of a voting trust (to the extent of the decedent's beneficial interest therein) or any other trust with respect to which the decedent was treated as an owner under Subpart E, Part I, Subchapter J, Chapter I of the Code immediately prior to his death. In the case of group-term life insurance, as defined in the regulations under section 79, the power to surrender or cancel a policy held by a corporation shall not be attributed to any decedent through his stock ownership. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7312, 39 FR 14949, Apr. 29, 1974; T.D. 7623, 44 FR 28800, May 17, 1979] § 20.2043-1 Transfers for insufficient consideration. (a) In general. (b) Marital rights and support obligations. § 20.2044-1 Certain property for which marital deduction was previously allowed. (a) In general. (b) Passed from. (c) Presumption. (d) Amount included In general. (2) Inclusion of income. (3) Reduction of includible share in certain cases. (i) The decedent-spouse's interest was in a trust and distributions of principal were made to the spouse during the spouse's lifetime; (ii) The trust provides that the distributions are to be made from the qualified terminable interest share of the trust; and (iii) The executor of the decedent-spouse's estate can establish the reduction in that share based on the fair market value of the trust assets at the time of each distribution. (4) Interest in previously severed trust. (e) Examples. Example 1. Inclusion of trust subject to election, Under D's will, assets valued at $800,000 in D's gross estate (net of debts, expenses and other charges, including death taxes, payable from the property) passed in trust with income payable to S for life. Upon S's death, the trust principal is to be distributed to D's children. D's executor elected under section 2056(b)(7) to treat the entire trust property as qualified terminable interest property and claimed a marital deduction of $800,000. S made no disposition of the income interest during S's lifetime under section 2519. On the date of S's death, the fair market value of the trust property was $740,000. S's executor did not elect the alternate valuation date. The amount included in S's gross estate pursuant to section 2044 is $740,000. Example 2. Inclusion of trust subject to partial election, The facts are the same as in Example 1, Example 3. Spouse receives qualifying income interest in a fraction of trust income, Under D's will, assets valued at $800,000 in D's gross estate (net of debts, expenses and other charges, including death taxes, payable from the property) passed in trust with 20 percent of the trust income payable to S for S's life. The will provides that the trust principal is to be distributed to D's children upon S's death. D's executor elected to deduct, pursuant to section 2056(b)(7), 50 percent of the amount for which the election could be made; i.e., $80,000 (50 percent of 20 percent of $800,000). Consequently, on the death of S, only the equivalent portion of the trust is included in S's gross estate; i.e., $74,000 (50 percent of 20 percent of $740,000). Example 4. Distribution of corpus during spouse's lifetime, The facts are the same as in Example 3, Example 5. Spouse assigns a portion of income interest during life, Under D's will, assets valued at $800,000 in D's gross estate (net of debts, expenses and other charges, including death taxes, payable from the property) passed in trust with all the income payable to S, for S's life. The will provides that the trust principal is to be distributed to D's children upon S's death. D's executor elected under section 2056(b)(7) to treat the entire trust property as qualified terminable interest property and claimed a marital deduction of $800,000. During the term of the trust, S transfers to C the right to 40 percent of the income from the trust for S's life. Because S is treated as transferring the entire remainder interest in the trust corpus under section 2519 (as well as 40 percent of the income interest under section 2511), no part of the trust is includible in S's gross estate under section 2044. However, if S retains until death an income interest in 60 percent of the trust corpus (which corpus is treated pursuant to section 2519 as having been transferred by S for both gift and estate tax purposes), 60 percent of the property will be includible in S's gross estate under section 2036(a) and a corresponding adjustment is made in S's adjusted taxable gifts. Example 6. Inter vivos trust subject to election under section 2523(f), D transferred $800,000 to a trust providing that trust income is to be paid annually to S, for S's life. The trust provides that upon S's death, $100,000 of principal is to be paid to X charity and the remaining principal distributed to D's children. D elected to treat all of the property transferred to the trust as qualified terminable interest property under section 2523(f). At the time of S's death, the fair market value of the trust is $1,000,000. S's executor does not elect the alternate valuation date. The amount included in S's gross estate is $1,000,000; i.e., the fair market value at S's death of the entire trust property. The $100,000 that passes to X charity on S's death is treated as a transfer by S to X charity for purposes of section 2055. Therefore, S's estate is allowed a charitable deduction for the $100,000 transferred from the trust to the charity to the same extent that a deduction would be allowed by section 2055 for a bequest by S to X charity. Example 7. Spousal interest in the form of an annuity, D died prior to October 24, 1992, the effective date of the Energy Policy Act of 1992 (Pub. L. 102-486). See § 20.2056(b)-7(e). Under D's will, assets valued at $500,000 in D's gross estate (net of debts, expenses and other charges, including death taxes, payable from the property) passed in trust pursuant to which an annuity of $20,000 a year was payable to S for S's life. Trust income not paid to S as an annuity is to be accumulated in the trust and may not be distributed during S's lifetime. D's estate deducted $200,000 under section 2056(b)(7) and § 20.2056(b)-7(e)(2). S did not assign any portion of S's interest during S's life. At the time of S's death, the value of the trust property is $800,000. S's executor does not elect the alternate valuation date. The amount included in S's gross estate pursuant to section 2044 is $320,000 ([$200,000/$500,000] × $800,000). Example 8. Inclusion of trust property when surviving spouse dies before first decedent's estate tax return is filed, D dies on July 1, 1997. Under the terms of D's will, a trust is established for the benefit of D's spouse, S. The will provides that S is entitled to receive the income from that portion of the trust that the executor elects to treat as qualified terminable interest property. The remaining portion of the trust passes as of D's date of death to a trust for the benefit of C, D's child. The trust terms otherwise provide S with a qualifying income interest for life under section 2056(b)(7)(B)(ii). S dies on February 10, 1998. On April 1, 1998, D's executor files D's estate tax return on which an election is made to treat a portion of the trust as qualified terminable interest property under section 2056(b)(7). S's estate tax return is filed on November 10, 1998. The value on the date of S's death of the portion of the trust for which D's executor made a QTIP election is includible in S's gross estate under section 2044. [T.D. 8522, 59 FR 9646, Mar. 1, 1994, as amended by T.D. 8779, 63 FR 44393, Aug. 19, 1998] § 20.2044-2 Effective dates. Except as specifically provided in Example 7 b [T.D. 8522, 59 FR 9647, Mar. 1, 1994] § 20.2045-1 Applicability to pre-existing transfers or interests. Sections 2034 through 2042 are applicable regardless of when the interests and events referred to in those sections were created or took place, except as otherwise provided in those sections and the regulations thereunder. [T.D. 6334, 23 FR 8904, Nov. 15, 1958; 25 FR 14021, Dec. 31, 1960. Redesignated by T.D. 8522, 59 FR 9646, Mar. 1, 1994] § 20.2046-1 Disclaimed property. (a) This section shall apply to the disclaimer or renunciation of an interest in the person disclaiming by a transfer made after December 31, 1976. For rules relating to when the transfer creating the interest occurs, see § 25.2518-2(c)(3) and (c)(4) of this chapter. If a qualified disclaimer is made with respect to such a transfer, the Federal estate tax provisions are to apply with respect to the property interest disclaimed as if the interest had never been transferred to the person making the disclaimer. See section 2518 and the corresponding regulations for rules relating to a qualified disclaimer. (b) The first and second sentences of this section are applicable for transfers creating the interest to be disclaimed made on or after December 31, 1997. [T.D. 8744, 62 FR 68184, Dec. 31, 1997] Actuarial Tables Applicable Before June 1, 2023 § 20.2031-7A Valuation of annuities, interests for life or a term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is before June 1, 2023. (a) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is before January 1, 1952. (b) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is after December 31, 1951, and before January 1, 1971. 1/2 1/2 (c) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is after December 31, 1970, and before December 1, 1983. (d) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is after November 30, 1983, and before May 1, 1989 In general. (ii) The present value of an annuity, life estate, remainder, or reversion determined under this section which is dependent on the continuation or termination of the life of one person is computed by the use of Table A in paragraph (d)(6) of this section. The present value of an annuity, term for years, remainder, or reversion dependent on a term certain is computed by the use of Table B in paragraph (d)(6) of this section. If the interest to be valued is dependent upon more than one life or there is a term certain concurrent with one or more lives, see paragraph (d)(5) of this section. For purposes of the computations described in this section, the age of a person is to be taken as the age of that person at his or her nearest birthday. (iii) In all examples set forth in this section, the decedent is assumed to have died on or after August 9, 1984, with the valuation date of the decedent's gross estate before May 1, 1989, and to have been competent to change the disposition of the property on December 1, 1983. (2) Annuities. Example (1). The decedent received, under the terms of the decedent's father's will an annuity of $10,000 a year payable annually for the life of the decedent's elder brother. At the time the decedent died, an annual payment had just been made. The brother at the decedent's death was 40 years eight months old. By reference to Table A, the figure in column 2 opposite 41 years, the number nearest to the brother's actual age, is found to be 9.1030. The present value of the annuity at the date of the decedent's death is, therefore, $91,030 ($10,000 × 9.1030). Example (2). The decedent was entitled to receive an annuity of $10,000 a year payable annually throughout a term certain. At the time the decedent died, the annual payment had just been made and five more annual payments were still to be made. By reference to Table B, it is found that the figure in column 2 opposite five years is 3.7908. The present value of the annuity is, therefore, $37,908 ($10,000 × 3.7808). (ii) If an annuity is payable at the end of semiannual, quarterly, monthly, or weekly periods during the life of an individual (as for example if the first payment is due one month after the decedent's death), the aggregate amount to be paid within a year is first multiplied by the figure in column 2 of Table A opposite the number of years in column 1 nearest the age of the individual whose life measures the duration of the annuity. The product so obtained is then multiplied by whichever of the following factors is appropriate: 1.0244 for semiannual payments, 1.0368 for quarterly payments, 1.0450 for monthly payments, 1.0482 for weekly payments. If the annuity is payable at the end of semiannual, quarterly, monthly, or weekly periods for a definite number of years, the aggregate amount to be paid within a year is first multiplied by the figure in column 2 of Table B opposite the number of years in column 1 representing the duration of the annuity. The product so obtained is then multiplied by whichever of the above factors is appropriate. The application of this paragraph (d)(2)(ii) may be illustrated by the following example: Example. The facts are the same as those contained in example (1) set forth in paragraph (d)(2)(i) of this section, except that the annuity is payable semiannually. The aggregate annual amount, $10,000, is multiplied by the factor 9.1030 and the product multiplied by 1.0244. The present value of the annuity at the date of the decedent's death is, therefore, $93,251.13 ($10,000 × 9.1030 × 1.0244). (iii)(A) If the first payment of an annuity for the life of an individual is due at the beginning of the annual or other payment period rather than at the end (as for example if the first payment is to be made immediately after the decedent's death), the value of the annuity is the sum of (A) the first payment plus (B) the present value of a similar annuity, the first payment of which is not to be made until the end of the payment period, determined as provided in paragraphs (d)(2)(i) or (ii) of this section. the application of this paragraph (d)(2)(iii)(A) may be illustrated by the following example: Example. The decedent was entitled to receive an annuity of $50 a month during the life of another person. The decedent died on the date the payment was due. At the date of the decedent's death, the person whose life measures the duration of the annuity was 50 years of age. The value of the annuity at the date of the decedent's death is $50 plus the product of $50 × 12 × 8.4743 (see Table A) × 1.0450 (See paragraph (d)(2)(ii) of this section). That is $50 plus $5,313.39, or $5,363.39. (B) If the first payment of an annuity for a definite number of years is due at the beginning of the annual or other payment period, the applicable factor is the product of the factor shown in Table B multiplied by whichever of the following factors is appropriate: 1.1000 for annual payments, 1.0744 for semiannual payments, 1.0618 for quarterly payments, 1.0534 for monthly payments, 1.0502 for weekly payments. The application of this paragraph (d)(2)(iii)(B) may be illustrated by the following example: Example. The decedent was the beneficiary of an annuity of $50 a month. On the day a payment was due, the decedent died. There were 300 payments to be made, including the payment due. The value of the annuity as of the date of decedent's death is the product of $50 × 12 × 9.0770 (see Table B) × 1.0534, or $5,737.03. (3) Life estates and terms for years. Example. The decedent or the decedent's estate was entitled to receive the income from a fund of $50,000 during the life of the decedent's elder brother. Upon the brother's death, the remainder is to go to B. The brother was 31 years, five months old at the time of decedent's death. By reference to Table A the figure in column 3 opposite 31 years is found to be 0.95254. The present value of the decedent's interest is, therefore, $47,627 ($50,000 × 0.95254). (4) Remainders or reversionary interests. Example. The decedent was entitled to receive certain property worth $50,000 upon the death of the decedent's elder sister, to whom the income was bequeathed for life. At the time of the decedent's death, the elder sister was 31 years five months old. By reference to Table A the figure in column 4 opposite 31 years is found to be .04746. The present value of the remainder interest at the date of the decedent's death is, therefore, $2,373 ($50,000 × .04746). (5) Actuarial computations by the Internal Revenue Service. lx (6) Tables. Table A—Single Life, Unisex, 10 Percent—Table Showing the Present Worth of an Annuity, of a Life Estate, and a Remainder Interest—Applicable for Transfers After November 30, 1983, and Before May 1, 1989 (1) Age (2) Annuity (3) Life estate (4) Remainder 0 9.7188 .97188 .02812 1 9.8988 .98988 .01012 2 9.9017 .99017 .00983 3 9.9008 .99008 .00992 4 9.8981 .98981 .01019 5 9.8938 .98938 .01062 6 9.8884 .98884 .01116 7 9.8822 .98822 .01178 8 9.8748 .98748 .01252 9 9.8663 .98663 .01337 10 9.8565 .98565 .01435 11 9.8453 .98453 .01547 12 9.8329 .98329 .01671 13 9.8198 .98198 .01802 14 9.8066 .98066 .01934 15 9.7937 .97937 .02063 16 9.7815 .97815 .02185 17 9.7700 .97700 .02300 18 9.7590 .97590 .02410 19 9.7480 .97480 .02520 20 9.7365 .97365 .02635 21 9.7245 .97245 .02755 22 9.7120 .97120 .02880 23 9.6986 .96986 .03014 24 9.6841 .96841 .03159 25 9.6678 .96678 .03322 26 9.6495 .96495 .03505 27 9.6290 .96290 .03710 28 9.6062 .96062 .03938 29 9.5813 .95813 .04187 30 9.5543 .95543 .04457 31 9.5254 .95254 .04746 32 9.4942 .94942 .05058 33 9.4608 .94608 .05392 34 9.4250 .94250 .05750 35 9.3868 .93868 .06132 36 9.3460 .93460 .06540 37 9.3026 .93026 .06974 38 9.2567 .92567 .07433 39 9.2083 .92083 .07917 40 9.1571 .91571 .08429 41 9.1030 .91030 .08970 42 9.0457 .90457 .09543 43 8.9855 .89855 .10145 44 8.9221 .89221 .10779 45 8.8558 .88558 .11442 46 8.7863 .87863 .12137 47 8.7137 .87137 .12863 48 8.6374 .86374 .13626 49 8.5578 .85578 .14422 50 8.4743 .84743 .15257 51 8.3874 .83874 .16126 52 8.2969 .82969 .17031 53 8.2028 .82028 .17972 54 8.1054 .81054 .18946 55 8.0046 .80046 .19954 56 7.9006 .79006 .20994 57 7.7931 .77931 .22069 58 7.6822 .76822 .23178 59 7.5675 .75675 .24325 60 7.4491 .74491 .25509 61 7.3267 .73267 .26733 62 7.2002 .72002 .27998 63 7.0696 .70696 .29304 64 6.9352 .69352 .30648 65 6.7970 .67970 .32030 66 6.6551 .66551 .33449 67 6.5098 .65098 .34902 68 6.3610 .63610 .36390 69 6.2086 .62086 .37914 70 6.0522 .60522 .39478 71 5.8914 .58914 .41086 72 5.7261 .57261 .42739 73 5.5571 .55571 .44429 74 5.3862 .53862 .46138 75 5.2149 .52149 .47851 76 5.0441 .50441 .49559 77 4.8742 .48742 .51258 78 4.7049 .47049 .52951 79 4.5357 .45357 .54643 80 4.3659 .43659 .56341 81 4.1967 .41967 .58033 82 4.0295 .40295 .59705 83 3.8642 .38642 .61358 84 3.6998 .36998 .63002 85 3.5359 .35359 .64641 86 3.3764 .33764 .66236 87 3.2262 .32262 .67738 88 3.0859 .30859 .69141 89 2.9526 .29526 .70474 90 2.8221 .28221 .71779 91 2.6955 .26955 .73045 92 2.5771 .25771 .74229 93 2.4692 .24692 .75308 94 2.3728 .23728 .76272 95 2.2887 .22887 .77113 96 2.2181 .22181 .77819 97 2.1550 .21550 .78450 98 2.1000 .21000 .79000 99 2.0486 .20486 .79514 100 1.9975 .19975 .80025 101 1.9532 .19532 .80468 102 1.9054 .19054 .80946 103 1.8437 .18437 .81563 104 1.7856 .17856 .82144 105 1.6962 .16962 .83038 106 1.5488 .15488 .84512 107 1.3409 .13409 .86591 108 1.0068 .10068 .89932 109 .4545 .04545 .95455 Table B—Term Certain, Unisex, 10 Percent—Table Showing the Present Worth of an Annuity for a Term Certain, of an Income Interest for a Term Certain, and of a Remainder Interest Postponed for a Term Certain—Applicable for Transfers After November 30, 1983, and before May 1, 1989 (1) Number of years (2) Annuity (3) Term certain (4) Remainder 1 .9091 .090909 .909091 2 1.7355 .173554 .826446 3 2.4869 .248685 .751315 4 3.1699 .316987 .683013 5 3.7908 .379079 .620921 6 4.3553 .435526 .564474 7 4.8684 .486842 .513158 8 5.3349 .533493 .466507 9 5.7590 .575902 .424098 10 6.1446 .614457 .385543 11 6.4951 .649506 .350494 12 6.8137 .681369 .318631 13 7.1034 .710336 .289664 14 7.3667 .736669 .263331 15 7.6061 .760608 .239392 16 7.8237 .782371 .217629 17 8.0216 .802155 .197845 18 8.2014 .820141 .179859 19 8.3649 .836492 .163508 20 8.5136 .851356 .148644 21 8.6487 .864869 .135131 22 8.7715 .877154 .122846 23 8.8832 .888322 .111678 24 8.9847 .898474 .101526 25 9.0770 .907704 .092296 26 9.1609 .916095 .083905 27 9.2372 .923722 .076278 28 9.3066 .930657 .069343 29 9.3696 .936961 .063039 30 9.4269 .942691 .057309 31 9.4790 .947901 .052099 32 9.5264 .952638 .047362 33 9.5694 .956943 .043057 34 9.6086 .960857 .039143 35 9.6442 .964416 .035584 36 9.6765 .967651 .032349 37 9.7059 .970592 .029408 38 9.7327 .973265 .026735 39 9.7570 .975696 .024304 40 9.7791 .977905 .022095 41 9.7991 .979914 .020086 42 9.8174 .981740 .018260 43 9.8340 .983400 .016600 44 9.8491 .984909 .015091 45 9.8628 .986281 .013719 46 9.8753 .987528 .012472 47 9.8866 .988662 .011338 48 9.8969 .989693 .010307 49 9.9063 .990630 .009370 50 9.9140 .991481 .008519 51 9.9226 .992256 .007744 52 9.9296 .992960 .007040 53 9.9360 .993600 .006400 54 9.9418 .994182 .005818 55 9.9471 .994711 .005289 56 9.9519 .995191 .004809 57 9.9563 .995629 .004371 58 9.9603 .996026 .003974 59 9.9639 .996387 .003613 60 9.9672 .996716 .003284 Table LN—Applicable for Transfers After November 30, 1983, and Before May 1, 1989 (1) Age X (2) lx 0 100,000 1 97,998 2 97,876 3 97,792 4 97,724 5 97,668 6 97,619 7 97,573 8 97,531 9 97,494 10 97,460 11 97,430 12 97,401 13 97,367 14 97,322 15 97,261 16 97,181 17 97,083 18 96,970 19 96,846 20 96,716 21 96,580 22 96,438 23 96,292 24 96,145 25 96,000 26 95,859 27 95,721 28 95,586 29 95,448 30 95,307 31 95,158 32 95,003 33 94,840 34 94,666 35 94,482 36 94,285 37 94,073 38 93,843 39 93,593 40 93,322 41 93,028 42 92,712 43 92,368 44 91,995 45 91,587 46 91,144 47 90,662 48 90,142 49 89,579 50 88,972 51 88,315 52 87,605 53 86,838 54 86,007 55 85,110 56 84,142 57 83,103 58 81,988 59 80,798 60 79,529 61 78,181 62 76,751 63 75,236 64 73,631 65 71,933 66 70,139 67 68,246 68 66,254 69 64,166 70 61,984 71 59,715 72 57,360 73 54,913 74 52,363 75 49,705 76 46,946 77 44,101 78 41,192 79 38,245 80 35,285 81 32,323 82 29,375 83 26,469 84 23,638 85 20,908 86 18,282 87 15,769 88 13,407 89 11,240 90 9,297 91 7,577 92 6,070 93 4,773 94 3,682 95 2,786 96 2,068 97 1,511 98 1,087 99 772 100 542 101 375 102 257 103 175 104 117 105 78 106 52 107 34 108 22 109 14 110 0 (e) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is after April 30, 1989, and before May 1, 1999 In general. (2) Transitional rule. b (ii) If a decedent dies after April 30, 1989, and if on May 1, 1989, the decedent was mentally incompetent so that the disposition of the decedent's property could not be changed, and the decedent dies without having regained competency to dispose of the decedent's property or dies within 90 days of the date on which the decedent first regains competency, the fair market value of annuities, life estates, terms for years, remainders, and reversions included in the gross estate of the decedent is their present value determined either under this section or under the corresponding section applicable at the time the decedent became mentally incompetent, at the option of the decedent's executor. For example, see paragraph (d) of this section. (3) Publications and actuarial computations by the Internal Revenue Service. b (4) Actuarial tables. Table S—Based on Life Table 80CNSMT Single Life Remainder Factors [Applicable After April 30, 1989, and Before May 1, 1999] Age Interest rate 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 6.0% 0 .07389 .06749 .06188 .05695 .05261 .04879 .04541 .04243 .03978 .03744 1 .06494 .05832 .05250 .04738 .04287 .03889 .03537 .03226 .02950 .02705 2 .06678 .05999 .05401 .04874 .04410 .03999 .03636 .03314 .03028 .02773 3 .06897 .06200 .05587 .05045 .04567 .04143 .03768 .03435 .03139 .02875 4 .07139 .06425 .05796 .05239 .04746 .04310 .03922 .03578 .03271 .02998 5 .07401 .06669 .06023 .05451 .04944 .04494 .04094 .03738 .03421 .03137 6 .07677 .06928 .06265 .05677 .05156 .04692 .04279 .03911 .03583 .03289 7 .07968 .07201 .06521 .05918 .05381 .04903 .04477 .04097 .03757 .03453 8 .08274 .07489 .06792 .06172 .05621 .05129 .04689 .04297 .03945 .03630 9 .08597 .07794 .07079 .06443 .05876 .05370 .04917 .04511 .04148 .03821 10 .08936 .08115 .07383 .06730 .06147 .05626 .05159 .04741 .04365 .04027 11 .09293 .08453 .07704 .07035 .06436 .05900 .05419 .04988 .04599 .04250 12 .09666 .08807 .08040 .07354 .06739 .06188 .05693 .05248 .04847 .04486 13 .10049 .09172 .08387 .07684 .07053 .06487 .05977 .05518 .05104 .04731 14 .10437 .09541 .08738 .08017 .07370 .06788 .06263 .05791 .05364 .04978 15 .10827 .09912 .09090 .08352 .07688 .07090 .06551 .06064 .05623 .05225 16 .11220 .10285 .09445 .08689 .08008 .07394 .06839 .06337 .05883 .05472 17 .11615 .10661 .09802 .09028 .08330 .07699 .07129 .06612 .06144 .05719 18 .12017 .11043 .10165 .09373 .08656 .08009 .07422 .06890 .06408 .05969 19 .12428 .11434 .10537 .09726 .08992 .08327 .07724 .07177 .06679 .06226 20 .12850 .11836 .10919 .10089 .09337 .08654 .08035 .07471 .06959 .06492 21 .13282 .12248 .11311 .10462 .09692 .08991 .08355 .07775 .07247 .06765 22 .13728 .12673 .11717 .10848 .10059 .09341 .08686 .08090 .07546 .07049 23 .14188 .13113 .12136 .11248 .10440 .09703 .09032 .08418 .07858 .07345 24 .14667 .13572 .12575 .11667 .10839 .10084 .09395 .08764 .08187 .07659 25 .15167 .14051 .13034 .12106 .11259 .10486 .09778 .09130 .08536 .07991 26 .15690 .14554 .13517 .12569 .11703 .10910 .10184 .09518 .08907 .08346 27 .16237 .15081 .14024 .13056 .12171 .11359 .10614 .09930 .09302 .08724 28 .16808 .15632 .14555 .13567 .12662 .11831 .11068 .10366 .09720 .09125 29 .17404 .16208 .15110 .14104 .13179 .12329 .11547 .10827 .10163 .09551 30 .18025 .16808 .15692 .14665 .13721 .12852 .12051 .11313 .10631 .10002 31 .18672 .17436 .16300 .15255 .14291 .13403 .12584 .11827 .11127 .10480 32 .19344 .18090 .16935 .15870 .14888 .13980 .13142 .12367 .11650 .10985 33 .20044 .18772 .17598 .16514 .15513 .14587 .13730 .12936 .12201 .11519 34 .20770 .19480 .18287 .17185 .16165 .15221 .14345 .13533 .12780 .12080 35 .21522 .20215 .19005 .17884 .16846 .15883 .14989 .14159 .13388 .12670 36 .22299 .20974 .19747 .18609 .17552 .16571 .15660 .14812 .14022 .13287 37 .23101 .21760 .20516 .19360 .18286 .17288 .16358 .15492 .14685 .13933 38 .23928 .22572 .21311 .20139 .19048 .18032 .17085 .16201 .15377 .14607 39 .24780 .23409 .22133 .20945 .19837 .18804 .17840 .16939 .16097 .15310 40 .25658 .24273 .22982 .21778 .20654 .19605 .18624 .17706 .16847 .16043 41 .26560 .25163 .23858 .22639 .21499 .20434 .19436 .18502 .17627 .16806 42 .27486 .26076 .24758 .23525 .22370 .21289 .20276 .19326 .18434 .17597 43 .28435 .27013 .25683 .24436 .23268 .22172 .21143 .20177 .19270 .18416 44 .29407 .27975 .26633 .25373 .24191 .23081 .22038 .21057 .20134 .19265 45 .30402 .28961 .27608 .26337 .25142 .24019 .22962 .21966 .21028 .20144 46 .31420 .29970 .28608 .27326 .26120 .24983 .23913 .22904 .21951 .21053 47 .32460 .31004 .29632 .28341 .27123 .25975 .24892 .23870 .22904 .21991 48 .33521 .32058 .30679 .29379 .28151 .26992 .25897 .24862 .23883 .22957 49 .34599 .33132 .31746 .30438 .29201 .28032 .26926 .25879 .24888 .23949 50 .35695 .34224 .32833 .31518 .30273 .29094 .27978 .26921 .25918 .24966 51 .36809 .35335 .33940 .32619 .31367 .30180 .29055 .27987 .26973 .26010 52 .37944 .36468 .35070 .33744 .32486 .31292 .30158 .29081 .28057 .27083 53 .39098 .37622 .36222 .34892 .33629 .32429 .31288 .30203 .29170 .28186 54 .40269 .38794 .37393 .36062 .34795 .33590 .32442 .31349 .30308 .29316 55 .41457 .39985 .38585 .37252 .35983 .34774 .33621 .32522 .31474 .30473 56 .42662 .41194 .39796 .38464 .37193 .35981 .34824 .33720 .32666 .31658 57 .43884 .42422 .41028 .39697 .38426 .37213 .36053 .34945 .33885 .32872 58 .45123 .43668 .42279 .40951 .39682 .38468 .37307 .36196 .35132 .34114 59 .46377 .44931 .43547 .42224 .40958 .39745 .38584 .37471 .36405 .35383 60 .47643 .46206 .44830 .43513 .42250 .41040 .39880 .38767 .37699 .36674 61 .48916 .47491 .46124 .44814 .43556 .42350 .41192 .40080 .39012 .37985 62 .50196 .48783 .47427 .46124 .44874 .43672 .42518 .41408 .40340 .39314 63 .51480 .50081 .48736 .47444 .46201 .45006 .43856 .42749 .41684 .40658 64 .52770 .51386 .50054 .48773 .47540 .46352 .45208 .44105 .43043 .42019 65 .54069 .52701 .51384 .50115 .48892 .47713 .46577 .45480 .44422 .43401 66 .55378 .54029 .52727 .51472 .50262 .49093 .47965 .46876 .45824 .44808 67 .56697 .55368 .54084 .52845 .51648 .50491 .49373 .48293 .47248 .46238 68 .58026 .56717 .55453 .54231 .53049 .51905 .50800 .49729 .48694 .47691 69 .59358 .58072 .56828 .55624 .54459 .53330 .52238 .51179 .50154 .49160 70 .60689 .59427 .58205 .57021 .55874 .54762 .53683 .52638 .51624 .50641 71 .62014 .60778 .59578 .58415 .57287 .56193 .55131 .54100 .53099 .52126 72 .63334 .62123 .60948 .59808 .58700 .57624 .56579 .55563 .54577 .53617 73 .64648 .63465 .62315 .61198 .60112 .59056 .58029 .57030 .56059 .55113 74 .65961 .64806 .63682 .62590 .61527 .60492 .59485 .58504 .57550 .56620 75 .67274 .66149 .65054 .63987 .62948 .61936 .60950 .59990 .59053 .58140 76 .68589 .67495 .66429 .65390 .64377 .63390 .62427 .61487 .60570 .59676 77 .69903 .68841 .67806 .66796 .65811 .64849 .63910 .62993 .62097 .61223 78 .71209 .70182 .69179 .68199 .67242 .66307 .65393 .64501 .63628 .62775 79 .72500 .71507 .70537 .69588 .68660 .67754 .66867 .65999 .65151 .64321 80 .73768 .72809 .71872 .70955 .70058 .69180 .68320 .67479 .66655 .65849 81 .75001 .74077 .73173 .72288 .71422 .70573 .69741 .68926 .68128 .67345 82 .76195 .75306 .74435 .73582 .72746 .71926 .71123 .70335 .69562 .68804 83 .77346 .76491 .75654 .74832 .74026 .73236 .72460 .71699 .70952 .70219 84 .78456 .77636 .76831 .76041 .75265 .74503 .73756 .73021 .72300 .71592 85 .79530 .78743 .77971 .77212 .76466 .75733 .75014 .74306 .73611 .72928 86 .80560 .79806 .79065 .78337 .77621 .76917 .76225 .75544 .74875 .74216 87 .81535 .80813 .80103 .79404 .78717 .78041 .77375 .76720 .76076 .75442 88 .82462 .81771 .81090 .80420 .79760 .79111 .78472 .77842 .77223 .76612 89 .83356 .82694 .82043 .81401 .80769 .80147 .79533 .78929 .78334 .77747 90 .84225 .83593 .82971 .82357 .81753 .81157 .80570 .79991 .79420 .78857 91 .85058 .84455 .83861 .83276 .82698 .82129 .81567 .81013 .80466 .79927 92 .85838 .85263 .84696 .84137 .83585 .83040 .82503 .81973 .81449 .80933 93 .86557 .86009 .85467 .84932 .84405 .83884 .83370 .82862 .82360 .81865 94 .87212 .86687 .86169 .85657 .85152 .84653 .84160 .83673 .83192 .82717 95 .87801 .87298 .86801 .86310 .85825 .85345 .84872 .84404 .83941 .83484 96 .88322 .87838 .87360 .86888 .86420 .85959 .85502 .85051 .84605 .84165 97 .88795 .88328 .87867 .87411 .86961 .86515 .86074 .85639 .85208 .84782 98 .89220 .88769 .88323 .87883 .87447 .87016 .86589 .86167 .85750 .85337 99 .89612 .89176 .88745 .88318 .87895 .87478 .87064 .86656 .86251 .85850 100 .89977 .89555 .89136 .88722 .88313 .87908 .87506 .87109 .86716 .86327 101 .90326 .89917 .89511 .89110 .88712 .88318 .87929 .87543 .87161 .86783 102 .90690 .90294 .89901 .89513 .89128 .88746 .88369 .87995 .87624 .87257 103 .91076 .90694 .90315 .89940 .89569 .89200 .88835 .88474 .88116 .87760 104 .91504 .91138 .90775 .90415 .90058 .89704 .89354 .89006 .88661 .88319 105 .92027 .91681 .91337 .90996 .90658 .90322 .89989 .89659 .89331 .89006 106 .92763 .92445 .92130 .91816 .91506 .91197 .90890 .90586 .90284 .89983 107 .93799 .93523 .93249 .92977 .92707 .92438 .92170 .91905 .91641 .91378 108 .95429 .95223 .95018 .94814 .94611 .94409 .94208 .94008 .93809 .93611 109 .97985 .97893 .97801 .97710 .97619 .97529 .97438 .97348 .97259 .97170 Table S—Based on Life Table 80CNSMT Single Life Remainder Factors [Applicable After April 30, 1989, and Before May 1, 1999] Age Interest rate 6.2% 6.4% 6.6% 6.8% 7.0% 7.2% 7.4% 7.6% 7.8% 8.0% 0 .03535 .03349 .03183 .03035 .02902 .02783 .02676 .02579 .02492 .02413 1 .02486 .02292 .02119 .01963 .01824 .01699 .01587 .01486 .01395 .01312 2 .02547 .02345 .02164 .02002 .01857 .01727 .01609 .01504 .01408 .01321 3 .02640 .02429 .02241 .02073 .01921 .01785 .01662 .01552 .01451 .01361 4 .02753 .02535 .02339 .02163 .02005 .01863 .01735 .01619 .01514 .01418 5 .02883 .02656 .02453 .02269 .02105 .01956 .01822 .01700 .01590 .01490 6 .03026 .02790 .02578 .02387 .02215 .02060 .01919 .01792 .01677 .01572 7 .03180 .02935 .02714 .02515 .02336 .02174 .02027 .01894 .01773 .01664 8 .03347 .03092 .02863 .02656 .02469 .02300 .02146 .02007 .01881 .01766 9 .03528 .03263 .03025 .02810 .02615 .02438 .02278 .02133 .02000 .01880 10 .03723 .03449 .03201 .02977 .02774 .02590 .02423 .02271 .02133 .02006 11 .03935 .03650 .03393 .03160 .02949 .02757 .02583 .02424 .02279 .02147 12 .04160 .03865 .03598 .03356 .03136 .02936 .02755 .02589 .02438 .02299 13 .04394 .04088 .03811 .03560 .03331 .03123 .02934 .02761 .02603 .02458 14 .04629 .04312 .04025 .03764 .03527 .03311 .03113 .02933 .02768 .02617 15 .04864 .04536 .04238 .03968 .03721 .03496 .03290 .03103 .02930 .02773 16 .05099 .04759 .04451 .04170 .03913 .03679 .03466 .03270 .03090 .02926 17 .05333 .04982 .04662 .04370 .04104 .03861 .03638 .03434 .03247 .03075 18 .05570 .05207 .04875 .04573 .04296 .04044 .03812 .03599 .03404 .03225 19 .05814 .05438 .05095 .04781 .04494 .04231 .03990 .03769 .03565 .03378 20 .06065 .05677 .05321 .04996 .04698 .04424 .04173 .03943 .03731 .03535 21 .06325 .05922 .05554 .05217 .04907 .04623 .04362 .04122 .03901 .03697 22 .06594 .06178 .05797 .05447 .05126 .04831 .04559 .04309 .04078 .03865 23 .06876 .06446 .06051 .05688 .05355 .05048 .04766 .04505 .04265 .04042 24 .07174 .06729 .06321 .05945 .05599 .05281 .04987 .04715 .04465 .04233 25 .07491 .07031 .06609 .06219 .05861 .05530 .05224 .04941 .04680 .04438 26 .07830 .07355 .06918 .06515 .06142 .05799 .05481 .05187 .04915 .04662 27 .08192 .07702 .07250 .06832 .06446 .06090 .05759 .05454 .05170 .04906 28 .08577 .08071 .07603 .07171 .06772 .06402 .06059 .05740 .05445 .05170 29 .08986 .08464 .07981 .07534 .07120 .06736 .06380 .06049 .05742 .05456 30 .09420 .08882 .08383 .07921 .07492 .07095 .06725 .06381 .06061 .05763 31 .09881 .09327 .08812 .08335 .07891 .07479 .07095 .06738 .06405 .06095 32 .10369 .09797 .09267 .08774 .08315 .07888 .07491 .07120 .06774 .06451 33 .10885 .10297 .09750 .09241 .08767 .08325 .07913 .07529 .07170 .06834 34 .11430 .10824 .10261 .09736 .09246 .08790 .08363 .07964 .07592 .07243 35 .12002 .11380 .10800 .10259 .09754 .09282 .08841 .08428 .08041 .07679 36 .12602 .11963 .11366 .10809 .10288 .09800 .09344 .08917 .08516 .08140 37 .13230 .12574 .11961 .11387 .10850 .10347 .09876 .09433 .09018 .08628 38 .13887 .13214 .12584 .11994 .11441 .10922 .10436 .09978 .09549 .09145 39 .14573 .13883 .13237 .12630 .12061 .11527 .11025 .10553 .10109 .09690 40 .15290 .14583 .13920 .13297 .12712 .12162 .11644 .11157 .10698 .10266 41 .16036 .15312 .14633 .13994 .13393 .12827 .12294 .11792 .11318 .10871 42 .16810 .16071 .15375 .14720 .14103 .13522 .12973 .12456 .11967 .11505 43 .17614 .16858 .16146 .15475 .14842 .14245 .13682 .13149 .12645 .12169 44 .18447 .17675 .16948 .16261 .15613 .15000 .14421 .13873 .13355 .12864 45 .19310 .18524 .17780 .17078 .16414 .15787 .15192 .14630 .14096 .13591 46 .20204 .19402 .18644 .17926 .17247 .16604 .15995 .15418 .14870 .14350 47 .21128 .20311 .19538 .18806 .18112 .17454 .16830 .16238 .15676 .15141 48 .22080 .21249 .20462 .19716 .19007 .18335 .17696 .17090 .16513 .15964 49 .23059 .22214 .21413 .20653 .19930 .19244 .18591 .17970 .17379 .16816 50 .24063 .23206 .22391 .21617 .20881 .20180 .19514 .18879 .18274 .17697 51 .25095 .24225 .23398 .22610 .21861 .21147 .20466 .19818 .19199 .18609 52 .26157 .25275 .24436 .23636 .22874 .22147 .21453 .20791 .20159 .19556 53 .27249 .26357 .25505 .24694 .23919 .23180 .22474 .21799 .21154 .20537 54 .28369 .27466 .26604 .25782 .24995 .24244 .23526 .22839 .22181 .21552 55 .29518 .28605 .27734 .26900 .26103 .25341 .24611 .23912 .23243 .22601 56 .30695 .29774 .28893 .28050 .27242 .26469 .25728 .25019 .24338 .23685 57 .31902 .30973 .30084 .29232 .28415 .27632 .26881 .26161 .25469 .24805 58 .33138 .32203 .31306 .30446 .29621 .28829 .28069 .27339 .26637 .25962 59 .34402 .33461 .32558 .31691 .30859 .30059 .29290 .28550 .27839 .27155 60 .35690 .34745 .33836 .32963 .32124 .31317 .30540 .29792 .29073 .28379 61 .36999 .36050 .35137 .34259 .33414 .32601 .31817 .31062 .30334 .29633 62 .38325 .37374 .36458 .35576 .34726 .33907 .33117 .32356 .31621 .30912 63 .39669 .38717 .37799 .36913 .36060 .35236 .34441 .33674 .32933 .32217 64 .41031 .40078 .39159 .38272 .37415 .36588 .35789 .35016 .34270 .33548 65 .42416 .41464 .40545 .39656 .38798 .37968 .37166 .36390 .35639 .34912 66 .43825 .42876 .41958 .41070 .40211 .39380 .38576 .37797 .37043 .36312 67 .45260 .44315 .43399 .42513 .41655 .40824 .40019 .39238 .38482 .37749 68 .46720 .45779 .44868 .43985 .43129 .42299 .41494 .40713 .39956 .39221 69 .48197 .47263 .46357 .45478 .44625 .43798 .42995 .42215 .41458 .40722 70 .49686 .48760 .47861 .46988 .46140 .45316 .44516 .43738 .42983 .42248 71 .51182 .50265 .49374 .48508 .47666 .46847 .46051 .45276 .44523 .43790 72 .52685 .51778 .50896 .50038 .49203 .48390 .47599 .46829 .46079 .45349 73 .54194 .53298 .52426 .51578 .50751 .49946 .49161 .48397 .47652 .46926 74 .55714 .54832 .53972 .53134 .52317 .51520 .50744 .49986 .49247 .48527 75 .57250 .56382 .55536 .54710 .53904 .53118 .52351 .51601 .50870 .50156 76 .58803 .57951 .57120 .56308 .55515 .54740 .53984 .53245 .52522 .51817 77 .60369 .59535 .58720 .57923 .57144 .56383 .55639 .54912 .54200 .53504 78 .61942 .61126 .60329 .59549 .58787 .58040 .57310 .56596 .55896 .55212 79 .63508 .62713 .61935 .61174 .60428 .59698 .58983 .58283 .57597 .56925 80 .65059 .64285 .63527 .62785 .62058 .61345 .60646 .59961 .59290 .58632 81 .66579 .65827 .65090 .64368 .63659 .62965 .62283 .61615 .60959 .60316 82 .68061 .67332 .66616 .65914 .65226 .64550 .63886 .63235 .62595 .61968 83 .69499 .68793 .68099 .67418 .66749 .66092 .65447 .64813 .64191 .63579 84 .70896 .70213 .69541 .68881 .68233 .67595 .66969 .66353 .65748 .65153 85 .72256 .71596 .70947 .70308 .69681 .69063 .68456 .67859 .67271 .66693 86 .73569 .72931 .72305 .71688 .71081 .70484 .69896 .69318 .68748 .68188 87 .74818 .74204 .73599 .73003 .72417 .71839 .71271 .70711 .70159 .69616 88 .76011 .75419 .74836 .74261 .73695 .73137 .72588 .72046 .71512 .70986 89 .77169 .76599 .76037 .75484 .74938 .74400 .73870 .73347 .72831 .72323 90 .78302 .77755 .77215 .76683 .76158 .75640 .75129 .74625 .74128 .73638 91 .79395 .78870 .78352 .77842 .77337 .76840 .76349 .75864 .75385 .74913 92 .80423 .79920 .79423 .78933 .78449 .77971 .77499 .77033 .76572 .76118 93 .81377 .80894 .80417 .79946 .79481 .79022 .78568 .78120 .77677 .77239 94 .82247 .81784 .81325 .80873 .80425 .79983 .79547 .79115 .78688 .78266 95 .83033 .82586 .82145 .81709 .81278 .80852 .80431 .80014 .79602 .79195 96 .83729 .83298 .82872 .82451 .82034 .81622 .81215 .80812 .80414 .80019 97 .84361 .83944 .83532 .83124 .82721 .82322 .81927 .81537 .81151 .80769 98 .84929 .84525 .84126 .83730 .83339 .82952 .82569 .82190 .81815 .81443 99 .85454 .85062 .84674 .84290 .83910 .83534 .83161 .82792 .82427 .82066 100 .85942 .85561 .85184 .84810 .84440 .84074 .83711 .83352 .82997 .82644 101 .86408 .86037 .85670 .85306 .84946 .84589 .84236 .83886 .83539 .83196 102 .86894 .86534 .86177 .85823 .85473 .85126 .84782 .84442 .84104 .83770 103 .87408 .87060 .86714 .86371 .86032 .85695 .85362 .85031 .84703 .84378 104 .87980 .87644 .87311 .86980 .86653 .86328 .86005 .85686 .85369 .85054 105 .88684 .88363 .88046 .87731 .87418 .87108 .86800 .86494 .86191 .85890 106 .89685 .89389 .89095 .88804 .88514 .88226 .87940 .87656 .87374 .87094 107 .91117 .90858 .90600 .90344 .90089 .89836 .89584 .89334 .89085 .88838 108 .93414 .93217 .93022 .92828 .92634 .92442 .92250 .92060 .91870 .91681 109 .97081 .96992 .96904 .96816 .96729 .96642 .96555 .96468 .96382 .96296 Table S—Based on Life Table 80CNSMT Single Life Remainder Factors [Applicable After April 30, 1989, and Before May 1, 1999] Age Interest rate 8.2% 8.4% 8.6% 8.8% 9.0% 9.2% 9.4% 9.6% 9.8% 10.0% 0 .02341 .02276 .02217 .02163 .02114 .02069 .02027 .01989 .01954 .01922 1 .01237 .01170 .01108 .01052 .01000 .00953 .00910 .00871 .00834 .00801 2 .01243 .01172 .01107 .01048 .00994 .00944 .00899 .00857 .00819 .00784 3 .01278 .01203 .01135 .01073 .01016 .00964 .00916 .00872 .00832 .00795 4 .01332 .01253 .01182 .01116 .01056 .01001 .00951 .00904 .00862 .00822 5 .01400 .01317 .01241 .01172 .01109 .01051 .00998 .00949 .00904 .00862 6 .01477 .01390 .01310 .01238 .01171 .01110 .01054 .01002 .00954 .00910 7 .01563 .01472 .01389 .01312 .01242 .01178 .01118 .01064 .01013 .00966 8 .01660 .01564 .01477 .01396 .01322 .01254 .01192 .01134 .01081 .01031 9 .01770 .01669 .01577 .01492 .01414 .01342 .01276 .01216 .01159 .01107 10 .01891 .01785 .01688 .01599 .01517 .01442 .01372 .01308 .01249 .01194 11 .02026 .01915 .01814 .01720 .01634 .01555 .01481 .01414 .01351 .01293 12 .02173 .02056 .01950 .01852 .01761 .01678 .01601 .01529 .01463 .01402 13 .02326 .02204 .02092 .01989 .01895 .01807 .01726 .01651 .01582 .01517 14 .02478 .02351 .02234 .02126 .02027 .01935 .01850 .01771 .01698 .01630 15 .02628 .02495 .02372 .02259 .02155 .02058 .01969 .01886 .01810 .01738 16 .02774 .02635 .02507 .02388 .02279 .02178 .02084 .01997 .01917 .01842 17 .02917 .02772 .02637 .02513 .02399 .02293 .02194 .02103 .02018 .01940 18 .03059 .02907 .02767 .02637 .02517 .02406 .02302 .02207 .02118 .02035 19 .03205 .03046 .02899 .02763 .02637 .02521 .02412 .02312 .02218 .02131 20 .03355 .03188 .03035 .02892 .02760 .02638 .02524 .02419 .02320 .02229 21 .03509 .03334 .03173 .03024 .02886 .02758 .02638 .02527 .02424 .02328 22 .03669 .03487 .03318 .03162 .03017 .02882 .02757 .02640 .02532 .02430 23 .03837 .03646 .03470 .03306 .03154 .03013 .02881 .02759 .02644 .02538 24 .04018 .03819 .03634 .03463 .03303 .03155 .03016 .02888 .02767 .02655 25 .04214 .04006 .03812 .03633 .03465 .03309 .03164 .03029 .02902 .02784 26 .04428 .04210 .04008 .03820 .03644 .03481 .03328 .03186 .03052 .02928 27 .04662 .04434 .04223 .04025 .03841 .03670 .03509 .03360 .03219 .03088 28 .04915 .04677 .04456 .04249 .04056 .03876 .03708 .03550 .03403 .03264 29 .05189 .04941 .04709 .04493 .04291 .04102 .03925 .03760 .03604 .03458 30 .05485 .05226 .04984 .04757 .04546 .04348 .04162 .03988 .03825 .03671 31 .05805 .05535 .05282 .05045 .04824 .04616 .04421 .04238 .04067 .03905 32 .06149 .05867 .05603 .05356 .05124 .04906 .04702 .04510 .04329 .04160 33 .06520 .06226 .05950 .05692 .05449 .05221 .05007 .04806 .04616 .04438 34 .06916 .06609 .06322 .06052 .05799 .05560 .05336 .05125 .04926 .04738 35 .07339 .07020 .06720 .06439 .06174 .05925 .05690 .05469 .05260 .05063 36 .07787 .07455 .07143 .06850 .06573 .06313 .06068 .05836 .05617 .05411 37 .08262 .07917 .07593 .07287 .06999 .06727 .06470 .06228 .05999 .05783 38 .08765 .08407 .08069 .07751 .07451 .07167 .06899 .06646 .06407 .06180 39 .09296 .08925 .08574 .08243 .07931 .07635 .07356 .07092 .06841 .06604 40 .09858 .09472 .09109 .08765 .08440 .08132 .07841 .07565 .07303 .07055 41 .10449 .10050 .09673 .09316 .08978 .08658 .08355 .08067 .07794 .07535 42 .11069 .10656 .10265 .09895 .09544 .09212 .08896 .08596 .08312 .08041 43 .11718 .11291 .10887 .10503 .10140 .09794 .09466 .09154 .08858 .08576 44 .12399 .11958 .11540 .11143 .10766 .10407 .10067 .09743 .09434 .09141 45 .13111 .12656 .12224 .11814 .11423 .11052 .10699 .10362 .10042 .09736 46 .13856 .13387 .12941 .12516 .12113 .11728 .11362 .11013 .10680 .10363 47 .14633 .14150 .13690 .13252 .12835 .12438 .12059 .11697 .11352 .11022 48 .15442 .14945 .14471 .14020 .13589 .13179 .12787 .12412 .12055 .11713 49 .16280 .15769 .15281 .14816 .14373 .13949 .13544 .13157 .12787 .12433 50 .17147 .16622 .16121 .15643 .15186 .14749 .14331 .13931 .13548 .13182 51 .18045 .17507 .16993 .16501 .16030 .15580 .15150 .14737 .14342 .13963 52 .18979 .18427 .17899 .17394 .16911 .16448 .16004 .15579 .15172 .14780 53 .19947 .19383 .18842 .18324 .17828 .17352 .16896 .16458 .16038 .15635 54 .20950 .20372 .19819 .19288 .18779 .18291 .17822 .17372 .16940 .16524 55 .21986 .21397 .20831 .20288 .19767 .19266 .18785 .18322 .17878 .17450 56 .23058 .22457 .21879 .21324 .20791 .20278 .19785 .19310 .18854 .18414 57 .24167 .23554 .22965 .22399 .21854 .21329 .20824 .20338 .19870 .19419 58 .25314 .24690 .24090 .23512 .22956 .22420 .21904 .21407 .20927 .20464 59 .26497 .25863 .25252 .24664 .24097 .23550 .23023 .22515 .22024 .21551 60 .27712 .27068 .26448 .25849 .25272 .24716 .24178 .23659 .23158 .22674 61 .28956 .28304 .27674 .27067 .26480 .25913 .25366 .24837 .24325 .23831 62 .30228 .29567 .28929 .28312 .27717 .27141 .26584 .26045 .25524 .25020 63 .31525 .30857 .30211 .29586 .28982 .28397 .27832 .27284 .26754 .26240 64 .32851 .32176 .31522 .30890 .30278 .29685 .29111 .28555 .28016 .27493 65 .34209 .33528 .32868 .32229 .31610 .31010 .30429 .29865 .29317 .28787 66 .35604 .34918 .34253 .33609 .32983 .32377 .31788 .31217 .30663 .30124 67 .37037 .36347 .35678 .35028 .34398 .33786 .33191 .32614 .32053 .31508 68 .38508 .37815 .37142 .36489 .35854 .35237 .34638 .34055 .33488 .32937 69 .40008 .39313 .38638 .37982 .37344 .36724 .36120 .35533 .34961 .34405 70 .41533 .40838 .40162 .39504 .38864 .38241 .37634 .37043 .36468 .35907 71 .43076 .42382 .41705 .41047 .40405 .39780 .39171 .38578 .38000 .37436 72 .44638 .43945 .43269 .42611 .41969 .41344 .40733 .40138 .39558 .38991 73 .46218 .45527 .44854 .44197 .43556 .42931 .42321 .41725 .41143 .40575 74 .47823 .47137 .46466 .45812 .45173 .44549 .43940 .43345 .42763 .42195 75 .49459 .48777 .48112 .47462 .46826 .46205 .45598 .45004 .44424 .43856 76 .51127 .50452 .49793 .49148 .48517 .47900 .47297 .46706 .46129 .45563 77 .52823 .52157 .51505 .50867 .50243 .49632 .49033 .48447 .47873 .47311 78 .54541 .53885 .53242 .52613 .51996 .51392 .50800 .50220 .49652 .49094 79 .56267 .55621 .54989 .54369 .53762 .53166 .52582 .52009 .51448 .50897 80 .57987 .57354 .56733 .56125 .55527 .54941 .54366 .53802 .53248 .52705 81 .59685 .59065 .58457 .57860 .57274 .56699 .56134 .55579 .55035 .54499 82 .61351 .60746 .60151 .59567 .58993 .58429 .57875 .57331 .56796 .56270 83 .62978 .62387 .61806 .61236 .60675 .60123 .59581 .59047 .58523 .58007 84 .64567 .63992 .63426 .62869 .62321 .61783 .61253 .60731 .60218 .59713 85 .66125 .65565 .65014 .64472 .63938 .63413 .62896 .62387 .61886 .61392 86 .67636 .67092 .66557 .66030 .65511 .65000 .64496 .64000 .63511 .63030 87 .69081 .68554 .68034 .67522 .67018 .66520 .66031 .65548 .65071 .64602 88 .70468 .69957 .69453 .68956 .68466 .67983 .67507 .67037 .66574 .66117 89 .71821 .71326 .70838 .70357 .69882 .69414 .68952 .68495 .68045 .67601 90 .73153 .72676 .72204 .71739 .71280 .70827 .70379 .69938 .69502 .69071 91 .74447 .73986 .73532 .73083 .72640 .72202 .71770 .71343 .70921 .70504 92 .75669 .75225 .74787 .74354 .73927 .73504 .73087 .72674 .72267 .71864 93 .76807 .76379 .75957 .75540 .75127 .74719 .74317 .73918 .73524 .73135 94 .77849 .77437 .77030 .76627 .76229 .75835 .75446 .75061 .74680 .74303 95 .78792 .78394 .78001 .77611 .77226 .76845 .76468 .76096 .75727 .75362 96 .79630 .79244 .78863 .78485 .78112 .77742 .77377 .77015 .76657 .76303 97 .80391 .80016 .79646 .79280 .78917 .78559 .78203 .77852 .77504 .77160 98 .81076 .80712 .80352 .79996 .79643 .79294 .78948 .78606 .78267 .77931 99 .81709 .81354 .81004 .80657 .80313 .79972 .79635 .79302 .78971 .78644 100 .82296 .81950 .81609 .81270 .80934 .80602 .80273 .79947 .79624 .79304 101 .82855 .82518 .82185 .81854 .81526 .81201 .80880 .80561 .80245 .79932 102 .83438 .83110 .82785 .82462 .82142 .81826 .81512 .81200 .80892 .80586 103 .84056 .83737 .83420 .83106 .82795 .82487 .82181 .81878 .81577 .81279 104 .84743 .84433 .84127 .83822 .83521 .83221 .82924 .82630 .82338 .82048 105 .85591 .85295 .85001 .84709 .84419 .84132 .83846 .83563 .83282 .83003 106 .86816 .86540 .86266 .85993 .85723 .85454 .85187 .84922 .84659 .84397 107 .88592 .88348 .88105 .87863 .87623 .87384 .87147 .86911 .86676 .86443 108 .91493 .91306 .91119 .90934 .90749 .90566 .90383 .90201 .90020 .89840 109 .96211 .96125 .96041 .95956 .95872 .95788 .95704 .95620 .95537 .95455 Table S—Based on Life Table 80CNSMT Single Life Remainder Factors [Applicable After April 30, 1989, and Before May 1, 1999] Age Interest rate 10.2% 10.4% 10.6% 10.8% 11.0% 11.2% 11.4% 11.6% 11.8% 12.0% 0 .01891 .01864 .01838 .01814 .01791 .01770 .01750 .01732 .01715 .01698 1 .00770 .00741 .00715 .00690 .00667 .00646 .00626 .00608 .00590 .00574 2 .00751 .00721 .00693 .00667 .00643 .00620 .00600 .00580 .00562 .00544 3 .00760 .00728 .00699 .00671 .00646 .00622 .00600 .00579 .00560 .00541 4 .00786 .00752 .00721 .00692 .00665 .00639 .00616 .00594 .00573 .00554 5 .00824 .00788 .00755 .00724 .00695 .00668 .00643 .00620 .00598 .00578 6 .00869 .00832 .00796 .00764 .00733 .00705 .00678 .00654 .00630 .00608 7 .00923 .00883 .00846 .00811 .00779 .00749 .00720 .00694 .00669 .00646 8 .00986 .00943 .00904 .00867 .00833 .00801 .00771 .00743 .00716 .00692 9 .01059 .01014 .00972 .00933 .00897 .00863 .00831 .00801 .00773 .00747 10 .01142 .01095 .01051 .01009 .00971 .00935 .00901 .00869 .00840 .00812 11 .01239 .01189 .01142 .01098 .01057 .01019 .00983 .00950 .00918 .00889 12 .01345 .01292 .01243 .01197 .01154 .01113 .01075 .01040 .01007 .00975 13 .01457 .01401 .01349 .01300 .01255 .01212 .01172 .01135 .01100 .01067 14 .01567 .01508 .01453 .01402 .01354 .01309 .01267 .01227 .01190 .01155 15 .01672 .01610 .01552 .01498 .01448 .01400 .01356 .01314 .01275 .01238 16 .01772 .01707 .01646 .01589 .01536 .01486 .01439 .01396 .01354 .01315 17 .01866 .01798 .01734 .01674 .01618 .01566 .01516 .01470 .01427 .01386 18 .01958 .01886 .01818 .01755 .01697 .01641 .01590 .01541 .01495 .01452 19 .02050 .01974 .01903 .01837 .01775 .01717 .01662 .01611 .01563 .01517 20 .02143 .02064 .01989 .01919 .01854 .01793 .01735 .01681 .01630 .01582 21 .02238 .02154 .02075 .02002 .01933 .01868 .01807 .01750 .01696 .01646 22 .02336 .02247 .02164 .02087 .02014 .01946 .01882 .01821 .01764 .01711 23 .02438 .02345 .02257 .02176 .02099 .02027 .01959 .01895 .01835 .01778 24 .02550 .02451 .02359 .02273 .02192 .02115 .02044 .01976 .01913 .01853 25 .02673 .02569 .02472 .02381 .02295 .02214 .02138 .02067 .01999 .01936 26 .02811 .02701 .02598 .02502 .02411 .02326 .02246 .02170 .02098 .02031 27 .02965 .02849 .02741 .02639 .02543 .02452 .02367 .02287 .02211 .02140 28 .03134 .03013 .02898 .02790 .02689 .02593 .02503 .02418 .02338 .02262 29 .03322 .03193 .03072 .02958 .02851 .02750 .02654 .02564 .02479 .02398 30 .03527 .03391 .03264 .03143 .03030 .02923 .02821 .02726 .02635 .02550 31 .03753 .03610 .03475 .03348 .03228 .03115 .03008 .02907 .02811 .02720 32 .04000 .03849 .03707 .03573 .03446 .03326 .03213 .03105 .03004 .02907 33 .04269 .04111 .03961 .03819 .03685 .03558 .03438 .03325 .03217 .03115 34 .04561 .04394 .04236 .04087 .03946 .03812 .03685 .03565 .03451 .03342 35 .04877 .04702 .04535 .04378 .04229 .04087 .03953 .03826 .03706 .03591 36 .05215 .05031 .04856 .04690 .04533 .04384 .04242 .04108 .03980 .03859 37 .05578 .05384 .05200 .05025 .04860 .04703 .04553 .04411 .04276 .04148 38 .05965 .05761 .05568 .05385 .05211 .05045 .04888 .04738 .04595 .04460 39 .06379 .06165 .05962 .05770 .05587 .05412 .05247 .05089 .04939 .04795 40 .06820 .06596 .06383 .06181 .05989 .05806 .05631 .05465 .05307 .05155 41 .07288 .07054 .06832 .06620 .06418 .06226 .06042 .05868 .05701 .05541 42 .07784 .07539 .07306 .07085 .06873 .06671 .06479 .06295 .06119 .05952 43 .08308 .08052 .07808 .07576 .07355 .07143 .06941 .06748 .06564 .06387 44 .08861 .08594 .08340 .08097 .07865 .07644 .07432 .07230 .07036 .06851 45 .09445 .09167 .08901 .08648 .08406 .08174 .07953 .07741 .07538 .07343 46 .10060 .09770 .09494 .09230 .08977 .08735 .08503 .08281 .08068 .07865 47 .10707 .10406 .10119 .09843 .09579 .09327 .09085 .08853 .08630 .08417 48 .11386 .11073 .10774 .10487 .10213 .09949 .09697 .09455 .09222 .08999 49 .12094 .11769 .11458 .11160 .10874 .10600 .10337 .10084 .09842 .09609 50 .12831 .12494 .12172 .11862 .11565 .11280 .11006 .10743 .10490 .10247 51 .13600 .13251 .12917 .12596 .12288 .11991 .11706 .11432 .11169 .10915 52 .14405 .14044 .13698 .13366 .13046 .12738 .12442 .12157 .11883 .11619 53 .15247 .14875 .14517 .14172 .13841 .13522 .13215 .12919 .12635 .12360 54 .16124 .15740 .15370 .15014 .14671 .14341 .14023 .13717 .13421 .13136 55 .17039 .16642 .16261 .15893 .15539 .15198 .14868 .14551 .14244 .13948 56 .17991 .17583 .17190 .16811 .16445 .16092 .15752 .15423 .15106 .14799 57 .18984 .18564 .18160 .17769 .17392 .17029 .16677 .16338 .16010 .15692 58 .20018 .19587 .19172 .18770 .18382 .18007 .17645 .17295 .16956 .16628 59 .21093 .20652 .20225 .19812 .19414 .19028 .18655 .18294 .17945 .17606 60 .22206 .21753 .21316 .20893 .20483 .20087 .19703 .19332 .18972 .18624 61 .23353 .22890 .22442 .22009 .21589 .21182 .20788 .20407 .20037 .19678 62 .24532 .24059 .23601 .23158 .22728 .22311 .21907 .21515 .21135 .20767 63 .25742 .25260 .24793 .24339 .23900 .23473 .23060 .22658 .22268 .21890 64 .26987 .26495 .26019 .25556 .25107 .24671 .24248 .23837 .23438 .23050 65 .28271 .27771 .27286 .26815 .26357 .25912 .25480 .25059 .24651 .24254 66 .29601 .29093 .28600 .28120 .27654 .27200 .26760 .26331 .25913 .25507 67 .30978 .30462 .29961 .29474 .29000 .28539 .28090 .27653 .27227 .26813 68 .32401 .31879 .31371 .30877 .30396 .29927 .29471 .29027 .28593 .28171 69 .33863 .33336 .32822 .32322 .31835 .31359 .30896 .30445 .30005 .29576 70 .35361 .34829 .34310 .33804 .33311 .32830 .32361 .31903 .31457 .31021 71 .36886 .36349 .35826 .35316 .34818 .34332 .33858 .33394 .32942 .32500 72 .38439 .37899 .37373 .36858 .36356 .35866 .35387 .34919 .34461 .34015 73 .40021 .39479 .38950 .38432 .37927 .37433 .36950 .36478 .36016 .35565 74 .41639 .41096 .40565 .40046 .39538 .39042 .38556 .38081 .37616 .37161 75 .43301 .42758 .42226 .41706 .41198 .40699 .40212 .39734 .39267 .38809 76 .45009 .44467 .43937 .43417 .42908 .42410 .41921 .41443 .40974 .40514 77 .46761 .46221 .45693 .45175 .44667 .44170 .43682 .43203 .42734 .42274 78 .48548 .48013 .47488 .46973 .46468 .45972 .45486 .45009 .44541 .44082 79 .50356 .49826 .49306 .48795 .48294 .47802 .47319 .46845 .46379 .45922 80 .52171 .51647 .51133 .50628 .50132 .49644 .49166 .48695 .48233 .47779 81 .53974 .53457 .52950 .52451 .51961 .51479 .51006 .50541 .50083 .49633 82 .55753 .55245 .54745 .54254 .53771 .53296 .52828 .52369 .51917 .51472 83 .57500 .57001 .56510 .56026 .55551 .55083 .54623 .54170 .53724 .53285 84 .59216 .58726 .58245 .57770 .57304 .56844 .56391 .55945 .55506 .55074 85 .60906 .60428 .59956 .59492 .59034 .58583 .58139 .57702 .57270 .56845 86 .62555 .62088 .61627 .61173 .60725 .60284 .59849 .59420 .58997 .58580 87 .64139 .63683 .63233 .62790 .62352 .61921 .61495 .61076 .60661 .60253 88 .65666 .65221 .64783 .64350 .63923 .63502 .63086 .62675 .62270 .61871 89 .67163 .66730 .66304 .65882 .65466 .65055 .64650 .64249 .63854 .63463 90 .68646 .68226 .67812 .67402 .66998 .66599 .66204 .65814 .65430 .65049 91 .70093 .69686 .69285 .68888 .68496 .68108 .67725 .67347 .66973 .66604 92 .71466 .71073 .70684 .70300 .69920 .69545 .69173 .68806 .68444 .68085 93 .72750 .72370 .71994 .71622 .71254 .70890 .70530 .70174 .69822 .69474 94 .73931 .73562 .73198 .72838 .72481 .72129 .71780 .71434 .71093 .70755 95 .75001 .74644 .74291 .73941 .73595 .73253 .72914 .72579 .72247 .71919 96 .75953 .75606 .75262 .74923 .74586 .74253 .73924 .73598 .73275 .72955 97 .76819 .76481 .76147 .75816 .75489 .75165 .74844 .74526 .74211 .73899 98 .77599 .77270 .76944 .76621 .76302 .75986 .75672 .75362 .75054 .74750 99 .78319 .77998 .77680 .77365 .77053 .76744 .76437 .76134 .75833 .75535 100 .78987 .78673 .78362 .78054 .77748 .77446 .77146 .76849 .76555 .76263 101 .79622 .79315 .79010 .78708 .78409 .78113 .77819 .77528 .77239 .76953 102 .80283 .79983 .79685 .79390 .79097 .78807 .78519 .78234 .77951 .77671 103 .80983 .80690 .80399 .80111 .79825 .79541 .79260 .78981 .78705 .78430 104 .81760 .81475 .81192 .80912 .80633 .80357 .80083 .79810 .79541 .79273 105 .82726 .82451 .82178 .81907 .81638 .81371 .81106 .80843 .80582 .80322 106 .84137 .83879 .83623 .83368 .83115 .82863 .82614 .82366 .82119 .81874 107 .86211 .85981 .85751 .85523 .85297 .85071 .84847 .84624 .84403 .84182 108 .89660 .89481 .89304 .89127 .88950 .88775 .88601 .88427 .88254 .88081 109 .95372 .95290 .95208 .95126 .95045 .94964 .94883 .94803 .94723 .94643 Table S—Based on Life Table 80CNSMT Single Life Remainder Factors [Applicable After April 30, 1989, and Before May 1, 1999] Age Interest rate 12.2% 12.4% 12.6% 12.8% 13.0% 13.2% 13.4% 13.6% 13.8% 14.0% 0 .01683 .01669 .01655 .01642 .01630 .01618 .01607 .01596 .01586 .01576 1 .00559 .00544 .00531 .00518 .00506 .00494 .00484 .00473 .00464 .00454 2 .00528 .00513 .00499 .00485 .00473 .00461 .00449 .00439 .00428 .00419 3 .00524 .00508 .00493 .00479 .00465 .00453 .00441 .00429 .00419 .00408 4 .00536 .00519 .00503 .00488 .00473 .00460 .00447 .00435 .00423 .00412 5 .00558 .00540 .00523 .00507 .00492 .00477 .00464 .00451 .00439 .00427 6 .00588 .00569 .00550 .00533 .00517 .00502 .00487 .00473 .00460 .00448 7 .00624 .00604 .00584 .00566 .00549 .00532 .00517 .00502 .00488 .00475 8 .00668 .00646 .00626 .00606 .00588 .00570 .00554 .00538 .00523 .00509 9 .00722 .00699 .00677 .00656 .00636 .00617 .00600 .00583 .00567 .00552 10 .00785 .00761 .00737 .00715 .00694 .00674 .00655 .00637 .00620 .00604 11 .00861 .00835 .00810 .00786 .00764 .00743 .00723 .00704 .00686 .00668 12 .00946 .00918 .00891 .00866 .00843 .00820 .00799 .00779 .00760 .00741 13 .01035 .01006 .00978 .00951 .00927 .00903 .00880 .00859 .00839 .00819 14 .01122 .01091 .01061 .01034 .01007 .00982 .00958 .00936 .00914 .00894 15 .01203 .01171 .01140 .01110 .01082 .01056 .01031 .01007 .00985 .00963 16 .01279 .01244 .01211 .01181 .01151 .01123 .01097 .01072 .01048 .01025 17 .01347 .01311 .01276 .01244 .01213 .01184 .01156 .01130 .01104 .01081 18 .01411 .01373 .01336 .01302 .01270 .01239 .01210 .01182 .01155 .01130 19 .01474 .01434 .01396 .01359 .01325 .01293 .01262 .01233 .01205 .01178 20 .01537 .01494 .01454 .01415 .01379 .01345 .01313 .01282 .01252 .01224 21 .01598 .01553 .01510 .01470 .01432 .01396 .01361 .01329 .01298 .01268 22 .01660 .01613 .01568 .01525 .01485 .01446 .01410 .01375 .01343 .01312 23 .01725 .01674 .01627 .01581 .01539 .01498 .01460 .01423 .01388 .01355 24 .01796 .01742 .01692 .01644 .01599 .01556 .01515 .01476 .01439 .01404 25 .01876 .01819 .01765 .01714 .01666 .01621 .01577 .01536 .01497 .01460 26 .01967 .01907 .01850 .01796 .01745 .01696 .01650 .01606 .01565 .01525 27 .02072 .02008 .01948 .01890 .01836 .01784 .01735 .01688 .01644 .01601 28 .02190 .02122 .02057 .01996 .01938 .01883 .01831 .01781 .01734 .01689 29 .02322 .02249 .02181 .02116 .02054 .01996 .01940 .01887 .01836 .01788 30 .02469 .02392 .02319 .02250 .02184 .02122 .02062 .02006 .01952 .01900 31 .02634 .02552 .02475 .02401 .02331 .02264 .02201 .02140 .02083 .02028 32 .02816 .02729 .02647 .02568 .02494 .02423 .02355 .02291 .02229 .02170 33 .03018 .02926 .02838 .02755 .02675 .02600 .02528 .02459 .02393 .02331 34 .03239 .03142 .03048 .02960 .02875 .02795 .02718 .02645 .02575 .02508 35 .03482 .03378 .03279 .03185 .03095 .03009 .02928 .02850 .02775 .02704 36 .03743 .03633 .03528 .03428 .03333 .03242 .03155 .03072 .02992 .02916 37 .04026 .03909 .03798 .03692 .03591 .03494 .03401 .03313 .03228 .03147 38 .04330 .04207 .04089 .03977 .03869 .03767 .03668 .03574 .03484 .03398 39 .04658 .04528 .04403 .04284 .04170 .04061 .03957 .03857 .03762 .03670 40 .05011 .04873 .04741 .04615 .04495 .04379 .04269 .04163 .04061 .03964 41 .05389 .05244 .05104 .04971 .04844 .04721 .04604 .04492 .04384 .04281 42 .05791 .05638 .05491 .05350 .05216 .05086 .04962 .04844 .04729 .04620 43 .06219 .06057 .05902 .05754 .05612 .05475 .05344 .05218 .05098 .04981 44 .06673 .06503 .06340 .06184 .06034 .05890 .05752 .05619 .05491 .05368 45 .07157 .06978 .06806 .06642 .06484 .06332 .06186 .06046 .05911 .05781 46 .07669 .07481 .07301 .07128 .06962 .06802 .06649 .06501 .06358 .06221 47 .08212 .08015 .07826 .07645 .07470 .07302 .07140 .06984 .06834 .06690 48 .08784 .08578 .08380 .08190 .08006 .07830 .07660 .07496 .07338 .07186 49 .09384 .09169 .08961 .08762 .08570 .08384 .08206 .08034 .07868 .07708 50 .10013 .09787 .09570 .09361 .09160 .08966 .08779 .08598 .08424 .08256 51 .10671 .10436 .10209 .09991 .09780 .09577 .09381 .09192 .09009 .08832 52 .11365 .11120 .10883 .10655 .10435 .10222 .10017 .09819 .09628 .09442 53 .12095 .11840 .11593 .11355 .11126 .10904 .10689 .10482 .10282 .10088 54 .12860 .12595 .12338 .12090 .11851 .11619 .11396 .11179 .10970 .10767 55 .13663 .13386 .13120 .12862 .12613 .12372 .12138 .11912 .11694 .11482 56 .14503 .14217 .13940 .13672 .13413 .13162 .12919 .12683 .12456 .12235 57 .15385 .15089 .14801 .14523 .14254 .13994 .13741 .13496 .13259 .13029 58 .16311 .16004 .15706 .15418 .15139 .14868 .14606 .14352 .14105 .13866 59 .17279 .16961 .16654 .16355 .16066 .15786 .15514 .15250 .14994 .14745 60 .18286 .17958 .17640 .17332 .17033 .16743 .16462 .16188 .15922 .15664 61 .19330 .18992 .18665 .18347 .18038 .17738 .17447 .17164 .16889 .16622 62 .20409 .20061 .19724 .19396 .19078 .18768 .18467 .18175 .17891 .17614 63 .21522 .21165 .20818 .20480 .20152 .19833 .19523 .19221 .18928 .18642 64 .22672 .22306 .21949 .21602 .21265 .20937 .20617 .20306 .20003 .19708 65 .23867 .23491 .23125 .22769 .22423 .22085 .21757 .21437 .21125 .20821 66 .25112 .24727 .24353 .23988 .23632 .23286 .22948 .22619 .22299 .21986 67 .26409 .26016 .25633 .25260 .24896 .24541 .24195 .23857 .23528 .23206 68 .27760 .27359 .26968 .26586 .26214 .25851 .25497 .25151 .24814 .24484 69 .29157 .28748 .28350 .27961 .27581 .27211 .26849 .26495 .26150 .25812 70 .30596 .30181 .29775 .29379 .28992 .28614 .28245 .27884 .27532 .27187 71 .32069 .31648 .31236 .30833 .30440 .30055 .29679 .29312 .28952 .28600 72 .33578 .33151 .32733 .32325 .31925 .31535 .31152 .30778 .30412 .30054 73 .35123 .34691 .34269 .33855 .33450 .33054 .32666 .32286 .31914 .31550 74 .36715 .36279 .35852 .35434 .35024 .34623 .34230 .33845 .33468 .33098 75 .38360 .37921 .37491 .37069 .36656 .36250 .35853 .35464 .35082 .34708 76 .40064 .39623 .39190 .38765 .38349 .37941 .37540 .37148 .36762 .36384 77 .41823 .41381 .40947 .40521 .40103 .39692 .39290 .38895 .38507 .38126 78 .43632 .43189 .42755 .42329 .41910 .41499 .41095 .40698 .40309 .39926 79 .45473 .45032 .44599 .44173 .43755 .43344 .42940 .42543 .42153 .41770 80 .47333 .46894 .46463 .46040 .45623 .45213 .44811 .44414 .44025 .43642 81 .49191 .48755 .48328 .47907 .47493 .47085 .46684 .46290 .45902 .45520 82 .51034 .50603 .50179 .49762 .49351 .48947 .48549 .48157 .47772 .47392 83 .52852 .52427 .52008 .51595 .51189 .50788 .50394 .50006 .49623 .49246 84 .54648 .54228 .53815 .53407 .53006 .52610 .52221 .51836 .51458 .51084 85 .56426 .56013 .55606 .55205 .54810 .54420 .54035 .53656 .53282 .52913 86 .58169 .57764 .57364 .56970 .56581 .56197 .55818 .55445 .55076 .54713 87 .59850 .59452 .59060 .58673 .58291 .57913 .57541 .57174 .56811 .56453 88 .61476 .61086 .60702 .60322 .59947 .59577 .59212 .58851 .58494 .58142 89 .63078 .62697 .62321 .61950 .61583 .61220 .60862 .60508 .60159 .59813 90 .64674 .64302 .63935 .63573 .63215 .62861 .62511 .62165 .61823 .61485 91 .66238 .65877 .65520 .65167 .64819 .64474 .64133 .63795 .63462 .63132 92 .67730 .67379 .67032 .66689 .66350 .66014 .65682 .65354 .65029 .64708 93 .69130 .68789 .68452 .68119 .67789 .67463 .67140 .66820 .66504 .66191 94 .70421 .70090 .69762 .69438 .69118 .68800 .68486 .68175 .67867 .67563 95 .71594 .71272 .70954 .70639 .70326 .70017 .69712 .69409 .69109 .68812 96 .72638 .72325 .72014 .71707 .71403 .71101 .70803 .70507 .70215 .69925 97 .73590 .73285 .72982 .72682 .72385 .72090 .71799 .71510 .71224 .70941 98 .74448 .74149 .73853 .73560 .73269 .72981 .72696 .72414 .72134 .71856 99 .75240 .74948 .74658 .74371 .74086 .73805 .73525 .73248 .72974 .72702 100 .75974 .75687 .75403 .75121 .74842 .74566 .74292 .74020 .73751 .73484 101 .76669 .76388 .76109 .75833 .75559 .75287 .75018 .74751 .74486 .74223 102 .77393 .77117 .76844 .76573 .76304 .76037 .75773 .75511 .75251 .74993 103 .78158 .77888 .77620 .77355 .77091 .76830 .76571 .76313 .76058 .75805 104 .79007 .78743 .78482 .78222 .77964 .77709 .77455 .77203 .76953 .76705 105 .80065 .79809 .79556 .79304 .79054 .78805 .78559 .78314 .78071 .77829 106 .81631 .81389 .81149 .80911 .80674 .80438 .80204 .79972 .79741 .79511 107 .83963 .83745 .83529 .83313 .83099 .82886 .82674 .82463 .82254 .82045 108 .87910 .87739 .87569 .87400 .87232 .87064 .86897 .86731 .86566 .86401 109 .94563 .94484 .94405 .94326 .94248 .94170 .94092 .94014 .93937 .93860 Table 80CNSMT—Applicable After April 30, 1989, and Before May 1, 1999 Age × 1( × ) Age × 1( × ) Age × 1( × ) (1) (2) (1) (2) (1) (2) 0 100000 37 95492 74 59279 1 98740 38 95317 75 56799 2 98648 39 95129 76 54239 3 98584 40 94926 77 51599 4 98535 41 94706 78 48878 5 98495 42 94465 79 46071 6 98459 43 94201 80 43180 7 98426 44 93913 81 40208 8 98396 45 93599 82 37172 9 98370 46 93256 83 34095 10 98347 47 92882 84 31012 11 98328 48 92472 85 27960 12 98309 49 92021 86 24961 13 98285 50 91526 87 22038 14 98248 51 90986 88 19235 15 98196 52 90402 89 16598 16 98129 53 89771 90 14154 17 98047 54 89087 91 11908 18 97953 55 88348 92 9863 19 97851 56 87551 93 8032 20 97741 57 86695 94 6424 21 97623 58 85776 95 5043 22 97499 59 84789 96 3884 23 97370 60 83726 97 2939 24 97240 61 82581 98 2185 25 97110 62 81348 99 1598 26 96982 63 80024 100 1150 27 96856 64 78609 101 815 28 96730 65 77107 102 570 29 96604 66 75520 103 393 30 96477 67 73846 104 267 31 96350 68 72082 105 179 32 96220 69 70218 106 119 33 96088 70 68248 107 78 34 95951 71 66165 108 51 35 95808 72 63972 109 33 36 95655 73 61673 110 0 (f) Valuation of annuities, interests for life or term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is after April 30,1999, and before May 1, 2009 In general. (2) Transitional rule. (ii) If a decedent dies after April 30, 1999, and before July 1, 1999, the fair market value of annuities, life estates, remainders, and reversions based on one or more measuring lives included in the gross estate of the decedent is their present value determined under this section by use of the section 7520 interest rate for the month in which the valuation date occurs (see §§ 20.7520-1(b) and 20.7520-2(a)(2)) and the appropriate actuarial tables under either paragraph (e)(4) or paragraph (f)(4) of this section, at the option of the decedent's executor. (iii) For purposes of paragraphs (f)(2)(i) and (f)(2)(ii) of this section, where the decedent's executor is given the option to use the appropriate actuarial tables under either paragraph (e)(4) or paragraph (f)(4) of this section, the decedent's executor must use the same actuarial table with respect to each individual transaction and with respect to all transfers occurring on the valuation date (for example, gift and income tax charitable deductions with respect to the same transfer must be determined based on the same tables, and all assets includible in the gross estate and/or estate tax deductions claimed must be valued based on the same tables). (3) Publications and actuarial computations by the Internal Revenue Service. b (4) Actuarial tables. (4) Actuarial Table S and Table 90CM where the valuation date is after April 30, 1999. Table S—Based on Life on Life Table 90CM Single Life Remainder Factors, Applicable After April 30, 1999, and Before May 1, 2009 [Interest rate] Age 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 6.0% 0 .06752 .06130 .05586 .05109 .04691 .04322 .03998 .03711 .03458 .03233 1 .06137 .05495 .04932 .04438 .04003 .03620 .03283 .02985 .02721 .02487 2 .06325 .05667 .05088 .04580 .04132 .03737 .03388 .03079 .02806 .02563 3 .06545 .05869 .05275 .04752 .04291 .03883 .03523 .03203 .02920 .02668 4 .06784 .06092 .05482 .04944 .04469 .04048 .03676 .03346 .03052 .02791 5 .07040 .06331 .05705 .05152 .04662 .04229 .03845 .03503 .03199 .02928 6 .07310 .06583 .05941 .05372 .04869 .04422 .04025 .03672 .03357 .03076 7 .07594 .06849 .06191 .05607 .05089 .04628 .04219 .03854 .03528 .03236 8 .07891 .07129 .06453 .05853 .05321 .04846 .04424 .04046 .03709 .03407 9 .08203 .07423 .06731 .06115 .05567 .05079 .04643 .04253 .03904 .03592 10 .08532 .07734 .07024 .06392 .05829 .05326 .04877 .04474 .04114 .03790 11 .08875 .08059 .07331 .06683 .06104 .05587 .05124 .04709 .04336 .04002 12 .09233 .08398 .07653 .06989 .06394 .05862 .05385 .04957 .04572 .04226 13 .09601 .08748 .07985 .07304 .06693 .06146 .05655 .05214 .04816 .04458 14 .09974 .09102 .08322 .07624 .06997 .06435 .05929 .05474 .05064 .04694 15 .10350 .09460 .08661 .07946 .07303 .06725 .06204 .05735 .05312 .04930 16 .10728 .09818 .09001 .08268 .07608 .07014 .06479 .05996 .05559 .05164 17 .11108 .10179 .09344 .08592 .07916 .07306 .06755 .06257 .05807 .05399 18 .11494 .10545 .09691 .08921 .08227 .07601 .07034 .06521 .06057 .05636 19 .11889 .10921 .10047 .09259 .08548 .07904 .07322 .06794 .06315 .05880 20 .12298 .11310 .10417 .09610 .08881 .08220 .07622 .07078 .06584 .06135 21 .12722 .11713 .10801 .09976 .09228 .08550 .07935 .07375 .06866 .06403 22 .13159 .12130 .11199 .10354 .09588 .08893 .08260 .07685 .07160 .06682 23 .13613 .12563 .11612 .10748 .09964 .09250 .08601 .08009 .07468 .06975 24 .14084 .13014 .12043 .11160 .10357 .09625 .08958 .08349 .07793 .07284 25 .14574 .13484 .12493 .11591 .10768 .10018 .09334 .08708 .08135 .07611 26 .15084 .13974 .12963 .12041 .11199 .10431 .09728 .09085 .08496 .07956 27 .15615 .14485 .13454 .12513 .11652 .10865 .10144 .09484 .08878 .08322 28 .16166 .15016 .13965 .13004 .12124 .11319 .10580 .09901 .09279 .08706 29 .16737 .15567 .14497 .13516 .12617 .11792 .11035 .10339 .09699 .09109 30 .17328 .16138 .15048 .14047 .13129 .12286 .11510 .10796 .10138 .09532 31 .17938 .16728 .15618 .14599 .13661 .12799 .12004 .11272 .10597 .09974 32 .18568 .17339 .16210 .15171 .14214 .13333 .12520 .11769 .11076 .10435 33 .19220 .17972 .16824 .15766 .14790 .13889 .13058 .12289 .11578 .10920 34 .19894 .18627 .17460 .16383 .15388 .14468 .13618 .12831 .12102 .11426 35 .20592 .19307 .18121 .17025 .16011 .15073 .14204 .13399 .12652 .11958 36 .21312 .20010 .18805 .17691 .16658 .15701 .14814 .13990 .13225 .12514 37 .22057 .20737 .19514 .18382 .17331 .16356 .15450 .14608 .13825 .13096 38 .22827 .21490 .20251 .19100 .18031 .17038 .16113 .15253 .14452 .13705 39 .23623 .22270 .21013 .19845 .18759 .17747 .16805 .15927 .15108 .14344 40 .24446 .23078 .21805 .20620 .19516 .18487 .17527 .16631 .15795 .15013 41 .25298 .23915 .22626 .21425 .20305 .19259 .18282 .17368 .16514 .15715 42 .26178 .24782 .23478 .22262 .21125 .20062 .19069 .18138 .17267 .16450 43 .27087 .25678 .24360 .23129 .21977 .20898 .19888 .18941 .18053 .17220 44 .28025 .26603 .25273 .24027 .22860 .21766 .20740 .19777 .18873 .18023 45 .28987 .27555 .26212 .24953 .23772 .22664 .21622 .20644 .19724 .18858 46 .29976 .28533 .27179 .25908 .24714 .23591 .22536 .21542 .20606 .19725 47 .30987 .29535 .28171 .26889 .25682 .24546 .23476 .22468 .21518 .20621 48 .32023 .30563 .29190 .27897 .26678 .25530 .24447 .23425 .22460 .21549 49 .33082 .31615 .30234 .28931 .27702 .26543 .25447 .24412 .23434 .22509 50 .34166 .32694 .31306 .29995 .28756 .27586 .26479 .25432 .24441 .23502 51 .35274 .33798 .32404 .31085 .29838 .28658 .27541 .26482 .25479 .24528 52 .36402 .34924 .33525 .32200 .30946 .29757 .28630 .27561 .26547 .25584 53 .37550 .36070 .34668 .33339 .32078 .30882 .29746 .28667 .27643 .26669 54 .38717 .37237 .35833 .34500 .33234 .32031 .30888 .29801 .28766 .27782 55 .39903 .38424 .37019 .35683 .34413 .33205 .32056 .30961 .29918 .28925 56 .41108 .39631 .38227 .36890 .35617 .34405 .33250 .32149 .31099 .30097 57 .42330 .40857 .39455 .38118 .36844 .35629 .34469 .33363 .32306 .31297 58 .43566 .42098 .40699 .39364 .38089 .36873 .35710 .34600 .33538 .32522 59 .44811 .43351 .41956 .40623 .39350 .38133 .36968 .35855 .34789 .33768 60 .46066 .44613 .43224 .41896 .40624 .39408 .38243 .37127 .36058 .35033 61 .47330 .45887 .44505 .43182 .41914 .40699 .39535 .38418 .37347 .36318 62 .48608 .47175 .45802 .44485 .43223 .42011 .40848 .39732 .38660 .37629 63 .49898 .48478 .47115 .45807 .44550 .43343 .42184 .41069 .39997 .38966 64 .51200 .49793 .48442 .47143 .45895 .44694 .43539 .42427 .41357 .40326 65 .52512 .51121 .49782 .48495 .47255 .46062 .44912 .43805 .42738 .41709 66 .53835 .52461 .51137 .49862 .48634 .47449 .46307 .45206 .44143 .43118 67 .55174 .53818 .52511 .51250 .50034 .48860 .47727 .46633 .45576 .44556 68 .56524 .55188 .53899 .52654 .51452 .50291 .49168 .48083 .47034 .46020 69 .57882 .56568 .55299 .54071 .52885 .51737 .50627 .49552 .48513 .47506 70 .59242 .57951 .56703 .55495 .54325 .53193 .52096 .51034 .50004 .49007 71 .60598 .59332 .58106 .56918 .55767 .54651 .53569 .52520 .51503 .50516 72 .61948 .60707 .59504 .58338 .57206 .56108 .55043 .54009 .53004 .52029 73 .63287 .62073 .60895 .59751 .58640 .57561 .56513 .55495 .54505 .53543 74 .64621 .63435 .62282 .61162 .60073 .59015 .57985 .56984 .56009 .55061 75 .65953 .64796 .63671 .62575 .61510 .60473 .59463 .58480 .57523 .56591 76 .67287 .66160 .65063 .63995 .62954 .61940 .60952 .59989 .59050 .58135 77 .68622 .67526 .66459 .65419 .64404 .63415 .62450 .61509 .60590 .59694 78 .69954 .68892 .67856 .66845 .65858 .64895 .63955 .63036 .62140 .61264 79 .71278 .70250 .69246 .68265 .67308 .66372 .65457 .64563 .63690 .62836 80 .72581 .71588 .70618 .69668 .68740 .67833 .66945 .66077 .65227 .64396 81 .73857 .72899 .71962 .71045 .70147 .69268 .68408 .67566 .66741 .65933 82 .75101 .74178 .73274 .72389 .71522 .70672 .69840 .69024 .68225 .67441 83 .76311 .75423 .74553 .73700 .72864 .72044 .71240 .70451 .69678 .68919 84 .77497 .76645 .75809 .74988 .74183 .73393 .72618 .71857 .71110 .70377 85 .78665 .77848 .77047 .76260 .75487 .74728 .73982 .73250 .72530 .71823 86 .79805 .79025 .78258 .77504 .76764 .76036 .75320 .74617 .73925 .73245 87 .80904 .80159 .79427 .78706 .77998 .77301 .76615 .75940 .75277 .74624 88 .81962 .81251 .80552 .79865 .79188 .78521 .77865 .77220 .76584 .75958 89 .82978 .82302 .81636 .80980 .80335 .79699 .79072 .78455 .77847 .77248 90 .83952 .83309 .82676 .82052 .81437 .80831 .80234 .79645 .79064 .78492 91 .84870 .84260 .83658 .83064 .82479 .81902 .81332 .80771 .80217 .79671 92 .85716 .85136 .84563 .83998 .83441 .82891 .82348 .81812 .81283 .80761 93 .86494 .85942 .85396 .84858 .84326 .83801 .83283 .82771 .82266 .81767 94 .87216 .86690 .86170 .85657 .85149 .84648 .84153 .83664 .83181 .82704 95 .87898 .87397 .86902 .86412 .85928 .85450 .84977 .84510 .84049 .83592 96 .88537 .88060 .87587 .87121 .86659 .86203 .85751 .85305 .84864 .84427 97 .89127 .88672 .88221 .87775 .87335 .86898 .86467 .86040 .85618 .85200 98 .89680 .89245 .88815 .88389 .87968 .87551 .87138 .86730 .86326 .85926 99 .90217 .89803 .89393 .88987 .88585 .88187 .87793 .87402 .87016 .86633 100 .90738 .90344 .89953 .89567 .89183 .88804 .88428 .88056 .87687 .87322 101 .91250 .90876 .90504 .90137 .89772 .89412 .89054 .88699 .88348 .88000 102 .91751 .91396 .91045 .90696 .90350 .90007 .89668 .89331 .88997 .88666 103 .92247 .91912 .91579 .91249 .90922 .90598 .90276 .89957 .89640 .89326 104 .92775 .92460 .92148 .91839 .91532 .91227 .90924 .90624 .90326 .90031 105 .93290 .92996 .92704 .92415 .92127 .91841 .91558 .91276 .90997 .90719 106 .93948 .93680 .93415 .93151 .92889 .92628 .92370 .92113 .91857 .91604 107 .94739 .94504 .94271 .94039 .93808 .93579 .93351 .93124 .92899 .92675 108 .95950 .95767 .95585 .95404 .95224 .95045 .94867 .94689 .94512 .94336 109 .97985 .97893 .97801 .97710 .97619 .97529 .97438 .97348 .97259 .97170 Age 6.2% 6.4% 6.6% 6.8% 7.0% 7.2% 7.4% 7.6% 7.8% 8.0% 0 .03034 .02857 .02700 .02559 .02433 .02321 .02220 .02129 .02047 .01973 1 .02279 .02094 .01929 .01782 .01650 .01533 .01427 .01331 .01246 .01168 2 .02347 .02155 .01983 .01829 .01692 .01569 .01458 .01358 .01268 .01187 3 .02444 .02243 .02065 .01905 .01761 .01632 .01516 .01412 .01317 .01232 4 .02558 .02349 .02163 .01996 .01846 .01712 .01590 .01481 .01382 .01292 5 .02686 .02469 .02275 .02101 .01945 .01804 .01677 .01562 .01458 .01364 6 .02825 .02600 .02398 .02217 .02053 .01906 .01773 .01653 .01544 .01445 7 .02976 .02742 .02532 .02343 .02172 .02019 .01880 .01754 .01640 .01536 8 .03137 .02894 .02675 .02479 .02301 .02140 .01995 .01864 .01744 .01635 9 .03311 .03059 .02832 .02627 .02442 .02274 .02122 .01985 .01859 .01745 10 .03499 .03237 .03001 .02788 .02595 .02420 .02262 .02118 .01987 .01867 11 .03700 .03428 .03183 .02961 .02760 .02578 .02413 .02262 .02125 .02000 12 .03913 .03632 .03377 .03146 .02937 .02748 .02575 .02418 .02275 .02144 13 .04135 .03843 .03579 .03339 .03122 .02924 .02744 .02580 .02431 .02294 14 .04359 .04057 .03783 .03534 .03308 .03102 .02915 .02744 .02587 .02444 15 .04584 .04270 .03986 .03728 .03493 .03279 .03083 .02905 .02742 .02593 16 .04806 .04482 .04187 .03919 .03674 .03452 .03248 .03063 .02892 .02736 17 .05029 .04692 .04387 .04108 .03855 .03623 .03411 .03218 .03040 .02877 18 .05253 .04905 .04588 .04299 .04036 .03795 .03574 .03373 .03187 .03017 19 .05484 .05124 .04796 .04496 .04222 .03972 .03742 .03532 .03339 .03161 20 .05726 .05354 .05013 .04702 .04418 .04158 .03919 .03700 .03498 .03313 21 .05980 .05595 .05242 .04920 .04625 .04354 .04105 .03877 .03667 .03473 22 .06246 .05847 .05482 .05147 .04841 .04559 .04301 .04063 .03844 .03642 23 .06524 .06112 .05734 .05387 .05069 .04777 .04508 .04260 .04032 .03821 24 .06819 .06392 .06001 .05642 .05312 .05008 .04728 .04470 .04232 .04012 25 .07131 .06690 .06285 .05913 .05570 .05255 .04964 .04695 .04447 .04218 26 .07460 .07005 .06586 .06200 .05845 .05518 .05215 .04936 .04677 .04438 27 .07810 .07340 .06907 .06508 .06140 .05800 .05485 .05195 .04925 .04676 28 .08179 .07693 .07246 .06833 .06451 .06098 .05772 .05469 .05189 .04929 29 .08566 .08065 .07603 .07176 .06780 .06414 .06075 .05761 .05469 .05198 30 .08973 .08456 .07978 .07536 .07127 .06748 .06396 .06069 .05766 .05483 31 .09398 .08865 .08372 .07915 .07491 .07098 .06733 .06394 .06078 .05785 32 .09843 .09294 .08785 .08313 .07875 .07468 .07089 .06737 .06409 .06103 33 .10310 .09745 .09220 .08732 .08279 .07858 .07466 .07100 .06759 .06441 34 .10799 .10217 .09676 .09173 .08705 .08269 .07862 .07483 .07129 .06798 35 .11314 .10715 .10157 .09638 .09155 .08704 .08283 .07890 .07522 .07179 36 .11852 .11236 .10662 .10127 .09628 .09162 .08726 .08319 .07938 .07581 37 .12416 .11783 .11193 .10641 .10126 .09645 .09194 .08772 .08377 .08006 38 .13009 .12359 .11751 .11183 .10652 .10155 .09689 .09253 .08843 .08459 39 .13629 .12962 .12338 .11753 .11206 .10693 .10212 .09761 .09337 .08938 40 .14281 .13597 .12955 .12355 .11791 .11262 .10766 .10299 .09860 .09447 41 .14966 .14264 .13606 .12989 .12409 .11864 .11352 .10870 .10417 .09989 42 .15685 .14966 .14291 .13657 .13061 .12500 .11972 .11475 .11006 .10564 43 .16437 .15702 .15010 .14360 .13747 .13171 .12627 .12115 .11631 .11174 44 .17224 .16472 .15764 .15098 .14469 .13876 .13317 .12789 .12290 .11819 45 .18042 .17274 .16550 .15867 .15223 .14615 .14040 .13496 .12982 .12496 46 .18893 .18110 .17370 .16671 .16011 .15387 .14796 .14238 .13708 .13207 47 .19775 .18975 .18220 .17505 .16830 .16190 .15584 .15010 .14466 .13950 48 .20688 .19873 .19102 .18373 .17682 .17027 .16406 .15817 .15258 .14727 49 .21633 .20804 .20018 .19274 .18568 .17898 .17262 .16658 .16084 .15539 50 .22612 .21769 .20969 .20210 .19490 .18805 .18155 .17536 .16948 .16388 51 .23625 .22769 .21955 .21182 .20448 .19749 .19084 .18452 .17849 .17275 52 .24669 .23799 .22973 .22186 .21438 .20726 .20047 .19400 .18784 .18196 53 .25742 .24861 .24022 .23222 .22461 .21735 .21043 .20383 .19753 .19151 54 .26845 .25952 .25101 .24290 .23516 .22777 .22072 .21399 .20756 .20140 55 .27978 .27074 .26212 .25389 .24604 .23853 .23136 .22450 .21793 .21166 56 .29140 .28227 .27355 .26522 .25725 .24963 .24233 .23535 .22867 .22227 57 .30333 .29411 .28529 .27686 .26879 .26106 .25365 .24656 .23976 .23324 58 .31551 .30621 .29731 .28878 .28061 .27278 .26528 .25807 .25116 .24453 59 .32790 .31854 .30956 .30095 .29269 .28477 .27716 .26986 .26284 .25610 60 .34050 .33107 .32202 .31334 .30500 .29699 .28929 .28190 .27478 .26794 61 .35331 .34384 .33473 .32598 .31757 .30948 .30170 .29422 .28701 .28007 62 .36639 .35688 .34772 .33892 .33044 .32229 .31443 .30687 .29958 .29255 63 .37974 .37020 .36101 .35216 .34363 .33542 .32750 .31986 .31250 .30539 64 .39334 .38378 .37456 .36568 .35711 .34884 .34087 .33317 .32574 .31857 65 .40718 .39761 .38838 .37947 .37087 .36257 .35455 .34681 .33932 .33208 66 .42128 .41172 .40249 .39357 .38496 .37663 .36858 .36079 .35326 .34597 67 .43569 .42616 .41694 .40803 .39941 .39107 .38299 .37518 .36761 .36028 68 .45038 .44089 .43170 .42281 .41419 .40585 .39777 .38994 .38235 .37499 69 .46531 .45587 .44672 .43786 .42927 .42094 .41286 .40503 .39743 .39006 70 .48040 .47103 .46194 .45312 .44456 .43626 .42820 .42038 .41278 .40540 71 .49558 .48629 .47727 .46851 .46000 .45174 .44371 .43591 .42832 .42095 72 .51082 .50162 .49268 .48399 .47554 .46733 .45934 .45157 .44401 .43666 73 .52607 .51697 .50813 .49952 .49114 .48299 .47506 .46733 .45981 .45249 74 .54139 .53241 .52367 .51515 .50686 .49879 .49092 .48325 .47578 .46849 75 .55683 .54798 .53936 .53095 .52276 .51477 .50698 .49938 .49197 .48474 76 .57243 .56373 .55524 .54696 .53888 .53100 .52330 .51579 .50846 .50130 77 .58819 .57965 .57132 .56318 .55523 .54747 .53988 .53247 .52523 .51815 78 .60408 .59572 .58755 .57957 .57177 .56414 .55668 .54939 .54225 .53527 79 .62001 .61184 .60385 .59604 .58840 .58092 .57360 .56644 .55943 .55256 80 .63582 .62786 .62007 .61244 .60497 .59765 .59048 .58347 .57659 .56985 81 .65142 .64367 .63608 .62864 .62135 .61421 .60721 .60034 .59361 .58701 82 .66673 .65920 .65182 .64458 .63748 .63052 .62368 .61698 .61041 .60395 83 .68175 .67444 .66728 .66024 .65334 .64656 .63991 .63338 .62696 .62066 84 .69657 .68950 .68256 .67574 .66904 .66246 .65599 .64964 .64340 .63727 85 .71128 .70446 .69775 .69116 .68467 .67830 .67204 .66587 .65982 .65386 86 .72576 .71919 .71272 .70636 .70010 .69394 .68789 .68193 .67606 .67029 87 .73981 .73349 .72726 .72114 .71511 .70917 .70333 .69757 .69190 .68632 88 .75342 .74735 .74137 .73548 .72968 .72396 .71833 .71279 .70732 .70194 89 .76658 .76076 .75503 .74938 .74381 .73832 .73290 .72757 .72231 .71712 90 .77928 .77371 .76823 .76281 .75748 .75221 .74702 .74190 .73684 .73186 91 .79131 .78600 .78075 .77557 .77046 .76542 .76044 .75553 .75068 .74589 92 .80246 .79737 .79235 .78740 .78250 .77767 .77290 .76818 .76353 .75893 93 .81274 .80788 .80307 .79832 .79363 .78899 .78441 .77989 .77542 .77100 94 .82232 .81766 .81306 .80850 .80401 .79956 .79517 .79082 .78653 .78228 95 .83141 .82695 .82254 .81818 .81387 .80961 .80539 .80122 .79710 .79302 96 .83996 .83569 .83147 .82729 .82316 .81907 .81503 .81103 .80707 .80315 97 .84787 .84378 .83973 .83573 .83176 .82784 .82396 .82012 .81632 .81255 98 .85530 .85138 .84750 .84366 .83985 .83609 .83236 .82867 .82502 .82140 99 .86255 .85880 .85508 .85140 .84776 .84415 .84057 .83703 .83353 .83005 100 .86960 .86601 .86246 .85894 .85546 .85200 .84858 .84519 .84183 .83849 101 .87655 .87313 .86974 .86638 .86305 .85975 .85648 .85324 .85003 .84684 102 .88338 .88012 .87689 .87369 .87052 .86738 .86426 .86116 .85809 .85505 103 .89015 .88706 .88399 .88095 .87793 .87494 .87197 .86903 .86611 .86321 104 .89737 .89446 .89157 .88871 .88586 .88304 .88024 .87745 .87469 .87195 105 .90443 .90170 .89898 .89628 .89360 .89094 .88830 .88568 .88307 .88049 106 .91351 .91101 .90852 .90605 .90359 .90115 .89873 .89632 .89392 .89154 107 .92452 .92230 .92010 .91791 .91573 .91356 .91141 .90927 .90714 .90502 108 .94161 .93987 .93814 .93641 .93469 .93298 .93128 .92958 .92790 .92622 109 .97081 .96992 .96904 .96816 .96729 .96642 .96555 .96468 .96382 .96296 Age 8.2% 8.4% 8.6% 8.8% 9.0% 9.2% 9.4% 9.6% 9.8% 10.0% 0 .01906 .01845 .01790 .01740 .01694 .01652 .01613 .01578 .01546 .01516 1 .01098 .01034 .00977 .00924 .00876 .00833 .00793 .00756 .00722 .00691 2 .01113 .01046 .00986 .00930 .00880 .00834 .00791 .00753 .00717 .00684 3 .01155 .01084 .01020 .00962 .00909 .00860 .00816 .00775 .00737 .00702 4 .01211 .01137 .01069 .01008 .00952 .00900 .00853 .00810 .00770 .00733 5 .01279 .01201 .01130 .01065 .01006 .00952 .00902 .00856 .00814 .00775 6 .01356 .01274 .01199 .01131 .01068 .01011 .00959 .00910 .00865 .00824 7 .01442 .01356 .01277 .01205 .01140 .01079 .01023 .00972 .00925 .00881 8 .01536 .01446 .01363 .01287 .01218 .01154 .01096 .01041 .00991 .00945 9 .01641 .01546 .01460 .01380 .01307 .01240 .01178 .01120 .01068 .01019 10 .01758 .01659 .01567 .01484 .01407 .01336 .01270 .01210 .01154 .01103 11 .01886 .01781 .01686 .01598 .01517 .01442 .01373 .01310 .01251 .01196 12 .02024 .01915 .01814 .01721 .01636 .01558 .01485 .01419 .01357 .01299 13 .02168 .02054 .01948 .01851 .01762 .01679 .01603 .01533 .01467 .01407 14 .02313 .02193 .02083 .01981 .01887 .01801 .01721 .01646 .01578 .01514 15 .02456 .02330 .02214 .02107 .02009 .01918 .01834 .01756 .01684 .01617 16 .02593 .02462 .02340 .02229 .02126 .02030 .01942 .01860 .01785 .01714 17 .02728 .02590 .02463 .02346 .02238 .02138 .02046 .01960 .01880 .01806 18 .02861 .02717 .02584 .02462 .02348 .02243 .02146 .02056 .01972 .01894 19 .02998 .02847 .02708 .02580 .02461 .02351 .02249 .02154 .02066 .01984 20 .03142 .02984 .02839 .02704 .02580 .02465 .02357 .02258 .02165 .02079 21 .03295 .03130 .02978 .02837 .02706 .02585 .02473 .02368 .02271 .02180 22 .03455 .03283 .03124 .02976 .02839 .02712 .02594 .02484 .02382 .02286 23 .03626 .03446 .03279 .03124 .02981 .02847 .02723 .02608 .02500 .02400 24 .03809 .03620 .03446 .03283 .03133 .02993 .02863 .02741 .02628 .02522 25 .04005 .03808 .03625 .03456 .03298 .03151 .03014 .02887 .02768 .02656 26 .04216 .04010 .03819 .03641 .03476 .03322 .03178 .03044 .02919 .02802 27 .04444 .04229 .04029 .03843 .03670 .03508 .03357 .03217 .03085 .02962 28 .04687 .04463 .04254 .04059 .03877 .03708 .03550 .03402 .03263 .03133 29 .04946 .04712 .04493 .04289 .04099 .03922 .03756 .03600 .03455 .03318 30 .05221 .04976 .04748 .04534 .04335 .04149 .03975 .03812 .03659 .03515 31 .05511 .05255 .05017 .04794 .04585 .04390 .04208 .04037 .03876 .03725 32 .05818 .05551 .05302 .05069 .04851 .04647 .04455 .04276 .04107 .03948 33 .06144 .05866 .05606 .05363 .05135 .04921 .04720 .04532 .04355 .04188 34 .06489 .06200 .05928 .05674 .05436 .05212 .05002 .04805 .04619 .04444 35 .06857 .06555 .06273 .06007 .05758 .05524 .05304 .05097 .04902 .04718 36 .07246 .06932 .06638 .06361 .06101 .05856 .05626 .05409 .05205 .05012 37 .07659 .07332 .07025 .06737 .06466 .06210 .05969 .05742 .05528 .05325 38 .08098 .07758 .07439 .07138 .06855 .06588 .06336 .06099 .05874 .05662 39 .08563 .08210 .07878 .07565 .07270 .06992 .06729 .06480 .06245 .06023 40 .09059 .08692 .08347 .08021 .07714 .07423 .07149 .06889 .06643 .06411 41 .09586 .09206 .08848 .08509 .08189 .07886 .07600 .07329 .07072 .06828 42 .10147 .09753 .09381 .09029 .08696 .08381 .08083 .07800 .07531 .07277 43 .10742 .10334 .09948 .09583 .09237 .08909 .08598 .08304 .08024 .07758 44 .11373 .10950 .10551 .10172 .09813 .09472 .09148 .08841 .08549 .08272 45 .12035 .11599 .11185 .10792 .10420 .10066 .09730 .09410 .09106 .08817 46 .12732 .12281 .11853 .11447 .11061 .10694 .10345 .10013 .09696 .09395 47 .13460 .12995 .12553 .12133 .11733 .11353 .10991 .10646 .10317 .10004 48 .14223 .13743 .13287 .12853 .12439 .12046 .11671 .11313 .10972 .10646 49 .15020 .14526 .14056 .13608 .13181 .12774 .12385 .12015 .11661 .11322 50 .15855 .15347 .14862 .14401 .13960 .13540 .13138 .12754 .12388 .12037 51 .16727 .16205 .15707 .15232 .14777 .14344 .13929 .13532 .13153 .12789 52 .17634 .17098 .16587 .16097 .15630 .15183 .14755 .14345 .13953 .13577 53 .18576 .18027 .17501 .16999 .16518 .16057 .15616 .15194 .14789 .14400 54 .19552 .18990 .18451 .17935 .17441 .16968 .16514 .16078 .15661 .15260 55 .20564 .19989 .19437 .18908 .18402 .17915 .17449 .17001 .16571 .16157 56 .21613 .21025 .20461 .19919 .19400 .18901 .18422 .17962 .17519 .17093 57 .22698 .22098 .21522 .20968 .20436 .19925 .19434 .18961 .18507 .18069 58 .23816 .23204 .22616 .22051 .21507 .20984 .20481 .19996 .19530 .19080 59 .24962 .24339 .23740 .23163 .22608 .22073 .21558 .21062 .20584 .20123 60 .26136 .25502 .24892 .24304 .23738 .23192 .22666 .22158 .21669 .21196 61 .27339 .26695 .26075 .25477 .24900 .24343 .23806 .23288 .22787 .22304 62 .28578 .27925 .27295 .26687 .26100 .25533 .24985 .24456 .23945 .23451 63 .29854 .29192 .28553 .27935 .27339 .26762 .26205 .25666 .25145 .24641 64 .31164 .30494 .29846 .29221 .28615 .28030 .27463 .26915 .26384 .25870 65 .32508 .31831 .31177 .30543 .29930 .29336 .28761 .28203 .27663 .27140 66 .33891 .33208 .32547 .31906 .31285 .30684 .30101 .29536 .28987 .28456 67 .35318 .34630 .33963 .33316 .32689 .32081 .31491 .30918 .30363 .29823 68 .36785 .36093 .35422 .34770 .34138 .33524 .32928 .32349 .31787 .31240 69 .38290 .37595 .36920 .36265 .35628 .35009 .34408 .33824 .33256 .32703 70 .39823 .39127 .38450 .37791 .37151 .36529 .35924 .35335 .34762 .34204 71 .41378 .40681 .40003 .39343 .38701 .38076 .37467 .36875 .36298 .35736 72 .42950 .42253 .41575 .40914 .40271 .39644 .39034 .38438 .37858 .37293 73 .44535 .43840 .43162 .42502 .41858 .41231 .40619 .40022 .39440 .38872 74 .46139 .45446 .44771 .44112 .43469 .42842 .42230 .41632 .41049 .40479 75 .47769 .47080 .46408 .45752 .45111 .44485 .43874 .43277 .42693 .42123 76 .49430 .48747 .48079 .47427 .46790 .46167 .45558 .44963 .44380 .43811 77 .51123 .50447 .49786 .49139 .48506 .47888 .47282 .46690 .46111 .45543 78 .52845 .52177 .51523 .50884 .50257 .49645 .49044 .48457 .47881 .47317 79 .54584 .53926 .53282 .52650 .52032 .51426 .50833 .50251 .49681 .49122 80 .56325 .55678 .55044 .54423 .53813 .53216 .52630 .52056 .51492 .50939 81 .58054 .57419 .56797 .56186 .55587 .54999 .54422 .53856 .53300 .52754 82 .59762 .59140 .58530 .57931 .57343 .56766 .56198 .55641 .55094 .54557 83 .61448 .60840 .60243 .59657 .59081 .58515 .57958 .57411 .56874 .56346 84 .63124 .62531 .61949 .61376 .60813 .60259 .59715 .59179 .58652 .58134 85 .64800 .64224 .63657 .63099 .62550 .62010 .61478 .60955 .60441 .59934 86 .66461 .65902 .65351 .64810 .64276 .63751 .63233 .62724 .62222 .61728 87 .68083 .67541 .67008 .66483 .65965 .65455 .64953 .64458 .63970 .63489 88 .69663 .69140 .68624 .68116 .67615 .67121 .66634 .66154 .65680 .65213 89 .71201 .70696 .70199 .69708 .69224 .68747 .68276 .67811 .67353 .66900 90 .72694 .72209 .71730 .71257 .70791 .70330 .69876 .69427 .68984 .68547 91 .74117 .73650 .73190 .72735 .72286 .71842 .71404 .70972 .70545 .70123 92 .75439 .74991 .74548 .74110 .73678 .73251 .72829 .72412 .72000 .71593 93 .76664 .76233 .75806 .75385 .74969 .74557 .74150 .73748 .73350 .72957 94 .77809 .77394 .76983 .76578 .76177 .75780 .75388 .75000 .74616 .74237 95 .78899 .78500 .78106 .77715 .77329 .76947 .76569 .76195 .75826 .75460 96 .79928 .79544 .79165 .78790 .78418 .78050 .77686 .77326 .76970 .76617 97 .80883 .80514 .80149 .79787 .79430 .79075 .78725 .78377 .78033 .77693 98 .81781 .81427 .81075 .80727 .80382 .80041 .79703 .79368 .79036 .78708 99 .82661 .82320 .81982 .81648 .81316 .80988 .80662 .80340 .80020 .79704 100 .83519 .83192 .82868 .82547 .82228 .81913 .81600 .81290 .80982 .80678 101 .84368 .84055 .83744 .83437 .83131 .82829 .82529 .82231 .81936 .81643 102 .85203 .84904 .84607 .84313 .84021 .83731 .83444 .83159 .82876 .82596 103 .86034 .85748 .85465 .85184 .84906 .84629 .84355 .84082 .83812 .83544 104 .86923 .86653 .86385 .86119 .85855 .85593 .85333 .85074 .84818 .84563 105 .87792 .87537 .87283 .87032 .86782 .86534 .86287 .86042 .85799 .85557 106 .88918 .88683 .88450 .88218 .87987 .87758 .87530 .87304 .87079 .86855 107 .90291 .90082 .89873 .89666 .89460 .89255 .89051 .88849 .88647 .88447 108 .92455 .92288 .92123 .91958 .91794 .91630 .91468 .91306 .91145 .90984 109 .96211 .96125 .96041 .95956 .95872 .95788 .95704 .95620 .95537 .95455 Age 10.2% 10.4% 10.6% 10.8% 11.0% 11.2% 11.4% 11.6% 11.8% 12.0% 0 .01488 .01463 .01439 .01417 .01396 .01377 .01359 .01343 .01327 .01312 1 .00662 .00636 .00612 .00589 .00568 .00548 .00530 .00513 .00497 .00482 2 .00654 .00626 .00600 .00576 .00554 .00533 .00514 .00496 .00479 .00463 3 .00670 .00641 .00613 .00588 .00564 .00542 .00522 .00502 .00484 .00468 4 .00699 .00668 .00639 .00612 .00587 .00563 .00542 .00521 .00502 .00484 5 .00739 .00706 .00675 .00646 .00620 .00595 .00571 .00550 .00529 .00510 6 .00786 .00751 .00718 .00687 .00659 .00633 .00608 .00585 .00563 .00543 7 .00841 .00803 .00769 .00736 .00706 .00678 .00652 .00627 .00604 .00582 8 .00902 .00863 .00826 .00791 .00759 .00730 .00702 .00675 .00651 .00628 9 .00973 .00931 .00892 .00856 .00822 .00790 .00760 .00733 .00706 .00682 10 .01055 .01010 .00969 .00930 .00894 .00861 .00829 .00799 .00772 .00746 11 .01146 .01099 .01055 .01014 .00976 .00940 .00907 .00875 .00846 .00818 12 .01246 .01196 .01150 .01106 .01066 .01028 .00993 .00960 .00928 .00899 13 .01351 .01298 .01249 .01204 .01161 .01121 .01084 .01049 .01016 .00985 14 .01455 .01400 .01348 .01300 .01255 .01213 .01173 .01136 .01102 .01069 15 .01555 .01497 .01443 .01392 .01345 .01300 .01259 .01220 .01183 .01148 16 .01648 .01587 .01530 .01477 .01427 .01380 .01336 .01295 .01257 .01220 17 .01737 .01673 .01612 .01556 .01504 .01455 .01408 .01365 .01324 .01286 18 .01822 .01754 .01691 .01632 .01576 .01525 .01476 .01430 .01387 .01347 19 .01908 .01837 .01770 .01708 .01650 .01595 .01544 .01495 .01450 .01407 20 .01999 .01924 .01854 .01788 .01726 .01669 .01615 .01564 .01516 .01471 21 .02096 .02017 .01943 .01874 .01809 .01748 .01691 .01637 .01586 .01539 22 .02197 .02114 .02036 .01963 .01895 .01830 .01770 .01713 .01660 .01610 23 .02306 .02218 .02136 .02059 .01987 .01919 .01855 .01795 .01739 .01686 24 .02424 .02331 .02245 .02163 .02087 .02016 .01948 .01885 .01825 .01769 25 .02552 .02455 .02364 .02278 .02197 .02122 .02051 .01984 .01920 .01861 26 .02692 .02589 .02493 .02403 .02318 .02238 .02162 .02091 .02025 .01961 27 .02846 .02738 .02636 .02541 .02451 .02367 .02287 .02212 .02141 .02074 28 .03012 .02898 .02791 .02690 .02595 .02506 .02422 .02342 .02267 .02196 29 .03190 .03070 .02957 .02851 .02751 .02656 .02567 .02483 .02404 .02329 30 .03381 .03254 .03135 .03023 .02917 .02817 .02723 .02634 .02551 .02471 31 .03583 .03450 .03324 .03206 .03094 .02989 .02890 .02796 .02707 .02623 32 .03799 .03659 .03527 .03402 .03284 .03173 .03068 .02968 .02874 .02785 33 .04031 .03883 .03744 .03612 .03488 .03371 .03260 .03155 .03055 .02961 34 .04279 .04123 .03976 .03838 .03707 .03583 .03465 .03354 .03249 .03149 35 .04545 .04382 .04227 .04081 .03943 .03812 .03688 .03571 .03459 .03354 36 .04830 .04658 .04495 .04341 .04196 .04058 .03927 .03803 .03685 .03573 37 .05134 .04953 .04782 .04620 .04467 .04321 .04183 .04052 .03928 .03809 38 .05462 .05272 .05092 .04921 .04760 .04606 .04461 .04322 .04191 .04066 39 .05812 .05613 .05424 .05245 .05075 .04913 .04760 .04614 .04475 .04343 40 .06190 .05981 .05782 .05594 .05415 .05245 .05083 .04929 .04783 .04643 41 .06597 .06378 .06170 .05972 .05784 .05605 .05435 .05272 .05118 .04970 42 .07035 .06806 .06587 .06380 .06182 .05994 .05815 .05644 .05481 .05326 43 .07505 .07265 .07036 .06818 .06611 .06414 .06225 .06045 .05874 .05710 44 .08008 .07757 .07518 .07290 .07072 .06865 .06667 .06478 .06298 .06125 45 .08542 .08279 .08029 .07791 .07563 .07346 .07138 .06940 .06750 .06569 46 .09108 .08834 .08573 .08324 .08085 .07858 .07640 .07432 .07233 .07043 47 .09705 .09419 .09147 .08886 .08637 .08399 .08172 .07954 .07745 .07545 48 .10335 .10038 .09754 .09482 .09222 .08973 .08735 .08507 .08288 .08078 49 .10999 .10690 .10394 .10111 .09840 .09581 .09332 .09093 .08864 .08644 50 .11701 .11380 .11073 .10778 .10496 .10225 .09965 .09716 .09477 .09247 51 .12441 .12108 .11789 .11482 .11189 .10907 .10636 .10376 .10126 .09886 52 .13217 .12871 .12540 .12222 .11916 .11623 .11341 .11071 .10810 .10560 53 .14028 .13670 .13327 .12997 .12680 .12375 .12082 .11801 .11529 .11268 54 .14875 .14505 .14150 .13808 .13480 .13163 .12859 .12566 .12284 .12012 55 .15760 .15378 .15011 .14657 .14317 .13989 .13674 .13370 .13077 .12794 56 .16684 .16290 .15911 .15546 .15194 .14855 .14528 .14213 .13909 .13615 57 .17648 .17242 .16851 .16474 .16111 .15760 .15422 .15096 .14781 .14477 58 .18647 .18229 .17827 .17438 .17064 .16702 .16353 .16015 .15689 .15374 59 .19678 .19249 .18835 .18435 .18049 .17676 .17316 .16968 .16631 .16305 60 .20740 .20300 .19875 .19464 .19066 .18682 .18311 .17952 .17604 .17268 61 .21837 .21385 .20949 .20527 .20119 .19724 .19341 .18971 .18613 .18266 62 .22973 .22511 .22064 .21631 .21212 .20807 .20414 .20033 .19664 .19306 63 .24152 .23680 .23222 .22779 .22350 .21934 .21530 .21139 .20760 .20392 64 .25372 .24890 .24422 .23969 .23529 .23103 .22690 .22289 .21899 .21521 65 .26633 .26141 .25664 .25201 .24752 .24316 .23893 .23482 .23083 .22695 66 .27940 .27439 .26953 .26481 .26023 .25577 .25145 .24724 .24316 .23918 67 .29299 .28790 .28296 .27815 .27348 .26894 .26453 .26024 .25606 .25200 68 .30709 .30193 .29691 .29202 .28728 .28265 .27816 .27378 .26952 .26537 69 .32166 .31643 .31134 .30639 .30157 .29687 .29230 .28785 .28351 .27928 70 .33661 .33133 .32618 .32116 .31628 .31152 .30688 .30235 .29794 .29364 71 .35188 .34654 .34134 .33627 .33133 .32651 .32181 .31722 .31275 .30838 72 .36742 .36204 .35679 .35168 .34668 .34181 .33706 .33241 .32788 .32345 73 .38317 .37776 .37248 .36733 .36229 .35738 .35257 .34788 .34330 .33882 74 .39923 .39380 .38849 .38330 .37823 .37328 .36844 .36370 .35908 .35455 75 .41566 .41021 .40489 .39968 .39459 .38961 .38474 .37997 .37531 .37074 76 .43254 .42709 .42176 .41655 .41144 .40645 .40156 .39677 .39208 .38749 77 .44988 .44444 .43912 .43391 .42880 .42380 .41891 .41411 .40940 .40479 78 .46765 .46224 .45694 .45174 .44665 .44166 .43677 .43197 .42726 .42265 79 .48574 .48037 .47510 .46993 .46487 .45990 .45502 .45024 .44554 .44094 80 .50397 .49865 .49343 .48830 .48327 .47834 .47349 .46873 .46406 .45947 81 .52219 .51693 .51176 .50669 .50171 .49682 .49201 .48729 .48265 .47809 82 .54029 .53510 .53000 .52499 .52007 .51523 .51047 .50580 .50120 .49667 83 .55826 .55315 .54813 .54319 .53834 .53356 .52886 .52424 .51969 .51522 84 .57624 .57123 .56629 .56144 .55666 .55195 .54732 .54277 .53828 .53386 85 .59435 .58944 .58460 .57984 .57516 .57054 .56599 .56151 .55710 .55275 86 .61241 .60762 .60289 .59824 .59365 .58913 .58468 .58029 .57596 .57170 87 .63015 .62548 .62087 .61633 .61185 .60744 .60309 .59880 .59456 .59039 88 .64753 .64299 .63851 .63409 .62973 .62543 .62118 .61700 .61287 .60879 89 .66454 .66013 .65579 .65150 .64726 .64308 .63895 .63488 .63086 .62689 90 .68115 .67689 .67268 .66853 .66442 .66037 .65637 .65241 .64851 .64465 91 .69706 .69294 .68887 .68486 .68089 .67696 .67309 .66925 .66547 .66173 92 .71190 .70792 .70399 .70011 .69627 .69247 .68872 .68501 .68134 .67771 93 .72569 .72184 .71804 .71429 .71057 .70689 .70326 .69967 .69611 .69259 94 .73861 .73490 .73123 .72759 .72400 .72044 .71692 .71344 .71000 .70659 95 .75097 .74739 .74384 .74033 .73686 .73342 .73002 .72665 .72331 .72001 96 .76267 .75922 .75579 .75240 .74905 .74572 .74243 .73917 .73595 .73275 97 .77356 .77022 .76691 .76363 .76039 .75718 .75399 .75084 .74772 .74463 98 .78382 .78059 .77740 .77423 .77110 .76799 .76491 .76186 .75884 .75584 99 .79390 .79079 .78771 .78465 .78162 .77862 .77565 .77270 .76978 .76688 100 .80376 .80076 .79779 .79485 .79193 .78904 .78617 .78333 .78051 .77771 101 .81353 .81066 .80780 .80497 .80217 .79938 .79662 .79388 .79117 .78847 102 .82318 .82042 .81768 .81496 .81227 .80960 .80694 .80431 .80170 .79911 103 .83278 .83014 .82752 .82491 .82233 .81977 .81723 .81470 .81220 .80971 104 .84310 .84059 .83810 .83563 .83317 .83073 .82831 .82591 .82352 .82115 105 .85318 .85079 .84843 .84607 .84374 .84142 .83911 .83682 .83455 .83229 106 .86633 .86413 .86193 .85975 .85758 .85543 .85329 .85116 .84904 .84694 107 .88247 .88049 .87852 .87656 .87460 .87266 .87073 .86881 .86690 .86500 108 .90825 .90666 .90507 .90350 .90193 .90037 .89881 .89727 .89572 .89419 109 .95372 .95290 .95208 .95126 .95045 .94964 .94883 .94803 .94723 .94643 Age 12.2% 12.4% 12.6% 12.8% 13.0% 13.2% 13.4% 13.6% 13.8% 14.0% 0 .01298 .01285 .01273 .01261 .01250 .01240 .01230 .01221 .01212 .01203 1 .00468 .00455 .00443 .00431 .00420 .00410 .00400 .00391 .00382 .00374 2 .00448 .00435 .00421 .00409 .00398 .00387 .00376 .00366 .00357 .00348 3 .00452 .00437 .00423 .00410 .00398 .00386 .00375 .00365 .00355 .00345 4 .00468 .00452 .00437 .00423 .00410 .00397 .00386 .00375 .00364 .00354 5 .00493 .00476 .00460 .00445 .00431 .00418 .00405 .00393 .00382 .00371 6 .00524 .00506 .00489 .00473 .00458 .00444 .00430 .00418 .00406 .00394 7 .00562 .00543 .00525 .00508 .00492 .00477 .00462 .00449 .00436 .00423 8 .00606 .00586 .00566 .00548 .00531 .00515 .00499 .00485 .00471 .00458 9 .00659 .00637 .00616 .00597 .00579 .00561 .00545 .00529 .00514 .00500 10 .00721 .00698 .00676 .00655 .00636 .00617 .00600 .00583 .00567 .00552 11 .00792 .00767 .00744 .00722 .00701 .00682 .00663 .00645 .00628 .00612 12 .00871 .00845 .00821 .00797 .00775 .00754 .00735 .00716 .00698 .00681 13 .00955 .00928 .00902 .00877 .00854 .00831 .00810 .00790 .00771 .00753 14 .01038 .01009 .00981 .00955 .00930 .00907 .00885 .00864 .00843 .00824 15 .01116 .01085 .01056 .01028 .01002 .00977 .00954 .00932 .00910 .00890 16 .01186 .01153 .01123 .01094 .01066 .01040 .01015 .00992 .00969 .00948 17 .01250 .01215 .01183 .01152 .01124 .01096 .01070 .01045 .01022 .00999 18 .01308 .01272 .01238 .01206 .01175 .01147 .01119 .01093 .01068 .01044 19 .01367 .01329 .01293 .01259 .01227 .01196 .01167 .01140 .01113 .01088 20 .01428 .01388 .01350 .01314 .01280 .01248 .01217 .01188 .01161 .01134 21 .01494 .01451 .01411 .01373 .01337 .01303 .01271 .01240 .01211 .01183 22 .01562 .01517 .01475 .01435 .01397 .01361 .01326 .01294 .01263 .01233 23 .01635 .01588 .01543 .01501 .01460 .01422 .01386 .01351 .01319 .01287 24 .01716 .01665 .01618 .01573 .01530 .01489 .01451 .01415 .01380 .01347 25 .01804 .01751 .01701 .01653 .01608 .01565 .01524 .01485 .01448 .01413 26 .01902 .01845 .01792 .01741 .01693 .01648 .01604 .01563 .01524 .01487 27 .02011 .01951 .01895 .01841 .01790 .01742 .01696 .01652 .01610 .01571 28 .02129 .02066 .02006 .01949 .01895 .01844 .01795 .01748 .01704 .01662 29 .02258 .02191 .02127 .02067 .02009 .01955 .01903 .01853 .01806 .01762 30 .02396 .02325 .02257 .02193 .02132 .02074 .02019 .01966 .01916 .01869 31 .02543 .02467 .02396 .02328 .02263 .02201 .02143 .02087 .02034 .01983 32 .02701 .02621 .02545 .02472 .02404 .02338 .02276 .02217 .02160 .02106 33 .02871 .02786 .02706 .02629 .02556 .02487 .02420 .02357 .02297 .02240 34 .03054 .02964 .02879 .02797 .02720 .02646 .02576 .02509 .02445 .02383 35 .03253 .03158 .03067 .02981 .02898 .02820 .02745 .02674 .02606 .02541 36 .03467 .03366 .03269 .03178 .03090 .03007 .02928 .02852 .02779 .02710 37 .03697 .03590 .03488 .03391 .03298 .03209 .03125 .03044 .02967 .02893 38 .03947 .03833 .03725 .03622 .03524 .03430 .03340 .03254 .03172 .03094 39 .04217 .04096 .03982 .03873 .03768 .03669 .03573 .03482 .03395 .03312 40 .04510 .04383 .04262 .04146 .04035 .03930 .03828 .03732 .03639 .03550 41 .04830 .04695 .04567 .04445 .04327 .04215 .04108 .04005 .03907 .03812 42 .05177 .05035 .04900 .04770 .04646 .04527 .04413 .04304 .04200 .04100 43 .05553 .05404 .05261 .05123 .04992 .04866 .04746 .04630 .04520 .04413 44 .05960 .05802 .05651 .05506 .05368 .05235 .05107 .04985 .04867 .04754 45 .06395 .06229 .06069 .05917 .05770 .05630 .05495 .05365 .05241 .05121 46 .06860 .06685 .06517 .06356 .06202 .06053 .05911 .05774 .05643 .05516 47 .07353 .07169 .06992 .06823 .06660 .06504 .06353 .06209 .06070 .05936 48 .07877 .07684 .07498 .07320 .07149 .06984 .06826 .06673 .06527 .06385 49 .08433 .08231 .08036 .07849 .07669 .07495 .07329 .07168 .07013 .06864 50 .09026 .08814 .08609 .08413 .08224 .08042 .07867 .07698 .07535 .07378 51 .09655 .09433 .09219 .09013 .08815 .08624 .08440 .08262 .08091 .07926 52 .10318 .10086 .09863 .09647 .09439 .09239 .09046 .08860 .08680 .08506 53 .11017 .10774 .10541 .10315 .10098 .09888 .09686 .09491 .09302 .09120 54 .11750 .11498 .11254 .11019 .10792 .10572 .10361 .10156 .09958 .09767 55 .12522 .12258 .12005 .11759 .11522 .11294 .11072 .10859 .10652 .10451 56 .13332 .13059 .12794 .12539 .12292 .12054 .11823 .11599 .11383 .11174 57 .14183 .13899 .13624 .13359 .13102 .12853 .12613 .12380 .12154 .11936 58 .15070 .14775 .14490 .14215 .13948 .13689 .13439 .13197 .12962 .12734 59 .15990 .15685 .15389 .15103 .14826 .14558 .14298 .14046 .13801 .13564 60 .16942 .16626 .16321 .16024 .15737 .15459 .15189 .14927 .14673 .14426 61 .17929 .17603 .17287 .16981 .16684 .16395 .16115 .15844 .15580 .15324 62 .18960 .18623 .18297 .17980 .17673 .17375 .17085 .16803 .16530 .16264 63 .20035 .19688 .19352 .19025 .18708 .18400 .18100 .17809 .17525 .17250 64 .21154 .20797 .20451 .20114 .19787 .19469 .19159 .18859 .18566 .18281 65 .22318 .21951 .21595 .21249 .20912 .20584 .20265 .19955 .19652 .19358 66 .23532 .23156 .22790 .22434 .22088 .21751 .21422 .21102 .20791 .20487 67 .24804 .24419 .24044 .23679 .23324 .22977 .22640 .22311 .21990 .21678 68 .26133 .25740 .25356 .24983 .24618 .24263 .23917 .23579 .23250 .22929 69 .27516 .27114 .26723 .26341 .25969 .25605 .25251 .24905 .24567 .24237 70 .28945 .28536 .28137 .27747 .27367 .26996 .26633 .26279 .25934 .25596 71 .30412 .29996 .29590 .29193 .28806 .28427 .28057 .27696 .27343 .26998 72 .31913 .31491 .31078 .30675 .30281 .29895 .29519 .29150 .28790 .28438 73 .33444 .33016 .32597 .32188 .31788 .31396 .31013 .30638 .30271 .29913 74 .35012 .34579 .34155 .33741 .33335 .32938 .32549 .32168 .31795 .31430 75 .36628 .36190 .35762 .35343 .34932 .34530 .34136 .33750 .33372 .33001 76 .38299 .37858 .37427 .37004 .36589 .36183 .35784 .35394 .35011 .34636 77 .40028 .39585 .39151 .38725 .38307 .37898 .37496 .37103 .36716 .36337 78 .41812 .41368 .40933 .40506 .40086 .39675 .39271 .38874 .38485 .38103 79 .43641 .43198 .42762 .42334 .41914 .41502 .41096 .40698 .40308 .39924 80 .45496 .45054 .44619 .44192 .43772 .43360 .42954 .42556 .42164 .41779 81 .47360 .46920 .46487 .46061 .45643 .45231 .44827 .44429 .44038 .43653 82 .49223 .48785 .48355 .47932 .47516 .47106 .46703 .46307 .45916 .45532 83 .51081 .50648 .50221 .49802 .49388 .48982 .48581 .48187 .47799 .47416 84 .52951 .52523 .52101 .51686 .51277 .50874 .50477 .50086 .49701 .49321 85 .54847 .54425 .54009 .53600 .53196 .52798 .52406 .52019 .51638 .51262 86 .56749 .56335 .55926 .55523 .55126 .54734 .54348 .53966 .53591 .53220 87 .58627 .58221 .57820 .57425 .57035 .56650 .56270 .55895 .55526 .55161 88 .60477 .60079 .59688 .59301 .58919 .58542 .58170 .57802 .57439 .57081 89 .62297 .61909 .61527 .61149 .60776 .60408 .60044 .59685 .59330 .58979 90 .64084 .63707 .63335 .62968 .62604 .62246 .61891 .61540 .61194 .60851 91 .65803 .65437 .65076 .64719 .64366 .64017 .63672 .63330 .62993 .62659 92 .67412 .67058 .66707 .66360 .66017 .65678 .65342 .65010 .64682 .64357 93 .68911 .68567 .68227 .67890 .67557 .67227 .66901 .66578 .66258 .65942 94 .70321 .69988 .69657 .69330 .69006 .68686 .68369 .68055 .67744 .67437 95 .71674 .71351 .71031 .70713 .70399 .70088 .69781 .69476 .69174 .68875 96 .72959 .72646 .72335 .72028 .71724 .71422 .71123 .70828 .70534 .70244 97 .74156 .73853 .73552 .73254 .72959 .72666 .72376 .72089 .71804 .71522 98 .75287 .74993 .74702 .74413 .74126 .73842 .73561 .73282 .73006 .72732 99 .76401 .76117 .75834 .75555 .75277 .75002 .74730 .74459 .74191 .73926 100 .77494 .77219 .76946 .76676 .76408 .76142 .75878 .75616 .75357 .75099 101 .78580 .78315 .78052 .77791 .77532 .77275 .77021 .76768 .76517 .76268 102 .79654 .79399 .79146 .78894 .78645 .78397 .78152 .77908 .77666 .77426 103 .80724 .80479 .80236 .79994 .79755 .79517 .79280 .79046 .78813 .78582 104 .81879 .81646 .81413 .81183 .80954 .80726 .80501 .80276 .80054 .79832 105 .83005 .82782 .82560 .82340 .82121 .81904 .81688 .81474 .81260 .81049 106 .84485 .84277 .84071 .83866 .83662 .83459 .83257 .83057 .82857 .82659 107 .86311 .86124 .85937 .85751 .85566 .85382 .85199 .85017 .84835 .84655 108 .89266 .89114 .88963 .88812 .88662 .88513 .88364 .88216 .88068 .87922 109 .94563 .94484 .94405 .94326 .94248 .94170 .94092 .94014 .93937 .93860 Table 90CM—Applicable After April 30, 1999, and Before May 1, 2009 Age × l(x) Age × l(x) Age × l(x) 0 100000 37 95969 74 62852 1 99064 38 95780 75 60449 2 98992 39 95581 76 57955 3 98944 40 95373 77 55373 4 98907 41 95156 78 52704 5 98877 42 94928 79 49943 6 98850 43 94687 80 47084 7 98826 44 94431 81 44129 8 98803 45 94154 82 41091 9 98783 46 93855 83 37994 10 98766 47 93528 84 34876 11 98750 48 93173 85 31770 12 98734 49 92787 86 28687 13 98713 50 92370 87 25638 14 98681 51 91918 88 22658 15 98635 52 91424 89 19783 16 98573 53 90885 90 17046 17 98497 54 90297 91 14466 18 98409 55 89658 92 12066 19 98314 56 88965 93 9884 20 98215 57 88214 94 7951 21 98113 58 87397 95 6282 22 98006 59 86506 96 4868 23 97896 60 85537 97 3694 24 97784 61 84490 98 2745 25 97671 62 83368 99 1999 26 97556 63 82169 100 1424 27 97441 64 80887 101 991 28 97322 65 79519 102 672 29 97199 66 78066 103 443 30 97070 67 76531 104 284 31 96934 68 74907 105 175 32 96791 69 73186 106 105 33 96642 70 71357 107 60 34 96485 71 69411 108 33 35 96322 72 67344 109 17 36 96150 73 65154 110 0 (g) Valuation of annuities, interests for life or a term of years, and remainder or reversionary interests for estates of decedents for which the valuation date of the gross estate is on or after May 1, 2009, and before June 1, 2023 In general. (2) Transitional rules. (ii) If a decedent dies on or after May 1, 2009, and before July 1, 2009, the fair market value of annuities, interests for life or a term of years, and remainder or reversionary interests based on one or more measuring lives included in the gross estate of the decedent is their present value determined under this section by using the section 7520 interest rate for the month in which the valuation date occurs (see §§ 20.7520-1(b) and 20.7520-2(a)(2)) and the appropriate actuarial tables under either paragraph (f)(4) or (g)(4) of this section, at the option of the decedent's executor. (iii) For purposes of paragraphs (g)(2)(i) and (ii) of this section, where the decedent's executor is given the option to use the appropriate actuarial tables under either paragraph (f)(4) or (g)(4) of this section, the decedent's executor must consistently use the same mortality basis with respect to each interest (income, remainder, partial, etc.) in the same property, and with respect to all transfers occurring on the same valuation date. For example, gift and income tax charitable deductions with respect to the same transfer must be determined based on factors with the same mortality basis, and all assets includible in the gross estate and/or estate tax deductions claimed must be valued based on factors with the same mortality basis. (iv) If a decedent dies after April 30, 2019, and before June 1, 2023, the fair market value of annuities, interests for life or a term of years, and remainder or reversionary interests based on one or more measuring lives included in the gross estate is their present value determined under § 20.2031-7(d)(3). (3) Publications and actuarial computations by the Internal Revenue Service. Actuarial Values Version 3A https://www.irs.gov/retirement-plans/actuarial-tables b (4) Actuarial tables. Actuarial Valuations Version 3A, https://www.irs.gov/retirement-plans/actuarial-tables. (5) Applicability dates. [T.D. 8540, 59 FR 30151, June 10, 1994, as amended at 59 FR 30152, June 10, 1994; T.D. 8819, 64 FR 23211, 23212, Apr. 30, 1999; 64 FR 33195, June 22, 1999; T.D. 8886, 65 FR 36943, June 12, 2000; T.D. 9448, 74 FR 21509, May 7, 2009; T.D. 9540, 76 FR 49637, Aug. 10, 2011; T.D. 9974, 88 FR 37445, June 7, 2023] Taxable Estate § 20.2051-1 Definition of taxable estate. (a) General rule. (1) Funeral and administration expenses and claims against the estate (including certain taxes and charitable pledges) (section 2053). (2) Losses from casualty or theft during the administration of the estate (section 2054). (3) Charitable transfers (section 2055). (4) The marital deduction (section 2056). (5) Qualified domestic trusts (section 2056A). (6) Family-owned business interests (section 2057) to the extent applicable to estates of decedents. (7) State death taxes (section 2058) to the extent applicable to estates of decedents. (b) Special rules. (c) Effective/applicability date. [T.D. 9468, 74 FR 53657, Oct. 20, 2009] § 20.2052-1 Exemption. An exemption of $60,000 is allowed as a deduction under section 2052 from the gross estate of a decedent who was a citizen or resident of the United States at the time of his death. For the amount of the exemption allowed as a deduction from the gross estate of a decedent who was a nonresident not a citizen of the United States, see paragraph (a)(3) of § 20.2106-1. § 20.2053-1 Deductions for expenses, indebtedness, and taxes; in general. (a) General rule. (1) First category. (i) Funeral expenses; (ii) Administration expenses; (iii) Claims against the estate (including taxes to the extent set forth in § 20.2053-6 and charitable pledges to the extent set forth in § 20.2053-5); and (iv) Unpaid mortgages on, or any indebtedness in respect of, property, the value of the decedent's interest in which is included in the value of the gross estate undiminished by the mortgage or indebtedness. As used in this subparagraph, the phrase “allowable by the law of the jurisdiction” means allowable by the law governing the administration of decedents' estates. The phrase has no reference to amounts allowable as deductions under a law which imposes a State death tax. See further §§ 20.2053-2 through 20.2053-7. (2) Second category. (i) Would be allowed as deductions in the first category if the property being administered were subject to claims; and (ii) Were paid before the expiration of the period of limitation for assessment provided in section 6501. See further § 20.2053-8. (b) Provisions applicable to both categories In general. (2) Bona fide requirement In general. (ii) Claims and expenses involving family members. (A) The transaction underlying the claim or expense occurs in the ordinary course of business, is negotiated at arm's length, and is free from donative intent. (B) The nature of the claim or expense is not related to an expectation or claim of inheritance. (C) The claim or expense originates pursuant to an agreement between the decedent and the family member, related entity, or beneficiary, and the agreement is substantiated with contemporaneous evidence. (D) Performance by the claimant is pursuant to the terms of an agreement between the decedent and the family member, related entity, or beneficiary and the performance and the agreement can be substantiated. (E) All amounts paid in satisfaction or settlement of a claim or expense are reported by each party for Federal income and employment tax purposes, to the extent appropriate, in a manner that is consistent with the reported nature of the claim or expense. (iii) Definitions. (A) Family members (B) A related entity (C) Beneficiaries (3) Court decrees and settlements Court decree. (ii) Claims and expenses where court approval not required under local law. (iii) Consent decree. (iv) Settlements. (v) Additional rules. (4) Examples. Example 1. Consent decree at variance with the law of the State, Decedent's (D's) estate is probated in State. D's probate estate is valued at $100x. State law provides that the executor's commission shall not exceed 3 percent of the probate estate. A consent decree is entered allowing the executor's commission in the amount of $5x. The estate pays the executor's commission in the amount of $5x. For purposes of section 2053, the executor may deduct only $3x of the $5x expense paid for the executor's commission because the amount approved by the consent decree in excess of $3x is in excess of the applicable limit for executor's commissions under local law. Therefore, for purposes of section 2053, the consent decree may not be relied upon to establish the amount of the expense for the executor's commission. Example 2. Decedent's (D's) estate is probated in State, State law grants authority to an executor to administer an estate without court approval, so long as notice of and a right to object to a proposed action is provided to interested persons. The executor of D's estate (E) proposes to sell property of the estate in order to pay the debts of D. E gives requisite notice to all interested parties and no interested person objects. E sells the real estate and pays a real estate commission of $20x to a professional real estate agent. The amount of the real estate commission paid does not exceed the applicable limit under State law. Provided that the sale of the property was necessary to pay D's debts, expenses of administration, or taxes, to preserve the estate, or to effect distribution, the executor may deduct the $20x expense for the real estate commission under section 2053 even though no court decree was entered approving the expense. Example 3. Claim by family member, For a period of three years prior to D's death, D's niece (N) provides accounting and bookkeeping services on D's behalf. N is a CPA and provides similar accounting and bookkeeping services to unrelated clients. At the end of each month, N presents an itemized bill to D for services rendered. The fees charged by N conform to the prevailing market rate for the services rendered and are comparable to the fees N charges other clients for similar services. The amount due is timely paid each month by D and is properly reported for Federal income and employment tax purposes by N. In the six months prior to D's death, D's poor health prevents D from making payments to N for the amount due. After D's death, N asserts a claim against the estate for $25x, an amount representing the amount due for the six-month period prior to D's death. D's estate pays $25x to N in satisfaction of the claim before the return is timely filed and N properly reports the $25x received by E for income tax purposes. Barring any other relevant facts or circumstances, E may rely on the following factors to establish that the claim is bona fide: (1) N's claim for services rendered arose in the ordinary course of business, as N is a CPA performing similar services for other clients; (2) the fees charged were deemed to be negotiated at arm's length, as the fees were consistent with the fees N charged for similar services to unrelated clients; (3) the billing records and the records of D's timely payments to N constitute contemporaneous evidence of an agreement between D and N for N's bookkeeping services; and (4) the amount of the payments to N is properly reported by N for Federal income and employment tax purposes. E may deduct the amount paid to N in satisfaction of the claim. (c) Provision applicable to first category only. (1) The value of property included in the decedent's gross estate and subject to claims, plus (2) Amounts paid, out of property not subject to claims against the decedent's estate, within 9 months (15 months in the case of the estate of a decedent dying before January 1, 1971) after the decedent's death (the period within which the estate tax return must be filed under section 6075), or within any extension of time for filing the return granted under section 6081. The term “property subject to claims” is defined in section 2053(c)(2) as meaning the property includible in the gross estate which, or the avails of which, under the applicable law, would bear the burden of the payment of these deductions in the final adjustment and settlement of the decedent's estate. However, for the purposes of this definition, the value of property subject to claims is first reduced by the amount of any deduction allowed under section 2054 for any losses from casualty or theft incurred during the settlement of the estate attributable to such property. The application of this paragraph may be illustrated by the following examples: Example (1). The only item in the gross estate is real property valued at $250,000 which the decedent and his surviving spouse held as tenants by the entirety. Under the local law this real property is not subject to claims. Funeral expenses of $1,200 and debts of the decedent in the amount of $1,500 are allowable under local law. Before the prescribed date for filing the estate tax return, the surviving spouse paid the funeral expenses and $1,000 of the debts. The remaining $500 of the debts was paid by her after the prescribed date for filing the return. The total amount allowable as deductions under section 2053 is limited to $2,200, the amount paid prior to the prescribed date for filing the return. Example (2). The only two items in the gross estate were a bank deposit of $20,000 and insurance in the amount of $150,000. The insurance was payable to the decedent's surviving spouse and under local law was not subject to claims. Funeral expenses of $1,000 and debts in the amount of $29,000 were allowable under local law. A son was executor of the estate and before the prescribed date for filing the estate tax return he paid the funeral expenses of $9,000 of the debts, using therefor $5,000 of the bank deposit and $5,000 supplied by the surviving spouse. After the prescribed date for filing the return, the executor paid the remaining $20,000 of the debts, using for that purpose the $15,000 left in the bank account plus an additional $5,000 supplied by the surviving spouse. The total amount allowable as deductions under section 2053 is limited to $25,000 ($20,000 of property subject to claims plus the $5,000 additional amount which, before the prescribed date for filing the return, was paid out of property not subject to claims). (d) Amount deductible General rule. (2) Application of post-death events. (i) Until the expiration of the applicable period of limitations on assessment prescribed in section 6501 (including without limitation at all times during which the running of the period of limitations is suspended); and (ii) During subsequent periods, in determining the amount (if any) of an overpayment of estate tax due in connection with a claim for refund filed within the time prescribed in section 6511(a). (3) Reimbursements. (4) Exception for certain ascertainable amounts General rule. (ii) Effect of post-death events. (5) Protective claim for refund In general. b (ii) Effect on marital and charitable deduction. (6) [Reserved] (7) Examples. Example 1. Amount of expense ascertainable, Decedent's (D's) estate was probated in State. State law provides that the personal representative shall receive compensation equal to 2.5 percent of the value of the probate estate. The executor (E) may claim a deduction for estimated fees equal to 2.5 percent of D's probate estate on the Form 706 filed for D's estate under the rule for deducting certain ascertainable amounts set forth in paragraph (d)(4) of this section, provided that the estimated amount will be paid. However, the Commissioner will disallow the deduction upon examination of the estate's Form 706 to the extent that the amount for which a deduction was claimed no longer satisfies the requirements of paragraph (d)(4) of this section. If this occurs, E may file a protective claim for refund in accordance with paragraph (d)(5) of this section in order to preserve the estate's right to claim a refund for the amount of the fee that is subsequently paid or that subsequently meets the requirements of paragraph (d)(4) of this section for deducting certain ascertainable amounts. Example 2. Amount of claim not ascertainable, Prior to death, Decedent (D) is sued by Claimant (C) for $100x in a tort proceeding and responds asserting affirmative defenses available to D under applicable local law. C and D are unrelated. D subsequently dies and D's Form 706 is due before a final judgment is entered in the case. The executor of D's estate (E) may not claim a deduction with respect to C's claim on D's Form 706 under the special rule contained in paragraph (d)(4) of this section because the deductible amount cannot be ascertained with reasonable certainty. However, E may file a timely protective claim for refund in accordance with paragraph (d)(5) of this section in order to preserve the estate's right to subsequently claim a refund at the time a final judgment is entered in the case and the claim is either paid or meets the requirements of paragraph (d)(4) of this section for deducting certain ascertainable amounts. Example 3. Amount of claim payable out of property qualifying for marital deduction, The facts are the same as in Example 2 (e) Disallowance of double deductions. (f) Effective/applicability date. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 7238, 37 FR 28719, Dec. 29, 1972; T.D. 9468, 74 FR 53657, Oct. 20, 2009; T.D. 9468, 74 FR 61525, Nov. 25, 2009] § 20.2053-2 Deduction for funeral expenses. Such amounts for funeral expenses are allowed as deductions from a decedent's gross estate as (a) are actually expended, (b) would be properly allowable out of property subject to claims under the laws of the local jurisdiction, and (c) satisfy the requirements of paragraph (c) of § 20.2053-1. A reasonable expenditure for a tombstone, monument, or mausoleum, or for a burial lot, either for the decedent or his family, including a reasonable expenditure for its future care, may be deducted under this heading, provided such an expenditure is allowable by the local law. Included in funeral expenses is the cost of transportation of the person bringing the body to the place of burial. § 20.2053-3 Deduction for expenses of administering estate. (a) In general. (b) Executor's commissions. (2) A bequest or devise to the executor in lieu of commissions is not deductible. If, however, the terms of the will set forth the compensation payable to the executor for services to be rendered in the administration of the estate, a deduction may be taken to the extent that the amount so fixed does not exceed the compensation allowable by the local law or practice and to the extent permitted by § 20.2053-1. (3) Except to the extent that a trustee is in fact performing services with respect to property subject to claims which would normally be performed by an executor, amounts paid as trustees' commissions do not constitute expenses of administration under the first category, and are only deductible as expenses of the second category to the extent provided in § 20.2053-8. (c) Attorney's fees (2) A deduction for attorneys' fees incurred in contesting an asserted deficiency or in prosecuting a claim for refund should be claimed at the time the deficiency is contested or the refund claim is prosecuted. A deduction for reasonable attorney's fees actually incurred in contesting an asserted deficiency or in prosecuting a claim for refund will be allowed to the extent permitted by § 20.2053-1 even though the deduction, as such, was not claimed on the estate tax return or in the claim for refund. A deduction for these fees shall not be denied, and the sufficiency of a claim for refund shall not be questioned, solely by reason of the fact that the amount of the fees to be paid was not established at the time that the right to the deduction was claimed. (3) Attorneys' fees incurred by beneficiaries incident to litigation as to their respective interests are not deductible if the litigation is not essential to the proper settlement of the estate within the meaning of paragraph (a) of this section. An attorney's fee not meeting this test is not deductible as an administration expense under section 2053 and this section, even if it is approved by a probate court as an expense payable or reimbursable by the estate. (d) Miscellaneous administration expenses. (2) Expenses for selling property of the estate are deductible to the extent permitted by § 20.2053-1 if the sale is necessary in order to pay the decedent's debts, expenses of administration, or taxes, to preserve the estate, or to effect distribution. The phrase “expenses for selling property” includes brokerage fees and other expenses attending the sale, such as the fees of an auctioneer if it is reasonably necessary to employ one. Where an item included in the gross estate is disposed of in a bona fide sale (including a redemption) to a dealer in such items at a price below its fair market value, for purposes of this paragraph there shall be treated as an expense for selling the item whichever of the following amounts is the lesser: (i) The amount by which the fair market value of the property on the applicable valuation date exceeds the proceeds of the sale, or (ii) the amount by which the fair market value of the property on the date of the sale exceeds the proceeds of the sale. The principles used in determining the value at which an item of property is included in the gross estate shall be followed in arriving at the fair market value of the property for purposes of this paragraph. See §§ 20.2031-1 through 20.2031-9. (3) Expenses incurred in defending the estate against claims described in section 2053(a)(3) are deductible to the extent permitted by § 20.2053-1 if the expenses are incurred incident to the assertion of defenses to the claim available under the applicable law, even if the estate ultimately does not prevail. For purposes of this paragraph (d)(3), “expenses incurred in defending the estate against claims” include costs relating to the arbitration and mediation of contested issues, costs associated with defending the estate against claims (whether or not enforceable), and costs associated with reaching a negotiated settlement of the issues. (e) Effective/applicability date. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6826, 30 FR 7708, June 15, 1965; 44 FR 23525, Apr. 20, 1979; T.D. 9468, 74 FR 53660, Oct. 20, 2009] § 20.2053-4 Deduction for claims against the estate. (a) In general General rule. (i) Are actually paid by the estate in satisfaction of the claim; or (ii) Meet the requirements of § 20.2053-1(d)(4) for deducting certain ascertainable amounts. (2) Effect of post-death events. (b) Exception for claims and counterclaims in related matter General rule. (i) Each such claim against the estate otherwise satisfies the applicable requirements set forth in § 20.2053-1; (ii) Each such claim against the estate represents a personal obligation of the decedent existing at the time of the decedent's death; (iii) Each such claim is enforceable against the decedent's estate (and is not unenforceable when paid); (iv) The value of each such claim against the estate is determined from a “qualified appraisal” performed by a “qualified appraiser” within the meaning of section 170 of the Internal Revenue Code and the corresponding regulations; (v) The value of each such claim against the estate is subject to adjustment for post-death events; and (vi) The aggregate value of the related claims or assets included in the decedent's gross estate exceeds 10 percent of the decedent's gross estate. (2) Limitation on deduction. (3) Effect of post-death events. (c) Exception for claims totaling not more than $500,000 General rule. (i) Each such claim against the estate otherwise satisfies the applicable requirements for deductibility set forth in § 20.2053-1; (ii) Each such claim against the estate represents a personal obligation of the decedent existing at the time of the decedent's death; (iii) Each such claim is enforceable against the decedent's estate (and is not unenforceable when paid); (iv) The value of each such claim against the estate is determined from a “qualified appraisal” performed by a “qualified appraiser” within the meaning of section 170 of the Internal Revenue Code and the corresponding regulations; (v) The total amount deducted by the estate under this paragraph (c) does not exceed $500,000; (vi) The full value of each claim, rather than just a portion of that amount, must be deductible under this paragraph (c) and, for this purpose, the full value of each such claim is deemed to be the unpaid amount of that claim that is not deductible after the application of §§ 20.2053-1 and 20.2053-4(b); and (vii) The value of each claim deducted under this paragraph (c) is subject to adjustment for post-death events. (2) Effect of post-death events. (3) Examples. (d) Special rules Potential and unmatured claims. (2) Contested claims. (3) Claims against multiple parties. Example 1. There are three claims against the estate of the decedent (D) that are not paid and are not deductible under § 20.2053-1(d)(4) or paragraph (b) of this section: $25,000 of Claimant A, $35,000 of Claimant B, and $1,000,000 of Claimant C. The executor of D's estate (E) may not claim a deduction under this paragraph with respect to any portion of the claim of Claimant C because the value of that claim exceeds $500,000. E may claim a deduction under this paragraph for the total amount of the claims filed by Claimant A and Claimant B ($60,000) because the aggregate value of the full amount of those claims does not exceed $500,000. Example 2. There are three claims against the estate of the decedent (D) that are not paid and are not deductible under § 20.2053-1(d)(4) or paragraph (b) of this section; specifically, a separate $200,000 claim of each of three claimants, A, B and C. The executor of D's estate (E) may claim a deduction under this paragraph for any two of these three claims because the aggregate value of the full amount of any two of the claims does not exceed $500,000. E may not deduct any part of the value of the remaining claim under this paragraph because the aggregate value of the full amount of all three claims would exceed $500,000. Example 3. As a result of an automobile accident involving the decedent (D) and A, D's gross estate includes a claim against A that is valued at $750,000. In the same matter, A files a counterclaim against D's estate that is valued at $1,000,000. A's claim against D's estate is not paid and is not deductible under § 20.2053-1(d)(4). All other section 2053 claims and expenses of D's estate have been paid and are deductible. The executor of D's estate (E) deducts $750,000 of A's claim against the estate under § 20.2053-4(b). E may claim a deduction under this paragraph (c) for the total value of A's claim not deducted under § 20.2053-4(b), or $250,000. If, instead, the value of A's claim against D's estate is $1,500,000, so that the amount not deductible under § 20.2053-4(b) exceeds $500,000, no deduction is available under this paragraph (c). (4) Unenforceable claims. (5) Claims founded upon a promise. (6) Recurring payments Noncontingent obligations. (ii) Contingent obligations. (iii) Purchase of commercial annuity to satisfy recurring obligation to pay. (A) The amount paid for the commercial annuity, to the extent that the amount paid is not refunded, or expected to be refunded, to the estate; (B) Any amount actually paid to the claimant by the estate prior to the purchase of the commercial annuity; and (C) Any amount actually paid to the claimant by the estate in excess of the annuity amount as is necessary to satisfy the recurring obligation. (7) Examples. (i) A claim satisfies the applicable requirements set forth in § 20.2053-1 and paragraph (a) of this section, is payable from property subject to claims, and the amount of the claim is not subject to any other applicable limitations in § 20.2053-1; (ii) A claim is not deductible under paragraphs (b) or (c) of this section as an exception to the general rule contained in paragraph (a) of this section; and (iii) The claimant (C) is not a family member, related entity or beneficiary of the estate of decedent (D) and is not the executor (E). Example 1. Contested claim, single defendant, no decision, D is sued by C for $100x in a tort proceeding and responds asserting affirmative defenses available to D under applicable local law. D dies and E is substituted as defendant in the suit. D's Form 706 is due before a judgment is reached in the case. D's gross estate exceeds $100x. E may not take a deduction on Form 706 for the claim against the estate. However, E may claim a deduction under § 20.2053-3(c) or § 20.2053-3(d)(3) for expenses incurred in defending the estate against the claim if the expenses have been paid in accordance with § 20.2053-1(d)(1) or if the expenses meet the requirements of § 20.2053-1(d)(4) for deducting certain ascertainable amounts. E may file a protective claim for refund before the expiration of the period of limitation prescribed in section 6511(a) in order to preserve the estate's right to claim a refund, if the amount of the claim will not be paid or cannot be ascertained with reasonable certainty by the expiration of this limitation period. If payment is subsequently made pursuant to a court decision or a settlement, the payment, as well as expenses incurred incident to the claim and not previously deducted, may be deducted and relief may be sought in connection with a timely-filed claim for refund. Example 2. Contested claim, single defendant, final court decree and payment, The facts are the same as in Example 1 Example 3. Contested claim, single defendant, settlement and payment, The facts are the same as in Example 1 Example 4. Contested claim, multiple defendants, The facts are the same as in Example 1 Example 5. Contested claim, multiple defendants, settlement and payment, The facts are the same as in Example 1 Example 6. Mixed claims, During life, D contracts with C to perform specific work on D's home for $75x. Under the contract, additional work must be approved in advance by D. C performs additional work and sues D for $100x for work completed including the $75x agreed to in the contract. D dies and D's Form 706 is due before a judgment is reached in the case. E accepts liability of $75x but contests liability of $25x. E may take a deduction of $75x on Form 706 if the amount has been paid or meets the requirements of § 20.2053-1(d)(4) for deducting certain ascertainable amounts. In addition, E may claim a deduction under § 20.2053-3(c) or § 20.2053-3(d)(3) for expenses incurred in defending the estate against the claim if the expenses have been paid or if the expenses meet the requirements of § 20.2053-1(d)(4) for deducting certain ascertainable amounts. E may file a protective claim for refund before the expiration of the period of limitation prescribed in section 6511(a) in order to preserve the estate's right to claim a refund for any amount in excess of $75x that is subsequently paid to resolve the claim against the estate. To the extent that any unpaid expenses incurred in defending the estate against the claim are not deducted as an ascertainable amount pursuant to § 20.2053-1(d)(4), they may be included in the protective claim for refund. Example 7. Claim having issue of enforceability, D is sued by C for $100x in a tort proceeding in which there is an issue as to whether the claim is barred by the applicable period of limitations. After D's death but prior to the decision of the court, a settlement meeting the requirements of § 20.2053-1(b)(3)(iv) is reached between E and C in the amount of $50x. E pays C this amount before the Form 706 is timely filed. E may take a deduction on Form 706 for the amount paid to C ($50x) in satisfaction of the claim. If, subsequent to E's payment to C, facts develop to indicate that the claim was, in fact, unenforceable, the deduction will not be denied provided the enforceability of the claim was at issue in a bona dispute at the time of the payment. See § 20.2053-1(b)(3)(iv). A deduction may be available under § 20.2053-3(d)(3) for expenses incurred in defending the estate, reaching a settlement, and processing payment of the claim if the expenses have been paid in accordance with § 20.2053-1(d)(1) or if the expenses meet the requirements of § 20.2053-1(d)(4) for deducting certain ascertainable amounts. Example 8. Noncontingent and recurring obligation to pay, binding on estate, D's property settlement agreement incident to D's divorce, signed three years prior to D's death, obligates D or D's estate to pay to S, D's former spouse, $20x per year until S's death or remarriage. Prior to D's death, D made payments in accordance with the agreement and, after D's death, E continues to make the payments in accordance with the agreement. D's obligation to pay S under the property settlement agreement is deemed to be a claim against the estate that is ascertainable with reasonable certainty for purposes of § 20.2053-1(d)(4). To the extent the obligation to make the recurring payment is a claim that will be paid, E may deduct the amount of the claim (measured according to actuarial principles, using factors set forth in the transfer tax regulations or otherwise provided by the IRS) under the rule for deducting certain ascertainable amounts set forth in § 20.2053-1(d)(4). Example 9. Recurring obligation to pay, estate purchases a commercial annuity in satisfaction, D's settlement agreement with T, the claimant in a suit against D, signed three years prior to D's death, obligates D or D's estate to pay to T $20x per year for 10 years, provided that T does not reveal the details of the claim or of the settlement during that period. D dies in Year 1. In Year 2, D's estate purchases a commercial annuity from an unrelated issuer of commercial annuities, XYZ, to fund the obligation to T. E may deduct the entire amount paid to XYZ to obtain the annuity, even though the obligation to T was contingent. (e) Interest on claim (2) Post-death accrued interest may be deductible in appropriate circumstances either as an estate tax administration expense under section 2053 or as an income tax deduction. (f) Effective/applicability date. [T.D. 9468, 74 FR 53660, Oct. 20, 2009, as amended at T.D. 9468, 74 FR 61525, Nov. 25, 2009] § 20.2053-5 Deductions for charitable, etc., pledges or subscriptions. (a) A pledge or a subscription, evidenced by a promissory note or otherwise, even though enforceable against the estate, is deductible (subject to any applicable limitations in § 20.2053-1) only to the extent that— (1) Liability therefor was contracted bona fide and for an adequate and full consideration in cash or its equivalent, or (2) It would have constituted an allowable deduction under section 2055 (relating to charitable, etc., deductions) if it had been a bequest. (b) Effective/applicability date. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended at T.D. 9468, 74 FR 53664, Oct. 20, 2009] § 20.2053-6 Deduction for taxes. (a) In general. (i) Only as claims against the estate (except to the extent that excise taxes may be allowable as administration expenses); (ii) Only to the extent not disallowed by section 2053(c)(1)(B) and this section; and (iii) Subject to any applicable limitations in § 20.2053-1. (2) See §§ 20.2053-9 and 20.2053-10 with respect to the deduction allowed for certain state and foreign death taxes. (b) Property taxes. (c) Death taxes. (2) For the estates of decedents dying after December 31, 2004, see section 2058 to determine the deductibility of state death taxes. (d) Gift taxes. (e) Excise taxes. (f) Income taxes. (1) The decedent's liability for the period (as determined in this paragraph) reduced by the amounts already contributed by the decedent toward payment of the joint liability, or (2) If there is an enforceable agreement between the decedent and his spouse or between the executor and the spouse relative to the payment of the joint liability, the amount which pursuant to the agreement is to be contributed by the estate toward payment of the joint liability. If the decedent's estate and his surviving spouse are entitled to a refund on account of an overpayment of a joint income tax liability, the overpayment is an asset includible in the decedent's gross estate under section 2033 in the amount to which the estate would be entitled under local law, as between the estate and the surviving spouse. In the absence of evidence to the contrary, the includible amount is presumed to be the amount by which the decedent's contributions toward payment of the joint tax exceeds his liability determined in accordance with the principles set forth in this paragraph (other than subparagraph (1) of this paragraph). (g) Post-death adjustments of deductible tax liability. Example 1. Increase in tax due, After the decedent's death, the Internal Revenue Service examines the gift tax return filed by the decedent in the year before the decedent's death and asserts a deficiency of $100x. The estate pays attorney's fees of $30x in a non-frivolous defense against the increased deficiency. The final determination of the deficiency, in the amount of $90x, is paid by the estate prior to the expiration of the limitation period for filing a claim for refund. The estate may deduct $90x under section 2053(a)(3) and $30x under § 20.2053-3(c)(2) or (d)(3) in connection with a timely claim for refund. Example 2. Refund of taxes paid, Decedent's estate timely files D's individual income tax return for the year in which the decedent died. The estate timely pays the entire amount of the tax due, $50x, as shown on that return. The entire $50x was attributable to income received prior to the decedent's death. Decedent's estate subsequently discovers an error on the income tax return and timely files a claim for refund of income tax. Decedent's estate receives a refund of $10x. The estate is allowed a deduction of only $40x under section 2053(a)(3) for the income tax liability accrued prior to the decedent's death. If D's estate had claimed a deduction of $50x on D's United States Estate (and Generation-Skipping Transfer) Tax Return (Form 706), the deduction claimed under section 2053(a)(3) will be allowed only to the extent of $40x upon examination by the Commissioner. (h) Effective/applicability date. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended at T.D. 9468, 74 FR 53664, Oct. 20, 2009] § 20.2053-7 Deduction for unpaid mortgages. A deduction is allowed from a decedent's gross estate of the full unpaid amount of a mortgage upon, or of any other indebtedness in respect of, any property of the gross estate, including interest which had accrued thereon to the date of death, provided the value of the property, undiminished by the amount of the mortgage or indebtedness, is included in the value of the gross estate. If the decedent's estate is liable for the amount of the mortgage or indebtedness, the full value of the property subject to the mortgage or indebtedness must be included as part of the value of the gross estate; the amount of the mortgage or indebtedness being in such case allowed as a deduction. But if the decedent's estate is not so liable, only the value of the equity of redemption (or the value of the property, less the mortgage or indebtedness) need be returned as part of the value of the gross estate. In no case may the deduction on account of the mortgage or indebtedness exceed the liability therefor contracted bona fide and for an adequate and full consideration in money or money's worth. See § 20.2043-1. Only interest accrued to the date of the decedent's death is allowable even though the alternate valuation method under section 2032 is selected. In any case where real property situated outside the United States no deduction may be taken of any mortgage thereon or any other indebtedness does not form a part of the gross estate, in respect thereof. [T.D. 6684, 28 FR 11409, Oct. 24, 1963] § 20.2053-8 Deduction for expenses in administering property not subject to claims. (a) Expenses incurred in administering property included in a decedent's gross estate but not subject to claims fall within the second category of deductions set forth in § 20.2053-1, and may be allowed as deductions if they— (1) Would be allowed as deductions in the first category if the property being administered were subject to claims; and (2) Were paid before the expiration of the period of limitation for assessment provided in section 6501. Usually, these expenses are incurred in connection with the administration of a trust established by a decedent during his lifetime. They may also be incurred in connection with the collection of other assets or the transfer or clearance of title to other property included in a decedent's gross estate for estate tax purposes but not included in his probate estate. (b) These expenses may be allowed as deductions only to the extent that they would be allowed as deductions under the first category if the property were subject to claims. See § 20.2053-3. The only expenses in administering property not subject to claims which are allowed as deductions are those occasioned by the decedent's death and incurred in settling the decedent's interest in the property or vesting good title to the property in the beneficiaries. Expenses not coming within the description in the preceding sentence but incurred on behalf of the transferees are not deductible. (c) The principles set forth in paragraphs (b), (c), and (d) of § 20.2053-3 (relating to the allowance of executor's commissions, attorney's fees, and miscellaneous administration expenses of the first category) are applied in determining the extent to which trustee's commissions, attorney's and accountant's fees, and miscellaneous administration expenses are allowed in connection with the administration of property not subject to claims. (d) The application of this section may be illustrated by the following examples: Example (1). In 1940, the decedent made an irrevocable transfer of property to the X Trust Company, as trustee. The instrument of transfer provided that the trustee should pay the income from the property to the decedent for the duration of his life and upon his death, distribute the corpus of the trust among designated beneficiaries. The property was included in the decedent's gross estate under the provisions of section 2036. Three months after the date of death, the trustee distributed the trust corpus among the beneficiaries, except for $6,000 which it withheld. The amount withheld represented $5,000 which it retained as trustee's commissions in connection with the termination of the trust and $1,000 which it had paid to an attorney for representing it in connection with the termination. Both the trustee's commissions and the attorney's fees were allowable under the law of the jursidiction in which the trust was being administered, were reasonable in amount, and were in accord with local custom. Under these circumstances, the estate is allowed a deduction of $6,000. Example (2). In 1945, the decedent made an irrevocable transfer of property to Y Trust Company, as trustee. The instrument of transfer provided that the trustee should pay the income from the property to the decedent during his life. If the decedent's wife survived him, the trust was to continue for the duration of her life, with Y Trust Company and the decedent's son as co-trustees, and with income payable to the decedent's wife for the duration of her life. Upon the death of both the decedent and his wife, the corpus is to be distributed among designated remaindermen. The decedent was survived by his wife. The property was included in the decedent's gross estate under the provisions of section 2036. In accordance with local custom, the trustee made an accounting to the court as of the date of the decedent's death. Following the death of the decedent, a controversy arose among the remaindermen as to their respective rights under the instrument of transfer, and a suit was brought in court to which the trustee was made a party. As part of the accounting, the court approved the following expenses which the trustee had paid within 3 years following the date of death: $10,000, trustee's commissions; $5,000, accountant's fees; $25,000, attorney's fees; and $2,500, representing fees paid to the guardian of a remainderman who was a minor. The trustee's commissions and accountant's fees were for services in connection with the usual issues involved in a trust accounting as also were one-half of the attorney's and guardian's fees. The remainder of the attorney's and guardian's fees were for services performed in connection with the suit brought by the remaindermen. The amount allowed as a deduction is the $28,750 ($10,000, trustee's commissions; $5,000, accountant's fees; $12,500, attorney's fees; and $1,250, guardian's fees) incurred as expenses in connection with the usual issues involved in a trust accounting. The remaining expenses are not allowed as deductions since they were incurred on behalf of the transferees. Example (3). Decedent in 1950 made an irrevocable transfer of property to the Z Trust Company, as trustee. The instrument of transfer provided that the trustee should pay the income from the property to the decedent's wife for the duration of her life. If the decedent survived his wife the trust corpus was to be returned to him but if he did not survive her, then upon the death of the wife, the trust corpus was to be distributed among their children. The decedent predeceased his wife and the transferred property, less the value of the wife's outstanding life estate, was included in his gross estate under the provisions of section 2037 since his reversionary interest therein immediately before his death was in excess of 5 percent of the value of the property. At the wife's request, the court ordered the trustee to render an accounting of the trust property as of the date of the decedent's death. No deduction will be allowed the decedent's estate for any of the expenses incurred in connection with the trust accounting, since the expenses were incurred on behalf of the wife. Example (4). If, in the preceding example, the decedent died without other property and no executor or administrator of his estate was appointed, so that it was necessary for the trustee to prepare an estate tax return and participate in its audit, or if the trustee required accounting proceedings for its own protection in accordance with local custom, trustees', attorneys', and guardians' fees in connection with the estate tax or accounting proceedings would be deductible to the same extent that they would be deductible if the property were subject to claims. Deductions incurred under similar circumstances by a surviving joint tenant or the recipient of life insurance proceeds would also be deductible. § 20.2053-9 Deduction for certain State death taxes. (a) General rule. (b) Condition for allowance of deduction. (i) The entire decrease in the Federal estate tax resulting from the allowance of the deduction inures solely to the benefit of a charitable, etc., transferee described in section 2055 or 2106(a)(2), or (ii) The Federal estate tax is equitably apportioned among all the transferees (including the decedent's surviving spouse and the charitable, etc., transferees) of property included in the decedent's gross estate. For allowance of the credit, it is sufficient if either of these conditions is satisfied. Thus, in a case where the entire decrease in Federal estate tax inures to the benefit of a charitable transferee, the deduction is allowable even though the Federal estate tax is not equitably apportioned among all the transferees of property included in the decedent's gross estate. Similarly, if the Federal estate tax is equitably apportioned among all the transferees of property included in the decedent's gross estate, the deduction is allowable even though a noncharitable transferee receives some benefit from the allowance of the deduction. (2) For purposes of this paragraph, the Federal estate tax is considered to be equitably apportioned among all the transferees (including the decedent's surviving spouse and the charitable, etc., transferees) of property included in the decedent's gross estate only if each transferee's share of the tax is based upon the net amount of his transfer subjected to the tax (taking into account any exemptions, credits, or deductions allowed by Chapter 11). See examples (2) through (5) of paragraph (e) of this section. (c) Exercise of election. (d) Amount of State death tax imposed upon a transfer. (e) Examples. Example (1). The decedent's gross estate was valued at $200,000. He bequeathed $90,000 to a nephew, $10,000 to Charity A, and the remainder of his estate to Charity B. State inheritance tax in the amount of $13,500 was imposed upon the bequest to the nephew, $1,500 upon the bequest to Charity A, and $15,000 upon the bequest to Charity B. Under the will and local law, each legatee is required to pay the State inheritance tax on his bequest, and the Federal estate tax is to be paid out of the residuary estate. Since the entire burden of paying the Federal estate tax falls on Charity B, it follows that the decrease in the Federal estate tax resulting from the allowance of deductions for State death taxes in the amounts of $1,500 and $15,000 would inure solely for the benefit of Charity B. Therefore, deductions of $1,500 and $15,000 are allowable under section 2053(d). If, in this example, the State death taxes as well as the Federal estate tax were to be paid out of the residuary estate, the result would be the same. Example (2). The decedent's gross estate was valued at $350,000. Expenses, indebtedness, etc., amounted to $50,000. The entire estate was bequeathed in equal shares to a son, a daughter, and Charity C. State inheritance tax in the amount of $2,000 was imposed upon the bequest to the son, $2,000 upon the bequest to the daughter, and $5,000 upon the bequest to Charity C. Under the will and local law, each legatee is required to pay his own State inheritance tax and his proportionate share of the Federal estate tax determined by taking into consideration the net amount of his bequest subjected to the tax. Since each legatee's share of the Federal estate tax is based upon the net amount of his bequest subjected to the tax (note that the deductions under sections 2053(d) and 2055 will have the effect of reducing Charity C's proportionate share of the tax), the tax is considered to be equitably apportioned. Thus, a deduction of $5,000 is allowable under section 2053(d). This deduction together with a deduction of $95,000 under section 2055 (charitable deduction) will mean that none of Charity C's bequest is subjected to Federal estate tax. Hence, the son and the daughter will bear the entire estate tax. Example (3). The decedent bequeathed his property in equal shares, after payment of all expenses, to a son, a daughter, and a charity. State inheritance tax of $2,000 was imposed upon the bequest to the son, $2,000 upon the bequest to the daughter, and $15,000 upon the bequest to the charity. Under the will and local law, each beneficiary pays the State inheritance tax on his bequest and the Federal estate tax is to be paid out of the estate as an administration expense. If the deduction for State death tax on the charitable bequest is allowed in this case, some portion of the decrease in the Federal estate tax would inure to the benefit of the son and the daughter. The Federal estate tax is not considered to be equitably apportioned in this case since each legatee's share of the Federal estate tax is not based upon the net amount of his bequest subjected to the tax (note that the deductions under sections 2053(d) and 2055 will not have the effect of reducing the charity's proportionate share of the tax). Inasmuch as some of the decrease in the Federal estate tax payable would inure to the benefit of the son and the daughter, and inasmuch as there is no equitable apportionment of the tax, no deduction is allowable under section 2053(d). Example (4). The decedent bequeathed his entire residuary estate in trust to pay the income to X for life with remainder to charity. The State imposed inheritance taxes of $2,000 upon the bequest to X and $10,000 upon the bequest to charity. Under the will and local law, all State and Federal taxes are payable out of the residuary estate and therefore they would reduce the amount which would become the corpus of the trust. If the deduction for the State death tax on the charitable bequest is allowed in this case, some portion of the decrease in the Federal estate tax would inure to the benefit of X since the allowance of the deduction would increase the size of the corpus from which X is to receive the income for life. Also, the Federal estate tax is not considered to be equitably apportioned in this case since each legatee's share of the Federal estate tax is not based upon the net amount of his bequest subjected to the tax (note that the deductions under sections 2053(d) and 2055 will not have the effect of reducing the charity's proportionate share of the tax). Inasmuch as some of the decrease in the Federal estate tax payable would inure to the benefit of X, and inasmuch as there is no equitable apportionment of the tax, no deduction is allowable under section 2053(d). Example (5). The decedent's gross estate was valued at $750,000. Expenses, indebtedness, etc., amounted to $500,000. The decedent bequeathed $350,000 of his estate to his surviving spouse and the remainder of his estate equally to his son and Charity D. State inheritance tax in the amount of $7,000 was imposed upon the bequest to the surviving spouse, $26,250 upon the bequest to the son, and $26,250 upon the bequest to Charity D. The will was silent concerning the payment of taxes. In such a case, the local law provides that each legatee shall pay his own State inheritance tax. The local law further provides for an apportionment of the Federal estate tax among the legatees of the estate. Under the apportionment provisions, the surviving spouse is not required to bear any part of the Federal estate tax with respect to her $350,000 bequest. It should be noted, however, that the marital deduction allowed to the decedent's estate by reason of the bequest to the surviving spouse is limited to $343,000 ($350,000 bequest less $7,000 State inheritance tax payable by the surviving spouse). Thus, the bequest to the surviving spouse is subjected to the Federal estate tax in the net amount of $7,000. If the deduction for State death tax on the charitable bequest is allowed in this case, some portion of the decrease in the Federal estate tax would inure to the benefit of the son. The Federal estate tax is not considered to be equitably apportioned in this case since each legatee's share of the Federal estate tax is not based upon the net amount of his bequest subjected to the tax (note that the surviving spouse is to pay no tax). Inasmuch as some of the decrease in the Federal estate tax payable would inure to the benefit of the son, and inasmuch as there is no equitable apportionment of the tax, no deduction is allowable under section 2053(d). (f) Effective/applicability date. (2) The other provisions of this section apply to the estates of decedents dying on or after October 20, 2009, to which section 2058 is not applicable. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6526, 26 FR 417, Jan. 19, 1961; T.D. 6666, 28 FR 7251, July 16, 1963; T.D. 9468, 74 FR 53664, Oct. 20, 2009] § 20.2053-10 Deduction for certain foreign death taxes. (a) General rule. (b) Condition for allowance of deduction. (i) The entire decrease in the Federal estate tax resulting from the allowance of the deduction inures solely to the benefit of a charitable, etc., transferee described in section 2055, or (ii) The Federal estate tax is equitably apportioned among all the transferees (including the decedent's surviving spouse and the charitable, etc., transferees) of property included in the decedent's gross estate. For allowance of the deduction, it is sufficient if either of these conditions is satisfied. Thus, in a case where the entire decrease in Federal estate tax inures to the benefit of a charitable transferee, the deduction is allowable even though the Federal estate tax is not equitably apportioned among all the transferees of property included in the decedent's gross estate. Similarly, if the Federal estate tax is equitably apportioned among all the transferees of property included in the decedent's gross estate, the deduction is allowable even though a noncharitable transferee receives some benefit from the allowance of the deduction. (2) For purposes of this paragraph, the Federal estate tax is considered to be equitably apportioned among all the transferees (including the decedent's surviving spouse and the charitable, etc., transferees) of property included in the decedent's gross estate only if each transferee's share of the tax is based upon the net amount of his transfer subjected to the tax (taking into account any exemptions, credits, or deductions allowed by Chapter 11). See examples (2) through (5) of paragraph (e) of § 20.2053-9. (c) Exercise of election. (d) Amount of foreign death tax imposed upon a transfer. [T.D. 6600, 27 FR 4985, May 29, 1962, as amended at T.D. 9468, 74 FR 53665, Oct. 20, 2009] § 20.2054-1 Deduction for losses from casualties or theft. A deduction is allowed for losses incurred during the settlement of the estate arising from fires, storms, shipwrecks, or other casualties, or from theft, if the losses are not compensated for by insurance or otherwise. If the loss is partly compensated for, the excess of the loss over the compensation may be deducted. Losses which are not of the nature described are not deductible. In order to be deductible a loss must occur during the settlement of the estate. If a loss with respect to an asset occurs after its distribution to the distributee it may not be deducted. Notwithstanding the foregoing, no deduction is allowed under this section if the estate has waived its right to take such a deduction pursuant to the provisions of section 642(g) in order to permit its allowance for income tax purposes. See further § 1.642(g)-1. § 20.2055-1 Deduction for transfers for public, charitable, and religious uses; in general. (a) General rule. (1) To or for the use of the United States, any State, Territory, any political subdivision thereof, or the District of Columbia, for exclusively public purposes; (2) To or for the use of any corporation or association organized and operated exclusively for religious, charitable, scientific, literary, or educational purposes (including the encouragement of art and for the prevention of cruelty to children or animals), if no part of the net earnings of the corporation or association inures to the benefit of any private stockholder or individual (other than as a legitimate object of such purposes), if the organization is not disqualified for tax exemption under section 501(c)(3) by reason of attempting to influence legislation, and if, in the case of transfers made after December 31, 1969, it does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of or in opposition to any candidate for public office. (3) To a trustee or trustees, or a fraternal society, order, or association operating under the lodge system, if the transferred property is to be used exclusively for religious, charitable, scientific, literary, or educational purposes (or for the prevention of cruelty to children or animals), if no substantial part of the activities of such transferree is carrying on propaganda, or otherwise attempting, to influence legislation, and if, in the case of transfers made after December 31, 1969, such transferee does not participate in, or intervene in (including the publishing or distributing of statements), any political campaign on behalf of any candidate for public office; or (4) To or for the use of any veterans' organization incorporated by act of Congress, or of any of its departments, local chapters, or posts, no part of the net earnings of which inures to the benefit of any private shareholder or individual. The deduction is not limited, in the case of estates of citizens or residents of the United States, to transfers to domestic corporations or associations, or to trustees for use within the United States. Nor is the deduction subject to percentage limitations such as are applicable to the charitable deduction under the income tax. An organization will not be considered to meet the requirements of subparagraph (2) or (3) of this paragraph if such organization engages in any activity which would cause it to be classified as an “action” organization under paragraph (c)(3) of § 1.501(c)(3)-1 of this chapter (Income Tax Regulations). See §§ 20.2055-4 and 20.2055-5 for rules relating to the disallowance of deductions to trusts and organizations which engage in certain prohibited transactions or whose governing instruments do not contain certain specified requirements. (b) Powers of appointment General rule. (2) Certain bequests subject to power of appointment. (c) Submission of evidence. (1) A copy of any instrument in writing by which the decedent made a transfer of property in his lifetime the value of which is required by statute to be included in his gross estate, for which a deduction under section 2055 is claimed. If the instrument is of record the copy should be certified, and if not of record, the copy should be verified. (2) A written statement by the executor containing a declaration that it is made under penalties of perjury and stating whether any action has been instituted to construe or to contest the decedent's will or any provision thereof affecting the charitable deduction claimed and whether, according to his information and belief, any such action is designed or contemplated. The executor shall also submit such other documents or evidence as may be requested by the district director. (d) Cross references. (2) For treatment of bequests accepted by the Secretary of State or the Secretary of Commerce, for the purpose of organizing and holding an international conference to negotiate a Patent Corporation Treaty, as bequests to or for the use of the United States, see section 3 of Joint Resolution of December 24, 1969 (Pub. L. 91-160, 83 Stat. 443). (3) For treatment of bequests accepted by the Secretary of the Department of Housing and Urban Development, for the purpose of aiding or facilitating the work of the Department, as bequests to or for the use of the United States, see section 7(k) of the Department of Housing and Urban Development Act (42 U.S.C. 3535), as added by section 905 of Pub. L. 91-609 (84 Stat. 1809). (4) For treatment of certain property accepted by the Chairman of the Administrative Conference of the United States, for the purposes of aiding and facilitating the work of the Conference, as a devise or bequest to the United States, see 5 U.S.C. 575(c)(12), as added by section 1(b) of the Act of October 21, 1972 (Pub. L. 92-526, 86 Stat. 1048). (5) For treatment of the Board for International Broadcasting as a corporation described in section 2055(a)(2), see section 7 of the Board for International Broadcasting Act of 1973 (Pub. L. 93-129, 87 Stat. 459). [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8318, 39 FR 25452, July 11, 1974; T.D. 8308, 55 FR 35593, Aug. 31, 1990] § 20.2055-2 Transfers not exclusively for charitable purposes. (a) Remainders and similar interests. (b) Transfers subject to a condition or a power. (2) The application of this paragraph may be illustrated by the following examples: Example (1). In 1965, A dies leaving certain property in trust in which charity is to receive the income for the life of his widow. The assets placed in trust by the decedent consist of stock in a corporation the fiscal policies of which are controlled by the decedent and his family. The trustees of the trust and the remaindermen are members of the decedent's family, and the governing instrument contains no adequate guarantee of the request income to the charitable organization. Under such circumstances, no deduction will be allowed. Similarly, if the trustees are not members of the decedent's family but have no power to sell or otherwise dispose of the closely held stock, or otherwise insure the requisite enjoyment of income to the charitable organization, no deduction will be allowed. Example (2). C dies leaving a tract of land to a city government for as long as the land is used by the city for a public park. If the city accepts the tract and if, on the date of C's death, the possibility that the city will not use the land for a public park is so remote as to be negligible, a deduction will be allowed. (c) Disclaimers Decedents dying after December 31, 1976. (i) A qualified disclaimer (see section 2518 and the corresponding regulations for rules relating to a qualified disclaimer), or (ii) The complete termination of a power to consume, invade, or appropriate property for the benefit of an individual by reason of the death of such individual or for any other reason, if the termination occurs within the period of time (including extensions) for filing the decedent's Federal estate tax return and before such power has been exercised. (2) Decedents dying before January 1, 1977. (i) A disclaimer of a bequest, devise, transfer, or power, if the disclaimer is made within 9 months (15 months if the decedent died on or before December 31, 1970) after the decedent's death (the period of time within which the estate tax return must be filed under section 6075) or within any extension of time for filing the return, granted pursuant to section 6081, and the disclaimer is irrevocable at the time the deduction is allowed, or (ii) The complete termination of a power to consume, invade, or appropriate property for the benefit of an individual (whether the termination occurs by reason of the death of the individual, or otherwise) if the termination occurs within the period described in paragraph (c)(2)(i) of this section and before the power has been exercised. Ordinarily, a disclaimer made by a person not under any legal disability will be considered irrevocable when filed with the probate court. A disclaimer is a complete and unqualified refusal to accept the right to which one is entitled. Thus, if a beneficiary uses these rights for his own purposes, as by receiving a consideration for his formal disclaimer, he has not refused the rights to which he was entitled. There can be no disclaimer after an acceptance of these rights, expressly or impliedly. The disclaimer of a power is to be distinguished from the release or exercise of a power. The release or exercise of a power by the donee of the power in favor of a person or object described in paragraph (a) of § 20.2055-1 does not result in any deduction under section 2055 in the estate of the donor of a power (but see paragraph (b)(1) of § 20.2055-1 with respect to the donee's estate). (d) Payments in compromise. (e) Limitation applicable to decedents dying after December 31, 1969 Disallowance of deduction In general. Example (1). In 1973, H creates a trust which is to pay the income of the trust to W for her life, the reversionary interest in the trust being retained by H. H predeceases W in 1975. H's will provide that the residue of his estate (including the reversionary interest in the trust) is to be transferred to charity. For purposes of this paragraph (e)(1)(i), interests in the same property have passed from H for charitable purposes and for private purposes. Example (2). In 1973, H creates a trust which is to pay the income of the trust to W for her life and upon termination of the life estate to transfer the remainder to S. S predeceases W in 1975. S's will provides that the residue of his estate (including the remainder interest in the trust) is to be transferred to charity. For purposes of this paragraph (e)(1)(i), interests in the same property have not passed from H or S for charitable purposes and for private purposes. Example (3). H transfers Blackacre to A by gift, reserving the right to the rentals of Blackacre for a term of 20 years. H dies within the 20-year term, bequeathing the right to the remaining rentals to charity. For purposes of this paragraph (e)(1)(i) the term “property” refers to Blackacre, and the right to rentals from Blackacre consist of an interest in Blackacre. An interest in Blackacre has passed from H for charitable purposes and for private purposes. Example (4). H bequeaths the residue of his estate in trust for the benefit of A and a charity. An annuity of $5,000 a year is to be paid to charity for 20 years. Upon termination of the 20-year term the corpus is to be distributed to A if living. However, if A should die during the 20-year term, the corpus is to be distributed to charity upon termination of the term. An interest in the residue of the estate has passed from H for charitable purposes. In addition, an interest in the residue of the estate has passed from H for private purposes, unless the possibility that A will survive the 20-year term is so remote as to be negligible. Example (5). H bequeaths the residue of his estate in trust. Under the terms of the trust an annuity of $5,000 a year is to be paid to charity for 20 years. Upon termination of the term, the corpus is to pass to such of A's children and their issue as A may appoint. However, if A should die during the 20-year term without exercising the power of appointment, the corpus is to be distributed to charity upon termination of the term. Since the possible appointees include private persons, an interest in the residue of the estate is considered to have passed from H for private purposes. Example (6). H devises Blackacre to X charity. Under applicable local law, W, H's widow, is entitled to elect a dower interest in Blackacre. W elects to take her dower interest in Blackacre. For purposes of this paragraph (e)(1)(i), interests in the same property have passed from H for charitable purposes and for private purposes. If, however, W does not elect to take her dower interest in Blackacre, then, for purposes of this paragraph (e)(1)(i), interests in the same property have not passed from H for charitable purposes and for private purposes. (ii) Works of art and copyrights treated as separate properties a In general. ( b Work of art defined. a ( c Qualified contribution defined. a d ( d Qualified organization defined. c ( e Examples. a d Example (1). A, an artist, died in 1983. A work of art created by A and the copyright interest in that work of art were included in A's estate. Under the terms of A's will, the work of art is transferred to X charity, the only charitable beneficiary under A's will. X has no suitable use for the work of art and sells it. It is determined under the rules of § 1.170A-4(b)(3) that the property is put to an unrelated use by X charity. Therefore, the rule of paragraph (e)(1)(ii)( a (i) If under local law A's will is treated as fully transferring both the work of art and the copyright interest to X, then paragraph (e)(1)(i) of this section does not apply to disallow a deduction under section 2055 for the value of the work of art and the copyright interest. (ii) If under local law A's will is treated as transferring only the work of art to X, and the copyright interest is treated as part of the residue of the estate, no deduction is allowable under section 2055 to A's estate for the value of the work of art because the transfer of the work of art is not a qualified contribution and paragraph (e)(1)(i) of this section applies to disallow the deduction. Example (2). B, a collector of art, purchased a work of art from an artist who retained the copyright interest. B died in 1983. Under the terms of B's will the work of art is given to Y charity. Since B did not own the copyright interest, paragraph (e)(1)(i) of this section does not apply to disallow a deduction under section 2055 for the value of the work of art, regardless of whether or not the contribution is a qualified contribution under paragraph (e)(1)(ii)( c (2) Deductible interests. (i) Undivided portion of decedent's entire interest. (ii) Remainder interest in personal residence. (iii) Remainder interest in a farm. (iv) Qualified conservation contribution. (v) Charitable remainder trusts and pooled income funds. (vi) Guaranteed annuity interest. a ( b ( c ( d ( e ( f f See ( g e f ( 1 ( i ( ii ( iii ( 2 ( i ( ii ( iii ( h ( i (vii) Unitrust interest. a ( b ( c ( d ( e e ( f (3) Effective/applicability date. (i) In the case of property passing under the terms of a will executed on or before October 9, 1969— ( a ( b ( c (ii) In the case of property transferred in trust on or before October 9, 1969— ( a ( b ( c (iii)(A) The rule in paragraphs (e)(2)(vi)( a a a a a a (B) The appropriate annuity factor for an annuity payable for a term of years is computed by subtracting from 1.000000 the factor for an ordinary remainder interest following the same term certain that is determined under the formula in § 20.2031-7(d)(2)(ii)(A) and then dividing the result by the applicable section 7520 interest rate, expressing the annuity factor to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in the “Annuity” column of Table B. The appropriate annuity factor for an annuity payable for the life of one individual is computed by subtracting from 1.00000 the factor for an ordinary remainder interest following the life of the same individual that is determined under the formula in § 20.2031-7(d)(2)(ii)(B) and then dividing the result by the applicable section 7520 interest rate expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in the “Annuity” column of Table S. Tables B and S can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables Table 1 to Paragraph (e)(3)(iii)(B) Years Annuity Income interest Remainder Factors From Table B Annuity, Income, and Remainder Interests for a Term Certain Interest at 3.2 Percent 37 21.5068 0.688218 0.311782 38 21.8089 0.697886 0.302114 Factors from Table S—Based on Table 2010CM Interest at 3.2 Percent Age Annuity Life estate Remainder 40 21.7045 0.69454 0.30546 (C) The following example illustrates how to determine the term of years for a reformed interest as discussed in paragraph (e)(3)(iii)(A) of this section. Assume an annuity interest payable for the life of an individual age 40 at the time of the transfer on or after June 1, 2023, with an interest rate of 3.2 percent under section 7520. Under Table S, the annuity factor at 3.2 percent for the life of an individual age 40 is 21.7045. Based on Table B at 3.2 percent, the factor 21.7045 corresponds to a term of years between 37 and 38 years. Accordingly, the annuity interest must be reformed into an interest payable for a term of 38 years. (4) Amendment of dispositive provisions. (5) Amendment of wills providing for pour-over into trusts. (f) Valuation of charitable interest In general. h (2) Certain decedents dying after July 31, 1969. (i) The present value of a remainder interest in a charitable remainder annuity trust is to be determined under § 1.664-2(c) of this chapter (Income Tax Regulations). (ii) The present value of a remainder interest in a charitable remainder unitrust is to be determined under § 1.664-4 of this chapter. (iii) The present value of a remainder interest in a pooled income fund is to be determined under § 1.642(c)-6 of this chapter. (iv) The present value of a guaranteed annuity interest described in paragraph (e)(2)(vi) of this section is to be determined under § 20.2031-7 or, for certain prior periods, § 20.2031-7A, except that, if the annuity is issued by a company regularly engaged in the sale of annuities, the present value is to be determined under § 20.2031-8. If by reason of all the conditions and circumstances surrounding a transfer of an income interest in property in trust it appears that the charity may not receive the beneficial enjoyment of the interest, a deduction will be allowed under section 2055 only for the minimum amount it is evident the charity will receive. Example (1). In 1975, B dies bequeathing $20,000 in trust with the requirement that a designated charity be paid a guaranteed annuity interest (as defined in paragraph (e)(2)(vi) of this section) of $4,100 a year, payable annually at the end of each year, for a period of 6 years and that the remainder be paid to his children. The fair market value of an annuity of $4,100 a year for a period of 6 years is $20,160.93 ($4,100 × 4.9173), as determined under Table B in § 20.2031-7A(d). The deduction with respect to the guaranteed annuity interest will be limited to $20,000, which is the minimum amount it is evident the charity will receive. Example (2). In 1975, C dies bequeathing $40,000 in trust with the requirement that D, an individual, and X Charity be paid simultaneously guaranteed annuity interests (as defined in paragraph (e)(2)(vi) of this section) of $5,000 a year each, payable annually at the end of each year, for a period of 5 years and that the remainder be paid to C's children. The fair market value of two annuities of $5,000 each a year for a period of 5 years is $42,124 ([$5,000 × 4.2124] × 2), as determined under Table B in § 20.2031-7A(d). The trust instrument provides that in the event the trust fund is insufficient to pay both annuities in a given year, the trust fund will be evenly divided between the charitable and private annuitants. The deduction with respect to the charitable annuity will be limited to $20,000, which is the minimum amount it is evident the charity will receive. Example (3). In 1975, D dies bequeathing $65,000 in trust with the requirement that a guaranteed annuity interest (as defined in paragraph (e)(2)(vi) of this section) of $5,000 a year, payable annually at the end of each year, be paid to Y Charity for a period of 10 years and that a guaranteed annuity interest (as defined in paragraph (e)(2)(vi) of this section) of $5,000 a year, payable annually at the end of each year, be paid to W, his widow, aged 62, for 10 years or until her prior death. The annuities are to be paid simultaneously, and the remainder is to be paid to D's children. The fair market value of the private annuity is $33,877 ($5,000 × 6.7754), as determined pursuant to § 20.2031-7A(c) and by the use of factors involving one life and a term of years as published in Publication 723A (12-70). The fair market value of the charitable annuity is $36,800.50 ($5,000 × 7.3601), as determined under Table B in § 20.2031-7A(d). It is not evident from the governing instrument of the trust or from local law that the trustee would be required to apportion the trust fund between the widow and charity in the event the fund were insufficient to pay both annuities in a given year. Accordingly, the deduction with respect to the charitable annuity will be limited to $31,123 ($65,000 less $33,877 [the value of the private annuity]), which is the minimum amount it is evident the charity will receive. (v) The present value of a unitrust interest described in paragraph (e)(2)(vii) of this section is to be determined by subtracting the present value of all interests in the transferred property other than the unitrust interest from the fair market value of the transferred property. (3) Certain decedents dying before August 1, 1969. (4) Other decedents. (5) Special computations. (6) Applicability date. [T.D. 6296, 23 FR 4529, June 24, 1958] Editorial Note: For Federal Register www.govinfo.gov. § 20.2055-3 Effect of death taxes and administration expenses. (a) Death taxes. (2) It should be noted that if the Federal estate tax is payable out of a charitable transfer so that the amount of the transfer otherwise passing to charity is reduced by the amount of the tax, the resultant decrease in the amount passing to charity will further reduce the allowable deduction. In such a case, the amount of the charitable deduction can be obtained only by a series of trial-and-error computations, or by a formula. If, in addition, interdependent State and Federal taxes are involved, the computation becomes highly complicated. Examples of methods of computation of the charitable deduction and the marital deduction (with which similar problems are encountered) in various situations are contained in supplemental instructions to the estate tax return. (3) For the allowance of a deduction to a decedent's estate for certain State death taxes imposed upon charitable transfers, see section 2053(d) and § 20.2053-9. (b) Administration expenses Definitions Management expenses. (ii) Transmission expenses. (iii) Charitable share. (2) Effect of transmission expenses. (3) Effect of management expenses attributable to the charitable share. (4) Effect of management expenses not attributable to the charitable share. (5) Example. Example. The decedent, who dies in 2000, leaves his residuary estate, after the payment of debts, expenses, and estate taxes, to a charitable remainder unitrust that satisfies the requirements of section 664(d). During the period of administration, the estate incurs estate transmission expenses of $400,000. The residue of the estate (the charitable share) must be reduced by the $400,000 of transmission expenses and by the Federal and State estate taxes before the present value of the remainder interest passing to charity can be determined in accordance with the provisions of § 1.664-4 of this chapter. Because the estate taxes are payable out of the residue, the computation of the estate taxes and the allowable charitable deduction are interrelated. See paragraph (a)(2) of this section. (6) Cross reference. (7) Effective date. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8846, 64 FR 67764, Dec. 3, 1999; 64 FR 71022, Dec. 20, 1999] § 20.2055-4 Disallowance of charitable, etc., deductions because of “prohibited transactions” in the case of decedents dying before January 1, 1970. (a) Sections 503(e) and 681(b)(5) provides that no deduction which would otherwise be allowable under section 2055 for the value of property transferred by the decedent during his lifetime or by will for religious, charitable, scientific, literary, or educational purposes (including the encouragement of art and the prevention of cruelty to children or animals) is allowed if (1) the transfer is made in trust, and, for income tax purposes for the taxable year of the trust in which the transfer is made, the deduction otherwise allowable to the trust under section 642(c) is limited by section 681(b)(1) by reason of the trust having engaged in a prohibited transaction described in section 681(b)(2), or (2) the transfer is made to a corporation, community chest, fund or foundation which, for its taxable year in which the transfer is made, is not exempt from income tax under section 501(a) by reason of having engaged in a prohibited transaction described in section 503(c). (b) For purposes of section 681(b)(5) and section 503(e), the term “transfer” includes any gift, contribution, bequest, devise, legacy, or other disposition. In applying such sections for estate tax purposes, a transfer, whether made during the decedent's lifetime or by will, is considered as having been made at the moment of the decedent's death. (c) The income tax regulations contain the rules for the determination of the taxable year of the trust for which the deduction under section 642(c) is limited by section 681(b) and for the determination of the taxable year of the organization for which an exemption is denied under section 503(a). Generally, such taxable year is a taxable year subsequent to the taxable year during which the trust or organization has been notified by the Commissioner of Internal Revenue that it has engaged in a prohibited transaction. However, if the trust or organization during or prior to the taxable year entered into the prohibited transaction for the purpose of diverting its corpus or income from the charitable or other purposes by reason of which it is entitled to a deduction or exemption, and the transaction involves a substantial part of the income or corpus, then the deduction of the trust under section 642(c) for such taxable year is limited by section 681(b), or exemption of the organization for such taxable year is denied under section 503(a), whether or not the organization has previously received notification by the Commissioner of Internal Revenue that it is engaged in a prohibited transaction. In certain cases, the limitation of section 681 or 503 may be removed or the exemption may be reinstated for certain subsequent taxable years under the rules set forth in the income tax regulations under sections 681 and 503. In cases in which prior notification by the Commissioner of Internal Revenue is not required in order to limit the deduction of the trust under section 681(d) or to deny exemption of the organization under section 503, the deduction otherwise allowable under section 2055 is not disallowed in respect of transfers made during the same taxable year of the trust or organization in which a prohibited transaction occurred or in a prior taxable year unless the decedent or a member of his family was a party to the prohibited transaction. For the purpose of the preceding sentence, the members of the decedent's family include only his brothers and sisters, whether by whole or half blood, spouse, ancestors, and lineal descendants. (d) This section applies only in the case of decedents dying before January 1, 1970. In the case of decedents dying after December 31, 1969, see § 20.2055-5. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7318, 39 FR 25456, July 11, 1974] § 20.2055-5 Disallowance of charitable, etc., deductions in the case of decedents dying after December 31, 1969. (a) Organizations subject to section 507(c) tax. (b) Taxable private foundations, section 4947 trusts, etc. In general. (i) A private foundation or a trust described in section 4947(a)(2) in a taxable year of such organization for which such organization fails to meet the governing instrument requirements of section 508(e) (determined without regard to section 508(e)(2) (B) and (C)), or (ii) Any organization in a period for which it is not treated as an organization described in section 501(c)(3) by reason of its failure to give notification under section 508(a) of its status to the Commissioner. For additional rules, see § 1.508-2(b) (1) of this chapter (Income Tax Regulations). (2) Transfers not covered by section 508(d)(2)(A) In general. ( a ( 1 ( 2 ( 3 ( b ( 1 ( 2 ( 3 (ii) Amendment of dispositive provisions. (c) Foreign organization with substantial support from foreign sources. [T.D. 7318, 39 FR 25456, July 11, 1974] § 20.2055-6 Disallowance of double deduction in the case of qualified terminable interest property. No deduction is allowed from the decedent's gross estate under section 2055 for property with respect to which a deduction is allowed by reason of section 2056(b)(7). See section 2056(b)(9) and § 20.2056(b)-9. [T.D. 8522, 59 FR 9647, Mar. 1, 1994] § 20.2056-0 Table of contents. This section lists the captions that appear in the regulations under §§ 20.2056(a)-1 through 20.2056(d)-3. § 20.2056(a)-1 Marital deduction; in general. (a) In general. (b) Requirements for marital deduction. (1) In general. (2) Burden of establishing requisite facts. (c) Marital deduction; limitation on aggregate deductions. (1) Estates of decedents dying before 1977. (2) Estates of decedents dying after December 31, 1976, and before January 1, 1982. (3) Estates of decedents dying after December 31, 1981. § 20.2056(a)-2 Marital deduction; deductible interests and nondeductible interests. (a) In general. (b) Deductible interests. § 20.2056(b)-1 Marital deduction; limitation in case of life estate or other “terminable interest.” (a) In general. (b) Terminable interests. (c) Nondeductible terminable interests. (d) Exceptions. (e) Miscellaneous principles. (f) Direction to acquire a terminable interest. (g) Examples. § 20.2056(b)-2 Marital deduction; interest in unidentified assets. (a) In general. (b) Application of section 2056(b)(2). (c) Interest nondeductible if circumstances present. (d) Example. § 20.2056(b)-3 Marital deduction; interest of spouse conditioned on survival for limited period. (a) In general. (b) Six months' survival. (c) Common disaster. (d) Examples. § 20.2056(b)-4 Marital deduction; valuation of interest passing to surviving spouse. (a) In general. (b) Property interest subject to an encumbrance or obligation. (c) Effect of death taxes. (d) Remainder interests. § 20.2056(b)-5 Marital deduction; life estate with power of appointment in surviving spouse. (a) In general. (b) Specific portion; deductible amount. (c) Meaning of specific portion. (1) In general. (2) Fraction or percentage share. (3) Special rule in the case of estates of decedents dying on or before October 24, 1992, and certain decedents dying after October 24, 1992, with wills or revocable trusts executed on or prior to that date. (4) Local law. (5) Examples. (d) Meaning of entire interest. (e) Application of local law. (f) Right to income. (g) Power of appointment in surviving spouse. (h) Requirement of survival for a limited period. (j) Existence of power in another. § 20.2056(b)-6 Marital deduction; life insurance or annuity payments with power of appointment in surviving spouse. (a) In general. (b) Specific portion; deductible interest. (c) Applicable principles. (d) Payments of installments or interest. (e) Powers of appointment. § 20.2056(b)-7 Election with respect to life estate for surviving spouse. (a) In general. (b) Qualified terminable interest property. (1) In general. (2) Property for which an election may be made. (3) Persons permitted to make the election. (4) Manner and time of making the election. (c) Protective elections. (1) In general. (2) Protective election irrevocable. (d) Qualifying income interest for life. (1) In general. (2) Entitled for life to all income. (3) Contingent income interests. (4) Income between last distribution date and spouse's date of death. (5) Pooled income funds. (6) Power to distribute principal to spouse. (e) Annuities payable from trusts in the case of estates of decedents dying on or before October 24, 1992, and certain decedents dying after October 24, 1992, with wills or revocable trusts executed on or prior to that date. (1) In general. (2) Deductible interest. (3) Distributions permissible only to surviving spouse. (4) Applicable interest rate. (5) Effective dates. (f) Joint and survivor annuities. [Reserved] (g) Application of local law. (h) Examples. § 20.2056(b)-8 Special rule for charitable remainder trusts. (a) In general. (1) Surviving spouse only noncharitable beneficiary. (2) Interest for life or term of years. (3) Payment of state death taxes. (b) Charitable trusts where surviving spouse is not the only noncharitable beneficiary. § 20.2056(b)-9 Denial of double deduction. § 20.2056(b)-10 Effective dates. § 20.2056(c)-1 Marital deduction; definition of passed from the decedent. (a) In general. (b) Expectant interest in property under community property laws. § 20.2056(c)-2 Marital deduction; definition of “passed from the decedent to his surviving spouse.” (a) In general. (b) Examples. (c) Effect of election by surviving spouse. (d) Will contests. (e) Survivorship. § 20.2056(c)-3 Marital deduction; definition of passed from the decedent to a person other than his surviving spouse. § 20.2056(d)-1 Marital deduction; special rules for marital deduction if surviving spouse is not a United States citizen. § 20.2056(d)-2 Marital deduction; effect of disclaimers of post-December 31, 1976 transfers. (a) Disclaimer by a surviving spouse. (b) Disclaimer by a person other than a surviving spouse. § 20.2056(d)-3 Marital deduction; effect of disclaimers of pre-January 1, 1977 transfers. (a) Disclaimers by a surviving spouse. (b) Disclaimer by a person other than a surviving spouse. (1) Decedents dying after October 3, 1966, and before January 1, 1977. (2) Decedents dying after September 30, 1963, and before October 4, 1966. (3) Decedents dying before October 4, 1966. [T.D. 8522, 59 FR 9647, Mar. 1, 1994, as amended by T.D. 8612, 60 FR 43538, Aug. 22, 1995] § 20.2056(a)-1 Marital deduction; in general. (a) In general. deductible interest marital deduction. (b) Requirements for marital deduction In general. (i) The decedent was survived by a spouse (see § 20.2056(c)-2(e)); (ii) The property interest passed from the decedent to the spouse (see §§ 20.2056(b)-5 through 20.2056(b)-8 and 20.2056(c)-1 through 20.2056(c)-3); (iii) The property interest is a deductible interest (iv) The value of the property interest (see § 20.2056(b)-4). (2) Burden of establishing requisite facts. (c) Marital deduction; limitation on aggregate deductions Estates of decedents dying before 1977. adjusted gross estate, (2) Estates of decedents dying after December 31, 1976, and before January 1, 1982. (i) $250,000; or (ii) One-half of the value of the decedent's adjusted gross estate, adjusted for intervivos gifts to the spouse as prescribed by section 2056(c)(1)(B) prior to repeal by the Economic Recovery Tax Act of 1981 (Pub. L. 97-34). (3) Estates of decedents dying after December 31, 1981. [T.D. 8522, 59 FR 9648, Mar. 1, 1994] § 20.2056(a)-2 Marital deduction; “deductible interests” and “nondeductible interests”. (a) In general. (1) Those with respect to which the marital deduction is authorized, and (2) Those with respect to which the marital deduction is not authorized. These categories are referred to in this section and other sections of the regulations under section 2056 as “deductible interests” and “nondeductible interests”, respectively (see paragraph (b) of this section). Subject to any applicable limitations set forth in § 20.2056(a)-1(c), the amount of the marital deduction is the aggregate value of the deductible interests. (b) Deductible interests. (1) Any property interest which passed from the decedent to his surviving spouse is a “nondeductible interest” to the extent it is not included in the decedent's gross estate. (2) If a deduction is allowed under section 2053 (relating to deductions for expenses and indebtedness) by reason of the passing of a property interest from the decedent to his surviving spouse, such interest is, to the extent of the deduction under section 2053, a “nondeductible interest.” Thus, a property interest which passed from the decedent to his surviving spouse in satisfaction of a deductible claim of the spouse against the estate is, to the extent of the claim, a “nondeductible interest” (see § 20.2056(b)-4). Similarly, amounts deducted under section 2053(a)(2) for commissioners allowed to the surviving spouse as executor are “nondeductible interests”. As to the valuation, for the purpose of the marital deduction, of any property interest which passed from the decedent to his surviving spouse subject to a mortgage or other encumbrance, see § 20.2056(b)-4. (3) If during settlement of the estate a loss deductible under section 2054 occurs with respect to a property interest, then that interest is, to the extent of the deductible loss, a “nondeductible interest” for the purpose of the marital deduction. (4) A property interest passing to a decedent's surviving spouse which is a “terminable interest”, as defined in § 20.2056(b)-1, is a “nondeductible interest” to the extent specified in that section. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8522, 59 FR 9649, Mar. 1, 1994] § 20.2056(b)-1 Marital deduction; limitation in case of life estate or other “terminable interest”. (a) In general. (b) Terminable interests. (c) Nondeductible terminable interests. (i) Another interest in the same property passed from the decedent to some other person for less than an adequate and full consideration in money or money's worth, and (ii) By reason of its passing, the other person or his heirs or assigns may possess or enjoy any part of the property after the termination or failure of the spouse's interest. (2) Even though a property interest which constitutes a terminable interest is not nondeductible by reason of the rules stated in subparagraph (1) of this paragraph, such an interest is nondeductible if— (i) The decedent has directed his executor or a trustee to acquire such an interest for the decedent's surviving spouse (see further paragraph (f) of this section), or (ii) Such an interest passing to the decedent's surviving spouse may be satisfied out of a group of assets which includes a nondeductible interest (see further § 20.2056(b)-2. In this case, however, full nondeductibility may not result. (d) Exceptions. (1) It is conditioned on the spouse's surviving for a limited period, in the manner described in § 20.2056(b)-3; (2) It is a right to income for life with a general power of appointment, meeting the requirements set forth in § 20.2056(b)-5; (3) It consists of life insurance or annuity payments held by the insurer with a general power of appointment in the spouse, meeting the requirements set forth in § 20.2056(b)-6; (4) It is qualified terminable interest property, meeting the requirements set forth in § 20.2056(b)-7; or (5) It is an interest in a qualified charitable remainder trust in which the spouse is the only noncharitable beneficiary, meeting the requirements set forth in § 20.2056(b)-8. (e) Miscellaneous principles. (2) In determining whether an interest in the same property passed from the decedent both to his surviving spouse and to some other person, a distinction is to be drawn between “property”, as such term is used in section 2056, and an “interest in property”. The term “property” refers to the underlying property in which various interests exist; each such interest is not for this purpose to be considered as “property”. (3) Whether or not an interest is nondeductible because it is a terminable interest is to be determined by reference to the property interests which actually passed from the decedent. Subsequent conversions of the property are immaterial for this purpose. Thus, where a decedent bequeathed his estate to his wife for life with remainder to his children, the interest which passed to his wife is a nondeductible interest, even though the wife agrees with the children to take a fractional share of the estate in fee in lieu of the life interest in the whole, or sells the life estate for cash, or acquires the remainder interest of the children either by purchase or gift. (4) The terms passed from the decedent, passed from the decedent to his surviving spouse passed from the decedent to a person other than his surviving spouse (f) Direction to acquire a terminable interest. (g) Examples. Example (1). H (the decedent) devised real property to W (his surviving wife) for life, with remainder to A and his heirs. The interest which passed from H to W is a nondeductible interest since it will terminate upon her death and A (or his heirs or assigns) will thereafter possess or enjoy the property. Example (2). H bequeathed the residue of his estate in trust for the benefit of W and A. The trust income is to be paid to W for life, and upon her death the corpus is to be distributed to A or his issue. However, if A should die without issue, leaving W surviving, the corpus is then to be distributed to W. The interest which passed from H to W is a nondeductible interest since it will terminate in the event of her death if A or his issue survive, and A or his issue will thereafter possess or enjoy the property. Example (3). H during his lifetime purchased an annuity contract providing for payments to himself for life and then to W for life if she should survive him. Upon the death of the survivor of H and W, the excess, if any, of the cost of the contract over the annuity payments theretofore made was to be refunded to A. The interest which passed from H to W is a nondeductible interest since A may possess or enjoy a part of the property following the termination of the interest of W. If, however, the contract provided for no refund upon the death of the survivor of H and W, or provided that any refund was to go to the estate of the survivor, then the interest which passed from H to W is (to the extent it is included in H's gross estate) a deductible interest. Example (4). H, in contemplation of death, transferred a residence to A for life with remainder to W provided W survives A, but if W predeceases A, the property is to pass to B and his heirs. If it is assumed that H died during A's lifetime, and the value of the residence was included in determining the value of his gross estate, the interest which passed from H to W is a nondeductible interest since it will terminate if W predeceases A and the property will thereafter be possessed or enjoyed by B (or his heirs or assigns). This result is not affected by B's assignment of his interest during H's lifetime, whether made in favor of W or another person, since the term “assigns” (as used in section 2056(b)(1)(B)) includes such an assignee. However, if it is assumed that A predeceased H, the interest of B in the property was extinguished, and, viewed as of the time of the subsequent death of H, the interest which passed from him to W is the entire interest in the property and, therefore, a deductible interest. Example (5). H transferred real property to A by gift (reserving the right to the rentals of the property for a term of 20 years. H died within the 20-year term, bequeathing the right to the remaining rentals to a trust for the benefit of W. The terms of the trust satisfy the five conditions stated in § 20.2056(b)-5, so that the property interest which passed in trust is considered to have passed from H to W. However, the interest is a nondeductible interest since it will terminate upon the expiration of the term and A will thereafter possess or enjoy the property. Example (6). H bequeathed a patent to W and A as tenants in common. In this case, the interest of W will terminate upon the expiration of the term of the patent, but possession or enjoyment of the property by A must necessarily cease at the same time. Therefore, since A's possession or enjoyment cannot outlast the termination of W's interest, the latter is a deductible interest. Example (7). A decedent bequeathed $100,000 to his wife, subject to a direction to his executor to use the bequest for the purchase of an annuity for the wife. The bequest is a nondeductible interest. Example (8). Assume that pursuant to local law an allowance for support is payable to the decedent's surviving spouse during the period of the administration of the decedent's estate, but that upon her death or remarriage during such period her right to any further allowance will terminate. Assume further that the surviving spouse is sole beneficiary of the decedent's estate. Under such circumstances, the allowance constitutes a deductible interest since any part of the allowance not receivable by the surviving spouse during her lifetime will pass to her estate under the terms of the decedent's will. If, in this example, the decedent bequeathed only one-third of his residuary estate to his surviving spouse, then two-thirds of the allowance for support would constitute a nondeductible terminable interest. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8522, 59 FR 9649, Mar. 1, 1994] § 20.2056(b)-2 Marital deduction; interest in unidentified assets. (a) In general. (b) Application of section 2056(b)(2). (1) The property interest which passed from the decedent to his surviving spouse must be payable out of a group of assets included in the gross estate. Examples of property interests payable out of a group of assets are a general legacy, a bequest of the residue of the decedent's estate or of a proportion of the residue, and a right to a share of the corpus of a trust upon its termination. (2) The group of assets out of which the property interest is payable must include one or more particular assets which, if passing specifically to the surviving spouse, would be nondeductible interests. Therefore, section 2056(b)(2) is not applicable merely because the group of assets includes a terminable interest, but would only be applicable if the terminable interest were nondeductible under the provisions of § 20.2056(b)-1. (c) Interest nondeductible if circumstances present. (d) Example. Example. A decedent bequeathed one-third of the residue of his estate to his wife. The property passing under the decedent's will included a right to the rentals of an office building for a term of years, reserved by the decedent under a deed of the building by way of gift to his son. The decedent did not make a specific bequest of the right to such rentals. Such right, if passing specifically to the wife, would be a nondeductible interest (see example (5) of paragraph (g) of § 20.2056(b)-1). It is assumed that the value of the bequest of one-third of the residue of the estate to the wife was $85,000, and that the right to the rentals was included in the gross estate at a value of $60,000. If the decedent's executor had the right under the decedent's will or local law to assign the entire lease in satisfaction of the bequest, the bequest is a nondeductible interest to the extent of $60,000. If the executor could only assign a one-third interest in the lease in satisfaction of the bequest, the bequest is a nondeductible interest to the extent of $20,000. If the decedent's will provided that his wife's bequest could not be satisfied with a nondeductible interest, the entire bequest is a deductible interest. If, in this example, the asset in question had been foreign real estate not included in the decedent's gross estate, the results would be the same. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8522, 59 FR 9649, Mar. 1, 1994] § 20.2056(b)-3 Marital deduction; interest of spouse conditioned on survival for limited period. (a) In general. (b) Six months' survival. (c) Common disaster. (d) Examples. Example (1). A decedent bequeathed his entire estate to his spouse on condition that she survive him by 6 months. In the event his spouse failed to survive him by 6 months, his estate was to go to his niece and her heirs. The decedent was survived by his spouse. It will be observed that, as of the time of the decedent's death, it was possible that the niece would, by reason of the interest which passed to her from the decedent possess or enjoy the estate after the termination of the interest which passed to the spouse. Hence, under the general rule set forth in § 20.2056(b)-1, the interest which passed to the spouse would be regarded as a nondeductible interest. If the surviving spouse in fact died within 6 months after the decedent's death, that general rule is to be applied, and the interest which passed to the spouse is a nondeductible interest. However, if the spouse in fact survived the decedent by 6 months, thus extinguishing the interest of the niece, the case comes within the exception provided by section 2056(b)(3), and the interest which passed to the spouse is a deductible interest. (It is assumed for the purpose of this example that no other factor which would cause the interest to be nondeductible is present.) Example (2). The facts are the same as in example (1) except that the will provided that the estate was to go to the niece either in case the decedent and his spouse should both die as a result of a common disaster, or in case the spouse should fail to survive the decedent by 3 months. It is assumed that the decedent was survived by his spouse. In this example, the interest which passed from the decedent to his surviving spouse is to be regarded as a nondeductible interest if the surviving spouse in fact died either within 3 months after the decedent's death or as a result of a common disaster which also resulted in the decedent's death. However, if the spouse in fact survived the decedent by 3 months, and did not thereafter die as a result of a common disaster which also resulted in the decedent's death, the exception provided under section 2056(b)(3) will apply and the interest will be deductible. Example (3). The facts are the same as in example (1) except that the will provided that the estate was to go to the niece if the decedent and his spouse should both die as a result of a common disaster and if the spouse failed to survive the decedent by 3 months. If the spouse in fact survived the decedent by 3 months, the interest of the niece is extinguished, and the interest passing to the spouse is a deductible interest. Example (4). A decedent devised and bequeathed his residuary estate to his wife if she was living on the date of distribution of his estate. The devise and bequest is a nondeductible interest even though distribution took place within 6 months after the decedent's death and the surviving spouse in fact survived the date of distribution. § 20.2056(b)-4 Marital deduction; valuation of interest passing to surviving spouse. (a) In general. (b) Property interest subject to an encumbrance or obligation. Example (1). A decedent devised a residence valued at $25,000 to his wife, with a direction that she pay $5,000 to his sister. For the purpose of the marital deduction, the value of the property interest passing to the wife is only $20,000. Example (2). A decedent devised real property to his wife in satisfaction of a debt owing to her. The debt is a deductible claim under section 2053. Since the wife is obligated to relinquish the claim as a condition to acceptance of the devise, the value of the devise is, for the purpose of the marital deduction, to be reduced by the amount of the claim. Example (3). A decedent bequeathed certain securities to his wife in lieu of her interest in property held by them as community property under the law of the State of their residence. The wife elected to relinquish her community property interest and to take the bequest. For the purpose of the marital deduction, the value of the bequest is to be reduced by the value of the community property interest relinquished by the wife. (c) Effect of death taxes. (2) For example, assume that the only bequest to the surviving spouse is $100,000 and the spouse is required to pay a State inheritance tax in the amount of $1,500. If no other death taxes affect the net value of the bequest, the value, for the purpose of the marital deduction, is $98,500. (3) As another example, assume that a decedent devised real property to his wife having a value for Federal estate tax purposes of $100,000 and also bequeathed to her a nondeductible interest for life under a trust. The State of residence valued the real property at $90,000 and the life interest at $30,000, and imposed an inheritance tax (at graduated rates) of $4,800 with respect to the two interests. If it is assumed that the inheritance tax on the devise is required to be paid by the wife, the amount of tax to be ascribed to the devise is: (90,000 ÷ 120,000) × $4,800 = $3,600. Accordingly, if no other death taxes affect the net value of the bequest, the value, for the purpose of the marital deduction, is $100,000 less $3,600, or $96,400. (4) If the decedent bequeaths his residuary estate, or a portion of it, to his surviving spouse, and his will contains a direction that all death taxes shall be payable out of the residuary estate, the value of the bequest, for the purpose of the marital deduction, is based upon the amount of the residue as reduced pursuant to such direction, if the residuary estate, or a portion of it, is bequeathed to the surviving spouse, and by the local law the Federal estate tax is payable out of the residuary estate, the value of the bequest, for the purpose of the marital deduction, may not exceed its value as reduced by the Federal estate tax. Methods of computing the deduction, under such circumstances, are set forth in supplemental instructions to the estate tax return. (d) Effect of administration expenses Definitions Management expenses. (ii) Transmission expenses. (iii) Marital share. (2) Effect of transmission expenses. (3) Effect of management expenses attributable to the marital share. (4) Effect of management expenses not attributable to the marital share. (5) Examples. Example 1. The decedent dies after 2006 having made no lifetime gifts. The decedent makes a bequest of shares of ABC Corporation stock to the decedent's child. The bequest provides that the child is to receive the income from the shares from the date of the decedent's death. The value of the bequeathed shares on the decedent's date of death is $3,000,000. The residue of the estate is bequeathed to a trust for which the executor properly makes an election under section 2056(b)(7) to treat as qualified terminable interest property. The value of the residue on the decedent's date of death, before the payment of administration expenses and Federal and State estate taxes, is $6,000,000. Under applicable local law, the executor has the discretion to pay administration expenses from the income or principal of the residuary estate. All estate taxes are to be paid from the residue. The State estate tax equals the State death tax credit available under section 2011. During the period of administration, the estate incurs estate transmission expenses of $400,000, which the executor charges to the residue. For purposes of determining the marital deduction, the value of the residue is reduced by the Federal and State estate taxes and by the estate transmission expenses. If the transmission expenses are deducted on the Federal estate tax return, the marital deduction is $3,500,000 ($6,000,000 minus $400,000 transmission expenses and minus $2,100,000 Federal and State estate taxes). If the transmission expenses are deducted on the estate's Federal income tax return rather than on the estate tax return, the marital deduction is $3,011,111 ($6,000,000 minus $400,000 transmission expenses and minus $2,588,889 Federal and State estate taxes). Example 2. The facts are the same as in Example 1, except that, instead of incurring estate transmission expenses, the estate incurs estate management expenses of $400,000 in connection with the residue property passing for the benefit of the spouse. The executor charges these management expenses to the residue. In determining the value of the residue passing to the spouse for marital deduction purposes, a reduction is made for Federal and State estate taxes payable from the residue but no reduction is made for the estate management expenses. If the management expenses are deducted on the estate's income tax return, the net value of the property passing to the spouse is $3,900,000 ($6,000,000 minus $2,100,000 Federal and State estate taxes). A marital deduction is claimed for that amount, and the taxable estate is $5,100,000. Example 3. The facts are the same as in Example 1, Example 4. The decedent, who dies in 2000, has a gross estate of $3,000,000. Included in the gross estate are proceeds of $150,000 from a policy insuring the decedent's life and payable to the decedent's child as beneficiary. The applicable credit amount against the tax was fully consumed by the decedent's lifetime gifts. Applicable State law requires the child to pay any estate taxes attributable to the life insurance policy. Pursuant to the decedent's will, the rest of the decedent's estate passes outright to the surviving spouse. During the period of administration, the estate incurs estate management expenses of $150,000 in connection with the property passing to the spouse. The value of the property passing to the spouse is $2,850,000 ($3,000,000 less the insurance proceeds of $150,000 passing to the child). For purposes of determining the marital deduction, if the management expenses are deducted on the estate's income tax return, the marital deduction is $2,850,000 ($3,000,000 less $150,000) and there is a resulting taxable estate of $150,000 ($3,000,000 less a marital deduction of $2,850,000). Suppose, instead, the management expenses of $150,000 are deducted on the estate's estate tax return under section 2053 as expenses of administration. In such a situation, claiming a marital deduction of $2,850,000 would be taking a deduction for the same $150,000 in property under both sections 2053 and 2056 and would shield from estate taxes the $150,000 in insurance proceeds passing to the decedent's child. Therefore, in accordance with section 2056(b)(9), the marital deduction is limited to $2,700,000, and the resulting taxable estate is $150,000. Example 5. The decedent dies after 2006 having made no lifetime gifts. The value of the decedent's residuary estate on the decedent's date of death is $3,000,000, before the payment of administration expenses and Federal and State estate taxes. The decedent's will provides a formula for dividing the decedent's residuary estate between two trusts to reduce the estate's Federal estate taxes to zero. Under the formula, one trust, for the benefit of the decedent's child, is to be funded with that amount of property equal in value to so much of the applicable exclusion amount under section 2010 that would reduce the estate's Federal estate tax to zero. The other trust, for the benefit of the surviving spouse, satisfies the requirements of section 2056(b)(7) and is to be funded with the remaining property in the estate. The State estate tax equals the State death tax credit available under section 2011. During the period of administration, the estate incurs transmission expenses of $200,000. The transmission expenses of $200,000 reduce the value of the residue to $2,800,000. If the transmission expenses are deducted on the Federal estate tax return, then the formula divides the residue so that the value of the property passing to the child's trust is $1,000,000 and the value of the property passing to the marital trust is $1,800,000. The allowable marital deduction is $1,800,000. The applicable exclusion amount shields from Federal estate tax the entire $1,000,000 passing to the child's trust so that the amount of Federal and State estate taxes is zero. Alternatively, if the transmission expenses are deducted on the estate's Federal income tax return, the formula divides the residue so that the value of the property passing to the child's trust is $800,000 and the value of the property passing to the marital trust is $2,000,000. The allowable marital deduction is $2,000,000. The applicable exclusion amount shields from Federal estate tax the entire $800,000 passing to the child's trust so that the amount of Federal and State estate taxes remains zero. Example 6. The facts are the same as in Example 5, Example 7. The decedent, who dies in 2000, makes an outright pecuniary bequest of $3,000,000 to the decedent's surviving spouse, and the residue of the estate, after the payment of all debts, expenses, and Federal and State estate taxes, passes to the decedent's child. Under the terms of the governing instrument and applicable local law, a beneficiary of a pecuniary bequest is not entitled to any income on the bequest. During the period of administration, the estate pays estate transmission expenses from the income earned by the property that will be distributed to the surviving spouse in satisfaction of the pecuniary bequest. The income earned on this property is not part of the marital share. Therefore, the allowable marital deduction is $3,000,000, unreduced by the amount of the estate transmission expenses. (6) Effective date. (e) Remainder interests. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8522, 59 FR 9649, Mar. 1, 1994; T.D. 8540, 59 FR 30103, June 10, 1994; T.D. 8846, 64 FR 67765, Dec. 3, 1999; 64 FR 71022, Dec. 20, 1999] § 20.2056(b)-5 Marital deduction; life estate with power of appointment in surviving spouse. (a) In general. (1) The surviving spouse must be entitled for life to all of the income from the entire interest or a specific portion of the entire interest, or to a specific portion of all the income from the entire interest. (2) The income payable to the surviving spouse must be payable annually or at more frequent intervals. (3) The surviving spouse must have the power to appoint the entire interest or the specific portion to either herself or her estate. (4) The power in the surviving spouse must be exercisable by her alone and (whether exercisable by will or during life) must be exercisable in all events. (5) The entire interest or the specific portion must not be subject to a power in any other person to appoint any part to any person other than the surviving spouse. (b) Specific portion; deductible amount. (c) Meaning of specific portion In general. (2) Fraction or percentage share. (3) Special rule in the case of estates of decedents dying on or before October 24, 1992, and certain decedents dying after October 24, 1992, with wills or revocable trusts executed on or prior to that date. (A) A specific sum payable annually, or at more frequent intervals, out of the property and its income that is not limited by the income of the property is treated as the right to receive the income from a specific portion of the property. The specific portion, for purposes of paragraph (c)(2) of this section, is the portion of the property that, assuming the interest rate generally applicable for the valuation of annuities at the time of the decedent's death, would produce income equal to such payments. However, a pecuniary amount payable annually to a surviving spouse is not treated as a right to the income from a specific portion of the trust property for purposes of this paragraph (c)(3)(i)(A) if any person other than the surviving spouse may receive, during the surviving spouse's lifetime, any distribution of the property. To determine the applicable interest rate for valuing annuities, see sections 2031 and 7520 and the regulations under those sections. (B) The right to appoint a pecuniary amount out of a larger fund (or trust corpus) is considered the right to appoint a specific portion of such fund or trust for purposes of paragraph (c)(2) in an amount equal to such pecuniary amount. (ii) The rules contained in paragraphs (c)(3)(i) (A) and (B) of this section apply with respect to estates of decedents dying on or before October 24, 1992. (iii) The rules contained in paragraphs (c)(3)(i) (A) and (B) of this section apply in the case of decedents dying after October 24, 1992, if property passes to the spouse pursuant to a will or revocable trust agreement executed on or before October 24, 1992, and either— (A) On that date, the decedent was under a mental disability to change the disposition of the property and did not regain competence to dispose of such property before the date of death; or (B) The decedent dies prior to October 24, 1995. (iv) Notwithstanding paragraph (c)(3)(iii) of this section, paragraphs (c)(3)(i) (A) and (B) of this section do not apply if the will or revocable trust is amended after October 24, 1992, in any respect that increases the amount of the transfer qualifying for the marital deduction or alters the terms by which the interest so passes to the surviving spouse of the decedent. (4) Local law. (5) Examples. Example 1. Spouse entitled to the lesser of an annuity or a fraction of trust income, The decedent, D, died prior to October 24, 1992. D bequeathed in trust 500 identical shares of X company stock, valued for estate tax purposes at $500,000. The trust provides that during the lifetime of D's spouse, S, the trustee is to pay annually to S the lesser of one-half of the trust income or $20,000. Any trust income not paid to S is to be accumulated in the trust and may not be distributed during S's lifetime. S has a testamentary general power of appointment over the entire trust principal. The applicable interest rate for valuing annuities as of D's date of death under section 7520 is 10 percent. For purposes of paragraphs (a) through (c) of this section, S is treated as receiving all of the income from the lesser of— (i) One half of the stock ($250,000); or (ii) $200,000, the specific portion of the stock which, as determined in accordance with § 20.2056(b)-5(c)(3)(i)(A), would produce annual income of $20,000 (20,000/.10). Accordingly, the marital deduction is limited to $200,000 (200,000/500,000 or 2/5 Example 2. Spouse possesses power and income interest over different specific portions of trust, The facts are the same as in Example 1 1/4 1/4 2/5 1/4 Example 3. Power of appointment over pecuniary amount, The decedent, D, died prior to October 24, 1992. D bequeathed property valued at $400,000 for estate tax purposes in trust. The trustee is to pay annually to D's spouse, S, one-fourth of the trust income. Any trust income not paid to S is to be accumulated in the trust and may not be distributed during S's lifetime. The will gives S a testamentary general power of appointment over the sum of $160,000. Because D died prior to October 24, 1992, S's power of appointment over $160,000 is treated as a power of appointment over a specific portion of the entire trust interest. The marital deduction allowable under section 2056(b)(5) is limited to $100,000; that is, the lesser of— (1) The value of the trust corpus ($400,000); (2) The value of the trust corpus over which S has a power of appointment ($160,000); or (3) That specific portion of the trust with respect to which S is entitled to all the income ($100,000). Example 4. Power of appointment over shares of stock constitutes a power over a specific portion, Under D's will, 250 shares of Y company stock were bequeathed in trust pursuant to which all trust income was payable annually to S, D's spouse, for life. S was given a testamentary general power of appointment over 100 shares of stock. The trust provides that if the trustee sells the Y company stock, S's general power of appointment is exercisable with respect to the sale proceeds or the property in which the proceeds are reinvested. Because the amount of property represented by a single share of stock would be altered if the corporation split its stock, issued stock dividends, made a distribution of capital, etc., a power to appoint 100 shares at the time of S's death is not necessarily a power to appoint the entire interest that the 100 shares represented on the date of D's death. If it is shown that, under local law, S has a general power to appoint not only the 100 shares designated by D but also 100/250 of any distributions by the corporation that are included in trust principal, the requirements of paragraph (c)(2) of this section are satisfied and S is treated as having a general power to appoint 100/250 of the entire interest in the 250 shares. In that case, the marital deduction is limited to 40 percent of the trust principal. If local law does not give S that power, the 100 shares would not constitute a specific portion under § 20.2056(b)-5(c) (including § 20.2056(b)-5(c)(3)(i)(B)). The nature of the asset is such that a change in the capitalization of the corporation could cause an alteration in the original value represented by the shares at the time of D's death and, thus, it does not represent a specific portion of the trust. (d) Meaning of entire interest. Example (1). The decedent transferred to a trustee three adjoining farms, Blackacre, Whiteacre, and Greenacre. His will provided that during the lifetime of the surviving spouse the trustee should pay her all of the income from the trust. Upon her death, all of Blackacre, a one-half interest in White- acre, and a one-third interest in Greenacre were to be distributed to the person or persons appointed by her in her will. The surviving spouse is considered as being entitled to all of the income from the entire interest in Blackacre, all of the income from the entire interest in Whiteacre, and all of the income from the entire interest in Greenacre. She also is considered as having a power of appointment over the entire interest in Blackacre, over one-half of the entire interest in Whiteacre, and over one-third of the entire interest in Greenacre. Example (2). The decedent bequeathed $250,000 to C, as trustee. C is to invest the money and pay all of the income from the investments to W, the decedent's surviving spouse, annually. W was given a general power, exercisable by will, to appoint one-half of the corpus of the trust. Here, immediately following distribution by the executor, the $250,000 will be sufficiently segregated to permit its identification as a separate item, and the $250,000 will constitute an entire property interest. Therefore, W has a right to income and a power of appointment such that one-half of the entire interest is a deductible interest. Example (3). The decedent bequeathed 100 shares of Z corporation stock to D, as trustee. W, the decedent's surviving spouse, is to receive all of the income of the trust annually and is given a general power, exercisable by will, to appoint out of the trust corpus the sum of $25,000. In this case the $25,000 is not, immediately following distribution, sufficiently segregated to permit its identification as a separate item of property in which the surviving spouse has the entire interest. Therefore, the $25,000 does not constitute the entire interest in a property for the purpose of paragraphs (a) and (b) of this section. (e) Application of local law. (f) Right to income. (2) If the over-all effect of a trust is to give to the surviving spouse such enforceable rights as will preserve to her the requisite degree of enjoyment, it is immaterial whether that result is effected by rules specifically stated in the trust instrument, or, in their absence, by the rules for the management of the trust property and the allocation of receipts and expenditures supplied by the State law. For example, a provision in the trust instrument for amortization of bond premium by appropriate periodic charges to interest will not disqualify the interest passing in trust even though there is no State law specifically authorizing amortization, or there is a State law denying amortization which is applicable only in the absence of such a provision in the trust instrument. (3) In the case of a trust, the rules to be applied by the trustee in allocation of receipts and expenses between income and corpus must be considered in relation to the nature and expected productivity of the assets passing in trust, the nature and frequency of occurrence of the expected receipts, and any provisions as to change in the form of investments. If it is evident from the nature of the trust assets and the rules provided for management of the trust that the allocation to income of such receipts as rents, ordinary cash dividends, and interest will give to the spouse the substantial enjoyment during life required by the statute, provisions that such receipts as stock dividends and proceeds from the conversion of trust assets shall be treated as corpus will not disqualify the interest passing in trust. Similarly, provision for a depletion charge against income in the case of trust assets which are subject to depletion will not disqualify the interest passing in trust, unless the effect is to deprive the spouse of the requisite beneficial enjoyment. The same principle is applicable in the case of depreciation, trustees' commissions, and other charges. (4) Provisions granting administrative powers to the trustee will not have the effect of disqualifying an interest passing in trust unless the grant of powers evidences the intention to deprive the surviving spouse of the beneficial enjoyment required by the statute. Such an intention will not be considered to exist if the entire terms of the instrument are such that the local courts will impose reasonable limitations upon the exercise of the powers. Among the powers which if subject to reasonable limitations will not disqualify the interest passing in trust are the power to determine the allocation or apportionment of receipts and disbursements between income and corpus, the power to apply the income or corpus for the benefit of the spouse, and the power to retain the assets passing to the trust. For example, a power to retain trust assets which consist substantially of unproductive property will not disqualify the interest if the applicable rules for the administration of the trust require, or permit the spouse to require, that the trustee either make the property productive or convert it within a reasonable time. Nor will such a power disqualify the interest if the applicable rules for administration of the trust require the trustee to use the degree of judgment and care in the exercise of the power which a prudent man would use if he were owner of the trust assets. Further, a power to retain a residence or other property for the personal use of the spouse will not disqualify the interest passing in trust. (5) An interest passing in trust will not satisfy the condition set forth in paragraph (a)(1) of this section that the surviving spouse be entitled to all the income if the primary purpose of the trust is to safeguard property without providing the spouse with the required beneficial enjoyment. Such trusts include not only trusts which expressly provide for the accumulation of the income but also trusts which indirectly accomplish a similar purpose. For example, assume that the corpus of a trust consists substantially of property which is not likely to be income producing during the life of the surviving spouse and that the spouse cannot compel the trustee to convert or otherwise deal with the property as described in subparagraph (4) of this paragraph. An interest passing to such a trust will not qualify unless the applicable rules for the administration require, or permit the spouse to require, that the trustee provide the required beneficial enjoyment such as by payments to the spouse out of other assets of the trust. (6) If a trust is created during the decedent's life, it is immaterial whether or not the interest passing in trust satisfied the conditions set forth in paragraph (a) (1) through (5) of this section prior to the decedent's death. If a trust may be terminated during the life of the surviving spouse, under her exercise of a power of appointment or by distribution of the corpus to her, the interest passing in trust satisfies the condition set forth in paragraph (a)(1) of this section (that the spouse be entitled to all the income) if she (i) is entitled to the income until the trust terminates, or (ii) has the right, exercisable in all events, to have the corpus distributed to her at any time during her life. (7) An interest passing in trust fails to satisfy the condition set forth in paragraph (a)(1) of this section, that the spouse be entitled to all the income, to the extent that the income is required to be accumulated in whole or in part or may be accumulated in the discretion of any person other than the surviving spouse; to the extent that the consent of any person other than the surviving spouse is required as a condition precedent to distribution of the income; or to the extent that any person other than the surviving spouse has the power to alter the terms of the trust so as to deprive her of her right to the income. An interest passing in trust will not fail to satisfy the condition that the spouse be entitled to all the income merely because its terms provide that the right of the surviving spouse to the income shall not be subject to assignment, alienation, pledge, attachment or claims of creditors. (8) In the case of an interest passing in trust, the terms “entitled for life” and “payable annually or at more frequent intervals,” as used in the conditions set forth in paragraph (a) (1) and (2) of this section, require that under the terms of the trust the income referred to must be currently (at least annually; see paragraph (e) of this section) distributable to the spouse or that she must have such command over the income that it is virtually hers. Thus, the conditions in paragraph (a) (1) and (2) of this section are satisfied in this respect if, under the terms of the trust instrument, the spouse has the right exercisable annually (or more frequently) to require distribution to herself of the trust income, and otherwise the trust income is to be accumulated and added to corpus. Similarly, as respects the income for the period between the last distribution date and the date of the spouse's death, it is sufficient if that income is subject to the spouse's power to appoint. Thus, if the trust instrument provides that income accrued or undistributed on the date of the spouse's death is to be disposed of as if it had been received after her death, and if the spouse has a power of appointment over the trust corpus, the power necessarily extends to the undistributed income. (9) An interest is not to be regarded as failing to satisfy the conditions set forth in paragraph (a) (1) and (2) of this section (that the spouse be entitled to all the income and that it be payable annually or more frequently) merely because the spouse is not entitled to the income from estate assets for the period before distribution of those assets by the executor, unless the executor is, by the decedent's will, authorized or directed to delay distribution beyond the period reasonably required for administration of the decedent's estate. As to the valuation of the property interest passing to the spouse in trust where the right to income is expressly postponed, see § 20.2056(b)-4. (g) Power of appointment in surviving spouse. (i) A power so to appoint fully exercisable in her own favor at any time following the decedent's death (as, for example, an unlimited power to invade); or (ii) A power so to appoint exercisable in favor of her estate. Such a power, if exercisable during life, must be fully exercisable at any time during life, or, if exercisable by will, must be fully exercisable irrespective of the time of her death (subject in either case to the provisions of § 20.2053(b)-3, relating to interests conditioned on survival for a limited period); or (iii) A combination of the powers described under subdivisions (i) and (ii) of this subparagraph. For example, the surviving spouse may, until she attains the age of 50 years, have a power to appoint to herself and thereafter have a power to appoint to her estate. However, the condition that the spouse's power must be exercisable in all events is not satisfied unless irrespective of when the surviving spouse may die the entire interest or a specific portion of it will at the time of her death be subject to one power or the other (subject to the exception in § 20.2053(b)-3, relating to interests contingent on survival for a limited period). (2) The power of the surviving spouse must be a power to appoint the entire interest or a specific portion of it as unqualified owner (and free of the trust if a trust is involved, or free of the joint tenancy if a joint tenancy is involved) or to appoint the entire interest or a specific portion of it as a part of her estate (and free of the trust if a trust is involved), that is, in effect, to dispose of it to whomsoever she pleases. Thus, if the decedent devised property to a son and the surviving spouse as joint tenants with right of survivorship and under local law the surviving spouse has a power of severance exercisable without consent of the other joint tenant, and by exercising this power could acquire a one-half interest in the property as a tenant in common, her power of severance will satisfy the conditions set forth in paragraph (a)(3) of this section that she have a power of appointment in favor of herself or her estate. However, if the surviving spouse entered into a binding agreement with the decedent to exercise the power only in favor of their issue, that condition is not met. An interest passing in trust will not be regarded as failing to satisfy the condition merely because takers in default of the surviving spouse's exercise of the power are designated by the decedent. The decedent may provide that, in default of exercise of the power, the trust shall continue for an additional period. (3) A power is not considered to be a power exercisable by a surviving spouse alone and in all events as required by paragraph (a)(4) of this section if the exercise of the power in the surviving spouse to appoint the entire interest or a specific portion of it to herself or to her estate requires the joinder or consent of any other person. The power is not “exercisable in all events”, if it can be terminated during the life of the surviving spouse by any event other than her complete exercise or release of it. Further, a power is not “exercisable in all events” if it may be exercised for a limited purpose only. For example, a power which is not exercisable in the event of the spouse's remarriage is not exercisable in all events. Likewise, if there are any restrictions, either by the terms of the instrument or under applicable local law, on the exercise of a power to consume property (whether or not held in trust) for the benefit of the spouse, the power is not exercisable in all events. Thus, if a power of invasion is exercisable only for the spouse's support, or only for her limited use, the power is not exercisable in all events. In order for a power of invasion to be exercisable in all events, the surviving spouse must have the unrestricted power exercisable at any time during her life to use all or any part of the property subject to the power, and to dispose of it in any manner, including the power to dispose of it by gift (whether or not she has power to dispose of it by will). (4) The power in the surviving spouse is exercisable in all events only if it exists immediately following the decedent's death. For example, if the power given to the surviving spouse is exercisable during life, but cannot be effectively exercised before distribution of the assets by the executor, the power is not exercisable in all events. Similarly, if the power is exercisable by will, but cannot be effectively exercised in the event the surviving spouse dies before distribution of the assets by the executor, the power is not exercisable in all events. However, an interest will not be disqualified by the mere fact that, in the event the power is exercised during administration of the estate, distribution of the property to the appointee will be delayed for the period of administration. If the power is in existence at all times following the decedent's death, limitations of a formal nature will not disqualify an interest. Examples of formal limitations on a power exercisable during life are requirements that an exercise must be in a particular form, that it must be filed with a trustee during the spouse's life, that reasonable notice must be given, or that reasonable intervals must elapse between successive partial exercises. Examples of formal limitations on a power exercisable by will are that it must be exercised by a will executed by the surviving spouse after the decedent's death or that exercise must be by specific reference to the power. (5) If the surviving spouse has the requisite power to appoint to herself or her estate, it is immaterial that she also has one or more lesser powers. Thus, if she has a testamentary power to appoint to her estate, she may also have a limited power of withdrawal or of appointment during her life. Similarly, if she has an unlimited power of withdrawal, she may have a limited testamentary power. (h) Requirement of survival for a limited period. (i) [Reserved] (j) Existence of a power in another. Example (1). Assume that a decedent created a trust, designating his surviving spouse as income beneficiary for life with an unrestricted power in the spouse to appoint the corpus during her life. The decedent further provided that in the event the surviving spouse should die without having exercised the power, the trust should continue for the life of his son with a power in the son to appoint the corpus. Since the power in the son could become exercisable only after the death of the surviving spouse, the interest is not regarded as failing to satisfy the condition set forth in paragraph (a)(5) of this section. Example (2). Assume that the decedent created a trust, designating his surviving spouse as income beneficiary for life and as donee of a power to appoint by will the entire corpus. The decedent further provided that the trustee could distribute 30 percent of the corpus to the decedent's son when he reached the age of 35 years. Since the trustee has a power to appoint 30 percent of the entire interest for the benefit of a person other than the surviving spouse, only 70 percent of the interest placed in trust satisfied the condition set forth in paragraph (a)(5) of this section. If, in this case, the surviving spouse had a power, exercisable by her will, to appoint only one-half of the corpus as it was constituted at the time of her death, it should be noted that only 35 percent of the interest placed in the trust would satisfy the condition set forth in paragraph (a)(3) of this section. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 8522, 59 FR 9649, Mar. 1, 1994; T.D. 9102, 69 FR 20, Jan. 2, 2004] § 20.2056(b)-6 Marital deduction; life insurance or annuity payments with power of appointment in surviving spouse. (a) In general. (1) The proceeds, or a specific portion of the proceeds, must be held by the insurer subject to an agreement either to pay the entire proceeds or a specific portion thereof in installments, or to pay interest thereon, and all or a specific portion of the installments or interest payable during the life of the surviving spouse must be payable only to her. (2) The installments or interest payable to the surviving spouse must be payable annually, or more frequently, commencing not later than 13 months after the decedent's death. (3) The surviving spouse must have the power to appoint all or a specific portion of the amounts so held by the insurer to either herself or her estate. (4) The power in the surviving spouse must be exercisable by her alone and (whether exercisable by will or during life) must be exercisable in all events. (5) The amounts or the specific portion of the amounts payable under such contract must not be subject to a power in any other person to appoint any part thereof to any person other than the surviving spouse. (b) Specific portion; deductible interest. (c) Applicable principles. (2) The provisions of paragraph (a) of this section are applicable with respect to a property interest which passed from the decedent in the form of proceeds of a policy of insurance upon the decedent's life, a policy of insurance upon the life of a person who predeceased the decedent, a matured endowment policy, or an annuity contract, but only in case the proceeds are to be held by the insurer. With respect to proceeds under any such contract which are to be held by a trustee, with power of appointment in the surviving spouse, see § 20.2056(b)-5. As to the treatment of proceeds not meeting the requirements of § 20.2056(b)-5 or of this section, see § 20.2056(a)-2. (3) In the case of a contract under which payments by the insurer commenced during the decedent's life, it is immaterial whether or not the conditions in subparagraphs (1) through (5) of paragraph (a) of this section were satisfied prior to the decedent's death. (d) Payments of installments or interest. (e) Powers of appointment. (2) For examples of formal limitations on the power which will not disqualify the contract, see paragraph (g)(4) of § 20.2056(b)-5. If the power is exercisable from the moment of the decedent's death, the contract is not disqualified merely because the insurer may require proof of the decedent's death as a condition to making payment to the appointee. If the submission of proof of the decedent's death is a condition to the exercise of the power, the power will not be considered “exercisable in all events” unless in the event the surviving spouse had died immediately following the decedent, her power to appoint would have been considered to exist at the time of her death, within the meaning of section 2041(a)(2). See paragraph (b) of § 20.2041-3. (3) It is sufficient for the purposes of the condition in paragraph (a)(3) of this section that the surviving spouse have the power to appoint amounts held by the insurer to herself or her estate if the surviving spouse has the unqualified power, exercisable in favor of herself or her estate, to appoint amounts held by the insurer which are payable after her death. Such power to appoint need not extend to installments or interest which will be paid to the spouse during her life. Further, the power to appoint need not be a power to require payment in a single sum. For example, if the proceeds of a policy are payable in installments, and if the surviving spouse has the power to direct that all installments payable after her death be paid to her estate, she has the requisite power. (4) It is not necessary that the phrase “power to appoint” be used in the contract. For example, the condition in paragraph (a)(3) of this section that the surviving spouse have the power to appoint amounts held by the insurer to herself or her estate is satisfied by terms of a contract which give the surviving spouse a right which is, in substance and effect, a power to appoint to herself or her estate, such as a right to withdraw the amount remaining in the fund held by the insurer, or a right to direct that any amount held by the insurer under the contract at her death shall be paid to her estate. § 20.2056(b)-7 Election with respect to life estate for surviving spouse. (a) In general. (b) Qualified terminable interest property In general. qualified terminable interest property. (i) Terminable interests described in section 2056(b)(1)(C) cannot qualify as qualified terminable interest property. Thus, if the decedent directs the executor to purchase a terminable interest with estate assets, the terminable interest acquired will not qualify as qualified terminable interest property. (ii) For purposes of section 2056(b)(7)(B)(i), the term property entire interest in property specific portion of the entire interest (2) Property for which an election may be made In general. (ii) Division of trusts In general. (B) Manner of dividing and funding trust. (C) Local law. (3) Persons permitted to make the election. (4) Manner and time of making the election In general. return of tax imposed by section 2001 (ii) Election irrevocable. (c) Protective elections In general. (2) Protective election irrevocable. (d) Qualifying income interest for life In general. qualifying income interest for life. (2) Entitled for life to all income. (3) Contingent income interests. (ii) Estates of decedents whose estate tax returns were due on or before February 18, 1997, that did not make the election under section 2056(b)(7)(B)(v) because the surviving spouse's income interest in the property was contingent upon the election or because the nonelected portion of the property was to pass to a beneficiary other than the surviving spouse are granted an extension of time to make the QTIP election if the following requirements are satisfied: (A) The period of limitations on filing a claim for credit or refund under section 6511(a) has not expired. (B) A claim for credit or refund is filed on Form 843 with a revised Recapitulation and Schedule M, Form 706 (or 706NA) that signifies the QTIP election. Reference to this section should be made on the Form 843. (C) The following statement is included with the Form 843: “The undersigned certifies that the property with respect to which the QTIP election is being made will be included in the gross estate of the surviving spouse as provided in section 2044 of the Internal Revenue Code, in determining the federal estate tax liability on the spouse's death.” The statement must be signed, under penalties of perjury, by the surviving spouse, the surviving spouse's legal representative (if the surviving spouse is legally incompetent), or the surviving spouse's executor (if the surviving spouse is deceased). (4) Income between last distribution date and date of spouse's death. (5) Pooled income funds. (6) Power to distribute principal to spouse. (e) Annuities payable from trusts in the case of estates of decedents dying on or before October 24, 1992, and certain decedents dying after October 24, 1992, with wills or revocable trusts executed on or prior to that date In general. (2) Deductible interest. (3) Distributions permissible only to surviving spouse. (4) Applicable interest rate. (5) Effective dates. (ii) The rules contained in § 20.2056(b)-7(e) apply in the case of decedents dying after October 24, 1992, if property passes to the spouse pursuant to a will or revocable trust executed on or before October 24, 1992, and either— (A) On that date, the decedent was under a mental disability to change the disposition of his property and did not regain his competence to dispose of such property before the date of death; or (B) The decedent dies prior to October 24, 1995. (iii) Notwithstanding the foregoing, the rules contained in § 20.2056(b)-7(e) do not apply if the will or revocable trust is amended after October 24, 1992, in any respect that increases the amount of the transfer qualifying for the marital deduction or alters the terms by which the interest so passes to the surviving spouse. (f) Joint and survivor annuities. (g) Application of local law. (h) Examples. Example 1. Life estate in residence. D owned a personal residence valued at $250,000 for estate tax purposes. Under D's will, the exclusive and unrestricted right to use the residence (including the right to continue to occupy the property as a personal residence or to rent the property and receive the income) passes to S for life. At S's death, the property passes to D's children. Under applicable local law, S must consent to any sale of the property. If the executor elects to treat all of the personal residence as qualified terminable interest property, the deductible interest is $250,000, the value of the residence for estate tax purposes. Example 2. Power to make property productive, D's will established a trust funded with property valued for estate tax purposes at $500,000. The assets include both income producing assets and non-productive assets. S was given the power, exercisable annually, to require distribution of all of the trust income to herself. No trust property may be distributed during S's lifetime to any person other than S. Applicable local law permits S to require that the trustee either make the trust property productive or sell the property and reinvest in productive property within a reasonable time after D's death. If the executor elects to treat all of the trust as qualified terminable interest property, the deductible interest is $500,000. If the executor elects to treat only 20 percent of the trust as qualified terminable interest property, the deductible interest is $100,000, i.e., 20 percent of $500,000. Example 3. Power of distribution over fraction of trust income, The facts are the same as in Example 2 Example 4. Power to distribute trust corpus to other beneficiaries, D's will established a trust providing that S is entitled to receive at least annually all the trust income. The trustee is given the power to use annually during S's lifetime $5,000 from the trust for the maintenance and support of S's minor child, C. Any such distribution does not necessarily relieve S of S's obligation to support and maintain C. S does not have a qualifying income interest for life in any portion of the trust because the bequest fails to satisfy the condition that no person have a power, other than a power the exercise of which takes effect only at or after S's death, to appoint any part of the property to any person other than S. The trust would also be nondeductible under section 2056(b)(7) if S, rather than the trustee, held the power to appoint a portion of the principal to C. However, in the latter case, if S made a qualified disclaimer (within the meaning of section 2518) of the power to appoint to C, the trust could qualify for the marital deduction pursuant to section 2056(b)(7), assuming that the power is personal to S and S's disclaimer terminates the power. Similarly, in either case, if C made a qualified disclaimer of C's right to receive distributions from the trust, the trust would qualify under section 2056(b)(7), assuming that C's disclaimer effectively negates the trustee's power under local law. Example 5. Spouse's income interest terminable on remarriage, D's will established a trust providing that all of the trust income is payable at least annually to S for S's lifetime, provided that, if S remarries, S's interest in the trust will pass to X. The trust is not deductible under section 2056(b)(7). S's income interest is not a qualifying income interest for life Example 6. Spouse's qualifying income interest for life contingent on executor's election, D's will established a trust providing that S is entitled to receive the income, payable at least annually, from that portion of the trust that the executor elects to treat as qualified terminable interest property. The portion of the trust which the executor does not elect to treat as qualified terminable interest property passes as of D's date of death to a trust for the benefit of C, D's child. Under these facts, the executor is not considered to have a power to appoint any part of the trust property to any person other than S during S's life. Example 7. Formula partial election, D's will established a trust funded with the residue of D's estate. Trust income is to be paid annually to S for life, and the principal is to be distributed to D's children upon S's death. S has the power to require that all the trust property be made productive. There is no power to distribute trust property during S's lifetime to any person other than S. D's executor elects to deduct a fractional share of the residuary estate under section 2056(b)(7). The election specifies that the numerator of the fraction is the amount of deduction necessary to reduce the Federal estate tax to zero (taking into account final estate tax values) and the denominator of the fraction is the final estate tax value of the residuary estate (taking into account any specific bequests or liabilities of the estate paid out of the residuary estate). The formula election is of a fractional share. The value of the share qualifies for the marital deduction even though the executor's determinations to claim administration expenses as estate or income tax deductions and the final estate tax values will affect the size of the fractional share. Example 8. Formula partial election, The facts are the same as in Example 7 Example 7. Example 9. Severance of QTIP trust, D's will established a trust funded with the residue of D's estate. Trust income is to be paid annually to S for life, and the principal is to be distributed to D's children upon S's death. S has the power to require that all of the trust property be made productive. There is no power to distribute trust property during S's lifetime to any person other than S. D's will authorizes the executor to make the election under section 2056(b)(7) only with respect to the minimum amount of property necessary to reduce estate taxes on D's estate to zero, authorizes the executor to divide the residuary estate into two separate trusts to reflect the election, and authorizes the executor to charge any payment of principal to S to the qualified terminable interest trust. S is the sole beneficiary of both trusts during S's lifetime. The authorizations in the will do not adversely affect the allowance of the marital deduction. Only the property remaining in the marital deduction trust, after payment of principal to S, is subject to inclusion in S's gross estate under section 2044 or subject to gift tax under section 2519. Example 10. Payments to spouse from individual retirement account, S is the life beneficiary of sixteen remaining annual installments payable from D's individual retirement account. The terms of the account provide for the payment of the account balance in nineteen annual installments that commenced when D reached age 70 1/2 1/19 1/18 1/17 Example 11. Spouse's interest in trust in the form of an annuity, D died prior to October 24, 1992. D's will established a trust funded with income producing property valued at $500,000 for estate tax purposes. The trustee is required by the trust instrument to pay $20,000 a year to S for life. Trust income in excess of the annuity amount is to be accumulated in the trust and may not be distributed during S's lifetime. S's lifetime annuity interest is treated as a qualifying income interest for life. If the executor elects to treat the entire portion of the trust in which S has a qualifying income interest as qualified terminable interest property, the value of the deductible interest is (assuming that 10 percent is the applicable interest rate under section 7520 for valuing annuities on the appropriate valuation date) $200,000, because that amount would yield an income to S of $20,000 a year. Example 12. Value of spouse's annuity exceeds value of trust corpus, The facts are the same as in Example 11 Example 13. Pooled income fund, D's will provides for a bequest of $200,000 to a pooled income fund described in section 642(c)(5), designating S as the income beneficiary for life. If D's executor elects to treat the entire $200,000 as qualified terminable interest property, the deductible interest is $200,000. Example 14. Funding severed QTIP trusts, D's will established a trust satisfying the requirements of section 2056(b)(7). Pursuant to the authority in D's will and § 20.2056(b)-7(b)(2)(ii), D's executor indicates on the Federal estate tax return that an election under section 2056(b)(7) is being made with respect to 50 percent of the trust, and that the trust will subsequently be divided to reflect the partial election on the basis of the fair market value of the property at the time of the division. D's executor funds the trust at the end of the period of estate administration. At that time, the property available to fund the trusts consists of 100 shares of X Corporation stock with a current value of $400,000 and 200 shares of Y Corporation stock with a current value of $400,000. D may fund each trust with the stock of either or both corporations, in any combination, provided that the aggregate value of the stock allocated to each trust is $400,000. [T.D. 8522, 59 FR 9651, Mar. 1, 1994, as amended by T.D. 8779, 63 FR 44393, Aug. 19, 1998; T.D. 9102, 69 FR 21, Jan. 2, 2004] § 20.2056(b)-8 Special rule for charitable remainder trusts. (a) In general Surviving spouse only noncharitable beneficiary. non-charitable beneficiary (2) Interest for life or term of years. (3) Payment of state death taxes. (b) Charitable remainder trusts where the surviving spouse is not the only noncharitable beneficiary. [T.D. 8522, 59 FR 9653, Mar. 1, 1994] § 20.2056(b)-9 Denial of double deduction. The value of an interest in property may not be deducted for Federal estate tax purposes more than once with respect to the same decedent. For example, where a decedent transfers a life estate in a farm to the spouse with a remainder to charity, the entire property is, pursuant to the executor's election under section 2056(b)(7), treated as passing to the spouse. The entire value of the property qualifies for the marital deduction. No part of the value of the property qualifies for a charitable deduction under section 2055 in the decedent's estate. [T.D. 8522, 59 FR 9654, Mar. 1, 1994] § 20.2056(b)-10 Effective dates. Except as specifically provided in §§ 20.2056(b)-5(c)(3) (ii) and (iii), 20.2056(b)-7(d)(3), 20.2056(b)-7(e)(5), and 20.2056(b)-8(b), the provisions of §§ 20.2056(b)-5(c), 20.2056(b)-7, 20.2056(b)-8, and 20.2056(b)-9 are applicable with respect to estates of decedents dying after March 1, 1994. With respect to decedents dying on or before such date, the executor of the decedent's estate may rely on any reasonable interpretation of the statutory provisions. In addition, the rule in the last sentence of § 20.2056(b)-5(f)(1) and the rule in the last sentence of § 20.2056(b)-7(d)(1) regarding the effect on the spouse's right to income if applicable local law provides for the reasonable apportionment between the income and remainder beneficiaries of the total return of the trust are applicable with respect to trusts for taxable years ending after January 2, 2004. [T.D. 8779, 63 FR 44393, Aug. 19, 1998, as amended by T.D. 9102, 69 FR 21, Jan. 2, 2004] § 20.2056(c)-1 Marital deduction; definition of “passed from the decedent.” (a) In general. (1) Property interests devolving upon any person (or persons) as surviving coowner with the decedent under any form of joint ownership under which the right of survivorship existed are considered as having passed from the decedent to such person (or persons). (2) Property interests at any time subject to the decedent's power to appoint (whether alone or in conjunction with any person) are considered as having passed from the decedent to the appointee under his exercise of the power, or, in case of the lapse, release or nonexercise of the power, as having passed from the decedent to the taker in default of exercise. (3) The dower or curtesy interest (or statutory interest in lieu thereof) of the decedent's surviving spouse is considered as having passed from the decedent to his spouse. (4) The proceeds of insurance upon the life of the decedent are considered as having passed from the decedent to the person who, at the time of the decedent's death, was entitled to receive the proceeds. (5) Any property interest transferred during life, bequeathed or devised by the decedent, or inherited from the decedent, is considered as having passed to the person to whom he transferred, bequeathed, or devised the interest, or to the person who inherited the interest from him. (6) The survivor's interest in an annuity or other payment described in section 2039 (see §§ 20.2039-1 and 20.2039-2) is considered as having passed from the decedent to the survivor only to the extent that the value of such interest is included in the decedent's gross estate under that section. If only a portion of the entire annuity or other payment is included in the decedent's gross estate and the annuity or other payment is payable to more than one beneficiary, then the value of the interest considered to have passed to each beneficiary is that portion of the amount payable to each beneficiary that the amount of the annuity or other payment included in the decedent's gross estate bears to the total value of the annuity or other payment payable to all beneficiaries. (b) Expectant interest in property under community property laws. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960. Redesignated and amended by T.D. 8522, 59 FR 9654, Mar. 1, 1994] § 20.2056(c)-2 Marital deduction; definition of “passed from the decedent to his surviving spouse.” (a) In general. (1) In the case of certain interests with income for life to the surviving spouse with power of appointment in her (see § 20.2056(b)-5); (2) In the case of certain interests with income for life to the surviving spouse that the executor elects to treat as qualified terminable interest property (see § 20.2056(b)-7); (3) In the case of proceeds held by the insurer under a life insurance, endowment, or annuity contract with power of appointment in the surviving spouse (see § 20.2056(b)-6); (4) In case of the disclaimer of an interest by the surviving spouse or by any other person (see § 20.2056(d)-1); (5) In case of an election by the surviving spouse (see paragraph (c) of this section); and (6) In case of a controversy involving the decedent's will, see paragraph (d) of this section. A property interest is treated as passing to the surviving spouse only if it passes to the spouse as beneficial owner, except to the extent otherwise provided in §§ 20.2056(b)-5 through 20.2056(b)-7. For this purpose, where a property interest passed from the decedent in trust, such interest is considered to have passed from him to his surviving spouse to the extent of her beneficial interest therein. The deduction may not be taken with respect to a property interest which passed to such spouse merely as trustee, or subject to a binding agreement by the spouse to dispose of the interest in favor of a third person. An allowance or award paid to a surviving spouse pursuant to local law for her support during the administration of the decedent's estate constitutes a property interest passing from the decedent to his surviving spouse. In determining whether or not such an interest is deductible, however, see generally the terminable interest rules of § 20.2056(b)-1 and especially example (8) of paragraph (g) of that section. (b) Examples. (1) A property interest bequeathed in trust by H (the decedent) is considered as having passed from him to W (his surviving spouse)— (i) If the trust income is payable to W for life and upon her death the corpus is distributable to her executors or administrators; (ii) If W is entitled to the trust income for a term of years following which the corpus is to be paid to W or her estate; (iii) If the trust income is to be accumulated for a term of years or for W's life and the augmented fund paid to W or her estate; or (iv) If the terms of the transfer satisfy the requirements of § 20.2056(b)-5 or § 20.2056(b)-7. (2) If H devised property— (i) To A for life with remainder absolutely to W or her estate, the remainder interest is considered to have passed from H to W; (ii) To W for life with remainder to her estate, the entire property is considered as having passed from H to W; or (iii) Under conditions which satisfy the provisions of § 20.2056(b)-5 or 20.2056(b)-7, the entire property is considered as having passed from H to W. (3) Proceeds of insurance upon the life of H are considered as having passed from H to W if the terms of the contract— (i) Meet the requirements of § 20.2056(b)-6; (ii) Provide that the proceeds are payable to W in a lump sum; (iii) Provide that the proceeds are payable in installments to W for life and after her death any remaining installments are payable to her estate; (iv) Provide that interest on the proceeds is payable to W for life and upon her death the principal amount is payable to her estate; or (v) Provide that the proceeds are payable to a trustee under an arrangement whereby the requirements of § 20.2056(b)-5 or 20.2056(b)-7 are satisfied. (c) Effect of election by surviving spouse. (d) Will contests. (2) If as a result of the controversy involving the decedent's will, or involving any bequest or devise thereunder, a property interest is assigned or surrendered to the surviving spouse, the interest so acquired will be regarded as having “passed from the decedent to his surviving spouse” only if the assignment or surrender as a bona fide recognition of enforceable rights of the surviving spouse in the decedent's estate. Such a bona fide recognition will be presumed where the assignment or surrender was pursuant to a decision of a local court upon the merits in an adversary proceeding following a genuine and active contest. However, such a decree will be accepted only to the extent that the court passed upon the facts upon which deductibility of the property interest depends. If the assignment or surrender was pursuant to a decree rendered by consent, or pursuant to an agreement not to contest the will or not to probate the will, it will not necessarily be accepted as a bona fide evaluation of the rights of the spouse. (e) Survivorship. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960. Redesignated and amended by T.D. 8522, 59 FR 9654, Mar. 1, 1994] § 20.2056(c)-3 Marital deduction; definition of “passed from the decedent to a person other than his surviving spouse”. The expression “passed from the decedent to a person other than his surviving spouse” refers to any property interest which, under the definition stated in § 20.2056(c)-1 is considered as having “passed from the decedent” and which under the rules referred to in § 20.2056(c)-2 is not considered as having “passed from the decedent to his surviving spouse.” Interests which passed to a person other than the surviving spouse include interests so passing under the decedent's exercise, release, or nonexercise of a nontaxable power to appoint. It is immaterial whether the property interest which passed from the decedent to a person other than his surviving spouse is included in the decedent's gross estate. The term “person other than his surviving spouse” includes the possible unascertained takers of a property interest, as, for example, the members of a class to be ascertained in the future. As another example, assume that the decedent created a power of appointment over a property interest, which does not come within the purview of § 20.2056(b)-5 or § 20.2056(b)-6. In such a case, the term “person other than his surviving spouse” refers to the possible appointees and possible takers in default (other than the spouse) of such property interest. Whether or not there is a possibility that the “person other than his surviving spouse” (or the heirs or assigns of such person) may possess or enjoy the property following termination or failure of the interest therein which passed from the decedent to his surviving spouse is to be determined as of the time of the decedent's death. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960. Redesignated and amended by T.D. 8522, 59 FR 9654, Mar. 1, 1994] § 20.2056(d)-1 Marital deduction; special rules for marital deduction if surviving spouse is not a United States citizen. Rules pertaining to the application of section 2056(d), including certain transition rules, are contained in §§ 20.2056A-1 through 20.2056A-13. [T.D. 8612, 60 FR 43538, Aug. 22, 1995] § 20.2056(d)-2 Marital deduction; effect of disclaimers of post-December 31, 1976 transfers. (a) Disclaimer by a surviving spouse. (b) Disclaimer by a person other than a surviving spouse. (1) The person other than the surviving spouse makes a qualified disclaimer with respect to such interest; and (2) The surviving spouse is entitled to such interest in property as a result of such disclaimer, the disclaimed interest is treated as passing directly from the decedent to the surviving spouse. For rules relating to when the transfer creating the interest occurs, see § 25.2518-2(c)(3) and (c)(4) of this chapter. (c) Effective date. [T.D. 8095, 51 FR 28368, Aug. 7, 1986. Redesignated by T.D. 8612, 60 FR 43538, Aug. 22, 1995, as amended by T.D. 8744, 62 FR 68184, Dec. 31, 1997] § 20.2056(d)-3 Marital deduction; effect of disclaimers of pre-January 1, 1977 transfers. (a) Disclaimer by a surviving spouse. (b) Disclaimer by a person other than a surviving spouse Decedents dying after October 3, 1966 and before January 1, 1977. (2) Decedents dying after September 30, 1963 and before October 4, 1966. The interests passing by disclaimer to the surviving spouse under this paragraph (b)(2) are to qualify for the marital deduction only to the extent that, when added to any other allowable marital deduction without regard to this paragraph (b)(2), they do not exceed the greater of the deductions which would be allowable for the marital deduction without regard to the disclaimer if the surviving spouse exercised the election under State law to take against the will, or an amount equal to one-third of the decedent's adjusted gross estate. If the disclaimer does not satisfy the requirements of this paragraph (b)(2), the property is treated as passing from the decedent to the person who made the disclaimer, in the same manner as if the disclaimer had not been made. (3) Decedents dying before October 4, 1966. [T.D. 8095, 51 FR 28368, Aug. 7, 1986. Redesignated by T.D. 8612, 60 FR 43538, Aug. 22, 1995] § 20.2056A-0 Table of contents. This section lists the captions that appear in the final regulations under §§ 20.2056A-1 through 20.2056A-13. § 20.2056A-1 Restrictions on allowance of marital deduction if surviving spouse is not a United States citizen. (a) General rule. (b) Marital deduction allowed if resident spouse becomes citizen. (c) Special rules in the case of certain transfers subject to estate and gift tax treaties. § 20.2056A-2 Requirements for qualified domestic trust. (a) In general. (b) Qualified marital interest requirements. (1) Property passing to QDOT. (2) Property passing outright to spouse. (3) Property passing under a nontransferable plan or arrangement. (c) Statutory requirements. (d) Additional requirements to ensure collection of the section 2056A estate tax. (1) Security and other arrangements for payment of estate tax imposed under section 2056A(b)(1). (2) Individual trustees. (3) Annual reporting requirements. (4) Request for alternate arrangement or waiver. (5) Adjustment of dollar threshold and exclusion. (6) Special rules. (e) Applicability date. § 20.2056A-3 QDOT election. (a) General rule. (b) No partial elections. (c) Protective elections. (d) Manner of election. § 20.2056A-4 Procedures for conforming marital trusts and nontrust marital transfers to the requirements of a qualified domestic trust. (a) Marital trusts. (1) In general. (2) Judicial reformations. (3) Tolling of statutory assessment period. (b) Nontrust marital transfers. (1) In general. (2) Form of transfer or assignment. (3) Assets eligible for transfer or assignment. (4) Pecuniary assignment—special rules. (5) Transfer tax treatment of transfer or assignment. (6) Period for completion of transfer. (7) Retirement accounts and annuities. (8) Protective assignment. (c) Nonassignable annuities and other arrangements. (1) Definition and general rule. (2) Agreement to remit section 2056A estate tax on corpus portion of each annuity payment. (3) Agreement to roll over corpus portion of annuity payment to QDOT. (4) Determination of corpus portion. (5) Information Statement. (6) Agreement to pay section 2056A estate tax. (7) Agreement to roll over annuity payments. (d) Examples. (e) Applicability date. § 20.2056A-5 Imposition of section 2056A estate tax. (a) In general. (b) Amounts subject to tax. (1) Distribution of principal during the spouse's lifetime. (2) Death of surviving spouse. (3) Trust ceases to qualify as QDOT. (c) Distributions and dispositions not subject to tax. (1) Distributions of principal on account of hardship. (2) Distributions of income to the surviving spouse. (3) Certain miscellaneous distributions and dispositions. § 20.2056A-6 Amount of tax. (a) Definition of tax. (b) Benefits allowed in determining amount of section 2056A estate tax. (1) General rule. (2) Treatment as resident. (3) Special rule in the case of trusts described in section 2056(b)(8). (4) Credit for state and foreign death taxes. (5) Alternate valuation and special use valuation. (c) Miscellaneous rules. (d) Examples. § 20.2056A-7 Allowance of prior transfer credit under section 2013. (a) Property subject to QDOT election. (b) Property not subject to QDOT election. (c) Example. § 20.2056A-8 Special rules for joint property. (a) Inclusion in gross estate. (1) General rule. (2) Consideration furnished by surviving spouse. (3) Amount allowed to be transferred to QDOT. (b) Surviving spouse becomes citizen. (c) Examples. § 20.2056A-9 Designated Filer. § 20.2056A-10 Surviving spouse becomes citizen after QDOT established. (a) Section 2056A estate tax no longer imposed under certain circumstances. (b) Special election by spouse. § 20.2056A-11 Filing requirements and payment of the section 2056A estate tax. (a) Distributions during surviving spouse's life. (b) Tax at death of surviving spouse. (c) Extension of time for paying section 2056A estate tax. (1) Extension of time for paying tax under section 6161(a)(2). (2) Extension of time for paying tax under section 6161(a)(1). (d) Liability for tax. (e) Applicability date. § 20.2056A-12 Increased basis for section 2056A estate tax paid with respect to distribution from a QDOT. § 20.2056A-13 Effective date. [T.D. 8612, 60 FR 43538, Aug. 22, 1995, as amended by T.D. 8686, 61 FR 60553, Nov. 29, 1996; T.D. 10050, 91 FR 42661, July 10, 2026] § 20.2056A-1 Restrictions on allowance of marital deduction if surviving spouse is not a United States citizen. (a) General rule. (1) The property passes from the decedent to (or pursuant to)— (i) A qualified domestic trust (QDOT) described in section 2056A and § 20.2056A-2; (ii) A trust that, although not meeting all of the requirements for a QDOT, is reformed after the decedent's death to meet the requirements of a QDOT (see § 20.2056A-4(a)); (iii) The surviving spouse not in trust (e.g., by outright bequest or devise, by operation of law, or pursuant to the terms of an annuity or other similar plan or arrangement) and, prior to the date that the estate tax return is filed and on or before the last date prescribed by law that the QDOT election may be made (no more than one year after the time prescribed by law, including extensions, for filing the return), the surviving spouse either actually transfers the property to a QDOT or irrevocably assigns the property to a QDOT (see § 20.2056A-4(b)); or (iv) A plan or other arrangement that would have qualified for the marital deduction but for section 2056(d)(1)(A), and whose payments are not assignable or transferable to a QDOT, if the requirements of § 20.2056A-4(c) are met; and (2) The executor makes a timely QDOT election under § 20.2056A-3. (b) Marital deduction allowed if resident spouse becomes citizen. (c) Special rules in the case of certain transfers subject to estate and gift tax treaties. [T.D. 8612, 60 FR 43539, Aug. 22, 1995] § 20.2056A-2 Requirements for qualified domestic trust. (a) In general. (b) Qualified marital interest requirements Property passing to QDOT. (2) Property passing outright to spouse. (3) Property passing under a nontransferable plan or arrangement. (c) Statutory requirements. (d) Additional requirements to ensure collection of the section 2056A estate tax Security and other arrangements for payment of estate tax imposed under section 2056A(b)(1) QDOTs with assets in excess of $2 million. (A) Bank Trustee. (B) Bond. ( 1 Requirements for the bond. https://www.irs.gov Collection Advisory Offices Contact Information, https://www.irs.gov ( 2 Form of bond. Bond in Favor of the Internal Revenue Service To Secure Payment of Section 2056A Estate Tax Imposed Under Section 2056A(b) of the Internal Revenue Code. Know all persons by these presents, [amount determined under paragraph (d)(1)(i)(B) of this section], [Identify trust and governing instrument, name and address of trustee], Whereas, Now therefore, https://www.irs.gov Collection Advisory Offices Contact Information, https://www.irs.gov This bond shall be effective as of Principal Date Surety Date ( 3 Additional governing instrument requirements. ( 4 Procedure. https://www.irs.gov Collection Advisory Offices Contact Information, https://www.irs.gov (C) Letter of credit. ( 1 Requirements for the letter of credit. https://www.irs.gov Collection Advisory Offices Contact Information, https://www.irs.gov ( 2 Form of letter of credit. see [Issue Date] To: Internal Revenue Service Attention: https://www.irs.gov Collection Advisory Offices Contact Information, https://www.irs.gov, [Or in the case of nonresident noncitizen decedents and United States citizens who die domiciled outside the United States, To: Estate Tax Group, Assistant Commissioner (International) 950 L'Enfant Plaza CP:IN:D:C:EX:HQ:1114 Washington, DC 20024] Dear Sirs: We hereby establish our irrevocable Letter of Credit No.—in your favor for drawings up to U.S. $ [Applicant should provide bank with amount which Applicant determined under paragraph (d)(1)(i)(C)] For information and reference only, we are informed that this Letter of Credit relates to [Applicant should provide bank with the identity of qualified domestic trust and governing instrument], [Applicant should provide bank with the trustee name, address and the QDOT's TIN number, if any]. Drawings on this Letter of Credit are available upon presentation of the following documents: 1. Your draft drawn at sight on us bearing our Letter of Credit No. ________; and 2. Your signed statement as follows: The amount of the accompanying draft is payable under [identify bank] e.g., Except as expressly stated herein, this undertaking is not subject to any agreement, requirement or qualification. The obligation of [Name of Issuing Bank] [Name of Issuing Bank] It is a condition of this Letter of Credit that it is deemed to be automatically extended without amendment for a period of one year from the expiration date hereof, or any future expiration date, unless at least 60 days prior to any expiration date, we mail to you and to the U.S. Trustee notice by Registered Mail or Certified Mail, return receipt requested, or by courier to your and the trustee's address indicated above, that we elect not to consider this Letter of Credit renewed for any such additional period. Upon receipt of this notice, you may draw hereunder on or before the then current expiration date, by presentation of your draft and statement as stipulated above. [In the case of a letter of credit issued by a U.S. branch of a foreign bank the following language must be added]. It is a further condition of this Letter of Credit that if the U.S. branch of [name of foreign bank] Except where otherwise stated herein, this Letter of Credit is subject to the most recent revision of the Uniform Customs and Practice for Documentary Credits published by the International Chamber of Commerce (ICC), which can be found on https://www.iccwbo.org. Except as stated herein, this Letter of Credit cannot be modified or revoked without your consent. Authorized Signature Date ( 3 Form of confirmation. [Issue Date] To: Internal Revenue Service Attention: https://www.irs.gov Collection Advisory Offices Contact Information, https://www.irs.gov, [or in the case of nonresident noncitizens decedents and United States citizens who die domiciled outside the United States, To: Estate Tax Group, Assistant Commissioner (International) 950 L'Enfant Plaza CP:IN:D:C:EX:HQ:1114 Washington, DC 20024] Dear Sirs: We hereby confirm the enclosed irrevocable Letter of Credit No. ____________, and amendments thereto, if any, in your favor by _________ [Issuing Bank] for drawings up to U.S. $ [same amount as in initial Letter of Credit] effective immediately. This confirmation is issued, presentable and payable at our office at ________ and expires at 3:00 p.m. [EDT, EST, CDT, CST, MDT, MST, PDT, PST] on _____ at said office. For information and reference only, we are informed that this Confirmation relates to [Applicant should provide bank with the identity of qualified domestic trust and governing instrument], and the name, address, and identifying number of the trustee is [Applicant should provide bank with the trustee name, address and the QDOT's TIN number, if any]. We hereby undertake to honor your sight draft(s) drawn as specified in the Letter of Credit. Except as expressly stated herein, this undertaking is not subject to any agreement, condition, or qualification. The obligation of [Name of Confirming Bank] [Name of Confirming Bank] It is a condition of this Confirmation that it is deemed to be automatically extended without amendment for a period of one year from the expiry date hereof, or any future expiration date, unless at least sixty days prior to any expiration date, we send to you and to the U.S. Trustee notice by Registered Mail or Certified Mail, return receipt requested, or by courier to your and the trustee's addresses, respectively, indicated above, that we elect not to consider this Confirmation renewed for any additional period. Upon receipt of this notice by you, you may draw hereunder on or before the then current expiration date, by presentation of your draft and statement as stipulated above. Except where otherwise stated herein, this Confirmation is subject to the most recent version of the Uniform Customs and Practice for Documentary Credits https://www.iccwbo.org Except as stated herein, this Confirmation cannot be modified or revoked without your consent. Authorized Signature Date ( 4 Additional governing instrument requirements. ( 5 Procedure. https://www.irs.gov, Collection Advisory Offices Contact Information, https://www.irs.gov (D) Disallowance of marital deduction for substantial undervaluation of QDOT property in certain situations. 1 ( i ( ii ( 2 ( i ( ii (ii) QDOTs with assets of $2 million or less. (A) Multiple QDOTs. (B) Look-through rule. (C) Interests in other entities. (D) Special rule for foreign real property. (iii) Definition of finally determined In general. ( 1 ( 2 ( 3 ( 4 (B) Contested and Executor defined. contested executor (iv) Special rules for personal residence and related personal effects Two million dollar threshold. (B) Security requirement. (C) Foreign real property limitation. (D) Personal residence. personal residence (E) Related furnishings. related furnishings (F) Required statement. (G) Cessation of use. (v) Anti-abuse rule. (2) Individual trustees. (3) Annual reporting requirements In general. (A) The QDOT directly owns any foreign real property on the last day of its taxable year (or the last day of the calendar year if it has no taxable year), and the QDOT does not satisfy the requirements of paragraph (d)(1)(i) (A), (B), or (C) or (d)(4) of this section by employing a bank as trustee or providing security; or (B) The personal residence previously subject to the exclusion under paragraph (d)(1)(iv) of this section is sold, or that personal residence ceases to be used, or held for use, as a personal residence, during the taxable year (or during the calendar year if the QDOT does not have a taxable year); or (C) After the application of the look-through rule contained in paragraph (d)(1)(ii)(B) of this section, the QDOT is treated as owning any foreign real property on the last day of the taxable year (or the last day of the calendar year if the QDOT has no taxable year), and the QDOT does not satisfy the requirements of paragraph (d)(1) (A), (B), (C) or (d)(4) of this section by employing a bank as trustee or providing security. (ii) Time and manner of filing. (iii) Contents of statement. (A) The name, address, and taxpayer identification number, if any, of the U.S. Trustee and the QDOT; and (B) A list summarizing the assets held by the QDOT, together with the fair market value of each listed QDOT asset, determined as of the last day of the taxable year (December 31 if the QDOT does not have a taxable year) for which the written statement is filed. If the look-through rule contained in paragraph (d)(1)(ii)(B) of this section applies, then the partnership, corporation, trust or other entity must be identified and the QDOT's pro rata share of the foreign real property and other assets owned by that entity must be listed on the statement as if directly owned by the QDOT; and (C) If a personal residence previously subject to the exclusion under paragraph (d)(1)(iv) of this section is sold during the taxable year (or during the calendar year if the QDOT does not have a taxable year), the statement must provide the date of sale, the adjusted sales price (as defined in section 1034(b)(1)), the extent to which the amount of the adjusted sales price has been or will be used to purchase a new personal residence and, if not timely reinvested, the steps that will or have been taken to comply with paragraph (d)(1)(i) of this section, if applicable; and (D) If the personal residence ceases to be used, or held for use, as a personal residence by the surviving spouse during the taxable year (or during the calendar year if the QDOT does not have a taxable year), the written statement must describe the steps that will or have been taken to comply with paragraph (d)(1)(i) of this section, if applicable. (4) Request for alternate arrangement or waiver. (5) Adjustment of dollar threshold and exclusion. (6) Special rules— Special rule in the case of incompetency. (A) The testator or settlor dies after February 19, 1996; (B) The testator or settlor is, on November 20, 1995, and at all times thereafter, under a legal disability to amend the will or trust instrument; (C) The will or trust instrument does not provide the executor or the U.S. Trustee with a power to amend the instrument in order to meet the requirements of section 2056A; and (D) The U.S. Trustee provides a written statement with the federal estate tax return (Form 706 or 706NA) that the trust is being administered (or will be administered) so as to be in actual compliance with the requirements of this paragraph (d) and will continue to be administered so as to be in actual compliance with this paragraph (d) for the duration of the trust. This statement must be binding on all successor trustees. (ii) Special rule in the case of certain irrevocable trusts. (A) The settlor dies after February 19, 1996; (B) The trust instrument does not provide the U.S. Trustee with a power to amend the trust instrument in order to meet the requirements of section 2056A; and (C) The U.S. Trustee provides a written statement with the decedent's federal estate tax return (Form 706 or 706NA) that the trust is being administered in actual compliance with the requirements of this paragraph (d) and will continue to be administered so as to be in actual compliance with this paragraph (d) for the duration of the trust. This statement must be binding on all successor trustees. (e) Applicability date. [T.D. 8612, 60 FR 43540, Aug. 22, 1995, as amended by T.D. 8686, 61 FR 60553, Nov. 29, 1996; T.D. 10050, 91 FR 42661, July 10, 2026; T.D. 10050, 91 FR 46724, July 24, 2026] § 20.2056A-3 QDOT election. (a) General rule. (b) No partial elections. (c) Protective elections. (d) Manner of election. [T.D. 8612, 60 FR 43540, Aug. 22, 1995] § 20.2056A-4 Procedures for conforming marital trusts and nontrust marital transfers to the requirements of a qualified domestic trust. (a) Marital trusts In general. (2) Judicial reformations. (3) Tolling of statutory assessment period. (b) Nontrust marital transfers In general. (2) Form of transfer or assignment. (3) Assets eligible for transfer or assignment. (4) Pecuniary assignment—special rules. (i) Assets actually transferred to the QDOT in satisfaction of the assignment have an aggregate fair market value on the date of actual transfer to the QDOT amounting to no less than the amount of the pecuniary transfer or assignment; or (ii) The assets actually transferred to the QDOT be fairly representative of appreciation or depreciation in the value of all property available for transfer to the QDOT between the valuation date and the date of actual transfer to the QDOT, if the assignment is to be satisfied by accounting for the assets on the basis of their fair market value as of some date before the date of actual transfer to the QDOT. (5) Transfer tax treatment of transfer or assignment. (6) Period for completion of transfer. (7) Retirement accounts and annuities In general. (ii) Individual retirement annuities. (iii) Individual retirement accounts. (iv) Other effects of assignment. (8) Protective assignment. (c) Nonassignable annuities and other arrangements Definition and general rule. nonassignable annuity or other arrangement (2) Agreement to remit section 2056A estate tax on corpus portion of each annuity payment. (i) The noncitizen surviving spouse agrees to pay on an annual basis, as described in paragraph (c)(6)(i) of this section, the estate tax imposed under section 2056A(b)(1) due on the corpus portion, as defined in paragraph (c)(4) of this section, of each nonassignable annuity or other payment received under the plan or arrangement. However, for purposes of this paragraph (c)(2), if the financial circumstances of the spouse are such that an amount equal to all or a portion of the corpus portion of a nonassignable annuity payment received by the spouse would be subject to a hardship exemption (as defined in § 20.2056A-5(c)) if paid from a QDOT, then all or a corresponding part of the corpus portion will be exempt from the tax payment requirement under this paragraph (c)(2); (ii) The executor of the decedent's estate files with the estate tax return the Information Statement described in paragraph (c)(5) of this section; (iii) The executor files with the estate tax return the Agreement To Pay Section 2056A Estate Tax described in paragraph (c)(6) of this section; and (iv) The executor makes the election under § 20.2056A-3 with respect to the nonassignable annuity or other payment. (3) Agreement to roll over corpus portion of annuity payment to QDOT. (i) The noncitizen surviving spouse agrees to roll over and transfer, within the time prescribed under paragraph (c)(7)(i) of this section, the corpus portion of each annuity payment to a QDOT, whether the QDOT is created by the decedent's will, the executor of the decedent's estate, or the surviving spouse. However, for purposes of this section, if the financial circumstances of the spouse are such that an amount equal to all or a portion of the corpus portion of a nonassignable annuity payment received by the spouse would be subject to a hardship exemption (as defined in § 20.2056A-5(c)) if paid from a QDOT, then all or a corresponding part of the corpus portion will be exempt from the rollover requirement under this paragraph (c)(3); (ii) A QDOT for the benefit of the surviving spouse is established prior to the date that the estate tax return is filed and on or prior to the last date prescribed by law that the QDOT election may be made; (iii) The executor of the decedent's estate files with the estate tax return the Information Statement described in paragraph (c)(5) of this section; (iv) The executor files with the estate tax return the Agreement To Roll Over Annuity Payments described in paragraph (c)(7) of this section; and (v) The executor makes the election under § 20.2056A-3 with respect to the nonassignable annuity or other payment. See § 20.2056A-5(c)(3)(iv)(A), regarding distributions from the QDOT reimbursing the spouse for income taxes paid (either by actual payment or withholding) by the spouse with respect to amounts transferred to the QDOT pursuant to this paragraph (c)(3). (4) Determination of corpus portion Corpus portion. (ii) Corpus amount. (B) The total present value of the nonassignable annuity or other payment is the present value of the annuity or other payment as of the date of the decedent's death, determined in accordance with the interest rates and mortality table prescribed by section 7520. The expected annuity term is the number of years that would be required for the scheduled payments to exhaust a hypothetical fund equal to the present value of the scheduled payments. This is determined by first dividing the total present value of the payments by the annual payment. From the quotient so obtained, the expected annuity term is derived by identifying the term of years that corresponds to the lowest annuity factor that is equal to or greater than the quotient. The annuity factor is computed by subtracting from 1.000000 the factor for an ordinary remainder interest following the same term certain that is determined under the formula in § 20.2031-7(d)(2)(ii)(A) and then dividing the result by the applicable section 7520 interest rate expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in the “Annuity” column of Table B which can be found on the IRS website at https://www.irs.gov/retirement-plans/actuarial-tables (5) Information Statement In general. (ii) Annuity source information Employment-related annuity. ( 1 ( 2 ( 3 ( 4 (B) Annuity not employment-related. ( 1 ( 2 ( 3 (iii) The total annuity amount payable each year. (iv) The duration of the annuity. (v) The market interest rate under section 7520. (vi) Determination of corpus portion of each payment (in accordance with paragraph (c)(4) of this section). (A) The present value of the nonassignable annuity or other payment as of the decedent's death; (B) The expected annuity term; (C) The corpus amount of the annual annuity payments (paragraph (c)(5)(vi)(A) of this section divided by paragraph (c)(5)(vi)(B) of this section); and (D) The corpus portion of the annual payments (paragraph (c)(5)(vi)(C) of this section divided by the total amount payable annually). (vii) Recipient QDOT. (A) The name and address of the trustee of the QDOT who is the U.S. Trustee; and (B) The name and taxpayer identification number of the QDOT. (viii) Certification statement. Under penalties of perjury, I hereby certify that, to the best of my knowledge and belief, the information reported in this Information Statement is true, correct and complete. (6) Agreement to pay section 2056A estate tax Payment of section 2056A estate tax. (ii) Agreement. I [name] [name of plan or arrangement] https://www.irs.gov (7) Agreement to roll over annuity payments Roll over of corpus portion. (ii) Agreement. I [name] [name of plan or arrangement], [identify the QDOT]. [name of plan or arrangement] [identify the QDOT]. https://www.irs.gov (d) Examples. D, D S, D (1) Example 1. Transfer and assignment of probate and nonprobate property to QDOT S D Pecuniary bequest under will $400,000 Proceeds of life insurance 200,000 D S 300,000 Devise of real property under will 100,000 Total $1,000,000 (ii) Before the estate tax return for D S S S S S S S D S S D S D (2) Example 2. Formula assignment. D S. D S S S D (3) Example 3. Jointly owned property. D D S D S S (4) Example 4. Computation of corpus portion of annuity payment. https://www.irs.gov/retirement-plans/actuarial-tables. Table 2 to Paragraph (d)(4)(i) Factors From Table S—Based on Table 2010CM Age Annuity Life Estate Remainder Interest at 3.6 Percent 60 14.6908 0.52887 0.47113 Factors From Table B Annuity, Income, and Remainder Interests for a Term Certain Interest at 3.6 Percent Years Annuity Income Interest Remainder 21 14.5605 0.524177 0.475823 22 15.0198 0.540712 0.459288 Factors From Table K Adjustment Factors for Annuities Payable at the End of Each Interval Interest Rate Semi-Annually Quarterly Monthly 3.6% 1.0089 1.0134 1.0164 (ii) At the time of D's death, on or after June 1, 2023, D is a participant in an employees' pension plan described in section 401(a). On D's death, D's spouse S, a resident of the United States, becomes entitled to receive a survivor's annuity of $72,000 per year, payable monthly, for life. At the time of D's death, S is age 60. Assume that under section 7520, the appropriate discount rate to be used for valuing annuities in the case of this decedent is 3.6 percent. Under Table S, the annuity factor at 3.6 percent for a person age 60 is 14.6908. The adjustment factor at 3.6 percent in Table K for monthly payments is 1.0164. Accordingly, the right to receive $72,000 per year on a monthly basis is equal to the right to receive $73,180.80 ($72,000 × 1.0164) on an annual basis. (iii) The corpus portion of each annuity payment received by S is determined as follows: (A) The first step is to determine the present value of S's annuity payments under the plan ($73,180.80 × 14.6908 = $1,075,084.50). (B) The second step is to determine the number of years that would be required for S's annuity to exhaust a hypothetical fund of $1,075,084.50. The annuity factor of 14.6908 falls between the Table B term certain annuity factors for 21 and 22 years at an interest rate of 3.6 percent. Accordingly, the expected annuity term is 22 years. (C) The third step is to determine the corpus amount of the annual payment by dividing the expected term of 22 years into the present value of the hypothetical fund ($1,075,084.50/22 = $48,867.48). (D) In the fourth step, the corpus portion of each annuity payment is determined by dividing the corpus amount of each annual payment by the annual annuity payment (adjusted for payments more frequently than annually as in paragraph (d)(4)(i) of this section) ($48,867.48/73,180.80 = 0.67). (iv) Accordingly, 67 percent of each payment to S is deemed to be a distribution of corpus. A marital deduction is allowed for $1,075,084.50, the present value of the annuity as of D's date of death, if either: S agrees to roll over the corpus portion of each payment to a QDOT and the executor files the Information Statement described in paragraph (c)(5) of this section and the Roll Over Agreement described in paragraph (c)(7) of this section; or S agrees to pay the tax due on the corpus portion of each payment and the executor files the Information Statement described in paragraph (c)(5) of this section and the Payment Agreement described in paragraph (c)(6) of this section. (5) Example 5. Transfer to QDOT subject to gift tax. D S, S S S, D S D D D D D S. S S D S. S S S S D (e) Applicability date. [T.D. 8612, 60 FR 43541, Aug. 22, 1995, as amended by T.D. 8819, 64 FR 23229, Apr. 30, 1999; 64 FR 33196, June 22, 1999; T.D. 9448, 74 FR 21510, May 7, 2009; T.D. 9540, 76 FR 49637, Aug. 10, 2011; T.D. 9974, 88 FR 37448, June 7, 2023; T.D. 10050, 91 FR 42664, July 10, 2026] § 20.2056A-5 Imposition of section 2056A estate tax. (a) In general. (b) Amounts subject to tax Distribution of principal during the spouse's lifetime. (2) Death of surviving spouse. (3) Trust ceases to qualify as QDOT. (c) Distributions and dispositions not subject to tax Distributions of principal on account of hardship. (2) Distributions of income to the surviving spouse. income (3) Certain miscellaneous distributions and dispositions. (i) Payments for ordinary and necessary expenses of the QDOT (including bond premiums and letter of credit fees); (ii) Payments to applicable governmental authorities for income tax or any other applicable tax imposed on the QDOT (other than a payment of the section 2056A estate tax due on the occurrence of a taxable event as described in paragraph (b) of this section); (iii) Dispositions of trust assets by the trustees (such as sales, exchanges, or pledging as collateral) for full and adequate consideration in money or money's worth; and (iv) Pursuant to section 2056A(b)(15), amounts paid from the QDOT to reimburse the surviving spouse for any tax imposed on the spouse under Subtitle A of the Internal Revenue Code on any item of income of the QDOT to which the surviving spouse is not entitled under the terms of the trust. Such distributions include (but are not limited to) amounts paid from the QDOT to reimburse the spouse for income taxes paid by the spouse (either by actual payment or through withholding) with respect to amounts received from a nonassignable annuity or other arrangement that are transferred by the spouse to a QDOT pursuant to § 20.2056A-4(c)(3); and income taxes paid by the spouse (either by actual payment or through withholding) with respect to amounts received in a lump sum distribution from a qualified plan if the lump sum distribution is assigned by the surviving spouse to a QDOT. For purposes of this paragraph (c)(3)(iv), the amount of attributable tax eligible for reimbursement is the difference between the actual income tax liability of the spouse and the spouse's income tax liability determined as if the item had not been included in the spouse's gross income in the applicable taxable year. [T.D. 8612, 60 FR 43546, Aug. 22, 1995, as amended by T.D. 9102, 69 FR 21, Jan. 2, 2004] § 20.2056A-6 Amount of tax. (a) Definition of tax. the tax which would have been imposed by section 2001 on the estate of the decedent (b) Benefits allowed in determining amount of section 2056A estate tax General rule. (2) Treatment as resident. (3) Special rule in the case of trusts described in section 2056(b)(8). (4) Credit for state and foreign death taxes. Example 2, (5) Alternate valuation and special use valuation In general. (ii) Alternate valuation. (iii) Special use valuation. (c) Miscellaneous rules. (d) Examples. Example 1. (i) D, D D D Gross estate $1,200,000 Marital Deduction (700,000) Taxable Estate $500,000 Gross Tax $155,800 Less: Unified Credit (155,800) Net Tax 0 (ii) S S S D $500,000 QDOT property 700,000 Total $1,200,000 Gross Tax $427,800 Less: Unified Credit (192,800) Net Tax § 235,000 Less: Tax that would have been imposed on D 0 Section 2056A Estate Tax $235,000 Example 2. (i) The facts are the same as in Example 1, D D D Gross Estate $2,000,000 Marital Deduction (700,000) Taxable Estate $1,300,000 Gross Tax $469,800 Less: Unified Credit 192,800 State Death Tax Credit Limitation (lesser of $51,600 or $70,000 tax paid) 51,600 (244,400) Estate Tax $225,400 (ii) S S S S S D $1,300,000 QDOT Property 800,000 Total $2,100,000 Gross Tax $829,800 Less: Unified Credit (192,800) Pre-2011 section 2056A estate tax $637,000 (A) State Death Tax Credit Computation: (1) State death tax paid by S D (2) Credit limit under section 2011(b) (based on D (B) State death tax credit allowable against section 2056A estate tax (lesser of paragraph (ii)(A)(1) or (2) of this Example 2 (106,800) Net Tax $530,200 Less: Tax that would have been imposed on D 225,400 Section 2056A Estate Tax $304,800 [T.D. 8612, 60 FR 43547, Aug. 22, 1995] § 20.2056A-7 Allowance of prior transfer credit under section 2013. (a) Property subject to QDOT election. (1) The first limitation as described in section 2013(b) and § 20.2013-2 is the amount of the estate tax imposed under section 2056A(b)(1)(A), with respect to distributions during the spouse's life, and under section 2056A(b)(1)(B), with respect to the value of the QDOT assets on the spouse's death; (2) In computing the second limitation as described in section 2013(c) and § 20.2013-3, the value of the property transferred to the decedent (as defined in section 2013(d) and § 20.2013-4) is deemed to be the value of the QDOT assets on the date of death of the surviving spouse. The value as so determined is not reduced by the section 2056A estate tax imposed at the time of the spouse's death; and (3) The amount of the credit is determined without regard to the percentage limitations contained in section 2013(a). (b) Property not subject to QDOT election. (c) Example. Example. The facts are the same as in § 20.2056A-6, Example 2 D, D D S, S S S S (i) Under paragraph (a)(1) of this section, the first limitation for purposes of section 2013(b) is $304,800, the amount of the section 2056A estate tax. (ii) Under paragraph (a)(2) of this section, the second limitation for purposes of section 2013(c) is computed as follows: (A) S Taxable estate $1,500,000 Gross estate tax 555,800 Less: Unified credit $192,800 Credit for state death taxes 64,400 257,200 Pre-2013 net estate tax payable $298,600 (B) S Taxable estate $700,000 Gross estate tax 229,800 Less: Unified credit $192,800 Credit for state death taxes 18,000 210,800 Net tax payable $19,000 (C) Second Limitation: Paragraph (ii)(A) of this Example $298,600 Less: Paragraph (ii)(B) of this Example 19,000 $279,600 (iii) Credit for tax on prior transfers = $279,600 (lesser of paragraphs (i) or (ii) of this Example. [T.D. 8612, 60 FR 43549, Aug. 22, 1995] § 20.2056A-8 Special rules for joint property. (a) Inclusion in gross estate General rule. (2) Consideration furnished by surviving spouse. (3) Amount allowed to be transferred to QDOT. Example 3. (b) Surviving spouse becomes citizen. (c) Examples. Example 1. In 1987, D, D S, D S. D S D S D Example 2. The facts are the same as in Example 1, S D D S S S S Example 3. The facts are the same as in Example 1, D S D S. D S D S S D [T.D. 8612, 60 FR 43549, Aug. 22, 1995] § 20.2056A-9 Designated Filer. Section 2056A(b)(2)(C) provides special rules where more than one QDOT is established with respect to a decedent. The designation of a person responsible for filing a return under section 2056A(b)(2)(C)(i) (the Designated Filer) must be made on the decedent's federal estate tax return, or on the first Form 706-QDT that is due and is filed by its prescribed date, including extensions. The Designated Filer must be a U.S. Trustee. If the U.S. Trustee is an individual, that individual must have a tax home (as defined in section 911(d)(3)) in the United States. At least sixty days before the due date for filing the tax returns for all of the QDOTs, the U.S. Trustee(s) of each of the QDOTs must provide to the Designated Filer all of the necessary information relating to distributions from their respective QDOTs. The section 2056A estate tax due from each QDOT is allocated on a pro rata basis (based on the ratio of the amount of each respective distribution constituting a taxable event to the amount of all such distributions), unless a different allocation is required under the terms of the governing instrument or under local law. Unless the decedent has provided for a successor Designated Filer, if the Designated Filer ceases to qualify as a U.S. Trustee, or otherwise becomes unable to serve as the Designated Filer, the remaining trustees of each QDOT must select a qualifying successor Designated Filer (who is also a U.S. Trustee) prior to the due date for the filing of Form 706-QDT (including extensions). The selection is to be indicated on the Form 706-QDT. Failure to select a successor Designated Filer will result in the application of section 2056A(b)(2)(C). [T.D. 8612, 60 FR 43550, Aug. 22, 1995] § 20.2056A-10 Surviving spouse becomes citizen after QDOT established. (a) Section 2056A estate tax no longer imposed under certain circumstances. (1) The spouse either was a United States resident (for the definition of resident for this purpose, see § 20.2056A-1(b)) at all times after the death of the decedent and before becoming a United States citizen, or no taxable distributions are made from the QDOT before the spouse becomes a United States citizen (regardless of the residency status of the spouse); and (2) The U.S. Trustee(s) of the QDOT notifies the Internal Revenue Service and certifies in writing that the surviving spouse has become a United States citizen. Notice is to be made by filing a final Form 706-QDT on or before April 15th of the calendar year following the year in which the surviving spouse becomes a United States citizen, unless an extension of time for filing is granted under section 6081. (b) Special election by spouse. (1) The spouse elects to treat any taxable distribution from the QDOT prior to the spouse's election as a taxable gift made by the spouse for purposes of section 2001(b)(1)(B) (referring to adjusted taxable gifts), and for purposes of determining the amount of the tax imposed by section 2501 on actual taxable gifts made by the spouse during the year in which the spouse becomes a citizen or in any subsequent year; (2) The spouse elects to treat any previous reduction in the section 2056A estate tax by reason of the decedent's unified credit (under either section 2010 or section 2102(c)) as a reduction in the spouse's unified credit under section 2505 for purposes of determining the amount of the credit allowable with respect to taxable gifts made by the surviving spouse during the taxable year in which the spouse becomes a citizen, or in any subsequent year; and (3) The elections referred to in this paragraph (b) are made by timely filing a Form 706-QDT on or before April 15th of the year following the year in which the surviving spouse becomes a citizen (unless an extension of time for filing is granted under section 6081) and attaching notification of the election to the return. [T.D. 8612, 60 FR 43550, Aug. 22, 1995] § 20.2056A-11 Filing requirements and payment of the section 2056A estate tax. (a) Distributions during surviving spouse's life. (b) Tax at death of surviving spouse. (c) Extension of time for paying section 2056A estate tax Extension of time for paying tax under section 6161(a)(2). https://www.irs.gov (2) Extension of time for paying tax under section 6161(a)(1). https://www.irs.gov (d) Liability for tax. (e) Applicability date. [T.D. 8612, 60 FR 43551, Aug. 22, 1995, as amended by T.D. 10050, 91 FR 42665, July 10, 2026] § 20.2056A-12 Increased basis for section 2056A estate tax paid with respect to distribution from a QDOT. Under section 2056A(b)(13), in the case of any distribution from a QDOT on which an estate tax is imposed under section 2056A(b)(1)(A), the distribution is treated as a transfer by gift for purposes of section 1015, and any estate tax paid under section 2056A(b)(1)(A) is treated as a gift tax. See § 1.1015-5(c)(4) and (5) of this chapter for rules for determining the amount by which the basis of the distributed property is increased. [T.D. 8612, 60 FR 43551, Aug. 22, 1995] § 20.2056A-13 Applicability dates. Except as provided in this section and in §§ 20.2056A-2(e), 20.2056A-4(e), and 20.2056A-11(e), the provisions of §§ 20.2056A-1 through 20.2056A-12 are applicable with respect to estates of decedents dying on or after August 22, 1995. The rule in the fourth sentence of § 20.2056A-5(c)(2) regarding unitrusts and distributions of income to the surviving spouse in conformance with applicable local law is applicable to trusts for taxable years ending after January 2, 2004. [T.D. 9102, 69 FR 21, Jan. 2, 2004, as amended by T.D. 10050, 91 FR 42665, July 10, 2026] Estates of Nonresidents Not Citizens § 20.2101-1 Estates of nonresidents not citizens; tax imposed. (a) Imposition of tax. resident, nonresident, United States, (b) Special rates in the case of certain decedents. (c) Rate schedule for decedents dying after December 31, 1976 and on or before November 10, 1988. If the amount for which the tentative tax to be computed is: The tentative tax is: Not over $100,000 6% of such amount. Over $100,000 but not over $500,000 $6,000, plus 12% of excess over $100,000. Over $500,000 but not over $1,000,000 $54,000, plus 18% of excess over $500,000. Over $1,000,000 but not over $2,000,000 $144,000, plus 24% of excess over $1,000,000. Over $2,000,000 $384,000, plus 30% of excess over $2,000,000. [T.D. 8612, 60 FR 43551, Aug. 22, 1995] § 20.2102-1 Estates of nonresidents not citizens; credits against tax. (a) In general. (1) The State death tax credit under section 2011, to the extent permitted by section 2102(b) and paragraph (b) of this section; (2) The gift tax credit under section 2012; and (3) The credit under section 2013 for tax on prior transfers. Except as provided in section 2102(b) and paragraph (b) of this section (relating to a special limitation on the amount of the credit for State death taxes), the amount of each of these credits is determined in the same manner as that prescribed for its determination in the case of estates of citizens or residents of the United States. See §§ 20.2011-1 through 20.2013-6. Subject to the additional special limitation contained in section 2102(b) in the case of section 2015, the provisions of sections 2015 and 2016, relating respectively to the credit for death taxes on remainders and the recovery of taxes claimed as a credit, are applicable with respect to the credit for State death taxes in the case of the estates of nonresidents not citizens. However, no credit is allowed under section 2014 for foreign death taxes. (b) Special limitation In general. (2) Illustrations. Example (1). A, a nonresident not a citizen of the United States, died on February 15, 1967, owning real property in State Z valued at $50,000 and stock in various domestic corporations valued at $100,000 and not subject to death taxes in any State. State Z's inheritance tax actually paid with respect to the real property in State Z is $2,000. A's taxable estate for Federal estate tax purposes is $110,000, in respect of which the maximum credit under section 2011 would be $720 in the absence of the special limitation contained in section 2102(b). However, under section 2102(b) and this paragraph the amount of the maximum credit allowable in respect to A's estate for State death taxes is limited to the amount which bears the same ratio to $720 (the maximum credit computed as provided in section 2011(b)) as $50,000 (the value of the property in respect of which a State death tax was actually paid and which is included in A's gross estate under section 2103) bears to $150,000 (the value of A's total gross estate under section 2103). Accordingly, the maximum credit allowable under section 2102 and this section for all State death taxes actually paid is $240 ($720 × $50,000/$150,000). Example (2). B, a nonresident not a citizen of the United States, died on January 15, 1967, owning real property in State X valued at $100,000, real property in State Y valued at $200,000, and stock in various domestic corporations valued at $300,000 and not subject to death taxes in any State. States X and Y both imposed inheritance taxes. State X has, in addition to its inheritance tax, an estate tax equal to the amount by which the maximum State death tax credit allowable to an estate against its Federal estate tax exceeds the amount of the inheritance tax imposed by State X plus the amount of death taxes paid to other States. State Y has no estate tax. The amount of the inheritance tax actually paid to State X with respect to the real property situated in State X is $4,000; the amount of the inheritance tax actually paid to State Y with respect to the real property situated in State Y is $9,000. B's taxable estate for Federal estate tax purposes is $550,000, in respect of which the maximum credit under section 2011 would be $14,400 in the absence of the special limitation contained in section 2102(b). However, under section 2102(b) and this paragraph the amount of the maximum credit allowable in respect of B's estate for State death taxes is limited to the amount which bears the same ratio to $14,400 (the maximum credit computed as provided in section 2011(b)) as $300,000 (the value of the property in respect of which a State death tax was actually paid and which is included in B's gross estate under section 2103) bears to $600,000 (the value of B's total gross estate under section 2103). Accordingly, the maximum credit allowable under section 2102 and this section for all State death taxes actually paid is $7,200 ($14,400 × $300,000/$600,000), and the estate tax of State X is not applicable to B's estate. (c) Unified credit In general. (2) When treaty is applicable. (3) Certain residents of possessions. [T.D. 7296, 38 FR 34194, Dec. 12, 1973, as amended at T.D. 8612, 60 FR 43552, Aug. 22, 1995] § 20.2103-1 Estates of nonresidents not citizens; “entire gross estate”. The “entire gross estate” wherever situated of a nonresident who was not a citizen of the United States at the time of his death is made up in the same way as the “gross estate” of a citizen or resident of the United States. See §§ 20.2031-1 through 20.2044-1. See paragraphs (a) and (c) of § 20.2031-1 for the circumstances under which real property situated outside the United States is excluded from the gross estate of a citizen or resident of the United States. However, except as provided in section 2107(b) with respect to the estates of certain expatriates, in the case of a nonresident not a citizen, only that part of the entire gross estate which on the date of the decedent's death is situated in the United States is included in his taxable estate. In fact, property situated outside the United States need not be disclosed on the return unless section 2107 is applicable, certain deductions are claimed, or information is specifically requested. See §§ 20.2106-1, 20.2106-2, and 20.2107-1. For a description of property considered to be situated in the United States, see § 20.2104-1. For a description of property considered to be situated outside the United States, see § 20.2105-1. [T.D. 7296, 38 FR 34195, Dec. 12, 1973] § 20.2104-1 Estates of nonresidents not citizens; property within the United States. (a) In general. (1) Real property located in the United States. (2) Tangible personal property located in the United States, except certain works of art on loan for exhibition (see paragraph (b) of § 20.2105-1). (3) In the case of an estate of a decedent dying before November 14, 1966, written evidence of intangible personal property which is treated as being the property itself, such as a bond for the payment of money, if it is physically located in the United States; except that this subparagraph shall not apply to obligations of the United States (but not its instrumentalities) issued before March 1, 1941, if the decedent was not engaged in business in the United States at the time of his death. See section 2106(c). (4) Except as specifically provided otherwise in this section or in § 20.2105-1 (which specific exceptions, in the case of estates of decedents dying on or after November 14, 1966, cause this subparagraph to have relatively limited applicability), intangible personal property the written evidence of which is not treated as being the property itself, if it is issued by or enforceable against a resident of the United States or a domestic corporation or governmental unit. (5) Shares of stock issued by a domestic corporation, irrespective of the location of the certificates (see, however, paragraph (i) of § 20.2105-1 for a special rule with respect to certain withdrawable accounts in savings and loan or similar associations). (6) In the case of an estate of a decedent dying before November 14, 1966, moneys deposited in the United States by or for the decedent with any person carrying on the banking business, if the decedent was engaged in business in the United States at the time of his death. (7) In the case of an estate of a decedent dying on or after November 14, 1966, except as specifically provided otherwise in paragraph (d), (i), (j), (l), or (m) of § 20.2105-1, any debt obligation, including a bank deposit, the primary obligor of which is— (i) A United States person (as defined in section 7701(a)(30)), or (ii) The United States, a State or any political subdivision thereof, the District of Columbia, or any agency or instrumentality of any such government. This paragraph applies irrespective of whether the written evidence of the debt obligation is treated as being the property itself or whether the decedent was engaged in business in the United States at the time of his death. For purposes of this subparagraph and paragraphs (k), (l), and (m) of § 20.2105-1, a debt obligation on which there are two or more primary obligors shall be apportioned among such obligors, taking into account to the extent appropriate under all the facts and circumstances any choate or inchoate rights of contribution existing among such obligors with respect to the indebtedness. The term “agency or instrumentality,” as used in paragraph (a)(7)(ii) of this section does not include a possession of the United States or an agency or instrumentality of a possession. Currency is not a debt obligation for purposes of this subparagraph. (8) In the case of an estate of a decedent dying on or after January 1, 1970, except as specifically provided otherwise in paragraph (i) or (l) of § 20.2105-1, deposits with a branch in the United States of a foreign corporation, if the branch is engaged in the commercial banking business, whether or not the decedent was engaged in business in the United States at the time of his death. (b) Transfers. (c) Death tax convention. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7296, 38 FR 34195, Dec. 12, 1973; T.D. 7321, 39 FR 29597, Aug. 16, 1974] § 20.2105-1 Estates of nonresidents not citizens; property without the United States. Property of a nonresident who was not a citizen of the United States at the time of his death is considered to be situated outside the United States if it is— (a)(1) Real property located outside the United States, except to the extent excludable from the entire gross estate wherever situated under § 20.2103-1. (2) Tangible personal property located outside the United States. (b) Works of art owned by the decedent if they were— (1) Imported into the United States solely for exhibition purposes, (2) Loaned for those purposes to a public gallery or museum, no part of the net earnings of which inures to the benefit of any private shareholder or individual, and (3) At the time of the death of the owner, on exhibition, or en route to or from exhibition, in such a public gallery or museum. (c) In the case of an estate of a decedent dying before November 14, 1966, written evidence of intangible personal property which is treated as being the property itself, such as a bond for the payment of money, if it is not physically located in the United States. (d) Obligations of the United States issued before March 1, 1941, even though physically located in the United States, if the decedent was not engaged in business in the United States at the time of his death. (e) Except as specifically provided otherwise in this section or in § 20.2104-1, intangible personal property the written evidence of which is not treated as being the property itself, if it is not issued by or enforceable against a resident of the United States or a domestic corporation or governmental unit. (f) Shares of stock issued by a corporation which is not a domestic corporation, regardless of the location of the certificates. (g) Amounts receivable as insurance on the decedent's life. (h) In the case of an estate of a decedent dying before November 14, 1966, moneys deposited in the United States by or for the decedent with any person carrying on the banking business, if the decedent was not engaged in business in the United States at the time of his death. (i) In the case of an estate of a decedent dying on or after November 14, 1966, and before January 1, 1976, any amount deposited in the United States which is described in section 861(c) (relating to certain bank deposits, withdrawable accounts, and amounts held by an insurance company under an agreement to pay interest), if any interest thereon, were such interest received by the decedent at the time of his death, would be treated under section 862(a)(1) as income from sources without the United States by reason of section 861(a)(1)(A) (relating to interest on amounts described in section 861(c) which is not effectively connected with the conduct of a trade or business within the United States) and the regulations thereunder. If such interest would be treated by reason of those provisions as income from sources without the United States only in part, the amount described in section 861(c) shall be considered situated outside the United States in the same proportion as the part of the interest which would be treated as income from sources without the United States bears to the total amount of the interest. This paragraph applies whether or not the decedent was engaged in business in the United States at the time of his death, and, except with respect to amounts described in section 861(c)(3) (relating to amounts held by an insurance company under an agreement to pay interest), whether or not the deposit or other amount is in fact interest bearing. (j) In the case of an estate of a decedent dying on or after November 14, 1966, deposits with a branch outside of the United States of a domestic corporation or domestic partnership, if the branch is engaged in the commercial banking business. This paragraph applies whether or not the decedent was engaged in business in the United States at the time of his death, and whether or not the deposits, upon withdrawal, are payable in currency of the United States. (k) In the case of an estate of a decedent dying on or after November 14, 1966, except as specifically provided otherwise in paragraph (a)(8) of § 20.2104-1 with respect to estates of decedents dying on or after January 1, 1970, any debt obligation, including a bank deposit, the primary obligor of which is neither— (1) A United States person (as defined in section 7701(a)(30)), nor (2) The United States, a State or any political subdivision thereof, the District of Columbia, or any agency or instrumentality of any such government. This paragraph applies irrespective of whether the written evidence of the debt obligation is treated as being the property itself or whether the decedent was engaged in business in the United States at the time of his death. See paragraph (a)(7) of § 20.2104-1 for the treatment of a debt obligation on which there are two or more primary obligors. The term “agency or instrumentality,” as used in subparagraph (2) of this paragraph, does not include a possession of the United States or an agency or instrumentality of a possession. Currency is not a debt obligation for purposes of this paragraph. (l) In the case of an estate of a decedent dying on or after November 14, 1966, any debt obligation to the extent that the primary obligor on the debt obligation is a domestic corporation, if any interest thereon, were the interest received from such obligor by the decedent at the time of his death, would be treated under section 862(a)(1) as income from sources without the United States by reason of section 861(a)(1)(B) (relating to interest received from a domestic corporation less than 20 percent of whose gross income for a 3-year period was derived from sources within the United States) and the regulations thereunder. For such purposes the 3-year period referred to in section 861(a)(1)(B) is the period of 3 years ending with the close of the domestic corporation's last taxable year terminating before the decedent's death. This paragraph applies whether or not (1) the obligation is in fact interest bearing, (2) the written evidence of the debt obligation is treated as being the property itself, or (3) the decedent was engaged in business in the United States at the time of his death. See paragraph (a)(7) of § 20.2104-1 for the treatment of a debt obligation on which there are two or more primary obligors. (m)(1) In the case of an estate of a decedent dying after December 31, 1972, except as otherwise provided in paragraph (m)(2) of this section any debt obligation to the extent that the primary obligor on the debt obligation is a domestic corporation or domestic partnership, if any interest thereon, were the interest received from such obligor by the decedent at the time of his death, would be treated under section 862(a)(1) as income from sources without the United States by reason of section 861(a)(1)(G) (relating to interest received on certain debt obligations with respect to which elections have been made under section 4912(c)) and the regulations thereunder. This paragraph applies whether or not (i) the obligation is in fact interest bearing, (ii) the written evidence of the debt obligation is treated as being the property itself, or (iii) the decedent was engaged in business in the United States at the time of his death. See paragraph (a)(7) of § 20.2104-1 for the treatment of a debt obligation on which there are two or more primary obligors. (2) In the case of an estate of a decedent dying before January 1, 1974, this paragraph does not apply to any debt obligation of a foreign corporation assumed by a domestic corporation which is treated under section 4912(c)(2) as issued by such domestic corporation during 1973. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6684, 28 FR 11410, Oct. 24, 1963; T.D. 7296, 38 FR 34196, Dec. 12, 1973; T.D. 7321, 39 FR 29597, Aug. 16, 1974] § 20.2106-1 Estates of nonresidents not citizens; taxable estate; deductions in general. (a) The taxable estate of a nonresident who was not a citizen of the United States at the time of his death is determined by adding the value of that part of his gross estate which, at the time of his death, is situated in the United States and, in the case of an estate to which section 2107 (relating to expatriation to avoid tax) applies, any amounts includible in his gross estate under section 2107(b), and then subtracting from the sum thereof the total amount of the following deductions: (1) The deductions allowed in the case of estates of decedents who were citizens or residents of the United States under sections 2053 and 2054 (see §§ 20.2053-1 through 20.2053-9 and § 20.2054-1) for expenses, indebtedness and taxes, and for losses, to the extent provided in § 20.2106-2. (2) A deduction computed in the same manner as the one allowed under section 2055 (see §§ 20.2055-1 through 20.2055-5) for charitable, etc., transfers, except— (i) That the deduction is allowed only for transfers to corporations and associations created or organized in the United States, and to trustees for use within the United States, and (ii) That the provisions contained in paragraph (c)(2) of § 20.2055-2 relating to termination of a power to consume are not applicable. (3) Subject to the special rules set forth at § 20.2056A-1(c), the amount which would be deductible with respect to property situated in the United States at the time of the decedent's death under the principles of section 2056. Thus, if the surviving spouse of the decedent is a citizen of the United States at the time of the decedent's death, a marital deduction is allowed with respect to the estate of the decedent if all other applicable requirements of section 2056 are satisfied. If the surviving spouse of the decedent is not a citizen of the United States at the time of the decedent's death, the provisions of section 2056, including specifically the provisions of section 2056(d) and (unless section 2056(d)(4) applies) the provisions of section 2056A (QDOTs) must be satisfied. (b) Section 2106(b) provides that no deduction is allowed under paragraph (a) (1) or (2) of this section unless the executor discloses in the estate tax return the value of that part of the gross estate not situated in the United States. See § 20.2105-1. Such part must be valued as of the date of the decedent's death, or if the alternate valuation method under section 2032 is elected, as of the applicable valuation date. [T.D. 6296, 23 FR 5429, June 24, 1958, as amended by T.D. 6526, 26 FR 417, Jan. 19, 1961; T.D. 7296, 38 FR 34197, Dec. 12, 1973; T.D. 7318, 39 FR 25457, July 11, 1974; T.D. 8612, 60 FR 43552, Aug. 22, 1995] § 20.2106-2 Estates of nonresidents not citizens; deductions for expenses, losses, etc. (a) In computing the taxable estate of a nonresident who was not a citizen of the United States at the time of his death, deductions are allowed under sections 2053 and 2054 for expenses, indebtedness and taxes, and for losses, to the following extent: (1) A pledge or subscription is deductible if it is an enforceable claim against the estate and if it would constitute an allowable deduction under paragraph (a)(2) of § 20.2106-1, relating to charitable, etc., transfers, if it had been a bequest. (2) That proportion of other deductions under sections 2053 and 2054 is allowed which the value of that part of the decedent's gross estate situated in the United States at the time of his death bears to the value of the decedent's entire gross estate wherever situated. It is immaterial whether the amounts to be deducted were incurred or expended within or without the United States. For purposes of this subparagraph, an amount which is includible in the decedent's gross estate under section 2107(b) with respect to stock in a foreign corporation shall be included in the value of the decedent's gross estate situated in the United States. No deduction is allowed under this paragraph unless the value of the decedent's entire gross estate is disclosed in the estate tax return. See paragraph (b) of § 20.2106-1. (b) In order that the Internal Revenue Service may properly pass upon the items claimed as deductions, the executor should submit a certified copy of the schedule of liabilities, claims against the estate, and expenses of administration filed under any applicable foreign death duty act. If no such schedule was filed, the executor should submit a certified copy of the schedule of these liabilities, claims and expenses filed with the foreign court in which administration was had. If the items of deduction allowable under section 2106(a)(1) were not included in either such schedule, or if no such schedules were filed, then there should be submitted a written statement of the foreign executor containing a declaration that it is made under the penalties of perjury setting forth the facts relied upon as entitling the estate to the benefit of the particular deduction or deductions. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7296, 38 FR 34197, Dec. 12, 1973; T.D. 8612, 60 FR 43552, Aug. 22, 1995] § 20.2107-1 Expatriation to avoid tax. (a) Rate of tax. (b) Gross estate Determination of value General rule. (ii) Amount includible with respect to stock in certain foreign corporations. ( a ( b then section 2107(b) requires the inclusion in the decedent's gross estate, in addition to amounts otherwise includible therein under subdivision (i) of this subparagraph, of an amount equal to that proportion of the fair market value (determined at the time of the decedent's death or, if so elected by the executor of the decedent's estate, on the alternate valuation date as provided in section 2032) of the stock in such foreign corporation owned (within the meaning of section 958(a) and the regulations thereunder) by the decedent at the time of his death, which the fair market value of any assets owned by such foreign corporation and situated in the United States, at the time of his death, bears to the total fair market value of all assets owned by such foreign corporation at the time of his death. (iii) Rules of application. a ( b ( c a b ( d b ( e (2) Illustrations. Example (1). (a) At the time of his death, H, a nonresident expatriate decedent the transfer of whose estate is subject to the tax imposed by section 2107(a), owned a 60-percent interest in M Company, a foreign partnership, which in turn owned stock issued by N Corporation, a foreign corporation. The stock in N Corporation held by M Company, which constituted 50 percent of the total combined voting power of all classes of stock entitled to vote in N Corporation, was valued at $50,000 at the time of H's death. In addition, W, H's wife, also a nonresident not a citizen of the United States, owned at the time of H's death stock in N Corporation constituting 25 percent of the total combined voting power of all classes of stock entitled to vote in that corporation. The fair market value of the assets of N Corporation which, at the time of H's death, were situated in the United States constituted 40 percent of the fair market value of all assets of that corporation. It is assumed for purposes of this example that the executor of H's estate has not elected to value the estate on the alternate valuation date provided in section 2032. (b) The test contained in subparagraph (1)(ii)( a b i.e., Example (2). (a) Assume the same facts as those given in example (1) except that H made a transfer to W in contemplation of his death (within the meaning of section 2035) of his 60-percent interest in M Company, that on the date of the transfer M Company held stock in N Corporation constituting 80 percent of the total combined voting power of all classes of stock entitled to vote in that corporation (rather than the 50 percent of total combined voting power held by M Company on the date of H's death), and that the 80 percent of total combined voting power owned by M Company on the date of the transfer is valued at $70,000 on that date and at $85,000 at the time of H's death. It is assumed for purposes of this example that the 60-percent interest in M Company was held by W at the time of H's death. (b) The test contained in subparagraph (1)(ii)( a c b c c i.e., (c) The fact that the stock in N Corporation owned by M Company is considered under subparagraph (1)(ii)( b i.e., d Example (3). (a) At the time of his death, H, a nonresident expatriate decedent the transfer of whose estate is subject to the tax imposed by section 2107(a), owned a 40-percent beneficial interest in a domestic trust; at that time he also directly owned stock in P Corporation, a foreign corporation, constituting 15 percent of the total combined voting power of all classes of stock entitled to vote in that corporation. The trust owned stock in P Corporation constituting 51 percent of the total combined voting power of all classes of stock entitled to vote in that corporation. The stock in P Corporation owned directly by H was valued at $20,000 on the alternate valuation date determined pursuant to an election under section 2032. The fair market value of the assets of P Corporation which, at the time of H's death, were situated in the United States constituted 20 percent of the fair market value of all assets of that corporation. (b) By reason of section 958(b)(2) and the regulations thereunder, the trust is considered to own all the stock entitled to vote in P Corporation since it owns more than 50 percent of the total combined voting power of all classes of stock entitled to vote in that corporation. The test contained in subparagraph (1)(ii)( a b (c) Credits. (d) Decedents to whom the tax imposed by section 2107(a) applies General rule. (i) Resulted from the application of section 301(b), 350, or 355 of the Immigration and Nationality Act, as amended (8 U.S.C. 1401(b), 1482, or 1487); or (ii) Did not have for one of its principal purposes (but not necessarily its only principal purpose) the avoidance of Federal income, estate, or gift tax. Section 301(b) of the Immigration and Nationality Act provides generally that a U.S. citizen, who is born outside the United States of parents one of whom is an alien and the other is a U.S. citizen who was physically present in the United States for a specified period, shall lose his U.S. citizenship if, within a specified period preceding the age of 28 years, he fails to be continuously physically present in the United States for at least 5 years. Section 350 of that Act provides that under certain circumstances a person, who at birth acquired the nationality of the United States and of a foreign country and who has voluntarily sought or claimed benefits of the nationality of any foreign country, shall lose his U.S. nationality if, after attaining the age of 22 years, he has a continuous residence for 3 years in the foreign country of which he is a national by birth. Section 355 of that Act provides that a person having U.S. nationality, who is under 21 years of age and whose residence is in a foreign country with or under the legal custody of a parent who loses his U.S. nationality under specified circumstances, shall lose his U.S. nationality if he has or acquires the nationality of that foreign country and attains the age of 25 years without having established his residence in the United States. Section 2107 and this section do not apply to the transfer of any estate the estate tax treatment of which is subject to a Presidential proclamation made pursuant to section 2108(a) (relating to the application of pre-1967 estate tax provisions in the case of a foreign country which imposes a more burdensome tax than the United States). (2) Burden of proof General rule. a b (ii) Tentative determination of substantial reduction in Federal and foreign death taxes. a b a b [T.D. 7296, 38 FR 34197, Dec. 12, 1973] Miscellaneous § 20.2202-1 Missionaries in foreign service. Section 2202 provides that a duly commissioned missionary, dying while in foreign missionary service under a board of foreign missions of a religious denomination in the United States, is presumed to have retained a United States residence (see paragraph (b)(1) of § 20.0-1) held at the time of his commission and departure for foreign service, in the absence of relevant facts other than his intention to remain permanently in such foreign service. § 20.2203-1 Definition of executor. The term executor § 20.2204-1 Discharge of executor from personal liability. (a) General rule. (b) Special rule in the case of extension of time for payment of tax. [T.D. 7238, 37 FR 28720, Dec. 29, 1972, as amended by T.D. 7941, 49 FR 4468, Feb. 7, 1984] § 20.2204-2 Discharge of fiduciary other than executor from personal liability. (a) A fiduciary (not including a fiduciary of the estate of a nonresident decedent, other than the executor, who as a fiduciary holds, or has held at any time since the decedent's death, property transferred to the fiduciary from a decedent dying after December 31, 1970, or his estate, may make written application to the applicable internal revenue officer with whom the estate tax return is required to be filed, as provided in § 20.6091-1, for a determination of the Federal estate tax liability with respect to such property and for a discharge of personal liability therefrom. The application must be accompanied by a copy of the instrument, if any, under which the fiduciary is acting, a description of all the property transferred to the fiduciary from the decedent or his estate, and any other information that would be relevant to a determination of the fiduciary's tax liability. (b) Upon the discharge of the executor from personal liability under § 20.2204-1, or, if later, within 6 months after the receipt of the application filed by a fiduciary pursuant to the provisions of paragraph (a) of this section, such fiduciary will be notified either (1) of the amount of tax for which it has been determined the fiduciary is liable, or (2) that it has been determined that the fiduciary is not liable for any such tax. The fiduciary will also be notified of the amount of bond, if any, to be furnished for any Federal estate tax for which the time for payment has been extended under section 6161, 6163, or 6166. The amount of any bond required under the provisions of this paragraph shall not exceed the amount of tax the payment of which has been so extended. Upon payment of the amount for which it has been determined the fiduciary is liable, and upon furnishing any bond required under this paragraph in the form specified under § 301.7101-1 of this chapter (Regulations on Procedure and Administration), or upon receipt by the fiduciary of notification of a determination that he is not liable for such tax or that a bond is not required, the fiduciary will be discharged from personal liability for any deficiency in the tax thereafter found to be due. If no such notification is received, the fiduciary is discharged at the end of such 6 months (or upon discharge of the executor, if later) from personal liability for any deficiency thereafter found to be due. The discharge of the fiduciary from personal liability under this section applies only to him in his personal capacity and to his personal assets. The discharge is not applicable to his liability as a fiduciary (such as a trustee) to the extent of the assets of the estate in his possession or control. Further, the discharge is not to operate as a release of any part of the gross estate from the lien for estate tax for any deficiency that may thereafter be determined to be due. [T.D. 7238, 37 FR 28720, Dec. 29, 1972] § 20.2204-3 Special rules for estates of decedents dying after December 31, 1976; special lien under section 6324A. For purposes of §§ 20.2204-1(b) and 20.2204-2(b), in the case of a decedent dying after December 31, 1976, if the executor elects a special lien in favor of the United States under section 6324A, relating to special lien for estate taxes deferred under sections 6166 or 6166A (as in effect prior to its repeal by the Economic Recovery Tax Act of 1981), such lien shall be treated as the furnishing of a bond with respect to the amount for which the time for payment has been extended under section 6166. If an election has been made under section 6324A, the executor may not thereafter substitute a bond pursuant to section 2204 in lieu of that lien. If a bond has been supplied under section 2204, however,the executor may, by filing a proper notice of election and agreement, substitute a lien under section 6324A for any part or all of such bond. See §§ 20.6324A-1 and 301.6324A-1 for rules relating to a special lien under section 6324A. [T.D. 7941, 49 FR 4468, Feb. 7, 1984] § 20.2205-1 Reimbursement out of estate. If any portion of the tax is paid by or collected out of that part of the estate passing to, or in the possession of, any person other than the duly qualified executor or administrator, that person may be entitled to reimbursement, either out of the undistributed estate or by contribution from other beneficiaries whose shares or interests in the estate would have been reduced had the tax been paid before distribution of the estate, or whose shares or interests are subject either to an equal or prior liability for the payment of taxes, debts, or other charges against the estate. For specific provisions giving the executor the right to reimbursement from life insurance beneficiaries and from recipients of property over which the decedent had a power of appointment, see sections 2206 and 2207. These provisions, however, are not designed to curtail the right of the district director to collect the tax from any person, or out of any property, liable for its payment. The district director cannot be required to apportion the tax among the persons liable nor to enforce any right of reimbursement or contribution. § 20.2206-1 Liability of life insurance beneficiaries. With respect to the right of the district director to collect the tax without regard to the provisions of section 2206, see § 20.2205-1. § 20.2207-1 Liability of recipient of property over which decedent had power of appointment. With respect to the right of the district director to collect the tax without regard to the provisions of section 2207, see § 20.2205-1. § 20.2207A-1 Right of recovery of estate taxes in the case of certain marital deduction property. (a) In general Right of recovery from person receiving the property. person receiving the property (2) Failure to exercise right of recovery. (3) Waiver of right of recovery. (b) Amount of estate tax attributable to property includible under section 2044. (c) Amount of estate tax attributable to a particular property. (d) Person receiving the property. person receiving the property (e) Example. Example. D died in 1994. D's will created a trust funded with certain income producing assets included in D's gross estate at $1,000,000. The trust provides that all the income is payable to D's wife, S, for life, remainder to be divided equally among their four children. In computing D's taxable estate, D's executor deducted, pursuant to section 2056(b)(7), $1,000,000. Assume that S received no other property from D and that S died in 1996. Assume further that S made no section 2519 disposition of the property, that the property was included in S's gross estate at a value of $1,080,000, and that S's will contained no provision regarding section 2207A(a). The tax attributable to the property is equal to the amount by which the total Federal estate tax (including penalties and interest) paid by S's estate exceeds the Federal estate tax (including penalties and interest) that would have been paid if S's gross estate had been reduced by $1,080,000. That amount of tax may be recovered by S's estate from the trust. If, at the time S's estate seeks reimbursement, the trust has been distributed to the four children, S's estate is also entitled to recover the tax from the children. [T.D. 8522, 59 FR 9654, Mar. 1, 1994, as amended by T.D. 9077, 68 FR 42594, July 18, 2003] § 20.2207A-2 Effective date. The provisions of § 20.2207A-1 are effective with respect to estates of decedents dying after March 1, 1994. With respect to estates of decedent dying on or before such date, the executor of the decedent's estate may rely on any reasonable interpretation of the statutory provisions. For these purposes, the provisions of § 20.2207A-1 (as well as project LR-211-76, 1984-1 C.B., page 598, see § 601.601(d)(2)(ii)( b [T.D. 8522, 59 FR 9655, Mar. 1, 1994] § 20.2208-1 Certain residents of possessions considered citizens of the United States. As used in this part, the term “citizen of the United States” is considered to include a decedent dying after September 2, 1958, who, at the time of his death, was domiciled in a possession of the United States and was a United States citizen, and who did not acquire his United States citizenship solely by reason of his being a citizen of such possession or by reason of his birth or residence within such possession. The estate of such a decedent is, therefore, subject to the tax imposed by section 2001. See paragraph (a)(2) of § 20.0-1 and § 20.2209-1 for further information relating to the application of the Federal estate tax to the estates of decedents who were residents of possessions of the United States. The application of this section may be illustrated by the following example and the examples set forth in § 20.2209-1: Example. A, a citizen of the United States by reason of his birth in the United States at San Francisco, established residence in Puerto Rico and acquired a Puerto Rican citizenship. A died on September 4, 1958, while a citizen and domiciliary of Puerto Rico. A's estate is, by reason of the provisions of section 2208, subject to the tax imposed by section 2001 inasmuch as his United States citizenship is based on birth in the United States and is not based solely on being a citizen of a possession or solely on birth or residence in a possession. [T.D. 6526, 26 FR 417, Jan. 19, 1961] § 20.2209-1 Certain residents of possessions considered nonresidents not citizens of the United States. As used in this part, the term “nonresident not a citizen of the United States” is considered to include a decedent dying after September 14, 1960, who, at the time of his death, was domiciled in a possession of the United States and was a United States citizen, and who acquired his United States citizenship solely by reason of his being a citizen of such possession or by reason of his birth or residence within such possession. The estate of such a decedent is, therefore, subject to the tax imposed by section 2101 which is the tax applicable in the case of a “nonresident not a citizen of the United States.” See paragraph (a)(2) of § 20.0-1 and § 20.2208-1 for further information relating to the application of the Federal estate tax to the estates of decedents who were residents of possessions of the United States. The application of this section may be illustrated by the following examples and the example set forth in § 20.2208-1. In each of the following examples the decedent is deemed a “nonresident not a citizen of the United States” and his estate is subject to the tax imposed by section 2101 since the decedent died after September 14, 1960, but would not have been so deemed and subject to such tax if the decedent had died on or before September 14, 1960. Example (1). C, who acquired his United States citizenship under section 5 of the Act of March 2, 1917 (39 Stat. 953), by reason of being a citizen of Puerto Rico, died in Puerto Rico on October 1, 1960, while domiciled therein. C is considered to have acquired his United States citizenship solely by reason of his being a citizen of Puerto Rico. Example (2). E, whose parents were United States citizens by reason of their birth in Boston, was born in the Virgin Islands on March 1, 1927. On September 30, 1960, he died in the Virgin Islands while domiciled therein. E is considered to have acquired his United States citizenship solely by reason of his birth in the Virgin Islands (section 306 of the Immigration and Nationality Act (66 Stat. 237, 8 U.S.C. 1406)). Example (3). N, who acquired United States citizenship by reason of being a native of the Virgin Islands and a resident thereof on June 28, 1932 (section 306 of the Immigration and Nationality Act (66 Stat. 237, 8 U.S.C. 1406)), died on October 1, 1960, while domiciled in the Virgin Islands. N is considered to have acquired his United States citizenship solely by reason of his birth or residence in the Virgin Islands. Example (4). P, a former Danish citizen, who on January 17, 1917, resided in the Virgin Islands, made the declaration to preserve his Danish citizenship required by Article 6 of the treaty entered into on August 4, 1916, between the United States and Denmark. Subsequently P acquired United States citizenship when he renounced such declaration before a court of record (section 306 of the Immigration and Nationality Act (66 Stat. 237, 8 U.S.C. 1406)). P died on October 1, 1960, while domiciled in the Virgin Islands. P is considered to have acquired his United States citizenship solely by reason of his birth or residence in the Virgin Islands. Example (5). R, a former French citizen, acquired his United States citizenship through naturalization proceedings in a court located in the Virgin Islands after having qualified for citizenship by residing in the Virgin Islands for 5 years. R died on October 1, 1960, while domiciled in the Virgin Islands. R is considered to have acquired his United States citizenship solely by reason of his birth or residence within the Virgin Islands. [T.D. 6526, 26 FR 418, Jan. 19, 1961] Procedure and Administration § 20.6001-1 Persons required to keep records and render statements. (a) It is the duty of the executor to keep such complete and detailed records of the affairs of the estate for which he acts as will enable the district director to determine accurately the amount of the estate tax liability. All documents and vouchers used in preparing the estate tax return (§ 20.6018-1) shall be retained by the executor so as to be available for inspection whenever required. (b) In addition to filing an estate tax return (see § 20.6018-1) and, if applicable, a preliminary notice (see § 20.6036-1), the executor shall furnish such supplemental data as may be necessary to establish the correct estate tax. It is therefore the duty of the executor (1) to furnish, upon request, copies of any documents in his possession (or on file in any court having jurisdiction over the estate) relating to the estate, appraisal lists of any items included in the gross estate, copies of balance sheets or other financial statements obtainable by him relating to the value of stock, and any other information obtainable by him that may be found necessary in the determination of the tax, and (2) to render any written statement, containing a declaration that it is made under penalties of perjury, of facts within his knowledge which the district director may require for the purpose of determining whether a tax liability exists and, if so, the extent thereof. Failure to comply with such a request will render the executor liable to penalties (see section 7269), and proceedings may be instituted in the proper court of the United States to secure compliance therewith (see section 7604). (c) Persons having possession or control of any records or documents containing or supposed to contain any information concerning the estate, or having knowledge of or information about any fact or facts which have a material bearing upon the liability, or the extent of liability, of the estate for the estate tax, shall, upon request of the district director, make disclosure thereof. Failure on the part of any person to comply with such request will render him liable to penalties (section 7269), and compliance with the request may be enforced in the proper court of the United States (section 7604). (d) Upon notification from the Internal Revenue Service, a corporation (organized or created in the United States) or its transfer agent is required to furnish the following information pertaining to stocks or bonds registered in the name of a nonresident decedent (regardless of citizenship): (1) The name of the decedent as registered; (2) the date of the decedent's death; (3) the decedent's residence and his place of death; (4) the names and addresses of executors, attorneys, or other representatives of the estate, within and without the United States; and (5) a description of the securities, the number of shares or bonds and the par values thereof. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 7238, 37 FR 28720, Dec. 29, 1972] § 20.6011-1 General requirement of return, statement, or list. (a) General rule. (b) Use of prescribed forms. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 7238, 37 FR 28720, Dec. 29, 1972] § 20.6011-4 Requirement of statement disclosing participation in certain transactions by taxpayers. (a) In general. listed transaction transaction of interest b (b) Effective/applicability date. [T.D. 9350, 72 FR 43153, Aug. 3, 2007] § 20.6018-1 Returns. (a) Estates of citizens or residents. (b) Estates of nonresidents not citizens In general. (2) Certain estates of decedents dying on or after November 14, 1966. (i) Transfers subject to the tax imposed by section 2107(a). (ii) Transfers subject to a Presidential proclamation. (c) Place for filing. (d) Time for filing. [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7296, 38 FR 34200, Dec. 12, 1973] § 20.6018-2 Returns; person required to file return. It is required that the duly qualified executor or administrator shall file the return. If there is more than one executor or administrator, the return must be made jointly by all. If there is no executor or administrator appointed, qualified and acting within the United States, every person in actual or constructive possession of any property of the decedent situated in the United States is constituted an executor for purposes of the tax (see § 20.2203-1), and is required to make and file a return. If in any case the executor is unable to make a complete return as to any part of the gross estate, he is required to give all the information he has as to such property, including a full description, and the name of every person holding a legal or beneficial interest in the property. If the executor is unable to make a return as to any property, every person holding a legal or beneficial interest therein shall, upon notice from the district director, make a return as to that part of the gross estate. For delinquency penalty for failure to file return, see section 6651 and § 301.6651-1 of this chapter (Regulations on Procedure and Administration). For criminal penalties for failure to file a return and filing a false or fraudulent return, see sections 7203, 7206, 7207, and 7269. § 20.6018-3 Returns; contents of returns. (a) Citizens or residents. (b) Nonresidents not citizens. (1) An itemized list of that part of the gross estate situated in the United States (see §§ 20.2103-1 and 20.2104-1); (2) In the case of an estate the transfer of which is subject to the tax imposed by section 2107(a) (relating to expatriation to avoid tax), a list of any amounts with respect to stock in a foreign corporation which are includible in the gross estate under section 2107(b), together with an explanation of how the amounts were determined; (3) An itemized list of any deductions claimed (see §§ 20.2106-1 and 20.2106-2); (4) The amount of the taxable estate (see § 20.2106-1); and (5) The gross estate tax, reduced by any credits against the tax (see § 20.2102-1). For the disallowance of certain deductions if the return does not disclose that part of the gross estate not situated in the United States, see §§ 20.2106-1 and 20.2106-2. (c) Provisions applicable to returns described in paragraphs (a) and (b) of this section. (2) A description of bonds shall include the number held, principal amount, name of obligor, date of maturity, rate of interest, date or dates on which interest is payable, series number if there is more than one issue, and the principal exchange upon which listed, or the principal business office of the obligor, if unlisted. A description of stocks shall include number of shares, whether common or preferred, and, if preferred, what issue, par value, quotation at which returned, exact name of corporation, and, if the stock is unlisted, the location of the principal business office and State in which incorporated and the date of incorporation, or if the stock is listed, the principal exchange upon which sold. A description of notes shall include name of maker, date on which given, date of maturity, amount of principal, amount of principal unpaid, rate of interest and whether simple or compound, date to which interest has been paid and amount of unpaid interest. A description of the seller's interest in land contracts shall include name of buyer, date of contract, description of property, sale price, initial payment, amounts of installment payments, unpaid balance of principal and accrued interest, interest rate and date prior to decedent's death to which interest had been paid. (3) A description of bank accounts shall disclose the name and address of depository, amount on deposit, whether a checking, savings, or a time-deposit account, rate of interest, if any payable, amount of interest accrued and payable, and serial number. A description of life insurance shall give the name of the insurer, number of policy, name of the beneficiary, and the amount of the proceeds. (4) In describing an annuity, the name and address of the grantor of the annuity shall be given, or, if the annuity is payable out of a trust or other funds, such a description as will fully identify it. If the annuity is payable for a term of years, the duration of the term and the date on which it began shall be given, and if payable for the life of a person other than the decedent, the date of birth of such person shall be stated. If the executor has not included in the gross estate the full value of an annuity or other payment described in section 2039, he shall nevertheless fully describe the annuity and state its total purchase price and the amount of the contribution made by each person (including the decedent's employer) toward the purchase price. If the executor believes that any part of the annuity or other payment is excludable from the gross estate under the provisions of section 2039, or for any other reason, he shall state in the return the reason for his belief. (5) Judgments should be described by giving the title of the cause and the name of the court in which rendered, date of judgment, name and address of the judgment debtor, amount of judgment, and rate of interest to which subject, and by stating whether any payments have been made thereon, and, if so, when and in what amounts. (6) If, pursuant to section 2032, the executor elects to have the estate valued at a date or dates subsequent to the time of the decedent's death, there must be set forth on the return: (i) An itemized description of all property included in the gross estate on the date of the decedent's death, together with the value of each item as of that date; (ii) an itemized disclosure of all distributions, sales, exchanges, and other dispositions of any property during the 6 month (1 year, if the decedent died on or before December 31, 1970) period after the date of the decedent's death, together with the dates thereof; and (iii) the value of each item of property in accordance with the provisions of section 2032 (see § 20.2032-1). Interest and rents accrued at the date of the decedent's death and dividends declared to stockholders of record on or before the date of the decedent's death and not collected at that date are to be shown separately. (See also paragraph (e) of § 20.6018-4 with respect to documents required to be filed with the return.) (7) All transfers made by the decedent within 3 years before the date of his death of a value of $1,000 or more and all transfers (other than outright transfers not in trust) made by the decedent at any time during his life of a value of $5,000 or more, except bona fide sales for an adequate and full consideration in money or money's worth, must be disclosed in the return, whether or not the executor regards the transfers as subject to the tax. If the executor believes that such a transfer is not subject to the tax, a brief statement of the pertinent facts shall be made. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 7238, 37 FR 28721, Dec. 29, 1972; T.D. 7296, 38 FR 34200, Dec. 12, 1973] § 20.6018-4 Returns; documents to accompany the return. (a) A certified copy of the will, if the decedent died testate, must be submitted with the return, together with copies of such other documents as are required in Form 706 and in the applicable sections of these regulations. There may also be filed copies of any documents which the executor may desire to submit in explanation of the return. (b) In the case of an estate of a nonresident citizen, the executor shall also file the following documents with the return: (1) A copy of any inventory of property and schedule of liabilities, claims against the estate and expenses of administration filed with the foreign court of probate jurisdiction, certified by a proper official of the court; and (2) A copy of any return filed under any applicable foreign inheritance, estate, legacy, or succession tax act, certified by a proper official of the foreign tax department. (c) In the case of an estate of a nonresident not a citizen of the United States, the executor must also file with the return, but only if deductions are claimed or the transfer of the estate is subject to the tax imposed by section 2107(a) (relating to expatriation to avoid tax), a copy of the inventory of property filed under the foreign death duty act; or, if no such inventory was filed, a certified copy of the inventory filed with the foreign court of probate jurisdiction. (d) For every policy of life insurance listed on the return, the executor must procure a statement, on Form 712, by the company issuing the policy and file it with the return. (e) If, pursuant to section 2032, the executor elects to have the estate valued at a date or dates subsequent to the time of the decedent's death, the executor shall file with the return evidence in support of any statements made by him in the return as to distributions, sales, exchanges, or other dispositions of property during the 6 month (1 year, if the decedent died on or before December 31, 1970) period which followed the decedent's death. If the court having jurisdiction over the estate makes an order or decree of distribution during that period, a certified copy thereof must be submitted as part of the evidence. The district director, or the director of a service center, may require the submission of such additional evidence as is deemed necessary. (f) In any case where a transfer, by trust or otherwise, was made by a written instrument, a copy thereof shall be filed with the return if (1) the property is included in the gross estate, or (2) the executor pursuant to the provisions of paragraph (c)(7) of § 20.6018-3 has made a disclosure of the transfer on the return but has not included its value in the gross estate in the belief that it is not so includible. If the written instrument is of public record, the copy shall be certified, or if it is not of record, the copy shall be verified. If the decedent was a nonresident, not a citizen at the time of his death, the copy may be either certified or verified. (g) If the executor contends that the value of property transferred by the decedent within a period of three years ending with the date of the decedent's death should not be included in the gross estate because he considers that the transfer was not made in contemplation of death, he shall file with the return (1) a copy of the death certificate, and (2) a statement, continuing a declaration that it is made under the penalties of perjury, of all the material facts and circumstances, including those directly or indirectly indicating the decedent's motive in making the transfer and his mental and physical condition at that time. However, this data need not be furnished with respect to transfers of less than $1,000 in value unless requested by the district director. [T.D. 6996, 23 FR 4529, June 24, 1958, as amended by T.D. 7238, 37 FR 28721, Dec. 29, 1972; T.D. 7296, 38 FR 34200, Dec. 12, 1973] § 20.6036-1 Notice of qualification as executor of estate of decedent dying before 1971. (a) Preliminary notice for estates of decedents dying before January 1, 1971. (2) In the case of a nonresident not a citizen of the United States dying on or after November 14, 1966— (i) Subject to the provisions of subdivisions (ii) and (iii) of this subparagraph, a preliminary notice must be filed on Form 705 if that part of the decedent's gross estate situated in the United States exceeded $30,000 in value on the date of his death (see §§ 20.2103-1 and 20.2104-1). (ii) If the transfer of the estate is subject to the tax imposed by section 2107(a) (relating to expatriation to avoid tax), any amounts includible in the decedent's gross estate under section 2107(b) are to be added to the value on the date of his death of that part of his gross estate situated in the United States, for purposes of determining under subdivision (i) of this subparagraph whether his gross estate exceeded $30,000 in value on the date of his death. (iii) If the transfer of the estate is subject to tax pursuant to a Presidential proclamation made under section 2108(a) (relating to Presidential proclamations of the application of pre-1967 estate tax provisions), a preliminary notice must be filed on Form 705 if the value on the date of the decedent's death of that part of his gross estate situated in the United States exceeded $2,000. (3) A preliminary notice must be filed on Form 705 for the estate of every nonresident not a citizen of the United States dying before November 14, 1966, if the value on the date of his death of that part of his gross estate situated in the United States exceeded $2,000. (4) The value of the gross estate on the date of death governs with respect to the requirement for filing the preliminary notice irrespective of whether the value of the gross estate is, at the executor's election, finally determined pursuant to the provisions of section 2032 as of a date subsequent to the date of death. If there is doubt as to whether the gross estate exceeds $60,000, $30,000, or $2,000, as the case may be, the notice shall be filed as a matter of precaution in order to avoid the possibility of penalties attaching. (5) The primary purpose of the preliminary notice is to advise the Internal Revenue Service of the existence of taxable estates, and filing shall not be delayed beyond the period provided for in § 20.6071-1 merely because of uncertainty as to the exact value of the assets. The estimate of the gross estate called for by the notice shall be the best approximation of value which can be made within the time allowed. Duplicate copies of the preliminary notice are not required to be filed. (6) For criminal penalties for failure to file a notice and filing a false or fraudulent notice, see sections 7203, 7207, and 7269. See § 20.6091-1 for the place for filing the notice. See § 20.6071-1 for the time for filing the notice. (b) Persons required to file. [T.D. 7238, 37 FR 28721, Dec. 29, 1972, as amended by T.D. 7296, 38 FR 34200, Dec. 12, 1973] § 20.6036-2 Notice of qualification as executor of estate of decedent dying after 1970. In the case of the estate of a decedent dying after December 31, 1970, no special notice of qualification as executor of an estate is required to be filed. The requirement of section 6036 for notification of qualification as executor of an estate shall be satisfied by the filing of the estate tax return required by section 6018 and the regulations thereunder. [T.D. 7238, 37 FR 28721, Dec. 29, 1972] § 20.6060-1 Reporting requirements for tax return preparers. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78450, Dec. 22, 2008] § 20.6061-1 Signing of returns and other documents. Any return, statement, or other document required to be made under any provision of Chapter 11 or Subtitle F of the Code or regulations prescribed thereunder with respect to any tax imposed by Chapter 11 of the Code shall be signed by the executor, administrator or other person required or duly authorized to sign in accordance with the regulations, forms or instructions prescribed with respect to such return, statement, or other document. See section 2203 for definition of executor, administrator, etc. The person required or duly authorized to make the return may incur liability for the penalties provided for erroneous, false, or fraudulent returns. For criminal penalties see sections 7201, 7203, 7206, 7207, and 7269. [T.D. 6600, 27 FR 4986, May 29, 1962] § 20.6065-1 Verification of returns. (a) Penalties of perjury. (b) Oath. [T.D. 6600, 27 FR 4986, May 29, 1962] § 20.6071-1 Time for filing preliminary notice required by § 20.6036-1. In the case of the estate of a decedent dying before January 1, 1971, if a duly qualified executor or administrator of the estate of such a decedent who was a resident or a citizen of the United States qualifies within 2 months after a decedent's death, or if a duly qualified executor or administrator of the estate of such a decedent who was a nonresident not a citizen qualifies within the United States within 2 months after the decedent's death, the preliminary notice required by § 20.6036-1 must be filed within 2 months after his qualification. If no such executor or administrator qualifies within that period, the preliminary notice must be filed within 2 months of the decedent's death. [T.D. 7238, 37 FR 28721, Dec. 29, 1972] § 20.6075-1 Returns; time for filing estate tax return. The estate tax return required by section 6018 must be filed on or before the due date. The due date is the date on or before which the return is required to be filed in accordance with the provisions of section 6075(a) or the last day of the period covered by an extension of time as provided in § 20.6081-1. The due date, for a decedent dying after December 31, 1970, is, unless an extension of time for filing has been obtained, the day of the ninth calendar month after the decedent's death numerically corresponding to the day of the calendar month on which death occurred. However, if there is no numerically corresponding day in the ninth month, the last day of the ninth month is the due date. For example, if the decedent dies on July 31, 2000, the estate tax return and tax payment must be made on or before April 30, 2001. When the due date falls on Saturday, Sunday, or a legal holiday, the due date for filing the return is the next succeeding day that is not Saturday, Sunday, or a legal holiday. For the definition of a legal holiday, see section 7503 and § 301.7503-1 of this chapter. As to additions to the tax in the case of failure to file the return or pay the tax within the prescribed time, see section 6651 and § 301.6651-1 of this chapter. For rules with respect to the right to elect to have the property valued as of a date or dates subsequent to the decedent's death, see section 2032 and § 20.2032-1, and section 7502 and § 301.7502-1 of this chapter. This section applies to estates of decedents dying after August 16, 1954. [T.D. 8957, 66 FR 38546, July 25, 2001] § 20.6081-1 Extension of time for filing the return. (a) Procedures for requesting an extension of time for filing the return. (b) Automatic extension. (c) Extension for good cause shown. (d) Filing the return. (e) Payment of the tax. (f) Effective date. [T.D. 8957, 66 FR 38546, July 25, 2001] § 20.6091-1 Place for filing returns or other documents. (a) General rule. (1) The service center serving the location in which the decedent was domiciled at the time of his death, if the instructions applicable to the estate tax return provide that the return shall be filed with a service center, or (2) Any person assigned the responsibility to receive returns in the local Internal Revenue Service office serving the location in which the decedent was domiciled at the time of his death, if paragraph (a)(1) of this section does not apply. Paragraph (a)(1) of this section does not apply if the return is made by hand-carrying or if the instructions applicable to the preliminary notice or to the return do not provide that it shall be filed with a service center. (b) Non-U.S. domiciliaries. [T.D. 7238, 37 FR 28722, Dec. 29, 1972, as amended by T.D. 7302, 39 FR 796, Jan. 3, 1974; T.D. 7495, 42 FR 33726, July 1, 1977; T.D. 9156, 69 FR 55745, Sept. 16, 2004] § 20.6091-2 Exceptional cases. Notwithstanding the provisions of § 20.6091-1 the Commissioner may permit the filing of the preliminary notice required by § 20.6036-1 and the estate tax return required by § 20.6018-1 in any local Internal Revenue Service office. [T.D. 6600, 27 FR 4986, May 29, 1962, as amended by T.D. 9156, 69 FR 55745, Sept. 16, 2004] § 20.6107-1 Tax return preparer must furnish copy of return to taxpayer and must retain a copy or record. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78450, Dec. 22, 2008] § 20.6109-1 Tax return preparers furnishing identifying numbers for returns or claims for refund. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78450, Dec. 22, 2008] § 20.6151-1 Time and place for paying tax shown on the return. (a) General rule. (b) Extension of time for paying In general. (2) Reversionary or remainder interests. (3) Interest in a closely held business. (c) Payment with obligations of the United States. (d) Receipt for payment. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6522, 25 FR 13885, Dec. 29, 1960] § 20.6161-1 Extension of time for paying tax shown on the return. (a) Basis for granting an extension of time Reasonable cause. Example (1). An estate includes sufficient liquid assets to pay the estate tax when otherwise due. The liquid assets, however, are located in several jurisdictions and are not immediately subject to the control of the executor. Consequently, such assets cannot readily be marshaled by the executor, even with the exercise of due diligence. Example (2). An estate is comprised in substantial part of assets consisting of rights to receive payments in the future (i.e., annuities, copyright royalties, contingent fees, or accounts receivable). These assets provide insufficient present cash with which to pay the estate tax when otherwise due and the estate cannot borrow against these assets except upon terms which would inflict loss upon the estate. Example (3). An estate includes a claim to substantial assets which cannot be collected without litigation. Consequently, the size of the gross estate is unascertainable as of the time the tax is otherwise due. Example (4). An estate does not have sufficient funds (without borrowing at a rate of interest higher than that generally available) with which to pay the entire estate tax when otherwise due, to provide a reasonable allowance during the remaining period of administration of the estate for the decedent's widow and dependent children, and to satisfy claims against the estate that are due and payable. Furthermore, the executor has made a reasonable effort to convert assets in his possession (other than an interest in a closely held business to which section 6166 applies) into cash. (2) Undue hardship General rule. (ii) Definition of “undue hardship”. Example (1). A farm (or other closely held business) comprises a significant portion of an estate, but the percentage requirements of section 6166(a) (relating to an extension where the estate includes a closely held business) are not satisfied and, therefore, that section does not apply. Sufficient funds for the payment of the estate tax when otherwise due are not readily available. The farm (or closely held business) could be sold to unrelated persons at a price equal to its fair market value, but the executor seeks an extension of time to facilitate the raising of funds from other sources for the payment of the estate tax. Example (2). The assets in the gross estate which must be liquidated to pay the estate tax can only be sold at a sacrifice price or in a depressed market if the tax is to be paid when otherwise due. (b) Application for extension. (c) Special rules Payment pursuant to extension. (2) Interest. (3) Duty to file timely return. (4) Credit for taxes. (d) Cross references. [T.D. 7238, 37 FR 28722, Dec. 29, 1972, as amended by T.D. 7384, 40 FR 49323, Oct. 22, 1975] § 20.6161-2 Extension of time for paying deficiency in tax. (a) In any case in which the district director finds that payment, on the date prescribed therefor, of any part of a deficiency would impose undue hardship upon the estate, he may extend the time for payment for a period or periods not to exceed one year for any one period and for all periods not to exceed four years from the date prescribed for payment thereof. However, see § 20.6161-1 for extensions of time for payment of the part of a deficiency which is prorated to installments under the provisions of section 6166. (b) The extension will not be granted upon a general statement of hardship. The term “undue hardship” means more than an inconvenience to the estate. It must appear that a substantial financial loss, for example, due to the sale of property at a sacrifice price, will result to the estate from making payment of the deficiency at the date prescribed therefor. If a market exists, a sale of property at the current market price is not ordinarily considered as resulting in an undue hardship. No extension will be granted if the deficiency is due to negligence or intentional disregard of rules and regulations or to fraud with intent to evade the tax. (c) An application for such an extension must be in writing and must contain, or be supported by, information in a written statement declaring that it is made under penalties of perjury showing the undue hardship that would result to the estate if the extension were refused. The application, with the supporting information, must be filed with the district director. When received, it will be examined, and, if possible, within thirty days will be denied, granted, or tentatively granted subject to certain conditions of which the executor will be notified. The district director will not consider an application for such an extension unless it is applied for on or before the date prescribed for payment of the deficiency, as shown by the notice and demand from the district director. If the executor desires to obtain an additional extension, it must be applied for on or before the date of the expiration of the previous extension. The granting of the extension of time for paying the deficiency is discretionary with the district director. (d) The amount of the deficiency for which an extension is granted, with the additions thereto, shall be paid on or before the expiration of the period of extension without the necessity of notice and demand from the district director. (e) The granting of an extension of time for paying the deficiency will not operate to prevent the running of interest. See section 6601. An extension of time to pay the deficiency may extend the period within which State and foreign death taxes allowed as a credit under sections 2011 and 2014 are required to be paid and the credit therefor claimed. See paragraph (c) of § 20.2011-1 and § 20.2014-6. (f) For provisions requiring the furnishing of security for the payment of the deficiency for which an extension is granted, see § 20.6165-1. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6522, 25 FR 13885, Dec. 29, 1960] § 20.6163-1 Extension of time for payment of estate tax on value of reversionary or remainder interest in property. (a)(1) In case there is included in the gross estate a reversionary or remainder interest in property, the payment of the part of the tax attributable to that interest may, at the election of the executor, be postponed until six months after the termination of the precedent interest or interests in the property. The provisions of this section are limited to cases in which the reversionary or remainder interest is included in the decedent's gross estate as such and do not extend to cases in which the decedent creates future interests by his own testamentary act. (2) If the district director finds that the payment of the tax at the expiration of the period of postponement described in subparagraph (1) of this paragraph would result in undue hardship to the estate, he may— (i) After September 2, 1958, and before February 27, 1964, extend the time for payment for a reasonable period or periods not to exceed in all 2 years from the expiration of the period of postponement, but only if the precedent interest or interests in the property terminated after March 2, 1958, or (ii) After February 26, 1964, extend the time for payment for a reasonable period or periods not to exceed in all 3 years from the expiration of the period of postponement, but only if the time for payment of the tax, including any extensions thereof, did not expire before February 26, 1964. See paragraph (a)(2)(ii) of § 20.6161-1 for the meaning of the term “undue hardship”. An example of undue hardship is a case where, by reason of the time required to settle the complex issues involved in a trust, the decedent's heirs or beneficiaries cannot reasonably expect to receive the decedent's remainder interest in the trust before the expiration of the period of postponement. The extension will be granted only in the manner provided in paragraph (b) of § 20.6161-1, and the amount of the tax for which the extension is granted, with the additions thereto, shall be paid on or before the expiration of the period of extension without the necessity of notice and demand from the district director. (b) Notice of the exercise of the election to postpone the payment of the tax attributable to a reversionary or remainder interest should be filed with the district director before the date prescribed for payment of the tax. The notice of election may be made in the form of a letter addressed to the district director. There shall be filed with the notice of election a certified copy of the will or other instrument under which the reversionary or remainder interest, was created, or a copy verified by the executor if the instrument is not filed of record. The district director may require the submission of such additional proof as he deems necessary to disclose the complete facts. If the duration of the precedent interest is dependent upon the life of any person, the notice of election must show the date of birth of that person. (c) If the decedent's gross estate consists of both a reversionary or remainder interest in property and other property, the tax attributable to the reversionary or remainder interest, within the meaning of this section, is an amount which bears the same ratio to the total tax as the value of the reversionary or remainder interest (reduced as provided in the following sentence) bears to the entire gross estate (reduced as provided in the last sentence of this paragraph). In applying this ratio, the value of the reversionary or remainder interest is reduced by (1) the amount of claims, mortgages, and indebtedness which is a lien upon such interest; (2) losses in respect of such interest during the settlement of the estate which are deductible under the provisions of section 2054 or section 2106(a)(1); (3) any amount deductible in respect of such interest under section 2055 or 2106(a)(2) for charitable, etc., transfers; and (4) the portion of the marital deduction allowed under the provisions of section 2056 on account of bequests, etc., of such interests to the decedent's surviving spouse. Likewise, in applying the ratio, the value of the gross estate is reduced by such deductions having similar relationship to the items comprising the gross estate. (d) For provisions requiring the payment of interest during the period of the extension occurring before July 1, 1975, see section 6601(b) prior to its amendment by section 7(d)(1) of the Act of Jan. 3, 1975 (Pub. L. 93-625, 88 Stat. 2115). For provisions requiring the furnishing of security for the payment of the tax for which the extension is granted, see paragraph (b) of § 20.6165-1. For provisions concerning the time within which credit for State and foreign death taxes on such a reversionary or remainder interest may be taken, see section 2015 and the regulations thereunder. [T.D. 6296, 23 FR 4529, June 24, 1958, as amended by T.D. 6716, 29 FR 3757, Mar. 26, 1964; T.D. 7238, 37 FR 28724, Dec. 29, 1972; T.D. 7384, 40 FR 49323, Oct. 22, 1975] § 20.6165-1 Bonds where time to pay tax or deficiency has been extended. (a) Extensions under sections 6161 and 6163(b) of time to pay tax or deficiency. (b) Extensions under section 6163 of time to pay estate tax attributable to reversionary or remainder interests. [T.D. 6526, 26 FR 418, Jan. 19, 1961, as amended by T.D. 6600, 27 FR 4986, May 29, 1962] § 20.6166-1 Election of alternate extension of time for payment of estate tax where estate consists largely of interest in closely held business. (a) In general. (b) Time and manner of election. (1) The decedent's name and taxpayer identification number as they appear on the estate tax return; (2) The amount of tax which is to be paid in installments; (3) The date selected for payment of the first installment; (4) The number of annual installments, including the first installment, in which the tax is to be paid; (5) The properties shown on the estate tax return which constitute the closely held business interest (identified by schedule and item number); and (6) The facts which formed the basis for the executor's conclusion that the estate qualifies for payment of the estate tax in installments. In the absence of a statement in the notice of election as to the amount of tax to be paid in installments, the date selected for payment of the first installment, or the number of installments, the election is presumed to be for the maximum amount so payable and for payment thereof in 10 equal installments, the first of which is due on the date which is 5 years after the date prescribed in section 6151(a) for payment of estate tax. (c) Treatment of certain deficiencies No election before assessment of deficiency. (2) Election made with estate tax return. (3) Portion of deficiency attributable to closely held business interest. (d) Protective election. (e) Special rules Effect of deficiencies and protective elections upon payment. (2) Determination of date for payment of first installment. (f) Rule for computing interest. (g) Relation of sections 6166 and 6166A. (h) Special rule for estates for which elections under section 6166 are made on or before August 30, 1980. (i) Examples. Example (1). (i) Based upon values shown on decedent A's timely filed estate tax return, 60 percent of the value of A's adjusted gross estate consisted of a farm which was a closely held business within the meaning of section 6166. A's executor, B, made a protective election under section 6166 when he filed A's estate tax return. B also applied for an extension of time under section 6161 to pay $15,000 of the $30,000 of estate tax shown due on the return. The requested extension was granted and was renewed at the end of 1 year. Eighteen months after the return was filed and after examination of A's estate tax return, the value of the farm was found to constitute 67 percent of the adjusted gross estate. B entered into an agreement consenting to the values as established on examination and to a deficiency of $5,000. B then filed a final notice of election under section 6166, choosing a 5-year deferral followed by 10 annual installment payments and thereby terminated his extension under section 6161 because that amount of tax was then included under the section 6166 election. B could have extended payment of 67 percent of the total estate tax, or $23,450. $23,450 is eligible for installment payments under section 6166 and the section section 6166 election is considered to be for that amount. B is considered to have prepaid $3,450 of tax since only $20,000 of tax remained unpaid. The $3,450 is attributed to the first installment of $2,345 and to $1,105 of the second installment which would have been payable under the section 6166 election. (ii) Had B been granted an extension of time under section 6161 to pay $20,000 of tax, $25,000 would remain upaid when the final section 6166 election is made. Payment of the full $23,450 (67 percent) of tax which is attributable to the closely held business interest is included under the section 6166 election. The balance of unpaid tax ($1,550) is due upon expiration of the estate's section 6161 extension. (iii) Assume the facts under example (1) (i). B must pay all unpaid accrued interest with his notice of final election. Since only 18 months have passed, no installments of tax are due. Interest on the $5,000 deficiency is computed at 4 percent per annum for the entire 18 months, and interest for 12 months of that period is currently due to be paid. Interest for the remaining 6 months is due at the next succeeding date for payment of interest. Interest on the $15,000 of tax extended under section 6161 is computed at the rate determined under section 6621 until the date of the final section 6166 election and is due upon termination of the section 6161 extension. After that date, the interest on the $15,000 will also accrue at 4 percent per annum. Example (2). Assume the facts as in example (1), except B initially made an election under section 6166A and made no protective election under section 6166. Following final determination of values, B is not permitted to make any election under section 6166; however, had B protectively elected section 6166 at the time he made the section 6166A election, he could have terminated the section 6166A election and finally elected under section 6166. In such a case, the full $23,450 of tax attributable to the farm would have been eligible for extension under section 6166. The 4 percent interest rate would apply to the $5,000 deficiency from the original due date of the tax, and, as with the extension under section 6161, it would apply to the amounts extended under section 6166A only from the date on which the election under section 6166 was finalized. Example (3). C died in 1977. His estate owes Federal estate taxes of $750,000, $500,000 of which is attributable to a closely held business interest. Payment of the $500,000 was extended under section 6166. A 5-year deferral followed by 10 annual installment payments was chosen by C's executor. Under paragraph (f) of this section, only 63.16 percent of each installment will be subject to the special 4 percent interest rate and the remainder will be subject to the rate determined under section 6621. The same rule applies in computing interest for the 5 years during which payment of tax is deferred. (This is so because the 4 percent interest rate applies only to a maximum of $345,800 of tax less the $30,000 of credit allowable under section 2010(a) rather than to the entire $500,000 extended amount). [T.D. 7710, 45 FR 50745, July 31, 1980] § 20.6166A-1 Extension of time for payment of estate tax where estate consists largely of interest in closely held business. (a) In general. (b) Limitation on amount of tax payable in installments. Value of interest in a closely held business which is included in the gross estate (C) ÷ Value of gross estate (D) × Gross Federal estate tax reduced by the credits authorized by sections 2011 through 2014 and any death tax convention (B). The executor may elect to pay in installments an amount less than the amount computed under the limitation in this paragraph. For example, if the total estate tax payable is $100,000 and the amount computed under the limitation in this paragraph is $60,000, the executor may elect to pay in installments some lesser sum such as $30,000, in which event the executor must pay $73,000 to the district director on or before the date prescribed by section 6151(a) for payment of the tax. Of such payment, $70,000 represents tax which the executor either could not elect to pay in installments or did not choose to so elect, and $3,000 represents a payment of the first installment of the tax which the executor elected to pay in installments. (c) Number of installments and dates for payment. (d) Deficiencies. (e) Notice of election Filing of notice. (2) Form of notice. (3) Protective election. (f) Time for paying interest. (g) Extensions of time for payment in hardship cases. (h) Prepayments. [T.D. 6522, 25 FR 13886, Dec. 29, 1960, as amended by T.D. 7238, 37 FR 28724, Dec. 29, 1972; T.D. 7384, 40 FR 49323, Oct. 22, 1975. Redesignated by T.D. 7710, 45 FR 50745, July 31, 1980] § 20.6166A-2 Definition of an interest in a closely held business. (a) In general. (1) An interest as a proprietor in a trade or business carried on as a proprietorship. (2) An interest as a partner in a partnership carrying on a trade or business if 20 percent or more of the total capital interest in the partnership is included in determining the decedent's gross estate or if the partnership had 10 or less partners. (3) Stock in a corporation carrying on a trade or business if 20 percent or more in value of the voting stock of the corporation is included in determining the decedent's gross estate or if the corporation had 10 or less shareholders. (b) Number of partners or shareholders. (c) Carrying on a trade or business. (2) In the case of a trade or business carried on as a proprietorship, the interest in the closely held business includes only those assets of the decedent which were actually utilized by him in the trade or business. Thus, if a building was used by the decedent in part as a personal residence and in part for the carrying on of a mercantile business, the part of the building used as a residence does not form any part of the interest in the closely held business. Whether an asset will be considered as used in the trade or business will depend on the facts and circumstances of the particular case, for example, if a bank account was held by the decedent in his individual name (as distinguished from the trade or business name) and it can be clearly shown that the amount on deposit represents working capital of the business as well as nonbusiness funds (e.g., receipts from investments, such as dividends and interest), then that part of the amount on deposit which represents working capital of the business will constitute a part of the interest in the closely held business. On the other hand, if a bank account is held by the decedent in the trade or business name and it can be shown that the amount represents nonbusiness funds as well as working capital, then only that part of the amount on deposit which represents working capital of the business will constitute a part of the interest in the closely held business. In a case where an interest in a partnership or stock of a corporation qualifies as an interest in a closely held business, the decedent's entire interest in the partnership, or the decedent's entire holding of stock in the corporation, constitutes an interest in a closely held business even though a portion of the partnership or corporate assets is used for a purpose other than the carrying on of a trade or business. (d) Interests in two or more closely held businesses. [T.D. 6522, 25 FR 13888, Dec. 29, 1960. Redesignated by T.D. 7710, 45 FR 50745, July 31, 1980] § 20.6166A-3 Acceleration of payment. (a) In general. (b) Undistributed net income of estate. (2) The term “undistributed net income” of the estate for any taxable year for purposes of this section is the amount by which the distributable net income of the estate, as defined in section 643, exceeds the sum of— (i) The amount for such year specified in section 661(a) (1) and (2), (ii) The amount of the Federal income tax imposed on the estate for such taxable year under Chapter I of the Code, and (iii) The amount of the Federal estate tax, including interest thereon, paid for the estate during such taxable year (other than any amount paid by reason of the application of this acceleration rule). (3) The payment described in subparagraph (1) of this paragraph shall be applied against the total unpaid portion of the tax which the executor elected to pay in installments, and shall be divided equally among the installments due after the date of such payment. The application of this subparagraph may be illustrated by the following example: Example. The decedent died on January 1, 1959. The executor elects under section 6166 to pay tax in the amount of $100,000 in 10 installments of $10,000. The first installment is due on April 1, 1960. The estate files its income tax returns on a calendar year basis. For its fifth taxable year (calendar year 1963) it has undistributed net income of $6,000. If the prepayment of $6,000 required by section 6166(h)(2)(A), and due on or before April 15, 1964, is paid before the fifth installment (due April 1, 1964), the $6,000 is apportioned equally among installments 5 through 10, leaving $9,000 as the amount due on each of such installments. However, if the prepayment of $6,000 is paid after the fifth installment, it is apportioned equally among installments 6 through 10, leaving $8,800 as the amount due on each of such installments. (c) Failure to pay installment on or before due date. (d) Withdrawal of funds from business. (2) If a distribution in redemption of stock is (by reason of the provisions of section 303 or so much of section 304 as relates to section 303) treated for income tax purposes as a distribution in full payment in exchange for the stock so redeemed, the amount of such distribution is not counted as a withdrawal of money or other property made with respect to the decedent's interest in the trade or business for purposes of determining whether the withdrawals of money or other property made with respect to the decedent's interest in the trade or business equal or exceed 50 percent of the value of the trade or business. However, in the case described in the preceding sentence the value of the trade or business for purposes of applying the rule set forth in subparagraph (1) of this paragraph is the value thereof reduced by the proportionate part thereof which such distribution represents. The proportionate part of the value of the trade or business which the distribution represents is determined at the time of the distribution, but the reduction in the value of the trade or business represented by it relates back to the time of the decedent's death, or the alternate valuation date if an election is made under section 2032, for purposes of determining whether other withdrawals with respect to the decedent's interest in the trade or business constitute withdrawals equaling or exceeding 50 percent of the value of the trade or business. See example (3) of paragraph (e)(6) of this section for illustration of this principle. The rule stated in the first sentence of this subparagraph does not apply unless after the redemption, but on or before the date prescribed for payment of the first installment which becomes due after the redemption, there is paid an amount of estate tax not less than the amount of money or other property distributed. Where there are a series of section 303 redemptions, each redemption is treated separately and the failure of one redemption to qualify under the rule stated in the first sentence of this subparagraph does not necessarily mean that another redemption will not qualify. (3) The application of this paragraph may be illustrated by the following examples, in each of which the executor elected to pay the estate tax in installments: Example (1). A, who died on July 1, 1957, owned an 80 percent interest in a partnership which qualified as an interest in a closely held business. B owned the other 20 percent interest in the partnership. On the date of A's death the value of the business was $200,000 and the value of A's interest therein was included in his gross estate at $160,000. On October 1, 1958, when the value of the business was the same as at A's death, the executor withdrew $80,000 from the business. On December 1, 1958, when the value of the remaining portion of the business was $160,000, the executor withdrew $20,000 from the business and B withdrew $10,000. On February 1, 1959, when the value of the then remaining portion of the business was $150,000 the executor withdrew $15,000. The withdrawals of money or other property from the trade or business with respect to the interest therein included in the gross estate are considered as not having equaled or exceeded 50 percent of the value of the trade or business until February 1, 1959. The executor is considered as having withdrawn 40 percent of the value of the trade or business on October 1, 1958, computed as follows: $80,000 (withdrawal) ÷ $200,000 (value of trade or business at time of withdrawal) × 100 percent = 40 percent Immediately following the October withdrawal the remaining portion of the business represents 60 percent of the value of the trade or business in existence at the time of A's death (100 percent less 40 percent withdrawn). The executor is considered as having withdrawn 7.5 percent of the value of the trade or business on December 1, 1958, and B as having withdrawn 3.75 percent of the value thereof at that time, computed as follows: Executor's withdrawal— $20,000 (withdrawal) ÷ $160,000 (value of trade or business at time of withdrawal) × 60 percent = 7.5 percent B's withdrawal— $10,000 (withdrawal) ÷ $160,000 (value of trade or business at time of withdrawal) × 60 percent = 3.75 percent Immediately following the December withdrawal the then remaining portion of the business represented 48.75 percent of the value of the trade or business in existence at the time of A's death (100 percent less 40 percent withdrawn by executor in October, 7.5 percent withdrawn by executor in December, and 3.75 percent withdrawn by B in December). It should be noted that while at this point the total withdrawals by the executor and B from the trade or business exceed 50 percent of the value thereof, the aggregate of the withdrawals by the executor were less than 50 percent of the value of the trade or business. Also it should be noted that while the total withdrawals by the executor exceeded 50 percent of the value of A's interest in the trade or business, they did not exceed 50 percent of the value of the entire trade or business. The executor is considered as having withdrawn 4.875 percent of the value of the trade or business on February 1, 1959, computed as follows: $15,000 (withdrawal) ÷ $150,000 (value of trade or business at time of withdrawal) × 48.75 percent = 4.875 percent As of February 1, 1959, the total withdrawals from the trade or business made with respect to A's interest therein was 52.375 percent of the value of the trade or business. Example (2). The decedent's 40-percent interest in the XYZ partnership constituted an interest in a closely held business. Since the decedent's interest in the closely held business amounted to less than 50 percent of the value of the business, money or other property equaling or exceeding 50 percent of the value of the business could not be withdrawn from the decedent's interest in the business. Therefore, withdrawals of money or other property from this trade or business never would accelerate the payment of the tax under the provisions of this paragraph. Example (3). The decedent died on September 1, 1957. He owned 100 shares of B Corporation (the total number of shares outstanding at the time of his death) and a 75 percent interest in a partnership of which C was the other partner. The B Corporation stock and the interest in the partnership together make up the interest in the closely held business which was included in the decedent's gross estate. The B Corporation stock was included in the gross estate at a value of $400,000 and the interest in the partnership was included at a value of $300,000. On November 1, 1957, at which time the value of the corporation's assets had not changed, in a section 303 redemption the executor surrendered 26 shares of B Corporation stock for $104,000. On December 1, 1957, at which time the value of the partnership's assets had not changed, the partners withdrew 90 percent of the assets of the partnership, with the executor receiving $270,000 and C receiving $90,000. The estate tax amounts to $240,000, of which the executor elected under section 6166 to pay $140,000 in 10 installments of $14,000 each. On December 1, 1958, the due date for paying the estate tax which was not payable in installments and for paying the first installment under section 6166, the executor paid estate tax of $114,000, of which $100,000 represented the tax not payable in installments and $14,000 represented the first installment. Inasmuch as after the section 303 distribution and on or before the due date of the first installment (December 1, 1958) after the section 303 distribution the executor paid as estate tax an amount not less than the amount of the distribution, the section 303 distribution does not constitute a withdrawal of money or other property from the business for purposes of section 6166(h)(1). Therefore, the value of the trade or business is reduced by the amount of the section 303 distribution. Accordingly, the value of the entire trade or business is $696,000, of which $400,000 represents the value of the partnership and $296,000 represents the value of the B Corporation stock. Since the executor is considered as having withdrawn only $270,000 (the withdrawal from the partnership) from the trade or business, the withdrawal of money or other property from the trade or business made with respect to the decedent's interest therein was 270,000/696,000 of the value of the entire trade or business, or less than 50 percent thereof. (e) Disposition of interest in business. (2) The phrase “distributed, sold, exchanged, or otherwise disposed of” comprehends all possible ways by which an interest in a closely held business ceases to form a part of the gross estate. The term includes the surrender of a stock certificate for corporate assets in complete or partial liquidation of a corporation pursuant to section 331. The term also includes the surrender of stock for stock pursuant to a transaction described in subparagraphs (A), (B), or (C) of section 368(a)(1). In general the term does not, however, extend to transactions which are mere changes in form. It does not include a transfer of assets to a corporation in exchange for its stock in a transaction with respect to which no gain or loss would be recognizable for income tax purposes under section 351. It does not include an exchange of stock in a corporation for stock in the same corporation or another corporation pursuant to a plan of reorganization described in subparagraph (D), (E), or (F) of section 368(a)(1), nor to an exchange to which section 355 (or so much of section 356 as relates to section 355) applies. However, any stock received in an exchange to which the two preceding sentences apply shall for purposes of this paragraph be treated as an interest in a closely held business. (3) An interest in a closely held business may be “distributed” by either a trustee who received it from the executor, or a trustee of an interest which is included in the gross estate under sections 2035 through 2038, or section 2041. See subparagraph (1) of this paragraph relative to the distribution of an interest by the executor to the person entitled to receive it under the decedent's will or an intestacy law. (4) An interest in a closely held business may be “sold, exchanged, or otherwise disposed of” by (i) the executor; (ii) a trustee or other donee to whom the decedent in his lifetime transferred the interest included in his gross estate under section 2035 through 2038, or section 2041; (iii) a beneficiary, trustee, or heir entitled to receive the property from the executor under the decedent's will or under the applicable law of descent and distribution, or to whom title to the interest passed directly under local law; (iv) a surviving joint tenant or tenant by the entirety; or (v) any other person. (5) If a distribution in redemption of stock is (by reason of the provisions of section 303 or so much of section 304 as relates to section 303) treated for income tax purposes as a distribution in full payment in exchange for the stock redeemed, the stock so redeemed is not counted as distributed, sold, exchanged, or otherwise disposed of for purposes of determining whether 50 percent or more of the decedent's interest in a closely held business has been distributed, sold, exchanged, or otherwise disposed of. However, in the case described in the preceding sentence the interest in the closely held business for purposes of applying the rule set forth in subparagraph (1) of this paragraph is such interest reduced by the proportionate part thereof which the redeemed stock represents. The proportionate part of the interest which the redeemed stock represents is determined at the time of the redemption, but the reduction in the interest represented by it relates back to the time of the decedent's death, or the alternate valuation date if an election is made under section 2032, for purposes of determining whether other distributions, sales, exchanges, and dispositions of the decedent's interest in the closely held business equal or exceed in the aggregate 50 percent of such interest. See example (3) of subparagraph (6) of this paragraph for illustration of this principle. The rule stated in the first sentence of this subparagraph does not apply unless after the redemption, but on or before the date prescribed for payment of the first installment which becomes due after the redemption, there is paid an amount of estate tax not less than the amount of money or other property distributed. Where there are a series of section 303 redemptions, each redemption is treated separately and the failure of one redemption to qualify under the rule stated in the first sentence of this subparagraph does not necessarily mean that another redemption will not qualify. (6) The application of this paragraph may be illustrated by the following examples, in each of which the executor elected to pay the tax in installments: Example (1). The decedent died on October 1, 1957. He owned 8,000 of the 12,000 shares of D Corporation outstanding at the time of his death and 3,000 of the 5,000 shares of E Corporation outstanding at that time. The D Corporation stock was included in the gross estate at $50 per share, or a total of $400,000. The E Corporation stock was included in the gross estate at $100 per share, or a total of $300,000. On November 1, 1958, the executor sold the 3,000 shares of E Corporation and on February 1, 1959, he sold 1,000 shares of D Corporation. Since the decedent's shares of D Corporation and E Corporation together constituted the interest in a closely held business, the value of such interest was $700,000 ($400,000 plus $300,000) and the D Corporation stock represented 400,000/700,000 thereof and the E Corporation stock represented 300,000/700,000 thereof. While the sale of 3,000 shares of E Corporation on November 1, 1958, was a sale of the decedent's entire interest in E Corporation and a sale of more than 50 percent of the outstanding stock of E Corporation, nevertheless it constituted a sale of only 300,000/700,000 of the interest in the closely held business. The sale of 1,000 shares of D Corporation stock on February 1, 1959, represented a sale of 50,000/700,000 of the interest in the closely held business. The numerator of $50,000 is determined as follows: 1,000 (shares sold) ÷ 8,000 (shares owned) × $400,000 (value of shares owned, as included in gross estate) Taken together the two sales represented a sale of 50 percent (350,000/700,000) of the interest in the closely held business. Therefore, as of February 1, 1959 (the date of the sale of 1,000 shares of E Corporation), 50 percent or more in value of the interest in the closely held business is considered as distributed, sold, exchanged, or otherwise disposed of. Example (2). The decedent died on September 1, 1958. The interest owned by him in a closely held business consisted of 100 shares of the M Corporation. On February 1, 1959, in a section 303 redemption, 20 shares were redeemed for cash and an amount equivalent to the proceeds was paid on the Federal estate tax before the date of the next installment. On July 1, 1959, the executor sold 40 of the remaining shares of the stock. The section 303 redemption is not considered to be a distribution, sale, exchange, or other disposition of the portion of the interest represented by the 20 shares redeemed. As a result of the section 303 redemption the remaining 80 shares represent the decedent's entire interest in the closely held business for purposes of determining whether in the aggregate 50 percent or more of the interest in the closely held business has been distributed, sold, exchanged, or otherwise disposed of. The sale on July 1, 1959, of the 40 shares represents a sale of 50 percent of the interest in the closely held business. Example (3). The facts are the same as in example (2) except that the 40 shares were sold on December 1, 1958 (before the section 303 redemption was made) instead of on July 1, 1959 (after the section 303 redemption was made). The sale of the 40 shares in December represents, as of that date, a sale of 40 percent of the interest in the closely held business. However, the section 303 redemption of 20 shares does not count as a distribution, sale, exchange, or other disposition of the interest, but it does reduce the interest to 80 shares (100 shares less 20 shares redeemed) for purposes of determining whether other distributions, sales, exchanges, and dispositions in the aggregate equal or exceed 50 percent of the interest in the closely held business. Since the reduction of the interest to 80 shares relates back to the time of the decedent's death, or the alternate valuation date if an election is made under section 2032, the sale of the 40 shares, as recomputed represents a sale of 50 percent of the interest. However, since the sale of the 40 shares did not represent a sale of 50 percent of the interest until the section 303 distribution was made, February 1, 1959 (the date of the section 303 distribution) is considered the date on which 50 percent of the interest was distributed, sold, exchanged, or otherwise disposed of. (f) Information to be furnished by executor. (i) Aggregate withdrawals of money or other property from the trade or business equal to or exceeding 50 percent of the value of the entire trade or business, or (ii) Aggregate distributions, sales, exchanges, and other dispositions equal to or exceeding 50 percent of the interest in the closely held business which was included in the gross estate, the executor shall so notify the district director, in writing, within 30 days of acquiring such knowledge. (2) On the date fixed for payment of each installment of tax (determined without regard to any extension of time for the payment thereof), other than the final installment, the executor shall furnish the district director, in writing, with either— (i) A complete disclosure of all transactions described in paragraphs (d) and (e) of this section of which he has knowledge and which have not previously been made known by him to the district director, or (ii) A statement that to the best knowledge of the executor all transactions described in paragraphs (d) and (e) of this section which have occurred have not produced a result described in subparagraph (1) (i) or (ii) of this paragraph. (3) The district director may require the submission of such additional information as is deemed necessary to establish the estate's right to continue payment of the tax in installments. [T.D. 6522, 25 FR 13888, Dec. 29, 1960. Redesignated by T.D. 7710, 45 FR 50745, July 31, 1980] § 20.6166A-4 Special rules applicable where due date of return was before September 3, 1958. (a) In general. (b) Tax to which election applies. (c) Proration of deficiency to installments. (d) Notice of election. (e) Undistributed income of estate. [T.D. 6522, 25 FR 13891, Dec. 29, 1960. Redesignated by T.D. 7710, 45 FR 50745, July 31, 1980] § 20.6302-1 Voluntary payments of estate taxes by electronic funds transfer. Any person may voluntarily remit by electronic funds transfer any payment of tax to which this part 20 applies. Such payment must be made in accordance with procedures prescribed by the Commissioner. [T.D. 8828, 64 FR 37676, July 13, 1999] § 20.6314-1 Duplicate receipts for payment of estate taxes. The internal revenue officer with whom the estate tax return is filed will, upon request, give to the person paying the tax duplicate receipts, either of which will be sufficient evidence of such payment and entitle the executor to be credited with the amount by any court having jurisdiction to audit or settle his accounts. [T.D. 7238, 37 FR 28724, Dec. 29, 1972] § 20.6321 Statutory provisions; lien for taxes. Sec. 6321. Lien for taxes. § 20.6321-1 Lien for taxes. For regulations concerning the lien for taxes, see § 301.6321-1 of this chapter (Regulations on Procedure and Administration). [T.D. 7710, 45 FR 50747, July 31, 1980] § 20.6323-1 Validity and priority against certain persons. For regulations concerning the validity of the lien imposed by section 6321 against certain persons, see §§ 301.6323(a)-1 through 301.6323(i)-1 of this chapter (Regulations on Procedure and Administration). [T.D. 7429, 41 FR 35495, Aug. 23, 1976] § 20.6324-1 Special lien for estate tax. For regulations concerning the special lien for the estate tax, see § 301.6324-1 of this chapter (Regulations on Procedure and Administration). § 20.6324A-1 Special lien for estate tax deferred under section 6166 or 6166A. (a) In general. (b) Section 6166 lien property In general. (2) Maximum value of required property. (3) Additional lien property may be required. (4) Partial substitution of bond. (c) Special rules Period of lien. (i) The executor is discharged from liability under section 2204; or (ii) Notice of lien is filed in accordance with § 301.6323(f)-1 of this chapter. The section 6324A lien continues until the liability for the deterred amount is satisfied or becomes unenforceable by reason of lapse of time. The provisions of § 301.6325-1(c), relating to release of lien or discharge of property, shall apply to this paragraph (c)(1). (2) Requirement that lien be filed. (3) Priorities. (i) To the extent provided in section 6323(b)(6), relating to real property tax and special assessment liens, regardless of whether such liens came into existence before or after the filing of the notice of Federal tax lien; (ii) In the case of any real property subject to a lien for repair or improvement, as against a mechanic's lienor, whether or not such lien came into existence before or after the notice of tax lien was filed; and (iii) As against any security interest set forth in section 6323(c)(3), relating to real property construction or improvement financing agreements, regardless whether such security interest came into existence before or after filing of the notice of tax lien. However, paragraphs (c)(3) (ii) and (iii) of this section shall not apply to any security interest that came into existence after the date of filing of notice (in a manner similar to a notice filed under section 6323(f)) that payment of the deferred amount has been accelerated under section 6166(g) or 6166A(h) (as in effect prior to its repeal by the Economic Recovery Tax Act of 1981). (d) Release or discharge of lien. (e) Definitions. (1) Deferred amount. (2) Required interest amount. (3) Deferral period. (4) Application of definitions. [T.D. 7941, 49 FR 4468, Feb. 7, 1984] § 20.6324B-1 Special lien for additional estate tax attributable to farm, etc., valuation. (a) General rule. (b) Period of lien. (1) The liability for the additional estate tax under section 2032A(c) with respect to such interest has been satisfied; or (2) Such liability has become unenforceable by reason of lapse of time; or (3) The district director is satisfied that no further liability for additional estate tax with respect to such interest may arise under section 2032A(c), i.e., the required time period has elapsed since the decedent's death without the occurrence of an event described in section 2032A(c)(1), or the qualified heir (as defined in section 2032A(e)(1)) had died. For procedures regarding the release or subordination of liens or discharge of property from liens, see § 301.6325-1 of this chapter (Regulations on Procedure and Administration). (c) Substitution of security for lien. (d) Special rules. [T.D. 7847, 47 FR 50856, Nov. 10, 1982] § 20.6325-1 Release of lien or partial discharge of property; transfer certificates in nonresident estates. (a) A transfer certificate is a certificate permitting the transfer of property of a nonresident decedent without liability. Except as provided in paragraph (b) of this section, no domestic corporation or its transfer agent should transfer stock registered in the name of a non-resident decedent (regardless of citizenship) except such shares which have been submitted for transfer by a duly qualified executor or administrator who has been appointed and is acting in the United States, without first requiring a transfer certificate covering all of the decedent's stock of the corporation and showing that the transfer may be made without liability. Corporations, transfer agents of domestic corporations, transfer agents of foreign corporations (except as to shares held in the name of a nonresident decedent not a citizen of the United States), banks, trust companies, or other custodians in actual or constructive possession of property, of such a decedent can insure avoidance of liability for taxes and penalties only by demanding and receiving transfer certificates before transfer of property of nonresident decedents. (b)(1) Subject to the provisions of paragraph (b)(2) of this section— (i) In the case of a nonresident not a citizen of the United States dying on or after January 1, 1977, a transfer certificate is not required with respect to the transfer of any property of the decedent if the value on the date of death of that part of the decedent's gross estate situated in the United States did not exceed the lesser of $60,000 or $60,000 reduced by the adjustments, if any, required by section 6018(a)(4) for certain taxable gifts made by the decedent and for the aggregate amount of certain specific exemptions. (ii) In the case of a nonresident not a citizen of the United States dying on or after November 14, 1966, a transfer certificate is not required with respect to the transfer before June 24, 1981 of any property of the decedent if the value on the date of death of that part of the decedent's gross estate situated in the United States did not exceed $30,000. (2)(i) If the transfer of the estate is subject to the tax imposed by section 2107(a) (relating to expatriation to avoid tax), any amounts which are includible in the decedent's gross estate under section 2107(b) must be added to the date of death value of the decedent's gross estate situated in the United States to determine the value on the date of death of the decedent's gross estate for purposes of paragraph (b)(1) of this section. (ii) If the transfer of the estate is subject to tax pursuant to a Presidential proclamation made under section 2108(a) (relating to Presidential proclamations of the application of pre-1967 estate tax provisions), a transfer certificate is not required with respect to the transfer of any property of the decedent if the value on the date of death of that part of the decedent's gross estate situated in the United States did not exceed $2,000. (3) A corporation, transfer agent, bank, trust company, or other custodian will not incur liability for a transfer of the decedent's property without a transfer certificate if the corporation or other person, having no information to the contrary, first receives from the executor or other responsible person, who may be reasonably regarded as in possession of the pertinent facts, a statement of the facts relating to the estate showing that the sum of the value on the date of the decedent's death of that part of his gross estate situated in the United States, and, if applicable, any amounts includible in his gross estate under section 2107(b), is such an amount that, pursuant to the provisions of paragraph (b) (1) and (2) of this section, a transfer certificate is not required. (4) For the determination of the gross estate situated in the United States, see §§ 20.2103-1 and 20.2104-1. (c) A transfer certificate will be issued by the service center director or the district director when he is satisfied that the tax imposed upon the estate, if any, has been fully discharged or provided for. The tax will be considered fully discharged for purposes of the issuance of a transfer certificate only when investigation has been completed and payment of the tax, including any deficiency finally determined, has been made. If the tax liability has not been fully discharged, transfer certificates may be issued permitting the transfer of particular items of property without liability upon the filing with the district director of such security as he may require. No transfer certificate is required in an estate of a resident decedent. Further, in the case of an estate of a nonresident decedent (regardless of citizenship) a transfer certificate is not required with respect to property which is being administered by an executor or administrator appointed, qualified, and acting within the United States. For additional regulations under section 6325, see § 301.6325-1 of this chapter (Regulations on Procedure and Administration). [T.D. 6296, 23 FR 4529, June 24, 1958; 25 FR 14021, Dec. 31, 1960, as amended by T.D. 7296, 38 FR 34201, Dec. 12, 1973; T.D. 7302, 39 FR 796, Jan. 3, 1974; T.D. 7825, 47 FR 35189, Aug. 13, 1982] § 20.6601-1 Interest on underpayment, nonpayment, or extensions of time for payment, of tax. For regulations concerning interest on underpayments, etc., see § 301.6601-1 of this chapter (Regulations on Procedure and Administration). § 20.6694-1 Section 6694 penalties applicable to tax return preparer. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78450, Dec. 22, 2008, as amended at 74 FR 5105, Jan. 29, 2009] § 20.6694-2 Penalties for understatement due to an unreasonable position. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78451, Dec. 22, 2008] § 20.6694-3 Penalty for understatement due to willful, reckless, or intentional conduct. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78451, Dec. 22, 2008] § 20.6694-4 Extension of period of collection when preparer pays 15 percent of a penalty for understatement of taxpayer's liability and certain other procedural matters. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78451, Dec. 22, 2008] § 20.6695-1 Other assessable penalties with respect to the preparation of tax returns for other persons. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78451, Dec. 22, 2008] § 20.6696-1 Claims for credit or refund by tax return preparers or appraisers. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78451, Dec. 22, 2008] § 20.6905-1 Discharge of executor from personal liability for decedent's income and gift taxes. For regulations concerning the discharge of an executor from personal liability for a decedent's income and gift taxes, see § 301.6905-1 of this chapter (Regulations on Procedure and Administration). [T.D. 7238, 37 FR 28725, Dec. 29, 1972] § 20.7101-1 Form of bonds. See paragraph (b) of § 20.6165-1 for provisions relating to the bond required in any case in which the payment of the tax attributable to a reversionary or remainder interest has been postponed under the provisions of § 20.6163-1. For further provisions relating to bonds, see § 20.6165-1 of these regulations and the regulations under section 7101 contained in part 301 of this chapter (Regulations on Procedure and Administration). [T.D. 6600, 27 FR 4987, May 29, 1962] General Actuarial Valuations Source: Sections 20.7520-1 through 20.7520-4 appear at T.D. 8540, 59 FR 30170, June 10, 1994, unless otherwise noted. § 20.7520-1 Valuation of annuities, unitrust interests, interests for life or terms of years, and remainder or reversionary interests. (a) General actuarial valuations. (2) For a transfer to a pooled income fund, see § 1.642(c)-6(e) of this chapter (or, for periods prior to June 1, 2023, § 1.642(c)-6A of this chapter) with respect to the valuation of the remainder interest. (3) In the case of a transfer to a charitable remainder annuity trust with a valuation date after April 30, 1989, see § 1.664-2 of this chapter with respect to the valuation of the remainder interest. See § 1.664-4 of this chapter with respect to the valuation of the remainder interest in property transferred to a charitable remainder unitrust. (b) Components of valuation Interest rate component Section 7520 Interest rate. b (ii) Valuation date. (2) Mortality component. Actuarial Valuations Version 4A, https://www.irs.gov/retirement-plans/actuarial-tables (c) Actuarial factors. b (d) IRS publications referencing and explaining actuarial tables with rates from 0.2 to 20 percent, inclusive, at intervals of two-tenths of one percent, for valuation dates on and after June 1, 2023. https://www.irs.gov/retirement-plans/actuarial-tables: (1) IRS Publication 1457, Actuarial Valuations Version 4A (2) IRS Publication 1458, Actuarial Valuations Version 4B (3) IRS Publication 1459, Actuarial Valuations Version 4C (4) The publications identified in paragraphs (d)(1) through (3) of this section also reference Table 2010CM, the mortality component table. (e) Use of approximation methods for obtaining factors when the required valuation rate falls between two listed rates. (f) Applicability date. [T.D. 8540, 59 FR 30170, June 10, 1994, as amended by T.D. 8819, 64 FR 23222, 23229, Apr. 30, 1999; T.D. 8886, 65 FR 36939, June 12, 2000; T.D. 9448, 74 FR 21511, May 7, 2009; T.D. 9540, 76 FR 49637, Aug. 10, 2011; T.D. 9974, 88 FR 37450, June 7, 2023] § 20.7520-2 Valuation of charitable interests. (a) In general Valuation. (2) Prior-month election rule. (3) Transfers of more than one interest in the same property. (4) Information required with tax return. (i) A complete description of the interest that is transferred, including a copy of the instrument of transfer; (ii) The valuation date of the transfer; (iii) The names and identification numbers of the beneficiaries of the transferred interest; (iv) The names and birthdates of any measuring lives, a description of any relevant terminal illness condition of any measuring life, and (if applicable) an explanation of how any terminal illness condition was taken into account in valuing the interest; and (v) A computation of the deduction showing the applicable section 7520 interest rate that is used to value the transferred interest. (5) Place for filing returns. (b) Election of interest rate component Time for making election. (2) Manner of making election. (3) Revocability. (c) Effective dates. § 20.7520-3 Limitation on the application of section 7520. (a) Internal Revenue Code sections to which section 7520 does not apply. (1) Part I, subchapter D of subtitle A (section 401 et. seq.), relating to the income tax treatment of certain qualified plans. (However, section 7520 does apply to the estate and gift tax treatment of certain qualified plans and for purposes of determining excess accumulations under section 4980A); (2) Sections 72 and 101(b), relating to the income taxation of life insurance, endowment, and annuity contracts, unless otherwise provided for in the regulations under sections 72, 101, and 1011 (see, particularly, §§ 1.101-2(e)(1)(iii)( b 2 Example 8 (3) Sections 83 and 451, unless otherwise provided for in the regulations under those sections; (4) Section 457, relating to the valuation of deferred compensation, unless otherwise provided for in the regulations under section 457; (5) Sections 3121(v) and 3306(r), relating to the valuation of deferred amounts, unless otherwise provided for in the regulations under those sections; (6) Section 6058, relating to valuation statements evidencing compliance with qualified plan requirements, unless otherwise provided for in the regulations under section 6058; (7) Section 7872, relating to income and gift taxation of interest-free loans and loans with below-market interest rates, unless otherwise provided for in the regulations under section 7872; or (8) Section 2702(a)(2)(A), relating to the value of a nonqualified retained interest upon a transfer of an interest in trust to or for the benefit of a member of the transferor's family; and (9) Any other sections of the Internal Revenue Code to the extent provided by the Internal Revenue Service in revenue rulings or revenue procedures. (See §§ 601.201 and 601.601 of this chapter). (b) Other limitations on the application of section 7520 In general Ordinary beneficial interests. (A) An ordinary annuity interest (B) An ordinary income interest (C) An ordinary remainder or reversionary interest (ii) Certain restricted beneficial interests. restricted beneficial interest Example 4 Example 1 (iii) Other beneficial interests. (2) Provisions of governing instrument and other limitations on source of payment Annuities. Example 5 (ii) Income and similar interests Beneficial enjoyment. (B) Diversions of income and corpus. ( 1 ( 2 (iii) Remainder and reversionary interests. (iv) Pooled income fund interests. (v) Examples. Example 1. Unproductive property, A died, survived by B and C. B died two years after A. A's will provided for a bequest of corporation stock in trust under the terms of which all of the trust income was paid to B for life. After the death of B, the trust terminated and the trust property was distributed to C. The trust specifically authorized, but did not require, the trustee to retain the shares of stock. The corporation paid no dividends on this stock during the 5 years before A's death and the 2 years before B's death. There was no indication that this policy would change after A's death. Under applicable state law, the corporation is considered to be a sound investment that satisfies fiduciary standards. The facts and circumstances, including applicable state law, indicate that B did not have the legal right to compel the trustee to make the trust corpus productive in conformity with the requirements for a lifetime trust income interest under applicable local law. Therefore, B's life income interest in this case is considered nonproductive. Consequently, B's income interest may not be valued actuarially under this section. Example 2. Beneficiary's right to make trust productive, The facts are the same as in Example 1, Example 3. Discretionary invasion of corpus, The decedent, A, transferred property to a trust under the terms of which all of the trust income is to be paid to A's child for life and the remainder of the trust is to be distributed to a grandchild. The trust authorizes the trustee without restriction to distribute corpus to A's surviving spouse for the spouse's comfort and happiness. In this case, because the trustee's power to invade trust corpus is unrestricted, the exercise of the power could result in the termination of the income interest at any time. Consequently, the income interest is not considered an ordinary income interest for purposes of this paragraph, and may not be valued actuarially under this section. Example 4. Limited invasion of corpus, The decedent, A, bequeathed property to a trust under the terms of which all of the trust income is to be paid to A's child for life and the remainder is to be distributed to A's grandchild. The trust authorizes the child to withdraw up to $5,000 per year from the trust corpus. In this case, the child's power to invade trust corpus is limited to an ascertainable amount each year. Annual invasions of any amount would be expected to progressively diminish the property from which the child's income is paid. Consequently, the income interest is not considered an ordinary income interest for purposes of this paragraph, and the standard section 7520 income interest factor may not be used to determine the present value of the income interest. Nevertheless, the present value of the child's income interest is ascertainable by making a special actuarial calculation that would take into account not only the initial value of the trust corpus, the section 7520 interest rate for the month of the transfer, and the mortality component for the child's age, but also the assumption that the trust corpus will decline at the rate of $5,000 each year during the child's lifetime. The child's right to receive an amount not in excess of $5,000 per year may be separately valued in this instance and, assuming the trust corpus would not exhaust before the child would attain age 110, would be considered an ordinary annuity interest. Example 5. Power to consume, The decedent, A, devised a life estate in 3 parcels of real estate to A's surviving spouse with the remainder to a child, or, if the child doesn't survive, to the child's estate. A also conferred upon the spouse an unrestricted power to consume the property, which includes the right to sell part or all of the property and to use the proceeds for the spouse's support, comfort, happiness, and other purposes. Any portion of the property or its sale proceeds remaining at the death of the surviving spouse is to vest by operation of law in the child at that time. The child predeceased the surviving spouse. In this case, the surviving spouse's power to consume the corpus is unrestricted, and the exercise of the power could entirely exhaust the remainder interest during the life of the spouse. Consequently, the remainder interest that is includible in the child's estate is not considered an ordinary remainder interest for purposes of this paragraph and may not be valued actuarially under this section. (3) Mortality component Terminal illness. (ii) Terminal illness exceptions. (iii) Death resulting from common accidents. (4) Examples. Example 1. Terminal illness, The decedent bequeaths $1,000,000 to a trust under the terms of which the trustee is to pay $103,000 per year to a charitable organization during the life of the decedent's child. Upon the death of the child, the remainder in the trust is to be distributed to the decedent's grandchild. The child, who is age 60, has been diagnosed with an incurable illness, and there is at least a 50 percent probability of the child dying within 1 year. Assuming the presumption provided for in paragraph (b)(3)(i) of this section does not apply, the standard life annuity factor for a person age 60 may not be used to determine the present value of the charitable organization's annuity interest because there is at least a 50 percent probability that the child, who is the measuring life, will die within 1 year. Instead, a special section 7520 annuity factor must be computed that takes into account the projection of the child's actual life expectancy. Example 2. Deaths resulting from common accidents, etc, The decedent's will establishes a trust to pay income to the decedent's surviving spouse for life. The will provides that, upon the spouse's death or, if the spouse fails to survive the decedent, upon the decedent's death the trust property is to pass to the decedent's children. The decedent and the decedent's spouse die simultaneously in an accident under circumstances in which it was impossible to determine who survived the other. Even if the terms of the will and applicable state law presume that the decedent died first with the result that the property interest is considered to have passed in trust for the benefit of the spouse for life, after which the remainder is to be distributed to the decedent's children, the spouse's life income interest may not be valued by use of the mortality component described under section 7520. The result would be the same even if it was established that the spouse survived the decedent. (5) Additional limitations. (c) Effective date. [T.D. 8540, 59 FR 30170, June 10, 1994, as amended by T.D. 8630, 60 FR 63916, Dec. 13, 1995] § 20.7520-4 Transitional rules. (a) Reliance. b (b) Effective date. § 20.7701-1 Tax return preparer. (a) In general. (b) Effective/applicability date. [T.D. 9436, 73 FR 78451, Dec. 22, 2008] § 20.7701-2 Definitions; spouse, husband and wife, husband, wife, marriage. (a) In general. (b) Applicability date. [T.D. 9785, 81 FR 60616, Sept. 2, 2016]

Related documents

• 50 CFR Part 600 — Magnuson-Stevens Act Provisions#512148
• 50 CFR Part 622 — Fisheries of the Caribbean, Gulf of America, and South Atlantic#512149
• 50 CFR Part 635 — Atlantic Highly Migratory Species#512150
• 50 CFR Part 648 — Fisheries of the Northeastern United States#512151
• 50 CFR Part 660 — Fisheries off West Coast States#512152