#### § 25.2512-5 Valuation of annuities, unitrust interests, interests for life or term of years, and remainder or reversionary interests.

(a) *In general.* Except as otherwise provided in [paragraph (b)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(b)) of this section and [§ 25.7520-3(b)](/on/2024-09-17/title-26/section-25.7520-3#p-25.7520-3(b)), the fair market value of annuities, unitrust interests, life estates, terms of years, remainders, and reversions transferred by gift is the present value of the interests determined under [paragraph (d)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)) of this section. [Section 20.2031-7 of this chapter](/on/2024-09-17/title-26/section-20.2031-7) (Estate Tax Regulations) and related sections provide tables with standard actuarial factors and examples that illustrate how to use the tables to compute the present value of ordinary annuity, life, and remainder interests in property. These sections also refer to standard and special actuarial factors that may be necessary to compute the present value of similar interests in more unusual fact situations. These factors and examples are also generally applicable for gift tax purposes in computing the values of taxable gifts.

(b) *Commercial annuities and insurance contracts.* The value of life insurance contracts and contracts for the payment of annuities issued by companies regularly engaged in their sale is determined under [§ 25.2512-6](/on/2024-09-17/title-26/section-25.2512-6).

(c) *Actuarial valuations.* The present value of annuities, interests for life or a term of years, and remainder or reversionary interests transferred by gift on or after June 1, 2023, is determined under [paragraph (d)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)) of this section. The present value of annuities, interests for life or a term of years, and remainder or reversionary interests transferred by gift before June 1, 2023, is determined (subject to [paragraph (d)(3)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(3)) of this section) under the following sections:

Table 1 to Paragraph (c)

| Transfers | | Applicable regulations |
| --- | --- | --- |
| After | Before |
| | 01-01-52 | § 25.2512-5A(a) |
| 12-31-51 | 01-01-71 | 25.2512-5A(b) |
| 12-31-70 | 12-01-83 | 25.2512-5A(c) |
| 11-30-83 | 05-01-89 | 25.2512-5A(d) |
| 04-30-89 | 05-01-99 | 25.2512-5A(e) |
| 04-30-99 | 05-01-09 | 25.2512-5A(f) |
| 04-30-09 | 06-01-23 | 25.2512-5A(g) |

(d) *Actuarial valuations on or after June 1, 2023* —

(1) *In general.* Except as otherwise provided in [paragraph (b)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(b)) of this section and [§ 25.7520-3(b)](/on/2024-09-17/title-26/section-25.7520-3#p-25.7520-3(b)) (relating to exceptions to the use of prescribed tables under certain circumstances), the fair market value of annuities, interests for life or a term of years, and remainder or reversionary interests transferred on or after June 1, 2023, is the present value of such interests determined under [paragraph (d)(2)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)) of this section and by using standard or special section 7520 actuarial factors. Many of these factors are derived by using the actuarial formulas provided in [§ 20.2031-7(d)(2) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)), appropriate section 7520 interest rate, and, if applicable, the mortality component for the valuation date of the interest that is being valued. For purposes of the computations described in this section, the age of an individual is the age of that individual at the individual's nearest birthday. For the convenience of taxpayers, [paragraph (d)(2)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)) of this section provides for published tables of factors for specific types of interests. These published tables provide factors for rates from 0.2 to 20 percent, inclusive, at intervals of two-tenths of one percent. In general, appropriate factors instead may be computed directly from the actuarial formulas provided in [§ 20.2031-7(d)(2) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)). In some cases, specific examples in this part and IRS publications illustrate approximation methods (for example, interpolation) for obtaining factors when the required valuation rate falls between two listed rates (such as in the case of a pooled income fund's rate of return or a unitrust's adjusted payout rate). Exact methods of obtaining the applicable actuarial factors are allowed, such as through software using the actual rate of return and the actuarial formulas provided in [§ 20.2031-7(d)(2) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)). When using either an exact method or the approximation method, the resulting actuarial factor must be expressed with at least the same number of decimal places as that used in this part. The approximation method provided in this part must be used if more exact methods are not available. See [§§ 25.7520-1](/on/2024-09-17/title-26/section-25.7520-1) through [25.7520-4](/on/2024-09-17/title-26/section-25.7520-4). The selected method must be applied consistently in valuing all interests in the same property. The fair market value of a qualified annuity interest described in section 2702(b)(1) and a qualified unitrust interest described in section 2702(b)(2) is the present value of such interests determined under [§ 25.7520-1(c)](/on/2024-09-17/title-26/section-25.7520-1#p-25.7520-1(c)).

(2) *Specific interests.* When the donor transfers property in trust or otherwise and retains an interest therein, generally, the value of the gift is the value of the property transferred less the value of the donor's retained interest. However, if the donor transfers property after October 8, 1990, to or for the benefit of a member of the donor's family, the value of the gift is the value of the property transferred less the value of the donor's retained interest as determined under section 2702. If the donor assigns or relinquishes an annuity, an interest for life or a term of years, a remainder or reversionary interest that the donor holds by virtue of a transfer previously made by the donor or another, the value of the gift is the value of the interest transferred. However, see section 2519 for a special rule in the case of the assignment of an income interest by a person who received the interest from a spouse.

(i) *Pooled income funds and charitable remainder trusts.* The fair market value of a remainder interest in a pooled income fund, as defined in [§ 1.642(c)-5 of this chapter](/on/2024-09-17/title-26/section-1.642(c)-5), is its value determined under [§ 1.642(c)-6(e) of this chapter](/on/2024-09-17/title-26/section-1.642(c)-6#p-1.642(c)-6(e)) (see [§ 1.642(c)-6A of this chapter](/on/2024-09-17/title-26/section-1.642(c)-6A) for certain prior periods). The fair market value of a remainder interest in a charitable remainder annuity trust, as described in [§ 1.664-2(a) of this chapter](/on/2024-09-17/title-26/section-1.664-2#p-1.664-2(a)), is its present value determined under [§ 1.664-2(c) of this chapter](/on/2024-09-17/title-26/section-1.664-2#p-1.664-2(c)). The fair market value of a remainder interest in a charitable remainder unitrust, as defined in [§ 1.664-3 of this chapter](/on/2024-09-17/title-26/section-1.664-3), is its present value determined under [§ 1.664-4(e) of this chapter](/on/2024-09-17/title-26/section-1.664-4#p-1.664-4(e)). The fair market value of a life interest or term for years interest in a charitable remainder unitrust is the fair market value of the property as of the date of transfer less the fair market value of the remainder interest, determined under [§ 1.664-4(e)(4)](/on/2024-09-17/title-26/section-1.664-4#p-1.664-4(e)(4)) and [(5) of this chapter](/on/2024-09-17/title-26/section-1.664-4#p-1.664-4(e)(5)).

(ii) *Ordinary remainder and reversionary interests* —

(A) *Remainder and reversionary interests after a term of years.* If the interest to be valued is a remainder or reversionary interest to take effect after a definite number of years, the present value of the interest is computed by multiplying the value of the property by the appropriate remainder factor (that corresponds to the applicable section 7520 interest rate and the stated term). The factor for an ordinary remainder interest following a term certain may be found using the formula in [§ 20.2031-7(d)(2)(ii)(A) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(ii)(A)) and computing the result to at least six decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table B. Table B can be found on the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>* (or a corresponding URL as may be updated from time to time). Table B is referenced and explained in IRS Publication 1457, *Actuarial Valuations Version 4A,* which will be available within a reasonable time after June 1, 2023. The remainder factors from Table B also can be found in [paragraph (d)(6)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(6)) of this section, but only for interest rates from 4.2 to 14 percent, inclusive. For information about obtaining special factors for other situations, see [paragraph (d)(4)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(4)) of this section.

(B) *Remainder and reversionary interests dependent on the life of one individual.* If the interest to be valued is a remainder or reversionary interest to take effect after the death of one individual, the present value of the interest is computed by multiplying the value of the property by the appropriate remainder factor (that corresponds to the applicable section 7520 interest rate and the age of the measuring life of the life interest that precedes the remainder interest). The factor for an ordinary remainder interest following the death of one individual may be found by using the formula in [§ 20.2031-7(d)(2)(ii)(B) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(ii)(B)) to derive a remainder factor from the appropriate mortality table to at least five decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table S. Table S currently is available, at no charge, electronically via the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>* (or a corresponding URL as may be updated from time to time). Table S is referenced and explained by IRS Publication 1457, *Actuarial Valuations Version 4A,* which will be available within a reasonable time after June 1, 2023. For information about obtaining special factors for other situations, see [paragraph (d)(4)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(4)) of this section.

(iii) *Ordinary interests for a term of years and life interests.* If the interest to be valued is the right of a person to receive the income of certain property, or to the use of certain property, for a term of years or for the life of one individual, the present value of the interest is computed by multiplying the value of the property by the appropriate actuarial factor for an interest for a term of years or for a life interest (that corresponds to the applicable section 7520 interest rate and the durational period). The actuarial factor for an ordinary income interest for a term certain may be found 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) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(ii)(A)). For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in the “Income Interest” column of Table B which can be found on the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>* (or a corresponding URL as may be updated from time to time). The actuarial factor for an ordinary income interest for the life of one individual may be found by subtracting from 1.00000 the factor for an ordinary remainder interest following the life of the same individual that is determined in [§ 20.2031-7(d)(2)(ii)(B) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(ii)(B)). For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in the “Life Estate” column of Table S. Table S (applicable when the valuation date is on or after June 1, 2023) can be found on the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>.* Tables B and S are referenced and explained by IRS Publication 1457, *Actuarial Valuations Version 4A.* See [§ 20.2031-7A of this chapter](/on/2024-09-17/title-26/section-20.2031-7A) or earlier versions of Publication 1457 for valuation of interests before June 1, 2023. For information about obtaining special factors for other situations, see [paragraph (d)(4)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(4)) of this section.

(iv) *Annuities.*

(A) If the interest to be valued is the right of a person to receive an annuity that is payable at the end of each year for a term of years or for the life of one individual, the present value of the interest is computed by multiplying the aggregate amount payable annually by the appropriate annuity factor (that corresponds to the applicable section 7520 interest rate and annuity period). 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) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-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>* (or a corresponding URL as may be updated from time to time). 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 in [§ 20.2031-7(d)(2)(ii)(B) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-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. Table S (applicable when the valuation date is on or after June 1, 2023) can be found on the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>.* Tables B and S are referenced and explained in IRS Publication 1457, *Actuarial Valuations Version 4A.* See [§ 20.2031-7A of this chapter](/on/2024-09-17/title-26/section-20.2031-7A) or earlier versions of Publication 1457 for valuation of interests before June 1, 2023. For information about obtaining special factors for other situations, see [paragraph (d)(4)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(4)) of this section.

(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 then is multiplied by the applicable adjustment factor at the appropriate interest rate component for payments made at the end of the specified period. The applicable adjustment factor may be found using the formula in [§ 20.2031-7(d)(2)(iv)(B) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(iv)(B)) expressed 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>.* The provisions of this [paragraph (d)(2)(iv)(B)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(iv)(B)) are illustrated by the example in [paragraph (d)(2)(iv)(B)(*2*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(iv)(B)(2)) of this section.

(*1*) *Sample factors from actuarial Tables S and K.* For purposes of the example in [paragraph (d)(2)(iv)(B)(*2*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(iv)(B)(2)) of this section, the relevant factors from Tables S and K are:

Table 2 to Paragraph (d)(2)(iv)(B)(*1*)

| Age | Annuity | Life estate | Remainder |
| --- | --- | --- | --- |
| **Factors From Table S—Based on Table 2010CM** | | | |
| **Interest at 3.2 Percent** | | | |
| 68 | 12.2552 | 0.39217 | 0.60783 |
| **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.* On July 1 of a year after 2021, the donor agrees to pay the annuitant the sum of $10,000 per year, payable in equal semiannual installments at the end of each period. The semiannual installments are to be made on each December 31st and June 30th. The annuity is payable until the annuitant's death. On the date of the agreement, the annuitant is 68 years and 5 months old. The donee annuitant's age is treated as 68 for purposes of computing the present value of the annuity. The section 7520 rate on the date of the agreement is 3.2 percent. Under Table S, the factor at 3.2 percent for determining the present value of an annuity payable until the death of a person aged 68 is 12.2552. The adjustment factor from Table K in the column for payments made at the end of each semiannual period at the rate of 3.2 percent is 1.0079. The aggregate annual amount of the annuity, $10,000, is multiplied by the factor 12.2552 and the product is multiplied by 1.0079. The present value of the donee's annuity is, therefore, $123,520.16 ($10,000 × 12.2552 × 1.0079).

(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)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(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 [§ 20.2031-7(d)(2)(iv)(C) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(iv)(C)) expressed 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>.* If an annuity is payable at the beginning of annual, semiannual, quarterly, monthly, or weekly periods for one or more lives, the value of the annuity is the sum of the first payment and 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 [paragraph (d)(2)(iv)(B)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(iv)(B)) of this section.

(v) *Annuity and unitrust interests for a term of years or until the prior death of an individual* —

(A) *Annuity interests* —

(*1*) *In general.*

(*i*) The present value of an annuity interest that is payable until the earlier to occur of the lapse of a specific number of years or the death of an individual may be computed with the use of commutation factors and an applicable adjustment factor. The commutation factors are computed directly with the set of formulas in Figure 1 to this [paragraph (d)(2)(v)(A)(*1*)(*i*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(A)(1)(i)). The prescribed mortality table is Table 2010CM as set forth in [§ 20.2031-7(d)(7)(ii) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(7)(ii)), or for periods before June 1, 2023, the appropriate table found in [§ 20.2031-7A of this chapter](/on/2024-09-17/title-26/section-20.2031-7A). For the convenience of taxpayers, commutation factors have been computed by the IRS and appear in Table H. Table H currently is available, at no charge, electronically via the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>* (or a corresponding URL as may be updated from time to time). Table H is referenced and explained by IRS Publication 1457, *Actuarial Valuations Version 4A,* which will be available within a reasonable time after June 1, 2023.

Figure 1 to Paragraph (d)(2)(v)(A)(*1*)(*i*)—Formulas for Determining Commutation Factors

[![](https://img.federalregister.gov/ER07JN23.016/ER07JN23.016_large.png)](https://img.federalregister.gov/ER07JN23.016/ER07JN23.016_original_size.png)

(*ii*) The applicable adjustment factor for annuities that are payable at the end of semiannual, quarterly, monthly, or weekly periods is computed by use of the formula in [§ 20.2031-7(d)(2)(iv)(B) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(iv)(B)) expressed 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 can be found on the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>.* For purposes of the example in [paragraph (d)(2)(v)(A)(*2*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(A)(2)) of this section, the relevant factors from Tables H(2.8) and K are:

Table 3 to Paragraph (d)(2)(v)(A)(*1*)(*ii*)

| Age (x) | Dx | Nx-factor | Mx-factor |
| --- | --- | --- | --- |
| **Factors From Table H(2.8)** | | | |
| **Commutation Factors—Based on Table 2010CM** | | | |
| **Interest Rate of 2.8 Percent** | | | |
| 60 | 16,911.03 | 271,994.3 | 9,295.187 |
| 70 | 11,280.80 | 133,677.8 | 7,537.826 |
| **Factors From Table K** | | | |
| **Adjustment Factors for Annuities Payable at the End of Each Interval** | | | |
| Interest rate | Semi-annually | Quarterly | Monthly |
| 2.8% | 1.0070 | 1.0104 | 1.0128 |

(*2*) *Example.* The donor transfers $100,000 into a trust on January 1, 2022 and retains the right to receive an annuity from the trust in the amount of $10,000 per year, payable in equal semiannual installments at the end of each period. The semiannual installments are to be made on each June 30th and December 31st. The annuity is payable for 10 years or until the donor's prior death. At the time of the transfer, the donor is 59 years and 6 months old. The donor's age is deemed to be 60 for purposes of computing the present value of the retained annuity. If the section 7520 rate for the month in which the transfer occurred is 2.8 percent, the present value of the donor's retained annuity interest for the shorter of life or term would be is $82,363.54, determined in Figure 2 to this [paragraph (d)(2)(v)(A)(*2*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(A)(2)).

Figure 2 to Paragraph (d)(2)(v)(A)(*2*)—Illustration of Calculation of Present Value of the Donor's Retained Annuity Interest for the Shorter of Life or Term

[![](https://img.federalregister.gov/ER07JN23.017/ER07JN23.017_large.png)](https://img.federalregister.gov/ER07JN23.017/ER07JN23.017_original_size.png)

(B) *Unitrust interests* —

(*1*) *In general.*

(*i*) The present value of a unitrust interest that is payable until the earlier to occur of the lapse of a specific number of years or the death of an individual may be computed with the use of an adjusted payout rate factor and unitrust commutation factors. The payout rate adjustment factor is determined by applying the formula in [§ 1.664-4(e)(6)(ii) of this chapter](/on/2024-09-17/title-26/section-1.664-4#p-1.664-4(e)(6)(ii)) for the section 7520 interest rate applicable to the transfer and computing the result to at least six decimal places. For the convenience of taxpayers, payout rate adjustment factors have been computed by the IRS, for interest rates from 0.2 to 20 percent, inclusive, and appear in Tables F(0.2) through F(20.0). The unitrust commutation factors may be computed directly with the set of formulas in Figure 3 to this [paragraph (d)(2)(v)(B)(*1*)(*i*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(B)(1)(i)). For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table Z. Tables F and Z can be found on the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>.*

Figure 3 to Paragraph (d)(2)(v)(B)(*1*)(*i*)—Formulas for Determining Unitrust Commutation Factors

[![](https://img.federalregister.gov/ER07JN23.018/ER07JN23.018_large.png)](https://img.federalregister.gov/ER07JN23.018/ER07JN23.018_original_size.png)

(*ii*) For purposes of the example in [paragraph (d)(2)(v)(B)(*2*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(B)(2)) of this section, the relevant factors from Tables F(3.4), Z(4.8), and Z(5.0) are:

Table 4 to Paragraph (d)(2)(v)(B)(*1*)(*ii*)

| Number of months from annual valuation to first payout | | Adjustment factors for payments at end of period | |
| --- | --- | --- | --- |
| At least | But less than | Annual | Semiannual |
| **Factors From Table F(3.4)** | | | |
| **Factors for Computing Adjusted Payout Rates for Unitrusts** | | | |
| **Interest at 3.4 Percent** | | | |
| 6 | 7 | 0.983422 | 0.975270 |
| **Factors From Table Z(4.8)** | | | |
| **Unitrust Commutation Factors—Based on Table 2010CM** | | | |
| **Adjusted Payout Rate of 4.8 Percent** | | | |
| Age (x) | U Dx | U Nx-factor | U Mx-factor |
| 60 | 4,634.189 | 58,509.09 | 1,684.151 |
| 70 | 2,491.406 | 24,541.74 | 1,254.007 |
| **Factors From Table Z(5.0)** | | | |
| **Unitrust Commutation Factors—Based on Table 2010CM** | | | |
| **Adjusted Payout Rate of 5.0 Percent** | | | |
| Age (x) | U Dx | U Nx-factor | U Mx-factor |
| 60 | 4,084.822 | 50,451.77 | 1,429.466 |
| 70 | 2,150.356 | 20,823.44 | 1,054.386 |

(*2*) *Example of interpolation.* The donor who, as of the nearest birthday, is 60 years old, transfers $100,000 to a unitrust on January 1st of a year after 2021. The trust instrument requires that each year the trust pay to the donor, in equal semiannual installments on June 30th and December 31st, 5 percent of the fair market value of the trust assets, valued as of January 1st of that year, for 10 years or until the prior death of the donor. The section 7520 rate for the January in which the transfer occurred is 3.4 percent. Under Table F(3.4), the appropriate adjustment factor is 0.975270 for semiannual payments payable at the end of the semiannual period. The adjusted payout rate is 4.876 percent (5% × 0.975270). The present value of the donor's retained interest is $37,419.00 determined in [paragraphs (d)(2)(v)(B)(*2*)(*i*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(B)(2)(i)) through [(*iii*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(B)(2)(iii)) of this section. Using Table Z, the method required is to prepare two computations, one at a payout rate of 4.8 percent, and one at 5.0 percent, and interpolate between these two in order to get the result at the adjusted payout rate of 4.876 percent. As an alternative to using an interpolation method, it also is acceptable to compute the remainder factor directly from the root actuarial formulas using the actual adjusted payout rate of 4.876%.

(*i*) Determine the terminal age, as illustrated in Figure 4 to this [paragraph (d)(2)(v)(B)(*2*)(*i*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(B)(2)(i)).

Figure 4 to Paragraph (d)(2)(v)(B)(*2*)(*i*)—Illustration of Determination of Terminal Age

[![](https://img.federalregister.gov/ER07JN23.019/ER07JN23.019_large.png)](https://img.federalregister.gov/ER07JN23.019/ER07JN23.019_original_size.png)

(*ii*) Determine the Payout Interest Factor at the Table Z payout rates immediately below and above the adjusted payout rate, as illustrated in Figure 5 to this [paragraph (d)(2)(v)(B)(*2*)(*ii*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(B)(2)(ii)).

Figure 5 to Paragraph (d)(2)(v)(B)(*2*)(*ii*)—Illustration of Determination of Payout Interest Factors

[![](https://img.federalregister.gov/ER07JN23.020/ER07JN23.020_large.png)](https://img.federalregister.gov/ER07JN23.020/ER07JN23.020_original_size.png)

(*iii*) Interpolate between the Payout Interest Factors at 4.8% and 5.0% to determine the Payout Interest Factor at the adjusted rate of 4.876%, as illustrated in Figure 6 to this [paragraph (d)(2)(v)(B)(*2*)(*iii*)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(2)(v)(B)(2)(iii)).

Figure 6 to Paragraph (d)(2)(v)(B)(*2*)(*iii*)—Illustration of Interpolation

[![](https://img.federalregister.gov/ER07JN23.021/ER07JN23.021_large.png)](https://img.federalregister.gov/ER07JN23.021/ER07JN23.021_original_size.png)

(3) *Transitional rule.* If the valuation date of a transfer of property by gift is after April 30, 2019, and on or before June 1, 2023, the fair market value of the interest transferred is determined by using the section 7520 interest rate for the month in which the valuation date occurs (see [§§ 25.7520-1(b)](/on/2024-09-17/title-26/section-25.7520-1#p-25.7520-1(b)) and [25.7520](/on/2024-09-17/title-26/section-25.7520)-2(a)(2)) and the appropriate actuarial factors derived from the selected mortality table, either Table 2010CM in [§ 20.2031-7(d)(7)(ii) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(7)(ii)) or Table 2000CM in [§ 20.2031-7A(g)(4) of this chapter](/on/2024-09-17/title-26/section-20.2031-7A#p-20.2031-7A(g)(4)), at the option of the donor or the decedent's executor, as the case may be. If any previously filed gift tax return is supplemented to use the actuarial factors based on Table 2010CM, the supplemental return must state at the top “AMENDED PURSUANT TO TD 9974.” For the convenience of taxpayers, actuarial factors based on Table 2010CM appear in the current version of Table S, and actuarial factors based on Table 2000CM appear in the previous version of Table S. Both versions of Table S will be available as provided in [paragraph (d)(4)](/on/2024-09-17/title-26/section-25.2512-5#p-25.2512-5(d)(4)) of this section. With respect to each individual transaction, the donor 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.

(4) *Publications and actuarial computations by the Internal Revenue Service.* The factor for determining the present value of a remainder interest that is dependent on the termination of the life of one individual may be computed by using the formula in [§ 20.2031-7(d)(2)(ii)(B) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(ii)(B)) to derive a remainder factor from the appropriate mortality table expressed to at least five decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table S. The factor for determining the present value of a remainder interest following a term certain may be computed by using the formula in [§ 20.2031-7(d)(2)(ii)(A) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(ii)(A)) expressed to at least six decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table B. Adjustment factors for term certain annuities payable at the beginning of each interval may be computed by using the formula in [§ 20.2031-7(d)(2)(iv)(C) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(iv)(C)) expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table J. Adjustment factors for annuities payable at the end of each interval may be computed by using the formula in [§ 20.2031-7(d)(2)(iv)(B) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)(iv)(B)) expressed to at least four decimal places. For the convenience of taxpayers, actuarial factors have been computed by the IRS and appear in Table K. These tables currently are available, at no charge, electronically via the IRS website at *<https://www.irs.gov/retirement-plans/actuarial-tables>* (or a corresponding URL as may be updated from time to time). IRS Publication 1457, *Actuarial Valuations Version 4A* (2023), references and explains the factors contained in the actuarial tables and also includes examples that illustrate how to compute many special factors for more unusual situations. This publication will be available within a reasonable time after June 1, 2023. Tables B, J, and K also can be found in [§ 20.2031-7(d)(6) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(6)), but only for interest rates from 4.2 to 14 percent, inclusive. If a particular factor is required, that factor may be calculated by the taxpayer using the actuarial formula in [§ 20.2031-7(d)(2) of this chapter](/on/2024-09-17/title-26/section-20.2031-7#p-20.2031-7(d)(2)) or the taxpayer may request a ruling to obtain the factor from the Internal Revenue Service. The request for a ruling must be accompanied by a recitation of the facts including a statement of the date of birth for each measuring life, the date of the gift, any other applicable dates, and a copy of the will, trust, or other relevant documents. A request for a ruling must comply with the instructions for requesting a ruling published periodically in the Internal Revenue Bulletin (see Rev. Proc. 2023-1, 2023-1 I.R.B. 1, or successor revenue procedures, and [§§ 601.201](/on/2024-09-17/title-26/section-601.201) and [601.601(d)(2)(ii)(*b*) of this chapter](/on/2024-09-17/title-26/section-601.601#p-601.601(d)(2)(ii)(b))) and must include payment of the required user fee.

(e) *Applicability date.* This section applies on and after June 1, 2023.

[T.D. 8540, [59 FR 30174](https://www.federalregister.gov/citation/59-FR-30174), June 10, 1994, as amended by T.D. 8819, [64 FR 23224](https://www.federalregister.gov/citation/64-FR-23224), Apr. 30, 1999; T.D. 8886, [65 FR 36940](https://www.federalregister.gov/citation/65-FR-36940), June 12, 2000; [65 FR 39470](https://www.federalregister.gov/citation/65-FR-39470), June 26, 2000; [65 FR 58222](https://www.federalregister.gov/citation/65-FR-58222), Sept. 28, 2000; T.D. 9448, [74 FR 21512](https://www.federalregister.gov/citation/74-FR-21512), May 7, 2009; T.D. 9540, [76 FR 49639](https://www.federalregister.gov/citation/76-FR-49639), Aug. 10, 2011; T.D. 9974, [88 FR 37451](https://www.federalregister.gov/citation/88-FR-37451), June 7, 2023]