Pennsylvania Code › Title 61 - REVENUE › Part I - Department of Revenue › Subpart B - General Fund Revenues › Article IV - County Collections › Chapter 91 - REALTY TRANSFER TAX › Subchapter H - SPECIAL SITUATIONS › Section 91.165 - Reservations or conveyances of life estates

Current through Register Vol. 54, No. 28, July 13, 2024
(a) The value of a life estate or remainder
						interest in real estate will be the consideration paid or to be paid for the
						life estate or remainder interest except as provided for in subsection (b) or
						(c).
(b) When no or nominal
						consideration or consideration less than actual monetary worth is paid for a
						life estate or remainder interest in real estate, life estate and remainder
						factors as provided in subsection (d) are multiplied by the real estate's
						computed value in order to calculate the value of a life estate or remainder
						interest.
(c) When consideration
						that is paid or to be paid for the conveyance of real estate or the computed
						value of real estate must be apportioned to calculate the taxable value of a
						life estate or remainder interest that is part of the conveyance, the life
						estate and remainder factors as provided in subsection (d) are multiplied by
						the consideration paid or to be paid for the conveyance of the real estate or
						the computed value in order to calculate the value of the life estate or
						remainder interest.
(d) The
						Department will publish by notice in the
Pennsylvania Bulletin
life estate and remainder factors and their effective date to be used for the
						calculation of the taxable value of a life estate and remainder interest in
						real estate.
(1)
Formula
.
						The factors will be based upon tables published by the Internal Revenue Service
						for calculating the present worth of a life estate and remainder interest. The
						Department will use the factors contained in the Internal Revenue Service Table
						using an interest rate equal to the average interest rate for the 36
						consecutive months prior to the publication of the factors in the
Pennsylvania Bulletin
.
(2)
Updates
. The Department
						will update the factors periodically as needed to account for changes in
						mortality and interest rates.
Example 1
: In an arm's length
						  transaction for actual monetary worth, L conveys a life estate interest (or
						  remainder interest, as the case may be) in real estate to T for $50,000. The
						  taxable value of the life estate is the consideration paid, that is
						  $50,000.
Example 2
: L conveys a life estate
						  interest in real estate to T for less than actual monetary worth. L reserves
						  the remainder interest for himself. The computed value of the entire real
						  estate is $100,000. T is 50 years old. The taxable value of T's life estate
						  interest is the computed value of the entire real estate multiplied by the life
						  estate factor based upon T's age.
Example 3
: L conveys a remainder
						  interest in real estate to T for less than actual monetary worth. L retains a
						  life estate interest in the real estate. The computed value of the entire real
						  estate is $100,000. L is 50 years old. The taxable value of T's remainder
						  interest is the computed value of the entire real estate multiplied by the
						  remainder factor based upon L's age.
Example 4
: X sells real estate to X's
						  friends Y and Z. The sale consists of a life estate to Y and the remainder to
						  Z. Y is 60 years old, and Z is 45 years old. X sells the real estate to Y and Z
						  for a total, arm's length purchase price of $100,000, but the agreement of sale
						  does not apportion the purchase price between the price to be paid for the life
						  estate and the remainder interest. To calculate the taxable value of the life
						  estate and remainder interest, the life estate and remainder factors based upon
						  Y's age are multiplied by the total purchase price.