Opinion ID: 1200224
Heading Depth: 3
Heading Rank: 4

Heading: Summary of regulation

Text: By promulgating Section 20.7520-3(b), the Treasury Department formalized existing case-law exceptions that applied to valuation under the annuity tables  exceptions that were only applicable in cases that presented facts that disproved assumptions underlying the tables. Cook, 349 F.3d at 856. Cook concluded that the non-marketability of a private annuity is an assumption underlying the annuity tables. Id. Thus, the marketability restrictions on the Estate's annuities do not disprove a relevant assumption. We do not find the post-December 1995 regulation to be a basis on which to reject the Cook conclusion about non-marketability and the tables, which is the law in this Circuit. We continue to hold that the Tax Court was correct when it stated that the intent of this provision [in Section 20.7520-3(b)] was to formalize the existing case law regarding the validity of the tabular assumptions in situations where facts show a clear risk that the payee will not receive the anticipated return. Estate of Gribauskas v. Comm'r, 116 T.C. 142, 164, 2001 WL 227025 (2001), rev'd, 342 F.3d 85 (2d Cir.2003). [7] That risk does not arise in the facts before us today. Requiring valuation of non-marketable annuities under the tables, absent facts substantially at variance with factual assumptions underlying the tables, respects Congress's preference for convenience and certainty over accuracy in the individual case. Cook, 349 F.3d at 854-55. As the Tax Court noted: the enactment of a statutory mandate in section 7520 reflects a strong policy in favor of standardized actuarial valuation of these interests which would be largely vitiated by the estate's advocated approach. A necessity to probe in each instance the nuances of a payee's contractual rights, when those rights neither alter or jeopardize the essential entitlement to a stream of fixed payments, would unjustifiably weaken the law. Gribauskas, 116 T.C. at 163-64. The Estate at oral argument asserted that there exists a market for structured settlement annuities, a market that it alleges is as predictable and more accurate than the Section 7520 tables. Regardless of the precise details, we accept that there is a market-recognized and discounted value to the right to transfer an income stream. There certainly are individuals who will wish to sell at a discounted price their inherited right to receive a guaranteed amount of money that is paid out over a term of years. What Cook held and what we conclude was unchanged by anything relevant since Cook, is that for tax purposes, the annuity tables are not concerned about the difference in market value between an inherited, non-transferable right to receive periodic payments of this sort and an inherited, transferable right to receive such payments. Only if the successor to the decedent desires to assign the annuity is there a practical difference to what that successor has received. Though markets value assignable and non-assignable annuities differently, we continue to conclude that for purposes of Section 7520, the Tax Code does not. As interpreted in Cook, Section 7520 demonstrates Congress's intent that current tables govern the valuation of annuities unless the factual assumptions underlying those tables are disproved. Those assumptions hold in this case. In light of its language, structure, and purpose, we do not read Section 20.7520-3(b) so broadly as to require a non-marketability exception from the annuity tables. To the extent the Estate argues that, notwithstanding Cook, the language of Section 20.7520-3(b) is broad enough to permit this Court to adopt a non-marketability exception, we decline to do so. This exception was rejected by Cook. The principles that guided Cook also guide us even with a new regulation as part of the direction given. Instead, we follow the Tax Court's rationale in Gribauskas, endorsed by Cook, that a restriction within the meaning of the regulation is one which jeopardizes receipt of the payment stream, not one which merely impacts on the ability of the payee to dispose of his or her right thereto. Gribauskas, 116 T.C. at 165. We affirm the district court's decision that Bankston's annuities were not restricted beneficial interests under Section 20.7520-3(b).