Opinion ID: 1200224
Heading Depth: 4
Heading Rank: 2

Heading: Regulation's Promulgation

Text: We also find it useful to examine Treasury Decision 8630 (T.D. 8630), which accompanied the final publication of Section 20.7520-3(b). See 60 Fed.Reg. 63913 (Dec. 13, 1995). T.D. 8630 summarizes the new regulation as being necessary in order to provide guidance consistent with court decisions concluding that the valuation tables are not to be used in certain situations. 60 Fed.Reg. at 63913 (emphasis added). In response to comments regarding the application of the tables, T.D. 8630 states that these regulations generally adopt principles established in case law and published IRS positions. 60 Fed. Reg. at 63914. The only comments to which T.D. 8630 responded concerned exhaustion or underfunding of the trust corpus or a terminally ill measuring life. 60 Fed.Reg. at 63913-14. Like the regulation itself, T.D. 8630 makes no mention of marketability or transferability restrictions and provides no examples that would invoke such restrictions. The Estate directs our attention to T.D. 8630's declaration that the tables cannot be used if the instrument of transfer does not provide the beneficiary of the annuity, income interest, or remainder interest with the degree of beneficial enjoyment that is consistent with the traditional character of that property interest under applicable local law. 60 Fed.Reg. at 63913. The Estate argues that the right to market or alienate a private annuity is essential to the beneficial enjoyment of such an interest. Perhaps to show that marketability of such annuities is traditional and not aberrational, counsel for the Estate at oral argument asserted that marketing of structured settlement rights is so common that the value can be easily determined. It is true that the beneficial enjoyment language on which the Estate relies appears in the regulation itself. See Treas. Reg. § 20.7520-3(b)(2)(ii)(A). However, the final regulation elaborates on T.D. 8630's language, stating that beneficial enjoyment is provided only if it was the transferor's intent, as manifested by the provisions of the governing instrument and the surrounding circumstances, that the trust provide an income interest for the income beneficiary during the specified period of time that is consistent with the value of the trust corpus and with its preservation. Treas. Reg. § 20.7520-3(b)(2)(ii)(A). Consistently with what we have already said about the regulation, this language emphasizes preservation of the trust corpus. This comports with Cook 's recognition that an annuity, unlike many other assets, grants the beneficiary the right, independent of market forces, to receive a certain amount of money annually for a certain term. Cook, 349 F.3d at 856 (emphasis added). We find that beneficial enjoyment, in the context of an annuity, refers to the ability of the corpus to support the periodic payments, not to the ability of the annuitant to transfer his interest in those payments. [6]