Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 61-88

1961-1 C.B. 417

IRS Headnote

For Federal estate tax purposes, the right of a decedent's estate to receive property on the death without issue of a married woman aged 44 who has never had children, though not susceptible of valuation under actuarial rules, should be included in the gross estate at an evaluation made in accordance with the general rules for the valuation of property set forth in section 20.2031-1 of the Estate Tax Regulations.

Full Text

Rev. Rul. 61-88

Advice has been requested as to the proper valuation of a remainder interest in trust, under the circumstances described below.

Under the terms of an irrevocable trust, the decedent or his estate was entitled to receive certain property on the death of the life tenant G , provided G died without issue. The decedent was survived by G , a married woman aged 44 living with her husband H . At the time of decedent's death, G had never borne a child, but G and H were believed to be still capable of having issue.

Section 2031 of the Internal Revenue Code of 1954 provides that the gross estate of a decedent shall be determined by including to the extent provided by law the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside of the United States. General rules for the valuation of property for purposes of section 2031 are set forth in section 20.2031-1 of the Estate Tax Regulations.

In the absence of facts tending to show that birth of issue to G is impossible, valuation of the remainder interest of the present decedent's estate by the mere mechanical application of actuarial formulas is not supportable. See Estate of Louis Sternberger, et al. v. United States , 348 U.S. 187, Ct.D. 1777, C.B. 1955-1, 450. However, merely because an interest in property cannot be evaluated with sufficient accuracy to support a deduction, it does not necessarily follow that the interest is without value. Section 20.2037-1(c)(3) of the Estate Tax Regulations, dealing with the valuation of a decedenths reversionary interest for the purposes of section 2037 of the Code (transfers taking effect at death) makes this clear in the following excerpt:

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 sections 20.2031-1, 20.2031-7, and 20,2031-9.) For example, if the decedents' reversionary interest was subject to an outstanding life estate in his wife, his interest is valued according to the actuarial rules set forth in section 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 section 20.2031-7), his interest is valued according to the general rules set forth in section 20.2031-1.

In general, a remainder interest which becomes operative upon the death without issue of a woman aged 44 may be of considerable value. In making the valuation, however, consideration should be given to all known circumstances relative to the particular life tenant, rather than to women aged 44 in general.

Accordingly, it is held that, in the instant case, the remainder interest, since it is not susceptible of valuation under acturial rules, should be evaluated in accordance with the general rules for the valuation of property set forth in section 20.2031-1 of the regulations.