Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 70-15

1970-1 C.B. 20

Sec. 72

Sec. 170

IRS Headnote

The amount in excess of fair market value of an annuity contract purchased from an organization described in section 170(c) of the Code may not be treated as an "investment in the contract"; such amount may be deducted as a charitable contribution.

Full Text

Rev. Rul. 70-15

A taxpayer purchased an annuity contract from an organization of the type described in section 170(c) of the Internal Revenue Code of 1954. The amount paid by him for the annuity was in excess of its fair market value at the time of purchase as determined by the annuity rate tables in Revenue Ruling 62-137, C.B. 1962-2, 28, and Revenue Ruling 62-216, C.B. 1962-2, 30.

Held, the taxpayer may not treat the excess amount paid for the contract as "investment in the contract" for purposes of computing the allowable exclusion from gross income of annuity proceeds pursuant to section 72(b) of the Code. However, the amount paid by him for the annuity in excess of its fair market value at the time of purchase is a charitable contribution for the taxable year of such payment pursuant to section 1.170-2(a)(3)(i) of the Income Tax Regulations.