Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 71-18

1971-1 C.B. 33

Sec. 72

IRS Headnote

Future cost-of-living increases in survivors' annuities payable by the U.S. Civil Service Disability and Retirement Fund are not taken into account in computing the expected return, or in determining the aggregate amount receivable, from such annuities.

Full Text

Rev. Rul. 71-18

A United States Government employee died prior to attaining normal retirement age. Pursuant to the Civil Service Retirement Act, as amended, 5 U.S.C. 8301 through 8348, his widow and surviving child became entitled to a life annuity and a temporary annuity, respectively, from the United States Civil Service Disability and Retirement Fund. The Act contains provisions for cost-of-living adjustments in the annuities as a result of increases in the price index specified therein.

Held, possible future cost-of-living increases in the annuities, to be effective after the annuities commence, are not to be taken into account for purposes of computing the expected return under section 72(b) of the Internal Revenue Code of 1954 or determining the aggregate amount receivable for purposes of section 72(d). However, increases effective on or before the annuity commences are to be considered for such purposes. Cost-of-living increases effective after the annuities commence are includible in gross income as amounts not received as an annuity under the provisions of section 72(e)(1) of the Code.