Rev. Rul. 86-32

Caution: Superseded by 87-45

TRUST; REVERSIONERY INTERESTS; DETERMINATION OF LIFE EXPECTANCY

Published: March 3, 1986

Section 673. Reversionary Interests, 26 CFR 1.673(a)-1. Reversionary interests; income payable to beneficiaries other than certain charitable

  Trust; reversioneryinterests; determination of life expectancy. Actuarial tables are adopted for determining life expectancy for purposes of section 673 of Code for transfers to a trust occurring after November 30, 1983.

ISSUE

  For transfers occurring after November 30, 1983, to a trust that reverts to the grantor upon a person's death, what are the appropriate actuarial tables to determine whether a portion of the trust will revert within ten years for purposes of section 673(a) of the Internal Revenue Code?

FACTS

  On December 1, 1984, the date of A's 73rd birthday, A transferred certain property to an irrevocable trust. The trust instrument directs the trustee to pay the income of the trust to other persons during the life of A, to distribute the corpus of the trust to A's estate.

LAW AND ANALYSIS

  Section 673(a) of the Code provides that the grantor shall be treated as the owner of any portion of a trust in which the grantor has a reversionary interest in either the corpus or the income therefrom if, as of the inception of that portion of the trust, the interest will or may reasonably be expected to take effect in possession or enjoyment within 10 years commencing with the date of the transfer of that portion of the trust.

  Section 1.673(a)-1(c) of the Income Tax Regulations provides that if the reversionary interest in any portion of a trust is to take effect on or after the death of the grantor (or any person other than the person to whom the income is payable), the grantor is treated under section 673(a) of the Code as the owner of that portion if the life expectancy of the grantor (or the person other than the person to whom the income is payable) is less than 10 years on the date of transfer of the portion. The grantor is not treated as the owner if the life expectancy of the measuring life is 10 years or longer

  For transfers occurring after November 30, 1983, the appropriate actuarial table is determining life expectancy is Table 1 of United States Life Tables:

1969-1971, published by the Department of Health, Education, and Welfare, Public Health Service. See, T.D. 7955, 1984-1 C.B. 40, which revises actuarial tables used for valuation purposes in various regulations. Table 1 of United States Life Tables was used to derive the actuarial tables in T.D. 7955. Table 1 eliminates the distinction between male and female mortality and is, thus, gender neutral.

  Column (7) of Table 1 states the life expectancy of 10.34 years. At the age of 74, life expectancy is 9.82 years. To apply the table, the age of the measuring life should be taken at the person's age at the birthday nearest to the date of the transfer. For example, a grantor 73 years and six months old or more on the date of a transfer to a trust has a life expectancy of no more than 9.82 years as of the date of transfer.

  On December 1, 1984, the date of the transfer of property to the trust, A has a life expectancy of 10 years or more (10.34 years). Accordingly, A is not treated, under section 673(a) of the Code, as the owner of the corpus of the trust that will revert to A's estate upon A's death.

HOLDING

  For transfers occurring after November 30, 1983, Table 1 of United States Life Tables: 1969-1971 is the appropriate actuarial table to determine whether a portion of a trust that reverts to the grantor upon a person's death will revert within ten years for purposes of section 673(a) of the Code.

EFFECTIVE DATE

  The revenue ruling is effective for transfers occurring after November 30, 1983, which is the general effective date of T.D. 7955.

  For transfers occurring after December 31, 1970, and on or before November 30, 1983, see Rev. Rul. 73-251, 1973-1 C.B. 324. For transfers occurring on or before December 31, 1970, see Rev. Rul. 58-567, 1958-2 C.B. 365.

Rev. Rul. 86-32, 1986-1 C.B. 252, 1986-9 I.R.B. 16.