REVENUE RULE 95-1

1995-1 I.R.B. 6.

VALUATION OF A REMAINDER INTEREST IN PROPERTY TRANSFERRED TO A NEW POOLED INCOME FUND UNDER SECTION 642(C)(5)

Published: January 3, 1995

§642. - Special Rules for Credits and Deductions, 26 CFR 1.642(c)-6: Valuation of a remainder interest in property transferred to a pooled income fund

(See Also §§170, 2055, 2522, 7520; 1.170A-6, 20.2055-2, 25.2522(c)-3, 1.7520-1, 20.7520-1, 25.7520-1.)

Valuation of a remainder interest in property transferred to a new pooled income fund under section 642(c)(5). The deemed rate of return computed under section 7520 of the Code is provided for transfers in calendar year 1995 to new pooled income funds that have been in existence for less than 3 taxable years.

This revenue ruling lists the calendar year 1995 deemed rate of return computed under s 7520 of the Internal Revenue Code for pooled income funds (PIFs) described in s 642(c)(5) that have been in existence for less than 3 years immediately preceding the 1995 taxable year in which a transfer is made to the PIF.

Under s 7520, the value of annuities, interests for life or terms of years, and remainder or reversionary interests created after April 30, 1989, are determined by using the interest rate (rounded to the nearest 2/10ths of 1 percent) equal to 120 percent of the applicable federal midterm rate under s 1274(d)(1) for the month in which the valuation date falls and life contingencies in mortality tables prescribed in the regulations.

Section 1.642(c)-6(e)(2) of the Income Tax Regulations provides that the present value of an income interest in property transferred to a PIF is computed on the basis of life contingencies prescribed under s 20.2031-7(d)(6) of the Estate Tax Regulations and an interest rate equal to the highest yearly rate of return of the PIF for the 3 taxable years immediately preceding the taxable year in which the transfer to the PIF is made. A deemed rate of return must be used for any transfer to a new PIF until the PIF has been in existence for 3 taxable years and can compute its highest rate of return for the 3 taxable years immediately preceding the taxable year in which the transfer to the PIF is made. See s 1.642(c)-6(e)(2)(ii).

If a transfer is made to a new PIF after April 30, 1989, the deemed rate of return is the interest rate (rounded to the nearest 2/10ths of 1 percent) that is 1 percent less than the highest annual average of the monthly s 7520 rates for the 3 calendar years immediately preceding the calendar year in which the transfer to the PIF is made.

The deemed rate of return for transfers to a new PIF during taxable year 1995 is 6.8 percent.

The following Table lists the rates for transfers to new PIFs in 1995 and the rates for transfers to new PIFs in each of the past 6 calendar years.

Rev. Rul. 95-1 Table

Deemed Rates of Return for Transfers to New Pooled Income Funds
Time of Transfer Deemed Rate of Return

DRAFTING INFORMATION

The principal author of this revenue ruling is William L. Blodgett of the Office of Assistant Chief Counsel (Passthroughs and Special Industries). For further information regarding this revenue ruling contact Mr. Blodgett on (202) 622-3090 (not a toll-free call).