Rev. Rul. 96-1
1996-1 C.B. 119, 1996-1 I.R.B. 7

INTERNAL REVENUE SERVICE
Revenue Ruling

VALUATION OF A REMAINDER INTEREST IN PROPERTY TRANSFERRED TO A NEW POOLED

INCOME FUND UNDER SECTION 642(C)(5)

Published: January 2, 1996

Section 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.
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 1996 to new pooled income funds that have been in existence for less than 3 taxable years.

Section 170. - Charitable, etc., Contributions and Gifts, 26 CFR 1.170A-6: Charitable contributions in trust.
During calendar year 1996, if a taxpayer transfers property to a new pooled income fund that has been in existence for less than 3 taxable years, what deemed rate of return is used to value the remainder interest?

Section 2055. - Transfers for Public, Charitable, and Religious Uses, 26 CFR 20.2055-2: Transfers not exclusively for charitable purposes.
During calendar year 1996, if a taxpayer transfers property to a new pooled income fund that has been in existence for less than 3 taxable years, what deemed rate of return is used to value the remainder interest?

Section 2522. - Charitable and Similar Gifts, 26 CFR 25.2522(c)-3: Transfers not exclusively for charitable, etc., purposes in the case of gifts made after July 31, 1969.
During calendar year 1996, if a taxpayer transfers property to a new pooled income fund that has been in existence for less than 3 taxable years, what deemed rate of return is used to value the remainder interest?

Section 7520. - Valuation Tables, 26 CFR 1.7520-1: Valuation of annuities, unitrust interests, interests for life or terms of years, and remainder or reversionary interests.
During calendar year 1996, if a taxpayer transfers property to a new pooled income fund that has been in existence for less than 3 taxable years, what deemed rate of return is used to value the remainder interest?

26 CFR 20.7520-1: Valuation of annuities, unitrust interests, interests for life or term of years, and remainder or reversionary interests.
During calendar year 1996, if a taxpayer transfers property to a new pooled income fund that has been in existence for less than 3 taxable years, what deemed rate of return is used to value the remainder interest?

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 1996 to new pooled income funds that have been in existence for less than 3 taxable years.

This revenue ruling lists the calendar year 1996 deemed rate of return computed under § 7520 of the Internal Revenue Code for pooled income funds (PIFs) described in § 642(c)(5) that have been in existence for less than 3 years immediately preceding the 1996 taxable year in which a transfer is made to the PIF.

Under § 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 (1) the interest rate (rounded to the nearest 2/10ths of 1 percent) equal to 120 percent of the applicable federal midterm rate under § 1274(d)(1) for the month in which the valuation date falls, and (2) 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 § 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 § 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 § 7520 rates for the 3 calendar years immediately preceding the calendar year in which the transfer to the PIF is made. See § 1.642(c)-6(e)(3).

The deemed rate of return for transfers to a new PIF during taxable year 1996 is 7.2 percent.

The following Table lists the rate for transfers to new PIFs in 1996 and the rates for transfers to new PIFs in each of the past 7 calendar years.

Rev. Rul. 96-1 Table

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).

Rev. Rul. 96-1, 1996-1 C.B. 119, 1996-1 I.R.B. 7