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With respect to the private annuity, petitioner contends
that the annuity, as of August 29, 1989, had a value of
$1,865,500, and that the accountant hired to determine the annual
payment decedent was to receive employed a "reasonable and
proper" procedure in valuing the annuity at $1,865,500.
Petitioner maintains that respondent's $1,360,724 valuation of
the annuity is somehow suspect and that the valuation methodology
respondent employed is not, in fact, required by section 7520 and
the regulations thereunder. We disagree.
Following the enactment of section 7520 on November 10,
1988, the IRS published temporary guidance to taxpayers for
transfers occurring after April 30, 1989, that would be subject
to section 7520. Notice 89-24, 1989-1 C.B. 660, published on
March 6, 1989, sets forth the formulas for computing the present
value of an annuity on the basis of the appropriate applicable
Federal midterm rate and the prior mortality experience. Notice
89-60, 1989-1 C.B. 700, published on May 30, 1989, provides
tables of actuarial factors to be used in determining the present
value of an annuity on the basis of more recent mortality
experience. Although final regulations under section 7520 were
not promulgated until June 10, 1994, the regulations eventually
issued provide certain transitional rules which were made
retroactive to May 1, 1989. Under these transitional rules,
where the valuation date is after April 30, 1989, and before June
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