- 23 -
10, 1994, executors or donors can rely on Notice 89-24, supra, or
Notice 89-60, supra, in valuing the transferred interest. Sec.
20.7520-4, Estate Tax Regs.; sec. 25.7520-4, Gift Tax Regs.
Thus, contrary to petitioner's argument, the valuation
methodology respondent employed is specifically required by the
transitional rules provided in section 25.7520-4, Gift Tax Regs.
Applying Notice 89-24, supra, and Notice 89-60, supra,
respondent, in the notice of deficiency dated March 13, 1996,
determined that the private annuity decedent received had a value
of $1,360,724.
In addition, the record discloses that decedent's accountant
did not reasonably value the annuity decedent was to receive.
The accountant did not follow the procedure specified in Notice
89-24, supra, and Notice 89-60, supra, as he testified that he
had been unaware of the enactment of section 7520. Moreover, he
did not even value the annuity pursuant to the actuarial table
prescribed under the estate and gift tax regulations in effect in
late 1988, which were issued in 1984. See supra note 5. He
used an interest rate of 9 percent (which he believed was a rate
slightly higher than the then prevailing interest rate charged on
land sales contracts in Arizona), notwithstanding that the
actuarial tables contained in the estate and gift tax regulations
then in effect (in late 1988 when decedent's accountant
apparently valued the annuity) used an interest rate factor of 10
Page: Previous 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NextLast modified: May 25, 2011