- 24 -
percent. See H. Conf. Rept. 100-1104 (Vol. II), at 112 (1988),
1988-3 C.B. 473, 602. Thus, the 9-percent interest rate the
accountant used was not a reasonable interest rate, as a higher
rate should have been used to reflect the private annuity's
unsecured nature. Unlike a seller under a land sale contract,6
decedent under the private annuity would have only an unsecured
right to receive a specified annual payment during her life.
We hold that the private annuity decedent received had a
value of $1,360,724 as of August 29, 1989. Sec. 7520; sec.
25.7520-4, Gift Tax Regs.; Notice 89-60, supra; Notice 89-24,
supra.7 Thus, the $1,865,500 worth of land decedent transferred
6 In general, in an installment land sale contract, the
seller retains record title to the real property but agrees to
give the buyer immediate possession and to issue later to the
buyer a deed to the property upon the buyer's full payment of the
purchase price. See Ariz. Rev. Stat. Ann. secs. 33-741 to 33-749
(West 1990); see also Maciborski v. Chase Serv. Corp., 161 Ariz.
557, 779 P.2d 1296, 1298-1299 (Ariz. Ct. App. 1989).
7 As indicated above, respondent's $1,360,724 valuation of
the annuity is in accordance with the mandated standards of sec.
7520; that is, in valuing the annuity, respondent employed (1) an
interest rate based on the applicable Federal midterm rate and
(2) a mortality component based on more recent U.S. census data.
We would note that even under the pre-sec. 7520 case law, to
justify a departure from respondent's administrative actuarial
tables, petitioner would have had to offer, among other things,
convincing expert actuarial testimony establishing respondent's
table to be old or outmoded. See Estate of Christ v.
Commissioner, 480 F.2d at 174. Petitioner offered no such expert
testimony at trial. Even if petitioner had offered evidence
attempting to do so, respondent's interest rate and mortality
assumptions here (which are those prescribed by sec. 7520) can
hardly be considered old or outmoded.
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