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3(b)(1)(i), Gift Tax Regs., that the annuity amount “be payable
to (or for the benefit of) the holder of the annuity interest for
each taxable year of the term.”
Lastly, we observe that the legislative history indicates
section 2702 was to draw upon the rules for valuing split-
interest gifts to charity under section 664. Section 664 deals
with charitable remainder annuity trusts and unitrusts for which
a tax deduction is available. Yet under this statute, respondent
apparently acknowledges that an annuity payable for a term of
years to an individual or the individual’s estate is valued as a
fixed-term interest. Section 1.664-2(c), Income Tax Regs.,
provides that the present value of an annuity is to be computed
in accordance with regulations promulgated under section 2031.
Such regulations, in turn, contain the following example:
Example 4. Annuity payable for a term of years. The
decedent, or the decedent’s estate, was entitled to
receive an annuity of $10,000 a year payable in equal
quarterly installments at the end of each quarter
throughout a term certain. At the time of the
decedent’s death, the section 7520 rate was 9.8
percent. A quarterly payment had just been made prior
to the decedent’s death and payments were to continue
for 5 more years. Under Table B in � 20.2031-7(d)(6)
for the interest rate of 9.8 percent, the factor for
the present value of a remainder interest due after a
term of 5 years is .626597. Converting the factor to
an annuity factor, as described in paragraph
(d)(2)(iv)(A) of this section, the factor for the
present value of an annuity for a term of 5 years is
3.8102. The adjustment factor from Table K in �
20.2031-7(d)(6) at an interest rate of 9.8 percent for
quarterly annuity payments made at the end of the
period is 1.0360. The present value of the annuity is,
therefore, $39,473.67 ($10,000 x 3.8102 x 1.0360).
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