Estate of Gladys J. Cook - Page 8

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               In Estate of Gribauskas, it was argued that the stream of              
          lottery payments was not an annuity.  We held that a decedent’s             
          right to receive lottery payments was a private annuity,                    
          includable in the gross estate under section 2033, but which                
          should be valued pursuant to section 7520, even though the                  
          payments were unmarketable, illiquid, and nontransferable.  Id.             
               Generally, the present value of an annuity is determined by            
          multiplying the stream of future annuity payments by a factor.              
          The factor incorporates an interest rate component and a                    
          mortality or term of payments component.  Section 7520 provides             
          that the value of any annuity, any interest for life or a term of           
          years, or any remainder or reversionary interest shall be                   
          determined under the tables prescribed by the Secretary and using           
          a rounded interest rate equal to 120 percent of the applicable              
          Federal midterm rate for the month in which the valuation date              
          falls.  Sec. 7520(a)(1) and (2); sec. 20.7520-1(b), Estate Tax              
          Regs.  The mortality component is the life expectancy of the                
          annuitant if the annuity is measured by a life.  If the annuity             
          is payable for a fixed term of years, the fixed term is the                 
          mortality component.  The term “annuity” is not defined in                  
          section 7520; however, an annuity is commonly defined as a right            
          to receive fixed periodic payments, either for life or for a term           
          of years.  Estate of Shapiro v. Commissioner, T.C. Memo. 1993-              
          483.  Except as provided in section 20.7520-3(b), Estate Tax                

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