- 8 -
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
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Next
Last modified: May 25, 2011