- 53 -
The difference of 0.3 percent between the 5.8-percent after-
tax rate computed for 1991 and the 5.5-percent after-tax rate
petitioners used in 1991 is relatively minimal and does not
establish that the 5.5-percent rate was unreasonable.
Moreover, the Internal Revenue Service publishes a permissible
range of interest rates used to calculate the current liability for
purposes of the full-funding limitation for pensions under section
412(c)(7). See Notice 88-73, 1988-2 C.B. 383. Although we are
mindful that Notice 88-73, supra, provides that no inference should
be drawn from the notice as to any issue not specifically addressed
therein, in the absence of regulations or other guidance to the
contrary, in our opinion rates that fall within the permissible
range of rates for purposes of the full-funding limitations on
pensions are reasonable for purposes of computing the reserve under
section 419A(c)(2).
The published range for a January 1991 valuation date is 7.77-
9.49 percent. Notice 91-5, 1991-1 C.B. 315. The income of a
pension trust is not taxable, and the interest rates provided for
purposes of the full-funding limitation represent pretax rates.
Application of a 36-percent combined tax rate to 7.8 percent (the
lowest investment rate (rounded) in the permissible range for
purposes of section 412(c)(7)) gives an after-tax investment rate
of 5.0 percent, which we believe supports the reasonableness of the
5.5-percent after-tax rate petitioners used for 1991.
Page: Previous 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 NextLast modified: May 25, 2011