After thirteen years, actuarial tables used for valuing certain interests in property have been updated.
Final regulations have been issued that contain revisions to actuarial tables used in valuing:
- interests for life or terms of years; and
- remainder or reversionary interests.
These regulations will affect the valuation of lifetime and testamentary transfers of interests that are dependent on one or more measuring lives and will be effective, generally, for valuations occurring after June 1, 2023 (T.D. 9974, June 2, 2023). However, transitional rules will apply in certain limited circumstances.
Valuation of Annuities and Term Interests
The regulatory actuarial tables included in these regulations are used for the valuation of annuities, interests for life or terms of years and remainder or reversionary interests in property. Pursuant to Code Sec. 7520(c)(2), the IRS is required to revise the tables at least once in each 10-year period. On May 5, 2022, the IRS published proposed regulations (NPRM REG-122770-18) that updated the actuarial tables based on data compiled from the 2010 census as set forth in Life Table 2010CM. Tables S (Single Life Remainder Factors) and U(1) (Unitrust Single Life Remainder Factors), effective for transfers for which the valuation date is after June 1, 2023, are based on that data. Conforming amendments were made to various provisions to reflect the revised tables.
Decimal Places and Calculations. The IRS received comments that noted a lack of consistency in the number of decimal places used in the calculation of different types of factors. An example was corrected to remove the inconsistency in the examples.
In addition, comments were received regarding the number of decimal places used by software programs and the use of alternate methods of deriving certain factors. The final regulations allow taxpayers to use actuarial formulas or more exact methods in place of the approximation methods. In doing so, taxpayers should use at least as many decimal places as are provided in the final regulations.
Transition Period. The transition period is extended to apply to transactions that occurred on or after May 1, 2019, and before June 2, 2023. For transactions occurring during that period, the taxpayer may choose to use actuarial factors based on Table 2000CM or Table 2010CM. The taxpayer must be consistent in using the same mortality basis for reach interest in the same property and with respect to all transfers occurring on that valuation date.
Amended Returns. For transactions occurring after May 1, 2019, that apply the new valuation factors, amended or supplemental returns should include the caption “AMENDED PURSUANT TO TD 9974” or “SUPPLEMENTED PURSUANT TO TD 9974.”
Election to Use Table 2010CM. As noted, an amended or supplemented return should use the caption above. However, no other affirmative statement is required by the regulations to make the election to use Table 2010CM.
The regulations are applicable in the case of annuities, interests for life or term of years, and remainder or reversionary interests valued as of a date on or after June 1, 2023.