26 CFR 20.2056A-4T - Procedures for conforming marital trusts and nontrust marital transfers to the requirements of a qualified domestic trust (temporary).

§ 20.2056A-4T Procedures for conforming marital trusts and nontrust marital transfers to the requirements of a qualified domestic trust (temporary).
(a) through (c)(4)(ii)(A). [Reserved] For further guidance see § 20.2056A-4(a) through (c)(4)(ii)(A).
(c)
(4)
(ii) (B) The total present value of the annuity or other payment is the present value of the nonassignable annuity or other payment as of the date of the decedent's death, determined in accordance with the interest rates and mortality data prescribed by section 7520. The expected annuity term is the number of years that would be required for the scheduled payments to exhaust a hypothetical fund equal to the present value of the scheduled payments. This is determined by first dividing the total present value of the payments by the annual payment. From the quotient so obtained, the expected annuity term is derived by identifying the term of years that corresponds to the annuity factor equal to the quotient. This is determined by using column 1 of Table B, for the applicable interest rate, contained in Publication 1457, Actuarial Valuations Version 3A. A copy of this publication is available beginning May 1, 2009, at no charge, electronically via the IRS Internet site at http://www.irs.gov. If the quotient obtained falls between two terms, the longer term is used.
(c)
(5) through (c)(7). [Reserved] For further guidance see § 20.2056A-4(c)(5) through (c)(7).
(d) Examples 1 through 3. [Reserved] For further guidance see § 20.2056A-4(d) Examples 1 through 3.
Example 4.
Computation of corpus portion of annuity payment. (i) At the time of D's death on or after May 1, 2009, D is a participant in an employees' pension plan described in section 401(a). On D's death, D's spouse S, a resident of the United States, becomes entitled to receive a survivor's annuity of $72,000 per year, payable monthly, for life. At the time of D's death, S is age 60. Assume that under section 7520, the appropriate discount rate to be used for valuing annuities in the case of this decedent is 6.0 percent. The annuity factor at 6.0 percent for a person age 60 is 11.0625 (1.0000 minus .33625, divided by .06). The adjustment factor at 6.0 percent in Table K for monthly payments is 1.0272. Accordingly, the right to receive $72,000 per year on a monthly basis is equal to the right to receive $73,958.40 ($72,000 × 1.0272) on an annual basis.
(ii) The corpus portion of each annuity payment received by S is determined as follows. The first step is to determine the annuity factor for the number of years that would be required to exhaust a hypothetical fund that has a present value and a payout corresponding to S's interest in the payments under the plan, determined as follows:
(A) Present value of S's annuity: $73,958.40 × 11.0625 = $818,164.80.
(B) Annuity Factor for Expected Annuity Term: $818,164.80/$73,958.40 = 11.0625
(iii) The second step is to determine the number of years that would be required for S 's annuity to exhaust a hypothetical fund of $818,164.80. The term certain annuity factor of 11.0625 falls between the annuity factors for 18 and 19 years in a 6.0 percent term certain annuity table (Column 1 of Table B, Publication 1457 Actuarial Valuations Version 3A, which may be obtained on the IRS Internet site). Accordingly, the expected annuity term is 19 years.
(iv) The third step is to determine the corpus amount by dividing the expected term of 19 years into the present value of the hypothetical fund as follows:
Corpus amount of annual payment: $818,164.80/19 = $43,061.31
(v) In the fourth step, the corpus portion of each annuity payment is determined by dividing the corpus amount of each annual payment by the annual annuity payment (adjusted for payments more frequently than annually as in (i) of this Example 4) as follows:
Corpus portion of each annuity payment: $43,061.31/$73,958.40 = .58
(vi) Accordingly, 58 percent of each payment to S is deemed to be a distribution of corpus. A marital deduction is allowed for $818,164.80, the present value of the annuity as of D's date of death, if either: S agrees to roll over the corpus portion of each payment to a QDOT and the executor files the Information Statement described in paragraph (c)(5) of this section and the Roll Over Agreement described in paragraph (c)(7) of this section; or S agrees to pay the tax due on the corpus portion of each payment and the executor files the Information Statement described in paragraph (c)(5) of this section and the Payment Agreement described in paragraph (c)(6) of this section.
Example 5.
[Reserved] For further guidance see § 20.2056A-4(d) Example 5.
(e) Effective/applicability date. Paragraph (c)(4)(ii)(B) and Example 4 in paragraph (d) of this section are applicable with respect to decedents dying on or after May 1, 2009.
(f) Expiration date. Paragraph (c)(4)(ii)(B) and Example 4 in paragraph (d) of this section expire on or before May 1, 2012.
[T.D. 9448, 74 FR 21510, May 7, 2009]

Title 26 published on 2014-04-01

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