column 2 of Table A(1) or A(2), whichever is appropriate, opposite the number of years in column 1 nearest the age of the individual whose life measures the duration of the annuity. The product so obtained is then multiplied by whichever of the following factors is appropriate:

1.0148 for semiannual payments, 1.0222 for quarterly payments, 1.0272 for monthly payments, 1.0291 for weekly payments.

or

If the annuity is payable at the end of semiannual, quarterly, monthly, weekly periods for a definite number of years, the aggregate amount to be paid within a year is first multiplied by the figure in column 2 of Table B opposite the number of years in column 1 representing the duration of the annuity. The product so obtained is then multiplied by whichever of the above factors is appropriate. The application of this subparagraph may be illustrated by the following example:

Example. The facts are the same as those contained in example (1) set forth in subparagraph (1) of this paragraph, except that the annuity is payable semiannually. The aggregate annual amount, $10,000, is multiplied by the factor 12.9934, and the product multiplied by 1.0148. The present value of the annuity at the date of the decedent's death is, therefore, $131,857,02 ($10,000 × 12.9934 X 1.0148).

(3) Payable at the beginning of annual, semiannual, quarterly, monthly, or weekly periods. (i) If the first payment of an annuity for the life of an individual is due at the beginning of the annual or other payment period rather than at the end (as, for example, if the first payment is to be made immediately after the decedent's death), the value of the annuity is the sum of (a) the first payment plus (b) the present value of a similar annuity, the first payment of which is not to be made until the end of the payment period, determined as provided in subparagraph (1) or (2) of this paragraph. The application of this subdivision may be illustrated by the following example:

Example. The decedent was entitled to receive an annuity of $50 a month during the life of another, a woman. The decedent died on the day a payment was due. At the date of the decedent's death, the person whose life measures the duration of the annuity is 50 years of age. The value of the annuity at the date of the decedent's death is $50 plus the product of $50×12× 12.5793 (see Table

A(2)) × 1.0272 (see subparagraph (2) of this paragraph). That is, $50 plus $7,752.87, or $7,802.87.

(ii) If the first payment of an annuity for a definite number of years is due at the beginning of the annual or other payment period, the applicable factor is the product of the factor shown in Table B multiplied by whichever of the following factors is appropriate:

1.0600 for annual payments, 1.0448 for semiannual payments, 1.0372 for quarterly payments, 1.0322 for monthly payments, 1.0303 for weekly payments.

The application of this subdivision may be illustrated by the following example:

Example. The decedent was the beneficiary of an annuity of $50 a month. On the day a payment was due, the decedent died. There were 300 payments to be made, including the payment due. The value of the annuity as of the date of decedent's death is the product of $50 × 12 × 12.7834 (see Table B) X1.0322, or $7,917.02.

(c) Life estates and terms for years. If the interest to be valued is the right of a person for his life, or for the life of another person, to receive the income of certain property or to use nonincomeproducing property, the value of the interest is the value of the property multiplied by the figure in column 3 of Table A(1) or A(2), whichever is appropriate, opposite the number of years nearest to the actual age of the measuring life. If the interest to be valued is the right to receive income of property or to use nonincome-producing property for a term of years, column 3 of Table B is used. The application of this paragraph may be illustrated by the following example:

Example. The decedent or his estate was entitled to receive the income from a fund of $50,000 during the life of his elder brother. Upon the brother's death, the remainder is to go to X. The brother was 31 years 5 months old at the time of decedent's death. By reference to Table A(1) the figure in column 3 opposite 31 years is found to be 0.86117. The present value of decedent's interest is therefore, $43,058.50 ($50,000 × 0.86117).

(d) Remainders or reversionary interests. If a decedent had, at the time of his death, a remainder or a reversionary interest in property to take effect after an estate for the life of another, the present value of his interest is obtained by multiplying the value of the property by the figure in column 4 of Table A(1)

or A(2), whichever is appropriate, opposite the number of years nearest to the actual age of the person whose life measures the preceding estate. If the remainder or reversion is to take effect at the end of a term for years, column 4 of Table B is used. The application of this paragraph may be illustrated by the following example:

Example. The decedent was entitled to receive certain property worth $50,000 upon the death of his elder sister, to whom the income was bequeathed for life. At the time of the decedent's death, the elder sister was 31 years 5 months old. By reference to Table A(2), the figure in column 4 opposite 31 years is found to be 0.10227. The present value of the remainder interest at the date of decedent's death is, therefore, $5,113.50 ($50,000×0.10227).

(e) Actuarial computations by the Internal Revenue Service. If the valuation of the interest involved is dependent upon the continuation or the termination of more than one life or upon a term certain concurrent with one or more lives, a special factor must be used. The factor is to be computed on the basis of interest at the rate of 6 percent a year, compounded annually, and life contingencies determined, as to each male and female life involved, from the values of lx that are set forth in columns 2 and 3, respectively, of Table LN of paragraph (f). Table LN contains values of lx taken from the life table for total males and the life table for total females appearing as Tables 2 and 3, respectively, in United States Life Tables: 1959-61, published by the Department of Health, Education, and Welfare, Public Health Service, except that for technical reasons Table LN employs graduated data, furnished by that Department, to increase the number of significant figures shown at ages of male lives older than 86 and female lives older than 90. Many such special factors may be found in, or computed with the use of the tables contained in, the publications entitled "Actuarial Values I: Valuation of Last Survivor Charitable Remainders" and "Actuarial Values II: Factors at 6 Percent Involving One and Two Lives." These publications may be purchased from the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. However, if a special factor is required in the case of an actual decedent, the Commissioner will furnish the factor to the executor upon

10. 2960

[T.D. 6296, 23 F.R. 4529, June 24, 1958, as amended by T.D. 7077, 35 F.R. 18461, Dec. 4, 1970]

§ 20.2031-11 Valuation of life estates, terms for years, remainders and reversions in certain depreciable property. [Reserved]

[T.D. 7077, 35 F.R. 18464, Dec. 4, 1970]

§ 20.2032 Statutory provisions; alternate valuation.

SEC. 2032. Alternate valuation-(a) General. The value of the gross estate may be determined, if the executor so elects, by valuing all the property included in the gross estate as follows:

(1) In the case of property distributed, sold, exchanged, or otherwise disposed of, within 6 months after the decedent's death such property shall be valued as of the date of distribution, sale, exchange, or other disposition.

(2) In the case of property not distributed, sold, exchanged, or otherwise disposed of, within 6 months after the decedent's death such property shall be valued as of the date 6 months after the decedent's death.

(3) Any interest or estate which is affected by mere lapse of time shall be included at its value as of the time of death (instead of the later date) with adjustment for any difference in its value as of the later date not due to mere lapse of time.

(b) Special rules. No deduction under this chapter of any item shall be allowed if allowance for such item is in effect given by the alternate valuation provided by this section. Wherever in any other subsection or section of this chapter reference is made to the value of property at the time of the decedent's death, such reference shall be deemed to refer to the value of such property used in determining the value of the gross estate. In case of an election made by the executor under this section, then

(1) For purposes of the charitable deduction under section 2055 or 2106 (a) (2), any bequest, legacy, devise, or transfer enumerated therein, and

(2) For the purpose of the marital deduction under section 2056, any interest in property passing to the surviving spouse, shall be valued as of the date of the decedent's death with adjustment for any difference in value (not due to mere lapse of time or the occurrence or nonoccurrence of a contingency) of the property as of the date 6 months after the decedent's death (substituting, in the case of property distributed by the executor or trustee, or sold, exchanged, or otherwise disposed of, during such 6-month period, the date thereof).

(c) Time of election. The election provided for in this section shall be exercised by the executor on his return if filed within the time prescribed by law or before the expiration of any extension of time granted pursuant to law for the filing of the return. [Sec. 2032 as amended by sec. 101(a), Excise, Estate, and Gift Tax Adjustment Act 1970 (84 Stat. 1836)]

[T.D. 6296, 23 F.R. 4529, June 24, 1958, as amended by T.D. 7238, 37 F.R. 28718, Dec. 29, 1972]