[Title 26 CFR ]
[Code of Federal Regulations (annual edition) - April 1, 2003 Edition]
[From the U.S. Government Printing Office]



[[Page i]]



                    26


          Part 1 (Secs. 1.641 to 1.850)

                         Revised as of April 1, 2003

Internal Revenue





          Containing a codification of documents of general 
          applicability and future effect
          As of April 1, 2003
          With Ancillaries
          Published by
          Office of the Federal Register
          National Archives and Records
          Administration

 A Special Edition of the Federal Register



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                     U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003



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                            Table of Contents



                                                                    Page
  Explanation.................................................       v

  Title 26:
          Chapter I--Internal Revenue Service, Department of 
          the Treasury (Continued)                                   3
  Finding Aids:
      Table of CFR Titles and Chapters........................     771
      Alphabetical List of Agencies Appearing in the CFR......     789
      Table of OMB Control Numbers............................     799
      List of CFR Sections Affected...........................     817



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                     ----------------------------

                     Cite this Code:  CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus,  26 CFR 1.641(a)-0 
                       refers to title 26, part 
                       1, section 641(a)-0.

                     ----------------------------

[[Page v]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
regulation. Each title is divided into chapters which usually bear the 
name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
volume.

LEGAL STATUS

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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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EFFECTIVE AND EXPIRATION DATES

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OMB CONTROL NUMBERS

    The Paperwork Reduction Act of 1980 (Pub. L. 96-511) requires 
Federal agencies to display an OMB control number with their information 
collection request.

[[Page vi]]

Many agencies have begun publishing numerous OMB control numbers as 
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OBSOLETE PROVISIONS

    Provisions that become obsolete before the revision date stated on 
the cover of each volume are not carried. Code users may find the text 
of provisions in effect on a given date in the past by using the 
appropriate numerical list of sections affected. For the period before 
January 1, 2001, consult either the List of CFR Sections Affected, 1949-
1963, 1964-1972, 1973-1985, or 1986-2000, published in 11 separate 
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CFR INDEXES AND TABULAR GUIDES

    A subject index to the Code of Federal Regulations is contained in a 
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    The Federal Register Index is issued monthly in cumulative form. 
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    A List of CFR Sections Affected (LSA) is published monthly, keyed to 
the revision dates of the 50 CFR titles.

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in the Code of Federal Regulations.

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[[Page vii]]

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                              Raymond A. Mosley,
                                    Director,
                          Office of the Federal Register.

April 1, 2003.



[[Page ix]]



                               THIS TITLE

    Title 26--Internal Revenue is composed of twenty volumes. The 
contents of these volumes represent all current regulations issued by 
the Internal Revenue Service, Department of the Treasury, as of April 1, 
2003. The first thirteen volumes comprise part 1 (Subchapter A--Income 
Tax) and are arranged by sections as follows: Secs. 1.0-1-1.60; 
Secs. 1.61-1.169; Secs. 1.170-1.300; Secs. 1.301-1.400; Secs. 1.401-
1.440; Secs. 1.441-1.500; Secs. 1.501-1.640; Secs. 1.641-1.850; 
Secs. 1.851-1.907; Secs. 1.908-1.1000; Secs. 1.1001-1.1400; 
Secs. 1.1401-1-1.1503-2A; and Sec. 1.1551-1 to end. The fourteenth 
volume containing parts 2-29, includes the remainder of subchapter A and 
all of Subchapter B--Estate and Gift Taxes. The last six volumes contain 
parts 30-39 (Subchapter C--Employment Taxes and Collection of Income Tax 
at Source); parts 40-49; parts 50-299 (Subchapter D--Miscellaneous 
Excise Taxes); parts 300-499 (Subchapter F--Procedure and 
Administration); parts 500-599 (Subchapter G--Regulations under Tax 
Conventions); and part 600 to end (Subchapter H--Internal Revenue 
Practice).

    The OMB control numbers for Title 26 appear in Sec. 602.101 of this 
chapter. For the convenience of the user, Sec. 602.101 appears in the 
Finding Aids section of the volumes containing parts 1 to 599.

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[[Page 1]]



                       TITLE 26--INTERNAL REVENUE




            (This book contains part 1, Secs. 1.641 to 1.850)

  --------------------------------------------------------------------
                                                                    Part

chapter i--Internal Revenue Service, Department of the 
  Treasury (Continued)......................................           1

[[Page 3]]



    CHAPTER I--INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY 
                               (CONTINUED)




                     (Part 1, Secs. 1.641 to 1.850)

  --------------------------------------------------------------------


  Editorial Notes: IRS published a document at 45 FR 6088, Jan. 25, 
1980, deleting statutory sections from their regulations. In chapter I 
cross references to the deleted material have been changed to the 
corresponding sections of the IRS Code of 1954 or to the appropriate 
regulations sections. When either such change produced a redundancy, the 
cross reference has been deleted. For further explanation, see 45 FR 
20795, March 31, 1980.

                  SUBCHAPTER A--INCOME TAX (CONTINUED)
Part                                                                Page
1               Income taxes................................           5

Supplementary Publication: Internal Revenue Service Looseleaf 
  Regulations System.

  Additional supplementary publications are issued covering Alcohol and 
Tobacco Tax Regulations, and Regulations Under Tax Conventions.

[[Page 5]]



                  SUBCHAPTER A--INCOME TAX (CONTINUED)





PART 1--INCOME TAXES--Table of Contents




                        Normal Taxes and Surtaxes

              ESTATES, TRUSTS, BENEFICIARIES, AND DECEDENTS

                   ESTATES, TRUSTS, AND BENEFICIARIES

            General Rules For Taxation Of Estates And Trusts

Sec.
1.641  [Reserved]
1.641(a)-0  Scope of subchapter J.
1.641(a)-1  Imposition of tax; application of tax.
1.641(a)-2  Gross income of estates and trusts.
1.641(b)-1  Computation and payment of tax; deductions and credits of 
          estates and trusts.
1.641(b)-2  Filing of returns and payment of the tax.
1.641(b)-3  Termination of estates and trusts.
1.641(c)-0  Table of contents.
1.641(c)-1  Electing small business trust.
1.642(a)(1)-1  Partially tax-exempt interest.
1.642(a)(2)-1  Foreign taxes.
1.642(a)(3)-1  Dividends received by an estate or trust.
1.642(a)(3)-2  Time of receipt of dividends by beneficiary.
1.642(a)(3)-3  Cross reference.
1.642(b)-1  Deduction for personal exemption.
1.642(c)-0  Effective dates.
1.642(c)-1  Unlimited deduction for amounts paid for a charitable 
          purpose.
1.642(c)-2  Unlimited deduction for amounts permanently set aside for a 
          charitable purpose.
1.642(c)-3  Adjustments and other special rules for determining 
          unlimited charitable contributions deduction.
1.642(c)-4  Nonexempt private foundations.
1.642(c)-5  Definition of pooled income fund.
1.642(c)-6  Valuation of a remainder interest in property transferred to 
          a pooled income fund.
1.642(c)-7  Transitional rules with respect to pooled income funds.
1.642(d)-1  Net operating loss deduction.
1.642(e)-1  Depreciation and depletion.
1.642(f)-1  Amortization deductions.
1.642(g)-1  Disallowance of double deductions; in general.
1.642(g)-2  Deductions included.
1.642(h)-1  Unused loss carryovers on termination of an estate or trust.
1.642(h)-2  Excess deductions on termination of an estate or trust.
1.642(h)-3  Meaning of ``beneficiaries succeeding to the property of the 
          estate or trust''.
1.642(h)-4  Allocation.
1.642(h)-5  Example.
1.642(i)-1  Certain distributions by cemetery perpetual care funds.
1.642(i)-2  Definitions.
1.643(a)-0  Distributable net income; deduction for distributions; in 
          general.
1.643(a)-1  Deduction for distributions.
1.643(a)-2  Deduction for personal exemption.
1.643(a)-3  Capital gains and losses.
1.643(a)-4  Extraordinary dividends and taxable stock dividends.
1.643(a)-5  Tax-exempt interest.
1.643(a)-6  Income of foreign trust.
1.643(a)-7  Dividends.
1.643(a)-8  Certain distributions by charitable remainder trusts.
1.643(b)-1  Definition of ``income''.
1.643(b)-2  Dividends allocated to corpus.
1.643(c)-1  Definition of ``beneficiary''.
1.643(d)-1  Definition of ``foreign trust created by a United States 
          person''.
1.643(d)-2  Illustration of the provisions of section 643.
1.643(h)-1  Distributions by certain foreign trusts through 
          intermediaries.

    pooled income fund actuarial tables applicable before may 1, 1999

1.642(c)-6A  Valuation of charitable remainder interests for which the 
          valuation date is before May 1, 1999.

              Election to treat trust as part of an estate

1.645-1  Election by certain revocable trusts to be treated as part of 
          estate.

               Trusts which distribute current income only

1.651(a)-1  Simple trusts; deduction for distributions; in general.
1.651(a)-2  Income required to be distributed currently.
1.651(a)-3  Distribution of amounts other than income.
1.651(a)-4  Charitable purposes.
1.651(a)-5  Estates.
1.651(b)-1  Deduction for distributions to beneficiaries.
1.652(a)-1  Simple trusts; inclusion of amounts in income of 
          beneficiaries.
1.652(a)-2  Distributions in excess of distributable net income.
1.652(b)-1  Character of amounts.
1.652(b)-2  Allocation of income items.
1.652(b)-3  Allocation of deductions.
1.652(c)-1  Different taxable years.
1.652(c)-2  Death of individual beneficiaries.
1.652(c)-3  Termination of existence of other beneficiaries.
1.652(c)-4  Illustration of the provisions of sections 651 and 652.

[[Page 6]]

   estates and trusts which may accumulate income or which distribute 
                                 corpus

1.661(a)-1  Estates and trusts accumulating income or distributing 
          corpus; general.
1.661(a)-2  Deduction for distributions to beneficiaries.
1.661(b)-1  Character of amounts distributed; in general.
1.661(b)-2  Character of amounts distributed when charitable 
          contributions are made.
1.661(c)-1  Limitation on deduction.
1.661(c)-2  Illustration of the provisions of section 661.
1.662(a)-1  Inclusion of amounts in gross income of beneficiaries of 
          estates and complex trusts; general.
1.662(a)-2  Currently distributable income.
1.662(a)-3  Other amounts distributed.
1.662(a)-4  Amounts used in discharge of a legal obligation.
1.662(b)-1  Character of amounts; when no charitable contributions are 
          made.
1.662(b)-2  Character of amounts; when charitable contributions are 
          made.
1.662(c)-1  Different taxable years.
1.662(c)-2  Death of individual beneficiary.
1.662(c)-3  Termination of existence of other beneficiaries.
1.662(c)-4  Illustration of the provisions of sections 661 and 662.
1.663(a)-1  Special rules applicable to sections 661 and 662; 
          exclusions; gifts, bequests, etc.
1.663(a)-2  Charitable, etc., distributions.
1.663(a)-3  Denial of double deduction.
1.663(b)-1  Distributions in first 65 days of taxable year; scope.
1.663(b)-2  Election.
1.663(c)-1  Separate shares treated as separate trusts or as separate 
          estates; in general.
1.663(c)-2  Rules of administration.
1.663(c)-3  Applicability of separate share rule to certain trusts.
1.663(c)-4  Applicability of separate share rule to estates and 
          qualified revocable trusts.
1.663(c)-5  Examples.
1.663(c)-6  Effective dates.
1.664-1  Charitable remainder trusts.
1.664-2  Charitable remainder annuity trust.
1.664-3  Charitable remainder unitrust.
1.664-4  Calculation of the fair market value of the remainder interest 
          in a charitable remainder unitrust.

treatment of excess distributions by trusts applicable to taxable years 
                    beginning before january 1, 1969

1.665(a)-0  Excess distributions by trusts; scope of subpart D.
1.665(a)-1  Undistributed net income.
1.665(b)-1  Accumulation distributions of trusts other than certain 
          foreign trusts; in general.
1.665(b)-2  Exclusions from accumulation distributions in the case of 
          trusts (other than a foreign trust created by a U.S. person).
1.665(b)-3  Exclusions under section 663(a) (1).
1.665(c)-1  Accumulation distributions of certain foreign trusts; in 
          general.
1.665(c)-2  Indirect payments to the beneficiary.
1.665(d)-1  Taxes imposed on the trust.
1.665(e)-1  Preceding taxable year.
1.665(e)-2  Application of separate share rule.
1.666(a)-1A  Amount allocated.
1.666(b)-1A  Total taxes deemed distributed.
1.666(c)-1A  Pro rata portion of taxes deemed distributed.
1.666(c)-2A  Illustration of the provisions of section 666 (a), (b), and 
          (c).
1.666(d)-1A  Information required from trusts.
1.666(a)-1  Amount allocated.
1.666(b)-1  Total taxes deemed distributed.
1.666(c)-1  Pro rata portion of taxes deemed distributed.
1.666(c)-2  Illustration of the provisions of section 666.
1.667-1  Denial of refund to trusts.
1.667(a)-1A  Denial of refund to trusts.
1.667(b)-1A  Authorization of credit to beneficiary for taxes imposed on 
          the trust.
1.668(a)-1A  Amounts treated as received in prior taxable years; 
          inclusion in gross income.
1.668(a)-2A  Allocation among beneficiaries; in general.
1.668(a)-3A  Determination of tax.
1.668(b)-1A  Tax on distribution.
1.668(b)-2A  Special rules applicable to section 668.
1.668(b)-3A  Computation of the beneficiary's income and tax for a prior 
          taxable year.
1.668(b)-4A  Information requirements with respect to beneficiary.
1.668(a)-1  Amounts treated as received in prior taxable years; 
          inclusion in gross income.
1.668(a)-2  Allocation among beneficiaries; in general.
1.668(a)-3  Excluded amounts.
1.668(a)-4  Tax attributable to throwback.
1.668(b)-1  Credit for taxes paid by the trust.
1.668(b)-2  Illustration of the provisions of subpart D.
1.669(a)-1A  Amount allocated.
1.669(b)-1A  Tax on distribution.
1.669(c)-1A  Special rules applicable to section 669.
1.669(c)-2A  Computation of the beneficiary's income and tax for a prior 
          taxable year.
1.669(c)-3A  Information requirements with respect to beneficiary.
1.669(d)-1A  Total taxes deemed distributed.
1.669(e)-1A  Pro rata portion of taxes deemed distributed.
1.669(e)-2A  Illustration of the provisions of section 669.

[[Page 7]]

1.669(f)-1A  Character of capital gain.
1.669(f)-2A  Exception for capital gain distributions from certain 
          trusts.
1.669(a)-1  Limitation on tax.
1.669(a)-2  Rules applicable to section 669 computations.
1.669(a)-3  Tax computed by the exact throwback method.
1.669(a)-4  Tax attributable to short-cut throwback method.
1.669(b)-1  Information requirements.
1.669(b)-2  Manner of exercising election.

         unitrust actuarial tables applicable before may 1, 1999

1.664-4A  Valuation of charitable remainder interests for which the 
          valuation date is before May 1, 1999.

treatment of excess distributions of trusts applicable to taxable years 
                  beginning on or after january 1, 1969

1.665(a)-0A  Excess distributions by trusts; scope of subpart D.
1.665(a)-1A  Undistributed net income.
1.665(b)-1A  Accumulation distributions.
1.665(b)-2A  Special rules for accumulation distributions made in 
          taxable years beginning before January 1, 1974.
1.665(c)-1A  Special rule applicable to distributions by certain foreign 
          trusts.
1.665(d)-1A  Taxes imposed on the trust.
1.665(e)-1A  Preceding taxable year.
1.665(f)-1A  Undistributed capital gain.
1.665(g)-1A  Capital gain distribution.
1.665(g)-2A  Application of separate share rule.

            grantors and others treated as substantial owners

1.671-1  Grantors and others treated as substantial owners; scope.
1.671-2  Applicable principles.
1.671-3  Attribution or inclusion of income, deductions, and credits 
          against tax.
1.671-4  Method of reporting.
1.672(a)-1  Definition of adverse party.
1.672(b)-1  Nonadverse party.
1.672(c)-1  Related or subordinate party.
1.672(d)-1  Power subject to condition precedent.
1.672(f)-1  Foreign persons not treated as owners.
1.672(f)-2  Certain foreign corporations.
1.672(f)-3  Exceptions to general rule.
1.672(f)-4  Recharacterization of purported gifts.
1.672(f)-5  Special rules.
1.673(a)-1  Reversionary interests; income payable to beneficiaries 
          other than certain charitable organizations; general rule.
1.673(b)-1  Income payable to charitable beneficiaries (before amendment 
          by Tax Reform Act of 1969).
1.673(c)-1  Reversionary interest after income beneficiary's death.
1.673(d)-1  Postponement of date specified for reacquisition.
1.674(a)-1  Power to control beneficial enjoyment; scope of section 674.
1.674(b)-1  Excepted powers exercisable by any person.
1.674(c)-1  Excepted powers exercisable only by independent trustees.
1.674(d)-1  Excepted powers exercisable by any trustee other than 
          grantor or spouse.
1.674(d)-2  Limitations on exceptions in section 674 (b), (c), and (d).
1.675-1  Administrative powers.
1.676(a)-1  Power to revest title to portion of trust property in 
          grantor; general rule.
1.676(b)-1  Powers exercisable only after a period of time.
1.677(a)-1  Income for benefit of grantor; general rule.
1.677(b)-1  Trusts for support.
1.678(a)-1  Person other than grantor treated as substantial owner; 
          general rule.
1.678(b)-1  If grantor is treated as the owner.
1.678(c)-1  Trusts for support.
1.678(d)-1  Renunciation of power.
1.679-0  Outline of major topics.
1.679-1  U.S. transferor treated as owner of foreign trust.
1.679-2  Trusts treated as having a U.S. beneficiary.
1.679-3  Transfers.
1.679-4  Exceptions to general rule.
1.679-5  Pre-immigration trusts.
1.679-6  Outbound migrations of domestic trusts.
1.679-7  Effective dates.

                              miscellaneous

1.681(a)-1  Limitation on charitable contributions deductions of trusts; 
          scope of section 681.
1.681(a)-2  Limitation on charitable contributions deduction of trusts 
          with trade or business income.
1.681(b)-1  Cross reference.
1.682(a)-1  Income of trust in case of divorce, etc.
1.682(b)-1  Application of trust rules to alimony payments.
1.682(c)-1  Definitions.
1.683-1  Applicability of provisions; general rule.
1.683-2  Exceptions.
1.683-3  Application of the 65-day rule of the Internal Revenue Code of 
          1939.
1.684-1  Recognition of gain on transfers to certain foreign trusts and 
          estates.
1.684-2  Transfers.
1.684-3  Exceptions to general rule of gain recognition.
1.684-4  Outbound migrations of domestic trusts.
1.684-5  Effective date.

[[Page 8]]

                     income in respect of decedents

1.691(a)-1  Income in respect of a decedent.
1.691(a)-2  Inclusion in gross income by recipients.
1.691(a)-3  Character of gross income.
1.691(a)-4  Transfer of right to income in respect of a decedent.
1.691(a)-5  Installment obligations acquired from decedent.
1.691(b)-1  Allowance of deductions and credit in respect to decedents.
1.691(c)-1  Deduction for estate tax attributable to income in respect 
          of a decedent.
1.691(c)-2  Estates and trusts.
1.691(d)-1  Amounts received by surviving annuitant under joint and 
          survivor annuity contract.
1.691(e)-1  Installment obligations transmitted at death when prior law 
          applied.
1.691(f)-1  Cross reference.
1.692-1  Abatement of income taxes of certain members of the Armed 
          Forces of the United States upon death.

                        PARTNERS AND PARTNERSHIPS

                     Determination of Tax Liability

1.701-1  Partners, not partnership, subject to tax.
1.701-2  Anti-abuse rule.
1.702-1  Income and credits of partner.
1.702-2  Net operating loss deduction of partner.
1.702-3T  4-Year spread (temporary).
1.703-1  Partnership computations.
1.704-1  Partner's distributive share.
1.704-2  Allocations attributable to nonrecourse liabilities.
1.704-3  Contributed property.
1.704-4  Distribution of contributed property.
1.705-1  Determination of basis of partner's interest.
1.705-2  Basis adjustments coordinating sections 705 and 1032.
1.706-1  Taxable years of partner and partnership.
1.706-2T  Temporary regulations; question and answer under the Tax 
          Reform Act of 1984.
1.707-0  Table of contents.
1.707-1  Transactions between partner and partnership.
1.707-2  Disguised payments for services. [Reserved]
1.707-3  Disguised sales of property to partnership; general rules.
1.707-4  Disguised sales of property to partnership; special rules 
          applicable to guaranteed payments, preferred returns, 
          operating cash flow distributions, and reimbursements of 
          preformation expenditures.
1.707-5  Disguised sales of property to partnership; special rules 
          relating to liabilities.
1.707-6  Disguised sales of property by partnership to partner; general 
          rules.
1.707-7  Disguised sales of partnership interests. [Reserved]
1.707-8  Disclosure of certain information.
1.707-9  Effective dates and transitional rules.
1.708-1  Continuation of partnership.
1.709-1  Treatment of organization and syndication costs.
1.709-2  Definitions.

               Contributions, Distributions, and Transfers

                     contributions to a partnership

1.721-1  Nonrecognition of gain or loss on contribution.
1.722-1  Basis of contributing partner's interest.
1.723-1  Basis of property contributed to partnership.

                     distributions by a partnership

1.731-1  Extent of recognition of gain or loss on distribution.
1.731-2  Partnership distributions of marketable securities.
1.732-1  Basis of distributed property other than money.
1.732-2  Special partnership basis of distributed property.
1.732-3  Corresponding adjustment to basis of assets of a distributed 
          corporation controlled by a corporate partner.
1.733-1  Basis of distributee partner's interest.
1.734-1  Optional adjustment to basis of undistributed partnership 
          property.
1.734-2  Adjustment after distribution to transferee partner.
1.735-1  Character of gain or loss on disposition of distributed 
          property.
1.736-1  Payments to a retiring partner or a deceased partner's 
          successor in interest.
1.737-1  Recognition of precontribution gain.
1.737-2  Exceptions and special rules.
1.737-3  Basis adjustments; recovery rules.
1.737-4  Anti-abuse rule.
1.737-5  Effective date.

                 transfers of interests in a partnership

1.741-1  Recognition and character of gain or loss on sale or exchange.
1.742-1  Basis of transferee partner's interest.
1.743-1  Optional adjustment to basis of partnership property.

    provisions common to part ii, subchapter k, chapter 1 of the code

1.751-1  Unrealized receivables and inventory items.
1.752-0  Table of contents.
1.752-1  Treatment of partnership liabilities.

[[Page 9]]

1.752-2  Partner's share of resource liabilities.
1.752-3  Partner's share of nonrecourse liabilities.
1.752-4  Special rules.
1.752-5  Effective dates and transition rules.
1.753-1  Partner receiving income in respect of decedent.
1.754-1  Time and manner of making election to adjust basis of 
          partnership property.
1.755-1  Rules for allocation of basis.
1.755-2T  Coordination of sections 755 and 1060 (temporary).

                               definitions

1.761-1  Terms defined.
1.761-2  Exclusion of certain unincorporated organizations from the 
          application of all or part of subchapter K of chapter 1 of the 
          Internal Revenue Code.

         effective date for subchapter k, chapter 1 of the code

1.771-1  Effective date.

                           INSURANCE COMPANIES

                        Life Insurance Companies

                         definition; tax imposed

1.801-1  Definitions.
1.801-2  Taxable years affected.
1.801-3  Definitions.
1.801-4  Life insurance reserves.
1.801-5  Total reserves.
1.801-6  Adjustments in reserves for policy loans.
1.801-7  Variable annuities.
1.801-8  Contracts with reserves based on segregated asset accounts.
1.802(b)-1  Tax on life insurance companies.
1.802-2  Taxable years affected.
1.802-3  Tax imposed on life insurance companies.
1.802-4  Life insurance company taxable income.
1.802-5  Special rule for 1959 and 1960.
1.803-1  Life insurance reserves.
1.803-2  Adjusted reserves.
1.803-3  Interest paid or accrued.
1.803-4  Taxable income and deductions.
1.803-5  Real estate owned and occupied.
1.803-6  Amortization of premium and accrual of discount.
1.803-7  Taxable years affected.

                            investment income

1.804-3  Gross investment income of a life insurance company.
1.804-4  Investment yield of a life insurance company.
1.806-1  Adjustment for certain reserves.
1.806-2  Taxable years affected.
1.806-3  Certain changes in reserves and assets.
1.806-4  Change of basis in computing reserves.
1.807-1  Mortality and morbidity tables.

                      gain and loss from operations

1.809-1  Taxable years affected.
1.809-2  Exclusion of share of investment yield set aside for 
          policyholders.
1.809-3  Gain and loss from operations defined.
1.809-4  Gross amount.
1.809-5  Deductions.
1.809-6  Modifications.
1.809-7  Limitation on certain deductions.
1.809-8  Limitation on deductions for certain mutualization 
          distributions.
1.809-9  Computation of the differential earnings rate and the 
          recomputed differential earnings rate.
1.809-10  Computation of equity base.
1.810-1  Taxable years affected.
1.810-2  Rules for certain reserves.
1.810-3  Adjustment for change in computing reserves.
1.810-4  Certain decreases in reserves of voluntary employees' 
          beneficiary associations.
1.811-1  Taxable years affected.
1.811-2  Dividends to policyholders.
1.812-1  Taxable years affected.
1.812-2  Operations loss deduction.
1.812-3  Computation of loss from operations.
1.812-4  Operations loss carrybacks and operations loss carryovers.
1.812-5  Offset.
1.812-6  New company defined.
1.812-7  Application of subtitle A and subtitle F.
1.812-8  Illustration of operations loss carrybacks and carryovers.

                      distributions to shareholders

1.815-1  Taxable years affected.
1.815-2  Distributions to shareholders.
1.815-3  Shareholders surplus account.
1.815-4  Policyholders surplus account.
1.815-5  Other accounts defined.
1.815-6  Special rules.

                        miscellaneous provisions

1.817-1  Taxable years affected.
1.817-2  Treatment of capital gains and losses.
1.817-3  Gain on property held on December 31, 1958, and certain 
          substituted property acquired after 1958.
1.817-4  Special rules.
1.817-5  Diversification requirements for variable annuity, endowment, 
          and life insurance contracts.
1.818-1  Taxable years affected.
1.818-2  Accounting provisions.
1.818-3  Amortization of premium and accrual of discount.
1.818-4  Election with respect to life insurance reserves computed on 
          preliminary term basis.

[[Page 10]]

1.818-5  Short taxable years.
1.818-6  Transitional rule for change in method of accounting.
1.818-7  Denial of double deductions.
1.818-8  Special rules relating to consolidated returns and certain 
          capital losses.
1.819-1  Taxable years affected.
1.819-2  Foreign life insurance companies.

Mutual Insurance Companies (Other Than Life and Certain Marine Insurance 
Companies and Other Than Fire or Flood Insurance Companies Which Operate 
           on Basis of Perpetual Policies or Premium Deposits)

1.821-1  Tax on mutual insurance companies other than life or marine or 
          fire insurance companies subject to the tax imposed by section 
          831.
1.821-2  Taxable years affected.
1.821-3  Tax on mutual insurance companies other than life or marine or 
          fire insurance companies subject to the tax imposed by section 
          831.
1.821-4  Tax on mutual insurance companies other than life insurance 
          companies and other than fire, flood, or marine insurance 
          companies, subject to tax imposed by section 831.
1.821-5  Special transitional underwriting loss.
1.822-1  Taxable income and deductions.
1.822-2  Real estate owned and occupied.
1.822-3  Amortization of premium and accrual of discount.
1.822-4  Taxable years affected.
1.822-5  Mutual insurance company taxable income.
1.822-6  Real estate owned and occupied.
1.822-7  Amortization of premium and accrual of discount.
1.822-8  Determination of taxable investment income.
1.822-9  Real estate owned and occupied.
1.822-10  Amortization of premium and accrual of discount.
1.822-11  Net premiums.
1.822-12  Dividends to policyholders.
1.823-1  Net premiums.
1.823-2  Dividends to policyholders.
1.823-3  Taxable years affected.
1.823-4  Net premiums.
1.823-5  Dividends to policyholders.
1.823-6  Determination of statutory underwriting income or loss.
1.823-7  Subscribers of reciprocal underwriters and interinsurers.
1.823-8  Special transitional underwriting loss; cross reference.
1.825-1  Unused loss deduction; in general.
1.825-2  Unused loss carryovers and carrybacks.
1.825-3  Examples.
1.826-1  Election by reciprocal underwriters and interinsurers.
1.826-2  Special rules applicable to electing reciprocals.
1.826-3  Attorney-in-fact of electing reciprocals.
1.826-4  Allocation of expenses.
1.826-5  Attribution of tax.
1.826-6  Credit or refund.
1.826-7  Examples.

                        Other Insurance Companies

1.831-1  Tax on insurance companies (other than life or mutual), mutual 
          marine insurance companies, and mutual fire insurance 
          companies issuing perpetual policies.
1.831-2  Taxable years affected.
1.831-3  Tax on insurance companies (other than life or mutual), mutual 
          marine insurance companies, mutual fire insurance companies 
          issuing perpetual policies, and mutual fire or flood insurance 
          companies operating on the basis of premium deposits; taxable 
          years beginning after December 31, 1962.
1.831-4  Election of multiple line companies to be taxed on total 
          income.
1.832-1  Gross income.
1.832-2  Deductions.
1.832-3  Taxable years affected.
1.832-4  Gross income.
1.832-5  Deductions.
1.832-6  Policyholders of mutual fire or flood insurance companies 
          operating on the basis of premium deposits.
1.832-7T  Treatment of salvage and reinsurance in computing ``losses 
          incurred'' deduction, taxable years beginning before January 
          1, 1990 (temporary).
1.846-0  Outline of provisions.
1.846-1  Application of discount factors.
1.846-2  Election by taxpayer to use its own historical loss payment 
          pattern.
1.846-3  Fresh start and reserve strengthening.
1.846-4  Effective date.
1.848-0  Outline of regulations under section 848.
1.848-1  Definitions and special provisions.
1.848-2  Determination of net premiums.
1.848-3  Interim rules for certain reinsurance agreements.

    Authority: 26 U.S.C. 7805, unless otherwise noted.
    Section 1.642(c)-6 also issued under 26 U.S.C. 642(c)(5).
    Section 1.643(a)-8 also issued under 26 U.S.C. 643(a)(7).
    Section 1.643(h)-1 also issued under 26 U.S.C. 643(a)(7).
    Section 1.642(c)-6A also issued under 26 U.S.C. 642(c)(5).
    Section 1.645-1 also issued under 26 U.S.C. 645.
    Sections 1.663(c)-1, 1.663(c)-2, 1.663(c)-3, 1.663(c)-4, 1.663(c)-5, 
and 1.663(c)-6 also issued under 26 U.S.C. 663(c).
    Section 1.664-1 also issued under 26 U.S.C. 664(a).

[[Page 11]]

    Section 1.664-2 also issued under 26 U.S.C. 664(a).
    Section 1.664-3 also issued under 26 U.S.C. 664(a).
    Section 1.664-4 also issued under 26 U.S.C. 664(a).
    Section 1.664-4A also issued under 26 U.S.C. 664(a).
    Section 1.671-2 also issued under 26 U.S.C. 643(a)(7) and 672(f)(6).
    Section 1.672(f)-1 also issued under 26 U.S.C. 643(a)(7) and 
672(f)(6).
    Section 1.672(f)-2 also issued under 26 U.S.C. 643(a)(7) and 
672(f)(3) and (6).
    Section 1.672(f)-3 also issued under 26 U.S.C. 643(a)(7) and 
672(f)(2) and (6).
    Section 1.672(f)-4 also issued under 26 U.S.C. 643(a)(7) and 
672(f)(4) and (6).
    Section 1.672(f)-5 also issued under 26 U.S.C. 643(a)(7) and 
672(f)(6).
    Section 1.679-1 also issued under 26 U.S.C. 643(a)(7) and 679(d).
    Section 1.679-2 also issued under 26 U.S.C. 643(a)(7) and 679(d).
    Section 1.679-3 also issued under 26 U.S.C. 643(a)(7) and 679(d).
    Section 1.679-4 also issued under 26 U.S.C. 643(a)(7), 679(a)(3) and 
679(d).
    Section 1.679-5 also issued under 26 U.S.C. 643(a)(7) and 679(d).
    Section 1.679-6 also issued under 26 U.S.C. 643(a)(7) and 679(d).
    Section 1.684-1 also issued under 26 U.S.C. 643(a)(7) and 684(a).
    Section 1.684-2 also issued under 26 U.S.C. 643(a)(7) and 684(a).
    Section 1.684-3 also issued under 26 U.S.C. 643(a)(7) and 684(a).
    Section 1.684-4 also issued under 26 U.S.C. 643(a)(7) and 684(a).
    Section 1.684-5 also issued under 26 U.S.C. 643(a)(7) and 684(a).
    Section 1.701-2 also issued under 26 U.S.C. 701 through 761.
    Section 1.704-3 also issued under 26 U.S.C. 704(c).
    Section 1.704-3T also issued under 26 U.S.C. 704(c).
    Section 1.704-4 also issued under 26 U.S.C. 704(c).
    Section 1.705-2 also issued under 26 U.S.C. 705 and 1032.
    Section 1.706-1T also issued under 26 U.S.C. 706(b).
    Section 1.706-3T also issued under 26 U.S.C. 444(f).
    Sections 1.707-2 through 1.707-9 also issued under 26 U.S.C. 
707(a)(2).
    Section 1.721-1 also issued under 26 U.S.C. 721.
    Section 1.731-2 also issued under 26 U.S.C. 731(c).
    Section 1.732-1 also issued under 26 U.S.C. 732.
    Section 1.732-2 also issued under 26 U.S.C. 732.
    Section 1.732-3 also issued under 26 U.S.C. 732(f).
    Section 1.734-1 also issued under 26 U.S.C. 734.
    Section 1.743-1 also issued under 26 U.S.C. 743.
    Section 1.751-1 also issued under 26 U.S.C. 751.
    Section 1.755-1 also issued under 26 U.S.C. 755.
    Section 1.761-2 also issued under 26 U.S.C. 446(b) and 26 U.S.C. 
761(a).
    Section 1.809-10 also issued under 26 U.S.C. 809(b)(2) and (g)(3).
    Section 1.832-4 also issued under 26 U.S.C. 832(b)(5)(A).
    Sections 1.846-1 through 1.846-4 also issued under 26 U.S.C. 846.
    Section 1.848-2 also issued under 26 U.S.C. 845(b) and 26 U.S.C. 
848(d)(4)(B).
    Section 1.848-3 also issued under 26 U.S.C. 848(d)(4)(B).

    Source: T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 
1960, unless otherwise noted.

              ESTATES, TRUSTS, BENEFICIARIES, AND DECEDENTS

                   Estates, Trusts, and Beneficiaries

            General Rules for Taxation of Estates and Trusts



Sec. 1.641  [Reserved]



Sec. 1.641(a)-0  Scope of subchapter J.

    (a) In general. Subchapter J (sections 641 and following), chapter 1 
of the Code, deals with the taxation of income of estates and trusts and 
their beneficiaries, and of income in respect of decedents. Part I of 
subchapter J contains general rules for taxation of estates and trusts 
(subpart A), specific rules relating to trusts which distribute current 
income only (subpart B), estates and trusts which may accumulate income 
or which distribute corpus (subpart C), treatment of excess 
distributions by trusts (subpart D), grantors and other persons treated 
as substantial owners (subpart E), and miscellaneous provisions relating 
to limitations on charitable deductions, income of an estate or trust in 
case of divorce, and taxable years to which the provisions of subchapter 
J are applicable (subpart F). Part I has no application to any 
organization which is not to be classified for tax purposes as a trust 
under the classification rules of

[[Page 12]]

Sec. Sec. 301.7701-2, 301.7701-3, and 301.7701-4 of this chapter 
(Regulations on Procedure and Administration). Part II of subchapter J 
relates to the treatment of income in respect of decedents. However, the 
provisions of subchapter J do not apply to employee trusts subject to 
subchapters D and F, chapter 1 of the Code, and common trust funds 
subject to subchapter H, chapter 1 of the Code.
    (b) Scope of subparts A, B, C, and D. Subparts A, B, C, and D 
(section 641 and following), part I, subchapter J, chapter 1 of the 
Code, relate to the taxation of estates and trusts and their 
beneficiaries. These subparts have no application to any portion of the 
corpus or income of a trust which is to be regarded, within the meaning 
of the Code, as that of the grantor or others treated as its substantial 
owners. See subpart E (section 671 and following), Part I, subchapter J, 
chapter 1 of the Code, and the regulations thereunder for rules for the 
treatment of any portion of a trust where the grantor (or another 
person) is treated as the substantial owner. So-called alimony trusts 
are treated under subparts A, B, C, and D, except to the extent 
otherwise provided in section 71 or section 682. These subparts have no 
application to beneficiaries of nonexempt employees' trusts. See section 
402(b) and the regulations thereunder.
    (c) Multiple trusts. Multiple trusts that have:
    (1) No substantially independent purposes (such as independent 
dispositive purposes),
    (2) The same grantor and substantially the same beneficiary, and
    (3) The avoidance or mitigation of (i) the progressive rates of tax 
(including mitigation as a result of deferral of tax) or (ii) the 
minimum tax for tax preferences imposed by section 56 as their principal 
purpose,

shall be consolidated and treated as one trust for the purposes of 
subchapter J.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 
731, Jan. 17, 1969; T.D. 7204, 37 FR 17158, Aug. 25, 1972]



Sec. 1.641(a)-1  Imposition of tax; application of tax.

    For taxable years beginning after December 31, 1970, section 641 
prescribes that the taxes imposed by section 1(d), as amended by the Tax 
Reform Act of 1969, shall apply to the income of estates or of any kind 
of property held in trust. For taxable years ending before January 1, 
1971, section 641 prescribes that the taxes imposed upon individuals by 
chapter 1 of the Code apply to the income of estates or of any kind of 
property held in trust. The rates of tax, the statutory provisions 
respecting gross income, and, with certain exceptions, the deductions 
and credits allowed to individuals apply also to estates and trust.

[T.D. 7117, 36 FR 9421, May 25, 1971]



Sec. 1.641(a)-2  Gross income of estates and trusts.

    The gross income of an estate or trust is determined in the same 
manner as that of an individual. Thus, the gross income of an estate or 
trust consists of all items of gross income received during the taxable 
year, including:
    (a) Income accumulated in trust for the benefit of unborn or 
unascertained persons or persons with contingent interests;
    (b) Income accumulated or held for future distribution under the 
terms of the will or trust;
    (c) Income which is to be distributed currently by the fiduciary to 
the beneficiaries, and income collected by a guardian of an infant which 
is to be held or distributed as the court may direct;
    (d) Income received by estates of deceased persons during the period 
of administration or settlement of the estate; and
    (e) Income which, in the discretion of the fiduciary, may be either 
distributed to the beneficiaries or accumulated. The several classes of 
income enumerated in this section do not exclude others which also may 
come within the general purposes of section 641.



Sec. 1.641(b)-1  Computation and payment of tax; deductions and credits of estates and trusts.

    Generally, the deductions and credits allowed to individuals are 
also allowed to estates and trusts. However, there are special rules for 
the computation of

[[Page 13]]

certain deductions and for the allocation between the estate or trust 
and the beneficiaries of certain credits and deductions. See section 642 
and the regulations thereunder. In addition, an estate or trust is 
allowed to deduct, in computing its taxable income, the deductions 
provided by sections 651 and 661 and regulations thereunder, relating to 
distributions to beneficiaries.



Sec. 1.641(b)-2  Filing of returns and payment of the tax.

    (a) The fiduciary is required to make and file the return and pay 
the tax on the taxable income of an estate or of a trust. Liability for 
the payment of the tax on the taxable income of an estate attaches to 
the person of the executor or administrator up to and after his 
discharge if, prior to distribution and discharge, he had notice of his 
tax obligations or failed to exercise due diligence in ascertaining 
whether or not such obligations existed. For the extent of such 
liability, see section 3467 of the Revised Statutes, as amended by 
section 518 of the Revenue Act of 1934 (31 U. S. C. 192). Liability for 
the tax also follows the assets of the estate distributed to heirs, 
devisees, legatees, and distributees, who may be required to discharge 
the amount of the tax due and unpaid to the extent of the distributive 
shares received by them. See section 6901. The same considerations apply 
to trusts.
    (b) The estate of an infant, incompetent, or other person under a 
disability, or, in general, of an individual or corporation in 
receivership or a corporation in bankruptcy is not a taxable entity 
separate from the person for whom the fiduciary is acting, in that 
respect differing from the estate of a deceased person or of a trust. 
See section 6012(b) (2) and (3) for provisions relating to the 
obligation of the fiduciary with respect to returns of such persons.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6580, 26 FR 
11486, Dec. 5, 1961]



Sec. 1.641(b)-3  Termination of estates and trusts.

    (a) The income of an estate of a deceased person is that which is 
received by the estate during the period of administration or 
settlement. The period of administration or settlement is the period 
actually required by the administrator or executor to perform the 
ordinary duties of administration, such as the collection of assets and 
the payment of debts, taxes, legacies, and bequests, whether the period 
required is longer or shorter than the period specified under the 
applicable local law for the settlement of estates. For example, where 
an executor who is also named as trustee under a will fails to obtain 
his discharge as executor, the period of administration continues only 
until the duties of administration are complete and he actually assumes 
his duties as trustee, whether or not pursuant to a court order. 
However, the period of administration of an estate cannot be unduly 
prolonged. If the administration of an estate is unreasonably prolonged, 
the estate is considered terminated for Federal income tax purposes 
after the expiration of a reasonable period for the performance by the 
executor of all the duties of administration. Further, an estate will be 
considered as terminated when all the assets have been distributed 
except for a reasonable amount which is set aside in good faith for the 
payment of unascertained or contingent liabilities and expenses (not 
including a claim by a beneficiary in the capacity of beneficiary). 
Notwithstanding the above, if the estate has joined in making a valid 
election under section 645 to treat a qualified revocable trust, as 
defined under section 645(b)(1), as part of the estate, the estate shall 
not terminate under this paragraph prior to the termination of the 
section 645 election period. See section 645 and the regulations 
thereunder for rules regarding the termination of the section 645 
election period.
    (b) Generally, the determination of whether a trust has terminated 
depends upon whether the property held in trust has been distributed to 
the persons entitled to succeed to the property upon termination of the 
trust rather than upon the technicality of whether or not the trustee 
has rendered his final accounting. A trust does not automatically 
terminate upon the happening of the event by which the duration of the 
trust is measured. A reasonable time is permitted after such

[[Page 14]]

event for the trustee to perform the duties necessary to complete the 
administration of the trust. Thus, if under the terms of the governing 
instrument, the trust is to terminate upon the death of the life 
beneficiary and the corpus is to be distributed to the remainderman, the 
trust continues after the death of the life beneficiary for a period 
reasonably necessary to a proper winding up of the affairs of the trust. 
However, the winding up of a trust cannot be unduly postponed and if the 
distribution of the trust corpus is unreasonably delayed, the trust is 
considered terminated for Federal income tax purposes after the 
expiration of a reasonable period for the trustee to complete the 
administration of the trust. Further, a trust will be considered as 
terminated when all the assets have been distributed except for a 
reasonable amount which is set aside in good faith for the payment of 
unascertained or contingent liabilities and expenses (not including a 
claim by a beneficiary in the capacity of beneficiary).
    (c)(1) Except as provided in subparagraph (2) of this paragraph, 
during the period between the occurrence of an event which causes a 
trust to terminate and the time when the trust is considered as 
terminated under this section, whether or not the income and the excess 
of capital gains over capital losses of the trust are to be considered 
as amounts required to be distributed currently to the ultimate 
distributee for the year in which they are received depends upon the 
principles stated in Sec. 1.651(a)-2. See Sec. 1.663-1 et seq. for 
application of the separate share rule.
    (2)(i) Except in cases to which the last sentence of this 
subdivision applies, for taxable years of a trust ending before 
September 1, 1957, subparagraph (1) of this paragraph shall not apply 
and the rule of subdivision (ii) of this subparagraph shall apply unless 
the trustee elects to have subparagraph (1) of this paragraph apply. 
Such election shall be made by the trustee in a statement filed on or 
before April 15, 1959, with the district director with whom such trust's 
return for any such taxable year was filed. The election provided by 
this subdivision shall not be available if the treatment given the 
income and the excess of capital gains over capital losses for taxable 
years for which returns have been filed was consistent with the 
provisions of subparagraph (1) of this paragraph.
    (ii) The rule referred to in subdivision (i) of this subparagraph is 
as follows: During the period between the occurrence of an event which 
causes a trust to terminate and the time when a trust is considered as 
terminated under this section, the income and the excess of capital 
gains over capital losses of the trust are in general considered as 
amounts required to be distributed for the year in which they are 
received. For example, a trust instrument provides for the payment of 
income to A during her life, and upon her death for the payment of the 
corpus to B. The trust reports on the basis of the calendar year. A dies 
on November 1, 1955, but no distribution is made to B until January 15, 
1956. The income of the trust and the excess of capital gains over 
capital losses for the entire year 1955, to the extent not paid, 
credited, or required to be distributed to A or A's estate, are treated 
under sections 661 and 662 as amounts required to be distributed to B 
for the year 1955.
    (d) If a trust or the administration or settlement of an estate is 
considered terminated under this section for Federal income tax purposes 
(as for instance, because administration has been unduly prolonged), the 
gross income, deductions, and credits of the estate or trust are, 
subsequent to the termination, considered the gross income, deductions, 
and credits of the person or persons succeeding to the property of the 
estate or trust.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 9032, 67 FR 78376, Dec. 24, 2002]



Sec. 1.641(c)-0  Table of contents.

    This section lists the major captions contained in Sec. 1.641(c)-1.

                             Sec. 1.641(c)-1

                     Electing small business trust.

    (a) In general.
    (b) Definitions.
    (1) Grantor portion.
    (2) S portion.
    (3) Non-S portion.
    (c) Taxation of grantor portion.
    (d) Taxation of S portion.

[[Page 15]]

    (1) In general.
    (2) Section 1366 amounts.
    (3) Gains and losses on disposition of S stock.
    (4) State and local income taxes and administrative expenses.
    (e) Tax rates and exemption of S portion.
    (1) Income tax rate.
    (2) Alternative minimum tax exemption.
    (f) Adjustments to basis of stock in the S portion under section 
1367.
    (g) Taxation of non-S portion.
    (1) In general.
    (2) Dividend income under section 1368(c)(2).
    (3) Interest on installment obligations.
    (4) Charitable deduction.
    (h) Allocation of state and local income taxes and administration 
expenses.
    (i) Treatment of distributions from the trust.
    (j) Termination or revocation of ESBT election.
    (k) Effective date.
    (l) Examples.

[T.D. 8994, 67 FR 34394, May 14, 2002]



Sec. 1.641(c)-1  Electing small business trust.

    (a) In general. An electing small business trust (ESBT) within the 
meaning of section 1361(e) is treated as two separate trusts for 
purposes of chapter 1 of the Internal Revenue Code. The portion of an 
ESBT that consists of stock in one or more S corporations is treated as 
one trust. The portion of an ESBT that consists of all the other assets 
in the trust is treated as a separate trust. The grantor or another 
person may be treated as the owner of all or a portion of either or both 
such trusts under subpart E, part I, subchapter J, chapter 1 of the 
Internal Revenue Code. The ESBT is treated as a single trust for 
administrative purposes, such as having one taxpayer identification 
number and filing one tax return. See Sec. 1.1361-1(m).
    (b) Definitions--(1) Grantor portion. The grantor portion of an ESBT 
is the portion of the trust that is treated as owned by the grantor or 
another person under subpart E.
    (2) S portion. The S portion of an ESBT is the portion of the trust 
that consists of S corporation stock and that is not treated as owned by 
the grantor or another person under subpart E.
    (3) Non-S portion. The non-S portion of an ESBT is the portion of 
the trust that consists of all assets other than S corporation stock and 
that is not treated as owned by the grantor or another person under 
subpart E.
    (c) Taxation of grantor portion. The grantor or another person who 
is treated as the owner of a portion of the ESBT includes in computing 
taxable income items of income, deductions, and credits against tax 
attributable to that portion of the ESBT under section 671.
    (d) Taxation of S portion--(1) In general. The taxable income of the 
S portion is determined by taking into account only the items of income, 
loss, deduction, or credit specified in paragraphs (d)(2), (3), and (4) 
of this section, to the extent not attributable to the grantor portion.
    (2) Section 1366 amounts--(i) In general. The S portion takes into 
account the items of income, loss, deduction, or credit that are taken 
into account by an S corporation shareholder pursuant to section 1366 
and the regulations thereunder. Rules otherwise applicable to trusts 
apply in determining the extent to which any loss, deduction, or credit 
may be taken into account in determining the taxable income of the S 
portion. See Sec. 1.1361-1(m)(3)(iv) for allocation of those items in 
the taxable year of the S corporation in which the trust is an ESBT for 
part of the year and an eligible shareholder under section 
1361(a)(2)(A)(i) through (iv) for the rest of the year.
    (ii) Special rule for charitable contributions. If a deduction 
described in paragraph (d)(2)(i) of this section is attributable to an 
amount of the S corporation's gross income that is paid by the S 
corporation for a charitable purpose specified in section 170(c) 
(without regard to section 170(c)(2)(A)), the contribution will be 
deemed to be paid by the S portion pursuant to the terms of the trust's 
governing instrument within the meaning of section 642(c)(1). The 
limitations of section 681, regarding unrelated business income, apply 
in determining whether the contribution is deductible in computing the 
taxable income of the S portion.
    (iii) Multiple S corporations. If an ESBT owns stock in more than 
one S

[[Page 16]]

corporation, items of income, loss, deduction, or credit from all the S 
corporations are aggregated for purposes of determining the S portion's 
taxable income.
    (3) Gains and losses on disposition of S stock--(i) In general. The 
S portion takes into account any gain or loss from the disposition of S 
corporation stock. No deduction is allowed under section 1211(b)(1) and 
(2) for capital losses that exceed capital gains.
    (ii) Installment method. If income from the sale or disposition of 
stock in an S corporation is reported by the trust on the installment 
method, the income recognized under this method is taken into account by 
the S portion. See paragraph (g)(3) of this section for the treatment of 
interest on the installment obligation. See Sec. 1.1361-1(m)(5)(ii) 
regarding treatment of a trust as an ESBT upon the sale of all S 
corporation stock using the installment method.
    (iii) Distributions in excess of basis. Gain recognized under 
section 1368(b)(2) from distributions in excess of the ESBT's basis in 
its S corporation stock is taken into account by the S portion.
    (4) State and local income taxes and administrative expenses--(i) In 
general. State and local income taxes and administrative expenses 
directly related to the S portion and those allocated to that portion in 
accordance with paragraph (h) are taken into account by the S portion.
    (ii) Special rule for certain interest. Interest paid by the trust 
on money borrowed by the trust to purchase stock in an S corporation is 
allocated to the S portion but is not a deductible administrative 
expense for purposes of determining the taxable income of the S portion.
    (e) Tax rates and exemption of S portion--(1) Income tax rate. 
Except for capital gains, the highest marginal trust rate provided in 
section 1(e) is applied to the taxable income of the S portion. See 
section 1(h) for the rates that apply to the S portion's net capital 
gain.
    (2) Alternative minimum tax exemption. The exemption amount of the S 
portion under section 55(d) is zero.
    (f) Adjustments to basis of stock in the S portion under section 
1367. The basis of S corporation stock in the S portion must be adjusted 
in accordance with section 1367 and the regulations thereunder. If the 
ESBT owns stock in more than one S corporation, the adjustments to the 
basis in the S corporation stock of each S corporation must be 
determined separately with respect to each S corporation. Accordingly, 
items of income, loss, deduction, or credit of an S corporation that are 
taken into account by the ESBT under section 1366 can only result in an 
adjustment to the basis of the stock of that S corporation and cannot 
affect the basis in the stock of the other S corporations held by the 
ESBT.
    (g) Taxation of non-S portion--(1) In general. The taxable income of 
the non-S portion is determined by taking into account all items of 
income, deduction, and credit to the extent not taken into account by 
either the grantor portion or the S portion. The items attributable to 
the non-S portion are taxed under subparts A through D of part I, 
subchapter J, chapter 1 of the Internal Revenue Code. The non-S portion 
may consist of more than one share pursuant to section 663(c).
    (2) Dividend income under section 1368(c)(2). Any dividend income 
within the meaning of section 1368(c)(2) is includible in the gross 
income of the non-S portion.
    (3) Interest on installment obligations. If income from the sale or 
disposition of stock in an S corporation is reported by the trust on the 
installment method, the interest on the installment obligation is 
includible in the gross income of the non-S portion. See paragraph 
(d)(3)(ii) of this section for the treatment of income from such a sale 
or disposition.
    (4) Charitable deduction. For purposes of applying section 642(c)(1) 
to payments made by the trust for a charitable purpose, the amount of 
gross income of the trust is limited to the gross income of the non-S 
portion. See paragraph (d)(2)(ii) of this section for special rules 
concerning charitable contributions paid by the S corporation that are 
deemed to be paid by the S portion.
    (h) Allocation of state and local income taxes and administration 
expenses. Whenever state and local income taxes or

[[Page 17]]

administration expenses relate to more than one portion of an ESBT, they 
must be allocated between or among the portions to which they relate. 
These items may be allocated in any manner that is reasonable in light 
of all the circumstances, including the terms of the governing 
instrument, applicable local law, and the practice of the trustee with 
respect to the trust if it is reasonable and consistent. The taxes and 
expenses apportioned to each portion of the ESBT are taken into account 
by that portion.
    (i) Treatment of distributions from the trust. Distributions to 
beneficiaries from the S portion or the non-S portion, including 
distributions of the S corporation stock, are deductible under section 
651 or 661 in determining the taxable income of the non-S portion, and 
are includible in the gross income of the beneficiaries under section 
652 or 662. However, the amount of the deduction or inclusion cannot 
exceed the amount of the distributable net income of the non-S portion. 
Items of income, loss, deduction, or credit taken into account by the 
grantor portion or the S portion are excluded for purposes of 
determining the distributable net income of the non-S portion of the 
trust.
    (j) Termination or revocation of ESBT election. If the ESBT election 
of the trust terminates pursuant to Sec. 1.1361-1(m)(5) or the ESBT 
election is revoked pursuant to Sec. 1.1361-1(m)(6), the rules contained 
in this section are thereafter not applicable to the trust. If, upon 
termination or revocation, the S portion has a net operating loss under 
section 172; a capital loss carryover under section 1212; or deductions 
in excess of gross income; then any such loss, carryover, or excess 
deductions shall be allowed as a deduction, in accordance with the 
regulations under section 642(h), to the trust, or to the beneficiaries 
succeeding to the property of the trust if the entire trust terminates.
    (k) Effective date. This section generally is applicable for taxable 
years of ESBTs beginning on and after May 14, 2002. However, paragraphs 
(a), (b), (c), and (l) Example 1 of this section are applicable for 
taxable years of ESBTs that end on and after December 29, 2000. ESBTs 
may apply paragraphs (d)(4) and (h) of this section for taxable years of 
ESBTs beginning after December 31, 1996.
    (l) Examples. The following examples illustrate the rules of this 
section:

    Example 1. Comprehensive example. (i) Trust has a valid ESBT 
election in effect. Under section 678, B is treated as the owner of a 
portion of Trust consisting of a 10% undivided fractional interest in 
Trust. No other person is treated as the owner of any other portion of 
Trust under subpart E. Trust owns stock in X, an S corporation, and in 
Y, a C corporation. During 2000, Trust receives a distribution from X of 
$5,100, of which $5,000 is applied against Trust's adjusted basis in the 
X stock in accordance with section 1368(c)(1) and $100 is a dividend 
under section 1368(c)(2). Trust makes no distributions to its 
beneficiaries during the year.
    (ii) For 2000, Trust has the following items of income and 
deduction:

Ordinary income attributable to X under section 1366...........   $5,000
Dividend income from Y.........................................     $900
Dividend from X representing C corporation earnings and profits     $100
Total trust income.............................................   $6,000
 
Charitable contributions attributable to X under section 1366..     $300
Trustee fees...................................................     $200
State and local income taxes...................................     $100
 

    (iii) Trust's items of income and deduction are divided into a 
grantor portion, an S portion, and a non-S portion for purposes of 
determining the taxation of those items. Income is allocated to each 
portion as follows:
    B must take into account the items of income attributable to the 
grantor portion, that is, 10% of each item, as follows:

Ordinary income from X.........................................     $500
Dividend income from Y.........................................      $90
Dividend income from X.........................................      $10
                                                                --------
    Total grantor portion income...............................     $600
 

    The total income of the S portion is $4,500, determined as follows:

Ordinary income from X.........................................   $5,000
Less: Grantor portion..........................................   ($500)
                                                                --------
    Total S portion income.....................................   $4,500
 

    The total income of the non-S portion is $900 determined as follows:

Dividend income from Y (less grantor portion)..................     $810
Dividend income from X (less grantor portion)..................      $90
                                                                --------

[[Page 18]]

 
    Total non-S portion income.................................     $900
 

    (iv) The administrative expenses and the state and local income 
taxes relate to all three portions and under state law would be 
allocated ratably to the $6,000 of trust income. Thus, these items would 
be allocated 10% (600/6000) to the grantor portion, 75% (4500/6000) to 
the S portion and 15% (900/6000) to the non-S portion.
    (v) B must take into account the following deductions attributable 
to the grantor portion of the trust:

Charitable contributions from X................................      $30
Trustee fees...................................................      $20
State and local income taxes...................................      $10
 

    (vi) The taxable income of the S portion is $4,005, determined as 
follows:

Ordinary income from X.........................................   $4,500
Less: Charitable contributions from X (less grantor portion)...   ($270)
75% of trustee fees............................................   ($150)
75% of state and local income taxes............................    ($75)
Taxable income of S portion....................................   $4,005
 

    (vii) The taxable income of the non-S portion is $755, determined as 
follows:

Dividend income from Y.........................................     $810
Dividend income from X.........................................      $90
Total non-S portion income.....................................     $900
Less: 15% of trustee fees......................................    ($30)
15% state and local income taxes...............................    ($15)
Personal exemption.............................................   ($100)
Taxable income of non-S portion................................     $755
 

    Example 2. Sale of S stock. Trust has a valid ESBT election in 
effect and owns stock in X, an S corporation. No person is treated as 
the owner of any portion of Trust under subpart E. In 2003, Trust sells 
all of its stock in X to a person who is unrelated to Trust and its 
beneficiaries and realizes a capital gain of $5,000. This gain is taken 
into account by the S portion and is taxed using the appropriate capital 
gain rate found in section 1(h).
    Example 3. (i) Sale of S stock for an installment note. Assume the 
same facts as in Example 2, except that Trust sells its stock in X for a 
$400,000 installment note payable with stated interest over ten years. 
After the sale, Trust does not own any S corporation stock.
    (ii) Loss on installment sale. Assume Trust's basis in its X stock 
was $500,000. Therefore, Trust sustains a capital loss of $100,000 on 
the sale. Upon the sale, the S portion terminates and the excess loss, 
after being netted against the other items taken into account by the S 
portion, is made available to the entire trust as provided in section 
641(c)(4).
    (iii) Gain on installment sale. Assume Trust's basis in its X stock 
was $300,000 and that the $100,000 gain will be recognized under the 
installment method of section 453. Interest income will be recognized 
annually as part of the installment payments. The portion of the 
$100,000 gain recognized annually is taken into account by the S 
portion. However, the annual interest income is includible in the gross 
income of the non-S portion.
    Example 4. Charitable lead annuity trust. Trust is a charitable lead 
annuity trust which is not treated as owned by the grantor or another 
person under subpart E. Trust acquires stock in X, an S corporation, and 
elects to be an ESBT. During the taxable year, pursuant to its terms, 
Trust pays $10,000 to a charitable organization described in section 
170(c)(2). The non-S portion of Trust receives an income tax deduction 
for the charitable contribution under section 642(c) only to the extent 
the amount is paid out of the gross income of the non-S portion. To the 
extent the amount is paid from the S portion by distributing S 
corporation stock, no charitable deduction is available to the S 
portion.
    Example 5. ESBT distributions. (i) As of January 1, 2002, Trust owns 
stock in X, a C corporation. No portion of Trust is treated as owned by 
the grantor or another person under subpart E. X elects to be an S 
corporation effective January 1, 2003, and Trust elects to be an ESBT 
effective January 1, 2003. On February 1, 2003, X makes an $8,000 
distribution to Trust, of which $3,000 is treated as a dividend from 
accumulated earnings and profits under section 1368(c)(2) and the 
remainder is applied against Trust's basis in the X stock under section 
1368(b). The trustee of Trust makes a distribution of $4,000 to 
Beneficiary during 2003. For 2003, Trust's share of X's section 1366 
items is $5,000 of ordinary income. For the year, Trust has no other 
income and no expenses or state or local taxes.
    (ii) For 2003, Trust has $5,000 of taxable income in the S portion. 
This income is taxed to Trust at the maximum rate provided in section 
1(e). Trust also has $3,000 of distributable net income (DNI) in the 
non-S portion. The non-S portion of Trust receives a distribution 
deduction under section 661(a) of $3,000, which represents the amount 
distributed to Beneficiary during the year ($4,000), not to exceed the 
amount of DNI ($3,000). Beneficiary must include this amount in gross 
income under section 662(a). As a result, the non-S portion has no 
taxable income.

[T.D. 8994, 67 FR 34395, May 14, 2002]

[[Page 19]]



Sec. 1.642(a)(1)-1  Partially tax-exempt interest.

    An estate or trust is allowed the credit against tax for partially 
tax-exempt interest provided by section 35 only to the extent that the 
credit does not relate to interest properly allocable to a beneficiary 
under section 652 or 662 and the regulations thereunder. A beneficiary 
of an estate or trust is allowed the credit against tax for partially 
tax-exempt interest provided by section 35 only to the extent that the 
credit relates to interest properly allocable to him under section 652 
or 662 and the regulations thereunder. If an estate or trust holds 
partially tax-exempt bonds and elects under section 171 to treat the 
premium on the bonds as amortizable, the credit allowable under section 
35, with respect to the bond interest (whether allowable to the estate 
or trust or to the beneficiary), is reduced under section 171(a)(3) by 
reducing the shares of the interest allocable, respectively, to the 
estate or trust and its beneficiary by the portion of the amortization 
deduction attributable to the shares.



Sec. 1.642(a)(2)-1  Foreign taxes.

    An estate or trust is allowed the credit against tax for taxes 
imposed by foreign countries and possessions of the United States to the 
extent allowed by section 901 only for so much of those taxes as are not 
properly allocable under that section to the beneficiaries. See section 
901(b)(4). For purposes of section 901(b)(4), the term beneficiaries 
includes charitable beneficiaries.



Sec. 1.642(a)(3)-1  Dividends received by an estate or trust.

    An estate or trust is allowed a credit against the tax for dividends 
received on or before December 31, 1964 (see section 34), only for so 
much of the dividends as are not properly allocable to any beneficiary 
under section 652 or 662. Section 642(a)(3), and this section do not 
apply to amounts received as dividends after December 31, 1964. For 
treatment of the credit in the hands of the beneficiary see 
Sec. 1.652(b)-1.

[T.D. 6777, 29 FR 17808, Dec. 16, 1964]



Sec. 1.642(a)(3)-2  Time of receipt of dividends by beneficiary.

    In general, dividends are deemed received by a beneficiary in the 
taxable year in which they are includible in his gross income under 
section 652 or 662. For example, a simple trust, reporting on the basis 
of a fiscal year ending October 30, receives quarterly dividends on 
November 3, 1954, and February 3, May 3, and August 3, 1955. These 
dividends are all allocable to beneficiary A, reporting on a calendar 
year basis, under section 652 and are deemed received by A in 1955. See 
section 652(c). Accordingly, A may take all these dividends into account 
in determining his credit for dividends received under section 34 and 
his dividends exclusion under section 116. However, solely for purposes 
of determining whether dividends deemed received by individuals from 
trusts or estates qualify under the time limitations of section 34(a) or 
section 116(a), section 642(a)(3) provides that the time of receipt of 
the dividends by the trust or estate is also considered the time of 
receipt by the beneficiary. For example, a simple trust reporting on the 
basis of a fiscal year ending October 30 receives quarterly dividends on 
December 3, 1953, and March 3, June 3, and September 3, 1954. These 
dividends are all allocable to beneficiary A, reporting on the calendar 
year basis, under section 652 and are includible in his income for 1954. 
However, for purposes of section 34(a) or section 116(a), these 
dividends are deemed received by A on the same dates that the trust 
received them. Accordingly, A may take into account in determining the 
credit under section 34 only those dividends received by the trust on 
September 3, 1954, since the dividend received credit is not allowed 
under section 34 for dividends received before August 1, 1954 (or after 
December 31, 1964). Section 642(a)(3) and this section do not apply to 
amounts received by an estate or trust as dividends after December 31, 
1964. However, the rules in this section relating to time of receipt of 
dividends by a beneficiary are applicable to dividends received by an 
estate or trust prior to January 1, 1965, and accordingly, such 
dividends are deemed to be received by the beneficiary (even though 
received

[[Page 20]]

after December 31, 1964) on the same dates that the estate or trust 
received them for purposes of determining the credit under section 34 or 
the exclusion under section 116.

[T.D. 6777, 29 FR 17808, Dec. 16, 1964]



Sec. 1.642(a)(3)-3  Cross reference.

    See Sec. 1.683-2(c) for examples relating to the treatment of 
dividends received by an estate or trust during a fiscal year beginning 
in 1953 and ending in 1954.



Sec. 1.642(b)-1  Deduction for personal exemption.

    In lieu of the deduction for personal exemptions provided by section 
151:
    (a) An estate is allowed a deduction of $600,
    (b) A trust which, under its governing instrument, is required to 
distribute currently all of its income for the taxable year is allowed a 
deduction of $300, and
    (c) All other trusts are allowed a deduction of $100.

A trust which, under its governing instrument, is required to distribute 
all of its income currently is allowed a deduction of $300, even though 
it also distributes amounts other than income in the taxable year and 
even though it may be required to make distributions which would qualify 
for the charitable contributions deduction under section 642(c) (and 
therefore does not qualify as a ``simple trust'' under sections 651-
652). A trust for the payment of an annuity is allowed a deduction of 
$300 in a taxable year in which the amount of the annuity required to be 
paid equals or exceeds all the income of the trust for the taxable year. 
For the meaning of the term income required to be distributed currently, 
see Sec. 1.651(a)-2.



Sec. 1.642(c)-0  Effective dates.

    The provisions of section 642(c) (other than section 642(c)(5)) and 
of Secs. 1.642 (c)-1 through 1.642(c)-4 apply to amounts paid, 
permanently set aside, or to be used for a charitable purpose in taxable 
years beginning after December 31, 1969. The provisions of section 
642(c)(5) and of Secs. 1.642(c)-5 through 1.642(c)-7 apply to transfers 
in trust made after July 31, 1969. For provisions relating to amounts 
paid, permanently set aside, or to be used for a charitable purpose in 
taxable years beginning before January 1, 1970, see 26 CFR 1.642(c)-1 
through 1.642(c)-4 (Rev. as of Jan. 1, 1971).

[T.D. 7357, 40 FR 23739, June 2, 1975]



Sec. 1.642(c)-1  Unlimited deduction for amounts paid for a charitable purpose.

    (a) In general. (1) Any part of the gross income of an estate, or 
trust which, pursuant to the terms of the governing instrument is paid 
(or treated under paragraph (b) of this section as paid) during the 
taxable year for a purpose specified in section 170(c) shall be allowed 
as a deduction to such estate or trust in lieu of the limited charitable 
contributions deduction authorized by section 170(a). In applying this 
paragraph without reference to paragraph (b) of this section, a 
deduction shall be allowed for an amount paid during the taxable year in 
respect of gross income received in a previous taxable year, but only if 
no deduction was allowed for any previous taxable year to the estate or 
trust, or in the case of a section 645 election, to a related estate, as 
defined under Sec. 1.645-1(b), for the amount so paid.
    (2) In determining whether an amount is paid for a purpose specified 
in section 170(c)(2) the provisions of section 170(c)(2)(A) shall not be 
taken into account. Thus, an amount paid to a corporation, trust, or 
community chest, fund, or foundation otherwise described in section 
170(c)(2) shall be considered paid for a purpose specified in section 
170(c) even though the corporation, trust, or community chest, fund, or 
foundation is not created or organized in the United States, any State, 
the District of Columbia, or any possession of the United States.
    (3) See section 642(c)(6) and Sec. 1.642(c)-4 for disallowance of a 
deduction under this section to a trust which is, or is treated under 
section 4947(a)(1) as though it were a private foundation (as defined in 
section 509(a) and the regulations thereunder) and not exempt from 
taxation under section 501(a).
    (b) Election to treat contributions as paid in preceding taxable 
year--(1) In general. For purposes of determining

[[Page 21]]

the deduction allowed under paragraph (a) of this section, the fiduciary 
(as defined in section 7701(a)(6)) of an estate or trust may elect under 
section 642(c)(1) to treat as paid during the taxable year (whether or 
not such year begins before January 1, 1970) any amount of gross income 
received during such taxable year or any preceding taxable year which is 
otherwise deductible under such paragraph and which is paid after the 
close of such taxable year but on or before the last day of the next 
succeeding taxable year of the estate or trust. The preceding sentence 
applies only in the case of payments actually made in a taxable year 
which is a taxable year beginning after December 31, 1969. No election 
shall be made, however, in respect of any amount which was deducted for 
any previous taxable year or which is deducted for the taxable year in 
which such amount is paid.
    (2) Time for making election. The election under subparagraph (1) of 
this paragraph shall be made not later than the time, including 
extensions thereof, prescribed by law for filing the income tax return 
for the succeeding taxable year. Such election shall, except as provided 
in subparagraph (4) of this paragraph, become irrevocable after the last 
day prescribed for making it. Having made the election for any taxable 
year, the fiduciary may, within the time prescribed for making it, 
revoke the election without the consent of the Commissioner.
    (3) Manner of making the election. The election shall be made by 
filing with the income tax return (or an amended return) for the taxable 
year in which the contribution is treated as paid a statement which:
    (i) States the name and address of the fiduciary,
    (ii) Identifies the estate or trust for which the fiduciary is 
acting,
    (iii) Indicates that the fiduciary is making an election under 
section 642(c)(1) in respect of contributions treated as paid during 
such taxable year,
    (iv) Gives the name and address of each organization to which any 
such contribution is paid, and
    (v) States the amount of each contribution and date of actual 
payment or, if applicable, the total amount of contributions paid to 
each organization during the succeeding taxable year, to be treated as 
paid in the preceding taxable year.
    (4) Revocation of certain elections with consent. An application to 
revoke with the consent of the Commissioner any election made on or 
before June 8, 1970, must be in writing and must be filed not later than 
September 2, 1975.

No consent will be granted to revoke an election for any taxable year 
for which the assessment of a deficiency is prevented by the operation 
of any law or rule of law. If consent to revoke the election is granted, 
the fiduciary must attach a copy of the consent to the return (or 
amended return) for each taxable year affected by the revocation. The 
application must be addressed to the Commissioner of Internal Revenue, 
Washington, DC 20224, and must indicate:
    (i) The name and address of the fiduciary and the estate or trust 
for which he was acting,
    (ii) The taxable year for which the election was made,
    (iii) The office of the district director, or the service center, 
where the return (or amended return) for the year of election was filed, 
and
    (iv) The reason for revoking the election.

[T.D. 7357, 40 FR 23739, June 2, 1975; 40 FR 24361, June 6, 1975; T.D. 
9032, 67 FR 78376, Dec. 24, 2002]



Sec. 1.642(c)-2  Unlimited deduction for amounts permanently set aside for a charitable purpose.

    (a) Estates. Any part of the gross income of an estate which 
pursuant to the terms of the will:
    (1) Is permanently set aside during the taxable year for a purpose 
specified in section 170(c), or
    (2) Is to be used (within or without the United States or any of its 
possessions) exclusively for religious, charitable, scientific, 
literary, or educational purposes, or for the prevention of cruelty to 
children or animals, or for the establishment, acquisition, maintenance, 
or operation of a public cemetery not operated for profit,

shall be allowed as a deduction to the estate in lieu of the limited 
charitable

[[Page 22]]

contributions deduction authorized by section 170(a).
    (b) Certain trusts--(1) In general. Any part of the gross income of 
a trust to which either subparagraph (3) or (4) of this paragraph 
applies, that by the terms of the governing instrument:
    (i) Is permanently set aside during the taxable year for a purpose 
specified in section 170(c), or
    (ii) Is to be used (within or without the United States or any of 
its possessions) exclusively for religious, charitable, scientific, 
literary, or educational purposes, or for the prevention of cruelty to 
children or animals, or for the establishment, acquisition, maintenance, 
or operation of a public cemetery not operated for profit,

shall be allowed, subject to the limitation provided in subparagraph (2) 
of this paragraph, as a deduction to the trust in lieu of the limited 
charitable contributions deduction authorized by section 170(a). The 
preceding sentence applied only to a trust which is required by the 
terms of its governing instrument to set amounts aside. See section 
642(c)(6) and Sec. 1.642(c)-4 for disallowance of a deduction under this 
section to a trust which is, or is treated under section 4947(a)(1) as 
though it were, a private foundation (as defined in section 509(a) and 
the regulations thereunder) that is not exempt from taxation under 
section 501(a).
    (2) Limitation of deduction. Subparagraph (1) of this paragraph 
applies only to the gross income earned by a trust with respect to 
amounts transferred to the trust under a will executed on or before 
October 9, 1969, and satisfying the requirements of subparagraph (4) of 
this paragraph or transferred to the trust on or before October 9, 1969. 
For such purposes, any income, gains, or losses, which are derived at 
any time from the amounts so transferred to the trust shall also be 
taken into account in applying subparagraph (1) of this paragraph. If 
any such amount so transferred to the trust is invested or reinvested at 
any time, any asset received by the trust upon such investment or 
reinvestment shall also be treated as an amount which was so transferred 
to the trust. In the case of a trust to which this paragraph applies 
which contains (i) amounts transferred pursuant to transfers described 
in the first sentence of this subparagraph and (ii) amounts transferred 
pursuant to transfers not so described, subparagraph (1) of this 
paragraph shall apply only if the amounts described in subdivision (i) 
of this subparagraph, together with all income, gains, and losses 
derived therefrom, are separately accounted for from the amounts 
described in subdivision (ii) of this subparagraph, together with all 
income, gains, and losses derived therefrom. Such separate accounting 
shall be carried out consistently with the principles of paragraph 
(c)(4) of Sec. 53.4947-1 of this chapter (Foundation Excise Tax 
Regulations), relating to accounting for segregated amounts of split-
interest trusts.
    (3) Trusts created on or before October 9, 1969. A trust to which 
this subparagraph applies is a trust, testamentary or otherwise, which 
was created on or before October 9, 1969, and which qualifies under 
either subdivision (i) or (ii) of this subparagraph.
    (i) Transfer of irrevocable remainder interest to charity. To 
qualify under this subdivision the trust must have been created under 
the terms of an instrument granting an irrevocable remainder interest in 
such trust to or for the use of an organization described in section 
170(c). If the instrument granted a revocable remainder interest but the 
power to revoke such interest terminated on or before October 9, 1969, 
without the remainder interest having been revoked, the remainder 
interest will be treated as irrevocable for purposes of the preceding 
sentence.
    (ii) Grantor under a mental disability to change terms of trust. (A) 
To qualify under this subdivision (ii) the trust must have been created 
by a grantor who was at all times after October 9, 1969, under a mental 
disability to change the terms of the trust. The term mental disability 
for this purpose means mental incompetence to change the terms of the 
trust, whether or not there has been an adjudication of mental 
incompetence and whether or not there has been an appointment of a 
committee, guardian, fiduciary, or other person charged with the care of 
the person or property of the grantor.

[[Page 23]]

    (B) If the grantor has not been adjudged mentally incompetent, the 
trustee must obtain from a qualified physician a certificate stating 
that the grantor of the trust has been mentally incompetent at all times 
after October 9, 1969, and that there is no reasonable probability that 
the grantor's mental capacity will ever improve to the extent that he 
will be mentally competent to change the terms of the trust. A copy of 
this certification must be filed with the first return on which a 
deduction is claimed by reason of this subdivision (ii) and subparagraph 
(1) of this paragraph. Thereafter, a statement referring to such medical 
opinion must be attached to any return for a taxable year for which such 
a deduction is claimed and during which the grantor's mental 
incompetence continues. The original certificate must be retained by the 
trustee of the trust.
    (C) If the grantor has been adjudged mentally incompetent, a copy of 
the judgment or decree, and any modification thereof, must be filed with 
the first return on which a deduction is claimed by reason of this 
subdivision (ii) and subparagraph (1) of this paragraph. Thereafter, a 
statement referring to such judgment or decree must be attached to any 
return for a taxable year for which such a deduction is claimed and 
during which the grantor's mental incompetence continues. A copy of such 
judgment or decree must also be retained by the trustee of the trust.
    (D) This subdivision (ii) applies even though a person charged with 
the care of the person or property of the grantor has the power to 
change the terms of the trust.
    (4) Testamentary trust established by will executed on or before 
October 9, 1969. A trust to which this subparagraph applies is a trust 
which was established by will executed on or before October 9, 1969, and 
which qualifies under either subdivision (i), (ii), or (iii) of this 
subparagraph. This subparagraph does not apply, however, to that portion 
of any trust, not established by a will executed on or before October 9, 
1969, which was transferred to such trust by a will executed on or 
before October 9, 1969. Nor does it apply to that portion of any trust, 
not established by a will executed on or before October 9, 1969, which 
was subject to a testamentary power of appointment that fails by reason 
of the testator's nonexercise of the power in a will executed on or 
before October 9, 1969.
    (i) Testator dying within 3 years without republishing his will. To 
qualify under this subdivision the trust must have been established by 
the will of a testator who died after October 9, 1969, but before 
October 9, 1972, without having amended any dispositive provision of the 
will after October 9, 1969, by codicil or otherwise.
    (ii) Testator having no right to change his will. To qualify under 
this subdivision the trust must have been established by the will of a 
testator who died after October 9, 1969, and who at no time after that 
date had the right to change any portion of such will pertaining to such 
trust. This subdivision could apply, for example, where a contract has 
been entered into for the execution of wills containing reciprocal 
provisions as well as provisions for the benefit of an organization 
described in section 170(c) and under applicable local law the surviving 
testator is prohibited from revoking his will because he has accepted 
the benefit of the provisions of the will of the other contracting 
party.
    (iii) Testator under a mental disability to republish his will. To 
qualify under this subdivision the trust must have been established by 
the will of a testator who died after October 8, 1972, without having 
amended any dispositive provision of such will after October 9, 1969, 
and before October 9, 1972, by codicil or otherwise, and who is under a 
mental disability at all times after October 8, 1972, to amend such 
will, by codicil or otherwise. The provisions of subparagraph (3)(ii) of 
this paragraph with respect to mental incompetence apply for purposes of 
this subdivision.
    (iv) Amendment of dispositive provisions. The provisions of 
paragraph (e) (4) and (5) of Sec. 20.2055-2 of this chapter (Estate Tax 
Regulations) are to be applied under subdivisions (i) and (iii) of this 
subparagraph in determining whether there has been an amendment of a 
dispositive provision of a will.

[[Page 24]]

    (c) Pooled income funds. Any part of the gross income of a pooled 
income fund to which Sec. 1.642(c)-5 applies for the taxable year that 
is attributable to net long-term capital gain (as defined in section 
1222(7)) which, pursuant to the terms of the governing instrument, is 
permanently set aside during the taxable year for a purpose specified in 
section 170(c) shall be allowed as a deduction to the fund in lieu of 
the limited charitable contributions deduction authorized by section 
170(a). No deduction shall be allowed under this paragraph for any 
portion of the gross income of such fund which is (1) attributable to 
income other than net long-term capital gain (2) earned with respect to 
amounts transferred to such fund before August 1, 1969. However, see 
paragraph (b) of this section for a deduction (subject to the 
limitations of such paragraph) for amounts permanently set aside by a 
pooled income fund which meets the requirements of that paragraph. The 
principles of paragraph (b) or (2) of this section with respect to 
investment, reinvestment, and separate accounting shall apply under this 
paragraph in the case of amounts transferred to the fund after July 31, 
1969.
    (d) Disallowance of deduction for certain amounts not deemed to be 
permanently set aside for charitable purposes. No amount will be 
considered to be permanently set aside, or to be used, for a purpose 
described in paragraph (a) or (b)(1) of this section unless under the 
terms of the governing instrument and the circumstances of the 
particular case the possibility that the amount set aside, or to be 
used, will not be devoted to such purpose or use is so remote as to be 
negligible. Thus, for example, where there is possibility of the 
invasion of the corpus of a charitable remainder trust, as defined in 
Sec. 1.664-1(a)(1)(ii), in order to make payment of the annuity amount 
or unitrust amount, no deduction will be allowed under paragraph (a) of 
this section in respect of any amount set aside by an estate for 
distribution to such a charitable remainder trust.

For treatment of distributions by an estate to a charitable remainder 
trust, see paragraph (a)(5)(iii) of Sec. 1.664-1.

[T.D. 7357, 40 FR 23740, June 2, 1975; 40 FR 24361, June 6, 1975]



Sec. 1.642(c)-3  Adjustments and other special rules for determining unlimited charitable contributions deduction.

    (a) Income in respect of a decedent. For purposes of Secs. 1.642(c)-
1 and 1.642(c)-2, an amount received by an estate or trust which is 
includible in its gross income under section 691(a)(1) as income in 
respect of a decedent shall be included in the gross income of the 
estate or trust.
    (b) Reduction of charitable contributions deduction by amounts not 
included in gross income. (1) If an estate, pooled income fund, or other 
trust pays, permanently sets aside, or uses any amount of its income for 
a purpose specified in section 642(c) (1), (2) or (3) and that amount 
includes any items of estate or trust income not entering into the gross 
income of the estate or trust, the deduction allowable under 
Sec. 1.642(c)-1 or Sec. 1.642(c)-2 is limited to the gross income so 
paid, permanently set aside, or used. In the case of a pooled income 
fund for which a deduction is allowable under paragraph (c) of 
Sec. 1.642(c)-2 for amounts permanently set aside, only the gross income 
of the fund which is attributable to net long-term capital gain (as 
defined in section 1222(7)) shall be taken into account.
    (2) In determining whether the amounts of income so paid, 
permanently set aside, or used for a purpose specified in section 642(c) 
(1), (2), or (3) include particular items of income of an estate or 
trust not included in gross income, the specific provision controls if 
the governing instrument specifically provides as to the source out of 
which amounts are to be paid, permanently set aside, or used for such a 
purpose.

In the absence of specific provisions in the governing instrument, an 
amount to which section 642(c) (1), (2) or (3) applies is deemed to 
consist of the same proportion of each class of the items of income of 
the estate or trust as the

[[Page 25]]

total of each class bears to the total of all classes. See paragraph (b) 
of Sec. 1.643(a)-5 for the method of determining the allocable portion 
of exempt income and foreign income.
    (3) For examples showing the determination of the character of an 
amount deductible under Sec. 1.642(c)-1 or Sec. 1.642(c)-2, see examples 
1 and 2 in Sec. 1.662(b)-2 and paragraph (e) of the example in 
Sec. 1.662(c)-4.
    (4) For the purpose of this paragraph, the provisions of section 116 
are not to be taken into account.
    (c) Capital gains included in charitable contribution. Where any 
amount of the income paid, permanently set aside, or used for a purpose 
specified in section 642(c) (1), (2), or (3), is attributable to net 
long-term capital gain (as defined in section 1222(7)), the amount of 
the deduction otherwise allowable under Sec. 1.642(c)-1 or 
Sec. 1.642(c)-2, must be adjusted for any deduction provided in section 
1202 of 50 percent of the excess, if any, of the net long-term capital 
gain over the net short-term capital loss. For determination of the 
extent to which the contribution to which Sec. 1.642(c)-1 or 
Sec. 1.642(c)-2 applies is deemed to consist of net long-term capital 
gains, see paragraph (b) of this section. The application of this 
paragraph may be illustrated by the following examples:

    Example 1. Under the terms of the trust instrument, the income of a 
trust described in Sec. 1.642(c)-2 (b)(3)(i) is currently distributable 
to A during his life and capital gains are allocable to corpus. No 
provision is made in the trust instrument for the invasion of corpus for 
the benefit of A. Upon A's death the corpus of the trust is to be 
distributed to M University, an organization described in section 
501(c)(3) which is exempt from taxation under section 501(a). During the 
taxable year ending December 31, 1970, the trust has long-term capital 
gains of $100,000 from property transferred to it on or before October 
9, 1969, which are permanently set aside for charitable purposes. The 
trust includes $100,000 in gross income but is allowed a deduction of 
$50,000 under section 1202 for the long-term capital gains and a 
charitable contributions deduction of $50,000 under section 642(c)(2) 
($100,000 permanently set aside for charitable purposes less $50,000 
allowed as a deduction under section 1202 with respect to such 
$100,000).
    Example 2. Under the terms of the will, $200,000 of the income 
(including $100,000 capital gains) for the taxable year 1972 of an 
estate is distributed, one-quarter to each of two individual 
beneficiaries and one-half to N University, an organization described in 
section 501(c)(3) which is exempt from taxation under section 501(a). 
During 1972 the estate has ordinary income of $200,000, long-term 
capital gains of $100,000, and no capital losses. It is assumed that for 
1972 the estate has no other items of income or any deductions other 
than those discussed herein. The entire capital gains of $100,000 are 
included in the gross income of the estate for 1972, and N University 
receives $100,000 from the estate in such year. However, the amount 
allowable to the estate under section 642(c)(1) is subject to 
appropriate adjustment for the deduction allowable under section 1202. 
In view of the distributions of $25,000 of capital gains to each of the 
individual beneficiaries, the deduction allowable to the estate under 
section 1202 is limited by such section to $25,000 [($100,000 capital 
gains less $50,000 capital gains includible in income of individual 
beneficiaries under section 662) x 50%]. Since the whole of this $25,000 
deduction under section 1202 is attributable to the distribution of 
$50,000 of capital gains to N University, the deduction allowable to the 
estate in 1972 under section 642(c)(1) is $75,000 [$100,000 (distributed 
to N) less $25,000 (proper adjustment for section 1202 deduction)].
    Example 3. Under the terms of the trust instrument, 30 percent of 
the gross income (exclusive of capital gains) of a trust described in 
Sec. 1.642(c)-2(b)(3)(i) is currently distributed to B, the sole income 
beneficiary. Net capital gains (capital gain net income for taxable 
years beginning after December 31, 1976) and undistributed ordinary 
income are allocable to corpus. No provision is made in the trust 
instrument for the invasion of corpus for the benefit of B. Upon B's 
death the remainder of the trust is to be distributed to M Church. 
During the taxable year 1972, the trust has ordinary income of $100,000, 
long-term capital gains of $15,000, short-term capital gains of $1,000, 
long-term capital losses of $5,000, and short-term capital losses of 
$2,500. It is assumed that the trust has no other items of income or any 
deductions other than those discussed herein. All the ordinary income 
and capital gains and losses are attributable to amounts transferred to 
the trust before October 9, 1969. The trust includes in gross income for 
1972 the total amount of $116,000 [$100,000 (ordinary income)+$16,000 
(total capital gains determined without regard to capital losses)]. 
Pursuant to the terms of the governing instrument the trust distributes 
to B in 1972 the amount of $30,000 ($100,000x30%). The balance of 
$78,500 [($116,000 less $7,500 capital losses) -030,000 distribution] is 
available for the set-aside for charitable purposes. In determining 
taxable income for 1972 the capital losses of $7,500 ($5,000+$2,500) are 
allowable in full under section 1211(b)(1). The net capital gain 
(capital

[[Page 26]]

gain net income for taxable years beginning after December 31, 1976) of 
$8,500 ($16,000 less $7,500) is the excess of the net long-term capital 
gain of $10,000 ($15,000 less $5,000) over the net short-term capital 
loss of $1,500 ($2,500 less $1,000). The deduction under section 1202 is 
$4,250 ($8,500x50%), all of which is attributable to the set-aside for 
charitable purposes. Accordingly, for 1972 the deduction allowable to 
the trust under section 642(c)(2) is $74,250 [$78,500 (set-aside for M) 
less $4,250 (proper adjustment for section 1202 deduction)].
    Example 4. During the taxable year a pooled income fund, as defined 
in Sec. 1.642(c)-5, has in addition to ordinary income long-term capital 
gains of $150,000, short-term capital gains of $15,000, long-term 
capital losses of $100,000, and short-term capital losses of $10,000. 
Under the Declaration of Trust and pursuant to State law net long-term 
capital gain is allocable to corpus and net short-term capital gain is 
to be distributed to the income beneficiaries of the fund. All the 
capital gains and losses are attributable to amounts transferred to the 
fund after July 31, 1969. In view of the distribution of the net short-
term capital gain of $5,000 ($15,000 less $10,000) to the income 
beneficiaries, the deduction allowed to the fund under section 1202 is 
limited by such section to $25,000 [($150,000 (long-term capital gains) 
less $100,000 (long-term capital losses))x50%]. Since the whole of this 
deduction under section 1202 is attributable to the set-aside for 
charitable purposes, the deduction of $50,000 ($150,000 less $100,000) 
otherwise allowable under section 642(c)(3) is subject to appropriate 
adjustment under section 642(c)(4) for the deduction allowable under 
section 1202. Accordingly, the amount of the set-aside deduction is 
$25,000 [$50,000 (set-aside for public charity) less $25,000 (proper 
adjustment for section 1202 deduction)].
    Example 5. The facts are the same as in example 4 except that under 
the Declaration of Trust and pursuant to State law all the net capital 
gain (capital gain net income for taxable years beginning after December 
31, 1976) for the taxable year is allocable to corpus of the fund. The 
fund would thus include in gross income total capital gains of $165,000 
($150,000+$15,000). In determining taxable income for the taxable year 
the capital losses of $110,000 ($100,000+$10,000) are allowable in full 
under section 1211(b)(1). The net capital gain of $55,000 ($165,000 less 
$110,000) is available for the set-aside for charitable purposes under 
section 642(c)(3) only in the amount of the net long-term capital gain 
of $50,000 ($150,000 long-term gains less $100,000 long-term losses). 
The deduction under section 1202 is $25,000 ($50,000x50%), all of which 
is attributable to the set-aside for charitable purposes. Accordingly, 
the deduction allowable to the fund under section 642(c)(3) is $25,000 
[$50,000 (set-aside for public charity) less $25,000 (proper adjustment 
for section 1202 deduction)]. The $5,000 balance of net capital gain 
(capital gain net income for taxable years beginning after December 31, 
1976) is taken into account in determining taxable income of the pooled 
income fund for the taxable year.

    (d) Disallowance of deduction for amounts allocable to unrelated 
business income. In the case of a trust, the deduction otherwise 
allowable under Sec. 1.642(c)-1 or Sec. 1.642(c)-2 is disallowed to the 
extent of amounts allocable to the trust's unrelated business income. 
See section 681(a) and the regulations thereunder.
    (e) Disallowance of deduction in certain cases. For disallowance of 
certain deductions otherwise allowable under section 642(c) (1), (2), or 
(3), see sections 508(d) and 4948(c)(4).
    (f) Information returns. For rules applicable to the annual 
information return that must be filed by trusts claiming a deduction 
under section 642(c) for the taxable year, see section 6034 and the 
regulations thereunder.

[T.D. 7357, 40 FR 23741, June 2, 1975; 40 FR 24361, June 6, 1975, as 
amended by T.D. 7728, 45 FR 72650, Nov. 3, 1980]



Sec. 1.642(c)-4  Nonexempt private foundations.

    In the case of a trust which is, or is treated under section 
4947(a)(1) as though it were, a private foundation (as defined in 
section 509(a) and the regulations thereunder) that is not exempt from 
taxation under section 501(a) for the taxable year, a deduction for 
amounts paid or permanently set aside, or used for a purpose specified 
in section 642(c) (1), or (2) shall not be allowed under Sec. 1.642(c)-1 
or Sec. 1.642(c)-2, but such trust shall, subject to the provisions 
applicable to individuals, be allowed a deduction under section 170 for 
charitable contributions paid during the taxable year. Section 642(c)(6) 
and this section do not apply to a trust described in section 4947(a)(1) 
unless such trust fails to meet the requirements of section 508(e). 
However, if on October 9, 1969, or at any time thereafter, a trust is 
recognized as being exempt from taxation under section 501(a) as an 
organization described in section 501(c)(3), if at such time such trust 
is a private

[[Page 27]]

foundation, and if at any time thereafter such trust is determined not 
to be exempt from taxation under section 501(a) as an organization 
described in section 501(c)(3), section 642(c)(6) and this section will 
apply to such trust. See Sec. 1.509 (b)-1 (b).

[T.D. 7357, 40 FR 23742, June 2, 1975; 40 FR 24362, June 6, 1975]



Sec. 1.642(c)-5  Definition of pooled income fund.

    (a) In general--(1) Application of provisions. Section 642(c)(5) 
prescribes certain rules for the valuation of contributions involving 
transfers to certain funds described in that section as pooled income 
funds. This section sets forth the requirements for qualifying as a 
pooled income fund and provides for the manner of allocating the income 
of the fund to the beneficiaries. Section 1.642(c)-6 provides for the 
valuation of a remainder interest in property transferred to a pooled 
income fund. Section 1.642(c)-7 provides transitional rules under which 
certain funds may be amended so as to qualify as pooled income funds in 
respect to transfers of property occurring after July 31, 1969.
    (2) Tax status of fund and its beneficiaries. Notwithstanding any 
other provision of this chapter, a fund which meets the requirements of 
a pooled income fund, as defined in section 642(c)(5) and paragraph (b) 
of this section, shall not be treated as an association within the 
meaning of section 7701(a)(3). Such a fund, which need not be a trust 
under local law, and its beneficiaries shall be taxable under part I, 
subchapter J, chapter 1 of the Code, but the provisions of subpart E 
(relating to grantors and others treated as substantial owners) of such 
part shall not apply to such fund.
    (3) Recognition of gain or loss on transfer to fund. No gain or loss 
shall be recognized to the donor on the transfer of property to a pooled 
income fund. In such case, the fund's basis and holding period with 
respect to property transferred to the fund by a donor shall be 
determined as provided in sections 1015(b) and 1223(2). If, however, a 
donor transfers property to a pooled income fund and, in addition to 
creating or retaining a life income interest therein, receives property 
from the fund, or transfers property to the fund which is subject to an 
indebtedness, this subparagraph shall not apply to the gain realized by 
reason of (i) the receipt of such property or (ii) the amount of such 
indebtedness, whether or not assumed by the pooled income fund, which is 
required to be treated as an amount realized on the transfer. For 
applicability of the bargain sale rules, see section 1011(b) and the 
regulations thereunder.
    (4) Charitable contributions deduction. A charitable contributions 
deduction for the value of the remainder interest, as determined under 
Sec. 1.642(c)-6, may be allowed under section 170, 2055, 2106, or 2522, 
where there is a transfer of property to a pooled income fund. For a 
special rule relating to the reduction of the amount of a charitable 
contribution of certain ordinary income property or capital gain 
property, see section 170(e)(1) (A) or (B)(i) and the regulations 
thereunder.
    (5) Definitions. For purposes of this section, Secs. 1.642(c)-6 and 
1.642(c)-7:
    (i) The term income has the same meaning as it does under section 
643(b) and the regulations thereunder.
    (ii) The term donor includes a decedent who makes a testamentary 
transfer of property to a pooled income fund.
    (iii) The term governing instrument means either the governing plan 
under which the pooled income fund is established and administered or 
the instrument of transfer, as the context requires.
    (iv) The term public charity means an organization described in 
clause (i) to (vi) of section 170(b)(1)(A). If an organization is 
described in clause (i) to (vi) of section 170(b)(1)(A) and is also 
described in clause (viii) of such section, it shall be treated as a 
public charity.
    (v) The term fair market value, when used with respect to property, 
means its value in excess of the indebtedness or charges against such 
property.
    (vi) The term determination date means each day within the taxable 
year of a pooled income fund on which a valuation is made of the 
property in the fund. The property in the fund shall be valued on the 
first day of the taxable year of the fund and on at least 3 other days 
within the taxable year.

[[Page 28]]

The period between any two consecutive determination dates within the 
taxable year shall not be greater than 3 calendar months. In the case of 
a taxable year of less than 12 months, the property in the fund shall be 
valued on the first day of such taxable year and on such other days 
within such year as occur at successive intervals of no greater than 3 
calendar months. Where a valuation date falls on a Saturday, Sunday, or 
legal holiday (as defined in section 7503 and the regulations 
thereunder), the valuation may be made on either the next preceding day 
which is not a Saturday, Sunday, or legal holiday or the next succeeding 
day which is not a Saturday, Sunday, or legal holiday, so long as the 
next such preceding day or next such succeeding day is consistently used 
where the valuation date falls on a Saturday, Sunday, or legal holiday.
    (6) Cross references. (i) See section 4947(a)(2) and section 
4947(b)(3)(B) for the application to pooled income funds of the 
provisions relating to private foundations and section 508(e) for rules 
relating to provisions required in the governing instrument prohibiting 
certain activities specified in section 4947(a)(2).
    (ii) For rules for postponing the time for deduction of a charitable 
contribution of a future interest in tangible personal property, see 
section 170(a)(3) and the regulations thereunder.
    (b) Requirements for qualification as a pooled income fund. A pooled 
income fund to which this section applies must satisfy all of the 
following requirements:
    (1) Contribution of remainder interest to charity. Each donor must 
transfer property to the fund and contribute an irrevocable remainder 
interest in such property to or for the use of a public charity, 
retaining for himself, or creating for another beneficiary or 
beneficiaries, a life income interest in the transferred property. A 
contingent remainder interest shall not be treated as an irrevocable 
remainder interest for purposes of this subparagraph.
    (2) Creation of life income interest. Each donor must retain for 
himself for life an income interest in the property transferred to such 
fund, or create an income interest in such property for the life of one 
or more beneficiaries, each of whom must be living at the time of the 
transfer of the property to the fund by the donor. The term one or more 
beneficiaries includes those members of a named class who are alive and 
can be ascertained at the time of the transfer of the property to the 
fund. In the event more than one beneficiary of the income interest is 
designated, such beneficiaries may enjoy their shares of income 
concurrently, consecutively, or both concurrently and consecutively. The 
donor may retain the power exercisable only by will to revoke or 
terminate the income interest of any designated beneficiary other than 
the public charity. The governing instrument must specify at the time of 
the transfer the particular beneficiary or beneficiaries to whom the 
income is payable and the share of income distributable to each person 
so specified. The public charity to or for the use of which the 
remainder interest is contributed may also be designated as one of the 
beneficiaries of an income interest. The donor need not retain or create 
a life interest in all the income from the property transferred to the 
fund provided any income not payable under the terms of the governing 
instrument to an income beneficiary is contributed to, and within the 
taxable year in which it is received is paid to, the same public charity 
to or for the use of which the remainder interest is contributed. No 
charitable contributions deduction shall be allowed to the donor for the 
value of such income interest of the public charity or for the amount of 
any such income paid to such organization.
    (3) Commingling of property required. The property transferred to 
the fund by each donor must be commingled with, and invested or 
reinvested with, other property transferred to the fund by other donors 
satisfying the requirements of subparagraphs (1) and (2) of this 
paragraph. The governing instrument of the pooled income fund must 
contain a provision requiring compliance with the preceding sentence. 
The public charity to or for the use of which the remainder interest is 
contributed may maintain more than one pooled income fund, provided that 
each

[[Page 29]]

such fund is maintained by the organization and is not a device to 
permit a group of donors to create a fund which may be subject to their 
manipulation. The fund must not include property transferred under 
arrangements other than those specified in section 642(c)(5) and this 
paragraph. However, a fund shall not be disqualified as a pooled income 
fund under this paragraph because any portion of its properties is 
invested or reinvested jointly with other properties, not a part of the 
pooled income fund, which are held by, or for the use of, the public 
charity which maintains the fund, as for example, with securities in the 
general endowment fund of the public charity to or for the use of which 
the remainder interest is contributed. Where such joint investment or 
reinvestment of properties occurs, records must be maintained which 
sufficiently identify the portion of the total fund which is owned by 
the pooled income fund and the income earned by, and attributable to, 
such portion. Such a joint investment or reinvestment of properties 
shall not be treated as an association or partnership for purposes of 
the Code. A bank which serves as trustee of more than one pooled income 
fund may maintain a common trust fund to which section 584 applies for 
the collective investment and reinvestment of moneys of such funds.
    (4) Prohibition against exempt securities. The property transferred 
to the fund by any donor must not include any securities, the income 
from which is exempt from tax under subtitle A of the Code, and the fund 
must not invest in such securities. The governing instrument of the fund 
must contain specific prohibitions against accepting or investing in 
such securities.
    (5) Maintenance by charitable organization required. The fund must 
be maintained by the same public charity to or for the use of which the 
irrevocable remainder interest is contributed. The requirement of 
maintenance will be satisfied where the public charity exercises control 
directly or indirectly over the fund. For example, this requirement of 
control shall ordinarily be met when the public charity has the power to 
remove the trustee or trustees of the fund and designate a new trustee 
or trustees. A national organization which carries out its purposes 
through local organizations, chapters, or auxiliary bodies with which it 
has an identity of aims and purposes may maintain a pooled income fund 
(otherwise satisfying the requirements of this paragraph) in which one 
or more local organizations, chapters, or auxiliary bodies which are 
public charities have been named as recipients of the remainder 
interests. For example, a national church body may maintain a pooled 
income fund where donors have transferred property to such fund and 
contributed an irrevocable remainder interest therein to or for the use 
of various local churches or educational institutions of such body. The 
fact that such local organizations or chapters have been separately 
incorporated from the national organization is immaterial.
    (6) Prohibition against donor or beneficiary serving as trustee. The 
fund must not have, and the governing instrument must prohibit the fund 
from having, as a trustee a donor to the fund or a beneficiary (other 
than the public charity to or for the use of which the remainder 
interest is contributed) of an income interest in any property 
transferred to such fund. Thus, if a donor or beneficiary (other than 
such public charity) directly or indirectly has general responsibilities 
with respect to the fund which are ordinarily exercised by a trustee, 
such fund does not meet the requirements of section 642(c)(5) and this 
paragraph. The fact that a donor of property to the fund, or a 
beneficiary of the fund, is a trustee, officer, director, or other 
official of the public charity to or for the use of which the remainder 
interest is contributed ordinarily will not prevent the fund from 
meeting the requirements of section 642(c)(5) and this paragraph.
    (7) Income of beneficiary to be based on rate of return of fund. 
Each beneficiary entitled to income of any taxable year of the fund must 
receive such income in an amount determined by the rate of return earned 
by the fund for such taxable year with respect to his income interest, 
computed as provided in paragraph (c) of this section. The governing 
instrument of the fund shall direct the trustee to distribute income 
currently

[[Page 30]]

or within the first 65 days following the close of the taxable year in 
which the income is earned. Any such payment made after the close of the 
taxable year shall be treated as paid on the last day of the taxable 
year. A statement shall be attached to the return of the pooled income 
fund indicating the date and amount of such payments after the close of 
the taxable year. Subject to the provisions of part I, subchapter J, 
chapter 1 of the Code, the beneficiary shall include in his gross income 
all amounts properly paid, credited, or required to be distributed to 
the beneficiary during the taxable year or years of the fund ending 
within or with his taxable year. The governing instrument shall provide 
that the income interest of any designated beneficiary shall either 
terminate with the last regular payment which was made before the death 
of the beneficiary or be prorated to the date of his death.
    (8) Termination of life income interest. Upon the termination of the 
income interest retained or created by any donor, the trustee shall 
sever from the fund an amount equal to the value of the remainder 
interest in the property upon which the income interest is based. The 
value of the remainder interest for such purpose may be either (i) its 
value as of the determination date next succeeding the termination of 
the income interest or (ii) its value as of the date on which the last 
regular payment was made before the death of the beneficiary if the 
income interest is terminated on such payment date. The amount so 
severed from the fund must either be paid to, or retained for the use 
of, the designated public charity, as provided in the governing 
instrument. However, see subparagraph (3) of this paragraph for rules 
relating to commingling of property.
    (c) Allocation of income to beneficiary--(1) In general. Every 
income interest retained or created in property transferred to a pooled 
income fund shall be assigned a proportionate share of the annual income 
earned by the fund, such share, or unit of participation, being based on 
the fair market value of such property on the date of transfer, as 
provided in this paragraph.
    (2) Units of participation--(i) Unit plan. (a) On each transfer of 
property by a donor to a pooled income fund, one or more units of 
participation in the fund shall be assigned to the beneficiary or 
beneficiaries of the income interest retained or created in such 
property, the number of units of participation being equal to the number 
obtained by dividing the fair market value of the property by the fair 
market value of a unit in the fund at the time of the transfer.
    (b) The fair market value of a unit in the fund at the time of the 
transfer shall be determined by dividing the fair market value of all 
property in the fund at such time by the number of units then in the 
fund. The initial fair market value of a unit in a pooled income fund 
shall be the fair market value of the property transferred to the fund 
divided by the number of units assigned to the income interest in that 
property. The value of each unit of participation will fluctuate with 
each new transfer of property to the fund in relation to the 
appreciation or depreciation in the fair market value of the property in 
the fund, but all units in the fund will always have equal value.
    (c) The share of income allocated to to each unit of participation 
shall be determined by dividing the income of the fund for the taxable 
year by the outstanding number of units in the fund at the end of such 
year, except that, consistently with paragraph (b)(7) of this section, 
income shall be allocated to units outstanding during only part of such 
year by taking into consideration the period of time such units are 
outstanding. For this purpose the actual income of such part of the 
taxable year, or a prorated portion of the annual income, may be used, 
after making such adjustments as are reasonably necessary to reflect 
fluctuations during the year in the fair market value of the property in 
the fund.
    (ii) Other plans. The governing instrument of the fund may provide 
any other reasonable method not described in subdivision (i) of this 
subparagraph for assigning units of participation in the fund and 
allocating income to such units which reaches a result reasonably 
consistent with the provisions of such subdivision.
    (iii) Transfers between determination dates. For purposes of 
subdivisions (i)

[[Page 31]]

and (ii) of this subparagraph, if a transfer of property to the fund by 
a donor occurs on other than a determination date, the number of units 
of participation assigned to the income interest in such property may be 
determined by using the fair market value of the property in the fund on 
the determination date immediately preceding the date of transfer 
(determined without regard to the property so transferred), subject, 
however, to appropriate adjustments on the next succeeding determination 
date. Such adjustments may be made by any reasonable method, including 
the use of a method whereby the fair market value of the property in the 
fund at the time of the transfer is deemed to be the average of the fair 
market values of the property in the fund on the determination dates 
immediately preceding and succeeding the date of transfer. For purposes 
of determining such average any property transferred to the fund between 
such preceding and succeeding dates, or on such succeeding date, shall 
be excluded. The application of this subdivision may be illustrated by 
the following example:

    Example. The determination dates of a pooled income fund are the 
first day of each calendar month. On April 1, 1971, the fair market 
value of the property in the fund is $100,000, at which time 1,000 units 
of participation are outstanding with a value of $100 each. On April 15, 
1971, B transfers property with a fair market value of $50,000 to the 
fund, retaining for himself for life an income interest in such 
property. No other property is transferred to the fund after April 1, 
1971. On May 1, 1971, the fair market value of the property in the fund, 
including the property transferred by B, is $160,000. The average of the 
fair market values of the property in the fund (excluding the property 
transferred by B) on April 1 and May 1, 1971, is $105,000 ($100,000+ 
[$160,000-$50,000]/2). Accordingly, the fair market value of a unit of 
participation in the fund on April 15, 1971, at the time of B's transfer 
may be deemed to be $105 ($105,000/1,000 units), and B is assigned 
476.19 units of participation in the fund ($50,000/$105).

    (3) Special rule for partial allocation of income to charity. 
Notwithstanding subparagraph (2) of this paragraph, the governing 
instrument may provide that a unit of participation is entitled to share 
in the income of the fund in a lesser amount than would otherwise be 
determined under such subparagraph, provided that the income otherwise 
allocable to the unit under such subparagraph is paid within the taxable 
year in which it is received to the public charity to or for the use of 
which the remainder interest is contributed under the governing 
instrument.
    (4) Illustrations. The application of this paragraph may be 
illustrated by the following examples:

    Example 1. On July 1, 1970, A and B transfer separate properties 
with a fair market value of $20,000 and $10,000, respectively, to a 
newly created pooled income fund which is maintained by Y University and 
uses as its taxable year the fiscal year ending June 30. A and B each 
retain in themselves for life an income interest in such property, the 
remainder interest being contributed to Y University. The pooled income 
fund assigns an initial value of $100 to each unit of participation in 
the fund, and under the governing instruments A receives 200 units, and 
B receives 100 units, in the fund. On October 1, 1970, which is a 
determination date, C transfers property to the fund with a fair market 
value of $12,000, retaining in himself for life an income interest in 
such property and contributing the remainder interest to Y University. 
The fair market value of the property in the fund at the time of C's 
transfer is $36,000. The fair market value of A's and B's units at the 
time of such transfer is $120 each ($36,000/300). By reason of his 
transfer of property C is assigned 100 units of participation in the 
fund ($12,000/$120).
    Example 2. Assume that the pooled income fund in example 1 earns 
$2,600 for its taxable year ending June 30, 1971, and there are no 
further contributions of property to the fund in such year. Further 
assume $300 is earned in the first quarter ending September 30, 1970. 
Therefore, the fund earns $1 per unit for the first quarter ($300 
divided by 300 units outstanding) and $5.75 per unit for the remainder 
of the taxable year ( [$2,600-$300] divided by 400 units outstanding). 
If the fund distributes its income for the year based on its actual 
earnings per quarter, the income must be distributed as follows:

 
               Beneficiary                        Share of income
 
A........................................  $1,350 ( [200x$1]+[200x$5.75]
                                            ).
B........................................  $675 ( [100x$1]+[100x$5.75]
                                            ).
C........................................  $575 (100x$5.75).
 

    Example 3. (a) On July 1, 1970, A and B transfer separate properties 
with a fair market value of $10,000 and $20,000, respectively, to a 
newly created pooled income fund which is maintained by X University and 
uses as its taxable year the fiscal year ending June 30. A and B each 
retain in themselves an income

[[Page 32]]

interest for life in such property, the remainder interest being 
contributed to X University. The governing instrument provides that each 
unit of participation in the fund shall have a value of not more than 
its initial fair market value; the instrument also provides that the 
income allocable to appreciation in the fair market value of such unit 
(to the extent in excess of its initial fair market value) at the end of 
each quarter of the fiscal year is to be distributed currently to X 
University. On October 1, 1970, which is a determination date, C 
contributes to the fund property with a fair market value of $60,000 and 
retains in himself an income interest for life in such property, the 
remainder interest being contributed to X University. The initial fair 
market value of the units assigned to A, B, and C is $100. A, B, and C's 
units of participation are as follows:

 
               Beneficiary                     Units of participation
 
A........................................  100 ($10,000 divided by
                                            $100).
B........................................  200 ($20,000 divided by
                                            $100).
C........................................  100 ($10,000 divided by
                                            $100).
 

    (b) The fair market value of the property in the fund at the time of 
C's contribution is $40,000. Assuming the fair market value of the 
property in the fund is $100,000 on December 31, 1970, and that the 
income of the fund for the second quarter ending December 31, 1970, is 
$2,000, the income is shared by the income beneficiaries and X 
University as follows:

 
               Beneficiary                      Allocation of income
 
A, B, and C..............................  90% ($90,000 divided by
                                            $100,000).
X University.............................  10% ($10,000 divided by
                                            $100,000).
 

    (c) For the quarter ending December 31, 1970, each unit of 
participation is allocated $2 (90 percentx$2,000 divided by 900) of the 
income earned for that quarter. A, B, C, and X University share in the 
income as follows:

 
               Beneficiary                        Share of income
 
A........................................  $200 (100x$2).
B........................................  $400 (200x$2).
C........................................  $1,200 (600x$2).
X University.............................  $200 (10%x$2,000).
 


[T.D. 7105, 36 FR 6477, Apr. 6, 1971; 36 FR 7004, Apr. 13, 1971, as 
amended by T.D. 7125, 36 FR 11032, June 8, 1971; T.D. 7357, 40 FR 23742, 
June 2, 1975; T.D. 7633, 44 FR 57925, Oct. 9, 1979]



Sec. 1.642(c)-6  Valuation of a remainder interest in property transferred to a pooled income fund.

    (a) In general. (1) For purposes of sections 170, 2055, 2106, and 
2522, the fair market value of a remainder interest in property 
transferred to a pooled income fund is its present value determined 
under paragraph (d) of this section.
    (2) The present value of a remainder interest at the time of the 
transfer of property to the pooled income fund is determined by 
computing the present value (at the time of the transfer) of the life 
income interest and subtracting that value from the fair market value of 
the transferred property on the valuation date. The fact that the income 
beneficiary may not receive the last income payment, as provided in 
paragraph (b)(7) of Sec. 1.642(c)-5, is not taken into account for 
purposes of determining the value of the life income interest. For 
purposes of this section, the valuation date is the date on which 
property is transferred to the fund by the donor except that, for 
purposes of section 2055 or 2106, it is the alternate valuation date, if 
elected, under the provisions and limitations set forth in section 2032 
and the regulations thereunder.
    (3) Any claim for a deduction on any return for the value of the 
remainder interest in property transferred to a pooled income fund must 
be supported by a statement attached to the return showing the 
computation of the present value of the interest.
    (b) Actuarial computations by the Internal Revenue Service. The 
regulations in this and in related sections provide tables of actuarial 
factors and examples that illustrate the use of the tables in 
determining the value of remainder interests in property. Section 
1.7520-1(c)(2) refers to government publications that provide additional 
tables of factors and examples of computations for more complex 
situations. If the computation requires the use of a factor that is not 
provided in this section, the Commissioner may supply the factor upon a 
request for a ruling. A request for a ruling must be accompanied by a 
recitation of the facts including the pooled income fund's highest 
yearly rate of return for the 3 taxable years immediately preceding the 
date of transfer, the date of birth of each measuring life, and copies 
of the relevant documents. A request for a ruling must comply with the 
instructions for requesting a ruling published periodically in the 
Internal Revenue Bulletin (see Secs. 601.201 and

[[Page 33]]

601.601(d)(2)(ii)(b) of this chapter) and include payment of the 
required user fee. If the Commissioner furnishes the factor, a copy of 
the letter supplying the factor should be attached to the tax return in 
which the deduction is claimed. If the Commissioner does not furnish the 
factor, the taxpayer must furnish a factor computed in accordance with 
the principles set forth in this section.
    (c) Computation of pooled income fund's yearly rate of return. (1) 
For purposes of determining the present value of the life income 
interest, the yearly rate of return earned by a pooled income fund for a 
taxable year is the percentage obtained by dividing the amount of income 
earned by the pooled income fund for the taxable year by an amount equal 
to--
    (i) The average fair market value of the property in such fund for 
that taxable year; less
    (ii) The corrective term adjustment.
    (2) The average fair market value of the property in a pooled income 
fund for a taxable year shall be the sum of the amounts of the fair 
market value of all property held by the pooled income fund on each 
determination date, as defined in paragraph (a)(5)(vi) of Sec. 1.642(c)-
5, of such taxable year divided by the number of determination dates in 
such taxable year. For such purposes the fair market value of property 
held by the fund shall be determined without including any income earned 
by the fund.
    (3)(i) The corrective term adjustment shall be the sum of the 
products obtained by multiplying each income payment made by the pooled 
income fund within its taxable year by the percentage set forth in 
column (2) of the following table opposite the period within such year, 
set forth in column (1), which includes the date on which that payment 
is made:

                                  Table
 
                                                       (2) Percentage of
                  (1) Payment period                        payment
 
Last week of 4th quarter.............................            0
Balance of 4th quarter...............................           25
Last week of 3d quarter..............................           25
Balance of 3d quarter................................           50
Last week of 2d quarter..............................           50
Balance of 2d quarter................................           75
Last week of 1st quarter.............................           75
Balance of 1st quarter...............................          100
 

    (ii) If the taxable year of the fund consists of less than 12 
months, the corrective term adjustment shall be the sum of the products 
obtained by multiplying each income payment made by the pooled income 
fund within such taxable year by the percentage obtained by subtracting 
from 1 a fraction the numerator of which is the number of days from the 
first day of such taxable year to the date of such income payment and 
the denominator of which is 365.
    (4) A pooled income fund's method of calculating its yearly rate of 
return must be supported by a full statement attached to the income tax 
return of the pooled income fund for each taxable year.
    (5) The application of this paragraph may be illustrated by the 
following examples:

    Example 1. (a) The pooled income fund maintained by W University has 
established determination dates on the first day of each calendar 
quarter. The pooled income fund is on a calendar-year basis. The pooled 
income fund earned $5,000 of income during 1971. The fair market value 
of its property (determined without including any income earned by the 
fund), and the income paid out, on the first day of each calendar 
quarter in 1971 are as follows:

------------------------------------------------------------------------
                                    Fair market value
               Date                    of property       Income payment
------------------------------------------------------------------------
Jan. 1............................   $100,000             $1,200
Apr. 1............................    105,000              1,200
July 1............................     95,000              1,200
Oct. 1............................    100,000              1,400
                                   -------------------------------------
                                      400,000              5,000
------------------------------------------------------------------------

    (b) The average fair market value of the property in the fund for 
1971 is $100,000 ($400,000, divided by 4).
    (c) The corrective term adjustment for 1971 is $3,050, determined by 
applying the percentages obtained in column (2) of the table in 
subparagraph (3) of this paragraph:

 
                   Multiplication:                          Product
 
  100%x$1,200........................................     $1,200
  75%x$1,200.........................................        900

[[Page 34]]

 
  50%x$1,200.........................................        600
  25%x$1,400.........................................        350
                                                      ------------------
    Sum of products..................................      3,050
 

    (d) The pooled income fund's yearly rate of return for 1971 is 5.157 
percent, determined as follows:

$5,000/$100,000-$3,050=0.05157
    Example 2. (a) The pooled income fund maintained by X University has 
established determination dates on the first day of each calendar 
quarter. The pooled income fund is on a calendar-year basis. The pooled 
income fund earned $5,000 of income during 1971 and paid out $3,000 on 
December 15, 1971, and $2,000 on January 15, 1972, the last amount being 
treated under paragraph (b)(7) of Sec. 1.642(c)-5 as paid on December 
31, 1971. The fair market value of its property (determined without 
including any income earned by the fund) on the determination dates in 
1971 and the income paid out during 1971 are as follows:

------------------------------------------------------------------------
                                    Fair market value
               Date                    of property       Income payment
------------------------------------------------------------------------
Jan. 1............................   $125,000          .................
Apr. 1............................    125,000          .................
July 1............................     75,000          .................
Oct. 1............................     75,000
Dec. 15...........................  .................     $3,000
Dec. 31...........................  .................      2,000
                                   -------------------------------------
                                      400,000              5,000
------------------------------------------------------------------------

    (b) The average fair market value of the property in the fund for 
1971 is $100,000 ($400,000 divided by 4).
    (c) The corrective term adjustment for 1971 is $750, determined by 
applying the percentages obtained in column (2) of the table in 
subparagraph (3) of this paragraph:

 
                                                            Product
 
Multiplication:
  0%x$2,000..........................................
  25%x$3,000.........................................       $750
                                                      ------------------
    Sum of products..................................        750
 

    (d) The pooled income fund's yearly rate of return for 1971 is 5.038 
percent, determined as follows:

$5,000/$100,000-$750=0.05038

    (d) Valuation. The present value of the remainder interest in 
property transferred to a pooled income fund after April 30, 1999, is 
determined under paragraph (e) of this section. The present value of the 
remainder interest in property transferred to a pooled income fund for 
which the valuation date is before May 1, 1999, is determined under the 
following sections:

------------------------------------------------------------------------
               Valuation Dates
----------------------------------------------  Applicable  regulations
              After                  Before
------------------------------------------------------------------------
                                     01-01-52  1.642(c)-6A(a)
12-31-51.........................    01-01-71  1.642(c)-6A(b)
12-31-70.........................    12-01-83  1.642(c)-6A(c)
11-30-83.........................    05-01-89  1.642(c)-6A(d)
04-30-89.........................    05-01-99  1.642(c)-6A(e)
------------------------------------------------------------------------

    (e) Present value of the remainder interest in the case of transfers 
to pooled income funds for which the valuation date is after April 30, 
1999--(1) In general. In the case of transfers to pooled income funds 
for which the valuation date is after April 30, 1999, the present value 
of a remainder interest is determined under this section. See, however, 
Sec. 1.7520-3(b) (relating to exceptions to the use of prescribed tables 
under certain circumstances). The present value of a remainder interest 
that is dependent on the termination of the life of one individual is 
computed by the use of Table S in paragraph (e)(6) of this section. For 
purposes of the computations under this section, the age of an 
individual is the age at the individual's nearest birthday.
    (2) Transitional rules for valuation of transfers to pooled income 
funds. (i) For purposes of sections 2055, 2106, or 2624, if on May 1, 
1999, the decedent was mentally incompetent so that the disposition of 
the property could not be changed, and the decedent died after April 30, 
1999, without having regained competency to dispose of the decedent's 
property, or the decedent died within 90 days of the date that the 
decedent first regained competency after April 30, 1999, the present 
value of a remainder interest is determined as if the valuation date 
with respect to the decedent's gross estate is either before May 1, 
1999, or after April 30, 1999, at the option of the decedent's executor.
    (ii) For purposes of sections 170, 2055, 2106, 2522, or 2624, in the 
case of transfers to a pooled income fund for which the valuation date 
is after April 30, 1999, and before July 1, 1999, the present value of 
the remainder interest under this section is determined by use of the 
section 7520 interest rate for the month in which the valuation date 
occurs (see Secs. 1.7520-1(b) and 1.7520-2(a)(2)) and the

[[Page 35]]

appropriate actuarial tables under either paragraph (e)(6) of this 
section or Sec. 1.642(c)-6A(e)(5), at the option of the donor or the 
decedent's executor, as the case may be.
    (iii) For purposes of paragraphs (e)(2)(i) and (ii) of this section, 
where the donor or decedent's executor is given the option to use the 
appropriate actuarial tables under either paragraph (e)(6) of this 
section or Sec. 1.642(c)-6A(e)(5), the donor or decedent's executor must 
use the same actuarial table with respect to each individual transaction 
and with respect to all transfers occurring on the valuation date (for 
example, gift and income tax charitable deductions with respect to the 
same transfer must be determined based on the same tables, and all 
assets includible in the gross estate and/or estate tax deductions 
claimed must be valued based on the same tables).
    (3) Present value of a remainder interest. The present value of a 
remainder interest in property transferred to a pooled income fund is 
computed on the basis of--
    (i) Life contingencies determined from the values of lx that are set 
forth in Table 90CM in Sec. 20.2031-7(d)(7) of this chapter (see 
Sec. 20.2031-7A of this chapter for certain prior periods); and
    (ii) Discount at a rate of interest, compounded annually, equal to 
the highest yearly rate of return of the pooled income fund for the 3 
taxable years immediately preceding its taxable year in which the 
transfer of property to the fund is made. For purposes of this paragraph 
(e), the yearly rate of return of a pooled income fund is determined as 
provided in paragraph (c) of this section unless the highest rate of 
return is deemed to be the rate described in paragraph (e)(4) of this 
section for funds in existence less than 3 taxable years. For purposes 
of this paragraph (e)(3)(ii), the first taxable year of a pooled income 
fund is considered a taxable year even though the taxable year consists 
of less than 12 months. However, appropriate adjustments must be made to 
annualize the rate of return earned by the fund for that period. Where 
it appears from the facts and circumstances that the highest yearly rate 
of return of the fund for the 3 taxable years immediately preceding the 
taxable year in which the transfer of property is made has been 
purposely manipulated to be substantially less than the rate of return 
that would otherwise be reasonably anticipated with the purpose of 
obtaining an excessive charitable deduction, that rate of return may not 
be used. In that case, the highest yearly rate of return of the fund is 
determined by treating the fund as a pooled income fund that has been in 
existence for less than 3 preceding taxable years.
    (4) Pooled income funds in existence less than 3 taxable years. If a 
pooled income fund has been in existence less than 3 taxable years 
immediately preceding the taxable year in which the transfer is made to 
the fund and the transfer to the fund is made after April 30, 1989, the 
highest rate of return is deemed to be the interest rate (rounded to the 
nearest two-tenths of one percent) that is 1 percent less than the 
highest annual average of the monthly section 7520 rates for the 3 
calendar years immediately preceding the calendar year in which the 
transfer to the pooled income fund is made. The deemed rate of return 
for transfers to new pooled income funds is recomputed each calendar 
year using the monthly section 7520 rates for the 3-year period 
immediately preceding the calendar year in which each transfer to the 
fund is made until the fund has been in existence for 3 taxable years 
and can compute its highest rate of return for the 3 taxable years 
immediately preceding the taxable year in which the transfer of property 
to the fund is made in accordance with the rules set forth in the first 
sentence of paragraph (e)(3)(ii) of this section.
    (5) Computation of value of remainder interest. The factor that is 
used in determining the present value of a remainder interest that is 
dependent on the termination of the life of one individual is the factor 
from Table S in paragraph (e)(6) of this section under the appropriate 
yearly rate of return opposite the number that corresponds to the age of 
the individual upon whose life the value of the remainder interest is 
based (see Sec. 1.642(c)-6A for certain prior periods). The tables in 
paragraph (e)(6) of this section include factors for yearly rates of 
return from 4.2 to 14

[[Page 36]]

percent. Many actuarial factors not contained in the tables in paragraph 
(e)(6) of this section are contained in Table S in Internal Revenue 
Service Publication 1457, ``Actuarial Values, Book Aleph,'' (7-1999). A 
copy of this publication is available for purchase from the 
Superintendent of Documents, United States Government Printing Office, 
Washington, DC 20402. For other situations, see paragraph (b) of this 
section. If the yearly rate of return is a percentage that is between 
the yearly rates of return for which factors are provided, a linear 
interpolation must be made. The present value of the remainder interest 
is determined by multiplying the fair market value of the property on 
the valuation date by the appropriate remainder factor. This paragraph 
(e)(5) may be illustrated by the following example:

    Example. A, who is 54 years and 8 months, transfers $100,000 to a 
pooled income fund, and retains a life income interest in the property. 
The highest yearly rate of return earned by the fund for its 3 preceding 
taxable years is 9.47 percent. In Table S, the remainder factor opposite 
55 years under 9.4 percent is .17449 and under 9.6 percent is .17001. 
The present value of the remainder interest is $17,292.00, computed as 
follows:

 
 
 
Factor at 9.4 percent for age 55..............................    .17449
Factor at 9.6 percent for age 55..............................    .17001
                                                               ---------
Difference....................................................    .00448
 


Interpolation adjustment:
[GRAPHIC] [TIFF OMITTED] TR12JN00.001


 
 
 
Factor at 9.4 percent for age 55..............................    .17449
Less: Interpolation adjustment................................    .00157
                                                               ---------
Interpolated factor...........................................    .17292
 

Present value of remainder interest:

($100,000x.17292) .......... $17,292.00

    (6) Actuarial tables. In the case of transfers for which the 
valuation date is after April 30, 1999, the present value of a remainder 
interest dependent on the termination of one life in the case of a 
transfer to a pooled income fund is determined by use of the following 
Table S:

     Table S--Based on Life Table 90CM Single Life Remainder Factors
                     Applicable After April 30, 1999
                             [Interest rate]
 
 


--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Age                                 4.2%     4.4%     4.6%     4.8%     5.0%     5.2%     5.4%     5.6%     5.8%     6.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.............................................................   .06752   .06130   .05586   .05109   .04691   .04322   .03998   .03711   .03458   .03233
1.............................................................   .06137   .05495   .04932   .04438   .04003   .03620   .03283   .02985   .02721   .02487
2.............................................................   .06325   .05667   .05088   .04580   .04132   .03737   .03388   .03079   .02806   .02563
3.............................................................   .06545   .05869   .05275   .04752   .04291   .03883   .03523   .03203   .02920   .02668
4.............................................................   .06784   .06092   .05482   .04944   .04469   .04048   .03676   .03346   .03052   .02791
5.............................................................   .07040   .06331   .05705   .05152   .04662   .04229   .03845   .03503   .03199   .02928
6.............................................................   .07310   .06583   .05941   .05372   .04869   .04422   .04025   .03672   .03357   .03076
7.............................................................   .07594   .06849   .06191   .05607   .05089   .04628   .04219   .03854   .03528   .03236
8.............................................................   .07891   .07129   .06453   .05853   .05321   .04846   .04424   .04046   .03709   .03407
9.............................................................   .08203   .07423   .06731   .06115   .05567   .05079   .04643   .04253   .03904   .03592
10............................................................   .08532   .07734   .07024   .06392   .05829   .05326   .04877   .04474   .04114   .03790
11............................................................   .08875   .08059   .07331   .06683   .06104   .05587   .05124   .04709   .04336   .04002
12............................................................   .09233   .08398   .07653   .06989   .06394   .05862   .05385   .04957   .04572   .04226
13............................................................   .09601   .08748   .07985   .07304   .06693   .06146   .05655   .05214   .04816   .04458
14............................................................   .09974   .09102   .08322   .07624   .06997   .06435   .05929   .05474   .05064   .04694
15............................................................   .10350   .09460   .08661   .07946   .07303   .06725   .06204   .05735   .05312   .04930
16............................................................   .10728   .09818   .09001   .08268   .07608   .07014   .06479   .05996   .05559   .05164
17............................................................   .11108   .10179   .09344   .08592   .07916   .07306   .06755   .06257   .05807   .05399
18............................................................   .11494   .10545   .09691   .08921   .08227   .07601   .07034   .06521   .06057   .05636
19............................................................   .11889   .10921   .10047   .09259   .08548   .07904   .07322   .06794   .06315   .05880
20............................................................   .12298   .11310   .10417   .09610   .08881   .08220   .07622   .07078   .06584   .06135
21............................................................   .12722   .11713   .10801   .09976   .09228   .08550   .07935   .07375   .06866   .06403
22............................................................   .13159   .12130   .11199   .10354   .09588   .08893   .08260   .07685   .07160   .06682
23............................................................   .13613   .12563   .11612   .10748   .09964   .09250   .08601   .08009   .07468   .06975
24............................................................   .14084   .13014   .12043   .11160   .10357   .09625   .08958   .08349   .07793   .07284
25............................................................   .14574   .13484   .12493   .11591   .10768   .10018   .09334   .08708   .08135   .07611
26............................................................   .15084   .13974   .12963   .12041   .11199   .10431   .09728   .09085   .08496   .07956
27............................................................   .15615   .14485   .13454   .12513   .11652   .10865   .10144   .09484   .08878   .08322

[[Page 37]]

 
28............................................................   .16166   .15016   .13965   .13004   .12124   .11319   .10580   .09901   .09279   .08706
29............................................................   .16737   .15567   .14497   .13516   .12617   .11792   .11035   .10339   .09699   .09109
30............................................................   .17328   .16138   .15048   .14047   .13129   .12286   .11510   .10796   .10138   .09532
31............................................................   .17938   .16728   .15618   .14599   .13661   .12799   .12004   .11272   .10597   .09974
32............................................................   .18568   .17339   .16210   .15171   .14214   .13333   .12520   .11769   .11076   .10435
33............................................................   .19220   .17972   .16824   .15766   .14790   .13889   .13058   .12289   .11578   .10920
34............................................................   .19894   .18627   .17460   .16383   .15388   .14468   .13618   .12831   .12102   .11426
35............................................................   .20592   .19307   .18121   .17025   .16011   .15073   .14204   .13399   .12652   .11958
36............................................................   .21312   .20010   .18805   .17691   .16658   .15701   .14814   .13990   .13225   .12514
37............................................................   .22057   .20737   .19514   .18382   .17331   .16356   .15450   .14608   .13825   .13096
38............................................................   .22827   .21490   .20251   .19100   .18031   .17038   .16113   .15253   .14452   .13705
39............................................................   .23623   .22270   .21013   .19845   .18759   .17747   .16805   .15927   .15108   .14344
40............................................................   .24446   .23078   .21805   .20620   .19516   .18487   .17527   .16631   .15795   .15013
41............................................................   .25298   .23915   .22626   .21425   .20305   .19259   .18282   .17368   .16514   .15715
42............................................................   .26178   .24782   .23478   .22262   .21125   .20062   .19069   .18138   .17267   .16450
43............................................................   .27087   .25678   .24360   .23129   .21977   .20898   .19888   .18941   .18053   .17220
44............................................................   .28025   .26603   .25273   .24027   .22860   .21766   .20740   .19777   .18873   .18023
45............................................................   .28987   .27555   .26212   .24953   .23772   .22664   .21622   .20644   .19724   .18858
46............................................................   .29976   .28533   .27179   .25908   .24714   .23591   .22536   .21542   .20606   .19725
47............................................................   .30987   .29535   .28171   .26889   .25682   .24546   .23476   .22468   .21518   .20621
48............................................................   .32023   .30563   .29190   .27897   .26678   .25530   .24447   .23425   .22460   .21549
49............................................................   .33082   .31615   .30234   .28931   .27702   .26543   .25447   .24412   .23434   .22509
50............................................................   .34166   .32694   .31306   .29995   .28756   .27586   .26479   .25432   .24441   .23502
51............................................................   .35274   .33798   .32404   .31085   .29838   .28658   .27541   .26482   .25479   .24528
52............................................................   .36402   .34924   .33525   .32200   .30946   .29757   .28630   .27561   .26547   .25584
53............................................................   .37550   .36070   .34668   .33339   .32078   .30882   .29746   .28667   .27643   .26669
54............................................................   .38717   .37237   .35833   .34500   .33234   .32031   .30888   .29801   .28766   .27782
55............................................................   .39903   .38424   .37019   .35683   .34413   .33205   .32056   .30961   .29918   .28925
56............................................................   .41108   .39631   .38227   .36890   .35617   .34405   .33250   .32149   .31099   .30097
57............................................................   .42330   .40857   .39455   .38118   .36844   .35629   .34469   .33363   .32306   .31297
58............................................................   .43566   .42098   .40699   .39364   .38089   .36873   .35710   .34600   .33538   .32522
59............................................................   .44811   .43351   .41956   .40623   .39350   .38133   .36968   .35855   .34789   .33768
60............................................................   .46066   .44613   .43224   .41896   .40624   .39408   .38243   .37127   .36058   .35033
61............................................................   .47330   .45887   .44505   .43182   .41914   .40699   .39535   .38418   .37347   .36318
62............................................................   .48608   .47175   .45802   .44485   .43223   .42011   .40848   .39732   .38660   .37629
63............................................................   .49898   .48478   .47115   .45807   .44550   .43343   .42184   .41069   .39997   .38966
64............................................................   .51200   .49793   .48442   .47143   .45895   .44694   .43539   .42427   .41357   .40326
65............................................................   .52512   .51121   .49782   .48495   .47255   .46062   .44912   .43805   .42738   .41709
66............................................................   .53835   .52461   .51137   .49862   .48634   .47449   .46307   .45206   .44143   .43118
67............................................................   .55174   .53818   .52511   .51250   .50034   .48860   .47727   .46633   .45576   .44556
68............................................................   .56524   .55188   .53899   .52654   .51452   .50291   .49168   .48083   .47034   .46020
69............................................................   .57882   .56568   .55299   .54071   .52885   .51737   .50627   .49552   .48513   .47506
70............................................................   .59242   .57951   .56703   .55495   .54325   .53193   .52096   .51034   .50004   .49007
71............................................................   .60598   .59332   .58106   .56918   .55767   .54651   .53569   .52520   .51503   .50516
72............................................................   .61948   .60707   .59504   .58338   .57206   .56108   .55043   .54009   .53004   .52029
73............................................................   .63287   .62073   .60895   .59751   .58640   .57561   .56513   .55495   .54505   .53543
74............................................................   .64621   .63435   .62282   .61162   .60073   .59015   .57985   .56984   .56009   .55061
75............................................................   .65953   .64796   .63671   .62575   .61510   .60473   .59463   .58480   .57523   .56591
76............................................................   .67287   .66160   .65063   .63995   .62954   .61940   .60952   .59989   .59050   .58135
77............................................................   .68622   .67526   .66459   .65419   .64404   .63415   .62450   .61509   .60590   .59694
78............................................................   .69954   .68892   .67856   .66845   .65858   .64895   .63955   .63036   .62140   .61264
79............................................................   .71278   .70250   .69246   .68265   .67308   .66372   .65457   .64563   .63690   .62836
80............................................................   .72581   .71588   .70618   .69668   .68740   .67833   .66945   .66077   .65227   .64396
81............................................................   .73857   .72899   .71962   .71045   .70147   .69268   .68408   .67566   .66741   .65933
82............................................................   .75101   .74178   .73274   .72389   .71522   .70672   .69840   .69024   .68225   .67441
83............................................................   .76311   .75423   .74553   .73700   .72864   .72044   .71240   .70451   .69678   .68919
84............................................................   .77497   .76645   .75809   .74988   .74183   .73393   .72618   .71857   .71110   .70377
85............................................................   .78665   .77848   .77047   .76260   .75487   .74728   .73982   .73250   .72530   .71823
86............................................................   .79805   .79025   .78258   .77504   .76764   .76036   .75320   .74617   .73925   .73245
87............................................................   .80904   .80159   .79427   .78706   .77998   .77301   .76615   .75940   .75277   .74624
88............................................................   .81962   .81251   .80552   .79865   .79188   .78521   .77865   .77220   .76584   .75958
89............................................................   .82978   .82302   .81636   .80980   .80335   .79699   .79072   .78455   .77847   .77248
90............................................................   .83952   .83309   .82676   .82052   .81437   .80831   .80234   .79645   .79064   .78492
91............................................................   .84870   .84260   .83658   .83064   .82479   .81902   .81332   .80771   .80217   .79671
92............................................................   .85716   .85136   .84563   .83998   .83441   .82891   .82348   .81812   .81283   .80761
93............................................................   .86494   .85942   .85396   .84858   .84326   .83801   .83283   .82771   .82266   .81767
94............................................................   .87216   .86690   .86170   .85657   .85149   .84648   .84153   .83664   .83181   .82704
95............................................................   .87898   .87397   .86902   .86412   .85928   .85450   .84977   .84510   .84049   .83592
96............................................................   .88537   .88060   .87587   .87121   .86659   .86203   .85751   .85305   .84864   .84427
97............................................................   .89127   .88672   .88221   .87775   .87335   .86898   .86467   .86040   .85618   .85200
98............................................................   .89680   .89245   .88815   .88389   .87968   .87551   .87138   .86730   .86326   .85926
99............................................................   .90217   .89803   .89393   .88987   .88585   .88187   .87793   .87402   .87016   .86633
100...........................................................   .90738   .90344   .89953   .89567   .89183   .88804   .88428   .88056   .87687   .87322
101...........................................................   .91250   .90876   .90504   .90137   .89772   .89412   .89054   .88699   .88348   .88000

[[Page 38]]

 
102...........................................................   .91751   .91396   .91045   .90696   .90350   .90007   .89668   .89331   .88997   .88666
103...........................................................   .92247   .91912   .91579   .91249   .90922   .90598   .90276   .89957   .89640   .89326
104...........................................................   .92775   .92460   .92148   .91839   .91532   .91227   .90924   .90624   .90326   .90031
105...........................................................   .93290   .92996   .92704   .92415   .92127   .91841   .91558   .91276   .90997   .90719
106...........................................................   .93948   .93680   .93415   .93151   .92889   .92628   .92370   .92113   .91857   .91604
107...........................................................   .94739   .94504   .94271   .94039   .93808   .93579   .93351   .93124   .92899   .92675
108...........................................................   .95950   .95767   .95585   .95404   .95224   .95045   .94867   .94689   .94512   .94336
109...........................................................   .97985   .97893   .97801   .97710   .97619   .97529   .97438   .97348   .97259   .97170


--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Age                                 6.2%     6.4%     6.6%     6.8%     7.0%     7.2%     7.4%     7.6%     7.8%     8.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.............................................................   .03034   .02857   .02700   .02559   .02433   .02321   .02220   .02129   .02047   .01973
1.............................................................   .02279   .02094   .01929   .01782   .01650   .01533   .01427   .01331   .01246   .01168
2.............................................................   .02347   .02155   .01983   .01829   .01692   .01569   .01458   .01358   .01268   .01187
3.............................................................   .02444   .02243   .02065   .01905   .01761   .01632   .01516   .01412   .01317   .01232
4.............................................................   .02558   .02349   .02163   .01996   .01846   .01712   .01590   .01481   .01382   .01292
5.............................................................   .02686   .02469   .02275   .02101   .01945   .01804   .01677   .01562   .01458   .01364
6.............................................................   .02825   .02600   .02398   .02217   .02053   .01906   .01773   .01653   .01544   .01445
7.............................................................   .02976   .02742   .02532   .02343   .02172   .02019   .01880   .01754   .01640   .01536
8.............................................................   .03137   .02894   .02675   .02479   .02301   .02140   .01995   .01864   .01744   .01635
9.............................................................   .03311   .03059   .02832   .02627   .02442   .02274   .02122   .01985   .01859   .01745
10............................................................   .03499   .03237   .03001   .02788   .02595   .02420   .02262   .02118   .01987   .01867
11............................................................   .03700   .03428   .03183   .02961   .02760   .02578   .02413   .02262   .02125   .02000
12............................................................   .03913   .03632   .03377   .03146   .02937   .02748   .02575   .02418   .02275   .02144
13............................................................   .04135   .03843   .03579   .03339   .03122   .02924   .02744   .02580   .02431   .02294
14............................................................   .04359   .04057   .03783   .03534   .03308   .03102   .02915   .02744   .02587   .02444
15............................................................   .04584   .04270   .03986   .03728   .03493   .03279   .03083   .02905   .02742   .02593
16............................................................   .04806   .04482   .04187   .03919   .03674   .03452   .03248   .03063   .02892   .02736
17............................................................   .05029   .04692   .04387   .04108   .03855   .03623   .03411   .03218   .03040   .02877
18............................................................   .05253   .04905   .04588   .04299   .04036   .03795   .03574   .03373   .03187   .03017
19............................................................   .05484   .05124   .04796   .04496   .04222   .03972   .03742   .03532   .03339   .03161
20............................................................   .05726   .05354   .05013   .04702   .04418   .04158   .03919   .03700   .03498   .03313
21............................................................   .05980   .05595   .05242   .04920   .04625   .04354   .04105   .03877   .03667   .03473
22............................................................   .06246   .05847   .05482   .05147   .04841   .04559   .04301   .04063   .03844   .03642
23............................................................   .06524   .06112   .05734   .05387   .05069   .04777   .04508   .04260   .04032   .03821
24............................................................   .06819   .06392   .06001   .05642   .05312   .05008   .04728   .04470   .04232   .04012
25............................................................   .07131   .06690   .06285   .05913   .05570   .05255   .04964   .04695   .04447   .04218
26............................................................   .07460   .07005   .06586   .06200   .05845   .05518   .05215   .04936   .04677   .04438
27............................................................   .07810   .07340   .06907   .06508   .06140   .05800   .05485   .05195   .04925   .04676
28............................................................   .08179   .07693   .07246   .06833   .06451   .06098   .05772   .05469   .05189   .04929
29............................................................   .08566   .08065   .07603   .07176   .06780   .06414   .06075   .05761   .05469   .05198
30............................................................   .08973   .08456   .07978   .07536   .07127   .06748   .06396   .06069   .05766   .05483
31............................................................   .09398   .08865   .08372   .07915   .07491   .07098   .06733   .06394   .06078   .05785
32............................................................   .09843   .09294   .08785   .08313   .07875   .07468   .07089   .06737   .06409   .06103
33............................................................   .10310   .09745   .09220   .08732   .08279   .07858   .07466   .07100   .06759   .06441
34............................................................   .10799   .10217   .09676   .09173   .08705   .08269   .07862   .07483   .07129   .06798
35............................................................   .11314   .10715   .10157   .09638   .09155   .08704   .08283   .07890   .07522   .07179
36............................................................   .11852   .11236   .10662   .10127   .09628   .09162   .08726   .08319   .07938   .07581
37............................................................   .12416   .11783   .11193   .10641   .10126   .09645   .09194   .08772   .08377   .08006
38............................................................   .13009   .12359   .11751   .11183   .10652   .10155   .09689   .09253   .08843   .08459
39............................................................   .13629   .12962   .12338   .11753   .11206   .10693   .10212   .09761   .09337   .08938
40............................................................   .14281   .13597   .12955   .12355   .11791   .11262   .10766   .10299   .09860   .09447
41............................................................   .14966   .14264   .13606   .12989   .12409   .11864   .11352   .10870   .10417   .09989
42............................................................   .15685   .14966   .14291   .13657   .13061   .12500   .11972   .11475   .11006   .10564
43............................................................   .16437   .15702   .15010   .14360   .13747   .13171   .12627   .12115   .11631   .11174
44............................................................   .17224   .16472   .15764   .15098   .14469   .13876   .13317   .12789   .12290   .11819
45............................................................   .18042   .17274   .16550   .15867   .15223   .14615   .14040   .13496   .12982   .12496
46............................................................   .18893   .18110   .17370   .16671   .16011   .15387   .14796   .14238   .13708   .13207
47............................................................   .19775   .18975   .18220   .17505   .16830   .16190   .15584   .15010   .14466   .13950
48............................................................   .20688   .19873   .19102   .18373   .17682   .17027   .16406   .15817   .15258   .14727
49............................................................   .21633   .20804   .20018   .19274   .18568   .17898   .17262   .16658   .16084   .15539
50............................................................   .22612   .21769   .20969   .20210   .19490   .18805   .18155   .17536   .16948   .16388
51............................................................   .23625   .22769   .21955   .21182   .20448   .19749   .19084   .18452   .17849   .17275
52............................................................   .24669   .23799   .22973   .22186   .21438   .20726   .20047   .19400   .18784   .18196
53............................................................   .25742   .24861   .24022   .23222   .22461   .21735   .21043   .20383   .19753   .19151
54............................................................   .26845   .25952   .25101   .24290   .23516   .22777   .22072   .21399   .20756   .20140
55............................................................   .27978   .27074   .26212   .25389   .24604   .23853   .23136   .22450   .21793   .21166
56............................................................   .29140   .28227   .27355   .26522   .25725   .24963   .24233   .23535   .22867   .22227
57............................................................   .30333   .29411   .28529   .27686   .26879   .26106   .25365   .24656   .23976   .23324
58............................................................   .31551   .30621   .29731   .28878   .28061   .27278   .26528   .25807   .25116   .24453
59............................................................   .32790   .31854   .30956   .30095   .29269   .28477   .27716   .26986   .26284   .25610
60............................................................   .34050   .33107   .32202   .31334   .30500   .29699   .28929   .28190   .27478   .26794
61............................................................   .35331   .34384   .33473   .32598   .31757   .30948   .30170   .29422   .28701   .28007
62............................................................   .36639   .35688   .34772   .33892   .33044   .32229   .31443   .30687   .29958   .29255

[[Page 39]]

 
63............................................................   .37974   .37020   .36101   .35216   .34363   .33542   .32750   .31986   .31250   .30539
64............................................................   .39334   .38378   .37456   .36568   .35711   .34884   .34087   .33317   .32574   .31857
65............................................................   .40718   .39761   .38838   .37947   .37087   .36257   .35455   .34681   .33932   .33208
66............................................................   .42128   .41172   .40249   .39357   .38496   .37663   .36858   .36079   .35326   .34597
67............................................................   .43569   .42616   .41694   .40803   .39941   .39107   .38299   .37518   .36761   .36028
68............................................................   .45038   .44089   .43170   .42281   .41419   .40585   .39777   .38994   .38235   .37499
69............................................................   .46531   .45587   .44672   .43786   .42927   .42094   .41286   .40503   .39743   .39006
70............................................................   .48040   .47103   .46194   .45312   .44456   .43626   .42820   .42038   .41278   .40540
71............................................................   .49558   .48629   .47727   .46851   .46000   .45174   .44371   .43591   .42832   .42095
72............................................................   .51082   .50162   .49268   .48399   .47554   .46733   .45934   .45157   .44401   .43666
73............................................................   .52607   .51697   .50813   .49952   .49114   .48299   .47506   .46733   .45981   .45249
74............................................................   .54139   .53241   .52367   .51515   .50686   .49879   .49092   .48325   .47578   .46849
75............................................................   .55683   .54798   .53936   .53095   .52276   .51477   .50698   .49938   .49197   .48474
76............................................................   .57243   .56373   .55524   .54696   .53888   .53100   .52330   .51579   .50846   .50130
77............................................................   .58819   .57965   .57132   .56318   .55523   .54747   .53988   .53247   .52523   .51815
78............................................................   .60408   .59572   .58755   .57957   .57177   .56414   .55668   .54939   .54225   .53527
79............................................................   .62001   .61184   .60385   .59604   .58840   .58092   .57360   .56644   .55943   .55256
80............................................................   .63582   .62786   .62007   .61244   .60497   .59765   .59048   .58347   .57659   .56985
81............................................................   .65142   .64367   .63608   .62864   .62135   .61421   .60721   .60034   .59361   .58701
82............................................................   .66673   .65920   .65182   .64458   .63748   .63052   .62368   .61698   .61041   .60395
83............................................................   .68175   .67444   .66728   .66024   .65334   .64656   .63991   .63338   .62696   .62066
84............................................................   .69657   .68950   .68256   .67574   .66904   .66246   .65599   .64964   .64340   .63727
85............................................................   .71128   .70446   .69775   .69116   .68467   .67830   .67204   .66587   .65982   .65386
86............................................................   .72576   .71919   .71272   .70636   .70010   .69394   .68789   .68193   .67606   .67029
87............................................................   .73981   .73349   .72726   .72114   .71511   .70917   .70333   .69757   .69190   .68632
88............................................................   .75342   .74735   .74137   .73548   .72968   .72396   .71833   .71279   .70732   .70194
89............................................................   .76658   .76076   .75503   .74938   .74381   .73832   .73290   .72757   .72231   .71712
90............................................................   .77928   .77371   .76823   .76281   .75748   .75221   .74702   .74190   .73684   .73186
91............................................................   .79131   .78600   .78075   .77557   .77046   .76542   .76044   .75553   .75068   .74589
92............................................................   .80246   .79737   .79235   .78740   .78250   .77767   .77290   .76818   .76353   .75893
93............................................................   .81274   .80788   .80307   .79832   .79363   .78899   .78441   .77989   .77542   .77100
94............................................................   .82232   .81766   .81306   .80850   .80401   .79956   .79517   .79082   .78653   .78228
95............................................................   .83141   .82695   .82254   .81818   .81387   .80961   .80539   .80122   .79710   .79302
96............................................................   .83996   .83569   .83147   .82729   .82316   .81907   .81503   .81103   .80707   .80315
97............................................................   .84787   .84378   .83973   .83573   .83176   .82784   .82396   .82012   .81632   .81255
98............................................................   .85530   .85138   .84750   .84366   .83985   .83609   .83236   .82867   .82502   .82140
99............................................................   .86255   .85880   .85508   .85140   .84776   .84415   .84057   .83703   .83353   .83005
100...........................................................   .86960   .86601   .86246   .85894   .85546   .85200   .84858   .84519   .84183   .83849
101...........................................................   .87655   .87313   .86974   .86638   .86305   .85975   .85648   .85324   .85003   .84684
102...........................................................   .88338   .88012   .87689   .87369   .87052   .86738   .86426   .86116   .85809   .85505
103...........................................................   .89015   .88706   .88399   .88095   .87793   .87494   .87197   .86903   .86611   .86321
104...........................................................   .89737   .89446   .89157   .88871   .88586   .88304   .88024   .87745   .87469   .87195
105...........................................................   .90443   .90170   .89898   .89628   .89360   .89094   .88830   .88568   .88307   .88049
106...........................................................   .91351   .91101   .90852   .90605   .90359   .90115   .89873   .89632   .89392   .89154
107...........................................................   .92452   .92230   .92010   .91791   .91573   .91356   .91141   .90927   .90714   .90502
108...........................................................   .94161   .93987   .93814   .93641   .93469   .93298   .93128   .92958   .92790   .92622
109...........................................................   .97081   .96992   .96904   .96816   .96729   .96642   .96555   .96468   .96382   .96296


--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Age                                 8.2%     8.4%     8.6%     8.8%     9.0%     9.2%     9.4%     9.6%     9.8%    10.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.............................................................   .01906   .01845   .01790   .01740   .01694   .01652   .01613   .01578   .01546   .01516
1.............................................................   .01098   .01034   .00977   .00924   .00876   .00833   .00793   .00756   .00722   .00691
2.............................................................   .01113   .01046   .00986   .00930   .00880   .00834   .00791   .00753   .00717   .00684
3.............................................................   .01155   .01084   .01020   .00962   .00909   .00860   .00816   .00775   .00737   .00702
4.............................................................   .01211   .01137   .01069   .01008   .00952   .00900   .00853   .00810   .00770   .00733
5.............................................................   .01279   .01201   .01130   .01065   .01006   .00952   .00902   .00856   .00814   .00775
6.............................................................   .01356   .01274   .01199   .01131   .01068   .01011   .00959   .00910   .00865   .00824
7.............................................................   .01442   .01356   .01277   .01205   .01140   .01079   .01023   .00972   .00925   .00881
8.............................................................   .01536   .01446   .01363   .01287   .01218   .01154   .01096   .01041   .00991   .00945
9.............................................................   .01641   .01546   .01460   .01380   .01307   .01240   .01178   .01120   .01068   .01019
10............................................................   .01758   .01659   .01567   .01484   .01407   .01336   .01270   .01210   .01154   .01103
11............................................................   .01886   .01781   .01686   .01598   .01517   .01442   .01373   .01310   .01251   .01196
12............................................................   .02024   .01915   .01814   .01721   .01636   .01558   .01485   .01419   .01357   .01299
13............................................................   .02168   .02054   .01948   .01851   .01762   .01679   .01603   .01533   .01467   .01407
14............................................................   .02313   .02193   .02083   .01981   .01887   .01801   .01721   .01646   .01578   .01514
15............................................................   .02456   .02330   .02214   .02107   .02009   .01918   .01834   .01756   .01684   .01617
16............................................................   .02593   .02462   .02340   .02229   .02126   .02030   .01942   .01860   .01785   .01714
17............................................................   .02728   .02590   .02463   .02346   .02238   .02138   .02046   .01960   .01880   .01806
18............................................................   .02861   .02717   .02584   .02462   .02348   .02243   .02146   .02056   .01972   .01894
19............................................................   .02998   .02847   .02708   .02580   .02461   .02351   .02249   .02154   .02066   .01984
20............................................................   .03142   .02984   .02839   .02704   .02580   .02465   .02357   .02258   .02165   .02079
21............................................................   .03295   .03130   .02978   .02837   .02706   .02585   .02473   .02368   .02271   .02180
22............................................................   .03455   .03283   .03124   .02976   .02839   .02712   .02594   .02484   .02382   .02286
23............................................................   .03626   .03446   .03279   .03124   .02981   .02847   .02723   .02608   .02500   .02400

[[Page 40]]

 
24............................................................   .03809   .03620   .03446   .03283   .03133   .02993   .02863   .02741   .02628   .02522
25............................................................   .04005   .03808   .03625   .03456   .03298   .03151   .03014   .02887   .02768   .02656
26............................................................   .04216   .04010   .03819   .03641   .03476   .03322   .03178   .03044   .02919   .02802
27............................................................   .04444   .04229   .04029   .03843   .03670   .03508   .03357   .03217   .03085   .02962
28............................................................   .04687   .04463   .04254   .04059   .03877   .03708   .03550   .03402   .03263   .03133
29............................................................   .04946   .04712   .04493   .04289   .04099   .03922   .03756   .03600   .03455   .03318
30............................................................   .05221   .04976   .04748   .04534   .04335   .04149   .03975   .03812   .03659   .03515
31............................................................   .05511   .05255   .05017   .04794   .04585   .04390   .04208   .04037   .03876   .03725
32............................................................   .05818   .05551   .05302   .05069   .04851   .04647   .04455   .04276   .04107   .03948
33............................................................   .06144   .05866   .05606   .05363   .05135   .04921   .04720   .04532   .04355   .04188
34............................................................   .06489   .06200   .05928   .05674   .05436   .05212   .05002   .04805   .04619   .04444
35............................................................   .06857   .06555   .06273   .06007   .05758   .05524   .05304   .05097   .04902   .04718
36............................................................   .07246   .06932   .06638   .06361   .06101   .05856   .05626   .05409   .05205   .05012
37............................................................   .07659   .07332   .07025   .06737   .06466   .06210   .05969   .05742   .05528   .05325
38............................................................   .08098   .07758   .07439   .07138   .06855   .06588   .06336   .06099   .05874   .05662
39............................................................   .08563   .08210   .07878   .07565   .07270   .06992   .06729   .06480   .06245   .06023
40............................................................   .09059   .08692   .08347   .08021   .07714   .07423   .07149   .06889   .06643   .06411
41............................................................   .09586   .09206   .08848   .08509   .08189   .07886   .07600   .07329   .07072   .06828
42............................................................   .10147   .09753   .09381   .09029   .08696   .08381   .08083   .07800   .07531   .07277
43............................................................   .10742   .10334   .09948   .09583   .09237   .08909   .08598   .08304   .08024   .07758
44............................................................   .11373   .10950   .10551   .10172   .09813   .09472   .09148   .08841   .08549   .08272
45............................................................   .12035   .11599   .11185   .10792   .10420   .10066   .09730   .09410   .09106   .08817
46............................................................   .12732   .12281   .11853   .11447   .11061   .10694   .10345   .10013   .09696   .09395
47............................................................   .13460   .12995   .12553   .12133   .11733   .11353   .10991   .10646   .10317   .10004
48............................................................   .14223   .13743   .13287   .12853   .12439   .12046   .11671   .11313   .10972   .10646
49............................................................   .15020   .14526   .14056   .13608   .13181   .12774   .12385   .12015   .11661   .11322
50............................................................   .15855   .15347   .14862   .14401   .13960   .13540   .13138   .12754   .12388   .12037
51............................................................   .16727   .16205   .15707   .15232   .14777   .14344   .13929   .13532   .13153   .12789
52............................................................   .17634   .17098   .16587   .16097   .15630   .15183   .14755   .14345   .13953   .13577
53............................................................   .18576   .18027   .17501   .16999   .16518   .16057   .15616   .15194   .14789   .14400
54............................................................   .19552   .18990   .18451   .17935   .17441   .16968   .16514   .16078   .15661   .15260
55............................................................   .20564   .19989   .19437   .18908   .18402   .17915   .17449   .17001   .16571   .16157
56............................................................   .21613   .21025   .20461   .19919   .19400   .18901   .18422   .17962   .17519   .17093
57............................................................   .22698   .22098   .21522   .20968   .20436   .19925   .19434   .18961   .18507   .18069
58............................................................   .23816   .23204   .22616   .22051   .21507   .20984   .20481   .19996   .19530   .19080
59............................................................   .24962   .24339   .23740   .23163   .22608   .22073   .21558   .21062   .20584   .20123
60............................................................   .26136   .25502   .24892   .24304   .23738   .23192   .22666   .22158   .21669   .21196
61............................................................   .27339   .26695   .26075   .25477   .24900   .24343   .23806   .23288   .22787   .22304
62............................................................   .28578   .27925   .27295   .26687   .26100   .25533   .24985   .24456   .23945   .23451
63............................................................   .29854   .29192   .28553   .27935   .27339   .26762   .26205   .25666   .25145   .24641
64............................................................   .31164   .30494   .29846   .29221   .28615   .28030   .27463   .26915   .26384   .25870
65............................................................   .32508   .31831   .31177   .30543   .29930   .29336   .28761   .28203   .27663   .27140
66............................................................   .33891   .33208   .32547   .31906   .31285   .30684   .30101   .29536   .28987   .28456
67............................................................   .35318   .34630   .33963   .33316   .32689   .32081   .31491   .30918   .30363   .29823
68............................................................   .36785   .36093   .35422   .34770   .34138   .33524   .32928   .32349   .31787   .31240
69............................................................   .38290   .37595   .36920   .36265   .35628   .35009   .34408   .33824   .33256   .32703
70............................................................   .39823   .39127   .38450   .37791   .37151   .36529   .35924   .35335   .34762   .34204
71............................................................   .41378   .40681   .40003   .39343   .38701   .38076   .37467   .36875   .36298   .35736
72............................................................   .42950   .42253   .41575   .40914   .40271   .39644   .39034   .38438   .37858   .37293
73............................................................   .44535   .43840   .43162   .42502   .41858   .41231   .40619   .40022   .39440   .38872
74............................................................   .46139   .45446   .44771   .44112   .43469   .42842   .42230   .41632   .41049   .40479
75............................................................   .47769   .47080   .46408   .45752   .45111   .44485   .43874   .43277   .42693   .42123
76............................................................   .49430   .48747   .48079   .47427   .46790   .46167   .45558   .44963   .44380   .43811
77............................................................   .51123   .50447   .49786   .49139   .48506   .47888   .47282   .46690   .46111   .45543
78............................................................   .52845   .52177   .51523   .50884   .50257   .49645   .49044   .48457   .47881   .47317
79............................................................   .54584   .53926   .53282   .52650   .52032   .51426   .50833   .50251   .49681   .49122
80............................................................   .56325   .55678   .55044   .54423   .53813   .53216   .52630   .52056   .51492   .50939
81............................................................   .58054   .57419   .56797   .56186   .55587   .54999   .54422   .53856   .53300   .52754
82............................................................   .59762   .59140   .58530   .57931   .57343   .56766   .56198   .55641   .55094   .54557
83............................................................   .61448   .60840   .60243   .59657   .59081   .58515   .57958   .57411   .56874   .56346
84............................................................   .63124   .62531   .61949   .61376   .60813   .60259   .59715   .59179   .58652   .58134
85............................................................   .64800   .64224   .63657   .63099   .62550   .62010   .61478   .60955   .60441   .59934
86............................................................   .66461   .65902   .65351   .64810   .64276   .63751   .63233   .62724   .62222   .61728
87............................................................   .68083   .67541   .67008   .66483   .65965   .65455   .64953   .64458   .63970   .63489
88............................................................   .69663   .69140   .68624   .68116   .67615   .67121   .66634   .66154   .65680   .65213
89............................................................   .71201   .70696   .70199   .69708   .69224   .68747   .68276   .67811   .67353   .66900
90............................................................   .72694   .72209   .71730   .71257   .70791   .70330   .69876   .69427   .68984   .68547
91............................................................   .74117   .73650   .73190   .72735   .72286   .71842   .71404   .70972   .70545   .70123
92............................................................   .75439   .74991   .74548   .74110   .73678   .73251   .72829   .72412   .72000   .71593
93............................................................   .76664   .76233   .75806   .75385   .74969   .74557   .74150   .73748   .73350   .72957
94............................................................   .77809   .77394   .76983   .76578   .76177   .75780   .75388   .75000   .74616   .74237
95............................................................   .78899   .78500   .78106   .77715   .77329   .76947   .76569   .76195   .75826   .75460
96............................................................   .79928   .79544   .79165   .78790   .78418   .78050   .77686   .77326   .76970   .76617
97............................................................   .80883   .80514   .80149   .79787   .79430   .79075   .78725   .78377   .78033   .77693

[[Page 41]]

 
98............................................................   .81781   .81427   .81075   .80727   .80382   .80041   .79703   .79368   .79036   .78708
99............................................................   .82661   .82320   .81982   .81648   .81316   .80988   .80662   .80340   .80020   .79704
100...........................................................   .83519   .83192   .82868   .82547   .82228   .81913   .81600   .81290   .80982   .80678
101...........................................................   .84368   .84055   .83744   .83437   .83131   .82829   .82529   .82231   .81936   .81643
102...........................................................   .85203   .84904   .84607   .84313   .84021   .83731   .83444   .83159   .82876   .82596
103...........................................................   .86034   .85748   .85465   .85184   .84906   .84629   .84355   .84082   .83812   .83544
104...........................................................   .86923   .86653   .86385   .86119   .85855   .85593   .85333   .85074   .84818   .84563
105...........................................................   .87792   .87537   .87283   .87032   .86782   .86534   .86287   .86042   .85799   .85557
106...........................................................   .88918   .88683   .88450   .88218   .87987   .87758   .87530   .87304   .87079   .86855
107...........................................................   .90291   .90082   .89873   .89666   .89460   .89255   .89051   .88849   .88647   .88447
108...........................................................   .92455   .92288   .92123   .91958   .91794   .91630   .91468   .91306   .91145   .90984
109...........................................................   .96211   .96125   .96041   .95956   .95872   .95788   .95704   .95620   .95537   .95455


--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Age                                10.2%    10.4%    10.6%    10.8%    11.0%    11.2%    11.4%    11.6%    11.8%    12.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.............................................................   .01488   .01463   .01439   .01417   .01396   .01377   .01359   .01343   .01327   .01312
1.............................................................   .00662   .00636   .00612   .00589   .00568   .00548   .00530   .00513   .00497   .00482
2.............................................................   .00654   .00626   .00600   .00576   .00554   .00533   .00514   .00496   .00479   .00463
3.............................................................   .00670   .00641   .00613   .00588   .00564   .00542   .00522   .00502   .00484   .00468
4.............................................................   .00699   .00668   .00639   .00612   .00587   .00563   .00542   .00521   .00502   .00484
5.............................................................   .00739   .00706   .00675   .00646   .00620   .00595   .00571   .00550   .00529   .00510
6.............................................................   .00786   .00751   .00718   .00687   .00659   .00633   .00608   .00585   .00563   .00543
7.............................................................   .00841   .00803   .00769   .00736   .00706   .00678   .00652   .00627   .00604   .00582
8.............................................................   .00902   .00863   .00826   .00791   .00759   .00730   .00702   .00675   .00651   .00628
9.............................................................   .00973   .00931   .00892   .00856   .00822   .00790   .00760   .00733   .00706   .00682
10............................................................   .01055   .01010   .00969   .00930   .00894   .00861   .00829   .00799   .00772   .00746
11............................................................   .01146   .01099   .01055   .01014   .00976   .00940   .00907   .00875   .00846   .00818
12............................................................   .01246   .01196   .01150   .01106   .01066   .01028   .00993   .00960   .00928   .00899
13............................................................   .01351   .01298   .01249   .01204   .01161   .01121   .01084   .01049   .01016   .00985
14............................................................   .01455   .01400   .01348   .01300   .01255   .01213   .01173   .01136   .01102   .01069
15............................................................   .01555   .01497   .01443   .01392   .01345   .01300   .01259   .01220   .01183   .01148
16............................................................   .01648   .01587   .01530   .01477   .01427   .01380   .01336   .01295   .01257   .01220
17............................................................   .01737   .01673   .01612   .01556   .01504   .01455   .01408   .01365   .01324   .01286
18............................................................   .01822   .01754   .01691   .01632   .01576   .01525   .01476   .01430   .01387   .01347
19............................................................   .01908   .01837   .01770   .01708   .01650   .01595   .01544   .01495   .01450   .01407
20............................................................   .01999   .01924   .01854   .01788   .01726   .01669   .01615   .01564   .01516   .01471
21............................................................   .02096   .02017   .01943   .01874   .01809   .01748   .01691   .01637   .01586   .01539
22............................................................   .02197   .02114   .02036   .01963   .01895   .01830   .01770   .01713   .01660   .01610
23............................................................   .02306   .02218   .02136   .02059   .01987   .01919   .01855   .01795   .01739   .01686
24............................................................   .02424   .02331   .02245   .02163   .02087   .02016   .01948   .01885   .01825   .01769
25............................................................   .02552   .02455   .02364   .02278   .02197   .02122   .02051   .01984   .01920   .01861
26............................................................   .02692   .02589   .02493   .02403   .02318   .02238   .02162   .02091   .02025   .01961
27............................................................   .02846   .02738   .02636   .02541   .02451   .02367   .02287   .02212   .02141   .02074
28............................................................   .03012   .02898   .02791   .02690   .02595   .02506   .02422   .02342   .02267   .02196
29............................................................   .03190   .03070   .02957   .02851   .02751   .02656   .02567   .02483   .02404   .02329
30............................................................   .03381   .03254   .03135   .03023   .02917   .02817   .02723   .02634   .02551   .02471
31............................................................   .03583   .03450   .03324   .03206   .03094   .02989   .02890   .02796   .02707   .02623
32............................................................   .03799   .03659   .03527   .03402   .03284   .03173   .03068   .02968   .02874   .02785
33............................................................   .04031   .03883   .03744   .03612   .03488   .03371   .03260   .03155   .03055   .02961
34............................................................   .04279   .04123   .03976   .03838   .03707   .03583   .03465   .03354   .03249   .03149
35............................................................   .04545   .04382   .04227   .04081   .03943   .03812   .03688   .03571   .03459   .03354
36............................................................   .04830   .04658   .04495   .04341   .04196   .04058   .03927   .03803   .03685   .03573
37............................................................   .05134   .04953   .04782   .04620   .04467   .04321   .04183   .04052   .03928   .03809
38............................................................   .05462   .05272   .05092   .04921   .04760   .04606   .04461   .04322   .04191   .04066
39............................................................   .05812   .05613   .05424   .05245   .05075   .04913   .04760   .04614   .04475   .04343
40............................................................   .06190   .05981   .05782   .05594   .05415   .05245   .05083   .04929   .04783   .04643
41............................................................   .06597   .06378   .06170   .05972   .05784   .05605   .05435   .05272   .05118   .04970
42............................................................   .07035   .06806   .06587   .06380   .06182   .05994   .05815   .05644   .05481   .05326
43............................................................   .07505   .07265   .07036   .06818   .06611   .06414   .06225   .06045   .05874   .05710
44............................................................   .08008   .07757   .07518   .07290   .07072   .06865   .06667   .06478   .06298   .06125
45............................................................   .08542   .08279   .08029   .07791   .07563   .07346   .07138   .06940   .06750   .06569
46............................................................   .09108   .08834   .08573   .08324   .08085   .07858   .07640   .07432   .07233   .07043
47............................................................   .09705   .09419   .09147   .08886   .08637   .08399   .08172   .07954   .07745   .07545
48............................................................   .10335   .10038   .09754   .09482   .09222   .08973   .08735   .08507   .08288   .08078
49............................................................   .10999   .10690   .10394   .10111   .09840   .09581   .09332   .09093   .08864   .08644
50............................................................   .11701   .11380   .11073   .10778   .10496   .10225   .09965   .09716   .09477   .09247
51............................................................   .12441   .12108   .11789   .11482   .11189   .10907   .10636   .10376   .10126   .09886
52............................................................   .13217   .12871   .12540   .12222   .11916   .11623   .11341   .11071   .10810   .10560
53............................................................   .14028   .13670   .13327   .12997   .12680   .12375   .12082   .11801   .11529   .11268
54............................................................   .14875   .14505   .14150   .13808   .13480   .13163   .12859   .12566   .12284   .12012
55............................................................   .15760   .15378   .15011   .14657   .14317   .13989   .13674   .13370   .13077   .12794
56............................................................   .16684   .16290   .15911   .15546   .15194   .14855   .14528   .14213   .13909   .13615
57............................................................   .17648   .17242   .16851   .16474   .16111   .15760   .15422   .15096   .14781   .14477
58............................................................   .18647   .18229   .17827   .17438   .17064   .16702   .16353   .16015   .15689   .15374

[[Page 42]]

 
59............................................................   .19678   .19249   .18835   .18435   .18049   .17676   .17316   .16968   .16631   .16305
60............................................................   .20740   .20300   .19875   .19464   .19066   .18682   .18311   .17952   .17604   .17268
61............................................................   .21837   .21385   .20949   .20527   .20119   .19724   .19341   .18971   .18613   .18266
62............................................................   .22973   .22511   .22064   .21631   .21212   .20807   .20414   .20033   .19664   .19306
63............................................................   .24152   .23680   .23222   .22779   .22350   .21934   .21530   .21139   .20760   .20392
64............................................................   .25372   .24890   .24422   .23969   .23529   .23103   .22690   .22289   .21899   .21521
65............................................................   .26633   .26141   .25664   .25201   .24752   .24316   .23893   .23482   .23083   .22695
66............................................................   .27940   .27439   .26953   .26481   .26023   .25577   .25145   .24724   .24316   .23918
67............................................................   .29299   .28790   .28296   .27815   .27348   .26894   .26453   .26024   .25606   .25200
68............................................................   .30709   .30193   .29691   .29202   .28728   .28265   .27816   .27378   .26952   .26537
69............................................................   .32166   .31643   .31134   .30639   .30157   .29687   .29230   .28785   .28351   .27928
70............................................................   .33661   .33133   .32618   .32116   .31628   .31152   .30688   .30235   .29794   .29364
71............................................................   .35188   .34654   .34134   .33627   .33133   .32651   .32181   .31722   .31275   .30838
72............................................................   .36742   .36204   .35679   .35168   .34668   .34181   .33706   .33241   .32788   .32345
73............................................................   .38317   .37776   .37248   .36733   .36229   .35738   .35257   .34788   .34330   .33882
74............................................................   .39923   .39380   .38849   .38330   .37823   .37328   .36844   .36370   .35908   .35455
75............................................................   .41566   .41021   .40489   .39968   .39459   .38961   .38474   .37997   .37531   .37074
76............................................................   .43254   .42709   .42176   .41655   .41144   .40645   .40156   .39677   .39208   .38749
77............................................................   .44988   .44444   .43912   .43391   .42880   .42380   .41891   .41411   .40940   .40479
78............................................................   .46765   .46224   .45694   .45174   .44665   .44166   .43677   .43197   .42726   .42265
79............................................................   .48574   .48037   .47510   .46993   .46487   .45990   .45502   .45024   .44554   .44094
80............................................................   .50397   .49865   .49343   .48830   .48327   .47834   .47349   .46873   .46406   .45947
81............................................................   .52219   .51693   .51176   .50669   .50171   .49682   .49201   .48729   .48265   .47809
82............................................................   .54029   .53510   .53000   .52499   .52007   .51523   .51047   .50580   .50120   .49667
83............................................................   .55826   .55315   .54813   .54319   .53834   .53356   .52886   .52424   .51969   .51522
84............................................................   .57624   .57123   .56629   .56144   .55666   .55195   .54732   .54277   .53828   .53386
85............................................................   .59435   .58944   .58460   .57984   .57516   .57054   .56599   .56151   .55710   .55275
86............................................................   .61241   .60762   .60289   .59824   .59365   .58913   .58468   .58029   .57596   .57170
87............................................................   .63015   .62548   .62087   .61633   .61185   .60744   .60309   .59880   .59456   .59039
88............................................................   .64753   .64299   .63851   .63409   .62973   .62543   .62118   .61700   .61287   .60879
89............................................................   .66454   .66013   .65579   .65150   .64726   .64308   .63895   .63488   .63086   .62689
90............................................................   .68115   .67689   .67268   .66853   .66442   .66037   .65637   .65241   .64851   .64465
91............................................................   .69706   .69294   .68887   .68486   .68089   .67696   .67309   .66925   .66547   .66173
92............................................................   .71190   .70792   .70399   .70011   .69627   .69247   .68872   .68501   .68134   .67771
93............................................................   .72569   .72184   .71804   .71429   .71057   .70689   .70326   .69967   .69611   .69259
94............................................................   .73861   .73490   .73123   .72759   .72400   .72044   .71692   .71344   .71000   .70659
95............................................................   .75097   .74739   .74384   .74033   .73686   .73342   .73002   .72665   .72331   .72001
96............................................................   .76267   .75922   .75579   .75240   .74905   .74572   .74243   .73917   .73595   .73275
97............................................................   .77356   .77022   .76691   .76363   .76039   .75718   .75399   .75084   .74772   .74463
98............................................................   .78382   .78059   .77740   .77423   .77110   .76799   .76491   .76186   .75884   .75584
99............................................................   .79390   .79079   .78771   .78465   .78162   .77862   .77565   .77270   .76978   .76688
100...........................................................   .80376   .80076   .79779   .79485   .79193   .78904   .78617   .78333   .78051   .77771
101...........................................................   .81353   .81066   .80780   .80497   .80217   .79938   .79662   .79388   .79117   .78847
102...........................................................   .82318   .82042   .81768   .81496   .81227   .80960   .80694   .80431   .80170   .79911
103...........................................................   .83278   .83014   .82752   .82491   .82233   .81977   .81723   .81470   .81220   .80971
104...........................................................   .84310   .84059   .83810   .83563   .83317   .83073   .82831   .82591   .82352   .82115
105...........................................................   .85318   .85079   .84843   .84607   .84374   .84142   .83911   .83682   .83455   .83229
106...........................................................   .86633   .86413   .86193   .85975   .85758   .85543   .85329   .85116   .84904   .84694
107...........................................................   .88247   .88049   .87852   .87656   .87460   .87266   .87073   .86881   .86690   .86500
108...........................................................   .90825   .90666   .90507   .90350   .90193   .90037   .89881   .89727   .89572   .89419
109...........................................................   .95372   .95290   .95208   .95126   .95045   .94964   .94883   .94803   .94723   .94643


--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Age                                12.2%    12.4%    12.6%    12.8%    13.0%    13.2%    13.4%    13.6%    13.8%    14.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.............................................................   .01298   .01285   .01273   .01261   .01250   .01240   .01230   .01221   .01212   .01203
1.............................................................   .00468   .00455   .00443   .00431   .00420   .00410   .00400   .00391   .00382   .00374
2.............................................................   .00448   .00435   .00421   .00409   .00398   .00387   .00376   .00366   .00357   .00348
3.............................................................   .00452   .00437   .00423   .00410   .00398   .00386   .00375   .00365   .00355   .00345
4.............................................................   .00468   .00452   .00437   .00423   .00410   .00397   .00386   .00375   .00364   .00354
5.............................................................   .00493   .00476   .00460   .00445   .00431   .00418   .00405   .00393   .00382   .00371
6.............................................................   .00524   .00506   .00489   .00473   .00458   .00444   .00430   .00418   .00406   .00394
7.............................................................   .00562   .00543   .00525   .00508   .00492   .00477   .00462   .00449   .00436   .00423
8.............................................................   .00606   .00586   .00566   .00548   .00531   .00515   .00499   .00485   .00471   .00458
9.............................................................   .00659   .00637   .00616   .00597   .00579   .00561   .00545   .00529   .00514   .00500
10............................................................   .00721   .00698   .00676   .00655   .00636   .00617   .00600   .00583   .00567   .00552
11............................................................   .00792   .00767   .00744   .00722   .00701   .00682   .00663   .00645   .00628   .00612
12............................................................   .00871   .00845   .00821   .00797   .00775   .00754   .00735   .00716   .00698   .00681
13............................................................   .00955   .00928   .00902   .00877   .00854   .00831   .00810   .00790   .00771   .00753
14............................................................   .01038   .01009   .00981   .00955   .00930   .00907   .00885   .00864   .00843   .00824
15............................................................   .01116   .01085   .01056   .01028   .01002   .00977   .00954   .00932   .00910   .00890
16............................................................   .01186   .01153   .01123   .01094   .01066   .01040   .01015   .00992   .00969   .00948
17............................................................   .01250   .01215   .01183   .01152   .01124   .01096   .01070   .01045   .01022   .00999
18............................................................   .01308   .01272   .01238   .01206   .01175   .01147   .01119   .01093   .01068   .01044
19............................................................   .01367   .01329   .01293   .01259   .01227   .01196   .01167   .01140   .01113   .01088

[[Page 43]]

 
20............................................................   .01428   .01388   .01350   .01314   .01280   .01248   .01217   .01188   .01161   .01134
21............................................................   .01494   .01451   .01411   .01373   .01337   .01303   .01271   .01240   .01211   .01183
22............................................................   .01562   .01517   .01475   .01435   .01397   .01361   .01326   .01294   .01263   .01233
23............................................................   .01635   .01588   .01543   .01501   .01460   .01422   .01386   .01351   .01319   .01287
24............................................................   .01716   .01665   .01618   .01573   .01530   .01489   .01451   .01415   .01380   .01347
25............................................................   .01804   .01751   .01701   .01653   .01608   .01565   .01524   .01485   .01448   .01413
26............................................................   .01902   .01845   .01792   .01741   .01693   .01648   .01604   .01563   .01524   .01487
27............................................................   .02011   .01951   .01895   .01841   .01790   .01742   .01696   .01652   .01610   .01571
28............................................................   .02129   .02066   .02006   .01949   .01895   .01844   .01795   .01748   .01704   .01662
29............................................................   .02258   .02191   .02127   .02067   .02009   .01955   .01903   .01853   .01806   .01762
30............................................................   .02396   .02325   .02257   .02193   .02132   .02074   .02019   .01966   .01916   .01869
31............................................................   .02543   .02467   .02396   .02328   .02263   .02201   .02143   .02087   .02034   .01983
32............................................................   .02701   .02621   .02545   .02472   .02404   .02338   .02276   .02217   .02160   .02106
33............................................................   .02871   .02786   .02706   .02629   .02556   .02487   .02420   .02357   .02297   .02240
34............................................................   .03054   .02964   .02879   .02797   .02720   .02646   .02576   .02509   .02445   .02383
35............................................................   .03253   .03158   .03067   .02981   .02898   .02820   .02745   .02674   .02606   .02541
36............................................................   .03467   .03366   .03269   .03178   .03090   .03007   .02928   .02852   .02779   .02710
37............................................................   .03697   .03590   .03488   .03391   .03298   .03209   .03125   .03044   .02967   .02893
38............................................................   .03947   .03833   .03725   .03622   .03524   .03430   .03340   .03254   .03172   .03094
39............................................................   .04217   .04096   .03982   .03873   .03768   .03669   .03573   .03482   .03395   .03312
40............................................................   .04510   .04383   .04262   .04146   .04035   .03930   .03828   .03732   .03639   .03550
41............................................................   .04830   .04695   .04567   .04445   .04327   .04215   .04108   .04005   .03907   .03812
42............................................................   .05177   .05035   .04900   .04770   .04646   .04527   .04413   .04304   .04200   .04100
43............................................................   .05553   .05404   .05261   .05123   .04992   .04866   .04746   .04630   .04520   .04413
44............................................................   .05960   .05802   .05651   .05506   .05368   .05235   .05107   .04985   .04867   .04754
45............................................................   .06395   .06229   .06069   .05917   .05770   .05630   .05495   .05365   .05241   .05121
46............................................................   .06860   .06685   .06517   .06356   .06202   .06053   .05911   .05774   .05643   .05516
47............................................................   .07353   .07169   .06992   .06823   .06660   .06504   .06353   .06209   .06070   .05936
48............................................................   .07877   .07684   .07498   .07320   .07149   .06984   .06826   .06673   .06527   .06385
49............................................................   .08433   .08231   .08036   .07849   .07669   .07495   .07329   .07168   .07013   .06864
50............................................................   .09026   .08814   .08609   .08413   .08224   .08042   .07867   .07698   .07535   .07378
51............................................................   .09655   .09433   .09219   .09013   .08815   .08624   .08440   .08262   .08091   .07926
52............................................................   .10318   .10086   .09863   .09647   .09439   .09239   .09046   .08860   .08680   .08506
53............................................................   .11017   .10774   .10541   .10315   .10098   .09888   .09686   .09491   .09302   .09120
54............................................................   .11750   .11498   .11254   .11019   .10792   .10572   .10361   .10156   .09958   .09767
55............................................................   .12522   .12258   .12005   .11759   .11522   .11294   .11072   .10859   .10652   .10451
56............................................................   .13332   .13059   .12794   .12539   .12292   .12054   .11823   .11599   .11383   .11174
57............................................................   .14183   .13899   .13624   .13359   .13102   .12853   .12613   .12380   .12154   .11936
58............................................................   .15070   .14775   .14490   .14215   .13948   .13689   .13439   .13197   .12962   .12734
59............................................................   .15990   .15685   .15389   .15103   .14826   .14558   .14298   .14046   .13801   .13564
60............................................................   .16942   .16626   .16321   .16024   .15737   .15459   .15189   .14927   .14673   .14426
61............................................................   .17929   .17603   .17287   .16981   .16684   .16395   .16115   .15844   .15580   .15324
62............................................................   .18960   .18623   .18297   .17980   .17673   .17375   .17085   .16803   .16530   .16264
63............................................................   .20035   .19688   .19352   .19025   .18708   .18400   .18100   .17809   .17525   .17250
64............................................................   .21154   .20797   .20451   .20114   .19787   .19469   .19159   .18859   .18566   .18281
65............................................................   .22318   .21951   .21595   .21249   .20912   .20584   .20265   .19955   .19652   .19358
66............................................................   .23532   .23156   .22790   .22434   .22088   .21751   .21422   .21102   .20791   .20487
67............................................................   .24804   .24419   .24044   .23679   .23324   .22977   .22640   .22311   .21990   .21678
68............................................................   .26133   .25740   .25356   .24983   .24618   .24263   .23917   .23579   .23250   .22929
69............................................................   .27516   .27114   .26723   .26341   .25969   .25605   .25251   .24905   .24567   .24237
70............................................................   .28945   .28536   .28137   .27747   .27367   .26996   .26633   .26279   .25934   .25596
71............................................................   .30412   .29996   .29590   .29193   .28806   .28427   .28057   .27696   .27343   .26998
72............................................................   .31913   .31491   .31078   .30675   .30281   .29895   .29519   .29150   .28790   .28438
73............................................................   .33444   .33016   .32597   .32188   .31788   .31396   .31013   .30638   .30271   .29913
74............................................................   .35012   .34579   .34155   .33741   .33335   .32938   .32549   .32168   .31795   .31430
75............................................................   .36628   .36190   .35762   .35343   .34932   .34530   .34136   .33750   .33372   .33001
76............................................................   .38299   .37858   .37427   .37004   .36589   .36183   .35784   .35394   .35011   .34636
77............................................................   .40028   .39585   .39151   .38725   .38307   .37898   .37496   .37103   .36716   .36337
78............................................................   .41812   .41368   .40933   .40506   .40086   .39675   .39271   .38874   .38485   .38103
79............................................................   .43641   .43198   .42762   .42334   .41914   .41502   .41096   .40698   .40308   .39924
80............................................................   .45496   .45054   .44619   .44192   .43772   .43360   .42954   .42556   .42164   .41779
81............................................................   .47360   .46920   .46487   .46061   .45643   .45231   .44827   .44429   .44038   .43653
82............................................................   .49223   .48785   .48355   .47932   .47516   .47106   .46703   .46307   .45916   .45532
83............................................................   .51081   .50648   .50221   .49802   .49388   .48982   .48581   .48187   .47799   .47416
84............................................................   .52951   .52523   .52101   .51686   .51277   .50874   .50477   .50086   .49701   .49321
85............................................................   .54847   .54425   .54009   .53600   .53196   .52798   .52406   .52019   .51638   .51262
86............................................................   .56749   .56335   .55926   .55523   .55126   .54734   .54348   .53966   .53591   .53220
87............................................................   .58627   .58221   .57820   .57425   .57035   .56650   .56270   .55895   .55526   .55161
88............................................................   .60477   .60079   .59688   .59301   .58919   .58542   .58170   .57802   .57439   .57081
89............................................................   .62297   .61909   .61527   .61149   .60776   .60408   .60044   .59685   .59330   .58979
90............................................................   .64084   .63707   .63335   .62968   .62604   .62246   .61891   .61540   .61194   .60851
91............................................................   .65803   .65437   .65076   .64719   .64366   .64017   .63672   .63330   .62993   .62659
92............................................................   .67412   .67058   .66707   .66360   .66017   .65678   .65342   .65010   .64682   .64357
93............................................................   .68911   .68567   .68227   .67890   .67557   .67227   .66901   .66578   .66258   .65942

[[Page 44]]

 
94............................................................   .70321   .69988   .69657   .69330   .69006   .68686   .68369   .68055   .67744   .67437
95............................................................   .71674   .71351   .71031   .70713   .70399   .70088   .69781   .69476   .69174   .68875
96............................................................   .72959   .72646   .72335   .72028   .71724   .71422   .71123   .70828   .70534   .70244
97............................................................   .74156   .73853   .73552   .73254   .72959   .72666   .72376   .72089   .71804   .71522
98............................................................   .75287   .74993   .74702   .74413   .74126   .73842   .73561   .73282   .73006   .72732
99............................................................   .76401   .76117   .75834   .75555   .75277   .75002   .74730   .74459   .74191   .73926
100...........................................................   .77494   .77219   .76946   .76676   .76408   .76142   .75878   .75616   .75357   .75099
101...........................................................   .78580   .78315   .78052   .77791   .77532   .77275   .77021   .76768   .76517   .76268
102...........................................................   .79654   .79399   .79146   .78894   .78645   .78397   .78152   .77908   .77666   .77426
103...........................................................   .80724   .80479   .80236   .79994   .79755   .79517   .79280   .79046   .78813   .78582
104...........................................................   .81879   .81646   .81413   .81183   .80954   .80726   .80501   .80276   .80054   .79832
105...........................................................   .83005   .82782   .82560   .82340   .82121   .81904   .81688   .81474   .81260   .81049
106...........................................................   .84485   .84277   .84071   .83866   .83662   .83459   .83257   .83057   .82857   .82659
107...........................................................   .86311   .86124   .85937   .85751   .85566   .85382   .85199   .85017   .84835   .84655
108...........................................................   .89266   .89114   .88963   .88812   .88662   .88513   .88364   .88216   .88068   .87922
109...........................................................   .94563   .94484   .94405   .94326   .94248   .94170   .94092   .94014   .93937   .93860
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (f) Effective dates. This section applies after April 30, 1999.

[T.D. 7105, 36 FR 6480, Apr. 6, 1971; 36 FR 9512, May 26, 1971; 36 FR 
12290, June 30, 1971, as amended by T.D. 7955, 49 FR 19976, May 11, 
1984; T.D. 8540, 59 FR 30105, June 10, 1994; T.D. 8819, 64 FR 23190, 
Apr. 30, 1999; T.D. 8886, 65 FR 36910, June 12, 2000]



Sec. 1.642(c)-7  Transitional rules with respect to pooled income funds.

    (a) In general--(1) Amendment of certain funds. A fund created 
before May 7, 1971, and not otherwise qualifying as a pooled income fund 
may be treated as a pooled income fund to which Sec. 1.642(c)-5 applies 
if on July 31, 1969, or on each date of transfer of property to the fund 
occurring after July 31, 1969, it possessed the initial characteristics 
described in paragraph (b) of this section and is amended, in the time 
and manner provided in paragraph (c) of this section, to meet all the 
requirements of section 642(c)(5) and Sec. 1.642(c)-5. If a fund to 
which this subparagraph applies is amended in the time and manner 
provided in paragraph (c) of this section it shall be treated as 
provided in paragraph (d) of this section for the period beginning on 
August 1, 1969, or, if later, on the date of its creation and ending the 
day before the date on which it meets the requirements of section 
642(c)(5) and Sec. 1.642(c)-5.
    (2) Severance of a portion of a fund. Any portion of a fund created 
before May 7, 1971, which consists of property transferred to such fund 
after July 31, 1969, may be severed from such fund consistently with the 
principles of paragraph (c)(2) of this section and established before 
January 1, 1972, as a separate pooled income fund, provided that on and 
after the date of severance the severed fund meets all the requirements 
of section 642(c)(5) and Sec. 1.642(c)-5. A separate fund which is 
established pursuant to this subparagraph shall be treated as provided 
in paragraph (d) of this section for the period beginning on the day of 
the first transfer of property which becomes part of the separate fund 
and ending the day before the day on which the separate fund meets the 
requirements of section 642(c)(5) and Sec. 1.642(c)-5.
    (b) Initial characteristics required. A fund described in paragraph 
(a)(1) of this section shall not be treated as a pooled income fund to 
which section 642(c)(5) applies, even though it is amended as provided 
in paragraph (c) of this section, unless it possessed the following 
characteristics on July 31, 1969, or on each date of transfer of 
property to the fund occurring after July 31, 1969:
    (1) It satisfied the requirements of section 642(c)(5)(A) other than 
that the fund be a trust;
    (2) It was constituted in a way to attract and contain commingled 
properties transferred to the fund by more than one donor satisfying 
such requirements; and
    (3) Each beneficiary of a life income interest which was retained or 
created in any property transferred to the fund was entitled to receive, 
but not less often than annually, a proportional share of the annual 
income earned by the fund, such share being based on the fair market 
value of the property in

[[Page 45]]

which such life interest was retained or created.
    (c) Amendment requirements. (1) A fund described in paragraph (a)(1) 
of this section and possessing the initial characteristics described in 
paragraph (b) of this section on the date prescribed therein shall be 
treated as a pooled income fund if it is amended to meet all the 
requirements of section 642(c)(5) and Sec. 1.642(c)-5 before January 1, 
1972, or, if later, on or before the 30th day after the date on which 
any judicial proceedings commenced before January 1, 1972, which are 
required to amend its governing instrument or any other instrument which 
does not permit it to meet such requirements, become final. However, see 
paragraph (d) of this section for limitation on the period in which a 
claim for credit or refund may be filed.
    (2) In addition, if the transferred property described in paragraph 
(b)(2) of this section is commingled with other property, the 
transferred property must be separated on or before the date specified 
in subparagraph (1) of this paragraph from the other property and 
allocated to the fund in accordance with the transferred property's 
percentage share of the fair market value of the total commingled 
property on the date of separation. The percentage share shall be the 
ratio which the fair market value of the transferred property on the 
date of separation bears to the fair market value of the total 
commingled property on that date and shall be computed in a manner 
consistent with paragraph (c) of Sec. 1.642(c)-5. The property which is 
so allocated to the fund shall be treated as property received from 
transfers which meet the requirements of section 642(c)(5), and such 
transfers shall be treated as made on the dates on which the properties 
giving rise to such allocation were transferred to the fund by the 
respective donors. The property so allocated to the fund must be 
representative of all the commingled property other than securities the 
income from which is exempt from tax under subtitle A of the Code; 
compensating increases in other commingled property allocated to the 
fund shall be made where such tax-exempt securities are not allocated to 
the fund. The application of this subparagraph may be illustrated by the 
following example:

    Example. (a) The trustees of X fund are in the process of amending 
it in order to qualify as a pooled income fund. The property transferred 
to the X fund was commingled with other property transferred to the 
organization by which the fund was established. After taking into 
account the various transfers and the appreciation in the fair market 
value of all the properties, the fair market value of the property 
allocated to the fund on the various transfer dates is set forth in the 
following schedule and determined in the manner indicated:

                                                    Transfers
----------------------------------------------------------------------------------------------------------------
                                               Value of all     Trust      Other     Value of all     Property
                                                 property      property   property  property after  allocated to
                                                  before     ----------------------    transfer         fund
              Date of transfer                   transfer                          -----------------------------
                                             ----------------    (2)        (3)
                                                    (1)                                   (4)            (5)
----------------------------------------------------------------------------------------------------------------
January 1, 1968.............................  ..............   $100,000   $100,000     $200,000     \1\ $100,000
September 30, 1968..........................     $300,000       100,000  .........      400,000     \2\ 250,000
January 15, 1969............................      480,000        60,000  .........      540,000     \3\ 360,000
November 11, 1969...........................      600,000       200,000  .........      800,000     \4\ 600,000
----------------------------------------------------------------------------------------------------------------
\1\ $100,000=(the amount in column (2)).
\2\ $250,000=([$100,000/$200,000x$300,000]+$100,000).
\3\ $360,000=([$250,000/$400,000x$480,000]+$60,000).
\4\ $600,000=([$360,000/$540,000x$600,000]+$200,000).

    (b) On September 30, 1970, the trustees decide to separate the 
property of X fund from the other property. The fair market value of all 
the commingled property is $1 million on September 30, 1970, and there 
were no additional transfers to the fund after November 11, 1969. 
Accordingly, the fair market value of the property required to be 
allocated to X fund must be $750,000 ($600,000/$800,000x$1,000,000), and 
X fund's percentage

[[Page 46]]

share of the commingled property is 75 percent ($750,000/$1,000,000). 
Accordingly, assuming that the commingled property consists of Y stock 
with a fair market value of $800,000 and Z bonds with a fair market 
value of $200,000, there must be allocated to X fund at the close of 
September 30, 1970, Y stock with a value of $600,000 ($800,000x75%) and 
Z bonds with a value of $150,000 ($200,000x75%).

    (d) Transactions before amendment of or severance from fund. (1) A 
fund which is amended pursuant to paragraph (c) of this section, or is 
severed from a fund pursuant to paragraph (a)(2) of this section, shall 
be treated for all purposes, including the allowance of a deduction for 
any charitable contribution, as if it were before its amendment or 
severance a pooled income fund to which section 642(c)(5) and 
Sec. 1.642(c)-5 apply. Thus, for example, where a donor transferred 
property in trust to such an amended or severed fund on August 1, 1969, 
but before its amendment or severance under this section, a charitable 
contributions deduction for the value of the remainder interest may be 
allowed under section 170, 2055, 2106, or 2522. The deduction may not be 
allowed, however, until the fund is amended or severed pursuant to this 
section and shall be allowed only if a claim for credit or refund is 
filed within the period of limitation prescribed by section 6511(a).
    (2) For purposes of determining under Sec. 1.642(c)-6 the highest 
yearly rate of return earned by a fund (which is amended pursuant to 
paragraph (c) of this section) for the 3 preceding taxable years, 
taxable years of the fund preceding its taxable year in which the fund 
is so amended and qualifies as a pooled income fund under this section 
shall be used provided that the fund did not at any time during such 
preceding years hold any investments in securities the income from which 
is exempt from tax under subtitle A of the Code. If any such tax-exempt 
securities were held during such period by such amended fund, or if the 
fund consists of a portion of a fund which is severed pursuant to 
paragraph (a)(2) of this section, the highest yearly rate of return 
under Sec. 1.642(c)-6 shall be determined by treating the fund as a 
pooled income fund which has been in existence for less than 3 taxable 
years preceding the taxable year in which the transfer of property to 
the fund is made.
    (3) Property transferred to a fund before its amendment pursuant to 
paragraph (c) of this section, or before its severance under paragraph 
(a)(2) of this section, shall be treated as property received from 
transfers which meet the requirements of section 642(c)(5).

[T.D. 7105, 36 FR 6486, Apr. 6, 1971, as amended by T.D. 7125, 36 FR 
11032, June 8, 1971; T.D. 8540, 59 FR 30102, June 10, 1994]



Sec. 1.642(d)-1  Net operating loss deduction.

    The net operating loss deduction allowed by section 172 is available 
to estates and trusts generally, with the following exceptions and 
limitations:
    (a) In computing gross income and deductions for the purposes of 
section 172, a trust shall exclude that portion of the income and 
deductions attributable to the grantor or another person under sections 
671 through 678 (relating to grantors and others treated as substantial 
owners).
    (b) An estate or trust shall not, for the purposes of section 172, 
avail itself of the deductions allowed by section 642(c) (relating to 
charitable contributions deductions) and sections 651 and 661 (relating 
to deductions for distributions).



Sec. 1.642(e)-1  Depreciation and depletion.

    An estate or trust is allowed the deductions for depreciation and 
depletion, but only to the extent the deductions are not apportioned to 
beneficiaries under sections 167(h) and 611(b). For purposes of sections 
167(h) and 611(b), the term beneficiaries includes charitable 
beneficiaries. See the regulations under those sections.

[T.D. 6712, 29 FR 3655, Mar. 24, 1964]



Sec. 1.642(f)-1  Amortization deductions.

    An estate or trust is allowed amortization deductions with respect 
to an emergency facility as defined in section 168(d), with respect to a 
certified pollution control facility as defined in section 169(d), with 
respect to qualified railroad rolling stock as defined in section 
184(d), with respect to certified coal mine safety equipment as defined

[[Page 47]]

in section 187(d), with respect to on-the-job training and child-care 
facilities as defined in section 188(b), and with respect to certain 
rehabilitations of certified historic structures as defined in section 
191, in the same manner and to the same extent as in the case of an 
individual. However, the principles governing the apportionment of the 
deductions for depreciation and depletion between fiduciaries and the 
beneficiaries of an estate or trust (see sections 167(h) and 611(b) and 
the regulations thereunder) shall be applicable with respect to such 
amortization deductions.

[T.D. 7700, 45 FR 38055, June 6, 1980]



Sec. 1.642(g)-1  Disallowance of double deductions; in general.

    Amounts allowable under section 2053(a)(2) (relating to 
administration expenses) or under section 2054 (relating to losses 
during administration) as deductions in computing the taxable estate of 
a decedent are not allowed as deductions in computing the taxable income 
of the estate unless there is filed a statement, in duplicate, to the 
effect that the items have not been allowed as deductions from the gross 
estate of the decedent under section 2053 or 2054 and that all rights to 
have such items allowed at any time as deductions under section 2053 or 
2054 are waived. The statement should be filed with the return for the 
year for which the items are claimed as deductions or with the district 
director for the internal revenue district in which the return was 
filed, for association with the return. The statement may be filed at 
any time before the expiration of the statutory period of limitation 
applicable to the taxable year for which the deduction is sought. 
Allowance of a deduction in computing an estate's taxable income is not 
precluded by claiming a deduction in the estate tax return, so long as 
the estate tax deduction is not finally allowed and the statement is 
filed. However, after a statement is filed under section 642(g) with 
respect to a particular item or portion of an item, the item cannot 
thereafter be allowed as a deduction for estate tax purposes since the 
waiver operates as a relinquishment of the right to have the deduction 
allowed at any time under section 2053 or 2054.



Sec. 1.642(g)-2  Deductions included.

    It is not required that the total deductions, or the total amount of 
any deduction, to which section 642(g) is applicable be treated in the 
same way. One deduction or portion of a deduction may be allowed for 
income tax purposes if the appropriate statement is filed, while another 
deduction or portion is allowed for estate tax purposes. Section 642(g) 
has no application to deductions for taxes, interest, business expenses, 
and other items accrued at the date of a decedent's death so that they 
are allowable as a deduction under section 2053(a)(3) for estate tax 
purposes as claims against the estate, and are also allowable under 
section 691(b) as deductions in respect of a decedent for income tax 
purposes. However, section 642(g) is applicable to deductions for 
interest, business expenses, and other items not accrued at the date of 
the decedent's death so that they are allowable as deductions for estate 
tax purposes only as administration expenses under section 2053(a)(2). 
Although deductible under section 2053(a)(3) in determining the value of 
the taxable estate of a decedent, medical, dental, etc., expenses of a 
decedent which are paid by the estate of the decedent are not deductible 
in computing the taxable income of the estate. See section 213(d) and 
the regulations thereunder for rules relating to the deductibility of 
such expenses in computing the taxable income of the decedent.



Sec. 1.642(h)-1  Unused loss carryovers on termination of an estate or trust.

    (a) If, on the final termination of an estate or trust, a net 
operating loss carryover under section 172 or a capital loss carryover 
under section 1212 would be allowable to the estate or trust in a 
taxable year subsequent to the taxable year of termination but for the 
termination, the carryover or carryovers are allowed under section 
642(h)(1) to the beneficiaries succeeding to the property of the estate 
or trust. See Sec. 1.641(b)-3 for the determination of when an estate or 
trust terminates.

[[Page 48]]

    (b) The net operating loss carryover and the capital loss carryover 
are the same in the hands of a beneficiary as in the estate or trust, 
except that the capital loss carryover in the hands of a beneficiary 
which is a corporation is a short-term loss irrespective of whether it 
would have been a long-term or short-term capital loss in the hands of 
the estate or trust. The net operating loss carryover and the capital 
loss carryover are taken into account in computing taxable income, 
adjusted gross income, and the tax imposed by section 56 (relating to 
the minimum tax for tax preferences). The first taxable year of the 
beneficiary to which the loss shall be carried over is the taxable year 
of the beneficiary in which or with which the estate or trust 
terminates. However, for purposes of determining the number of years to 
which a net operating loss, or a capital loss under paragraph (a) of 
Sec. 1.1212-1, may be carried over by a beneficiary, the last taxable 
year of the estate or trust (whether or not a short taxable year) and 
the first taxable year of the beneficiary to which a loss is carried 
over each constitute a taxable year, and, in the case of a beneficiary 
of an estate or trust that is a corporation, capital losses carried over 
by the estate or trust to any taxable year of the estate or trust 
beginning after December 31, 1963, shall be treated as if they were 
incurred in the last taxable year of the estate or trust (whether or not 
a short taxable year). For the treatment of the net operating loss 
carryover when the last taxable year of the estate or trust is the last 
taxable year to which such loss can be carried over, see Sec. 1.642(h)-
2.
    (c) The application of this section may be illustrated by the 
following examples:

    Example 1. A trust distributes all of its assets to A, the sole 
remainderman, and terminates on December 31, 1954, when it has a capital 
loss carryover of $10,000 attributable to transactions during the 
taxable year 1952. A, who reports on the calendar year basis, otherwise 
has ordinary income of $10,000 and capital gains of $4,000 for the 
taxable year 1954. A would offset his capital gains of $4,000 against 
the capital loss of the trust and, in addition, deduct under section 
1211(b) $1,000 on his return for the taxable year 1954. The balance of 
the capital loss carryover of $5,000 may be carried over only to the 
years 1955 and 1956, in accordance with paragraph (a) of Sec. 1.1212-1 
and the rules of this section.
    Example 2. A trust distributes all of its assets, one-half to A, an 
individual, and one-half to X, a corporation, who are the sole 
remaindermen, and terminates on December 31, 1966, when it has a short-
term capital loss carryover of $20,000 attributable to short-term 
transactions during the taxable years 1964, 1965, and 1966, and a long-
term capital loss carryover of $12,000 attributable to long-term 
transactions during such years. A, who reports on the calendar year 
basis, otherwise has ordinary income of $15,000, short-term capital 
gains of $4,000 and long-term capital gains of $6,000, for the taxable 
year 1966. A would offset his short-term capital gains of $4,000 against 
his share of the short-term capital loss carryover of the trust, $10,000 
(one-half of $20,000), and, in addition deduct under section 1211(b) 
$1,000 (treated as a short-term gain for purposes of computing capital 
loss carryovers) on his return for the taxable year 1966. A would also 
offset his long-term capital gains of $6,000 against his share of the 
long-term capital loss carryover of the trust, $6,000 (one-half of 
$12,000). The balance of A's share of the short-term capital loss 
carryover, $5,000, may be carried over as a short-term capital loss 
carryover to the succeeding taxable year and treated as a short-term 
capital loss incurred in such succeeding taxable year in accordance with 
paragraph (b) of Sec. 1.1212-1. X, which also reports on the calendar 
year basis, otherwise has capital gains of $4,000 for the taxable year 
1966. X would offset its capital gains of $4,000 against its share of 
the capital loss carryovers of the trust, $16,000 (the sum of one-half 
of each the short-term carryover and the long-term carryover of the 
trust), on its return for the taxable year 1966. The balance of X's 
share, $12,000, may be carried over as a short-term capital loss only to 
the years 1967, 1968, 1969, and 1970, in accordance with paragraph (a) 
of Sec. 1.1212-1 and the rules of this section.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6828, 30 FR 
7805, June 17, 1965; T.D. 7564, 43 FR 40495, Sept. 12, 1978]



Sec. 1.642(h)-2  Excess deductions on termination of an estate or trust.

    (a) If, on the termination of an estate or trust, the estate or 
trust has for its last taxable year deductions (other than the 
deductions allowed under section 642(b) (relating to personal exemption) 
or section 642(c) (relating to charitable contributions)) in excess of 
gross income, the excess is allowed under section 642(h)(2) as a 
deduction to the

[[Page 49]]

beneficiaries succeeding to the property of the estate or trust. The 
deduction is allowed only in computing taxable income and must be taken 
into account in computing the items of tax preference of the 
beneficiary; it is not allowed in computing adjusted gross income. The 
deduction is allowable only in the taxable year of the beneficiary in 
which or with which the estate or trust terminates, whether the year of 
termination of the estate or trust is of normal duration or is a short 
taxable year. For example: Assume that a trust distributes all of its 
assets to B and terminates on December 31, 1954. As of that date it has 
excess deductions, for example, because of corpus commissions on 
termination, of $18,000. B, who reported on the calendar year basis, 
could claim the $18,000 as a deduction for the taxable year 1954. 
However, if the deduction (when added to his other deductions) exceeds 
his gross income, the excess may not be carried over to the year 1955 or 
subsequent years.
    (b) A deduction based upon a net operating loss carryover will never 
be allowed to beneficiaries under both paragraphs (1) and (2) of section 
642(h). Accordingly, a net operating loss deduction which is allowable 
to beneficiaries succeeding to the property of the estate or trust under 
the provisions of paragraph (1) of section 642(h) cannot also be 
considered a deduction for purposes of paragraph (2) of section 642(h) 
and paragraph (a) of this section. However, if the last taxable year of 
the estate or trust is the last year in which a deduction on account of 
a net operating loss may be taken, the deduction, to the extent not 
absorbed in that taxable year by the estate or trust, is considered an 
``excess deduction'' under section 642(h)(2) and paragraph (a) of this 
section.
    (c) Any item of income or deduction, or any part thereof, which is 
taken into account in determining the net operating loss or capital loss 
carryover of the estate or trust for its last taxable year shall not be 
taken into account again in determining excess deductions on termination 
of the trust or estate within the meaning of section 642(h)(2) and 
paragraph (a) of this section (see example in Sec. 1.642(h)-5).

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 7564, 43 FR 
40495, Sept. 12, 1978]



Sec. 1.642(h)-3  Meaning of ``beneficiaries succeeding to the property of the estate or trust''.

    (a) The phrase beneficiaries succeeding to the property of the 
estate or trust means those beneficiaries upon termination of the estate 
or trust who bear the burden of any loss for which a carryover is 
allowed, or of any excess of deductions over gross income for which a 
deduction is allowed, under section 642(h).
    (b) With reference to an intestate estate, the phrase means the 
heirs and next of kin to whom the estate is distributed, or if the 
estate is insolvent, to whom it would have been distributed if it had 
not been insolvent. If a decedent's spouse is entitled to a specified 
dollar amount of property before any distribution to other heirs and 
next of kin, and if the estate is less than that amount, the spouse is 
the beneficiary succeeding to the property of the estate or trust to the 
extent of the deficiency in amount.
    (c) In the case of a testate estate, the phrase normally means the 
residuary beneficiaries (including a residuary trust), and not specific 
legatees or devisees, pecuniary legatees, or other nonresiduary 
beneficiaries. However, the phrase does not include the recipient of a 
specific sum of money even though it is payable out of the residue, 
except to the extent that it is not payable in full. On the other hand, 
the phrase includes a beneficiary (including a trust) who is not 
strictly a residuary beneficiary but whose devise or bequest is 
determined by the value of the decedent's estate as reduced by the loss 
or deductions in question. Thus the phrase includes:
    (1) A beneficiary of a fraction of a decedent's net estate after 
payment of debts, expenses, etc.;
    (2) A nonresiduary legatee or devisee, to the extent of any 
deficiency in his legacy or devise resulting from the insufficiency of 
the estate to satisfy it in full;

[[Page 50]]

    (3) A surviving spouse receiving a fractional share of an estate in 
fee under a statutory right of election, to the extent that the loss or 
deductions are taken into account in determining the share. However, the 
phrase does not include a recipient of dower or curtesy, or any income 
beneficiary of the estate or trust from which the loss or excess 
deduction is carried over.
    (d) The principles discussed in paragraph (c) of this section are 
equally applicable to trust beneficiaries. A remainderman who receives 
all or a fractional share of the property of a trust as a result of the 
final termination of the trust is a beneficiary succeeding to the 
property of the trust. For example, if property is transferred to pay 
the income to A for life and then to pay $10,000 to B and distribute the 
balance of the trust corpus to C, C and not B is considered to be the 
succeeding beneficiary except to the extent that the trust corpus is 
insufficient to pay B $10,000.



Sec. 1.642(h)-4  Allocation.

    The carryovers and excess deductions to which section 642(h) applies 
are allocated among the beneficiaries succeeding to the property of an 
estate or trust (see Sec. 1.642(h)-3) proportionately according to the 
share of each in the burden of the loss or deductions. A person who 
qualified as a beneficiary succeeding to the property of an estate or 
trust with respect to one amount and does not qualify with respect to 
another amount is a beneficiary succeeding to the property of the estate 
or trust as to the amount with respect to which he qualifies. The 
application of this section may be illustrated by the following example:

    Example. A decedent's will leaves $100,000 to A, and the residue of 
his estate equally to B and C. His estate is sufficient to pay only 
$90,000 to A, and nothing to B and C. There is an excess of deductions 
over gross income for the last taxable year of the estate or trust of 
$5,000, and a capital loss carryover of $15,000, to both of which 
section 642(h) applies. A is a beneficiary succeeding to the property of 
the estate to the extent of $10,000, and since the total of the excess 
of deductions and the loss carryover is $20,000, A is entitled to the 
benefit of one half of each item, and the remaining half is divided 
equally between B and C.



Sec. 1.642(h)-5  Example.

    The application of section 642(h) may be illustrated by the 
following example:

    Example. (a) A decedent dies January 31, 1954, leaving a will which 
provides for distributing all her estate equally to A and an existing 
trust for B. The period of administration of the estate terminates on 
December 31, 1954, at which time all the property of the estate is 
distributed to A and the trust. A reports his income for tax purposes on 
a calendar year basis, and the trust reports its income on the basis of 
a fiscal year ending August 31. During the period of the administration, 
the estate has the following items of income and deductions:

Taxable interest...........................................   $2,500
Business income............................................    3,000
                                                            ------------
    Total..................................................    5,500
                                                            ============
Business expenses (including administrative expense            5,000
 allocable to business income).............................
Administrative expenses and corpus commissions not             9,800
 allocable to business income..............................
                                                            ------------
    Total deductions.......................................   14,800
 

    It also has a capital loss of $5,000.
    (b) Under section 642(h)(1), an unused net operating loss carryover 
of the estate on termination of $2,000 will be allowable to: A to the 
extent of $1,000 for his taxable year 1954 and the next four taxable 
years in accordance with section 172; and to the trust to the extent of 
$1,000 for its taxable year ending August 31, 1955, and its next four 
taxable years. The amount of the net operating loss carryover is 
computed as follows:

Deductions of estate for 1954...........................     $14,800
Less adjustment under section 172(d)(4) (deductions not        7,300
 attributable to a trade or business ($9,800) allowable
 only to extent of gross income not derived from such
 trade or business ($2,500))............................
                                                         ---------------
  Deductions as adjusted................................       7,500
Gross income of estate for 1954.........................       5,500
                                                         ---------------
  Net operating loss of estate for 1954.................       2,000
(No deduction for capital loss of $5,000 under section
 172(d)(2))
 


Neither A nor the trust will be allowed to carry back any part of the 
net operating loss made available to them under section 642(h)(1).
    (c) Under section 642(h)(2), excess deductions of the estate of 
$7,300 will be allowed as a deduction to A to the extent of $3,650 for

[[Page 51]]

the calendar year 1954 and to the trust to the extent of $3,650 for the 
taxable year ending August 31, 1955. The deduction of $7,300 for 
administrative expenses and corpus commissions is the only amount which 
was not taken into account in determining the net operating loss of the 
estate ($9,800 of such expenses less $2,500 taken into account).
    (d) Under section 642(h)(1), there will be allowable to A a capital 
loss carryover of $2,500 for his taxable year 1954 and for his next 4 
taxable years in accordance with paragraph (a) of Sec. 1.1212-1. There 
will be allowable to the trust a similar capital loss carryover of 
$2,500 for its taxable year ending August 31, 1955, and its next 4 
taxable years (but see paragraph (b) of Sec. 1.643(a)-3), (for taxable 
years beginning after December 31, 1963, net capital losses may be 
carried over indefinitely by beneficiaries other than corporations, in 
accordance with Sec. 1.642(h)-1 and paragraph (b) of Sec. 1.1212-1.)
    (e) The carryovers and excess deductions are not allowable directly 
to B, the trust beneficiary, but to the extent the distributable net 
income of the trust is reduced by the carryovers and excess deductions B 
may receive indirect benefit.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6828, 30 FR 
7806, June 17, 1965]



Sec. 1.642(i)-1  Certain distributions by cemetery perpetual care funds.

    (a) In general. Section 642 (i) provides that amounts distributed 
during taxable years ending after December 31, 1963, by a cemetery 
perpetual care fund trust for the care and maintenance of gravesites 
shall be treated as distributions solely for purposes of sections 651 
and 661. The deduction for such a distribution is allowable only if the 
fund is taxable as a trust. In addition, the fund must have been created 
pursuant to local law by a taxable cemetery corporation (as defined in 
Sec. 1.642 (i)-2 (a)) expressly for the care and maintenance of cemetery 
property. A care fund will be treated as having been created by a 
taxable cemetery corporation (``cemetery'') if the distributee cemetery 
is taxable, even though the care fund was created by the distributee 
cemetery in a year that it was tax-exempt or by a predecessor of such 
distributee cemetery which was tax-exempt in the year the fund was 
established. The deduction is the amount of the distributions during the 
fund's taxable year to the cemetery corporation for such care and 
maintenance that would be otherwise allowable under section 651 or 661, 
but in no event is to exceed the limitations described in paragraphs (b) 
and (c) of this section. The provisions of this paragraph shall not have 
the effect of extending the period of limitations under section 6511.
    (b) Limitation on amount of deduction. The deduction in any taxable 
year may not exceed the product of $5 multiplied by the aggregate number 
of gravesites sold by the cemetery corporation before the beginning of 
the taxable year of the trust. In general, the aggregate number of 
gravesites sold shall be the aggregate number of interment rights sold 
by the cemetery corporation (including gravesites sold by the cemetery 
before a care fund trust law was enacted). In addition, the number of 
gravesites sold shall include gravesites used to make welfare burials. 
Welfare burials and pre-trust fund law gravesites shall be included only 
to the extent that the cemetery cares for and maintain such gravesites. 
For purposes of this section, a gravesite is sold as of the date on 
which the purchaser acquires interment rights enforceable under local 
law. The aggregate number of gravesites includes only those gravesites 
with respect to which the fund or taxable cemetery corporation has an 
obligation for care and maintenance.
    (c) Requirements for deductibility of distributions for care and 
maintenance--(1) Obligation for care and maintenance. A deduction is 
allowed only for distributions for the care and maintenance of 
gravesites with respect to which the fund or taxable cemetery 
corporation has an obligation for care and maintenance. Such obligation 
may be established by the trust instrument, by local law, or by the 
cemetery's practice of caring for and maintaining gravesites, such as 
welfare burial plots or gravesites sold before the enactment of a care 
fund trust law.
    (2) Distribution actually used for care and maintenance. The amount 
of a deduction otherwise allowable for care fund distributions in any 
taxable year shall not exceed the portion of such distributions expended 
by the distributee cemetery corporation for the care and maintenance of 
gravesites before the end of the fund's taxable year

[[Page 52]]

following the taxable year in which it makes the distributions. A 6-
month extension of time for filing the trust's return may be obtained 
upon request under section 6081. The failure of a cemetery to expend the 
care fund's distributions within a reasonable time before the due date 
for filing the return will be considered reasonable grounds for granting 
a 6-month extension of time for section 6081. For purposes of this 
paragraph, any amount expended by the care fund directly for the care 
and maintenance of gravesites shall be treated as an additional care 
fund distribution which is expended on the day of distribution by the 
cemetery corporation. The fund shall be allowed a deduction for such 
direct expenditure in the fund's taxable year during which the 
expenditure is made.
    (3) Example. The application of paragraph (c)(2) of this section is 
illustrated by the following example:

    A, a calendar-year perpetual care fund trust, meeting the 
requirements of section 642 (i), makes a $10,000 distribution on 
December 1, 1978 to X, a taxable cemetery corporation operating on a May 
31 fiscal year. From this $10,000 distribution, the cemetery makes the 
following expenditures for the care and maintenance of gravesites: 
$2,000 on December 20, 1978; $4,000 on June 1, 1979; $2,000 on October 
1, 1979; and $1,000 on April 1, 1980. In addition, as authorized by the 
trust instrument, A itself makes a direct $1,000 payment to a contractor 
on September 1, 1979 for qualifying care and maintenance work performed. 
As a result of these transactions, A will be allowed an $8,000 deduction 
for its 1978 taxable year attributable to the cemetery's expenditures, 
and a $1,000 deduction for its 1979 taxable year attributable to the 
fund's direct payment. A will not be allowed a deduction for its 1978 
taxable year for the cemetery's expenditure of either the $1,000 
expended on April 1, 1980 or the remaining unspent portion of the 
original $10,000 distribution. The trustee may request a 6-month 
extension in order to allow the fund until October 15, 1979 to file its 
return for 1978.

    (d) Certified statement made by cemetery officials to fund trustees. 
A trustee of a cemetery perpetual care fund shall not be held personally 
liable for civil or criminal penalties resulting from false statements 
on the trust's tax return to the extent that such false statements 
resulted from the trustee's reliance on a certified statement made by 
the cemetery specifying the number of interments sold by the cemetery or 
the amount of the cemetery's expenditures for care and maintenance. The 
statement must indicate the basis upon which the cemetery determined 
what portion of its expenditures were made for the care and maintenance 
of gravesites. The statement must be certified by an officer or employee 
of the cemetery who has the responsibility to make or account for 
expenditures for care and maintenance. A copy of this statement shall be 
retained by the trustee along with the trust's return and shall be made 
available for inspection upon request by the Secretary. This paragraph 
does not relieve the care fund trust of its liability to pay the proper 
amount of tax due and to maintain adequate records to substantiate each 
of its deductions, including the deduction provided in section 642(i) 
and this section.

[T.D. 7651, 44 FR 61596, Oct. 26, 1979]



Sec. 1.642(i)-2  Definitions.

    (a) Taxable cemetery corporation. For purposes of section 642(i) and 
this section, the meaning of the term taxable cemetery corporation is 
limited to a corporation (within the meaning of section 7701(a)(3)) 
engaged in the business of owning and operating a cemetery that either 
(1) is not exempt from Federal tax, or (2) is subject to tax under 
section 511 with respect to its cemetery activities.
    (b) Pursuant to local law. A cemetery perpetual care fund is created 
pursuant to local law if:
    (1) The governing law of the relevant jurisdiction (State, district, 
county, parish, etc.) requires or expressly permits the creation of such 
a fund, or
    (2) The legally enforceable bylaws or contracts of a taxable 
cemetery corporation require a perpetual care fund.
    (c) Gravesite. A gravesite is any type of interment right that has 
been sold by a cemetery, including, but not limited to, a burial lot, 
mausoleum, lawn crypt, niche, or scattering ground. For purposes of 
Sec. 1.642 (i)-1, the term gravesites includes only those gravesites 
with respect to which the care fund or cemetery has an obligation for 
care and maintenance within the meaning of Sec. 1.642 (i)-1(c)(1).

[[Page 53]]

    (d) Care and maintenance. For purposes of section 642(i) and this 
section, the term care and maintenance of gravesite shall be generally 
defined in accordance with the definition of such term under the local 
law pursuant to which the cemetery perpetual care fund is created. If 
the applicable local law contains no definition, care and maintenance of 
gravesites may include the upkeep, repair and preservation of those 
portions of cemetery property in which gravesites (as defined in 
paragraph (c) of this section) have been sold; including gardening, road 
maintenance, water line and drain repair and other activities reasonably 
necessary to the preservation of cemetery property. The costs for care 
and maintenance include, but are not limited to, expenditures for the 
maintenance, repair and replacement of machinery, tools, and equipment, 
compensation of employees performing such work, insurance premiums, 
reasonable payments for employees' pension and other benefit plans, and 
the costs of maintaining necessary records of lot ownership, transfers 
and burials. However, if some of the expenditures of the cemetery 
corporation, such as officers' salaries, are for both care and 
maintenance and for other purposes, the expenditures must be properly 
allocated between care and maintenance of gravesites and the other 
purposes. Only those expenditures that are properly allocable to those 
portions of cemetery property in which gravesites have been sold qualify 
as expenditures for care and maintenance of gravesites.

[T.D. 7651, 44 FR 61596, Oct. 26, 1979]



Sec. 1.643(a)-0  Distributable net income; deduction for distributions; in general.

    The term distributable net income has no application except in the 
taxation of estates and trusts and their beneficiaries. It limits the 
deductions allowable to estates and trusts for amounts paid, credited, 
or required to be distributed to beneficiaries and is used to determine 
how much of an amount paid, credited, or required to be distributed to a 
beneficiary will be includible in his gross income. It is also used to 
determine the character of distributions to the beneficiaries. 
Distributable net income means for any taxable year, the taxable income 
(as defined in section 63) of the estate or trust, computed with the 
modifications set forth in Secs. 1.643(a)-1 through 1.643(a)-7.



Sec. 1.643(a)-1  Deduction for distributions.

    The deduction allowable to a trust under section 651 and to an 
estate or trust under section 661 for amounts paid, credited, or 
required to be distributed to beneficiaries is not allowed in the 
computation of distributable net income.



Sec. 1.643(a)-2  Deduction for personal exemption.

    The deduction for personal exemption under section 642(b) is not 
allowed in the computation of distributable net income.



Sec. 1.643(a)-3  Capital gains and losses.

    (a) Except as provided in Sec. 1.643(a)-6, gains from the sale or 
exchange of capital assets are ordinarily excluded from distributable 
net income, and are not ordinarily considered as paid, credited, or 
required to be distributed to any beneficiary unless they are:
    (1) Allocated to income under the terms of the governing instrument 
or local law by the fiduciary on its books or by notice to the 
beneficiary,
    (2) Allocated to corpus and actually distributed to beneficiaries 
during the taxable year, or
    (3) Utilized (pursuant to the terms of the governing instrument or 
the practice followed by the fiduciary) in determining the amount which 
is distributed or required to be distributed.

However, if capital gains are paid, permanently set aside, or to be used 
for the purposes specified in section 642(c), so that a charitable 
deduction is allowed under that section in respect of the gains, they 
must be included in the computation of distributable net income.
    (b) Losses from the sale or exchange of capital assets are excluded 
in computing distributable net income except to the extent that they 
enter into the determination of any capital gains that are paid, 
credited, or required to be distributed to any beneficiary during the

[[Page 54]]

taxable year (but see Sec. 1.642(h)-1 with respect to capital loss 
carryovers in the year of final termination of an estate or trust).
    (c) The deduction under section 1202 (relating to capital gains) is 
taken into account in computing distributable net income to the extent 
that it is allocable to capital gains which are paid, permanently set 
aside, or to be used for the purposes specified in section 642(c). See 
the regulations under section 642(c) to determine the extent to which 
the amount so paid, permanently set aside, or to be used consists of 
capital gains. The deduction for capital gains provided in section 1202 
insofar as it is allocable to the remainder of the capital gains is not 
taken into account.
    (d) The application of this section may be illustrated by the 
following examples:

    Example 1. A trust is created to pay the income to A for life, with 
a discretionary power in the trustee to invade principal for A's 
benefit. In the taxable year, $10,000 is realized from the sale of 
securities at a profit, and $10,000 in excess of income is distributed 
to A. The capital gain is not allocated to A by the trustee. During the 
taxable year the trustee received and paid out $5,000 of dividends. No 
other cash was received or on hand during the taxable year. The capital 
gain will not ordinarily be included in distributable net income. 
However, if the trustee follows a regular practice of distributing the 
exact net proceeds of the sale of trust property, capital gains will be 
included in distributable net income.
    Example 2. The result in example 1 would have been the same if the 
trustee had been directed to pay an annuity of $15,000 a year to A 
(instead of being directed to pay the income to A with a discretionary 
power to distribute principal).
    Example 3. The trustee of a trust containing Blackacre and other 
property is directed to hold Blackacre for ten years, and then sell it 
and distribute its proceeds to A. Any capital gain realized from the 
sale of Blackacre will be included in distributable net income.
    Example 4. A trust instrument directs that the income shall be paid 
to A, and that the principal shall be distributed to A when he reaches 
age 35. All capital gains realized in the year of termination will be 
included in distributable net income. (See Sec. 1.641(b)-3 for the 
determination of the year of final termination and the taxability of 
capital gains realized after the terminating event and before final 
distribution.)
    Example 5. If in example 4 the trustee had been directed to 
distribute half of the principal to A when he reached 35, the capital 
gain would be included in distributable net income (and in the 
distribution to A) to the extent the capital gain is allocable to A 
under the governing instrument and local law. Thus, if the trust assets 
consisted entirely of 100 shares of corporation M stock and the trustee 
sold half the shares and distributed the proceeds to A, the entire 
capital gain would normally be considered as allocated to A. On the 
other hand, if the trustee sold all the shares and distributed half the 
proceeds to A, half the capital gain would be considered as allocable to 
A.
    Example 6. If in example 4 the trustee had been directed to pay 
$10,000 to B before making distribution to A, no portion of the capital 
gains would be allocable to B since the distribution to B is a gift of a 
specific sum of money within the meaning of section 663(a)(1).

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6989, 34 FR 
731, Jan. 17, 1969; T.D. 7357, 40 FR 23742, June 2, 1975]



Sec. 1.643(a)-4  Extraordinary dividends and taxable stock dividends.

    In the case solely of a trust which qualifies under subpart B 
(section 651 and following) as a ``simple trust,'' there are excluded 
from distributable net income extraordinary dividends (whether paid in 
cash or in kind) or taxable stock dividends which are not distributed or 
credited to a beneficiary because the fiduciary in good faith determines 
that under the terms of the governing instrument and applicable local 
law such dividends are allocable to corpus. See section 665(e), 
paragraph (b) of Sec. 1.665(e)-1, and paragraph (b) of Sec. 1.665(e)-1A 
for the treatment of such dividends upon subsequent distribution.

[T.D. 7204, 37 FR 17134, Aug. 25, 1972]



Sec. 1.643(a)-5  Tax-exempt interest.

    (a) There is included in distributable net income any tax-exempt 
interest excluded from gross income under section 103, reduced by 
disbursements allocable to such interest which would have been 
deductible under section 212 but for the provisions of section 265 
(relating to disallowance of deductions allocable to tax-exempt income).
    (b) If the estate or trust is allowed a charitable contributions 
deduction

[[Page 55]]

under section 642(c), the amounts specified in paragraph (a) of this 
section and Sec. 1.643(a)-6 are reduced by the portion deemed to be 
included in income paid, permanently set aside, or to be used for the 
purposes specified in section 642(c). If the governing instrument 
specifically provides as to the source out of which amounts are paid, 
permanently set aside, or to be used for such charitable purposes, the 
specific provisions control. In the absence of specific provisions in 
the governing instrument, an amount to which section 642(c) applies is 
deemed to consist of the same proportion of each class of the items of 
income of the estate or trust as the total of each class bears to the 
total of all classes. For illustrations showing the determination of the 
character of an amount deductible under section 642(c), see examples 1 
and 2 of Sec. 1.662(b)-2 and paragraph (e) of Sec. 1.662(c)-4.



Sec. 1.643(a)-6  Income of foreign trust.

    (a) Distributable net income of a foreign trust. In the case of a 
foreign trust (see section 7701(a)(31)), the determination of 
distributable net income is subject to the following rules:
    (1) There is included in distributable net income the amounts of 
gross income from sources without the United States, reduced by 
disbursements allocable to such foreign income which would have been 
deductible but for the provisions of section 265 (relating to 
disallowance of deductions allocable to tax exempt income). See 
paragraph (b) of Sec. 1.643(a)-5 for rules applicable when an estate or 
trust is allowed a charitable contributions deduction under section 
642(c).
    (2) In the case of a distribution made by a trust before January 1, 
1963, for purposes of determining the distributable net income of the 
trust for the taxable year in which the distribution is made, or for any 
prior taxable year;
    (i) Gross income from sources within the United States is determined 
by taking into account the provisions of section 894 (relating to income 
exempt under treaty); and
    (ii) Distributable net income is determined by taking into account 
the provisions of section 643(a)(3) (relating to exclusion of certain 
gains from the sale or exchange of capital assets).
    (3) In the case of a distribution made by a trust after December 31, 
1962, for purposes of determining the distributable net income of the 
trust for any taxable year, whether ending before January 1, 1963, or 
after December 31, 1962;
    (i) Gross income (for the entire foreign trust) from sources within 
the United States is determined without regard to the provisions of 
section 894 (relating to income exempt under treaty);
    (ii) In respect of a foreign trust created by a U.S. person (whether 
such trust constitutes the whole or only a portion of the entire foreign 
trust) (see section 643(d) and Sec. 1.643(d)-1), there shall be included 
in gross income gains from the sale or exchange of capital assets 
reduced by losses from such sales or exchanges to the extent such losses 
do not exceed gains from such sales or exchanges, and the deduction 
under section 1202 (relating to deduction for capital gains) shall not 
be taken into account; and
    (iii) In respect of a foreign trust created by a person other than a 
U.S. person (whether such trust constitutes the whole or only a portion 
of the entire foreign trust) (see section 643(d) and Sec. 1.643(d)-1), 
distributable net income is determined by taking into account all of the 
provisions of section 643 except section 643(a)(6)(C) (relating to gains 
from the sale or exchange of capital assets by a foreign trust created 
by a U.S. person).
    (b) Examples. The application of this section, showing the 
computation of distributable net income for one of the taxable years for 
which such a computation must be made, may be illustrated by the 
following examples:

    Example 1. (1) A trust is created in 1952 under the laws of Country 
X by the transfer to a trustee in Country X of money and property by a 
U.S. person. The entire trust constitutes a foreign trust created by a 
U.S. person. The income from the trust corpus is to be accumulated until 
the beneficiary, a resident citizen of the United States who was born in 
1944, reaches the age of 21 years, and upon his reaching that age, the 
corpus and accumulated income are to be distributed to him. The trust 
instrument provides that capital gains are to be allocated to corpus and 
are not to be paid, credited, or required to be distributed to any 
beneficiary during the

[[Page 56]]

taxable year or paid, permanently set aside, or to be used for the 
purposes specified in section 642(c). Under the terms of a tax 
convention between the United States and Country X, interest income 
received by the trust from U.S. sources is exempt from U.S. taxation. In 
1965 the corpus and accumulated income are distributed to the 
beneficiary. During the taxable year 1964, the trust has the following 
items of income, loss, and expense:

Interest on bonds of a U.S. corporation......................    $10,000
Net long-term capital gain from U.S. sources.................     30,000
Gross income from investments in Country X...................     40,000
Net short-term capital loss from U.S. sources................      5,000
Expenses allocable to gross income from investments in             5,000
 Country X...................................................
 

    (2) The distributable net income for the taxable year 1964 of the 
foreign trust created by a U.S. person, determined under section 643(a), 
is $70,000, computed as follows:

Interest on bonds of a U.S. corporation......................    $10,000
Gross income from investments in Country X...................     40,000
Net long-term capital gain from U.S. sources......    $30,000
Less: Net short-term capital loss from U.S.             5,000
 sources..........................................
                                                   ===========
Excess of net long-term capital gain over net short-term          25,000
 capital loss................................................
                                                   ------------
    Total....................................................     75,000
Less: Expenses allocable to income from investments in             5,000
 Country X...................................................
                                                   ------------
    Distributable net income.................................     70,000
 

    (3) In determining the distributable net income of $70,000, the 
taxable income of the trust is computed with the following 
modifications: No deduction is allowed for the personal exemption of the 
trust (section 643(a)(2)); the interest received on bonds of a U.S. 
corporation is included in the trust gross income despite the fact that 
such interest is exempt from U.S. tax under the provisions of the tax 
treaty between Country X and the United States (section 643(a)(6) (see 
H. Con. Res. (B)); the excess of net long-term capital gain over net 
short-term capital loss allocable to corpus is included in distributable 
net income, but such excess is not subject to the deduction under 
section 1202 (section 643(a)(6)(C)); and the amount representing gross 
income from investments in Country X is included, but such amount is 
reduced by the amount of the disbursements allocable to such income 
(section 643(a)(6)(A)).
    Example 2. (1) The facts are the same as in example 1 except that 
money or property has also been transferred to the trust by a person 
other than a U.S. person and, pursuant to the provisions of 
Sec. 1.643(d)-1, during 1964 only 60 percent of the entire trust 
constitutes a foreign trust created by a U.S. person.
    (2) The distributable net income for the taxable year 1964 of the 
foreign trust created by a U.S. person, determined under section 643(a), 
is $42,000 computed as follows:

Interest on bonds of a U.S. corporation (60 percent of            $6,000
 $10,000).....................................................
Gross income from investments in Country X (60 percent of         24,000
 $40,000).....................................................
Net long-term capital gain from U.S. sources (60       $18,000
 percent of $30,000)................................
Less: Net short-term capital loss from U.S. sources      3,000
 (60 percent of $5,000).............................
                                                     ----------
                                                                  15,000
                                                               ---------
    Total...........................................              45,000
Less: Expenses allocable to income from investments in Country     3,000
 X (60 percent of $5,000).....................................
                                                     -----------
    Distributable net income..................................    42,000
 

    (3) The distributable net income for the taxable year 1964 of the 
portion of the entire foreign trust which does not constitute a foreign 
trust created by a U.S. person, determined under section 643(a), is 
$18,000, computed as follows:

Interest on bonds of a U.S. corporation (40 percent of            $4,000
 $10,000).....................................................
Gross income from investments in Country X (40 percent of         16,000
 $40,000).....................................................
                                                               ---------
    Total.....................................................    20,000
Less: Expenses allocable to income from investments in Country     2,000
 X (40 percent of $5,000).....................................
                                                               ---------
    Distributable net income..................................    18,000
 

    (4) The distributable net income of the entire foreign trust for the 
taxable year 1964 is $60,000, computed as follows:

Distributable net income of the foreign trust created by a       $42,000
 U.S. person.................................................
Distributable net income of that portion of the entire            18,000
 foreign trust which does not constitute a foreign trust
 created by a U.S. person....................................
                                                              ----------
  Distributable net income of the entire foreign trust.......     60,000
 


It should be noted that the difference between the $70,000 distributable 
net income of the foreign trust in example 1 and the $60,000 
distributable net income of the entire foreign trust in this example is 
due to the $10,000 (40 percent of $25,000) net capital gain (capital 
gain net income for taxable years beginning after December 31, 1976) 
which under section 643(a)(3) is excluded from the distributable net 
income of that portion of the foreign trust in example 2 which does not 
constitute a foreign trust created by a U.S. person.

[T.D. 6989, 34 FR 731, Jan. 17, 1969, as amended by T.D. 7728, 45 FR 
72650, Nov. 3, 1980]



Sec. 1.643(a)-7  Dividends.

    Dividends excluded from gross income under section 116 (relating to 
partial exclusion of dividends received) are included in distributable 
net income. For this purpose, adjustments similar

[[Page 57]]

to those required by Sec. 1.643(a)-5 with respect to expenses allocable 
to tax-exempt income and to income included in amounts paid or set aside 
for charitable purposes are not made. See the regulations under section 
642(c).

[T.D. 7357, 40 FR 23742, June 2, 1975]



Sec. 1.643(a)-8  Certain distributions by charitable remainder trusts.

    (a) Purpose and scope. This section is intended to prevent the 
avoidance of the purposes of the charitable remainder trust rules 
regarding the characterizations of distributions from those trusts in 
the hands of the recipients and should be interpreted in a manner 
consistent with this purpose. This section applies to all charitable 
remainder trusts described in section 664 and the beneficiaries of such 
trusts.
    (b) Deemed sale by trust. (1) For purposes of section 664(b), a 
charitable remainder trust shall be treated as having sold, in the year 
in which a distribution of an annuity or unitrust amount is made from 
the trust, a pro rata portion of the trust assets to the extent that the 
distribution of the annuity or unitrust amount would (but for the 
application of this paragraph (b)) be characterized in the hands of the 
recipient as being from the category described in section 664(b)(4) and 
exceeds the amount of the previously undistributed
    (i) Cash contributed to the trust (with respect to which a deduction 
was allowable under section 170, 2055, 2106, or 2522); plus
    (ii) Basis in any contributed property (with respect to which a 
deduction was allowable under section 170, 2055, 2106, or 2522) that was 
sold by the trust.
    (2) Any transaction that has the purpose or effect of circumventing 
the rules in this paragraph (b) shall be disregarded.
    (3) For purposes of paragraph (b)(1) of this section, trust assets 
do not include cash or assets purchased with the proceeds of a trust 
borrowing, forward sale, or similar transaction.
    (4) Proper adjustment shall be made to any gain or loss subsequently 
realized for gain or loss taken into account under paragraph (b)(1) of 
this section.
    (c) Examples. The following examples illustrate the rules of 
paragraph (b) of this section:

    Example 1. Deemed sale by trust. Donor contributes stock having a 
fair market value of $2 million to a charitable remainder unitrust with 
a unitrust amount of 50 percent of the net fair market value of the 
trust assets and a two-year term. The stock has a total adjusted basis 
of $400,000. In Year 1, the trust receives dividend income of $20,000. 
As of the valuation date, the trust's assets have a net fair market 
value of $2,020,000 ($2 million in stock, plus $20,000 in cash). To 
obtain additional cash to pay the unitrust amount to the noncharitable 
beneficiary, the trustee borrows $990,000 against the value of the 
stock. The trust then distributes $1,010,000 to the beneficiary before 
the end of Year 1. Under section 664(b)(1), $20,000 of the distribution 
is characterized in the hands of the beneficiary as dividend income. The 
rest of the distribution, $990,000, is attributable to an amount 
received by the trust that did not represent either cash contributed to 
the trust or a return of basis in any contributed asset sold by the 
trust during Year 1. Under paragraph (b)(3) of this section, the stock 
is a trust asset because it was not purchased with the proceeds of the 
borrowing. Therefore, in Year 1, under paragraph (b)(1) of this section, 
the trust is treated as having sold $990,000 of stock and as having 
realized $792,000 of capital gain (the trust's basis in the shares 
deemed sold is $198,000). Thus, in the hands of the beneficiary, 
$792,000 of the distribution is characterized as capital gain under 
section 664(b)(2) and $198,000 is characterized as a tax-free return of 
corpus under section 664(b)(4). No part of the $990,000 loan is treated 
as acquisition indebtedness under section 514(c) because the entire loan 
has been recharacterized as a deemed sale.
    Example 2. Adjustment to trust's basis in assets deemed sold. The 
facts are the same as in Example 1. During Year 2, the trust sells the 
stock for $2,100,000. The trustee uses a portion of the proceeds of the 
sale to repay the outstanding loan, plus accrued interest. Under 
paragraph (b)(4) of this section, the trust's adjusted basis in the 
stock is $1,192,000 ($400,000 plus the $792,000 of gain recognized in 
Year 1). Therefore, the trust recognizes capital gain (as described in 
section 664(b)(2)) in Year 2 of $908,000.
    Example 3. Distribution of cash contributions. Upon the death of D, 
the proceeds of a life insurance policy on D's life are payable to T, a 
charitable remainder annuity trust. The terms of the trust provide that, 
for a period of three years commencing upon D's death, the trust shall 
pay an annuity amount equal to $x annually to A, the child of D. After 
the

[[Page 58]]

expiration of such three-year period, the remainder interest in the 
trust is to be transferred to charity Z. In Year 1, the trust receives 
payment of the life insurance proceeds and pays the appropriate pro rata 
portion of the $x annuity to A from the insurance proceeds. During Year 
1, the trust has no income. Because the entire distribution is 
attributable to a cash contribution (the insurance proceeds) to the 
trust for which a charitable deduction was allowable under section 2055 
with respect to the present value of the remainder interest passing to 
charity, the trust will not be treated as selling a pro rata portion of 
the trust assets under paragraph (b)(1) of this section. Thus, the 
distribution is characterized in A's hands as a tax-free return of 
corpus under section 664(b)(4).

    (d) Effective date. This section is applicable to distributions made 
by a charitable remainder trust after October 18, 1999.

[T.D. 8926, 66 FR 1037, Jan. 5, 2001]



Sec. 1.643(b)-1  Definition of ``income''.

    For purposes of subparts A through D, part I, subchapter J, chapter 
1 of the Code, the term income when not preceded by the words 
``taxable'', ``distributable net'', ``undistributed net'', or ``gross'', 
means the amount of income of an estate or trust for the taxable year 
determined under the terms of its governing instrument and applicable 
local law. Trust provisions which depart fundamentally from concepts of 
local law in the determination of what constitutes income are not 
recognized for this purpose. For example, if a trust instrument directs 
that all the trust income shall be paid to A, but defines ordinary 
dividends and interest as corpus, the trust will not be considered one 
which under its governing instrument is required to distribute all its 
income currently for purposes of section 642(b) (relating to the 
personal exemption) and section 651 (relating to ``simple'' trusts).



Sec. 1.643(b)-2  Dividends allocated to corpus.

    Extraordinary dividends or taxable stock dividends which the 
fiduciary, acting in good faith, determines to be allocable to corpus 
under the terms of the governing instrument and applicable local law are 
not considered ``income'' for purposes of subpart A, B, C, or D, part I, 
subchapter J, chapter 1 of the Code. See section 643(a)(4), 
Sec. 1.643(a)-4, Sec. 1.643(d)-2, section 665(e), paragraph (b) of 
Sec. 1.665(e)-1, and paragraph (b) of Sec. 1.665(e)-1A for the treatment 
of such items in the computation of distributable net income.

[T.D. 7204, 37 FR 17134, Aug. 25, 1972]



Sec. 1.643(c)-1  Definition of ``beneficiary''.

    An heir, legatee, or devisee (including an estate or trust) is a 
beneficiary. A trust created under a decedent's will is a beneficiary of 
the decedent's estate. The following persons are treated as 
beneficiaries:
    (a) Any person with respect to an amount used to discharge or 
satisfy that person's legal obligation as that term is used in 
Sec. 1.662(a)-4.
    (b) The grantor of a trust with respect to an amount applied or 
distributed for the support of a dependent under the circumstances 
specified in section 677(b) out of corpus or out of other than income 
for the taxable year of the trust.
    (c) The trustee or cotrustee of a trust with respect to an amount 
applied or distributed for the support of a dependent under the 
circumstances specified in section 678(c) out of corpus or out of other 
than income for the taxable year of the trust.



Sec. 1.643(d)-1  Definition of ``foreign trust created by a United States person''.

    (a) In general. For the purpose of part I, subchapter J, chapter 1 
of the Internal Revenue Code, the term foreign trust created by a United 
States person means that portion of a foreign trust (as defined in 
section 7701(a)(31)) attributable to money or property (including all 
accumulated earnings, profits, or gains attributable to such money or 
property) of a U.S. person (as defined in section 7701(a)(30)) 
transferred directly or indirectly, or under the will of a decedent who 
at the date of his death was a U.S. citizen or resident, to the foreign 
trust. A foreign trust created by a person who is not a U.S. person, to 
which a U.S. person transfers his money or property, is a foreign trust 
created by a U.S. person to the extent that the fair market value of the 
entire foreign trust is attributable to money or property of the U.S. 
person transferred to the foreign trust. The transfer

[[Page 59]]

of money or property to the foreign trust may be made either directly or 
indirectly by a U.S. person. Transfers of money or property to a foreign 
trust do not include transfers of money or property pursuant to a sale 
or exchange which is made for a full and adequate consideration. 
Transfers to which section 643(d) and this section apply are transfers 
of money or property which establish or increase the corpus of a foreign 
trust. The rules set forth in this section with respect to transfers by 
a U.S. person to a foreign trust also are applicable with respect to 
transfers under the will of a decedent who at the date of his death was 
a U.S. citizen or resident. For provisions relating to the information 
returns which are required to be filed with respect to the creation of 
or transfers to foreign trusts, see section 6048 and Sec. 16.3-1 of this 
chapter (Temporary Regulations under the Revenue Act of 1962).
    (b) Determination of a foreign trust created by a U.S. person--(1) 
Transfers of money or property only by a U.S. person. If all the items 
of money or property constituting the corpus of a foreign trust are 
transferred to the trust by a U.S. person, the entire foreign trust is a 
foreign trust created by a U.S. person.
    (2) Transfers of money or property by both a U.S. person and a 
person other than a U.S. person; transfers required to be treated as 
separate funds. Where there are transfers of money or property by both a 
U.S. person and a person other than a U.S. person to a foreign trust, 
and it is necessary, either by reason of the provisions of the governing 
instrument of the trust or by reason of some other requirement such as 
local law, that the trustee treat the entire foreign trust as composed 
of two separate funds, one consisting of the money or property 
(including all accumulated earnings, profits, or gains attributable to 
such money or property) transferred by the U.S. person and the other 
consisting of the money or property (including all accumulated earnings, 
profits, or gains attributable to such money or property) transferred by 
the person other than the U.S. person, the foreign trust created by a 
U.S. person shall be the fund consisting of the money or property 
transferred by the U.S. person. See example 1 in paragraph (c) of this 
section.
    (3) Transfers of money or property by both a U.S. person and a 
person other than a U.S. person; transfers not required to be treated as 
separate funds. Where the corpus of a foreign trust consists of money or 
property transferred to the trust (simultaneously or at different times) 
by a U.S. person and by a person who is not a U.S. person, the foreign 
trust created by a U.S. person within the meaning of section 643(d) is 
that portion of the entire foreign trust which, immediately after any 
transfer of money or property to the trust, the fair market value of 
money or property (including all accumulated earnings, profits, or gains 
attributable to such money or property) transferred to the foreign trust 
by the U.S. person bears to the fair market value of the corpus 
(including all accumulated earnings, profits, or gains attributable to 
the corpus) of the entire foreign trust.
    (c) Examples. The provisions of paragraph (b) of this section may be 
illustrated by the following examples. Example 1 illustrates the 
application of paragraph (b)(2) of this section. Example (2) illustrates 
the application of paragraph (b)(3) of this section in a case where 
there is no provision in the governing instrument of the trust or 
elsewhere which would require the trustee to treat the corpus of the 
trust as composed of more than one fund.

    Example 1. On January 1, 1964, the date of the creation of a foreign 
trust, a U.S. person transfers to it stock of a U.S. corporation with a 
fair market value of $50,000. On the same day, a person other than a 
U.S. person transfers to the trust Country X bonds with a fair market 
value of $25,000. The governing instrument of the trust provides that 
the income from the stock of the U.S. corporation is to be accumulated 
until A, a U.S. beneficiary, reaches the age of 21 years, and upon his 
reaching that age, the stock and income accumulated thereon are to be 
distributed to him. The governing instrument of the trust further 
provides that the income from the Country X bonds is to be accumulated 
until B, a U.S. beneficiary, reaches the age of 21 years, and upon his 
reaching that age, the bonds and income accumulated thereon are to be 
distributed to him. To comply with the provisions of the governing 
instrument of the trust that the income from the stock of

[[Page 60]]

the U.S. corporation be accumulated and distributed to A and that the 
income from the Country X bonds be accumulated and distributed to B, it 
is necessary that the trustee treat the transfers as two separate funds. 
The fund consisting of the stock of the U.S. corporation is a foreign 
trust created by a U.S. person.
    Example 2. On January 1, 1964, the date of the creation of a foreign 
trust, a U.S. person transfers to it property having a fair market value 
of $60,000 and a person other than a U.S. person transfers to it 
property having a fair market value of $40,000. Immediately after these 
transfers, the foreign trust created by a U.S. person is 60 percent of 
the entire foreign trust, determined as follows:

$60,000 (Value of property transferred by U.S. person)/$100,000 (Value 
of entire property transferred to trust)=60 percent


The undistributed net income for the calendar years 1964 and 1965 is 
$20,000 which increases the value of the entire foreign trust to 
$120,000 ($100,000 plus $20,000). Accordingly, as of December 31, 1965, 
the portion of the foreign trust created by the U.S. person is $72,000 
(60 percent of $120,000). On January 1, 1966, the U.S. person transfers 
property having a fair market value of $40,000 increasing the value of 
the entire foreign trust to $160,000 ($120,000 plus $40,000) and 
increasing the value of the portion of the foreign trust created by the 
U.S. person to $112,000 ($72,000 plus $40,000). Immediately, after this 
transfer, the foreign trust created by the U.S. person is 70 percent of 
the entire foreign trust, determined as follows:

$112,000 (Value of property transferred by U.S. person)/$160,000 (Value 
of entire property transferred to the trust)=70 percent

[T.D. 6989, 34 FR 732, Jan. 17, 1969]



Sec. 1.643(d)-2  Illustration of the provisions of section 643.

    (a) The provisions of section 643 may be illustrated by the 
following example:

    Example. (1) Under the terms of the trust instrument, the income of 
a trust is required to be currently distributed to W during her life. 
Capital gains are allocable to corpus and all expenses are charges 
against corpus. During the taxable year the trust has the following 
items of income and expenses:

Dividends from domestic corporations.........................    $30,000
Extraordinary dividends allocated to corpus by the trustee in     20,000
 good faith..................................................
Taxable interest.............................................     10,000
Tax-exempt interest..........................................     10,000
Long-term capital gains......................................     10,000
Trustee's commissions and miscellaneous expenses allocable to      5,000
 corpus......................................................
 

    (2) The ``income'' of the trust determined under section 643(b) 
which is currently distributable to W is $50,000, consisting of 
dividends of $30,000, taxable interest of $10,000, and tax-exempt 
interest of $10,000. The trustee's commissions and miscellaneous 
expenses allocable to tax-exempt interest amount to $1,000 (10,000/
50,000x $5,000).
    (3) The ``distributable net income'' determined under section 643(a) 
amounts to $45,000, computed as follows:

Dividends from domestic corporations.........................    $30,000
Taxable interest.............................................     10,000
Nontaxable interest...............................    $10,000
Less: Expenses allocable thereto..................      1,000
                                                   -----------
                                                                   9,000
                                                   ------------
    Total....................................................     49,000
Less: Expenses ($5,000 less $1,000 allocable to tax-exempt         4,000
 interest)...................................................
                                                   ------------
    Distributable net income.................................     45,000
 


In determining the distributable net income of $45,000, the taxable 
income of the trust is computed with the following modifications: No 
deductions are allowed for distributions to W and for personal exemption 
of the trust (section 643(a) (1) and (2)); capital gains allocable to 
corpus are excluded and the deduction allowable under section 1202 is 
not taken into account (section 643(a)(3)): the extraordinary dividends 
allocated to corpus by the trustee in good faith are excluded (sections 
643(a)(4)); and the tax- exempt interest (as adjusted for expenses) and 
the dividend exclusion of $50 are included) section 643(a) (5) and (7)).

    (b) See paragraph (c) of the example in Sec. 1.661(c)-2 for the 
computation of distributable net income where there is a charitable 
contributions deduction.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960. Redesignated, T.D. 6989, 34 FR 
732, Jan. 1, 1969]



Sec. 1.643(h)-1  Distributions by certain foreign trusts through intermediaries.

    (a) In general--(1) Principal purpose of tax avoidance. Except as 
provided in paragraph (b) of this section, for purposes of part I of 
subchapter J, chapter 1 of the Internal Revenue Code, and section 6048, 
any property (within the meaning of paragraph (f) of this section) that 
is transferred to a United States person by another person (an 
intermediary) who has received property from a foreign trust will be 
treated as property transferred directly by the foreign trust to the 
United States person if the intermediary received the

[[Page 61]]

property from the foreign trust pursuant to a plan one of the principal 
purposes of which was the avoidance of United States tax.
    (2) Principal purpose of tax avoidance deemed to exist. For purposes 
of paragraph (a)(1) of this section, a transfer will be deemed to have 
been made pursuant to a plan one of the principal purposes of which was 
the avoidance of United States tax if the United States person--
    (i) Is related (within the meaning of paragraph (e) of this section) 
to a grantor of the foreign trust, or has another relationship with a 
grantor of the foreign trust that establishes a reasonable basis for 
concluding that the grantor of the foreign trust would make a gratuitous 
transfer (within the meaning of Sec. 1.671-2(e)(2)) to the United States 
person;
    (ii) Receives from the intermediary, within the period beginning 
twenty-four months before and ending twenty-four months after the 
intermediary's receipt of property from the foreign trust, either the 
property the intermediary received from the foreign trust, proceeds from 
such property, or property in substitution for such property; and
    (iii) Cannot demonstrate to the satisfaction of the Commissioner 
that--
    (A) The intermediary has a relationship with the United States 
person that establishes a reasonable basis for concluding that the 
intermediary would make a gratuitous transfer to the United States 
person;
    (B) The intermediary acted independently of the grantor and the 
trustee of the foreign trust;
    (C) The intermediary is not an agent of the United States person 
under generally applicable United States agency principles; and
    (D) The United States person timely complied with the reporting 
requirements of section 6039F, if applicable, if the intermediary is a 
foreign person.
    (b) Exceptions--(1) Nongratuitous transfers. Paragraph (a) of this 
section does not apply to the extent that either the transfer from the 
foreign trust to the intermediary or the transfer from the intermediary 
to the United States person is a transfer that is not a gratuitous 
transfer within the meaning of Sec. 1.671-2(e)(2).
    (2) Grantor as intermediary. Paragraph (a) of this section does not 
apply if the intermediary is the grantor of the portion of the trust 
from which the property that is transferred is derived. For the 
definition of grantor, see Sec. 1.671-2(e).
    (c) Effect of disregarding intermediary--(1) General rule. Except as 
provided in paragraph (c)(2) of this section, the intermediary is 
treated as an agent of the foreign trust, and the property is treated as 
transferred to the United States person in the year the property is 
transferred, or made available, by the intermediary to the United States 
person. The fair market value of the property transferred is determined 
as of the date of the transfer by the intermediary to the United States 
person. For purposes of section 665(d)(2), the term taxes imposed on the 
trust includes any income, war profits, and excess profits taxes imposed 
by any foreign country or possession of the United States on the 
intermediary with respect to the property transferred.
    (2) Exception. If the Commissioner determines, or if the taxpayer 
can demonstrate to the satisfaction of the Commissioner, that the 
intermediary is an agent of the United States person under generally 
applicable United States agency principles, the property will be treated 
as transferred to the United States person in the year the intermediary 
receives the property from the foreign trust. The fair market value of 
the property transferred will be determined as of the date of the 
transfer by the foreign trust to the intermediary. For purposes of 
section 901(b), any income, war profits, and excess profits taxes 
imposed by any foreign country or possession of the United States on the 
intermediary with respect to the property transferred will be treated as 
having been imposed on the United States person.
    (3) Computation of gross income of intermediary. If property is 
treated as transferred directly by the foreign trust to a United States 
person pursuant to this section, the fair market value of such property 
is not taken into account in computing the gross income of the 
intermediary (if otherwise required to be taken into account by

[[Page 62]]

the intermediary but for paragraph (a) of this section).
    (d) Transfers not in excess of $10,000. This section does not apply 
if, during the taxable year of the United States person, the aggregate 
fair market value of all property transferred to such person from all 
foreign trusts either directly or through one or more intermediaries 
does not exceed $10,000.
    (e) Related parties. For purposes of this section, a United States 
person is treated as related to a grantor of a foreign trust if the 
United States person and the grantor are related for purposes of section 
643(i)(2)(B), with the following modifications--
    (1) For purposes of applying section 267 (other than section 267(f)) 
and section 707(b)(1), ``at least 10 percent'' is used instead of ``more 
than 50 percent'' each place it appears; and
    (2) The principles of section 267(b)(10), using ``at least 10 
percent'' instead of ``more than 50 percent,'' apply to determine 
whether two corporations are related.
    (f) Definition of property. For purposes of this section, the term 
property includes cash.
    (g) Examples. The following examples illustrate the rules of this 
section. In each example, FT is an irrevocable foreign trust that is not 
treated as owned by any other person and the fair market value of the 
property that is transferred exceeds $10,000. The examples are as 
follows:

    Example 1. Principal purpose of tax avoidance. FT was created in 
1980 by A, a nonresident alien, for the benefit of his children and 
their descendants. FT's trustee, T, determines that 1000X of accumulated 
income should be distributed to A's granddaughter, B, who is a resident 
alien. Pursuant to a plan with a principal purpose of avoiding the 
interest charge that would be imposed by section 668, T causes FT to 
make a gratuitous transfer (within the meaning of Sec. 1.671-2(e)(2)) of 
1000X to I, a foreign person. I subsequently makes a gratuitous transfer 
of 1000X to B. Under paragraph (a)(1) of this section, FT is deemed to 
have made an accumulation distribution of 1000X directly to B.
    Example 2. United States person unable to demonstrate that 
intermediary acted independently. GM and her daughter, M, are both 
nonresident aliens. M's daughter, D, is a resident alien. GM creates and 
funds FT for the benefit of her children. On July 1, 2001, FT makes a 
gratuitous transfer of XYZ stock to M. M immediately sells the XYZ stock 
and uses the proceeds to purchase ABC stock. On January 1, 2002, M makes 
a gratuitous transfer of the ABC stock to D. D is unable to demonstrate 
that M acted independently of GM and the trustee of FT in making the 
transfer to D. Under paragraph (a)(2) of this section, FT is deemed to 
have distributed the ABC stock to D. Under paragraph (c)(1) of this 
section, M is treated as an agent of FT, and the distribution is deemed 
to have been made on January 1, 2002.
    Example 3. United States person demonstrates that specified 
conditions are satisfied. Assume the same facts as in Example 2, except 
that M receives 1000X cash from FT instead of XYZ stock. M gives 1000X 
cash to D on January 1, 2002. Also assume that M receives annual income 
of 5000X from her own investments and that M has given D 1000X at the 
beginning of each year for the past ten years. Based on this and 
additional information provided by D, D demonstrates to the satisfaction 
of the Commissioner that M has a relationship with D that establishes a 
reasonable basis for concluding that M would make a gratuitous transfer 
to D, that M acted independently of GM and the trustee of FT, that M is 
not an agent of D under generally applicable United States agency 
principles, and that D timely complied with the reporting requirements 
of section 6039F. FT will not be deemed under paragraph (a)(2) of this 
section to have made a distribution to D.
    Example 4. Transfer to United States person less than 24 months 
before transfer to intermediary. Several years ago, A, a nonresident 
alien, created and funded FT for the benefit of his children and their 
descendants. A has a close friend, C, who also is a nonresident alien. 
A's granddaughter, B, is a resident alien. On December 31, 2001, C makes 
a gratuitous transfer of 1000X to B. On January 15, 2002, FT makes a 
gratuitous transfer of 1000X to C. B is unable to demonstrate that C has 
a relationship with B that would establish a reasonable basis for 
concluding that C would make a gratuitous transfer to B or that C acted 
independently of A and the trustee of FT in making the transfer to B. 
Under paragraph (a)(2) of this section, FT is deemed to have distributed 
1000X directly to B. Under paragraph (c)(1) of this section, C is 
treated as an agent of FT, and the distribution is deemed to have been 
made on December 31, 2001.
    Example 5. United States person receives property in substitution 
for property transferred to intermediary. GM and her son, S, are both 
nonresident aliens. S's daughter, GD, is a resident alien. GM creates 
and funds FT for the benefit of her children and their descendants. On 
July 1, 2001, FT makes a gratuitous transfer of ABC stock with a fair 
market value of approximately 1000X to S. On January 1, 2002, S makes a 
gratuitous

[[Page 63]]

transfer of DEF stock with a fair market value of approximately 1000X to 
GD. GD is unable to demonstrate that S acted independently of GM and the 
trustee of FT in transferring the DEF stock to GD. Under paragraph 
(a)(2) of this section, FT is deemed to have distributed the DEF stock 
to GD. Under paragraph (c)(1) of this section, S is treated as an agent 
of FT, and the distribution is deemed to have been made on January 1, 
2002.
    Example 6. United States person receives indirect loan from foreign 
trust. Several years ago, A, a nonresident alien, created and funded FT 
for the benefit of her children and their descendants. A's daughter, B, 
is a resident alien. B needs funds temporarily while she is starting up 
her own business. If FT were to loan money directly to B, section 643(i) 
would apply. FT deposits 500X with FB, a foreign bank, on June 30, 2001. 
On July 1, 2001, FB loans 400X to B. Repayment of the loan is guaranteed 
by FT's 500X deposit. B is unable to demonstrate to the satisfaction of 
the Commissioner that FB has a relationship with B that establishes a 
reasonable basis for concluding that FB would make a loan to B or that 
FB acted independently of A and the trustee of FT in making the loan. 
Under paragraph (a)(2) of this section, FT is deemed to have loaned 400X 
directly to B on July 1, 2001. Under paragraph (c)(1) of this section, 
FB is treated as an agent of FT. For the treatment of loans from foreign 
trusts, see section 643(i).
    Example 7. United States person demonstrates that specified 
conditions are satisfied. GM, a nonresident alien, created and funded FT 
for the benefit of her children and their descendants. One of GM's 
children is M, who is a resident alien. During the year 2001, FT makes a 
gratuitous transfer of 500X to M. M reports the 500X on Form 3520 as a 
distribution received from a foreign trust. During the year 2002, M 
makes a gratuitous transfer of 400X to her son, S, who also is a 
resident alien. M files a Form 709 treating the gratuitous transfer to S 
as a gift. Based on this and additional information provided by S, S 
demonstrates to the satisfaction of the Commissioner that M has a 
relationship with S that establishes a reasonable basis for concluding 
that M would make a gratuitous transfer to S, that M acted independently 
of GM and the trustee of FT, and that M is not an agent of S under 
generally applicable United States agency principles. FT will not be 
deemed under paragraph (a)(2) of this section to have made a 
distribution to S.M
    Example 8. Intermediary as agent of trust; increase in FMV. A, a 
nonresident alien, created and funded FT for the benefit of his children 
and their descendants. On December 1, 2001, FT makes a gratuitous 
transfer of XYZ stock with a fair market value of 85X to B, a 
nonresident alien. On November 1, 2002, B sells the XYZ stock to a third 
party in an arm's length transaction for 100X in cash. On November 1, 
2002, B makes a gratuitous transfer of 98X to A's grandson, C, a 
resident alien. C is unable to demonstrate to the satisfaction of the 
Commissioner that B acted independently of A and the trustee of FT in 
making the transfer. Under paragraph (a)(2) of this section, FT is 
deemed to have made a distribution directly to C. Under paragraph (c)(1) 
of this section, B is treated as an agent of FT, and FT is deemed to 
have distributed 98X to C on November 1, 2002.
    Example 9. Intermediary as agent of United States person; increase 
in FMV. Assume the same facts as in Example 8, except that the 
Commissioner determines that B is an agent of C under generally 
applicable United States agency principles. Under paragraph (c)(2) of 
this section, FT is deemed to have distributed 85X to C on December 1, 
2001. C must take the gain of 15X into account in the year 2002.
    Example 10. Intermediary as agent of trust; decrease in FMV. Assume 
the same facts as in Example 8, except that the value of the XYZ stock 
on November 1, 2002, is only 80X. Instead of selling the XYZ stock to a 
third party and transferring cash to C, B transfers the XYZ stock to C 
in a gratuitous transfer. Under paragraph (c)(1) of this section, FT is 
deemed to have distributed XYZ stock with a value of 80X to C on 
November 1, 2002.
    Example 11. Intermediary as agent of United States person; decrease 
in FMV. Assume the same facts as in Example 10, except that the 
Commissioner determines that B is an agent of C under generally 
applicable United States agency principles. Under paragraph (c)(2) of 
this section, FT is deemed to have distributed XYZ stock with a value of 
85X to C on December 1, 2001.

    (h) Effective date. The rules of this section are applicable to 
transfers made to United States persons after August 10, 1999.

[T.D. 8831, 64 FR 43272, Aug. 10, 1999, as amended by T.D. 8890, 65 FR 
41332, July 5, 2000]

    pooled income fund actuarial tables applicable before may 1, 1999



Sec. 1.642(c)-6A  Valuation of charitable remainder interests for which the valuation date is before May 1, 1999.

    (a) Valuation of charitable remainder interests for which the 
valuation date is before January 1, 1952. There was no provision for the 
qualification of pooled income funds under section 642 until 1969. See 
Sec. 20.2031-7A(a) of this chapter (Estate Tax Regulations) for the 
determination of the present value of a

[[Page 64]]

charitable remainder interest created before January 1, 1952.
    (b) Valuation of charitable remainder interests for which the 
valuation date is after December 31, 1951, and before January 1, 1971. 
No charitable deduction is allowable for a transfer to a pooled income 
fund for which the valuation date is after the effective dates of the 
Tax Reform Act of 1969 unless the pooled income fund meets the 
requirements of section 642(c)(5). See Sec. 20.2031-7A(b) of this 
chapter (Estate Tax Regulations) for the determination of the present 
value of a charitable remainder interest for which the valuation date is 
after December 31, 1951, and before January 1, 1971.
    (c) Present value of remainder interest in the case of transfers to 
pooled income funds for which the valuation date is after December 31, 
1970, and before December 1, 1983. For the determination of the present 
value of a remainder interest in property transferred to a pooled income 
fund for which the valuation date is after December 31, 1970, and before 
December 1, 1983, see Sec. 20.2031-7A(c) of this chapter (Estate Tax 
Regulations) and former Sec. 1.642(c)-6(e) (as contained in the 26 CFR 
part 1 edition revised as of April 1, 1994).
    (d) Present value of remainder interest dependent on the termination 
of one life in the case of transfers to pooled income funds made after 
November 30, 1983, for which the valuation date is before May 1, 1989--
(1) In general. For transfers to pooled income funds made after November 
30, 1983, for which the valuation date is before May 1, 1989, the 
present value of the remainder interest at the time of the transfer of 
property to the fund is determined by computing the present value (at 
the time of the transfer) of the life income interest in the transferred 
property (as determined under paragraph (d)(2) of this section) and 
subtracting that value from the fair market value of the transferred 
property on the valuation date. The present value of a remainder 
interest that is dependent on the termination of the life of one 
individual is computed by use of Table G in paragraph (d)(4) of this 
section. For purposes of the computation under this section, the age of 
an individual is to be taken as the age of the individual at the 
individual's nearest birthday.
    (2) Present value of life income interest. The present value of the 
life income interest in property transferred to a pooled income fund 
shall be computed on the basis of:
    (i) Life contingencies determined from the values of lx that are set 
forth in Table LN of Sec. 20.2031-7A(d)(6) of this chapter (Estate Tax 
Regulations); and
    (ii) Discount at a rate of interest, compounded annually, equal to 
the highest yearly rate of return of the pooled income fund for the 3 
taxable years immediately preceding its taxable year in which the 
transfer of property to the fund is made. For purposes of this paragraph 
(d)(2), the yearly rate of return of a pooled income fund is determined 
as provided in Sec. 1.642(c)-6(c) unless the highest yearly rate of 
return is deemed to be 9 percent. For purposes of this paragraph (d)(2), 
the first taxable year of a pooled income fund is considered a taxable 
year even though the taxable year consists of less than 12 months. 
However, appropriate adjustments must be made to annualize the rate of 
return earned by the fund for that period. Where it appears from the 
facts and circumstances that the highest yearly rate of return for the 3 
taxable years immediately preceding the taxable year in which the 
transfer of property is made has been purposely manipulated to be 
substantially less than the rate of return that would otherwise be 
reasonably anticipated with the purpose of obtaining an excessive 
charitable deduction, that rate of return may not be used. In that case, 
the highest yearly rate of return of the fund is determined by treating 
the fund as a pooled income fund that has been in existence for less 
than 3 preceding taxable years. If a pooled income fund has been in 
existence less than 3 taxable years immediately preceding the taxable 
year in which the transfer of property to the fund is made, the highest 
yearly rate of return is deemed to be 9 percent.
    (3) Computation of value of remainder interest. The factor which is 
used in determining the present value of the remainder interest is the 
factor under the appropriate yearly rate of return in column (2) of 
Table G opposite the

[[Page 65]]

number in column (1) which corresponds to the age of the individual upon 
whose life the value of the remainder interest is based. If the yearly 
rate of return is a percentage which is between yearly rates of return 
for which factors are provided in Table G, a linear interpolation must 
be made. The present value of the remainder interest is determined by 
multiplying, by the factor determined under this paragraph (d)(3), the 
fair market value on the appropriate valuation date. If the yearly rate 
of return is below 2.2 percent or above 14 percent, see Sec. 1.642(c)-
6(b). This paragraph (d)(3) may be illustrated by the following example:

    Example. A, who will be 50 years old on April 15, 1985, transfers 
$100,000 to a pooled income fund on January 1, 1985, and retains a life 
income interest in such property. The highest yearly rate of return 
earned by the fund for its 3 preceding taxable years is 9.9 percent. In 
Table G the figure in column (2) opposite 50 years under 9.8 percent is 
.15653 and under 10 percent is .15257. The present value of the 
remainder interest is $15,455, computed as follows:

Factor at 9.8 percent for person aged 50......................    .15653
Factor at 10 percent for person aged 50.......................    .15257
                                                               ---------
Difference....................................................    .00396
Interpolation adjustment:
 

[GRAPHIC] [TIFF OMITTED] TC14NO91.133


Factor at 9.8 percent for person aged 50.....................    0.15653
Less:
  Interpolation adjustment...................................     .00198
                                                              ----------
  Interpolated factor........................................     .15455
                                                              ==========
Present value of remainder interest ($100,000x.15455.........    $15,455
 

    (4) Actuarial tables. The following tables shall be used in the 
application of the provisions of this section.

                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  2.2%      2.4%      2.6%      2.8%      3.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .23930    .21334    .19077    .17113    .15401
1.............................................................    .22891    .20224    .17903    .15880    .14114
2.............................................................    .23297    .20610    .18265    .16218    .14429
3.............................................................    .23744    .21035    .18669    .16600    .14787
4.............................................................    .24212    .21485    .19098    .17006    .15171
5.............................................................    .24701    .21955    .19547    .17434    .15577
6.............................................................    .25207    .22442    .20015    .17880    .16001
7.............................................................    .25726    .22944    .20497    .18342    .16441
8.............................................................    .26259    .23461    .20995    .18820    .16898
9.............................................................    .26809    .23995    .21511    .19315    .17373
10............................................................    .27373    .24544    .22043    .19828    .17865
11............................................................    .27953    .25110    .22592    .20358    .18375
12............................................................    .28546    .25690    .23156    .20904    .18902
13............................................................    .29149    .26280    .23731    .21462    .19440
14............................................................    .29757    .26877    .24312    .22026    .19986
15............................................................    .30368    .27476    .24896    .22593    .20535
16............................................................    .30978    .28075    .25481    .23161    .21085
17............................................................    .31589    .28676    .26068    .23732    .21637
18............................................................    .32204    .29280    .26659    .24306    .22193
19............................................................    .32825    .29892    .27257    .24889    .22759
20............................................................    .33457    .30514    .27867    .25484    .23336
21............................................................    .34099    .31148    .28489    .26092    .23927
22............................................................    .34751    .31794    .29124    .26712    .24532
23............................................................    .35416    .32452    .29773    .27348    .25152
24............................................................    .36096    .33127    .30439    .28002    .25791
25............................................................    .36793    .33821    .31124    .28676    .26452
26............................................................    .37509    .34535    .31832    .29374    .27136
27............................................................    .38244    .35269    .32560    .30093    .27844
28............................................................    .38998    .36023    .33311    .30836    .28577
29............................................................    .39767    .36795    .34080    .31599    .29330
30............................................................    .40553    .37584    .34868    .32382    .30104
31............................................................    .41352    .38388    .35672    .33182    .30897
32............................................................    .42165    .39208    .36494    .34001    .31710
33............................................................    .42993    .40044    .37333    .34839    .32543
34............................................................    .43834    .40894    .38188    .35694    .33395
35............................................................    .44689    .41760    .39060    .36567    .34266
36............................................................    .45556    .42640    .39947    .37458    .35156
37............................................................    .46435    .43534    .40850    .38365    .36063
38............................................................    .47325    .44440    .41767    .39288    .36987
39............................................................    .48226    .45358    .42696    .40225    .37927
40............................................................    .49136    .46288    .43640    .41177    .38884
41............................................................    .50056    .47228    .44596    .42143    .39856
42............................................................    .50988    .48182    .45566    .43125    .40846
43............................................................    .51927    .49145    .46547    .44120    .41850
44............................................................    .52874    .50118    .47540    .45128    .42869
45............................................................    .53828    .51099    .48543    .46146    .43899
46............................................................    .54788    .52088    .49554    .47176    .44943
47............................................................    .55754    .53083    .50574    .48216    .45998
48............................................................    .56726    .54087    .51604    .49267    .47065
49............................................................    .57703    .55097    .52642    .50327    .48144
50............................................................    .58685    .56114    .53688    .51398    .49234
51............................................................    .59670    .57136    .54740    .52476    .50333
52............................................................    .60658    .58161    .55798    .53560    .51441
53............................................................    .61647    .59189    .56859    .54651    .52556
54............................................................    .62635    .60217    .57923    .55744    .53675
55............................................................    .63622    .61246    .58987    .56840    .54798
56............................................................    .64606    .62273    .60052    .57937    .55923
57............................................................    .65589    .63299    .61117    .59037    .57052
58............................................................    .66569    .64324    .62181    .60136    .58183
59............................................................    .67546    .65347    .63246    .61237    .59316
60............................................................    .68521    .66368    .64309    .62338    .60450
61............................................................    .69492    .67388    .65372    .63440    .61587
62............................................................    .70461    .68406    .66434    .64542    .62726
63............................................................    .71425    .69420    .67494    .65643    .63865
64............................................................    .72384    .70430    .68550    .66742    .65002
65............................................................    .73336    .71434    .69602    .67837    .66137
66............................................................    .74281    .72431    .70647    .68926    .67267
67............................................................    .75216    .73419    .71684    .70009    .68391
68............................................................    .76143    .74399    .72714    .71085    .69509
69............................................................    .77060    .75370    .73735    .72153    .70622
70............................................................    .77969    .76334    .74750    .73215    .71728

[[Page 66]]

 
71............................................................    .78870    .77290    .75758    .74272    .72830
72............................................................    .79764    .78240    .76760    .75323    .73928
73............................................................    .80646    .79178    .77751    .76364    .75016
74............................................................    .81511    .80099    .78725    .77387    .76086
75............................................................    .82353    .80995    .79674    .78386    .77132
76............................................................    .83169    .81866    .80596    .79357    .78149
77............................................................    .83960    .82710    .81491    .80301    .79139
78............................................................    .84727    .83530    .82360    .81218    .80101
79............................................................    .85473    .84328    .83207    .82112    .81041
80............................................................    .86201    .85106    .84034    .82986    .81960
81............................................................    .86905    .85861    .84837    .83835    .82853
82............................................................    .87585    .86589    .85612    .84655    .83717
83............................................................    .88239    .87291    .86360    .85447    .84552
84............................................................    .88873    .87971    .87085    .86216    .85362
85............................................................    .89487    .88630    .87789    .86963    .86150
86............................................................    .90070    .89258    .88459    .87674    .86901
87............................................................    .90609    .89838    .89079    .88332    .87597
88............................................................    .91106    .90372    .89650    .88939    .88239
89............................................................    .91570    .90872    .90184    .89507    .88839
90............................................................    .92014    .91350    .90696    .90051    .89416
91............................................................    .92435    .91804    .91182    .90569    .89964
92............................................................    .92822    .92222    .91630    .91045    .90469
93............................................................    .93170    .92597    .92032    .91474    .90923
94............................................................    .93477    .92929    .92387    .91853    .91325
95............................................................    .93743    .93216    .92695    .92181    .91673
96............................................................    .93967    .93458    .92955    .92458    .91966
97............................................................    .94167    .93674    .93186    .92704    .92228
98............................................................    .94342    .93863    .93389    .92921    .92457
99............................................................     94508     94041    .93580    .93124    .92673
100...........................................................    .94672    .94218    .93770    .93326    .92887
101...........................................................    .94819    .94377    .93940    .93508    .93080
102...........................................................    .94979    .94550    .94125    .93704    .93288
103...........................................................    .95180    .94766    .94357    .93952    .93550
104...........................................................    .95377    .94979    .94585    .94194    .93806
105...........................................................    .95663    .95288    .94916    .94547    .94181
106...........................................................    .96101    .95762    .95425    .95091    .94760
107...........................................................    .96688    .96398    .96110    .95824    .95539
108...........................................................    .97569    .97354    .97141    .96928    .96717
109...........................................................    .98924    .98828    .98733    .98638    .98544
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  3.2%      3.4%      3.6%      3.8%      4.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .13908    .12603    .11461    .10461    .09583
1.............................................................    .12570    .11220    .10036    .08998    .08086
2.............................................................    .12862    .11489    .10284    .09225    .08293
3.............................................................    .13198    .11802    .10576    .09496    .08544
4.............................................................    .13559    .12141    .10893    .09793    .08821
5.............................................................    .13943    .12503    .11234    .10112    .09121
6.............................................................    .14345    .12884    .11593    .10451    .09439
7.............................................................    .14763    .13280    .11968    .10805    .09773
8.............................................................    .15198    .13694    .12360    .11176    .10125
9.............................................................    .15652    .14126    .12771    .11567    .10495
10............................................................    .16123    .14576    .13200    .11975    .10883
11............................................................    .16613    .15045    .13648    .12402    .11290
12............................................................    .17119    .15531    .14113    .12847    .11715
13............................................................    .17638    .16029    .14591    .13304    .12152
14............................................................    .18164    .16535    .15076    .13769    .12597
15............................................................    .18693    .17044    .15565    .14238    .13045
16............................................................    .19224    .17554    .16055    .14707    .13494
17............................................................    .19756    .18066    .16547    .15178    .13945
18............................................................    .20294    .18584    .17044    .15655    .14401
19............................................................    .20840    .19110    .17550    .16140    .14866
20............................................................    .21399    .19650    .18069    .16639    .15344
21............................................................    .21972    .20203    .18602    .17152    .15836
22............................................................    .22559    .20771    .19151    .17680    .16344
23............................................................    .23162    .21356    .19716    .18225    .16869
24............................................................    .23784    .21960    .20301    .18791    .17414
25............................................................    .24429    .22588    .20910    .19380    .17984
26............................................................    .25098    .23240    .21545    .19996    .18581
27............................................................    .25792    .23918    .22206    .20639    .19205
28............................................................    .26512    .24623    .22894    .21310    .19858
29............................................................    .27253    .25350    .23605    .22004    .20534
30............................................................    .28016    .26100    .24341    .22724    .21236
31............................................................    .28799    .26871    .25097    .23464    .21961
32............................................................    .29603    .27664    .25877    .24230    .22710
33............................................................    .30428    .28478    .26679    .25018    .23484
34............................................................    .31273    .29314    .27504    .25830    .24280
35............................................................    .32139    .30172    .28351    .26665    .25102
36............................................................    .33024    .31050    .29220    .27523    .25948
37............................................................    .33929    .31949    .30111    .28404    .26816
38............................................................    .34851    .32867    .31022    .29305    .27707
39............................................................    .35791    .33804    .31953    .30228    .28620
40............................................................    .36749    .34759    .32904    .31172    .29555
41............................................................    .37724    .35733    .33874    .32137    .30512
42............................................................    .38717    .36727    .34866    .33124    .31493
43............................................................    .39727    .37739    .35877    .34132    .32495
44............................................................    .40752    .38768    .36906    .35159    .33518
45............................................................    .41791    .39811    .37952    .36204    .34560
46............................................................    .42844    .40871    .39014    .37267    .35621
47............................................................    .43910    .41944    .40092    .38347    .36701
48............................................................    .44990    .43034    .41188    .39446    .37801
49............................................................    .46083    .44137    .42299    .40562    .38919
50............................................................    .47189    .45256    .43427    .41695    .40056
51............................................................    .48306    .46386    .44567    .42844    .41209
52............................................................    .49432    .47528    .45721    .44006    .42378
53............................................................    .50567    .48679    .46886    .45182    .43562
54............................................................    .51708    .49838    .48060    .46367    .44756
55............................................................    .52854    .51004    .49242    .47563    .45962
56............................................................    .54004    .52175    .50430    .48766    .47177
57............................................................    .55159    .53352    .51626    .49978    .48402
58............................................................    .56316    .54533    .52827    .51196    .49636
59............................................................    .57478    .55719    .54036    .52424    .50879
60............................................................    .58643    .56910    .55250    .53658    .52131
61............................................................    .59811    .58107    .56471    .54901    .53393
62............................................................    .60982    .59307    .57697    .56150    .54662
63............................................................    .62155    .60510    .58928    .57405    .55940
64............................................................    .63327    .61714    .60161    .58664    .57222
65............................................................    .64498    .62918    .61395    .59926    .58508
66............................................................    .65666    .64120    .62628    .61188    .59796
67............................................................    .66829    .65319    .63859    .62448    .61083
68............................................................    .67986    .66512    .65086    .63706    .62370
69............................................................    .69139    .67702    .66311    .64963    .63656
70............................................................    .70286    .68888    .67533    .66218    .64942
71............................................................    .71431    .70073    .68754    .67474    .66231
72............................................................    .72572    .71255    .69974    .68730    .67520
73............................................................    .73704    .72429    .71188    .69980    .68805
74............................................................    .74819    .73586    .72384    .71214    .70075
75............................................................    .75909    .74718    .73557    .72424    .71320
76............................................................    .76971    .75822    .74700    .73606    .72538
77............................................................    .78004    .76897    .75815    .74758    .73726
78............................................................    .79010    .77944    .76902    .75883    .74886
79............................................................    .79993    .78968    .77965    .76984    .76023

[[Page 67]]

 
80............................................................    .80955    .79971    .79008    .78064    .77140
81............................................................    .81891    .80948    .80024    .79118    .78230
82............................................................    .82796    .81894    .81009    .80140    .79288
83............................................................    .83672    .82810    .81962    .81131    .80314
84............................................................    .84525    .83700     82891    .82096    .81314
85............................................................    .85352    .84567    .83795    .83037    .82291
86............................................................    .86141    .85394    .84659    .83936    .83224
87............................................................    .86874    .86162    .85461    .84771    .84092
88............................................................    .87549    .86870    .86201    .85542    .84893
89............................................................    .88182    .87534    .86895    .86266    .85645
90............................................................    .88789    .88171    .87562     86961    .86369
91............................................................    .89367    .88779    .88198    .87625    .87059
92............................................................    .89900    .89338    .88784    .88237    .87697
93............................................................    .90379    .89842    .89312    .88788    .88271
94............................................................    .90803    .90288    .89780    .89277    .88781
95............................................................    .91171    .90675    .90185    .89701    .89223
96............................................................    .91481    .91001    .90527    .90058    .89594
97............................................................    .91757    .91291    .90831    .90376    .89926
98............................................................    .91999    .91546    .91098    .90655    .90217
99............................................................    .92227    .91786    .91349    .90917    .90490
100...........................................................    .92453    .92023    .91598    .91177    .90761
101...........................................................    .92656    .92236    .91821    .91410    .91003
102...........................................................    .92875    .92467    .92063    .91662    .91266
103...........................................................    .93152    .92758    .92367    .91980     91597
104...........................................................    .93423    .93042    .92665    .92291    .91920
105...........................................................    .93818    .93458    .93101    .92747    .92395
106...........................................................    .94430    .94104    .93779    .93457    .93127
107...........................................................     95256    .94975    .94696    .94418    .94143
108...........................................................    .96507     96298    .96090    .95883    .95676
109...........................................................    .98450    .98356    .98263    .98170    .98077
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  4.2%      4.4%      4.6%      4.8%      5.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .08811    .08132    .07534    .07006    .06539
1.............................................................    .07283    .06576    .05952    .05400    .04912
2.............................................................    .07471    .06746    .06106    .05539    .05037
3.............................................................    .07704    .06962    .06304    .05722    .05205
4.............................................................    .07962    .07202    .06528    .05930    .05398
5.............................................................    .08243    .07464    .06773    .06159    .05612
6.............................................................    .08542    .07745    .07037    .06406    .05844
7.............................................................    .08857    .08042    .07316    .06669    .06091
8.............................................................    .09189    .08355    .07612    .06948    .06354
9.............................................................    .09540    .08687    .07926    .07245    .06635
10............................................................    .09908    .09037    .08258    .07560    .06934
11............................................................    .10296    .09406    .08609    .07894    .07251
12............................................................    .10701    .09793    .08977    .08245    .07586
13............................................................    .11119    .10191    .09358    .08608    .07932
14............................................................    .11544    .10597    .09745    .08978    .08285
15............................................................    .11972    .11007    .10136    .09350    .08640
16............................................................    .12402    .11416    .10527    .09723    .08995
17............................................................    .12832    .11827    .10919    .10096    .09351
18............................................................    .13268    .12243    .11315    .10474    .09711
19............................................................    .13712    .12667    .11720    .10860    .10078
20............................................................    .14170    .13105    .12138    .11259    .10459
21............................................................    .14642    .13557    .12570    .11671    .10853
22............................................................    .15129    .14024    .13017    .12099    .11261
23............................................................    .15634    .14508    .13481    .12544    .11687
24............................................................    .16159    .15013    .13967    .13009    .12133
25............................................................    .16709    .15543    .14477    .13500    .12604
26............................................................    .17286    .16101    .15014    .14018    .13103
27............................................................    .17891    .16686    .15580    .14564    .13630
28............................................................    .18525    .17301    .16175    .15140    .14187
29............................................................    .19183    .17940    .16796    .15742    .14770
30............................................................    .19867    .18606    .17443    .16370    .15380
31............................................................    .20574    .19295    .18114    .17023    .16013
32............................................................    .21307    .20010    .18811    .17702    .16674
33............................................................    .22064    .20751    .19535    .18407    .17362
34............................................................    .22846    .21516    .20283    .19138    .18075
35............................................................    .23653    .22307    .21058    .19896    .18816
36............................................................    .24484    .23124    .21859    .20681    .19584
37............................................................    .25340    .23966    .22685    .21492    .20379
38............................................................    .26219    .24831    .23536    .22328    .21199
39............................................................    .27120    .25720    .24411    .23188    .22044
40............................................................    .28045    .26633    .25311    .24075    .22916
41............................................................    .28992    .27569    .26236    .24986    .23814
42............................................................    .29965    .28532    .27188    .25926    .24741
43............................................................    .30960    .29518    .28163    .26890    .25693
44............................................................    .31977    .30527    .29164    .27880    .26671
45............................................................    .33013    .31557    .30185    .28892    .27673
46............................................................    .34071    .32609    .31230    .29929    .28700
47............................................................    .35148    .33681    .32296    .30988    .29750
48............................................................    .36246    .34777    .33387    .32072    .30826
49............................................................    .37364    .35893    .34499    .33179    .31927
50............................................................    .38503    .37030    .35634    .34310    .33053
51............................................................    .39659    .38187    .36790    .35462    .34201
52............................................................    .40832    .39362    .37965    .36636    .35371
53............................................................    .42021    .40554    .39158    .37829    .36562
54............................................................    .43222    .41760    .40367    .39039    .37771
55............................................................    .44436    .42980    .41591    .40264    .38997
56............................................................    .45660    .44212    .42828    .41504    .40239
57............................................................    .46897    .45456    .44079    .42760    .41498
58............................................................    .48142    .46712    .45342    .44030    .42771
59............................................................    .49399    .47980    .46620    .45314    .44062
60............................................................    .50666    .49260    .47910    .46613    .45367
61............................................................    .51944    .50552    .49214    .47927    .46690
62............................................................    .53232    .51856    .50531    .49256    .48028
63............................................................    .54529    .53169    .51860    .50598    .49381
64............................................................    .55832    .54491    .53198    .51950    .50746
65............................................................    .57140    .55819    .54544    .53312    .52121
66............................................................    .58451    .57152    .55895    .54681    .53506
67............................................................    .59763    .58486    .57251    .56054    .54896
68............................................................    .61076    .59823    .58609    .57432    .56292
69............................................................    .62390    .61162    .59971    .58816    .57695
70............................................................    .63705    .62503    .61337    .60204    .59104
71............................................................    .65023    .63849    .62709    .61600    .60522
72............................................................    .66344    .65199    .64086    .63003    .61949
73............................................................    .67661    .66547    .65463    .64407    .63378
74............................................................    .68964    .67882    .66827    .65798    .64796
75............................................................    .70243    .69193    .68168    .67168    .66192
76............................................................    .71495    .70477    .69482    .68511    .67563
77............................................................    .72717    .71731    .70768    .69826    .68905
78............................................................    .73912    .72959    .72026    .71114    .70221
79............................................................    .75083    .74163    .73262    .72379    .71515
80............................................................    .76235    .75348    .74479    .73627    .72792
81............................................................    .77360    .76506    .75669    .74848    .74043
82............................................................    .78452    .77632    .76827    .76036    .75260
83............................................................    .79513    .78725    .77952    .77192    .76446
84............................................................    .80547    .79792    .79051    .78322    .77606
85............................................................    .81557    .80836    .80126    .79429    .78742
86............................................................    .82524    .81835    .81157    .80489    .79832
87............................................................    .83423    .82764    .82115    .81477    .80847
88............................................................    .84253    .83623    .83002    .82390    .81787

[[Page 68]]

 
89............................................................    .85033    .84430    .83836    .83250    .82672
90............................................................    .85784    .85208    .84639    .84079    .83525
91............................................................    .86502    .85951    .85408    .84871    .84342
92............................................................    .87164    .86638    .86118    .85605    .85098
93............................................................    .87761    .87257    .86759    .86267    .85781
94............................................................    .88290    .87806    .87327    .86854    .86386
95............................................................    .88750    .88282    .87820    .87364    .86913
96............................................................    .89136    .88683    .88236    .87793    .87355
97............................................................    .89481    .89041    .88606    .88176    .87750
98............................................................    .89783    .89354    .88930    .88511    .88096
99............................................................    .90067    .89649    .89235    .88826    .88420
100...........................................................    .90349    .89941    .89538    .89138    .88743
101...........................................................    .90600    .90202    .89807    .89416    .89029
102...........................................................    .90873    .90484    .90099    .89717    .89339
103...........................................................    .91217    .90841    .90468    .90099    .99733
104...........................................................    .91553    .91188    .90827    .90469    .90114
105...........................................................    .92047    .91701    .91358    .91018    .90680
106...........................................................    .92819    .92504    .92191    .91880    .91571
107...........................................................    .93868    .93596    .93325    .93056    .92788
108...........................................................    .95471    .95267    .95064    .94862    .94661
109...........................................................    .97985    .97893    .97801    .97710    .97619
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  5.2%      5.4%      5.6%      5.8%      6.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .06126    .05759    .05433    .05143    .04884
1.............................................................    .04480    .04096    .03754    .03450    .03179
2.............................................................    .04591    .04194    .03841    .03527    .03246
3.............................................................    .04745    .04336    .03972    .03646    .03355
4.............................................................    .04924    .04502    .04125    .03789    .03487
5.............................................................    .05124    .04689    .04300    .03952    .03639
6.............................................................    .05342    .04893    .04492    .04131    .03808
7.............................................................    .05574    .05112    .04697    .04324    .03990
8.............................................................    .05822    .05346    .04918    .04533    .04186
9.............................................................    .06089    .05598    .05156    .04759    .04400
10............................................................    .06372    .05866    .05411    .05000    .04630
11............................................................    .06673    .06153    .05684    .05260    .04877
12............................................................    .06992    .06457    .05973    .05536    .05141
13............................................................    .07322    .06772    .06274    .05824    .05415
14............................................................    .07659    .07093    .06581    .06117    .05695
15............................................................    .07998    .07417    .06890    .06411    .05976
16............................................................    .08337    .07739    .07197    .06704    .06255
17............................................................    .08675    .08062    .07504    .06996    .06533
18............................................................    .09018    .08387    .07813    .07290    .06813
19............................................................    .09367    .08720    .08130    .07591    .07099
20............................................................    .09730    .09065    .08458    .07904    .07397
21............................................................    .10106    .09423    .08800    .08229    .07707
22............................................................    .10496    .09796    .09155    .08568    .08030
23............................................................    .10903    .10185    .09526    .08923    .08368
24............................................................    .11330    .10594    .09918    .09297    .08726
25............................................................    .11782    .11028    .10334    .09696    .09108
26............................................................    .12262    .11489    .10778    .10122    .09518
27............................................................    .12771    .11979    .11249    .10576    .09955
28............................................................    .13309    .12499    .11751    .11060    .10421
29............................................................    .13873    .13044    .12278    .11570    .10914
30............................................................    .14464    .13617    .12833    .12107    .11433
31............................................................    .15079    .14214    .13412    .12668    .11977
32............................................................    .15722    .14838    .14018    .13256    .12548
33............................................................    .16391    .15490    .14652    .13873    .13147
34............................................................    .17087    .16168    .15312    .14515    .13772
35............................................................    .17811    .16874    .16001    .15186    .14426
36............................................................    .18562    .17608    .16717    .15886    .15108
37............................................................    .19340    .18369    .17462    .16613    .15819
38............................................................    .20144    .19157    .18233    .17368    .16557
39............................................................    .20974    .19971    .19031    .18149    .17322
40............................................................    .21830    .20812    .19856    .18959    .18115
41............................................................    .22714    .21681    .20710    .19797    .18938
42............................................................    .23627    .22579    .21594    .20665    .19791
43............................................................    .24566    .23505    .22505    .21562    .20673
44............................................................    .25532    .24458    .23445    .22488    .21585
45............................................................    .26522    .25436    .24410    .23440    .22523
46............................................................    .27538    .26441    .25402    .24420    .23490
47............................................................    .28579    .27471    .26421    .25427    .24484
48............................................................    .29647    .28529    .27469    .26463    .25508
49............................................................    .30739    .29613    .28543    .27527    .26562
50............................................................    .31859    .30724    .29646    .28620    .27645
51............................................................    .33001    .31860    .30774    .29740    .28755
52............................................................    .34167    .33020    .31928    .30886    .29893
53............................................................    .35355    .34204    .33105    .32057    .31056
54............................................................    .36562    .35407    .34304    .33250    .32243
55............................................................    .37787    .36630    .35523    .34465    .33452
56............................................................    .39029    .37870    .36761    .35699    .34682
57............................................................    .40289    .39130    .38020    .36956    .35935
58............................................................    .41565    .40408    .39297    .38231    .37208
59............................................................    .42859    .41704    .40595    .39529    .38504
60............................................................    .44170    .43019    .41912    .40847    .39822
61............................................................    .45499    .44353    .43250    .42187    .41164
62............................................................    .46845    .45706    .44607    .43548    .42527
63............................................................    .48208    .47076    .45984    .44930    .43913
64............................................................    .49583    .48461    .47377    .46329    .45317
65............................................................    .50971    .49859    .48784    .47744    .46738
66............................................................    .52369    .51269    .50204    .49173    .48175
67............................................................    .53774    .52688    .51635    .50614    .49625
68............................................................    .55187    .54115    .53075    .52066    .51088
69............................................................    .56607    .55551    .54526    .53530    .52563
70............................................................    .58035    .56997    .55987    .55006    .54053
71............................................................    .59474    .58455    .57463    .56498    .55559
72............................................................    .60923    .59924    .58952    .58004    .57082
73............................................................    .62375    .61398    .60446    .59518    .58613
74............................................................    .63818    .62864    .61933    .61026    .60140
75............................................................    .65240    .64310    .63402    .62515    .61649
76............................................................    .66636    .65731    .64846    .63981    .63135
77............................................................    .68005    .67124    .66263    .65420    .64596
78............................................................    .69347    .68492    .67655    .66836    .66033
79............................................................    .70669    .69840    .69028    .68232    .67452
80............................................................    .71973    .71171    .70384    .69613    .68856
81............................................................    .73252    .72477    .71717    .70970    .70237
82............................................................    .74499    .73751    .73016    .72295    .71587
83............................................................    .75713    .74992    .74284    .73589    .72905
84............................................................    .76901    .76208    .75527    .74857    .74198
85............................................................    .78067    .77402    .76748    .76104    .75471
86............................................................    .79185    .78548    .77921    .77304    .76695
87............................................................    .80228    .79617    .79015    .78423    .77838
88............................................................    .81193    .80607    .80029    .79460    .78899
89............................................................    .82102    .81540    .80985    .80438    .79899
90............................................................    .82979    .82441    .81909    .81384    .80867
91............................................................    .83820    .83304    .82795    .82292    .81796
92............................................................    .84598    .84104    .83616    .83134    .82657
93............................................................    .85300    .84826    .84357    .83894    .83437
94............................................................    .85924    .85468    .85017    .84570    .84130
95............................................................    .86466    .86025    .85589    .85158    .84732
96............................................................    .86922    .86494    .86071    .85652    .85238
97............................................................    .87329    .86913    .86501    .86093    .85690

[[Page 69]]

 
98............................................................    .87685    .87279    .86877    .86479    .86085
99............................................................    .88019    .87622    .87230    .86841    .86456
100...........................................................    .88351    .87964    .87580    .87200    .86824
101...........................................................    .88646    .88267    .87891    .87519    .87150
102...........................................................    .88965    .88594    .88227    .87863    .87503
103...........................................................    .89370    .89011    .88654    .88301    .87952
104...........................................................    .89763    .89414    .89068    .88725    .88385
105...........................................................    .90345    .90013    .89683    .89356    .89032
106...........................................................    .91265    .90961    .90658    .90358    .90060
107...........................................................    .92522    .92258    .91995    .91734    .91474
108...........................................................    .94461    .94262    .94063    .93866    .93670
109...........................................................    .97529    .97438    .97348    .97259    .97170
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  6.2%      6.4%      6.6%      6.8%      7.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .04653    .04447    .04262    .04095    .03946
1.............................................................    .02937    .02720    .02525    .02351    .02194
2.............................................................    .02994    .02769    .02567    .02385    .02221
3.............................................................    .03094    .02860    .02650    .02460    .02290
4.............................................................    .03216    .02973    .02755    .02558    .92380
5.............................................................    .03359    .03106    .02879    .02674    .02488
6.............................................................    .03517    .03255    .03019    .02805    .02612
7.............................................................    .03688    .03416    .03171    .02949    .02747
8.............................................................    .03874    .03592    .03337    .03106    .02896
9.............................................................    .04077    .03784    .03519    .03279    .03061
10............................................................    .04295    .03992    .03717    .03467    .03240
11............................................................    .04531    .04217    .03931    .03672    .03436
12............................................................    .04782    .04457    .04161    .03892    .02647
13............................................................    .05045    .04708    .04402    .04122    .03868
14............................................................    .05312    .04964    .04646    .04357    .04093
15............................................................    .05581    .05220    .04891    .04591    .04317
16............................................................    .05847    .05474    .05134    .04822    .04538
17............................................................    .06111    .05726    .05374    .05051    .04756
18............................................................    .06378    .05979    .05615    .05280    .04974
19............................................................    .06650    .06238    .05861    .05514    .05196
20............................................................    .06933    .06507    .06117    .05758    .05429
21............................................................    .07228    .06788    .06384    .06013    .05671
22............................................................    .07535    .07081    .06664    .06279    .05925
23............................................................    .07858    .07389    .06958    .06559    .06192
24............................................................    .08201    .07717    .07270    .06858    .06477
25............................................................    .08567    .08067    .07606    .07179    .06785
26............................................................    .08960    .08444    .07968    .07527    .07118
27............................................................    .09380    .08849    .08357    .07901    .07478
28............................................................    .09830    .09283    .08775    .08304    .07867
29............................................................    .10306    .09742    .09218    .08732    .08280
30............................................................    .10808    .10228    .09688    .09187    .08720
31............................................................    .11335    .10738    .10182    .09665    .09182
32............................................................    .11889    .11275    .10704    .10170    .09672
33............................................................    .12471    .11840    .11252    .10703    .10189
34............................................................    .13079    .12432    .11827    .11261    .10732
35............................................................    .13716    .13052    .12431    .11849    .11305
36............................................................    .14381    .13701    .13063    .12465    .11905
37............................................................    .15075    .14378    .13724    .13110    .12534
38............................................................    .15796    .15083    .14412    .13782    .13190
39............................................................    .16545    .15815    .15129    .14483    .13875
40............................................................    .17322    .16576    .15874    .15212    .14589
41............................................................    .18129    .17367    .16649    .15971    .15332
42............................................................    .18967    .18190    .17456    .16763    .16108
43............................................................    .19834    .19041    .18293    .17585    .16915
44............................................................    .20731    .19924    .19160    .18437    .17753
45............................................................    .21655    .20834    .20055    .19318    .18619
46............................................................    .22608    .21773    .20981    .20229    .19516
47............................................................    .23590    .22741    .21935    .21170    .20443
48............................................................    .24602    .23741    .22922    .22144    .21403
49............................................................    .25644    .24770    .23939    .23148    .22394
50............................................................    .26716    .25831    .24989    .24185    .23419
51............................................................    .27816    .26921    .26068    .25253    .24475
52............................................................    .28945    .28040    .27176    .26351    .25562
53............................................................    .30100    .29187    .28313    .27478    .26679
54............................................................    .31279    .30357    .29475    .28631    .27822
55............................................................    .32482    .31553    .30663    .29810    .28992
56............................................................    .33707    .32771    .31875    .31014    .30188
57............................................................    .34955    .34015    .33112    .32244    .31411
58............................................................    .36225    .35280    .34372    .33499    .32659
59............................................................    .37519    .36571    .35659    .34781    .33936
60............................................................    .38836    .37886    .36971    .36089    .35239
61............................................................    .40177    .39226    .38309    .37425    .36572
62............................................................    .41542    .40591    .39674    .38788    .37932
63............................................................    .42930    .41981    .41064    .40178    .39321
64............................................................    .44338    .43392    .42477    .41591    .40734
65............................................................    .45765    .44823    .43910    .43027    .42171
66............................................................    .47208    .46271    .45364    .44483    .43630
67............................................................    .48666    .47736    .46834    .45958    .45108
68............................................................    .50138    .49215    .48320    .47450    .46605
69............................................................    .51624    .50711    .49824    .48961    .48122
70............................................................    .53125    .52223    .51345    .50491    .49660
71............................................................    .54645    .53755    .52889    .52045    .51223
72............................................................    .56183    .55307    .54453    .53621    .52809
73............................................................    .57731    .56870    .56030    .55211    .54412
74............................................................    .59275    .58431    .57606    .56801    .56015
75............................................................    .60803    .59976    .59168    .58379    .57607
76............................................................    .62308    .61500    .60709    .59936    .59179
77............................................................    .63789    .63000    .62227    .61470    .60730
78............................................................    .65247    .64477    .63723    .62984    .62261
79............................................................    .66687    .65938    .65203    .64483    .63777
80............................................................    .68114    .67386    .66672    .65971    .65284
81............................................................    .69518    .68812    .68119    .67438    .66770
82............................................................    .70891    .70207    .69535    .68875    .68227
83............................................................    .72232    .71572    .70922    .70283    .69655
84............................................................    .73550    .72913    .72285    .71668    .71061
85............................................................    .74847    .74234    .73630    .73035    .72449
86............................................................    .76096    .75506    .74925    .74353    .73789
87............................................................    .77263    .76696    .76137    .75585    .75042
88............................................................    .78345    .77799    .77261    .76730    .76207
89............................................................    .79367    .78842    .78323    .77812    .77308
90............................................................    .80356    .79851    .79353    .78862    .78376
91............................................................    .81306    .80821    .80344    .79871    .79405
92............................................................    .82187    .81722    .81263    .80810    .80361
93............................................................    .82984    .82538    .82096    .81659    .81228
94............................................................    .83694    .83263    .82837    .82416    .81999
95............................................................    .84310    .83893    .83481    .83073    .82670
96............................................................    .84829    .84424    .84023    .83626    .83234
97............................................................    .85291    .84897    .84506    .84120    .83738
98............................................................    .85696    .85310    .84929    .84551    .84177
99............................................................    .86075    .85698    .85325    .84956    .84590
100...........................................................    .86452    .86084    .85719    .85357    .85000
101...........................................................    .86785    .86424    .86066    .85711    .85360
102...........................................................    .87146    .86792    .86442    .86094    .85750
103...........................................................    .87605    .87261    .86921    .86583    .86248
104...........................................................    .88047    .87713    .87382    .87053    .86727
105...........................................................    .88710    .88390    .88073    .87758    .87446
106...........................................................    .89764    .89471    .89179    .88889    .88601

[[Page 70]]

 
107...........................................................    .91216    .90960    .90705    .90451    .90199
108...........................................................    .93474    .93280    .93086    .92894    .92702
109...........................................................    .97081    .96992    .96904    .96816    .96729
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  7.2%      7.4%      7.6%      7.8%      8.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .03811    .03689    .03579    .03479    .03388
1.............................................................    .02052    .01924    .01809    .01704    .01609
2.............................................................    .02074    .01940    .01819    .01710    .01611
3.............................................................    .02136    .01996    .01870    .01756    .01652
4.............................................................    .02219    .02074    .01942    .01822    .01713
5.............................................................    .02321    .02169    .02031    .01905    .01791
6.............................................................    .02437    .02278    .02134    .02003    .01883
7.............................................................    .02565    .02399    .02248    .02111    .01986
8.............................................................    .02706    .02533    .02376    .02232    .02101
9.............................................................    .02863    .02682    .02518    .02367    .02230
10............................................................    .03034    .02846    .02674    .02517    .02373
11............................................................    .03221    .03025    .02846    .02682    .02532
12............................................................    .03424    .03219    .03032    .02861    .02704
13............................................................    .03635    .03422    .03228    .03049    .02885
14............................................................    .03851    .03630    .03427    .03240    .03069
15............................................................    .04066    .03836    .03624    .03430    .03252
16............................................................    .04277    .04037    .03817    .03615    .03429
17............................................................    .04485    .04236    .04007    .03796    .03602
18............................................................    .04693    .04434    .04196    .03976    .03773
19............................................................    .04904    .04635    .04387    .04159    .03947
20............................................................    .05125    .04845    .04588    .04349    .04129
21............................................................    .05356    .05065    .04797    .04549    .04319
22............................................................    .05597    .05295    .05016    .04758    .04519
23............................................................    .05853    .05539    .05248    .04979    .04730
24............................................................    .06124    .05799    .05497    .05217    .04957
25............................................................    .06420    .06081    .05767    .05475    .05205
26............................................................    .06739    .06388    .06062    .05758    .05476
27............................................................    .07086    .06721    .06382    .06067    .05773
28............................................................    .07460    .07082    .06730    .06402    .06097
29............................................................    .07859    .07467    .07102    .06762    .06444
30............................................................    .08284    .07879    .07500    .07146    .06815
31............................................................    .08733    .08312    .07920    .07553    .07209
32............................................................    .09207    .08773    .08366    .07986    .07629
33............................................................    .09709    .09260    .08839    .08445    .08075
34............................................................    .10237    .09773    .09338    .08929    .08546
35............................................................    .10794    .10315    .09865    .09442    .09045
36............................................................    .11379    .10884    .10420    .09983    .09572
37............................................................    .11992    .11483    .11003    .10552    .10126
38............................................................    .12633    .12108    .11614    .11148    .10708
39............................................................    .13302    .12762    .12253    .11772    .11318
40............................................................    .14000    .13445    .12921    .12425    .11957
41............................................................    .14728    .14158    .13619    .13109    .12626
42............................................................    .15490    .14904    .14350    .13825    .13328
43............................................................    .16260    .15680    .15111   .145072    .14060
44............................................................     17104    .16488    .15905    .15351    .14825
45............................................................    .17955    .17326    .16727    .16159    .15619
46............................................................    .18838    .18194    .17582    .16999    .16445
47............................................................    .19751    .19093    .18467    .17870    .17302
48............................................................    .20698    .20026    .19386    .18776    .18194
49............................................................    .21676    .20991    .20338    .19715    .19119
50............................................................    .22689    .21991    .21325    .20689    .20080
51............................................................    .23732    .23023    .22344    .21695    .21074
52............................................................    .24808    .24086    .23396    .22735    .22102
53............................................................    .25914    .25181    .24479    .23807    .24252
54............................................................    .27047    .26304    .25591    .24908    .25372
55............................................................    .28208    .27455    .26733    .26039    .25372
56............................................................    .29395    .28633    .37901    .27197    .26521
57............................................................    .30610    .29840    .29099    .28386    .27700
58............................................................    .31851    .31074    .30325    .29604    .28909
59............................................................    .33122    .32337    .31581    .30853    .30150
60............................................................    .34420    .33630    .32867    .32132    .31422
61............................................................    .35748    .34953    .34185    .33444    .32727
62............................................................    .37106    .36307    .35535    .34788    .34066
63............................................................    .38492    .37691    .36915    .36165    .35438
64............................................................    .39905    .39102    .38324    .37571    .36841
65............................................................    .41342    .40539    .39760    .39005    .38272
66............................................................    .42803    .42000    .41221    .40465    .39731
67............................................................    .44283    .43483    .42705    .41949    .41215
68............................................................    .45784    .44987    .44211    .43457    .42724
69............................................................    .47307    .46513    .45741    .44990    .44254
70............................................................    .48851    .48063    .47296    .46549    .45821
71............................................................    .50422    .49641    .48880    .48139    .47416
72............................................................    .52018    .51246    .50493    .49758    .49042
73............................................................    .53631    .52870    .52126    .51400    .50691
74............................................................    .55247    .54497    .53764    .53048    .52347
75............................................................    .56852    .56115    .55393    .54687    .53997
76............................................................    .58439    .57714    .57005    .56311    .55632
77............................................................    .60005    .59294    .58599    .57917    .57249
78............................................................    .61551    .60856    .60174    .59506    .58851
79............................................................    .63084    .62405    .61739    .61085    .60443
80............................................................    .64609    .63946    .63296    .62657    .62030
81............................................................    .66114    .65469    .64835    .64213    .63602
82............................................................    .67589    .66963    .66347    .65742    .65146
83............................................................    .60937    .68429    .67831    .67243    .66664
84............................................................    .70463    .69875    .69296    .68726    .68165
85............................................................    .71872    .71304    .70745    .70194    .69651
86............................................................    .73233    .72685    .72146    .71614    .71089
87............................................................    .74507    .73978    .73458    .72944    .72438
88............................................................    .75691    .75181    .74679    .74183    .73694
89............................................................    .76810    .76319    .75834    .75355    .74883
90............................................................    .77897    .77424    .76957    .76496    .76040
91............................................................    .78945    .78490    .78040    .77596    .77158
92............................................................    .79919    .79481    .79048    .78621    .78198
93............................................................    .80801    .80380    .79963    .79550    .79143
94............................................................    .81587    .81180    .80777    .80379    .79985
95............................................................    .82271    .81877    .81487    .81100    .80719
96............................................................    .82846    .82462    .82083    .81707    .81335
97............................................................    .83360    .82985    .82615    .82248    .81885
98............................................................    .33808    .83441    .83079    .82720    .82365
99............................................................    .84228    .83869    .83514    .83163    .82815
100...........................................................    .84645    .84294    .83947    .83603    .83262
101...........................................................    .85012    .84668    .84327    .83988    .83653
102...........................................................    .85409    .85072    .84737    .84405    .84077
103...........................................................    .85917    .85588    .85262    .84939    .84619
104...........................................................    .86403    .86083    .85765    .85449    .85136
105...........................................................    .87136    .86829    .86524    .86221    .85921
106...........................................................    .88315    .88032    .87750    .87470    .87192
107...........................................................    .89949    .89700    .89452    .89206    .88961
108...........................................................    .92511    .92321    .92132    .91944    .91757
109...........................................................    .96642    .96555    .96468    .96382    .96296
----------------------------------------------------------------------------------------------------------------


[[Page 71]]


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  8.2%      8.4%      8.6%      8.8%      9.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .03305    .03230    .03161    .03098    .03040
1.............................................................    .01523    .01444    .01372    .01307    .01247
2.............................................................    .01520    .01438    .01362    .01294    .01230
3.............................................................    .01557    .01470    .01391    .01319    .01253
4.............................................................    .01613    .01522    .01439    .01363    .01294
5.............................................................    .01687    .01591    .01504    .01424    .01351
6.............................................................    .01774    .01674    .01582    .01498    .01421
7.............................................................    .01871    .01766    .01670    .01581    .01500
8.............................................................    .01980    .01870    .01769    .01676    .01591
9.............................................................    .02104    .01989    .01883    .01785    .01695
10............................................................    .02241    .02120    .02009    .01906    .01812
11............................................................    .02394    .02267    .02150    .02042    .01943
12............................................................    .02560    .02427    .02305    .02192    .02088
13............................................................    .02734    .02595    .02467    .02349    .02240
14............................................................    .02912    .02766    .02632    .02509    .02394
15............................................................    .03087    .02935    .02795    .02666    .02546
16............................................................    .03257    .03099    .02952    .02817    .02691
17............................................................    .03423    .03257    .03104    .02962    .02831
18............................................................    .03586    .03414    .03253    .03105    .02967
19............................................................    .03752    .03572    .03404    .03249    .03105
20............................................................    .03925    .03737    .03562    .03399    .03248
21............................................................    .04107    .03910    .03727    .03557    .03398
22............................................................    .04297    .04091    .03899    .03722    .03556
23............................................................    .04498    .04283    .04083    .03897    .03723
24............................................................    .04715    .04491    .04282    .04087    .03905
25............................................................    .04953    .04718    .04499    .04295    .04105
26............................................................    .05213    .04968    .04740    .04527    .04327
27............................................................    .05499    .05243    .05005    .04782    .04573
28............................................................    .05811    .05545    .05295    .05062    .04844
29............................................................    .06146    .05868    .05608    .05365    .05136
30............................................................    .06506    .06217    .05945    .05691    .05452
31............................................................    .06888    .06586    .06303    .06038    .05789
32............................................................    .07295    .06981    .06687    .06410    .06149
33............................................................    .07728    .07401    .07095    .06806    .06535
34............................................................    .08185    .07846    .07527    .07227    .06944
35............................................................    .08671    .08319    .07988    .07675    .07380
36............................................................    .09184    .08819    .08475    .08150    .07843
37............................................................    .09725    .09347    .08989    .08652    .08332
38............................................................    .10293    .09901    .09531    .09180    .08848
39............................................................    .10889    .10483    .10099    .09736    .09391
40............................................................    .11514    .11094    .10697    .10320    .09963
41............................................................    .12168    .11735    .11324    .10934    .10564
42............................................................    .12856    .12409    .11984    .11581    .11197
43............................................................    .13574    .13113    .12675    .12258    .11862
44............................................................    .14325    .13850    .13398    .12967    .12558
45............................................................    .15105    .14616    .14150    .13706    .13283
46............................................................    .15917    .15414    .14935    .14478    .14041
47............................................................    .16760    .16244    .15751    .15280    .14831
48............................................................    .17639    .17109    .16602    .16119    .15656
49............................................................    .18551    .18007    .17488    .16991    .16516
50............................................................    .19499    .18942    .18410    .17900    .17412
51............................................................    .20480    .19911    .19366    .18844    .18343
52............................................................    .21495    .20914    .20357    .19822    .19309
53............................................................    .22544    .21951    .21381    .20835    .20309
54............................................................    .23622    .23018    .22437    .21878    .21341
55............................................................    .24732    .24116    .23524    .22954    .22406
56............................................................    .25870    .25244    .24641    .24060    .23501
57............................................................    .27040    .26404    .25791    .25200    .24630
58............................................................    .28239    .27594    .26971    .26370    .25791
59............................................................    .29472    .28817    .28186    .27576    .26987
60............................................................    .30736    .30074    .29434    .28816    .28218
61............................................................    .32035    .31365    .30718    .30092    .29486
62............................................................    .33368    .32692    .32038    .31405    .30791
63............................................................    .34735    .34054    .33394    .32754    .32134
64............................................................    .36133    .35448    .34783    .34138    .33512
65............................................................    .37562    .36873    .36204    .35554    .34924
66............................................................    .39019    .38327    .37655    .37002    .36367
67............................................................    .40502    .39809    .39134    .38479    .37841
68............................................................    .42011    .41317    .40642    .39985    .39345
69............................................................    .43547    .42854    .42179    .41522    .40882
70............................................................    .45112    .44421    .43748    .43091    .42451
71............................................................    .46711    .46023    .45352    .44698    .44059
72............................................................    .48342    .47659    .46992    .46341    .45705
73............................................................    .49998    .49321    .48660    .48014    .47382
74............................................................    .51663    .50994    .50339    .49699    .49073
75............................................................    .53322    .52661    .52014    .51381    .50762
76............................................................    .54967    .54315    .53678    .53053    .52440
77............................................................    .56595    .55954    .55326    .54710    .54106
78............................................................    .58209    .57579    .56961    .56355    .55761
79............................................................    .59814    .59196    .58590    .57995    .57410
80............................................................    .61415    .60810    .60217    .59633    .59060
81............................................................    .63001    .62410    .61830    .61260    .60699
82............................................................    .64561    .63985    .63419    .62862    .62314
83............................................................    .66095    .65535    .64983    .64441    .63907
84............................................................    .67612    .67068    .66533    .66005    .65486
85............................................................    .69116    .68589    .68070    .67559    .67055
86............................................................    .70573    .70063    .69561    .69066    .68578
87............................................................    .71939    .71446    .70961    .70481    .70009
88............................................................    .73211    .72735    .72265    .71801    .71343
89............................................................    .74417    .73956    .73501    .73053    .72609
90............................................................    .75590    .75146    .74707    .74273    .73845
91............................................................    .76724    .76296    .75873    .75454    .75041
92............................................................    .77781    .77368    .76960    .76556    .76158
93............................................................    .78740    .78342    .77948    .77558    .77173
94............................................................    .79596    .79210    .78829    .78452    .78079
95............................................................    .80341    .79967    .79597    .79231    .78869
96............................................................    .80967    .80603    .80242    .79885    .79532
97............................................................    .81526    .81170    .80818    .80470    .80125
98............................................................    .82013    .81665    .81320    .80979    .80641
99............................................................    .82470    .82129    .81791    .81456    .81125
100...........................................................    .82924    .82590    .82258    .81930    .81605
101...........................................................    .83322    .82993    .82667    .82344    .82024
102...........................................................    .83751    .83428    .83108    .82791    .82477
103...........................................................    .84301    .83986    .83674    .83365    .83058
104...........................................................    .84826    .84518    .84213    .83910    .83610
105...........................................................    .85623    .85327    .85033    .84741    .84452
106...........................................................    .86915    .86641    .86369    .86098    .85829
107...........................................................    .88718    .88476    .88236    .87997    .87759
108...........................................................    .91571    .91385    .91201    .91017    .90834
109...........................................................    .96211    .96125    .96041    .95956    .95872
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  9.2%      9.4%      9.6%      9.8%      10.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .02987    .02938    .02893    .02851    .02812
1.............................................................    .01192    .01141    .01094    .01051    .01012
2.............................................................    .01173    .01119    .01070    .01025    .00983
3.............................................................    .01192    .01136    .01084    .01036    .00992
4.............................................................    .01229    .01170    .01116    .01066    .01019
5.............................................................    .01283    .01221    .01164    .01111    .01062
6.............................................................    .01350    .01284    .01224    .01168    .01116
7.............................................................    .01425    .01356    .01292    .01233    .01178
8.............................................................    .01512    .01439    .01372    .01309    .01252

[[Page 72]]

 
9.............................................................    .01612    .01535    .01464    .01398    .01337
10............................................................    .01724    .01644    .01569    .01499    .01435
11............................................................    .01851    .01766    .01688    .01615    .01547
12............................................................    .01991    .01902    .01819    .01742    .01671
13............................................................    .02139    .02045    .01958    .01877    .01802
14............................................................    .02288    .02190    .02098    .02013    .01934
15............................................................    .02435    .02331    .02235    .02146    .02063
16............................................................    .02575    .02466    .02366    .02272    .02185
17............................................................    .02709    .02595    .02490    .02391    .02300
18............................................................    .02839    .02721    .02610    .02507    .02410
19............................................................    .02971    .02846    .02730    .02621    .02520
20............................................................    .03108    .02977    .02855    .02741    .02635
21............................................................    .03251    .03114    .02986    .02866    .02755
22............................................................    .03402    .03258    .03123    .02998    .02880
23............................................................    .03562    .03410    .03269    .03137    .03014
24............................................................    .03735    .03577    .03428    .03290    .03159
25............................................................    .03927    .03761    .03605    .03459    .03322
26............................................................    .04141    .03966    .03803    .03649    .03505
27............................................................    .04377    .04194    .04023    .03861    .03710
28............................................................    .04639    .04447    .04267    .04098    .03938
29............................................................    .04922    .04721    .04532    .04354    .04187
30............................................................    .05228    .05017    .04819    .04633    .04457
31............................................................    .05554    .05334    .05126    .04930    .04746
32............................................................    .05904    .05674    .05456    .05251    .05058
33............................................................    .06279    .06038    .05810    .05595    .05392
34............................................................    .06677    .06435    .06187    .05962    .05750
35............................................................    .07102    .06839    .06590    .06355    .06132
36............................................................    .07553    .07278    .07019    .06773    .06540
37............................................................    .08030    .07745    .07474    .07217    .06974
38............................................................    .08534    .08237    .07955    .07687    .07433
39............................................................    .09065    .08755    .08462    .08182    .07917
40............................................................    .09624    .09302    .08996    .08706    .08429
41............................................................    .10212    .09878    .09560    .09258    .08970
42............................................................    .10833    .10486    .10156    .09842    .09543
43............................................................    .11484    .11125    .10783    .10456    .10145
44............................................................    .12167    .11795    .11441    .11102    .10779
45............................................................    .12880    .12495    .12128    .11777    .11442
46............................................................    .13625    .13227    .12847    .12484    .12137
47............................................................    .14402    .13991    .13599    .13223    .12863
48............................................................    .15214    .14791    .14385    .13997    .13626
49............................................................    .16060    .15625    .15207    .14806    .14422
50............................................................    .16944    .16496    .16065    .15653    .15257
51............................................................    .17862    .17401    .16959    .16534    .16126
52............................................................    .18816    .18343    .17888    .17451    .17031
53............................................................    .19805    .19320    .18853    .18404    .17972
54............................................................    .20825    .20328    .19850    .19390    .18946
55............................................................    .21878    .21370    .20881    .20409    .19954
56............................................................    .22963    .22443    .21943    .21460    .20994
57............................................................    .24081    .23551    .23040    .22546    .22069
58............................................................    .25231    .24691    .24170    .23665    .23178
59............................................................    .26418    .25868    .25336    .24822    .24325
60............................................................    .27640    .27081    .26540    .26016    .25509
61............................................................    .28899    .28332    .27782    .27249    .26733
62............................................................    .30197    .29622    .29064    .28523    .27998
63............................................................    .31533    .30950    .30385    .29836    .29304
64............................................................    .32905    .32316    .31743    .31188    .30648
65............................................................    .34311    .33716    .33138    .32576    .32030
66............................................................    .35751    .35151    .34568    .34001    .33449
67............................................................    .37221    .36618    .36030    .35459    .34902
68............................................................    .38723    .38116    .37526    .36950    .36390
69............................................................    .40257    .39649    .39056    .38478    .37914
70............................................................    .41826    .41217    .40623    .40043    .39478
71............................................................    .43435    .42827    .42233    .41652    .41086
72............................................................    .45084    .44478    .43885    .43305    .42739
73............................................................    .46765    .46161    .45571    .44994    .44429
74............................................................    .48460    .47861    .47274    .46700    .46138
75............................................................    .50155    .49561    .48979    .48409    .47851
76............................................................    .51841    .51253    .50677    .50112    .49559
77............................................................    .53514    .52934    .52364    .51806    .51258
78............................................................    .55177    .54605    .54043    .53492    .52951
79............................................................    .56837    .56273    .55720    .55177    .54643
80............................................................    .58497    .57944    .57401    .56866    .56341
81............................................................    .60148    .59606    .59073    .58548    .58033
82............................................................    .61775    .61245    .60723    .60210    .59705
83............................................................    .63381    .62863    .62354    .61852    .61358
84............................................................    .64974    .64470    .63973    .63484    .63002
85............................................................    .66558    .66068    .65586    .65110    .64641
86............................................................    .68096    .67622    .67154    .66692    .66236
87............................................................    .69542    .69082    .68628    .68180    .67738
88............................................................    .70891    .70445    .70005    .69570    .69141
89............................................................    .72172    .71739    .71312    .70891    .70474
90............................................................    .73422    .73004    .72591    .72182    .71779
91............................................................    .74632    .74229    .73829    .73435    .73045
92............................................................    .75763    .75373    .74988    .74606    .74229
93............................................................    .76791    .76414    .76042    .75673    .75308
94............................................................    .77710    .77345    .76983    .76626    .76272
95............................................................    .78510    .78155    .77804    .77457    .77113
96............................................................    .79183    .78837    .78494    .78155    .77819
97............................................................    .79783    .79445    .79110    .78779    .78450
98............................................................    .80306    .79975    .79647    .79322    .79000
99............................................................    .80797    .80471    .80149    .79830    .79514
100...........................................................    .81283    .80964    .80648    .80335    .80025
101...........................................................    .81708    .81394    .81082    .80774    .80468
102...........................................................    .82165    .81856    .81550    .81247    .80946
103...........................................................    .82754    .82452    .82153    .81857    .81563
104...........................................................    .83312    .83017    .82723    .82433    .82144
105...........................................................    .84165    .83880    .83597    .83316    .83038
106...........................................................    .85562    .85297    .85034    .84772    .84512
107...........................................................    .87523    .87288    .87054    .86822    .86591
108...........................................................    .90652    .90471    .90291    .90111    .89932
109...........................................................    .95788    .95704    .95620    .95537    .95455
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  10.2%     10.4%     10.6%     10.8%     11.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .02776    .02743    .02712    .02682    .02655
1.............................................................    .00975    .00941    .00909    .00880    .00852
2.............................................................    .00945    .00909    .00875    .00844    .00816
3.............................................................    .00952    .00914    .00879    .00846    .00815
4.............................................................    .00976    .00936    .00899    .00865    .00832
5.............................................................    .01016    .00974    .00935    .00898    .00864
6.............................................................    .01068    .01023    .00981    .00943    .00907
7.............................................................    .01128    .01080    .01036    .00995    .00957
8.............................................................    .01198    .01148    .01101    .01058    .01017
9.............................................................    .01281    .01228    .01179    .01133    .01090
10............................................................    .01375    .01319    .01267    .01219    .01173
11............................................................    .01483    .01425    .01370    .01318    .01270
12............................................................    .01604    .01542    .01484    .01430    .01379
13............................................................    .01732    .01666    .01605    .01548    .01494
14............................................................    .01860    .01792    .01727    .01667    .01610
15............................................................    .01986    .01913    .01845    .01782    .01723
16............................................................    .02103    .02027    .01956    .01889    .01827
17............................................................    .02214    .02134    .02059    .01989    .01923

[[Page 73]]

 
18............................................................    .02320    .02236    .02157    .02084    .02014
19............................................................    .02426    .02337    .02254    .02177    .02104
20............................................................    .02536    .02442    .02355    .02273    .02197
21............................................................    .02650    .02552    .02460    .02374    .02293
22............................................................    .02770    .02667    .02570    .02479    .02394
23............................................................    .02898    .02789    .02687    .02591    .02501
24............................................................    .03037    .02923    .02815    .02714    .02619
25............................................................    .03194    .03073    .02960    .02853    .02752
26............................................................    .03370    .03243    .03123    .03010    .02904
27............................................................    .03568    .03434    .03307    .03188    .03076
28............................................................    .03789    .03647    .03514    .03389    .03271
29............................................................    .04029    .03880    .03740    .03608    .03483
30............................................................    .04291    .04135    .03987    .03848    .03716
31............................................................    .04572    .04407    .04252    .04105    .03966
32............................................................    .04875    .04702    .04538    .04384    .04237
33............................................................    .05200    .05019    .04847    .04684    .04530
34............................................................    .05548    .05358    .05177    .05006    .04843
35............................................................    .05921    .05722    .05532    .05352    .05181
36............................................................    .06319    .06110    .05911    .05722    .05543
37............................................................    .06743    .06524    .06315    .06117    .05929
38............................................................    .07191    .06962    .06744    .06536    .06338
39............................................................    .07665   .074425    .07197    .06980    .06773
40............................................................    .08166    .07916    .07677    .07450    .07233
41............................................................    .08696    .08434    .08185    .07947    .07721
42............................................................    .09257    .08985    .08725    .08477    .08239
43............................................................    .09848    .09564    .09293    .09034    .08787
44............................................................    .10470    .10175    .09893    .09623    .09365
45............................................................    .11121    .10815    .10522    .10241    .09972
46............................................................    .11805    .11486    .11182    .10890    .10610
47............................................................    .12519    .12189    .11873    .11569    .11279
48............................................................    .13269    .12927    .12600    .12285    .11983
49............................................................    .14054    .13600    .13361    .13035    .12721
50............................................................    .14876    .14511    .14160    .13822    .13497
51............................................................    .15734    .15356    .14994    .14645    .14309
52............................................................    .16627    .16238    .15864    .15504    .15156
53............................................................    .17557    .17156    .16770    .16399    .16040
54............................................................    .18519    .18107    .17710    .17327    .16957
55............................................................    .19515    .19092    .18684    .18290    .17909
56............................................................    .20544    .20110    .19691    .19286    .18894
57............................................................    .21609    .21164    .20734    .20318    .19916
58............................................................    .22707    .22252    .21811    .21385    .20972
59............................................................    .23844    .23378    .22928    .22491    .22068
60............................................................    .25018    .24543    .24082    .23636    .23203
61............................................................    .26233    .25749    .25279    .24823    .24381
62............................................................    .27490    .26996    .26517    .26052    .25601
63............................................................    .28787    .28286    .27798    .27325    .26865
64............................................................    .30124    .29615    .29120    .28639    .28171
65............................................................    .31500    .30983    .30481    .29993    .29517
66............................................................    .32912    .32390    .31881    .31386    .30904
67............................................................    .34360    .33832    .33318    .32817    .32328
68............................................................    .35843    .35311    .34791    .34285    .33791
69............................................................    .37365    .36828    .36305    .35794    .35296
70............................................................    .38925    .38386    .37860    .37346    .36844
71............................................................    .40532    .39991    .39463    .38946    .38442
72............................................................    .42185    .41644    .41115    .40597    .40091
73............................................................    .43876    .43336    .42807    .42289    .41782
74............................................................    .45588    .45050    .44522    .44005    .43499
75............................................................    .47304    .46769    .46244    .45729    .45225
76............................................................    .49016    .48485    .47963    .47451    .46949
77............................................................    .50721    .50193    .49676    .49168    .48670
78............................................................    .52419    .51898    .51385    .50882    .50388
79............................................................    .54119    .53604    .53097    .52600    .52111
80............................................................    .55825    .55318    .54819    .54328    .53846
81............................................................    .57526    .57027    .56536    .56053    .55578
82............................................................    .59208    .58718    .58236    .57762    .57295
83............................................................    .60871    .60392    .59920    .59455    .58997
84............................................................    .62527    .62059    .61597    .61143    .60695
85............................................................    .64179    .63723    .63273    .62830    .62393
86............................................................    .65787    .65344    .64907    .64475    .64050
87............................................................    .67302    .66871    .66446    .66026    .65612
88............................................................    .68717    .68298    .67885    .67477    .67074
89............................................................    .70063    .69656    .69255    .68858    .68466
90............................................................    .71380    .70986    .70597    .70212    .69831
91............................................................    .72659    .72278    .71901    .71528    .71160
92............................................................    .73856    .73488    .73123    .72762    .72405
93............................................................    .74947    .74590    .74236    .73887    .73541
94............................................................    .75922    .75575    .75233    .74893    .74557
95............................................................    .76773    .76436    .76102    .75772    .75445
96............................................................    .77487    .77158    .76832    .76510    .76190
97............................................................    .78125    .77803    .77485    .77169    .76856
98............................................................    .78681    .78365    .78052    .77742    .77435
99............................................................    .79201    .78891    .78583    .78279    .77977
100...........................................................    .79717    .79412    .79111    .78811    .78515
101...........................................................    .80165    .79865    .79568    .79273    .78981
102...........................................................    .80648    .80353    .80060    .79769    .79481
103...........................................................    .81271    .80982    .80695    .80411    .80129
104...........................................................    .81858    .81574    .81292    .81013    .80736
105...........................................................    .83761    .82487    .82214    .81943    .81675
106...........................................................    .84254    .83998    .83743    .83490    .83238
107...........................................................    .86362    .86133    .85906    .85681    .85456
108...........................................................    .89755    .89577    .89401    .89226    .89051
109...........................................................    .95372    .95290    .95208    .95126    .95045
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  11.2%     11.4%     11.6%     11.8%     12.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .02630    .02606    .02583    .02562    .02542
1.............................................................    .00827    .00803    .00780    .00759    .00739
2.............................................................    .00789    .00763    .00740    .00718    .00697
3.............................................................    .00787    .00760    .00736    .00712    .00690
4.............................................................    .00802    .00774    .00748    .00723    .00700
5.............................................................    .00832    .00802    .00774    .00748    .00724
6.............................................................    .00873    .00841    .00812    .00784    .00758
7.............................................................    .00921    .00888    .00856    .00827    .00799
8.............................................................    .00979    .00944    .00910    .00879    .00850
9.............................................................    .01049    .01012    .00976    .00943    .00912
10............................................................    .01131    .01091    .01053    .01018    .00985
11............................................................    .01225    .01183    .01143    .01106    .01070
12............................................................    .01331    .01286    .01244    .01205    .01168
13............................................................    .01444    .01397    .01352    .01311    .01271
14............................................................    .01558    .01508    .01461    .01417    .01375
15............................................................    .01667    .01614    .01565    .01519    .01475
16............................................................    .01768    .01713    .01661    .01612    .01566
17............................................................    .01862    .01803    .01749    .01697    .01649
18............................................................    .01949    .01888    .01831    .01776    .01725
19............................................................    .02035    .01971    .01910    .01853    .01799
20............................................................    .02124    .02056    .01992    .01932    .01875
21............................................................    .02217    .02145    .02078    .02014    .01954
22............................................................    .02313    .02238    .02166    .02099    .02035
23............................................................    .02416    .02336    .02261    .02190    .02122
24............................................................    .02529    .02445    .02365    .02290    .02218
25............................................................    .02657    .02568    .02484    .02404    .02328
26............................................................    .02804    .02710    .02620    .02536    .02456

[[Page 74]]

 
27............................................................    .02970    .02870    .02776    .02686    .02601
28............................................................    .03159    .03053    .02953    .02858    .02768
29............................................................    .03365    .03253    .03147    .03047    .02951
30............................................................    .03591    .03473    .03361    .03255    .03154
31............................................................    .03834    .03709    .03591    .03478    .03372
32............................................................    .04098    .03966    .03841    .03722    .03610
33............................................................    .04383    .04244    .04112    .03987    .03867
34............................................................    .04689    .04543    .04403    .04271    .04145
35............................................................    .05019    .04865    .04718    .04578    .04445
36............................................................    .05372    .05210    .05055    .04907    .04767
37............................................................    .05749    .05578    .05416    .05260    .05112
38............................................................    .06150    .05970    .05799    .05636    .05480
39............................................................    .06575    .06387    .06207    .06035    .05871
40............................................................    .07026    .06828    .06639    .06459    .06286
41............................................................    .07504    .07297    .07099    .06909    .06728
42............................................................    .08013    .07796    .07589    .07390    .07200
43............................................................    .08550    .08323    .08106    .07898    .07699
44............................................................    .09118    .08881    .08654    .08437    .08228
45............................................................    .09714    .09467    .09230    .09003    .08784
46............................................................    .10341    .10084    .09837    .09599    .09371
47............................................................    .10999    .10731    .10473    .10226    .09988
48............................................................    .11693    .11414    .11145    .10888    .10639
49............................................................    .12420    .12130    .11852    .11583    .11325
50............................................................    .13185    .12884    .12595    .12316    .12047
51............................................................    .13985    .13674    .13373    .13084    .12805
52............................................................    .14822    .14499    .14188    .13888    .13598
53............................................................    .15695    .15361    .15039    .14729    .14428
54............................................................    .16601    .16256    .15924    .15602    .15292
55............................................................    .17542    .17186    .16843    .16511    .16190
56............................................................    .18516    .18150    .17796    .17454    .17122
57............................................................    .19527    .19150    .18786    .18433    .18091
58............................................................    .20573    .20186    .19811    .19448    .19096
59............................................................    .21659    .21262    .20877    .20504    .20142
60............................................................    .22784    .22377    .21982    .21599    .21227
61............................................................    .23952    .23535    .23131    .22738    .22357
62............................................................    .25163    .24737    .24324    .23922    .23531
63............................................................    .26418    .25984    .25561    .25151    .24751
64............................................................    .27716    .27273    .26842    .26423    .26015
65............................................................    .29054    .28604    .28165    .27738    .27322
66............................................................    .30434    .29976    .29530    .29096    .28672
67............................................................    .31852    .31388    .30935    .30494    .30063
68............................................................    .33310    .32840    .32381    .31933    .31496
69............................................................    .34809    .34334    .33870    .33417    .32975
70............................................................    .36353    .35874    .35405    .34948    .34500
71............................................................    .37948    .37466    .36994    .36532    .36081
72............................................................    .39595    .39111    .38636    .38172    .37718
73............................................................    .41286    .40801    .40325    .39859    .39403
74............................................................    .43004    .42518    .42042    .41575    .41118
75............................................................    .44730    .44245    .43770    .43304    .42846
76............................................................    .46457    .45974    .45500    .45035    .44579
77............................................................    .48181    .47700    .47229    .46766    .46311
78............................................................    .49903    .49426    .48958    .48497    .48045
79............................................................    .51631    .51159    .50694    .50238    .49789
80............................................................    .53371    .52905    .52446    .51994    .51550
81............................................................    .55110    .54650    .54197    .53752    .53313
82............................................................    .56835    .56382    .55937    .55497    .55065
83............................................................    .58546    .58101    .57663    .57231    .56806
84............................................................    .60253    .59817    .59388    .58965    .58547
85............................................................    .61961    .61536    .61116    .60703    .60294
86............................................................    .63630    .63215    .62806    .62402    .62004
87............................................................    .65203    .64800    .64401    .64007    .63619
88............................................................    .66676    .66282    .65894    .65510    .65131
89............................................................    .68079    .67696    .67318    .66944    .66574
90............................................................    .69455    .69084    .68716    .68353    .67993
91............................................................    .70795    .70435    .70078    .69726    .69377
92............................................................    .72052    .71703    .71357    .71015    .70677
93............................................................    .73198    .72860    .72524    .72192    .71864
94............................................................    .74225    .73896    .73570    .73248    .72928
95............................................................    .75121    .74801    .74483    .74169    .73858
96............................................................    .75874    .75561    .75250    .74943    .74639
97............................................................    .76546    .76240    .75936    .75635    .75336
98............................................................    .77131    .76830    .76531    .76235    .75942
99............................................................    .77678    .77382    .77088    .76798    .76509
100...........................................................    .78221    .77930    .77642    .77356    .77072
101...........................................................    .78691    .78404    .78119    .77837    .77557
102...........................................................    .79196    .78912    .78632    .78353    .78077
103...........................................................    .79849    .79572    .79297    .79024    .78753
104...........................................................    .80460    .80188    .79917    .79648    .79381
105...........................................................    .81408    .81143    .80881    .80620    .80361
106...........................................................    .82989    .82740    .82494    .82249    .82006
107...........................................................    .85233    .85012    .84791    .84572    .84353
108...........................................................    .88877    .88704    .88532    .88361    .88190
109...........................................................    .94964    .94883    .94803    .94723    .94643
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  12.2%     12.4%     12.6%     12.8%     13.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .02523    .02505    .02488    .02472    .02456
1.............................................................    .00721    .00703    .00687    .00671    .00657
2.............................................................    .00678    .00659    .00642    .00626    .00610
3.............................................................    .00670    .00650    .00632    .00615    .00599
4.............................................................    .00678    .00658    .00638    .00620    .00603
5.............................................................    .00701    .00679    .00658    .00639    .00620
6.............................................................    .00733    .00710    .00688    .00668    .00648
7.............................................................    .00733    .00748    .00725    .00703    .00682
8.............................................................    .00822    .00796    .00771    .00748    .00726
9.............................................................    .00882    .00854    .00828    .00803    .00780
10............................................................    .00953    .00924    .00896    .00869    .00844
11............................................................    .01037    .01006    .00976    .00948    .00922
12............................................................    .01132    .01099    .01068    .01038    .01010
13............................................................    .01234    .01199    .01166    .01134    .01104
14............................................................    .01336    .01299    .01264    .01231    .01199
15............................................................    .01434    .01395    .01358    .01323    .01289
16............................................................    .01522    .01481    .01442    .01405    .01371
17............................................................    .01603    .01559    .01518    .01480    .01443
18............................................................    .01677    .01631    .01588    .01547    .01508
19............................................................    .01748    .01700    .01654    .01611    .01570
20............................................................    .01821    .01770    .01722    .01677    .01633
21............................................................    .01897    .01843    .01792    .01744    .01698
22............................................................    .01975    .01918    .01864    .01813    .01765
23............................................................    .02059    .01998    .01941    .01887    .01836
24............................................................    .02151    .02087    .02027    .01970    .01915
25............................................................    .02257    .02189    .02125    .02064    .02006
26............................................................    .02380    .02308    .02240    .02175    .02114
27............................................................    .02521    .02445    .02373    .02304    .02239
28............................................................    .02683    .02602    .02525    .02452    .02383
29............................................................    .02861    .02775    .02694    .02616    .02543
30............................................................    .03058    .02967    .02881    .02798    .02720
31............................................................    .03270    .03174    .03082    .02995    .02911
32............................................................    .03502    .03400    .03303    .03210    .03122
33............................................................    .03754    .03646    .03543    .03444    .03350
34............................................................    .04025    .03910    .03801    .03697    .03597
35............................................................    .04318    .04197    .04081    .03971    .03865

[[Page 75]]

 
36............................................................    .04633    .04505    .04383    .04266    .04154
37............................................................    .04971    .04836    .04707    .04583    .04465
38............................................................    .05331    .05188    .05052    .04922    .04797
39............................................................    .05714    .05564    .05420    .05282    .05150
40............................................................    .06121    .05963    .05812    .05667    .05528
41............................................................    .06554    .06388    .06229    .06076    .05929
42............................................................    .07018    .06843    .06675    .06514    .06360
43............................................................    .07508    .07324    .07148    .06979    .06817
44............................................................    .08028    .07325    .07651    .07473    .07303
45............................................................    .08575    .08373    .08180    .07993    .07814
46............................................................    .09152    .08941    .08738    .08543    .08355
47............................................................    .09759    .09539    .09326    .09122    .08926
48............................................................    .10401    .10171    .09949    .09735    .09530
49............................................................    .11076    .10836    .10605    .10382    .10167
50............................................................    .11788    .11538    .11297    .11065    .10840
51............................................................    .12535    .12276    .12025    .11782    .11548
52............................................................    .13319    .13049    .12788    .12536    .12292
53............................................................    .14139    .13858    .13588    .13326    .13072
54............................................................    .14992    .14701    .14420    .14149    .13885
55............................................................    .15880    .15579    .15288    .15006    .14733
56............................................................    .16801    .16491    .16190    .15898    .15615
57............................................................    .17760    .17439    .17128    .16827    .16534
58............................................................    .18755    .18424    .18103    .17792    .17489
59............................................................    .19790    .19450    .19119    .18798    .18486
60............................................................    .20866    .20516    .20175    .19844    .19523
61............................................................    .21986    .21626    .21276    .20936    .20605
62............................................................    .23151    .22782    .22423    .22073    .21733
63............................................................    .24362    .23984    .23616    .23257    .22908
64............................................................    .25617    .25231    .24854    .24487    .24129
65............................................................    .26917    .26522    .26137    .25761    .25395
66............................................................    .28259    .27857    .27464    .27081    .26707
67............................................................    .29643    .29233    .28833    .28443    .38061
68............................................................    .31070    .30653    .30246    .29849    .29461
69............................................................    .32542    .32120    .31707    .31303    .30908
70............................................................    .34063    .33635    .33217    .32807    .32407
71............................................................    .35639    .35207    .34784    .34370    .33965
72............................................................    .37273    .36837    .36410    .35993    .35583
73............................................................    .38955    .38517    .38088    .37667    .37255
74............................................................    .40670    .40230    .39799    .39377    .38962
75............................................................    .42398    .41958    .41526    .41102    .40686
76............................................................    .44131    .43691    .43259    .42825    .42419
77............................................................    .45864    .45425    .44994    .44571    .44155
78............................................................    .47601    .47164    .46734    .46312    .45897
79............................................................    .49348    .48914    .48487    .48067    .47654
80............................................................    .51112    .50682    .50259    .49842    .49432
81............................................................    .52881    .52455    .52036    .51624    .51218
82............................................................    .54639    .54219    .53805    .53398    .52996
83............................................................    .56386    .55973    .55566    .55164    .54768
84............................................................    .58136    .57730    .57329    .56934    .56545
85............................................................    .59891    .59494    .59102    .58715    .58333
86............................................................    .61610    .61222    .60839    .60460    .60086
87............................................................    .62335    .62856    .62481    .62111    .61746
88............................................................    .64757    .64386    .64021    .63659    .63302
89............................................................    .66209    .65848    .65491    .65139    .64790
90............................................................    .67638    .67287    .66939    .66596    .66256
91............................................................    .69032    .68691    .68353    .68019    .67689
92............................................................    .70342    .70011    .69683    .69359    .69038
93............................................................    .71539    .71217    .70899    .70584    .70271
94............................................................    .72612    .72299    .71989    .71683    .71379
95............................................................    .73550    .43245    .72943    .72643    .72347
96............................................................    .74337    .74039    .73743    .73450    .73160
97............................................................    .75041    .74748    .74458    .74171    .73886
98............................................................    .74652    .75364    .75079    .74797    .74517
99............................................................    .76224    .75941    .75660    .75382    .75106
100...........................................................    .76791    .76513    .76237    .75963    .75692
101...........................................................    .77280    .77005    .76732    .67462    .76194
102...........................................................    .77804    .77532    .77263    .76996    .76732
103...........................................................    .78485    .78218    .77954    .77692    .77432
104...........................................................    .79117    .78854    .78594    .78335    .78078
105...........................................................    .80103    .79848    .78595    .79343    .79093
106...........................................................    .81764    .81524    .81285    .81048    .80813
107...........................................................    .84137    .93921    .83706    .83493    .83281
108...........................................................    .88020    .87851    .87682    .87515    .87348
109...........................................................    .94563    .94484    .94405    .94326    .94248
----------------------------------------------------------------------------------------------------------------


                                                     Table G
 Table G--Single Life, Unisex--Table Showing the Present Worth of the Remainder Interest in Property Transferred
   to a Pooled Income Fund Having the Yearly Rate of Return Shown--Applicable for Transfers After November 30,
                                          1983, and Before May 1, 1989
----------------------------------------------------------------------------------------------------------------
                                                                            (2) Yearly rate of return
                            (1) Age                            -------------------------------------------------
                                                                  13.2%     13.4%     13.6%     13.8%     14.0%
----------------------------------------------------------------------------------------------------------------
0.............................................................    .02442    .02428    .02414    .02402    .02389
1.............................................................    .00643    .00629    .00617    .00605    .00594
2.............................................................    .00596    .00582    .00569    .00556    .00544
3.............................................................    .00583    .00569    .00555    .00542    .00529
4.............................................................    .00586    .00571    .00556    .00542    .00529
5.............................................................    .00603    .00587    .00571    .00556    .00542
6.............................................................    .00630    .00612    .00595    .00580    .00565
7.............................................................    .00663    .00644    .00626    .00610    .00594
8.............................................................    .00705    .00685    .00666    .00648    .00631
9.............................................................    .00757    .00736    .00716    .00697    .00679
10............................................................    .00821    .00798    .00777    .00756    .00737
11............................................................    .00896    .00872    .00850    .00828    .00807
12............................................................    .00983    .00958    .00934    .00911    .00889
13............................................................    .01076    .01049    .01024    .00999    .00976
14............................................................    .01170    .01141    .01114    .01088    .01064
15............................................................    .01258    .01228    .01200    .01172    .01147
16............................................................    .01337    .01306    .01276    .01247    .01220
17............................................................    .01408    .01375    .01343    .01313    .01284
18............................................................    .01471    .01436    .01403    .01371    .01341
19............................................................    .01531    .01494    .01459    .01426    .01394
20............................................................    .01592    .01553    .01516    .01481    .01447
21............................................................    .01655    .01614    .01574    .01537    .01502
22............................................................    .01719    .01675    .01634    .01594    .01557
23............................................................    .01787    .01741    .01697    .01655    .01615
24............................................................    .01863    .01814    .01768    .01723    .01681
25............................................................    .01952    .01899    .01850    .01802    .01757
26............................................................    .02056    .02000    .01947    .01897    .01849
27............................................................    .02177    .02118    .02061    .02008    .01956
28............................................................    .02317    .02254    .02194    .02137    .02082
29............................................................    .02472    .02405    .02342    .02281    .02223
30............................................................    .02645    .02574    .02506    .02441    .02379
31............................................................    .02832    .02756    .02684    .02615    .02549
32............................................................    .03037    .02957    .02880    .02806    .02736
33............................................................    .03261    .03175    .03093    .03015    .02940
34............................................................    .03502    .03411    .03324    .03241    .03162
35............................................................    .03764    .03668    .03576    .03488    .03403
36............................................................    .04048    .03945    .03847    .03754    .03664
37............................................................    .04352    .04244    .04140    .04040    .03945
38............................................................    .04677    .04563    .04453    .04347    .04246
39............................................................    .05024    .04903    .04787    .04675    .04568
40............................................................    .05394    .05266    .05143    .05025    .04912
41............................................................    .05789    .05653    .05524    .05399    .05279
42............................................................    .06212    .06069    .05932    .05800    .05674
43............................................................    .06661    .06511    .06366    .06227    .06093
44............................................................    .07138    .06980    .06828    .06682    .06541

[[Page 76]]

 
45............................................................    .07642    .07476    .07316    .07162    .07013
46............................................................    .08174    .08000    .07832    .07670    .07514
47............................................................    .08736    .08553    .08377    .08207    .08042
48............................................................    .09331    .09140    .08955    .08776    .08604
49............................................................    .09959    .09759    .09565    .09378    .09198
50............................................................    .10624    .10414    .10212    .10016    .09827
51............................................................    .11322    .11104    .10892    .10688    .10490
52............................................................    .12057    .11829    .11608    .11395    .11188
53............................................................    .12827    .12590    .12360    .12138    .11922
54............................................................    .13631    .13384    .13145    .12913    .12689
55............................................................    .14469    .14213    .13964    .13724    .13490
56............................................................    .15341    .15075    .14817    .14567    .14324
57............................................................    .16250    .15975    .15708    .15448    .15196
58............................................................    .17196    .16911    .16634    .16365    .16104
59............................................................    .18183    .17888    .17602    .17324    .17053
60............................................................    .19210    .18906    .18611    .18323    .18043
61............................................................    .20283    .19970    .19665    .19368    .19079
62............................................................    .21402    .21079    .20766    .20460    .20162
63............................................................    .22568    .22237    .21914    .21600    .21293
64............................................................    .23780    .23440    .23109    .22786    .22471
65............................................................    .25038    .24690    .24350    .24019    .23695
66............................................................    .26342    .25986    .25638    .25298    .24967
67............................................................    .27689    .27325    .26970    .26623    .26284
68............................................................    .29081    .28711    .28248    .27994    .27647
69............................................................    .30523    .30145    .29776    .29415    .29062
70............................................................    .32015    .31632    .31257    .30890    .30530
71............................................................    .33568    .33179    .32799    .32426    .32061
72............................................................    .35182    .34789    .34404    .34027    .33657
73............................................................    .36851    .36455    .36066    .35685    .35311
74............................................................    .38555    .38156    .37765    .37381    .37004
75............................................................    .40278    .39877    .39484    .39098    .38710
76............................................................    .42010    .41608    .41213    .40826    .40445
77............................................................    .43746    .43344    .42949    .42561    .42179
78............................................................    .45489    .45088    .44693    .44305    .43923
79............................................................    .47248    .46848    .46454    .46067    .45686
80............................................................    .49028    .48631    .48240    .47854    .47475
82............................................................    .50818    .50423    .50035    .49653    .59276
82............................................................    .52600    .52210    .51826    .51447    .51074
83............................................................    .54377    .53992    .53613    .53238    .52869
84............................................................    .56160    .55781    .55407    .55038    .54674
85............................................................    .57956    .57584    .57216    .56854    .56496
86............................................................    .59717    .59353    .58993    .58638    .58287
87............................................................    .61385    .61028    .60676    .60328    .59984
88............................................................    .62950    .62601    .62256    .61915    .61578
89............................................................    .64445    .64104    .63767    .63434    .63105
90............................................................    .65920    .65588    .65259    .64934    .64612
91............................................................    .67362    .67039    .66719    .66402    .66089
92............................................................    .68720    .68405    .68094    .67786    .67481
93............................................................    .69962    .69657    .69354    .69054    .68757
94............................................................    .71078    .70780    .70485    .70193    .69903
95............................................................    .72053    .71763    .71475    .71189    .70906
96............................................................    .72872    .72587    .72305    .72026    .71748
97............................................................    .73604    .73325    .73048    .72773    .72501
98............................................................    .74239    .73964    .73692    .73422    .73154
99............................................................    .74833    .74562    .74294    .74028    .73764
100...........................................................    .75423    .75156    .74892    .74630    .74370
101...........................................................    .75928    .75664    .75403    .75144    .74887
102...........................................................    .76469    .76209    .75950    .75694    .75440
103...........................................................    .77174    .76918    .76664    .76413    .76163
104...........................................................    .77824    .77571    .77320    .77071    .76824
105...........................................................    .78845    .78599    .78354    .78111    .77870
106...........................................................    .80579    .80346    .80115    .79885    .79657
107...........................................................    .83070    .82860    .82652    .82444    .82238
108...........................................................    .87182    .87016    .86852    .86688    .86525
109...........................................................    .94170    .94092    .94014    .93937    .93860
----------------------------------------------------------------------------------------------------------------

    (e) Present value of the remainder interest in the case of transfers 
to pooled income funds for which the valuation date is after April 30, 
1989, and before May 1, 1999--(1) In general. In the case of transfers 
to pooled income funds for which the valuation date is after April 30, 
1989, and before May 1, 1999, the present value of a remainder interest 
is determined under this section. See, however, Sec. 1.7520-3(b) 
(relating to exceptions to the use of prescribed tables under certain 
circumstances). The present value of a remainder interest that is 
dependent on the termination of the life of one individual is computed 
by the use of Table S in paragraph (e)(5) of this section. For purposes 
of the computations under this section, the age of an individual is the 
age at the individual's nearest birthday. If the valuation date of a 
transfer to a pooled income fund is after April 30, 1989, and before 
June 10, 1994, a transferor can rely on Notice 89-24, 1989-1 C.B. 660, 
or Notice 89-60, 1989-1 C.B. 700, in valuing the transferred interest. 
(See Sec. 601.601(d)(2)(ii)(b) of this chapter.)
    (2) Present value of a remainder interest. The present value of a 
remainder interest in property transferred to a pooled income fund is 
computed on the basis of--
    (i) Life contingencies determined from the values of lx that are set 
forth in Table 80CNSMT in Sec. 20.2031-7A(e)(4) of this chapter (Estate 
Tax Regulations); and
    (ii) Discount at a rate of interest, compounded annually, equal to 
the highest yearly rate of return of the pooled income fund for the 3 
taxable years immediately preceding its taxable year in which the 
transfer of property to the fund is made. The provisions of 
Sec. 1.642(c)-6(c) apply for determining the yearly rate of return. 
However, where the taxable year is less than 12 months, the provisions 
of Sec. 1.642(c)-6(e)(3)(ii) apply for the determining the yearly rate 
of return.
    (3) Pooled income funds in existence less than 3 taxable years. The 
provisions of Sec. 1.642(c)-6(e)(4) apply for determining the highest 
yearly rate of return when the pooled income fund has been in existence 
less than three taxable years.

[[Page 77]]

    (4) Computation of value of remainder interest. The factor that is 
used in determining the present value of a remainder interest that is 
dependent on the termination of the life of one individual is the factor 
from Table S in paragraph (e)(5) of this section under the appropriate 
yearly rate of return opposite the number that corresponds to the age of 
the individual upon whose life the value of the remainder interest is 
based. Table S in paragraph (e)(5) of this section includes factors for 
yearly rates of return from 4.2 to 14 percent. Many actuarial factors 
not contained in Table S in paragraph (e)(5) of this section are 
contained in Table S in Internal Revenue Service Publication 1457, 
``Actuarial Values, Alpha Volume,'' (8-89). Publication 1457 is no 
longer available for purchase from the Superintendent of Documents, 
United States Government Printing Office, Washington, DC 20402. However, 
pertinent factors in this publication may be obtained by a written 
request to: CC:DOM:CORP:R (IRS Publication 1457), room 5226, Internal 
Revenue Service, POB 7604, Ben Franklin Station, Washington, DC 20044. 
For other situations, see Sec. 1.642(c)-6(b). If the yearly rate of 
return is a percentage that is between the yearly rates of return for 
which factors are provided, a linear interpolation must be made. The 
present value of the remainder interest is determined by multiplying the 
fair market value of the property on the valuation date by the 
appropriate remainder factor. For an example of a computation of the 
present value of a remainder interest requiring a linear interpolation 
adjustment, see Sec. 1.642(c)-6(e)(5).
    (5) Actuarial tables. In the case of transfers for which the 
valuation date is after April 30, 1989, and before May 1, 1999, the 
present value of a remainder interest dependent on the termination of 
one life in the case of a transfer to a pooled income fund is determined 
by use of the following tables:

                                           Table S.--Based on Life Table 80CNSMT Single Life Remainder Factors
                                                [Applicable After April 30, 1989, and Before May 1, 1999]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Interest rate
                         Age                         ---------------------------------------------------------------------------------------------------
                                                        4.2%      4.4%      4.6%      4.8%      5.0%      5.2%      5.4%      5.6%      5.8%      6.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................    .07389    .06749    .06188    .05695    .05261    .04879    .04541    .04243    .03978    .03744
1...................................................    .06494    .05832    .05250    .04738    .04287    .03889    .03537    .03226    .02950    .02705
2...................................................    .06678    .05999    .05401    .04874    .04410    .03999    .03636    .03314    .03028    .02773
3...................................................    .06897    .06200    .05587    .05045    .04567    .04143    .03768    .03435    .03139    .02875
4...................................................    .07139    .06425    .05796    .05239    .04746    .04310    .03922    .03578    .03271    .02998
5...................................................    .07401    .06669    .06023    .05451    .04944    .04494    .04094    .03738    .03421    .03137
6...................................................    .07677    .06928    .06265    .05677    .05156    .04692    .04279    .03911    .03583    .03289
7...................................................    .07968    .07201    .06521    .05918    .05381    .04903    .04477    .04097    .03757    .03453
8...................................................    .08274    .07489    .06792    .06172    .05621    .05129    .04689    .04297    .03945    .03630
9...................................................    .08597    .07794    .07079    .06443    .05876    .05370    .04917    .04511    .04148    .03821
10..................................................    .08936    .08115    .07383    .06730    .06147    .05626    .05159    .04741    .04365    .04027
11..................................................    .09293    .08453    .07704    .07035    .06436    .05900    .05419    .04988    .04599    .04250
12..................................................    .09666    .08807    .08040    .07354    .06739    .06188    .05693    .05248    .04847    .04486
13..................................................    .10049    .09172    .08387    .07684    .07053    .06487    .05977    .05518    .05104    .04731
14..................................................    .10437    .09541    .08738    .08017    .07370    .06788    .06263    .05791    .05364    .04978
15..................................................    .10827    .09912    .09090    .08352    .07688    .07090    .06551    .06064    .05623    .05225
16..................................................    .11220    .10285    .09445    .08689    .08008    .07394    .06839    .06337    .05883    .05472
17..................................................    .11615    .10661    .09802    .09028    .08330    .07699    .07129    .06612    .06144    .05719
18..................................................    .12017    .11043    .10165    .09373    .08656    .08009    .07422    .06890    .06408    .05969
19..................................................    .12428    .11434    .10537    .09726    .08992    .08327    .07724    .07177    .06679    .06226
20..................................................    .12850    .11836    .10919    .10089    .09337    .08654    .08035    .07471    .06959    .06492
21..................................................    .13282    .12248    .11311    .10462    .09692    .08991    .08355    .07775    .07247    .06765
22..................................................    .13728    .12673    .11717    .10848    .10059    .09341    .08686    .08090    .07546    .07049
23..................................................    .14188    .13113    .12136    .11248    .10440    .09703    .09032    .08418    .07858    .07345
24..................................................    .14667    .13572    .12575    .11667    .10839    .10084    .09395    .08764    .08187    .07659
25..................................................    .15167    .14051    .13034    .12106    .11259    .10486    .09778    .09130    .08536    .07991
26..................................................    .15690    .14554    .13517    .12569    .11703    .10910    .10184    .09518    .08907    .08346
27..................................................    .16237    .15081    .14024    .13056    .12171    .11359    .10614    .09930    .09302    .08724
28..................................................    .16808    .15632    .14555    .13567    .12662    .11831    .11068    .10366    .09720    .09125
29..................................................    .17404    .16208    .15110    .14104    .13179    .12329    .11547    .10827    .10163    .09551
30..................................................    .18025    .16808    .15692    .14665    .13721    .12852    .12051    .11313    .10631    .10002
31..................................................    .18672    .17436    .16300    .15255    .14291    .13403    .12584    .11827    .11127    .10480
32..................................................    .19344    .18090    .16935    .15870    .14888    .13980    .13142    .12367    .11650    .10985
33..................................................    .20044    .18772    .17598    .16514    .15513    .14587    .13730    .12936    .12201    .11519
34..................................................    .20770    .19480    .18287    .17185    .16165    .15221    .14345    .13533    .12780    .12080

[[Page 78]]

 
35..................................................    .21522    .20215    .19005    .17884    .16846    .15883    .14989    .14159    .13388    .12670
36..................................................    .22299    .20974    .19747    .18609    .17552    .16571    .15660    .14812    .14022    .13287
37..................................................    .23101    .21760    .20516    .19360    .18286    .17288    .16358    .15492    .14685    .13933
38..................................................    .23928    .22572    .21311    .20139    .19048    .18032    .17085    .16201    .15377    .14607
39..................................................    .24780    .23409    .22133    .20945    .19837    .18804    .17840    .16939    .16097    .15310
40..................................................    .25658    .24273    .22982    .21778    .20654    .19605    .18624    .17706    .16847    .16043
41..................................................    .26560    .25163    .23858    .22639    .21499    .20434    .19436    .18502    .17627    .16806
42..................................................    .27486    .26076    .24758    .23525    .22370    .21289    .20276    .19326    .18434    .17597
43..................................................    .28435    .27013    .25683    .24436    .23268    .22172    .21143    .20177    .19270    .18416
44..................................................    .29407    .27975    .26633    .25373    .24191    .23081    .22038    .21057    .20134    .19265
45..................................................    .30402    .28961    .27608    .26337    .25142    .24019    .22962    .21966    .21028    .20144
46..................................................    .31420    .29970    .28608    .27326    .26120    .24983    .23913    .22904    .21951    .21053
47..................................................    .32460    .31004    .29632    .28341    .27123    .25975    .24892    .23870    .22904    .21991
48..................................................    .33521    .32058    .30679    .29379    .28151    .26992    .25897    .24862    .23883    .22957
49..................................................    .34599    .33132    .31746    .30438    .29201    .28032    .26926    .25879    .24888    .23949
50..................................................    .35695    .34224    .32833    .31518    .30273    .29094    .27978    .26921    .25918    .24966
51..................................................    .36809    .35335    .33940    .32619    .31367    .30180    .29055    .27987    .26973    .26010
52..................................................    .37944    .36468    .35070    .33744    .32486    .31292    .30158    .29081    .28057    .27083
53..................................................    .39098    .37622    .36222    .34892    .33629    .32429    .31288    .30203    .29170    .28186
54..................................................    .40269    .38794    .37393    .36062    .34795    .33590    .32442    .31349    .30308    .29316
55..................................................    .41457    .39985    .38585    .37252    .35983    .34774    .33621    .32522    .31474    .30473
56..................................................    .42662    .41194    .39796    .38464    .37193    .35981    .34824    .33720    .32666    .31658
57..................................................    .43884    .42422    .41028    .39697    .38426    .37213    .36053    .34945    .33885    .32872
58..................................................    .45123    .43668    .42279    .40951    .39682    .38468    .37307    .36196    .35132    .34114
59..................................................    .46377    .44931    .43547    .42224    .40958    .39745    .38584    .37471    .36405    .35383
60..................................................    .47643    .46206    .44830    .43513    .42250    .41040    .39880    .38767    .37699    .36674
61..................................................    .48916    .47491    .46124    .44814    .43556    .42350    .41192    .40080    .39012    .37985
62..................................................    .50196    .48783    .47427    .46124    .44874    .43672    .42518    .41408    .40340    .39314
63..................................................    .51480    .50081    .48736    .47444    .46201    .45006    .43856    .42749    .41684    .40658
64..................................................    .52770    .51386    .50054    .48773    .47540    .46352    .45208    .44105    .43043    .42019
65..................................................    .54069    .52701    .51384    .50115    .48892    .47713    .46577    .45480    .44422    .43401
66..................................................    .55378    .54029    .52727    .51472    .50262    .49093    .47965    .46876    .45824    .44808
67..................................................    .56697    .55368    .54084    .52845    .51648    .50491    .49373    .48293    .47248    .46238
68..................................................    .58026    .56717    .55453    .54231    .53049    .51905    .50800    .49729    .48694    .47691
69..................................................    .59358    .58072    .56828    .55624    .54459    .53330    .52238    .51179    .50154    .49160
70..................................................    .60689    .59427    .58205    .57021    .55874    .54762    .53683    .52638    .51624    .50641
71..................................................    .62014    .60778    .59578    .58415    .57287    .56193    .55131    .54100    .53099    .52126
72..................................................    .63334    .62123    .60948    .59808    .58700    .57624    .56579    .55563    .54577    .53617
73..................................................    .64648    .63465    .62315    .61198    .60112    .59056    .58029    .57030    .56059    .55113
74..................................................    .65961    .64806    .63682    .62590    .61527    .60492    .59485    .58504    .57550    .56620
75..................................................    .67274    .66149    .65054    .63987    .62948    .61936    .60950    .59990    .59053    .58140
76..................................................    .68589    .67495    .66429    .65390    .64377    .63390    .62427    .61487    .60570    .59676
77..................................................    .69903    .68841    .67806    .66796    .65811    .64849    .63910    .62993    .62097    .61223
78..................................................    .71209    .70182    .69179    .68199    .67242    .66307    .65393    .64501    .63628    .62775
79..................................................    .72500    .71507    .70537    .69588    .68660    .67754    .66867    .65999    .65151    .64321
80..................................................    .73768    .72809    .71872    .70955    .70058    .69180    .68320    .67479    .66655    .65849
81..................................................    .75001    .74077    .73173    .72288    .71422    .70573    .69741    .68926    .68128    .67345
82..................................................    .76195    .75306    .74435    .73582    .72746    .71926    .71123    .70335    .69562    .68804
83..................................................    .77346    .76491    .75654    .74832    .74026    .73236    .72460    .71699    .70952    .70219
84..................................................    .78456    .77636    .76831    .76041    .75265    .74503    .73756    .73021    .72300    .71592
85..................................................    .79530    .78743    .77971    .77212    .76466    .75733    .75014    .74306    .73611    .72928
86..................................................    .80560    .79806    .79065    .78337    .77621    .76917    .76225    .75544    .74875    .74216
87..................................................    .81535    .80813    .80103    .79404    .78717    .78041    .77375    .76720    .76076    .75442
88..................................................    .82462    .81771    .81090    .80420    .79760    .79111    .78472    .77842    .77223    .76612
89..................................................    .83356    .82694    .82043    .81401    .80769    .80147    .79533    .78929    .78334    .77747
90..................................................    .84225    .83593    .82971    .82357    .81753    .81157    .80570    .79991    .79420    .78857
91..................................................    .85058    .84455    .83861    .83276    .82698    .82129    .81567    .81013    .80466    .79927
92..................................................    .85838    .85263    .84696    .84137    .83585    .83040    .82503    .81973    .81449    .80933
93..................................................    .86557    .86009    .85467    .84932    .84405    .83884    .83370    .82862    .82360    .81865
94..................................................    .87212    .86687    .86169    .85657    .85152    .84653    .84160    .83673    .83192    .82717
95..................................................    .87801    .87298    .86801    .86310    .85825    .85345    .84872    .84404    .83941    .83484
96..................................................    .88322    .87838    .87360    .86888    .86420    .85959    .85502    .85051    .84605    .84165
97..................................................    .88795    .88328    .87867    .87411    .86961    .86515    .86074    .85639    .85208    .84782
98..................................................    .89220    .88769    .88323    .87883    .87447    .87016    .86589    .86167    .85750    .85337
99..................................................    .89612    .89176    .88745    .88318    .87895    .87478    .87064    .86656    .86251    .85850
100.................................................    .89977    .89555    .89136    .88722    .88313    .87908    .87506    .87109    .86716    .86327
101.................................................    .90326    .89917    .89511    .89110    .88712    .88318    .87929    .87543    .87161    .86783
102.................................................    .90690    .90294    .89901    .89513    .89128    .88746    .88369    .87995    .87624    .87257
103.................................................    .91076    .90694    .90315    .89940    .89569    .89200    .88835    .88474    .88116    .87760

[[Page 79]]

 
104.................................................    .91504    .91138    .90775    .90415    .90058    .89704    .89354    .89006    .88661    .88319
105.................................................    .92027    .91681    .91337    .90996    .90658    .90322    .89989    .89659    .89331    .89006
106.................................................    .92763    .92445    .92130    .91816    .91506    .91197    .90890    .90586    .90284    .89983
107.................................................    .93799    .93523    .93249    .92977    .92707    .92438    .92170    .91905    .91641    .91378
108.................................................    .95429    .95223    .95018    .94814    .94611    .94409    .94208    .94008    .93809    .93611
109.................................................    .97985    .97893    .97801    .97710    .97619    .97529    .97438    .97348    .97259    .97170
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                           Table S.--Based on Life Table 80CNSMT Single Life Remainder Factors
                                                [Applicable After April 30, 1989, and Before May 1, 1999]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Interest rate
                         Age                         ---------------------------------------------------------------------------------------------------
                                                        6.2%      6.4%      6.6%      6.8%      7.0%      7.2%      7.4%      7.6%      7.8%      8.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................    .03535    .03349    .03183    .03035    .02902    .02783    .02676    .02579    .02492    .02413
1...................................................    .02486    .02292    .02119    .01963    .01824    .01699    .01587    .01486    .01395    .01312
2...................................................    .02547    .02345    .02164    .02002    .01857    .01727    .01609    .01504    .01408    .01321
3...................................................    .02640    .02429    .02241    .02073    .01921    .01785    .01662    .01552    .01451    .01361
4...................................................    .02753    .02535    .02339    .02163    .02005    .01863    .01735    .01619    .01514    .01418
5...................................................    .02883    .02656    .02453    .02269    .02105    .01956    .01822    .01700    .01590    .01490
6...................................................    .03026    .02790    .02578    .02387    .02215    .02060    .01919    .01792    .01677    .01572
7...................................................    .03180    .02935    .02714    .02515    .02336    .02174    .02027    .01894    .01773    .01664
8...................................................    .03347    .03092    .02863    .02656    .02469    .02300    .02146    .02007    .01881    .01766
9...................................................    .03528    .03263    .03025    .02810    .02615    .02438    .02278    .02133    .02000    .01880
10..................................................    .03723    .03449    .03201    .02977    .02774    .02590    .02423    .02271    .02133    .02006
11..................................................    .03935    .03650    .03393    .03160    .02949    .02757    .02583    .02424    .02279    .02147
12..................................................    .04160    .03865    .03598    .03356    .03136    .02936    .02755    .02589    .02438    .02299
13..................................................    .04394    .04088    .03811    .03560    .03331    .03123    .02934    .02761    .02603    .02458
14..................................................    .04629    .04312    .04025    .03764    .03527    .03311    .03113    .02933    .02768    .02617
15..................................................    .04864    .04536    .04238    .03968    .03721    .03496    .03290    .03103    .02930    .02773
16..................................................    .05099    .04759    .04451    .04170    .03913    .03679    .03466    .03270    .03090    .02926
17..................................................    .05333    .04982    .04662    .04370    .04104    .03861    .03638    .03434    .03247    .03075
18..................................................    .05570    .05207    .04875    .04573    .04296    .04044    .03812    .03599    .03404    .03225
19..................................................    .05814    .05438    .05095    .04781    .04494    .04231    .03990    .03769    .03565    .03378
20..................................................    .06065    .05677    .05321    .04996    .04698    .04424    .04173    .03943    .03731    .03535
21..................................................    .06325    .05922    .05554    .05217    .04907    .04623    .04362    .04122    .03901    .03697
22..................................................    .06594    .06178    .05797    .05447    .05126    .04831    .04559    .04309    .04078    .03865
23..................................................    .06876    .06446    .06051    .05688    .05355    .05048    .04766    .04505    .04265    .04042
24..................................................    .07174    .06729    .06321    .05945    .05599    .05281    .04987    .04715    .04465    .04233
25..................................................    .07491    .07031    .06609    .06219    .05861    .05530    .05224    .04941    .04680    .04438
26..................................................    .07830    .07355    .06918    .06515    .06142    .05799    .05481    .05187    .04915    .04662
27..................................................    .08192    .07702    .07250    .06832    .06446    .06090    .05759    .05454    .05170    .04906
28..................................................    .08577    .08071    .07603    .07171    .06772    .06402    .06059    .05740    .05445    .05170
29..................................................    .08986    .08464    .07981    .07534    .07120    .06736    .06380    .06049    .05742    .05456
30..................................................    .09420    .08882    .08383    .07921    .07492    .07095    .06725    .06381    .06061    .05763
31..................................................    .09881    .09327    .08812    .08335    .07891    .07479    .07095    .06738    .06405    .06095
32..................................................    .10369    .09797    .09267    .08774    .08315    .07888    .07491    .07120    .06774    .06451
33..................................................    .10885    .10297    .09750    .09241    .08767    .08325    .07913    .07529    .07170    .06834
34..................................................    .11430    .10824    .10261    .09736    .09246    .08790    .08363    .07964    .07592    .07243
35..................................................    .12002    .11380    .10800    .10259    .09754    .09282    .08841    .08428    .08041    .07679
36..................................................    .12602    .11963    .11366    .10809    .10288    .09800    .09344    .08917    .08516    .08140
37..................................................    .13230    .12574    .11961    .11387    .10850    .10347    .09876    .09433    .09018    .08628
38..................................................    .13887    .13214    .12584    .11994    .11441    .10922    .10436    .09978    .09549    .09145
39..................................................    .14573    .13883    .13237    .12630    .12061    .11527    .11025    .10553    .10109    .09690
40..................................................    .15290    .14583    .13920    .13297    .12712    .12162    .11644    .11157    .10698    .10266
41..................................................    .16036    .15312    .14633    .13994    .13393    .12827    .12294    .11792    .11318    .10871
42..................................................    .16810    .16071    .15375    .14720    .14103    .13522    .12973    .12456    .11967    .11505
43..................................................    .17614    .16858    .16146    .15475    .14842    .14245    .13682    .13149    .12645    .12169
44..................................................    .18447    .17675    .16948    .16261    .15613    .15000    .14421    .13873    .13355    .12864
45..................................................    .19310    .18524    .17780    .17078    .16414    .15787    .15192    .14630    .14096    .13591
46..................................................    .20204    .19402    .18644    .17926    .17247    .16604    .15995    .15418    .14870    .14350
47..................................................    .21128    .20311    .19538    .18806    .18112    .17454    .16830    .16238    .15676    .15141
48..................................................    .22080    .21249    .20462    .19716    .19007    .18335    .17696    .17090    .16513    .15964
49..................................................    .23059    .22214    .21413    .20653    .19930    .19244    .18591    .17970    .17379    .16816
50..................................................    .24063    .23206    .22391    .21617    .20881    .20180    .19514    .18879    .18274    .17697
51..................................................    .25095    .24225    .23398    .22610    .21861    .21147    .20466    .19818    .19199    .18609
52..................................................    .26157    .25275    .24436    .23636    .22874    .22147    .21453    .20791    .20159    .19556
53..................................................    .27249    .26357    .25505    .24694    .23919    .23180    .22474    .21799    .21154    .20537

[[Page 80]]

 
54..................................................    .28369    .27466    .26604    .25782    .24995    .24244    .23526    .22839    .22181    .21552
55..................................................    .29518    .28605    .27734    .26900    .26103    .25341    .24611    .23912    .23243    .22601
56..................................................    .30695    .29774    .28893    .28050    .27242    .26469    .25728    .25019    .24338    .23685
57..................................................    .31902    .30973    .30084    .29232    .28415    .27632    .26881    .26161    .25469    .24805
58..................................................    .33138    .32203    .31306    .30446    .29621    .28829    .28069    .27339    .26637    .25962
59..................................................    .34402    .33461    .32558    .31691    .30859    .30059    .29290    .28550    .27839    .27155
60..................................................    .35690    .34745    .33836    .32963    .32124    .31317    .30540    .29792    .29073    .28379
61..................................................    .36999    .36050    .35137    .34259    .33414    .32601    .31817    .31062    .30334    .29633
62..................................................    .38325    .37374    .36458    .35576    .34726    .33907    .33117    .32356    .31621    .30912
63..................................................    .39669    .38717    .37799    .36913    .36060    .35236    .34441    .33674    .32933    .32217
64..................................................    .41031    .40078    .39159    .38272    .37415    .36588    .35789    .35016    .34270    .33548
65..................................................    .42416    .41464    .40545    .39656    .38798    .37968    .37166    .36390    .35639    .34912
66..................................................    .43825    .42876    .41958    .41070    .40211    .39380    .38576    .37797    .37043    .36312
67..................................................    .45260    .44315    .43399    .42513    .41655    .40824    .40019    .39238    .38482    .37749
68..................................................    .46720    .45779    .44868    .43985    .43129    .42299    .41494    .40713    .39956    .39221
69..................................................    .48197    .47263    .46357    .45478    .44625    .43798    .42995    .42215    .41458    .40722
70..................................................    .49686    .48760    .47861    .46988    .46140    .45316    .44516    .43738    .42983    .42248
71..................................................    .51182    .50265    .49374    .48508    .47666    .46847    .46051    .45276    .44523    .43790
72..................................................    .52685    .51778    .50896    .50038    .49203    .48390    .47599    .46829    .46079    .45349
73..................................................    .54194    .53298    .52426    .51578    .50751    .49946    .49161    .48397    .47652    .46926
74..................................................    .55714    .54832    .53972    .53134    .52317    .51520    .50744    .49986    .49247    .48527
75..................................................    .57250    .56382    .55536    .54710    .53904    .53118    .52351    .51601    .50870    .50156
76..................................................    .58803    .57951    .57120    .56308    .55515    .54740    .53984    .53245    .52522    .51817
77..................................................    .60369    .59535    .58720    .57923    .57144    .56383    .55639    .54912    .54200    .53504
78..................................................    .61942    .61126    .60329    .59549    .58787    .58040    .57310    .56596    .55896    .55212
79..................................................    .63508    .62713    .61935    .61174    .60428    .59698    .58983    .58283    .57597    .56925
80..................................................    .65059    .64285    .63527    .62785    .62058    .61345    .60646    .59961    .59290    .58632
81..................................................    .66579    .65827    .65090    .64368    .63659    .62965    .62283    .61615    .60959    .60316
82..................................................    .68061    .67332    .66616    .65914    .65226    .64550    .63886    .63235    .62595    .61968
83..................................................    .69499    .68793    .68099    .67418    .66749    .66092    .65447    .64813    .64191    .63579
84..................................................    .70896    .70213    .69541    .68881    .68233    .67595    .66969    .66353    .65748    .65153
85..................................................    .72256    .71596    .70947    .70308    .69681    .69063    .68456    .67859    .67271    .66693
86..................................................    .73569    .72931    .72305    .71688    .71081    .70484    .69896    .69318    .68748    .68188
87..................................................    .74818    .74204    .73599    .73003    .72417    .71839    .71271    .70711    .70159    .69616
88..................................................    .76011    .75419    .74836    .74261    .73695    .73137    .72588    .72046    .71512    .70986
89..................................................    .77169    .76599    .76037    .75484    .74938    .74400    .73870    .73347    .72831    .72323
90..................................................    .78302    .77755    .77215    .76683    .76158    .75640    .75129    .74625    .74128    .73638
91..................................................    .79395    .78870    .78352    .77842    .77337    .76840    .76349    .75864    .75385    .74913
92..................................................    .80423    .79920    .79423    .78933    .78449    .77971    .77499    .77033    .76572    .76118
93..................................................    .81377    .80894    .80417    .79946    .79481    .79022    .78568    .78120    .77677    .77239
94..................................................    .82247    .81784    .81325    .80873    .80425    .79983    .79547    .79115    .78688    .78266
95..................................................    .83033    .82586    .82145    .81709    .81278    .80852    .80431    .80014    .79602    .79195
96..................................................    .83729    .83298    .82872    .82451    .82034    .81622    .81215    .80812    .80414    .80019
97..................................................    .84361    .83944    .83532    .83124    .82721    .82322    .81927    .81537    .81151    .80769
98..................................................    .84929    .84525    .84126    .83730    .83339    .82952    .82569    .82190    .81815    .81443
99..................................................    .85454    .85062    .84674    .84290    .83910    .83534    .83161    .82792    .82427    .82066
100.................................................    .85942    .85561    .85184    .84810    .84440    .84074    .83711    .83352    .82997    .82644
101.................................................    .86408    .86037    .85670    .85306    .84946    .84589    .84236    .83886    .83539    .83196
102.................................................    .86894    .86534    .86177    .85823    .85473    .85126    .84782    .84442    .84104    .83770
103.................................................    .87408    .87060    .86714    .86371    .86032    .85695    .85362    .85031    .84703    .84378
104.................................................    .87980    .87644    .87311    .86980    .86653    .86328    .86005    .85686    .85369    .85054
105.................................................    .88684    .88363    .88046    .87731    .87418    .87108    .86800    .86494    .86191    .85890
106.................................................    .89685    .89389    .89095    .88804    .88514    .88226    .87940    .87656    .87374    .87094
107.................................................    .91117    .90858    .90600    .90344    .90089    .89836    .89584    .89334    .89085    .88838
108.................................................    .93414    .93217    .93022    .92828    .92634    .92442    .92250    .92060    .91870    .91681
109.................................................    .97081    .96992    .96904    .96816    .96729    .96642    .96555    .96468    .96382    .96296
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                           Table S.--Based on Life Table 80CNSMT Single Life Remainder Factors
                                                [Applicable After April 30, 1989, and Before May 1, 1999]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Interest rate
                         Age                         ---------------------------------------------------------------------------------------------------
                                                        8.2%      8.4%      8.6%      8.8%      9.0%      9.2%      9.4%      9.6%      9.8%      10.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................    .02341    .02276    .02217    .02163    .02114    .02069    .02027    .01989    .01954    .01922
1...................................................    .01237    .01170    .01108    .01052    .01000    .00953    .00910    .00871    .00834    .00801
2...................................................    .01243    .01172    .01107    .01048    .00994    .00944    .00899    .00857    .00819    .00784
3...................................................    .01278    .01203    .01135    .01073    .01016    .00964    .00916    .00872    .00832    .00795

[[Page 81]]

 
4...................................................    .01332    .01253    .01182    .01116    .01056    .01001    .00951    .00904    .00862    .00822
5...................................................    .01400    .01317    .01241    .01172    .01109    .01051    .00998    .00949    .00904    .00862
6...................................................    .01477    .01390    .01310    .01238    .01171    .01110    .01054    .01002    .00954    .00910
7...................................................    .01563    .01472    .01389    .01312    .01242    .01178    .01118    .01064    .01013    .00966
8...................................................    .01660    .01564    .01477    .01396    .01322    .01254    .01192    .01134    .01081    .01031
9...................................................    .01770    .01669    .01577    .01492    .01414    .01342    .01276    .01216    .01159    .01107
10..................................................    .01891    .01785    .01688    .01599    .01517    .01442    .01372    .01308    .01249    .01194
11..................................................    .02026    .01915    .01814    .01720    .01634    .01555    .01481    .01414    .01351    .01293
12..................................................    .02173    .02056    .01950    .01852    .01761    .01678    .01601    .01529    .01463    .01402
13..................................................    .02326    .02204    .02092    .01989    .01895    .01807    .01726    .01651    .01582    .01517
14..................................................    .02478    .02351    .02234    .02126    .02027    .01935    .01850    .01771    .01698    .01630
15..................................................    .02628    .02495    .02372    .02259    .02155    .02058    .01969    .01886    .01810    .01738
16..................................................    .02774    .02635    .02507    .02388    .02279    .02178    .02084    .01997    .01917    .01842
17..................................................    .02917    .02772    .02637    .02513    .02399    .02293    .02194    .02103    .02018    .01940
18..................................................    .03059    .02907    .02767    .02637    .02517    .02406    .02302    .02207    .02118    .02035
19..................................................    .03205    .03046    .02899    .02763    .02637    .02521    .02412    .02312    .02218    .02131
20..................................................    .03355    .03188    .03035    .02892    .02760    .02638    .02524    .02419    .02320    .02229
21..................................................    .03509    .03334    .03173    .03024    .02886    .02758    .02638    .02527    .02424    .02328
22..................................................    .03669    .03487    .03318    .03162    .03017    .02882    .02757    .02640    .02532    .02430
23..................................................    .03837    .03646    .03470    .03306    .03154    .03013    .02881    .02759    .02644    .02538
24..................................................    .04018    .03819    .03634    .03463    .03303    .03155    .03016    .02888    .02767    .02655
25..................................................    .04214    .04006    .03812    .03633    .03465    .03309    .03164    .03029    .02902    .02784
26..................................................    .04428    .04210    .04008    .03820    .03644    .03481    .03328    .03186    .03052    .02928
27..................................................    .04662    .04434    .04223    .04025    .03841    .03670    .03509    .03360    .03219    .03088
28..................................................    .04915    .04677    .04456    .04249    .04056    .03876    .03708    .03550    .03403    .03264
29..................................................    .05189    .04941    .04709    .04493    .04291    .04102    .03925    .03760    .03604    .03458
30..................................................    .05485    .05226    .04984    .04757    .04546    .04348    .04162    .03988    .03825    .03671
31..................................................    .05805    .05535    .05282    .05045    .04824    .04616    .04421    .04238    .04067    .03905
32..................................................    .06149    .05867    .05603    .05356    .05124    .04906    .04702    .04510    .04329    .04160
33..................................................    .06520    .06226    .05950    .05692    .05449    .05221    .05007    .04806    .04616    .04438
34..................................................    .06916    .06609    .06322    .06052    .05799    .05560    .05336    .05125    .04926    .04738
35..................................................    .07339    .07020    .06720    .06439    .06174    .05925    .05690    .05469    .05260    .05063
36..................................................    .07787    .07455    .07143    .06850    .06573    .06313    .06068    .05836    .05617    .05411
37..................................................    .08262    .07917    .07593    .07287    .06999    .06727    .06470    .06228    .05999    .05783
38..................................................    .08765    .08407    .08069    .07751    .07451    .07167    .06899    .06646    .06407    .06180
39..................................................    .09296    .08925    .08574    .08243    .07931    .07635    .07356    .07092    .06841    .06604
40..................................................    .09858    .09472    .09109    .08765    .08440    .08132    .07841    .07565    .07303    .07055
41..................................................    .10449    .10050    .09673    .09316    .08978    .08658    .08355    .08067    .07794    .07535
42..................................................    .11069    .10656    .10265    .09895    .09544    .09212    .08896    .08596    .08312    .08041
43..................................................    .11718    .11291    .10887    .10503    .10140    .09794    .09466    .09154    .08858    .08576
44..................................................    .12399    .11958    .11540    .11143    .10766    .10407    .10067    .09743    .09434    .09141
45..................................................    .13111    .12656    .12224    .11814    .11423    .11052    .10699    .10362    .10042    .09736
46..................................................    .13856    .13387    .12941    .12516    .12113    .11728    .11362    .11013    .10680    .10363
47..................................................    .14633    .14150    .13690    .13252    .12835    .12438    .12059    .11697    .11352    .11022
48..................................................    .15442    .14945    .14471    .14020    .13589    .13179    .12787    .12412    .12055    .11713
49..................................................    .16280    .15769    .15281    .14816    .14373    .13949    .13544    .13157    .12787    .12433
50..................................................    .17147    .16622    .16121    .15643    .15186    .14749    .14331    .13931    .13548    .13182
51..................................................    .18045    .17507    .16993    .16501    .16030    .15580    .15150    .14737    .14342    .13963
52..................................................    .18979    .18427    .17899    .17394    .16911    .16448    .16004    .15579    .15172    .14780
53..................................................    .19947    .19383    .18842    .18324    .17828    .17352    .16896    .16458    .16038    .15635
54..................................................    .20950    .20372    .19819    .19288    .18779    .18291    .17822    .17372    .16940    .16524
55..................................................    .21986    .21397    .20831    .20288    .19767    .19266    .18785    .18322    .17878    .17450
56..................................................    .23058    .22457    .21879    .21324    .20791    .20278    .19785    .19310    .18854    .18414
57..................................................    .24167    .23554    .22965    .22399    .21854    .21329    .20824    .20338    .19870    .19419
58..................................................    .25314    .24690    .24090    .23512    .22956    .22420    .21904    .21407    .20927    .20464
59..................................................    .26497    .25863    .25252    .24664    .24097    .23550    .23023    .22515    .22024    .21551
60..................................................    .27712    .27068    .26448    .25849    .25272    .24716    .24178    .23659    .23158    .22674
61..................................................    .28956    .28304    .27674    .27067    .26480    .25913    .25366    .24837    .24325    .23831
62..................................................    .30228    .29567    .28929    .28312    .27717    .27141    .26584    .26045    .25524    .25020
63..................................................    .31525    .30857    .30211    .29586    .28982    .28397    .27832    .27284    .26754    .26240
64..................................................    .32851    .32176    .31522    .30890    .30278    .29685    .29111    .28555    .28016    .27493
65..................................................    .34209    .33528    .32868    .32229    .31610    .31010    .30429    .29865    .29317    .28787
66..................................................    .35604    .34918    .34253    .33609    .32983    .32377    .31788    .31217    .30663    .30124
67..................................................    .37037    .36347    .35678    .35028    .34398    .33786    .33191    .32614    .32053    .31508
68..................................................    .38508    .37815    .37142    .36489    .35854    .35237    .34638    .34055    .33488    .32937
69..................................................    .40008    .39313    .38638    .37982    .37344    .36724    .36120    .35533    .34961    .34405
70..................................................    .41533    .40838    .40162    .39504    .38864    .38241    .37634    .37043    .36468    .35907
71..................................................    .43076    .42382    .41705    .41047    .40405    .39780    .39171    .38578    .38000    .37436
72..................................................    .44638    .43945    .43269    .42611    .41969    .41344    .40733    .40138    .39558    .38991

[[Page 82]]

 
73..................................................    .46218    .45527    .44854    .44197    .43556    .42931    .42321    .41725    .41143    .40575
74..................................................    .47823    .47137    .46466    .45812    .45173    .44549    .43940    .43345    .42763    .42195
75..................................................    .49459    .48777    .48112    .47462    .46826    .46205    .45598    .45004    .44424    .43856
76..................................................    .51127    .50452    .49793    .49148    .48517    .47900    .47297    .46706    .46129    .45563
77..................................................    .52823    .52157    .51505    .50867    .50243    .49632    .49033    .48447    .47873    .47311
78..................................................    .54541    .53885    .53242    .52613    .51996    .51392    .50800    .50220    .49652    .49094
79..................................................    .56267    .55621    .54989    .54369    .53762    .53166    .52582    .52009    .51448    .50897
80..................................................    .57987    .57354    .56733    .56125    .55527    .54941    .54366    .53802    .53248    .52705
81..................................................    .59685    .59065    .58457    .57860    .57274    .56699    .56134    .55579    .55035    .54499
82..................................................    .61351    .60746    .60151    .59567    .58993    .58429    .57875    .57331    .56796    .56270
83..................................................    .62978    .62387    .61806    .61236    .60675    .60123    .59581    .59047    .58523    .58007
84..................................................    .64567    .63992    .63426    .62869    .62321    .61783    .61253    .60731    .60218    .59713
85..................................................    .66125    .65565    .65014    .64472    .63938    .63413    .62896    .62387    .61886    .61392
86..................................................    .67636    .67092    .66557    .66030    .65511    .65000    .64496    .64000    .63511    .63030
87..................................................    .69081    .68554    .68034    .67522    .67018    .66520    .66031    .65548    .65071    .64602
88..................................................    .70468    .69957    .69453    .68956    .68466    .67983    .67507    .67037    .66574    .66117
89..................................................    .71821    .71326    .70838    .70357    .69882    .69414    .68952    .68495    .68045    .67601
90..................................................    .73153    .72676    .72204    .71739    .71280    .70827    .70379    .69938    .69502    .69071
91..................................................    .74447    .73986    .73532    .73083    .72640    .72202    .71770    .71343    .70921    .70504
92..................................................    .75669    .75225    .74787    .74354    .73927    .73504    .73087    .72674    .72267    .71864
93..................................................    .76807    .76379    .75957    .75540    .75127    .74719    .74317    .73918    .73524    .73135
94..................................................    .77849    .77437    .77030    .76627    .76229    .75835    .75446    .75061    .74680    .74303
95..................................................    .78792    .78394    .78001    .77611    .77226    .76845    .76468    .76096    .75727    .75362
96..................................................    .79630    .79244    .78863    .78485    .78112    .77742    .77377    .77015    .76657    .76303
97..................................................    .80391    .80016    .79646    .79280    .78917    .78559    .78203    .77852    .77504    .77160
98..................................................    .81076    .80712    .80352    .79996    .79643    .79294    .78948    .78606    .78267    .77931
99..................................................    .81709    .81354    .81004    .80657    .80313    .79972    .79635    .79302    .78971    .78644
100.................................................    .82296    .81950    .81609    .81270    .80934    .80602    .80273    .79947    .79624    .79304
101.................................................    .82855    .82518    .82185    .81854    .81526    .81201    .80880    .80561    .80245    .79932
102.................................................    .83438    .83110    .82785    .82462    .82142    .81826    .81512    .81200    .80892    .80586
103.................................................    .84056    .83737    .83420    .83106    .82795    .82487    .82181    .81878    .81577    .81279
104.................................................    .84743    .84433    .84127    .83822    .83521    .83221    .82924    .82630    .82338    .82048
105.................................................    .85591    .85295    .85001    .84709    .84419    .84132    .83846    .83563    .83282    .83003
106.................................................    .86816    .86540    .86266    .85993    .85723    .85454    .85187    .84922    .84659    .84397
107.................................................    .88592    .88348    .88105    .87863    .87623    .87384    .87147    .86911    .86676    .86443
108.................................................    .91493    .91306    .91119    .90934    .90749    .90566    .90383    .90201    .90020    .89840
109.................................................    .96211    .96125    .96041    .95956    .95872    .95788    .95704    .95620    .95537    .95455
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                           Table S.--Based on Life Table 80CNSMT Single Life Remainder Factors
                                                  [Applicable After April 30, 1989, Before May 1, 1999]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Interest rate
                         Age                         ---------------------------------------------------------------------------------------------------
                                                        10.2%     10.4%     10.6%     10.8%     11.0%     11.2%     11.4%     11.6%     11.8%     12.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................    .01891    .01864    .01838    .01814    .01791    .01770    .01750    .01732    .01715    .01698
1...................................................    .00770    .00741    .00715    .00690    .00667    .00646    .00626    .00608    .00590    .00574
2...................................................    .00751    .00721    .00693    .00667    .00643    .00620    .00600    .00580    .00562    .00544
3...................................................    .00760    .00728    .00699    .00671    .00646    .00622    .00600    .00579    .00560    .00541
4...................................................    .00786    .00752    .00721    .00692    .00665    .00639    .00616    .00594    .00573    .00554
5...................................................    .00824    .00788    .00755    .00724    .00695    .00668    .00643    .00620    .00598    .00578
6...................................................    .00869    .00832    .00796    .00764    .00733    .00705    .00678    .00654    .00630    .00608
7...................................................    .00923    .00883    .00846    .00811    .00779    .00749    .00720    .00694    .00669    .00646
8...................................................    .00986    .00943    .00904    .00867    .00833    .00801    .00771    .00743    .00716    .00692
9...................................................    .01059    .01014    .00972    .00933    .00897    .00863    .00831    .00801    .00773    .00747
10..................................................    .01142    .01095    .01051    .01009    .00971    .00935    .00901    .00869    .00840    .00812
11..................................................    .01239    .01189    .01142    .01098    .01057    .01019    .00983    .00950    .00918    .00889
12..................................................    .01345    .01292    .01243    .01197    .01154    .01113    .01075    .01040    .01007    .00975
13..................................................    .01457    .01401    .01349    .01300    .01255    .01212    .01172    .01135    .01100    .01067
14..................................................    .01567    .01508    .01453    .01402    .01354    .01309    .01267    .01227    .01190    .01155
15..................................................    .01672    .01610    .01552    .01498    .01448    .01400    .01356    .01314    .01275    .01238
16..................................................    .01772    .01707    .01646    .01589    .01536    .01486    .01439    .01396    .01354    .01315
17..................................................    .01866    .01798    .01734    .01674    .01618    .01566    .01516    .01470    .01427    .01386
18..................................................    .01958    .01886    .01818    .01755    .01697    .01641    .01590    .01541    .01495    .01452
19..................................................    .02050    .01974    .01903    .01837    .01775    .01717    .01662    .01611    .01563    .01517
20..................................................    .02143    .02064    .01989    .01919    .01854    .01793    .01735    .01681    .01630    .01582
21..................................................    .02238    .02154    .02075    .02002    .01933    .01868    .01807    .01750    .01696    .01646
22..................................................    .02336    .02247    .02164    .02087    .02014    .01946    .01882    .01821    .01764    .01711

[[Page 83]]

 
23..................................................    .02438    .02345    .02257    .02176    .02099    .02027    .01959    .01895    .01835    .01778
24..................................................    .02550    .02451    .02359    .02273    .02192    .02115    .02044    .01976    .01913    .01853
25..................................................    .02673    .02569    .02472    .02381    .02295    .02214    .02138    .02067    .01999    .01936
26..................................................    .02811    .02701    .02598    .02502    .02411    .02326    .02246    .02170    .02098    .02031
27..................................................    .02965    .02849    .02741    .02639    .02543    .02452    .02367    .02287    .02211    .02140
28..................................................    .03134    .03013    .02898    .02790    .02689    .02593    .02503    .02418    .02338    .02262
29..................................................    .03322    .03193    .03072    .02958    .02851    .02750    .02654    .02564    .02479    .02398
30..................................................    .03527    .03391    .03264    .03143    .03030    .02923    .02821    .02726    .02635    .02550
31..................................................    .03753    .03610    .03475    .03348    .03228    .03115    .03008    .02907    .02811    .02720
32..................................................    .04000    .03849    .03707    .03573    .03446    .03326    .03213    .03105    .03004    .02907
33..................................................    .04269    .04111    .03961    .03819    .03685    .03558    .03438    .03325    .03217    .03115
34..................................................    .04561    .04394    .04236    .04087    .03946    .03812    .03685    .03565    .03451    .03342
35..................................................    .04877    .04702    .04535    .04378    .04229    .04087    .03953    .03826    .03706    .03591
36..................................................    .05215    .05031    .04856    .04690    .04533    .04384    .04242    .04108    .03980    .03859
37..................................................    .05578    .05384    .05200    .05025    .04860    .04703    .04553    .04411    .04276    .04148
38..................................................    .05965    .05761    .05568    .05385    .05211    .05045    .04888    .04738    .04595    .04460
39..................................................    .06379    .06165    .05962    .05770    .05587    .05412    .05247    .05089    .04939    .04795
40..................................................    .06820    .06596    .06383    .06181    .05989    .05806    .05631    .05465    .05307    .05155
41..................................................    .07288    .07054    .06832    .06620    .06418    .06226    .06042    .05868    .05701    .05541
42..................................................    .07784    .07539    .07306    .07085    .06873    .06671    .06479    .06295    .06119    .05952
43..................................................    .08308    .08052    .07808    .07576    .07355    .07143    .06941    .06748    .06564    .06387
44..................................................    .08861    .08594    .08340    .08097    .07865    .07644    .07432    .07230    .07036    .06851
45..................................................    .09445    .09167    .08901    .08648    .08406    .08174    .07953    .07741    .07538    .07343
46..................................................    .10060    .09770    .09494    .09230    .08977    .08735    .08503    .08281    .08068    .07865
47..................................................    .10707    .10406    .10119    .09843    .09579    .09327    .09085    .08853    .08630    .08417
48..................................................    .11386    .11073    .10774    .10487    .10213    .09949    .09697    .09455    .09222    .08999
49..................................................    .12094    .11769    .11458    .11160    .10874    .10600    .10337    .10084    .09842    .09609
50..................................................    .12831    .12494    .12172    .11862    .11565    .11280    .11006    .10743    .10490    .10247
51..................................................    .13600    .13251    .12917    .12596    .12288    .11991    .11706    .11432    .11169    .10915
52..................................................    .14405    .14044    .13698    .13366    .13046    .12738    .12442    .12157    .11883    .11619
53..................................................    .15247    .14875    .14517    .14172    .13841    .13522    .13215    .12919    .12635    .12360
54..................................................    .16124    .15740    .15370    .15014    .14671    .14341    .14023    .13717    .13421    .13136
55..................................................    .17039    .16642    .16261    .15893    .15539    .15198    .14868    .14551    .14244    .13948
56..................................................    .17991    .17583    .17190    .16811    .16445    .16092    .15752    .15423    .15106    .14799
57..................................................    .18984    .18564    .18160    .17769    .17392    .17029    .16677    .16338    .16010    .15692
58..................................................    .20018    .19587    .19172    .18770    .18382    .18007    .17645    .17295    .16956    .16628
59..................................................    .21093    .20652    .20225    .19812    .19414    .19028    .18655    .18294    .17945    .17606
60..................................................    .22206    .21753    .21316    .20893    .20483    .20087    .19703    .19332    .18972    .18624
61..................................................    .23353    .22890    .22442    .22009    .21589    .21182    .20788    .20407    .20037    .19678
62..................................................    .24532    .24059    .23601    .23158    .22728    .22311    .21907    .21515    .21135    .20767
63..................................................    .25742    .25260    .24793    .24339    .23900    .23473    .23060    .22658    .22268    .21890
64..................................................    .26987    .26495    .26019    .25556    .25107    .24671    .24248    .23837    .23438    .23050
65..................................................    .28271    .27771    .27286    .26815    .26357    .25912    .25480    .25059    .24651    .24254
66..................................................    .29601    .29093    .28600    .28120    .27654    .27200    .26760    .26331    .25913    .25507
67..................................................    .30978    .30462    .29961    .29474    .29000    .28539    .28090    .27653    .27227    .26813
68..................................................    .32401    .31879    .31371    .30877    .30396    .29927    .29471    .29027    .28593    .28171
69..................................................    .33863    .33336    .32822    .32322    .31835    .31359    .30896    .30445    .30005    .29576
70..................................................    .35361    .34829    .34310    .33804    .33311    .32830    .32361    .31903    .31457    .31021
71..................................................    .36886    .36349    .35826    .35316    .34818    .34332    .33858    .33394    .32942    .32500
72..................................................    .38439    .37899    .37373    .36858    .36356    .35866    .35387    .34919    .34461    .34015
73..................................................    .40021    .39479    .38950    .38432    .37927    .37433    .36950    .36478    .36016    .35565
74..................................................    .41639    .41096    .40565    .40046    .39538    .39042    .38556    .38081    .37616    .37161
75..................................................    .43301    .42758    .42226    .41706    .41198    .40699    .40212    .39734    .39267    .38809
76..................................................    .45009    .44467    .43937    .43417    .42908    .42410    .41921    .41443    .40974    .40514
77..................................................    .46761    .46221    .45693    .45175    .44667    .44170    .43682    .43203    .42734    .42274
78..................................................    .48548    .48013    .47488    .46973    .46468    .45972    .45486    .45009    .44541    .44082
79..................................................    .50356    .49826    .49306    .48795    .48294    .47802    .47319    .46845    .46379    .45922
80..................................................    .52171    .51647    .51133    .50628    .50132    .49644    .49166    .48695    .48233    .47779
81..................................................    .53974    .53457    .52950    .52451    .51961    .51479    .51006    .50541    .50083    .49633
82..................................................    .55753    .55245    .54745    .54254    .53771    .53296    .52828    .52369    .51917    .51472
83..................................................    .57500    .57001    .56510    .56026    .55551    .55083    .54623    .54170    .53724    .53285
84..................................................    .59216    .58726    .58245    .57770    .57304    .56844    .56391    .55945    .55506    .55074
85..................................................    .60906    .60428    .59956    .59492    .59034    .58583    .58139    .57702    .57270    .56845
86..................................................    .62555    .62088    .61627    .61173    .60725    .60284    .59849    .59420    .58997    .58580
87..................................................    .64139    .63683    .63233    .62790    .62352    .61921    .61495    .61076    .60661    .60253
88..................................................    .65666    .65221    .64783    .64350    .63923    .63502    .63086    .62675    .62270    .61871
89..................................................    .67163    .66730    .66304    .65882    .65466    .65055    .64650    .64249    .63854    .63463
90..................................................    .68646    .68226    .67812    .67402    .66998    .66599    .66204    .65814    .65430    .65049
91..................................................    .70093    .69686    .69285    .68888    .68496    .68108    .67725    .67347    .66973    .66604

[[Page 84]]

 
92..................................................    .71466    .71073    .70684    .70300    .69920    .69545    .69173    .68806    .68444    .68085
93..................................................    .72750    .72370    .71994    .71622    .71254    .70890    .70530    .70174    .69822    .69474
94..................................................    .73931    .73562    .73198    .72838    .72481    .72129    .71780    .71434    .71093    .70755
95..................................................    .75001    .74644    .74291    .73941    .73595    .73253    .72914    .72579    .72247    .71919
96..................................................    .75953    .75606    .75262    .74923    .74586    .74253    .73924    .73598    .73275    .72955
97..................................................    .76819    .76481    .76147    .75816    .75489    .75165    .74844    .74526    .74211    .73899
98..................................................    .77599    .77270    .76944    .76621    .76302    .75986    .75672    .75362    .75054    .74750
99..................................................    .78319    .77998    .77680    .77365    .77053    .76744    .76437    .76134    .75833    .75535
100.................................................    .78987    .78673    .78362    .78054    .77748    .77446    .77146    .76849    .76555    .76263
101.................................................    .79622    .79315    .79010    .78708    .78409    .78113    .77819    .77528    .77239    .76953
102.................................................    .80283    .79983    .79685    .79390    .79097    .78807    .78519    .78234    .77951    .77671
103.................................................    .80983    .80690    .80399    .80111    .79825    .79541    .79260    .78981    .78705    .78430
104.................................................    .81760    .81475    .81192    .80912    .80633    .80357    .80083    .79810    .79541    .79273
105.................................................    .82726    .82451    .82178    .81907    .81638    .81371    .81106    .80843    .80582    .80322
106.................................................    .84137    .83879    .83623    .83368    .83115    .82863    .82614    .82366    .82119    .81874
107.................................................    .86211    .85981    .85751    .85523    .85297    .85071    .84847    .84624    .84403    .84182
108.................................................    .89660    .89481    .89304    .89127    .88950    .88775    .88601    .88427    .88254    .88081
109.................................................    .95372    .95290    .95208    .95126    .95045    .94964    .94883    .94803    .94723    .94643
--------------------------------------------------------------------------------------------------------------------------------------------------------


                                           Table S.--Based on Life Table 80CNSMT Single Life Remainder Factors
                                                [Applicable After April 30, 1989, and Before May 1, 1999]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                 Interest rate
                         Age                         ---------------------------------------------------------------------------------------------------
                                                        12.2%     12.4%     12.6%     12.8%     13.0%     13.2%     13.4%     13.6%     13.8%     14.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0...................................................    .01683    .01669    .01655    .01642    .01630    .01618    .01607    .01596    .01586    .01576
1...................................................    .00559    .00544    .00531    .00518    .00506    .00494    .00484    .00473    .00464    .00454
2...................................................    .00528    .00513    .00499    .00485    .00473    .00461    .00449    .00439    .00428    .00419
3...................................................    .00524    .00508    .00493    .00479    .00465    .00453    .00441    .00429    .00419    .00408
4...................................................    .00536    .00519    .00503    .00488    .00473    .00460    .00447    .00435    .00423    .00412
5...................................................    .00558    .00540    .00523    .00507    .00492    .00477    .00464    .00451    .00439    .00427
6...................................................    .00588    .00569    .00550    .00533    .00517    .00502    .00487    .00473    .00460    .00448
7...................................................    .00624    .00604    .00584    .00566    .00549    .00532    .00517    .00502    .00488    .00475
8...................................................    .00668    .00646    .00626    .00606    .00588    .00570    .00554    .00538    .00523    .00509
9...................................................    .00722    .00699    .00677    .00656    .00636    .00617    .00600    .00583    .00567    .00552
10..................................................    .00785    .00761    .00737    .00715    .00694    .00674    .00655    .00637    .00620    .00604
11..................................................    .00861    .00835    .00810    .00786    .00764    .00743    .00723    .00704    .00686    .00668
12..................................................    .00946    .00918    .00891    .00866    .00843    .00820    .00799    .00779    .00760    .00741
13..................................................    .01035    .01006    .00978    .00951    .00927    .00903    .00880    .00859    .00839    .00819
14..................................................    .01122    .01091    .01061    .01034    .01007    .00982    .00958    .00936    .00914    .00894
15..................................................    .01203    .01171    .01140    .01110    .01082    .01056    .01031    .01007    .00985    .00963
16..................................................    .01279    .01244    .01211    .01181    .01151    .01123    .01097    .01072    .01048    .01025
17..................................................    .01347    .01311    .01276    .01244    .01213    .01184    .01156    .01130    .01104    .01081
18..................................................    .01411    .01373    .01336    .01302    .01270    .01239    .01210    .01182    .01155    .01130
19..................................................    .01474    .01434    .01396    .01359    .01325    .01293    .01262    .01233    .01205    .01178
20..................................................    .01537    .01494    .01454    .01415    .01379    .01345    .01313    .01282    .01252    .01224
21..................................................    .01598    .01553    .01510    .01470    .01432    .01396    .01361    .01329    .01298    .01268
22..................................................    .01660    .01613    .01568    .01525    .01485    .01446    .01410    .01375    .01343    .01312
23..................................................    .01725    .01674    .01627    .01581    .01539    .01498    .01460    .01423    .01388    .01355
24..................................................    .01796    .01742    .01692    .01644    .01599    .01556    .01515    .01476    .01439    .01404
25..................................................    .01876    .01819    .01765    .01714    .01666    .01621    .01577    .01536    .01497    .01460
26..................................................    .01967    .01907    .01850    .01796    .01745    .01696    .01650    .01606    .01565    .01525
27..................................................    .02072    .02008    .01948    .01890    .01836    .01784    .01735    .01688    .01644    .01601
28..................................................    .02190    .02122    .02057    .01996    .01938    .01883    .01831    .01781    .01734    .01689
29..................................................    .02322    .02249    .02181    .02116    .02054    .01996    .01940    .01887    .01836    .01788
30..................................................    .02469    .02392    .02319    .02250    .02184    .02122    .02062    .02006    .01952    .01900
31..................................................    .02634    .02552    .02475    .02401    .02331    .02264    .02201    .02140    .02083    .02028
32..................................................    .02816    .02729    .02647    .02568    .02494    .02423    .02355    .02291    .02229    .02170
33..................................................    .03018    .02926    .02838    .02755    .02675    .02600    .02528    .02459    .02393    .02331
34..................................................    .03239    .03142    .03048    .02960    .02875    .02795    .02718    .02645    .02575    .02508
35..................................................    .03482    .03378    .03279    .03185    .03095    .03009    .02928    .02850    .02775    .02704
36..................................................    .03743    .03633    .03528    .03428    .03333    .03242    .03155    .03072    .02992    .02916
37..................................................    .04026    .03909    .03798    .03692    .03591    .03494    .03401    .03313    .03228    .03147
38..................................................    .04330    .04207    .04089    .03977    .03869    .03767    .03668    .03574    .03484    .03398
39..................................................    .04658    .04528    .04403    .04284    .04170    .04061    .03957    .03857    .03762    .03670
40..................................................    .05011    .04873    .04741    .04615    .04495    .04379    .04269    .04163    .04061    .03964
41..................................................    .05389    .05244    .05104    .04971    .04844    .04721    .04604    .04492    .04384    .04281

[[Page 85]]

 
42..................................................    .05791    .05638    .05491    .05350    .05216    .05086    .04962    .04844    .04729    .04620
43..................................................    .06219    .06057    .05902    .05754    .05612    .05475    .05344    .05218    .05098    .04981
44..................................................    .06673    .06503    .06340    .06184    .06034    .05890    .05752    .05619    .05491    .05368
45..................................................    .07157    .06978    .06806    .06642    .06484    .06332    .06186    .06046    .05911    .05781
46..................................................    .07669    .07481    .07301    .07128    .06962    .06802    .06649    .06501    .06358    .06221
47..................................................    .08212    .08015    .07826    .07645    .07470    .07302    .07140    .06984    .06834    .06690
48..................................................    .08784    .08578    .08380    .08190    .08006    .07830    .07660    .07496    .07338    .07186
49..................................................    .09384    .09169    .08961    .08762    .08570    .08384    .08206    .08034    .07868    .07708
50..................................................    .10013    .09787    .09570    .09361    .09160    .08966    .08779    .08598    .08424    .08256
51..................................................    .10671    .10436    .10209    .09991    .09780    .09577    .09381    .09192    .09009    .08832
52..................................................    .11365    .11120    .10883    .10655    .10435    .10222    .10017    .09819    .09628    .09442
53..................................................    .12095    .11840    .11593    .11355    .11126    .10904    .10689    .10482    .10282    .10088
54..................................................    .12860    .12595    .12338    .12090    .11851    .11619    .11396    .11179    .10970    .10767
55..................................................    .13663    .13386    .13120    .12862    .12613    .12372    .12138    .11912    .11694    .11482
56..................................................    .14503    .14217    .13940    .13672    .13413    .13162    .12919    .12683    .12456    .12235
57..................................................    .15385    .15089    .14801    .14523    .14254    .13994    .13741    .13496    .13259    .13029
58..................................................    .16311    .16004    .15706    .15418    .15139    .14868    .14606    .14352    .14105    .13866
59..................................................    .17279    .16961    .16654    .16355    .16066    .15786    .15514    .15250    .14994    .14745
60..................................................    .18286    .17958    .17640    .17332    .17033    .16743    .16462    .16188    .15922    .15664
61..................................................    .19330    .18992    .18665    .18347    .18038    .17738    .17447    .17164    .16889    .16622
62..................................................    .20409    .20061    .19724    .19396    .19078    .18768    .18467    .18175    .17891    .17614
63..................................................    .21522    .21165    .20818    .20480    .20152    .19833    .19523    .19221    .18928    .18642
64..................................................    .22672    .22306    .21949    .21602    .21265    .20937    .20617    .20306    .20003    .19708
65..................................................    .23867    .23491    .23125    .22769    .22423    .22085    .21757    .21437    .21125    .20821
66..................................................    .25112    .24727    .24353    .23988    .23632    .23286    .22948    .22619    .22299    .21986
67..................................................    .26409    .26016    .25633    .25260    .24896    .24541    .24195    .23857    .23528    .23206
68..................................................    .27760    .27359    .26968    .26586    .26214    .25851    .25497    .25151    .24814    .24484
69..................................................    .29157    .28748    .28350    .27961    .27581    .27211    .26849    .26495    .26150    .25812
70..................................................    .30596    .30181    .29775    .29379    .28992    .28614    .28245    .27884    .27532    .27187
71..................................................    .32069    .31648    .31236    .30833    .30440    .30055    .29679    .29312    .28952    .28600
72..................................................    .33578    .33151    .32733    .32325    .31925    .31535    .31152    .30778    .30412    .30054
73..................................................    .35123    .34691    .34269    .33855    .33450    .33054    .32666    .32286    .31914    .31550
74..................................................    .36715    .36279    .35852    .35434    .35024    .34623    .34230    .33845    .33468    .33098
75..................................................    .38360    .37921    .37491    .37069    .36656    .36250    .35853    .35464    .35082    .34708
76..................................................    .40064    .39623    .39190    .38765    .38349    .37941    .37540    .37148    .36762    .36384
77..................................................    .41823    .41381    .40947    .40521    .40103    .39692    .39290    .38895    .38507    .38126
78..................................................    .43632    .43189    .42755    .42329    .41910    .41499    .41095    .40698    .40309    .39926
79..................................................    .45473    .45032    .44599    .44173    .43755    .43344    .42940    .42543    .42153    .41770
80..................................................    .47333    .46894    .46463    .46040    .45623    .45213    .44811    .44414    .44025    .43642
81..................................................    .49191    .48755    .48328    .47907    .47493    .47085    .46684    .46290    .45902    .45520
82..................................................    .51034    .50603    .50179    .49762    .49351    .48947    .48549    .48157    .47772    .47392
83..................................................    .52852    .52427    .52008    .51595    .51189    .50788    .50394    .50006    .49623    .49246
84..................................................    .54648    .54228    .53815    .53407    .53006    .52610    .52221    .51836    .51458    .51084
85..................................................    .56426    .56013    .55606    .55205    .54810    .54420    .54035    .53656    .53282    .52913
86..................................................    .58169    .57764    .57364    .56970    .56581    .56197    .55818    .55445    .55076    .54713
87..................................................    .59850    .59452    .59060    .58673    .58291    .57913    .57541    .57174    .56811    .56453
88..................................................    .61476    .61086    .60702    .60322    .59947    .59577    .59212    .58851    .58494    .58142
89..................................................    .63078    .62697    .62321    .61950    .61583    .61220    .60862    .60508    .60159    .59813
90..................................................    .64674    .64302    .63935    .63573    .63215    .62861    .62511    .62165    .61823    .61485
91..................................................    .66238    .65877    .65520    .65167    .64819    .64474    .64133    .63795    .63462    .63132
92..................................................    .67730    .67379    .67032    .66689    .66350    .66014    .65682    .65354    .65029    .64708
93..................................................    .69130    .68789    .68452    .68119    .67789    .67463    .67140    .66820    .66504    .66191
94..................................................    .70421    .70090    .69762    .69438    .69118    .68800    .68486    .68175    .67867    .67563
95..................................................    .71594    .71272    .70954    .70639    .70326    .70017    .69712    .69409    .69109    .68812
96..................................................    .72638    .72325    .72014    .71707    .71403    .71101    .70803    .70507    .70215    .69925
97..................................................    .73590    .73285    .72982    .72682    .72385    .72090    .71799    .71510    .71224    .70941
98..................................................    .74448    .74149    .73853    .73560    .73269    .72981    .72696    .72414    .72134    .71856
99..................................................    .75240    .74948    .74658    .74371    .74086    .73805    .73525    .73248    .72974    .72702
100.................................................    .75974    .75687    .75403    .75121    .74842    .74566    .74292    .74020    .73751    .73484
101.................................................    .76669    .76388    .76109    .75833    .75559    .75287    .75018    .74751    .74486    .74223
102.................................................    .77393    .77117    .76844    .76573    .76304    .76037    .75773    .75511    .75251    .74993
103.................................................    .78158    .77888    .77620    .77355    .77091    .76830    .76571    .76313    .76058    .75805
104.................................................    .79007    .78743    .78482    .78222    .77964    .77709    .77455    .77203    .76953    .76705
105.................................................    .80065    .79809    .79556    .79304    .79054    .78805    .78559    .78314    .78071    .77829
106.................................................    .81631    .81389    .81149    .80911    .80674    .80438    .80204    .79972    .79741    .79511
107.................................................    .83963    .83745    .83529    .83313    .83099    .82886    .82674    .82463    .82254    .82045
108.................................................    .87910    .87739    .87569    .87400    .87232    .87064    .86897    .86731    .86566    .86401
109.................................................    .94563    .94484    .94405    .94326    .94248    .94170    .94092    .94014    .93937    .93860
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 86]]


[Redesignated from 36 FR 6480, Apr. 6, 1971. T.D. 8540, 59 FR 30102, 
30105, 30116, June 10, 1994, as amended by T.D. 8819, 64 FR 23190, 
23199, 23228, Apr. 30, 1999; 64 FR 33196, June 22, 1999; T.D. 8886, 65 
FR 36943, June 12, 2000]

              Election to Treat Trust as Part of an Estate



Sec. 1.645-1  Election by certain revocable trusts to be treated as part of estate.

    (a) In general. If an election is filed for a qualified revocable 
trust, as defined in paragraph (b)(1) of this section, in accordance 
with the rules set forth in paragraph (c) of this section, the qualified 
revocable trust is treated and taxed for purposes of subtitle A of the 
Internal Revenue Code as part of its related estate, as defined in 
paragraph (b)(5) of this section (and not as a separate trust) during 
the election period, as defined in paragraph (b)(6) of this section. 
Rules regarding the use of taxpayer identification numbers (TINs) and 
the filing of a Form 1041, ``U.S. Income Tax Return for Estates and 
Trusts,'' for a qualified revocable trust are in paragraph (d) of this 
section. Rules regarding the tax treatment of an electing trust and 
related estate and the general filing requirements for the combined 
entity during the election period are in paragraph (e)(2) of this 
section. Rules regarding the tax treatment of an electing trust and its 
filing requirements during the election period if no executor, as 
defined in paragraph (b)(4) of this section, is appointed for a related 
estate are in paragraph (e)(3) of this section. Rules for determining 
the duration of the section 645 election period are in paragraph (f) of 
this section. Rules regarding the tax effects of the termination of the 
election are in paragraph (h) of this section. Rules regarding the tax 
consequences of the appointment of an executor after a trustee has made 
a section 645 election believing that an executor would not be appointed 
for a related estate are in paragraph (g) of this section.
    (b) Definitions. For purposes of this section:
    (1) Qualified revocable trust. A qualified revocable trust (QRT) is 
any trust (or portion thereof) that on the date of death of the decedent 
was treated as owned by the decedent under section 676 by reason of a 
power held by the decedent (determined without regard to section 
672(e)). A trust that was treated as owned by the decedent under section 
676 by reason of a power that was exercisable by the decedent only with 
the approval or consent of a nonadverse party or with the approval or 
consent of the decedent's spouse is a QRT. A trust that was treated as 
owned by the decedent under section 676 solely by reason of a power held 
by a nonadverse party or by reason of a power held by the decedent's 
spouse is not a QRT.
    (2) Electing trust. An electing trust is a QRT for which a valid 
section 645 election has been made. Once a section 645 election has been 
made for the trust, the trust shall be treated as an electing trust 
throughout the entire election period.
    (3) Decedent. The decedent is the individual who was treated as the 
owner of the QRT under section 676 on the date of that individual's 
death.
    (4) Executor. An executor is an executor, personal representative, 
or administrator that has obtained letters of appointment to administer 
the decedent's estate through formal or informal appointment procedures. 
Solely for purposes of this paragraph (b)(4), an executor does not 
include a person that has actual or constructive possession of property 
of the decedent unless that person is also appointed or qualified as an 
executor, administrator, or personal representative of the decedent's 
estate. If more than one jurisdiction has appointed an executor, the 
executor appointed in the domiciliary or primary proceeding is the 
executor of the related estate for purposes of this paragraph (b)(4).
    (5) Related estate. A related estate is the estate of the decedent 
who was treated as the owner of the QRT on the date of the decedent's 
death.
    (6) Election period. The election period is the period of time 
during which an electing trust is treated and taxed as part of its 
related estate. The rules for determining the duration of the election 
period are in paragraph (f) of this section.
    (c) The election--(1) Filing the election if there is an executor--
(i) Time and manner for filing the election. If there is an

[[Page 87]]

executor of the related estate, the trustees of each QRT joining in the 
election and the executor of the related estate make an election under 
section 645 and this section to treat each QRT joining in the election 
as part of the related estate for purposes of subtitle A of the Internal 
Revenue Code by filing a form provided by the IRS for making the 
election (election form) properly completed and signed under penalties 
of perjury, or in any other manner prescribed after December 24, 2002 by 
forms provided by the Internal Revenue Service (IRS), or by other 
published guidance for making the election. For the election to be 
valid, the election form must be filed not later than the time 
prescribed under section 6072 for filing the Form 1041 for the first 
taxable year of the related estate (regardless of whether there is 
sufficient income to require the filing of that return). If an extension 
is granted for the filing of the Form 1041 for the first taxable year of 
the related estate, the election form will be timely filed if it is 
filed by the time prescribed for filing the Form 1041 including the 
extension granted with respect to the Form 1041.
    (ii) Conditions to election. In addition to providing the 
information required by the election form, as a condition to a valid 
section 645 election, the trustee of each QRT joining in the election 
and the executor of the related estate agree, by signing the election 
form under penalties of perjury, that:
    (A) With respect to a trustee--
    (1) The trustee agrees to the election;
    (2) The trustee is responsible for timely providing the executor of 
the related estate with all the trust information necessary to permit 
the executor to file a complete, accurate, and timely Form 1041 for the 
combined electing trust(s) and related estate for each taxable year 
during the election period;
    (3) The trustee of each QRT joining the election and the executor of 
the related estate have agreed to allocate the tax burden of the 
combined electing trust(s) and related estate for each taxable year 
during the election period in a manner that reasonably reflects the tax 
obligations of each electing trust and the related estate; and
    (4) The trustee is responsible for insuring that the electing 
trust's share of the tax obligations of the combined electing trust(s) 
and related estate is timely paid to the Secretary.
    (B) With respect to the executor--
    (1) The executor agrees to the election;
    (2) The executor is responsible for filing a complete, accurate, and 
timely Form 1041 for the combined electing trust(s) and related estate 
for each taxable year during the election period;
    (3) The executor and the trustee of each QRT joining in the election 
have agreed to allocate the tax burden of the combined electing trust(s) 
and related estate for each taxable year during the election period in a 
manner that reasonably reflects the tax obligations of each electing 
trust and the related estate;
    (4) The executor is responsible for insuring that the related 
estate's share of the tax obligations of the combined electing trust(s) 
and related estate is timely paid to the Secretary.
    (2) Filing the election if there is no executor--(i) Time and manner 
for filing the election. If there is no executor for a related estate, 
an election to treat one or more QRTs of the decedent as an estate for 
purposes of subtitle A of the Internal Revenue Code is made by the 
trustees of each QRT joining in the election, by filing a properly 
completed election form, or in any other manner prescribed after 
December 24, 2002 by forms provided by the IRS, or by other published 
guidance for making the election. For the election to be valid, the 
election form must be filed not later than the time prescribed under 
section 6072 for filing the Form 1041 for the first taxable year of the 
trust, taking into account the trustee's election to treat the trust as 
an estate under section 645 (regardless of whether there is sufficient 
income to require the filing of that return). If an extension is granted 
for the filing of the Form 1041 for the first taxable year of the 
electing trust, the election form will be timely filed if it is filed by 
the time prescribed for filing the Form 1041 including the extension 
granted with respect to the filing of the Form 1041.
    (ii) Conditions to election. In addition to providing the 
information required

[[Page 88]]

by the election form, as a condition to a valid section 645 election, 
the trustee of each QRT joining in the election agrees, by signing the 
election form under penalties of perjury, that--
    (A) The trustee agrees to the election;
    (B) If there is more than one QRT joining in the election, the 
trustees of each QRT joining in the election have appointed one trustee 
to be responsible for filing the Form 1041 for the combined electing 
trusts for each taxable year during the election period (filing trustee) 
and the filing trustee has agreed to accept that responsibility;
    (C) If there is more than one QRT, the trustees of each QRT joining 
in the election have agreed to allocate the tax liability of the 
combined electing trusts for each taxable year during the election 
period in a manner that reasonably reflects the tax obligations of each 
electing trust;
    (D) The trustee agrees to:
    (1) Timely file a Form 1041 for the electing trust(s) for each 
taxable year during the election period; or
    (2) If there is more than one QRT and the trustee is not the filing 
trustee, timely provide the filing trustee with all of the electing 
trust's information necessary to permit the filing trustee to file a 
complete, accurate, and timely Form 1041 for the combined electing 
trusts for each taxable year during the election period;
    (3) Insure that the electing trust's share of the tax burden is 
timely paid to the Secretary;
    (E) There is no executor and, to the knowledge and belief of the 
trustee, one will not be appointed; and
    (F) If an executor is appointed after the filing of the election 
form and the executor agrees to the section 645 election, the trustee 
will complete and file a revised election form with the executor.
    (3) Election for more than one QRT. If there is more than one QRT, 
the election may be made for some or all of the QRTs. If there is no 
executor, one trustee must be appointed by the trustees of the electing 
trusts to file Forms 1041 for the combined electing trusts filing as an 
estate during the election period.
    (d) TIN and filing requirements for a QRT--(1) Obtaining a TIN. 
Regardless of whether there is an executor for a related estate and 
regardless of whether a section 645 election will be made for the QRT, a 
TIN must be obtained for the QRT following the death of the decedent. 
See Sec. 301.6109-1(a)(3) of this chapter. The trustee must furnish this 
TIN to the payors of the QRT. See Sec. 301.6109-1(a)(5) of this chapter 
for the definition of payor.
    (2) Filing a Form 1041 for a QRT--(i) Option not to file a Form 1041 
for a QRT for which a section 645 election will be made. If a section 
645 election will be made for a QRT, the executor of the related estate, 
if any, and the trustee of the QRT may treat the QRT as an electing 
trust from the decedent's date of death until the due date for the 
section 645 election. Accordingly, the trustee of the QRT is not 
required to file a Form 1041 for the QRT for the short taxable year 
beginning with the decedent's date of death and ending December 31 of 
that year. However, if a QRT is treated as an electing trust under this 
paragraph from the decedent's date of death until the due date for the 
section 645 election but a valid section 645 election is not made for 
the QRT, the QRT will be subject to penalties and interest for failing 
to timely file a Form 1041 and pay the tax due thereon.
    (ii) Requirement to file a Form 1041 for a QRT if paragraph 
(d)(2)(i) of this section does not apply--(A) Requirement to file Form 
1041. If the trustee of the QRT and the executor of the related estate, 
if any, do not treat the QRT as an electing trust as provided under 
paragraph (d)(2)(i) of this section, or if the trustee of the electing 
trust and the executor, if any, are uncertain whether a section 645 
election will be made for a QRT, the trustee of the QRT must file a Form 
1041 for the short taxable year beginning with the decedent's death and 
ending December 31 of that year (unless the QRT is not required to file 
a Form 1041 under section 6012 for this period).
    (B) Requirement to amend Form 1041 if a section 645 election is 
made--(1) If there is an executor. If there is an executor and a valid 
section 645 election is made for a QRT after a Form 1041 has been

[[Page 89]]

filed for the QRT as a trust (see paragraph (d)(2)(ii)(A) of this 
section), the trustee must amend the Form 1041. The QRT's items of 
income, deduction, and credit must be excluded from the amended Form 
1041 filed under this paragraph and must be included on the Form 1041 
filed for the first taxable year of the combined electing trust and 
related estate under paragraph (e)(2)(ii)(A) of this section.
    (2) If there is no executor. If there is no executor and a valid 
section 645 election is made for a QRT after a Form 1041 has been filed 
for the QRT as a trust (see paragraph (d)(2)(ii)(A) of this section) for 
the short taxable year beginning with the decedent's death and ending 
December 31 of that year, the trustee must file an amended return for 
the QRT. The amended return must be filed consistent with paragraph 
(e)(3) of this section and must be filed by the due date of the Form 
1041 for the QRT, taking into account the trustee's election under 
section 645.
    (e) Tax treatment and general filing requirements of electing trust 
and related estate during the election period--(1) Effect of election. 
The section 645 election once made is irrevocable.
    (2) If there is an executor--(i) Tax treatment of the combined 
electing trust and related estate. If there is an executor, the electing 
trust is treated, during the election period, as part of the related 
estate for all purposes of subtitle A of the Internal Revenue Code. 
Thus, for example, the electing trust is treated as part of the related 
estate for purposes of the set-aside deduction under section 642(c)(2), 
the subchapter S shareholder requirements of section 1361(b)(1), and the 
special offset for rental real estate activities in section 469(i)(4).
    (ii) Filing requirements--(A) Filing the Form 1041 for the combined 
electing trust and related estate during the election period. If there 
is an executor, the executor files a single income tax return annually 
(assuming a return is required under section 6012) under the name and 
TIN of the related estate for the combined electing trust and the 
related estate. Information regarding the name and TIN of each electing 
trust must be provided on the Form 1041 as required by the instructions 
to that form. The period of limitations provided in section 6501 for 
assessments with respect to an electing trust and the related estate 
starts with the filing of the return required under this paragraph. 
Except as required under the separate share rules of section 663(c), for 
purposes of filing the Form 1041 under this paragraph and computing the 
tax, the items of income, deduction, and credit of the electing trust 
and related estate are combined. One personal exemption in the amount of 
$600 is permitted under section 642(b), and the tax is computed under 
section 1(e), taking into account section 1(h), for the combined taxable 
income.
    (B) Filing a Form 1041 for the electing trust is not required. 
Except for any final Form 1041 required to be filed under paragraph 
(h)(2)(i)(B) of this section, if there is an executor, the trustee of 
the electing trust does not file a Form 1041 for the electing trust 
during the election period. Although the trustee is not required to file 
a Form 1041 for the electing trust, the trustee of the electing trust 
must timely provide the executor of the related estate with all the 
trust information necessary to permit the executor to file a complete, 
accurate and timely Form 1041 for the combined electing trust and 
related estate. The trustee must also insure that the electing trust's 
share of the tax obligations of the combined electing trust and related 
estate is timely paid to the Secretary. In certain situations, the 
trustee of a QRT may be required to file a Form 1041 for the QRT's short 
taxable year beginning with the date of the decedent's death and ending 
December 31 of that year. See paragraph (d)(2) of this section.
    (iii) Application of the separate share rules--(A) Distributions to 
beneficiaries (other than to a share (or shares) of the combined 
electing trust and related estate). Under the separate share rules of 
section 663(c), the electing trust and related estate are treated as 
separate shares for purposes of computing distributable net income (DNI) 
and applying the distribution provisions of sections 661 and 662. 
Further, the electing trust share or the related estate share may each 
contain two or more shares. Thus, if during the taxable year, a 
distribution is made by the electing trust

[[Page 90]]

or the related estate, the DNI of the share making the distribution must 
be determined and the distribution provisions of sections 661 and 662 
must be applied using the separately determined DNI applicable to the 
distributing share.
    (B) Adjustments to the DNI of the separate shares for distributions 
between shares to which sections 661 and 662 would apply. A distribution 
from one share to another share to which sections 661 and 662 would 
apply if made to a beneficiary other than another share of the combined 
electing trust and related estate affects the computation of the DNI of 
the share making the distribution and the share receiving the 
distribution. The share making the distribution reduces its DNI by the 
amount of the distribution deduction that it would be entitled to under 
section 661 (determined without regard to section 661(c)), had the 
distribution been made to another beneficiary, and, solely for purposes 
of calculating DNI, the share receiving the distribution increases its 
gross income by the same amount. The distribution has the same character 
in the hands of the recipient share as in the hands of the distributing 
share. The following example illustrates the provisions of this 
paragraph (e)(2)(iii)(B):

    Example. (i) A's will provides that, after the payment of debts, 
expenses, and taxes, the residue of A's estate is to be distributed to 
Trust, an electing trust. The sole beneficiary of Trust is C. The estate 
share has $15,000 of gross income, $5,000 of deductions, and $10,000 of 
taxable income and DNI for the taxable year based on the assets held in 
A's estate. During the taxable year, A's estate distributes $15,000 to 
Trust. The distribution reduces the DNI of the estate share by $10,000.
    (ii) For the same taxable year, the trust share has $25,000 of gross 
income and $5,000 of deductions. None of the modifications provided for 
under section 643(a) apply. In calculating the DNI for the trust share, 
the gross income of the trust share is increased by $10,000, the amount 
of the reduction in the DNI of the estate share as a result of the 
distribution to Trust. Thus, solely for purposes of calculating DNI, the 
trust share has gross income of $35,000, and taxable income of $30,000. 
Therefore, the trust share has $30,000 of DNI for the taxable year.
    (iii) During the same taxable year, Trust distributes $35,000 to C. 
The distribution deduction reported on the Form 1041 filed for A's 
estate and Trust is $30,000. As a result of the distribution by Trust to 
C, C must include $30,000 in gross income for the taxable year. The 
gross income reported on the Form 1041 filed for A's estate and Trust is 
$40,000.

    (iv) Application of the governing instrument requirement of section 
642(c). A deduction is allowed in computing the taxable income of the 
combined electing trust and related estate to the extent permitted under 
section 642(c) for--
    (A) Any amount of the gross income of the related estate that is 
paid or set aside during the taxable year pursuant to the terms of the 
governing instrument of the related estate for a purpose specified in 
section 170(c); and
    (B) Any amount of gross income of the electing trust that is paid or 
set aside during the taxable year pursuant to the terms of the governing 
instrument of the electing trust for a purpose specified in section 
170(c).
    (3) If there is no executor--(i) Tax treatment of the electing 
trust. If there is no executor, the trustee treats the electing trust, 
during the election period, as an estate for all purposes of subtitle A 
of the Internal Revenue Code. Thus, for example, an electing trust is 
treated as an estate for purposes of the set-aside deduction under 
section 642(c)(2), the subchapter S shareholder requirements of section 
1361(b)(1), and the special offset for rental real estate activities 
under section 469(i)(4). The trustee may also adopt a taxable year other 
than a calendar year.
    (ii) Filing the Form 1041 for the electing trust. If there is no 
executor, the trustee of the electing trust must, during the election 
period, file a Form 1041, under the TIN obtained by the trustee under 
Sec. 301.6109-1(a)(3) of this chapter upon the death of the decedent, 
treating the trust as an estate. If there is more than one electing 
trust, the Form 1041 must be filed by the filing trustee (see paragraph 
(c)(2)(ii)(B) of this section) under the name and TIN of the electing 
trust of the filing trustee. Information regarding the names and TINs of 
the other electing trusts must be provided on the Form 1041 as required 
by the instructions to that form. Any return filed in accordance with 
this paragraph shall be treated as a return filed for the electing trust 
(or

[[Page 91]]

trusts, if there is more than one electing trust) and not as a return 
filed for any subsequently discovered related estate. Accordingly, the 
period of limitations provided in section 6501 for assessments with 
respect to a subsequently discovered related estate does not start until 
a return is filed with respect to the related estate. See paragraph (g) 
of this section.
    (4) Application of the section 6654(l)(2) to the electing trust. 
Each electing trust and related estate (if any) is treated as a separate 
taxpayer for all purposes of subtitle F of the Internal Revenue Code, 
including, without limitation, the application of section 6654. The 
provisions of section 6654(l)(2)(A) relating to the two year exception 
to an estate's obligation to make estimated tax payments, however, will 
apply to each electing trust for which a section 645 election has been 
made.
    (f) Duration of election period--(1) In general. The election period 
begins on the date of the decedent's death and terminates on the earlier 
of the day on which both the electing trust and related estate, if any, 
have distributed all of their assets, or the day before the applicable 
date. The election does not apply to successor trusts (trusts that are 
distributees under the trust instrument).
    (2) Definition of applicable date--(i) Applicable date if no Form 
706 ``United States Estate (and Generation Skipping Transfer) Tax 
Return'' is required to be filed. If a Form 706 is not required to be 
filed as a result of the decedent's death, the applicable date is the 
day which is 2 years after the date of the decedent's death.
    (ii) Applicable date if a Form 706 is required to be filed. If a 
Form 706 is required to be filed as a result of the decedent's death, 
the applicable date is the later of the day that is 2 years after the 
date of the decedent's death, or the day that is 6 months after the date 
of final determination of liability for estate tax. Solely for purposes 
of determining the applicable date under section 645, the date of final 
determination of liability is the earliest of the following--
    (A) The date that is six months after the issuance by the Internal 
Revenue Service of an estate tax closing letter, unless a claim for 
refund with respect to the estate tax is filed within twelve months 
after the issuance of the letter;
    (B) The date of a final disposition of a claim for refund, as 
defined in paragraph (f)(2)(iii) of this section, that resolves the 
liability for the estate tax, unless suit is instituted within six 
months after a final disposition of the claim;
    (C) The date of execution of a settlement agreement with the 
Internal Revenue Service that determines the liability for the estate 
tax;
    (D) The date of issuance of a decision, judgment, decree, or other 
order by a court of competent jurisdiction resolving the liability for 
the estate tax unless a notice of appeal or a petition for certiorari is 
filed within 90 days after the issuance of a decision, judgment, decree, 
or other order of a court; or
    (E) The date of expiration of the period of limitations for 
assessment of the estate tax provided in section 6501.
    (iii) Definition of final disposition of claim for refund. For 
purposes of paragraph (f)(2)(ii)(B) of this section, a claim for refund 
shall be deemed finally disposed of by the Secretary when all items have 
been either allowed or disallowed. If a waiver of notification with 
respect to disallowance is filed with respect to a claim for refund 
prior to disallowance of the claim, the claim for refund will be treated 
as disallowed on the date the waiver is filed.
    (iv) Examples. The application of this paragraph (f)(2) is 
illustrated by the following examples:

    Example 1. A died on October 20, 2002. The executor of A's estate 
and the trustee of Trust, an electing trust, made a section 645 
election. A Form 706 is not required to be filed as a result of A's 
death. The applicable date is October 20, 2004, the day that is two 
years after A's date of death. The last day of the election period is 
October 19, 2004. Beginning October 20, 2004, Trust will no longer be 
treated and taxed as part of A's estate.
    Example 2. Assume the same facts as Example 1, except that a Form 
706 is required to be filed as the result of A's death. The Internal 
Revenue Service issues an estate tax closing letter accepting the Form 
706 as filed on March 15, 2005. The estate does not file a claim for 
refund by March 15, 2006, the day that is twelve months after the date 
of issuance of the estate tax closing letter. The date of final 
determination of liability is September 15, 2005, and the applicable 
date is

[[Page 92]]

March 15, 2006. The last day of the election period is March 14, 2006. 
Beginning March 15, 2006, Trust will no longer be treated and taxed as 
part of A's estate.
    Example 3. Assume the same facts as Example 1, except that a Form 
706 is required to be filed as the result of A's death. The Form 706 is 
audited, and a notice of deficiency authorized under section 6212 is 
mailed to the executor of A's estate as a result of the audit. The 
executor files a petition in Tax Court. The Tax Court issues a decision 
resolving the liability for estate tax on December 14, 2005, and neither 
party appeals within 90 days after the issuance of the decision. The 
date of final determination of liability is December 14, 2005. The 
applicable date is June 14, 2006, the day that is six months after the 
date of final determination of liability. The last day of the election 
period is June 13, 2006. Beginning June 14, 2006, Trust will no longer 
be treated and taxed as part of A's estate.

    (g) Executor appointed after the section 645 election is made--(1) 
Effect on the election. If an executor for the related estate is not 
appointed until after the trustee has made a valid section 645 election, 
the executor must agree to the trustee's election, and the IRS must be 
notified of that agreement by the filing of a revised election form 
(completed as required by the instructions to that form) within 90 days 
of the appointment of the executor, for the election period to continue 
past the date of appointment of the executor. If the executor does not 
agree to the election or a revised election form is not timely filed as 
required by this paragraph, the election period terminates the day 
before the appointment of the executor. If the IRS issues other guidance 
after December 24, 2002 for notifying the IRS of the executor's 
agreement to the election, the IRS must be notified in the manner 
provided in that guidance for the election period to continue.
    (2) Continuation of election period--(i) Correction of returns filed 
before executor appointed. If the election period continues under 
paragraph (g)(1) of this section, the executor of the related estate and 
the trustee of each electing trust must file amended Forms 1041 to 
correct the Forms 1041 filed by the trustee before the executor was 
appointed. The amended Forms 1041 must be filed under the name and TIN 
of the electing trust and must reflect the items of income, deduction, 
and credit of the related estate and the electing trust. The name and 
TIN of the related estate must be provided on the amended Forms 1041 as 
required in the instructions to that Form. The amended return for the 
taxable year ending immediately before the executor was appointed must 
indicate that this Form 1041 is a final return. If the period of 
limitations for making assessments has expired with respect to the 
electing trust for any of the Forms 1041 filed by the trustee, the 
executor must file Forms 1041 for any items of income, deduction, and 
credit of the related estate that cannot be properly included on amended 
forms for the electing trust. The personal exemption under section 
642(b) is not permitted to be taken on these Forms 1041 filed by the 
executor.
    (ii) Returns filed after the appointment of the executor. All 
returns filed by the combined electing trust and related estate after 
the appointment of the executor are to be filed under the name and TIN 
of the related estate in accordance with paragraph (e)(2) of this 
section. Regardless of the change in the name and TIN under which the 
Forms 1041 for the combined electing trust and related estate are filed, 
the combined electing trust and related estate will be treated as the 
same entity before and after the executor is appointed.
    (3) Termination of the election period. If the election period 
terminates under paragraph (g)(1) of this section, the executor must 
file Forms 1041 under the name and TIN of the estate for all taxable 
years of the related estate ending after the death of the decedent. The 
trustee of the electing trust is not required to amend any returns filed 
for the electing trust during the election period. Following termination 
of the election period, the trustee of the electing trust must obtain a 
new TIN. See Sec. 301.6109-1(a)(4) of this chapter.
    (h) Treatment of an electing trust and related estate following 
termination of the election--(1) The share (or shares) comprising the 
electing trust is deemed to be distributed upon termination of the 
election period. On the close of the last day of the election period, 
the combined electing trust and related estate, if

[[Page 93]]

there is an executor, or the electing trust, if there is no executor, is 
deemed to distribute the share (or shares, as determined under section 
663(c)) comprising the electing trust to a new trust in a distribution 
to which sections 661 and 662 apply. All items of income, including net 
capital gains, that are attributable to the share (or shares) comprising 
the electing trust are included in the calculation of the distributable 
net income of the electing trust and treated as distributed by the 
combined electing trust and related estate, if there is an executor, or 
by the electing trust, if there is no executor, to the new trust. The 
combined electing trust and related estate, if there is an executor, or 
the electing trust, if there is no executor, is entitled to a 
distribution deduction to the extent permitted under section 661 in the 
taxable year in which the election period terminates as a result of the 
deemed distribution. The new trust shall include the amount of the 
deemed distribution in gross income to the extent required under section 
662.
    (2) Filing of the Form 1041 upon the termination of the section 645 
election--(i) If there is an executor--(A) Filing the Form 1041 for the 
year of termination. If there is an executor, the Form 1041 filed under 
the name and TIN of the related estate for the taxable year in which the 
election terminates includes--
    (1) The items of income, deduction, and credit of the electing trust 
attributable to the period beginning with the first day of the taxable 
year of the combined electing trust and related estate and ending with 
the last day of the election period;
    (2) The items of income, deduction, and credit, if any, of the 
related estate for the entire taxable year; and
    (3) A deduction for the deemed distribution of the share (or shares) 
comprising the electing trust to the new trust as provided for under 
paragraph (h)(1) of this section.
    (B) Requirement to file a final Form 1041 under the name and TIN of 
the electing trust. If the electing trust terminates during the election 
period, the trustee of the electing trust must file a Form 1041 under 
the name and TIN of the electing trust and indicate that the return is a 
final return to notify the IRS that the electing trust is no longer in 
existence. The items of income, deduction, and credit of the trust are 
not reported on this final Form 1041 but on the appropriate Form 1041 
filed for the combined electing trust and related estate.
    (ii) If there is no executor. If there is no executor, the taxable 
year of the electing trust closes on the last day of the election 
period. A Form 1041 is filed in the manner prescribed under paragraph 
(e)(3)(ii) of this section reporting the items of income, deduction, and 
credit of the electing trust for the short period ending with the last 
day of the election period. The Form 1041 filed under this paragraph 
includes a distribution deduction for the deemed distribution provided 
for under paragraph (h)(1) of this section. The Form 1041 must indicate 
that it is a final return.
    (3) Use of TINs following termination of the election--(i) If there 
is an executor. Upon termination of the section 645 election, a former 
electing trust may need to obtain a new TIN. See Sec. 301.6109-1(a)(4) 
of this chapter. If the related estate continues after the termination 
of the election period, the related estate must continue to use the TIN 
assigned to the estate during the election period.
    (ii) If there is no executor. If there is no executor, the former 
electing trust must obtain a new TIN if the trust will continue after 
the termination of the election period. See Sec. 301.6109-1(a)(4) of 
this chapter.
    (4) Taxable year of estate and trust upon termination of the 
election--(i) Estate--Upon termination of the section 645 election 
period, the taxable year of the estate is the same taxable year used 
during the election period.
    (ii) Trust. Upon termination of the section 645 election, the 
taxable year of the new trust is the calendar year. See section 644.
    (i) Reserved.
    (j) Effective date. Paragraphs (a), (b), (c), (d), (f), and (g) of 
this section apply to trusts and estates of decedents dying on or after 
December 24, 2002. Paragraphs (e) and (h) of this section apply to 
taxable years ending on or after December 24, 2002.

[T.D. 9032, 67 FR 78377, Dec. 24, 2002]

[[Page 94]]

               trusts which distribute current income only



Sec. 1.651(a)-1  Simple trusts; deduction for distributions; in general.

    Section 651 is applicable only to a trust the governing instruments 
of which:
    (a) Requires that the trust distribute all of its income currently 
for the taxable year, and
    (b) Does not provide that any amounts may be paid, permanently set 
aside, or used in the taxable year for the charitable, etc., purposes 
specified in section 642(c),

and does not make any distribution other than of current income. A trust 
to which section 651 applies is referred to in this part as a ``simple'' 
trust. Trusts subject to section 661 are referred to as ``complex'' 
trusts. A trust may be a simple trust for one year and a complex trust 
for another year. It should be noted that under section 651 a trust 
qualifies as a simple trust in a taxable year in which it is required to 
distribute all its income currently and makes no other distributions, 
whether or not distributions of current income are in fact made. On the 
other hand a trust is not a complex trust by reason of distributions of 
amounts other than income unless such distributions are in fact made 
during the taxable year, whether or not they are required in that year.



Sec. 1.651(a)-2  Income required to be distributed currently.

    (a) The determination of whether trust income is required to be 
distributed currently depends upon the terms of the trust instrument and 
the applicable local law. For this purpose, if the trust instrument 
provides that the trustee in determining the distributable income shall 
first retain a reserve for depreciation or otherwise make due allowance 
for keeping the trust corpus intact by retaining a reasonable amount of 
the current income for that purpose, the retention of current income for 
that purpose will not disqualify the trust from being a ``simple'' 
trust. The fiduciary must be under a duty to distribute the income 
currently even if, as a matter of practical necessity, the income is not 
distributed until after the close of the trust's taxable year. For 
example: Under the terms of the trust instrument, all of the income is 
currently distributable to A. The trust reports on the calendar year 
basis and as a matter of practical necessity makes distribution to A of 
each quarter's income on the fifteenth day of the month following the 
close of the quarter. The distribution made by the trust on January 15, 
1955, of the income for the fourth quarter of 1954 does not disqualify 
the trust from treatment in 1955 under section 651, since the income is 
required to be distributed currently. However, if the terms of a trust 
require that none of the income be distributed until after the year of 
its receipt by the trust, the income of the trust is not required to be 
distributed currently and the trust is not a simple trust. For 
definition of the term ``income'' see section 643(b) and Sec. 1.643(b)-
1.
    (b) It is immaterial, for purposes of determining whether all the 
income is required to be distributed currently, that the amount of 
income allocated to a particular beneficiary is not specified in the 
instrument. For example, if the fiduciary is required to distribute all 
the income currently, but has discretion to ``sprinkle'' the income 
among a class of beneficiaries, or among named beneficiaries, in such 
amount as he may see fit, all the income is required to be distributed 
currently, even though the amount distributable to a particular 
beneficiary is unknown until the fiduciary has exercised his discretion.
    (c) If in one taxable year of a trust its income for that year is 
required or permitted to be accumulated, and in another taxable year its 
income for the year is required to be distributed currently (and no 
other amounts are distributed), the trust is a simple trust for the 
latter year. For example, a trust under which income may be accumulated 
until a beneficiary is 21 years old, and thereafter must be distributed 
currently, is a simple trust for taxable years beginning after the 
beneficiary reaches the age of 21 years in which no other amounts are 
distributed.

[[Page 95]]



Sec. 1.651(a)-3  Distribution of amounts other than income.

    (a) A trust does not qualify for treatment under section 651 for any 
taxable year in which it actually distributes corpus. For example, a 
trust which is required to distribute all of its income currently would 
not qualify as a simple trust under section 651 in the year of its 
termination since in that year actual distributions of corpus would be 
made.
    (b) A trust, otherwise qualifying under section 651, which may make 
a distribution of corpus in the discretion of the trustee, or which is 
required under the terms of its governing instrument to make a 
distribution of corpus upon the happening of a specified event, will be 
disqualified for treatment under section 651 only for the taxable year 
in which an actual distribution of corpus is made. For example: Under 
the terms of a trust, which is required to distribute all of its income 
currently, half of the corpus is to be distributed to beneficiary A when 
he becomes 30 years of age. The trust reports on the calendar year 
basis. On December 28, 1954, A becomes 30 years of age and the trustee 
distributes half of the corpus of the trust to him on January 3, 1955. 
The trust will be disqualified for treatment under section 651 only for 
the taxable year 1955, the year in which an actual distribution of 
corpus is made.
    (c) See section 661 and the regulations thereunder for the treatment 
of trusts which distribute corpus or claim the charitable contributions 
deduction provided by section 642(c).



Sec. 1.651(a)-4  Charitable purposes.

    A trust is not considered to be a trust which may pay, permanently 
set aside, or use any amount for charitable, etc., purposes for any 
taxable year for which it is not allowed a charitable, etc., deduction 
under section 642(c). Therefore, a trust with a remainder to a 
charitable organization is not disqualified for treatment as a simple 
trust if either (a) the remainder is subject to a contingency, so that 
no deduction would be allowed for capital gains or other amounts added 
to corpus as amounts permanently set aside for a charitable, etc., 
purpose under section 642 (c), or (b) the trust receives no capital 
gains or other income added to corpus for the taxable year for which 
such a deduction would be allowed.



Sec. 1.651(a)-5  Estates.

    Subpart B has no application to an estate.



Sec. 1.651(b)-1  Deduction for distributions to beneficiaries.

    In computing its taxable income, a simple trust is allowed a 
deduction for the amount of income which is required under the terms of 
the trust instrument to be distributed currently to beneficiaries. If 
the amount of income required to be distributed currently exceeds the 
distributable net income, the deduction allowable to the trust is 
limited to the amount of the distributable net income. For this purpose 
the amount of income required to be distributed currently, or 
distributable net income, whichever is applicable, does not include 
items of trust income (adjusted for deductions allocable thereto) which 
are not included in the gross income of the trust. For determination of 
the character of the income required to be distributed currently, see 
Sec. 1.652(b)-2. Accordingly, for the purposes of determining the 
deduction allowable to the trust under section 651, distributable net 
income is computed without the modifications specified in paragraphs 
(5), (6), and (7) of section 643(a), relating to tax-exempt interest, 
foreign income, and excluded dividends. For example: Assume that the 
distributable net income of a trust as computed under section 643(a) 
amounts to $99,000 but includes nontaxable income of $9,000. Then 
distributable net income for the purpose of determining the deduction 
allowable under section 651 is $90,000 ($99,000 less $9,000 nontaxable 
income).



Sec. 1.652(a)-1  Simple trusts; inclusion of amounts in income of beneficiaries.

    Subject to the rules in Secs. 1.652(a)-2 and 1.652(b)-1, a 
beneficiary of a simple trust includes in his gross income for the 
taxable year the amounts of income required to be distributed to him for 
such year, whether or not distributed. Thus, the income of a simple 
trust is includible in the beneficiary's

[[Page 96]]

gross income for the taxable year in which the income is required to be 
distributed currently even though, as a matter of practical necessity, 
the income is not distributed until after the close of the taxable year 
of the trust. See Sec. 1.642(a)(3)-2 with respect to time of receipt of 
dividends. See Sec. 1.652(c)-1 for treatment of amounts required to be 
distributed where a beneficiary and the trust have different taxable 
years. The term income required to be distributed currently includes 
income required to be distributed currently which is in fact used to 
discharge or satisfy any person's legal obligation as that term is used 
in Sec. 1.662(a)-4.



Sec. 1.652(a)-2  Distributions in excess of distributable net income.

    If the amount of income required to be distributed currently to 
beneficiaries exceeds the distributable net income of the trust (as 
defined in section 643(a)), each beneficiary includes in his gross 
income an amount equivalent to his proportionate share of such 
distributable net income. Thus, if beneficiary A is to receive two-
thirds of the trust income and B is to receive one-third, and the income 
required to be distributed currently is $99,000, A will receive $66,000 
and B, $33,000. However, if the distributable net income, as determined 
under section 643(a) is only $90,000, A will include two-thirds 
($60,000) of that sum in his gross income, and B will include one-third 
($30,000) in his gross income. See Secs. 1.652(b)-1 and 1.652(b)-2, 
however, for amounts which are not includible in the gross income of a 
beneficiary because of their tax-exempt character.



Sec. 1.652(b)-1  Character of amounts.

    In determining the gross income of a beneficiary, the amounts 
includible under Sec. 1.652(a)-1 have the same character in the hands of 
the beneficiary as in the hands of the trust. For example, to the extent 
that the amounts specified in Sec. 1.652(a)-1 consist of income exempt 
from tax under section 103, such amounts are not included in the 
beneficiary's gross income. Similarly, dividends distributed to a 
beneficiary retain their original character in the beneficiary's hands 
for purposes of determining the availability to the beneficiary of the 
dividends received credit under section 34 (for dividends received on or 
before December 31, 1964) and the dividend exclusion under section 116. 
Also, to the extent that the amounts specified in Sec. 1.652(a)-1 
consist of ``earned income'' in the hands of the trust under the 
provisions of section 1348 such amount shall be treated under section 
1348 as ``earned income'' in the hands of the beneficiary. Similarly, to 
the extent such amounts consist of an amount received as a part of a 
lump sum distribution from a qualified plan and to which the provisions 
of section 72(n) would apply in the hands of the trust, such amount 
shall be treated as subject to such section in the hands of the 
beneficiary except where such amount is deemed under section 666(a) to 
have been distributed in a preceding taxable year of the trust and the 
partial tax described in section 668(a)(2) is determined under section 
668(b)(1)(B). The tax treatment of amounts determined under 
Sec. 1.652(a)-1 depends upon the beneficiary's status with respect to 
them not upon the status of the trust. Thus, if a beneficiary is deemed 
to have received foreign income of a foreign trust, the includibility of 
such income in his gross income depends upon his taxable status with 
respect to that income.

[T.D. 7204, 37 FR 17134, Aug. 25, 1972]



Sec. 1.652(b)-2  Allocation of income items.

    (a) The amounts specified in Sec. 1.652(a)-1 which are required to 
be included in the gross income of a beneficiary are treated as 
consisting of the same proportion of each class of items entering into 
distributable net income of the trust (as defined in section 643(a)) as 
the total of each class bears to such distributable net income, unless 
the terms of the trust specifically allocate different classes of income 
to different beneficiaries, or unless local law requires such an 
allocation. For example: Assume that under the terms of the governing 
instrument, beneficiary A is to receive currently one-half of the trust 
income and beneficiaries B and C are each to receive currently one-
quarter, and the distributable net income of the trust (after allocation 
of expenses) consists of dividends of $10,000, taxable

[[Page 97]]

interest of $10,000, and tax-exempt interest of $4,000. A will be deemed 
to have received $5,000 of dividends, $5,000 of taxable interest, and 
$2,000 of tax-exempt interest; B and C will each be deemed to have 
received $2,500 of dividends, $2,500 of taxable interest, and $1,000 of 
tax-exempt interest. However, if the terms of the trust specifically 
allocate different classes of income to different beneficiaries, 
entirely or in part, or if local law requires such an allocation, each 
beneficiary will be deemed to have received those items of income 
specifically allocated to him.
    (b) The terms of the trust are considered specifically to allocate 
different classes of income to different beneficiaries only to the 
extent that the allocation is required in the trust instrument, and only 
to the extent that it has an economic effect independent of the income 
tax consequences of the allocation. For example:
    (1) Allocation pursuant to a provision in a trust instrument 
granting the trustee discretion to allocate different classes of income 
to different beneficiaries is not a specific allocation by the terms of 
the trust.
    (2) Allocation pursuant to a provision directing the trustee to pay 
all of one income to A, or $10,000 out of the income to A, and the 
balance of the income to B, but directing the trustee first to allocate 
a specific class of income to A's share (to the extent there is income 
of that class and to the extent it does not exceed A's share) is not a 
specific allocation by the terms of the trust.
    (3) Allocation pursuant to a provision directing the trustee to pay 
half the class of income (whatever it may be) to A, and the balance of 
the income to B, is a specific allocation by the terms of the trust.



Sec. 1.652(b)-3  Allocation of deductions.

    Items of deduction of a trust that enter into the computation of 
distributable net income are to be allocated among the items of income 
in accordance with the following principles:
    (a) All deductible items directly attributable to one class of 
income (except dividends excluded under section 116) are allocated 
thereto. For example, repairs to, taxes on, and other expenses directly 
attributable to the maintenance of rental property or the collection of 
rental income are allocated to rental income. See Sec. 1.642(e)-1 for 
treatment of depreciation of rental property. Similarly, all 
expenditures directly attributable to a business carried on by a trust 
are allocated to the income from such business. If the deductions 
directly attributable to a particular class of income exceed that 
income, the excess is applied against other classes of income in the 
manner provided in paragraph (d) of this section.
    (b) The deductions which are not directly attributable to a specific 
class of income may be allocated to any item of income (including 
capital gains) included in computing distributable net income, but a 
portion must be allocated to nontaxable income (except dividends 
excluded under section 116) pursuant to section 265 and the regulations 
thereunder. For example, if the income of a trust is $30,000 (after 
direct expenses), consisting equally of $10,000 of dividends, tax-exempt 
interest, and rents, and income commissions amount to $3,000, one-third 
($1,000) of such commissions should be allocated to tax-exempt interest, 
but the balance of $2,000 may be allocated to the rents or dividends in 
such proportions as the trustee may elect. The fact that the governing 
instrument or applicable local law treats certain items of deduction as 
attributable to corpus or to income not included in distributable net 
income does not affect allocation under this paragraph. For instance, if 
in the example set forth in this paragraph the trust also had capital 
gains which are allocable to corpus under the terms of the trust 
instrument, no part of the deductions would be allocable thereto since 
the capital gains are excluded from the computation of distributable net 
income under section 643(a)(3).
    (c) Examples of expenses which are considered as not directly 
attributable to a specific class of income are trustee's commissions, 
the rental of safe deposit boxes, and State income and personal property 
taxes.
    (d) To the extent that any items of deduction which are directly 
attributable to a class of income exceed that class of income, they may 
be allocated

[[Page 98]]

to any other class of income (including capital gains) included in 
distributable net income in the manner provided in paragraph (b) of this 
section, except that any excess deductions attributable to tax-exempt 
income (other than dividends excluded under section 116) may not be 
offset against any other class of income. See section 265 and the 
regulations thereunder. Thus, if the trust has rents, taxable interest, 
dividends, and tax-exempt interest, and the deductions directly 
attributable to the rents exceed the rental income, the excess may be 
allocated to the taxable interest or dividends in such proportions as 
the fiduciary may elect. However, if the excess deductions are 
attributable to the tax-exempt interest, they may not be allocated to 
either the rents, taxable interest, or dividends.



Sec. 1.652(c)-1  Different taxable years.

    If a beneficiary has a different taxable year (as defined in section 
441 or 442) from the taxable year of the trust, the amount he is 
required to include in gross income in accordance with section 652 (a) 
and (b) is based on the income of the trust for any taxable year or 
years ending with or within his taxable year. This rule applies to 
taxable years of normal duration as well as to so-called short taxable 
years. Income of the trust for its taxable year or years is determined 
in accordance with its method of accounting and without regard to that 
of the beneficiary.



Sec. 1.652(c)-2  Death of individual beneficiaries.

    If income is required to be distributed currently to a beneficiary, 
by a trust for a taxable year which does not end with or within the last 
taxable year of a beneficiary (because of the beneficiary's death), the 
extent to which the income is included in the gross income of the 
beneficiary for his last taxable year or in the gross income of his 
estate is determined by the computations under section 652 for the 
taxable year of the trust in which his last taxable year ends. Thus, the 
distributable net income of the taxable year of the trust determines the 
extent to which the income required to be distributed currently to the 
beneficiary is included in his gross income for his last taxable year or 
in the gross income of his estate. (Section 652(c) does not apply to 
such amounts.) The gross income for the last taxable year of a 
beneficiary on the cash basis includes only income actually distributed 
to the beneficiary before his death. Income required to be distributed, 
but in fact distributed to his estate, is included in the gross income 
of the estate as income in respect of a decedent under section 691. See 
paragraph (e) of Sec. 1.663(c)-3 with respect to separate share 
treatment for the periods before and after the decedent's death. If the 
trust does not qualify as a simple trust for the taxable year of the 
trust in which the last taxable year of the beneficiary ends, see 
section 662(c) and Sec. 1.662(c)-2.



Sec. 1.652(c)-3  Termination of existence of other beneficiaries.

    If the existence of a beneficiary which is not an individual 
terminates, the amount to be included under section 652(a) in its gross 
income for its last taxable year is computed with reference to 
Secs. 1.652(c)-1 and 1.652(c)-2 as if the beneficiary were a deceased 
individual, except that income required to be distributed prior to the 
termination but actually distributed to the beneficiary's successor in 
interest is included in the beneficiary's income for its last taxable 
year.



Sec. 1.652(c)-4  Illustration of the provisions of sections 651 and 652.

    The rules applicable to a trust required to distribute all of its 
income currently to its beneficiaries may be illustrated by the 
following example:

    Example. (a) Under the terms of a simple trust all of the income is 
to be distributed equally to beneficiaries A and B and capital gains are 
to be allocated to corpus. The trust and both beneficiaries file returns 
on the calendar year basis. No provision is made in the governing 
instrument with respect to depreciation. During the taxable year 1955, 
the trust had the following items of income and expense:

Rents........................................................    $25,000
Dividends of domestic corporations...........................     50,000
Tax-exempt interest on municipal bonds.......................     25,000
Long-term capital gains......................................     15,000
Taxes and expenses directly attributable to rents............      5,000
Trustee's commissions allocable to income account............      2,600
Trustee's commissions allocable to principal account.........      1,300

[[Page 99]]

 
Depreciation.................................................      5,000
 

    (b) The income of the trust for fiduciary accounting purposes is 
$92,400, computed as follows:

Rents........................................................    $25,000
Dividends....................................................     50,000
Tax-exempt interest..........................................     25,000
                                                   ------------
    Total....................................................    100,000
Deductions:
  Expenses directly attributable to rental income.     $5,000
  Trustee's commissions allocable to income             2,600
   account........................................
                                                   -----------
                                                                   7,600
                                                   ------------
    Income computed under section 643(b).....................     92,400
 


One-half ($46,200) of the income of $92,400 is currently distributable 
to each beneficiary.
    (c) The distributable net income of the trust computed under section 
643(a) is $91,100, determined as follows (cents are disregarded in the 
computation):

Rents........................................................    $25,000
Dividends....................................................     50,000
Tax-exempt interest...............................    $25,000
Less: Expenses allocable thereto (25,000/100,000          975
 x$3,900).........................................
                                                     --------     24,025
                                                              ----------
    Total.........................................  .........     99,025
Deductions:
  Expenses directly attributable to rental income.     $5,000
  Trustee's commissions ($3,900 less $975               2,925
   allocable to tax-exempt interest)..............
                                                     --------      7,925
                                                              ----------
    Distributable net income......................  .........     91,100
 

In computing the distributable net income of $91,100, the taxable income 
of the trust was computed with the following modifications: No 
deductions were allowed for distributions to the beneficiaries and for 
personal exemption of the trust (section 643(a) (1) and (2)); capital 
gains were excluded and no deduction under section 1202 (relating to the 
50-percent deduction for long-term capital gains) was taken into account 
(section 643(a)(3)); the tax-exempt interest (as adjusted for expenses) 
and the dividend exclusion of $50 were included (section 643(a) (5) and 
(7)). Since all of the income of the trust is required to be currently 
distributed, no deduction is allowable for depreciation in the absence 
of specific provisions in the governing instrument providing for the 
keeping of the trust corpus intact. See section 167(h) and the 
regulations thereunder.
    (d) The deduction allowable to the trust under section 651(a) for 
distributions to the beneficiaries is $67,025, computed as follows:

Distributable net income computed under section 643(a) (see      $91,100
 paragraph (c))..............................................
Less:
  Tax-exempt interest as adjusted.................    $24,025
  Dividend exclusion..............................         50
                                                     --------     24,075
                                                              ----------
    Distributable net income as determined under section          67,025
     651(b)..................................................
 

Since the amount of the income ($92,400) required to be distributed 
currently by the trust exceeds the distributable net income ($67,025) as 
computed under section 651(b), the deduction allowable under section 
651(a) is limited to the distributable net income of $67,025.
    (e) The taxable income of the trust is $7,200 computed as follows:

Rents........................................................    $25,000
Dividends ($50,000 less $50 exclusion).......................     49,950
Long-term capital gains......................................     15,000
                                                   ------------
    Gross income.............................................     89,950
Deductions:
  Rental expenses.................................     $5,000
  Trustee's commissions...........................      2,925
  Capital gain deduction..........................      7,500
  Distributions to beneficiaries..................     67,025
  Personal exemption..............................        300
                                                     --------     82,750
                                                              ----------
    Taxable income................................                 7,200
 

The trust is not allowed a deduction for the portion ($975) of the 
trustee's commissions allocable to tax-exempt interest in computing its 
taxable income.
    (f) In determining the character of the amounts includible in the 
gross income of A and B, it is assumed that the trustee elects to 
allocate to rents the expenses not directly attributable to a specific 
item of income other than the portion ($975) of such expenses allocated 
to tax-exempt interest. The allocation of expenses among the items of 
income is shown below:

----------------------------------------------------------------------------------------------------------------
                                                                                      Tax-exempt
                                                           Rents       Dividends       interest         Total
----------------------------------------------------------------------------------------------------------------
Income for trust accounting purposes.................    $25,000       $50,000         $25,000       $100,000
Less:
  Rental expenses....................................      5,000     ............  ...............      5,000
  Trustee's commissions..............................      2,925     ............          975          3,900
                                                      ==========================================================
    Total deductions.................................      7,925             0             975          8,900
                                                      ----------------------------------------------------------

[[Page 100]]

 
Character of amounts in the hands of the                  17,075        50,000          24,025      \1\ 91,100
 beneficiaries.......................................
----------------------------------------------------------------------------------------------------------------
\1\ Distributable net income.

Inasmuch as the income of the trust is to be distributed equally to A 
and B, each is deemed to have received one-half of each item of income; 
that is, rents of $8,537.50, dividends of $25,000, and tax-exempt 
interest of $12,012.50. The dividends of $25,000 allocated to each 
beneficiary are to be aggregated with his other dividends (if any) for 
purposes of the dividend exclusion provided by section 116 and the 
dividend received credit allowed under section 34. Also, each 
beneficiary is allowed a deduction of $2,500 for depreciation of rental 
property attributable to the portion (one-half) of the income of the 
trust distributed to him.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 6712, 29 FR 
3655, Mar. 24, 1964]

   estates and trusts which may accumulate income or which distribute 
                                 corpus



Sec. 1.661(a)-1  Estates and trusts accumulating income or distributing corpus; general.

    Subpart C, part I, subchapter J, chapter 1 of the Code, is 
applicable to all decedents' estates and their beneficiaries, and to 
trusts and their beneficiaries other than trusts subject to the 
provisions of subpart B of such part I (relating to trusts which 
distribute current income only, or ``simple'' trusts). A trust which is 
required to distribute amounts other than income during the taxable year 
may be subject to subpart B, and not subpart C, in the absence of an 
actual distribution of amounts other than income during the taxable 
year. See Secs. 1.651(a)-1 and 1.651(a)-3. A trust to which subpart C is 
applicable is referred to as a ``complex'' trust in this part. Section 
661 has no application to amounts excluded under section 663(a).



Sec. 1.661(a)-2  Deduction for distributions to beneficiaries.

    (a) In computing the taxable income of an estate or trust there is 
allowed under section 661(a) as a deduction for distributions to 
beneficiaries the sum of:
    (1) The amount of income for the taxable year which is required to 
be distributed currently, and
    (2) Any other amounts properly paid or credited or required to be 
distributed for such taxable year.

However, the total amount deductible under section 661(a) cannot exceed 
the distributable net income as computed under section 643(a) and as 
modified by section 661(c). See Sec. 1.661(c)-1.
    (b) The term income required to be distributed currently includes 
any amount required to be distributed which may be paid out of income or 
corpus (such as an annuity), to the extent it is paid out of income for 
the taxable year. See Sec. 1.651(a)-2 which sets forth additional rules 
which are applicable in determining whether income of an estate or trust 
is required to be distributed currently.
    (c) The term any other amounts properly paid, credited, or required 
to be distributed includes all amounts properly paid, credited, or 
required to be distributed by an estate or trust during the taxable year 
other than income required to be distributed currently. Thus, the term 
includes the payment of an annuity to the extent it is not paid out of 
income for the taxable year, and a distribution of property in kind (see 
paragraph (f) of this section). However, see section 663(a) and 
regulations thereunder for distributions which are not included. Where 
the income of an estate or trust may be accumulated or distributed in 
the discretion of the fiduciary, or where the fiduciary has a power to 
distribute corpus to a beneficiary, any such discretionary distribution 
would qualify under section 661(a)(2). The term also includes an amount 
applied or distributed for the support of a dependent of a grantor or of 
a trustee or cotrustee under the circumstances described in section 
677(b)

[[Page 101]]

or section 678(c) out of corpus or out of other than income for the 
taxable year.
    (d) The terms income required to be distributed currently and any 
other amounts properly paid or credited or required to be distributed 
also include any amount used to discharge or satisfy any person's legal 
obligation as that term is used in Sec. 1.662(a)-4.
    (e) The terms income required to be distributed currently and any 
other amounts properly paid or credited or required to be distributed 
include amounts paid, or required to be paid, during the taxable year 
pursuant to a court order or decree or under local law, by a decedent's 
estate as an allowance or award for the support of the decedent's widow 
or other dependent for a limited period during the administration of the 
estate. The term any other amounts properly paid or credited or required 
to be distributed does not include the value of any interest in real 
estate owned by a decedent, title to which under local law passes 
directly from the decedent to his heirs or devisees.
    (f) If property is paid, credited, or required to be distributed in 
kind:
    (1) No gain or loss is realized by the trust or estate (or the other 
beneficiaries) by reason of the distribution, unless the distribution is 
in satisfaction of a right to receive a distribution in a specific 
dollar amount or in specific property other than that distributed.
    (2) In determining the amount deductible by the trust or estate and 
includible in the gross income of the beneficiary the property 
distributed in kind is taken into account at its fair market value at 
the time it was distributed, credited, or required to be distributed.
    (3) The basis of the property in the hands of the beneficiary is its 
fair market value at the time it was paid, credited, or required to be 
distributed, to the extent such value is included in the gross income of 
the beneficiary. To the extent that the value of property distributed in 
kind is not included in the gross income of the beneficiary, its basis 
in the hands of the beneficiary is governed by the rules in sections 
1014 and 1015 and the regulations thereunder. For this purpose, if the 
total value of cash and property distributed, credited, or required to 
be distributed in kind to a beneficiary in any taxable year exceeds the 
amount includible in his gross income for that year, the value of the 
property other than cash is normally considered as includible in his 
gross income only to the extent that the amount includible exceeds the 
cash paid, credited, or required to be distributed to the beneficiary in 
that year. Further, to the extent that the value of different items of 
property other than cash is includible in the gross income of a 
beneficiary in accordance with the preceding sentence, a pro rata 
portion of the total value of each item of property distributed, 
credited, or required to be distributed is normally considered as 
includible in the beneficiary's gross income.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 7287, 38 FR 26912, Sept. 27, 1973]



Sec. 1.661(b)-1  Character of amounts distributed; in general.

    In the absence of specific provisions in the governing instrument 
for the allocation of different classes of income, or unless local law 
requires such an allocation, the amount deductible for distributions to 
beneficiaries under section 661(a) is treated as consisting of the same 
proportion of each class of items entering into the computation of 
distributable net income as the total of each class bears to the total 
distributable net income. For example, if a trust has distributable net 
income of $20,000, consisting of $10,000 each of taxable interest and 
royalties and distributes $10,000 to beneficiary A, the deduction of 
$10,000 allowable under section 661(a) is deemed to consist of $5,000 
each of taxable interest and royalties, unless the trust instrument 
specifically provides for the distribution or accumulation of different 
classes of income or unless local law requires such an allocation. See 
also Sec. 1.661(c)-1.



Sec. 1.661(b)-2  Character of amounts distributed when charitable contributions are made.

    In the application of the rule stated in Sec. 1.661(b)-1, the items 
of deduction which enter into the computation of distributable net 
income are allocated among the items of income which enter

[[Page 102]]

into the computation of distributable net income in accordance with the 
rules set forth in Sec. 1.652(b)-3, except that, in the absence of 
specific provisions in the governing instrument, or unless local law 
requires a different apportionment, amounts paid, permanently set aside, 
or to be used for the charitable, etc., purposes specified in section 
642(c) are first ratably apportioned among each class of items of income 
entering into the computation of the distributable net income of the 
estate or trust, in accordance with the rules set out in paragraph (b) 
of Sec. 1.643(a)-5.



Sec. 1.661(c)-1  Limitation on deduction.

    An estate or trust is not allowed a deduction under section 661(a) 
for any amount which is treated under section 661(b) as consisting of 
any item of distributable net income which is not included in the gross 
income of the estate or trust. For example, if in 1962, a trust, which 
reports on the calendar year basis, has distributable net income of 
$20,000, which is deemed to consist of $10,000 of dividends and $10,000 
of tax-exempt interest, and distributes $10,000 to beneficiary A, the 
deduction allowable under section 661(a) (computed without regard to 
section 661(c)) would amount to $10,000 consisting of $5,000 of 
dividends and $5,000 of tax-exempt interest. The deduction actually 
allowable under section 661(a) as limited by section 661(c) is $4,975, 
since no deduction is allowable for the $5,000 of tax-exempt interest 
and the $25 deemed distributed out of the $50 of dividends excluded 
under section 116, items of distributable net income which are not 
included in the gross income of the estate or trust.

[T.D. 6777, 29 FR 17809, Dec. 16, 1964]



Sec. 1.661(c)-2  Illustration of the provisions of section 661.

    The provisions of section 661 may be illustrated by the following 
example:

    Example. (a) Under the terms of a trust, which reports on the 
calendar year basis, $10,000 a year is required to be paid out of income 
to a designated charity. The balance of the income may, in the trustee's 
discretion, be accumulated or distributed to beneficiary A. Expenses are 
allocable against income and the trust instrument requires a reserve for 
depreciation. During the taxable year 1955 the trustee contributes 
$10,000 to charity and in his discretion distributes $15,000 of income 
to A. The trust has the following items of income and expense for the 
taxable year 1955:

Dividends........................................................$10,000
Partially tax-exempt interest.....................................10,000
Fully tax-exempt interest.........................................10,000
Rents.............................................................20,000
Rental expenses....................................................2,000
Depreciation of rental property....................................3,000
Trustee's commissions..............................................5,000

    (b) The income of the trust for fiduciary accounting purposes is 
$40,000, computed as follows:

Dividends....................................................    $10,000
Partially tax-exempt interest................................     10,000
Fully tax-exempt interest....................................     10,000
Rents........................................................     20,000
                                                   ------------
    Total....................................................     50,000
Less:
  Rental expenses.................................     $2,000
  Depreciation....................................      3,000
  Trustee's commissions...........................      5,000
                                                   ------------
                                                                  10,000
                                                   ------------
    Income as computed under section 643(b)..................     40,000
 

    (c) The distributable net income of the trust as computed under 
section 643(a) is $30,000, determined as follows:

Rents............................                                $20,000
Dividends........................                                 10,000
Partially tax-exempt interest....                                 10,000
Fully tax-exempt interest........                   $10,000
Less:
  Expenses allocable thereto            $1,000
   (10,000/50,000x$5,000)........
  Charitable contributions               2,000
   allocable thereto (10,000/
   50,000x$10,000)...............
                                  --------------
                                                      3,000
                                               --------------
                                                                   7,000
                                                            ------------
    Total........................                                 47,000
Deductions:
  Rental expenses................                     2,000
  Depreciation of rental property                     3,000
  Trustee's commissions ($5,000                       4,000
   less $1,000 allocated to tax-
   exempt interest)..............

[[Page 103]]

 
  Charitable contributions                            8,000
   ($10,000 less $2,000 allocated
   to tax-exempt interest).......
                                               --------------
                                                                  17,000
                                                            ------------
    Distributable net income                                      30,000
     (section 643(a))............
 

    (d) The character of the amounts distributed under section 661(a), 
determined in accordance with the rules prescribed in Secs. 1.661(b)-1 
and 1.661(b)-2 is shown by the following table (for the purpose of this 
allocation, it is assumed that the trustee elected to allocate the 
trustee's commissions to rental income except for the amount required to 
be allocated to tax-exempt interest):

----------------------------------------------------------------------------------------------------------------
                                                                       Partially tax-
                                   Rental      Taxable      Excluded       exempt       Tax-exempt      Total
                                   income     dividends    dividends      interest       interest
----------------------------------------------------------------------------------------------------------------
Trust income..................    $20,000       $9,950        $50         $10,000        $10,000       $50,000
Less:
  Charitable contributions....      4,000        2,000    ...........       2,000          2,000        10,000
  Rental expenses.............      2,000    ...........  ...........  .............  .............      2,000
  Depreciation................      3,000    ...........  ...........  .............  .............      3,000
  Trustee's commissions.......      4,000    ...........  ...........  .............       1,000         5,000
                               ---------------------------------------------------------------------------------
    Total deductions..........     13,000        2,000          0           2,000          3,000        20,000
Distributable net income......      7,000        7,950         50           8,000          7,000        30,000
Amounts deemed distributed          3,500        3,975         25           4,000          3,500        15,000
 under section 661(a) before
 applying the limitation of
 section 661(c)...............
----------------------------------------------------------------------------------------------------------------


In the absence of specific provisions in the trust instrument for the 
allocation of different classes of income, the charitable contribution 
is deemed to consist of a pro rata portion of the gross amount of each 
items of income of the trust (except dividends excluded under section 
116) and the trust is deemed to have distributed to A a pro rata portion 
(one-half) of each item of income included in distributable net income.
    (e) The taxable income of the trust is $11,375 computed as follows:

Rental income................................................    $20,000
Dividends ($10,000 less $50 exclusion).......................      9,950
Partially tax-exempt interest................................     10,000
                                                   ------------
    Gross income.............................................     39,950
Deductions:
  Rental expenses.................................     $2,000
  Depreciation of rental property.................      3,000
  Trustee's commissions...........................      4,000
  Charitable contributions........................      8,000
  Distributions to A..............................     11,475
  Personal exemption..............................        100
                                                   ------------
                                                                  28,575
                                                              ----------
    Taxable income...........................................     11,375
 

In computing the taxable income of the trust no deduction is allowable 
for the portions of the charitable contributions deduction ($2,000) and 
trustee's commissions ($1,000) which are treated under section 661(b) as 
attributable to the tax-exempt interest excludable from gross income. 
Also, of the dividends of $4,000 deemed to have been distributed to A 
under section 661(a), $25 ( 25/50ths of $50) is deemed to have been 
distributed from the excluded dividends and is not an allowable 
deduction to the trust. Accordingly, the deduction allowable under 
section 661 is deemed to be composed of $3,500 rental income, $3,975 of 
dividends, and $4,000 partially tax-exempt interest. No deduction is 
allowable for the portion of tax-exempt interest or for the portion of 
the excluded dividends deemed to have been distributed to the 
beneficiary.

[[Page 104]]

    (f) The trust is entitled to the credit allowed by section 34 with 
respect to dividends of $5,975 ($9,950 less $3,975 distributed to A) 
included in gross income. Also, the trust is allowed the credit provided 
by section 35 with respect to partially tax-exempt interest of $6,000 
($10,000 less $4,000 deemed distributed to A) included in gross income.
    (g) Dividends of $4,000 allocable to A are to be aggregated with his 
other dividends (if any) for purposes of the dividend exclusion under 
section 116 and the dividend received credit under section 84.



Sec. 1.662(a)-1  Inclusion of amounts in gross income of beneficiaries of estates and complex trusts; general.

    There is included in the gross income of a beneficiary of an estate 
or complex trust the sum of:
    (a) Amounts of income required to be distributed currently to him, 
and
    (b) All other amounts properly paid, credited, or required to be 
distributed to him

by the estate or trust. The preceding sentence is subject to the rules 
contained in Sec. 1.662(a)-2 (relating to currently distributable 
income), Sec. 1.662(a)-3 (relating to other amounts distributed), and 
Secs. 1.662(b)-1 and 1.662(b)-2 (relating to character of amounts). 
Section 662 has no application to amounts excluded under section 663(a).



Sec. 1.662(a)-2  Currently distributable income.

    (a) There is first included in the gross income of each beneficiary 
under section 662(a)(1) the amount of income for the taxable year of the 
estate or trust required to be distributed currently to him, subject to 
the provisions of paragraph (b) of this section. Such amount is included 
in the beneficiary's gross income whether or not it is actually 
distributed.
    (b) If the amount of income required to be distributed currently to 
all beneficiaries exceeds the distributable net income (as defined in 
section 643(a) but computed without taking into account the payment, 
crediting, or setting aside of an amount for which a charitable 
contributions deduction is allowable under section 642(c)) of the estate 
or trust, then there is included in the gross income of each beneficiary 
an amount which bears the same ratio to distributable net income (as so 
computed) as the amount of income required to be distributed currently 
to the beneficiary bears to the amount required to be distributed 
currently to all beneficiaries.
    (c) The phrase the amount of income for the taxable year required to 
be distributed currently includes any amount required to be paid out of 
income or corpus to the extent the amount is satisfied out of income for 
the taxable year. Thus, an annuity required to be paid in all events 
(either out of income or corpus) would qualify as income required to be 
distributed currently to the extent there is income (as defined in 
section 643(b)) not paid, credited, or required to be distributed to 
other beneficiaries for the taxable year. If an annuity or a portion of 
an annuity is deemed under this paragraph to be income required to be 
distributed currently, it is treated in all respects in the same manner 
as an amount of income actually required to be distributed currently. 
The phrase the amount of income for the taxable year required to be 
distributed currently also includes any amount required to be paid 
during the taxable year in all events (either out of income or corpus) 
pursuant to a court order or decree or under local law, by a decedent's 
estate as an allowance or award for the support of the decedent's widow 
or other dependent for a limited period during the administration of the 
estate to the extent there is income (as defined in section 643(b)) of 
the estate for the taxable year not paid, credited, or required to be 
distributed to other beneficiaries.
    (d) If an annuity is paid, credited, or required to be distributed 
tax free, that is, under a provision whereby the executor or trustee 
will pay the income tax of the annuitant resulting from the receipt of 
the annuity, the payment of or for the tax by the executor or trustee 
will be treated as income paid, credited, or required to be distributed 
currently to the extent it is made out of income.
    (e) The application of the rules stated in this section may be 
illustrated by the following examples:

    Example 1. (1) Assume that under the terms of the trust instrument 
$5,000 is to be paid to X charity out of income each year; that $20,000 
of income is currently distributable to A; and that an annuity of 
$12,000 is to be

[[Page 105]]

paid to B out of income or corpus. All expenses are charges against 
income and capital gains are allocable to corpus. During the taxable 
year the trust had income of $30,000 (after the payment of expenses) 
derived from taxable interest and made the payments to X charity and 
distributions to A and B as required by the governing instrument.
    (2) The amounts treated as distributed currently under section 
662(a)(1) total $25,000 ($20,000 to A and $5,000 to B). Since the 
charitable contribution is out of income the amount of income available 
for B's annuity is only $5,000. The distributable net income of the 
trust computed under section 643(a) without taking into consideration 
the charitable contributions deduction of $5,000 as provided by section 
661(a)(1), is $30,000. Since the amounts treated as distributed 
currently of $25,000 do not exceed the distributable net income (as 
modified) of $30,000, A is required to include $20,000 in his gross 
income and B is required to include $5,000 in his gross income under 
section 662(a)(1).
    Example 2. Assume the same facts as in paragraph (1) of example 1, 
except that the trust has, in addition, $10,000 of administration 
expenses, commissions, etc., chargeable to corpus. The amounts treated 
as distributed currently under section 662(a)(1) total $25,000 ($20,000 
to A and $5,000 to B), since trust income under section 643(b) remains 
the same as in example 1. Distributable net income of the trust computed 
under section 643(a) but without taking into account the charitable 
contributions deduction of $5,000 as provided by section 662(a)(1) is 
only $20,000. Since the amounts treated as distributed currently of 
$25,000 exceed the distributable net income (as so computed) of $20,000, 
A is required to include $16,000 (20,000/25,000 of $20,000) in his gross 
income and B is required to include $4,000 (5,000/25,000 of $20,000) in 
his gross income under section 662(a)(1). Because A and B are 
beneficiaries of amounts of income required to be distributed currently, 
they do not benefit from the reduction of distributable net income by 
the charitable contributions deduction.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 7287, 38 FR 26912, Sept. 27, 1973]



Sec. 1.662(a)-3  Other amounts distributed.

    (a) There is included in the gross income of a beneficiary under 
section 662(a)(2) any amount properly paid, credited, or required to be 
distributed to the beneficiary for the taxable year, other than (1) 
income required to be distributed currently, as determined under 
Sec. 1.662(a)-2, (2) amounts excluded under section 663(a) and the 
regulations thereunder, and (3) amounts in excess of distributable net 
income (see paragraph (c) of this section). An amount which is credited 
or required to be distributed is included in the gross income of a 
beneficiary whether or not it is actually distributed.
    (b) Some of the payments to be included under paragraph (a) of this 
section are: (1) A distribution made to a beneficiary in the discretion 
of the fiduciary; (2) a distribution required by the terms of the 
governing instrument upon the happening of a specified event; (3) an 
annuity which is required to be paid in all events but which is payable 
only out of corpus; (4) a distribution of property in kind (see 
paragraph (f) of Sec. 1.661(a)-2); (5) an amount applied or distributed 
for the support of a dependent of a grantor or a trustee or cotrustee 
under the circumstances specified in section 677(b) or section 678(c) 
out of corpus or out of other than income for the taxable year; and (6) 
an amount required to be paid during the taxable year pursuant to a 
court order or decree or under local law, by a decedent's estate as an 
allowance or award for the support of the decedent's widow or other 
dependent for a limited period during the administration of the estate 
which is payable only out of corpus of the estate under the order or 
decree or local law.
    (c) If the sum of the amounts of income required to be distributed 
currently (as determined under Sec. 1.662(a)-2) and other amounts 
properly paid, credited, or required to be distributed (as determined 
under paragraph (a) of this section) exceeds distributable net income 
(as defined in section 643(a)), then such other amounts properly paid, 
credited, or required to be distributed are included in gross income of 
the beneficiary but only to the extent of the excess of such 
distributable net income over the amounts of income required to be 
distributed currently. If the other amounts are paid, credited, or 
required to be distributed to more than one beneficiary, each 
beneficiary includes in gross income his proportionate share of the 
amount includible in gross income pursuant to the preceding sentence. 
The proportionate share is an amount which bears the same ratio to 
distributable net income

[[Page 106]]

(reduced by amounts of income required to be distributed currently) as 
the other amounts (as determined under paragraphs (a) and (d) of this 
section) distributed to the beneficiary bear to the other amounts 
distributed to all beneficiaries. For treatment of excess distributions 
by trusts, see sections 665 to 668, inclusive, and the regulations 
thereunder.
    (d) The application of the rules stated in this section may be 
illustrated by the following example:

    Example. The terms of a trust require the distribution annually of 
$10,000 of income to A. If any income remains, it may be accumulated or 
distributed to B, C, and D in amounts in the trustee's discretion. He 
may also invade corpus for the benefit of A, B, C, or D. In the taxable 
year, the trust has $20,000 of income after the deduction of all 
expenses. Distributable net income is $20,000. The trustee distributes 
$10,000 of income to A. Of the remaining $10,000 of income, he 
distributes $3,000 each to B, C, and D, and also distributes an 
additional $5,000 to A. A includes $10,000 in income under section 
662(a)(1). The ``other amounts distributed'' amount of $14,000, 
includible in the income of the recipients to the extent of $10,000, 
distributable net income less the income currently distributable to A. A 
will include an additional $3,571 (5,000/14,000x$10,000) in income under 
this section, and B, C, and D will each include $2,143 (3,000/
14,000x$10,000).

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 7287, 38 FR 26913, Sept. 27, 1973]



Sec. 1.662(a)-4  Amounts used in discharge of a legal obligation.

    Any amount which, pursuant to the terms of a will or trust 
instrument, is used in full or partial discharge or satisfaction of a 
legal obligation of any person is included in the gross income of such 
person under section 662(a) (1) or (2), whichever is applicable, as 
though directly distributed to him as a beneficiary, except in cases to 
which section 71 (relating to alimony payments) or section 682 (relating 
to income of a trust in case of divorce, etc.) applies. The term legal 
obligation includes a legal obligation to support another person if, and 
only if, the obligation is not affected by the adequacy of the 
dependent's own resources. For example, a parent has a ``legal 
obligation'' within the meaning of the preceding sentence to support his 
minor child if under local law property or income from property owned by 
the child cannot be used for his support so long as his parent is able 
to support him. On the other hand, if under local law a mother may use 
the resources of a child for the child's support in lieu of supporting 
him herself, no obligation of support exists within the meaning of this 
paragraph, whether or not income is actually used for support. 
Similarly, since under local law a child ordinarily is obligated to 
support his parent only if the parent's earnings and resources are 
insufficient for the purpose, no obligation exists whether or not the 
parent's earnings and resources are sufficient. In any event the amount 
of trust income which is included in the gross income of a person 
obligated to support a dependent is limited by the extent of his legal 
obligation under local law. In the case of a parent's obligation to 
support his child, to the extent that the parent's legal obligation of 
support, including education, is determined under local law by the 
family's station in life and by the means of the parent, it is to be 
determined without consideration of the trust income in question.



Sec. 1.662(b)-1  Character of amounts; when no charitable contributions are made.

    In determining the amount includible in the gross income of a 
beneficiary, the amounts which are determined under section 662(a) and 
Secs. 1.662(a)-1 through 1.662(a)-4 shall have the same character in the 
hands of the beneficiary as in the hands of the estate or trust. The 
amounts are treated as consisting of the same proportion of each class 
of items entering into the computation of distributable net income as 
the total of each class bears to the total distributable net income of 
the estate or trust unless the terms of the governing instrument 
specifically allocate different classes of income to different 
beneficiaries, or unless local law requires such an allocation. For this 
purpose, the principles contained in Sec. 1.652(b)-1 shall apply.

[[Page 107]]



Sec. 1.662(b)-2  Character of amounts; when charitable contributions are made.

    When a charitable contribution is made, the principles contained in 
Secs. 1.652(b)-1 and 1.662(b)-1 generally apply. However, before the 
allocation of other deductions among the items of distributable net 
income, the charitable contributions deduction allowed under section 
642(c) is (in the absence of specific allocation under the terms of the 
governing instrument or the requirement under local law of a different 
allocation) allocated among the classes of income entering into the 
computation of estate or trust income in accordance with the rules set 
forth in paragraph (b) of Sec. 1.643(a)-5. In the application of the 
preceding sentence, for the purpose of allocating items of income and 
deductions to beneficiaries to whom income is required to be distributed 
currently, the amount of the charitable contributions deduction is 
disregarded to the extent that it exceeds the income of the trust for 
the taxable year reduced by amounts for the taxable year required to be 
distributed currently. The application of this section may be 
illustrated by the following examples (of which example (1) is 
illustrative of the preceding sentence):

    Example 1. (a) A trust instrument provides that $30,000 of its 
income must be distributed currently to A, and the balance may either be 
distributed to B, distributed to a designated charity, or accumulated. 
Accumulated income may be distributed to B and to the charity. The trust 
for its taxable year has $40,000 of taxable interest and $10,000 of tax-
exempt income, with no expenses. The trustee distributed $30,000 to A, 
$50,000 to charity X, and $10,000 to B.
    (b) Distributable net income for the purpose of determining the 
character of the distribution to A is $30,000 (the charitable 
contributions deduction, for this purpose, being taken into account only 
to the extent of $20,000, the difference between the income of the trust 
for the taxable year, $50,000, and the amount required to be distributed 
currently, $30,000).
    (c) The charitable contributions deduction taken into account, 
$20,000, is allocated proportionately to the items of income of the 
trust, $16,000 to taxable interest and $4,000 to tax-exempt income.
    (d) Under section 662(a)(1), the amount of income required to be 
distributed currently to A is $30,000, which consists of the balance of 
these items, $24,000 of taxable interest and $6,000 of tax-exempt 
income.
    (e) In determining the amount to be included in the gross income of 
B under section 662 for the taxable year, however, the entire charitable 
contributions deduction is taken into account, with the result that 
there is no distributable net income and therefore no amount to be 
included in gross income.
    (f) See subpart D (section 665 and following), part I, subchapter J, 
chapter 1 of the Code for application of the throwback provisions to the 
distribution made to B.
    Example 2. The net income of a trust is payable to A for life, with 
the remainder to a charitable organization. Under the terms of the trust 
instrument and local law capital gains are added to corpus. During the 
taxable year the trust receives dividends of $10,000 and realized a 
long-term capital gain of $10,000, for which a long-term capital gain 
deduction of $5,000 is allowed under section 1202. Since under the trust 
instrument and local law the capital gains are allocated to the 
charitable organization, and since the capital gain deduction is 
directly attributable to the capital gain, the charitable contributions 
deduction and the capital gain deduction are both allocable to the 
capital gain, and dividends in the amount of $10,000 are allocable to A.



Sec. 1.662(c)-1  Different taxable years.

    If a beneficiary has a different taxable year (as defined in section 
441 or 442) from the taxable year of an estate or trust, the amount he 
is required to include in gross income in accordance with section 662 
(a) and (b) is based upon the distributable net income of the estate or 
trust and the amounts properly paid, credited, or required to be 
distributed to the beneficiary for any taxable year or years of the 
estate or trust ending with or within his taxable year. This rule 
applies as to so-called short taxable years as well as taxable years of 
normal duration. Income of an estate or trust for its taxable year or 
years is determined in accordance with its method of accounting and 
without regard to that of the beneficiary.



Sec. 1.662(c)-2  Death of individual beneficiary.

    If an amount specified in section 662(a) (1) or (2) is paid, 
credited, or required to be distributed by an estate or trust for a 
taxable year which does not end with or within the last taxable year of 
a beneficiary (because of the beneficiary's death), the extent to

[[Page 108]]

which the amount is included in the gross income of the beneficiary for 
his last taxable year or in the gross income of his estate is determined 
by the computations under section 662 for the taxable year of the estate 
or trust in which his last taxable year ends. Thus, the distributable 
net income and the amounts paid, credited, or required to be distributed 
for the taxable year of the estate or trust, determine the extent to 
which the amounts paid, credited, or required to be distributed to the 
beneficiary are included in his gross income for his last taxable year 
or in the gross income of his estate. (Section 662(c) does not apply to 
such amounts.) The gross income for the last taxable year of a 
beneficiary on the cash basis includes only income actually distributed 
to the beneficiary before his death. Income required to be distributed, 
but in fact distributed to his estate, is included in the gross income 
of the estate as income in respect of a decedent under section 691. See 
paragraph (e) of Sec. 1.663(c)-3 with respect to separate share 
treatment for the periods before and after the death of a trust's 
beneficiary.



Sec. 1.662(c)-3  Termination of existence of other beneficiaries.

    If the existence of a beneficiary which is not an individual 
terminates, the amount to be included under section 662(a) in its gross 
income for the last taxable year is computed with reference to 
Secs. 1.662(c)-1 and 1.662(c)-2 as if the beneficiary were a deceased 
individual, except that income required to be distributed prior to the 
termination but actually distributed to the beneficiary's successor in 
interest is included in the beneficiary's income for its last taxable 
year.



Sec. 1.662(c)-4  Illustration of the provisions of sections 661 and 662.

    The provisions of sections 661 and 662 may be illustrated in general 
by the following example:

    Example. (a) Under the terms of a testamentary trust one-half of the 
trust income is to be distributed currently to W, the decedent's wife, 
for her life. The remaining trust income may, in the trustee's 
discretion, either be paid to D, the grantor's daughter, paid to 
designated charities, or accumulated. The trust is to terminate at the 
death of W and the principal will then be payable to D. No provision is 
made in the trust instrument with respect to depreciation of rental 
property. Capital gains are allocable to the principal account under the 
applicable local law. The trust and both beneficiaries file returns on 
the calendar year basis. The records of the fiduciary show the following 
items of income and deduction for the taxable year 1955:

Rents........................................................    $50,000
Dividends of domestic corporations...........................     50,000
Tax-exempt interest..........................................     20,000
Partially tax-exempt interest................................     10,000
Capital gains (long term)....................................     20,000
Depreciation of rental property..............................     10,000
Expenses attributable to rental income.......................     15,400
Trustee's commissions allocable to income account............      2,800
Trustee's commissions allocable to principal account.........      1,100
 

    (b) The income for trust accounting purposes is $111,800, and the 
trustee distributes one-half ($55,900) to W and in his discretion makes 
a contribution of one-quarter ($27,950) to charity X and distributes the 
remaining one-quarter ($27,950) to D. The total of the distributions to 
beneficiaries is $83,850, consisting of (1) income required to be 
distributed currently to W of $55,900 and (2) other amounts properly 
paid or credited to D of $27,950. The income for trust accounting 
purposes of $111,800 is determined as follows:

Rents........................................................    $50,000
Dividends....................................................     50,000
Tax-exempt interest..........................................     20,000
Partially tax-exempt interest................................     10,000
                                                   ------------
    Total....................................................    130,000
Less:
  Rental expenses.................................    $15,400
  Trustee's commissions allocable to income             2,800
   account........................................
                                                     --------     18,200
                                                              ----------
    Income as computed under section 643(b).......    111,800
 

    (c) The distributable net income of the trust as computed under 
section 643(a) is $82,750, determined as follows:

Rents............................  ...........  ...........      $50,000
Dividends........................  ...........  ...........       50,000
Partially tax-exempt interest....  ...........  ...........       10,000
Tax-exempt interest..............  ...........      $20,000
Less:
  Trustee's commissions allocable         $600
   thereto (20,000/130,000 of
   $3,900).......................
  Charitable contributions               4,300
   allocable thereto (20,000/
   130,000 of $27,950)...........
                                  --------------

[[Page 109]]

 
                                    ----------        4,900
                                                 ----------       15,100
                                                            ------------
    Total........................  ...........  ...........      125,100
Deductions:
  Rental expenses................  ...........       15,400
  Trustee's commissions ($3,900    ...........        3,300
   less $600 allocated to tax-
   exempt interest)..............
  Charitable deduction ($27,950    ...........       23,650
   less $4,300 attributable to
   tax-exempt interest)..........
                                                 ----------       42,350
                                                            ------------
    Distributable net income.....  ...........  ...........       82,750
------------------------------------------------------------------------


In computing the distributable net income of $82,750, the taxable income 
of the trust was computed with the following modifications: No 
deductions were allowed for distributions to beneficiaries and for 
personal exemption of the trust (section 643(a) (1) and (2)); capital 
gains were excluded and no deduction under section 1202 (relating to the 
50 percent deduction for long-term capital gains) was taken into account 
(section 643(a)(3)); and the tax-exempt interest (as adjusted for 
expenses and charitable contributions) and the dividend exclusion of $50 
were included (section 643(a) (5) and (7)).
    (d) Inasmuch as the distributable net income of $82,750 as 
determined under section 643(a) is less than the sum of the amounts 
distributed to W and D of $83,850, the deduction allowable to the trust 
under section 661(a) is such distributable net income as modified under 
section 661(c) to exclude therefrom the items of income not included in 
the gross income of the trust, as follows:

Distributable net income.....................................    $82,750
Less:
  Tax-exempt interest (as adjusted for expenses       $15,100
   and the charitable contributions)..............
  Dividend exclusion allowable under section 116..         50
                                                     --------     15,150
                                                              ----------
    Deduction allowable under section 661(a).................     67,600
 

    (e) For the purpose of determining the character of the amounts 
deductible under section 642(c) and section 661(a), the trustee elected 
to offset the trustee's commissions (other than the portion required to 
be allocated to tax-exempt interest) against the rental income. The 
following table shows the determination of the character of the amounts 
deemed distributed to beneficiaries and contributed to charity.

----------------------------------------------------------------------------------------------------------------
                                                                                           Partially
                                             Rents      Taxable    Excluded   Tax exempt  tax exempt     Total
                                                       dividends   dividends   interest    interest
----------------------------------------------------------------------------------------------------------------
Trust income............................     $50,000     $49,950         $50     $20,000     $10,000    $130,000
Less:
  Charitable contribution...............      10,750      10,750  ..........       4,300       2,150      27,950
  Rental expenses.......................      15,400  ..........  ..........  ..........  ..........      15,400
  Trustee's commissions.................       3,300  ..........  ..........         600  ..........       3,900
                                         -----------------------------------------------------------------------
    Total deductions....................      29,450      10,750           0       4,900       2,150      47,250
                                         -----------------------------------------------------------------------
Amounts distributable to beneficiaries..      20,550      39,200          50      15,100       7,850      82,750
----------------------------------------------------------------------------------------------------------------

The character of the charitable contribution is determined by 
multiplying the total charitable contribution ($27,950) by a fraction 
consisting of each item of trust income, respectively, over the total 
trust income, except that no part of the dividends excluded from gross 
income are deemed included in the charitable contribution. For example, 
the charitable contribution is deemed to consist of rents of $10,750 
(50,000/130,000x $27,950).
    (f) The taxable income of the trust is $9,900 determined as follows:

Rental income................................................    $50,000
Dividends ($50,000 less $50 exclusion).......................     49,950
Partially tax-exempt interest................................     10,000
Capital gains................................................     20,000
                                                   ------------
    Gross income.............................................    129,950
Deductions:
  Rental expenses.................................     15,400
  Trustee's commissions...........................      3,300
  Charitable contributions........................     23,650
  Capital gain deduction..........................     10,000
  Distributions to beneficiaries..................     67,600
  Personal exemption..............................        100
                                                   ------------
                                                                 120,050
                                                              ----------
    Taxable income...........................................      9,900
 

    (g) In computing the amount includible in W's gross income under 
section 662(a)(1), the $55,900 distribution to her is deemed to be 
composed of the following proportions of the items of income deemed to 
have been distributed to the beneficiaries by the trust (see paragraph 
(e) of this example):

[[Page 110]]



Rents (20,550/82,750x$55,900)................................    $13,882
Dividends (39,250/82,750x$55,900)............................     26,515
Partially tax-exempt interest (7,850/ 82,750x$55,900)........      5,303
Tax-exempt interest (15,100/82,750x$55,900)..................     10,200
                                                   ------------
    Total....................................................     55,900
 

Accordingly, W will exclude $10,200 of tax-exempt interest from gross 
income and will receive the credits and exclusion for dividends received 
and for partially tax-exempt interest provided in sections 34, 116, and 
35, respectively, with respect to the dividends and partially tax-exempt 
interest deemed to have been distributed to her, her share of the 
dividends being aggregated with other dividends received by her for 
purposes of the dividend credit and exclusion. In addition, she may 
deduct a share of the depreciation deduction proportionate to the trust 
income allocable to her; that is, one-half of the total depreciation 
deduction, or $5,000.
    (h) Inasmuch as the sum of the amount of income required to be 
distributed currently to W ($55,900) and the other amounts properly 
paid, credited, or required to be distributed to D ($27,950) exceeds the 
distributable net income ($82,750) of the trust as determined under 
section 643(a), D is deemed to have received $26,850 ($82,750 less 
$55,900) for income tax purposes. The character of the amounts deemed 
distributed to her is determined as follows:

Rents (20,550/82,750x$26,850)................................     $6,668
Dividends (39,250/82,750x$26,850)............................     12,735
Partially tax-exempt interest (7,850/ 82,750x$26,850)........      2,547
Tax-exempt interest (15,100/82,750x$26,850)..................      4,900
                                                   ------------
    Total....................................................     26,850
 

Accordingly, D will exclude $4,900 of tax-exempt interest from gross 
income and will receive the crddits and exclusion for dividends received 
and for partially tax-exempt interest provided in sections 34, 116, and 
35, respectively, with respect to the dividends and partially tax-exempt 
interest deemed to have been distributed to her, her share of the 
dividends being aggregated with other dividends received by her for 
purposes of the dividend credit and exclusion. In addition, she may 
deduct a share of the depreciation deduction proportionate to the trust 
income allocable to her; that is, one-fourth of the total depreciation 
deduction, or $2,500.
    (i) [Reserved]
    (j) The remaining $2,500 of the depreciation deduction is allocated 
to the amount distributed to charity X and is hence non-deductible by 
the trust, W, or D. (See Sec. 1.642(e)-1.)



Sec. 1.663(a)-1  Special rules applicable to sections 661 and 662; exclusions; gifts, bequests, etc.

    (a) In general. A gift or bequest of a specific sum of money or of 
specific property, which is required by the specific terms of the will 
or trust instrument and is properly paid or credited to a beneficiary, 
is not allowed as a deduction to an estate or trust under section 661 
and is not included in the gross income of a beneficiary under section 
662, unless under the terms of the will or trust instrument the gift or 
bequest is to be paid or credited to the recipient in more than three 
installments. Thus, in order for a gift or bequest to be excludable from 
the gross income of the recipient, (1) it must qualify as a gift or 
bequest of a specific sum of money or of specific property (see 
paragraph (b) of this section), and (2) the terms of the governing 
instrument must not provide for its payment in more than three 
installments (see paragraph (c) of this section). The date when the 
estate came into existence or the date when the trust was created is 
immaterial.
    (b) Definition of a gift or bequest of a specific sum of money or of 
specific property. (1) In order to qualify as a gift or bequest of a 
specific sum of money or of specific property under section 663(a), the 
amount of money or the identity of the specific property must be 
ascertainable under the terms of a testator's will as of the date of his 
death, or under the terms of an inter vivos trust instrument as of the 
date of the inception of the trust. For example, bequests to a 
decedent's son of the decedent's interest in a partnership and to his 
daughter of a sum of money equal to the value of the partnership 
interest are bequests of specific property and of a specific sum of 
money, respectively. On the other hand, a bequest to the decedent's 
spouse of money or property, to be selected by the decedent's executor, 
equal in value to a fraction of the decedent's ``adjusted gross estate'' 
is neither a bequest of a specific sum of money or of specific property. 
The identity of the property and the amount of money specified in the 
preceding sentence are dependent both on the exercise of the executor's 
discretion and on the payment of administration expenses and other 
charges, neither of which are facts existing on the date of the 
decedent's death. It is immaterial that the value of the bequest is 
determinable

[[Page 111]]

after the decedent's death before the bequest is satisfied (so that gain 
or loss may be realized by the estate in the transfer of property in 
satisfaction of it).
    (2) The following amounts are not considered as gifts or bequests of 
a sum of money or of specific property within the meaning of this 
paragraph:
    (i) An amount which can be paid or credited only from the income of 
an estate or trust, whether from the income for the year of payment or 
crediting, or from the income accumulated from a prior year;
    (ii) An annuity, or periodic gifts of specific property in lieu of 
or having the effect of an annuity;
    (iii) A residuary estate or the corpus of a trust; or
    (iv) A gift or bequest paid in a lump sum or in not more than three 
installments, if the gift or bequest is required to be paid in more than 
three installments under the terms of the governing instrument.
    (3) The provisions of subparagraphs (1) and (2) of this paragraph 
may be illustrated by the following examples, in which it is assumed 
that the gift or bequest is not required to be made in more than three 
installments (see paragraph (c)):

    Example 1. Under the terms of a will, a legacy of $5,000 was left to 
A, 1,000 shares of X company stock was left to W, and the balance of the 
estate was to be divided equally between W and B. No provision was made 
in the will for the disposition of income of the estate during the 
period of administration. The estate had income of $25,000 during the 
taxable year 1954, which was accumulated and added to corpus for estate 
accounting purposes. During the taxable year, the executor paid the 
legacy of $5,000 in a lump sum to A, transferred the X company stock to 
W, and made no other distributions to beneficiaries. The distributions 
to A and W qualify for the exclusion under section 663(a)(1).
    Example 2. Under the terms of a will, the testator's estate was to 
be distributed to A. No provision was made in the will for the 
distribution of the estate's income during the period of administration. 
The estate had income of $50,000 for the taxable year. The estate 
distributed to A stock with a basis of $40,000 and with a fair market 
value of $40,000 on the date of distribution. No other distributions 
were made during the year. The distribution does not qualify for the 
exclusion under section 663(a)(1), because it is not a specific gift to 
A required by the terms of the will. Accordingly, the fair market value 
of the property ($40,000) represents a distribution within the meaning 
of sections 661(a) and 662(a) (see Sec. 1.661(a)-2(c)).
    Example 3. Under the terms of a trust instrument, trust income is to 
be accumulated for a period of 10 years. During the eleventh year, the 
trustee is to distribute $10,000 to B, payable from income or corpus, 
and $10,000 to C, payable out of accumulated income. The trustee is to 
distribute the balance of the accumulated income to A. Thereafter, A is 
to receive all the current income until the trust terminates. Only the 
distribution to B would qualify for the exclusion under section 
663(a)(1).

    (4) A gift or bequest of a specific sum of money or of specific 
property is not disqualified under this paragraph solely because its 
payment is subject to a condition. For example, provision for a payment 
by a trust to beneficiary A of $10,000 when he reaches age 25, and 
$10,000 when he reaches age 30, with payment over to B of any amount not 
paid to A because of his death, is a gift to A of a specific sum of 
money payable in two installments, within the meaning of this paragraph, 
even though the exact amount payable to A cannot be ascertained with 
certainty under the terms of the trust instrument.
    (c) Installment payments. (1) In determining whether a gift or 
bequest of a specific sum of money or of specific property, as defined 
in paragraph (b) of this section, is required to be paid or credited to 
a particular beneficiary in more than three installments:
    (i) Gifts or bequests of articles for personal use (such as personal 
and household effects, automobiles, and the like) are disregarded.
    (ii) Specifically devised real property, the title to which passes 
directly from the decedent to the devisee under local law, is not taken 
into account, since it would not constitute an amount paid, credited, or 
required to be distributed under section 661 (see paragraph (e) of 
Sec. 1.661(a)-2).
    (iii) All gifts and bequests under a decedent's will (which are not 
disregarded pursuant to subdivisions (i) and (ii) of this subparagraph) 
for which no time of payment or crediting is specified, and which are to 
be paid or credited in the ordinary course of administration of the 
decedent's estate, are considered as required to be paid or credited in 
a single installment.

[[Page 112]]

    (iv) All gifts and bequests (which are not disregarded pursuant to 
subdivisions (i) and (ii) of this subparagraph) payable at any one 
specified time under the terms of the governing instrument are taken 
into account as a single installment.

For purposes of determining the number of installments paid or credited 
to a particular beneficiary, a decedent's estate and a testamentary 
trust shall each be treated as a separate entity.
    (2) The application of the rules stated in subparagraph (1) of this 
paragraph may be illustrated by the following examples:

    Example (1). (i) Under the terms of a decedent's will, $10,000 in 
cash, household furniture, a watch, an automobile, 100 shares of X 
company stock, 1,000 bushels of grain, 500 head of cattle, and a farm 
(title to which passed directly to A under local law) are bequeathed or 
devised outright to A. The will also provides for the creation of a 
trust for the benefit of A, under the terms of which there are required 
to be distributed to A, $10,000 in cash and 100 shares of Y company 
stock when he reaches 25 years of age, $25,000 in cash and 200 shares of 
Y company stock when he reaches 30 years of age, and $50,000 in cash and 
300 shares of Y company stock when he reaches 35 years of age.
    (ii) The furniture, watch, automobile, and the farm are excluded in 
determining whether any gift or bequest is required to be paid or 
credited to A in more than three installments. These items qualify for 
the exclusion under section 663(a)(1) regardless of the treatment of the 
other items of property bequeathed to A.
    (iii) The $10,000 in cash, the shares of X company stock, the grain, 
the cattle and the assets required to create the trust, to be paid or 
credited by the estate to A and the trust are considered as required to 
be paid or credited in a single installment to each, regardless of the 
manner of payment or distribution by the executor, since no time of 
payment or crediting is specified in the will. The $10,000 in cash and 
shares of Y company stock required to be distributed by the trust to A 
when he is 25 years old are considered as required to be paid or 
distributed as one installment under the trust. Likewise, the 
distributions to be made by the trust to A when he is 30 and 35 years 
old are each considered as one installment under the trust. Since the 
total number of installments to be made by the estate does not exceed 
three, all of the items of money and property distributed by the estate 
qualify for the exclusion under section 663(a)(1). Similarly, the three 
distributions by the trust qualify.
    Example (2). Assume the same facts as in example (1), except that 
another distribution of a specified sum of money is required to be made 
by the trust to A when he becomes 40 years old. This distribution would 
also qualify as an installment, thus making four installments in all 
under the trust. None of the gifts to A under the trust would qualify 
for the exclusion under section 663(a)(1). The situation as to the 
estate, however, would not be changed.
    Example (3). A trust instrument provides that A and B are each to 
receive $75,000 in installments of $25,000, to be paid in alternate 
years. The trustee distributes $25,000 to A in 1954, 1956, and 1958, and 
to B in 1955, 1957, and 1959. The gifts to A and B qualify for exclusion 
under section 663(a)(1), although a total of six payments is made. The 
gifts of $75,000 to each beneficiary are to be separately treated.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 8849, 64 FR 72543, Dec. 28, 1999]



Sec. 1.663(a)-2  Charitable, etc., distributions.

    Any amount paid, permanently set aside, or to be used for the 
charitable, etc., purposes specified in section 642(c) and which is 
allowable as a deduction under that section is not allowed as a 
deduction to an estate or trust under section 661 or treated as an 
amount distributed for purposes of determining the amounts includible in 
gross income of beneficiaries under section 662. Amounts paid, 
permanently set aside, or to be used for charitable, etc., purposes are 
deductible by estates or trusts only as provided in section 642(c). For 
purposes of this section, the deduction provided in section 642(c) is 
computed without regard to the provisions of section 508(d), section 
681, or section 4948(c)(4) (concerning unrelated business income and 
private foundations).

[T.D. 6500, 25 FR 11814, Nov. 26, 1960, as amended by T.D. 7428, 41 FR 
34627, Aug. 16, 1976]



Sec. 1.663(a)-3  Denial of double deduction.

    No amount deemed to have been distributed to a beneficiary in a 
preceding year under section 651 or 661 is included in amounts falling 
within section 661(a) or 662(a). For example, assume that all of the 
income of a trust is required to be distributed currently to beneficiary

[[Page 113]]

A and both the trust and A report on the calendar year basis. For 
administrative convenience, the trustee distributes in January and 
February 1956 a portion of the income of the trust required to be 
distributed in 1955. The portion of the income for 1955 which was 
distributed by the trust in 1956 may not be claimed as a deduction by 
the trust for 1956 since it is deductible by the trust and includible in 
A's gross income for the taxable year 1955.



Sec. 1.663(b)-1  Distributions in first 65 days of taxable year; scope.

    (a) Taxable years beginning after December 31, 1968--(1) General 
rule. With respect to taxable years beginning after December 31, 1968, 
the fiduciary of a trust may elect under section (b) to 663 treat any 
amount or portion thereof that is properly paid or credited to a 
beneficiary within the first 65 days following the close of the taxable 
year as an amount that was properly paid or credited on the last day of 
such taxable year.
    (2) Effect of election. (i) An election is effective only with 
respect to the taxable year for which the election is made. In the case 
of distributions made after May 8, 1972, the amount to which the 
election applies shall not exceed:
    (a) The amount of income of the trust (as defined in Sec. 1.643(b)-
1) for the taxable year for which the election is made, or
    (b) The amount of distributable net income of the trust (as defined 
in Secs. 1.643(a)-1 through 1.643(a)-7) for such taxable year, if 
greater,

reduced by any amounts paid, credited, or required to be distributed in 
such taxable year other than those amounts considered paid or credited 
in a preceding taxable year by reason of section 663(b) and this 
section. An election shall be made for each taxable year for which the 
treatment is desired. The application of this paragraph may be 
illustrated by the following example:

    Example. X Trust, a calendar year trust, has $1,000 of income (as 
defined in Sec. 1.643(b)-1) and $800 of distributable net income (as 
defined in Secs. 1.643(a)-1 through 1.643(a)-7) in 1972. The trust 
properly pays $550 to A, a beneficiary, on January 15, 1972, which the 
trustee elects to treat under section 663(b) as paid on December 31, 
1971. The trust also properly pays to A $600 on July 19, 1972, and $450 
on January 17, 1973. For 1972, the maximum amount that may be elected 
under this subdivision to be treated as properly paid or credited on the 
last day of 1972 is $400 ($1,000-$600). The $550 paid on January 15, 
1972, does not reduce the maximum amount to which the election may 
apply, because that amount is treated as properly paid on December 31, 
1971.

    (ii) If an election is made with respect to a taxable year of a 
trust, this section shall apply only to those amounts which are properly 
paid or credited within the first 65 days following such year and which 
are so designated by the fiduciary in his election. Any amount 
considered under section 663(b) as having been distributed in the 
preceding taxable year shall be so treated for all purposes. For 
example, in determining the beneficiary's tax liability, such amount 
shall be considered as having been received by the beneficiary in his 
taxable year in which or with which the last day of the preceding 
taxable year of the trust ends.
    (b) Taxable years beginning before January 1, 1969. With respect to 
taxable years of a trust beginning before January 1, 1969, the fiduciary 
of the trust may elect under section 663(b) to treat distributions 
within the first 65 days following such taxable year as amounts which 
were paid or credited on the last day of such taxable year, if:
    (1) The trust was in existence prior to January 1, 1954;
    (2) An amount in excess of the income of the immediately preceding 
taxable year may not (under the terms of the governing instrument) be 
distributed in any taxable year; and
    (3) The fiduciary elects (as provided in Sec. 1.663(b)-2) to have 
section 663(b) apply.

[T.D. 7204, 37 FR 17135, Aug. 25, 1972]



Sec. 1.663(b)-2  Election.

    (a) Manner and time of election; irrevocability--(1) When return is 
required to be filed. If a trust return is required to be filed for the 
taxable year of the trust for which the election is made, the election 
shall be made in the appropriate place on such return. The election 
under this subparagraph shall be made not later than the time prescribed 
by law for filing such return (including extensions thereof). Such

[[Page 114]]

election shall become irrevocable after the last day prescribed for 
making it.
    (2) When no return is required to be filed. If no return is required 
to be filed for the taxable year of the trust for which the election is 
made, the election shall be made in a statement filed with the internal 
revenue office with which a return by such trust would be filed if such 
trust were required to file a return for such taxable year. See section 
6091 and the regulations thereunder for place for filing returns. The 
election under this subparagraph shall be made not later than the time 
prescribed by law for filing a return if such trust were required to 
file a return for such taxable year. Such election shall become 
irrevocable after the last day prescribed for making it.
    (b) Elections under prior law. Elections made pursuant to section 
663(b) prior to its amendment by section 331(b) of the Tax Reform Act of 
1969 (83 Stat. 598), which, under prior law, were irrevocable for the 
taxable year for which the election was made and all subsequent years, 
are not effective for taxable years beginning after December 31, 1968. 
In the case of a trust for which an election was made under prior law, 
the fiduciary shall make the election for each taxable year beginning 
after December 31, 1968, for which the treatment provided by section 
663(b) is desired.

[T.D. 7204, 37 FR 17135, Aug. 25, 1972]



Sec. 1.663(c)-1  Separate shares treated as separate trusts or as separate estates; in general.

    (a) If a single trust (or estate) has more than one beneficiary, and 
if different beneficiaries have substantially separate and independent 
shares, their shares are treated as separate trusts (or estates) for the 
sole purpose of determining the amount of distributable net income 
allocable to the respective beneficiaries under sections 661 and 662. 
Application of this rule will be significant in, for example, situations 
in which income is accumulated for beneficiary A but a distribution is 
made to beneficiary B of both income and corpus in an amount exceeding 
the share of income that would be distributable to B had there been 
separate trusts (or estates). In the absence of a separate share rule B 
would be taxed on income which is accumulated for A. The division of 
distributable net income into separate shares will limit the tax 
liability of B. Section 663(c) does not affect the principles of 
applicable law in situations in which a single trust (or estate) 
instrument creates not one but several separate trusts (or estates), as 
opposed to separate shares in the same trust (or estate) within the 
meaning of this section.
    (b) The separate share rule does not permit the treatment of 
separate shares as separate trusts (or estates) for any purpose other 
than the application of distributable net income. It does not, for 
instance, permit the treatment of separate shares as separate trusts (or 
estates) for purposes of:
    (1) The filing of returns and payment of tax,
    (2) The deduction of personal exemption under section 642(b), and
    (3) The allowance to beneficiaries succeeding to the trust (or 
estate) property of excess deductions and unused net operating loss and 
capital loss carryovers on termination of the trust (or estate) under 
section 642(h).
    (c) The separate share rule may be applicable even though separate 
and independent accounts are not maintained and are not required to be 
maintained for each share on the books of account of the trust (or 
estate), and even though no physical segregation of assets is made or 
required.
    (d) Separate share treatment is not elective. Thus, if a trust (or 
estate) is properly treated as having separate and independent shares, 
such treatment must prevail in all taxable years of the trust (or 
estate) unless an event occurs as a result of which the terms of the 
trust (or estate) instrument and the requirements of proper 
administration require different treatment.

[T. D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, as amended by T.D. 
8849, 64 FR 72543, Dec. 28, 1999]



Sec. 1.663(c)-2  Rules of administration.

    (a) When separate shares come into existence. A separate share comes 
into existence upon the earliest moment that a fiduciary may reasonably 
determine, based upon the known facts, that a separate economic interest 
exists.

[[Page 115]]

    (b) Computation of distributable net income for each separate share-
-(1) General rule. The amount of distributable net income for any share 
under section 663(c) is computed as if each share constituted a separate 
trust or estate. Accordingly, each separate share shall calculate its 
distributable net income based upon its portion of gross income that is 
includible in distributable net income and its portion of any applicable 
deductions or losses.
    (2) Section 643(b) income. This paragraph (b)(2) governs the 
allocation of the portion of gross income includible in distributable 
net income that is income within the meaning of section 643(b). Such 
gross income is allocated among the separate shares in accordance with 
the amount of income that each share is entitled to under the terms of 
the governing instrument or applicable local law.
    (3) Income in respect of a decedent. This paragraph (b)(3) governs 
the allocation of the portion of gross income includible in 
distributable net income that is income in respect of a decedent within 
the meaning of section 691(a) and is not income within the meaning of 
section 643(b). Such gross income is allocated among the separate shares 
that could potentially be funded with these amounts irrespective of 
whether the share is entitled to receive any income under the terms of 
the governing instrument or applicable local law. The amount of such 
gross income allocated to each share is based on the relative value of 
each share that could potentially be funded with such amounts.
    (4) Gross income not attributable to cash. This paragraph (b)(4) 
governs the allocation of the portion of gross income includible in 
distributable net income that is not attributable to cash received by 
the estate or trust (for example, original issue discount, a 
distributive share of partnership tax items, and the pro rata share of 
an S corporation's tax items). Such gross income is allocated among the 
separate shares in the same proportion as section 643(b) income from the 
same source would be allocated under the terms of the governing 
instrument or applicable local law.
    (5) Deductions and losses. Any deduction or any loss which is 
applicable solely to one separate share of the trust or estate is not 
available to any other share of the same trust or estate.
    (c) Computations and valuations. For purposes of calculating 
distributable net income for each separate share, the fiduciary must use 
a reasonable and equitable method to make the allocations, calculations, 
and valuations required by paragraph (b) of this section.

[T.D. 8849, 64 FR 72543, Dec. 28, 1999]



Sec. 1.663(c)-3  Applicability of separate share rule to certain trusts.

    (a) The applicability of the separate share rule provided by section 
663(c) to trusts other than qualified revocable trusts within the 
meaning of section 645(b)(1) will generally depend upon whether 
distributions of the trust are to be made in substantially the same 
manner as if separate trusts had been created. Thus, if an instrument 
directs a trustee to divide the testator's residuary estate into 
separate shares (which under applicable law do not constitute separate 
trusts) for each of the testator's children and the trustee is given 
discretion, with respect to each share, to distribute or accumulate 
income or to distribute principal or accumulated income, or to do both, 
separate shares will exist under section 663(c). In determining whether 
separate shares exist, it is immaterial whether the principal and any 
accumulated income of each share is ultimately distributable to the 
beneficiary of such share, to his descendants, to his appointees under a 
general or special power of appointment, or to any other beneficiaries 
(including a charitable organization) designated to receive his share of 
the trust and accumulated income upon termination of the beneficiary's 
interest in the share. Thus, a separate share may exist if the 
instrument provides that upon the death of the beneficiary of the share, 
the share will be added to the shares of the other beneficiaries of the 
trust.
    (b) Separate share treatment will not be applied to a trust or 
portion of a trust subject to a power to: (1) Distribute, apportion, or 
accumulate income, or (2) distribute corpus to or for one or more 
beneficiaries within a group or class of beneficiaries, unless

[[Page 116]]

payment of income, accumulated income, or corpus of a share of one 
beneficiary cannot affect the proportionate share of income, accumulated 
income, or corpus of any shares of the other beneficiaries, or unless 
substantially proper adjustment must thereafter be made (under the 
governing instrument) so that substantially separate and independent 
shares exist.
    (c) A share may be considered as separate even though more than one 
beneficiary has an interest in it. For example, two beneficiaries may 
have equal, disproportionate, or indeterminate interests in one share 
which is separate and independent from another share in which one or 
more beneficiaries have an interest. Likewise, the same person may be a 
beneficiary of more than one separate share.
    (d) Separate share treatment may be given to a trust or portion of a 
trust otherwise qualifying under this section if the trust or portion of 
a trust is subject to a power to pay out to a beneficiary of a share (of 
such trust or portion) an amount of corpus in excess of his 
proportionate share of the corpus of the trust if the possibility of 
exercise of the power is remote. For example, if the trust is subject to 
a power to invade the entire corpus for the health, education, support, 
or maintenance of A, separate share treatment is applied if exercise of 
the power requires consideration of A's other income which is so 
substantial as to make the possibility of exercise of the power remote. 
If instead it appears that A and B have separate shares in a trust, 
subject to a power to invade the entire corpus for the comfort, 
pleasure, desire, or happiness of A, separate share treatment shall not 
be applied.
    (e) For taxable years ending before December 31, 1978, the separate 
share rule may also be applicable to successive interests in point of 
time, as for instance in the case of a trust providing for a life estate 
to A and a second life estate or outright remainder to B. In such a 
case, in the taxable year of a trust in which a beneficiary dies items 
of income and deduction properly allocable under trust accounting 
principles to the period before a beneficiary's death are attributed to 
one share, and those allocable to the period after the beneficiary's 
death are attributed to the other share. Separate share treatment is not 
available to a succeeding interest, however, with respect to 
distributions which would otherwise be deemed distributed in a taxable 
year of the earlier interest under the throwback provisions of subpart D 
(section 665 and following), part I, subchapter J, chapter 1 of the 
Code. The application of this paragraph may be illustrated by the 
following example:

    Example. A trust instrument directs that the income of a trust is to 
be paid to A for her life. After her death income may be distributed to 
B or accumulated. A dies on June 1, 1956. The trust keeps its books on 
the basis of the calendar year. The trust instrument permits invasions 
of corpus for the benefit of A and B, and an invasion of corpus was in 
fact made for A's benefit in 1956. In determining the distributable net 
income of the trust for the purpose of determining the amounts 
includible in A's income, income and deductions properly allocable to 
the period before A's death are treated as income and deductions of a 
separate share; and for that purpose no account is taken of income and 
deductions allocable to the period after A's death.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960, as 
amended by T.D. 7633, 44 FR 57926, Oct. 9, 1979; T.D. 8849, 64 FR 72543, 
Dec. 28, 1999]



Sec. 1.663(c)-4  Applicability of separate share rule to estates and qualified revocable trusts.

    (a) General rule. The applicability of the separate share rule 
provided by section 663(c) to estates and qualified revocable trusts 
within the meaning of section 645(b)(1) will generally depend upon 
whether the governing instrument and applicable local law create 
separate economic interests in one beneficiary or class of beneficiaries 
of such estate or trust. Ordinarily, a separate share exists if the 
economic interests of the beneficiary or class of beneficiaries neither 
affect nor are affected by the economic interests accruing to another 
beneficiary or class of beneficiaries. Separate shares include, for 
example, the income on bequeathed property if the recipient of the 
specific bequest is entitled to such income and a surviving spouse's 
elective share that under local law is entitled to income and 
appreciation or depreciation. Furthermore, a qualified revocable trust

[[Page 117]]

for which an election is made under section 645 is always a separate 
share of the estate and may itself contain two or more separate shares. 
Conversely, a gift or bequest of a specific sum of money or of property 
as defined in section 663(a)(1) is not a separate share.
    (b) Special rule for certain types of beneficial interests. 
Notwithstanding the provisions of paragraph (a) of this section, a 
surviving spouse's elective share that under local law is determined as 
of the date of the decedent's death and is not entitled to income or any 
appreciation or depreciation is a separate share. Similarly, 
notwithstanding the provisions of paragraph (a) of this section, a 
pecuniary formula bequest that, under the terms of the governing 
instrument or applicable local law, is not entitled to income or to 
share in appreciation or depreciation constitutes a separate share if 
the governing instrument does not provide that it is to be paid or 
credited in more than three installments.
    (c) Shares with multiple beneficiaries and beneficiaries of multiple 
shares. A share may be considered as separate even though more than one 
beneficiary has an interest in it. For example, two beneficiaries may 
have equal, disproportionate, or indeterminate interests in one share 
which is economically separate and independent from another share in 
which one or more beneficiaries have an interest. Moreover, the same 
person may be a beneficiary of more than one separate share.

[T.D. 8849, 64 FR 72544, Dec. 28, 1999]



Sec. 1.663(c)-5  Examples.

    Section 663(c) may be illustrated by the following examples:

    Example 1. (i) A single trust was created in 1940 for the benefit of 
A, B, and C, who were aged 6, 4, and 2, respectively. Under the terms of 
the instrument, the trust income is required to be divided into three 
equal shares. Each beneficiary's share of the income is to be 
accumulated until he becomes 21 years of age. When a beneficiary reaches 
the age of 21, his share of the income may thereafter be either 
accumulated or distributed to him in the discretion of the trustee. The 
trustee also has discretion to invade corpus for the benefit of any 
beneficiary to the extent of his share of the trust estate, and the 
trust instrument requires that the beneficiary's right to future income 
and corpus will be proportionately reduced. When each beneficiary 
reaches 35 years of age, his share of the trust estate shall be paid 
over to him. The interest in the trust estate of any beneficiary dying 
without issue and before he has attained the age of 35 is to be equally 
divided between the other beneficiaries of the trust. All expenses of 
the trust are allocable to income under the terms of the trust 
instrument.
    (ii) No distributions of income or corpus were made by the trustee 
prior to 1955, although A became 21 years of age on June 30, 1954. 
During the taxable year of 1955, the trust has income from royalties of 
$20,000 and expenses of $5,000. The trustee in his discretion 
distributes $12,000 to A. Both A and the trust report on the calendar 
year basis.
    (iii) The trust qualifies for the separate share treatment under 
section 663(c) and the distributable net income must be divided into 
three parts for the purpose of determining the amount deductible by the 
trust under section 661 and the amount includible in A's gross income 
under section 662.
    (iv) The distributable net income of each share of the trust is 
$5,000 ($6,667 less $1,667). Since the amount ($12,000) distributed to A 
during 1955 exceeds the distributable net income of $5,000 allocated to 
his share, the trust is deemed to have distributed to him $5,000 of 1955 
income and $7,000 of amounts other than 1955 income. Accordingly, the 
trust is allowed a deduction of $5,000 under section 661. The taxable 
income of the trust for 1955 is $9,900, computed as follows:

Royalties.........................................    $20,000
Deductions:
  Expenses........................................     $5,000
  Distribution to A...............................      5,000
  Personal exemption..............................        100
                                                    .........     10,100
                                                              ----------
    Taxable income...........................................      9,900
 

    (v) In accordance with section 662, A must include in his gross 
income for 1955 an amount equal to the portion ($5,000) of the 
distributable net income of the trust allocated to his share. Also, the 
excess distribution of $7,000 made by the trust is subject to the 
throwback provisions of subpart D (section 665 and following), part I, 
subchapter J, chapter 1 of the Code, and the regulations thereunder.
    Example 2. (i) Facts. Testator, who dies in 2000, is survived by a 
spouse and two children. Testator's will contains a fractional formula 
bequest dividing the residuary estate between the surviving spouse and a 
trust for the benefit of the children. Under the fractional formula, the 
marital bequest constitutes 60% of the estate and the children's trust 
constitutes 40% of the estate. During the year, the executor makes a 
partial proportionate distribution of $1,000,0000,

[[Page 118]]

($600,000 to the surviving spouse and $400,000 to the children's trust) 
and makes no other distributions. The estate receives dividend income of 
$20,000, and pays expenses of $8,000 that are deductible on the estate's 
federal income tax return.
    (ii) Conclusion. The fractional formula bequests to the surviving 
spouse and to the children's trust are separate shares. Because 
Testator's will provides for fractional formula residuary bequests, the 
income and any appreciation in the value of the estate assets are 
proportionately allocated between the marital share and the trust's 
share. Therefore, in determining the distributable net income of each 
share, the income and expenses must be allocated 60% to the marital 
share and 40% to the trust's share. The distributable net income is 
$7,200 (60% of income less 60% of expenses) for the marital share and 
$4,800 (40% of income less 40% of expenses) for the trust's share. 
Because the amount distributed in partial satisfaction of each bequest 
exceeds the distributable net income of each share, the estate's 
distribution deduction under section 661 is limited to the sum of the 
distributable net income for both shares. The estate is allowed a 
distribution deduction of $12,000 ($7,200 for the marital share and 
$4,800 for the trust's share). As a result, the estate has zero taxable 
income ($20,000 income less $8,000 expenses and $12,000 distribution 
deduction). Under section 662, the surviving spouse and the trust must 
include in gross income $7,200 and $4,800, respectively.
    Example 3. The facts are the same as in Example 2, except that in 
2000 the executor makes the payment to partially fund the children's 
trust but makes no payment to the surviving spouse. The fiduciary must 
use a reasonable and equitable method to allocate income and expenses to 
the trust's share. Therefore, depending on when the distribution is made 
to the trust, it may no longer be reasonable or equitable to determine 
the distributable net income for the trust's share by allocating to it 
40% of the estate's income and expenses for the year. The computation of 
the distributable net income for the trust's share should take into 
consideration that after the partial distribution the relative size of 
the trust's separate share is reduced and the relative size of the 
spouse's separate share is increased.
    Example 4. (i) Facts. Testator, who dies in 2000, is survived by a 
spouse and one child. Testator's will provides for a pecuniary formula 
bequest to be paid in not more than three installments to a trust for 
the benefit of the child of the largest amount that can pass free of 
Federal estate tax and a bequest of the residuary to the surviving 
spouse. The will provides that the bequest to the child's trust is not 
entitled to any of the estate's income and does not participate in 
appreciation or depreciation in estate assets. During the 2000 taxable 
year, the estate receives dividend income of $200,000 and pays expenses 
of $15,000 that are deductible on the estate's federal income tax 
return. The executor partially funds the child's trust by distributing 
to it securities that have an adjusted basis to the estate of $350,000 
and a fair market value of $380,000 on the date of distribution. As a 
result of this distribution, the estate realizes long-term capital gain 
of $30,000.
    (ii) Conclusion. The estate has two separate shares consisting of a 
formula pecuniary bequest to the child's trust and a residuary bequest 
to the surviving spouse. Because, under the terms of the will, no estate 
income is allocated to the bequest to the child's trust, the 
distributable net income for that trust's share is zero. Therefore, with 
respect to the $380,000 distribution to the child's trust, the estate is 
allowed no deduction under section 661, and no amount is included in the 
trust's gross income under section 662. Because no distributions were 
made to the spouse, there is no need to compute the distributable net 
income allocable to the marital share. The taxable income of the estate 
for the 2000 taxable year is $214,400 ($200,000 (dividend income) plus 
$30,000 (capital gain) minus $15,000 (expenses) and minus $600 (personal 
exemption)).
    Example 5. The facts are the same as in Example 4, except that 
during 2000 the estate reports on its federal income tax return a pro 
rata share of an S corporation's tax items and a distributive share of a 
partnership's tax items allocated on Form K-1s to the estate by the S 
corporation and by the partnership, respectively. Because, under the 
terms of the will, no estate income from the S corporation or the 
partnership would be allocated to the pecuniary bequest to child's 
trust, none of the tax items attributable to the S corporation stock or 
the partnership interest is allocated to the trust's separate share. 
Therefore, with respect to the $380,000 distribution to the trust, the 
estate is allowed no deduction under section 661, and no amount is 
included in the trust's gross income under section 662.
    Example 6. The facts are the same as in Example 4, except that 
during 2000 the estate receives a distribution of $900,000 from the 
decedent's individual retirement account that is included in the 
estate's gross income as income in respect of a decedent under section 
691(a). The entire $900,000 is allocated to corpus under applicable 
local law. Both the separate share for the child's trust and the 
separate share for the surviving spouse may potentially be funded with 
the proceeds from the individual retirement account. Therefore, a 
portion of the $900,000 gross income must be allocated to the trust's 
separate share. The amount allocated to the trust's share must be based 
upon the relative values of the two separate shares using a reasonable 
and equitable method. The estate is entitled

[[Page 119]]

to a deduction under section 661 for the portion of the $900,000 
properly allocated to the trust's separate share, and the trust must 
include this amount in income under section 662.
    Example 7. (i) Facts. Testator, who dies in 2000, is survived by a 
spouse and three adult children. Testator's will divides the residue of 
the estate equally among the three children. The surviving spouse files 
an election under the applicable state's elective share statute. Under 
this statute, a surviving spouse is entitled to one-third of the 
decedent's estate after the payment of debts and expenses. The statute 
also provides that the surviving spouse is not entitled to any of the 
estate's income and does not participate in appreciation or depreciation 
of the estate's assets. However, under the statute, the surviving spouse 
is entitled to interest on the elective share from the date of the court 
order directing the payment until the executor actually makes payment. 
During the estate's 2001 taxable year, the estate distributes to the 
surviving spouse $5,000,000 in partial satisfaction of the elective 
share and pays $200,000 of interest on the delayed payment of the 
elective share. During that year, the estate receives dividend income of 
$3,000,000 and pays expenses of $60,000 that are deductible on the 
estate's federal income tax return.
    (ii) Conclusion. The estate has four separate shares consisting of 
the surviving spouse's elective share and each of the three children's 
residuary bequests. Because the surviving spouse is not entitled to any 
estate income under state law, none of the estate's gross income is 
allocated to the spouse's separate share for purposes of determining 
that share's distributable net income. Therefore, with respect to the 
$5,000,000 distribution, the estate is allowed no deduction under 
section 661, and no amount is included in the spouse's gross income 
under section 662. The $200,000 of interest paid to the spouse must be 
included in the spouse's gross income under section 61. Because no 
distributions were made to any other beneficiaries during the year, 
there is no need to compute the distributable net income of the other 
three separate shares. Thus, the taxable income of the estate for the 
2000 taxable year is $2,939,400 ($3,000,000 (dividend income) minus 
$60,000 (expenses) and $600 (personal exemption)). The estate's $200,000 
interest payment is a nondeductible personal interest expense described 
in section 163(h).
    Example 8. The will of Testator, who dies in 2000, directs the 
executor to distribute the X stock and all dividends therefrom to child 
A and the residue of the estate to child B. The estate has two separate 
shares consisting of the income on the X stock bequeathed to A and the 
residue of the estate bequeathed to B. The bequest of the X stock meets 
the definition of section 663(a)(1) and therefore is not a separate 
share. If any distributions, other than shares of the X stock, are made 
during the year to either A or B, then for purposes of determining the 
distributable net income for the separate shares, gross income 
attributable to dividends on the X stock must be allocated to A's 
separate share and any other income must be allocated to B's separate 
share.
    Example 9. The will of Testator, who dies in 2000, directs the 
executor to divide the residue of the estate equally between Testator's 
two children, A and B. The will directs the executor to fund A's share 
first with the proceeds of Testator's individual retirement account. The 
date of death value of the estate after the payment of debts, expenses, 
and estate taxes is $9,000,000. During 2000, the $900,000 balance in 
Testator's individual retirement account is distributed to the estate. 
The entire $900,000 is allocated to corpus under applicable local law. 
This amount is income in respect of a decedent within the meaning of 
section 691(a). The estate has two separate shares, one for the benefit 
of A and one for the benefit of B. If any distributions are made to 
either A or B during the year, then, for purposes of determining the 
distributable net income for each separate share, the $900,000 of income 
in respect of a decedent must be allocated to A's share.
    Example 10. The facts are the same as in Example 9, except that the 
will directs the executor to fund A's share first with X stock valued at 
$3,000,000, rather than with the proceeds of the individual retirement 
account. The estate has two separate shares, one for the benefit of A 
and one for the benefit of B. If any distributions are made to either A 
or B during the year, then, for purposes of determining the 
distributable net income for each separate share, the $900,000 of gross 
income attributable to the proceeds from the individual retirement 
account must be allocated between the two shares to the extent that they 
could potentially be funded with those proceeds. The maximum amount of 
A's share that could potentially be funded with the income in respect of 
decedent is $1,500,000 ($4,500,000 value of share less $3,000,000 to be 
funded with stock) and the maximum amount of B's share that could 
potentially be funded with income in respect of decedent is $4,500,000. 
Based upon the relative values of these amounts, the gross income 
attributable to the proceeds of the individual retirement account is 
allocated $225,000 (or one-fourth) to A's share and $675,000 (or three-
fourths) to B's share.
    Example 11. The will of Testator, who dies in 2000, provides that 
after the payment of specific bequests of money, the residue of the 
estate is to be divided equally among the Testator's three children, A, 
B, and C. The will also provides that during the period of 
administration one-half of the income from the residue is to be paid to 
a designated

[[Page 120]]

charitable organization. After the specific bequests of money are paid, 
the estate initially has three equal separate shares. One share is for 
the benefit of the charitable organization and A, another share is for 
the benefit of the charitable organization and B, and the last share is 
for the benefit of the charitable organization and C. During the period 
of administration, payments of income to the charitable organization are 
deductible by the estate to the extent provided in section 642(c) and 
are not subject to the distribution provisions of sections 661 and 662.

[T.D. 6500, 25 FR 11814, Nov. 26, 1960; 25 FR 14021, Dec. 31, 1960. 
Redesignated and amended by T.D. 8849, 64 FR 72543, 72544, Dec. 28, 
1999; 65 FR 16317, Mar. 28, 2000]



Sec. 1.663(c)-6  Effective dates.

    Sections 1.663(c)-1 through 1.663(c)-5 are applicable for estates 
and qualified revocable trusts within the meaning of section 645(b)(1) 
with respect to decedents who die on or after December 28, 1999. 
However, for estates and qualified revocable trusts with respect to 
decedents who died after the date that section 1307 of the Tax Reform 
Act of 1997 became effective but before December 28, 1999, the IRS will 
accept any reasonable interpretation of the separate share provisions, 
including those provisions provided in 1999-11 I.R.B. 41 (see 
Sec. 601.601(d)(2)(ii)(b) of this chapter). For trusts other than 
qualified revocable trusts, Sec. 1.663(c)-2 is applicable for taxable 
years of such trusts beginning after December 28, 1999.

[T.D. 8849, 64 FR 72545, Dec. 28, 1999; 65 FR 16317, Mar. 28, 2000]



Sec. 1.664-1  Charitable remainder trusts.

    (a) In general--(1) Introduction--(i) General description of a 
charitable remainder trust. Generally, a charitable remainder trust is a 
trust which provides for a specified distribution, at least annually, to 
one or more beneficiaries, at least one of which is not a charity, for 
life or for a term of years, with an irrevocable remainder interest to 
be held for the benefit of, or paid over to, charity. The specified 
distribution to be paid at least annually must be a sum certain which is 
not less than 5 percent of the initial net fair market value of all 
property placed in trust (in the case of a charitable remainder annuity 
trust) or a fixed percentage which is not less than 5 percent of the net 
fair market value of the trust assets, valued annually (in the case of a 
charitable remainder unitrust). A trust created after July 31, 1969, 
which is a charitable remainder trust is exempt from all of the taxes 
imposed by subtitle A of the Code for any taxable year of the trust 
except a taxable year in which it has unrelated business taxable income.
    (ii) Scope. This section provides definitions, general rules 
governing the creation and administration of a charitable remainder 
trust, and rules governing the taxation of the trust and its 
beneficiaries. For the application of certain foundation rules to 
charitable remainder trusts, see paragraph (b) of this section. If the 
trust has unrelated business taxable income, see paragraph (c) of this 
section. For the treatment of distributions to recipients, see paragraph 
(d) of this section. For the treatment of distributions to charity, see 
paragraph (e) of this section. For the time limitations for amendment of 
governing instruments, see paragraph (f) of this section. For 
transitional rules under which particular requirements are inapplicable 
to certain trusts, see paragraph (g) of this section. Section 1.664-2 
provides rules relating solely to a charitable remainder annuity trust. 
Section 1.664-3 provides rules relating solely to a charitable remainder 
unitrust. Section 1.664-4 provides rules governing the calculation of 
the fair market value of the remainder interest in a charitable 
remainder unitrust. For rules relating to the filing of returns for a 
charitable remainder trust, see paragraph (a)(6) of Sec. 1.6012-3 and 
section 6034 and the regulations thereunder.
    (iii) Definitions. As used in this section and Secs. 1.664-2, 1.664-
3, and 1.664-4:
    (a) Charitable remainder trust. The term charitable remainder trust 
means a trust with respect to which a deduction is allowable under 
section 170, 2055, 2106, or 2522 and which meets the description of a 
charitable remainder annuity trust (as described in Sec. 1.664-2) or a 
charitable remainder unitrust (as described in Sec. 1.664-3).
    (b) Annuity amount. The term annuity amount means the amount 
described in paragraph (a)(1) of Sec. 1.664-2 which is

[[Page 121]]

payable, at least annually, to the beneficiary of a charitable remainder 
annuity trust.
    (c) Unitrust amount. The term unitrust amount means the amount 
described in paragraph (a)(1) of Sec. 1.664-3 which is payable, at least 
annually, to the beneficiary of a charitable remainder unitrust.
    (d) Recipient. The term recipient means the beneficiary who receives 
the possession or beneficial enjoyment of the annuity amount or unitrust 
amount.
    (e) Governing instrument. The term governing instrument has the same 
meaning as in section 508(e) and the regulations thereunder.
    (2) Requirement that the trust must be either a charitable remainder 
annuity trust or a charitable remainder unitrust. A trust is a 
charitable remainder trust only if it is either a charitable remainder 
annuity trust in every respect or a charitable remainder unitrust in 
every respect. For example, a trust which provides for the payment each 
year to a noncharitable beneficiary of the greater of a sum certain or a 
fixed percentage of the annual value of the trust assets is not a 
charitable remainder trust inasmuch as the trust is neither a charitable 
remainder annuity trust (for the reason that the payment for the year 
may be a fixed percentage of the annual value of the trust assets which 
is not a ``sum certain'') nor a charitable remainder unitrust (for the 
reason that the payment for the year may be a sum certain which is not a 
``fixed percentage'' of the annual value of the trust assets).
    (3) Restrictions on investments. A trust is not a charitable 
remainder trust if the provisions of the trust include a provision which 
restricts the trustee from investing the trust assets in a manner which 
could result in the annual realization of a reasonable amount of income 
or gain from the sale or disposition of trust assets. In the case of 
transactions with, or for the benefit of, a disqualified person, see 
section 4941(d) and the regulations thereunder for rules relating to the 
definition of self-dealing.
    (4) Requirement that trust must meet definition of and function 
exclusively as a charitable remainder trust from its creation. In order 
for a trust to be a charitable remainder trust, it must meet the 
definition of and function exclusively as a charitable remainder trust 
from the creation of the trust. Solely for the purposes of section 664 
and the regulations thereunder, the trust will be deemed to be created 
at the earliest time that neither the grantor nor any other person is 
treated as the owner of the entire trust under subpart E, part 1, 
subchapter J, chapter 1, subtitle A of the Code (relating to grantors 
and others treated as substantial owners), but in no event prior to the 
time property is first transferred to the trust. For purposes of the 
preceding sentence, neither the grantor nor his spouse shall be treated 
as the owner of the trust under such subpart E merely because the 
grantor or his spouse is named as a recipient. See examples 1 through 3 
of subparagraph (6) of this paragraph for illustrations of the foregoing 
rule.
    (5) Rules applicable to testamentary transfers--(i) Deferral of 
annuity or unitrust amount. Notwithstanding subparagraph (4) of this 
paragraph and Secs. 1.664-2 and 1.664-3, for purposes of sections 2055 
and 2106 a charitable remainder trust shall be deemed created at the 
date of death of the decedent (even though the trust is not funded until 
the end of a reasonable period of administration or settlement) if the 
obligation to pay the annuity or unitrust amount with respect to the 
property passing in trust at the death of the decedent begins as of the 
date of death of the decedent, even though the requirement to pay such 
amount is deferred in accordance with the rules provided in this 
subparagraph. If permitted by applicable local law or authorized by the 
provisions of the governing instrument, the requirement to pay such 
amount may be deferred until the end of the taxable year of the trust in 
which occurs the complete funding of the trust. Within a reasonable 
period after such time, the trust must pay (in the case of an 
underpayment) or must receive from the recipient (in the case of an 
overpayment) the difference between:
    (a) Any annuity or unitrust amounts actually paid, plus interest on 
such

[[Page 122]]

amounts computed at the rate of interest specified in paragraph 
(a)(5)(iv) of this section, compounded annually, and
    (b) The annuity or unitrust amounts payable, plus interest on such 
amounts computed at the rate of interest specified in paragraph 
(a)(5)(iv) of this section, compounded annually.

The amounts payable shall be retroactively determined by using the 
taxable year, valuation method, and valuation dates which are ultimately 
adopted by the charitable remainder trust. See subdivision (ii) of this 
subparagraph for rules relating to retroactive determination of the 
amount payable under a charitable remainder unitrust. See paragraph 
(d)(4) of this section for rules relating to the year of inclusion in 
the case of an underpayment to a recipient and the allowance of a 
deduction in the case of an overpayment to a recipient.
    (ii) For purposes of retroactively determining the amount under 
subdivision (i)(b) of this subparagraph, the governing instrument of a 
charitable remainder unitrust may provide that the amount described in 
subdivision (i)(b) of this subparagraph with respect to property passing 
in trust at the death of the decedent for the period which begins on the 
date of death of the decedent and ends on the earlier of the date of 
death of the last recipient or the end of the taxable year of the trust 
in which occurs the complete funding of the trust shall be computed by 
multiplying:
    (a) The sum of (1) the value, on the earlier of the date of death of 
the last recipient or the last day in such taxable year, of the property 
held in trust which is attributable to property passing to the trust at 
the death of the decedent, (2) any distributions in respect of unitrust 
amounts made by the trust or estate before such date, and (3) interest 
on such distributions computed at the rate of interest specified in 
paragraph (a)(5)(iv) of this section, compounded annually, from the date 
of distribution to such date by:
    (b) (1) In the case of transfers made after November 30, 1983, for 
which the valuation date is before May 1, 1989, a factor equal to 
1.000000 less the factor under the appropriate adjusted payout rate in 
Table D in Sec. 1.664-4(e)(6) opposite the number of years in column 1 
between the date of death of the decedent and the date of the earlier of 
the death of the last recipient or the last day of such taxable year.
    (2) In the case of transfers for which the valuation date is after 
April 30, 1989, a factor equal to 1.000000 less the factor under the 
appropriate adjusted payout rate in Table D in Sec. 1.664-4(e)(6) 
opposite the number of years in column 1 between the date of death of 
the decedent and the date of the earlier of the death of the last 
recipient or the last day of such taxable year. The appropriate adjusted 
payout rate is determined by using the appropriate Table F contained in 
Sec. 1.664-4(e)(6) for the section 7520 rate for the month of the 
valuation date.
    (3) If the number of years between the date of death and the date of 
the earlier of the death of the last recipient or the last day of such 
taxable year is between periods for which factors are provided, a linear 
interpolation must be made.
    (iii) Treatment of distributions. The treatment of a distribution to 
a charitable remainder trust, or to a recipient in respect of an annuity 
or unitrust amount, paid, credited, or required to be distributed by an 
estate, or by a trust which is not a charitable remainder trust, shall 
be governed by the rules of subchapter J, chapter 1, subtitle A of the 
Code other than section 664. In the case of a charitable remainder trust 
which is partially or fully funded during the period of administration 
of an estate or settlement of a trust (which is not a charitable 
remainder trust), the treatment of any amount paid, credited, or 
required to be distributed by the charitable remainder trust shall be 
governed by the rules of section 664.
    (iv) Rate of interest. The following rates of interest shall apply 
for purposes of paragraphs (a)(5) (i) through (ii) of this section:
    (a) The section 7520 rate for the month in which the valuation date 
with respect to the transfer is (or one of the prior two months if 
elected under Sec. 1.7520-2(b)) after April 30, 1989;
    (b) 10 percent for instruments executed or amended (other than in 
the case of a reformation under section

[[Page 123]]

2055(e)(3)) on or after August 9, 1984, and before May 1, 1989, and not 
subsequently amended;
    (c) 6 percent or 10 percent for instruments executed or amended 
(other than in the case of a reformation under section 2055(e)(3)) after 
October 24, 1983, and before August 9, 1984; and
    (d) 6 percent for instruments executed before October 25, 1983, and 
not subsequently amended (other than in the case of a reformation under 
section 2055(e)(3)).
    (6) Examples. The application of the rules in paragraphs (a)(4) and 
(a)(5) of this section require the use of actuarial factors contained in 
Secs. 1.664-4(e) and 1.664-4A(d) and (e) and may be illustrated by use 
of the following examples:

    Example (1). On September 19, 1971, H transfers property to a trust 
over which he retains an inter vivos power of revocation. The trust is 
to pay W 5 percent of the value of the trust assets, valued annually, 
for her life, remainder to charity. The trust would satisfy all of the 
requirements of section 664 if it were irrevocable. For purposes of 
section 664, the trust is not deemed created in 1971 because H is 
treated as the owner of the entire trust under subpart E. On May 26, 
1975, H predeceases W at which time the trust becomes irrevocable. For 
purposes of section 664, the trust is deemed created on May 26, 1975, 
because that is the earliest date on which H is not treated as the owner 
of the entire trust under subpart E. The trust becomes a charitable 
remainder trust on May 26, 1975, because it meets the definition of a 
charitable remainder trust from its creation.
    Example (2). The facts are the same as in example (1), except that H 
retains the inter vivos power to revoke only one-half of the trust. For 
purposes of section 664, the trust is deemed created on September 19, 
1971, because on that date the grantor is not treated as the owner of 
the entire trust under subpart E. Consequently, a charitable deduction 
is not allowable either at the creation of the trust or at H's death 
because the trust does not meet the definition of a charitable remainder 
trust from the date of its creation. The trust does not meet the 
definition of a charitable remainder trust from the date of its creation 
because the trust is subject to a partial power to revoke on such date.
    Example (3). The facts are the same as in example (1), except that 
the residue of H's estate is to be paid to the trust and the trust is 
required to pay H's debts. The trust is not a charitable remainder trust 
at H's death because it does not function exclusively as a charitable 
remainder trust from the date of its creation which, in this case, is 
the date it becomes irrevocable.
    Example (4). (i) In 1971, H transfers property to Trust A over which 
he retains an inter vivos power of revocation. Trust A, which is not a 
charitable remainder trust, is to provide income or corpus to W until 
the death of H. Upon H's death the trust is required by its governing 
instrument to pay the debts and administration expenses of H's estate, 
and then to terminate and distribute all of the remaining assets to a 
separate Trust B which meets the definition of a charitable remainder 
annuity trust.
    (ii) Trust B will be charitable remainder trust from the date of its 
funding because it will function exclusively as a charitable remainder 
trust from its creation. For purposes of section 2055, Trust B will be 
deemed created at H's death if the obligation to pay the annuity amount 
begins on the date of H's death. For purposes of section 664, Trust B 
becomes a charitable remainder trust as soon as it is partially or 
completely funded. Consequently, unless Trust B has unrelated business 
taxable income, the income of the trust is exempt from all taxes imposed 
by subtitle A of the Code, and any distributions by the trust, even 
before it is completely funded, are governed by the rules of section 
664. Any distributions made by Trust A, including distributions to a 
recipient in respect of annuity amounts, are governed by the rules of 
subchapter J, chapter 1, subtitle A of the Code other than section 664.
    Example (5). In 1973, H dies testate leaving the net residue of his 
estate (after payment by the estate of all debts and administration 
expenses) to a trust which meets the definition of a charitable 
remainder unitrust. For purposes of section 2055, the trust is deemed 
created at H's death if the requirement to pay the unitrust amount 
begins on H's death and is a charitable remainder trust even though the 
estate is obligated to pay debts and administration expenses.
    For purposes of section 664, the trust becomes a charitable 
remainder trust as soon as it is partially or completely funded. 
Consequently, unless the trust has unrelated business taxable income, 
the income of the trust is exempt from all taxes imposed by subtitle A 
of the Code, and any distributions by the trust, even before it is 
completely funded, are governed by the rules of section 664. Any 
distributions made by H's estate, including distributions to a recipient 
in respect of unitrust amounts, are governed by the rules of subchapter 
J, chapter 1, subtitle A of the Code other than section 664.
    Example (6). (i) On January 1, 1974, H dies testate leaving the 
residue of his estate to a charitable remainder unitrust. The governing 
instrument provides that, beginning at H's death, the trustee is to make 
annual payments to W, on December 31 of each year of 5 percent of the 
net fair market value of

[[Page 124]]

the trust assets, valued as of December 31 of each year, for W's life 
and to pay the remainder to charity at the death of W. The governing 
instrument also provides that the actual payment of the unitrust amount 
need not be made until the end of the taxable year of the trust in which 
occurs the complete funding of the trust. The governing instrument also 
provides that the amount payable with respect to the period between the 
date of death and the end of such taxable year shall be computed under 
the special method provided in subparagraph (5)(ii) of this paragraph. 
The governing instrument provides that, within a reasonable period after 
the end of the taxable year of the trust in which occurs the complete 
funding of the trust, the trustee shall pay (in the case of an 
underpayment) or shall receive from the recipient (in the case of an 
overpayment) the difference between the unitrust amounts paid (plus 
interest at 6 percentage compounded annually) and the amount computed 
under the special method. The trust is completely funded on September 
20, 1976. No amounts were paid before June 30, 1977. The trust adopts a 
fiscal year of July 1 to June 30. The net fair market value of the trust 
assets on June 30, 1977, is $100,000.
    (ii) Because no amounts were paid prior to the end of the taxable 
year in which the trust was completely funded, the amount payable at the 
end of such taxable year is equal to the net fair market value of the 
trust assets on the last day of such taxable year (June 30, 1977) 
multiplied by a factor equal to 1.0 minus the factor in Table D 
corresponding to the number of years in the period between the date of 
death and the end of such taxable year. The adjusted payout rate 
(determined under Sec. 1.664-4A(c)) is 5 percent. Because the last day 
of the taxable year in which the trust is completely funded in June 30, 
1977, there are 3 181/365 years in such period. Because there is no 
factor given in Table D for such a period, a linear interpolation must 
be made:

1.0 minus 0.814506 (factor at 5 percent for 4 years)........    0.185494
1.0 minus 0.857375 (factor at 5 percent for 3 years)........     .142625
                                                             -----------
    Difference..............................................     .042869
                           181/365=X/0.042869
 
                               X=0.021258
 
1.0 minus 0.857375 (factor at 5 percent for 3 years.........    0.142625
Plus: X.....................................................     .021258
                                                             -----------
    Interpolated factor.....................................     .163883
 


Thus, the amount payable for the period from January 1, 1974, to June 
30, 1977, is $16,388.30 ($100,000x0.163883). Thereafter, the trust 
assets must be valued on December 31 of each year and 5 percent of such 
value paid annually to W for her life.

    (7) Valuation of unmarketable assets--(i) In general. If 
unmarketable assets are transferred to or held by a trust, the trust 
will not be a trust with respect to which a deduction is available under 
section 170, 2055, 2106, or 2522, or will be treated as failing to 
function exclusively as a charitable remainder trust unless, whenever 
the trust is required to value such assets, the valuation is--
    (a) Performed exclusively by an independent trustee; or
    (b) Determined by a current qualified appraisal, as defined in 
Sec. 1.170A-13(c)(3), from a qualified appraiser, as defined in 
Sec. 1.170A-13(c)(5).
    (ii) Unmarketable assets. Unmarketable assets are assets that are 
not cash, cash equivalents, or other assets that can be readily sold or 
exchanged for cash or cash equivalents. For example, unmarketable assets 
include real property, closely-held stock, and an unregistered security 
for which there is no available exemption permitting public sale.
    (iii) Independent trustee. An independent trustee is a person who is 
not the grantor of the trust, a noncharitable beneficiary, or a related 
or subordinate party to the grantor, the grantor's spouse, or a 
noncharitable beneficiary (within the meaning of section 672(c) and the 
applicable regulations).
    (b) Application of certain foundation rules to charitable remainder 
trusts. See section 4947(a)(2) and section 4947(b)(3)(B) and the 
regulations thereunder for the application to charitable remainder 
trusts of certain provisions relating to private foundations. See 
section 508(e) for rules relating to required provisions in governing 
instruments prohibiting certain activities specified in section 
4947(a)(2).
    (c) Taxation of nonexempt charitable remainder trusts. If the 
charitable remainder trust has any unrelated business taxable income 
(within the meaning of section 512 and the regulations thereunder, 
determined as if part III, subchapter F, chapter 1, subtitle A of the 
Code applied to such trust) for any taxable year, the trust is subject 
to all of the taxes imposed by subtitle A of the Code for such taxable 
year. For

[[Page 125]]

taxable years beginning after December 31, 1969, unrelated business 
taxable income includes debt-financed income. The taxes imposed by 
subtitle A of the Code upon a nonexempt charitable remainder trust shall 
be computed under the rules prescribed by subparts A and C, part 1, 
subchapter J, chapter 1, subtitle A of the Code for trusts which may 
accumulate income or which distribute corpus. The provisions of subpart 
E, part 1 of such subchapter J are not applicable with respect to a 
nonexempt charitable remainder trust. The application of the above rules 
may be illustrated by the following example:

    Example. In 1975, a charitable remainder trust which has a calendar 
year as its taxable year has $1,000 of ordinary income, including $100 
of unrelated business taxable income, and no deductions other than under 
sections 642(b) and 661(a). The trust is required to pay out $700 for 
1975 to a noncharitable recipient. Because the trust has some unrelated 
business taxable income in 1975, it is not exempt for such year. 
Consequently, the trust is taxable on all of its income as a complex 
trust. Under section 661(a) of the Code, the trust is allowed a 
deduction of $700. Under section 642(b) of the Code, the trust is 
allowed a deduction of $100. Consequently, the taxable income of the 
trust for 1975 is $200 ($1,000-$700-$100).

    (d) Treatment of annual distributions to recipients--(1) Character 
of distributions--(i) Order of distributions. Annuity and unitrust 
amounts shall be treated as having the following characteristics in the 
hands of the recipients (whether or not the trust is exempt) without 
credit for any taxes which are imposed by subtitle A of the Code on the 
trust:
    (a) Ordinary income. First, as ordinary income to the extent of the 
sum of the trust's ordinary income for the taxable year of the trust and 
its undistributed ordinary income for prior years. An ordinary loss for 
the current year shall be used to reduce undistributed ordinary income 
for prior years and any excess shall be carried forward indefinitely to 
reduce ordinary income for future years. For purposes of this section, 
the amount of current and prior years' income shall be computed without 
regard to the deduction for net operating losses provided by sections 
172 or 642(d).
    (b) Capital gain. Second, as capital gain to the extent of the 
trust's undistributed capital gains. Undistributed capital gains of the 
trust are determined on a cumulative net basis under the rules of this 
subdivision without regard to the provisions of section 1212.
    (1) Long- and short-term capital gains. If, in any taxable year of 
the trust, the trust has both undistributed short-term capital gain and 
undistributed long-term capital gain, then the short term capital gain 
shall be deemed distributed prior to any long-term capital gain.
    (2) Capital losses in excess of capital gains. If the trust has for 
any taxable year capital losses in excess of capital gains, any excess 
of the net short-term capital loss over the net long-term capital gain 
for such year shall be a short- term capital loss in the succeeding 
taxable year and any excess of the net long-term capital loss over the 
net short-term capital gain for such year shall be a long-term capital 
loss in the succeeding taxable year.
    (3) Capital gains in excess of capital losses. If the trust has for 
any taxable year capital gains in excess of capital losses, any excess 
of the net short-term capital gain over the net long-term capital loss 
for such year shall be, to the extent not deemed distributed, a short-
term capital gain in the succeeding taxable year and any excess of the 
net long-term capital gain over the net short-term capital loss for such 
year shall be, to the extent not deemed distributed, a long-term capital 
gain in the succeeding taxable year.

The application of the rules in this subdivision (b) may be illustrated 
by the following example:

    Example. (i) The X Trust is a charitable remainder trust created on 
January 1, 1975, and has the calendar year as its taxable year. During 
the years indicated, it has the following capital transactions:

1975:
  Long-term capital loss....................................         $10
  Short-term capital gain...................................           5
1976:
  Short-term capital gain...................................          20
  Short-term capital loss...................................           5
1977:
  Long-term capital gain....................................          15
 


Distributions for 1975 and 1976 were not in excess of current and 
accumulated ordinary income for those years. In 1977, distributions

[[Page 126]]

exceeded current and accumulated ordinary income by $5.
    (ii) The treatment of the 1975 and 1976 transactions is as follows:

1975:
  Long-term capital loss recognized.........................       $(10)
  Short-term capital gain recognized........................           5
                                                             -----------
    Net long-term capital loss carried forward to 1976......         (5)
                                                             ===========
1976:
  Short-term capital gain recognized........................          20
  Short-term capital loss recognized........................         (5)
  Long-term capital loss carried forward from 1975..........         (5)
                                                             -----------
    Net short-term capital gain carried forward to 1977.....         $10
                                                             ===========
1977:
  Long-term capital gain recognized.........................          15
  Net short-term capital gain carried forward from 1976.....          10
 

    (iii) Application of section 643(a)(7). For application of the anti-
abuse rule of section 643(a)(7) to distributions from charitable 
remainder trusts, see Sec. 1.643(a)-8.
    (iv) In 1977, the trust has long-term capital gain of $15 and short-
term capital gain of $10. If the trust has both short-term capital gain 
and long-term capital gain for the same taxable year, the short-term 
capital gain is deemed distributed prior to the long-term capital gain. 
Therefore, the distribution of $5 in 1977 is deemed to be short-term 
capital gain. The undistributed net short-term capital gain of $5 is a 
short-term capital gain carried forward to 1978. The undistributed net 
long-term capital gain of $15 is a long-term capital gain carried 
forward to 1978.

    (c) Other income. Third, as other income (including income excluded 
under part III, subchapter B, chapter 1, subtitle A of the Code) to the 
extent of the sum of the trust's other income for the taxable year and 
its undistributed other income for prior years. A loss in this category 
for the current year shall be used to reduce undistributed income in 
such category for prior years and any excess shall be carried forward 
indefinitely to reduce such income for future years.
    (d) Corpus. Finally, as a distribution of trust corpus. For purposes 
of this section, the term corpus means the net fair market value of the 
trust assets less the total undistributed income (but not loss) in each 
of the above categories.
    (ii) Rules relating to character of distributions. The determination 
of the character of amounts distributed shall be made as of the end of 
the taxable year of the trust. Amounts treated as paid from one of the 
categories of income described in (a), (b), or (c) of subdivision (i) of 
this subparagraph shall be treated as consisting of the same proportion 
of each class of items included in such category as the total of the 
current and accumulated income of each class of items bears to the total 
of the current and accumulated income for that category. A loss in one 
of such categories may not be used to reduce a gain in any other 
category. The provisions of subparts D and E, part 1, subchapter J, 
chapter 1, subtitle A of the Code are not applicable with respect to a 
charitable remainder trust (regardless of whether the trust is exempt).
    (iii) Application of section 643(a)(7). For application of the anti-
abuse rule of section 643(a)(7) to distributions from charitable 
remainder trusts, see Sec. 1.643(a)-8.
    (iv) Example. The following example illustrates the application of 
this paragraph (d)(1):

    Example. (i) X is a charitable remainder unitrust described in 
section 664(d)(2) and (3). The annual unitrust amount is the lesser of 
the amount of trust income, as defined in Sec. 1.664-3(a)(1)(i)(b), or 
six percent of the net fair market value of the trust assets valued 
annually. The net fair market value of the trust assets on the valuation 
date in 1996 is $150,000. During 1996, X has $7,500 of income after 
allocating all expenses. All of X's income for 1996 is tax-exempt 
income. At the end of 1996, X's ordinary income for the current taxable 
year and undistributed ordinary income for prior years are both zero; 
X's capital gain for the current taxable year is zero and undistributed 
capital gain for prior years is $30,000; and X's tax-exempt income for 
the current year is $7,500 and undistributed tax-exempt income for prior 
years is $2,500.
    (ii) Because the trust income of $7,500 is less than the fixed 
percentage amount of $9,000, the unitrust amount for 1996 is $7,500. The 
character of that amount in the hands of the recipient of the unitrust 
amount is determined under section 664(b). Because the unitrust amount 
is less than X's undistributed capital gain income, the recipient of the 
unitrust amount treats the distribution of $7,500 as capital gain. At 
the beginning of 1997, X's undistributed capital gain for prior years is 
reduced to $22,500, and X's undistributed tax-exempt income is increased 
to $10,000.

    (2) Allocation of deductions. Items of deduction of the trust for a 
taxable

[[Page 127]]

year of the trust which are deductible in determining taxable income 
(other than the deductions permitted by sections 642(b), 642(c), 661, 
and 1202) which are directly attributable to one or more classes of 
items within a category of income or to corpus (determined under 
subparagraph (1)(i) of this paragraph) shall be allocated to such 
classes of items or to corpus. All other allowable deductions for such 
taxable year which are not directly attributable to one or more classes 
of items within a category of income or to corpus (other than the 
deductions permitted by sections 642(b), 642(c), 661, and 1202) shall be 
allocated among the classes of items within the category (excluding 
classes of items with net losses) on the basis of the gross income of 
such classes for such taxable year reduced by the deductions allocated 
thereto under the first sentence of this subparagraph, but in no event 
shall the amount of expenses allocated to any class of items exceed such 
income of such class for the taxable year. Items of deduction which are 
not allocable under the above two sentences (other than the deductions 
permitted by sections 642(b), 642(c), 661, and 1202) may be allocated in 
any manner. All taxes imposed by subtitle A of the Code for which the 
trust is liable because it has unrelated business taxable income and all 
taxes imposed by chapter 42 of the Code shall be allocated to corpus. 
Any expense which is not deductible in determining taxable income and 
which is not allocable to any class of items described in subparagraph 
(1)(i)(c) of this paragraph shall be allocated to corpus. The deductions 
allowable to a trust under sections 642(b), 642(c), 661, and 1202 are 
not allowed in determining the amount or character of any class of items 
within a category of income or corpus in the categories described in 
subparagraph (1) of this paragraph.
    (3) Allocation of income among recipients. If there are two or more 
recipients, each will be treated as receiving his pro rata portion of 
the categories of income and corpus. The application of this rule may be 
illustrated by the following example:

    Example. X transfers $40,000 to a charitable remainder annuity trust 
which is to pay $3,000 per year to X and $2,000 per year to Y for a term 
of 5 years. During the first taxable year the trust has $3,000 of 
ordinary income, $500 of capital gain, and $500 of tax-exempt income 
after allocation of all expenses. X is treated as receiving ordinary 
income of $1,800 ($3,000/$5,000x$3,000), capital gain of $300 ($3,000/
$5,000x$500), tax exempt income of $300 ($3,000/$5,000x$500), and corpus 
of $600 ($3,000/$5,000x[$5,000-$4,000] ). Y is treated as receiving 
ordinary income of $1,200 ($2,000/$5,000x$3,000), capital gain of $200 
($2,000/$5,000x$500), tax exempt income of $200 ($2,000/$5,000x$500), 
and corpus of $400 ($2,000/$5,000x[$5,000-$4,000] ).

    (4) Year of inclusion--(i) General rule. To the extent required by 
this paragraph, the annuity or unitrust amount is includible in the 
recipient's gross income for the taxable year in which the annuity or 
unitrust amount is required to be distributed even though the annuity or 
unitrust amount is not distributed until after the close of the taxable 
year of the trust. If a recipient has a different taxable year (as 
defined in section 441 or 442) from the taxable year of the trust, the 
amount he is required to include in gross income to the extent required 
by this paragraph shall be included in his taxable year in which or with 
which ends the taxable year of the trust in which such amount is 
required to be distributed.
    (ii) Payments resulting from incorrect valuations. Notwithstanding 
subdivision (i) of this subparagraph, any payments which are made or 
required to be distributed by a charitable remainder trust pursuant to 
paragraph (a)(5) of this section, under paragraph (f)(3) of this section 
because of an amendment to the governing instrument, or under paragraphs 
(a)(1) of Secs. 1.664-2 and 1.664-3 because of an incorrect valuation, 
shall, to the extent required by this paragraph, be included in the 
gross income of the recipient in his taxable year in which or with which 
ends the taxable year of the trust in which the amount is paid, 
credited, or required to be distributed. For rules relating to required 
adjustments of underpayments and overpayments of the annuity or unitrust 
amounts in respect of payments made prior to the amendment of a 
governing instrument, see paragraph (f)(3) of this section. There is 
allowable to a recipient a deduction from gross income for any amounts 
repaid to the

[[Page 128]]

trust because of an overpayment during the reasonable period of 
administration or settlement or until the trust is fully funded, because 
of an amendment, or because of an incorrect valuation, to the extent 
such amounts were included in his gross income. See section 1341 and the 
regulations thereunder for rules relating to the computation of tax 
where a taxpayer restores substantial amounts held under a claim of 
right.
    (iii) Rules applicable to year of recipient's death. If the taxable 
year of the trust does not end with or within the last taxable year of 
the recipient because of the recipient's death, the extent to which the 
annuity or unitrust amount required to be distributed to him is included 
in the gross income of the recipient for his last taxable year, or in 
the gross income of his estate, is determined by making the computations 
required under this paragraph for the taxable year of the trust in which 
his last taxable year ends. (The last sentence of subdivision (i) of 
this subparagraph does not apply to such amounts.) The gross income for 
the last taxable year of a recipient on the cash basis includes (to the 
extent required by this paragraph) amounts actually distributed to the 
recipient before his death. Amounts required to be distributed which are 
distributed to his estate, are included (to the extent required by this 
paragraph) in the gross income of the estate as income in respect of a 
decedent under section 691.
    (5) Distributions in kind. The annuity or unitrust amount may be 
paid in cash or in other property. In the case of a distribution made in 
other property, the amount paid, credited, or required to be distributed 
shall be considered as an amount realized by the trust from the sale or 
other disposition of property. The basis of the property in the hands of 
the recipient is its fair market value at the time it was paid, 
credited, or required to be distributed. The application of these rules 
may be illustrated by the following example:

    Example. On January 1, 1971, X creates a charitable remainder 
annuity trust, whose taxable year is the calendar year, under which X is 
to receive $5,000 per year. During 1971, the trust receives $500 of 
ordinary income. On December 31, 1971, the trust distributed cash of 
$500 and a capital asset of the trust having a fair market value of 
$4,500 and a basis of $2,200. The trust is deemed to have realized a 
capital gain of $2,300. X treats the distribution of $5,000 as being 
ordinary income of $500, capital gain of $2,300 and trust corpus of 
$2,200. The basis of the distributed property is $4,500 in the hands of 
X.

    (e) Other distributions--(1) Character of distributions. An amount 
distributed by the trust to an organization described in section 170(c) 
other than the annuity or unitrust amount shall be considered as a 
distribution of corpus and of those categories of income specified in 
paragraph (d)(1) of this section in an order inverse to that prescribed 
in such paragraph. The character of such amount shall be determined as 
of the end of the taxable year of the trust in which the distribution is 
made after the character of the annuity or unitrust amount has been 
determined.
    (2) Distributions in kind. In the case of a distribution of an 
amount to which subparagraph (1) of this paragraph applies, no gain or 
loss is realized by the trust by reason of a distribution in kind unless 
such distribution is in satisfaction of a right to receive a 
distribution of a specific dollar amount or in specific property other 
than that distributed.
    (f) Effective date--(1) General rule. The provisions of this section 
are effective with respect to transfers in trust made after July 31, 
1969. Any trust created (within the meaning of applicable local law) 
prior to August 1, 1969, is not a charitable remainder trust even if it 
otherwise satisfies the definition of a charitable remainder trust.
    (2) Transfers to pre-1970 trusts. Property transferred to a trust 
created (within the meaning of applicable local law) before August 1, 
1969, whose governing instrument provides that an organization described 
in section 170(c) receives an irrevocable remainder interest in such 
trust, shall, for purposes of subparagraphs (1) and (3) of this 
paragraph, be deemed transferred to a trust created on the date of such 
transfer provided that the transfer occurs after July 31, 1969, and 
prior to October 18, 1971, and the transferred property and any 
undistributed income therefrom is severed and placed in a separate trust 
before December 31, 1972, or if later, on or before the 30th day after

[[Page 129]]

the date on which any judicial proceedings begun before December 31, 
1972, which are required to sever such property, become final.
    (3) Amendment of post-1969 trusts. A trust created (within the 
meaning of applicable local law) subsequent to July 31, 1969, and prior 
to December 31, 1972, which is not a charitable remainder trust at the 
date of its creation, may be treated as a charitable remainder trust 
from the date it would be deemed created under Sec. 1.664-1(a) (4) and 
(5)(i) for all purposes: Provided, That all the following requirements 
are met:
    (i) At the time of the creation of the trust, the governing 
instrument provides that an organization described in section 170(c) 
receives an irrevocable remainder interest in such trust.
    (ii) The governing instrument of the trust is amended so that the 
trust will meet the definition of a charitable remainder trust and, if 
applicable, will meet the requirement of paragraph (a)(5)(i) of this 
section that obligation to make payment of the annuity or unitrust 
amount with respect to property passing at death begin as of the date of 
death, before December 31, 1972, or if later, on or before the 30th day 
after the date on which any judicial proceedings which are begun before 
December 31, 1972, and which are required to amend its governing 
instrument, become final. In the case of a trust created (within the 
meaning of applicable local law) subsequent to July 31, 1969, and prior 
to December 31, 1972, the provisions of section 508(d)(2)(A) shall not 
apply if the governing instrument of the trust is amended so as to 
comply with the requirements of section 508(e) before December 31, 1972, 
or if later, on or before the 30th day after the date on which any 
judicial proceedings which are begun before December 31, 1972, and which 
are required to amend its governing instrument, become final. 
Notwithstanding the provisions of paragraphs (a)(3) and (a)(4) of 
Secs. 1.664-2 and 1.664-3, the governing instrument may grant to the 
trustee a power to amend the governing instrument for the sole purpose 
of complying with the requirements of this section and Sec. 1.664-2 or 
Sec. 1.664-3: Provided, That at the creation of the trust, the governing 
instrument (a) provides for the payment of a unitrust amount described 
in Sec. 1.664-3(a)(1)(i) or an annuity which meets the requirements of 
paragraph (a)(2) of Sec. 1.664-2 or Sec. 1.664-3, (b) designates the 
recipients of the trust and the period for which the amount described in 
(a) of this subdivision (ii) is to be paid, and (c) provides that an 
organization described in section 170(c) receives an irrevocable 
remainder interest in such trust. The mere granting of such a power is 
not sufficient to meet the requirements of this subparagraph that the 
governing instrument be amended in the manner and within the time 
limitations of this subparagraph.
    (iii)(a) Where the amount of the distributions which would have been 
made by the trust to a recipient if the amended provisions of such trust 
had been in effect from the time of creation of such trust exceeds the 
amount of the distributions made by the trust prior to its amendment, 
the trust pays an amount equal to such excess to the recipient.
    (b) Where the amount of distributions made to the recipient prior to 
the amendment of the trust exceeds the amount of the distributions which 
would have been made by such trust if the amended provisions of such 
trust had been in effect from the time of creation of such trust, such 
excess is repaid to the trust by the recipient.

See paragraph (d)(4) of this section for rules relating to the year of 
inclusion in the case of an underpayment to a recipient and the 
allowance of a deduction in the case of an overpayment to a recipient. A 
deduction for a transfer to a charitable remainder trust shall not be 
allowed until the requirements of this paragraph are met and then only 
if the deduction is claimed on a timely filed return (including 
extensions) or on a claim for refund filed within the period of 
limitations prescribed by section 6511(a).
    (4) Valuation of unmarketable assets. The rules contained in 
paragraph (a)(7) of this section are applicable for trusts created on or 
after December 10, 1998. A trust in existence as of December 10, 1998, 
whose governing instrument requires that an independent trustee value 
the trust's unmarketable assets may be amended or reformed to permit

[[Page 130]]

a valuation method that satisfies the requirements of paragraph (a)(7) 
of this section for taxable years beginning on or after December 10, 
1998.
    (g) Transitional effective date. Notwithstanding any other provision 
of this section, Sec. 1.664-2 or Sec. 1.664-3, the requirement of 
paragraph (a)(5)(i) of this section that interest accrue on overpayments 
and underpayments, the requirement of paragraph (a)(5)(ii) of this 
section that the unitrust amount accruing under the formula provided 
therein cease with the death of the last recipient, and the requirement 
that the governing instrument of the trust contain the provisions 
specified in paragraph (a)(1)(iv) of Sec. 1.664-2 (relating to 
computation of the annuity amount in certain circumstances), paragraph 
(a)(1)(v) of Sec. 1.664-3 (relating to computation of the unitrust 
amount in certain circumstances), paragraphs (b) of Secs. 1.664-2 and 
1.664-3 (relating to additional contributions), and paragraph 
(a)(1)(iii) of Sec. 1.664-3 (relating to incorrect valuations), 
paragraphs (a)(6)(iv) of Secs. 1.664-2 and 1.664-3 (relating to 
alternative remaindermen) shall not apply to:
    (1) A will executed on or before December 31, 1972, if:
    (i) The testator dies before December 31, 1975, without having 
republished the will after December 31, 1972, by codicil or otherwise.
    (ii) The testator at no time after December 31, 1972, had the right 
to change the provisions of the will which pertain to the trust, or
    (iii) The will is not republished by codicil or otherwise before 
December 31, 1975, and the testator is on such date and at all times 
thereafter under a mental disability to republish the will by codicil or 
otherwise, or
    (2) A trust executed on or before December 31, 1972, if:
    (i) The grantor dies before December 31, 1975, without having 
amended the trust after December 31, 1972,
    (ii) The trust is irrevocable on December 31, 1972, or
    (iii) The trust is not amended before December 31, 1975, and the 
grantor is on such date and at all times thereafter under a mental 
disability to change the terms of the trust.

[T.D. 7202, 37 FR 16913, Aug. 23, 1972; 37 FR 28288, Dec. 22, 1972, as 
amended by T.D. 7955, 49 FR 19983, May 11, 1984; T.D. 8540, 59 FR 30102, 
30116, June 10, 1994; T.D. 8791, 63 FR 68191, Dec. 10, 1998; T.D. 8819, 
64 FR 23228, 23229, Apr. 30, 1999; T.D. 8886, 65 FR 36943, June 12, 
2000; T.D. 8926, 66 FR 1037, Jan. 5, 2001]



Sec. 1.664-2  Charitable remainder annuity trust.

    (a) Description. A charitable remainder annuity trust is a trust 
which complies with the applicable provisions of Sec. 1.664-1 and meets 
all of the following requirements:
    (1) Required payment of annuity amount--(i) Payment of sum certain 
at least annually. The governing instrument provides that the trust will 
pay a sum certain not less often than annually to a person or persons 
described in paragraph (a)(3) of this section for each taxable year of 
the period specified in paragraph (a)(5) of this section.
    (a) General rule applicable to all trusts. A trust will not be 
deemed to have engaged in an act of self-dealing (within the meaning of 
section 4941), to have unrelated debt-financed income (within the 
meaning of section 514), to have received an additional contribution 
(within the meaning of paragraph (b) of this section), or to have failed 
to function exclusively as a charitable remainder trust (within the 
meaning of Sec. 1.664-1(a)(4)) merely because the annuity amount is paid 
after the close of the taxable year if such payment is made within a 
reasonable time after the close of such taxable year and the entire 
annuity amount in the hands of the recipient is characterized only as 
income from the categories described in section 664(b)(1), (2), or (3), 
except to the extent it is characterized as corpus described in section 
664(b)(4) because--
    (1) The trust pays the annuity amount by distributing property 
(other than cash) that it owned at the close of the taxable year to pay 
the annuity amount, and the trustee elects to treat any income generated 
by the distribution as occurring on the last day of the taxable year in 
which the annuity amount is due;
    (2) The trust pays the annuity amount by distributing cash that was

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contributed to the trust (with respect to which a deduction was 
allowable under section 170, 2055, 2106, or 2522); or
    (3) The trust pays the annuity amount by distributing cash received 
as a return of basis in any asset that was contributed to the trust 
(with respect to which a deduction was allowable under section 170, 
2055, 2106, or 2522), and that is sold by the trust during the year for 
which the annuity amount is due.
    (b) Special rule for trusts created before December 10, 1998. In 
addition to the circumstances described in paragraph (a)(1)(i)(a) of 
this section, a trust created before December 10, 1998, will not be 
deemed to have engaged in an act of self-dealing (within the meaning of 
section 4941), to have unrelated debt-financed income (within the 
meaning of section 514), to have received an additional contribution 
(within the meaning of paragraph (b) of this section), or to have failed 
to function exclusively as a charitable remainder trust (within the 
meaning of Sec. 1.664-1(a)(4)) merely because the annuity amount is paid 
after the close of the taxable year if such payment is made within a 
reasonable time after the close of such taxable year and the sum certain 
to be paid each year as the annuity amount is 15 percent or less of the 
initial net fair market value of the property irrevocably passing in 
trust as determined for federal tax purposes.
    (c) Reasonable time. For this paragraph (a)(1)(i), a reasonable time 
will not ordinarily extend beyond the date by which the trustee is 
required to file Form 5227, ``Split-Interest Trust Information Return,'' 
(including extensions) for the taxable year.
    (d) Example. The following example illustrates the rules in 
paragraph (a)(1)(i)(a) of this section:

    Example. X is a charitable remainder annuity trust described in 
section 664(d)(1) that was created after December 10, 1998. The prorated 
annuity amount payable from X for Year 1 is $100. The trustee does not 
pay the annuity amount to the recipient by the close of Year 1. At the 
end of Year 1, X has only $95 in the ordinary income category under 
section 664(b)(1) and no income in the capital gain or tax-exempt income 
categories under section 664(b)(2) or (3), respectively. By April 15 of 
Year 2, in addition to $95 in cash, the trustee distributes to the 
recipient of the annuity a capital asset with a $5 fair market value and 
a $2 adjusted basis to pay the $100 annuity amount due for Year 1. The 
trust owned the asset at the end of Year 1. Under Sec. 1.664-1(d)(5), 
the distribution is treated as a sale by X, resulting in X recognizing a 
$3 capital gain. The trustee elects to treat the capital gain as 
occurring on the last day of Year 1. Under Sec. 1.664-1(d)(1), the 
character of the annuity amount for Year 1 in the recipient's hands is 
$95 of ordinary income, $3 of capital gain income, and $2 of trust 
corpus. For Year 1, X satisfied paragraph (a)(1)(i)(a) of this section.

    (e) Effective date. This paragraph (a)(1)(i) is applicable for 
taxable years ending after April 18, 1997. However, paragraphs 
(a)(1)(i)(a)(2) and (3) of this section apply only to distributions made 
on or after January 5, 2001.
    (ii) Definition of sum certain. A sum certain is a stated dollar 
amount which is the same either as to each recipient or as to the total 
amount payable for each year of such period. For example, a provision 
for an amount which is the same every year to A until his death and 
concurrently an amount which is the same every year to B until his 
death, with the amount to each recipient to terminate at his death, 
would satisfy the above rule. Similarly, provisions for an amount to A 
and B for their joint lives and then to the survivor would satisfy the 
above rule. In the case of a distribution to an organization described 
in section 170(c) at the death of a recipient or the expiration of a 
term of years, the governing instrument may provide for a reduction of 
the stated amount payable after such a distribution: Provided, That:
    (a) The reduced amount payable is the same either as to each 
recipient or as to the total amount payable for each year of the balance 
of such period, and
    (b) The requirements of subparagraph (2)(ii) of this paragraph are 
met.
    (iii) Sum certain stated as a fraction or percentage. The stated 
dollar amount may be expressed as a fraction or a percentage of the 
initial net fair market value of the property irrevocably passing in 
trust as finally determined for Federal tax purposes. If the stated 
dollar amount is so expressed and such market value is incorrectly 
determined by the fiduciary, the requirement of this subparagraph will 
be satisfied if the governing instrument provides that

[[Page 132]]

in such event the trust shall pay to the recipient (in the case of an 
undervaluation) or be repaid by the recipient (in the case of an 
overvaluation) an amount equal to the difference between the amount 
which the trust should have paid the recipient if the correct value were 
used and the amount which the trust actually paid the recipient. Such 
payments or repayments must be made within a reasonable period after the 
final determination of such value. Any payment due to a recipient by 
reason of such incorrect valuation shall be considered to be a payment 
required to be distributed at the time of such final determination for 
purposes of paragraph (d)(4)(ii) of Sec. 1.664-1. See paragraph (d)(4) 
of Sec. 1.664-1 for rules relating to the year of inclusion of such 
payments and the allowance of a deduction for such repayments. See 
paragraph (b) of this section for rules relating to future 
contributions. For rules relating to required adjustments for 
underpayments or overpayments of the amount described in this paragraph 
in respect of payments made during a reasonable period of 
administration, see paragraph (a)(5) of Sec. 1.664-1. The application of 
the rule permitting the stated dollar amount to be expressed as a 
fraction or a percentage of the initial net fair market value of the 
property irrevocably passing in trust as finally determined for Federal 
tax purposes may be illustrated by the following example:

    Example. The will of X provides for the transfer of one-half of his 
residuary estate to a charitable remainder annuity trust which is 
required to pay to W for life an annuity equal to 5 percent of the 
initial net fair market value of the interest passing in trust as 
finally determined for Federal tax purposes. The annuity is to be paid 
on December 31 of each year computed from the date of X's death. The 
will also provides that if such initial net fair market value is 
incorrectly determined, the trust shall pay to W, in the case of an 
undervaluation, or be repaid by W, in the case of an overvaluation, an 
amount equal to the difference between the amount which the trust should 
have paid if the correct value were used and the amount which the trust 
actually paid. X dies on March 1, 1971. The executor files an estate tax 
return showing the value of the residuary estate as $250,000 before 
reduction for taxes and expenses of $50,000. The executor paid to W 
$4,192 ([$250,000- $50,000]x1/2x5 percentx306/365) on December 31, 1971. 
On January 1, 1972, the executor transfers one-half of the residue of 
the estate to the trust. The trust adopts the calendar year as its 
taxable year. The value of the residuary estate is finally determined 
for Federal tax purposes to be $240,000 ($290,000-$50,000). Accordingly, 
the amount which the executor should have paid to W is $5,030 ( 
[$290,000-$50,000]x 1/2x5 percentx306/365). Consequently, an additional 
amount of $838 ($5,030-$4,192) must be paid to W within a reasonable 
period after the final determination of value for Federal tax purposes.

    (iv) Computation of annuity amount in certain circumstances--(a) 
Short taxable years. The governing instrument provides that, in the case 
of a taxable year which is for a period of less than 12 months other 
than the taxable year in which occurs the end of the period specified in 
subparagraph (5) of this paragraph, the annuity amount determined under 
subdivision (i) of this subparagraph shall be the amount otherwise 
determined under that subdivision multiplied by a fraction the numerator 
of which is the number of days in the taxable year of the trust and the 
denominator of which is 365 (366 if February 29 is a day included in the 
numerator).
    (b) Last taxable year of period. The governing instrument provides 
that, in the case of the taxable year in which occurs the end of the 
period specified in subparagraph (5) of this paragraph, the annuity 
amount which must be distributed under subdivision (i) of this 
subparagraph shall be the amount otherwise determined under that 
subdivision multiplied by a fraction the numerator of which is the 
number of days in the period beginning on the first day of such taxable 
year and ending on the last day of the period specified in subparagraph 
(5) of this paragraph and the denominator of which is 365 (366 if 
February 29 is a day included in the numerator). See subparagraph (5) of 
this paragraph for a special rule allowing termination of payment of the 
annuity amount with the regular payment next preceding the termination 
of the period specified therein.
    (2) Minimum annuity amount--(i) General rule. The total amount 
payable under subparagraph (1) of this paragraph is not less than 5 
percent of the initial net fair market value of the

[[Page 133]]

property placed in trust as finally determined for Federal tax purposes.
    (ii) Reduction of annuity amount in certain cases. A trust will not 
fail to meet the requirements of this subparagraph by reason of the fact 
that it provides for a reduction of the stated amount payable upon the 
death of a recipient or the expiration of a term of years provided that:
    (a) A distribution is made to an organization described in section 
170(c) at the death of such recipient or the expiration of such term of 
years, and
    (b) The total amounts payable each year under subparagraph (1) of 
this paragraph after such distribution are not less than a stated dollar 
amount which bears the same ratio to 5 percent of the initial net fair 
market value of the trust assets as the net fair market value of the 
trust assets immediately after such distribution bears to the net fair 
market value of the trust assets immediately before such distribution.
    (iii) Rule applicable to inter vivos trust which does not provide 
for payment of minimum annuity amount. In the case where the grantor of 
an inter vivos trust underestimates in good faith the initial net fair 
market value of the property placed in trust as finally determined for 
Federal tax purposes and specifies a fixed dollar amount for the annuity 
which is less than 5 percent of the initial net fair market value of the 
property placed in trust as finally determined for Federal tax purposes, 
the trust will be deemed to have met the 5 percent requirement if the 
grantor or his representative consents, by appropriate agreement with 
the District Director, to accept an amount equal to 20 times the annuity 
as the fair market value of the property placed in trust for purposes of 
determining the appropriate charitable contributions deduction.
    (3) Permissible recipients--(i) General rule. The amount described 
in subparagraph (1) of this paragraph is payable to or for the use of a 
named person or persons, at least one of which is not an organization 
described in section 170(c). If the amount described in subparagraph (1) 
of this paragraph is to be paid to an individual or individuals, all 
such individuals must be living at the time of the creation of the 
trust. A named person or persons may include members of a named class 
provided that, in the case of a class which includes any individual, all 
such individuals must be alive and ascertainable at the time of the 
creation of the trust unless the period for which the annuity amount is 
to be paid to such class consists solely of a term of years. For 
example, in the case of a testamentary trust, the testator's will may 
provide that an amount shall be paid to his children living at his 
death.
    (ii) Power to alter amount paid to recipients. A trust is not a 
charitable remainder annuity trust if any person has the power to alter 
the amount to be paid to any named person other than an organization 
described in section 170(c) if such power would cause any person to be 
treated as the owner of the trust, or any portion thereof, if subpart E, 
part 1, subchapter J, chapter 1, subtitle A of the Code were applicable 
to such trust. See paragraph (a)(4) of this section for a rule 
permitting the retention by a grantor of a testamentary power to revoke 
or terminate the interest of any recipient other than an organization 
described in section 170(c). For example, the governing instrument may 
not grant the trustee the power to allocate the annuity among members of 
a class unless such power falls within one of the exceptions to section 
674(a).
    (4) Other payments. No amount other than the amount described in 
subparagraph (1) of this paragraph may be paid to or for the use of any 
person other than an organization described in section 170(c). An amount 
is not paid to or for the use of any person other than an organization 
described in section 170(c) if the amount is transferred for full and 
adequate consideration. The trust may not be subject to a power to 
invade, alter, amend, or revoke for the beneficial use of a person other 
than an organization described in section 170(c). Notwithstanding the 
preceding sentence, the grantor may retain the power exercisable only by 
will to revoke or terminate the interest of any recipient other than an 
organization described in section 170(c). The governing instrument may 
provide that any amount other than the amount described in subparagraph 
(1) of this

[[Page 134]]

paragraph shall be paid (or may be paid in the discretion of the 
trustee) to an organization described in section 170(c) provided that in 
the case of distributions in kind, the adjusted basis of the property 
distributed is fairly representative of the adjusted basis of the 
property available for payment on the date of payment. For example, the 
governing instrument may provide that a portion of the trust assets may 
be distributed currently, or upon the death of one or more recipients, 
to an organization described in section 170(c).
    (5) Period of payment of annuity amount--(i) General rules. The 
period for which an amount described in subparagraph (1) of this 
paragraph is payable begins with the first year of the charitable 
remainder trust and continues either for the life or lives of a named 
individual or individuals or for a term of years not to exceed 20 years. 
Only an individual or an organization described in section 170(c) may 
receive an amount for the life of an individual. If an individual 
receives an amount for life, it must be solely for his life. Payment of 
the amount described in subparagraph (1) of this paragraph may terminate 
with the regular payment next preceding the termination of the period 
described in this subparagraph. The fact that the recipient may not 
receive such last payment shall not be taken into account for purposes 
of determining the present value of the remainder interest. In the case 
of an amount payable for a term of years, the length of the term of 
years shall be ascertainable with certainty at the time of the creation 
of the trust, except that the term may be terminated by the death of the 
recipient or by the grantor's exercise by will of a retained power to 
revoke or terminate the interest of any recipient other than an 
organization described in section 170(c). In any event, the period may 
not extend beyond either the life or lives of a named individual or 
individuals or a term of years not to exceed 20 years. For example, the 
governing instrument may not provide for the payment of an annuity 
amount to A for his life and then to B for a term of years because it is 
possible for the period to last longer than either the lives of 
recipients in being at the creation of the trust or a term of years not 
to exceed 20 years. On the other hand, the governing instrument may 
provide for the payment of an annuity amount to A for his life and then 
to B for his life or a term of years (not to exceed 20 years), whichever 
is shorter (but not longer), if both A and B are in being at the 
creation of the trust because it is not possible for the period to last 
longer than the lives of recipients in being at the creation of the 
trust.
    (ii) Relationship to 5 percent requirement. The 5 percent 
requirement provided in subparagraph (2) of this paragraph must be met 
until the termination of all of the payments described in subparagraph 
(1) of this paragraph. For example, the following provisions would 
satisfy the above rules:
    (a) An amount equal to at least 5 percent of the initial net fair 
market value of the property placed in trust to A and B for their joint 
lives and then to the survivor for his life;
    (b) An amount equal to at least 5 percent of the initial net fair 
market value of the property placed in trust to A for life or for a term 
of years not longer than 20 years, whichever is longer (or shorter);
    (c) An amount equal to at least 5 percent of the initial net fair 
market value of the property placed in trust to A for a term of years 
not longer than 20 years and then to B for life (provided B was living 
at the date of creation of the trust);
    (d) An amount to A for his life and concurrently an amount to B for 
his life (the amount to each recipient to terminate at his death) if the 
amount given to each individual is not less than 5 percent of the 
initial net fair market value of the property placed in trust; or
    (e) An amount to A for his life and concurrently an equal amount to 
B for his life, and at the death of the first to die, the trust to 
distribute one-half of the then value of its assets to an organization 
described in section 170(c), if the total of the amounts given to A and 
B is not less than 5 percent of the initial net fair market value of the 
property placed in trust.

[[Page 135]]

    (6) Permissible remaindermen--(i) General rule. At the end of the 
period specified in subparagraph (5) of this paragraph the entire corpus 
of the trust is required to be irrevocably transferred, in whole or in 
part, to or for the use of one or more organizations described in 
section 170(c) or retained, in whole or in part, for such use.
    (ii) Treatment of trust. If all of the trust corpus is to be 
retained for such use, the taxable year of the trust shall terminate at 
the end of the period specified in subparagraph (5) of this paragraph 
and the trust shall cease to be treated as a charitable remainder trust 
for all purposes. If all or any portion of the trust corpus is to be 
transferred to or for the use of such organization or organizations, the 
trustee shall have a reasonable time after the period specified in 
subparagraph (5) of this paragraph to complete the settlement of the 
trust. During such time, the trust shall continue to be treated as a 
charitable remainder trust for all purposes, such as sections 664, 
4947(a)(2), and 4947(b)(3)(B). Upon the expiration of such period, the 
taxable year of the trust shall terminate and the trust shall cease to 
be treated as a charitable remainder trust for all purposes. If the 
trust continues in existence, it will be subject to the provisions of 
section 4947(a)(1) unless the trust is exempt from taxation under 
section 501(a). For purposes of determining whether the trust is exempt 
under section 501(a) as an organization described in section 501(c)(3), 
the trust shall be deemed to have been created at the time it ceases to 
be treated as a charitable remainder trust.
    (iii) Concurrent or successive remaindermen. Where interests in the 
corpus of the trust are given to more than one organization described in 
section 170(c) such interests may be enjoyed by them either concurrently 
or successively.
    (iv) Alternative remaindermen. The governing instrument shall 
provide that if an organization to or for the use of which the trust 
corpus is to be transferred or for the use of which the trust corpus is 
to be retained is not an organization described in section 170(c) at the 
time any amount is to be irrevocably transferred to or for the use of 
such organization, such amount shall be transferred to or for the use of 
one or more alternative organizations which are described in section 
170(c) at such time or retained for such use. Such alternative 
organization or organizations may be selected in any manner provided by 
the terms of the governing instrument.
    (b) Additional contributions. A trust is not a charitable remainder 
annuity trust unless its governing instrument provides that no 
additional contributions may be made to the charitable remainder annuity 
trust after the initial contribution. For purposes of this section, all 
property passing to a charitable remainder annuity trust by reason of 
death of the grantor shall be considered one contribution.
    (c) Calculation of the fair market value of the remainder interest 
of a charitable remainder annuity trust. For purposes of sections 170, 
2055, 2106, and 2522, the fair market value of the remainder interest of 
a charitable remainder annuity trust (as described in this section) is 
the net fair market value (as of the appropriate valuation date) of the 
property placed in trust less the present value of the annuity. For 
purposes of this section, valuation date means, in general, the date on 
which the property is transferred to the trust by the donor regardless 
of when the trust is created. In the case of transfers to a charitable 
remainder annuity trust for which the valuation date is after April 30, 
1989, if an election is made under section 7520 and Sec. 1.7520-2(b) to 
compute the present value of the charitable interest by use of the 
interest rate component for either of the 2 months preceding the month 
in which the transfer is made, the month so elected is the valuation 
date for purposes of determining the interest rate and mortality tables. 
For purposes of section 2055 or 2106, the valuation date is the date of 
death unless the alternate valuation date is elected in accordance with 
section 2032, in which event, and within the limitations set forth in 
section 2032 and the regulations thereunder, the valuation date is the 
alternate valuation date. If the decedent's estate elects the alternate 
valuation date under section 2032 and also elects, under section 7520 
and Sec. 1.7520-2(b), to use the interest rate

[[Page 136]]

component for one of the 2 months preceding the alternate valuation 
date, the month so elected is the valuation date for purposes of 
determining the interest rate and mortality tables. The present value of 
an annuity is computed under Sec. 20.2031-7(d) of this chapter (Estate 
Tax Regulations) for transfers for which the valuation date is after 
April 30, 1999, or under Sec. 20.2031-7A (a) through (e) of this 
chapter, whichever is applicable, for transfers for which the valuation 
date is before May 1, 1999. See, however, Sec. 1.7520-3(b) (relating to 
exceptions to the use of prescribed tables under certain circumstances).
    (d) Deduction for transfers to a charitable remainder annuity trust. 
For rules relating to a deduction for transfers to a charitable 
remainder annuity trust, see section 170, 2055, 2106, or 2522 and the 
regulations thereunder. Any claim for deduction on any return for the 
value of a remainder interest in a charitable remainder annuity trust 
must be supported by a full statement attached to the return showing the 
computation of the present value of such interest. The deduction allowed 
by section 170 is limited to the fair market value of the remainder 
interest of a charitable remainder annuity trust regardless of whether 
an organization described in section 170(c) also receives a portion of 
the annuity. For a special rule relating to the reduction of the amount 
of a charitable contribution deduction with respect to a contribution of 
certain ordinary income property or capital gain property, see section 
170(e)(1)(A) or 170(e)(1)(B)(i) and the regulations thereunder. For 
rules for postponing the time for deduction of a charitable contribution 
of a future interest in tangible personal property, see section 
170(a)(3) and the regulations thereunder.

[T.D. 7202, 37 FR 16918, Aug. 23, 1972, as amended by T.D. 7955, 49 FR 
19983, May 11, 1984; T.D. 8540, 59 FR 30116, June 10, 1994; T.D. 8791, 
63 FR 68191, Dec. 10, 1998; T.D. 8819, 64 FR 23229, Apr. 30, 1999; T.D. 
8819, Mar. 9, 2000, 65 FR 12471; T.D. 8926, 66 FR 1037, Jan. 5, 2001]



Sec. 1.664-3  Charitable remainder unitrust.

    (a) Description. A charitable remainder unitrust is a trust which 
complies with the applicable provisions of Sec. 1.664-1 and meets all of 
the following requirements:
    (1) Required payment of unitrust amount--(i) Payment of fixed 
percentage at least annually--(a) General rule. The governing instrument 
provides that the trust will pay not less often than annually a fixed 
percentage of the net fair market value of the trust assets determined 
annually to a person or persons described in paragraph (a)(3) of this 
section for each taxable year of the period specified in paragraph 
(a)(5) of this section. This paragraph (a)(1)(i)(a) is applicable for 
taxable years ending after April 18, 1997.
    (b) Income exception. Instead of the amount described in (a) of this 
subdivision (i), the governing instrument may provide that the trust 
shall pay for any year either the amount described in (1) or the total 
of the amounts described in (1) and (2) of this subdivision (b).
    (1) The amount of trust income for a taxable year to the extent that 
such amount is not more than the amount required to be distributed under 
paragraph (a)(1)(i)(a) of this section.
    (2) An amount of trust income for a taxable year that is in excess 
of the amount required to be distributed under paragraph (a)(1)(i)(a) of 
this section for such year to the extent that (by reason of paragraph 
(a)(1)(i)(b)(1) of this section) the aggregate of the amounts paid in 
prior years was less than the aggregate of such required amounts.
    (3) For this paragraph (a)(1)(i)(b), trust income means income as 
defined under section 643(b) and the applicable regulations.
    (4) For this paragraph (a)(1)(i)(b), proceeds from the sale or 
exchange of any assets contributed to the trust by the donor must be 
allocated to principal and not to trust income at least to the extent of 
the fair market value of those assets on the date of contribution.
    (5) The rules in paragraphs (a)(1)(i)(b)(1), (2), and (3) of this 
section are applicable for taxable years ending after April 18, 1997, 
and the rule in paragraph (a)(1)(i)(b)(4) of this section is applicable 
for sales or exchanges that occur after April 18, 1997.
    (c) Combination of methods. Instead of the amount described in 
paragraph

[[Page 137]]

(a)(1)(i)(a) or (b) of this section, the governing instrument may 
provide that the trust will pay not less often than annually the amount 
described in paragraph (a)(1)(i)(b) of this section for an initial 
period and then pay the amount described in paragraph (a)(1)(i)(a) of 
this section (calculated using the same fixed percentage) for the 
remaining years of the trust only if the governing instrument provides 
that--
    (1) The change from the method prescribed in paragraph (a)(1)(i)(b) 
of this section to the method prescribed in paragraph (a)(1)(i)(a) of 
this section is triggered on a specific date or by a single event whose 
occurrence is not discretionary with, or within the control of, the 
trustees or any other persons;
    (2) The change from the method prescribed in paragraph (a)(1)(i)(b) 
of this section to the method prescribed in paragraph (a)(1)(i)(a) of 
this section occurs at the beginning of the taxable year that 
immediately follows the taxable year during which the date or event 
specified under paragraph (a)(1)(i)(c)(1) of this section occurs; and
    (3) Following the trust's conversion to the method described in 
paragraph (a)(1)(i)(a) of this section, the trust will pay at least 
annually to the permissible recipients the amount described only in 
paragraph (a)(1)(i)(a) of this section and not any amount described in 
paragraph (a)(1)(i)(b) of this section.
    (d) Triggering event. For purposes of paragraph (a)(1)(i)(c)(1) of 
this section, a triggering event based on the sale of unmarketable 
assets as defined in Sec. 1.664-1(a)(7)(ii), or the marriage, divorce, 
death, or birth of a child with respect to any individual will not be 
considered discretionary with, or within the control of, the trustees or 
any other persons.
    (e) Examples. The following examples illustrate the rules in 
paragraph (a)(1)(i)(c) of this section. For each example, assume that 
the governing instrument of charitable remainder unitrust Y provides 
that Y will initially pay not less often than annually the amount 
described in paragraph (a)(1)(i)(b) of this section and then pay the 
amount described in paragraph (a)(1)(i)(a) of this section (calculated 
using the same fixed percentage) for the remaining years of the trust 
and that the requirements of paragraphs (a)(1)(i)(c)(2) and (3) of this 
section are satisfied. The examples are as follows:

    Example 1. Y is funded with the donor's former personal residence. 
The governing instrument of Y provides for the change in method for 
computing the annual unitrust amount as of the first day of the year 
following the year in which the trust sells the residence. Y provides 
for a combination of methods that satisfies paragraph (a)(1)(i)(c) of 
this section.
    Example 2. Y is funded with cash and an unregistered security for 
which there is no available exemption permitting public sale under the 
Securities and Exchange Commission rules. The governing instrument of Y 
provides that the change in method for computing the annual unitrust 
amount is triggered on the earlier of the date when the stock is sold or 
at the time the restrictions on its public sale lapse or are otherwise 
lifted. Y provides for a combination of methods that satisfies paragraph 
(a)(1)(i)(c) of this section.
    Example 3. Y is funded with cash and with a security that may be 
publicly traded under the Securities and Exchange Commission rules. The 
governing instrument of Y provides that the change in method for 
computing the annual unitrust amount is triggered when the stock is 
sold. Y does not provide for a combination of methods that satisfies the 
requirements of paragraph (a)(1)(i)(c) of this section because the sale 
of the publicly-traded stock is within the discretion of the trustee.
    Example 4. S establishes Y for her granddaughter, G, when G is 10 
years old. The governing instrument of Y provides for the change in 
method for computing the annual unitrust amount as of the first day of 
the year following the year in which G turns 18 years old. Y provides 
for a combination of methods that satisfies paragraph (a)(1)(i)(c) of 
this section.
    Example 5. The governing instrument of Y provides for the change in 
method for computing the annual unitrust amount as of the first day of 
the year following the year in which the donor is married. Y provides 
for a combination of methods that satisfies paragraph (a)(1)(i)(c) of 
this section.
    Example 6. The governing instrument of Y provides that if the donor 
divorces, the change in method for computing the annual unitrust amount 
will occur as of the first day of the year following the year of the 
divorce. Y provides for a combination of methods that satisfies 
paragraph (a)(1)(i)(c) of this section.
    Example 7. The governing instrument of Y provides for the change in 
method for computing the annual unitrust amount as of the first day of 
the year following the year in

[[Page 138]]

which the noncharitable beneficiary's first child is born. Y provides 
for a combination of methods that satisfies paragraph (a)(1)(i)(c) of 
this section.
    Example 8. The governing instrument of Y provides for the change in 
method for computing the annual unitrust amount as of the first day of 
the year following the year in which the noncharitable beneficiary's 
father dies. Y provides for a combination of methods that satisfies 
paragraph (a)(1)(i)(c) of this section.
    Example 9. The governing instrument of Y provides for the change in 
method for computing the annual unitrust amount as of the first day of 
the year following the year in which the noncharitable beneficiary's 
financial advisor determines that the beneficiary should begin receiving 
payments under the second prescribed payment method. Because the change 
in methods for paying the unitrust amount is triggered by an event that 
is within a person's control, Y does not provide for a combination of 
methods that satisfies paragraph (a)(1)(i)(c) of this section.
    Example 10. The governing instrument of Y provides for the change in 
method for computing the annual unitrust amount as of the first day of 
the year following the year in which the noncharitable beneficiary 
submits a request to the trustee that the trust convert to the second 
prescribed payment method. Because the change in methods for paying the 
unitrust amount is triggered by an event that is within a person's 
control, Y does not provide for a combination of methods that satisfies 
paragraph (a)(1)(i)(c) of this section.

    (f) Effective date--(1) General rule. Paragraphs (a)(1)(i)(c), (d), 
and (e) of this section are applicable for charitable remainder trusts 
created on or after December 10, 1998.
    (2) General rule regarding reformations of combination of method 
unitrusts. If a trust is created on or after December 10, 1998, and 
contains a provision allowing a change in calculating the unitrust 
amount that does not comply with the provisions of paragraph 
(a)(1)(i)(c) of this section, the trust will qualify as a charitable 
remainder unitrust only if it is amended or reformed to use the initial 
method for computing the unitrust amount throughout the term of the 
trust, or is reformed in accordance with paragraph (a)(1)(i)(f)(3) of 
this section. If a trust was created before December 10, 1998, and 
contains a provision allowing a change in calculating the unitrust 
amount that does not comply with the provisions of paragraph 
(a)(1)(i)(c) of this section, the trust may be reformed to use the 
initial method for computing the unitrust amount throughout the term of 
the trust without causing the trust to fail to function exclusively as a 
charitable remainder unitrust under Sec. 1.664-1(a)(4), or may be 
reformed in accordance with paragraph (a)(1)(i)(f)(3) of this section. 
Except as provided in paragraph (a)(1)(i)(f)(3) of this section, a 
qualified charitable remainder unitrust will not continue to qualify as 
a charitable remainder unitrust if it is amended or reformed to add a 
provision allowing a change in the method for calculating the unitrust 
amount.
    (3) Special rule for reformations of trusts that begin by June 8, 
1999. Notwithstanding paragraph (a)(1)(i)(f)(2) of this section, if a 
trust either provides for payment of the unitrust amount under a 
combination of methods that is not permitted under paragraph 
(a)(1)(i)(c) of this section, or provides for payment of the unitrust 
amount under only the method prescribed in paragraph (a)(1)(i)(b) of 
this section, then the trust may be reformed to allow for a combination 
of methods permitted under paragraph (a)(1)(i)(c) of this section 
without causing the trust to fail to function exclusively as a 
charitable remainder unitrust under Sec. 1.664-1(a)(4) or to engage in 
an act of self-dealing under section 4941 if the trustee begins legal 
proceedings to reform by June 8, 1999. The triggering event under the 
reformed governing instrument may not occur in a year prior to the year 
in which the court issues the order reforming the trust, except for 
situations in which the governing instrument prior to reformation 
already provided for payment of the unitrust amount under a combination 
of methods that is not permitted under paragraph (a)(1)(i)(c) of this 
section and the triggering event occurred prior to the reformation.
    (g) Payment under general rule for fixed percentage trusts. When the 
unitrust amount is computed under paragraph (a)(1)(i)(a) of this 
section, a trust will not be deemed to have engaged in an act of self-
dealing (within the meaning of section 4941), to have unrelated debt-
financed income (within the meaning

[[Page 139]]

of section 514), to have received an additional contribution (within the 
meaning of paragraph (b) of this section), or to have failed to function 
exclusively as a charitable remainder trust (within the meaning of 
Sec. 1.664-1(a)(4)) merely because the unitrust amount is paid after the 
close of the taxable year if such payment is made within a reasonable 
time after the close of such taxable year and the entire unitrust amount 
in the hands of the recipient is characterized only as income from the 
categories described in section 664(b)(1), (2), or (3), except to the 
extent it is characterized as corpus described in section 664(b)(4) 
because--
    (1) The trust pays the unitrust amount by distributing property 
(other than cash) that it owned at the close of the taxable year, and 
the trustee elects to treat any income generated by the distribution as 
occurring on the last day of the taxable year in which the unitrust 
amount is due;
    (2) The trust pays the unitrust amount by distributing cash that was 
contributed to the trust (with respect to which a deduction was 
allowable under section 170, 2055, 2106, or 2522); or
    (3) The trust pays the unitrust amount by distributing cash received 
as a return of basis in any asset that was contributed to the trust 
(with respect to which a deduction was allowable under section 170, 
2055, 2106, or 2522), and that is sold by the trust during the year for 
which the unitrust amount is due.
    (h) Special rule for fixed percentage trusts created before December 
10, 1998. When the unitrust amount is computed under paragraph 
(a)(1)(i)(a) of this section, a trust created before December 10, 1998, 
will not be deemed to have engaged in an act of self-dealing (within the 
meaning of section 4941), to have unrelated debt-financed income (within 
the meaning of section 514), to have received an additional contribution 
(within the meaning of paragraph (b) of this section), or to have failed 
to function exclusively as a charitable remainder trust (within the 
meaning of Sec. 1.664-1(a)(4)) merely because the unitrust amount is 
paid after the close of the taxable year if such payment is made within 
a reasonable time after the close of such taxable year and the fixed 
percentage to be paid each year as the unitrust amount is 15 percent or 
less of the net fair market value of the trust assets as determined 
under paragraph (a)(1)(iv) of this section.
    (i) Example. The following example illustrates the rules in 
paragraph (a)(1)(i)(g) of this section:

    Example. X is a charitable remainder unitrust that calculates the 
unitrust amount under paragraph (a)(1)(i)(a) of this section. X was 
created after December 10, 1998. The prorated unitrust amount payable 
from X for Year 1 is $100. The trustee does not pay the unitrust amount 
to the recipient by the end of the Year 1. At the end of Year 1, X has 
only $95 in the ordinary income category under section 664(b)(1) and no 
income in the capital gain or tax-exempt income categories under section 
664(b) (2) or (3), respectively. By April 15 of Year 2, in addition to 
$95 in cash, the trustee distributes to the unitrust recipient a capital 
asset with a $5 fair market value and a $2 adjusted basis to pay the 
$100 unitrust amount due for Year 1. The trust owned the asset at the 
end of Year 1. Under Sec. 1.664-1(d)(5), the distribution is treated as 
a sale by X, resulting in X recognizing a $3 capital gain. The trustee 
elects to treat the capital gain as occurring on the last day of Year 1. 
Under Sec. 1.664-1(d)(1), the character of the unitrust amount for Year 
1 in the recipient's hands is $95 of ordinary income, $3 of capital gain 
income, and $2 of trust corpus. For Year 1, X satisfied paragraph 
(a)(1)(i)(g) of this section.

    (j) Payment under income exception. When the unitrust amount is 
computed under paragraph (a)(1)(i)(b) of this section, a trust will not 
be deemed to have engaged in an act of self-dealing (within the meaning 
of section 4941), to have unrelated debt-financed income (within the 
meaning of section 514), to have received an additional contribution 
(within the meaning of paragraph (b) of this section), or to have failed 
to function exclusively as a charitable remainder trust (within the 
meaning of Sec. 1.664-1(a)(4)) merely because payment of the unitrust 
amount is made after the close of the taxable year if such payment is 
made within a reasonable time after the close of such taxable year.
    (k) Reasonable time. For paragraphs (a)(1)(i) (g), (h), and (j) of 
this section, a reasonable time will not ordinarily extend beyond the 
date by which the trustee is required to file Form 5227,

[[Page 140]]

``Split-Interest Trust Information Return,'' (including extensions) for 
the taxable year.
    (l) Effective date. Paragraphs (a)(1)(i) (g), (h), (i), (j), and (k) 
of this section are applicable for taxable years ending after April 18, 
1997. Paragraphs (a)(1)(i)(g)(2) and (3) apply only to distributions 
made on or after January 5, 2001.
    (ii) Definition of fixed percentage. The fixed percentage may be 
expressed either as a fraction or as a percentage and must be payable 
each year in the period specified in subparagraph (5) of this paragraph. 
A percentage is fixed if the percentage is the same either as to each 
recipient or as to the total percentage payable each year of such 
period. For example, provision for a fixed percentage which is the same 
every year to A until his death and concurrently a fixed percentage 
which is the same every year to B until his death, the fixed percentage 
to each recipient to terminate at his death, would satisfy the rule. 
Similarly, provision for a fixed percentage to A and B for their joint 
lives and then to the survivor would satisfy the rule. In the case of a 
distribution to an organization described in section 170(c) at the death 
of a recipient or the expiration of a term of years, the governing 
instrument may provide for a reduction of the fixed percentage payable 
after such distribution Provided That:
    (a) The reduced fixed percentage is the same either as to each 
recipient or as to the total amount payable for each year of the balance 
of such period, and
    (b) The requirements of subparagraph (2)(ii) of this paragraph are 
met.
    (iii) Rules applicable to incorrect valuations. The governing 
instrument provides that in the case where the net fair market value of 
the trust assets is incorrectly determined by the fiduciary, the trust 
shall pay to the recipient (in the case of an undervaluation) or be 
repaid by the recipient (in the case of an overvaluation) an amount 
equal to the difference between the amount which the trust should have 
paid the recipient if the correct value were used and the amount which 
the trust actually paid the recipient. Such payments or repayments must 
be made within a reasonable period after the final determination of such 
value. Any payment due to a recipient by reason of such incorrect 
valuation shall be considered to be a payment required to be distributed 
at the time of such final determination for purposes of paragraph 
(d)(4)(ii) of Sec. 1.664-1. See paragraph (d)(4) of Sec. 1.664-1 for 
rules relating to the year of inclusion of such payments and the 
allowance of a deduction for such repayments. See paragraph (b) of this 
section for rules relating to additional contributions.
    (iv) Rules applicable to valuation. In computing the net fair market 
value of the trust assets there shall be taken into account all assets 
and liabilities without regard to whether particular items are taken 
into account in determining the income of the trust. The net fair market 
value of the trust assets may be determined on any one date during the 
taxable year of the trust, or by taking the average of valuations made 
on more than one date during the taxable year of the trust, so long as 
the same valuation date or dates and valuation methods are used each 
year. If the governing instrument does not specify the valuation date or 
dates, the trustee must select such date or dates and indicate the 
selection on the first return on Form 5227, ``Split-Interest Trust 
Information Return,'' that the trust must file. The amount described in 
subdivision (i)(a) of this subparagraph which must be paid each year 
must be based upon the valuation for such year.
    (v) Computation of unitrust amount in certain circumstances--(a) 
Short taxable years. The governing instrument provides that, in the case 
of a taxable year which is for a period of less than 12 months other 
than the taxable year in which occurs the end of the period specified in 
subparagraph (5) of this paragraph:
    (1) The amount determined under subdivision (i)(a) of this 
subparagraph shall be the amount otherwise determined under that 
subdivision multiplied by a fraction the numerator of which is the 
number of days in the taxable year of the trust and the denominator of 
which is 365 (366 if February 29 is a day included in the numerator),
    (2) The amount determined under subdivision (i)(b) of this 
subparagraph

[[Page 141]]

shall be computed by using the amount determined under subdivision 
(a)(1) of this subdivision (v), and
    (3) If no valuation date occurs before the end of the taxable year 
of the trust, the trust assets shall be valued as of the last day of the 
taxable year of the trust.
    (b) Last taxable year of period. (1) The governing instrument 
provides that, in the case of the taxable year in which occurs the end 
of the period specified in subparagraph (5) of this paragraph:
    (i) The unitrust amount which must be distributed under subdivision 
(i)(a) of this subparagraph shall be the amount otherwise determined 
under that subdivision multiplied by a fraction the numerator of which 
is the number of days in the period beginning on the first day of such 
taxable year and ending on the last day of the period specified in 
subparagraph (5) of this paragraph and the denominator of which is 365 
(366 if February 29 is a day included in the numerator),
    (ii) The amount determined under subdivision (i)(b) of this 
subparagraph shall be computed by using the amount determined under 
(b)(1)(i) of this subdivision (v), and
    (iii) If no valuation date occurs before the end of such period, the 
trust assets shall be valued as of the last day of such period.
    (2) See subparagraph (5) of this paragraph for a special rule 
allowing termination of payment of the unitrust amount with the regular 
payment next preceding the termination of the period specified therein.
    (2) Minimum unitrust amount--(i) General rule. The fixed percentage 
described in subparagraph (1)(i) of this paragraph with respect to all 
beneficiaries taken together is not less than 5 percent.
    (ii) Reduction of unitrust amount in certain cases. A trust will not 
fail to meet the requirements of this subparagraph by reason of the fact 
that it provides for a reduction of the fixed percentage payable upon 
the death of a recipient or the expiration of a term of years Provided 
That:
    (a) A distribution is made to an organization described in section 
170(c) at the death of such recipient or the expiration of such term of 
years, and
    (b) The total of the percentage payable under subparagraph (1) of 
this paragraph after such distribution is not less than 5 percent.
    (3) Permissible recipients--(i) General rule. The amount described 
in subparagraph (1) of this paragraph is payable to or for the use of a 
named person or persons, at least one of which is not an organization 
described in section 170(c). If the amount described in subparagraph (1) 
of this paragraph is to be paid to an individual or individuals, all 
such individuals must be living at the time of creation of the trust. A 
named person or persons may include members of a named class except in 
the case of a class which includes any individual, all such individuals 
must be alive and ascertainable at the time of the creation of the trust 
unless the period for which the unitrust amount is to be paid to such 
class consists solely of a term of years. For example, in the case of a 
testamentary trust, the testator's will may provide that the required 
amount shall be paid to his children living at his death.
    (ii) Power to alter amount paid to recipients. A trust is not a 
charitable remainder unitrust if any person has the power to alter the 
amount to be paid to any named person other than an organization 
described in section 170(c) if such power would cause any person to be 
treated as the owner of the trust, or any portion thereof, if subpart E, 
part 1, subchapter J, chapter 1, subtitle A of the Code were applicable 
to such trust. See paragraph (a)(4) of this section for a rule 
permitting the retention by a grantor of a testamentary power to revoke 
or terminate the interest of any recipient other than an organization 
described in section 170(c). For example, the governing instrument may 
not grant the trustee the power to allocate the fixed percentage among 
members of a class unless such power falls within one of the exceptions 
to section 674(a).
    (4) Other payments. No amount other than the amount described in 
subparagraph (1) of this paragraph may be paid to or for the use of any 
person other than an organization described in section 170(c). An amount 
is not paid to or for the use of any person other than an organization 
described in section 170(c)

[[Page 142]]

if the amount is transferred for full and adequate consideration. The 
trust may not be subject to a power to invade, alter, amend, or revoke 
for the beneficial use of a person other than an organization described 
in section 170(c). Notwithstanding the preceding sentence, the grantor 
may retain the power exercisable only by will to revoke or terminate the 
interest of any recipient other than an organization described in 
section 170(c). The governing instrument may provide that any amount 
other than the amount described in subparagraph (1) of this paragraph 
shall be paid (or may be paid in the discretion of the trustee) to an 
organization described in section 170(c) provided that, in the case of 
distributions in kind, the adjusted basis of the property distributed is 
fairly representative of the adjusted basis of the property available 
for payment on the date of payment. For example, the governing 
instrument may provide that a portion of the trust assets may be 
distributed currently, or upon the death of one or more recipients, to 
an organization described in section 170(c).
    (5) Period of payment of unitrust amount--(i) General rules. The 
period for which an amount described in subparagraph (1) of this 
paragraph is payable begins with the first year of the charitable 
remainder trust and continues either for the life or lives of a named 
individual or individuals or for a term of years not to exceed 20 years. 
Only an individual or an organization described in section 170(c) may 
receive an amount for the life of an individual. If an individual 
receives an amount for life, it must be solely for his life. Payment of 
the amount described in subparagraph (1) of this paragraph may terminate 
with the regular payment next preceding the termination of the period 
described in this subparagraph. The fact that the recipient may not 
receive such last payment shall not be taken into account for purposes 
of determining the present value of the remainder interest. In the case 
of an amount payable for a term of years, the length of the term of 
years shall be ascertainable with certainty at the time of the creation 
of the trust, except that the term may be terminated by the death of the 
recipient or by the grantor's exercise by will of a retained power to 
revoke or terminate the interest of any recipient other than an 
organization described in section 170(c). In any event, the period may 
not extend beyond either the life or lives of a named individual or 
individuals or a term of years not to exceed 20 years. For example, the 
governing instrument may not provide for the payment of a unitrust 
amount to A for his life and then to B for a term of years because it is 
possible for the period to last longer than either the lives of 
recipients in being at the creation of the trust or a term of years not 
to exceed 20 years. On the other hand, the governing instrument may 
provide for the payment of a unitrust amount to A for his life and then 
to B for his life or a term of years (not to exceed 20 years), whichever 
is shorter (but not longer), if both A and B are in being at the 
creation of the trust because it is not possible for the period to last 
longer than the lives of recipients in being at the creation of the 
trust.
    (ii) Relationship to 5 percent requirement. The 5 percent 
requirement provided in subparagraph (2) of this paragraph must be met 
until the termination of all of the payments described in subparagraph 
(1) of this paragraph. For example, the following provisions would 
satisfy the above rules:
    (a) A fixed percentage of at least 5 percent to A and B for their 
joint lives and then to the survivor for his life;
    (b) A fixed percentage of at least 5 percent to A for life or for a 
term of years not longer than 20 years, whichever is longer (or 
shorter);
    (c) A fixed percentage of at least 5 percent to A for life or for a 
term of years not longer than 20 years and then to B for life (provided 
B was living at the creation of the trust);
    (d) A fixed percentage to A for his life and concurrently a fixed 
percentage to B for his life (the percentage to each recipient to 
terminate at his death) if the percentage given to each individual is 
not less than 5 percent;
    (e) A fixed percentage to A for his life and concurrently an equal 
percentage to B for his life, and at the death of the first to die, the 
trust to distribute one-half of the then value of its assets to an 
organization described in section

[[Page 143]]

170(c) if the total of the percentages is not less than 5 percent for 
the entire period described in this subparagraph.
    (6) Permissible remaindermen--(i) General rule. At the end of the 
period specified in subparagraph (5) of this paragraph, the entire 
corpus of the trust is required to be irrevocably transferred, in whole 
or in part, to or for the use of one or more organizations described in 
section 170(c) or retained, in whole or in part, for such use.
    (ii) Treatment of trust. If all of the trust corpus is to be 
retained for such use, the taxable year of the trust shall terminate at 
the end of the period specified in subparagraph (5) of this paragraph 
and the trust shall cease to be treated as a charitable remainder trust 
for all purposes. If all or any portion of the trust corpus is to be 
transferred to or for the use of such organization or organizations, the 
trustee shall have a reasonable time after the period specified in 
subparagraph (5) of this paragraph to complete the settlement of the 
trust. During such time, the trust shall continue to be treated as a 
charitable remainder trust for all purposes, such as section 664, 
4947(a)(2), and 4947(b)(3)(B). Upon the expiration of such period, the 
taxable year of the trust shall terminate and the trust shall cease to 
be treated as a charitable remainder trust for all purposes. If the 
trust continues in existence, it will be subject to the provisions of 
section 4947(a)(1) unless the trust is exempt from taxation under 
section 501(a). For purposes of determining whether the trust is exempt 
under section 501(a) as an organization described in section 501(c)(3), 
the trust shall be deemed to have been created at the time it ceases to 
be treated as a charitable remainder trust.
    (iii) Concurrent or successive remaindermen. Where interests in the 
corpus of the trust are given to more than one organization described in 
section 170(c) such interests may be enjoyed by them either concurrently 
or successively.
    (iv) Alternative remaindermen. The governing instrument shall 
provide that if an organization to or for the use of which the trust 
corpus is to be transferred or for the use of which the trust corpus is 
to be retained is not an organization described in section 170(c) at the 
time any amount is to be irrevocably transferred to or for the use of 
such organization, such amount shall be transferred to or for the use of 
or retained for the use of one or more alternative organizations which 
are described in section 170(c) at such time. Such alternative 
organization or organizations may be selected in any manner provided by 
the terms of the governing instrument.
    (b) Additional contributions. A trust is not a charitable remainder 
annuity trust unless its governing instrument either prohibits 
additional contributions to the trust after the initial contribution or 
provides that for the taxable year of the trust in which the additional 
contribution is made:
    (1) Where no valuation date occurs after the time of the 
contribution and during the taxable year in which the contribution is 
made, the additional property shall be valued as of the time of 
contribution; and
    (2) The amount described in paragraph (a)(1)(i)(a) of this section 
shall be computed by multiplying the fixed percentage by the sum of (i) 
the net fair market value of the trust assets (excluding the value of 
the additional property and any earned income from and any appreciation 
on such property after its contribution), and (ii) that proportion of 
the value of the additional property (that was excluded under 
subdivision (i) of this paragraph), which the number of days in the 
period which begins with the date of contribution and ends with the 
earlier of the last day of such taxable year or the last day of the 
period described in paragraph (a)(5) of this section bears to the number 
of days in the period which begins with the first day of such taxable 
year and ends with the earlier of the last day of such taxable year or 
the last day of the period described in paragraph (a)(5) of this 
section.

For purposes of this section, all property passing to a charitable 
remainder unitrust by reason of death of the grantor shall be considered 
one contribution. The application of the preceding rules may be 
illustrated by the following examples:

    Example 1. On March 2, 1971, X makes an additional contribution of 
property to a

[[Page 144]]

charitable remainder unitrust. The taxable year of the trust is the 
calendar year and the regular valuation date is January 1 of each year. 
For purposes of computing the required payout with respect to the 
additional contribution for the year of contribution, the additional 
contribution is valued on March 2, 1971, the time of contribution. The 
property had a value on that date of $5,000. Income from such property 
in the amount of $250 was received on December 31, 1971. The required 
payout with respect to the additional contribution for the year of 
contribution is $208 (5 percentx$5,000x305/365). The income earned after 
the date of the contribution and after the regular valuation date does 
not enter into the computation.
    Example 2. On July 1, 1971, X makes an additional contribution of 
$10,000 to a charitable remainder unitrust. The taxable year of the 
trust is the calendar year and the regular valuation date is December 31 
of each year. The fixed percentage is 5 percent. Between July 1, 1971, 
and December 31, 1971, the additional property appreciates in value to 
$12,500 and earns $500 of income. Because the regular valuation date for 
the year of contribution occurs after the date of the additional 
contribution, the additional contribution including income earned by it 
is valued on the regular valuation date. Thus, the required payout with 
respect to the additional contribution is $325.87 (5 
percentx[$12,500+$500]x183/365).

    (c) Calculation of the fair market value of the remainder interest 
of a charitable remainder unitrust. See Sec. 1.664-4 for rules relating 
to the calculation of the fair market value of the remainder interest of 
a charitable remainder unitrust.
    (d) Deduction for transfers to a charitable remainder unitrust. For 
rules relating to a deduction for transfers to a charitable remainder 
unitrust, see section 170, 2055, 2106, or 2522 and the regulations 
thereunder. The deduction allowed by section 170 for transfers to 
charity is limited to the fair market value of the remainder interest of 
a charitable remainder unitrusts regardless of whether an organization 
described in section 170(c) also receives a portion of the amount 
described in Sec. 1.664-3(a)(1). For a special rule relating to the 
reduction of the amount of a charitable contribution deduction with 
respect to a contribution of certain ordinary income property or capital 
gain property, see section 170(e)(1) (A) or (B)(i) and the regulations 
thereunder. For rules for postponing the time for deduction of a 
charitable contribution of a future interest in tangible personal 
property, see section 170(a)(3) and the regulations thereunder.

[T.D. 7202, 37 FR 16920, Aug. 23, 1972, as amended by T.D. 8791, 63 FR 
68192, Dec. 10, 1998; T.D. 8926, 66 FR 1038, Jan. 5, 2001]



Sec. 1.664-4  Calculation of the fair market value of the remainder interest in a charitable remainder unitrust.

    (a) Rules for determining present value. For purposes of sections 
170, 2055, 2106, and 2522, the fair market value of a remainder interest 
in a charitable remainder unitrust (as described in Sec. 1.664-3) is its 
present value determined under paragraph (d) of this section. The 
present value determined under this section shall be computed on the 
basis of--
    (1) Life contingencies determined as to each life involved, from the 
values of lx set forth in Table 90CM contained in Sec. 20.2031-7(d)(7) 
of this chapter in the case of transfers for which the valuation date is 
after April 30, 1999; or from Table 80CNSMT contained Sec. 20.2031-
7A(e)(4) of this chapter in the case of transfer for which the valuation 
date is after April 30, 1989, and before May 1, 1999. See Sec. 20.2031-
7A(a) through (d) of this chapter, whichever is applicable, for 
transfers for which the valuation date is before May 1, 1989;
    (2) Interest at the section 7520 rate in the case of transfers for 
which the valuation date is after April 30, 1989, or 10 percent in the 
case of transfers to charitable remainder unitrusts made after November 
30, 1983, for which the valuation date is before May 1, 1989. See 
Sec. 20.2031-7A (a) through (c) of this chapter, whichever is 
applicable, for transfers for which the valuation date is before 
December 1, 1983; and
    (3) The assumption that the amount described in Sec. 1.664-
3(a)(1)(i)(a) is distributed in accordance with the payout sequence 
described in the governing instrument. If the governing instrument does 
not prescribe when the distribution is made during the period for which 
the payment is made, for purposes of this section, the distribution is 
considered payable on the first day of the period for which the payment 
is made.
    (b) Actuarial Computations by the Internal Revenue Service. The 
regulations in this and in related sections provide

[[Page 145]]

tables of actuarial factors and examples that illustrate the use of the 
tables in determining the value of remainder interests in property. 
Section 1.7520-1(c)(2) refers to government publications that provide 
additional tables of factors and examples of computations for more 
complex situations. If the computation requires the use of a factor that 
is not provided in this section, the Commissioner may supply the factor 
upon a request for a ruling. A request for a ruling must be accompanied 
by a recitation of the facts including the date of birth of each 
measuring life, and copies of the relevant documents. A request for a 
ruling must comply with the instructions for requesting a ruling 
published periodically in the Internal Revenue Bulletin (See 
Sec. 601.601(d)(2)(ii)(b) of this chapter) and include payment of the 
required user fee. If the Commissioner furnishes the factor, a copy of 
the letter supplying the factor should be attached to the tax return in 
which the deduction is claimed. If the Commissioner does not furnish the 
factor, the taxpayer must furnish a factor computed in accordance with 
the principles set forth in this section.
    (c) Statement supporting deduction required. Any claim for a 
deduction on any return for the value of a remainder interest in a 
charitable remainder unitrust must be supported by a full statement 
attached to the return showing the computation of the present value of 
such interest.
    (d) Valuation. The fair market value of a remainder interest in a 
charitable remainder unitrust (as described in Sec. 1.664-3) for 
transfers for which the valuation date is after April 30, 1999, is its 
present value determined under paragraph (e) of this section. The fair 
market value of a remainder interest in a charitable remainder unitrust 
(as described in Sec. 1.664-3) for transfers for which the valuation 
date is before May 1, 1999, is its present value determined under the 
following sections:

------------------------------------------------------------------------
                Valuation dates
------------------------------------------------ Applicable  Regulations
               After                   Before
------------------------------------------------------------------------
                                       01-01-52  1.664-4A(a)
12-31-51...........................    01-01-71  1.664-4A(b)
12-31-70...........................    12-01-83  1.664-4A(c)
11-30-83...........................    05-01-89  1.664-4A(d)
04-30-89...........................    05-01-99  1.664-4A(e)
------------------------------------------------------------------------

    (e) Valuation of charitable remainder unitrusts having certain 
payout sequences for transfers for which the valuation date is after 
April 30, 1999--(1) In general. Except as otherwise provided in 
paragraph (e)(2) of this section, in the case of transfers for which the 
valuation date is after April 30, 1999, the present value of a remainder 
interest is determined under paragraphs (e)(3) through (e)(7) of this 
section, provided that the amount of the payout as of any payout date 
during any taxable year of the trust is not larger than the amount that 
the trust could distribute on such date under Sec. 1.664-3(a)(1)(v) if 
the taxable year of the trust were to end on such date. See, however, 
Sec. 1.7520-3(b) (relating to exceptions to the use of the prescribed 
tables under certain circumstances).
    (2) Transitional rules for valuation of charitable remainder 
unitrusts. (i) For purposes of sections 2055, 2106, or 2624, if on May 
1, 1999, the decedent was mentally incompetent so that the disposition 
of the property could not be changed, and the decedent died after April 
30, 1999, without having regained competency to dispose of the 
decedent's property, or the decedent died within 90 days of the date 
that the decedent first regained competency after April 30, 1999, the 
present value of a remainder interest under this section is determined 
as if the valuation date with respect to the decedent's gross estate is 
either before May 1, 1999, or after April 30, 1999, at the option of the 
decedent's executor.
    (ii) For purposes of sections 170, 2055, 2106, 2522, or 2624, in the 
case of transfers to a charitable remainder unitrust for which the 
valuation date is after April 30, 1999, and before July 1, 1999, the 
present value of a remainder interest based on one or more measuring 
lives is determined under this section by use of the section 7520 
interest rate for the month in which the valuation date occurs (see 
Secs. 1.7520-1(b) and 1.7520-2(a)(2)) and the appropriate actuarial 
tables under either paragraph (e)(7) of this section or Sec. 1.664-
4A(e)(6), at the

[[Page 146]]

option of the donor or the decedent's executor, as the case may be.
    (iii) For purposes of paragraphs (e)(2)(i) and (ii) of this section, 
where the donor or decedent's executor is given the option to use the 
appropriate actuarial tables under either paragraph (e)(7) of this 
section or Sec. 1.664-4A(e)(6), the donor or decedent's executor must 
use the same actuarial table with respect to each individual transaction 
and with respect to all transfers occurring on the valuation date (for 
example, gift and income tax charitable deductions with respect to the 
same transfer must be determined based on the same tables, and all 
assets includible in the gross estate and/or estate tax deductions 
claimed must be valued based on the same tables).
    (3) Adjusted payout rate. For transfers for which the valuation date 
is after April 30, 1989, the adjusted payout rate is determined by using 
the appropriate Table F in paragraph (e)(6) of this section, for the 
section 7520 interest rate applicable to the transfer. If the interest 
rate is between 4.2 and 14 percent, see paragraph (e)(6) of this 
section. If the interest rate is below 4.2 percent or greater than 14 
percent, see paragraph (b) of this section. The adjusted payout rate is 
determined by multiplying the fixed percentage described in Sec. 1.664-
3(a)(1)(i)(a) by the factor describing the payout sequence of the trust 
and the number of months by which the valuation date for the first full 
taxable year of the trust precedes the first payout date for such 
taxable year. If the governing instrument does not prescribe when the 
distribution or distributions shall be made during the taxable year of 
the trust, see paragraph (a) of this section. In the case of a trust 
having a payout sequence for which no figures have been provided by the 
appropriate table, and in the case of a trust that determines the fair 
market value of the trust assets by taking the average of valuations on 
more than one date during the taxable year, see paragraph (b) of this 
section.
    (4) Period is a term of years. If the period described in 
Sec. 1.664-3(a)(5) is a term of years, the factor that is used in 
determining the present value of the remainder interest for transfers 
for which the valuation date is after November 30, 1983, is the factor 
under the appropriate adjusted payout rate in Table D of paragraph 
(e)(6) of this section corresponding to the number of years in the term. 
If the adjusted payout rate is an amount that is between adjusted payout 
rates for which factors are provided in Table D, a linear interpolation 
must be made. The present value of the remainder interest is determined 
by multiplying the net fair market value (as of the appropriate 
valuation date) of the property placed in trust by the factor determined 
under this paragraph. For purposes of this section, the valuation date 
is, in the case of an inter vivos transfer, the date on which the 
property is transferred to the trust by the donor. However, if an 
election is made under section 7520 and Sec. 1.7520-2(b) to compute the 
present value of the charitable interest by use of the interest rate 
component for either of the 2 months preceding the month in which the 
date of transfer falls, the month so elected is the valuation date for 
purposes of determining the interest rate and mortality tables. In the 
case of a testamentary transfer under section 2055, 2106, or 2624, the 
valuation date is the date of death, unless the alternate valuation date 
is elected under section 2032, in which event, and within the 
limitations set forth in section 2032 and the regulations thereunder, 
the valuation date is the alternate valuation date. If the decedent's 
estate elects the alternate valuation date under section 2032 and also 
elects, under section 7520 and Sec. 1.7520-2(b), to use the interest 
rate component for one of the 2 months preceding the alternate valuation 
date, the month so elected is the valuation date for purposes of 
determining the interest rate and mortality tables. The application of 
this paragraph (e)(4) may be illustrated by the following example:

    Example. D transfers $100,000 to a charitable remainder unitrust on 
January 1. The trust instrument requires that the trust pay 8 percent of 
the fair market value of the trust assets as of January 1st for a term 
of 12 years to D in quarterly payments (March 31, June 30, September 30, 
and December 31). The section 7520 rate for January (the month that the 
transfer occurred) is 9.6 percent. Under Table F(9.6) in paragraph(e)(6) 
of this section, the appropriate adjustment factor is

[[Page 147]]

.944628 for quarterly payments payable at the end of each quarter. The 
adjusted payout rate is 7.557 (8%x .944628). Based on the remainder 
factors in Table D in paragraph(e)(6) of this section, the present value 
of the remainder interest is $38,950.30, computed as follows:

Factor at 7.4 percent for 12 years...........................    .397495
Factor at 7.6 percent for 12 years...........................    .387314
                                                              ----------
  Difference.................................................    .010181
 

    Interpolation adjustment:
    [GRAPHIC] [TIFF OMITTED] TR12JN00.002
    

Factor at 7.4 percent for 12 years...........................    .397495
Less: Interpolation adjustment...............................    .007992
                                                              ----------
  Interpolated factor........................................    .389503
 


    Present value of remainder interest:

($100,000x.389503)..........$38,950.30

    (5) Period is the life of one individual. If the period described in 
Sec. 1.664-3(a)(5) is the life of one individual, the factor that is 
used in determining the present value of the remainder interest for 
transfers for which the valuation date is after April 30, 1999, is the 
factor in Table U(1) in paragraph (e)(7) of this section under the 
appropriate adjusted payout. For purposes of the computations described 
in this paragraph, the age of an individual is the age of that 
individual at the individual's nearest birthday. If the adjusted payout 
rate is an amount that is between adjusted payout rates for which 
factors are provided in the appropriate table, a linear interpolation 
must be made. The present value of the remainder interest is determined 
by multiplying the net fair market value (as of the valuation date as 
determined in paragraph (e)(4) of this section) of the property placed 
in trust by the factor determined under this paragraph (e)(5). If the 
adjusted payout rate is between 4.2 and 14 percent, see paragraph (e)(7) 
of this section. If the adjusted payout rate is below 4.2 percent or 
greater than 14 percent, see paragraph (b) of this section. The 
application of this paragraph (e)(5) may be illustrated by the following 
example:

    Example. A, who is 44 years and 11 months old, transfers $100,000 to 
a charitable remainder unitrust on January 1st. The trust instrument 
requires that the trust pay to A semiannually (on June 30 and December 
31) 9 percent of the fair market value of the trust assets as of January 
1st during A's life. The section 7520 rate for January is 9.6 percent. 
Under Table F(9.6) in paragraph (e)(6) of this section, the appropriate 
adjustment factor is .933805 for semiannual payments payable at the end 
of the semiannual period. The adjusted payout rate is 8.404 (9% X 
.933805). Based on the remainder factors in Table U(1) in paragraph 
(e)(7) of this section, the present value of the remainder interest is 
$10,109.00, computed as follows:

Factor at 8.4 percent at age 45..............................     .10117
Factor at 8.6 percent at age 45..............................     .09715
                                                              ----------
  Difference.................................................     .00402
 

    Interpolation adjustment:
    [GRAPHIC] [TIFF OMITTED] TR12JN00.003
    

Factor at 8.4 percent at age 45..............................     .10117
Less: Interpolation adjustment...............................     .00008
                                                              ----------
Interpolated Factor..........................................     .10109
 


    Present value of remainder interest:

($100,000x.10109)..........$10,109.00

    (6) Actuarial Table D and F (4.2 through 14.0) for transfers for 
which the valuation date is after April 30, 1989. For transfers for 
which the valuation date is after April 30, 1989, the present value of a 
charitable remainder unitrust interest that is dependent upon a term of 
years is determined by using the section 7520 rate and the tables in 
this paragraph (e)(6). For transfers for which the valuation date is 
after April 30, 1999, where the present value of a charitable remainder 
unitrust interest is dependent on the termination of a life interest, 
see paragraph (e)(5) of this section. See, however, Sec. 1.7520-3(b) 
(relating to exceptions to the use of prescribed tables under certain 
circumstances). Many actuarial factors not contained in the following 
tables are contained in Internal Revenue Service Publication 1458, 
``Actuarial Values, Book Beth,'' (1999). A copy of

[[Page 148]]

this publication is available for purchase from the Superintendent of 
Documents, United States Government Printing Office, Washington, DC 
20402.

               Table D.--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Adjusted payout rate
                        Years                        ---------------------------------------------------------------------------------------------------
                                                        4.2%      4.4%      4.6%      4.8%      5.0%      5.2%      5.4%      5.6%      5.8%      6.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................................................   .958000   .956000   .954000   .952000   .950000   .948000   .946000   .944000   .942000   .940000
2...................................................   .917764   .913936   .910116   .906304   .902500   .898704   .894916   .891136   .887364   .883600
3...................................................   .879218   .873723   .868251   .862801   .857375   .851971   .846591   .841232   .835897   .830584
4...................................................   .842291   .835279   .828311   .821387   .814506   .807669   .800875   .794123   .787415   .780749
5...................................................   .806915   .798527   .790209   .781960   .773781   .765670   .757627   .749652   .741745   .733904
6...................................................   .773024   .763392   .753859   .744426   .735092   .725855   .716716   .707672   .698724   .689870
7...................................................   .740557   .729802   .719182   .708694   .698337   .688111   .678013   .668042   .658198   .648478
8...................................................   .709454   .697691   .686099   .674677   .663420   .652329   .641400   .630632   .620022   .609569
9...................................................   .679657   .666993   .654539   .642292   .630249   .618408   .606765   .595317   .584061   .572995
10..................................................   .651111   .637645   .624430   .611462   .598737   .586251   .573999   .561979   .550185   .538615
11..................................................   .623764   .609589   .595706   .582112   .568800   .555766   .543003   .530508   .518275   .506298
12..................................................   .597566   .582767   .568304   .554170   .540360   .526866   .513681   .500800   .488215   .475920
13..................................................   .572469   .557125   .542162   .527570   .513342   .499469   .485942   .472755   .459898   .447365
14..................................................   .548425   .532611   .517222   .502247   .487675   .473496   .459701   .446281   .433224   .420523
15..................................................   .525391   .509177   .493430   .478139   .463291   .448875   .434878   .421289   .408097   .395292
16..................................................   .503325   .486773   .470732   .455188   .440127   .425533   .411394   .397697   .384427   .371574
17..................................................   .482185   .465355   .449079   .433339   .418120   .403405   .389179   .375426   .362131   .349280
18..................................................   .461933   .444879   .428421   .412539   .397214   .382428   .368163   .354402   .341127   .328323
19..................................................   .442532   .425304   .408714   .392737   .377354   .362542   .348282   .334555   .321342   .308624
20..................................................   .423946   .406591   .389913   .373886   .358486   .343690   .329475   .315820   .302704   .290106
--------------------------------------------------------------------------------------------------------------------------------------------------------


               Table D.--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Adjusted payout rate
                        Years                        ---------------------------------------------------------------------------------------------------
                                                        6.2%      6.4%      6.6%      6.8%      7.0%      7.2%      7.4%      7.6%      7.8%      8.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................................................   .938000   .936000   .934000   .932000   .930000   .928000   .926000   .924000   .922000   .920000
2...................................................   .879844   .876096   .872356   .868624   .864900   .861184   .857476   .853776   .850084   .846400
3...................................................   .825294   .820026   .814781   .809558   .804357   .799179   .794023   .788889   .783777   .778688
4...................................................   .774125   .767544   .761005   .754508   .748052   .741638   .735265   .728933   .722643   .716393
5...................................................   .726130   .718421   .710779   .703201   .695688   .688240   .680855   .673535   .666277   .659082
6...................................................   .681110   .672442   .663867   .655383   .646990   .638687   .630472   .622346   .614307   .606355
7...................................................   .638881   .629406   .620052   .610817   .601701   .592701   .583817   .575048   .566391   .557847
8...................................................   .599270   .589124   .579129   .569282   .559582   .550027   .540615   .531344   .522213   .513219
9...................................................   .562115   .551420   .540906   .530571   .520411   .510425   .500609   .490962   .481480   .472161
10..................................................   .527264   .516129   .505206   .494492   .483982   .473674   .463564   .453649   .443925   .434388
11..................................................   .494574   .483097   .471863   .460866   .450104   .439570   .429260   .419171   .409298   .399637
12..................................................   .463910   .452179   .440720   .429527   .418596   .407921   .397495   .387314   .377373   .367666
13..................................................   .435148   .423239   .411632   .400320   .389295   .378550   .368081   .357879   .347938   .338253
14..................................................   .408169   .396152   .384465   .373098   .362044   .351295   .340843   .330680   .320799   .311193
15..................................................   .382862   .370798   .359090   .347727   .336701   .326002   .315620   .305548   .295777   .286297
16..................................................   .359125   .347067   .335390   .324082   .313132   .302529   .292264   .282326   .272706   .263394
17..................................................   .336859   .324855   .313254   .302044   .291213   .280747   .270637   .260870   .251435   .242322
18..................................................   .315974   .304064   .292579   .281505   .270828   .260533   .250610   .241044   .231823   .222936
19..................................................   .296383   .284604   .273269   .262363   .251870   .241775   .232065   .222724   .213741   .205101
20..................................................   .278008   .266389   .255233   .244522   .234239   .224367   .214892   .205797   .197069   .188693
--------------------------------------------------------------------------------------------------------------------------------------------------------


               Table D.--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Adjusted payout rate
                        Years                        ---------------------------------------------------------------------------------------------------
                                                        8.2%      8.4%      8.6%      8.8%      9.0%      9.2%      9.4%      9.6%      9.8%      10.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................................................   .918000   .916000   .914000   .912000   .910000   .908000   .906000   .904000   .902000   .900000
2...................................................   .842724   .839056   .835396   .831744   .828100   .824464   .820836   .817216   .813604   .810000
3...................................................   .773621   .768575   .763552   .758551   .753571   .748613   .743677   .738763   .733871   .729000
4...................................................   .710184   .704015   .697886   .691798   .685750   .679741   .673772   .667842   .661951   .656100

[[Page 149]]

 
5...................................................   .651949   .644878   .637868   .630920   .624032   .617205   .610437   .603729   .597080   .590490
6...................................................   .598489   .590708   .583012   .575399   .567869   .560422   .553056   .545771   .538566   .531441
7...................................................   .549413   .541089   .532873   .524764   .516761   .508863   .501069   .493377   .485787   .478297
8...................................................   .504361   .495637   .487046   .478585   .470253   .462048   .453968   .446013   .438180   .430467
9...................................................   .463003   .454004   .445160   .436469   .427930   .419539   .411295   .403196   .395238   .387420
10..................................................   .425037   .415867   .406876   .398060   .389416   .380942   .372634   .364489   .356505   .348678
11..................................................   .390184   .380934   .371885   .363031   .354369   .345895   .337606   .329498   .321567   .313811
12..................................................   .358189   .348936   .339902   .331084   .322475   .314073   .305871   .297866   .290054   .282430
13..................................................   .328817   .319625   .310671   .301949   .293453   .285178   .277119   .269271   .261628   .254187
14..................................................   .301854   .292777   .283953   .275377   .267042   .258942   .251070   .243421   .235989   .228768
15..................................................   .277102   .268184   .259533   .251144   .243008   .235119   .227469   .220053   .212862   .205891
16..................................................   .254380   .245656   .237213   .229043   .221137   .213488   .206087   .198928   .192001   .185302
17..................................................   .233521   .225021   .216813   .208887   .201235   .193847   .186715   .179830   .173185   .166772
18..................................................   .214372   .206119   .198167   .190505   .183124   .176013   .169164   .162567   .156213   .150095
19..................................................   .196794   .188805   .181125   .173741   .166643   .159820   .153262   .146960   .140904   .135085
20..................................................   .180657   .172946   .165548   .158452   .151645   .145117   .138856   .132852   .127096   .121577
--------------------------------------------------------------------------------------------------------------------------------------------------------


               Table D.--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Adjusted payout rate
                        Years                        ---------------------------------------------------------------------------------------------------
                                                        10.2%     10.4%     10.6%     10.8%     11.0%     11.2%     11.4%     11.6%     11.8%     12.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................................................   .898000   .896000   .894000   .892000   .890000   .888000   .886000   .884000   .882000   .880000
2...................................................   .806404   .802816   .799236   .795664   .792100   .788544   .784996   .781456   .777924   .774400
3...................................................   .724151   .719323   .714517   .709732   .704969   .700227   .695506   .690807   .686129   .681472
4...................................................   .650287   .644514   .638778   .633081   .627422   .621802   .616219   .610673   .605166   .599695
5...................................................   .583958   .577484   .571068   .564708   .558406   .552160   .545970   .539835   .533756   .527732
6...................................................   .524394   .517426   .510535   .503720   .496981   .490318   .483729   .477214   .470773   .464404
7...................................................   .470906   .463613   .456418   .449318   .442313   .435402   .428584   .421858   .415222   .408676
8...................................................   .422874   .415398   .408038   .400792   .393659   .386637   .379726   .372922   .366226   .359635
9...................................................   .379741   .372196   .364786   .357506   .350356   .343334   .336437   .329663   .323011   .316478
10..................................................   .341007   .333488   .326118   .318896   .311817   .304881   .298083   .291422   .284896   .278501
11..................................................   .306224   .298805   .291550   .284455   .277517   .270734   .264102   .257617   .251278   .245081
12..................................................   .274989   .267729   .260645   .253734   .246990   .240412   .233994   .227734   .221627   .215671
13..................................................   .246941   .239886   .233017   .226331   .219821   .213486   .207319   .201317   .195475   .189791
14..................................................   .221753   .214937   .208317   .201887   .195641   .189575   .183684   .177964   .172409   .167016
15..................................................   .199134   .192584   .186236   .180083   .174121   .168343   .162744   .157320   .152065   .146974
16..................................................   .178822   .172555   .166495   .160634   .154967   .149488   .144191   .139071   .134121   .129337
17..................................................   .160582   .154609   .148846   .143286   .137921   .132746   .127754   .122939   .118295   .113817
18..................................................   .144203   .138530   .133069   .127811   .122750   .117878   .113190   .108678   .104336   .100159
19..................................................   .129494   .124123   .118963   .114007   .109247   .104676   .100286   .096071   .092024   .088140
20..................................................   .116286   .111214   .106353   .101694   .097230   .092952   .088853   .084927   .081166   .077563
--------------------------------------------------------------------------------------------------------------------------------------------------------


               Table D.--Showing the Present Worth of a Remainder Interest Postponed for a Term Certain in a Charitable Remainder Unitrust
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                             Adjusted payout rate
                        Years                        ---------------------------------------------------------------------------------------------------
                                                        12.2%     12.4%     12.6%     12.8%     13.0%     13.2%     13.4%     13.6%     13.8%     14.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
1...................................................   .878000   .876000   .874000   .872000   .870000   .868000   .866000   .864000   .862000   .860000
2...................................................   .770884   .767376   .763876   .760384   .756900   .753424   .749956   .746496   .743044   .739600
3...................................................   .676836   .672221   .667628   .663055   .658503   .653972   .649462   .644973   .640504   .636056
4...................................................   .594262   .588866   .583507   .578184   .572898   .567648   .562434   .557256   .552114   .547008
5...................................................   .521762   .515847   .509985   .504176   .498421   .492718   .487068   .481469   .475923   .470427
6...................................................   .458107   .451882   .445727   .439642   .433626   .427679   .421801   .415990   .410245   .404567
7...................................................   .402218   .395848   .389565   .383368   .377255   .371226   .365279   .359415   .353631   .347928
8...................................................   .353147   .346763   .340480   .334297   .328212   .322224   .316332   .310535   .304830   .299218
9...................................................   .310063   .303764   .297579   .291507   .285544   .279690   .273944   .268302   .262764   .257327
10..................................................   .272236   .266098   .260084   .254194   .248423   .242771   .237235   .231813   .226502   .221302
11..................................................   .239023   .233102   .227314   .221657   .216128   .210725   .205446   .200286   .195245   .190319
12..................................................   .209862   .204197   .198672   .193285   .188032   .182910   .177916   .173047   .168301   .163675

[[Page 150]]

 
13..................................................   .184259   .178877   .173640   .168544   .163588   .158766   .154075   .149513   .145076   .140760
14..................................................   .161779   .156696   .151761   .146971   .142321   .137809   .133429   .129179   .125055   .121054
15..................................................   .142042   .137266   .132639   .128158   .123819   .119618   .115550   .111611   .107798   .104106
16..................................................   .124713   .120245   .115927   .111754   .107723   .103828   .100066   .096432   .092922   .089531
17..................................................   .109498   .105334   .101320   .097450   .093719   .090123   .086657   .083317   .080098   .076997
18..................................................   .096139   .092273   .088554   .084976   .081535   .078227   .075045   .071986   .069045   .066217
19..................................................   .084410   .080831   .077396   .074099   .070936   .067901   .064989   .062196   .059517   .056947
20..................................................   .074112   .070808   .067644   .064614   .061714   .058938   .056280   .053737   .051303   .048974
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(4.2)--With Interest at 4.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .989820                   .984755                  .981389
                   1                         2                   .996577                   .986432                   .981385                  .978030
                   2                         3                   .993166                   .983056                   .978026
                   3                         4                   .989767                   .979691                   .974679
                   4                         5                   .986380                   .976338
                   5                         6                   .983004                   .972996
                   6                         7                   .979639                   .969666
                   7                         8                   .976286
                   8                         9                   .972945
                   9                        10                   .969615
                  10                        11                   .966296
                  11                        12                   .962989
                  12      ........................               .959693
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(4.4)--With Interest at 4.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .989350                   .984054                  .980533
                   1                         2                   .996418                   .985806                   .980529                  .977021
                   2                         3                   .992849                   .982275                   .977017
                   3                         4                   .989293                   .978757                   .973517
                   4                         5                   .985749                   .975251
                   5                         6                   .982219                   .971758
                   6                         7                   .978700                   .968277
                   7                         8                   .975195
                   8                         9                   .971702
                   9                        10                   .968221
                  10                        11                   .964753
                  11                        12                   .961298
                  12      ........................               .957854
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 151]]


             Table F(4.6)--With Interest at 4.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .988882                   .983354                  .979680
                   1                         2                   .996259                   .985183                   .979676                  .976015
                   2                         3                   .992532                   .981498                   .976011
                   3                         4                   .988820                   .977826                   .972360
                   4                         5                   .985121                   .974168
                   5                         6                   .981436                   .970524
                   6                         7                   .977764                   .966894
                   7                         8                   .974107
                   8                         9                   .970463
                   9                        10                   .966832
                  10                        11                   .963216
                  11                        12                   .959613
                  12      ........................               .956023
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(4.8)--With Interest at 4.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .988415                   .982657                  .978830
                   1                         2                   .996101                   .984561                   .978825                  .975013
                   2                         3                   .992217                   .980722                   .975008
                   3                         4                   .988348                   .976898                   .971206
                   4                         5                   .984494                   .973089
                   5                         6                   .980655                   .969294
                   6                         7                   .976831                   .965515
                   7                         8                   .973022
                   8                         9                   .969228
                   9                        10                   .965448
                  10                        11                   .961684
                  11                        12                   .957934
                  12      ........................               .954198
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(5.0)--With Interest at 5.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .987950                   .981961                  .977982
                   1                         2                   .995942                   .983941                   .977977                  .974014
                   2                         3                   .991901                   .979949                   .974009
                   3                         4                   .987877                   .975973                   .970057
                   4                         5                   .983868                   .972013
                   5                         6                   .979876                   .968069
                   6                         7                   .975900                   .964141
                   7                         8                   .971940
                   8                         9                   .967997
                   9                        10                   .964069
                  10                        11                   .960157
                  11                        12                   .956261
                  12      ........................               .952381
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 152]]


             Table F(5.2)--With Interest at 5.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .987486                   .981268                  .977137
                   1                         2                   .995784                   .983323                   .977132                  .973018
                   2                         3                   .991587                   .979178                   .973012
                   3                         4                   .987407                   .975050                   .968911
                   4                         5                   .983244                   .970940
                   5                         6                   .979099                   .966847
                   6                         7                   .974972                   .962771
                   7                         8                   .970862
                   8                         9                   .966769
                   9                        10                   .962694
                  10                        11                   .958636
                  11                        12                   .954594
                  12      ........................               .950570
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(5.4)--With Interest at 5.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .987023                   .980577                  .976295
                   1                         2                   .995627                   .982707                   .976289                  .972026
                   2                         3                   .991273                   .978409                   .972019
                   3                         4                   .986938                   .974131                   .967769
                   4                         5                   .982622                   .969871
                   5                         6                   .978325                   .965629
                   6                         7                   .974047                   .961407
                   7                         8                   .969787
                   8                         9                   .965546
                   9                        10                   .961323
                  10                        11                   .957119
                  11                        12                   .952934
                  12      ........................               .948767
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(5.6)--With Interest at 5.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .986562                   .979888                  .975455
                   1                         2                   .995470                   .982092                   .975449                  .971036
                   2                         3                   .990960                   .977643                   .971029
                   3                         4                   .986470                   .973214                   .966630
                   4                         5                   .982001                   .968805
                   5                         6                   .977552                   .964416
                   6                         7                   .973124                   .960047
                   7                         8                   .968715
                   8                         9                   .964326
                   9                        10                   .959958
                  10                        11                   .955609
                  11                        12                   .951279
                  12      ........................               .946970
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 153]]


             Table F(5.8)--With Interest at 5.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2  Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .986102                   .979201                  .974618
                   1                         2                   .995313                   .981480                   .974611                  .970050
                   2                         3                   .990647                   .976879                   .970043
                   3                         4                   .986004                   .972300                   .965496
                   4                         5                   .981382                   .967743
                   5                         6                   .976782                   .963206
                   6                         7                   .972203                   .958692
                   7                         8                   .967646
                   8                         9                   .963111
                   9                        10                   .958596
                  10                        11                   .954103
                  11                        12                   .949631
                  12      ........................               .945180
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(6.0)--With Interest at 6.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2  Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .985643                   .978516                  .973784
                   1                         2                   .995156                   .980869                   .973776                  .969067
                   2                         3                   .990336                   .976117                   .969059
                   3                         4                   .985538                   .971389                   .964365
                   4                         5                   .980764                   .966684
                   5                         6                   .976014                   .962001
                   6                         7                   .971286                   .957341
                   7                         8                   .966581
                   8                         9                   .961899
                   9                        10                   .957239
                  10                        11                   .952603
                  11                        12                   .947988
                  12      ........................               .943396
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(6.2)--With Interest at 6.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .985185                   .977833                  .972952
                   1                         2                   .995000                   .980259                   .972944                  .968087
                   2                         3                   .990024                   .975358                   .968079
                   3                         4                   .985074                   .970481                   .963238
                   4                         5                   .980148                   .965628
                   5                         6                   .975247                   .960799
                   6                         7                   .970371                   .955995
                   7                         8                   .965519
                   8                         9                   .960691
                   9                        10                   .955887
                  10                        11                   .951107
                  11                        12                   .946352
                  12      ........................               .941620
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 154]]


             Table F(6.4)--With Interest at 6.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .984729                   .977152                  .972122
                   1                         2                   .994844                   .979652                   .972114                  .967110
                   2                         3                   .989714                   .974600                   .967101
                   3                         4                   .984611                   .969575                   .962115
                   4                         5                   .979534                   .964576
                   5                         6                   .974483                   .959602
                   6                         7                   .969458                   .954654
                   7                         8                   .964460
                   8                         9                   .959487
                   9                        10                   .954539
                  10                        11                   .949617
                  11                        12                   .944721
                  12      ........................               .939850
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(6.6)--With Interest at 6.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .984274                   .976473                  .971295
                   1                         2                   .994688                   .979046                   .971286                  .966136
                   2                         3                   .989404                   .973845                   .966127
                   3                         4                   .984149                   .968672                   .960995
                   4                         5                   .978921                   .963527
                   5                         6                   .973721                   .958408
                   6                         7                   .968549                   .953317
                   7                         8                   .963404
                   8                         9                   .958286
                   9                        10                   .953196
                  10                        11                   .948132
                  11                        12                   .943096
                  12      ........................               .938086
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(6.8)--With Interest at 6.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .983821                   .975796                  .970471
                   1                         2                   .994533                   .978442                   .970461                  .965165
                   2                         3                   .989095                   .973092                   .965156
                   3                         4                   .983688                   .967772                   .959879
                   4                         5                   .978309                   .962481
                   5                         6                   .972961                   .957219
                   6                         7                   .967641                   .951985
                   7                         8                   .962351
                   8                         9                   .957089
                   9                        10                   .951857
                  10                        11                   .946653
                  11                        12                   .941477
                  12      ........................               .936330
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 155]]


             Table F(7.0)--With Interest at 7.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2  Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .983368                   .975122                  .969649
                   1                         2                   .994378                   .977839                   .969639                  .964198
                   2                         3                   .988787                   .972342                   .964187
                   3                         4                   .983228                   .966875                   .958766
                   4                         5                   .977700                   .961439
                   5                         6                   .972203                   .956033
                   6                         7                   .966736                   .950658
                   7                         8                   .961301
                   8                         9                   .955896
                   9                        10                   .950522
                  10                        11                   .945178
                  11                        12                   .939864
                  12      ........................               .934579
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(7.2)--With Interest at 7.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2  Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .982917                   .974449                  .968830
                   1                         2                   .994223                   .977239                   .968819                  .963233
                   2                         3                   .988479                   .971593                   .963222
                   3                         4                   .982769                   .965980                   .957658
                   4                         5                   .977091                   .960400
                   5                         6                   .971446                   .954851
                   6                         7                   .965834                   .949335
                   7                         8                   .960255
                   8                         9                   .954707
                   9                        10                   .949192
                  10                        11                   .943708
                  11                        12                   .938256
                  12      ........................               .932836
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(7.4)--With Interest at 7.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .982467                   .973778                  .968013
                   1                         2                   .994068                   .976640                   .968002                  .962271
                   2                         3                   .988172                   .970847                   .962260
                   3                         4                   .982311                   .965088                   .956552
                   4                         5                   .976484                   .959364
                   5                         6                   .970692                   .953673
                   6                         7                   .964935                   .948017
                   7                         8                   .959211
                   8                         9                   .953521
                   9                        10                   .947866
                  10                        11                   .942243
                  11                        12                   .936654

[[Page 156]]

 
                  12      ........................               .931099
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(7.6)--With Interest at 7.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .982019                   .973109                  .967199
                   1                         2                   .993914                   .976042                   .967187                  .961313
                   2                         3                   .987866                   .970103                   .961301
                   3                         4                   .981854                   .964199                   .955451
                   4                         5                   .975879                   .958331
                   5                         6                   .969940                   .952499
                   6                         7                   .964037                   .946703
                   7                         8                   .958171
                   8                         9                   .952340
                   9                        10                   .946544
                  10                        11                   .940784
                  11                        12                   .935058
                  12      ........................               .929368
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(7.8)--With Interest at 7.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2  Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                 1.0000000                   .981571                   .972442                  .966387
                   1                         2                   .993761                   .975447                   .966374                  .960357
                   2                         3                   .987560                   .969361                   .960345
                   3                         4                   .981398                   .963312                   .954353
                   4                         5                   .975275                   .957302
                   5                         6                   .969190                   .951329
                   6                         7                   .963143                   .945393
                   7                         8                   .957133
                   8                         9                   .951161
                   9                        10                   .945227
                  10                        11                   .939329
                  11                        12                   .933468
                  12      ........................               .927644
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 157]]


             Table F(8.0)--With Interest at 8.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2  Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .981125                   .971777                  .965578
                   1                         2                   .993607                   .974853                   .965564                  .959405
                   2                         3                   .987255                   .968621                   .959392
                   3                         4                    980944                   .962429                   .953258
                   4                         5                   .974673                   .956276
                   5                         6                   .968442                   .950162
                   6                         7                   .962250                   .944088
                   7                         8                   .956099
                   8                         9                   .949987
                   9                        10                   .943913
                  10                        11                   .937879
                  11                        12                   .931883
                  12      ........................               .925926
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(8.2)--With Interest at 8.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2  Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .980680                   .971114                  .964771
                   1                         2                   .993454                   .974261                   .964757                  .958455
                   2                         3                   .986951                   .967883                   .958441
                   3                         4                   .980490                   .961547                   .952167
                   4                         5                   .974072                   .955253
                   5                         6                   .967695                   .949000
                   6                         7                   .961361                   .942788
                   7                         8                   .955068
                   8                         9                   .948816
                   9                        10                   .942605
                  10                        11                   .936434
                  11                        12                   .930304
                  12      ........................               .924214
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(8.2)--With Interest at 8.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2  Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .980237                   .970453                  .963966
                   1                         2                   .993301                   .973670                   .963952                  .957509
                   2                         3                   .986647                   .967148                   .957494
                   3                         4                   .980037                   .960669                   .951080
                   4                         5                   .973472                   .954233
                   5                         6                   .966951                   .947841
                   6                         7                   .960473                   .941491
                   7                         8                   .954039
                   8                         9                   .947648
                   9                        10                   .941300
                  10                        11                   .934994
                  11                        12                   .928731
                  12      ........................               .922509
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 158]]


             Table F(8.6)--With Interest at 8.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .979794                   .969794                  .963164
                   1                         2                   .993148                   .973081                   .963149                  .956565
                   2                         3                   .986344                   .966414                   .956550
                   3                         4                   .979586                   .959793                   .949996
                   4                         5                   .972874                   .953217
                   5                         6                   .966209                   .946686
                   6                         7                   .959589                   .940199
                   7                         8                   .953014
                   8                         9                   .946484
                   9                        10                   .940000
                  10                        11                   .933559
                  11                        12                   .927163
                  12      ........................               .920810
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(8.8)--With Interest at 8.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .979353                   .969136                  .962364
                   1                         2                   .992996                   .972494                   .962349                  .955624
                   2                         3                   .986041                   .965683                   .955609
                   3                         4                   .979135                   .958919                   .948916
                   4                         5                   .972278                   .952203
                   5                         6                   .965468                   .945534
                   6                         7                   .958706                   .938912
                   7                         8                   .951992
                   8                         9                   .945324
                   9                        10                   .938703
                  10                        11                   .932129
                  11                        12                   .925600
                  12      ........................               .919118
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(9.0)--With Interest at 9.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .978913                   .968481                  .961567
                   1                         2                   .992844                   .971908                   .961551                  .954686
                   2                         3                   .985740                   .964954                   .954670
                   3                         4                   .978686                   .958049                   .947839
                   4                         5                   .971683                   .951193
                   5                         6                   .964730                   .944387
                   6                         7                   .957826                   .937629
                   7                         8                   .950972
                   8                         9                   .944167
                   9                        10                   .937411
                  10                        11                   .930703
                  11                        12                   .924043
                  12      ........................               .917431
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 159]]


             Table F(9.2)--With Interest at 9.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .978474                   .967827                  .960772
                   1                         2                   .992693                   .971324                   .960755                  .953752
                   2                         3                   .985439                   .964226                   .953734
                   3                         4                   .978238                   .957180                   .946765
                   4                         5                   .971089                   .950186
                   5                         6                   .963993                   .943242
                   6                         7                   .956949                   .936350
                   7                         8                   .949956
                   8                         9                   .943014
                   9                        10                   .936123
                  10                        11                   .929283
                  11                        12                   .922492
                  12      ........................               .915751
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(9.4)--With Interest at 9.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .978037                   .967176                  .959980
                   1                         2                   .992541                   .970742                   .959962                  .952820
                   2                         3                   .985138                   .963501                   .952802
                   3                         4                   .977790                   .956315                   .945695
                   4                         5                   .970497                   .949182
                   5                         6                   .963258                   .942102
                   6                         7                   .956074                   .935075
                   7                         8                   .948942
                   8                         9                   .941865
                   9                        10                   .934839
                  10                        11                   .927867
                  11                        12                   .920946
                  12      ........................               .914077
--------------------------------------------------------------------------------------------------------------------------------------------------------


             Table F(9.6)--With Interest at 9.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .977600                   .966526                  .959190
                   1                         2                   .992390                   .970161                   .959171                  .951890
                   2                         3                   .984838                   .962778                   .951872
                   3                         4                   .977344                   .955452                   .944628
                   4                         5                   .969906                   .948181
                   5                         6                   .962526                   .940965
                   6                         7                   .955201                   .933805
                   7                         8                   .947932
                   8                         9                   .940718
                   9                        10                   .933560
                  10                        11                   .926455
                  11                        12                   .919405
                  12      ........................               .912409
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 160]]


             Table F(9.8)--With Interest at 9.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .977165                   .965878                  .958402
                   1                         2                   .992239                   .969582                   .958382                  .950964
                   2                         3                   .984539                   .962057                   .950945
                   3                         4                   .976898                   .954591                   .943565
                   4                         5                   .969317                   .947183
                   5                         6                   .961795                   .939832
                   6                         7                   .954331                   .932539
                   7                         8                   .946924
                   8                         9                   .939576
                   9                        10                   .932284
                  10                        11                   .925049
                  11                        12                   .917870
                  12      ........................               .910747
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(10.0)--With Interest at 10.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .976731                   .965232                  .957616
                   1                         2                   .992089                   .969004                   .957596                  .950041
                   2                         3                   .984240                   .961338                   .950021
                   3                         4                   .976454                   .953733                   .942505
                   4                         5                   .968729                   .946188
                   5                         6                   .961066                   .938703
                   6                         7                   .953463                   .931277
                   7                         8                   .945920
                   8                         9                   .938436
                   9                        10                   .931012
                  10                        11                   .923647
                  11                        12                   .916340
                  12      ........................               .909091
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(10.2)--With Interest at 10.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .976298                   .964588                  .956833
                   1                         2                   .991939                   .968428                   .956812                  .949120
                   2                         3                   .983943                   .960622                   .949099
                   3                         4                   .976011                   .952878                   .941448
                   4                         5                   .968143                   .945196
                   5                         6                   .960338                   .937577
                   6                         7                   .952597                   .930019
                   7                         8                   .944918
                   8                         9                   .937301
                   9                        10                   .929745
                  10                        11                   .922250
                  11                        12                   .914816
                  12      ........................               .907441
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 161]]


            Table F(10.4)--With Interest at 10.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .975867                   .963946                  .956052
                   1                         2                   .991789                   .967854                   .956031                  .948202
                   2                         3                   .983645                   .959907                   .948181
                   3                         4                   .975568                   .952025                   .940395
                   4                         5                   .967558                   .944208
                   5                         6                   .959613                   .936455
                   6                         7                   .951734                   .928765
                   7                         8                   .943919
                   8                         9                   .936168
                   9                        10                   .928481
                  10                        11                   .920858
                  11                        12                   .913296
                  12      ........................               .905797
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(10.6)--With Interest at 10.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .975436                   .963305                  .955274
                   1                         2                   .991639                   .967281                   .955252                  .947287
                   2                         3                   .983349                   .959194                   .947265
                   3                         4                   .975127                   .951174                   .939345
                   4                         5                   .966974                   .943222
                   5                         6                   .958890                   .935336
                   6                         7                   .950873                   .927516
                   7                         8                   .942923
                   8                         9                   .935039
                   9                        10                   .927222
                  10                        11                   .919470
                  11                        12                   .911782
                  12      ........................               .904159
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(10.8)--With Interest at 10.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .975007                   .962667                  .954498
                   1                         2                   .991490                   .966710                   .954475                  .946375
                   2                         3                   .983052                   .958483                   .946352
                   3                         4                   .974687                   .950327                   .938299
                   4                         5                   .966392                   .942239
                   5                         6                   .958168                   .934221
                   6                         7                   .950014                   .926271
                   7                         8                   .941930
                   8                         9                   .933914
                   9                        10                   .925966
                  10                        11                   .918086
                  11                        12                   .910273
                  12      ........................               .902527
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 162]]


            Table F(11.0)--With Interest at 11.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .974579                   .962030                  .953724
                   1                         2                   .991341                   .966140                   .953700                  .945466
                   2                         3                   .982757                   .957774                   .945442
                   3                         4                   .974247                   .949481                   .937255
                   4                         5                   .965811                   .941260
                   5                         6                   .957449                   .933109
                   6                         7                   .949158                   .925029
                   7                         8                   .940939
                   8                         9                   .932792
                   9                        10                   .924715
                  10                        11                   .916708
                  11                        12                   .908770
                  12      ........................               .900901
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(11.2)--With Interest at 11.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .974152                   .961395                  .952952
                   1                         2                   .991192                   .965572                   .952927                  .944559
                   2                         3                   .982462                   .957068                   .944534
                   3                         4                   .973809                   .948638                   .936215
                   4                         5                   .965232                   .940283
                   5                         6                   .956731                   .932001
                   6                         7                   .948304                   .923792
                   7                         8                   .939952
                   8                         9                   .931673
                   9                        10                   .923467
                  10                        11                   .915333
                  11                        12                   .907272
                  12      ........................               .899281
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(11.4)--With Interest at 11.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .973726                   .960762                  .952183
                   1                         2                   .991044                   .965005                   .952157                  .943655
                   2                         3                   .982168                   .956363                   .943630
                   3                         4                   .973372                   .947798                   .935178
                   4                         5                   .964654                   .939309
                   5                         6                   .956015                   .930896
                   6                         7                   .947452                   .922559
                   7                         8                   .938967
                   8                         9                   .930557
                   9                        10                   .922223
                  10                        11                   .913964
                  11                        12                   .905778
                  12      ........................               .897666
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 163]]


            Table F(11.6)--With Interest at 11.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .973302                   .960130                  .951416
                   1                         2                   .990896                   .964440                   .951389                  .942754
                   2                         3                   .981874                   .955660                   .942728
                   3                         4                   .972935                   .946959                   .934145
                   4                         5                   .964077                   .938338
                   5                         6                   .955300                   .929795
                   6                         7                   .946603                   .921330
                   7                         8                   .937985
                   8                         9                   .929445
                   9                        10                   .920984
                  10                        11                   .912599
                  11                        12                   .904290
                  12      ........................               .896057
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(11.8)--With Interest at 11.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period          Seminannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .972878                   .959501                  .950651
                   1                         2                   .990748                   .963877                   .950624                  .941855
                   2                         3                   .981582                   .954959                   .941828
                   3                         4                   .972500                   .946124                   .933114
                   4                         5                   .963502                   .937370
                   5                         6                   .954588                   .928698
                   6                         7                   .945756                   .920105
                   7                         8                   .937006
                   8                         9                   .928337
                   9                        10                   .919748
                  10                        11                   .911238
                  11                        12                   .902807
                  12      ........................               .894454
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(12.0)--With Interest at 12.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period          Seminannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .972456                   .958873                  .949888
                   1                         2                   .990600                   .963315                   .949860                  .940960
                   2                         3                   .981289                   .954260                   .940932
                   3                         4                   .972065                   .945290                   .932087
                   4                         5                   .962928                   .936405
                   5                         6                   .953877                   .927603
                   6                         7                   .944911                   .918884
                   7                         8                   .936029
                   8                         9                   .927231
                   9                        10                   .918515
                  10                        11                   .909882
                  11                        12                   .901329
                  12      ........................               .892857
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 164]]


            Table F(12.2)--With Interest at 12.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .972034                   .958247                  .949128
                   1                         2                   .990453                   .962754                   .949099                  .940067
                   2                         3                   .980997                   .953563                   .940038
                   3                         4                   .971632                   .944460                   .931063
                   4                         5                   .962356                   .935443
                   5                         6                   .953168                   .926512
                   6                         7                   .944069                   .917667
                   7                         8                   .935056
                   8                         9                   .926129
                   9                        10                   .917287
                  10                        11                   .908530
                  11                        12                   .899856
                  12      ........................               .891266
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(12.4)--With Interest at 12.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Montly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .971614                   .957623                  .948370
                   1                         2                   .990306                   .962195                   .948340                  .939176
                   2                         3                   .980706                   .952868                   .939147
                   3                         4                   .971199                   .943631                   .930043
                   4                         5                   .961785                   .934484
                   5                         6                   .952461                   .925425
                   6                         7                   .943228                   .916454
                   7                         8                   .934085
                   8                         9                   .925030
                   9                        10                   .916063
                  10                        11                   .907183
                  11                        12                   .898389
                  12      ........................               .889680
--------------------------------------------------------------------------------------------------------------------------------------------------------


            TABLE F(12.6)--With Interest at 12.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                but less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .971195                   .957000                  .947614
                   1                         2                   .990159                   .961638                   .947583                  .938289
                   2                         3                   .980416                   .952175                   .938258
                   3                         4                   .970768                   .942805                   .929025
                   4                         5                   .961215                   .933527
                   5                         6                   .951756                   .924341
                   6                         7                   .942390                   .915245
                   7                         8                   .933117
                   8                         9                   .923934
                   9                        10                   .914842
                  10                        11                   .905840
                  11                        12                   .896926

[[Page 165]]

 
                  12      ........................               .888099
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(12.8)--With Interest at 12.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                but less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .970777                   .956379                  .946860
                   1                         2                   .990013                   .961082                   .946828                  .937403
                   2                         3                   .980126                   .951484                   .937372
                   3                         4                   .970337                   .941981                   .928011
                   4                         5                   .960647                   .932574
                   5                         6                   .951053                   .923260
                   6                         7                   .941554                   .914040
                   7                         8                   .932151
                   8                         9                   .922842
                   9                        10                   .913625
                  10                        11                   .904501
                  11                        12                   .895468
                  12      ........................               .886525
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(13.0)--With Interest at 13.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .970360                   .955760                  .946108
                   1                         2                   .989867                   .960528                   .946075                  .936521
                   2                         3                   .979836                   .950795                   .936489
                   3                         4                   .969908                   .941160                   .926999
                   4                         5                   .960079                   .931623
                   5                         6                   .950351                   .922183
                   6                         7                   .940721                   .912838
                   7                         8                   .931188
                   8                         9                   .921753
                   9                        10                   .912412
                  10                        11                   .903167
                  11                        12                   .894015
                  12      ........................               .884956
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 166]]


            Table F(13.2)--With Interest at 13.2 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .969945                   .955143                  .945359
                   1                         2                   .989721                   .959975                   .945325                  .935641
                   2                         3                   .979548                   .950107                   .935608
                   3                         4                   .969479                   .940341                   .925991
                   4                         5                   .959514                   .930675
                   5                         6                   .949651                   .921109
                   6                         7                   .939889                   .911641
                   7                         8                   .930228
                   8                         9                   .920667
                   9                        10                   .911203
                  10                        11                   .901837
                  11                        12                   .892567
                  12      ........................               .883392
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(13.4)--With Interest at 13.4 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quaterly period           Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .969530                   .954527                  .944611
                   1                         2                   .989575                   .959423                   .944577                  .934764
                   2                         3                   .979260                   .949422                   .934730
                   3                         4                   .969051                   .939524                   .924986
                   4                         5                   .958949                   .929730
                   5                         6                   .948953                   .920038
                   6                         7                   .939060                   .910447
                   7                         8                   .929271
                   8                         9                   .919584
                   9                        10                   .909998
                  10                        11                   .900511
                  11                        12                   .891124
                  12      ........................               .881834
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(13.6)--With Interest at 13.6 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
  1  Number of months by which the valuation date                              2 Factors for payout at the end of each period
   for the first full taxable year of the trust    -----------------------------------------------------------------------------------------------------
             precedes the first payout
---------------------------------------------------       Annual period           Semiannual period         Quaterly period           Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .969117                   .953913                  .943866
                   1                         2                   .989430                   .958873                   .943831                  .933890
                   2                         3                   .978972                   .948738                   .933854
                   3                         4                   .968624                   .938710                   .923984
                   4                         5                   .958386                   .928788
                   5                         6                   .948256                   .918971
                   6                         7                   .938233                   .909257
                   7                         8                   .928316
                   8                         9                   .918504
                   9                        10                   .908796
                  10                        11                   .899190
                  11                        12                   .889686
                  12      ........................               .880282
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 167]]


            Table F(13.8)--With Interest at 13.8 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first full taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                             1                  1.000000                   .968704                   .953301                  .943123
                   1                         2                   .989285                   .958325                   .943087                  .933018
                   2                         3                   .978685                   .948056                   .932982
                   3                         4                   .968199                   .937898                   .922985
                   4                         5                   .957824                   .927849
                   5                         6                   .947561                   .917907
                   6                         7                   .937408                   .908072
                   7                         8                   .927364
                   8                         9                   .917428
                   9                        10                   .907598
                  10                        11                   .897873
                  11                        12                   .888252
                  12      ........................               .878735
--------------------------------------------------------------------------------------------------------------------------------------------------------


            Table F(14.0)--With Interest at 14.0 Percent, Showing Factors for Computation of the Adjusted Payout Rate for Certain Valuations
                                                            [Applicable after April 30, 1989]
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 Number of months by which the valuation date for                             2 Factors for payout at the end of each period
 the first rull taxable year of the trust precedes -----------------------------------------------------------------------------------------------------
                 the first payout
---------------------------------------------------       Annual period           Semiannual period         Quarterly period          Monthly period
        At least                But less than
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
                                             1                  1.000000                   .968293                   .952691                  .942382
                   1                         2                   .989140                   .957778                   .942345                  .932148
                   2                         3                   .978399                   .947377                   .932111
                   3                         4                   .967774                   .937088                   .921989
                   4                         5                   .957264                   .926912
                   5                         6                   .946868                   .916846
                   6                         7                   .936586                   .906889
                   7                         8                   .926415
                   8                         9                   .916354
                   9                        10                   .906403
                  10                        11                   .896560
                  11                        12                   .886824
                  12      ........................               .877193
--------------------------------------------------------------------------------------------------------------------------------------------------------

    (7) Actuarial Table U(1) for transfers for which the valuation date 
is after April 30, 1999. For transfers for which the valuation date is 
after April 30, 1999, the present value of a charitable remainder 
unitrust interest that is dependent on the termination of a life 
interest is determined by using the section 7520 rate, Table U(1) in 
this paragraph (e)(7), and Table F(4.2) through (14.0) in paragraph 
(e)(6) of this section. See, however, Sec. 1.7520-3(b) (relating to 
exceptions to the use of prescribed tables under certain circumstances). 
Many actuarial factors not contained in the following tables are 
contained in Internal Revenue Service Publication 1458, ``Actuarial 
Values, Book Beth,'' (7-1999). A copy of this publication is available 
for purchase from the Superintendent of Documents, United States 
Government Printing Office, Washington, DC 20402.

   Table U(1)--Based on Life Table 90CM Unitrust Single Life Remainder
          Factors Applicable For Transfers After April 30, 1999
                         [Adjusted payout rate]
 
 


[[Page 168]]


--------------------------------------------------------------------------------------------------------------------------------------------------------
                              Age                                 4.2%     4.4%     4.6%     4.8%     5.0%     5.2%     5.4%     5.6%     .8%      6.0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.............................................................   .06177   .05580   .05061   .04609   .04215   .03871   .03570   .03307   .03075   .02872
1.............................................................   .05543   .04925   .04388   .03919   .03509   .03151   .02838   .02563   .02321   .02109
2.............................................................   .05716   .05081   .04528   .04045   .03622   .03252   .02927   .02642   .02391   .02170
3.............................................................   .05920   .05268   .04699   .04201   .03765   .03382   .03046   .02750   .02490   .02260
4.............................................................   .06143   .05475   .04889   .04376   .03926   .03530   .03182   .02876   .02605   .02366
5.............................................................   .06384   .05697   .05095   .04567   .04103   .03694   .03334   .03016   .02735   .02487
6.............................................................   .06637   .05933   .05315   .04771   .04292   .03870   .03497   .03168   .02876   .02618
7.............................................................   .06905   .06183   .05547   .04987   .04494   .04058   .03673   .03332   .03029   .02761
8.............................................................   .07186   .06445   .05792   .05216   .04708   .04258   .03859   .03506   .03192   .02914
9.............................................................   .07482   .06722   .06052   .05460   .04936   .04471   .04060   .03694   .03369   .03079
10............................................................   .07793   .07015   .06327   .05718   .05179   .04700   .04274   .03896   .03559   .03259
11............................................................   .08120   .07323   .06617   .05991   .05435   .04942   .04502   .04111   .03762   .03450
12............................................................   .08461   .07645   .06920   .06277   .05706   .05197   .04744   .04339   .03978   .03655
13......................