Ilene Ishi is planning to fund an irrevocable charitable remainder annuity trust with $100,000 of cash. She

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Ilene Ishi is planning to fund an irrevocable charitable remainder annuity trust with $100,000 of cash. She will designate her sister, age 60, to receive an annuity of $5,000 per year for 15 years and State University to receive the remainder at the end of the fifteenth year.
The valuation of the charitable portion of the transfer, according to Reg. Sec. 25.2522(c) 3(d)(2)(i), is to be determined under Reg. Sec. 1.664-2(c), an income tax regulation.
Regulation Sec. 1.664-2(c) provides that, in valuing the remainder interest, the donor may elect to use the Sec. 7520 interest rate for either of the two months preceding the month of the transfer as an alternative to using the rate for the actual month of transfer. Otherwise, the value will be determined by using the Sec. 7520 rate for the month of the transfer. Assume that in the month of the transfer the interest rate was 4% but that in the two preceding months the rate was 4.2%. Should the donor elect to calculate the value of the remainder interest by using the interest rate for one of the two preceding months? Explain your answer.
The 4.2% rate does not appear in the excerpts from the actuarial tables, but the absence of such rate from the tables will not preclude you from answering this question.
Annuity
An annuity is a series of equal payment made at equal intervals during a period of time. In other words annuity is a contract between insurer and insurance company in which insurer make a lump-sum payment or a series of payment and, in return,...
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Federal Taxation 2014 Comprehensive

ISBN: 9780133438598

27th Edition

Authors: Timothy J. Rupert, Thomas R. Pope, Kenneth E. Anderson

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