CFR > Title 26 - Internal Revenue > CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY > SUBCHAPTER A—INCOME TAX (Parts 1–19) > PART 1—INCOME TAXES > 1.170A-12T—Valuation of a remainder interest in real property for contributions made after July 31, 1969 (temporary).

1.170A-12T—Valuation of a remainder interest in real property for contributions made after July 31, 1969 (temporary).

(a) through (b)(1) [Reserved] For further guidance see § 1.170A-12(a) through (b)(1).
(b) (2) Computation of depreciation factor. If the valuation of the remainder interest in depreciable property is dependent upon the continuation of one life, a special factor must be used. The factor determined under this paragraph (b)(2) is carried to the fifth decimal place. The special factor is to be computed on the basis of the interest rate and life contingencies prescribed in § 20.2031-7T (or for periods before May 1, 2009, § 20.2031-7A) and on the assumption that the property depreciates on a straight-line basis over its estimated useful life. For transfers for which the valuation date is on or after May 1, 2009, special factors for determining the present value of a remainder interest following one life and an example describing the computation are contained in Internal Revenue Service Publication 1459, “Actuarial Valuations Version 3C” (2009). This publication will be available beginning May 1, 2009, at no charge, electronically via the IRS Internet site at http://www.irs.gov. For transfers for which the valuation date is after April 30, 1999, and before May 1, 2009, special factors for determining the present value of a remainder interest following one life and an example describing the computation are contained in Internal Revenue Service Publication 1459, “Actuarial Values, Book Gimel,” (7-99). For transfers for which the valuation date is after April 30, 1989, and before May 1, 1999, special factors for determining the present value of a remainder interest following one life and an example describing the computation are contained in Internal Revenue Service Publication 1459, “Actuarial Values, Gamma Volume,” (8-89). These publications are no longer available for purchase from the Superintendent of Documents, United States Government Printing Office. However, they may be obtained by requesting a copy from: CC:PA:LPD:PR (IRS Publication 1459), Room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. See, however, § 1.7520-3(b) (relating to exceptions to the use of prescribed tables under certain circumstances). Otherwise, in the case of the valuation of a remainder interest following one life, the special factor may be obtained through use of the following formula:
Where:
n = the estimated number of years of useful life,
i = the applicable interest rate under section 7520 of the Internal Revenue Code,
v = 1 divided by the sum of 1 plus the applicable interest rate under section 7520 of the Internal Revenue Code,
x = the age of the life tenant, and
lx = number of persons living at age x as set forth in Table 2000CM of § 20.2031-7T (or, for periods before May 1, 2009, the tables set forth under § 20.2031-7A).
(3) The following example illustrates the provisions of this paragraph

Code of Federal Regulations

(b): Example. A, who is 62, donates to Y University a remainder interest in a personal residence, consisting of a house and land, subject to a reserved life estate in A. At the time of the gift, the land has a value of $30,000 and the house has a value of $100,000 with an estimated useful life of 45 years, at the end of which period the value of the house is expected to be $20,000. The portion of the property considered to be depreciable is $80,000 (the value of the house ($100,000) less its expected value at the end of 45 years ($20,000)). The portion of the property considered to be nondepreciable is $50,000 (the value of the land at the time of the gift ($30,000) plus the expected value of the house at the end of 45 years ($20,000)). At the time of the gift, the interest rate prescribed under section 7520 is 8.4 percent. Based on an interest rate of 8.4 percent, the remainder factor for $1.00 prescribed in § 20.2031-7T(d) for a person age 62 is 0.26534. The value of the nondepreciable remainder interest is $13,267.00 (0.26534 times $50,000). The value of the depreciable remainder interest is $15,053.60 (0.18817, computed under the formula described in paragraph (b)(2) of this section, times $80,000). Therefore, the value of the remainder interest is $28,320.60.
Code of Federal Regulations 148
(c) through (e) [Reserved] For further guidance see § 1.170A-12(c) through (e).
(f) Effective/applicability date. Paragraphs (b)(2) and (b)(3) apply to all contributions made on or after May 1, 2009.
(g) Expiration date. Paragraphs (b)(2) and (b)(3) expire on or before May 1, 2012.

Code of Federal Regulations

[T.D. 9448, 74 FR 21440, May 7, 2009]