Friday April 26, 2024

Rev. Rul. 62-137

GiftLaw Note: Charities that issue charitable gift annuities sometimes reinsure their annuity obligation by purchasing a commercial annuity. If a charity agrees to reinsure a gift annuity as part of its agreement with a donor, the donor's charitable income tax deduction is reduced by the cost of the commercial annuity.

1962-2 C.B. 28, REV. RUL. 62-137

July, 1962

An organization, such as a corporation, trust, fund or foundation (other than a commercial insurance company), from time to time, enters into agreements to pay life annuities of a specified amount to individuals or to their designees in exchange for money or other property. Held, the annuity contracts issued by such an organization are sufficiently comparable to individual annuity contracts issued by commercial insurance companies to justify the application of a similar standard of valuation to both. See Anna L. Raymond v. Commissioner, 40 B.T.A. 244, affirmed 114 Fed. (2d) 140, certiorari denied, 311 U.S. 710. Accordingly, the annuity rates listed in the table below, which have been selected as representative of the annuity rates currently charged by leading commercial insurance companies for individual contracts, will be used as the standard for valuing currently issued annuities (single life) for Federal tax purposes. It must be realized, however, that the table is subject to change depending upon market conditions. Notice of change will be given by publication in the Internal Revenue Bulletin.

If the agreement provides for an annuity which is not a single life annuity, then appropriate rates, comparable to the single-life rates shown in the table below, shall be used in the valuation. In the case of a completed transaction involving such an annuity, the Commissioner of Internal Revenue, Washington 25, D.C., will furnish the rate to the taxpayer concerned upon request. The request must be accompanied by a statement of the date of birth of each annuitant and by copies of the relevant instruments.

The values prescribed herein will apply even though the annuity contract to be valued (or any other contract) is reinsured or coinsured with a commercial insurance company, unless the agreement provides that all or a specified portion of the annuity obligation has been 29 reinsured by a designated commercial insurance company. In such case, the designated commercial insurance company's individual annuity rate for a comparable contract will be used for the amount of the obligation so reinsured, and the values prescribed herein will apply to any balance of the obligation.

The values prescribed herein will apply for the purpose of determining the aggregate amount of consideration paid for the contract (investment in the contract) for purposes of section 72 of the Internal Revenue Code of 1954.

The provisions of this Revenue Ruling apply to annuity contracts issued by such organizations on or after September 6, 1962, which is 10 days after the date of publication in the Internal Revenue Bulletin. The value of an annuity contract based on any acceptable table prior to the above date will not be changed.

FAIR MARKET VALUE OF ANNUITIES ISSUED BY ORGANIZATIONS (OTHER THAN COMMERCIAL INSURANCE COMPANIES) ON OR AFTER SEPTEMBER 6, 1962

Single Life Rates

Rates for immediate annuity of $1.00 per annum

	Rate			Rate			Rate
Age	Male	Female	Age	Male	Female	Age	Male	Female
32	22.812	25.063	50	17.311	19.468	68	10.266	12.078
33	22.566	24.809	51	16.950	19.094	69	9.889	11.627
34	22.312	24.550	52	16.586	18.714	70	9.512	11.172
35	22.052	24.284	53	16.217	18.331	71	9.143	10.715
36	21.785	24.012	54	15.845	17.942	72	8.775	10.256
37	21.510	23.734	55	15.469	17.550	73	8.408	9.879
38	21.228	23.449	56	15.089	17.154	74	8.043	9.502
39	20.940	23.158	57	14.705	16.754	75	7.682	9.125
40	20.643	22.858	58	14.317	16.351	76	7.323	8.749
41	20.339	22.552	59	13.924	15.942	77	6.970	8.374
42	20.027	22.239	60	13.526	15.531	78	6.622	8.001
43	19.707	21.919	61	13.125	15.116	79	6.281	7.632
44	19.382	21.590	62	12.717	14.696	80	5.946	7.266
45	19.049	21.255	63	12.306	14.271	81	5.619	6.905
46	18.710	20.911	64	11.889	13.842	82	5.299	6.549
47	18.368	20.560	65	11.469	13.409	83	4.989	6.200
48	18.019	20.203	66	11.046	12.970	84	4.688	5.857
49	17.667	19.838	67	10.641	12.527	85	4.397	5.522

The above table gives the rate for a life annuity of $1.00 per annum in annual installments, first payment one year hence. To obtain the rate for an annuity of $1.00 per annum payable in installments at the end of each: (a) monthly period, add $0.482 to the tabular rate. (b) quarterly period, add $0.395 to the tabular rate. (c) semi-annual period, add $0.263 to the tabular rate. For example, the rate for an annuity of $1.00 per annum payable at the end of each quarter during the life of a male aged 56 is $15.089 plus $0.395 or $15.484.