Cal. Code Regs. tit. 18 § 13952.4

Current through Register 2024 Notice Reg. No. 45, November 8, 2024

Section 13952.4 - Estates, Income and Annuities for Period of Years

(a) The present value of an estate in property, the income from which is to be paid annually in the unfixed amount for a term of years is computed as follows:

(1) Consult Table B of Section 13953, and ascertain therefrom the income factor for a term of years in column 3 opposite the figure in column 1 representing the number of years for which the income is to continue.

(2) Multiply the appraised value of the property by the income factor obtained pursuant to step (1), which will give the present value of the estate for the term of years as of the date of the transferor's death.

(3) Present worth of the remainder interest in the property is determined simply by subtracting the present value of the estate for the term of years, as determined pursuant to step (2), from the appraised value of the property.

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

EXAMPLE.

Decedent bequeaths to A the possession, use and enjoyment of real property for seven years. At the end of the seventh year, the property is to be transferred to B. At decedent's date of death, A is 60 years of age and the real property is appraised at $50,000. By reference to Table B, the income factor for a term of years in column 3 opposite seven in column 1, representing the number of years for which the income is to continue, is found to be .334943. The present value of A's estate for the seven years is $16,747 ($50,000 x .334943). The present worth of B's remainder interest in the property as of the date of the decedent's death is $33,253 ($50,000 - $16,747).

(b) The formula set forth under subdivision (a) is also used for determining the present value of a fixed annual annuity payable for a term certain, except that in such case the annuity for a term certain factor in column 2 of Table B is substituted for the income factor in step (1) of the formula and the annuity is substituted for the appraised value of the property in step (2) of the formula. The provisions of this subdivision may be illustrated by the following example:

EXAMPLE.

Decedent bequeaths to A an annuity of $1,000 a year for seven years. Table B of Section 13953 indicates the annuity factor in column 2 opposite seven years is 5.5824. The present value of the annuity certain as of the date of the decedent's death is $5,582 ($1,000 x 5.5824).

(c) In determining the present value of a fixed annuity for a term certain, payable at regular intervals of less than one year, the aggregate amount to be paid within a year is first multiplied by the appropriate annuity factor for a term certain, in column 2 of Table B opposite the number of years in column 1 representing the term for which the annuity is to be paid, to arrive at the product representing the present value of the annuity payable at the end of each year for the term certain. The product so obtained is then multiplied by whichever of the following adjustment factors is applicable:

(1) 1.0148, if the annuity is payable semiannually.

(2) 1.0222, if the annuity is payable quarterly.

(3) 1.0272, if the annuity is payable monthly.

The provisions of subdivision (c) may be illustrated by the following example:

EXAMPLE.

Decedent bequeaths to A an annuity of $1,000 per annum, payable monthly, for a term of seven years. By reference to Table B, the annuity factor in column 2 opposite seven years in column 1 is found to be 5.5824. The aggregate annual amount, $1,000, is multiplied by the term certain annuity factor, 5.5824, and the product is multiplied by the monthly adjustment factor of 1.0272. The present value of A's annuity, payable monthly for a period of seven years, as of the date of the decedent's death is $5,734 ($1,000 x 5.5824 x 1.0272).

(d) If the first payment of a fixed annuity for a term certain is due at the beginning of the annual, semiannual, quarterly or monthly payment period, the present value of the annuity is determined by multiplying together the aggregate amount to be paid within any year, the appropriate annuity factor for term certain shown in Table B and whichever of the following factors is applicable:

(1) 1.0600, if the annuity is payable annually.

(2) 1.0448, if the annuity is payable semiannually.

(3) 1.0372, if the annuity is payable quarterly.

(4) 1.0322, if the annuity is payable monthly.

The provisions of subdivision (d) may be illustrated by the following example:

EXAMPLE.

Decedent bequeaths to A an annuity of $1,000 per annum, payable monthly, for a term of seven years with the proviso that A be entitled to the first payment thereof on the date of death. By reference to Table B, the annuity factor in column 2 opposite seven years in column 1 is found to be 5.5824. The aggregate annual amount, $1,000, is multiplied by the term certain annuity factor, 5.5824, and the product is multiplied by the monthly adjustment factor of 1.0322. The present value of A's annuity, as of the decedent's date of death is $5,762 ($1,000 x 5.5824 x 1.0322).

Thus, fixed annuities for a term certain, payable at the beginning of the annuity period, must be distinguished from both life annuities (see Section 13952.1) and fixed annuities payable at the end of the annuity term.

NOTE: Reference: Section 13952, Revenue and Taxation Code.

Cal. Code Regs. Tit. 18, § 13952.4