Last updated on April 1st, 2024 at 10:32 pm
Title 26—Internal Revenue–Volume 2
CHAPTER I—INTERNAL REVENUE SERVICE, DEPARTMENT OF THE TREASURY (CONTINUED)
SUBCHAPTER A—INCOME TAX (CONTINUED)
PART 1—INCOME TAXES (CONTINUED)
Section 1.61-2T also issued under 26 U.S.C. 61. Section 1.61-21 also issued under 26 U.S.C. 61. Sections 1.62-1T and 1.62-2 also issued under 26 U.S.C. 62. Section 1.66-4 also issued under 26 U.S.C. 66(c); Sections 1.67-2T and 1.67-3T also issued under 26 U.S.C. 67(c). Section 1.67-3 also issued under 26 U.S.C. 67(c). Section 1.67-4 also issued under 26 U.S.C. 67(e). Sections 1.72-4, 1.72-5, 1.72-6, 1.72-7, 1.72-8, and 1.72-11 also issued under 26 U.S.C. 72(c). Section 1.78-1 also issued under 26 U.S.C. 245A(g). Section 1.101-7 also issued under 26 U.S.C. 101(d)(2)(B)(ii). Section 1.103-10 also issued under 26 U.S.C. 103(b)(6). Section 1.103A-2 also issued under 26 U.S.C. 103A(j). Section 1.108-1 also issued under 26 U.S.C. 108(e)(8) and 108(e)(10(B). Section 1.108-2 also issued under 26 U.S.C. 108. Section 1.108-3 also issued under 26 U.S.C. 108, 267, and 1502. Section 1.108-4 also issued under 26 U.S.C. 108. Section 1.108-5 also issued under 26 U.S.C. 108. Section 1.108(c)-1 also issued under the authority of 26 U.S.C. 108(d)(9). Section 1.108(i)-0 also issued under 26 U.S.C. 108(i)(7) and 1502. Section 1.108(i)-1 also issued under 26 U.S.C. 108(i)(7) and 1502. Section 1.108(i)-2 also issued under 26 U.S.C. 108(i)(7). Section 1.108(i)-3 also issued under 26 U.S.C. 108(i)(7) and 1502. Section 1.110-1 also issued under 26 U.S.C. 110(d). Sections 1.132-0 through 1.132-8T also issued under 26 U.S.C. 132.
COMPUTATION OF TAXABLE INCOME
Definition of Gross Income, Adjusted Gross Income, and Taxable Income
§ 1.61-1 Gross income.
(a) General definition. Gross income means all income from whatever source derived, unless excluded by law. Gross income includes income realized in any form, whether in money, property, or services. Income may be realized, therefore, in the form of services, meals, accommodations, stock, or other property, as well as in cash. Section 61 lists the more common items of gross income for purposes of illustration. For purposes of further illustration, § 1.61-14 mentions several miscellaneous items of gross income not listed specifically in section 61. Gross income, however, is not limited to the items so enumerated.
(b) Cross references. Cross references to other provisions of the Code are to be found throughout the regulations under section 61. The purpose of these cross references is to direct attention to the more common items which are included in or excluded from gross income entirely, or treated in some special manner. To the extent that another section of the Code or of the regulations thereunder, provides specific treatment for any item of income, such other provision shall apply notwithstanding section 61 and the regulations thereunder. The cross references do not cover all possible items.
(1) For examples of items specifically included in gross income, see Part II (section 71 and following), Subchapter B, Chapter 1 of the Code.
(2) For examples of items specifically excluded from gross income, see part III (section 101 and following), Subchapter B, Chapter 1 of the Code.
(3) For general rules as to the taxable year for which an item is to be included in gross income, see section 451 and the regulations thereunder.
§ 1.61-2 Compensation for services, including fees, commissions, and similar items.
(a) In general. (1) Wages, salaries, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips, bonuses (including Christmas bonuses), termination or severance pay, rewards, jury fees, marriage fees and other contributions received by a clergyman for services, pay of persons in the military or naval forces of the United States, retired pay of employees, pensions, and retirement allowances are income to the recipients unless excluded by law. Several special rules apply to members of the Armed Forces, National Oceanic and Atmospheric Administration, and Public Health Service of the United States; see paragraph (b) of this section.
(2) The Code provides special rules including the following items in gross income:
(i) Distributions from employees’ trusts, see sections 72, 402, and 403, and the regulations thereunder;
(ii) Compensation for child’s services (in child’s gross income), see section 73 and the regulations thereunder;
(iii) Prizes and awards, see section 74 and the regulations thereunder.
(3) Similarly, the Code provides special rules excluding the following items from gross income in whole or in part:
(i) Gifts, see section 102 and the regulations thereunder;
(ii) Compensation for injuries or sickness, see section 104 and the regulations thereunder;
(iii) Amounts received under accident and health plans, see section 105 and the regulations thereunder;
(iv) Scholarship and fellowship grants, see section 117 and the regulations thereunder;
(v) Miscellaneous items, see section 122.
(b) Members of the Armed Forces, National Oceanic and Atmospheric Administration, and Public Health Service. (1) Subsistence and uniform allowances granted commissioned officers, chief warrant officers, warrant officers, and enlisted personnel of the Armed Forces, National Oceanic and Atmospheric Administration, and Public Health Service of the United States, and amounts received by them as commutation of quarters, are excluded from gross income. Similarly, the value of quarters or subsistence furnished to such persons is excluded from gross income.
(2) For purposes of this section, quarters or subsistence includes the following allowances for expenses incurred after December 31, 1993, by members of the Armed Forces, members of the commissioned corps of the National Oceanic and Atmospheric Administration, and members of the commissioned corps of the Public Health Service, to the extent that the allowances are not otherwise excluded from gross income under another provision of the Internal Revenue Code: a dislocation allowance, authorized by 37 U.S.C. 407; a temporary lodging allowance, authorized by 37 U.S.C. 405; a temporary lodging expense, authorized by 37 U.S.C. 404a; and a move-in housing allowance, authorized by 37 U.S.C. 405. No deduction is allowed under this chapter for any expenses reimbursed by such excluded allowances. For the exclusion from gross income of—
(i) Disability pensions, see section 104(a)(4) and the regulations thereunder;
(ii) Miscellaneous items, see section 122.
(3) The per diem or actual expense allowance, the monetary allowance in lieu of transportation, and the mileage allowance received by members of the Armed Forces, National Oceanic and Atmospheric Administration, and the Public Health Service, while in a travel status or on temporary duty away from their permanent stations, are included in their gross income except to the extent excluded under the accountable plan provisions of § 1.62-2.
(c) Payment to charitable, etc., organization on behalf of person rendering services. The value of services is not includible in gross income when such services are rendered directly and gratuitously to an organization described in section 170(c). Where, however, pursuant to an agreement or understanding, services are rendered to a person for the benefit of an organization described in section 170(c) and an amount for such services is paid to such organization by the person to whom the services are rendered, the amount so paid constitutes income to the person performing the services.
(d) Compensation paid other than in cash—(1) In general. Except as otherwise provided in paragraph (d)(6)(i) of this section (relating to certain property transferred after June 30, 1969), if services are paid for in property, the fair market value of the property taken in payment must be included in income as compensation. If services are paid for in exchange for other services, the fair market value of such other services taken in payment must be included in income as compensation. If the services are rendered at a stipulated price, such price will be presumed to be the fair market value of the compensation received in the absence of evidence to the contrary. For special rules relating to certain options received as compensation, see §§ 1.61-15, 1.83-7, and section 421 and the regulations thereunder. For special rules relating to premiums paid by an employer for an annuity contract which is not subject to section 403(a), see section 403(c) and the regulations thereunder and § 1.83-8(a). For special rules relating to contributions made to an employees’ trust which is not exempt under section 501, see section 402(b) and the regulations thereunder and § 1.83-8(a).
(2) Property transferred to employee or independent contractor. (i) Except as otherwise provided in section 421 and the regulations thereunder and § 1.61-15 (relating to stock options), and paragraph (d)(6)(i) of this section, if property is transferred by an employer to an employee or if property is transferred to an independent contractor, as compensation for services, for an amount less than its fair market value, then regardless of whether the transfer is in the form of a sale or exchange, the difference between the amount paid for the property and the amount of its fair market value at the time of the transfer is compensation and shall be included in the gross income of the employee or independent contractor. In computing the gain or loss from the subsequent sale of such property, its basis shall be the amount paid for the property increased by the amount of such difference included in gross income
(ii)(A) Cost of life insurance on the life of the employee. Generally, life insurance premiums paid by an employer on the life of his employee where the proceeds of such insurance are payable to the beneficiary of such employee are part of the gross income of the employee. However, the amount includible in the employee’s gross income is determined with regard to the provisions of section 403 and the regulations thereunder in the case of an individual contract issued after December 31, 1962, or a group contract, which provides incidental life insurance protection and which satisfies the requirements of section 401(g) and § 1.401-9, relating to the nontransferability of annuity contracts. For example, if an employee or independent contractor is the owner (as defined in § 1.61-22(c)(1)) of a life insurance contract and the payments with regard to such contract are not split-dollar loans under § 1.7872-15(b)(1), the employee or independent contractor must include in income the amount of any such payments by the employer or service recipient with respect to such contract during any year to the extent that the employee’s or independent contractor’s rights to the life insurance contract are substantially vested (within the meaning of § 1.83-3(b)). This result is the same regardless of whether the employee or independent contractor has at all times been the owner of the life insurance contract or the contract previously has been owned by the employer or service recipient as part of a split-dollar life insurance arrangement (as defined in § 1.61-22(b)(1) or (2)) and was transferred by the employer or service recipient to the employee or independent contractor under § 1.61-22(g). For the special rules relating to the includibility in an employee’s gross income of an amount equal to the cost of certain group term life insurance on the employee’s life which is carried directly or indirectly by his employer, see section 79 and the regulations thereunder. For special rules relating to the exclusion of contributions by an employer to accident and health plans for the employee, see section 106 and the regulations thereunder.
(B) Cost of group-term life insurance on the life of an individual other than an employee. The cost (determined under paragraph (d)(2) of § 1.79-3) of group-term life insurance on the life of an individual other than an employee (such as the spouse or dependent of the employee) provided in connection with the performance of services by the employee is includible in the gross income of the employee.
(3) Meals and living quarters. The value of living quarters or meals which an employee receives in addition to his salary constitutes gross income unless they are furnished for the convenience of the employer and meet the conditions specified in section 119 and the regulations thereunder. For the treatment of rental value of parsonages or rental allowance paid to ministers, see section 107 and the regulations thereunder; for the treatment of statutory subsistence allowances received by police, see section 120 and the regulations thereunder.
(4) Stock and notes transferred to employee or independent contractor. Except as otherwise provided by section 421 and the regulations thereunder and § 1.61-15 (relating to stock options), and paragraph (d)(6)(i) of this section, if a corporation transfers its own stock to an employee or independent contractor as compensation for services, the fair market value of the stock at the time of transfer shall be included in the gross income of the employee or independent contractor. Notes or other evidences of indebtedness received in payment for services constitute income in the amount of their fair market value at the time of the transfer. A taxpayer receiving as compensation a note regarded as good for its face value at maturity, but not bearing interest, shall treat as income as of the time of receipt its fair discounted value computed at the prevailing rate. As payments are received on such a note, there shall be included in income that portion of each payment which represents the proportionate part of the discount originally taken on the entire note.
(5) Property transferred on or before June 30, 1969, subject to restrictions. Notwithstanding paragraph (d) (1), (2), or (4) of this section, if any property is transferred after September 24, 1959, by an employer to an employee or independent contractor as compensation for services, and such property is subject to a restriction which has a significant effect on its value at the time of transfer, the rules of § 1.421-6(d)(2) shall apply in determining the time and the amount of compensation to be included in the gross income of the employee or independent contractor. This (5) is also applicable to transfers subject to a restriction which has a significant effect on its value at the time of transfer and to which § 1.83-8(b) (relating to transitional rules with respect to transfers of restricted property) applies. For special rules relating to options to purchase stock or other property which are issued as compensation for services, see § 1.61-15 and section 421 and the regulations thereunder.
(6) Certain property transferred, premiums paid, and contributions made in connection with the performance of services after June 30, 1969—(i) Exception. Paragraph (d) (1), (2), (4), and (5) of this section and § 1.61-15 do not apply to the transfer of property (as defined in § 1.83-3(e)) after June 30, 1969, unless § 1.83-8 (relating to the applicability of section 83 and transitional rules) applies. If section 83 applies to a transfer of property, and the property is not subject to a restriction that has a significant effect on the fair market value of such property, then the rules contained in paragraph (d) (1), (2), and (4) of this section and § 1.61-15 shall also apply to such transfer to the extent such rules are not inconsistent with section 83.
(ii) Cross references. For rules relating to premiums paid by an employer for an annuity contract which is not subject to section 403(a), see section 403(c) and the regulations thereunder. For rules relating to contributions made to an employees’ trust which is not exempt under section 501(a), see section 402(b) and the regulations thereunder.
§ 1.61-3 Gross income derived from business.
(a) In general. In a manufacturing, merchandising, or mining business, “gross income” means the total sales, less the cost of goods sold, plus any income from investments and from incidental or outside operations or sources. Gross income is determined without subtraction of depletion allowances based on a percentage of income to the extent that it exceeds cost depletion which may be required to be included in the amount of inventoriable costs as provided in § 1.471-11 and without subtraction of selling expenses, losses or other items not ordinarily used in computing costs of goods sold or amounts which are of a type for which a deduction would be disallowed under section 162 (c), (f), or (g) in the case of a business expense. The cost of goods sold should be determined in accordance with the method of accounting consistently used by the taxpayer. Thus, for example, an amount cannot be taken into account in the computation of cost of goods sold any earlier than the taxable year in which economic performance occurs with respect to the amount (see § 1.446-1(c)(1)(ii)).
(b) State contracts. The profit from a contract with a State or political subdivision thereof must be included in gross income. If warrants are issued by a city, town, or other political subdivision of a State, and are accepted by the contractor in payment for public work done, the fair market value of such warrants should be returned as income. If, upon conversion of the warrants into cash, the contractor does not receive and cannot recover the full value of the warrants so returned, he may deduct any loss sustained from his gross income for the year in which the warrants are so converted. If, however, he realizes more than the value of the warrants so returned, he must include the excess in his gross income for the year in which realized.
§ 1.61-4 Gross income of farmers.
(a) Farmers using the cash method of accounting. A farmer using the cash receipts and disbursements method of accounting shall include in his gross income for the taxable year—
(1) The amount of cash and the value of merchandise or other property received during the taxable year from the sale of livestock and produce which he raised,
(2) The profits from the sale of any livestock or other items which were purchased,
(3) All amounts received from breeding fees, fees from rent of teams, machinery, or land, and other incidental farm income,
(4) All subsidy and conservation payments received which must be considered as income, and
(5) Gross income from all other sources.
(b) Farmers using an accrual method of accounting. A farmer using an accrual method of accounting must use inventories to determine his gross income. His gross income on an accrual method is determined by adding the total of the items described in subparagraphs (1) through (5) of this paragraph and subtracting therefrom the total of the items described in subparagraphs (6) and (7) of this paragraph. These items are as follows:
(1) The sales price of all livestock and other products held for sale and sold during the year;
(2) The inventory value of livestock and products on hand and not sold at the end of the year;
(3) All miscellaneous items of income, such as breeding fees, fees from the rent of teams, machinery, or land, or other incidental farm income;
(4) Any subsidy or conservation payments which must be considered as income;
(5) Gross income from all other sources;
(6) The inventory value of the livestock and products on hand and not sold at the beginning of the year; and
(7) The cost of any livestock or products purchased during the year (except livestock held for draft, dairy, or breeding purposes, unless included in inventory).
(c) Special rules for certain receipts. In the case of the sale of machinery, farm equipment, or any other property (except stock in trade of the taxpayer, or property of a kind which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year, or property held by the taxpayer primarily for sale to customers in the ordinary course of his trade or business), any excess of the proceeds of the sale over the adjusted basis of such property shall be included in the taxpayer’s gross income for the taxable year in which such sale is made. See, however, section 453 and the regulations thereunder for special rules relating to certain installment sales. If farm produce is exchanged for merchandise, groceries, or the like, the market value of the article received in exchange is to be included in gross income. Proceeds of insurance, such as hail or fire insurance on growing crops, should be included in gross income to the extent of the amount received in cash or its equivalent for the crop injured or destroyed. See section 451(d) for special rule relating to election to include crop insurance proceeds in income for taxable year following taxable year of destruction. For taxable years beginning after July 12, 1972, where a farmer is engaged in producing crops and the process of gathering and disposing of such crops is not completed within the taxable year in which such crops are planted, the income therefrom may, with the consent of the Commissioner (see section 446 and the regulations thereunder), be computed upon the crop method. For taxable years beginning on or before July 12, 1972, where a farmer is engaged in producing crops which take more than a year from the time of planting to the time of gathering and disposing, the income therefrom may, with the consent of the Commissioner (see section 446 and the regulations thereunder), be computed upon the crop method. In any case in which the crop method is used, the entire cost of producing the crop must be taken as a deduction for the year in which the gross income from the crop is realized, and not earlier.
(d) Definition of “farm”. As used in this section, the term “farm” embraces the farm in the ordinarily accepted sense, and includes stock, dairy, poultry, fruit, and truck farms; also plantations, ranches, and all land used for farming operations. All individuals, partnerships, or corporations that cultivate, operate, or manage farms for gain or profit, either as owners or tenants, are designated as farmers. For more detailed rules with respect to the determination of whether or not an individual is engaged in farming, see § 1.175-3. For rules applicable to persons cultivating or operating a farm for recreation or pleasure, see sections 162 and 165, and the regulations thereunder.
(e) Cross references. (1) For election to include Commodity Credit Corporation loans as income, see section 77 and regulations thereunder.
(2) For definition of gross income derived from farming for purposes of limiting deductibility of soil and water conservation expenditures, see section 175 and regulations thereunder.
(3) For definition of gross income from farming in connection with declarations of estimated income tax, see section 6073 and regulations thereunder.
§ 1.61-5 Allocations by cooperative associations; per-unit retain certificates—tax treatment as to cooperatives and patrons.
(a) In general. Amounts allocated on the basis of the business done with or for a patron by a cooperative association, whether or not entitled to tax treatment under section 522, in cash, merchandise, capital stock, revolving fund certificates, retain certificates, certificates of indebtedness, letters of advice or in some other manner disclosing to the patron the dollar amount allocated, shall be included in the computation of the gross income of such patron for the taxable year in which received to the extent prescribed in paragraph (b) of this section, regardless of whether the allocation is deemed, for the purpose of section 522, to be made at the close of a preceding taxable year of the cooperative association. The determination of the extent of taxability of such amounts is in no way dependent upon the method of accounting employed by the patron or upon the method, cash, accrual, or otherwise, upon which the taxable income of such patron is computed.
(b) Extent of taxability. (1) Amounts allocated to a patron on a patronage basis by a cooperative association with respect to products marketed for such patron, or with respect to supplies, equipment, or services, the cost of which was deductible by the patron under section 162 or section 212, shall be included in the computation of the gross income of such patron, as ordinary income, to the following extent:
(i) If the allocation is in cash, the amount of cash received.
(ii) If the allocation is in merchandise, the amount of the fair market value of such merchandise at the time of receipt by the patron.
(iii) If the allocation is in the form of revolving fund certificates, retain certificates, certificates of indebtedness, letters of advice, or similar documents, the amount of the fair market value of such document at the time of its receipt by the patron. For purposes of this subdivision, any document containing an unconditional promise to pay a fixed sum of money on demand or at a fixed or determinable time shall be considered to have a fair market value at the time of its receipt by the patron, unless it is clearly established to the contrary. However, for purposes of this subdivision, any document which is payable only in the discretion of the cooperative association, or which is otherwise subject to conditions beyond the control of the patron, shall be considered not to have any fair market value at the time of its receipt by the patron, unless it is clearly established to the contrary.
(iv) If the allocation is in the form of capital stock, the amount of the fair market value, if any, of such capital stock at the time of its receipt by the patron.
(2) If any allocation to which subparagraph (1) of this paragraph applies is received in the form of a document of the type described in subparagraph (1) (iii) or (iv) of this paragraph and is redeemed in full or in part or is otherwise disposed of, there shall be included in the computation of the gross income of the patron, as ordinary income, in the year of redemption or other disposition, the excess of the amount realized on the redemption or other disposition over the amount previously included in the computation of gross income under such subparagraph.
(3)(i) Amounts which are allocated on a patronage basis by a cooperative association with respect to supplies, equipment, or services, the cost of which was not deductible by the patron under section 162 or section 212, are not includible in the computation of the gross income of such patron. However, in the case of such amounts which are allocated with respect to capital assets (as defined in section 1221) or property used in the trade or business within the meaning of section 1231, such amounts shall, to the extent set forth in subparagraph (1) of this paragraph, be taken into account by such patron in determining the cost of the property to which the allocation relates. Notwithstanding the preceding sentence, to the extent that such amounts are in excess of the unrecovered cost of such property, and to the extent that such amounts relate to such property which the patron no longer owns, they shall be included in the computation of the gross income of such patron.
(ii) If any patronage dividend is allocated to the patron in the form of a document of the type described in subparagraph (1) (iii) or (iv) of this paragraph, and if such allocation is with respect to capital assets (as defined in section 1221) or property used in the trade or business within the meaning of section 1231, any amount realized on the redemption or other disposition of such document which is in excess of the amount which was taken into account upon the receipt of the document by the patron shall be taken into account by such patron in the year of redemption or other disposition as an adjustment to basis or as an inclusion in the computation of gross income, as the case may be.
(iii) Any adjustment to basis in respect of an amount to which subdivision (i) or (ii) of this subparagraph applies shall be made as of the first day of the taxable year in which such amount is received.
(iv) The application of the provisions of this subparagraph may be illustrated by the following examples:
| Cost of tractor, July 1, 1959 | $2,200 | |
| Less: | ||
| Depreciation for 1959 (6 mos.) | $200 | |
| Adjustment as of Jan. 1, 1960, for cash patronage dividend | 300 | |
| Salvage value | 200 | |
| 700 | ||
| Basis for depreciation for the remaining 4 | 1,500 | |
| Basis for depreciation divided by the 4 | 333.33 | |
| Cost of tractor, July 1, 1959 | $2,200 | |
| Less: | ||
| Depreciation for 1959 (6 mos.) | $200 | |
| Depreciation for 1960 | 400 | |
| Depreciation for 1961 | 400 | |
| 1,000 | ||
| Unrecovered cost on Jan. 1, 1962 | 1,200 | |
| Adjustment as of Jan. 1, 1962, for proceeds of the redemption of the revolving fund certificate | 300 | |
| Unrecovered cost on Jan. 1, 1962, after adjustment | 900 | |
| Less: Salvage value | 200 | |
| Basis for depreciation on Jan. 1, 1962 | 700 | |
| If P uses the tractor in his business until June 30, 1964, he would be entitled to the following depreciation allowances with respect to the tractor: | ||
| For 1962 | 280 | |
| For 1963 | 280 | |
| For 1964 (6 mos.) | 140 | |
| 700 | ||
| Balance to be depreciated | 0 | |
(c) Special rule. If, for any taxable year ending before December 3, 1959, a taxpayer treated any patronage dividend received in the form of a document described in paragraph (b) (1) (iii) or (iv) of this section in accordance with the regulations then applicable (whether such dividend is subject to paragraph (b) (1) or (3) of this section), such taxpayer is not required to change the treatment of such patronage dividends for any such prior taxable year. On the other hand, the taxpayer may, if he so desires, amend his income tax returns to treat the receipt of such patronage dividend in accordance with the provisions of this section, but no provision in this paragraph shall be construed as extending the period of limitations within which a claim for credit or refund may be filed under section 6511.
(d) Per-unit retain certificates; tax treatment of cooperative associations; distribution and reinvestment alternative. (1)(i) In the case of a taxable year to which this paragraph applies to a cooperative association, such association shall, in computing the amount paid or returned to a patron with respect to products marketed for such patron, take into account the stated dollar amount of any per-unit retain certificate (as defined in paragraph (g) of this section)—
(a) Which is issued during the payment period for such year (as defined in subparagraph (3) of this paragraph) with respect to such products,
(b) With respect to which the patron is a qualifying patron (as defined in subparagraph (2) of this paragraph), and
(c) Which clearly states the fact that the patron has agreed to treat the stated dollar amount thereof as representing a cash distribution to him which he has reinvested in the cooperative association.
(ii) No amount shall be taken into account by a cooperative association by reason of the issuance of a per-unit retain certificate to a patron who was not a qualifying patron with respect to such certificate. However, any amount paid in redemption of a per-unit retain certificate which was issued to a patron who was not a qualifying patron with respect to such certificate shall be taken into account by the cooperative in the year of redemption, as an amount paid or returned to such patron with respect to products marketed for him. This subdivision shall apply only to per-unit retain certificates issued with respect to taxable years of the cooperative association to which this paragraph applied to the association (that is, taxable years with respect to which per-unit retain certificates were issued to one or more patrons who are qualifying patrons).
(2)(i) A patron shall be considered to be a “qualifying patron” with respect to a per-unit retain certificate if there is in effect an agreement between the cooperative association and such patron which clearly provides that such patron agrees to treat the stated dollar amounts of all per-unit retain certificates issued to him by the association as representing cash distributions which he has constructively received and which he has, of his own choice, reinvested in the cooperative association. Such an agreement may be included in a by-law of the cooperative which is adopted prior to the time the products to which the per-unit retain certificates relate are marketed. However, except where there is in effect a “written agreement” described in subdivision (ii) of this subparagraph, a patron shall not be considered to be a “qualifying patron” with respect to a per-unit retain certificate if it has been established by a determination of the Tax Court of the United States, or any other court of competent jurisdiction, which has become final, that the stated dollar amount of such certificate, or of a similar certificate issued under similar circumstances to such patron or any other patron by the cooperative association, is not required to be included (as ordinary income) in the gross income of such patron, or such other patron, for the taxable year of the patron in which received.
(ii) The “written agreement” referred to in subdivision (i) of this subparagraph is an agreement in writing, signed by the patron, on file with the cooperative association, and revocable as provided in this subdivision. Unless such an agreement specifically provides to the contrary, it shall be effective for per-unit retain certificates issued with respect to the taxable year of the cooperative association in which the agreement is received by the association, and unless revoked, for per-unit retain certificates issued with respect to all subsequent taxable years. A “written agreement” must be revocable by the patron at any time after the close of the taxable year in which it is made. To be effective, a revocation must be in writing, signed by the patron, and furnished to the cooperative association. A revocation shall be effective only for per-unit retain certificates issued with respect to taxable years of the cooperative association following the taxable year in which it is furnished to the association. Notwithstanding the preceding sentence, a revocation shall not be effective for per-unit retain certificates issued with respect to products marketed for the patron under a pooling arrangement in which such patron participated before such revocation. The following is an example of an agreement which would meet the requirements of this subparagraph:
I agree that, for purposes of determining the amount I have received from this cooperative in payment for my goods, I shall treat the face amount of any per-unit retain certificates issued to me on and after _____ as representing a cash distribution which I have constructively received and which I have reinvested in the cooperative.
(3) For purposes of this paragraph and paragraph (e) of this section, the payment period for any taxable year of the cooperative is the period beginning with the first day of such taxable year and ending with the 15th day of the 9th month following the close of such year.
(4) This paragraph shall apply to any taxable year of a cooperative association if, with respect to such taxable year, the association has issued per-unit retain certificates to one or more of its patrons who are qualifying patrons with respect to such certificates within the meaning of subparagraph (2) of this paragraph.
(e) Tax treatment of cooperative association; taxable years for which paragraph (d) does not apply. (1) In the case of a taxable year to which paragraph (d) of this section does not apply to a cooperative association, such association shall, in computing the amount paid or returned to a patron with respect to products marketed for such patron, take into account the fair market value (at the time of issue) of any per-unit retain certificates which are issued by the association with respect to such products during the payment period for such taxable year.
(2) An amount paid in redemption of a per-unit retain certificate issued with respect to a taxable year of the cooperative association for which paragraph (d) of this section did not apply to the association, shall, to the extent such amount exceeds the fair market value of the certificate at the time of its issue, be taken into account by the association in the year of redemption, as an amount paid or returned to a patron with respect to products marketed for such patron.
(3) For purposes of this paragraph and paragraph (f)(2) of this section, any per-unit retain certificate containing an unconditional promise to pay a fixed sum of money on demand or at a fixed or determinable time shall be considered to have a fair market value at the time of its issue, unless it is clearly established to the contrary. On the other hand, any per-unit retain certificate (other than capital stock) which is redeemable only in the discretion of the cooperative association, or which is otherwise subject to conditions beyond the control of the patron, shall be considered not to have any fair market value at the time of its issue, unless it is clearly established to the contrary.
(f) Tax treatment of patron. (1) The following rules apply for purposes of computing the amount includible in gross income with respect to a per-unit retain certificate which was issued to a patron by a cooperative association with respect to a taxable year of such association for which paragraph (d) of this section applies.
(i) If the patron is a qualifying patron with respect to such certificate (within the meaning of paragraph (d) (2) of this section), he shall, in accordance with his agreement, include (as ordinary income) the stated dollar amount of the certificate in gross income for his taxable year in which the certificate is received by him.
(ii) If the patron is not a qualifying patron with respect to such certificate, no amount is includible in gross income on the receipt of the certificate; however, any gain on the redemption, sale, or other disposition of such certificate shall, to the extent of the stated dollar amount thereof, be considered as gain from the sale or exchange of property which is not a capital asset.
(2) The amount of the fair market value of a per-unit retain certificate which is issued to a patron by a cooperative association with respect to a taxable year of the association for which paragraph (d) of this section does not apply shall be included, as ordinary income, in the gross income of the patron for the taxable year in which the certificate is received. Any gain on the redemption, sale, or other disposition of such a per-unit retain certificate shall, to the extent its stated dollar amount exceeds its fair market value at the time of issue, be treated as gain on the redemption, sale, or other disposition of property which is not a capital asset.
(g) “Per-unit retain certificate” defined. For purposes of paragraphs (d), (e), and (f), of this section, the term “per-unit retain certificate” means any capital stock, revolving fund certificate, retain certificate, certificate of indebtedness, letter of advice, or other written notice—
(1) Which is issued to a patron with respect to products marketed for such patron;
(2) Which discloses to the patron the stated dollar amount allocated to him on the books of the cooperative association; and
(3) The stated dollar amount of which is fixed without reference to net earnings.
(h) Effective date. This section shall not apply to any amount the tax treatment of which is prescribed in section 1385 and § 1.1385-1. Paragraphs (d), (e), and (f) of this section shall apply to per-unit retain certificates as defined in paragraph (g) of this section issued by a cooperative association during taxable years of the association beginning after April 30, 1966, with respect to products marketed for patrons during such years.
§ 1.61-6 Gains derived from dealings in property.
(a) In general. Gain realized on the sale or exchange of property is included in gross income, unless excluded by law. For this purpose property includes tangible items, such as a building, and intangible items, such as goodwill. Generally, the gain is the excess of the amount realized over the unrecovered cost or other basis for the property sold or exchanged. The specific rules for computing the amount of gain or loss are contained in section 1001 and the regulations thereunder. When a part of a larger property is sold, the cost or other basis of the entire property shall be equitably apportioned among the several parts, and the gain realized or loss sustained on the part of the entire property sold is the difference between the selling price and the cost or other basis allocated to such part. The sale of each part is treated as a separate transaction and gain or loss shall be computed separately on each part. Thus, gain or loss shall be determined at the time of sale of each part and not deferred until the entire property has been disposed of. This rule may be illustrated by the following examples:
(b) Nontaxable exchanges. Certain realized gains or losses on the sale or exchange of property are not “recognized”, that is, are not included in or deducted from gross income at the time the transaction occurs. Gain or loss from such sales or exchanges is generally recognized at some later time. Examples of such sales or exchanges are the following:
(1) Certain formations, reorganizations, and liquidations of corporations, see sections 331, 333, 337, 351, 354, 355, and 361;
(2) Certain formations and distributions of partnerships, see sections 721 and 731;
(3) Exchange of certain property held for productive use or investment for property of like kind, see section 1031;
(4) A corporation’s exchange of its stock for property, see section 1032;
(5) Certain involuntary conversions of property if replaced, see section 1033;
(6) Sale or exchange of residence if replaced, see section 1034;
(7) Certain exchanges of insurance policies and annuity contracts, see section 1035; and
(8) Certain exchanges of stock for stock in the same corporation, see section 1036.
(c) Character of recognized gain. Under Subchapter P, Chapter 1 of the Code, relating to capital gains and losses, certain gains derived from dealings in property are treated specially, and under certain circumstances the maximum rate of tax on such gains is 25 percent, as provided in section 1201. Generally, the property subject to this treatment is a “capital asset”, or treated as a “capital asset”. For definition of such assets, see sections 1221 and 1231, and the regulations thereunder. For some of the rules either granting or denying this special treatment, see the following sections and the regulations thereunder:
(1) Transactions between partner and partnership, section 707;
(2) Sale or exchange of property used in the trade or business and involuntary conversions, section 1231;
(3) Payment of bonds and other evidences of indebtedness, section 1232;
(4) Gains and losses from short sales, section 1233;
(5) Options to buy or sell, section 1234;
(6) Sale or exchange of patents, section 1235;
(7) Securities sold by dealers in securities, section 1236;
(8) Real property subdivided for sale, section 1237;
(9) Amortization in excess of depreciation, section 1238;
(10) Gain from sale of certain property between spouses or between an individual and a controlled corporation, section 1239;
(11) Taxability to employee of termination payments, section 1240.
§ 1.61-7 Interest.
(a) In general. As a general rule, interest received by or credited to the taxpayer constitutes gross income and is fully taxable. Interest income includes interest on savings or other bank deposits; interest on coupon bonds; interest on an open account, a promissory note, a mortgage, or a corporate bond or debenture; the interest portion of a condemnation award; usurious interest (unless by State law it is automatically converted to a payment on the principal); interest on legacies; interest on life insurance proceeds held under an agreement to pay interest thereon; and interest on refunds of Federal taxes. For rules determining the taxable year in which interest, including interest accrued or constructively received, is included in gross income, see section 451 and the regulations thereunder. For the inclusion of interest in income for the purpose of the retirement income credit, see section 37 and the regulations thereunder. For credit of tax withheld at source on interest on tax-free covenant bonds, see section 32 and the regulations thereunder. For rules relating to interest on certain deferred payments, see section 483 and the regulations thereunder.
(b) Interest on Government obligations—(1) Wholly tax-exempt interest. Interest upon the obligations of a State, Territory, or a possession of the United States, or any political subdivision of any of the foregoing, or of the District of Columbia, is wholly exempt from tax. Interest on certain United States obligations issued before March 1, 1941, is exempt from tax to the extent provided in the acts of Congress authorizing the various issues. See section 103 and the regulations thereunder.
(2) Partially tax-exempt interest. Interest earned on certain United States obligations is partly tax exempt and partly taxable. For example, the interest on United States Treasury bonds issued before March 1, 1941, to the extent that the principal of such bonds exceeds $5,000, is exempt from normal tax but is subject to surtax. See sections 35 and 103, and the regulations thereunder.
(3) Fully taxable interest. In general, interest on United States obligations issued on or after March 1, 1941, and obligations issued by any agency or instrumentality of the United States after that date, is fully taxable; but see section 103 and the regulations thereunder. A taxpayer using the cash receipts and disbursements method of accounting who owns United States savings bonds issued at a discount has an election as to when he will report the interest; see section 454 and the regulations thereunder.
(c) Obligations bought at a discount; bonds bought when interest defaulted or accrued. When notes, bonds, or other certificates of indebtedness are issued by a corporation or the Government at a discount and are later redeemed by the debtor at the face amount, the original discount is interest, except as otherwise provided by law. See also paragraph (b) of this section for the rules relating to Government bonds. If a taxpayer purchases bonds when interest has been defaulted or when the interest has accrued but has not been paid, any interest which is in arrears but has accrued at the time of purchase is not income and is not taxable as interest if subsequently paid. Such payments are returns of capital which reduce the remaining cost basis. Interest which accrues after the date of purchase, however, is taxable interest income for the year in which received or accrued (depending on the method of accounting used by the taxpayer).
(d) Bonds sold between interest dates; amounts received in excess of original issue discount; interest on life insurance. When bonds are sold between interest dates, part of the sales price represents interest accrued to the date of the sale and must be reported as interest income. Amounts received in excess of the original issue discount upon the retirement or sale of a bond or other evidence of indebtedness may under some circumstances constitute capital gain instead of ordinary income. See section 1232 and the regulations thereunder. Interest payments on amounts payable as employees’ death benefits (whether or not section 101(b) applies thereto) and on the proceeds of life insurance policies payable by reason of the insured’s death constitute gross income under some circumstances. See section 101 and the regulations thereunder for details. Where accrued interest on unwithdrawn insurance policy dividends is credited annually and is subject to withdrawal annually by the taxpayer, such interest credits constitute gross income to such taxpayer as of the year of credit. However, if under the terms of the insurance policy the interest on unwithdrawn policy dividends is subject to withdrawal only on the anniversary date of the policy (or some other date specified therein), then such interest shall constitute gross income to the taxpayer for the taxable year in which such anniversary date (or other specified date) falls.
§ 1.61-8 Rents and royalties.
(a) In general. Gross income includes rentals received or accrued for the occupancy of real estate or the use of personal property. For the inclusion of rents in income for the purpose of the retirement income credit, see section 37 and the regulations thereunder. Gross income includes royalties. Royalties may be received from books, stories, plays, copyrights, trademarks, formulas, patents, and from the exploitation of natural resources, such as coal, gas, oil, copper, or timber. Payments received as a result of the transfer of patent rights may under some circumstances constitute capital gain instead of ordinary income. See section 1235 and the regulations thereunder. For special rules for certain income from natural resources, see Subchapter I (section 611 and following), Chapter 1 of the Code, and the regulations thereunder.
(b) Advance rentals; cancellation payments. Except as provided in section 467 and the regulations thereunder and except as otherwise provided by the Commissioner in published guidance (see § 601.601(d)(2) of this chapter), gross income includes advance rentals, which must be included in income for the year of receipt regardless of the period covered or the method of accounting employed by the taxpayer. An amount received by a lessor from a lessee for cancelling a lease constitutes gross income for the year in which it is received, since it is essentially a substitute for rental payments. As to amounts received by a lessee for the cancellation of a lease, see section 1241 and the regulations thereunder.
(c) Expenditures by lessee. As a general rule, if a lessee pays any of the expenses of his lessor such payments are additional rental income of the lessor. If a lessee places improvements on real estate which constitute, in whole or in part, a substitute for rent, such improvements constitute rental income to the lessor. Whether or not improvements made by a lessee result in rental income to the lessor in a particular case depends upon the intention of the parties, which may be indicated either by the terms of the lease or by the surrounding circumstances. For the exclusion from gross income of income (other than rent) derived by a lessor of real property on the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by a lessee, see section 109 and the regulations thereunder. For the exclusion from gross income of a lessor corporation of certain of its income taxes on rental income paid by a lessee corporation under a lease entered into before January 1, 1954, see section 110 and the regulations thereunder.
§ 1.61-9 Dividends.
(a) In general. Except as otherwise specifically provided, dividends are included in gross income under sections 61 and 301. For the principal rules with respect to dividends includible in gross income, see section 316 and the regulations thereunder. As to distributions made or deemed to be made by regulated investment companies, see sections 851 through 855, and the regulations thereunder. As to distributions made by real estate investment trusts, see sections 856 through 858, and the regulations thereunder. See section 116 for the exclusion from gross income of $100 ($50 for dividends received in taxable years beginning before January 1, 1964) of dividends received by an individual, except those from certain corporations. Furthermore, dividends may give rise to a credit against tax under section 34, relating to dividends received by individuals (for dividends received on or before December 31, 1964), and under section 37, relating to retirement income.
(b) Dividends in kind; stock dividends; stock redemptions. Gross income includes dividends in property other than cash, as well as cash dividends. For amounts to be included in gross income when distributions of property are made, see section 301 and the regulations thereunder. A distribution of stock, or rights to acquire stock, in the corporation making the distribution is not a dividend except under the circumstances described in section 305(b). However, the term “dividend” includes a distribution of stock, or rights to acquire stock, in a corporation other than the corporation making the distribution. For determining when distributions in complete liquidation shall be treated as dividends, see section 333 and the regulations thereunder. For rules determining when amounts received in exchanges under section 354 or exchanges and distributions under section 355 shall be treated as dividends, see section 356 and the regulations thereunder.
(c) Dividends on stock sold. When stock is sold, and a dividend is both declared and paid after the sale, such dividend is not gross income to the seller. When stock is sold after the declaration of a dividend and after the date as of which the seller becomes entitled to the dividend, the dividend ordinarily is income to the seller. When stock is sold between the time of declaration and the time of payment of the dividend, and the sale takes place at such time that the purchaser becomes entitled to the dividend, the dividend ordinarily is income to him. The fact that the purchaser may have included the amount of the dividend in his purchase price in contemplation of receiving the dividend does not exempt him from tax. Nor can the purchaser deduct the added amount he advanced to the seller in anticipation of the dividend. That added amount is merely part of the purchase price of the stock. In some cases, however, the purchaser may be considered to be the recipient of the dividend even though he has not received the legal title to the stock itself and does not himself receive the dividend. For example, if the seller retains the legal title to the stock as trustee solely for the purpose of securing the payment of the purchase price, with the understanding that he is to apply the dividends received from time to time in reduction of the purchase price, the dividends are considered to be income to the purchaser.
§ 1.61-10 Alimony and separate maintenance payments; annuities; income from life insurance and endowment contracts.
(a) In general. Alimony and separate maintenance payments, annuities, and income from life insurance and endowment contracts in general constitute gross income, unless excluded by law. Annuities paid by religious, charitable, and educational corporations are generally taxable to the same extent as other annuities. An annuity charged upon devised land is taxable to the donee-annuitant to the extent that it becomes payable out of the rents or other income of the land, whether or not it is a charge upon the income of the land.
(b) Cross references. For the detailed rules relating to—
(1) Alimony and separate maintenance payments, see section 71 and the regulations thereunder;
(2) Annuities, certain proceeds of endowment and life insurance contracts, see section 72 and the regulations thereunder;
(3) Life insurance proceeds paid by reason of death of insured, employees’ death benefits, see section 101 and the regulations thereunder;
(4) Annuities paid by employees’ trusts, see section 402 and the regulations thereunder;
(5) Annuities purchased for employee by employer, see section 403 and the regulations thereunder.
§ 1.61-11 Pensions.
(a) In general. Pensions and retirement allowances paid either by the Government or by private persons constitute gross income unless excluded by law. Usually, where the taxpayer did not contribute to the cost of a pension and was not taxable on his employer’s contributions, the full amount of the pension is to be included in his gross income. But see sections 72, 402, and 403, and the regulations thereunder. When amounts are received from other types of pensions, a portion of the payment may be excluded from gross income. Under some circumstances, amounts distributed from a pension plan in excess of the employee’s contributions may constitute long-term capital gain, rather than ordinary income.
(b) Cross references. For the inclusion of pensions in income for the purpose of the retirement income credit, see section 37 and the regulations thereunder. Detailed rules concerning the extent to which pensions and retirement allowances are to be included in or excluded from gross income are contained in other sections of the Code and the regulations thereunder. Amounts received as pensions or annuities under the Social Security Act (42 U.S.C. ch. 7) or the Railroad Retirement Act (45 U.S.C. ch. 9) are excluded from gross income. For other partial and total exclusions from gross income, see the following:
(1) Annuities in general, section 72 and the regulations thereunder;
(2) Employees’ annuities, sections 402 and 403 and the regulations thereunder;
(3) References to other acts of Congress exempting veterans’ pensions and railroad retirement annuities and pensions, section 122.
§ 1.61-12 Income from discharge of indebtedness.
(a) In general. The discharge of indebtedness, in whole or in part, may result in the realization of income. If, for example, an individual performs services for a creditor, who in consideration thereof cancels the debt, the debtor realizes income in the amount of the debt as compensation for his services. A taxpayer may realize income by the payment or purchase of his obligations at less than their face value. In general, if a shareholder in a corporation which is indebted to him gratuitously forgives the debt, the transaction amounts to a contribution to the capital of the corporation to the extent of the principal of the debt.
(b) Proceedings under Bankruptcy Act. (1) Income is not realized by a taxpayer by virtue of the discharge, under section 14 of the Bankruptcy Act (11 U.S.C. 32), of his indebtedness as the result of an adjudication in bankruptcy, or by virtue of an agreement among his creditors not consummated under any provision of the Bankruptcy Act, if immediately thereafter the taxpayer’s liabilities exceed the value of his assets. Furthermore, unless one of the principal purposes of seeking a confirmation under the Bankruptcy Act is the avoidance of income tax, income is not realized by a taxpayer in the case of a cancellation or reduction of his indebtedness under—
(i) A plan of corporate reorganization confirmed under Chapter X of the Bankruptcy Act (11 U.S.C., ch. 10);
(ii) An “arrangement” or a “real property arrangement” confirmed under Chapter XI or XII, respectively, of the Bankruptcy Act (11 U.S.C., ch. 11, 12); or
(iii) A “wage earner’s plan” confirmed under Chapter XIII of the Bankruptcy Act (11 U.S.C., ch. 13).
(2) For adjustment of basis of certain property in the case of cancellation or reduction of indebtedness resulting from a proceeding under the Bankruptcy Act, see the regulations under section 1016.
(c) Issuance and repurchase of debt instruments—(1) Issuance. An issuer does not realize gain or loss upon the issuance of a debt instrument. For rules relating to an issuer’s interest deduction for a debt instrument issued with bond issuance premium, see § 1.163-13.
(2) Repurchase—(i) In general. An issuer does not realize gain or loss upon the repurchase of a debt instrument. However, if a debt instrument provides for payments denominated in, or determined by reference to, a nonfunctional currency, an issuer may realize a currency gain or loss upon the repurchase of the instrument. See section 988 and the regulations thereunder. For purposes of this paragraph (c)(2), the term repurchase includes the retirement of a debt instrument, the conversion of a debt instrument into stock of the issuer, and the exchange (including an exchange under section 1001) of a newly issued debt instrument for an existing debt instrument.
(ii) Repurchase at a discount. An issuer realizes income from the discharge of indebtedness upon the repurchase of a debt instrument for an amount less than its adjusted issue price (within the meaning of § 1.1275-1(b)). The amount of discharge of indebtedness income is equal to the excess of the adjusted issue price over the repurchase price. See section 108 and the regulations thereunder for additional rules relating to income from discharge of indebtedness. For example, to determine the repurchase price of a debt instrument that is repurchased through the issuance of a new debt instrument, see section 108(e)(10).
(iii) Repurchase at a premium. An issuer may be entitled to a repurchase premium deduction upon the repurchase of a debt instrument for an amount greater than its adjusted issue price (within the meaning of § 1.1275-1(b)). See § 1.163-7(c) for the treatment of repurchase premium.
(iv) Effective date. This paragraph (c)(2) applies to debt instruments repurchased on or after March 2, 1998.
(d) Cross references. For exclusion from gross income of—
(1) Income from discharge of indebtedness in certain cases, see sections 108 and 1017, and regulations thereunder;
(2) Forgiveness of Government payments to encourage exploration, development, and mining for defense purposes, see section 621 and regulations thereunder.
(e) Cross reference. For rules relating to the treatment of liabilities on the sale or other disposition of encumbered property, see § 1.1001-2.
(a) In general. A partner’s distributive share of partnership gross income (under section 702(c)) constitutes gross income to him. Income in respect of a decedent (under section 691) constitutes gross income to the recipient. Income from an interest in an estate or trust constitutes gross income under the detailed rules of Part I (section 641 and following), Subchapter J, Chapter 1 of the Code. In many cases, these sections also determine who is to include in his gross income the income from an estate or trust.
(b) Creation of sinking fund by corporation. If a corporation, for the sole purpose of securing the payment of its bonds or other indebtedness, places property in trust or sets aside certain amounts in a sinking fund under the control of a trustee who may be authorized to invest and reinvest such sums from time to time, the property or fund thus set aside by the corporation and held by the trustee is an asset of the corporation, and any gain arising therefrom is income of the corporation and shall be included as such in its gross income.
§ 1.61-14 Miscellaneous items of gross income.
(a) In general. In addition to the items enumerated in section 61(a), there are many other kinds of gross income. For example, punitive damages such as treble damages under the antitrust laws and exemplary damages for fraud are gross income. Another person’s payment of the taxpayer’s income taxes constitutes gross income to the taxpayer unless excluded by law. Illegal gains constitute gross income. Treasure trove, to the extent of its value in United States currency, constitutes gross income for the taxable year in which it is reduced to undisputed possession.
(b) Cross references. (1) Prizes and awards, see section 74 and regulations thereunder;
(2) Damages for personal injury or sickness, see section 104 and the regulations thereunder;
(3) Income taxes paid by lessee corporation, see section 110 and regulations thereunder;
(4) Scholarships and fellowship grants, see section 117 and regulations thereunder;
(5) Miscellaneous exemptions under other acts of Congress, see section 122;
(6) Tax-free covenant bonds, see section 1451 and regulations thereunder.
(7) Notional principal contracts, see § 1.446-3.
§ 1.61-15 Options received as payment of income.
(a) In general. Except as otherwise provided in § 1.61-2(d)(6)(i) (relating to certain restricted property transferred after June 30, 1969), if any person receives an option in payment of an amount constituting compensation of such person (or any other person), such option is subject to the rules contained in § 1.421-6 for purposes of determining when income is realized in connection with such option and the amount of such income. In this regard, the rules of § 1.421-6 apply to an option received in payment of an amount constituting compensation regardless of the form of the transaction. Thus, the rules of § 1.421-6 apply to an option transferred for less than its fair market value in a transaction taking the form of a sale or exchange if the difference between the amount paid for the option and its fair market value at the time of transfer is the payment of an amount constituting compensation of the transferee or any other person. This section, for example, makes the rules of § 1.421-6 applicable to options granted in whole or partial payment for services of an independent contractor. If an amount of money or property is paid for an option to which this paragraph applies, then the amount paid shall be part of the basis of such option.
(b) Options to which paragraph (a) does not apply. (1) Paragraph (a) of this section does not apply to:
(i) An option which is subject to the rules contained in section 421; and
(ii) An option which is not granted as the payment of an amount constituting compensation, such as an option which is acquired solely as an investment (including an option which is part of an investment unit described in paragraph (b) of § 1.1232-3). For rules relating to the taxation of options described in this subdivision, see section 1234 and the regulations thereunder.
(2) If a person acquires an option which is not subject to the rules contained in section 421, and if such option has a readily ascertainable fair market value, such person may establish that such option was not acquired as payment of an amount constituting compensation by showing that the amount of money or its equivalent paid for the option equaled the readily ascertainable fair market value of the option. If a person acquires an option which is not subject to the rules contained in section 421, and if such option does not have a readily ascertainable fair market value, then to establish that such option was not acquired as payment of an amount constituting compensation, such person must show that, from an examination of all the surrounding circumstances, there was no reason for the option to have been granted as the payment of an amount constituting compensation. For example, such person must show that he had neither rendered nor was obligated to render substantial services in consideration for the granting of the option. In determining whether an option, such as an option acquired in connection with an obligation as part of an investment unit, has been granted as compensation for services, the ordinary services performed by an investor in his own self-interest in connection with his investing activities will not be treated as the consideration for the grant of the option. For example, if a small business investment company takes an active part in the management of its debtor small business company, the rendering of such management services will not be treated as the consideration for the granting of the option, provided such services are rendered for an independent consideration, or are merely protective of the small business investment company’s investment in the borrower. See paragraph (c) of § 1.421-6 for the meaning of the term “readily ascertainable fair market value.”
(c) Statement required in connection with certain options. (1) Any person acquiring any option to purchase securities (other than an option described in subparagraph (2) of this paragraph) shall attach a statement to his income tax return for the taxable year in which the option was acquired. For the definition of the term “securities”, see section 165(g)(2).
(2) The statement otherwise required by subparagraph (1) of this paragraph shall not be required with respect to the following options:
(i) Options subject to the rules contained in section 305(a) or section 421;
(ii) Options acquired as part of an investment unit consisting of an option and a debenture, note, or other similar obligation—
(a) If such unit is acquired as part of a public offering and the amount of money or its equivalent paid for such unit is not less than the public offering price, or
(b) If such unit is actively traded on an established market and the amount of money or its equivalent paid for such unit is not less than the price paid for such unit in contemporaneous purchases of such unit by persons independent of both the seller and the taxpayer;
(iii) Options acquired as part of a public offering, if the amount of money or its equivalent paid for such option is not less than the public offering price; and
(iv) Options which are actively traded on an established market and which are acquired for money or its equivalent at a price not less than the price paid for such options in contemporaneous purchases of such options by persons independent of both the seller and the taxpayer.
(3) The statement required by subparagraph (1) of this paragraph shall contain the following information:
(i) Name and address of the taxpayer;
(ii) Description of the securities subject to the option (including number of shares of stock);
(iii) Period during which the option is exercisable;
(iv) Whether the option had a readily ascertainable fair market value at date of grant; and
(v) Whether the option is subject to paragraph (a) of this section.
(4) If the statement required by subparagraph (1) of this paragraph indicates either that the option is not subject to paragraph (a) of this section, or that the option is subject to paragraph (a) of this section but that such option had a readily ascertainable fair market value at date of grant, then such statement shall contain the following additional information:
(i) Option price;
(ii) Value at date of grant of securities subject to the option;
(iii) Restrictions (if any) on exercise or transfer of option;
(iv) Restrictions (if any) on transfer of securities subject to the option;
(v) Value of the option (if readily ascertainable);
(vi) How value of option was determined;
(vii) Amount of money (or its equivalent) paid for the option;
(viii) Person from whom the option was acquired;
(ix) A concise description of the circumstances surrounding the acquisition of the option and any other factors relied upon by the taxpayer to establish that the option is not subject to paragraph (a) of this section, or, if the option is treated by the taxpayer as subject to paragraph (a) of this section, that the option had a readily ascertainable fair market value at date of grant.
(d) Effective date. This section shall apply to options granted after July 11, 1963, other than options required to be granted pursuant to the terms of a written contract entered into on or before such date.
§ 1.61-21 Taxation of fringe benefits.
(a) Fringe benefits—(1) In general. Section 61(a)(1) provides that, except as otherwise provided in subtitle A of the Internal Revenue Code of 1986, gross income includes compensation for services, including fees, commissions, fringe benefits, and similar items. For an outline of the regulations under this section relating to fringe benefits, see paragraph (a)(7) of this section. Examples of fringe benefits include: an employer-provided automobile, a flight on an employer-provided aircraft, an employer-provided free or discounted commercial airline flight, an employer-provided vacation, an employer-provided discount on property or services, an employer-provided membership in a country club or other social club, and an employer-provided ticket to an entertainment or sporting event.
(2) Fringe benefits excluded from income. To the extent that a particular fringe benefit is specifically excluded from gross income pursuant to another section of subtitle A of the Internal Revenue Code of 1986, that section shall govern the treatment of that fringe benefit. Thus, if the requirements of the governing section are satisfied, the fringe benefits may be excludable from gross income. Examples of excludable fringe benefits include qualified tuition reductions provided to an employee (section 117(d)); meals or lodging furnished to an employee for the convenience of the employer (section 119); benefits provided under a dependent care assistance program (section 129); and no-additional-cost services, qualified employee discounts, working condition fringes, and de minimis fringes (section 132). Similarly, the value of the use by an employee of an employer-provided vehicle or a flight provided to an employee on an employer-provided aircraft may be excludable from income under section 105 (because, for example, the transportation is provided for medical reasons) if and to the extent that the requirements of that section are satisfied. Section 134 excludes from gross income “qualified military benefits.” An example of a benefit that is not a qualified military benefit is the personal use of an employer-provided vehicle. The fact that another section of subtitle A of the Internal Revenue Code addresses the taxation of a particular fringe benefit will not preclude section 61 and the regulations thereunder from applying, to the extent that they are not inconsistent with such other section. For example, many fringe benefits specifically addressed in other sections of subtitle A of the Internal Revenue Code are excluded from gross income only to the extent that they do not exceed specific dollar or percentage limits, or only if certain other requirements are met. If the limits are exceeded or the requirements are not met, some or all of the fringe benefit may be includible in gross income pursuant to section 61. See paragraph (b)(3) of this section.
(3) Compensation for services. A fringe benefit provided in connection with the performance of services shall be considered to have been provided as compensation for such services. Refraining from the performance of services (such as pursuant to a covenant not to compete) is deemed to be the performance of services for purposes of this section.
(4) Person to whom fringe benefit is taxable—(i) In general. A taxable fringe benefit is included in the income of the person performing the services in connection with which the fringe benefit is furnished. Thus, a fringe benefit may be taxable to a person even though that person did not actually receive the fringe benefit. If a fringe benefit is furnished to someone other than the service provider such benefit is considered in this section as furnished to the service provider, and use by the other person is considered use by the service provider. For example, the provision of an automobile by an employer to an employee’s spouse in connection with the performance of services by the employee is taxable to the employee. The automobile is considered available to the employee and use by the employee’s spouse is considered use by the employee.
(ii) All persons to whom benefits are taxable referred to as employees. The person to whom a fringe benefit is taxable need not be an employee of the provider of the fringe benefit, but may be, for example, a partner, director, or an independent contractor. For convenience, the term “employee” includes any person performing services in connection with which a fringe benefit is furnished, unless otherwise specifically provided in this section.
(5) Provider of a fringe benefit referred to as an employer. The “provider” of a fringe benefit is that person for whom the services are performed, regardless of whether that person actually provides the fringe benefit to the recipient. The provider of a fringe benefit need not be the employer of the recipient of the fringe benefit, but may be, for example, a client or customer of the employer or of an independent contractor. For convenience, the term “employer” includes any provider of a fringe benefit in connection with payment for the performance of services, unless otherwise specifically provided in this section.
(6) Effective date. Except as otherwise provided, this section is effective as of January 1, 1989 with respect to fringe benefits provided after December 31, 1988.
(7) Outline of this section. The following is an outline of the regulations in this section relating to fringe benefits:
§ 1.61-21 (a) Fringe benefits.
(1) In general.
(2) Fringe benefits excluded from income.
(3) Compensation for services.
(4) Person to whom fringe benefit is taxable.
(5) Provider of a fringe benefit referred to as an employer.
(6) Effective date.
(7) Outline of this section.
§ 1.61-21 (b) Valuation of fringe benefits
(1) In general.
(2) Fair market value.
(3) Exclusion from income based on cost.
(4) Fair market value of the availability of an employer-provided vehicle.
(5) Fair market value of chauffeur services.
(6) Fair market value of a flight on an employer-provided piloted aircraft.
(7) Fair market value of the use of an employer-provided aircraft for which the employer does not furnish a pilot.
§ 1.61-21 (c) Special valuation rules.
(1) In general.
(2) Use of the special valuation rules.
(3) Additional rules for using special valuation.
(4) Application of section 414 to employers.
(5) Valuation formulae contained in the special valuation rules.
(6) Modification of the special valuation rules.
(7) Special accounting rule.
§ 1.61-21 (d) Automobile lease valuation rule.
(1) In general.
(2) Calculation of Annual Lease Value.
(3) Services included in, or excluded from, the Annual Lease Value Table.
(4) Availability of an automobile for less than an entire calendar year.
(5) Fair market value.
(6) Special rules for continuous availability of certain automobiles.
(7) Consistency rules.
§ 1.61-21 (e)Vehicle cents-per-mile valuation rule.
(1) In general.
(2) Definition of vehicle.
(3) Services included in, or excluded from, the cents-per-mile rate.
(4) Valuation of personal use only.
(5) Consistency rules.
§ 1.61-21 (f) Commuting valuation rule.
(1) In general.
(2) Special rules.
(3) Commuting value.
(4) Definition of vehicle.
(5) Control employee defined—Non-government employer.
(6) Control employee defined—Government employer.
(7) “Compensation” defined.
§ 1.61-21 (g) Non-commercial flight valuation rule.
(1) In general.
(2) Eligible flights and eligible aircraft.
(3) Definition of a flight.
(4) Personal and non-personal flights.
(5) Aircraft valuation formula.
(6) Discretion to provide new formula.
(7) Aircraft multiples.
(8) Control employee defined—Non-government employer.
(9) Control employee defined—Government employer.
(10) “Compensation” defined.
(11) Treatment of former employees.
(12) Seating capacity rule.
(13) Erroneous use of the non-commercial flight valuation rule.
(14) Consistency rules.
§ 1.61-21 (h) Commercial flight valuation rule.
(1) In general.
(2) Space-available flight.
(3) Commercial aircraft.
(4) Timing of inclusion.
(5) Consistency rules.
§ 1.61-21 (i) [Reserved]
§ 1.61-21 (j) Valuation of meals provided at an employer-operated eating facility for employees.
(1) In general.
(2) Valuation formula.
§ 1.61-21 (k) Commuting valuation rule for certain employees.
(1) In general.
(2) Trip-by-trip basis.
(3) Commuting value.
(4) Definition of employer-provided transportation.
(5) Unsafe conditions.
(6) Qualified employee defined.
(7) Examples.
(8) Effective date.
(b) Valuation of fringe benefits—(1) In general. An employee must include in gross income the amount by which the fair market value of the fringe benefit exceeds the sum of—
(i) The amount, if any, paid for the benefit by or on behalf of the recipient, and
(ii) The amount, if any, specifically excluded from gross income by some other section of subtitle A of the Internal Revenue Code of 1986.
(2) Fair market value. In general, fair market value is determined on the basis of all the facts and circumstances. Specifically, the fair market value of a fringe benefit is the amount that an individual would have to pay for the particular fringe benefit in an arm’s-length transaction. Thus, for example, the effect of any special relationship that may exist between the employer and the employee must be disregarded. Similarly, an employee’s subjective perception of the value of a fringe benefit is not relevant to the determination of the fringe benefit’s fair market value nor is the cost incurred by the employer determinative of its fair market value. For special rules relating to the valuation of certain fringe benefits, see paragraph (c) of this section.
(3) Exclusion from income based on cost. If a statutory exclusion phrased in terms of cost applies to the provision of a fringe benefit, section 61 does not require the inclusion in the recipient’s gross income of the difference between the fair market value and the excludable cost of that fringe benefit. For example, section 129 provides an exclusion from an employee’s gross income for amounts contributed by an employer to a dependent care assistance program for employees. Even if the fair market value of the dependent care assistance exceeds the employer’s cost, the excess is not subject to inclusion under section 61 and this section. However, if the statutory cost exclusion is a limited amount, the fair market value of the fringe benefit attributable to any excess cost is subject to inclusion. This would be the case, for example, where an employer pays or incurs a cost of more than $5,000 to provide dependent care assistance to an employee.
(4) Fair market value of the availability of an employer-provided vehicle—(i) In general. If the vehicle special valuation rules of paragraph (d), (e), or (f) of this section do not apply with respect to an employer-provided vehicle, the value of the availability of that vehicle is determined under the general valuation principles set forth in this section. In general, that value equals the amount that an individual would have to pay in an arm’s-length transaction to lease the same or comparable vehicle on the same or comparable conditions in the geographic area in which the vehicle is available for use. An example of a comparable condition is the amount of time that the vehicle is available to the employee for use, e.g., a one-year period. Unless the employee can substantiate that the same or comparable vehicle could have been leased on a cents-per-mile basis, the value of the availability of the vehicle cannot be computed by applying a cents-per-mile rate to the number of miles the vehicle is driven.
(ii) Certain equipment excluded. The fair market value of a vehicle does not include the fair market value of any specialized equipment not susceptible to personal use or any telephone that is added to or carried in the vehicle, provided that the presence of that equipment or telephone is necessitated by, and attributable to, the business needs of the employer. However, the value of specialized equipment must be included, if the employee to whom the vehicle is available uses the specialized equipment in a trade or business of the employee other than the employee’s trade or business of being an employee of the employer.
(5) Fair market value of chauffeur services—(i) Determination of value—(A) In general. The fair market value of chauffeur services provided to the employee by the employer is the amount that an individual would have to pay in an arm’s-length transaction to obtain the same or comparable chauffeur services in the geographic area for the period in which the services are provided. In determining the applicable fair market value, the amount of time, if any, the chauffeur remains on-call to perform chauffeur services must be included. For example, assume that A, an employee of corporation M, needs a chauffeur to be on-call to provide services to A during a twenty-four hour period. If during that twenty-four hour period, the chauffeur actually drives A for only six hours, the fair market value of the chauffeur services would have to be the value of having a chauffeur on-call for a twenty-four hour period. The cost of taxi fare or limousine service for the six hours the chauffeur actually drove A would not be an accurate measure of the fair market value of chauffeur services provided to A. Moreover, all other aspects of the chauffeur’s services (including any special qualifications of the chauffeur (e.g., training in evasive driving skills) or the ability of the employee to choose the particular chauffeur) must be taken into consideration.
(B) Alternative valuation with reference to compensation paid. Alternatively, the fair market value of the chauffeur services may be determined by reference to the compensation (as defined in paragraph (b)(5)(ii) of this section) received by the chauffeur from the employer.
(C) Separate valuation for chauffeur services. The value of chauffeur services is determined separately from the value of the availability of an employer-provided vehicle.
(ii) Definition of compensation—(A) In general. For purposes of this paragraph (b)(5)(ii), the term “compensation” means compensation as defined in section 414(q)(7) and the fair market value of nontaxable lodging (if any) provided by the employer to the chauffeur in the current year.
(B) Adjustments to compensation—For purposes of this paragraph (b)(5)(ii), a chauffeur’s compensation is reduced proportionately to reflect the amount of time during which the chauffeur performs substantial services for the employer other than as a chauffeur and is not on-call as a chauffeur. For example, assume a chauffeur is paid $25,000 a year for working a ten-hour day, five days a week and also receives $5,000 in nontaxable lodging. Further assume that during four hours of each day, the chauffeur is not on-call to perform services as a chauffeur because that individual is performing secretarial functions for the employer. Then, for purposes of determining the fair market value of this chauffeur’s services, the employer may reduce the chauffeur’s compensation by
(iii) Calculation of chauffeur services for personal purposes of the employee. The fair market value of chauffeur services provided to the employee for personal purposes may be determined by multiplying the fair market value of chauffeur services, as determined pursuant to paragraph (b)(5)(i) (A) or (B) of this section, by a fraction, the numerator of which is equal to the sum of the hours spent by the chauffeur actually providing personal driving services to the employee and the hours spent by the chauffeur in “personal on-call time,” and the denominator of which is equal to all hours the chauffeur spends in driving services of any kind paid for by the employer, including all hours that are “on-call.”
(iv) Definition of on-call time. For purposes of this paragraph, the term “on-call time” means the total amount of time that the chauffeur is not engaged in the actual performance of driving services, but during which time the chauffeur is available to perform such services. With respect to a round-trip, time spent by a chauffeur waiting for an employee to make a return trip is generally not treated as on-call time; rather such time is treated as part of the round-trip.
(v) Definition of personal on-call time. For purposes of this paragraph, the term “personal on-call time” means the amount of time outside the employee’s normal working hours for the employer when the chauffeur is available to the employee to perform driving services.
(vi) Presumptions. (A) An employee’s normal working hours will be presumed to consist of a ten hour period during which the employee usually conducts business activities for that employer.
(B) It will be presumed that if the chauffeur is on-call to provide driving services to an employee during the employee’s normal working hours, then that on-call time will be performed for business purposes.
(C) Similarly, if the chauffeur is on-call to perform driving services to an employee after normal working hours, then that on-call time will be presumed to be “personal on-call time.”
(D) The presumptions set out in paragraph (b)(5)(vi) (A), (B), and (C) of this section may be rebutted. For example, an employee may demonstrate by adequate substantiation that his or her normal working hours consist of more than ten hours. Furthermore, if the employee keeps adequate records and is able to substantiate that some portion of the driving services performed by the chauffeur after normal working hours is attributable to business purposes, then personal on-call time may be reduced by an amount equal to such personal on-call time multiplied by a fraction, the numerator of which is equal to the time spent by the chauffeur after normal working hours driving the employee for business purposes, and the denominator of which is equal to the total time spent by the chauffeur driving the employee after normal working hours for all purposes.
(vii) Examples. The rules of this paragraph (b)(5) may be illustrated by the following examples:
(6) Fair market value of a flight on an employer-provided piloted aircraft—(i) In general. If the non-commercial flight special valuation rule of paragraph (g) of this section does not apply, the value of a flight on an employer-provided piloted aircraft is determined under the general valuation principles set forth in this paragraph.
(ii) Value of flight. If an employee takes a flight on an employer-provided piloted aircraft and that employee’s flight is primarily personal (see § 1.162-2(b)(2)), the value of the flight is equal to the amount that an individual would have to pay in an arm’s-length transaction to charter the same or a comparable piloted aircraft for that period for the same or a comparable flight. A flight taken under these circumstances may not be valued by reference to the cost of commercial airfare for the same or a comparable flight. The cost to charter the aircraft must be allocated among all employees on board the aircraft based on all the facts and circumstances unless one or more of the employees controlled the use of the aircraft. Where one or more employees control the use of the aircraft, the value of the flight shall be allocated solely among such controlling employees, unless a written agreement among all the employees on the flight otherwise allocates the value of such flight. Notwithstanding the allocation required by the preceding sentence, no additional amount shall be included in the income of any employee whose flight is properly valued under the special valuation rule of paragraph (g) of this section. For purposes of this paragraph (b)(6), “control” means the ability of the employee to determine the route, departure time and destination of the flight. The rules provided in paragraph (g)(3) of this section will be used for purposes of this section in defining a flight. Notwithstanding the allocation required by the preceding sentence, no additional amount shall be included in the income of an employee for that portion of any such flight which is excludible from income pursuant to section 132(d) or § 1.132-5 as a working condition fringe.
(iii) Examples. The rules of paragraph (b)(6) of this section may be illustrated by the following examples:
(7) Fair market value of the use of an employer-provided aircraft for which the employer does not furnish a pilot—(i) In general. If the non-commercial flight special valuation rule of paragraph (g) of this section does not apply and if an employer provides an employee with the use of an aircraft without a pilot, the value of the use of the employer-provided aircraft is determined under the general valuation principles set forth in this paragraph (b)(7).
(ii) Value of flight. In general, if an employee takes a flight on an employer-provided aircraft for which the employer does not furnish a pilot, the value of that flight is equal to the amount that an individual would have to pay in an arm’s-length transaction to lease the same or comparable aircraft on the same or comparable terms for the same period in the geographic area in which the aircraft is used. For example, if an employer makes its aircraft available to an employee who will pilot the aircraft for a two-hour flight, the value of the use of the aircraft is the amount that an individual would have to pay in an arm’s-length transaction to rent a comparable aircraft for that period in the geographic area in which the aircraft is used. As another example, assume that an employee uses an employer-provided aircraft to commute between home and work. The value of the use of the aircraft is the amount that an individual would have to pay in an arm’s-length transaction to rent a comparable aircraft for commuting in the geographic area in which the aircraft is used. If the availability of the flight is of benefit to more than one employee, then such value shall be allocated among such employees on the basis of the relevant facts and circumstances.
(c) Special valuation rules—(1) In general. Paragraphs (d) through (k) of this section provide special valuation rules that may be used under certain circumstances for certain commonly provided fringe benefits. For general rules relating to the valuation of fringe benefits not eligible for valuation under the special valuation rules or fringe benefits with respect to which the special valuation rules are not used, see paragraph (b) of this section.
(2) Use of the special valuation rules—(i) For benefits provided before January 1, 1993. The special valuation rules may be used for income tax, employment tax, and reporting purposes. The employer has the option to use any of the special valuation rules. However, an employee may only use a special valuation rule if the employer uses the rule. Moreover, an employee may only use the special rule that the employer uses to value the benefit provided; the employee may not use another special rule to value that benefit. The employee may always use general valuation rules based on facts and circumstances (see paragraph (b) of this section) even if the employer uses a special rule. If a special rule is used, it must be used for all purposes. If an employer properly uses a special rule and the employee uses the special rule, the employee must include in gross income the amount determined by the employer under the special rule reduced by the sum of—
(A) Any amount reimbursed by the employee to the employer, and
(B) Any amount excludable from income under another section of subtitle A of the Internal Revenue Code of 1986. If an employer properly uses a special rule and properly determines the amount of an employee’s working condition fringe under section 132 and § 1.132-5 (under the general rule or under a special rule), and the employee uses the special valuation rule, the employee must include in gross income the amount determined by the employer less any amount reimbursed by the employee to the employer. The employer and employee may use the special rules to determine the amount of the reimbursement due the employer by the employee. Thus, if an employee reimburses an employer for the value of a benefit as determined under a special valuation rule, no amount is includable in the employee’s gross income with respect to the benefit. The provisions of this paragraph are effective for benefits provided before January 1, 1993.
(ii) For benefits provided after December 31, 1992. The special valuation rules may be used for income tax, employment tax, and reporting purposes. The employer has the option to use any of the special valuation rules. An employee may use a special valuation rule only if the employer uses that rule or the employer does not meet the condition of paragraph (c)(3)(ii)(A) of this section, but one of the other conditions of paragraph (c)(3)(ii) of this section is met. The employee may always use general valuation rules based on facts and circumstances (see paragraph (b) of this section) even if the employer uses a special rule. If a special rule is used, it must be used for all purposes. If an employer properly uses a special rule and the employee uses the special rule, the employee must include in gross income the amount determined by the employer under the special rule reduced by the sum of—
(A) Any amount reimbursed by the employee to the employer; and
(B) Any amount excludable from income under another section of subtitle A of the Internal Revenue Code of 1986. If an employer properly uses a special rule and properly determines the amount of an employee’s working condition fringe under section 132 and § 1.132-5 (under the general rule or under a special rule), and the employee uses the special valuation rule, the employee must include in gross income the amount determined by the employer less any amount reimbursed by the employee to the employer. The employer and employee may use the special rules to determine the amount of the reimbursement due the employer by the employee. Thus, if an employee reimburses an employer for the value of a benefit as determined under a special valuation rule, no amount is includible in the employee’s gross income with respect to the benefit. The provisions of this paragraph are effective for benefits provided after December 31, 1992.
(iii) Vehicle special valuation rules—(A) Vehicle by vehicle basis. Except as provided in paragraphs (d)(7)(v) and (e)(5)(v) of this section, the vehicle special valuation rules of paragraphs (d), (e), and (f) of this section apply on a vehicle by vehicle basis. An employer need not use the same vehicle special valuation rule for all vehicles provided to all employees. For example, an employer may use the automobile lease valuation rule for automobiles provided to some employees, and the commuting and vehicle cents-per-mile valuation rules for automobiles provided to other employees. For purposes of valuing the use or availability of a vehicle, the consistency rules provided in paragraphs (d)(7) and (e)(5) of this section (relating to the automobile lease valuation rule and the vehicle cents-per-mile valuation rule, respectively) apply.
(B) Shared vehicle usage. If an employer provides a vehicle to employees for use by more than one employee at the same time, such as with an employer-sponsored vehicle commuting pool, the employer may use any of the special valuation rules that may be applicable to value the use of the vehicle by the employees. The employer must use the same special valuation rule to value the use of the vehicle by each employee who shares such use. The employer must allocate the value of the use of the vehicle based on the relevant facts and circumstances among the employees who share use of the vehicle. For example, assume that an employer provides an automobile to four of its employees and that the employees use the automobile in an employer-sponsored vehicle commuting pool. Assume further that the employer uses the automobile lease valuation rule of paragraph (d) of this section and that the Annual Lease Value of the automobile is $5,000.
(iv) Commercial and noncommercial flight valuation rules. Except as otherwise provided, if either the commercial flight valuation rule or the non-commercial flight valuation rule is used, that rule must be used by an employer to value all eligible flights taken by all employees in a calendar year. See paragraph (g)(14) of this section for the applicable consistency rules.
(3) Additional rules for using special valuation—(i) Election to use special valuation rules for benefits provided before January 1, 1993. A particular special valuation rule is deemed to have been elected by the employer (and, if applicable, by the employee), if the employer (and, if applicable, the employee) determines the value of the fringe benefit provided by applying the special valuation rule and treats that value as the fair market value of the fringe benefit for income, employment tax, and reporting purposes. Neither the employer nor the employee must notify the Internal Revenue Service of the election. The provisions of this paragraph are effective for benefits provided before January 1, 1993.
(ii) Conditions on the use of special valuation rules for benefits provided after December 31, 1992. Neither the employer nor the employee may use a special valuation rule to value a benefit provided after December 31, 1992, unless one of the following conditions is satisfied—
(A) The employer treats the value of the benefit as wages for reporting purposes within the time for filing the returns for the taxable year (including extensions) in which the benefit is provided;
(B) The employee includes the value of the benefit in income within the time for filing the returns for the taxable year (including extensions) in which the benefit is provided;
(C) The employee is not a control employee as defined in paragraphs (f)(5) and (f)(6) of this section; or
(D) The employer demonstrates a good faith effort to treat the benefit correctly for reporting purposes.
(4) Application of section 414 to employers. For purposes of paragraphs (c) through (k) of this section, except as otherwise provided therein, the term “employer” includes all entities required to be treated as a single employer under section 414 (b), (c), (m), or (o).
(5) Valuation formulae contained in the special valuation rules. The valuation formula contained in the special valuation rules are provided only for use in connection with those rules. Thus, when a special valuation rule is properly applied to a fringe benefit, the Commissioner will accept the value calculated pursuant to the rule as the fair market value of that fringe benefit. However, when a special valuation rule is not properly applied to a fringe benefit (see, for example, paragraph (g)(13) of this section), or when a special valuation rule is used to value a fringe benefit by a taxpayer not entitled to use the rule, the fair market value of that fringe benefit may not be determined by reference to any value calculated under any special valuation rule. Under the circumstances described in the preceding sentence, the fair market value of the fringe benefit must be determined pursuant to the general valuation rules of paragraph (b) of this section.
(6) Modification of the special valuation rules. The Commissioner may, to the extent necessary for tax administration, add, delete, or modify any special valuation rule, including the valuation formulae contained herein, on a prospective basis by regulation, revenue ruling or revenue procedure.
(7) Special accounting rule. If the employer is using the special accounting rule provided in Announcement 85-113 (1985-31 I.R.B. 31, August 5, 1985) (see § 601.601(d)(2)(ii)(b) of this chapter) (relating to the reporting of and withholding on the value of noncash fringe benefits), benefits which are deemed provided in a subsequent calendar year pursuant to that rule are considered as provided in that subsequent calendar year for purposes of the special valuation rules. Thus, if a particular special valuation rule is in effect for a calendar year, it applies to benefits deemed provided during that calendar year under the special accounting rule.
(d) Automobile lease valuation rule—(1) In general—(i) Annual Lease Value. Under the special valuation rule of this paragraph (d), if an employer provides an employee with an automobile that is available to the employee for an entire calendar year, the value of the benefit provided is the Annual Lease Value (determined under paragraph (d)(2) of this section) of that automobile. Except as otherwise provided, for an automobile that is available to an employee for less than an entire calendar year, the value of the benefit provided is either a pro-rated Annual Lease Value or the Daily Lease Value (both as defined in paragraph (d)(4) of this section), whichever is applicable. Absent any statutory exclusion relating to the employer-provided automobile (see, for example, section 132(a)(3) and § 1.132-5(b)), the amount of the Annual Lease Value (or a pro-rated Annual Lease Value or the Daily Lease Value, as applicable) is included in the gross income of the employee.
(ii) Definition of automobile. For purposes of this paragraph (d), the term “automobile” means any four-wheeled vehicle manufactured primarily for use on public streets, roads, and highways.
(2) Calculation of Annual Lease Value—(i) In general. The Annual Lease Value of a particular automobile is calculated as follows:
(A) Determine the fair market value of the automobile as of the first date on which the automobile is made available to any employee of the employer for personal use. For an automobile first made available to any employee for personal use prior to January 1, 1985, determine the fair market value as of January l of the first year the special valuation rule of this paragraph (d) is used with respect to the automobile. For rules relating to determination of the fair market value of an automobile for purposes of this paragraph (d), see paragraph (d)(5) of this section.
(B) Select the dollar range in column 1 of the Annual Lease Value Table, set forth in paragraph (d)(2)(iii) of this section corresponding to the fair market value of the automobile. Except as otherwise provided in paragraphs (d)(2) (iv) and (v) of this section, the Annual Lease Value for each year of availability of the automobile is the corresponding amount in column 2 of the Table.
(ii) Calculation of Annual Lease Value of automobile owned or leased by both an employer and an employee—(A) Purchased automobiles. Notwithstanding anything in this section to the contrary, if an employee contributes an amount toward the purchase price of an automobile in return for a percentage ownership interest in the automobile, the Annual Lease Value or the Daily Lease Value, whichever is applicable, is determined by reducing the fair market value of the employer-provided automobile by the lesser of—
(1) The amount contributed, or
(2) An amount equal to the employee’s percentage ownership interest multiplied by the unreduced fair market value of the automobile.
(B) Leased automobiles. Notwithstanding anything in this section to the contrary, if an employee contributes an amount toward the cost to lease an automobile in return for a percentage interest in the automobile lease, the Annual Lease Value or the Daily Lease Value, whichever is applicable, is determined by reducing the fair market value of the employer-provided automobile by the amount specified in the following sentence. The amount specified in this sentence is the unreduced fair market value of a vehicle multiplied by the lesser of—
(1) The employee’s percentage interest in the lease, or
(2) A fraction, the numerator of which is the amount contributed and the denominator of which is the entire lease cost.
(C) Example. The rules of paragraph (d)(2)(ii) (A) and (B) of this section are illustrated by the following example:
(iii) Annual Lease Value Table.
| Automobile fair market value | Annual lease value |
|---|---|
| (1) | (2) |
| $0 to 999 | $600 |
| 1,000 to 1,999 | 850 |
| 2,000 to 2,999 | 1,100 |
| 3,000 to 3,999 | 1,350 |
| 4,000 to 4,999 | 1,600 |
| 5,000 to 5,999 | 1,850 |
| 6,000 to 6,999 | 2,100 |
| 7,000 to 7,999 | 2,350 |
| 8,000 to 8,999 | 2,600 |
| 9,000 to 9,999 | 2,850 |
| 10,000 to 10,999 | 3,100 |
| 11,000 to 11,999 | 3,350 |
| 12,000 to 12,999 | 3,600 |
| 13,000 to 13,999 | 3,850 |
| 14,000 to 14,999 | 4,100 |
| 15,000 to 15,999 | 4,350 |
| 16,000 to 16,999 | 4,600 |
| 17,000 to 17,999 | 4,850 |
| 18,000 to 18,999 | 5,100 |
| 19,000 to 19,999 | 5,350 |
| 20,000 to 20,999 | 5,600 |
| 21,000 to 21,999 | 5,850 |
| 22,000 to 22,999 | 6,100 |
| 23,000 to 23,999 | 6,350 |
| 24,000 to 24,999 | 6,600 |
| 25,000 to 25,999 | 6,850 |
| 26,000 to 27,999 | 7,250 |
| 28,000 to 29,999 | 7,750 |
| 30,000 to 31,999 | 8,250 |
| 32,000 to 33,999 | 8,750 |
| 34,000 to 35,999 | 9,250 |
| 36,000 to 37,999 | 9,750 |
| 38,000 to 39,999 | 10,250 |
| 40,000 to 41,999 | 10,750 |
| 42,000 to 43,999 | 11,250 |
| 44,000 to 45,999 | 11,750 |
| 46,000 to 47,999 | 12,250 |
| 48,000 to 49,999 | 12,750 |
| 50,000 to 51,999 | 13,250 |
| 52,000 to 53,999 | 13,750 |
| 54,000 to 55,999 | 14,250 |
| 56,000 to 57,999 | 14,750 |
| 58,000 to 59,999 | 15,250 |
(iv) Recalculation of Annual Lease Value. The Annual Lease Values determined under the rules of this paragraph (d) are based on four-year lease terms. Therefore, except as otherwise provided in paragraph (d)(2)(v) of this section, the Annual Lease Value calculated by applying paragraph (d)(2) (i) or (ii) of this section shall remain in effect for the period that begins with the first date the special valuation rule of paragraph (d) of this section is applied by the employer to the automobile and ends on December 31 of the fourth full calendar year following that date. The Annual Lease Value for each subsequent four-year period is calculated by determining the fair market value of the automobile as of the first January 1 following the period described in the previous sentence and selecting the amount in column 2 of the Annual Lease Value Table corresponding to the appropriate dollar range in column 1 of the Table. If, however, the employer is using the special accounting rule provided in Announcement 85-113 (1985-31 I.R.B. 31, August 5, 1985) (relating to the reporting of and withholding on the value of noncash fringe benefits), the employer may calculate the Annual Lease Value for each subsequent four-year period as of the beginning of the special accounting period that begins immediately prior to the January 1 described in the previous sentence. For example, assume that pursuant to Announcement 85-113, an employer uses the special accounting rule. Assume further that beginning on November 1, 1988, the special accounting period is November 1 to October 31 and that the employer elects to use the special valuation rule of this paragraph (d) as of January 1, 1989. The employer may recalculate the Annual Lease Value as of November 1, 1992, rather than as of January 1, 1993.
(v) Transfer of the automobile to another employee. Unless the primary purpose of the transfer is to reduce Federal taxes, if an employer transfers the use of an automobile from one employee to another employee, the employer may recalculate the Annual Lease Value based on the fair market value of the automobile as of January 1 of the calendar year of transfer. If, however, the employer is using the special accounting rule provided in Announcement 85-113 (1985-31 I.R.B. 31, August 5, 1985) (relating to the reporting of and withholding on the value of noncash fringe benefits), the employer may recalculate the Annual Lease Value based on the fair market value of the automobile as of the beginning of the special accounting period in which the transfer occurs. If the employer does not recalculate the Annual Lease Value, and the employee to whom the automobile is transferred uses the special valuation rule, the employee may not recalculate the Annual Lease Value.
(3) Services included in, or excluded from, the Annual Lease Value Table—(i) Maintenance and insurance included. The Annual Lease Values contained in the Annual Lease Value Table include the fair market value of maintenance of, and insurance for, the automobile. Neither an employer nor an employee may reduce the Annual Lease Value by the fair market value of any service included in the Annual Lease Value that is not provided by the employer, such as reducing the Annual Lease Value by the fair market value of a maintenance service contract or insurance. An employer or employee who wishes to take into account only the services actually provided with respect to an automobile may value the availability of the automobile under the general valuation rules of paragraph (b) of this section.
(ii) Fuel excluded—(A) In general. The Annual Lease Values do not include the fair market value of fuel provided by the employer, whether fuel is provided in kind or its cost is reimbursed by or charged to the employer. Thus, if an employer provides fuel, the fuel must be valued separately for inclusion in income.
(B) Valuation of fuel provided in kind. The provision of fuel in kind may be valued at fair market value based on all the facts and circumstances or, in the alternative, it may be valued at 5.5 cents per mile for all miles driven by the employee. However, the provision of fuel in kind may not be valued at 5.5 cents per mile for miles driven outside the United States, Canada or Mexico. For purposes of this section, the United States includes the United States, its possessions and its territories.
(C) Valuation of fuel where cost reimbursed by or charged to an employer. The fair market value of fuel, the cost of which is reimbursed by or charged to an employer, is generally the amount of the actual reimbursement or the amount charged, provided the purchase of the fuel is at arm’s-length.
(D) Fleet-average cents-per-mile fuel cost. If an employer with a fleet of at least 20 automobiles that meets the requirements of paragraph (d)(5)(v)(D) of this section reimburses employees for the cost of fuel or allows employees to charge the employer for the cost of fuel, the fair market value of fuel provided to those automobiles may be determined by reference to the employer’s fleet-average cents-per-mile fuel cost. The fleet-average cents-per-mile fuel cost is equal to the fleet-average per-gallon fuel cost divided by the fleet-average miles-per-gallon rate. The averages described in the preceding sentence must be determined by averaging the per-gallon fuel costs and miles-per-gallon rates of a representative sample of the automobiles in the fleet equal to the greater of ten percent of the automobiles in the fleet or 20 automobiles for a representative period, such as a two-month period. In lieu of determining the fleet-average cents-per-mile fuel cost, if an employer is using the fleet-average valuation rule of paragraph (d)(5)(v) of this section and if determining the amount of the actual reimbursement or the amount charged for the purchase of fuel would impose unreasonable administrative burdens on the employer, the provision of fuel may be valued under the rule provided in paragraph (d)(3)(ii)(B) of this section.
(iii) Treatment of other services. The fair market value of any service not specifically identified in paragraph (d)(3)(i) of this section that is provided by the employer with respect to an automobile (other than the services of a chauffeur) must be added to the Annual Lease Value of the automobile in determining the fair market value of the benefit provided. See paragraph (b) (5) of this section for rules relating to the valuation of chauffeur services.
(4) Availability of an automobile for less than an entire calendar year—(i) Pro-rated Annual Lease Value used for continuous availability of at least 30 days—(A) In general. Except as otherwise provided in paragraph (d)(4)(iv) of this section, for periods of continuous availability of at least 30 days, but less than an entire calendar year, the value of the availability of an automobile provided by an employer electing to use the automobile lease valuation rule of this paragraph (d) is the pro-rated Annual Lease Value. The pro-rated Annual Lease Value is calculated by multiplying the applicable Annual Lease Value by a fraction, the numerator of which is the number of days of availability and the denominator of which is 365.
(B) Special rule for continuous availability of at least 30 days that straddles two reporting years. If an employee is provided with the continuous availability of an automobile for at least 30 days, but the continuous period straddles two calendar years (or two special accounting periods if the special accounting rule of Announcement 85-113 (1985-31 I.R.B. 31, August 5, 1985) (relating to the reporting of and withholding on noncash fringe benefits) is used), the pro-rated Annual Lease Value, rather than the Daily Lease Value, may be applied with respect to such period of continuous availability.
(ii) Daily Lease Value used for continuous availability of less than 30 days. Except as otherwise provided in paragraph (d)(4)(iii) of this section, for periods of continuous availability of one or more but less than 30 days, the value of the availability of the employer-provided automobile is the Daily Lease Value. The Daily Lease Value is calculated by multiplying the applicable Annual Lease Value by a fraction, the numerator of which is four times the number of days of availability and the denominator of which is 365.
(iii) Election to treat all periods as periods of at least 30 days. The value of the availability of an employer-provided automobile for a period of continuous availability of less than 30 days may be determined by applying the pro-rated Annual Lease Value by treating the automobile as if it had been available for 30 days, if doing so would result in a lower valuation than applying the Daily Lease Value to the shorter period of actual availability.
(iv) Periods of unavailability—(A) General rule. In general, a pro-rated Annual Lease Value (as provided in paragraph (d)(4)(i) of this section) is used to value the availability of an employer-provided automobile when the automobile is available to an employee for a continuous period of at least 30 days but less than the entire calendar year. Neither an employer nor an employee, however, may use a pro-rated Annual Lease Value when the reduction of Federal taxes is the primary reason the automobile is unavailable to an employee at certain times during the calendar year.
(B) Unavailability for personal reasons of the employee. If an automobile is unavailable to an employee because of personal reasons of the employee, such as while the employee is on vacation, a pro-rated Annual Lease Value, if used, must not take into account such periods of unavailability. For example, assume that an automobile is available to an employee during the first five months of the year and during the last five months of the year. Assume further that the period of unavailability occurs because the employee is on vacation. The Annual Lease Value, if it is applied, must be applied with respect to the entire 12-month period. The Annual Lease Value may not be pro-rated to take into account the two-month period of unavailability.
(5) Fair market value—(i) In general. For purposes of determining the Annual Lease Value of an automobile under the Annual Lease Value Table, the fair market value of an automobile is the amount that an individual would have to pay in an arm’s-length transaction to purchase the particular automobile in the jurisdiction in which the vehicle is purchased or leased. That amount includes all amounts attributable to the purchase of an automobile such as sales tax and title fees as well as the purchase price of the automobile. Any special relationship that may exist between the employee and the employer must be disregarded. Also, the employee’s subjective perception of the value of the automobile is not relevant to the determination of the automobile’s fair market value, and, except as provided in paragraph (d)(5)(ii) of this section, the cost incurred by the employer in connection with the purchase or lease of the automobile is not determinative of the fair market value of the automobile.
(ii) Safe-harbor valuation rule—(A) General rule. For purposes of calculating the Annual Lease Value of an automobile under this paragraph (d), the safe-harbor value of the automobile may be used as the fair market value of the automobile.
(B) Automobiles owned by the employer. For an automobile owned by the employer, the safe-harbor value of the automobile is the employer’s cost of purchasing the automobile (including sales tax, title, and other expenses attributable to such purchase), provided the purchase is made at arm’s-length. Notwithstanding the preceding sentence, the safe-harbor value of this paragraph (d)(5)(ii)(B) is not available with respect to an automobile manufactured by the employer. Thus, for example, if one entity manufactures an automobile and sells it to an entity with which it is aggregated pursuant to paragraph (c)(4) of this section, this paragraph (d)(5)(ii)(B) does not apply to value the automobile by the aggregated employer. In this case, value must be determined under paragraph (d)(5)(i) of this section.
(C) Automobiles leased by the employer. For an automobile leased but not manufactured by the employer, the safe-harbor value of the automobile is either the manufacturer’s suggested retail price of the automobile less eight percent (including sales tax, title, and other expenses attributable to such purchase), or the value determined under paragraph (d)(5)(iii) of this section.
(iii) Use of nationally recognized pricing sources. The fair market value of an automobile that is—
(A) Provided to an employee prior to January 1, 1985,
(B) Being revalued pursuant to paragraph (d)(2) (iv) or (v) of this section, or
(C) A leased automobile being valued pursuant to paragraph (d)(5)(ii) of this section, may be determined by reference to the retail value of such automobile as reported by a nationally recognized pricing source that regularly reports new or used automobile retail values, whichever is applicable. That retail value must be reasonable with respect to the automobile being valued. Pricing sources consist of publications and electronic data bases.
(iv) Fair market value of special equipment. When determining the fair market value of an automobile, the employer may exclude the fair market value of any specialized equipment or telephone that is added to or carried in the automobile provided that the presence of that equipment or telephone is necessitated by, and attributable to, the business needs of the employer. The value of the specialized equipment must be included if the employee to whom the automobile is available uses the specialized equipment in a trade or business of the employee other than the employee’s trade or business of being an employee of the employer.
(v) Fleet-average valuation rule—(A) In general. An employer with a fleet of 20 or more automobiles meeting the requirements of this paragraph (d)(5)(v) (including the business-use and fair market value conditions of paragraph (d)(5)(v)(D) of this section) may use a fleet-average value for purposes of calculating the Annual Lease Values of the automobiles in the fleet. The fleet-average value is the average of the fair market values of all automobiles in the fleet. The fair market value of each automobile in the fleet shall be determined, pursuant to the rules of paragraphs (d)(5) (i) through (iv) of this section, as of the date described in paragraph (d)(2)(i)(A) of this section.
(B) Period for use of rule. The fleet-average valuation rule of this paragraph (d)(5)(v) may be used by an employer as of January 1 of any calendar year following the calendar year in which the employer acquires a sufficient number of automobiles to total a fleet of 20 or more automobiles. The Annual Lease Value calculated for the automobiles in the fleet, based on the fleet-average value, shall remain in effect for the period that begins with the first January 1 the fleet-average valuation ru1e of this paragraph (d)(5)(v) is applied by the employer to the automobiles in the fleet and ends on December 31 of the subsequent calendar year. The Annual Lease Value for each subsequent two-year period is calculated by determining the fleet-average value of the automobiles in the fleet as of the first January 1 of such period. An employer may cease using the fleet-average valuation rule as of any January 1. If, however, the employer is using the special accounting rule provided in Announcement 85-113 (1985-31 I.R.B. 31, August 5, 1985) (relating to the reporting of and withholding on noncash fringe benefits), the employer may apply the rules of this paragraph (d)(5)(v)(B) on the basis of the special accounting period rather than the calendar year. (This is accomplished by substituting (1) the beginning of the special accounting period that begins immediately prior to the January 1 described in this paragraph (d)(5)(v)(B) for January 1 wherever it appears in this paragraph (d)(5)(v) (B) and (2) the end of such accounting period for December 31.) If the number of qualifying automobiles in the employer’s fleet declines to fewer than 20 for more than 50 percent of the days in a year, then the fleet-average valuation rule does not apply as of January 1 of such year. In this case, the Annual Lease Value must be determined separately for each remaining automobile. The revaluation rules of paragraphs (d)(2) (iv) and (v) of this section do not apply to automobiles valued under this paragraph (d)(5)(v).
(C) Automobiles included in the fleet. An employer may include in a fleet any automobile that meets the requirements of this paragraph (d)(5)(v) and is available to any employee of the employer for personal use. An employer may include in the fleet only automobiles the availability of which is valued under the automobile lease valuation rule of this paragraph (d). An employer need not include in the fleet all automobiles valued under the automobile lease valuation rule. An employer may have more than one fleet for purposes of the fleet-average rule of this paragraph (d)(5)(v). For example, an employer may group automobiles in a fleet according to their physical type or use.
(D) Limitations on use of fleet-average rule. The rule provided in this paragraph (d)(5)(v) may not be used for any automobile the fair market value of which (determined pursuant to paragraphs (d)(5)(i) through (iv) of this section as of the first date on which the automobile is made available to any employee of the employer for personal use) exceeds $50,000, as adjusted by section 280F(d)(7). The first such adjustment shall be for calendar year 2019. In addition, the rule provided in this paragraph (d)(5)(v) may only be used for automobiles that the employer reasonably expects will regularly be used in the employer’s trade or business. For rules concerning when an automobile is regularly used in the employer’s business, see paragraph (e)(1)(iv) of this section.
(E) Additional automobiles added to the fleet. The fleet-average value in effect at the time an automobile is added to a fleet is treated as the fair market value of the additional automobile for purposes of determining the Annual Lease Value of the automobile until the fleet-average value changes pursuant to paragraph (d)(5)(v)(B) of this section.
(F) Use of the fleet-average rule by employees. An employee may only use the fleet-average rule if it is used by the employer. If an employer uses the fleet-average rule, and the employee uses the special valuation rule of paragraph (d) of this section, the employee must use the fleet-average value determined by the employer.
(G) Transition rule for 2018 and 2019. Notwithstanding paragraph (d)(5)(v)(B) of this section, an employer that did not qualify to use the fleet-average valuation rule prior to January 1, 2018, with respect to any automobile (including a truck or van) because the fair market value of the vehicle exceeded the inflation-adjusted maximum value requirement of paragraph (d)(5)(v)(D) of this section, as published by the Service in a notice or revenue procedure applicable to the year the vehicle was first made available to any employee of the employer, may adopt the fleet-average valuation rule for 2018 or 2019 with respect to the vehicle, provided the fair market value of the vehicle does not exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019, respectively.
(H) Applicability date. Paragraphs (d)(5)(v)(D), and (G) of this section apply to taxable years beginning on or after February 5, 2020. Notwithstanding the first sentence of this paragraph (d)(5)(v)(H), any taxpayer may choose to apply paragraph (d)(5)(v)(G) of this section beginning on or after January 1, 2018.
(6) Special rules for continuous availability of certain automobiles—(i) Fleet automobiles. If an employer is using the fleet-average valuation ru1e of paragraph (d)(5)(v) of this section and the employer provides an employee with the continuous availability of an automobile from the same fleet during a period (though not necessarily the same fleet automobile for the entire period), the employee is treated as having the use of a single fleet automobile for the entire period, e.g., an entire calendar year. Thus, when applying the automobile lease valuation rule of this paragraph (d), the employer may treat the fleet-average value as the fair market value of the automobile deemed available to the employee for the period for purposes of calculating the Annual Lease Value, (or pro-rated Annual Lease Value or Daily Lease Value whichever is applicable) of the automobile. If an employer provides an employee with the continuous availability of more than one fleet automobile during a period, the employer may treat the fleet-average value as the fair market value of each automobile provided to the employee provided that the rules of paragraph (d)(5)(v)(D) of this section are satisfied.
(ii) Demonstration automobiles—(A) In general. If an automobile dealership provides an employee with the continuous availability of a demonstration automobile (as defined in § 1.132-5(o)(3)) during a period (though not necessarily the same demonstration automobile for the entire period), the employee is treated as having the use of a single demonstration automobile for the entire period, e.g., an entire calendar year. If an employer provides an employee with the continuous availability of more than one demonstration automobile during a period, the employer may treat the value determined under paragraph (d)(6)(ii)(B) of this section as the fair market value of each automobile provided to the employee. For rules relating to the treatment as a working condition fringe of the qualified automobile demonstration use of a demonstration automobile by a full-time automobile salesman, see § 1.132-5(o).
(B) Determining the fair market value of a demonstration automobile. When applying the automobile lease valuation rule of this paragraph (d), the employer may treat the average of the fair market values of the demonstration automobiles which are available to an employee and held in the dealership’s inventory during the calendar year as the fair market value of the demonstration automobile deemed available to the employee for the period for purposes of calculating the Annual Lease Value of the automobile. If under the facts and circumstances it is inappropriate to take into account, with respect to an employee, certain models of demonstration automobiles, the value of the benefit is determined without reference to the fair market values of such models. For example, assume that an employee has the continuous availability for an entire calendar year of one demonstration automobile, although not the same one for the entire year. Assume further that the fair market values of the automobiles in the dealership inventory during the year range from $8,000 to $20,000. If there is not a substantial period (such as three months) during the year when the employee uses demonstration automobiles valued at less than $16,000, then those automobiles are not considered in determining the value of the benefit provided to the employee. In this case, the average of the fair market values of the demonstration automobiles in the dealership’s inventory valued at $16,000 or more is treated as the fair market value of the automobile deemed available to the employee for the calendar year for purposes of calculating the Annual Lease Value of the automobile.
(7) Consistency rules—(i) Use of the automobile lease valuation rule by an employer. Except as provided in paragraph (d)(5)(v)(B) of this section, an employer may adopt the automobile lease valuation rule of this paragraph (d) for an automobile only if the rule is adopted to take effect by the later of—
(A) January 1, 1989, or
(B) The first day on which the automobile is made available to an employee of the employer for personal use (or, if the commuting valuation rule of paragraph (f) of this section is used when the automobile is first made available to an employee of the employer for personal use, the first day on which the commuting valuation rule is not used).
(ii) An employer must use the automobile lease valuation rule for all subsequent years. Once the automobile lease valuation rule has been adopted for an automobile by an employer, the rule must be used by the employer for all subsequent years in which the employer makes the automobile available to any employee except that the employer may, for any year during which (or for any employee for whom) use of the automobile qualifies for the commuting valuation rule of paragraph (f) of this section, use the commuting valuation rule with respect to the automobile.
(iii) Use of the automobile lease valuation rule by an employee. An employee may adopt the automobile lease valuation rule for an automobile only if the rule is adopted—
(A) By the employer, and
(B) Beginning with the first day on which the automobile for which the employer (consistent with paragraph (d)(7)(i) of this section) adopted the rule is made available to that employee for personal use (or, if the commuting valuation rule of paragraph (f) of this section is used when the automobile is first made available to that employee for personal use, the first day on which the commuting valuation rule is not used).
(iv) An employee must use the automobile lease valuation rule for all subsequent years. Once the automobile lease valuation rule has been adopted for an automobile by an employee, the rule must be used by the employee for all subsequent years in which the automobile for which the rule is used is available to the employee. However, the employee may, for any year during which use of the automobile qualifies for use of the commuting valuation rule of paragraph (f) of this section and for which the employer uses such rule, use the commuting valuation rule with respect to the automobile.
(v) Replacement automobiles. Notwithstanding anything in this paragraph (d)(7) to the contrary, if the automobile lease valuation rule is used by an employer, or by an employer and an employee, with respect to a particular automobile, and a replacement automobile is provided to the employee for the primary purpose of reducing Federal taxes, then the employer, or the employer and the employee, using the rule must continue to use the rule with respect to the replacement automobile.
(e) Vehicle cents-per-mile valuation rule—(1) In general—(i) General rule. Under the vehicle cents-per-mile valuation rule of this paragraph (e), if an employer provides an employee with the use of a vehicle that—
(A) The employer reasonably expects will be regularly used in the employer’s trade or business throughout the calendar year (or such shorter period as the vehicle may be owned or leased by the employer), or
(B) Satisfies the requirements of paragraph (e)(1)(ii) of this section, the value of the benefit provided in the calendar year is the standard mileage rate provided in the applicable Revenue Ruling or Revenue Procedure (“cents-per-mile rate”) multiplied by the total number of miles the vehicle is driven by the employee for personal purposes. The cents-per-mile rate is to be applied prospectively from the first day of the taxable year following the date of publication of the applicable Revenue Ruling or Revenue Procedure. An employee who uses an employer-provided vehicle, in whole or in part, for a trade or business other than the employer’s trade or business, may take a deduction for such business use based upon the vehicle cents-per-mile rule as long as such deduction is at the same standard mileage rate as that used in calculating the employee’s income inclusion. The standard mileage rate must be applied to personal miles independent of business miles. Thus, for example, if the standard mileage rate were 24 cents per mile for the first 15,000 miles and 11 cents per mile for all miles over 15,000 and an employee drives 20,000 personal miles and 45,000 business miles in a year, the value of the personal use of the vehicle is $4,150 ((15,000 × $.24) + (5,000 × $.11)). For purposes of this section, the use of a vehicle for personal purposes is any use of the vehicle other than use in the employee’s trade or business of being an employee of the employer.
(ii) Mileage rule. A vehicle satisfies the requirements of this paragraph (e)(1)(ii) for a calendar year if—
(A) It is actually driven at least 10,000 miles in that year; and
(B) Use of the vehicle during the year is primarily by employees. For example, if a vehicle is used by only one employee during the calendar year and that employee drives the vehicle at least 10,000 miles during the year, the vehicle satisfies the requirements of this paragraph (e)(1)(ii) even if all miles driven by the employee are personal. A vehicle is considered used during the year primarily by employees in accordance with the requirement of paragraph (e)(1)(ii)(B) of this section if employees use the vehicle on a consistent basis for commuting. If the employer does not own or lease the vehicle during a portion of the year, the 10,000 mile threshold is to be reduced proportionately to reflect the periods when the employer did not own or lease the vehicle. For purposes of this paragraph (e)(1)(ii), use of the vehicle by an individual (other than the employee) whose use would be taxed to the employee is not considered use by the employee.
(iii) Limitation on use of the vehicle cents-per-mile valuation rule—(A) In general. The value of the use of an automobile (as defined in paragraph (d)(1)(ii) of this section) may not be determined under the vehicle cents-per-mile valuation rule of this paragraph (e) for a calendar year if the fair market value of the automobile (determined pursuant to paragraphs (d)(5)(i) through (iv) of this section as of the first date on which the automobile is made available to any employee of the employer for personal use) exceeds $50,000, as adjusted by section 280F(d)(7). The first such adjustment shall be for calendar year 2019.
(B) Application of limitation with respect to a vehicle owned by both an employer and an employee. If an employee contributes an amount towards the purchase price of a vehicle in return for a percentage ownership interest in the vehicle, for purposes of determining whether the limitation of this paragraph (e)(1)(iii) applies, the fair market value of the vehicle is reduced by the lesser of—
(1) The amount contributed, or
(2) An amount equal to the employee’s percentage ownership interest multiplied by the unreduced fair market value of the vehicle. If the employee does not receive an ownership interest in the employer-provided vehicle, then the fair market value of the vehicle is determined without regard to any amount contributed. For purposes of this paragraph (e)(1)(iii)(B), an employee’s ownership interest in a vehicle will not be recognized unless it is reflected in the title of the vehicle. An ownership interest reflected in the title of a vehicle will not be recognized if under the facts and circumstances the title does not reflect the benefits and burdens of ownership.
(C) Application of limitation with respect to a vehicle leased by both an employer and employee. If an employee contributes an amount toward the cost to lease a vehicle in return for a percentage interest in the vehicle lease, for purposes of determining whether the limitation of this paragraph (e)(1)(iii) applies, the fair market value of the vehicle is reduced by the amount specified in the following sentence. The amount specified in this sentence is the unreduced fair market value of a vehicle multiplied by the lesser of—
(1) The employee’s percentage interest in the lease, or
(2) A fraction, the numerator of which is the amount contributed and the denominator of which is the entire lease cost. If the employee does not receive an interest in the vehicle lease, then the fair market value is determined without regard to any amount contributed. For purposes of this paragraph (e)(1)(iii)(C), an employee’s interest in a vehicle lease will not be recognized unless the employee is a named co-lessee on the lease. An interest in a lease will not be recognized if under the facts and circumstances, the lease does not reflect the true obligations of the lessees.
(iv) Regular use in an employer’s trade or business. Whether a vehicle is regularly used in an employer’s trade or business is determined on the basis of all facts and circumstances. A vehicle is considered regularly used in an employer’s trade or business for purposes of paragraph (e)(1)(i)(A) of this section if one of the following safe harbor conditions is satisfied:
(A) At least 50 percent of the vehicle’s total annual mileage is for the employer’s business; or
(B) The vehicle is generally used each workday to transport at least three employees of the employer to and from work in an employer-sponsored commuting vehicle pool. Infrequent business use of the vehicle, such as for occasional trips to the airport or between the employer’s multiple business premises, does not constitute regular use of the vehicle in the employer’s trade or business.
(v) Application of rule to shared usage. If an employer regularly provides a vehicle to employees for use by more than one employee at the same time, such as with an employer-sponsored vehicle commuting pool, the employer may use the vehicle cents-per-mile valuation rule to value the use of the vehicle by each employee who shares such use. See § 1.61-21(c)(2)(ii)(B) for provisions relating to the allocation of the value of an automobile to more than one employee.
(2) Definition of vehicle. For purposes of this paragraph (e), the term “vehicle” means any motorized wheeled vehicle manufactured primarily for use on public streets, roads, and highways. The term “vehicle” includes an automobile as defined in paragraph (d)(1)(ii) of this section.
(3) Services included in, or excluded from, the cents-per-mile rate—(i) Maintenance and insurance included. The cents-per-mile rate includes the fair market value of maintenance of, and insurance for, the vehicle. The cents-per-mile rate may not be reduced by the fair market value of any service included in the cents-per-mile rate but not provided by the employer. An employer or employee who wishes to take into account only the particular services provided with respect to a vehicle may value the availability of the vehicle under the general valuation rules of paragraph (b) of this section.
(ii) Fuel provided by the employer—(A) Miles driven in the United States, Canada, or Mexico. With respect to miles driven in the United States, Canada, or Mexico, the cents-per-mile rate includes the fair market value of fuel provided by the employer. If fuel is not provided by the employer, the cents-per-mile rate may be reduced by no more than 5.5 cents or the amount specified in any applicable Revenue Ruling or Revenue Procedure. For purposes of this section, the United States includes the United States, its possessions and its territories.
(B) Miles driven outside the United States, Canada, or Mexico. With respect to miles driven outside the United States, Canada, or Mexico, the fair market value of fuel provided by the employer is not reflected in the cents-per-mile rate. Accordingly, the cents-per-mile rate may be reduced but by no more than 5.5 cents or the amount specified in any applicable Revenue Ruling or Revenue Procedure. If the employer provides the fuel in kind, it must be valued based on all the facts and circumstances. If the employer reimburses the employee for the cost of fuel or allows the employee to charge the employer for the cost of fuel, the fair market value of the fuel is generally the amount of the actual reimbursement or the amount charged, provided the purchase of fuel is at arm’s length.
(iii) Treatment of other services. The fair market value of any service not specifically identified in paragraph (e)(3)(i) of this section that is provided by the employer with respect to a vehicle is not reflected in the cents-per-mile rate. See paragraph (b)(5) of this section for rules relating to valuation of chauffeur services.
(4) Valuation of personal use only. The vehicle cents-per-mile valuation rule of this paragraph (e) may only be used to value the miles driven for personal purposes. Thus, the employer must include an amount in an employee’s income with respect to the use of a vehicle that is equal to the product of the number of personal miles driven by the employee and the appropriate cents-per-mile rate. The term “personal miles” means all miles for which the employee used the automobile except miles driven in the employee’s trade or business of being an employee of the employer. Unless additional services are provided with respect to the vehicle (see paragraph (e)(3)(iii) of this section), the employer may not include in income a greater amount; for example, the employer may not include in income 100 percent (all business and personal miles) of the value of the use of the vehicle.
(5) Consistency rules—(i) Use of the vehicle cents-per-mile valuation rule by an employer. An employer must adopt the vehicle cents-per-mile valuation rule of this paragraph (e) for a vehicle to take effect by the first day on which the vehicle is used by an employee of the employer for personal use (or, if the commuting valuation rule of paragraph (f) of this section is used when the vehicle is first used by an employee of the employer for personal use, the first day on which the commuting valuation rule is not used).
(ii) An employer must use the vehicle cents-per-mile valuation rule for all subsequent years. Once the vehicle cents-per-mile valuation rule has been adopted for a vehicle by an employer, the rule must be used by the employer for all subsequent years in which the vehicle qualifies for use of the rule, except that the employer may, for any year during which use of the vehicle qualifies for the commuting valuation rule of paragraph (f) of this section, use the commuting valuation rule with respect to the vehicle. If the vehicle fails to qualify for use of the vehicle cents-per-mile valuation rule during a subsequent year, the employer may adopt for such subsequent year and thereafter any other special valuation rule for which the vehicle then qualifies. If the employer elects to use the automobile lease valuation rule of paragraph (d) of this section for a period in which the automobile does not qualify for use of the vehicle cents-per-mile valuation rule, then the employer must comply with the requirements of paragraph (d)(7) of this section. For purposes of paragraph (d)(7) of this section, the first day on which the automobile with respect to which the vehicle cents-per-mile rule had been used fails to qualify for use of the vehicle cents-per-mile valuation rule may be deemed to be the first day on which the automobile is available to an employee of the employer for personal use.
(iii) Use of the vehicle cents-per-mile valuation rule by an employee. An employee may adopt the vehicle cents-per-mile valuation rule for a vehicle only if the rule is adopted—
(A) By the employer, and
(B) Beginning with respect to the first day on which the vehicle for which the employer (consistent with paragraph (e)(5)(i) of this section) adopted the rule is available to that employee for personal use (or, if the commuting valuation rule of paragraph (f) of this section is used when the vehicle is first used by an employee for personal use, the first day on which the commuting valuation rule is not used).
(iv) An employee must use the vehicle cents-per-mile valuation rule for all subsequent years. Once the vehicle cents-per-mile valuation rule has been adopted for a vehicle by an employee, the rule must be used by the employee for all subsequent years of personal use of the vehicle by the employee for which the rule is used by the employer. However, see paragraph (f) of this section for rules relating to the use of the commuting valuation rule for a subsequent year.
(v) Replacement vehicles. Notwithstanding anything in this paragraph (e)(5) to the contrary, if the vehicle cents-per-mile valuation rule is used by an employer, or by an employer and an employee, with respect to a particular vehicle. and a replacement vehicle is provided to the employee for the primary purpose of reducing Federal taxes, then the employer, or the employer and the employee, using the rule must continue to use the rule with respect to the replacement vehicle if the replacement vehicle qualifies for use of the rule.
(vi) Transition rule for 2018 and 2019. For a vehicle first made available to any employee of an employer for personal use before calendar year 2018, an employer that did not qualify under this paragraph (e)(5) to adopt the vehicle cents-per-mile valuation rule on the first day on which the vehicle is used by the employee for personal use because the fair market value of the vehicle exceeded the inflation-adjusted limitation of paragraph (e)(1)(iii) of this section, as published by the Service in a notice or revenue procedure applicable to the year the vehicle was first used by the employee for personal use, may first adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019 taxable year, provided the fair market value of the vehicle does not exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019, respectively. Similarly, for a vehicle first made available to any employee of the employer for personal use before calendar year 2018, if the commuting valuation rule of paragraph (f) of this section was used when the vehicle was first used by the employee for personal use, and the employer did not qualify to switch to the vehicle cents-per-mile valuation rule of this paragraph (e) on the first day on which the commuting valuation rule of paragraph (f) of this section was not used because the vehicle had a fair market value in excess of the inflation-adjusted limitation of paragraph (e)(1)(iii) of this section, as published by the Service in a notice or revenue procedure applicable to the year the commuting valuation rule was first not used, the employer may adopt the vehicle cents-per-mile valuation rule for the 2018 or 2019 taxable year, provided the fair market value of the vehicle does not exceed $50,000 on January 1, 2018, or $50,400 on January 1, 2019, respectively. However, in accordance with paragraph (e)(5)(ii) of this section, an employer that adopts the vehicle cents-per-mile valuation rule pursuant to this paragraph (e)(5)(vi) must continue to use the rule for all subsequent years in which the vehicle qualifies for use of the rule, except that the employer may, for any year during which use of the vehicle qualifies for the commuting valuation rule of paragraph (f) of this section, use the commuting valuation rule with regard to the vehicle.
(6) Applicability date. Paragraphs (e)(1)(iii)(A) and (e)(5)(i) and (vi) of this section apply to taxable years beginning on or after February 5, 2020. Notwithstanding the first sentence of this paragraph (e)(6), any taxpayer may choose to apply paragraph (e)(5)(vi) of this section beginning on or after January 1, 2018.
(f) Commuting valuation rule—(1) In general. Under the commuting valuation rule of this paragraph (f), the value of the commuting use of an employer-provided vehicle may be determined pursuant to paragraph (f)(3) of this section if the following criteria are met by the employer and employees with respect to the vehicle:
(i) The vehicle is owned or leased by the employer and is provided to one or more employees for use in connection with the employer’s trade or business and is used in the employer’s trade or business;
(ii) For bona fide noncompensatory business reasons, the employer requires the employee to commute to and/or from work in the vehicle;
(iii) The employer has established a written policy under which neither the employee, nor any individual whose use would be taxable to the employee, may use the vehicle for personal purposes, other than for commuting or de minimis personal use (such as a stop for a personal errand on the way between a business delivery and the employee’s home);
(iv) Except for de minimis personal use, the employee does not use the vehicle for any personal purpose other than commuting; and
(v) The employee required to use the vehicle for commuting is not a control employee of the employer (as defined in paragraphs (f) (5) and (6) of this section).
(2) Special rules. Notwithstanding anything in paragraph (f)(1) of this section to the contrary, the following special rules apply—
(i) Chauffeur-driven vehicles. If a vehicle is chauffeur-driven, the commuting valuation rule of this paragraph (f) may not be used to value the commuting use of any person (other than the chauffeur) who rides in the vehicle. (See paragraphs (d) and (e) of this section for other vehicle special valuation rules.) The special rule of this paragraph (f) may be used to value the commuting-only use of the vehicle by the chauffeur if the conditions of paragraph (f)(1) of this section are satisfied. For purposes of this paragraph (f)(2), an individual will not be considered a chauffeur if he or she performs non-driving services for the employer, is not available to perform driving services while performing such other services and whose only driving services consist of driving a vehicle used for commuting by other employees of the employer.
(ii) Control employee exception. If the vehicle in which the employee is required to commute is not an automobile as defined in paragraph (d)(1)(ii) of this section, the restriction of paragraph (f)(1)(v) of this section (relating to control employees) does not apply.
(3) Commuting value—(i) $1.50 per one-way commute. If the requirements of this paragraph (f) are satisfied, the value of the commuting use of an employer-provided vehicle is $1.50 per one-way commute (e.g., from home to work or from work to home). The value provided in this paragraph (f)(3) includes the value of any goods or services directly related to the vehicle (e.g., fuel).
(ii) Value per employee. If there is more than one employee who commutes in the vehicle, such as in the case of an employer-sponsored commuting vehicle pool, the amount includible in the income of each employee is $1.50 per one-way commute. Thus, the amount includible for each round-trip commute is $3.00 per employee. See paragraphs (d)(7)(vi) and (e)(5)(vi) of this section for use of the automobile lease valuation and vehicle cents-per-mile valuation special rules for valuing the use or availability of the vehicle in the case of an employer-sponsored vehicle or automobile commuting pool.
(4) Definition of vehicle. For purposes of this paragraph (f), the term “vehicle” means any motorized wheeled vehicle manufactured primarily for use on public streets, roads, and highways. The term “vehicle” includes an automobile as defined in paragraph (d)(1)(ii) of this section.
(5) Control employee defined—Non-government employer. For purposes of this paragraph (f), a control employee of a non-government employer is any employee—
(i) Who is a Board- or shareholder-appointed, confirmed, or elected officer of the employer whose compensation equals or exceeds $50,000,
(ii) Who is a director of the employer,
(iii) Whose compensation equals or exceeds $100,000, or
(iv) Who owns a one-percent or greater equity, capital, or profits interest in the employer.
(6) Control employee defined—Government employer. For purposes of this paragraph (f), a control employee of a government employer is any—
(i) Elected official, or
(ii) Employee whose compensation equals or exceeds the compensation paid to a Federal Government employee holding a position at Executive Level V, determined under Chapter 11 of title 2, United States Code, as adjusted by section 5318 of title 5 United States Code.
(7) “Compensation” defined. For purposes of this paragraph (f), the term “compensation” has the same meaning as in section 414(q)(7). Compensation includes all amounts received from all entities treated as a single employer under section 414 (b), (c), (m), or (o). Levels of compensation shall be adjusted at the same time and in the same manner as provided in section 415(d). The first such adjustment shall be for calendar year 1988.
(g) Non-commercial flight valuation rule—(1) In general. Under the non-commercial flight valuation rule of this paragraph (g), except as provided in paragraph (g)(12) of this section, if an employee is provided with a flight on an employer-provided aircraft, the value of the flight is calculated using the aircraft valuation formula of paragraph (g)(5) of this section. For purposes of this paragraph (g), the value of a flight on an employer-provided aircraft by an individual who is less than two years old is deemed to be zero. See paragraph (b)(1) of this section for rules relating to the amount includible in income when an employee reimburses the employee’s employer for all or part of the fair market value of the benefit provided.
(2) Eligible flights and eligible aircraft. The valuation rule of this paragraph (g) may be used to value flights on all employer-provided aircraft, including helicopters. The valuation rule of this paragraph (g) may be used to value international as well as domestic flights. The valuation rule of this paragraph (g) may not be used to value a flight on any commercial aircraft on which air transportation is sold to the public on a per-seat basis. For a special valuation rule relating to certain flights on commercial aircraft, see paragraph (h) of this section.
(3) Definition of a flight—(i) General rule. Except as otherwise provided in paragraph (g)(3)(iii) of this section (relating to intermediate stops), for purposes of this paragraph (g), a flight is the distance (in statute miles, i.e., 5,280 feet per statute mile) between the place at which the individual boards the aircraft and the place at which the individual deplanes.
(ii) Valuation of each flight. Under the valuation rule of this paragraph (g), value is determined separately for each flight. Thus, a round-trip is comprised of at least two flights. For example, an employee who takes a personal trip on an employer-provided aircraft from New York City to Denver, then Denver to Los Angeles, and finally Los Angeles to New York City has taken three flights and must apply the aircraft valuation formula separately to each flight. The value of a flight must be determined on a passenger-by-passenger basis. For example, if an individual accompanies an employee and the flight taken by the individual would be taxed to the employee, the employee would be taxed on the special rule value of the flight by the employee and the flight by the individual.
(iii) Intermediate stop. If a landing is necessitated by weather conditions, by an emergency, for purposes of refueling or obtaining other services relating to the aircraft or for any other purpose unrelated to the personal purposes of the employee whose flight is being valued, that landing is an intermediate stop. Additional mileage attributable to an intermediate stop is not considered when determining the distance of an employee’s flight.
(iv) Examples. The rules of paragraph (g)(3)(iii) of this section may be illustrated by the following examples:
(4) Personal and non-personal flights—(i) In general. The valuation rule of this paragraph (g) applies to personal flights on employer-provided aircraft. A personal flight is one the value of which is not excludable under another section of subtitle A of the Internal Revenue Code of 1986, such as under section 132(d) (relating to a working condition fringe). However, solely for purposes of paragraphs (g)(4)(ii) and (g)(4)(iii) of this section, references to personal flights do not include flights a portion of which would not be excludable from income by reason of section 274(c).
(ii) Trip primarily for employer’s business. If an employee combines, in one trip, personal and business flights on an employer-provided aircraft and the employee’s trip is primarily for the employer’s business (see § 1.162-2(b)(2)), the employee must include in income the excess of the value of all the flights that comprise the trip over the value of the flights that would have been taken had there been no personal flights but only business flights. For example, assume that an employee flies on an employer-provided aircraft from Chicago, Illinois, to Miami, Florida, for the employer’s business and that from Miami the employee flies on the employer-provided aircraft to Orlando, Florida, for personal purposes and then flies back to Chicago. Assume further that the primary purpose of the trip is for the employer’s business. The amount includible in income is the excess of the value of the three flights (Chicago to Miami, Miami to Orlando, and Orlando to Chicago), over the value of the flights that would have been taken had there been no personal flights but only business flights (Chicago to Miami and Miami to Chicago).
(iii) Primarily personal trip. If an employee combines, in one trip, personal and business flights on an employer-provided aircraft and the employee’s trip is primarily personal (see § 1.162-2(b)(2)), the amount includible in the employee’s income is the value of the personal flights that would have been taken had there been no business flights but only personal flights. For example, assume that an employee flies on an employer-provided aircraft from San Francisco, California, to Los Angeles, California, for the employer’s business and that from Los Angeles the employee flies on an employer-provided aircraft to Palm Springs, California, primarily for personal reasons and then flies back to San Francisco. Assume further that the primary purpose of the trip is personal. The amount includible in the employee’s income is the value of personal flights that would have been taken had there been no business flights but only personal flights (San Francisco to Palm Springs and Palm Springs to San Francisco).
(iv) Application of section 274(c). The value of employer- provided travel outside the United States away from home may not be excluded from the employee’s gross income as a working condition fringe, by either the employer or the employee, to the extent not deductible by reason of section 274(c). The valuation rule of this paragraph (g) applies to that portion of the value any flight not excludable by reason of section 274(c). Such value is includible in income in addition to the amounts determined under paragraphs (g)(4)(ii) and (g)(4)(iii) of this section.
(v) Flights by individuals who are not personal guests. If an individual who is not an employee of the employer providing the aircraft is on a flight, and the individual is not the personal guest of any employee of the employer, the flight by the individual is not taxable to any employee of the employer providing the aircraft. The rule in the preceding sentence applies where the individual is provided the flight by the employer for noncompensatory business reasons of the employer. For example, assume that G, an employee of company Y, accompanies A, an employee of company X, on company X’s aircraft for the purpose of inspecting land under consideration for purchase by company X from company Y. The flight by G is not taxable to A. No inference may be drawn from this paragraph (g)(4)(v) concerning the taxation of a flight provided to an individual who is neither an employee of the employer nor a personal guest of any employee of the employer.
(5) Aircraft valuation formula. Under the valuation rule of this paragraph (g), the value of a flight is determined under the base aircraft valuation formula (also known as the Standard Industry Fare Level formula or SIFL) by multiplying the SIFL cents-per-mile rates applicable for the period during which the flight was taken by the appropriate aircraft multiple (as provided in paragraph (g)(7) of this section) and then adding the applicable terminal charge. The SIFL cents-per-mile rates in the formula and the terminal charge are calculated by the Department of Transportation and are revised semi-annually. The base aircraft valuation formula in effect from January 1, 1989 through June 30, 1989, is as follows: a terminal charge of $26.48 plus ($.1449 per mile for the first 500 miles, $.1105 per mile for miles between 501 and 1500, and $.1062 per mile for miles over 1500). For example, if a flight taken on January 15, 1989, by a non-control employee on an employer-provided aircraft with a maximum certified takeoff weight of 26,000 lbs. is 2,000 miles long, the value of the flight determined under this paragraph (g)(5) is: $100.36 ((.313 × (($.1449 × 500) + ($.1105 × 1,000) + ($.1062 × 500))) + $26.48). The aircraft valuation formula applies separately to each flight being valued under this paragraph (g). Therefore, the number of miles an employee has flown on employer-provided aircraft flights prior to the flight being valued does not affect the determination of the value of the flight.
(6) Discretion to provide new formula. The Commissioner may prescribe a different base aircraft valuation formula by regulation, Revenue Ruling or Revenue Procedure in the event that the calculation of the Standard Industry Fare Level is discontinued.
(7) Aircraft multiples—(i) In general. The aircraft multiples are based on the maximum certified takeoff weight of the aircraft. When applying the aircraft valuation formula to a flight, the appropriate aircraft multiple is multiplied by the product of the applicable SIFL cents-per-mile rates multiplied by the number of miles in the flight and then the terminal charge is added to the product. For purposes of applying the aircraft valuation formula described in paragraph (g)(5) of this section, the aircraft multiples are as follows:
| Maximum certified take-off weight of the aircraft | Aircraft multiple for a control employee (percent) | Aircraft multiple for a non-control employee (percent) |
|---|---|---|
| 6,000 lbs. or less | 62.5 | 15.6 |
| 6,001-10,000 lbs. | 125 | 23.4 |
| 10,001-25,000 lbs. | 300 | 31.3 |
| 25,001 lbs. or more | 400 | 31.3 |
(ii) Flights treated as provided to a control employee. Except as provided in paragraph (g)(12) of this section, any fIight provided to an individual whose flight would be taxable to a control employee (as defined in paragraphs (g) (8) and (9) of this section) as the recipient shall be valued as if such flight had been provided to that control employee. For example, assume that the chief executive officer of an employer, his spouse, and his two children fly on an employer-provided aircraft for personal purposes. Assume further that the maximum certified takeoff weight of the aircraft is 12,000 lbs. The amount includible in the employee’s income is 4 × ((300 percent × the applicable SIFL cents-per-mile rates provided in paragraph (g)(5) of this section multiplied by the number of miles in the flight) plus the applicable terminal charge).
(8) Control employee defined—Non-government employer—(i) Definition. For purposes of this paragraph (g), a control employee of a non-government employer is any employee—
(A) Who is a Board- or shareholder-appointed, confirmed, or elected officer of the employer, limited to the lesser of—
(1) One percent of all employees (increased to the next highest integer, if not an integer) or
(2) Ten employees;
(B) Who is among the top one percent most highly-paid employees of the employer (increased to the next highest integer, if not an integer) limited to a maximum of 50;
(C) Who owns a five-percent or greater equity, capital, or profits interest in the employer; or
(D) Who is a director of the employer.
(ii) Special rules for control employee definition—(A) In general. For purposes of this paragraph (g), any employee who is a family member (within the meaning of section 267(c)(4)) of a control employee is also a control employee. For purposes of paragraph (g)(8)(i)(B) of this section, the term “employee” does not include any individual unless such individual is a common-law employee, partner, or one-percent or greater shareholder of the employer. Pursuant to this paragraph (g)(8), an employee may be a control employee under more than one of the requirements listed in paragraphs (g)(8)(i) (A) through (D) of this section. For example, an employee may be both an officer under paragraph (g)(8)(i)(A) of this section and a highly-paid employee under paragraph (g)(8)(i)(B) of this section. In this case, for purposes of the officer limitation rule of paragraph (g)(8)(i)(A) of this section and the highly-paid employee limitation rule of paragraph (g)(8)(i)(B) of this section, the employee would be counted in applying both limitations. For purposes of determining the one-percent limitation under paragraphs (g)(8)(i) (A) and (B) of this section, an employer shall exclude from consideration employees described in § 1.132-8(b)(3). Instead of applying the control employee definition of this paragraph (g)(8), an employer may treat all (and only) employees who are “highly compensated” employees (as defined in § 1.132-8(f)) as control employees for purposes of this paragraph (g).
(B) Special rules for officers, owners, and highly-paid control employees. In no event shall an employee whose compensation is less than $50,000 be a control employee under paragraph (g)(8)(i) (A) or (B) of this section. For purposes of determining who is a five-percent (or one-percent) owner under this paragraph (g)(8), any individual who owns (or is considered as owning under section 318(a) or principles similar to section 318(a) for entities other than corporations) five percent (or one-percent) or more of the fair market value of an entity (the “owned entity”) is considered a five-percent (or one-percent) owner of all entities which would be aggregated with the owned entity under the rules of section 414(b), (c), (m), or (o). For purposes of determining who is an officer or director with respect to an employer under this paragraph (g)(8), notwithstanding anything in this section to the contrary, if the employer would be aggregated with other employers under the rules of section 414 (b), (c), (m), or (o), the officer definition and the limitations and the director definition are applied to each such separate employer rather than to the aggregated employer. An employee who is an officer or director of one employer (the “first employer”) shall not be counted as an officer or a director of any other employer aggregated with the first employer under the rules of section 414 (b), (c), or (m). If applicable, the officer limitations rule of paragraph (g)(8)(i)(A) of this section is applied to employees in descending order of their compensation. Thus, if an employer has 11 board-appointed officers and the limit imposed under paragraph (g)(8)(i)(A) of this section is 10 officers, the employee with the least compensation of those officers would not be a control employee under paragraph (g)(8)(i)(A) of this section.
(9) Control employee defined—Government employer. For purposes of this paragraph (g), a control employee of a government employer is any—
(i) Elected official, or
(ii) Employee whose compensation equals or exceeds the compensation paid to a Federal Government employee holding a position at Executive Level V, determined under Chapter 11 of title 2, United States Code, as adjusted by section 5318 of title 5 United States Code.
(10) “Compensation” defined. For purposes of this paragraph (g), the term “compensation” has the same meaning as in section 414(q)(7). Compensation includes all amounts received from all entities treated as a single employer under section 414 (b), (c), (m), or (o). Levels of compensation shall be adjusted at the same time and in the same manner as provided in section 415(d). The first such adjustment was for calendar year 1988.
(11) Treatment of former employees. For purposes of this paragraph (g), an employee who was a control employee of the employer (as defined in this paragraph (g)) at any time after reaching age 55, or within three years of separation from the service of the employer, is a control employee with respect to flights taken after separation from the service of the employer. An individual who is treated as a control employee under this paragraph (g)(11) is not counted when determining the limitation of paragraph (g)(8)(i) (A) and (B) of this section. Thus, the total number of individuals treated as control employees under such paragraphs may exceed the limitations of such paragraphs to the extent that this paragraph (g)(11) applies.
(12) Seating capacity rule—(i) In general—(A) General rule. Where 50 percent or more of the regular passenger seating capacity of an aircraft (as used by the employer) is occupied by individuals whose flights are primarily for the employer’s business (and whose flights are excludable from income under section 132(d)), the value of a flight on that aircraft by any employee who is not flying primarily for the employer’s business (or who is flying primarily for the employer’s business but the value of whose flight is not excludable under section 132(d) by reason of section 274(c)) is deemed to be zero. See § 1.132-5 which limits the working condition fringe exclusion under section 132(d) to situations where the employee receives the flight in connection with the performance of services for the employer providing the aircraft.
(B) Special rules—(1) Definition of “employee.” For purposes of this paragraph (g)(12), the term “employee” includes only employees of the employer, including a partner of a partnership, providing the aircraft and does not include independent contractors and directors of the employer. A flight taken by an individual other than an “employee” as defined in the preceding sentence is considered a flight taken by an employee for purposes of this paragraph (g)(12) only if that individual is treated as an employee pursuant to section 132(f)(1) or that individual’s flight is treated as a flight taken by an employee pursuant to section 132(f)(2). If—
(i) A flight by an individual is not considered a flight taken by an employee (as defined in this paragraph (g)(12)(i)),
(ii) The value of that individual’s flight is not excludable under section 132(d), and
(iii) The seating capacity rule of this paragraph (g) (12) otherwise applies, then the value of the flight provided to such an individual is the value of a flight provided to a non-control employee pursuant to paragraph (g)(5) of this section (even if the individual who would be taxed on the value of the flight is a control employee).
(2) Example. The special rules of paragraph (g)(12)(i)(B)(1) of this section are illustrated by the following example:
(ii) Application of 50-percent test to multiple flights. The seating capacity rule of this paragraph (g)(12) must be met both at the time the individual whose flight is being valued boards the aircraft and at the time the individual deplanes. For example, assume that employee A boards an employer-provided aircraft for personal purposes in New York, New York, and that at that time 80 percent of the regular passenger seating capacity of the aircraft is occupied by individuals whose flights are primarily for the employer’s business (and whose flights are excludable from income under section 132(d)) (“the business passengers”). If the aircraft flies directly to Hartford, Connecticut where all of the passengers, including A, deplane, the requirements of the seating capacity rule of this paragraph (g)(12) have been satisfied. If instead, some of the passengers, including A, remain on the aircraft in Hartford and the aircraft continues on to Boston, Massachusetts, where they all deplane, the requirements of the seating capacity rule of this paragraph (g)(12) will not be satisfied with respect to A’s flight from New York to Boston unless at least 50 percent of the seats comprising the aircraft’s regular passenger seating capacity were occupied by the business passengers at the time A deplanes in Boston.
(iii) Regular passenger seating capacity. (A) General rule. Except as otherwise provided, the regular passenger seating capacity of an aircraft is the maximum number of seats that have at any time on or prior to the date of the flight been on the aircraft (while owned or leased by the employer). Except to the extent excluded pursuant to paragraph (g)(12)(v) of this section, regular seating capacity includes all seats which may be occupied by members of the flight crew. It is irrelevant that, on a particular flight, less than the maximum number of seats are available for use because, for example, some of the seats are removed.
(B) Special rules. When determining the maximum number of seats that have at any time on or prior to the date of the flight been on the aircraft (while owned or leased by the employer), seats that could not at any time be legally used during takeoff and have not at any time been used during takeoff are not counted. As of the date an employer permanently reduces the seating capacity of an aircraft, the regular passenger seating capacity is the reduced number of seats on the aircraft. The previous sentence shall not apply if at any time within 24 months after such reduction any seats are added in the aircraft. Unless the conditions of this paragraph (g)(12)(iii)(B) are satisfied, jumpseats and removable seats used solely for purposes of flight crew training are counted for purposes of the seating capacity rule of this paragraph (g)(12).
(iv) Examples. The rules of paragraph (g)(12)(iii) of this section are illustrated by the following examples:
(v) Seats occupied by flight crew. When determining the regular passenger seating capacity of an aircraft, any seat occupied by a member of the flight crew (whether or not such individual is an employee of the employer providing the aircraft) shall not be counted, unless the purpose of the flight by such individual is not primarily to serve as a member of the flight crew. If the seat occupied by a member of the flight crew is not counted as a passenger seat pursuant to the previous sentence, such member of the flight crew is disregarded in applying the 50-percent test described in the first sentence of paragraph (g)(12)(i) of this section. For example, assume that prior to application of this paragraph (g)(12)(v) the regular passenger seating capacity of an aircraft is one. Assume further that an employee pilots the aircraft and that the employee’s flight is nor primarily for the employer’s business. If the employee’s spouse occupies the other seat for personal purposes, the seating capacity rule is not met and the value of both flights must be included in the employee’s income. If, however, the employee’s flight were primarily for the employer’s business (unrelated to serving as a member of the flight crew), then the seating capacity rule is met and the value of the flight for the employee’s spouse is deemed to be zero. If the employee’s flight were primarily to serve as a member of the flight crew, then the seating capacity rule is not met and the value of a flight by any passenger for primarily personal reasons is not deemed to be zero.
(13) Erroneous use of the non-commercial flight valuation rule—(i) Certain errors in the case of a flight by a control employee. If—
(A) The non-commercial flight valuation rule of this paragraph (g) is applied by an employer or a control employee, as the case may be, on a return as originally filed or on an amended return on the grounds that either—
(1) The control employee is not in fact a control employee, or
(2) The aircraft is within a specific weight classification, and
(B) Either position is subsequently determined to be erroneous, the valuation rule of this paragraph (g) is not available to value the flight taken by that control employee by the person or persons taking the erroneous position. With respect to the weight classifications, the previous sentence does not apply if the position taken is that the weight of the aircraft is greater than it is subsequently determined to be. If, with respect to a flight by a control employee, the seating capacity rule of paragraph (g)(12) of this section is used by an employer or the control employee, as the case may be, on a return as originally filed or on an amended return, the valuation rule of this paragraph (g) is not available to value the flight taken by that control employee by the person or persons taking the erroneous position.
(ii) Value of flight excluded as a working condition fringe. If either an employer or an employee, on a return as originally filed or on an amended return, excludes from the employee’s income or wages all or any part of the value of a flight on the grounds that the flight was excludable as a working condition fringe under section 132, and that position is subsequently determined to be erroneous, the valuation rule of this paragraph (g) is not available to value the flight taken by that employee by the person or persons taking the erroneous position. Instead, the general valuation rules of paragraphs (b) (5) and (6) of this section apply.
(14) Consistency rules—(i) Use by employer. Except as otherwise provided in paragraph (g)(13) or paragraph (g)(14)(iii) of this section or in § 1.132-5(m)(4), if the non-commercial flight valuation rule of this paragraph (g) is used by an employer to value any flight provided in a calendar year, the rule must be used to value all flights provided to all employees in the calendar year.
(ii) Use by employee. Except as otherwise provided in paragraph (g)(13) or (g)(14)(iii) of this section or in § 1.132-5(m)(4), if the non-commercial flight valuation rule of this paragraph (g) is used by an employee to value a flight provided by an employer in a calendar year, the rule must be used to value all flights provided to the employee by that employer in the calendar year.
(iii) Exception for entertainment flights provided to specified individuals after October 22, 2004. Notwithstanding the provisions of paragraph (g)(14)(i) of this section, an employer may use the general valuation rules of paragraph (b) of this section to value the entertainment use of an aircraft provided after October 22, 2004, to a specified individual. An employer who uses the general valuation rules of paragraph (b) of this section to value any entertainment use of an aircraft by a specified individual in a calendar year must use the general valuation rules of paragraph (b) of this section to value all entertainment use of aircraft provided to all specified individuals during that calendar year.
(A) Specified individuals defined. For purposes of paragraph (g)(14)(iii) of this section, specified individual is defined in section 274(e)(2)(B) and § 1.274-9(b).
(B) Entertainment defined. For purposes of paragraph (g)(14)(iii) of this section, entertainment is defined in § 1.274-2(b)(1).
(h) Commercial flight valuation rule—(1) In general. Under the commercial flight valuation rule of this paragraph (h), the value of a space-available flight (as defined in paragraph (h) (2) of this section) on a commercial aircraft is 25 percent of the actual carrier’s highest unrestricted coach fare in effect for the particular flight taken. The rule of this paragraph (h) is available only to an individual described in § 1.132-1(b)(1).
(2) Space-available flight. The commercial flight valuation rule of this paragraph (h) is available to value a space-available flight. The term “space-available flight” means a flight on a commercial aircraft—
(i) Which is subject to the same types of restrictions customarily associated with flying on an employee “stand-by” or “space-available” basis, and
(ii) Which meets the definition of a no-additional-cost service under section 132(b), except that the flight is provided to an individual other than the employee or an individual treated as the employee under section 132(f). Thus, a flight is not a space-available flight if the employer guarantees the employee a seat on the flight or if the nondiscrimination requirements of section 132(h)(1) and § 1.132-8 are not satisfied. A flight may be a space-available flight even if the airline that is the actual carrier is not the employer of the employee.
(3) Commercial aircraft. If the actual carrier does not offer, in the ordinary course of its business, air transportation to customers on a per-seat basis, the commercial flight valuation rule of this paragraph (h) is not available. Thus, if, in the ordinary course of its line of business, the employer only offers air transportation to customers on a charter basis, the commercial flight valuation rule of this paragraph (h) may not be used to value a space-available flight on the employer’s aircraft. If the commercial flight valuation rule is not available, the flight may be valued under the non-commercial flight valuation rule of paragraph (g) of this section.
(4) Timing of inclusion. The date that the flight is taken is the relevant date for purposes of applying section 61(a)(1) and this section to a space-available flight on a commercial aircraft. The date of purchase or issuance of a pass or ticket is not relevant. Thus, this section applies to a flight taken on or after January 1, 1989, regardless of the date on which the pass or ticket for the flight was purchased or issued.
(5) Consistency rules—(i) Use by employer. If the commercial flight valuation rule of this paragraph (h) is used by an employer to value any flight provided in a calendar year, the rule must be used to value all flights eligible for use of the rule provided in the calendar year.
(ii) Use by employee. If the commercial flight valuation rule of this paragraph (h) is used by an employee to value a flight provided by an employer in a calendar year, the rule must be used to value all flights provided by that employer eligible for use of the rule taken by such employee in the calendar year.
(i) [Reserved]
(j) Valuation of meals provided at an employer-operated eating facility for employees—(1) In general. The valuation rule of this paragraph (j) may be used to value a meal provided at an employer-operated eating facility for employees (as defined in § 1.132-7). For rules relating to an exclusion for the value of meals provided at an employer-operated eating facility for employees, see section 132(e)(2) and § 1.132-7.
(2) Valuation formula—(i) In general. The value of all meals provided at an employer-operated eating facility for employees during a calendar year (“total meal value”) is 150 percent of the direct operating costs of the eating facility determined separately with respect to such eating facility whether or not the direct operating costs test is applied separately to such eating facility under § 1.132-7(b)(2). For purposes of this paragraph (j), the definition of direct operating costs provided in § 1.132-7(b) and the adjustments specified in § 1.132-7(a)(2) apply. The taxable value of meals provided at an eating facility may be determined in two ways. The “individual meal subsidy” may be treated as the taxable value of a meal provided at the eating facility (see paragraph (j)(2)(ii) of this section) to a particular employee. Alternatively, the employer may allocate the “total meal subsidy” among employees (see paragraph (j)(2)(iii) of this section).
(ii) “Individual meal subsidy” defined. The “individual meal subsidy” is determined by multiplying the amount paid by the employee for a particular meal by a fraction, the numerator of which is the total meal value and the denominator of which is the gross receipts of the eating facility for the calendar year and then subtracting the amount paid by the employee for the meal. The taxable value of meals provided to a particular employee during a calendar year, therefore, is the sum of the individual meal subsidies provided to the employee during the calendar year. This rule is available only if there is a charge for each meal selection and if each employee is charged the same price for any given meal selection.
(iii) Allocation of “total meal subsidy.” Instead of using the individual meal subsidy method provided in paragraph (j)(2)(ii) of this section, the employer may allocate the “total meal subsidy” (total meal value less the gross receipts of the facility) among employees in any manner reasonable under the circumstances. It will be presumed reasonable for an employer to allocate the total meal subsidy on a per-employee basis if the employer has information that would substantiate to the satisfaction of the Commissioner that each employee was provided approximately the same number of meals at the facility.
(k) Commuting valuation rule for certain employees—(1) In general. Under the rule of this paragraph (k), the value of the commuting use of employer-provided transportation may be determined under paragraph (k)(3) of this section if the following criteria are met by the employer and employee with respect to the transportation:
(i) The transportation is provided, solely because of unsafe conditions, to an employee who would ordinarily walk or use public transportation for commuting to or from work;
(ii) The employer has established a written policy (e.g., in the employer’s personnel manual) under which the transportation is not provided for the employee’s personal purposes other than for commuting due to unsafe conditions and the employer’s practice in fact corresponds with the policy;
(iii) The transportation is not used for personal purposes other than commuting due to unsafe conditions; and
(iv) The employee receiving the employer-provided transportation is a qualified employee of the employer (as defined in paragraph (k)(6) of this section).
(2) Trip-by-trip basis. The special valuation rule of this paragraph (k) applies on a trip-by-trip basis. If an employer and employee fail to meet the criteria of paragraph (k)(1) of this section with respect to any trip, the value of the transportation for that trip is not determined under paragraph (k)(3) of this section and the amount includible in the employee’s income is determined by reference to the fair market value of the transportation.
(3) Commuting value—(i) $1.50 per one-way commute. If the requirements of this paragraph (k) are satisfied, the value of the commuting use of the employer-provided transportation is $1.50 per one-way commute (i.e., from home to work or from work to home).
(ii) Value per employee. If transportation is provided to more than one qualified employee at the same time, the amount includible in the income of each employee is $1.50 per one-way commute.
(4) Definition of employer-provided transportation. For purposes of this paragraph (k), “employer-provided transportation” means transportation by vehicle (as defined in paragraph (f)(4) of this section) that is purchased by the employer (or that is purchased by the employee and reimbursed by the employer) from a party that is not related to the employer for the purpose of transporting a qualified employee to or from work. Reimbursements made by an employer to an employee to cover the cost of purchasing transportation (e.g., hiring cabs) must be made under a bona fide reimbursement arrangement.
(5) Unsafe conditions. Unsafe conditions exist if a reasonable person would, under the facts and circumstances, consider it unsafe for the employee to walk to or from home, or to walk to or use public transportation at the time of day the employee must commute. One of the factors indicating whether it is unsafe is the history of crime in the geographic area surrounding the employee’s workplace or residence at the time of day the employee must commute.
(6) Qualified employee defined—(i) In general. For purposes of this paragraph (k), a qualified employee is one who meets the following requirements with respect to the employer:
(A) The employee performs services during the current year, is paid on an hourly basis, is not claimed under section 213(a)(1) of the Fair Labor Standards Act of 1938 (as amended), 29 U.S.C. 201-219 (FLSA), to be exempt from the minimum wage and maximum hour provisions of the FLSA, and is within a classification with respect to which the employer actually pays, or has specified in writing that it will pay, compensation for overtime equal to or exceeding one and one-half times the regular rate as provided by section 207 of the FLSA; and
(B) The employee does not receive compensation from the employer in excess of the amount permitted by section 414(q)(1)(C) of the Code.
(ii) “Compensation” and “paid on an hourly basis” defined. For purposes of this paragraph (k), “compensation” has the same meaning as in section 414(q)(7). Compensation includes all amounts received from all entities treated as a single employer under section 414 (b), (c), (m), or (o). Levels of compensation shall be adjusted at the same time and in the same manner as provided in section 415(d). If an employee’s compensation is stated on an annual basis, the employee is treated as “paid on an hourly basis” for purposes of this paragraph (k) as long as the employee is not claimed to be exempt from the minimum wage and maximum hour provisions of the FLSA and is paid overtime wages either equal to or exceeding one and one-half the employee’s regular hourly rate of pay.
(iii) FLSA compliance required. An employee will not be considered a qualified employee for purposes of this paragraph (k), unless the employer is in compliance with the recordkeeping requirements concerning that employee’s wages, hours, and other conditions and practices of employment as provided in section 211(c) of the FLSA and 29 CFR part 516.
(iv) Issues arising under the FLSA. If questions arise concerning an employee’s classification under the FLSA, the pronouncements and rulings of the Administrator of the Wage and Hour Division, Department of Labor are determinative.
(v) Non-qualified employees. If an employee is not a qualified employee within the meaning of this paragraph (k)(6), no portion of the value of the commuting use of employer-provided transportation is excluded under this paragraph (k).
(7) Examples. This paragraph (k) is illustrated by the following examples:
(8) Effective date. This paragraph (k) applies to employer-provided transportation provided to a qualified employee on or after July 1, 1991.
§ 1.61-22 Taxation of split-dollar life insurance arrangements.
(a) Scope—(1) In general. This section provides rules for the taxation of a split-dollar life insurance arrangement for purposes of the income tax, the gift tax, the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), the Railroad Retirement Tax Act (RRTA), and the Self-Employment Contributions Act of 1954 (SECA). For the Collection of Income Tax at Source on Wages, this section also provides rules for the taxation of a split-dollar life insurance arrangement, other than a payment under a split-dollar life insurance arrangement that is a split-dollar loan under § 1.7872-15(b)(1). A split-dollar life insurance arrangement (as defined in paragraph (b) of this section) is subject to the rules of paragraphs (d) through (g) of this section, § 1.7872-15, or general tax rules. For rules to determine which rules apply to a split-dollar life insurance arrangement, see paragraph (b)(3) of this section.
(2) Overview. Paragraph (b) of this section defines a split-dollar life insurance arrangement and provides rules to determine whether an arrangement is subject to the rules of paragraphs (d) through (g) of this section, § 1.7872-15, or general tax rules. Paragraph (c) of this section defines certain other terms. Paragraph (d) of this section sets forth rules for the taxation of economic benefits provided under a split-dollar life insurance arrangement. Paragraph (e) of this section sets forth rules for the taxation of amounts received under a life insurance contract that is part of a split-dollar life insurance arrangement. Paragraph (f) of this section provides rules for additional tax consequences of a split-dollar life insurance arrangement, including the treatment of death benefit proceeds. Paragraph (g) of this section provides rules for the transfer of a life insurance contract (or an undivided interest in the contract) that is part of a split-dollar life insurance arrangement. Paragraph (h) of this section provides examples illustrating the application of this section. Paragraph (j) of this section provides the effective date of this section.
(b) Split-dollar life insurance arrangement—(1) In general. A split-dollar life insurance arrangement is any arrangement between an owner and a non-owner of a life insurance contract that satisfies the following criteria—
(i) Either party to the arrangement pays, directly or indirectly, all or any portion of the premiums on the life insurance contract, including a payment by means of a loan to the other party that is secured by the life insurance contract;
(ii) At least one of the parties to the arrangement paying premiums under paragraph (b)(1)(i) of this section is entitled to recover (either conditionally or unconditionally) all or any portion of those premiums and such recovery is to be made from, or is secured by, the proceeds of the life insurance contract; and
(iii) The arrangement is not part of a group-term life insurance plan described in section 79 unless the group-term life insurance plan provides permanent benefits to employees (as defined in § 1.79-0).
(2) Special rule—(i) In general. Any arrangement between an owner and a non-owner of a life insurance contract is treated as a split-dollar life insurance arrangement (regardless of whether the criteria of paragraph (b)(1) of this section are satisfied) if the arrangement is described in paragraph (b)(2)(ii) or (iii) of this section.
(ii) Compensatory arrangements. An arrangement is described in this paragraph (b)(2)(ii) if the following criteria are satisfied—
(A) The arrangement is entered into in connection with the performance of services and is not part of a group-term life insurance plan described in section 79;
(B) The employer or service recipient pays, directly or indirectly, all or any portion of the premiums; and
(C) Either—
(1) The beneficiary of all or any portion of the death benefit is designated by the employee or service provider or is any person whom the employee or service provider would reasonably be expected to designate as the beneficiary; or
(2) The employee or service provider has any interest in the policy cash value of the life insurance contract.
(iii) Shareholder arrangements. An arrangement is described in this paragraph (b)(2)(iii) if the following criteria are satisfied—
(A) The arrangement is entered into between a corporation and another person in that person’s capacity as a shareholder in the corporation;
(B) The corporation pays, directly or indirectly, all or any portion of the premiums; and
(C) Either—
(1) The beneficiary of all or any portion of the death benefit is designated by the shareholder or is any person whom the shareholder would reasonably be expected to designate as the beneficiary; or
(2) The shareholder has any interest in the policy cash value of the life insurance contract.
(3) Determination of whether this section or § 1.7872-15 applies to a split-dollar life insurance arrangement—(i) Split-dollar life insurance arrangements involving split-dollar loans under § 1.7872-15. Except as provided in paragraph (b)(3)(ii) of this section, paragraphs (d) through (g) of this section do not apply to any split-dollar loan as defined in § 1.7872-15(b)(1). Section 1.7872-15 applies to any such loan. See paragraph (b)(5) of this section for the treatment of a payment made by a non-owner under a split-dollar life insurance arrangement if the payment is not a split-dollar loan.
(ii) Exceptions. Paragraphs (d) through (g) of this section apply (and § 1.7872-15 does not apply) to any split-dollar life insurance arrangement if—
(A) The arrangement is entered into in connection with the performance of services, and the employer or service recipient is the owner of the life insurance contract (or is treated as the owner of the contract under paragraph (c)(1)(ii)(A)(1) of this section); or
(B) The arrangement is entered into between a donor and a donee (for example, a life insurance trust) and the donor is the owner of the life insurance contract (or is treated as the owner of the contract under paragraph (c)(1)(ii)(A)(2) of this section).
(4) Consistency requirement. A split-dollar life insurance arrangement described in paragraph (b)(1) or (2) of this section must be treated in the same manner by the owner and the non-owner of the life insurance contract under either the rules of this section or § 1.7872-15. In addition, the owner and non-owner must fully account for all amounts under the arrangement under paragraph (b)(5) of this section, paragraphs (d) through (g) of this section, or § 1.7872-15.
(5) Non-owner payments that are not split-dollar loans. If a non-owner of a life insurance contract makes premium payments (directly or indirectly) under a split-dollar life insurance arrangement, and the payments are neither split-dollar loans nor consideration for economic benefits described in paragraph (d) of this section, then neither the rules of paragraphs (d) through (g) of this section nor the rules in § 1.7872-15 apply to such payments. Instead, general income tax, employment tax, self-employment tax, and gift tax principles apply to the premium payments. See, for example, § 1.61-2(d)(2)(ii)(A).
(6) Waiver, cancellation, or forgiveness. If a repayment obligation described in § 1.7872-15(a)(2) is waived, cancelled, or forgiven at any time, then the parties must take the amount waived, cancelled, or forgiven into account in accordance with the relationships between the parties (for example, as compensation in the case of an employee-employer relationship).
(7) Change in the owner. If payments made by a non-owner to an owner were treated as split-dollar loans under § 1.7872-15 and the split-dollar life insurance arrangement is modified such that, after the modification, the non-owner is the owner (within the meaning of paragraph (c)(1) of this section) of the life insurance contract under the arrangement, paragraphs (d) through (g) of this section apply to the split-dollar life insurance arrangement from the date of the modification. The payments made (both before and after the modification) are not treated as split-dollar loans under § 1.7872-15 on or after the date of the modification. The non-owner of the life insurance contract under the modified split-dollar life insurance arrangement must fully take into account all economic benefits provided under the arrangement under paragraph (d) of this section on or after the date of the modification. For the treatment of a transfer of the contract when the unmodified arrangement is governed by paragraphs (d) through (g) of this section, see paragraph (g) of this section.
(c) Definitions. The following definitions apply for purposes of this section:
(1) Owner—(i) In general. With respect to a life insurance contract, the person named as the policy owner of such contract generally is the owner of such contract. If two or more persons are named as policy owners of a life insurance contract and each person has, at all times, all the incidents of ownership with respect to an undivided interest in the contract, each person is treated as the owner of a separate contract to the extent of such person’s undivided interest. If two or more persons are named as policy owners of a life insurance contract but each person does not have, at all times, all the incidents of ownership with respect to an undivided interest in the contract, the person who is the first-named policy owner is treated as the owner of the entire contract.
(ii) Special rule for certain arrangements—(A) In general. Notwithstanding paragraph (c)(1)(i) of this section—
(1) An employer or service recipient is treated as the owner of a life insurance contract under a split-dollar life insurance arrangement that is entered into in connection with the performance of services if, at all times, the only economic benefit that will be provided under the arrangement is current life insurance protection as described in paragraph (d)(3) of this section; and
(2) A donor is treated as the owner of a life insurance contract under a split-dollar life insurance arrangement that is entered into between a donor and a donee (for example, a life insurance trust) if, at all times, the only economic benefit that will be provided under the arrangement is current life insurance protection as described in paragraph (d)(3) of this section.
(B) Modifications. If an arrangement described in paragraph (c)(1)(ii)(A) of this section is modified such that the arrangement is no longer described in paragraph (c)(1)(ii)(A) of this section, the following rules apply:
(1) If, immediately after such modification, the employer, service recipient, or donor is the owner of the life insurance contract under the split-dollar life insurance arrangement (determined without regard to paragraph (c)(1)(ii)(A) of this section), the employer, service recipient, or donor continues to be treated as the owner of the life insurance contract.
(2) If, immediately after such modification, the employer, service recipient, or donor is not the owner of the life insurance contract under the split-dollar life insurance arrangement (determined without regard to paragraph (c)(1)(ii)(A) of this section), the employer, service recipient, or donor is treated as having made a transfer of the entire life insurance contract to the employee, service provider, or donee under the rules of paragraph (g) of this section as of the date of such modification.
(3) For purposes of this paragraph (c)(1)(ii)(B), entering into a successor split-dollar life insurance arrangement that has the effect of providing any economic benefit in addition to that described in paragraph (d)(3) of this section is treated as a modification of the prior split-dollar life insurance arrangement.
(iii) Attribution rules for compensatory arrangements. For purposes of this section, if a split-dollar life insurance arrangement is entered into in connection with the performance of services, the employer or service recipient is treated as the owner of the life insurance contract if the owner (within the meaning of paragraph (c)(1)(i) of this section) of the life insurance contract under the split-dollar life insurance arrangement is—
(A) A trust described in section 402(b);
(B) A trust that is treated as owned (within the meaning of sections 671 through 677) by the employer or the service recipient;
(C) A welfare benefit fund within the meaning of section 419(e)(1); or
(D) A member of the employer or service recipient’s controlled group (within the meaning of section 414(b)) or a trade or business that is under common control with the employer or service recipient (within the meaning of section 414(c)).
(iv) Life insurance contracts owned by partnerships. [Reserved]
(2) Non-owner—(i) Definition. With respect to a life insurance contract, a non-owner is any person (other than the owner of such contract under paragraph (c)(1) of this section) that has any direct or indirect interest in such contract (but not including a life insurance company acting only in its capacity as the issuer of a life insurance contract).
(ii) Example. The following example illustrates the provisions of this paragraph (c)(2):
(ii) Because E and T each have an indirect interest in the life insurance contract that is part of the split-dollar life insurance arrangement, each is a non-owner under paragraph (c)(2)(i) of this section. E and T each are provided economic benefits described in paragraph (d)(2) of this section pursuant to the split-dollar life insurance arrangement. Economic benefits are provided by owner R to E as a payment of compensation, and separately provided by E to T as a gift.
(3) Transfer of entire contract or undivided interest therein. A transfer of the ownership of a life insurance contract (or an undivided interest in such contract) that is part of a split-dollar life insurance arrangement occurs on the date that a non-owner becomes the owner (within the meaning of paragraph (c)(1) of this section) of the entire contract or of an undivided interest in the contract.
(4) Undivided interest. An undivided interest in a life insurance contract consists of an identical fractional or percentage interest or share in each right, benefit, and obligation with respect to the contract. In the case of any arrangement purporting to create undivided interests where, in substance, the rights, benefits or obligations are shared to any extent among the holders of such interests, the arrangement will be treated as a split-dollar life insurance arrangement.
(5) Employment tax. The term employment tax means any tax imposed by, or collected under, the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), the Railroad Retirement Tax Act (RRTA), and the Collection of Income Tax at Source on Wages.
(6) Self-employment tax. The term self-employment tax means the tax imposed by the Self-Employment Contributions Act of 1954 (SECA).
(d) Economic benefits provided under a split-dollar life insurance arrangement—(1) In general. In the case of a split-dollar life insurance arrangement subject to the rules of paragraphs (d) through (g) of this section, economic benefits are treated as being provided to the non-owner of the life insurance contract. The non-owner (and the owner for gift and employment tax purposes) must take into account the full value of all economic benefits described in paragraph (d)(2) of this section, reduced by the consideration paid directly or indirectly by the non-owner to the owner for those economic benefits. Depending on the relationship between the owner and the non-owner, the economic benefits may constitute a payment of compensation, a distribution under section 301, a contribution to capital, a gift, or a transfer having a different tax character. Further, depending on the relationship between or among a non-owner and one or more other persons (including a non-owner or non-owners), the economic benefits may be treated as provided from the owner to the non-owner and as separately provided from the non-owner to such other person or persons (for example, as a payment of compensation from an employer to an employee and as a gift from the employee to the employee’s child).
(2) Value of economic benefits. The value of the economic benefits provided to a non-owner for a taxable year under the arrangement equals—
(i) The cost of current life insurance protection provided to the non-owner as determined under paragraph (d)(3) of this section;
(ii) The amount of policy cash value to which the non-owner has current access within the meaning of paragraph (d)(4)(ii) of this section (to the extent that such amount was not actually taken into account for a prior taxable year); and
(iii) The value of any economic benefits not described in paragraph (d)(2)(i) or (ii) of this section provided to the non-owner (to the extent not actually taken into account for a prior taxable year).
(3) Current life insurance protection—(i) Amount of current life insurance protection. In the case of a split-dollar life insurance arrangement described in paragraph (d)(1) of this section, the amount of the current life insurance protection provided to the non-owner for a taxable year (or any portion thereof in the case of the first year or the last year of the arrangement) equals the excess of the death benefit of the life insurance contract (including paid-up additions thereto) over the total amount payable to the owner (including any outstanding policy loans that offset amounts otherwise payable to the owner) under the split-dollar life insurance arrangement, less the portion of the policy cash value actually taken into account under paragraph (d)(1) of this section or paid for by the non-owner under paragraph (d)(1) of this section for the current taxable year or any prior taxable year.
(ii) Cost of current life insurance protection. The cost of current life insurance protection provided to the non-owner for any year (or any portion thereof in the case of the first year or the last year of the arrangement) equals the amount of the current life insurance protection provided to the non-owner (determined under paragraph (d)(3)(i) of this section) multiplied by the life insurance premium factor designated or permitted in guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2)(ii) of this chapter).
(4) Policy cash value—(i) In general. For purposes of this paragraph (d), policy cash value is determined disregarding surrender charges or other similar charges or reductions. Policy cash value includes policy cash value attributable to paid-up additions.
(ii) Current access. For purposes of this paragraph (d), a non-owner has current access to that portion of the policy cash value—
(A) To which, under the arrangement, the non-owner has a current or future right; and
(B) That currently is directly or indirectly accessible by the non-owner, inaccessible to the owner, or inaccessible to the owner’s general creditors.
(5) Valuation date—(i) General rules. For purposes of this paragraph (d), the amount of the current life insurance protection and the policy cash value shall be determined on the same valuation date. The valuation date is the last day of the non-owner’s taxable year, unless the owner and non-owner agree to instead use the policy anniversary date as the valuation date. Notwithstanding the previous sentence, if the split-dollar life insurance arrangement terminates during the taxable year of the non-owner, the value of such economic benefits is determined on the day that the arrangement terminates.
(ii) Consistency requirement. The owner and non-owner of the split-dollar life insurance arrangement must use the same valuation date. In addition, the same valuation date must be used for all years prior to termination of the split-dollar life insurance arrangement unless the parties receive consent of the Commissioner to change the valuation date.
(iii) Artifice or device. Notwithstanding paragraph (d)(5)(i) of this section, if any artifice or device is used to understate the amount of any economic benefit on the valuation date in paragraph (d)(5)(i) of this section, then, for purposes of this paragraph (d), the date on which the amount of the economic benefit is determined is the date on which the amount of the economic benefit is greatest during that taxable year.
(iv) Special rule for certain taxes. For purposes of employment tax (as defined in paragraph (c)(5) of this section), self-employment tax (as defined in paragraph (c)(6) of this section), and sections 6654 and 6655 (relating to the failure to pay estimated income tax), the portions of the current life insurance protection and the policy cash value that are treated as provided by the owner to the non-owner shall be treated as so provided on the last day of the taxable year of the non-owner. Notwithstanding the previous sentence, if the split-dollar life insurance arrangement terminates during the taxable year of the non-owner, such portions of the current life insurance protection and the policy cash value shall be treated as so provided on the day that the arrangement terminates.
(6) Examples. The following examples illustrate the rules of this paragraph (d). Except as otherwise provided, both examples assume the following facts: employer (R) is the owner (as defined in paragraph (c)(1)(i) of this section) and employee (E) is the non-owner (as defined in paragraph (c)(2)(i) of this section) of a life insurance contract that is part of a split-dollar life insurance arrangement that is subject to the provisions of paragraphs (d) through (g) of this section; the contract is a life insurance contract as defined in section 7702 and not a modified endowment contract as defined in section 7702A; R does not withdraw or obtain a loan of any portion of the policy cash value and does not surrender any portion of the life insurance contract; the compensation paid to E is reasonable; E is not provided any economic benefits described in paragraph (d)(2)(iii) of this section; E does not make any premium payments; E’s taxable year is the calendar year; the value of the economic benefits is determined on the last day of E’s taxable year; and E reports on E’s Federal income tax return for each year that the split-dollar life insurance arrangement is in effect the amount of income required to be reported under paragraph (d) of this section. The examples are as follows:
(ii) Analysis. Under the terms of the split-dollar life insurance arrangement, E has the right for year 1 and all subsequent years to borrow or withdraw the portion of the policy cash value exceeding the amount payable to R. Thus, under paragraph (d)(4)(ii) of this section, E has current access to such portion of the policy cash value for each year that the arrangement is in effect. In addition, because R pays all of the premiums on the life insurance contract, R provides to E all of the economic benefits that E receives under the arrangement. Therefore, under paragraph (d)(1) of this section, E includes in gross income the value of all economic benefits described in paragraphs (d)(2)(i) and (ii) of this section provided to E under the arrangement.
(iii) Results for year 1. For year 1, E is provided, under paragraph (d)(2)(ii) of this section, $0 of policy cash value (excess of $55,000 policy cash value determined as of December 31 of year 1 over $55,000 payable to R). For year 1, E is also provided, under paragraph (d)(2)(i) of this section, current life insurance protection of $1,445,000 ($1,500,000 minus $55,000 payable to R). Thus, E includes in gross income for year 1 the cost of $1,445,000 of current life insurance protection.
(iv) Results for year 2. For year 2, E is provided, under paragraph (d)(2)(ii) of this section, $20,000 of policy cash value ($140,000 policy cash value determined as of December 31 of year 2 minus $120,000 payable to R). For year 2, E is also provided, under paragraph (d)(2)(i) of this section, current life insurance protection of $1,360,000 ($1,500,000 minus the sum of $120,000 payable to R and the aggregate of $20,000 of policy cash value that E actually includes in income on E’s year 1 and year 2 federal income tax returns). Thus, E includes in gross income for year 2 the sum of $20,000 of policy cash value and the cost of $1,360,000 of current life insurance protection.
(v) Results for year 3. For year 3, E is provided, under paragraph (d)(2)(ii) of this section, $40,000 of policy cash value ($240,000 policy cash value determined as of December 31 of year 3 minus the sum of $180,000 payable to R and $20,000 of aggregate policy cash value that E actually included in gross income on E’s year 1 and year 2 federal income tax returns). For year 3, E is also provided, under paragraph (d)(2)(i) of this section, current life insurance protection of $1,260,000 ($1,500,000 minus the sum of $180,000 payable to R and $60,000 of aggregate policy cash value that E actually includes in gross income on E’s year 1, year 2, and year 3 federal income tax returns). Thus, E includes in gross income for year 3 the sum of $40,000 of policy cash value and the cost of $1,260,000 of current life insurance protection.
(ii) Analysis. Under the terms of the split-dollar life insurance arrangement or applicable state law, the portion of the policy cash value exceeding the amount payable to R is inaccessible to R’s general creditors and E has a current or future right to that portion of the cash value. Thus, under paragraph (d)(4)(ii) of this section, E has current access to such portion of the policy cash value for each year that the arrangement is in effect. In addition, because R pays all of the premiums on the life insurance contract, R provides to E all of the economic benefits that E receives under the arrangement. Therefore, under paragraph (d)(1) of this section, E includes in gross income the value of all economic benefits described in paragraphs (d)(2)(i) and (ii) of this section provided to E under the arrangement.
(iii) Results for years 1, 2 and 3. The results for this example are the same as the results in Example 1.
(e) Amounts received under the contract—(1) In general. Except as otherwise provided in paragraph (f)(3) of this section, any amount received under a life insurance contract that is part of a split-dollar life insurance arrangement subject to the rules of paragraphs (d) through (g) of this section (including, but not limited to, a policy owner dividend, proceeds of a specified policy loan described in paragraph (e)(2) of this section, or the proceeds of a withdrawal from or partial surrender of the life insurance contract) is treated, to the extent provided directly or indirectly to a non-owner of the life insurance contract, as though such amount had been paid to the owner of the life insurance contract and then paid by the owner to the non-owner. The amount received is taxable to the owner in accordance with the rules of section 72. The non-owner (and the owner for gift tax and employment tax purposes) must take the amount described in paragraph (e)(3) of this section into account as a payment of compensation, a distribution under section 301, a contribution to capital, a gift, or other transfer depending on the relationship between the owner and the non-owner.
(2) Specified policy loan. A policy loan is a specified policy loan to the extent—
(i) The proceeds of the loan are distributed directly from the insurance company to the non-owner;
(ii) A reasonable person would not expect that the loan will be repaid by the non-owner; or
(iii) The non-owner’s obligation to repay the loan to the owner is satisfied or is capable of being satisfied upon repayment by either party to the insurance company.
(3) Amount required to be taken into account. With respect to a non-owner (and the owner for gift tax and employment tax purposes), the amount described in this paragraph (e)(3) is equal to the excess of—
(i) The amount treated as received by the owner under paragraph (e)(1) of this section; over
(ii) The amount of all economic benefits described in paragraphs (d)(2)(ii) and (iii) of this section actually taken into account by the non-owner (and the owner for gift tax and employment tax purposes) plus any consideration described in paragraph (d)(1) of this section paid by the non-owner for such economic benefits described in paragraphs (d)(2)(ii) and (iii) of this section. The amount determined under the preceding sentence applies only to the extent that neither this paragraph (e)(3)(ii) nor paragraph (g)(1)(ii) of this section previously has applied to such economic benefits.
(f) Other tax consequences—(1) Introduction. In the case of a split-dollar life insurance arrangement subject to the rules of paragraphs (d) through (g) of this section, this paragraph (f) sets forth other tax consequences to the owner and non-owner of a life insurance contract that is part of the arrangement for the period prior to the transfer (as defined in paragraph (c)(3) of this section) of the contract (or an undivided interest therein) from the owner to the non-owner. See paragraph (g) of this section and § 1.83-6(a)(5) for tax consequences upon the transfer of the contract (or an undivided interest therein).
(2) Investment in the contract—(i) To the non-owner. A non-owner does not receive any investment in the contract under section 72(e)(6) with respect to a life insurance contract that is part of a split-dollar life insurance arrangement subject to the rules of paragraphs (d) through (g) of this section.
(ii) To owner. Any premium paid by an owner under a split-dollar life insurance arrangement subject to the rules of paragraphs (d) through (g) of this section is included in the owner’s investment in the contract under section 72(e)(6). No premium or amount described in paragraph (d) of this section is deductible by the owner (except as otherwise provided in § 1.83-6(a)(5)). Any amount paid by a non-owner, directly or indirectly, to the owner of the life insurance contract for current life insurance protection or for any other economic benefit under the life insurance contract is included in the owner’s gross income and is included in the owner’s investment in the life insurance contract for purposes of section 72(e)(6) (but only to the extent not otherwise so included by reason of having been paid by the owner as a premium or other consideration for the contract).
(3) Treatment of death benefit proceeds—(i) Death benefit proceeds to beneficiary (other than the owner). Any amount paid to a beneficiary (other than the owner) by reason of the death of the insured is excluded from gross income by such beneficiary under section 101(a) as an amount received under a life insurance contract to the extent such amount is allocable to current life insurance protection provided to the non-owner pursuant to the split-dollar life insurance arrangement, the cost of which was paid by the non-owner, or the value of which the non-owner actually took into account pursuant to paragraph (d)(1) of this section.
(ii) Death benefit proceeds to owner as beneficiary. Any amount paid or payable to an owner in its capacity as a beneficiary by reason of the death of the insured is excluded from gross income of the owner under section 101(a) as an amount received under a life insurance contract to the extent such amount is not allocable to current life insurance protection provided to the non-owner pursuant to the split-dollar life insurance arrangement, the cost of which was paid by the non-owner, or the value of which the non-owner actually took into account pursuant to paragraph (d)(1) of this section.
(iii) Transfers of death benefit proceeds. Death benefit proceeds paid to a party to a split-dollar life insurance arrangement (or the estate or beneficiary of that party) that are not excludable from that party’s income under section 101(a) to the extent provided in paragraph (f)(3)(i) or (ii) of this section, are treated as transferred to that party in a separate transaction. The death benefit proceeds treated as so transferred will be taxed in a manner similar to other transfers. For example, if death benefit proceeds paid to an employee, the employee’s estate, or the employee’s beneficiary are not excludable from the employee’s gross income under section 101(a) to the extent provided in paragraph (f)(3)(i) of this section, then such payment is treated as a payment of compensation by the employer to the employee.
(g) Transfer of entire contract or undivided interest therein—(1) In general. Upon a transfer within the meaning of paragraph (c)(3) of this section of a life insurance contract (or an undivided interest therein) to a non-owner (transferee), the transferee (and the owner (transferor) for gift tax and employment tax purposes) takes into account the excess of the fair market value of the life insurance contract (or the undivided interest therein) transferred to the transferee at that time over the sum of—
(i) The amount the transferee pays to the transferor to obtain the contract (or the undivided interest therein); and
(ii) The amount of all economic benefits described in paragraph (d)(2)(ii) and (iii) of this section actually taken into account by the transferee (and the transferor for gift tax and employment tax purposes), plus any consideration described in paragraph (d)(1) of this section paid by the transferee for such economic benefits described in paragraphs (d)(2)(ii) and (iii) of this section. The amount determined under the preceding sentence applies only to the extent that neither this paragraph (g)(1)(ii) nor paragraph (e)(3)(ii) of this section previously has applied to such economic benefits.
(2) Determination of fair market value. For purposes of paragraph (g)(1) of this section, the fair market value of a life insurance contract is the policy cash value and the value of all other rights under such contract (including any supplemental agreements thereto and whether or not guaranteed), other than the value of current life insurance protection. Notwithstanding the preceding sentence, the fair market value of a life insurance contract for gift tax purposes is determined under § 25.2512-6(a) of this chapter.
(3) Exception for certain transfers in connection with the performance of services. To the extent the ownership of a life insurance contract (or undivided interest in such contract) is transferred in connection with the performance of services, paragraph (g)(1) of this section does not apply until such contract (or undivided interest in such contract) is taxable under section 83. For purposes of paragraph (g)(1) of this section, fair market value is determined disregarding any lapse restrictions and at the time the transfer of such contract (or undivided interest in such contract) is taxable under section 83.
(4) Treatment of non-owner after transfer—(i) In general. After a transfer of an entire life insurance contract (except when such transfer is in connection with the performance of services and the transfer is not yet taxable under section 83), the person who previously had been the non-owner is treated as the owner of such contract for all purposes, including for purposes of paragraph (b) of this section and for purposes of § 1.61-2(d)(2)(ii)(A). After the transfer of an undivided interest in a life insurance contract (or, if later, at the time such transfer is taxable under section 83), the person who previously had been the non-owner is treated as the owner of a separate contract consisting of that interest for all purposes, including for purposes of paragraph (b) of this section and for purposes of § 1.61-2(d)(2)(ii)(A).
(ii) Investment in the contract after transfer—(A) In general. The amount treated as consideration paid to acquire the contract under section 72(g)(1), in order to determine the aggregate premiums paid by the transferee for purposes of section 72(e)(6)(A) after the transfer (or, if later, at the time such transfer is taxable under section 83), equals the greater of the fair market value of the contract or the sum of the amounts determined under paragraphs (g)(1)(i) and (ii) of this section.
(B) Transfers between a donor and a donee. In the case of a transfer of a contract between a donor and a donee, the amount treated as consideration paid by the transferee to acquire the contract under section 72(g)(1), in order to determine the aggregate premiums paid by the transferee for purposes of section 72(e)(6)(A) after the transfer, equals the sum of the amounts determined under paragraphs (g)(1)(i) and (ii) of this section except that—
(1) The amount determined under paragraph (g)(1)(i) of this section includes the aggregate of premiums or other consideration paid or deemed to have been paid by the transferor; and
(2) The amount of all economic benefits determined under paragraph (g)(1)(ii) of this section actually taken into account by the transferee does not include such benefits to the extent such benefits were excludable from the transferee’s gross income at the time of receipt.
(C) Transfers of an undivided interest in a contract. If a portion of a contract is transferred to the transferee, then the amount to be included as consideration paid to acquire the contract is determined by multiplying the amount determined under paragraph (g)(4)(ii)(A) of this section (as modified by paragraph (g)(4)(ii)(B) of this section, if the transfer is between a donor and a donee) by a fraction, the numerator of which is the fair market value of the portion transferred and the denominator of which is the fair market value of the entire contract.
(D) Example. The following example illustrates the rules of this paragraph (g)(4)(ii):
(ii) E’s investment in the contract is $50,000, consisting of the $50,000 of premiums paid by D. The $80,000 of policy cash value to which E had current access is not included in E’s investment in the contract because such amount was excludable from E’s gross income when E had current access to that policy cash value.
(iii) No investment in the contract for current life insurance protection. Except as provided in paragraph (g)(4)(ii)(B) of this section, no amount allocable to current life insurance protection provided to the transferee (the cost of which was paid by the transferee or the value of which was provided to the transferee) is treated as consideration paid to acquire the contract under section 72(g)(1) to determine the aggregate premiums paid by the transferee for purposes of determining the transferee’s investment in the contract under section 72(e) after the transfer.
(h) Examples. The following examples illustrate the rules of this section. Except as otherwise provided, each of the examples assumes that the employer (R) is the owner (as defined in paragraph (c)(1) of this section) of a life insurance contract that is part of a split-dollar life insurance arrangement subject to the rules of paragraphs (d) through (g) of this section, that the employee (E) is not provided any economic benefits described in paragraph (d)(2)(iii) of this section, that the life insurance contract is not a modified endowment contract under section 7702A, that the compensation paid to E is reasonable, and that E makes no premium payments. The examples are as follows:
(ii) Because R is designated as the policy owner of the contract, R is the owner of the contract under paragraph (c)(1)(i) of this section. In addition, R would be treated as the owner of the contract regardless of whether R were designated as the policy owner under paragraph (c)(1)(i) of this section because the split-dollar life insurance arrangement is described in paragraph (c)(1)(ii)(A)(1) of this section. E is a non-owner of the contract. Under the arrangement between R and E, a portion of the death benefit is payable to a beneficiary designated by E. The arrangement is a split-dollar life insurance arrangement under paragraph (b)(1) or (2) of this section. Because R pays all the premiums on the life insurance contract, R provides to E the entire amount of the current life insurance protection E receives under the arrangement. Therefore, for each year that the split-dollar life insurance arrangement is in effect, E must include in gross income under paragraph (d)(1) of this section the value of current life insurance protection described in paragraph (d)(2)(i) of this section provided to E in each year.
(ii) Because R is designated as the policy owner, R is the owner of the contract under paragraph (c)(1)(i) of this section. E is a non-owner of the contract. For each year that the split-dollar life insurance arrangement is in effect, E has the right to borrow or withdraw at any time the portion of the policy cash value exceeding the amount payable to R. Thus, under paragraph (d)(4)(ii) of this section, E has current access to such portion of the policy cash value for each year that the arrangement is in effect. In addition, because R pays all the premiums on the life insurance contract, R provides to E all the economic benefits that E receives under the arrangement. Therefore, for each year that the split-dollar life insurance arrangement is in effect, E must include in gross income under paragraph (d)(1) of this section, the value of all economic benefits described in paragraph (d)(2)(i) and (ii) of this section provided to E in each year.
(ii) For each year that the split-dollar life insurance arrangement is in effect, E must include in gross income under paragraph (d)(1) of this section the value of the economic benefits described in paragraph (d)(2)(i) of this section provided to E under the arrangement during that year. In year 5 (and subsequent years), E has the right to borrow or withdraw at any time the portion of the policy cash value exceeding the amount payable to R. Thus, under paragraph (d)(4)(ii) of this section, E has current access to such portion of the policy cash value. Thus, in year 5 (and each subsequent year), E must also include in gross income under paragraph (d)(1) of this section the value of the economic benefits described in paragraph (d)(2)(ii) of this section provided to E in each year.
(iii) The arrangement is not described in paragraph (c)(1)(ii)(A)(1) of this section after it is modified in year 5. Because R is the designated owner of the life insurance contract, R continues to be treated as the owner of the contract under paragraph (c)(1)(ii)(B)(1) of this section after the arrangement is modified. In addition, because the modification made by R and E in year 5 does not involve the transfer (within the meaning of paragraph (c)(3) of this section) of an undivided interest in the life insurance contract from R to E, the modification is not a transfer for purposes of paragraph (g) of this section.
(ii) Commencing in year 7 (and in each subsequent year), E must include in gross income the economic benefits described in paragraph (d)(2)(ii) of this section as provided in this Example 4(ii) rather than as provided in Example 2(ii). Thus, in year 7 (and in each subsequent year) E must include in gross income under paragraph (d) of this section, the excess of the policy cash value over the lesser of 80 percent of the aggregate premiums paid by R or the policy cash value of the contract (to the extent E did not actually include such amounts in gross income for a prior taxable year). In addition, in year 7 (and each subsequent year) E must also include in gross income the value of the economic benefits described in paragraph (d)(2)(i) of this section provided to E under the arrangement in each such year.
(ii) In year 7, R is treated as having made a transfer (within the meaning of paragraph (c)(3) of this section) of the life insurance contract to E. E must include in gross income the amount determined under paragraph (g)(1) of this section.
(iii) After the transfer of the contract to E, E is the owner of the contract and any premium payments by R will be included in E’s income under paragraph (b)(5) of this section and § 1.61-2(d)(2)(ii)(A) (unless R’s payments are split-dollar loans as defined in § 1.7872-15(b)(1)).
(ii) For each year the arrangement is in effect, E must include in gross income the value of the economic benefits provided during the year, as required by paragraph (d)(2) of this section, over the $500 premium payments paid by E. In year 5, E must also include in gross income as compensation the excess, if any, of the $500 distributed to E from the proceeds of the policy owner dividend over the amount determined under paragraph (e)(3)(ii) of this section.
(iii) R must include in income the premiums paid by E during the years the split-dollar life insurance arrangement is in effect, including the $500 of the premium E paid in year 5 with proceeds of the policy owner dividend. R’s investment in the contract is increased in an amount equal to the premiums paid by E, including the $500 of the premium paid by E in year 5 from the proceeds of the policy owner dividend. In year 5, R is treated as receiving a $500 distribution under the contract, which is taxed pursuant to section 72.
(ii) In year 10, R is treated as receiving a $100,000 distribution from the insurance company. This amount is treated as an amount received by R under the contract and taxed pursuant to section 72. This amount reduces R’s investment in the contract under section 72(e). R is treated as paying the $100,000 to E as cash compensation, and E must include that amount in gross income less any amounts determined under paragraph (e)(3)(ii) of this section.
(ii) The transfer of the proceeds of the specified policy loan to E is treated as a loan by the insurance company to R. Under the rules of section 72(e), the $100,000 loan is not included in R’s income and does not reduce R’s investment in the contract. R is treated as paying the $100,000 of loan proceeds to E as cash compensation. E must include that amount in gross income less any amounts determined under paragraph (e)(3)(ii) of this section.
(i) [Reserved]
(j) Effective date—(1) General rule—(i) In general. This section applies to any split-dollar life insurance arrangement (as defined in paragraph (b)(1) or (2) of this section) entered into after September 17, 2003.
(ii) Determination of when an arrangement is entered into. For purposes of paragraph (j) of this section, a split-dollar life insurance arrangement is entered into on the latest of the following dates:
(A) The date on which the life insurance contract under the arrangement is issued;
(B) The effective date of the life insurance contract under the arrangement;
(C) The date on which the first premium on the life insurance contract under the arrangement is paid;
(D) The date on which the parties to the arrangement enter into an agreement with regard to the policy; or
(E) The date on which the arrangement satisfies the definition of a split-dollar life insurance arrangement (as defined in paragraph (b)(1) or (2) of this section).
(2) Modified arrangements treated as new arrangements—(i) In general. For purposes of paragraph (j)(1) of this section, if an arrangement entered into on or before September 17, 2003 is materially modified after September 17, 2003, the arrangement is treated as a new arrangement entered into on the date of the modification.
(ii) Non-material modifications. The following is a non-exclusive list of changes that are not material modifications under paragraph (j)(2)(i) of this section (either alone or in conjunction with other changes listed in paragraphs (j)(2)(ii)(A) through (I) of this section)—
(A) A change solely in the mode of premium payment (for example, a change from monthly to quarterly premiums);
(B) A change solely in the beneficiary of the life insurance contract, unless the beneficiary is a party to the arrangement;
(C) A change solely in the interest rate payable under the life insurance contract on a policy loan;
(D) A change solely necessary to preserve the status of the life insurance contract under section 7702;
(E) A change solely to the ministerial provisions of the life insurance contract (for example, a change in the address to send payment);
(F) A change made solely under the terms of any agreement (other than the life insurance contract) that is a part of the split-dollar life insurance arrangement if the change is non-discretionary by the parties and is made pursuant to a binding commitment (whether set forth in the agreement or otherwise) in effect on or before September 17, 2003;
(G) A change solely in the owner of the life insurance contract as a result of a transaction to which section 381(a) applies and in which substantially all of the former owner’s assets are transferred to the new owner of the policy;
(H) A change to the policy solely if such change is required by a court or a state insurance commissioner as a result of the insolvency of the insurance company that issued the policy; or
(I) A change solely in the insurance company that administers the policy as a result of an assumption reinsurance transaction between the issuing insurance company and the new insurance company to which the owner and the non-owner were not a party.
(iii) Delegation to Commissioner. The Commissioner, in revenue rulings, notices, and other guidance published in the Internal Revenue Bulletin, may provide additional guidance with respect to other modifications that are not material for purposes of paragraph (j)(2)(i) of this section. See § 601.601(d)(2)(ii) of this chapter.
§ 1.62-1 Adjusted gross income.
(a)-(b) [Reserved]
(c) Deductions allowable in computing adjusted gross income. The deductions specified in section 62(a) for purposes of computing adjusted gross income are—
(1) Deductions set forth in § 1.62-1T(c); and
(2) Deductions allowable under part VI, subchapter B, chapter 1 of the Internal Revenue Code, (section 161 and following) that consist of expenses paid or incurred by the taxpayer in connection with the performance of services as an employee under a reimbursement or other expense allowance arrangement (as defined in § 1.62-2) with his or her employer. For the rules pertaining to expenses paid or incurred in taxable years beginning before January 1, 1989, see § 1.62-1T (c)(2) and (f) (as contained in 26 CFR part 1 (§§ 1.61 to 1.169) revised April 1, 1992).
(d)-(h) [Reserved]
(i) Effective date. Paragraph (c) of this section is effective for taxable years beginning on or after January 1, 1989.
§ 1.62-1T Adjusted gross income (temporary).
(a) Basis for determining the amount of certain deductions. The term “adjusted gross income” means the gross income computed under section 61 minus such of the deductions allowed by chapter 1 of the Code as are specified in section 62(a). Adjusted gross income is used as the basis for determining the following:
(1) The limitation on the amount of miscellaneous itemized deductions (under section 67).
(2) The limitation on the amount of the deduction for casualty losses (under section 165(h)(2)),
(3) The limitation on the amount of the deduction for charitable contributions (under section 170(b)(1)),
(4) The limitation on the amount of the deduction for medical and dental expenses (under section 213),
(5) The limitation on the amount of the deduction for qualified retirement contributions for active participants in certain pension plans (under section 219(g)), and
(6) The phase-out of the exemption from the disallowance of passive activity losses and credits (under section 469(i)(3)).
(b) Double deduction not permitted. Section 62 (a) merely specifies which of the deductions provided in chapter 1 of the Code shall be allowed in computing adjusted gross income. It does not create any new deductions. The fact that a particular item may be described in more than one of the paragraphs under section 62(a) does not permit the item to be deducted twice in computing adjusted gross income or taxable income.
(c) Deductions allowable in computing adjusted gross income. The deductions specified in section 62(a) for purposes of computing adjusted gross income are:
(1) Deductions allowable under chapter 1 of the Code (other than by part VII (section 211 and following), subchapter B of such chapter) that are attributable to a trade or business carried on by the taxpayer not consisting of services performed as an employee;
(2) [Reserved]
(3) For taxable years beginning after December 31, 1986, deductions allowable under section 162 that consist of expenses paid or incurred by a qualified performing artist (as defined in section 62(b)) in connection with the performance by him or her of services in the performing arts as an employee;
(4) Deductions allowable under part VI as losses from the sale or exchange of property;
(5) Deductions allowable under part VI, section 212, or section 611 that are attributable to property held for the production of rents or royalties;
(6) Deductions for depreciation or depletion allowable under sections 167 or 611 to a life tenant of property or to an income beneficiary of property held in trust or to an heir, legatee, or devisee of an estate;
(7) Deductions allowed by section 404 for contributions on behalf of a self-employed individual;
(8) Deductions allowed by section 219 for contributions to an individual retirement account described in section 408(a), or for an individual retirement annuity described in section 408(b);
(9) Deductions allowed by section 402(e)(3) with respect to a lump-sum distribution;
(10) For taxable years beginning after December 31, 1972, deductions allowed by section 165 for losses incurred in any transaction entered into for profit though not connected with a trade or business, to the extent that such losses include amounts forfeited to a bank, mutual savings bank, savings and loan association, building and loan association, cooperative bank or homestead association as a penalty for premature withdrawal of funds from a time savings account, certificate of deposit, or similar class of deposit;
(11) For taxable years beginning after December 31, 1976, deductions for alimony and separate maintenance payments allowed by section 215;
(12) Deductions allowed by section 194 for the amortization of reforestation expenditures; and
(13) Deductions allowed by section 165 for the repayment (made in a taxable year beginning after December 28, 1980) to a trust described in paragraph (9) or (17) of section 501(c) of supplemental unemployment compensation benefits received from such trust if such repayment is required because of the receipt of trade readjustment allowances under section 231 or 232 of the Trade Act of 1974 (19 U.S.C. 2291 and 2292).
(d) Expenses directly related to a trade or business. For the purpose of the deductions specified in section 62, the performance of personal services as an employee does not constitute the carrying on of a trade or business, except as otherwise expressly provided. The practice of a profession, not as an employee, is considered the conduct of a trade or business within the meaning of such section. To be deductible for the purposes of determining adjusted gross income, expenses must be those directly, and not those merely remotely, connected with the conduct of a trade or business. For example, taxes are deductible in arriving at adjusted gross income only if they constitute expenditures directly attributable to a trade or business or to property from which rents or royalties are derived. Thus, property taxes paid or incurred on real property used in a trade or business are deductible, but state taxes on net income are not deductible even though the taxpayer’s income is derived from the conduct of a trade or business.
(e) Reimbursed and unreimbursed employee expenses—(1) In general. Expenses paid or incurred by an employee that are deductible from gross income under part VI in computing taxable income (determined without regard to section 67) and for which the employee is reimbursed by the employer, its agent, or third party (for whom the employee performs a benefit as an employee of the employer) under an express agreement for reimbursement or pursuant to an express expense allowance arrangement may be deducted from gross income in computing adjusted gross income. Except as provided in paragraphs (e)(2) and (e)(4) of this section, for taxable years beginning after December 31, 1986, if the amount of a reimbursement made by an employer, its agent, or third party to an employee is less than the total amount of the business expenses paid or incurred by the employee, the determination of to which of the employee’s business expenses the reimbursement applies and the amount of each expense that is covered by the reimbursement is made on the basis of all of the facts and circumstances of the particular case.
(2) Facts and circumstances unclear on business expenses for meals and entertainment. If—
(i) The facts and circumstances do not make clear—
(A) That a reimbursement does not apply to business expenses for meals or entertainment, or
(B) The amount of business expenses for meals or entertainment that is covered by the reimbursement, and
(ii) The employee pays or incurs business expenses for meals or entertainment,
(3) Deductibility of unreimbursed expenses. The amount of expenses that is determined not to be reimbursed pursuant to paragraph (e) (1) or (2) of this section is deductible from adjusted gross income in determining the employee’s taxable income subject to the limitations applicable to such expenses (e.g., the 2-percent floor of section 67 and the 80-percent limitation on meal and entertainment expenses provided for in section 274(n)).
(4) Unreimbursed expenses of State legislators. For taxable years beginning after December 31, 1986, any portion of the amount allowed as a deduction to State legislators pursuant to section 162(h)1)(B) that is not reimbursed by the State or a third party shall be allocated between lodging and meals in the same ratio as the amounts allowable for lodging and meals under the Federal per diem applicable to the legislator’s State capital at the end of the legislator’s taxable year (see Appendix 1-A of the Federal Travel Regulations (FTR), which as of March 28, 1988, are contained in GSA Bulletin FPMR A-40, Supplement 20). For purposes of this paragraph (e)(4), the amount allowable for meals under the Federal per diem shall be the amount of the Federal per diem allowable for meals and incidental expenses reduced by $2 per legislative day (or other amount allocated to incidental expenses in 1-7.5(a)(2) of the FTR). The unreimbursed portion of each type of expense is deductible from adjusted gross income in determining the State legislator’s taxable income subject to the limitations applicable to such expenses. For example, the unreimbursed portion allocable to meals shall be reduced by 20 percent pursuant to section 274(n) before being subjected to the 2-percent floor of section 67 for purposes of computing the taxable income of a State legislator. See § 1.67-1T(a)(2).
(5) Expenses paid directly by an employer, its agent, or third party. In the case of an employer, its agent, or a third party who provides property or services to an employee or who pays an employee’s expenses directly instead of reimbursing the employee, see section 132 and the regulations thereunder for the income tax treatment of such expenses.
(6) Examples. The provisions of this paragraph (e) may be illustrated by the following examples:
(f) [Reserved]
(g) Moving expenses. For taxable years beginning after December 31, 1986, a taxpayer described in section 217(a) shall not take into account the deduction described in section 217 relating to moving expenses in computing adjusted gross income under section 62 even if the taxpayer is reimbursed for his or her moving expenses. Such a taxpayer shall include the amount of any reimbursement for moving expenses in income pursuant to section 82. The deduction described in section 217 shall be taken into account in computing the taxable income of the taxpayer under section 63. Pursuant to section 67(b)(6), the 2-percent floor described in section 67(a) does not apply to moving expenses.
(h) Cross-reference. See 26 CFR 1.62-1 (Rev. as of April 1, 1986) with respect to pre-1987 deductions for travel, meal, lodging, transportation, and other trade or business expenses of an employee, reimbursed expenses of an employee, expenses of an outside salesperson, long-term capital gains, contributions described in section 405(c) to a bond purchase plan on behalf of a self-employed individual, moving expenses, amounts not received as benefits pursuant to section 1379(b)(3), and retirement bonds described in section 409 (allowed by section 219).
§ 1.62-2 Reimbursements and other expense allowance arrangements.
(a) Table of contents. The contents of this section are as follows:
(a) Table of contents.
(b) Scope.
(c) Reimbursement or other expense allowance arrangement.
(1) Defined.
(2) Accountable plans.
(i) In general.
(ii) Special rule for failure to return excess.
(3) Nonaccountable plans.
(i) In general.
(ii) Special rule for failure to return excess.
(4) Treatment of payments under accountable plans.
(5) Treatment of payments under nonaccountable plans.
(d) Business connection.
(1) In general.
(2) Other bona fide expenses.
(3) Reimbursement requirement.
(i) In general.
(ii) Per diem allowances.
(e) Substantiation.
(1) In general.
(2) Expenses governed by section 274(d).
(3) Expenses not governed by section 274(d).
(f) Returning amounts in excess of expenses.
(1) In general.
(2) Per diem or mileage allowances.
(g) Reasonable period.
(1) In general.
(2) Safe harbors.
(i) Fixed date method.
(ii) Periodic payment method.
(3) Pattern of overreimbursements.
(h) Withholding and payment of employment taxes.
(1) When excluded from wages.
(2) When included in wages.
(i) Accountable plans.
(A) General rule.
(B) Per diem or mileage allowances.
(1) In general.
(2) Reimbursements.
(3) Advances.
(4) Special rules.
(ii) Nonaccountable plans.
(i) Application.
(j) Examples.
(k) Anti-abuse provision.
(l) Cross references.
(m) Effective dates.
(b) Scope. For purposes of determining “adjusted gross income,” section 62(a)(2)(A) allows an employee a deduction for expenses allowed by part VI (section 161 and following), subchapter B, chapter 1 of the Code, paid by the employee, in connection with the performance of services as an employee of the employer, under a reimbursement or other expense allowance arrangement with a payor (the employer, its agent, or a third party). Section 62(c) provides that an arrangement will not be treated as a reimbursement or other expense allowance arrangement for purposes of section 62(a)(2)(A) if—
(1) Such arrangement does not require the employee to substantiate the expenses covered by the arrangement to the payor, or
(2) Such arrangement provides the employee the right to retain any amount in excess of the substantiated expenses covered under the arrangement.
(c) Reimbursement or other expense allowance arrangement—(1) Defined. For purposes of §§ 1.62-1, 1.62-1T, and 1.62-2, the phrase “reimbursement or other expense allowance arrangement” means an arrangement that meets the requirements of paragraphs (d) (business connection, (e) (substantiation), and (f) (returning amounts in excess of expenses) of this section. A payor may have more than one arrangement with respect to a particular employee, depending on the facts and circumstances. See paragraph (d)(2) of this section (payor treated as having two arrangements under certain circumstances).
(2) Accountable plans—(i) In general. Except as provided in paragraph (c)(2)(ii) of this section, if an arrangement meets the requirements of paragraphs (d), (e), and (f) of this section, all amounts paid under the arrangement are treated as paid under an “accountable plan.”
(ii) Special rule for failure to return excess. If an arrangement meets the requirements of paragraphs (d), (e), and (f) of this section, but the employee fails to return, within a reasonable period of time, any amount in excess of the amount of the expenses substantiated in accordance with paragraph (e) of this section, only the amounts paid under the arrangement that are not in excess of the substantiated expenses are treated as paid under an accountable plan.
(3) Nonaccountable plans—(i) In general. If an arrangement does not satisfy one or more of the requirements of paragraphs (d), (e), or (f) of this section, all amounts paid under the arrangement are treated as paid under a “nonaccountable plan.” If a payor provides a nonaccountable plan, an employee who receives payments under the plan cannot compel the payor to treat the payments as paid under an accountable plan by voluntarily substantiating the expenses and returning any excess to the payor.
(ii) Special rule for failure to return excess. If an arrangement meets the requirements of paragraphs (d), (e), and (f) of this section, but the employee fails to return, within a reasonable period of time, any amount in excess of the amount of the expenses substantiated in accordance with paragraph (e) of this section, the amounts paid under the arrangement that are in excess of the substantiated expenses are treated as paid under a nonaccountable plan.
(4) Treatment of payments under accountable plans. Amounts treated as paid under an accountable plan are excluded from the employee’s gross income, are not reported as wages or other compensation on the employee’s Form W-2, and are exempt from the withholding and payment of employment taxes (Federal Insurance Contributions Act (FICA), Federal Unemployment Tax Act (FUTA), Railroad Retirement Tax Act (RRTA), Railroad Unemployment Repayment Tax (RURT), and income tax.) See paragraph (l) of this section for cross references.
(5) Treatment of payments under nonaccountable plans. Amounts treated as paid under a nonaccountable plan are included in the employee’s gross income, must be reported as wages or other compensation on the employee’s Form W-2, and are subject to withholding and payment of employment taxes (FICA, FUTA, RRTA, RURT, and income tax). See paragraph (h) of this section. Expenses attributable to amounts included in the employee’s gross income may be deducted, provided the employee can substantiate the full amount of his or her expenses (i.e., the amount of the expenses, if any, the reimbursement for which is treated as paid under an accountable plan as well as those for which the employee is claiming the deduction) in accordance with §§ 1.274-5T and 1.274(d)-1 or § 1.162-17, but only as a miscellaneous itemized deduction subject to the limitations applicable to such expenses (e.g., the 80-percent limitation on meal and entertainment expenses provided in section 274(n) and the 2-percent floor provided in section 67).
(d) Business connection—(1) In general. Except as provided in paragraphs (d)(2) and (d)(3) of this section, an arrangement meets the requirements of this paragraph (d) if it provides advances, allowances (including per diem allowances, allowances only for meals and incidental expenses, and mileage allowances), or reimbursements only for business expenses that are allowable as deductions by part VI (section 161 and the following), subchapter B, chapter 1 of the Code, and that are paid or incurred by the employee in connection with the performance of services as an employee of the employer. The payment may be actually received from the employer, its agent, or a third party for whom the employee performs a service as an employee of the employer, and may include amounts charged directly or indirectly to the payor through credit card systems or otherwise. In addition, if both wages and the reimbursement or other expense allowance are combined in a single payment, the reimbursement or other expense allowance must be identified either by making a separate payment or by specifically identifying the amount of the reimbursement or other expense allowance.
(2) Other bona fide expenses. If an arrangement provides advances, allowances, or reimbursements for business expenses described in paragraph (d)(1) of this section (i.e., deductible employee business expenses) and for other bona fide expenses related to the employer’s business (e.g., travel that is not away from home) that are not deductible under part VI (section 161 and the following), subchapter B, chapter 1 of the Code, the payor is treated as maintaining two arrangements. The portion of the arrangement that provides payments for the deductible employee business expenses is treated as one arrangement that satisfies this paragraph (d). The portion of the arrangement that provides payments for the nondeductible employee expenses is treated as a second arrangement that does not satisfy this paragraph (d) and all amounts paid under this second arrangement will be treated as paid under a nonaccountable plan. See paragraphs (c)(5) and (h) of this section.
(3) Reimbursement requirement—(i) In general. If a payor arranges to pay an amount to an employee regardless of whether the employee incurs (or is reasonably expected to incur) business expenses of a type described in paragraph (d)(1) or (d)(2) of this section, the arrangement does not satisfy this paragraph (d) and all amounts paid under the arrangement are treated as paid under a nonaccountable plan. See paragraphs (c)(5) and (h) of this section.
(ii) Per diem allowances. An arrangement providing a per diem allowance for travel expenses of a type described in paragraph (d)(1) or (d)(2) of this section that is computed on a basis similar to that used in computing the employee’s wages or other compensation (e.g., the number of hours worked, miles traveled, or pieces produced) meets the requirements of this paragraph (d) only if, on December 12, 1989, the per diem allowance was identified by the payor either by making a separate payment or by specifically identifying the amount of the per diem allowance, or a per diem allowance computed on that basis was commonly used in the industry in which the employee is employed. See section 274(d) and § 1.274(d)-1. A per diem allowance described in this paragraph (d)(3)(ii) may be adjusted in a manner that reasonably reflects actual increases in employee business expenses occurring after December 12, 1989.
(e) Substantiation—(1) In general. An arrangement meets the requirements of this paragraph (e) if it requires each business expense to be substantiated to the payor in accordance with paragraph (e)(2) or (e)(3) of this section, whichever is applicable, within a reasonable period of time. See § 1.274-5T or § 1.162-17.
(2) Expenses governed by section 274(d). An arrangement that reimburses travel, entertainment, use of a passenger automobile or other listed property, or other business expenses governed by section 274(d) meets the requirements of this paragraph (e)(2) if information sufficient to satisfy the substantiation requirements of section 274(d) and the regulations thereunder is submitted to the payor. See § 1.274-5. Under section 274(d), information sufficient to substantiate the requisite elements of each expenditure or use must be submitted to the payor. For example, with respect to travel away from home, § 1.274-5(b)(2) requires that information sufficient to substantiate the amount, time, place, and business purpose of the expense must be submitted to the payor. Similarly, with respect to use of a passenger automobile or other listed property, § 1.274-5(b)(6) requires that information sufficient to substantiate the amount, time, use, and business purpose of the expense must be submitted to the payor. See § 1.274-5(g) and (j), which grant the Commissioner the authority to establish optional methods of substantiating certain expenses. Substantiation of the amount of a business expense in accordance with rules prescribed pursuant to the authority granted by § 1.274-5(g) or (j) will be treated as substantiation of the amount of such expense for purposes of this section.
(3) Expenses not governed by section 274(d). An arrangement that reimburses business expenses not governed by section 274(d) meets the requirements of this paragraph (e)(3) if information is submitted to the payor sufficient to enable the payor to identify the specific nature of each expense and to conclude that the expense is attributable to the payor’s business activities. Therefore, each of the elements of an expenditure or use must be substantiated to the payor. It is not sufficient if an employee merely aggregates expenses into broad categories (such as “travel”) or reports individual expenses through the use of vague, nondescriptive terms (such as “miscellaneous business expenses”). See § 1.162-17(b).
(f) Returning amounts in excess of expenses—(1) In general. Except as provided in paragraph (f)(2) of this section, an arrangement meets the requirements of this paragraph (f) if it requires the employee to return to the payor within a reasonable period of time may amount paid under the arrangement in excess of the expenses substantiated in accordance with paragraph (e) of this section. The determination of whether an arrangement requires an employee to return amounts in excess of substantiated expenses will depend on the facts and circumstances. An arrangement whereby money is advanced to an employee to defray expenses will be treated as satisfying the requirements of this paragraph (f) only if the amount of money advanced is reasonably calculated not to exceed the amount of anticipated expenditures, the advance of money is made on a day within a reasonable period of the day that the anticipated expenditures are paid or incurred, and any amounts in excess of the expenses substantiated in accordance with paragraph (e) of this section are required to be returned to the payor within a reasonable period of time after the advance is received.
(2) Per diem or mileage allowances. The Commissioner may, in his discretion, prescribe rules in pronouncements of general applicability under which a reimbursement or other expense allowance arrangement that provides per diem allowances providing for ordinary and necessary expenses of traveling away from home (exclusive of transportation costs to and from destination) or mileage allowances providing for ordinary and necessary expenses of local travel and tranportation while traveling away from home will be treated as satisfying the requirements of this paragraph (f), even though the arrangement does not require the employee to return the portion of such an allowance that relates to the days or miles of travel substantiated and that exceeds the amount of the employee’s expenses deemed substantiated pursuant to rules prescribed under section 274(d), provided the allowance is paid at a rate for each day or mile of travel that is reasonably calculated not to exceed the amount of the employee’s expenses or anticipated expenses and the employee is required to return to the payor within a reasonable period of time any portion of such allowance which relates to days or miles of travel not substantiated in accordance with paragraph (e) of this section.
(g) Reasonable period—(1) In general. The determination of a reasonable period of time will depend on the facts and circumstances.
(2) Safe harbors—(i) Fixed date method. An advance made within 30 days of when an expense is paid or incurred, an expense substantiated to the payor within 60 days after it is paid or incurred, or an amount returned to the payor within 120 days after an expense is paid or incurred will be treated as having occurred within a reasonable period of time.
(ii) Periodic statement method. If a payor provides employees with periodic statements (no less frequently than quarterly) stating the amount, if any, paid under the arrangement in excess of the expenses the employee has substantiated in accordance with paragraph (e) of this section, and requesting the employee to substantiate any additional business expenses that have not yet been substantiated (whether or not such expenses relate to the expenses with respect to which the original advance was paid) and/or to return any amounts remaining unsubstantiated within 120 days of the statement, an expense substantiated or an amount returned within that period will be treated as being substantiated or returned within a reasonable period of time.
(3) Pattern of overreimbursements. If, under a reimbursement or other expense allowance arrangement, a payor has a plan or practice to provide amounts to employees in excess of expenses substantiated in accordance with paragraph (e) of this section and to avoid reporting and withholding on such amounts, the payor may not use either of the safe harbors provided in paragraph (g)(2) of this section for any years during which such plan or practice exists.
(h) Withholding and payment of employment taxes—(1) When excluded from wages. If an arrangement meets the requirements of paragraphs (d), (e), and (f) of this section, the amounts paid under the arrangement that are not in excess of the expenses substantiated in accordance with paragraph (e) of this section (i.e., the amounts treated as paid under an accountable plan) are not wages and are not subject to withholding and payment of employment taxes. If an arrangement provides advances, allowances, or reimbursements for meal and entertainment expenses and a portion of the payment is treated as paid under a nonaccountable plan under paragraph (d)(2) of this section due solely to section 274(n), then notwithstanding paragraph (h)(2)(ii) of this section, these nondeductible amounts are neither treated as gross income nor subject to withholding and payment of employment taxes.
(2) When included in wages—(i) Accountable plans—(A) General rule. Except as provided in paragraph (h)(2)(i)(B) of this section, if the expenses covered under an arrangement that meets the requirements of paragraphs (d), (e), and (f) of this section are not substantiated to the payor in accordance with paragraph (e) of this section within a reasonable period of time or if any amounts in excess of the substantiated expenses are not returned to the payor in accordance with paragraph (f) of this section within a reasonable period of time, the amount which is treated as paid under a nonaccountable plan under paragraph (c)(3)(ii) of this section is subject to withholding and payment of employment taxes no later than the first payroll period following the end of the reasonable period. A payor may treat any amount not substantiated or returned within the periods specified in paragraph (g)(2) of this section as not substantiated or returned within a reasonable period of time.
(B) Per diem or mileage allowances—(1) In general. If a payor pays a per diem or mileage allowance under an arrangement that meets the requirements of the paragraphs (d), (e), and (f) of this section, the portion, if any, of the allowance paid that relates to days or miles of travel substantiated in accordance with paragraph (e) of this section and that exceeds the amount of the employee’s expenses deemed substantiated for such travel pursuant to rules prescribed under section 274(d) and § 1.274(d)-1 or § 1.274-5T(j) is treated as paid under a nonaccountable plan. See paragraph (c)(3)(ii) of this section. Because the employee is not required to return this excess portion, the reasonable period of time provisions of paragraph (g) of this section (relating to the return of excess amounts) do not apply to this excess portion.
(2) Reimbursements. Except as provided in paragraph (h)(2)(i)(B)(4) of this section, in the case of a per diem or mileage allowance paid as a reimbursement at a rate for each day or mile of travel that exceeds the amounts of the employee’s expenses deemed substantiated for a day or mile of travel, the excess portion described in paragraph (h)(2)(i) of this section is subject to withholding and payment of employment taxes in the payroll period in which the payor reimburses the expenses for the days or miles of travel substantiated in accordance with paragraph (e) of this section.
(3) Advances. Except as provided in paragraph (h)(2)(i)(B)(4) of this section, in the case of a per diem or mileage allowance paid as an advance at a rate for each day or mile of travel that exceeds the amount of the employee’s expenses deemed substantiated for a day or mile of travel, the excess portion described in paragraph (h)(2)(i) of this section is subject to withholding and payment of employment taxes no later than the first payroll period following the payroll period in which the expenses with respect to which the advance was paid (i.e., the days or miles of travel) are substantiated in accordance with paragraph (e) of this section. The expenses with respect to which the advance was paid must be substantiated within a reasonable period of time. See paragraph (g) of this section.
(4) Special rules. The Commissioner may, in his discretion, prescribe special rules in pronouncements of general applicability regarding the timing of withholding and payment of employment taxes on per diem and mileage allowances.
(ii) Nonaccountable plans. If an arrangement does not satisfy one or more of the requirements of paragraphs (d), (e), or (f) of this section, all amounts paid under the arrangement are wages and are subject to withholding and payment of employment taxes when paid.
(i) Application. The requirements of paragraphs (d) (business connection), (e) (substantiation), and (f) (returning amounts in excess of expenses) of this section will be applied on an employee-by-employee basis. Thus, for example, the failure by one employee to substantiate expenses under an arrangement in accordance with paragraph (e) of this section will not cause amounts paid to other employees to be treated as paid under a nonaccountable plan.
(j) Examples. The rules contained in this section may be illustrated by the following examples:
(k) Anti-abuse provision. If a payor’s reimbursement or other expense allowance arrangement evidences a pattern of abuse of the rules of section 62(c) and this section, all payments made under the arrangement will be treated as made under a nonaccountable plan.
(l) Cross references. For employment tax regulations relating to reimbursement and expense allowance arrangements, see §§ 31.3121 (a)-3, 31.3231(e)-(3), 31.3306(b)-2, and 31.3401(a)-4, which generally apply to payments made under reimbursement or other expense allowance arrangements received by an employee on or after July 1, 1990 with respect to expenses paid or incurred on or after July 1, 1990. For reporting requirements, see § 1.6041-3(i), which generally applies to payments made under reimbursement or other expense allowance arrangements received by an employee on or after January 1, 1989 with respect to expenses paid or incurred on or after January 1, 1989.
(m) Effective dates. This section generally applies to payments made under reimbursement or other expense allowance arrangements received by an employee in taxable years of the employee beginning on or after January 1, 1989, with respect to expenses paid or incurred in taxable years beginning on or after January 1, 1989. Paragraph (h) of this section generally applies to payments made under reimbursement or other expense allowance arrangements received by an employee on or after July 1, 1990 with respect to expenses paid or incurred on or after July 1, 1990. Paragraphs (d)(3)(ii) and (h)(2)(i)(B) of this section apply to payments made under reimbursement or other expense allowance arrangements received by an employee on or after January 1, 1991 with respect to expenses paid or incurred on or after January 1, 1991. Paragraph (e)(2) of this section applies to payments made under reimbursement or other expense allowance arrangements received by an employee with respect to expenses paid or incurred after December 31, 1997.
§ 1.63-1 Change of treatment with respect to the zero bracket amount and itemized deductions.
(a) In general. An individual who files a return on which the individual itemizes deductions in accordance with section 63(g) may later make a change of treatment by recomputing taxable income for the taxable year to which that return relates without itemizing deductions. Similarly, an individual who files a return on which the individual computes taxable income without itemizing deductions may later make a change of treatment by itemizing deductions in accordance with section 63(g) in recomputing taxable income for the taxable year to which that return relates.
(b) No extension of time for claiming credit or refund. A change of treatment described in paragraph (a) of this section does not extend the period of time prescribed in section 6511 within which the taxpayer may make a claim for credit or refund of tax.
(c) Special requirements if spouse filed separate return—(1) Requirements. If the spouse of the taxpayer filed a separate return for a taxable year corresponding to the taxable year of the taxpayer, the taxpayer may not make a change of treatment described in paragraph (a) of this section for that year unless—
(i) The spouse makes a change of treatment on the separate return consistent with the change of treatment sought by the taxpayer; and
(ii) The taxpayer and the taxpayer’s spouse file a consent in writing to the assessment of any deficiency of either spouse to the extent attributable to the change of treatment, even though the assessment of the deficiency would otherwise be prevented by the operation of any law or rule of law. The consent must be filed with the district director for the district in which the taxpayer applies for the change of treatment, and the period during which a deficiency may be assessed shall be established by agreement of the spouses and the district director.
(2) Corresponding taxable year. A taxable year of one spouse corresponds to a taxable year of the other spouse if both taxable years end in the same calendar year. If the taxable year of one spouse ends with death, however, the corresponding taxable year of the surviving spouse is that in which the death occurs.
(d) Inapplicable if tax liability has been compromised. The taxpayer may not make a change of treatment described in paragraph (a) of this section for any taxable year if—
(1) The tax liability of the taxpayer for the taxable year has been compromised under section 7122; or
(2) The tax liability of the taxpayer’s spouse for a taxable year corresponding to the taxable year of the taxpayer has been compromised under section 7122. See paragraph (c)(2) of this section for the determination of a corresponding taxable year.
(e) Effective date. This section applies to taxable years beginning after 1976.
§ 1.63-2 Cross reference.
For rules with respect to charitable contribution deductions for nonitemizing taxpayers, see section 63 (b)(1)(C) and (i) and section 170(i) of the Internal Revenue Code of 1954.
§ 1.66-1 Treatment of community income.
(a) In general. Married individuals domiciled in a community property state who do not elect to file a joint individual Federal income tax return under section 6013 generally must report half of the total community income earned by the spouses during the taxable year except at times when one of the following exceptions applies:
(1) The spouses live apart and meet the qualifications of § 1.66-2.
(2) The Secretary denies a spouse the Federal income tax benefits resulting from community property law under § 1.66-3, because that spouse acted as if solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income prior to the due date for the filing of his or her spouse’s return.
(3) A requesting spouse qualifies for traditional relief from the Federal income tax liability resulting from the operation of community property law under § 1.66-4(a).
(4) A requesting spouse qualifies for equitable relief from the Federal income tax liability resulting from the operation of community property law under § 1.66-4(b).
(b) Applicability. (1) The rules of this section apply only to community income, as defined by state law. The rules of this section do not apply to income that is not community income. Thus, the rules of this section do not apply to income from property that was formerly community property, but in accordance with state law, has ceased to be community property, becoming, e.g., separate property or property held by joint tenancy or tenancy in common.
(2) When taxpayers report income under paragraph (a) of this section, all community income for the calendar year is treated in accordance with the rules provided by section 879(a). Unlike the other provisions under section 66, section 66(a) does not permit inclusion on an item-by-item basis.
(c) Transferee liability. The provisions of section 66 do not negate liability that arises under the operation of other laws. Therefore, a spouse who is not subject to Federal income tax on community income may nevertheless remain liable for the unpaid tax (including additions to tax, penalties, and interest) to the extent provided by Federal or state transferee liability or property laws (other than community property laws). For the rules regarding the liability of transferees, see sections 6901 through 6904 and the regulations thereunder.
§ 1.66-2 Treatment of community income where spouses live apart.
(a) Community income of spouses domiciled in a community property state will be treated in accordance with the rules provided by section 879(a) if all of the following requirements are satisfied—
(1) The spouses are married to each other at any time during the calendar year;
(2) The spouses live apart at all times during the calendar year;
(3) The spouses do not file a joint return with each other for a taxable year beginning or ending in the calendar year;
(4) One or both spouses have earned income that is community income for the calendar year; and
(5) No portion of such earned income is transferred (directly or indirectly) between such spouses before the close of the calendar year.
(b) Living apart. For purposes of this section, living apart requires that spouses maintain separate residences. Spouses who maintain separate residences due to temporary absences are not considered to be living apart. Spouses who are not members of the same household under § 1.6015-3(b) are considered to be living apart for purposes of this section.
(c) Transferred income. For purposes of this section, transferred income does not include a de minimis amount of earned income that is transferred between the spouses. In addition, any amount of earned income transferred for the benefit of the spouses’ child will not be treated as an indirect transfer to one spouse. Additionally, income transferred between spouses is presumed to be a transfer of earned income. This presumption is rebuttable.
(d) Examples. The following examples illustrate the rules of this section:
§ 1.66-3 Denial of the Federal income tax benefits resulting from the operation of community property law where spouse not notified.
(a) In general. The Secretary may deny the Federal income tax benefits of community property law to any spouse with respect to any item of community income if that spouse acted as if solely entitled to the income and failed to notify his or her spouse of the nature and amount of the income before the due date (including extensions) for the filing of the return of his or her spouse for the taxable year in which the item of income was derived. Whether a spouse has acted as if solely entitled to the item of income is a facts and circumstances determination. This determination focuses on whether the spouse used, or made available, the item of income for the benefit of the marital community.
(b) Effect. The item of community income will be included, in its entirety, in the gross income of the spouse to whom the Secretary denied the Federal income tax benefits resulting from community property law. The tax liability arising from the inclusion of the item of community income must be assessed in accordance with section 6212 against this spouse.
(c) Examples. The following examples illustrate the rules of this section:
(ii) H and W are married and are domiciled in State B, a community property state. For taxable year 2000, H receives $45,000 in wage income that H places in a separate account. H and W maintain separate residences. H’s wage income is community income under the laws of State B. That same year, W loses her job, and H pays W’s mortgage and household expenses for several months while W seeks employment. Neither H nor W files a return for 2000, the taxable year for which the IRS subsequently audits them. The IRS may not raise section 66(b) and deny H the Federal income tax benefits resulting from the operation of community property law as to H’s wage income of $45,000, as H has not treated this income as if H were solely entitled to it.
§ 1.66-4 Request for relief from the Federal income tax liability resulting from the operation of community property law.
(a) Traditional relief—(1) In general. A requesting spouse will receive relief from the Federal income tax liability resulting from the operation of community property law for an item of community income if—
(i) The requesting spouse did not file a joint Federal income tax return for the taxable year for which he or she seeks relief;
(ii) The requesting spouse did not include in gross income for the taxable year an item of community income properly includible therein, which, under the rules contained in section 879(a), would be treated as the income of the nonrequesting spouse;
(iii) The requesting spouse establishes that he or she did not know of, and had no reason to know of, the item of community income; and
(iv) Taking into account all of the facts and circumstances, it is inequitable to include the item of community income in the requesting spouse’s individual gross income.
(2) Knowledge or reason to know. (i) A requesting spouse had knowledge or reason to know of an item of community income if he or she either actually knew of the item of community income, or if a reasonable person in similar circumstances would have known of the item of community income. All of the facts and circumstances are considered in determining whether a requesting spouse had reason to know of an item of community income. The relevant facts and circumstances include, but are not limited to, the nature of the item of community income, the amount of the item of community income relative to other income items, the couple’s financial situation, the requesting spouse’s educational background and business experience, and whether the item of community income was reflected on prior years’ returns (e.g., investment income omitted that was regularly reported on prior years’ returns).
(ii) If the requesting spouse is aware of the source of community income or the income-producing activity, but is unaware of the specific amount of the nonrequesting spouse’s community income, the requesting spouse is considered to have knowledge or reason to know of the item of community income. The requesting spouse’s lack of knowledge of the specific amount of community income does not provide a basis for relief under this section.
(3) Inequitable. All of the facts and circumstances are considered in determining whether it is inequitable to hold a requesting spouse liable for a deficiency attributable to an item of community income. One relevant factor for this purpose is whether the requesting spouse benefitted, directly or indirectly, from the omitted item of community income. A benefit includes normal support, but does not include de minimis amounts. Evidence of direct or indirect benefit may consist of transfers of property or rights to property, including transfers received several years after the filing of the return. Thus, for example, if a requesting spouse receives from the nonrequesting spouse property (including life insurance proceeds) that is traceable to items of community income attributable to the nonrequesting spouse, the requesting spouse will have benefitted from those items of community income. Other factors may include, if the situation warrants, desertion, divorce or separation. Factors relevant to whether it would be inequitable to hold a requesting spouse liable, more specifically described under the applicable administrative procedure issued under section 66(c) (Revenue Procedure 2000-15 (2000-1 C.B. 447) (See § 601.601(d)(2) of this chapter), or other applicable guidance published by the Secretary), are to be considered in making a determination under this paragraph.
(b) Equitable relief. Equitable relief may be available when the four requirements of paragraph (a)(1) of this section are not satisfied, but it would be inequitable to hold the requesting spouse liable for the unpaid tax or deficiency. Factors relevant to whether it would be inequitable to hold a requesting spouse liable, more specifically described under the applicable administrative procedure issued under section 66(c) (Revenue Procedure 2000-15 (2000-1 C.B. 447), or other applicable guidance published by the Secretary), are to be considered in making a determination under this paragraph.
(c) Applicability. Traditional relief under paragraph (a) of this section applies only to deficiencies arising out of items of omitted income. Equitable relief under paragraph (b) of this section applies to any deficiency or any unpaid tax (or any portion of either). Equitable relief is available only for the portion of liabilities that were unpaid as of July 22, 1998, and for liabilities that arise after July 22, 1998.
(d) Effect of relief. When the requesting spouse qualifies for relief under paragraph (a) or (b) of this section, the IRS must assess any deficiency of the nonrequesting spouse arising from the granting of relief to the requesting spouse in accordance with section 6212.
(e) Examples. The following examples illustrate the rules of this section:
(f) Fraudulent scheme. If the Secretary establishes that a spouse transferred assets to his or her spouse as part of a fraudulent scheme, relief is not available under this section. For purposes of this section, a fraudulent scheme includes a scheme to defraud the Secretary or another third party, such as a creditor, ex-spouse, or business partner.
(g) Definitions—(1) Requesting spouse. A requesting spouse is an individual who does not file a joint Federal income tax return with the nonrequesting spouse for the taxable year in question, and who requests relief from the Federal income tax liability resulting from the operation of community property law under this section for the portion of the liability arising from his or her share of community income for such taxable year.
(2) Nonrequesting spouse. A nonrequesting spouse is the individual to whom the requesting spouse was married and whose income or deduction gave rise to the tax liability from which the requesting spouse seeks relief in whole or in part.
(h) Effect of prior closing agreement or offer in compromise. A requesting spouse is not entitled to relief from the Federal income tax liability resulting from the operation of community property law under section 66 for any taxable year for which the requesting spouse has entered into a closing agreement (other than an agreement pursuant to section 6224(c) relating to partnership items) with the Secretary that disposes of the same liability that is the subject of the request for relief. In addition, a requesting spouse is not entitled to relief from the Federal income tax liability resulting from the operation of community property law under section 66 for any taxable year for which the requesting spouse has entered into an offer in compromise with the Secretary. For rules relating to the effect of closing agreements and offers in compromise, see sections 7121 and 7122, and the regulations thereunder.
(i) [Reserved]
(j) Time and manner for requesting relief—(1) Requesting relief. To request relief from the Federal income tax liability resulting from the operation of community property law under this section, a requesting spouse must file, within the time period prescribed in paragraph (j)(2) of this section, Form 8857, “Request for Innocent Spouse Relief” (or other specified form), or other written request, signed under penalties of perjury, stating why relief is appropriate. The requesting spouse must include the nonrequesting spouse’s name and taxpayer identification number in the written request. The requesting spouse must also comply with the Secretary’s reasonable requests for information that will assist the Secretary in identifying and locating the nonrequesting spouse.
(2) Time period for filing a request for relief—(i) Traditional relief. The earliest time for submitting a request for relief from the Federal income tax liability resulting from the operation of community property law under paragraph (a) of this section, for an amount underreported on, or omitted from, the requesting spouse’s separate return, is the date the requesting spouse receives notification of an audit or a letter or notice from the IRS stating that there may be an outstanding liability with regard to that year (as described in paragraph (j)(2)(iii) of this section). The latest time for requesting relief under paragraph (a) of this section is 6 months before the expiration of the period of limitations on assessment, including extensions, against the nonrequesting spouse for the taxable year that is the subject of the request for relief, unless the examination of the requesting spouse’s return commences during that 6-month period. If the examination of the requesting spouse’s return commences during that 6-month period, the latest time for requesting relief under paragraph (a) of this section is 30 days after the commencement of the examination.
(ii) Equitable relief. The earliest time for submitting a request for relief from the Federal income tax liability resulting from the operation of community property law under paragraph (b) of this section is the date the requesting spouse receives notification of an audit or a letter or notice from the IRS stating that there may be an outstanding liability with regard to that year (as described in paragraph (j)(2)(iii) of this section). A request for equitable relief from the Federal income tax liability resulting from the operation of community property law under paragraph (b) of this section for a liability that is properly reported but unpaid is properly submitted with the requesting spouse’s individual Federal income tax return, or after the requesting spouse’s individual Federal income tax return is filed.
(iii) Premature requests for relief. The Secretary will not consider a premature request for relief under this section. The notices or letters referenced in this paragraph (j)(2) do not include notices issued pursuant to section 6223 relating to TEFRA partnership proceedings. These notices or letters include notices of computational adjustment to a partner or partner’s spouse (Notice of Income Tax Examination Changes) that reflect a computation of the liability attributable to partnership items of the partner or the partner’s spouse.
(k) Nonrequesting spouse’s notice and opportunity to participate in administrative proceedings—(1) In general. When the Secretary receives a request for relief from the Federal income tax liability resulting from the operation of community property law under this section, the Secretary must send a notice to the nonrequesting spouse’s last known address that informs the nonrequesting spouse of the requesting spouse’s request for relief. The notice must provide the nonrequesting spouse with an opportunity to submit any information for consideration in determining whether to grant the requesting spouse relief from the Federal income tax liability resulting from the operation of community property law. The Secretary will share with each spouse the information submitted by the other spouse, unless the Secretary determines that the sharing of this information will impair tax administration.
(2) Information submitted. The Secretary will consider all of the information (as relevant to the particular relief provision) that the nonrequesting spouse submits in determining whether to grant relief from the Federal income tax liability resulting from the operation of community property law under this section.
§ 1.66-5 Effective date.
Sections 1.66-1 through 1.66-4 are applicable on July 10, 2003. In addition, § 1.66-4 applies to any request for relief filed prior to July 10, 2003, for which the Internal Revenue Service has not issued a preliminary determination as of July 10, 2003.
§ 1.67-1T 2-percent floor on miscellaneous itemized deductions (temporary).
(a) Type of expenses subject to the floor—(1) In general. With respect to individuals, section 67 disallows deductions for miscellaneous itemized deductions (as defined in paragraph (b) of this section) in computing taxable income (i.e., so-called “below-the-line” deductions) to the extent that such otherwise allowable deductions do not exceed 2 percent of the individual’s adjusted gross income (as defined in section 62 and the regulations thereunder). Examples of expenses that, if otherwise deductible, are subject to the 2-percent floor include but are not limited to—
(i) Unreimbursed employee expenses, such as expenses for transportation, travel fares and lodging while away from home, business meals and entertainment, continuing education courses, subscriptions to professional journals, union or professional dues, professional uniforms, job hunting, and the business use of the employee’s home.
(ii) Expenses for the production or collection of income for which a deduction is otherwise allowable under section 212 (1) and (2), such as investment advisory fees, subscriptions to investment advisory publications, certain attorneys’ fees, and the cost of safe deposit boxes,
(iii) Expenses for the determination of any tax for which a deduction is otherwise allowable under section 212(3), such as tax counsel fees and appraisal fees, and
(iv) Expenses for an activity for which a deduction is otherwise allowable under section 183.
(2) Other limitations. Except as otherwise provided in paragraph (d) of this section, to the extent that any limitation or restriction is placed on the amount of a miscellaneous itemized deduction, that limitation shall apply prior to the application of the 2-percent floor. For example, in the case of an expense for food or beverages, only 80 percent of which is allowable as a deduction because of the limitations provided in section 274(n), the otherwise deductible 80 percent of the expense is treated as a miscellaneous itemized deduction and is subject to the 2-percent limitation of section 67.
(b) Definition of miscellaneous itemized deductions. For purposes of this section, the term “miscellaneous itemized deductions” means the deductions allowable from adjusted gross income in determining taxable income, as defined in section 63, other than—
(1) The standard deduction as defined in section 63(c),
(2) Any deduction allowable for impairment-related work expenses as defined in section 67(d),
(3) The deduction under section 72(b)(3) (relating to deductions if annuity payments cease before the investment is recovered),
(4) The deductions allowable under section 151 for personal exemptions,
(5) The deduction under section 163 (relating to interest),
(6) The deduction under section 164 (relating to taxes),
(7) The deduction under section 165(a) for losses described in subsection (c)(3) or (d) of section 165,
(8) The deduction under section 170 (relating to charitable contributions and gifts),
(9) The deduction under section 171 (relating to deductions for amortizable bond premiums),
(10) The deduction under section 213 (relating to medical and dental expenses),
(11) The deduction under section 216 (relating to deductions in connection with cooperative housing corporations),
(12) The deduction under section 217 (relating to moving expenses),
(13) The deduction under section 691(c) (relating to the deduction for estate taxes in the case of income in respect of the decedent),
(14) The deduction under 1341 (relating to the computation of tax if a taxpayer restores a substantial amount held under claim of right), and
(15) Any deduction allowable in connection with personal property used in a short sale.
(c) Allocation of expenses. If a taxpayer incurs expenses that relate to both a trade or business activity (within the meaning of section 162) and a production of income or tax preparation activity (within the meaning of section 212), the taxpayer shall allocate such expenses between the activities on a reasonable basis.
(d) Members of Congress—(1) In general. With respect to the deduction for living expenses of Members of Congress referred to in section 162(a), the 2-percent floor described in section 67 and paragraph (a) of this section shall be applied to the deduction before the application of the $3,000 limitation on deductions for living expenses referred to in section 162(a). (For purposes of this paragraph (d), the term “Member(s) of Congress” includes any Delegate or Resident Commissioner.) The amount of miscellaneous itemized deductions of a Member of Congress that is disallowed pursuant to section 67 and paragraph (a) of this section shall be allocated between deductions for living expenses (within the meaning of section 162(a)) and other miscellaneous itemized deductions. The amount of deductions for living expenses of a Member of Congress that is disallowed pursuant to section 67 and paragraph (a) of this section is determined by multiplying the aggregate amount of such living expenses (determined without regard to the $3,000 limitation of section 162(a) but with regard to any other limitations) by a fraction, the numerator of which is the aggregate amount disallowed pursuant to section 67 and paragraph (a) of this section with respect to miscellaneous itemized deductions of the Member of Congress and the denominator of which is the amount of miscellaneous itemized deductions (including deductions for living expenses) of the Member of Congress (determined without regard to the $3,000 limitation of section 162(a) but without regard to any other limitations). The amount of deductions for miscellaneous itemized deductions (other than deductions for living expenses) of a Member of Congress that are disallowed pursuant to section 67 and paragraph (a) of this section is determined by multiplying the amount of miscellaneous itemized deductions (other than deductions for living expenses) of the Member of Congress (determined with regard to any limitations) by the fraction described in the preceding sentence.
(2) Example. The provisions of this paragraph (d) may be illustrated by the following example:
(e) State legislators. See § 1.62-1T(e)(4) with respect to rules regarding state legislator’s expenses.
§ 1.67-2T Treatment of pass-through entities (temporary).
(a) Application of section 67. This section provides rules for the application of section 67 to partners, shareholders, beneficiaries, participants, and others with respect to their interests in pass-through entities (as defined in paragraph (g) of this section). In general, an affected investor (as defined in paragraph (h) of this section) in a pass-through entity shall separately take into account as an item of income and as an item of expense an amount equal to his or her allocable share of the affected expenses (as defined in paragraph (i) of this section) of the pass-through entity for purposes of determining his or her taxable income. Except as provided in paragraph (e)(1)(ii)(B) of this section, the expenses so taken into account shall be treated as paid or incurred by the affected investor in the same manner as paid or incurred by the pass-through entity. For rules regarding the application of section 67 to affected investors in—
(1) Partnerships, S corporations, and grantor trusts, see paragraph (b) of this section,
(2) Real estate mortgage investment conduits, see paragraph (c) of this section,
(3) Common trust funds, see paragraph (d) of this section,
(4) Nonpublicly offered regulated investment companies, see paragraph (e) of this section, and
(5) Publicly offered regulated investment companies, see paragraph (p) of this section.
(b) Partnerships, S corporations, and grantor trusts—(1) In general. Pursuant to section 702(a) and 1366(a) of the Code and the regulations thereunder, each partner of a partnership or shareholder of an S corporation shall take into account separately his or her distributive or pro rata share of any items of deduction of such partnership or corporation that are defined as miscellaneous itemized deductions pursuant to section 67(b). The 2-percent limitation described in section 67 does not apply to the partnership or corporation with respect to such deductions, but such deductions shall be included in the deductions of the partner or shareholder to which that limitation applies. Similarly, the limitation applies to the grantor or other person treated as the owner of a grantor trust with respect to items that are paid or incurred by a grantor trust and are treated as miscellaneous itemized deductions of the grantor or other person pursuant to Subpart E, Part 1, Subchapter J, Chapter 1 of the Code, but not to the trust itself. The 2-percent limitation applies to amounts otherwise deductible in taxable years of partners, shareholders, or grantors beginning after December 31, 1986, regardless of the taxable year of the partnership, corporation, or trust.
(2) Example. The provisions of this paragraph (b) may be illustrated by the following example:
(c) Real estate mortgage investment conduit. See § 1.67-3T for rules regarding the application of section 67 to holders of interests in REMICs.
(d) Common trust funds—(1) In general. For purposes of determining the taxable income of an affected investor that is a participant in a common trust fund—
(i) The ordinary taxable income and ordinary net loss of the common trust fund shall be computed under section 584(d)(2) without taking into account any affected expenses, and
(ii) Each affected investor shall be treated as having paid or incurred an expense described in section 212 in an amount equal to the affected investor’s proportionate share of the affected expenses.
(2) Example. The provisions of this paragraph (d) may be illustrated by the following example:
(e) Nonpublicly offered regulated investment companies—(1) In general. For purposes of determining the taxable income of an affected investor that is a shareholder of a nonpublicly offered regulated investment company (as defined in paragraph (g)(3) of this section) during a calendar year—
(i) The current earnings and profits of the nonpublicly offered regulated investment company shall be computed without taking into account any affected RIC expenses that are allocated among affected investors, and
(ii) The affected investor shall be treated—
(A) As having received or accrued a dividend in an amount equal to the affected investor’s allocable share of the affected RIC expenses of the nonpublicly offered regulated investment company for the calendar year, and
(B) As having paid or incurred an expense described in section 212 (or section 162 in the case of an affected investor that is a nonpublicly offered regulated investment company) in an amount equal to the affected investor’s allocable share of the affected RIC expenses of the nonpublicly offered regulated investment company for the calendar year
(2) Shareholders that are not affected investors. A shareholder of a nonpublicly offered regulated investment company that is not an affected investor shall not take into account in computing its taxable income any amount of income or expense with respect to its allocable share of affected RIC expenses.
(3) Example. The provisions of this paragraph (e) may be illustrated by the following example:
(f) Cross-reference. See § 1.67-1T with respect to limitations on deductions for expenses described in section 212 (including amounts treated as such expenses under this section).
(g) Pass-through entity—(1) In general. Except as provided in paragraph (g)(2) of this section, for purposes of section 67(c) and this section, a pass-through entity is—
(i) A trust (or any portion thereof) to which Subpart E, Part 1, Subchapter J, Chapter 1 of the Code applies,
(ii) A partnership,
(iii) An S corporation,
(iv) A common trust fund described in section 584,
(v) A nonpublicly offered regulated investment company,
(vi) A real estate mortgage investment conduit, and
(vii) Any other person—
(A) Which is not subject to the income tax imposed by Subtitle A, Chapter 1, or which is allowed a deduction in computing such tax for distributions to owners or beneficiaries, and
(B) The character of the income of which may affect the character of the income recognized with respect to that person by its owners or beneficiaries.
(2) Exception. For purposes of section 67(c) and this section, a pass-through entity does not include:
(i) An estate;
(ii) A trust (or any portion thereof) not described in paragraph (g)(1)(i) of this section,
(iii) A cooperative described in section 1381(a)(2), determined without regard to subparagraphs (A) and (C) thereof, or
(iv) A real estate investment trust.
(3) Nonpublicly offered regulated investment company—(i) In general. For purposes of this section, the term “nonpublicly offered regulated investment company” means a regulated investment company to which Part I of Subchapter M of the Code applies that is not a publicly offered regulated investment company.
(ii) Publicly offered regulated investment company. For purposes of this section, the term “publicly offered regulated investment company” means a regulated investment company to which Part I of Subchapter M of the Code applies the shares of which are—
(A) Continuously offered pursuant to a public offering (within the meaning of section 4 of the Securities Act of 1933, as amended (15 U.S.C. 77a to 77aa)),
(B) Regularly traded on an established securities market, or
(C) Held by or for no fewer than 500 persons at all times during the taxable year.
(h) Affected investor—(1) In general. For purposes of this section, the term “affected investor” means a partner, shareholder, beneficiary, participant, or other interest holder in a pass-through entity at any time during the pass-through entity’s taxable year that is—
(i) An individual (other than a nonresident alien whose income with respect to his or her interest in the pass-through entity is not effectively connected with the conduct of a trade or business within the United States),
(ii) A person, including a trust or estate, that computes its taxable income in the same manner as in the case of an individual; or
(iii) A pass-through entity if one or more of its partners, shareholders, beneficiaries, participants, or other interest holders is (A) a pass-through entity or (B) a person described in paragraph (h)(1) (i) or (ii) of this section.
(2) Examples. The provisions of this paragraph (h) may be illustrated by the following examples:
(i) Affected expenses—(1) In general. In general, for purposes of this section, the term “affected expenses” means expenses that, if paid or incurred by an individual, would be deductible, if at all, as miscellaneous itemized deductions as defined in section 67(b).
(2) Special rule for nonpublicly offered regulated investment companies. In the case of a nonpublicly offered regulated investment company, the term “affected expenses” means only affected RIC expenses.
(j) Affected RIC expenses—(1) In general. In general, for purposes of this section the term “affected RIC expenses” means the excess of—
(i) The aggregate amount of the expenses (other than expenses described in sections 62(a)(3) and 67(b) and § 1.67-1T(b)) paid or incurred in the calendar year that are allowable as a deduction in determining the investment company taxable income (without regard to section 852(b)(2)(D)) of the nonpublicly offered regulated investment company for a taxable year that begins or ends with or within the calendar year, over
(ii) The amount of expenses taken into account under paragraph (j)(1)(i) of this section that are allocable to the following items (whether paid separately or included as part of a fee paid to an investment advisor or other person for a variety of services):
(A) Registration fees;
(B) Directors’ or trustees’ fees;
(C) Periodic meetings of directors, trustees, or shareholders;
(D) Transfer agent fees;
(E) Legal and accounting fees (other than fees for income tax return preparation or income tax advice); and
(F) Shareholder communications required by law (e.g. the preparation and mailing of prospectuses and proxy statements).
(2) Safe harbor. If a nonpublicly offered regulated investment company makes an election under this paragraph (j)(2), the affected RIC expenses for a calendar year shall be treated as equal to 40 percent of the amount determined under paragraph (j)(1)(i) of this section for that calendar year. The nonpublicly offered regulated investment company shall make the election by attaching to its income tax return for the taxable year that includes the last day of the first calendar year for which the nonpublicly offered regulated investment company makes the election a statement that it is making an election under paragraph (j)(2) of this section. An election made pursuant to this paragraph (j)(2) shall remain in effect for all subsequent calendar years unless revoked with the consent of the Commissioner.
(3) Reduction for unused RIC expenses. The amount determined under paragraph (j)(1)(i) of this section shall be reduced by the nonpublicly offered regulated investment company’s net operating loss, if any, for the taxable year ending with or within the calendar year. In computing the nonpublicly offered regulated investment company’s net operating loss for purposes of this section, the deduction for dividends paid shall not be allowed and any net capital gain for the taxable year shall be excluded.
(4) Exception. The affected RIC expenses of a nonpublicly offered regulated investment company will be treated as zero if the amount of its gross income for the calendar year (determined without regard to capital gain net income) is not greater than 1 percent of the sum of (i) such gross income and (ii) the amount of its interest income for the calendar year that is not includible in gross income pursuant to section 103.
(k) Allocation of expenses among nonpublicly offered regulated investment company shareholders—(1) General rule. A nonpublicly offered regulated investment company shall allocate to each of its affected investors that is a shareholder at any time during the calendar year, the affected investor’s allocable share of the affected RIC expenses of the nonpublicly offered regulated investment company for that calendar year. (See paragraph (m) of this section for rules regarding estimates with respect to the amount of an affected investor’s share of affected RIC expenses upon which certain persons can rely for certain purposes.) A nonpublicly offered regulated investment company may use any reasonable method to make the allocation. A method of allocation shall not be reasonable if—
(i) The method can be expected to have the effect, if applied to all affected RIC expenses and all shareholders (whether or not affected investors), of allocating to the shareholders an amount of affected RIC expenses that is less than the affected RIC expenses of the nonpublicly offered regulated investment company for the calendar year,
(ii) The method can be expected to have the effect of allocating a disproportionately high share of the affected RIC expenses of the nonpublicly offered regulated investment company to shareholders that are not affected investors or affected investors, the amount of whose miscellaneous itemized deductions (including their allocable share of affected RIC expenses) exceeds the 2-percent floor described in section 67, or
(iii) A principal purpose of the method of allocation is to avoid allocating affected RIC expenses to persons described in paragraph (h)(1) (i) or (ii) of this section whose miscellaneous itemized deductions (inclusive of their allocable share of affected RIC expenses) may not exceed the 2-percent floor described in section 67.
(2) Reasonable allocation method described—(i) In general. The allocation method described in this paragraph (k)(2) shall be treated as a reasonable allocation method. Under the method described in this paragraph, an affected investor’s allocable share of the affected RIC expenses of a nonpublicly offered regulated investment company is the amount that bears the same ratio to the amount of affected RIC expenses of the nonpublicly offered regulated investment company for the calendar year as—
(A) The amount of dividends paid to the affected investor during the calendar year, bears to
(B) The sum of—
(1) The aggregate amount of dividends paid by the nonpublicly offered regulated investment company during the calendar year to all shareholders, and
(2) Any amount on which tax is imposed under section 852(b)(1) for any taxable year of the nonpublicly offered regulated investment company ending within or with the calendar year.
(ii) Exception. Paragraph (k)(2)(i) of this section does not apply if the amount of the deduction for dividends paid during the calendar year is zero.
(iii) Dividends paid. For purposes of this paragraph (k)(2)—
(A) Dividends that are treated as paid during a calendar year pursuant to section 852(b)(7) are treated as paid during that calendar year and not during the succeeding calendar year.
(B) The term “dividends paid” does not include capital gain dividends (as defined in section 852(b)(3)(C)), exempt-interest dividends (as defined in section 852(b)(5)(A)), or any amount to which section 302(a) applies.
(C) The dividends paid during a calendar year is determined without regard to section 855(a).
(3) Reasonable allocation made by District Director. If a nonpublicly offered regulated investment company does not make a reasonable allocation of affected RIC expenses to its affected investors as required by paragraph (k)(1) of this section, a reasonable allocation shall be made by the District Director of the internal revenue district in which the principal place of business or principal office or agency of the nonpublicly offered regulated investment company is located.
(4) Examples. The provisions of this paragraph (k) may be illustrated by the following examples:
(l) Affected RIC expenses not subject to backup withholding. The amount of dividend income that an affected investor in a nonpublicly offered regulated investment company is treated as having received or accrued under paragraph (e)(1)(ii) of this section is not subject to backup withholding under section 3406.
(m) Reliance by nominees and pass-through investors on notices—(1) General rule. Persons described in paragraph (m)(3) of this section may, for the purposes described in that paragraph (m)(3), treat an affected investor’s allocable share of the affected RIC expenses of a nonpublicly offered regulated investment company as being equal to an amount determined by the nonpublicly offered regulated investment company on the basis of a reasonable estimate (e.g., of allocable expenses as a percentage of dividend distributions or allocable expenses per share) that is (i) reported in writing by the nonpublicly offered regulated investment company to the person or (ii) reported in a newspaper or financial publication having a nationwide circulation (e.g., the Wall Street Journal or Standard and Poor’s Weekly Dividend Record).
(2) Estimates must be reasonable. In general, for purposes of paragraph (m)(1) of this section, estimates of affected RIC expenses of a nonpublicly offered regulated investment company will be treated as reasonable only if the nonpublicly offered regulated investment company makes a reasonable effort to offset material understatements (or overstatements) of affected RIC expenses for a period by increasing (or decreasing) estimates of affected RIC expenses for a subsequent period. Understatements or overstatements of affected RIC expenses that are not material may be corrected by making offsetting adjustments in future periods, provided that understatements and overstatements are treated consistently.
(3) Application. Paragraph (m)(1) of this section shall apply to the following persons for the following purposes:
(i) A nominee who, pursuant to section 6042(a)(1)(B) and paragraph (n)(2) of this section, is required to report dividends paid by a nonpublicly offered regulated investment company to the Internal Revenue Service and to the person to whom the payment is made, for purposes of reporting to the Internal Revenue Service and the person to whom the payment is made the amount of affected RIC expenses allocated to such person.
(ii) An affected investor to whom a nominee (to which paragraph (m)(3)(i) of this section applies) reports, for purposes of calculating the affected investor’s taxable income and the amount of its affected expenses.
(iii) A shareholder that is a pass-through entity, for purposes of calculating its taxable income and the amount of its affected expenses.
(n) Return of information and reporting to affected investors by a nonpublicly offered regulated investment company—(1) In general—(i) Return of information. A nonpublicly offered regulated investment company shall make an information return (e.g., Form 1099-DIV, Dividends and Distributions, for 1987) with respect to each affected investor to which an allocation of affected RIC expenses is required to be made pursuant to paragraph (k) of this section and for which the nonpublicly offered regulated investment company is required to make an information return to the Internal Revenue Service pursuant to section 6042 (or would be required to make such information return but for the $10 threshold described in section 6042 (a)(1) (A) and (B). The nonpublicly offered regulated investment company shall make the information return for each calendar year and shall state separately on such return—
(A) The amount of affected RIC expenses required to be allocated to the affected investor for the calendar year pursuant to paragraph (k) of this section,
(B) The sum of—
(1) The aggregate amount of the dividends paid to the affected investor during the calendar year, and
(2) The amount of the affected RIC expenses required to be allocated to the affected investor for the calendar year pursuant to paragraph (k) of this section, and
(C) Such other information as may be specified by the form or its instructions.
(ii) Statement to be furnished to affected investors. A nonpublicly offered regulated investment company shall provide to each affected investor for each calendar year (whether or not the nonpublicly offered regulated investment company is required to make an information return with respect to the affected investor pursuant to section 6042), a written statement showing the following information:
(A) The information described in paragraph (n)(1)(i) of this section with respect to the affected investor;
(B) The name and address of the nonpublicly offered regulated investment company;
(C) The name and address of the affected investor; and
(D) If the nonpublicly offered regulated investment company is required to report the amount of the affected investor’s allocation of affected RIC expense to the Internal Revenue Service pursuant to paragraph (n)(1)(i) of this section a statement to that effect.
(iii) Affected investor’s shares held by a nominee. If an affected investor’s shares in a nonpublicly offered regulated investment company are held in the name of a nominee, the nonpublicly offered regulated investment company may make the information return described in paragraph (n)(1)(i) of this section with respect to the nominee in lieu of the affected investor and may provide the written statement described in paragraph (n)(1)(ii) of this section to such nominee in lieu of the affected investor.
(2) By a nominee—(i) In general. Except as otherwise provided for in paragraph (n)(2)(iii) of this section, in any case in which a nonpublicly offered regulated investment company provides, pursuant to paragraph (n)(1)(iii) of this section, a written statement to the nominee of an affected investor for a calendar year, the nominee shall—
(A) If the nominee is required to make an information return pursuant to section 6042 (or would be required to make an information return but for the $10 threshold described in section 6042(a)(1) (A) and (B), make an information return (e.g., Form 1099-DIV, Dividends and Distributions, for 1987) for the calendar year with respect to each affected investor and state separately on such information return the information described in paragraph (n)(1)(i) of this section, and
(B) Furnish each affected investor with a written statement for the calendar year showing the information required by paragraph (n)(2)(ii) of this section (whether or not the nominee is required to make an information return with respect to the affected investor pursuant to section 6042).
(ii) Form of statement. The written statement required to be furnished for a calendar year pursuant to paragraph (n)(2)(i)(B) of this section shall show the following information:
(A) The affected investor’s proportionate share of the items described in paragraph (n)(1)(i) of this section for the calendar year,
(B) The name and address of the nominee,
(C) The name and address of the affected investor, and
(D) If the nominee is required to report the affected investor’s share of the allocable investment expenses to the Internal Revenue Service pursuant to paragraph (n)(2)(i)(A) of this section, a statement to that effect.
(iii) Return not required. A nominee is not required to make an information return with respect to an affected investor pursuant to paragraph (n)(2)(i)(A) of this section if the nominee is excluded from the requirements of section 6042 pursuant to § 1.6042-2(a)(1) (ii) or (iii).
(iv) Statement not required. A nominee is not required to furnish a written statement to an affected investor pursuant to paragraph (n)(2)(i)(B) of this section if the nonpublicly offered regulated investment company furnishes the written statement to the affected investor pursuant to an agreement with the nominee described in § 1.6042-2(a)(1)(iii).
(v) Special rule. Paragraph (n)(1) (i) and (ii) of this section applies to a nonpublicly offered regulated investment company that agrees with the nominee to satisfy the requirements of section 6042 as described in § 1.6042-2(a)(1)(iii) with respect to the affected investor.
(3) Time and place for furnishing returns. The returns required by paragraph (n)(1)(i) and (2)(i)(A) of this section for any calendar year shall be filed at the time and place that a return required under section 6042 is required to be filed. See § 1.6042-2(c) .
(4) Time for furnishing statements. The statements required by paragraph (n)(1)(ii) and (2)(i)(B) of this section to be furnished by a nonpublicly offered regulated investment company and a nominee, respectively, to an affected investor for a calendar year shall be furnished to such affected investor on or before January 31 of the following year.
(5) Duplicative returns and statements not required—(i) Information return. The requirements of paragraph (n)(1)(i) and (2)(i)(A) of this section for the making of an information return shall be met by the timely filing of an information return pursuant to section 6042 that contains the information required by paragraph (n)(1)(i).
(ii) Written statement. The requirements of paragraph (n)(1)(ii) and (2)(i)(B) of this section for the furnishing of a written statement (including the statement required by paragraph (n)(1)(ii)(D) and (2)(ii)(D) of this section) shall be met by furnishing the affected investor a copy of the information return to which section 6042 applies (whether or not the nonpublicly offered regulated investment company or nominee is required to file an information return with respect to the affected investor pursuant to section 6042) that contains the information required by paragraph (n)(1)(ii) or (2)(ii), whichever is applicable, of this section. Nonpublicly offered regulated investment companies and nominees may use a substitute form that contains provisions substantially similar to those of the prescribed form if the nonpublicly offered regulated investment company or nominee complies with all revenue procedures relating to substitute forms in effect at the time. The statement shall be furnished either in person or in a statement mailed by first-class mail that includes adequate notice that the statement is enclosed. A statement shall be considered to be furnished to an affected investor within the meaning of this section if it is mailed to such affected investor at its last known address.
(o) Return of information by a common trust fund. With respect to each affected investor to which paragraph (d) of this section applies, the common trust fund shall state on the return it is required to make pursuant to section 6032 for its taxable year, the following information:
(1) The amount of the affected investor’s proportionate share of the affected expenses for the taxable year as described in paragraph (d)(1)(ii) of this section.
(2) The amount of the affected investor’s proportionate share of ordinary taxable income or ordinary net loss for the taxable year determined pursuant to paragraph (d)(1)(i) of this section, and
(3) Such other information as may be specified by the form or its instructions.
(p) Publicly offered regulated investment companies. [Reserved]
§ 1.67-3 Allocation of expenses by real estate mortgage investment conduits.
(a) Allocation of allocable investment expenses. [Reserved]
(b) Treatment of allocable investment expenses. [Reserved]
(c) Computation of proportionate share. [Reserved]
(d) Example. [Reserved]
(e) Allocable investment expenses not subject to backup withholding. [Reserved]
(f) Notice to pass-through interest holders—(1) Information required. A REMIC must provide to each pass-through interest holder to which an allocation of allocable investment expense is required to be made under § 1.67-3T(a)(1) notice of the following—
(i) If, pursuant to paragraph (f)(2)(i) or (ii) of this section, notice is provided for a calendar quarter, the aggregate amount of expenses paid or accrued during the calendar quarter for which the REMIC is allowed a deduction under section 212;
(ii) If, pursuant to paragraph (f)(2)(ii) of this section, notice is provided to a regular interest holder for a calendar year, the aggregate amount of expenses paid or accrued during each calendar quarter that the regular interest holder held the regular interest in the calendar year and for which the REMIC is allowed a deduction under section 212; and
(iii) The proportionate share of these expenses allocated to that pass-through interest holder, as determined under § 1.67-3T(c).
(2) Statement to be furnished—(i) To residual interest holder. For each calendar quarter, a REMIC must provide to each pass-through interest holder who holds a residual interest during the calendar quarter the notice required under paragraph (f)(1) of this section on Schedule Q (Form 1066), as required in § 1.860F-4(e).
(ii) To regular interest holder. For each calendar year, a single-class REMIC (as described in § 1.67-3T(a)(2)(ii)(B)) must provide to each pass-through interest holder who held a regular interest during the calendar year the notice required under paragraph (f)(1) of this section. Quarterly reporting is not required. The information required to be included in the notice may be separately stated on the statement described in § 1.6049-7(f) instead of on a separate statement provided in a separate mailing. See § 1.6049-7(f)(4). The separate statement provided in a separate mailing must be furnished to each pass-through interest holder no later than the last day of the month following the close of the calendar year.
(3) Returns to the Internal Revenue Service—(i) With respect to residual interest holders. Any REMIC required under paragraphs (f)(1) and (2)(i) of this section to furnish information to any pass-through interest holder who holds a residual interest must also furnish such information to the Internal Revenue Service as required in § 1.860F-4(e)(4).
(ii) With respect to regular interest holders. A single-class REMIC (as described in § 1.67-3T(a)(2)(ii)(B)) must make an information return on Form 1099 for each calendar year, with respect to each pass-through interest holder who holds a regular interest to which an allocation of allocable investment expenses is required to be made pursuant to § 1.67-3T(a)(1) and (2)(ii). The preceding sentence applies with respect to a holder for a calendar year only if the REMIC is required to make an information return to the Internal Revenue Service with respect to that holder for that year pursuant to section 6049 and § 1.6049-7(b)(2)(i) (or would be required to make an information return but for the $10 threshold described in section 6049(a)(1) and § 1.6049-7(b)(2)(i)). The REMIC must state on the information return—
(A) The sum of—
(1) The aggregate amounts includible in gross income as interest (as defined in § 1.6049-7(a)(1)(i) and (ii)), for the calendar year; and
(2) The sum of the amount of allocable investment expenses required to be allocated to the pass-through interest holder for each calendar quarter during the calendar year pursuant to § 1.67-3T(a); and
(B) Any other information specified by the form or its instructions.
(4) Interest held by nominees and other specified persons—(i) Pass-through interest holder’s interest held by a nominee. If a pass-through interest holder’s interest in a REMIC is held in the name of a nominee, the REMIC may make the information return described in paragraphs (f)(3)(i) and (ii) of this section with respect to the nominee in lieu of the pass-through interest holder and may provide the written statement described in paragraphs (f)(2)(i) and (ii) of this section to that nominee in lieu of the pass-through interest holder.
(ii) Regular interests in a single-class REMIC held by certain persons. If a person specified in § 1.6049-7(e)(4) holds a regular interest in a single-class REMIC (as described in § 1.67-3T(a)(2)(ii)(B)), then the single-class REMIC must provide the information described in paragraphs (f)(1) and (f)(3)(ii)(A) and (B) of this section to that person with the information specified in § 1.6049-7(e)(2) as required in § 1.6049-7(e).
(5) Nominee reporting—(i) In general. In any case in which a REMIC provides information pursuant to paragraph (f)(4) of this section to a nominee of a pass-through interest holder for a calendar quarter or, as provided in paragraph (f)(2)(ii) of this section, for a calendar year—
(A) The nominee must furnish each pass-through interest holder with a written statement described in paragraph (f)(2)(i) or (ii) of this section, whichever is applicable, showing the information described in paragraph (f)(1) of this section; and
(B) The nominee must make an information return on Form 1099 for each calendar year, with respect to the pass-through interest holder and state on this information return the information described in paragraphs (f)(3)(ii) (A) and (B) of this section, if—
(1) The nominee is a nominee for a pass-through interest holder who holds a regular interest in a single-class REMIC (as described in § 1.67-3T(a)(2)(ii)(B)); and
(2) The nominee is required to make an information return pursuant to section 6049 and § 1.6049-7 (b)(2)(i) and (b)(2)(ii)(B) (or would be required to make an information return but for the $10 threshold described in section 6049(a)(2) and § 1.6049-7(b)(2)(i)) with respect to the pass-through interest holder.
(ii) Time for furnishing statement. The statement required by paragraph (f)(5)(i)(A) of this section to be furnished by a nominee to a pass-through interest holder for a calendar quarter or calendar year must be furnished to this holder no later than 30 days after receiving the written statement described in paragraph (f)(2)(i) or (ii) of this section from the REMIC. If, however, pursuant to paragraph (f)(2)(ii) of this section, the information is separately stated on the statement described in § 1.6049-7(f), then the information must be furnished to the pass-through interest holder in the time specified in § 1.6049-7(f)(5).
(6) Special rules—(i) Time and place for furnishing returns. The returns required by paragraphs (f)(3)(ii) and (f)(5)(i)(B) of this section for any calendar year must be filed at the time and place that a return required under section 6049 and § 1.6049-7(b)(2) is required to be filed. See § 1.6049-4(g) and § 1.6049-7(b)(2)(iv).
(ii) Duplicative returns not required. The requirements of paragraphs (f)(3)(ii) and (f)(5)(i)(B) of this section for the making of an information return are satisfied by the timely filing of an information return pursuant to section 6049 and § 1.6049-7(b)(2) that contains the information required by paragraph (f)(3)(ii) of this section.
§ 1.67-3T Allocation of expenses by real estate mortgage investment conduits (temporary).
(a) Allocation of allocable investment expenses—(1) In general. A real estate mortgage investment conduit or REMIC (as defined in section 860D) shall allocate to each of its pass-through interest holders that holds an interest at any time during the calendar quarter the holder’s proportionate share (as determined under paragraph (c) of this section) of the aggregate amount of allocable investment expenses of the REMIC for the calendar quarter.
(2) Pass-through interest holder—(i) In general—(A) Meaning of term. Except as provided in paragraph (a)(2)(ii) of this section, the term “pass-through interest holder” means any holder of a REMIC residual interest (as definition in section 860G(a)(2)) that is—
(1) An individual (other than a nonresident alien whose income with respect to his or her interest in the REMIC is not effectively connected with the conduct of a trade or business within the United States),
(2) A person, including a trust or estate, that computes its taxable income in the same manner as in the case of an individual, or
(3) A pass-through entity (as defined in paragraph (a)(3) of this section) if one or more of its partners, shareholders, beneficiaries, participants, or other interest holders is (i) a pass-through entity or (ii) a person described in paragraph (a)(2)(i)(A) (1) or (2) of this section.
(B) Examples. The provisions of this paragraph (a)(2)(i) may be illustrated by the following examples:
(ii) Single-class REMIC—(A) In general. In the case of a single-class REMIC, the term “pass-through interest holder” means any holder of either—
(1) A REMIC regular interest (as defined in section 860G(a)(1)), or
(2) A REMIC residual interest, that is described in paragraph (a)(2)(i)(A) (1), (2), or (3) of this section.
(B) Single-class REMIC. For purposes of paragraph (a)(2)(ii)(A) of this section, a single-class REMIC IS either—
(1) A REMIC that would be classified as an investment trust under § 301.7701-4(c)(1) but for its qualification as a REMIC under section 860D and § 1.860D-1T, or
(2) A REMIC that—
(i) Is substantially similar to an investment trust under § 301.7701-4(c)(1), and
(ii) Is structured with the principal purpose of avoiding the requirement of paragraphs (a)(1) and (2)(ii)(A) of this section to allocate allocable investment expenses to pass-through interest holders that hold regular interests in the REMIC.
(C) Examples. The provisions of paragraph (a)(2)(ii) of this section must be illustrated by the following examples:
(3) Pass-through entity—(i) In general. Except as provided in paragraph (a)(3)(ii) of this section, for purposes of this section, a pass-through entity is—
(A) A trust (or any portion thereof) to which Subpart E, Part 1, Subchapter J, Chapter 1 of the Code applies,
(B) A partnership,
(C) An S corporation,
(D) A common trust fund described in section 584,
(E) A nonpublicly offered regulated investment company (as defined in paragraph (a)(5)(i) of this section),
(F) A REMIC, and
(G) Any other person—
(1) Which is not subject to income tax imposed by Subtitle A, Chapter 1, or which is allowed a deduction in computing such tax for distributions to owners or beneficiaries, and
(2) The character of the income of which may affect the character of the income recognized with respect to that person by its owners or beneficiaries.
(ii) Exception. For purposes of this section, a pass-through entity does not include—
(A) An estate,
(B) A trust (or any portion thereof) not described in paragraph (a)(3)(i)(A) of this section,
(C) A cooperative described without regard to subparagraphs (A) and (C) thereof, or
(D) A real estate investment trust.
(4) Allocable investment expenses. The term “allocable investment expenses” means the aggregate amount of the expenses paid or accrued in the calendar quarter for which a deduction is allowable under section 212 in determining the taxable income of the REMIC for the calendar quarter.
(5) Nonpublicly offered regulated investment company—(i) In general. For purposes of this section, the term “nonpublicly offered regulated investment company” means a regulated investment company to which Part I of Subchapter M of the Code applies that is not a publicly offered regulated investment company.
(ii) Publicly offered regulated investment company. For purposes of this section, the term “publicly offered regulated investment company” means a regulated investment company to which Part I of subchapter M of the Code applies, the shares of which are—
(A) Continuously offered pursuant to a public offering (within the meaning of section 4 of the Securities Act of 1933, as amended (15 U.S.C. 77a to 77aa)),
(B) Regularly traded on an established securities market, or
(C) Held by or for no fewer than 500 persons at all times during the taxable year.
(b) Treatment of allocable investment expenses—(1) By pass-through interest holders—(i) Taxable year ending with calendar quarter. A pass-through interest holder whose taxable year is the calendar year or ends with a calendar quarter shall be treated as having—
(A) Received or accrued income, and
(B) Paid or incurred an expense described in section 212 (or section 162 in the case of a pass-through interest holder that is a regulated investment company), in an amount equal to the pass-through interest holder’s proportionate share of the allocable investment expenses of the REMIC for those calendar quarters that fall within the holder’s taxable year.
(ii) Taxable year not ending with calendar quarter. A pass-through interest holder whose taxable year does not end with a calendar quarter shall be treated as having—
(A) Received or accrued income, and
(B) Paid or incurred an expense described in section 212 (or section 162 in the case of a pass-through interest holder that is a regulated investment company), in an amount equal to the sum of—
(C) The pass-through interest holder’s proportionate share of the allocable investment expenses of the REMIC for those calendar quarters that fall within the holder’s taxable year, and
(D) For each calendar quarter that overlaps the beginning or end of the taxable year, the sum of the daily amounts of the allocable investment expenses allocated to the holder pursuant to paragraph (c)(1)(ii) of this section for the days in the quarter that fall within the holder’s taxable year.
(2) Proportionate share of allocable investment expenses. For purposes of paragraph (b) of this section, a pass-through interest holder’s proportionate share of the allocable investment expenses is the amount allocated to the pass-through interest holder pursuant to paragraph (a)(1) of this section.
(3) Cross-reference. See § 1.67-1T with respect to limitations on deductions for expenses described in section 212 (including amounts treated as such expenses under this section).
(4) Interest income to holders of regular interests in certain REMICs. Any amount allocated under this section to the holder of a regular interest in a single-class REMIC (as described in paragraph (a)(2)(ii)(B) of this section) shall be treated as interest income.
(5) No adjustment to basis. The basis of any holder’s interest in a REMIC shall not be increased or decreased by the amount of the holder’s proportionate share of allocable investment expenses.
(6) Interest holders other than pass-through interest holders. An interest holder of a REMIC that is not a pass-through interest holder shall not take into account in computing its taxable income any amount of income or expense with respect to its proportionate share of allocable investment expenses.
(c) Computation of proportionate share—(1) In general. For purposes of paragraph (a)(1) of this section, a REMIC shall compute a pass-through interest holder’s proportionate share of the REMIC’s allocable investment expenses by—
(i) Determining the daily amount of the allocable investment expenses for the calendar quarter by dividing the total amount of such expenses by the number of days in that calendar quarter.
(ii) Allocating the daily amount of the allocable investment expenses to the pass-through interest holder in proportion to its respective holdings on that day, and
(iii) Totaling the interest holder’s daily amounts of allocable investment expenses for the calendar quarter.
(2) Other holders taken into account. For purposes of paragraph (c)(1)(ii) of this section, a pass-through interest holder’s proportionate share of the daily amount of the allocable investment expenses is determined by taking into account all holders of residual interests in the REMIC, whether or not pass-through interest holders.
(3) Single-class REMIC—(i) Daily allocation. In lieu of the allocation specified in paragraph (c)(1)(ii) of this section, a single-class REMIC (as described in paragraph (a)(2)(ii)(B) of this section) shall allocate the daily amount of the allocable investment expenses to each pass-through interest holder in proportion to the amount of income accruing to the holder with respect to its interest in the REMIC on that day.
(ii) Other holders taken into account. For purposes of paragraph (c)(3)(i) of this section, the amount of the allocable investment expenses that is allocated on any day to each pass-through interest holder shall be determined by multiplying the daily amount of allocable investment expenses (determined pursuant to paragraph (c)(1)(i) of this section) by a fraction, the numerator of which is equal to the amount of income that accrues (but not less than zero) to the pass-through interest holder on that day and the denominator of which is the total amount of income (as determined under paragraph (c)(3)(iii) of this section) that accrues to all regular and residual interest holders, whether or not pass-through interest holders, on that day.
(iii) Total income accruing. The total amount of income that accrues to all regular and residual interest holders is the sum of—
(A) The amount includible under section 860B in the gross income (but not less than zero) of the regular interest holders, and
(B) The amount of REMIC taxable income (but not less than zero) taken into account under section 860C by the residual interest holders.
(4) Dates of purchase and disposition. For purposes of this section, a pass-through interest holder holds an interest on the date of its purchase but not on the date of its disposition.
(d) Example. The provisions of this section may be illustrated by the following example:
A, an individual,
C, a C corporation that is a nominee for individual I.
S, an S corporation, and
M, a C corporation that is not a nominee.
(ii) Except for A, all of the residual interest holders hold their interests in X for the entire calendar quarter. On January 31, 1989, A sells his interest to S. Thus, for the first month of the calendar quarter, each residual interest holder holds a 25 percent interest (100%/4 interest holders) in X. For the last two months, S’s holding is increased to 50 percent and A’s holding is decreased to zero. The daily amount of allocable investment expenses for the calendar quarter is $10 ($900/90 days).
(iii) The amount of allocable investment expenses apportioned to the residual interest holders is as follows:
(A) $75 ($10 × 25% × 30 days) is allocated to A for the 30 days that A holds an interest in X during the calendar quarter. A includes $75 in gross income in calendar year 1989. The amount of A’s expenses described in section 212 is increased by $75 in calendar year 1989. A’s deduction under section 212 (including the $75 amount of the allocation) is subject to the limitations contained in section 67.
(B) $225 ($10 × 25% × 90 days) is allocated to C. Because C is a nominee for I, C does not include $225 in gross income or increase its deductible expenses by $225. Instead, I includes $225 in gross income in calendar year 1989, her taxable year. The amount of I’s expenses described in section 212 is increased by $225. I’s deduction under section 212 (including the $225 amount of the allocation) is subject to the limitations contained in section 67.
(C) $375 (($10 × 25% × 30 days) + ($10 × 50% × 60 days)) is allocated to S. S includes in gross income $375 of allocable investment expenses in calendar year 1989. The amount of S’s expenses described in section 212 for that taxable year is increased by $375. S allocates the $375 to its shareholders in accordance with the rules described in sections 1366 and 1377 in calendar year 1989. Thus, each shareholder of S includes its pro rata share of the $375 in gross income in its taxable year in which or with which calendar year 1989 ends. The amount of each shareholder’s expenses described in section 212 is increased by the amount of the shareholder’s allocation for the shareholder’s taxable year in which or with which calendar year 1989 ends. The shareholder’s deduction under section 212 (including the allocation under this section) is subject to the limitations contained in section 67.
(D) No amount is allocated to M. However, M’s interest is taken into account for purposes of determining the proportionate share of those residual interest holders to whom an allocation is required to be made.
(iv) No allocation is made to the 10 regular interest holders pursuant to paragraph (a) of this section. In addition, the interests held by these interest holders are not taken into account for purposes of determining the proportionate share of the residual interest holders to whom an allocation is required to be made.
(e) Allocable investment expenses not subject to backup withholding. The amount of allocable investment expenses required to be allocated to a pass-through interest holder pursuant to paragraph (a)(1) of this section is not subject to backup withholding under section 3406.
(f) Notice to pass-through interest holders—(1) Information required. A REMIC must provide to each pass-through interest holder to which an allocation of allocable investment expense is required to be made under paragraph (a)(1) of this section notice of the following—
(i) If, pursuant to paragraph (f)(2) (i) or (ii) of this section, notice is provided for a calendar quarter, the aggregate amount of expenses paid or accrued during the calendar quarter for which the REMIC is allowed a deduction under section 212;
(ii) If, pursuant to paragraph (f)(2)(ii) of this section, notice is provided to a regular interest holder for a calendar year, the aggregate amount of expenses paid or accrued during each calendar quarter that the regular interest holder held the regular interest in the calendar year and for which the REMIC is allowed a deduction under section 212; and
(iii) The proportionate share of these expenses allocated to that pass-through interest holder, as determined under paragraph (c) of this section.
(2) Statement to be furnished—(i) To residual interest holder. For each calendar quarter, a REMIC shall provide to each pass-through interest holder who holds a residual interest during the calendar quarter the notice required under paragraph (f)(1) of this section on Schedule Q (Form 1066), as required in § 1.860F-4(e).
(ii) To regular interest holder—(A) In general. For each calendar year, a single-class REMIC (as described in paragraph (a)(2)(ii)(B) of this section) must provide to each pass-through interest holder who held a regular interest during the calendar year the notice required under paragraph (f)(1) of this section. Quarterly reporting is not required. The information required to be included in the notice may be separately stated on the statement described in § 1.6049-7(f) instead of on a separate statement provided in a separate mailing. See § 1.6049-7(f)(4). The separate statement provided in a separate mailing must be furnished to each pass-through interest holder no later than the last day of the month following the close of the calendar year.
(B) Special rule for 1987. The information required under paragraph (f)(2)(ii)(A) of this section for any calendar quarter of 1987 shall be mailed (or otherwise delivered) to each pass-through interest holder who holds a regular interest during that calendar quarter no later than March 28, 1988.
(3) Returns to the Internal Revenue Service—(i) With respect to residual interest holders. Any REMIC required under paragraphs (f)(1) and (2)(i) of this section to furnish information to any pass-through interest holder who holds a residual interest shall also furnish such information to the Internal Revenue Service as required in § 1.860F-4(e)(4).
(ii) With respect to regular interest holders. A single-class REMIC (as described in paragraph (a)(2)(ii)(B) of this section) shall make an information return on Form 1099 for each calendar year beginning after December 31, 1987, with respect to each pass-through interest holder who holds a regular interest to which an allocation of allocable investment expenses is required to be made pursuant to paragraphs (a)(1) and (2)(ii) of this section. The preceding sentence applies with respect to a holder for a calendar year only if the REMIC is required to make an information return to the Internal Revenue Service with respect to that holder for that year pursuant to section 6049 and § 1.6049-7(b)(2)(i) (or would be required to make an information return but for the $10 threshold described in section 6049(a)(1) and § 1.6049-7(b)(2)(i)). The REMIC shall state on the information return—
(A) The sum of—
(1) The aggregate amounts includible in gross income as interest (as defined in § 1.6049-7(a)(1) (i) and (ii)), for the calendar year, and
(2) The sum of the amount of allocable investment expenses required to be allocated to the pass-through interest holder for each calendar quarter during the calendar year pursuant to paragraph (a) of this section, and
(B) Any other information specified by the form or its instructions.
(4) Interest held by nominees and other specified persons—(i) Pass-through interest holder’s interest held by a nominee. If a pass-through interest holder’s interest in a REMIC is held in the name of a nominee, the REMIC may make the information return described in paragraphs (f)(3) (i) and (ii) of this section with respect to the nominee in lieu of the pass-through interest holder and may provide the written statement described in paragraphs (f)(2) (i) and (ii) of this section to that nominee in lieu of the pass-through interest holder.
(ii) Regular interests in a single-class REMIC held by certain persons. For calendar quarters and calendar years after December 31, 1991, if a person specified in § 1.6049-7(e)(4) holds a regular interest in a single-class REMIC (as described in paragraph (a)(2)(ii)(B) of this section), then the single-class REMIC must provide the information described in paragraphs (f)(1) and (f)(3)(ii) (A) and (B) of this section to that person with the information specified in § 1.6049-7(e)(2) as required in § 1.6049-7(e).
(5) Nominee reporting—(i) In general. In any case in which a REMIC provides information pursuant to paragraph (f)(4) of this section to a nominee of a pass-through interest holder for a calendar quarter or, as provided in paragraph (f)(2)(ii) of this section, for a calendar year—
(A) The nominee shall furnish each pass-through interest holder with a written statement described in paragraph (f)(2) (i) or (ii) of this section, whichever is applicable, showing the information described in paragraph (f)(1) of this section, and
(B) If—
(1) The nominee is a nominee for a pass-through interest holder who holds a regular interest in a single-class REMIC (as described in paragraph (a)(2)(ii)(B) of this section), and
(2) The nominee is required to make an information return pursuant to section 6049 and § 1.6049-7(b)(2)(i) and (b)(2)(ii)(B) (or would be required to make an information return but for the $10 threshold described in section 6049(a)(2) and § 1.6049-7(b)(2)(i)) with respect to the pass-through interest holder,
(ii) Time for furnishing statement. The statement required by paragraph (f)(5)(i)(A) of this section to be furnished by a nominee to a pass-through interest holder for a calendar quarter or calendar year shall be furnished to this holder no later than 30 days after receiving the written statement described in paragraph (f)(2) (i) or (ii) of this section from the REMIC. If, however, pursuant to paragraph (f)(2)(ii) of this section, the information is separately stated on the statement described in § 1.6049-7(f), then the information must be furnished to the pass-through interest holder in the time specified in § 1.6049-7(f)(5).
(6) Special rules—(i) Time and place for furnishing returns. The returns required by paragraphs (f)(3)(ii) and (f)(5)(i)(B) of this section for any calendar year shall be filed at the time and place that a return required under section 6049 and § 1.6049-7(b)(2) is required to be filed. See § 1.6049-4(g) and § 1.6049-7(b)(2)(iv).
(ii) Duplicative returns not required. The requirements of paragraphs (f)(3)(ii) and (f)(5)(i)(B) of this section for the making of an information return shall be met by the timely filing of an information return pursuant to section 6049 and § 1.6049-7(b)(2) that contains the information required by paragraph (f)(3)(ii) of this section.
§ 1.67-4 Costs paid or incurred by estates or non-grantor trusts.
(a) Deductions—(1) Section 67(e) deductions—(i) In general. An estate or trust (including the S portion of an electing small business trust) not described in § 1.67-2T(g)(1)(i) (a non-grantor trust) must compute its adjusted gross income in the same manner as an individual, except that the following deductions (section 67(e) deductions) are allowed in arriving at adjusted gross income:
(A) Costs that are paid or incurred in connection with the administration of the estate or trust that would not have been incurred if the property were not held in such estate or trust; and
(B) Deductions allowable under section 642(b) (relating to the personal exemption) and sections 651 and 661 (relating to distributions).
(ii) Not disallowed under section 67(g). Section 67(e) deductions are not itemized deductions under section 63(d) and are not miscellaneous itemized deductions under section 67(b). Therefore, section 67(e) deductions are not disallowed under section 67(g).
(2) Deductions subject to 2-percent floor. A cost is not a section 67(e) deduction and thus is subject to both the 2-percent floor in section 67(a) and section 67(g) to the extent that it is included in the definition of miscellaneous itemized deductions under section 67(b), is incurred by an estate or non-grantor trust (including the S portion of an electing small business trust), and commonly or customarily would be incurred by a hypothetical individual holding the same property.
(b) “Commonly” or “Customarily” Incurred—(1) In general. In analyzing a cost to determine whether it commonly or customarily would be incurred by a hypothetical individual owning the same property, it is the type of product or service rendered to the estate or non-grantor trust in exchange for the cost, rather than the description of the cost of that product or service, that is determinative. In addition to the types of costs described as commonly or customarily incurred by individuals in paragraphs (b)(2), (3), (4), and (5) of this section, costs that are incurred commonly or customarily by individuals also include, for example, costs incurred in defense of a claim against the estate, the decedent, or the non-grantor trust that are unrelated to the existence, validity, or administration of the estate or trust.
(2) Ownership costs. Ownership costs are costs that are chargeable to or incurred by an owner of property simply by reason of being the owner of the property. Thus, for purposes of section 67(e), ownership costs are commonly or customarily incurred by a hypothetical individual owner of such property. Such ownership costs include, but are not limited to, partnership costs deemed to be passed through to and reportable by a partner if these costs are defined as miscellaneous itemized deductions pursuant to section 67(b), condominium fees, insurance premiums, maintenance and lawn services, and automobile registration and insurance costs. Other expenses incurred merely by reason of the ownership of property may be fully deductible under other provisions of the Code, such as sections 62(a)(4), 162, or 164(a), which would not be miscellaneous itemized deductions subject to section 67(e).
(3) Tax preparation fees. Costs relating to all estate and generation-skipping transfer tax returns, fiduciary income tax returns, and the decedent’s final individual income tax returns are not subject to the 2-percent floor. The costs of preparing all other tax returns (for example, gift tax returns) are costs commonly and customarily incurred by individuals and thus are subject to the 2-percent floor.
(4) Investment advisory fees. Fees for investment advice (including any related services that would be provided to any individual investor as part of an investment advisory fee) are incurred commonly or customarily by a hypothetical individual investor and therefore are subject to the 2-percent floor. However, certain incremental costs of investment advice beyond the amount that normally would be charged to an individual investor are not subject to the 2-percent floor. For this purpose, such an incremental cost is a special, additional charge that is added solely because the investment advice is rendered to a trust or estate rather than to an individual or attributable to an unusual investment objective or the need for a specialized balancing of the interests of various parties (beyond the usual balancing of the varying interests of current beneficiaries and remaindermen) such that a reasonable comparison with individual investors would be improper. The portion of the investment advisory fees not subject to the 2-percent floor by reason of the preceding sentence is limited to the amount of those fees, if any, that exceeds the fees normally charged to an individual investor.
(5) Appraisal fees. Appraisal fees incurred by an estate or a non-grantor trust to determine the fair market value of assets as of the decedent’s date of death (or the alternate valuation date), to determine value for purposes of making distributions, or as otherwise required to properly prepare the estate’s or trust’s tax returns, or a generation-skipping transfer tax return, are not incurred commonly or customarily by an individual and thus are not subject to the 2-percent floor. The cost of appraisals for other purposes (for example, insurance) is commonly or customarily incurred by individuals and is subject to the 2-percent floor.
(6) Certain fiduciary expenses. Certain other fiduciary expenses are not commonly or customarily incurred by individuals, and thus are not subject to the 2-percent floor. Such expenses include without limitation the following: Probate court fees and costs; fiduciary bond premiums; legal publication costs of notices to creditors or heirs; the cost of certified copies of the decedent’s death certificate; and costs related to fiduciary accounts.
(c) Bundled fees—(1) In general. If an estate or a non-grantor trust pays a single fee, commission, or other expense (such as a fiduciary’s commission, attorney’s fee, or accountant’s fee) for both costs that are subject to the 2-percent floor and costs (in more than a de minimis amount) that are not, then, except to the extent provided otherwise by guidance published in the Internal Revenue Bulletin, the single fee, commission, or other expense (bundled fee) must be allocated, for purposes of computing the adjusted gross income of the estate or non-grantor trust in compliance with section 67(e), between the costs that are subject to the 2-percent floor and those that are not.
(2) Exception. If a bundled fee is not computed on an hourly basis, only the portion of that fee that is attributable to investment advice is subject to the 2-percent floor; the remaining portion is not subject to that floor.
(3) Expenses not subject to allocation. Out-of-pocket expenses billed to the estate or non-grantor trust are treated as separate from the bundled fee. In addition, payments made from the bundled fee to third parties that would have been subject to the 2-percent floor if they had been paid directly by the estate or non-grantor trust are subject to the 2-percent floor, as are any fees or expenses separately assessed by the fiduciary or other payee of the bundled fee (in addition to the usual or basic bundled fee) for services rendered to the estate or non-grantor trust that are commonly or customarily incurred by an individual.
(4) Reasonable method. Any reasonable method may be used to allocate a bundled fee between those costs that are subject to the 2-percent floor and those costs that are not, including without limitation the allocation of a portion of a fiduciary commission that is a bundled fee to investment advice. Facts that may be considered in determining whether an allocation is reasonable include, but are not limited to, the percentage of the value of the corpus subject to investment advice, whether a third party advisor would have charged a comparable fee for similar advisory services, and the amount of the fiduciary’s attention to the trust or estate that is devoted to investment advice as compared to dealings with beneficiaries and distribution decisions and other fiduciary functions. The reasonable method standard does not apply to determine the portion of the bundled fee attributable to payments made to third parties for expenses subject to the 2-percent floor or to any other separately assessed expense commonly or customarily incurred by an individual, because those payments and expenses are readily identifiable without any discretion on the part of the fiduciary or return preparer.
(d) Applicability date. This section applies to taxable years beginning after December 31, 2014. Paragraph (a) of this section applies to taxable years beginning after October 19, 2020. Taxpayers may choose to apply paragraph (a) of this section to taxable years beginning after December 31, 2017, and on or before October 19, 2020.
Items Specifically Included in Gross Income
§ 1.71-1 Alimony and separate maintenance payments; income to wife or former wife.
(a) In general. Section 71 provides rules for treatment in certain cases of payments in the nature of or in lieu of alimony or an allowance for support as between spouses who are divorced or separated. For convenience, the payee spouse will hereafter in this section be referred to as the “wife” and the spouse from whom she is divorced or separated as the “husband.” See section 7701(a)(17). For rules relative to the deduction by the husband of periodic payments not attributable to transferred property, see section 215 and the regulations thereunder. For rules relative to the taxable status of income of an estate or trust in case of divorce, etc., see section 682 and the regulations thereunder.
(b) Alimony or separate maintenance payments received from the husband—(1) Decree of divorce or separate maintenance. (i) In the case of divorce or legal separation, paragraph (1) of section 71(a) requires the inclusion in the gross income of the wife of periodic payments (whether or not made at regular intervals) received by her after a decree of divorce or of separate maintenance. Such periodic payments must be made in discharge of a legal obligation imposed upon or incurred by the husband because of the marital or family relationship under a court order or decree divorcing or legally separating the husband and wife or a written instrument incident to the divorce status or legal separation status.
(ii) For treatment of payments attributable to property transferred (in trust or otherwise), see paragraph (c) of this section.
(2) Written separation agreement. (i) Where the husband and wife are separated and living apart and do not file a joint income tax return for the taxable year, paragraph (2) of section 71(a) requires the inclusion in the gross income of the wife of periodic payments (whether or not made at regular intervals) received by her pursuant to a written separation agreement executed after August 16, 1954. The periodic payments must be made under the terms of the written separation agreement after its execution and because of the marital or family relationship. Such payments are includable in the wife’s gross income whether or not the agreement is a legally enforceable instrument. Moreover, if the wife is divorced or legally separated subsequent to the written separation agreement, payments made under such agreement continue to fall within the provisions of section 71(a)(2).
(ii) For purposes of section 71(a)(2) any written separation agreement executed on or before August 16, 1954, which is altered or modified in writing by the parties in any material respect after that date will be treated as an agreement executed after August 16, 1954, with respect to payments made after the date of alteration or modification.
(iii) For treatment of payments attributable to property transferred (in trust or otherwise), see paragraph (c) of this section.
(3) Decree for support. (i) Where the husband and wife are separated and living apart and do not file a joint income tax return for the taxable year, paragraph (3) of section 71(a) requires the inclusion in the gross income of the wife of periodic payments (whether or not made at regular intervals) received by her after August 16, 1954, from her husband under any type of court order or decree (including an interlocutory decree of divorce or a decree of alimony pendente lite) entered after March 1, 1954, requiring the husband to make the payments for her support or maintenance. It is not necessary for the wife to be legally separated or divorced from her husband under a court order or decree; nor is it necessary for the order or decree for support to be for the purpose of enforcing a written separation agreement.
(ii) For purposes of section 71(a)(3), any decree which is altered or modified by a court order entered after March 1, 1954, will be treated as a decree entered after such date.
(4) Scope of section 71(a). Section 71(a) applies only to payments made because of the family or marital relationship in recognition of the general obligation to support which is made specific by the decree, instrument, or agreement. Thus, section 71(a) does not apply to that part of any periodic payment which is attributable to the repayment by the husband of, for example, a bona fide loan previously made to him by the wife, the satisfaction of which is specified in the decree, instrument, or agreement as a part of the general settlement between the husband and wife.
(5) Year of inclusion. Periodic payments are includible in the wife’s income under section 71(a) only for the taxable year in which received by her. As to such amounts, the wife is to be treated as if she makes her income tax returns on the cash receipts and disbursements method, regardless of whether she normally makes such returns on the accrual method. However, if the periodic payments described in section 71(a) are to be made by an estate or trust, such periodic payments are to be included in the wife’s taxable year in which they are includible according to the rules as to income of estates and trusts provided in sections 652, 662, and 682, whether or not such payments are made out of the income of such estates or trusts.
(6) Examples. The foregoing rules are illustrated by the following examples in which it is assumed that the husband and wife file separate income tax returns on the calendar year basis:
(c) Alimony and separate maintenance payments attributable to property. (1)(i) In the case of divorce or legal separation, paragraph (1) of section 71(a) requires the inclusion in the gross income of the wife of periodic payments (whether or not made at regular intervals) attributable to property transferred, in trust or otherwise, and received by her after a decree of divorce or of separate maintenance. Such property must have been transferred in discharge of a legal obligation imposed upon or incurred by the husband because of the marital or family relationship under a decree of divorce or separate maintenance or under a written instrument incident to such divorce status or legal separation status.
(ii) Where the husband and wife are separated and living apart and do not file a joint income tax return for the taxable year, paragraph (2) of section 71(a) requires the inclusion in the gross income of the wife of periodic payments (whether or not made at regular intervals) received by her which are attributable to property transferred, in trust or otherwise, under a written separation agreement executed after August 16, 1954. The property must be transferred because of the marital or family relationship. The periodic payments attributable to the property must be received by the wife after the written separation agreement is executed.
(iii) The periodic payments received by the wife attributable to property transferred under subdivisions (i) and (ii) of this subparagraph and includible in her gross income are not to be included in the gross income of the husband.
(2) The full amount of periodic payments received under the circumstances described in section 71(a) (1), (2), and (3) is required to be included in the gross income of the wife regardless of the source of such payments. Thus, it matters not that such payments are attributable to property in trust, to life insurance, endowment, or annuity contracts, or to any other interest in property, or are paid directly or indirectly by the husband from his income or capital. For example, if in order to meet an alimony or separate maintenance obligation of $500 a month the husband purchases or assigns for the benefit of his wife a commercial annuity contract paying such amount, the full $500 a month received by the wife is includible in her income, and no part of such amount is includible in the husband’s income or deductible by him. See section 72(k) and the regulations thereunder. Likewise, if property is transferred by the husband, subject to an annual charge of $5,000, payable to his wife in discharge of his alimony or separate maintenance obligation under the divorce or separation decree or written instrument incident to the divorce status or legal separation status or if such property is transferred pursuant to a written separation agreement and subject to a similar annual charge, the $5,000 received annually is, under section 71(a) (1) or (2), includible in the wife’s income, regardless of whether such amount is paid out of income or principal of the property.
(3) The same rule applies to periodic payments attributable to property in trust. The full amount of periodic payments to which section 71(a) (1) and (2) applies is includible in the wife’s income regardless of whether such payments are made out of trust income. Such periodic payments are to be included in the wife’s income under section 71(a) (1) or (2) and are to be excluded from the husband’s income even though the income of the trust would otherwise be includible in his income under Subpart E, Part I, Subchapter J, Chapter 1 of the Code, relating to trust income attributable to grantors and others as substantial owners. As to periodic payments received by a wife attributable to property in trust in cases to which section 71(a) (1) or (2) does not apply because the husband’s obligation is not specified in the decree or an instrument incident to the divorce status or legal separation status or the property was not transferred under a written separation agreement, see section 682 and the regulations thereunder.
(4) Section 71(a) (1) or (2) does not apply to that part of any periodic payment attributable to that portion of any interest in property transferred in discharge of the husband’s obligation under the decree or instrument incident to the divorce status or legal separation status, or transferred pursuant to the written separation agreement, which interest originally belonged to the wife. It will apply, however, if she received such interest from her husband in contemplation of or as an incident to the divorce or separation without adequate and full consideration in money or money’s worth, other than the release of the husband or his property from marital obligations. An example of the first rule is a case where the husband and wife transfer securities, which were owned by them jointly, in trust to pay an annuity to the wife. In this case, the full amount of that part of the annuity received by the wife attributable to the husband’s interest in the securities transferred in discharge of his obligation under the decree, or instrument incident to the divorce status or legal separation status, or transferred under the written separation agreement, is taxable to her under section 71(a) (1) or (2), while that portion of the annuity attributable to the wife’s interest in the securities so transferred is taxable to her only to the extent it is out of trust income as provided in Part I (sections 641 and following), Subchapter J, Chapter 1 of the Code. If, however, the husband’s transfer to his wife is made before such property is transferred in discharge of his obligation under the decree or written instrument, or pursuant to the separation agreement in an attempt to avoid the application of section 71(a) (1) or (2) to part of such payments received by his wife, such transfers will be considered as a part of the same transfer by the husband of his property in discharge of his obligation or pursuant to such agreement. In such a case, section 71(a) (1) or (2) will be applied to the full amount received by the wife. As to periodic payments received under a joint purchase of a commercial annuity contract, see section 72 and the regulations thereunder.
(d) Periodic and installment payments. (1) In general, installment payments discharging a part of an obligation the principal sum of which is, in terms of money or property, specified in the decree, instrument, or agreement are not considered “periodic payments” and therefore are not to be included under section 71(a) in the wife’s income.
(2) An exception to the general rule stated in subparagraph (1) of this paragraph is provided, however, in cases where such principal sum, by the terms of the decree, instrument, or agreement, may be or is to be paid over a period ending more than 10 years from the date of such decree, instrument, or agreement. In such cases, the installment payment is considered a periodic payment for the purposes of section 71(a) but only to the extent that the installment payment, or sum of the installment payments, received during the wife’s taxable year does not exceed 10 percent of the principal sum. This 10-percent limitation applies to installment payments made in advance but does not apply to delinquent installment payments for a prior taxable year of the wife made during her taxable year.
(3)(i) Where payments under a decree, instrument, or agreement are to be paid over a period ending 10 years or less from the date of such decree, instrument, or agreement, such payments are not installment payments discharging a part of an obligation the principal sum of which is, in terms of money or property, specified in the decree, instrument, or agreement (and are considered periodic payments for the purposes of section 71(a)) only if such payments meet the following two conditions:
(a) Such payments are subject to any one or more of the contingencies of death of either spouse, remarriage of the wife, or change in the economic status of either spouse, and
(b) Such payments are in the nature of alimony or an allowance for support.
(ii) Payments meeting the requirements of subdivision (i) are considered periodic payments for the purposes of section 71(a) regardless of whether—
(a) The contingencies described in subdivision (i)(a) of this subparagraph are set forth in the terms of the decree, instrument, or agreement, or are imposed by local law, or
(b) The aggregate amount of the payments to be made in the absence of the occurrence of the contingencies described in subdivision (i)(a) of this subparagraph is explicitly stated in the decree, instrument, or agreement or may be calculated from the face of the decree, instrument, or agreement, or
(c) The total amount which will be paid may be calculated actuarially.
(4) Where payments under a decree, instrument, or agreement are to be paid over a period ending more than ten years from the date of such decree, instrument, or agreement, but where such payments meet the conditions set forth in subparagraph (3)(i) of this paragraph, such payments are considered to be periodic payments for the purpose of section 71 without regard to the rule set forth in subparagraph (2) of this paragraph. Accordingly, the rules set forth in subparagraph (2) of this paragraph are not applicable to such payments.
(5) The rules as to periodic and installment payments are illustrated by the following examples:
(e) Payments for support of minor children. Section 71(a) does not apply to that part of any periodic payment which, by the terms of the decree, instrument, or agreement under section 71(a), is specifically designated as a sum payable for the support of minor children of the husband. The statute prescribes the treatment in cases where an amount or portion is so fixed but the amount of any periodic payment is less than the amount of the periodic payment specified to be made. In such cases, to the extent of the amount which would be payable for the support of such children out of the originally specified periodic payment, such periodic payment is considered a payment for such support. For example, if the husband is by terms of the decree, instrument, or agreement required to pay $200 a month to his divorced wife, $100 of which is designated by the decree, instrument, or agreement to be for the support of their minor children, and the husband pays only $150 to his wife, $100 is nevertheless considered to be a payment by the husband for the support of the children. If, however, the periodic payments are received by the wife for the support and maintenance of herself and of minor children of the husband without such specific designation of the portion for the support of such children, then the whole of such amounts is includible in the income of the wife as provided in section 71(a). Except in cases of a designated amount or portion for the support of the husband’s minor children, periodic payments described in section 71(a) received by the wife for herself and any other person or persons are includible in whole in the wife’s income, whether or not the amount or portion for such other person or persons is designated.
§ 1.71-1T Alimony and separate maintenance payments (temporary).
(a) In general.
Q-1 What is the income tax treatment of alimony or separate maintenance payments?
A-1 Alimony or separate maintenance payments are, under section 71, included in the gross income of the payee spouse and, under section 215, allowed as a deduction from the gross income of the payor spouse.
Q-2 What is an alimony or separate maintenance payment?
A-2 An alimony or separate maintenance payment is any payment received by or on behalf of a spouse (which for this purpose includes a former spouse) of the payor under a divorce or separation instrument that meets all of the following requirements:
(a) The payment is in cash (see A-5).
(b) The payment is not designated as a payment which is excludible from the gross income of the payee and nondeductible by the payor (see A-8).
(c) In the case of spouses legally separated under a decree of divorce or separate maintenance, the spouses are not members of the same household at the time the payment is made (see A-9).
(d) The payor has no liability to continue to make any payment after the death of the payee (or to make any payment as a substitute for such payment) and the divorce or separation instrument states that there is no such liability (see A-10).
(e) The payment is not treated as child support (see A-15).
(f) To the extent that one or more annual payments exceed $10,000 during any of the 6-post-separation years, the payor is obligated to make annual payments in each of the 6-post-separation years (see A-19).
Q-3 In order to be treated as alimony or separate maintenance payments, must the payments be “periodic” as that term was defined prior to enactment of the Tax Reform Act of 1984 or be made in discharge of a legal obligation of the payor to support the payee arising out of a marital or family relationship?
A-3 No. The Tax Reform Act of 1984 replaces the old requirements with the requirements described in A-2 above. Thus, the requirements that alimony or separate maintenance payments be “periodic” and be made in discharge of a legal obligation to support arising out of a marital or family relationship have been eliminated.
Q-4 Are the instruments described in section 71(a) of prior law the same as divorce or separation instruments described in section 71, as amended by the Tax Reform Act of 1984?
A-4 Yes.
(b) Specific requirements.
Q-5 May alimony or separate maintenance payments be made in a form other than cash?
A-5 No. Only cash payments (including checks and money orders payable on demand) qualify as alimony or separate maintenance payments. Transfers of services or property (including a debt instrument of a third party or an annuity contract), execution of a debt instrument by the payor, or the use of property of the payor do not qualify as alimony or separate maintenance payments.
Q-6 May payments of cash to a third party on behalf of a spouse qualify as alimony or separate maintenance payments if the payments are pursuant to the terms of a divorce or separation instrument?
A-6 Yes. Assuming all other requirements are satisfied, a payment of cash by the payor spouse to a third party under the terms of the divorce or separation instrument will qualify as a payment of cash which is received “on behalf of a spouse”. For example, cash payments of rent, mortgage, tax, or tuition liabilities of the payee spouse made under the terms of the divorce or separation instrument will qualify as alimony or separate maintenance payments. Any payments to maintain property owned by the payor spouse and used by the payee spouse (including mortgage payments, real estate taxes and insurance premiums) are not payments on behalf of a spouse even if those payments are made pursuant to the terms of the divorce or separation instrument. Premiums paid by the payor spouse for term or whole life insurance on the payor’s life made under the terms of the divorce or separation instrument will qualify as payments on behalf of the payee spouse to the extent that the payee spouse is the owner of the policy.
Q-7 May payments of cash to a third party on behalf of a spouse qualify as alimony or separate maintenance payments if the payments are made to the third party at the written request of the payee spouse?
A-7 Yes. For example, instead of making an alimony or separate maintenance payment directly to the payee, the payor spouse may make a cash payment to a charitable organization if such payment is pursuant to the written request, consent or ratification of the payee spouse. Such request, consent or ratification must state that the parties intend the payment to be treated as an alimony or separate maintenance payment to the payee spouse subject to the rules of section 71, and must be received by the payor spouse prior to the date of filing of the payor’s first return of tax for the taxable year in which the payment was made.
Q-8 How may spouses designate that payments otherwise qualifying as alimony or separate maintenance payments shall be excludible from the gross income of the payee and nondeductible by the payor?
A-8 The spouses may designate that payments otherwise qualifying as alimony or separate maintenance payments shall be nondeductible by the payor and excludible from gross income by the payee by so providing in a divorce or separation instrument (as defined in section 71(b)(2)). If the spouses have executed a written separation agreement (as described in section 71(b)(2)(B)), any writing signed by both spouses which designates otherwise qualifying alimony or separate maintenance payments as nondeductible and excludible and which refers to the written separation agreement will be treated as a written separation agreement (and thus a divorce or separation instrument) for purposes of the preceding sentence. If the spouses are subject to temporary support orders (as described in section 71(b)(2)(C)), the designation of otherwise qualifying alimony or separate payments as nondeductible and excludible must be made in the original or a subsequent temporary support order. A copy of the instrument containing the designation of payments as not alimony or separate maintenance payments must be attached to the payee’s first filed return of tax (Form 1040) for each year in which the designation applies.
Q-9 What are the consequences if, at the time a payment is made, the payor and payee spouses are members of the same household?
A-9 Generally, a payment made at the time when the payor and payee spouses are members of the same household cannot qualify as an alimony or separate maintenance payment if the spouses are legally separated under a decree of divorce or of separate maintenance. For purposes of the preceding sentence, a dwelling unit formerly shared by both spouses shall not be considered two separate households even if the spouses physically separate themselves within the dwelling unit. The spouses will not be treated as members of the same household if one spouse is preparing to depart from the household of the other spouse, and does depart not more than one month after the date the payment is made. If the spouses are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement or a decree described in section 71(b)(2)(C) may qualify as an alimony or separate maintenance payment notwithstanding that the payor and payee are members of the same household at the time the payment is made.
Q-10 Assuming all other requirements relating to the qualification of certain payments as alimony or separate maintenance payments are met, what are the consequences if the payor spouse is required to continue to make the payments after the death of the payee spouse?
A-10 None of the payments before (or after) the death of the payee spouse qualify as alimony or separate maintenance payments.
Q-11 What are the consequences if the divorce or separation instrument fails to state that there is no liability for any period after the death of the payee spouse to continue to make any payments which would otherwise qualify as alimony or separate maintenance payments?
A-11 If the instrument fails to include such a statement, none of the payments, whether made before or after the death of the payee spouse, will qualify as alimony or separate maintenance payments.
Q-12 Will a divorce or separation instrument be treated as stating that there is no liability to make payments after the death of the payee spouse if the liability to make such payments terminates pursuant to applicable local law or oral agreement?
A-12 No. Termination of the liability to make payments must be stated in the terms of the divorce or separation instrument.
Q-13 What are the consequences if the payor spouse is required to make one or more payments (in cash or property) after the death of the payee spouse as a substitute for the continuation of pre-death payments which would otherwise qualify as alimony or separate maintenance payments?
A-13 If the payor spouse is required to make any such substitute payments, none of the otherwise qualifying payments will qualify as alimony or separate maintenance payments. The divorce or separation instrument need not state, however, that there is no liability to make any such substitute payment.
Q-14 Under what circumstances will one or more payments (in cash or property) which are to occur after the death of the payee spouse be treated as a substitute for the continuation of payments which would otherwise qualify as alimony or separate maintenance payments?
A-14 To the extent that one or more payments are to begin to be made, increase in amount, or become accelerated in time as a result of the death of the payee spouse, such payments may be treated as a substitute for the continuation of payments terminating on the death of the payee spouse which would otherwise qualify as alimony or separate maintenance payments. The determination of whether or not such payments are a substitute for the continuation of payments which would otherwise qualify as alimony or separate maintenance payments, and of the amount of the otherwise qualifying alimony or separate maintenance payments for which any such payments are a substitute, will depend on all of the facts and circumstances.
(c) Child support payments.
Q-15 What are the consequences of a payment which the terms of the divorce or separation instrument fix as payable for the support of a child of the payor spouse?
A-15 A payment which under the terms of the divorce or separation instrument is fixed (or treated as fixed) as payable for the support of a child of the payor spouse does not qualify as an alimony or separate maintenance payment. Thus, such a payment is not deductible by the payor spouse or includible in the income of the payee spouse.
Q-16 When is a payment fixed (or treated as fixed) as payable for the support of a child of the payor spouse?
A-16 A payment is fixed as payable for the support of a child of the payor spouse if the divorce or separation instrument specifically designates some sum or portion (which sum or portion may fluctuate) as payable for the support of a child of the payor spouse. A payment will be treated as fixed as payable for the support of a child of the payor spouse if the payment is reduced (a) on the happening of a contingency relating to a child of the payor, or (b) at a time which can clearly be associated with such a contingency. A payment may be treated as fixed as payable for the support of a child of the payor spouse even if other separate payments specifically are designated as payable for the support of a child of the payor spouse.
Q-17 When does a contingency relate to a child of the payor?
A-17 For this purpose, a contingency relates to a child of the payor if it depends on any event relating to that child, regardless of whether such event is certain or likely to occur. Events that relate to a child of the payor include the following: the child’s attaining a specified age or income level, dying, marrying, leaving school, leaving the spouse’s household, or gaining employment.
Q-18 When will a payment be treated as to be reduced at a time which can clearly be associated with the happening of a contingency relating to a child of the payor?
A-18 There are two situations, described below, in which payments which would otherwise qualify as alimony or separate maintenance payments will be presumed to be reduced at a time clearly associated with the happening of a contingency relating to a child of the payor. In all other situations, reductions in payments will not be treated as clearly associated with the happening of a contingency relating to a child of the payor.
The first situation referred to above is where the payments are to be reduced not more than 6 months before or after the date the child is to attain the age of 18, 21, or local age of majority. The second situation is where the payments are to be reduced on two or more occasions which occur not more than one year before or after a different child of the payor spouse attains a certain age between the ages of 18 and 24, inclusive. The certain age referred to in the preceding sentence must be the same for each such child, but need not be a whole number of years.
The presumption in the two situations described above that payments are to be reduced at a time clearly associated with the happening of a contingency relating to a child of the payor may be rebutted (either by the Service or by taxpayers) by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to the children of the payor. The presumption in the first situation will be rebutted conclusively if the reduction is a complete cessation of alimony or separate maintenance payments during the sixth post-separation year (described in A-21) or upon the expiration of a 72-month period. The presumption may also be rebutted in other circumstances, for example, by showing that alimony payments are to be made for a period customarily provided in the local jurisdiction, such as a period equal to one-half the duration of the marriage.
(d) Excess front-loading rules.
Q-19 What are the excess front-loading rules?
A-19 The excess front-loading rules are two special rules which may apply to the extent that payments in any calendar year exceed $10,000. The first rule is a minimum term rule, which must be met in order for any annual payment, to the extent in excess of $10,000, to qualify as an alimony or separate maintenance payment (see A-2(f)). This rule requires that alimony or separate maintenance payments be called for, at a minimum, during the 6 “post-separation years”. The second rule is a recapture rule which characterizes payments retrospectively by requiring a recalculation and inclusion in income by the payor and deducation by the payee of previously paid alimony or separate maintenance payment to the extent that the amount of such payments during any of the 6 “post-separation years” falls short of the amount of payments during a prior year by more than $10,000.
Q-20 Do the excess front-loading rules apply to payments to the extent that annual payments never exceed $10,000?
A-20 No. For example, A is to make a single $10,000 payment to B. Provided that the other requirements of section 71 are met, the payment will qualify as an alimony or separate maintenance payment. If A were to make a single $15,000 payment to B, $10,000 of the payment would qualify as an alimony or separate maintenance payment and $5,000 of the payment would be disqualified under the minimum term rule because payments were not to be made for the minimum period.
Q-21 Do the excess front-loading rules apply to payments received under a decree described in section 71(b)(2)(C)?
A-21 No. Payments under decrees described in section 71(b)(2)(C) are to be disregarded entirely for purposes of applying the excess front-loading rules.
Q-22 Both the minimum term rule and the recapture rule refer to 6 “post-separation years”. What are the 6 “post separation years”?
A-22 The 6 “post-separation years” are the 6 consecutive calendar years beginning with the first calendar year in which the payor pays to the payee an alimony or separate maintenance payment (except a payment made under a decree described in section 71(b)(2)(C)). Each year within this period is referred to as a “post-separation year”. The 6-year period need not commence with the year in which the spouses separate or divorce, or with the year in which payments under the divorce or separation instrument are made, if no payments during such year qualify as alimony or separate maintenance payments. For example, a decree for the divorce of A and B is entered in October, 1985. The decree requires A to make monthly payments to B commencing November 1, 1985, but A and B are members of the same household until February 15, 1986 (and as a result, the payments prior to January 16, 1986, do not qualify as alimony payments). For purposes of applying the excess front-loading rules to payments from A to B, the 6 calendar years 1986 through 1991 are post-separation years. If a spouse has been making payments pursuant to a divorce or separation instrument described in section 71(b)(2) (A) or (B), a modification of the instrument or the substitution of a new instrument (for example, the substitution of a divorce decree for a written separation agreement) will not result in the creation of additional post-separation years. However, if a spouse has been making payments pursuant to a divorce or separation instrument described in section 71(b)(2)(C), the 6-year period does not begin until the first calendar year in which alimony or separate maintenance payments are made under a divorce or separation instrument described in section 71(b)(2) (A) or (B).
Q-23 How does the minimum term rule operate?
A-23 The minimum term rule operates in the following manner. To the extent payments are made in excess of $10,000, a payment will qualify as an alimony or separate maintenance payment only if alimony or separate maintenance payments are to be made in each of the 6 post-separation years. For example, pursuant to a divorce decree, A is to make alimony payments to B of $20,000 in each of the 5 calendar years 1985 through 1989. A is to make no payment in 1990. Under the minimum term rule, only $10,000 will qualify as an alimony payment in each of the calendar years 1985 through 1989. If the divorce decree also required A to make a $1 payment in 1990, the minimum term rule would be satisfied and $20,000 would be treated as an alimony payment in each of the calendar years 1985 through 1989. The recapture rule would, however, apply for 1990. For purposes of determining whether alimony or separate maintenance payments are to be made in any year, the possible termination of such payments upon the happening of a contingency (other than the passage of time) which has not yet occurred is ignored (unless such contingency may cause all or a portion of the payment to be treated as a child support payment).
Q-24 How does the recapture rule operate?
A-24 The recapture rule operates in the following manner. If the amount of alimony or separate maintenance payments paid in any post-separation year (referred to as the “computation year”) falls short of the amount of alimony or separate maintenance payments paid in any prior post-separation year by more than $10,000, the payor must compute an “excess amount” for the computation year. The excess amount for any computation year is the sum of excess amounts determined with respect to each prior post-separation year. The excess amount determined with respect to a prior post-separation year is the excess of (1) the amount of alimony or separate maintenance payments paid by the payor spouse during such prior post-separation year, over (2) the amount of the alimony or separate maintenance payments paid by the payor spouse during the computation year plus $10,000. For purposes of this calculation, the amount of alimony or separate maintenance payments made by the payor spouse during any post-separation year preceding the computation year is reduced by any excess amount previously determined with respect to such year. The rules set forth above may be illustrated by the following example. A makes alimony payments to B of $25,000 in 1985 and $12,000 in 1986. The excess amount with respect to 1985 that is recaptured in 1986 is $3,000 ($25,000− ($12,000 + $10,000)). For purposes of subsequent computation years, the amount deemed paid in 1985 is $22,000. If A makes alimony payments to B of $1,000 in 1987, the excess amount that is recaptured in 1987 will be $12,000. This is the sum of an $11,000 excess amount with respect to 1985 ($22,000−$1,000 + $10,000)) and a $1,000 excess amount with respect to 1986 ($12,000−($1,000 + $10,000)). If, prior to the end of 1990, payments decline further, additional recapture will occur. The payor spouse must include the excess amount in gross income for his/her taxable year begining with or in the computation year. The payee spouse is allowed a deduction for the excess amount in computing adjusted gross income for his/her taxable year beginning with or in the computation year. However, the payee spouse must compute the excess amount by reference to the date when payments were made and not when payments were received.
Q-25 What are the exceptions to the recapture rule?
A-25 Apart from the $10,000 threshold for application of the recapture rule, there are three exceptions to the recapture rule. The first exception is for payments received under temporary support orders described in section 71(b)(2)(C) (see A-21). The second exception is for any payment made pursuant to a continuing liability over the period of the post-separation years to pay a fixed portion of the payor’s income from a business or property or from compensation for employment or self-employment. The third exception is where the alimony or separate manitenance payments in any post-separation year cease by reason of the death of the payor or payee or the remarriage (as defined under applicable local law) of the payee before the close of the computation year. For example, pursuant to a divorce decree, A is to make cash payments to B of $30,000 in each of the calendar years 1985 through 1990. A makes cash payments of $30,000 in 1985 and $15,000 in 1986, in which year B remarries and A’s alimony payments cease. The recapture rule does not apply for 1986 or any subsequent year. If alimony or separate maintenance payments made by A decline or cease during a post-separation year for any other reason (including a failure by the payor to make timely payments, a modification of the divorce or separation instrument, a reduction in the support needs of the payee, or a reduction in the ability of the payor to provide support) excess amounts with respect to prior post-separation years will be subject to recapture.
(e) Effective dates.
Q-26 When does section 71, as amended by the Tax Reform Act of 1984, become effective?
A-26 Generally, section 71, as amended, is effective with respect to divorce or separation instruments (as defined in section 71(b)(2)) executed after December 31, 1984. If a decree of divorce or separate maintenance executed after December 31, 1984, incorporates or adopts without change the terms of the alimony or separate maintenance payments under a divorce or separation instrument executed before January 1, 1985, such decree will be treated as executed before January 1, 1985. A change in the amount of alimony or separate maintenance payments or the time period over which such payments are to continue, or the addition or deletion of any contingencies or conditions relating to such payments is a change in the terms of the alimony or separate maintenance payments. For example, in November 1984, A and B executed a written separation agreement. In February 1985, a decree of divorce is entered in substitution for the written separation agreement. The decree of divorce does not change the terms of the alimony A pays to B. The decree of divorce will be treated as executed before January 1, 1985 and hence alimony payments under the decree will be subject to the rules of section 71 prior to amendment by the Tax Reform Act of 1984. If the amount or time period of the alimony or separate maintenance payments are not specified in the pre-1985 separation agreement or if the decree of divorce changes the amount or term of such payments, the decree of divorce will not be treated as executed before January 1, 1985, and alimony payments under the decree will be subject to the rules of section 71, as amended by the Tax Reform Act of 1984.
Section 71, as amended, also applies to any divorce or separation instrument executed (or treated as executed) before January 1, 1985 that has been modified on or after January 1, 1985, if such modification expressly provides that section 71, as amended by the Tax Reform Act of 1984, shall apply to the instrument as modified. In this case, section 71, as amended, is effective with respect to payments made after the date the instrument is modified.
§ 1.71-2 Effective date; taxable years ending after March 31, 1954, subject to the Internal Revenue Code of 1939.
Pursuant to section 7851(a)(1)(C), the regulations prescribed in § 1.71-1, to the extent that they relate to payments under a written separation agreement executed after August 16, 1954, and to the extent that they relate to payments under a decree for support received after August 16, 1954, under a decree entered after March 1, 1954, shall also apply to taxable years beginning before January 1, 1954, and ending after August 16, 1954, although such years are subject to the Internal Revenue Code of 1939.
§ 1.72-1 Introduction.
(a) General principle. Section 72 prescribes rules relating to the inclusion in gross income of amounts received under a life insurance, endowment, or annuity contract unless such amounts are specifically excluded from gross income under other provisions of Chapter 1 of the Code. In general, these rules provide that amounts subject to the provisions of section 72 are includible in the gross income of the recipient except to the extent that they are considered to represent a reduction or return of premiums or other consideration paid.
(b) Amounts to be considered as a return of premiums. For the purpose of determining the extent to which amounts received represent a reduction or return of premiums or other consideration paid, the provisions of section 72 distinguish between “amounts received as an annuity” and “amounts not received as an annuity”. In general, “amounts received as an annuity” are amounts which are payable at regular intervals over a period of more than one full year from the date on which they are deemed to begin, provided the total of the amounts so payable or the period for which they are to be paid can be determined as of that date. See paragraph (b) (2) and (3) of § 1.72-2. Any other amounts to which the provisions of section 72 apply are considered to be “amounts not received as an annuity”. See § 1.72-11.
(c) “Amounts received as an annuity.” (1) In the case of “amounts received as an annuity” (other than certain employees’ annuities described in section 72(d) and in § 1.72-13), a proportionate part of each amount so received is considered to represent a return of premiums or other consideration paid. The proportionate part of each annuity payment which is thus excludable from gross income is determined by the ratio which the investment in the contract as of the date on which the annuity is deemed to begin bears to the expected return under the contract as of that date. See § 1.72-4.
(2) In the case of employees’ annuities of the type described in section 72(d), no amount received as an annuity in a taxable year to which the Internal Revenue Code of 1954 applies is includible in the gross income of a recipient until the aggregate of all amounts received thereunder and excluded from gross income under the applicable income tax law exceeds the consideration contributed (or deemed contributed) by the employee under § 1.72-8. Thereafter, all amounts so received are includible in the gross income of the recipient. See § 1.72-13.
(d) “Amounts not received as an annuity”. In the case of “amounts not received as an annuity”, if such amounts are received after an annuity has begun and during its continuance, amounts so received are generally includible in the gross income of the recipient. Amounts not received as an annuity which are received at any other time are generally includible in the gross income of the recipient only to the extent that such amounts, when added to all amounts previously received under the contract which were excludable from the gross income of the recipient under the income tax law applicable at the time of receipt, exceed the premiums or other consideration paid (see § 1.72-11). However, if the aggregate of premiums or other consideration paid for the contract includes amounts for which a deduction was allowed under section 404 as contributions on behalf of an owner-employee, the amounts received under the circumstances of the preceding sentence shall be includible in gross income until the amount so included equals the amount for which the deduction was so allowed. See paragraph (b) of § 1.72-17.
(e) Classification of recipients. For the purpose of the regulations under section 72, a recipient shall be considered an “annuitant” if he receives amounts under an annuity contract during the period that the annuity payments are to continue, whether for a term certain or during the continuing life or lives of the person or persons whose lives measure the duration of such annuity. However, a recipient shall be considered a “beneficiary” rather than an “annuitant” if the amounts he receives under a contract are received after the term of the annuity for a life or lives has expired and such amounts are paid by reason of the fact that the contract guarantees that payments of some minimum amount or for some minimum period shall be made. For special rules with respect to beneficiaries, see paragraphs (a)(1)(iii) and (c) of § 1.72-11.
§ 1.72-2 Applicability of section.
(a) Contracts. (1) The contracts under which amounts paid will be subject to the provisions of section 72 include contracts which are considered to be life insurance, endowment, and annuity contracts in accordance with the customary practice of life insurance companies. For the purposes of section 72, however, it is immaterial whether such contracts are entered into with an insurance company. The term “endowment contract” also includes the “face-amount certificates” described in section 72(1).
(2) If two or more annuity obligations or elements to which section 72 applies are acquired for a single consideration, such as an obligation to pay an annuity to A for his life accompanied by an obligation to pay an annuity to B for his life, there being a single consideration paid for both obligations (whether paid by one or more persons in equal or different amounts, and whether paid in a single sum or otherwise), such annuity elements shall be considered to comprise a single contract for the purpose of the application of section 72 and the regulations thereunder. For rules relating to the allocation of investment in the contract in the case of annuity elements payable to two or more persons, see paragraph (b) of § 1.72-6.
(3)(i) Sections 402 and 403 provide that certain distributions by employees’ trusts and certain payments under employee plans are taxable under section 72. For taxable years beginning before January 1, 1964, section 72(e)(3), as in effect before such date, does not apply to such distributions or payments. For purposes of applying section 72 to such distributions and payments (other than those described in subdivision (iii) of this subparagraph), each separate program of the employer consisting of interrelated contributions and benefits shall be considered a single contract. Therefore, all distributions or payments (other than those described in subdivision (iii) of this subparagraph) which are attributable to a separate program of interrelated contributions and benefits are considered as received under a single contract. A separate program of interrelated contributions and benefits may be financed by the purchase from an insurance company of one or more group contracts or one or more individual contracts, or may be financed partly by the purchase of contracts from an insurance company and partly through an investment fund, or may be financed completely through an investment fund. A program may be considered separate for purposes of section 72 although it is only a part of a plan which qualifies under section 401. There may be several trusts under one separate program, or several separate programs may make use of a single trust. See, however, subdivision (iii) of this subparagraph for rules relating to what constitutes a “contract” for purposes of applying section 72 to distributions commencing before October 20, 1960.
(ii) The following types of benefits, and the contributions used to provide them, are examples of separate programs of interrelated contributions and benefits:
(a) Definitely determinable retirement benefits.
(b) Definitely determinable benefits payable prior to retirement in case of disability.
(c) Life insurance.
(d) Accident and health insurance.
(iii) If any amount which is taxable under section 72 by reason of section 402 or 403 is actually distributed or made available to any person under an employees’ trust or plan (other than the Civil Service Retirement Act, 5 U.S.C. ch. 14) before October 20, 1960, section 72 shall, notwithstanding any other provisions in this subparagraph, be applied to all the distributions with respect to such person (or his beneficiaries) under such trust or plan (whether received before or after October 20, 1960) as though such distributions were provided under a single contract. For purposes of applying section 72 to distributions to which this subdivision applies, therefore, the term “contract” shall be considered to include the entire interest of an employee in each trust or plan described in sections 402 and 403 to the extent that distributions thereunder are subject to the provisions of section 72. Section 72 shall be applied to distributions received under the Civil Service Retirement Act in the manner prescribed in subdivision (i) of this subparagraph (see example (4) in subdivision (iv) of this subparagraph).
(iv) The application of this subparagraph may be illustrated by the following examples:
(b) Amounts. (1)(i) In general, the amounts to which section 72 applies are any amounts received under the contracts described in paragraph (a)(1) of this section. However, if such amounts are specifically excluded from gross income under other provisions of Chapter 1 of the Code, section 72 shall not apply for the purpose of including such amounts in gross income. For example, section 72 does not apply to amounts received under a life insurance contract if such amounts are paid by reason of the death of the insured and are excludable from gross income under section 101(a). See also sections 101(d), relating to proceeds of life insurance paid at a date later than death, and 104(a)(4), relating to compensation for injuries or sickness.
(ii) Section 72 does not exclude from gross income any amounts received under an agreement to hold an amount and pay interest thereon. See paragraph (a) of § 1.72-14. However, section 72 does apply to amounts received by a surviving annuitant under a joint and survivor annuity contract since such amounts are not considered to be paid by reason of the death of an insured. For a special deduction for the estate tax attributable to the inclusion of the value of the interest of a surviving annuitant under a joint and survivor annuity contract in the estate of the deceased primary annuitant, see section 691(d) and the regulations thereunder.
(2) Amounts subject to section 72 in accordance with subparagraph (1) of this paragraph are considered “amounts received as an annuity” only in the event that all of the following tests are met:
(i) They must be received on or after the “annuity starting date” as that term is defined in paragraph (b) of § 1.72-4;
(ii) They must be payable in periodic installments at regular intervals (whether annually, semiannually, quarterly, monthly, weekly, or otherwise) over a period of more than one full year from the annuity starting date; and
(iii) Except as indicated in subparagraph (3) of this paragraph, the total of the amounts payable must be determinable at the annuity starting date either directly from the terms of the contract or indirectly by the use of either mortality tables or compound interest computations, or both, in conjunction with such terms and in accordance with sound actuarial theory.
(3)(i) Notwithstanding the requirement of subparagraph (2)(iii) of this paragraph, if amounts are to be received for a definite or determinable time (whether for a period certain or for a life or lives) under a contract which provides:
(a) That the amount of the periodic payments may vary in accordance with investment experience (as in certain profit-sharing plans), cost of living indices, or similar fluctuating criteria, or
(b) For specified payments the value of which may vary for income tax purposes, such as in the case of any annuity payable in foreign currency,
(ii) For purposes of subdivision (i) of this subparagraph, the number of periodic payments anticipated during the time payments are to be made shall be determined by multiplying the number of payments to be made each year (a) by the number of years payments are to be made, or (b) if payments are to be made for a life or lives, by the multiple found by the use of the appropriate tables contained in § 1.72-9, as adjusted in accordance with the table in paragraph (a)(2) of § 1.72-5.
(iii) For an example of the computation to be made in accordance with this subparagraph and a special election which may be made in a taxable year subsequent to a taxable year in which the total payments received under a contract described in this subparagraph are less than the total of the amounts excludable from gross income in such year under subdivision (i) of this subparagraph, see paragraph (d)(3) of § 1.72-4.
§ 1.72-3 Excludable amounts not income.
In general, amounts received under contracts described in paragraph (a)(1) of § 1.72-2 are not to be included in the income of the recipient to the extent that such amounts are excludable from gross income as the result of the application of section 72 and the regulations thereunder.
§ 1.72-4 Exclusion ratio.
(a) General rule. (1)(i) To determine the proportionate part of the total amount received each year as an annuity which is excludable from the gross income of a recipient in the taxable year of receipt (other than amounts received under (a) certain employee annuities described in section 72(d) and § 1.72-13, or (b) certain annuities described in section 72(o) and § 1.122-1), an exclusion ratio is to be determined for each contract. In general, this ratio is determined by dividing the investment in the contract as found under § 1.72-6 by the expected return under such contract as found under § 1.72-5. Where a single consideration is given for a particular contract which provides for two or more annuity elements, an exclusion ratio shall be determined for the contract as a whole by dividing the investment in such contract by the aggregate of the expected returns under all the annuity elements provided thereunder. However, where the provisions of paragraph (b)(3) of § 1.72-2 apply to payments received under such a contract, see paragraph (b)(3) of § 1.72-6. In the case of a contract to which § 1.72-6(d) (relating to contracts in which amounts were invested both before July 1, 1986, and after June 30, 1986) applies, the exclusion ratio for purposes of this paragraph (a) is determined in accordance with § 1.72-6(d) and, in particular, § 1.72-6(d)(5)(i).
(ii) The exclusion ratio for the particular contract is then applied to the total amount received as an annuity during the taxable year by each recipient. See, however, paragraph (e)(3) of § 1.72-5. Any excess of the total amount received as an annuity during the taxable year over the amount determined by the application of the exclusion ratio to such total amount shall be included in the gross income of the recipient for the taxable year of receipt.
(2) The principles of subparagraph (1) may be illustrated by the following example:
(3) The exclusion ratio shall be applied only to amounts received as an annuity within the meaning of that term under paragraph (b) (2) and (3) of § 1.72-2. Where the periodic payments increase in amount after the annuity starting date in a manner not provided by the terms of the contract at such date, the portion of such payments representing the increase is not an amount received as an annuity. For the treatment of amounts not received as an annuity, see section 72(e) and § 1.72-11. For special rules where paragraph (b)(3) of § 1.72-2 applies to amounts received, see paragraph (d)(3) of this section.
(4) After an exclusion ratio has been determined for a particular contract, it shall be applied to any amounts received as an annuity thereunder unless or until one of the following occurs:
(i) The contract is assigned or transferred for a valuable consideration (see section 72(g) and paragraph (a) of § 1.72-10);
(ii) The contract matures or is surrendered, redeemed, or discharged in accordance with the provisions of paragraph (c) or (d) of § 1.72-11;
(iii) The contract is exchanged (or is considered to have been exchanged) in a manner described in paragraph (e) of § 1.72-11.
(b) Annuity starting date. (1) Except as provided in subparagraph (2) of this paragraph, the annuity starting date is the first day of the first period for which an amount is received as an annuity, except that if such date was before January 1, 1954, then the annuity starting date is January 1, 1954. The first day of the first period for which an amount is received as an annuity shall be whichever of the following is the later:
(i) The date upon which the obligations under the contract became fixed, or
(ii) The first day of the period (year, half-year, quarter, month, or otherwise, depending on whether payments are to be made annually, semiannually, quarterly, monthly, or otherwise) which ends on the date of the first annuity payment.
(2) Notwithstanding the provisions of paragraph (b)(1) of this section, the annuity starting date shall be determined in accordance with whichever of the following provisions is appropriate:
(i) In the case of a joint and survivor annuity contract described in section 72(i) and paragraph (b)(3) of § 1.72-5, the annuity starting date is January 1, 1954, or the first day of the first period for which an amount is received as an annuity by the surviving annuitant, whichever is the later;
(ii) In the case of the transfer of an annuity contract for a valuable consideration, as described in section 72(g) and paragraph (a) of § 1.72-10, the annuity starting date shall be January 1, 1954, or the first day of the first period for which the transferee received an amount as an annuity, whichever is the later;
(iii) If the provisions of paragraph (e) of § 1.72-11 apply to an exchange of one contract for another, or to a transaction deemed to be such an exchange, the annuity starting date of the contract received (or deemed received) in exchange shall be January 1, 1954, or the first day of the first period for which an amount is received as an annuity under such contract, whichever is the later; and
(iv) In the case of an employee who has retired from work because of personal injuries or sickness, and who is receiving amounts under a plan that is a wage continuation plan under section 105(d) and § 1.105-4, the annuity starting date shall be the date the employee reaches mandatory retirement age, as defined in § 1.105-4(a)(3)(i)(B). (See also §§ 1.72-15 and 1.105-6 for transitional and other special rules.)
(c) Fiscal year taxpayers. Fiscal year taxpayers receiving amounts as annuities in a taxable year to which the Internal Revenue Code of 1954 applies shall determine the annuity starting date in accordance with section 72(c)(4) and this section. The annuity starting date for fiscal year taxpayers receiving amounts as an annuity in a taxable year to which the Internal Revenue Code of 1939 applies shall be January 1, 1954, except where the first day of the first period for which an amount is received by such a taxpayer as an annuity is subsequent thereto and before the end of a fiscal year to which the Internal Revenue Code of 1939 applied. In such case, the latter date shall be the annuity starting date. In all cases where a fiscal year taxpayer received an amount as an annuity in a taxable year to which the Internal Revenue Code of 1939 applied and subsequent to the annuity starting date determined in accordance with the provisions of this paragraph, such amount shall be disregarded for the purposes of section 72 and the regulations thereunder.
(d) Exceptions to the general rule. (1) Where the provisions of section 72 would otherwise require an exclusion ratio to be determined, but the investment in the contract (determined under § 1.72-6) is an amount of zero or less, no exclusion ratio shall be determined and all amounts received under such a contract shall be includible in the gross income of the recipient for the purposes of section 72.
(2) Where the investment in the contract is equal to or greater than the total expected return under such contract found under § 1.72-5, the exclusion ratio shall be considered to be 100 percent and all amounts received as an annuity under such contract shall be excludable from the recipient’s gross income. See, for example, paragraph (f)(1) of § 1.72-5. In the case of a contract to which § 1.72-6(d) (relating to contracts in which amounts were invested both before July 1, 1986, and after June 30, 1986) applies, this paragraph (d)(2) is applied in the manner prescribed in § 1.72-6(d) and, in particular, § 1.72-6(d)(5)(ii).
(3)(i) If a contract provides for payments to be made to a taxpayer in the manner described in paragraph (b)(3) of § 1.72-2, the investment in the contract shall be considered to be equal to the expected return under such contract and the resulting exclusion ratio (100%) shall be applied to all amounts received as an annuity under such contract. For any taxable year, payments received under such a contract shall be considered to be amounts received as an annuity only to the extent that they do not exceed the portion of the investment in the contract which is properly allocable to that year and hence excludable from gross income as a return of premiums or other consideration paid for the contract. The portion of the investment in the contract which is properly allocable to any taxable year shall be determined by dividing the investment in the contract (adjusted for any refund feature in the manner described in paragraph (d) of § 1.72-7) by the applicable multiple (whether for a term certain, life, or lives) which would otherwise be used in determining the expected return for such a contract under § 1.72-5. The multiple shall be adjusted in accordance with the provisions of the table in paragraph (a)(2) of § 1.72-5, if any adjustment is necessary, before making the above computation. If payments are to be made more frequently than annually and the number of payments to be made in the taxable year in which the annuity begins are less than the number of payments to be made each year thereafter, the amounts considered received as an annuity (as otherwise determined under this subdivision) shall not exceed, for such taxable year (including a short taxable year), an amount which bears the same ratio to the portion of the investment in the contract considered allocable to each taxable year as the number of payments to be made in the first year bears to the number of payments to be made in each succeeding year. Thus, if payments are to be made monthly, only seven payments will be made in the first taxable year, and the portion of the investment in the contract allocable to a full year of payments is $600, the amounts considered received as an annuity in the first taxable year cannot exceed $350 ($600 ×
(ii) If subdivision (i) of this subparagraph applies to amounts received by a taxpayer and the total amount of payments he receives in a taxable year is less than the total amount excludable for such year under subdivision (i) of this subparagraph, the taxpayer may elect, in a succeeding taxable year in which he receives another payment, to redetermine the amounts to be received as an annuity during the current and succeeding taxable years. This shall be computed in accordance with the provisions of subdivision (i) of this subparagraph except that:
(a) The difference between the portion of the investment in the contract allocable to a taxable year, as found in accordance with subdivision (i) of this subparagraph, and the total payments actually received in the taxable year prior to the election shall be divided by the applicable life expectancy of the annuitant (or annuitants), found in accordance with the appropriate table in § 1.72-9 (and adjusted in accordance with paragraph (a)(2) of § 1.72-5), or by the remaining term of a term certain annuity, computed as of the first day of the first period for which an amount is received as an annuity in the taxable year of the election; and
(b) The amount determined under (a) of this subdivision shall be added to the portion of the investment in the contract allocable to each taxable year (as otherwise found). To the extent that the total periodic payments received under the contract in the taxable year of the election or any succeeding taxable year does not equal this total sum, such payments shall be excludable from the gross income of the recipient. To the extent such payments exceed the sum so found, they shall be fully includible in the recipient’s gross income. See subdivision (iii) of this subparagraph for an example illustrating the redetermination of amounts to be received as an annuity and subdivision (iv) of this subparagraph for the method of making the election provided by this subdivision.
(iii) The application of the principles of paragraph (d)(3) (i) and (ii) of this section may be illustrated by the following example:
(iv) If the taxpayer chooses to make the election described in subdivision (ii) of this subparagraph, he shall file with his return a statement that he elects to make a redetermination of the amounts excludable from gross income under his annuity contract in accordance with the provisions of paragraph (d)(3) of § 1.72-4. This statement shall also contain the following information:
(a) The original annuity starting date and his age on that date,
(b) The date of the first day of the first period for which he received an amount in the current taxable year,
(c) The investment in the contract originally determined (as adjusted for any refund feature), and
(d) The aggregate of all amounts received under the contract between the date indicated in (a) of this subdivision and the day after the date indicated in (b) of this subdivision to the extent such amounts were excludable from gross income.
(v) In the case of a contract to which § 1.72-6(d) (relating to contracts in which amounts were invested both before July 1, 1986, and after June 30, 1986) applies, this paragraph (d)(3) is applied in the manner prescribed in § 1.72-6(d) and, in particular, § 1.72-6(d)(5)(iii). This application may be illustrated by the following example:
Second, B determines the pre-July 1986 investment in the contract and the post-June 1986 investment in the contract allocable to the taxable year by dividing the pre-July 1986 and post-June 1986 investments in the contract by the applicable life expectancy multiple. The life expectancy multiple applicable to pre-July 1986 investment in the contract is B’s life expectancy as of the original annuity starting date adjusted for annual payments and is determined under Table I of § 1.72-9 [15.1 (15.6−0.5)]. The life expectancy multiple applicable to post-June 1986 investment in the contract is determined under Table V of § 1.72-9 (20.3 (20.8-0.5)). Thus, the pre-July 1986 investment in the contract allocable to each taxable year is $794.70 ($12,000 ÷ 15.1), and the post-June 1986 investment in the contract so allocable is $640.39 ($13,000 ÷ 20.3). Because the applicable portions of the total payment received in 1991 under the contract ($480 allocable to the pre-July 1986 investment in the contract and $520 allocable to the post-June 1986 investment in the contract) are treated as amounts received as an annuity and are excludable from gross income to the extent they do not exceed the portion of the corresponding investment in the contract allocable to 1991 ($794.70 pre-July 1986 investment in the contract and $640.39 post-June 1986 investment in the contract), the entire amount of each applicable portion of the total payment is excludable from gross income. B may elect, in the return filed for taxable year 1993, to redetermine amounts to be received as an annuity under the contract as of June 30, 1992. The extent to which the amounts received in 1993 or thereafter shall be considered amounts received as an annuity is determined as follows:
| Pre-July 1986 investment in the contract allocable to taxable years 1991 and 1992 ($794.70 × 2) | $1,589.40 |
| Less: Portion of total payments allocable to pre-July 1986 investment in the contract actually received as an annuity in taxable years 1991 and 1992 | 480.00 |
| 1,109.40 | |
| Divided by: Life expectancy multiple applicable to pre-July 1986 investment in the contract for B, age 66 (14.4—0.5) | 13.9 |
| 79.81 | |
| Plus: Amount originally determined with respect to pre-July 1986 investment in the contract | 794.70 |
| Pre-July 1986 amount | 874.51 |
| Post-June 1986 investment in the contract allocable to taxable years 1991 and 1992 ($640.39 × 2) | $1,280.78 |
| Less: Portion of total payments allocable to post-June 1986 investment in the contract actually received as an annuity in taxable years 1991 and 1992 | 520.00 |
| 760.78 | |
| Divided by: Life expectancy multiple applicable to post-June 1986 investment in the contract for B, age 66 (19.2−0.5) | 18.7 |
| 40.68 | |
| Plus: Amount originally determined with respect to post-June 1986 investment in the contract | 640.39 |
| Post-June 1986 amount | 681.07 |
(vi) The method of making an election to perform the separate computations illustrated in paragraph (d)(3)(v) of this section is described in § 1.72-6(d)(6).
(e) Exclusion ratio in the case of two or more annuity elements acquired for a single consideration. (1)(i) Where two or more annuity elements are provided under a contract described in paragraph (a)(2) of § 1.72-2, an exclusion ratio shall be determined for the contract as a whole and applied to all amounts received as an annuity under any of the annuity elements. To obtain this ratio, the investment in the contract determined in accordance with § 1.72-6 shall be divided by the aggregate of the expected returns found with respect to each of the annuity elements in accordance with § 1.72-5. For this purpose, it is immaterial that payments under one or more of the annuity elements involved have not commenced at the time when an amount is first received as an annuity under one or more of the other annuity elements.
(ii) The exclusion ratio found under subdivision (i) of this subparagraph does not apply to:
(a) An annuity element payable to a surviving annuitant under a joint and survivor annuity contract to which section 72(i) and paragraphs (b)(3) and (e)(3) of § 1.72-5 apply, or to
(b) A contract under which one or more of the constituent annuity elements provides for payments described in paragraph (b)(3) of § 1.72-2.
(2) If one or more of the annuity elements under a contract described in paragraph (a)(2) of § 1.72-2 provides for payments to which paragraph (b)(3) of § 1.72-2 applies:
(i) With respect to the annuity elements to which paragraph (b)(3) of § 1.72-2 does not apply, an exclusion ratio shall be determined by dividing the portion of the investment in the entire contract which is properly allocable to all such elements (in the manner provided in paragraph (b)(3)(ii) of § 1.72-6) by the aggregate of the expected returns thereunder and such ratio shall be applied in the manner described in subdivision (i) of subparagraph (1); and
(ii) With respect to the annuity elements to which paragraph (b)(3) of § 1.72-2 does apply, the investment in the entire contract shall be reduced by the portion thereof found in subdivision (i) of this subparagraph and the resulting amount shall be used to determine the extent to which the aggregate of the payments received during the taxable year under all such elements is excludable from gross income. The amount so excludable shall be allocated to each recipient under such elements in the same ratio that the total of payments he receives each year bears to the total of the payments received by all such recipients during the year. The exclusion ratio with respect to the amounts so allocated shall be 100 percent. See paragraph (f)(2) of § 1.72-5 and paragraph (b)(3) of § 1.72-6.
(iii) In the case of a contract to which § 1.72-6(d) (relating to contracts in which amounts were invested both before July 1, 1986, and after June 30, 1986) applies, this paragraph (e) is applied in the manner prescribed in § 1.72-6(d) and, in particular, § 1.72-6(d)(5)(iv).
§ 1.72-5 Expected return.
(a) Expected return for but one life. (1) If a contract to which section 72 applies provides that one annuitant is to receive a fixed monthly income for life, the expected return is determined by multiplying the total of the annuity payments to be received annually by the multiple shown in Table I or V (whichever is applicable) of § 1.72-9 under the age (as of the annuity starting date) and, if applicable, sex of the measuring life (usually the annuitant’s). Thus, where a male purchases a contract before July 1, 1986, providing for an immediate annuity of $100 per month for his life and, as of the annuity starting date (in this case the date of purchase), the annuitant’s age at his nearest birthday is 66, the expected return is computed as follows:
| Monthly payment of $100 × 12 months equals annual payment of | $1,200 |
| Multiple shown in Table I, male, age 66 | 14.4 |
| Expected return (1,200 × 14.4) | 17,280 |
(2)(i) If payments are to be made quarterly, semiannually, or annually, an adjustment of the applicable multiple shown in Table I or V (whichever is applicable) may be required. A further adjustment may be required where the interval between the annuity starting date and the date of the first payment is less than the interval between future payments. Neither adjustment shall be made, however, if the payments are to be made more frequently than quarterly. The amount of the adjustment, if any, is to be found in accordance with the following table:
| If the number of whole months from the annuity starting date to the first payment date is— | 0-1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| And the payments under the contract are to be made: | ||||||||||||
| Annually | + 0.5 | + 0.4 | + 0.3 | + 0.2 | + 0.1 | 0 | 0 | −0.1 | −0.2 | −0.3 | −0.4 | −0.5 |
| Semiannually | + .2 | + .1 | 0 | 0 | −.1 | −.2 | ||||||
| Quarterly | + .1 | 0 | −.1 |
(ii) Notwithstanding the table in subdivision (i) of this subparagraph, adjustments of multiples for early or other than monthly payments determined prior to February 19, 1956, under the table prescribed in paragraph 1(b)(4) of T.D. 6118 (19 FR 9897, C.B. 1955-1, 699), approved December 30, 1954, need not be redetermined.
(3) If the contract provides for fixed payments to be made to an annuitant until death or until the expiration of a specified limited period, whichever occurs earlier, the expected return of such temporary life annuity is determined by multiplying the total of the annuity payments to be received annually by the multiple shown in Table IV or VIII (whichever is applicable) of § 1.72-9 for the age (as of the annuity starting date) and, if applicable, sex of the annuitant and the nearest whole number of years in the specified period. For example, if a male annuitant, age 60 (at his nearest birthday), is to receive $60 per month for five years or until he dies, whichever is earlier, and there is no post-June 1986, investment in the contract, the expected return under such a contract is $3,456, computed as follows:
| Monthly payments of $60 × 12 months equals annual payment of | $720 |
| Multiple shown in Table IV for male, age 60, for term of 5 years | 4.8 |
| Expected return for 5 year temporary life annuity of $720 per year ($720 × 4.8) | $3,456 |
| Monthly payments of $60 × 12 months equals annual payment of | $720.00 |
| Multiple shown in Table VIII for annuitant, age 60, for term of 5 years | 4.9 |
| Expected return for 5-year temporary life annuity of $720 per year ($720 × 4.9) | $3,528.00 |
(4) If the contract provides for payments to be made to an annuitant for the annuitant’s lifetime, but the amount of the annual payments is to be decreased after the expiration of a specified limited period, the expected return is computed by considering the contract as a combination of a whole life annuity for the smaller amount plus a temporary life annuity for an amount equal to the difference between the larger and the smaller amount. For example, if a male annuitant, age 60, is to receive $150 per month for five years or until his earlier death, and is to receive $90 per month for the remainder of his lifetime after such five years, the expected return is computed as if the annuitant’s contract consisted of a whole life annuity for $90 per month plus a five year temporary life annuity of $60 per month. In such circumstances, the expected return if there is no post-June 1986 investment in the contract is computed as follows:
| Monthly payments of $90 × 12 months equals annual payment of | $1,080 |
| Multiple shown in Table I for male, age 60 | 18.2 |
| Expected return for whole life annuity of $1,080 per year | $19,656 |
| Expected return for 5-year temporary life annuity of $720 per year (as found in subparagraph (3) of this paragraph (a)) | $3,456 |
| Total expected return | $23,112 |
| Monthly payments of $90 × 12 months equals annual payment of | $1,080 |
| Multiple shown in Table V for annuitant, age 60 | 24.2 |
| Expected return for whole life annuity of $1,080 per year | $26,136 |
| Plus: Expected return for 5-year temporary life annuity of $720 per year (as found in subparagraph (3) of this paragraph (a)) | $3,528 |
| Total expected return | $29,664 |
(5) If the contract described in subparagraph (4) of this paragraph provided that the amount of the annual payments to the annuitant were to be increased (instead of decreased) after the expiration of a specified limited period, the expected return would be computed as if the annuitant’s contract consisted of a whole life annuity for the larger amount minus a temporary life annuity for an amount equal to the difference between the larger and smaller amount. Thus, if the annuitant described in subparagraph (4) of this paragraph were to receive $90 per month for five years or until his earlier death, and to receive $150 per month for the remainder of his lifetime after such five years, the expected return would be computed by subtracting the expected return under a five year temporary life annuity of $60 per month from the expected return under a whole life annuity of $150 per month. In such circumstances, the expected return if there is no post-June 1986 investment in the contract is computed as follows:
| Monthly payments of $150 × 12 months equals annual payment of | $1,800 |
| Multiple shown in Table 1 (male, age 60) | 18.2 |
| Expected return for annuity for whole life of $1,800 per year | $32,760 |
| Less expected return for 5-year temporary life annuity of $720 per year (as found in subparagraph (3)) | $3,456 |
| Net expected return | $29,304 |
| Monthly payments of $150 × 12 months equals annual payments of | $1,800 |
| Multiple shown in Table V (age 60) | 24.2 |
| Expected return for annuity for whole life of $1,800 per year | $43,560 |
| Less expected return for 5-year temporary life annuity of $720 per year (as found in subparagraph (3) of this paragraph (a)) | $3,528 |
| Net expected return | $40,032 |
(b) Expected return under joint and survivor and joint annuities. (1) In the case of a joint and survivor annuity contract involving two annuitants which provides the first annuitant with a fixed monthly income for life and, after the death of the first annuitant, provides an identical monthly income for life to a second annuitant, the expected return shall be determined by multiplying the total amount of the payments to be received annually by the multiple obtained from Table II or VI (whichever is applicable) of § 1.72-9 under the ages (as of the annuity starting date) and, if applicable, sexes of the living annuitants. For example, a husband purchases a joint and survivor annuity contract providing for payments of $100 per month for life and, after his death, for the same amount to his wife for the remainder of her life. As of the annuity starting date his age at his nearest birthday is 70 and that of his wife at her nearest birthday is 67. If there is no post-June 1986 investment in the contract, the expected return is computed as follows:
| Monthly payments of $100 × 12 months equals annual payment of | $1,200 |
| Multiple shown in Table II (male, age 70, female, age 67) | 19.7 |
| Expected return ($1,200 × 19.7) | $23,640 |
| Monthly payments of $100 × 12 months equals annual payment of | $1,200 |
| Multiple shown in Table VI (ages 70, 67) | 22.0 |
| Expected return ($1,200 × 22.0) | $26,400 |
(2) If a contract of the type described in subparagraph (1) of this paragraph provides that a different (rather than an identical) monthly income is payable to the second annuitant, the expected return is computed in the following manner. The applicable multiple in Table II or VI (whichever is applicable) is first found as in the example in subparagraph (1) of this paragraph. The multiple applicable to the first annuitant is then found in Table I or V (whichever is applicable) as though the contract were for a single life annuity. The multiple from Table I or V is then subtracted from the multiple obtained from Table II or VI and the resulting multiple is applied to the total payments to be received annually under the contract by the second annuitant. The result is the expected return with respect to the second annuitant. The portion of the expected return with respect to payments to be made during the first annuitant’s life is then computed by applying the multiple found in Table I or V to the total annual payments to be received by such annuitant under the contract. The expected returns with respect to each of the annuitants separately are then aggregated to obtain the expected return under the entire contract.
| Multiple from Table II (male, age 70, female, age 67) | 19.7 |
| Multiple from Table I (male, age 70) | 12.1 |
| Difference (multiple applicable to second annuitant) | 7.6 |
| Portion of expected return, second annuitant ($600 × 7.6) | $4,560 |
| Portion of expected return, first annuitant ($1,200 × 12.1) | $14,520 |
| Expected return under the contract | $19,080 |
| Multiple from Table VI (ages 70, 67) | 22.0 |
| Multiple from Table V (age 70) | 16.0 |
| Difference (multiple applicable to second annuitant) | 6.0 |
| Portion of expected return, second annuitant ($600 × 6.0) | $3,600 |
| Plus: Portion of expected return, first annuitant ($1,200 × 16.0) | $19,200 |
| Expected return under the contract | $22,800 |
(3) In the case of a joint and survivor annuity contract in respect of which the first annuitant died in 1951, 1952, or 1953, and the basis of the surviving annuitant’s interest in the contract was determinable under section 113(a)(5) of the Internal Revenue Code of 1939, such basis shall be considered the “aggregate of premiums or other consideration paid” by the surviving annuitant for the contract. (For rules governing this determination, see 26 CFR (1939) 39.22(b)(2)-2 and 39.113(a)(5)-1 (Regulations 118).) In determining such an annuitant’s investment in the contract, such aggregate shall be reduced by any amounts received under the contract by the surviving annuitant before the annuity starting date, to the extent such amounts were excludable from his gross income at the time of receipt. The expected return of the surviving annuitant in such cases shall be determined in the manner prescribed in paragraph (a) of this section, as though the surviving annuitant alone were involved. For this purpose, the appropriate multiple for the survivor shall be obtained from Table I as of the annuity starting date determined in accordance with paragraph (b)(2)(i) of § 1.72-4.
(4) If a contract involving two annuitants provides for fixed monthly payments to be made as a joint life annuity until the death of the first annuitant to die (in other words, only as long as both remain alive), the expected return under such contract shall be determined by multiplying the total of the annuity payments to be received annually under the contract by the multiple obtained from Table IIA or VIA (whichever is applicable) of § 1.72-9 under the ages (as of the annuity starting date) and, if applicable, sexes of the annuitants. If, however, payments are to be made under the contract quarterly, semiannually, or annually, an appropriate adjustment of the multiple found in Table IIA or VIA shall be made in accordance with paragraph (a)(2) of this section.
(5) If a joint and survivor annuity contract involving two annuitants provides that a specified amount shall be paid during their joint lives and a different specified amount shall be paid to the survivor upon the death of whichever of the annuitants is the first to die, the following preliminary computation shall be made in all cases preparatory to determining the expected return under the contract:
(i) From Table II or VI (whichever is applicable), obtain the multiple under both of the annuitants’ ages (as of the annuity starting date) and, if applicable, their appropriate sexes;
(ii) From Table IIA or VIA (whichever is applicable), obtain the multiple applicable to both annuitants’ ages (as of the annuity starting date) and, if applicable, their appropriate sexes;
(iii) Apply the multiple found in subdivision (i) of this subparagraph to the total of the amounts to be received annually after the death of the first to die; and
(iv) Apply the multiple found in subdivision (ii) of this subparagraph to the difference between the total of the amounts to be received annually before and the total of the amounts to be received annually after the death of the first to die.
| Multiple from Table II (male age 70, female age 67) | 19.7 |
| Multiple from Table IIA (male age 70, female age 67) | 9.3 |
| Portion of expected return ($900 × 19.7—sum per year after first death) | $17,730 |
| Plus: Portion of expected return ($300 × 9.3—amount of change in sum at first death) | $2,790 |
| Expected return under the contract | $20,520 |
The expected return under the contract is computed as follows:
| Multiple from Table VI (ages 70, 67) | 22.0 |
| Multiple from Table VIA (ages 70, 67) | 12.4 |
| Portion of expected return ($900 × 22.0—sum per year after first death) | $19,800 |
| Plus: Portion of expected return ($300 × 12.4—amount of change in sum at first death) | $3,720 |
| Expected return under the contract | $23,520 |
(6) If a contract provides for the payment of life annuities to two persons during their respective lives and, after the death of one (without regard to which one dies first), provides that the survivor shall receive for life both his own annuity payments and the payments made formerly to the deceased person, the expected return shall be determined in accordance with paragraph (e)(4) of this section.
(7) If paragraph (b)(3) of § 1.72-2 applies to payments provided under a contract and this paragraph applies to such payments, the principles of this paragraph shall be used in making the computations described in paragraph (d)(3) of § 1.72-4. This may be illustrated by the following examples, examples (1) through (3) of which assume that there is no post-June 1986 investment in the contract:
| Multiple from Table II (male, age 63, and female, age 55) | 28.1 |
| Number of units to be paid, in effect, as a joint and survivor annuity | × 6 |
| Number of total annual unit payments anticipatable with respect to the joint and survivor annuity element | 168.6 |
| Multiple from Table I (male, age 63) | 16.2 |
| Number of units to be paid, in effect, as a single life annuity | × 2 |
| Number of total annual unit payments anticipatable with respect to A alone | 32.4 |
| Total number of unit payments anticipatable | 201 |
| Portion of investment in the contract allocable to unit payments ($24,000 ÷ 201) on an annual basis | $119.40 |
| Number of units payable to A while he continues to live | × 8 |
| Portion of the investment in the contract allocable to each taxable year of A | $955.20 |
| Portion of investment in the contract allocable to unit payments ($24,000 ÷ 201) on an annual basis | $119.40 |
| Number of units payable to B for her life after A’s death | × 6 |
| Portion of the investment in the contract allocable to each taxable year of B | $716.40 |
| Multiple from Table VI (ages 60, 57) | 31.2 |
| Number of units to be paid, in effect, as a joint and survivor annuity | × 4 |
| Number of total annual unit payments anticipatable with respect to the joint and survivor annuity element | 124.8 |
| Multiple from Table V (age 60) | 24.2 |
| Number of units to be paid, in effect, as a single life annuity | × 6 |
| Number of total annual unit payments anticipatable with respect to C alone | 145.2 |
| Total number of unit payments anticipatable | 270 |
| Portion of investment in the contract allocable to unit payments ($28,000 ÷ 270) on an annual basis | 103.70 |
| Number of units payable to C while C continues to live | × 10 |
| Portion of the investment in the contract allocable to each taxable year of C | $1,037.00 |
| Portion of investment in the contract allocable to unit payments ($28,000 ÷ 270) on an annual basis | $103.70 |
| Number of units payable to D for D’s life after C’s death | × 4 |
| Portion of the investment in the contract allocable to each taxable year of D | $414.80 |
Pre-July 1986 Computation (all references to unit payments are to the pre-July 1986 applicable portion of such payments):
| Multiple from Table II (male, age 60, female, age 57) | 27.6 |
| Number of units to be paid, in effect, as a joint and survivor annuity | × 4 |
| Number of total annual unit payments anticipatable with respect to the joint and survivor annuity element | 110.40 |
| Multiple from Table I (male, age 60) | 18.2 |
| Number of units to be paid, in effect, as a single life annuity | × 6 |
| Number of total annual unit payments anticipatable with respect to C alone | 109.20 |
| Total number of unit payments anticipatable | 219.6 |
| Portion of pre-July 1986 investment in the contract allocable to unit payments ($16,000 ÷ 219.60) on an annual basis | $72.86 |
| Number of units payable to C while C continues to live | × 10 |
| Portion of pre-July 1986 investment in the contract allocable to each taxable year of C | 728.60 |
| Portion of pre-July 1986 investment in the contract allocable to unit payments ($16,000 ÷ 219.60) on an annual basis | 72.86 |
| Number of units payable to D for D’s life after C’s death | × 4 |
| Portion of pre-July 1986 investment in the contract allocable to each taxable year of D | $291.44 |
| Multiple from Table VI (ages 60, 57) | 31.2 |
| Number of units to be paid, in effect, as a joint and survivor annuity | x4 |
| Number of total annual unit payments anticipatable with respect to the joint and survivor annuity element | 124.80 |
| Multiple from Table V (age 60) | 24.2 |
| Number of units to be paid, in effect, as a single life annuity | × 6 |
| Number of total annual unit payments anticipatable with respect to C alone | 145.20 |
| Total number of unit payments anticipatable | 270 |
| Portion of post-June 1986 investment in the contract allocable to unit payments ($12,000 ÷ 270) on an annual basis | $44.44 |
| Number of units payable to C while C continues to live | × 10 |
| Portion of post-June 1986 investment in the contract allocable to each taxable year of C | $444.40 |
| Portion of post-June 1986 investment in the contract allocable to unit payments ($12,000 ÷ 270) on an annual basis | 44.44 |
| Number of units payable to D for D’s life after C’s death | × 4 |
| Portion of post-June 1986 investment in the contract allocable to each taxable year of D | $177.78 |
| Total computation: | |
| Total portion of the investment in the contract allocable to each taxable year of C ($728.60 + $444.40) | $1,173.00 |
| Total portion of the investment in the contract allocable to each taxable year of D ($291.44 + $177.78) | $469.22 |
(c) Expected return for term certain. In the case of a contract providing for specific periodic payments which are to be paid for a term certain such as a fixed number of months or years, without regard to life expectancy, the expected return is determined by multiplying the fixed number of years or months for which payments are to be made on or after the annuity starting date by the amount of the payment provided in the contract for each such period.
(d) Expected return with respect to amount certain. In the case of contracts involving no life or lives as a measurement of their duration, but under which a determinable total amount is to be paid in installments of lesser amounts paid at periodic intervals, the expected return shall be the total amount guaranteed. If an amount is to be paid periodically until a fund plus interest at a fixed rate is exhausted, but further payments may be made thereafter because of earnings at a higher interest rate, this paragraph shall apply to the total amount anticipatable as a result of the amount of the fund plus the fixed interest thereon. Any amount which may be paid as the result of earnings at a greater interest rate shall be disregarded in determining the expected return. If such an amount is later received, it shall be considered an amount not received as an annuity after the annuity starting date. See paragraph (b)(2) of § 1.72-11.
(e) Expected return where two or more annuity elements providing for fixed payments are acquired for a single consideration. (1) In the case of a contract described in paragraph (a)(2) of § 1.72-2, which provides for specified payments to be made under two or more annuity elements, the expected return shall be found for the contract as a whole by aggregating the expected returns found with respect to each annuity element. If individual life annuity elements are involved (including joint and survivor annuities where the primary annuitant died before January 1, 1954) the expected return for each of them shall be determined in the manner prescribed in paragraph (a) of this section. If joint and survivor annuity elements are involved, the expected return for such elements shall be determined under the appropriate subparagraph of paragraph (b) of this section. If terms certain or amounts certain are involved, the expected returns for such elements shall be determined under paragraph (c) or (d) of this section, respectively.
(2) The aggregate expected return found in accordance with the rules set forth in subparagraph (1) of this paragraph shall constitute the expected return for the contract as a whole. The investment in the contract shall be divided by the amount thus determined to obtain the exclusion ratio for the contract as a whole, This exclusion ratio shall be applied to all amounts received as an annuity under the contract by any recipient (in accordance with the provisions of § 1.72-4), except in the case of amounts received by a surviving annuitant under a joint and survivor annuity element to which the provisions of section 72(i) and paragraph (b)(3) of this section would apply if it were a separate contract. See subparagraph (3) of this paragraph.
(3) In the case of a contract providing two or more annuity elements, one of which is a joint and survivor annuity element of the type described in section 72(i) and paragraph (b)(3) of this section, the general exclusion ratio for the contract as a whole, for the purpose of computations with respect to all the other annuity elements shall be determined in accordance with the principles of subparagraphs (1) and (2) of this paragraph. A special exclusion ratio shall thereafter be determined for the surviving annuitant receiving payments under the annuity element described in section 72(i) and paragraph (b)(3) of this section by using the investment in the contract and the expected return determined in accordance with the provisions of paragraph (b)(3) of this section.
(4) In the case of a contract providing for payments to be made to two persons in the manner described in paragraph (b)(6) of this section, the expected return is to be computed as though there were two joint and survivor annuities under the same contract, in the following manner. First, the multiple appropriate to the ages (as of the annuity starting date) and, if applicable, sexes of the annuitants involved shall be found in Table II or VI (whichever is applicable) of § 1.72-9 and adjusted, if necessary, in the manner described in paragraph (a)(2) of this section. Second, the multiple so found shall be applied to the sum of the payments to be made each year to both annuitants. The result is the expected return for the contract as a whole.
(5) For rules relating to expected return where two or more annuity elements are acquired for a single consideration and one or more of such elements does not specify a fixed payment for each period, see paragraph (f) of this section.
(f) Expected return with respect to obligations providing for payments described in paragraph (b)(3) of § 1.72-2. (1) If a contract to which section 72 applies provides only for payments to be made in a manner described in paragraph (b)(3) of § 1.72-2, the expected return for such contract as a whole shall be an amount equal to the investment in the contract found in accordance with section 72(c)(1) and § 1.72-6, as adjusted for any refund feature in accordance with § 1.72-7.
(2) If a contract to which section 72 applies provides for annuity elements, one or more of which (but not all) provide for payments to be made in a manner described in paragraph (b)(3) of § 1.72-2:
(i) With respect to the portion of the contract providing for annuity elements to which paragraph (b)(3) of § 1.72-2 does not apply, the expected return shall be the aggregate of the expected returns found for each of such elements in accordance with the appropriate paragraph of this section; and
(ii) With respect to all annuity elements to which paragraph (b)(3) of § 1.72-2 does apply, the expected return for all such elements shall be an amount equal to the portion of the investment in the contract allocable to such elements in accordance with the provisions of paragraph (e)(2)(ii) of § 1.72-4 and paragraph (b)(3)(ii)(b) of § 1.72-6.
(g) Expected return with respect to contracts subject to § 1.72-6(d). In the case of a contract to which § 1.72-6(d) (relating to contracts in which amounts were invested both before July 1, 1986, and after June 30, 1986) applies, an expected return is computed using the multiples in Tables I through IV of § 1.72-9 with respect to the pre-July 1986 investment in the contract and a second expected return is computed using the multiples in Tables V through VIII of § 1.72-9 with respect to the post-June 1986 investment in the contract.
§ 1.72-6 Investment in the contract.
(a) General rule. (1) For the purpose of computing the “investment in the contract”, it is first necessary to determine the “aggregate amount of premiums or other consideration paid” for such contract. See section 72(c)(1). This determination is made as of the later of the annuity starting date of the contract or the date on which an amount is first received thereunder as an annuity. The amount so found is then reduced by the sum of the following amounts in order to find the investment in the contract:
(i) The total amount of any return of premiums or dividends received (including unrepaid loans or dividends applied against the principal or interest on such loans) on or before the date on which the foregoing determination is made, and
(ii) The total of any other amounts received with respect to the contract on or before such date which were excludable from the gross income of the recipient under the income tax law applicable at the time of receipt.
(2) For the purpose of subparagraph (1) of this paragraph, amounts received subsequent to the receipt of an amount as an annuity or subsequent to the annuity starting date, whichever is the later, shall be disregarded. See, however, § 1.72-11.
(3) The application of this paragraph may be illustrated by the following examples:
(b) Allocation of the investment in the contract where two or more annuity elements are acquired for a single consideration. (1) In the case of a contract described in § 1.72-2(a)(2) which provides for two or more annuity elements, the investment in the contract determined under paragraph (a) shall be allocated to each of the annuity elements in the ratio that the expected return under each annuity element bears to the aggregate of the expected returns under all the annuity elements. The exclusion ratio for the contract as a whole shall be determined by dividing the investment in the contract (after adjustment for the present value of any or all refund features) by the aggregate of the expected returns under all the annuity elements. This may be illustrated by the following examples:
| Expectancy of A under Table I and § 1.72-5(a)(2), 11.6 (12.1-0.5), multiplied by $1,000 | $11,600 |
| Plus: Expectancy of B computed in a similar manner ($1,000 × 14.5 [15.0−0.5]) | 14,500 |
| Total expected return | 26,100 |
| Expectancy of A under Table I and § 1.72-5(a)(2), 11.6 (12.1-0.5), multiplied by $1,000 | $11,600 |
| Plus: Expectancy of B under Table I and § 1.72-5(a)(2), 14.5 (15.0-0.5), multiplied by $1,000 | $14,500 |
| Pre-July 1986 expected return | $26,100 |
| Expectancy of A under Table V and § 1.72-5(a)(2), 15.5 (16.0-0.5), multiplied by $1,000 | $15,500 |
| Plus: Expectancy of B under Table V and § 1.72-5(a)(2), 15.5 (16.0-0.5), multiplied by $1,000 | $15,500 |
| Post-June 1986 expected return | $31,000 |
| Pre-July 1986 exclusion ratio ($10,000 ÷ $26,100) | 38.3 |
| Post-June 1986 exclusion ratio ($9,575 ÷ 31,000) | 30.9 |
| A and B shall each exclude from gross income $692 (38.3 percent of $1,000 + 30.9 percent of $1,000) of each $1,000 payment and include the remaining $308 in gross income |
(2) In the case of a contract providing for specified annual annuity payments to be made to two persons during their joint lives and the payment of the aggregate of the two individual payments to the survivor for his life, the investment in the contract shall be allocated in accordance with the provisions of subparagraph (1) of this paragraph. For this purpose, the investment in the contract (without regard to the fact that differing amounts may have been contributed by the two annuitants) shall be divided by the expected return determined in accordance with paragraph (e)(4) of § 1.72-5. The resulting exclusion ratio shall then be applied to any amounts received as an annuity by either annuitant.
(3) In the case of a contract providing two or more annuity elements, one or more of which provides for payments to be made in a manner described in paragraph (b)(3) of § 1.72-2, the investment in the contract shall be allocated to the various annuity elements in the following manner.
(i) If all the annuity elements provide for payments to be made in the manner described in paragraph (b)(3) of § 1.72-2, the investment in the contract shall be allocated on the basis of the amounts received by each recipient by apportioning the amount determined to be excludable under that section to each recipient in the same ratio as the total of the amounts received by him in the taxable year bears to the total of the amounts received by all recipients during the same period; and
(ii) If one or more, but not all, of the annuity elements provide for payments to be made in a manner described in paragraph (b)(3) of § 1.72-2:
(a) With respect to all annuity elements to which that section does not apply, the investment in the contract for all such elements shall be the portion of the investment in the contract as a whole (found in accordance with the provisions of this section) which is properly allocable to all such elements; and
(b) With respect to all annuity elements to which paragraph (b)(3) of § 1.72-2 does apply, the investment in the contract for all such elements shall be the investment in the contract as a whole (found in accordance with the provisions of this section) as reduced by the portion thereof determined under (a) of this subdivision.
(iii) In the case of a contract to which paragraph (d) of this section applies, this paragraph (b) is applied in the manner prescribed in paragraph (d) and, in particular, paragraph (d)(5)(v) of this section.
(c) Special rules. (1) For the special rule for determining the investment in the contract for a surviving annuitant in cases where the prior annuitant of a joint and survivor annuity contract died in 1951, 1952, or 1953, see paragraph (b)(3) of § 1.72-5.
(2) For special rules relating to the determination of the investment in the contract where employer contributions are involved, see § 1.72-8. See also paragraph (b) of § 1.72-16 for a special rule relating to the determination of the premiums or other consideration paid for a contract where an employee is taxable on the premiums paid for life insurance protection that is purchased by and considered to be a distribution from an exempt employees’ trust.
(3) For the determination of an adjustment in investment in the contract in cases where a contract contains a refund feature, see § 1.72-7.
(4) In the case of “face-amount certificates” described in section 72(1), the amount of consideration paid for purposes of computing the investment in the contract shall include any amount added to the holder’s basis by reason of section 1232(a)(3)(E) (relating to basis adjustment for amount of original issue discount ratably included in gross income as interest under section 1232(a)(3)).
(d) Pre-July 1986 and post-June 1986 investment in the contract. (1) This paragraph (d) applies to an annuity contract if:
(i) The investment in the contract includes a pre-July 1986 investment in the contract and a post-June 1986 investment in the contract (both as defined in § 1.72-6(d)(3));
(ii) The use of a multiple found in Tables I through VIII of § 1.72-9 is required to determine the expected return under the contract; and
(iii) The election described in paragraph (d)(6) of this section is made with respect to the contract.
(2) In the case of annuity contract to which this paragraph (d) applies—
(i) All computations required to determine the amount excludable from gross income shall be performed separately with respect to the pre-July 1986 investment in the contract and the post-June 1986 investment in the contract as if each such amount were the entire investment in the contract;
(ii) The multiples in Tables I through IV shall be used for computations involving the pre-July 1986 investment in the contract and the multiples in Tables V through VIII shall be used for computations involving the post-June 1986 investment in the contract; and
(iii) The amount excludable from gross income shall be the sum of the amounts determined under the separate computations required by paragraph (d)(2)(i) of this section.
(3) For purposes of the regulations under section 72, the pre-July 1986 investment in the contract and post-June 1986 investment in the contract are determined in accordance with the following rules:
(i)(A) Except as provided in § 1.72-9, if the annuity starting date of the contract occurs before July 1, 1986, the pre-July 1986 investment in the contract is the total investment in the contract as of the annuity starting date;
(B) Except as provided in § 1.72-9, if the annuity starting date of the contract occurs after June 30, 1986, and the contract does not provide for a disqualifying form of payment or settlement, the pre-July 1986 investment in the contract is the investment in the contract computed as of June 30, 1986, as if June 30, 1986, had been the later of the annuity starting date of the contract or the date on which an amount is first received thereunder as an annuity;
(C) If the annuity starting date of the contract occurs after June 30, 1986, and the contract provides, at the option of the annuitant or of any other person (including, in the case of an employee’s annuity, an option exercisable only by, or with the consent of, the employer), for a disqualifying form of payment or settlement, the pre-July 1986 investment in the contract is zero (i.e., the total investment in the contract is post-June 1986 investment in the contract).
(ii) The post-June 1986 investment in the contract is the amount by which the total investment in the contract as of the annuity starting date exceeds the pre-July 1986 investment in the contract.
(iii) For purposes of paragraph (d)(3)(i) of this section, a disqualifying form of payment or settlement is any form of payment or settlement (whether or not selected) that permits the receipt of amounts under the contract in a form other than a life annuity. For example, each of the following options provides for a disqualifying form of payment or settlement:
(A) An option to receive a lump sum in full discharge of the obligation under the contract.
(B) An option to receive an amount under the contract after June 30, 1986, and before the annuity starting date.
(C) An option to receive an annuity for a period certain.
(D) An option to receive payments under a refund feature (within the meaning of paragraphs (b) and (c) of § 1.72-7) that is substantially equivalent to an annuity for a period certain.
(E) An option to receive a temporary life annuity (within the meaning of § 1.72-5 (a)(3)) that is substantially equivalent to an annuity for a period certain.
(iv) For purposes of paragraph (d)(3)(iii) of this section, a refund feature is substantially equivalent to an annuity for a period certain if its value determined under Table VII of § 1.72-9 exceeds 50 percent. Similarly, a temporary life annuity is substantially equivalent to an annuity for a period certain if the multiple determined under Table VIII of § 1.72-9 exceeds 50 percent of the maximum duration of the annuity.
(4) In any separate computation under this paragraph (d), only the applicable portion of other amounts (such as the total expected return under the contract, or the total amount guaranteed under the contract as of the annuity starting date) shall be taken into account if the use of the entire amount in such computation is inconsistent with the use in the computation of only a portion of the investment in the contract. For example, such use is generally inconsistent if the computation requires a comparison of the investment in the contract and such other amount for the purpose of using the greater (or lesser) amount or the difference between the two. For purposes of the first sentence of this paragraph (d)(4), the applicable portion is the amount that bears the same ratio to the entire amount as the pre-July 1986, investment in the contract or the post-June 1986 investment in the contract, whichever is applicable, bears to the total investment in the contract as of the annuity starting date.
(5) Application to particular computations. (i) In the case of a contract to which this paragraph (d) applies, the exclusion ratio for purposes of § 1.72-4 (a) is the sum of the exclusion ratios separately computed in accordance with this paragraph (d). The exclusion ratio with respect to the pre-July 1986 investment in the contract is determined by dividing the pre-July 1986 investment in the contract by the expected return as found under § 1.72-5 by applying the appropriate multiples of Tables I through IV of § 1.72-9. Similarly, the exclusion ratio with respect to the post-June 1986 investment in the contract is determined by dividing the post-June 1986 investment in the contract by the expected return as found under § 1.72-5 by applying the appropriate multiples in Tables V through VIII of § 1.72-9.
(ii) The applicability of § 1.72-4(d)(2) to a contract to which this paragraph (d) applies shall be determined separately with respect to the post-June 1986 investment in the contract and the pre-July 1986 investment in the contract and in each such determination only the applicable portion of the total expected return under the contract shall be taken into account. If § 1.72-4(d)(2) applies with respect to either such investment in the contract, the separately computed exclusion ratio shall be considered to be the applicable portion of 100 percent.
(iii) If § 1.72-4(d)(3) applies to a contract to which this paragraph (d) applies—
(A) The applicable portions (as defined in paragraph (d)(4) of this section) of payments received under the contract for a taxable year shall be separately computed;
(B) The pre-July 1986 investment in the contract and the post-June 1986 investment in the contract shall be separately allocated to the taxable year; and
(C) The separate applicable portions of the payments received under the contract for the taxable year shall be considered to be amounts received as an annuity (for which the exclusion ratio is 100 percent) only to the extent they do not exceed the portions of the corresponding investments in the contract which are properly allocable to that year.
(iv) If § 1.72-4(e) applies to a contract to which this paragraph (d) applies, the exclusion ratio shall be separately computed with respect to the pre-July 1986 investment in the contract and the post-June 1986 investment in the contract. For purposes of the separate computations under § 1.72-4(e)(2)(ii), only the applicable portion of payments received shall be taken into account and the exclusion ratio (100%) shall be applied to the separately computed portion allocated to each participant.
(v) If paragraph (b)(3) of this section applies to a contract to which this paragraph (d) applies, separate allocations are required with respect to the pre-July 1986 investment in the contract and the post-June 1986 investment in the contract.
(vi) If § 1.72-7 applies to a contract to which this paragraph (d) applies, separate computations are required to determine the adjustment to the pre-July 1986 investment in the contract and the post-June 1986 investment in the contract. For purposes of such separate computations, only the applicable portions of the amounts described in § 1.72-7 (b)(3)(ii), (c)(1)(ii)(B), (c)(2)(vii)(B), and (d)(1)(ii) are taken into account. Similarly, in the case of computations with respect to the guarantee of a specified amount under § 1.72-7(d)(1), only the applicable portion of such amount is taken into account.
(6) This paragraph (d) applies to a contract only if the first taxpayer to receive an amount as an annuity under the contract elects to perform separate computations with respect to the pre-July 1986 investment in the contract and the post-June 1986 investment in the contract as if each such amount were the entire investment in contract. If two or more annuitants receive an amount as an annuity under the contract at the same time (such as under a joint-and-last-survivorship annuity contract), an election by one of the annuitants is treated as an election by each of the annuitants. The election is made by attaching a statement to the first return filed by the taxpayer for the first taxable year in which an amount is received as an annuity under the contract. The statement must indicate that the taxpayer is electing to apply the provisions of paragraph (d) of § 1.72-6, and must also contain the name, address, and taxpayer identification number of each annuitant under the contract, and the amount of the pre-July 1986 investment in the contract.
(7) If the investment in the contract includes a post-June 1986 investment in the contract and the election described in paragraph (d)(6) of this section is not made—
(i) The amount excludable from gross income shall be determined without regard to the separate computations described in this paragraph (d); and
(ii) Only the multiples found in Tables V through VIII shall be used in determining the amount excludable from gross income.
§ 1.72-7 Adjustment in investment where a contract contains a refund feature.
(a) Definition of a contract containing a refund feature. A contract to which section 72 applies, contains a refund feature if:
(1) The total amount receivable as an annuity under such contract depends, in whole or in part, on the continuing life of one or more persons,
(2) The contract provides for payments to be made to a beneficiary or the estate of an annuitant on or after the death of the annuitant if a specified amount or a stated number of payments has not been paid to the annuitant or annuitants prior to death, and
(3) Such payments are in the nature of a refund of the consideration paid. See paragraph (c)(1) of § 1.72-11.
(b) Adjustment of investment for the refund feature in the case of a single life annuity. Where a single life annuity contract to which section 72 applies contains a refund feature and the special rule of paragraph (d) of this section does not apply, the investment in the contract shall be adjusted in the following manner:
(1) Determine the number of years necessary for the guaranteed amount to be fully paid by dividing the maximum amount guaranteed as of the annuity starting date by the amount to be received annually under the contract to the extent such amount reduces the guaranteed amount. The number of years should be stated in terms of the nearest whole year, considering for this purpose a fraction of one-half or more as an additional whole year.
(2) Consult Table III or VII (whichever is applicable) of § 1.72-9 for the appropriate percentage under the whole number of years found in subparagraph (1) of this paragraph and the age (as of the annuity starting date) and, if applicable, sex of the annuitant.
(3) Multiply the percentage found in subparagraph (2) of this paragraph by whichever of the following is the smaller: (i) The investment in the contract found in accordance with § 1.72-6 or (ii) the total amount guaranteed as of the annuity starting date.
(4) Subtract the amount found in subparagraph (3) of this paragraph from the investment in the contract found in accordance with § 1.72-6.
| Cost of the annuity contract (investment in the contract, unadjusted) | $21,053 |
| Amount to be received annually | $1,200 |
| Number of years for which payment guaranteed ($21,053 divided by $1,200) | 17.5 |
| Rounded to nearest whole number of years | 18 |
| Percentage located in Table III for age 65 (age of the annuitant as of the annuity starting date) and 18 (the number of whole years) (percent) | 30 |
| Subtract value of the refund feature to the nearest dollar (30 percent of $21,053) | $6,316 |
| Investment in the contract adjusted for the present value of the refund feature without discount for interest | $14,737 |
| Cost of the annuity contract (investment in the contract, unadjusted) | $21,053 |
| Amount to be received annually | $1,200 |
| Number of years for which payment guaranteed ($21,053 ÷ $1,200) | 17.5 |
| Rounded to nearest whole number of years | 18 |
| Percentage in Table VII for age 65 and 18 years (percent) | 15 |
| Subtract value of the refund feature to the nearest dollar (15 percent of $21,053) | $3,158 |
| Investment in the contract adjusted for the present value of the refund feature without discount for interest | $17,895 |
| Pre-July 1986 investment in the contract (unadjusted) | $10,000 |
| Pre-July 1986 portion of the amount to be received annually ($10,000/$21,053 × $1,200) | $570.00 |
| Number of years for which payment guaranteed ($10,000 ÷ $570) | 17.50 |
| Rounded to nearest whole number of years | 18 |
| Percentage in Table III for age 65 and 18 years (percent) | 30 |
| Subtract value of the refund feature to the nearest dollar (30 percent of $10,000) | $3,000 |
| Pre-July 1986 investment in the contract adjusted for the present value of the refund feature without discount for interest | $7,000 |
| Post-June 1986 investment in the contract (unadjusted) | $11,053 |
| Post-June 1986 portion of the amount to be received annually ($11,053/$21,053 × $1,200) | $630 |
| Number of years for which payment guaranteed ($11,053 ÷ $630) | 17.54 |
| Rounded to nearest whole number of years | 18 |
| Percentage in Table VII for age 65 and 18 years (percent) | 15 |
| Subtract value of the refund feature to the nearest dollar (15 percent of $11,053) | $1,658 |
| Post-June 1986 investment in the contract adjusted for the present value of the refund feature without discount for interest | $9,395 |
(c) Adjustment of investment for the refund feature in the case of a joint and survivor annuity. (1) Except as provided in paragraph (c)(2) of this section, if a joint and survivor annuity contract described in paragraph (b) (1), (2) or (6) of § 1.72-5 contains a refund feature and the special rule of paragraph (d) of this section does not apply, the investment in the contract shall be adjusted in the following manner:
(i) Find the percentage determined under the following formula:
(ii) Multiply the percentage found in paragraph (c)(1)(i) of this section by the lesser of (A) the investment in the contract found in accordance with § 1.72-6, or (B) the total amount guaranteed as of the annuity starting date.
(iii) Subtract the amount found in paragraph (c)(1)(ii) of this section from the investment in the contract found in accordance with § 1.72-6.
| x | lx |
|---|---|
| 5 | 1000000. |
| 6 | 999729. |
| 7 | 999493. |
| 8 | 999284. |
| 9 | 999069. |
| 10 | 998849. |
| 11 | 998620. |
| 12 | 998382. |
| 13 | 998135. |
| 14 | 997876. |
| 15 | 997606. |
| 16 | 997322. |
| 17 | 997025. |
| 18 | 996714. |
| 19 | 996387. |
| 20 | 996044. |
| 21 | 995684. |
| 22 | 995304. |
| 23 | 994905. |
| 24 | 994484. |
| 25 | 994041. |
| 26 | 993573. |
| 27 | 993080. |
| 28 | 992563. |
| 29 | 992024. |
| 30 | 991461. |
| 31 | 990876. |
| 32 | 990269. |
| 33 | 989638. |
| 34 | 988984. |
| 35 | 988303. |
| 36 | 987593. |
| 37 | 986846. |
| 38 | 986055. |
| 39 | 985210. |
| 40 | 984298. |
| 41 | 983310. |
| 42 | 982230. |
| 43 | 981046. |
| 44 | 979742. |
| 45 | 978302. |
| 46 | 976709. |
| 47 | 974945. |
| 48 | 972992. |
| 49 | 970832. |
| 50 | 968447. |
| 51 | 966000. |
| 52 | 963313. |
| 53 | 960375. |
| 54 | 957175. |
| 55 | 953705. |
| 56 | 949954. |
| 57 | 945912. |
| 58 | 941568. |
| 59 | 936908. |
| 60 | 931903. |
| 61 | 926451. |
| 62 | 920540. |
| 63 | 914090. |
| 64 | 907011. |
| 65 | 899221. |
| 66 | 890428. |
| 67 | 880797. |
| 68 | 870298. |
| 69 | 858904. |
| 70 | 846565. |
| 71 | 832316. |
| 72 | 816861. |
| 73 | 800078. |
| 74 | 781837. |
| 75 | 762012. |
| 76 | 740743. |
| 77 | 717689. |
| 78 | 692780. |
| 79 | 665977. |
| 80 | 637260. |
| 81 | 607339. |
| 82 | 575531. |
| 83 | 541919. |
| 84 | 506647. |
| 85 | 469931. |
| 86 | 432459. |
| 87 | 394138. |
| 88 | 355393. |
| 89 | 316712. |
| 90 | 278663. |
| 91 | 242020. |
| 92 | 207150. |
| 93 | 174602. |
| 94 | 144828. |
| 95 | 118151. |
| 96 | 94871.7 |
| 97 | 74863.6 |
| 98 | 58042.2 |
| 99 | 44176.1 |
| 100 | 32956.4 |
| 101 | 24044.8 |
| 102 | 17104.1 |
| 103 | 11815.5 |
| 104 | 7886.75 |
| 105 | 5054.94 |
| 106 | 3086.95 |
| 107 | 1778.82 |
| 108 | 955.465 |
| 109 | 470.955 |
| 110 | 208.668 |
| 111 | 80.7899 |
| 112 | 26.2340 |
| 113 | 6.69620 |
| 114 | 1.19385 |
| 115 | .111460 |
(2) If the multiples in Tables I through IV of § 1.72-9 are used to determine any portion of the expected return under a contract described in paragraph (c)(1) of this section, only the post-June 1986 investment in the contract (if any) shall be adjusted in the manner described in paragraph (c)(1) of this section, and the pre-July 1986 investment in the contract shall, in the case of a contract described in paragraph (b) (1) or (6) of § 1.72-5, be adjusted in the following manner:
(i) Determine the number of years necessary for the guaranteed amount to be fully paid by dividing the maximum amount guaranteed as of the annuity starting date by the amount to be received annually under the contract. The number of years should be stated in terms of the nearest whole year, considering for this purpose a fraction of one-half or more as an additional whole year.
(ii) Consult Table III of § 1.72-9 for the appropriate percentages under the whole number of years found in subdivision (i) of this subparagraph and the age (as of the annuity starting date) and sex of each annuitant. If the annuitants are not of the same sex, substitute for the female annuitant a male annuitant 5 years younger, or for the male annuitant a female annuitant 5 years older, so that Table III will be entered in both cases with the ages of annuitants of the same sex.
(iii) Find the sum of the two percentages found in accordance with subdivision (ii) of this subparagraph.
(iv) To the age of the elder of the two annuitants (as determined under subdivision (ii) of this subparagraph), add the number of years (indicated in the table below) opposite the number of years by which such annuitants’ ages differ:
| Number of years difference in age (2 male annuitants or 2 female annuitants) | Addition to older age in years |
|---|---|
| 0 to 1, inclusive | 9 |
| 2 to 3, inclusive | 8 |
| 4 to 5, inclusive | 7 |
| 6 to 8, inclusive | 6 |
| 9 to 11, inclusive | 5 |
| 12 to 15, inclusive | 4 |
| 16 to 20, inclusive | 3 |
| 21 to 27, inclusive | 2 |
| 28 to 42, inclusive | 1 |
| Over 42 | 0 |
(v) Consult Table III for the appropriate percentage under the whole number of years found in subdivision (i) of this subparagraph and the age and sex of the elder annuitant as adjusted under subdivision (iv) of this subparagraph.
(vi) Subtract the percentage obtained in subdivision (v) of this subparagraph from the sum of the percentages found under subdivision (iii) of this subparagraph. If the result is less than one, subdivisions (vii) and (viii) of this subparagraph shall be disregarded and no adjustment made to the investment in the contract.
(vii) Multiply the percentage found in subdivision (vi) of this subparagraph by whichever of the following is the smaller: (A) the investment in the contract found in accordance with § 1.72-6 or (B) the total amount guaranteed as of the annuity starting date.
(viii) Subtract the amount found in subdivision (vii) of this subparagraph from the investment in the contract found in accordance with § 1.72-6.
(3) The principles of this paragraph (c) may be illustrated by the following examples:
| Cost of the annuity contract (investment in the contract unadjusted) | $33,050 |
| Guaranteed amount ($1,200 × 10) | $12,000 |
| Percentage in Table III for male, age 70 (or female, age 75) for duration of the guarantee (10) | 21 |
| Percentage in Table III for female, age 40 (or male, age 35) for duration of the guarantee (10) | 2 |
| Sum of percentages obtained | 23 |
| Difference in years of age between two males, aged 70 and 35 (or 2 females, aged 75 and 40) | 35 |
| Addition, in years, to older age | 1 |
| Percentage in Table III for male one year older than A | 22 |
| Difference between percentages obtained (23 percent less 22 percent) | 1 |
| Value of the refund feature to the nearest dollar (1 percent of $12,000) | $120 |
| Investment in the contract adjusted for present value of the refund feature | $32,930 |
(4) If an annuity described in paragraph (b) of § 1.72-5 contains a refund feature and the manner of determining the adjustment to the investment in the contract (or to any part of such investment) is not prescribed or requires use of the formula in paragraph (c)(1)(i) of this section, the Commissioner will determine the amount of the adjustment upon request. The request must contain the date of birth of each annuitant, the guaranteed amount, the annual annuity payable to each annuitant, and the annuity starting date. Send the request to the Commissioner of Internal Revenue, Attention: OP:E:EP:GA, Washington, D.C. 20224.
(d) Adjustment of investment in the contract where paragraph (b)(3) of § 1.72-2 applies to payments. (1) If paragraph (b)(3) of § 1.72-2 applies to payments to be made under a contract and this section also applies because of the provision for a refund feature, an adjustment shall be made to the investment in the contract in accordance with this paragraph before making the computations required by paragraph (d)(3) of § 1.72-4 and paragraph (d)(7) of § 1.72-5. In the case of the guarantee of a specified amount, the adjustment shall be made by applying the appropriate multiple from Table III or VII (whichever is applicable), as otherwise determined under this section, to the investment in the contract or the guranteed amount, whichever is the lesser. The guarantee period shall be found by dividing the amount guaranteed by the amount determined by placing the payments received during the first taxable year (to guaranteed amount) on an annual basis. Thus, if monthly payments are first received by a taxpayer on a calendar year basis in August, his total payments (to the extent that they reduce the guaranteed amount) for the taxable year would be divided by 5 and multiplied by 12. The guaranteed amount would then be divided by the result of this computation to obtain the guarantee period. If the contract merely guarantees that proceeds from a unit or units of a fund shall be paid for a fixed number of years or the life (or lives) of an annuitant (or annuitants), whichever is the longer, the fixed number of years is the guarantee period. The appropriate percentage in Table III or VII shall be applied to whichever of the following is the smaller: (i) the investment in the contract; or (ii) the product of the payments received in the first taxable year, placed on an annual basis, multiplied by the number of years for which payment of the proceeds of a unit or units is guaranteed.
(2) The principles of this paragraph may be illustrated by the following examples:
(e) Adjustment of the investment in the contract where more than one annuity element is provided for a single consideration. In the case of contracts to which paragraph (b) of § 1.72-6 applies for the purpose of allocating the investment in the contract to two or more annuity elements which are provided for a single consideration, if one or more of such elements involves a refund feature, the portion of the investment in the contract properly allocable to each such element shall be adjusted for the refund feature before aggregating all the investments in order to obtain the exclusion ratio which is to apply to the contract as a whole.
| A’s expected return (A’s payments per year of $4,146 multiplied by his life expectancy from Table 1 of 12.1) | $50,166.60 |
| B’s expected return (B’s payments per year of $2,820 multiplied by his life expectancy from Table 1 of 18.2) | $51,324.00 |
| Sum of expected returns to be used in determining exclusion ratio | $101,490.60 |
| Percentage of total expected return attributable to A’s expectancy of life ($50,166.60 ÷ $101,490.60) | 49.4 |
| Percentage of total expected return attributable to B’s expectancy of life ($51,324 ÷ $101,490.60) | 50.6 |
| Portion of investment in the contract allocable to A’s annuity (49.4 percent of $86,000) | $42,484.00 |
| Portion of investment in the contract allocable to B’s annuity (50.6 percent of $86,000) | $43,516.00 |
| Value of the refund feature with respect to A’s annuity (percentage from Table III for male, age 70, and duration 10, or 21 percent, multiplied by lesser of guaranteed amount and allocable portion of investment in the contract, $41,460) | $8,707.00 |
| A’s allocable portion of the investment in the contract adjusted for refund feature ($42,484 less $8,707.00) | $33,777.00 |
| Value of the refund feature with respect to B’s annuity (percentage from Table III for male, age 60, and duration 20, or 25 percent, multiplied by lesser of guaranteed amount and allocable portion of investment in the contract, $43,516) | $10,879.00 |
| B’s allocable portion of the investment in the contract adjusted for refund feature ($43,516 less $10,879.00) | $32,637.00 |
| Sum of A’s and B’s allocable portions of the investment in the contract after adjustment for the refund feature | $66,414.00 |
| Exclusion ratio for the contract as a whole (total adjusted investment in the contract, $66,414, divided by the total expected return from above, $101,490.60) (percent) | 65.4 |
| A’s expected return (A’s payments per year of $4,146 multiplied by his life expectancy from Table V of 16.0) | $66,336.00 |
| B’s expected return (B’s payments per year of $2,820 multiplied by his life expectancy from Table V of 24.2) | $68,244.00 |
| Sum of expected returns to be used in determining exclusion ratio | $134,580.00 |
| Percentage of total expected return attributable to A’s expectancy of life ($66,336.00 ÷ $134,580.00) | 49.3 |
| Percentage of total expected return attributable to B’s expectancy of life ($68,244.00 ÷ $134,580.00) | 50.7 |
| Portion of investment in the contract allocable to A’s annuity (49.3 percent of $86,000) | $42,398.00 |
| Portion of investment in the contract allocable to B’s annuity (50.7 percent of $86,000) | $43,602.00 |
| Value of the refund feature with respect to A’s annuity (percentage from Table VII for age 70 and duration 10, or 11 percent, multiplied by lesser of the guaranteed amount and allocable portion of investment in the contract, $41,460) | $4,560.60 |
| A’s allocable portion of the investment in the contract adjusted for refund feature ($42,398 less $4,560.60) | $37,837.40 |
| Value of the refund feature with respect to B’s annuity (percentage from Table VII for age 60 and duration 20, or 11 percent, multiplied by lesser of guaranteed amount and allocable portion of investment in the contract, $43,602) | $4,796.22 |
| B’s allocable portion of the investment in the contract adjusted for refund feature ($43,602 less $4,796.22) | $38,805.78 |
| Sum of A’s and B’s allocable portions of the investment in the contract after adjustment for the refund feature | $76,643.18 |
| Exclusion ratio for the contract as a whole (total adjusted investment in the contract, $76,643.18, divided by the total expected return from above, $134,580.00) (percent) | 56.9 |
(f) Adjustment of investment in the contract with respect to contracts subject to § 1.72-6(d). In the case of a contract to which § 1.72-6(d) (relating to contracts in which amounts were invested both before July 1, 1986, and after June 30, 1986) applies, this section is applied in the manner prescribed in § 1.72-6(d) and, in particular, § 1.72-6(d)(5)(vi).
(a) Contributions in the nature of compensation—(1) Amounts includible in gross income of employee under subtitle A of the Code or prior income tax laws. Section 72(f) provides that for the purposes of section 72 (c), (d), and (e), amounts contributed by an employer for the benefit of an employee or his beneficiaries shall constitute consideration paid or contributed by the employee to the extent that such amounts were includible in the gross income of the employee under subtitle A of the Code or prior income tax laws. Amounts to which this paragraph applies include, for example, contributions made by an employer to or under a trust or plan which fails to qualify under the provisions of section 401(a), provided that the employee’s rights to such contributions are nonforfeitable at the time the contributions are made. See sections 402(b) and 403(c) and the regulations thereunder. This subparagraph also applies to premiums paid by an employer (other than premiums paid on behalf of an owner-employee) for life insurance protection for an employee if such premiums are includible in the gross income of the employee when paid. See § 1.72-16. However, such premiums shall only be considered as premiums and other consideration paid by the employee with respect to any benefits attributable to the contract providing the life insurance protection. See § 1.72-16.
(2) Amounts not includible in gross income of employee at time contributed if paid directly to employee at that time. Except as provided in subparagraph (3) of this paragraph, section 72(f) provides that for the purposes of section 72 (c), (d), and (e), amounts contributed by an employer for the benefit of an employee or his beneficiaries shall constitute consideration paid or contributed by the employee to the extent that such amounts would not have been includible in the gross income of the employee at the time contributed had they been paid directly to the employee at that time. Amounts to which this subparagraph applies include, for example, contributions made by an employer after December 31, 1950, and before January 1, 1963, if made on account of foreign services rendered by an employee during a period in which the employee qualified as a bona fide resident of a foreign country under section 911(a) of the Internal Revenue Code of 1954, or under section 116(a) of the Internal Revenue Code of 1939. In such a case, it would be immaterial whether such contributions were made under a qualified plan or otherwise. See subparagraph (4) of this paragraph for rules governing the determination of the amount of employer foreign service contributions to which this subparagraph applies. On the other hand, if contributions are made by an employer to a qualified plan at a time when compensation paid directly to the employee concerned with respect to the same services rendered would have been includible in the gross income of the employee, such as in the case of an employee of a State government where contributions are made in 1955 with respect to services rendered by the employee prior to the year 1939, this subparagraph does not apply to such contributions.
(3) Limitation—(i) In general. Except as provided in subdivision (ii) of this subparagraph, the provisions of subparagraph (2) of this paragraph shall not apply to amounts which were contributed by the employer after December 31, 1962, and which would not have been includible in the gross income of the employee by reason of the application of section 911, if such amounts had been paid directly to the employee at the time of contribution. Employer contributions attributable to foreign services performed by the employee after December 31, 1962, do not constitute, for purposes of section 72 (c), (d), and (e), consideration paid or contributed by the employee.
(ii) Exception. The provisions of subdivision (i) of this subparagraph shall not apply to amounts which were contributed by the employer to provide pension or annuity credits (determined in accordance with the provisions of subparagraph (4) of this paragraph) to the extent such credits are—
(a) Attributable to foreign services performed before January 1, 1963, with respect to which the employee qualified for the benefits of section 911(a) (or corresponding provisions of prior revenue laws), and
(b) Provided pursuant to pension or annuity plan provisions in existence on March 12, 1962, and on that date applicable to such services.
(4) Determination of employer foreign service contributions which constitute consideration paid or contributed by employee. For purposes of subparagraphs (2) and (3)(ii) of this paragraph, employer foreign service contributions which constitute, for purposes of section 72 (c), (d), and (e), consideration paid or contributed by the employee shall be determined as follows:
(i) Treatment of identifiable contributions. If, under the terms of the pension or annuity plan under which employer contributions were made, such contributions may be identified as—
(a) Attributable to foreign services performed before January 1, 1963, with respect to which the employee qualified for the benefits of section 911(a) (or corresponding provisions of prior revenue laws), and
(b) Made under pension or annuity plan provisions in existence on March 12, 1962, which were applicable to the services referred to in (a) of this subdivision on that date,
(ii) Alternative rule for unidentifiable contributions. If employer contributions may not be identified in the manner described in subdivision (i) of this subparagraph, the amount of employer contributions attributable to foreign services performed before January 1, 1963, and considered paid or contributed by the employee shall be determined on the basis of an estimated allocation which is reasonable and consistent with the circumstances and the provisions of the pension or annuity plan under which such contributions are made. For example, if an employee’s benefits under a pension or annuity plan, which is unchanged after March 12, 1962, are determined with respect to his basic compensation during his entire period of credited service, the amount of employer contributions considered paid or contributed by the employee shall be an amount which bears the same ratio to total employer contributions for such employee under the pension or annuity plan as his basic compensation attributable to foreign services performed before January 1, 1963, with respect to which he qualified for the benefits of section 911(a) (or corresponding provisions of prior revenue laws) bears to his total basic compensation. On the other hand, if an employee’s benefits under a pension or annuity plan, which is unchanged after March 12, 1962, are determined with respect to his basic compensation during his final five years of credited service, the amount of employer contributions considered paid or contributed by the employee shall be an amount which bears the same ratio to total employer contributions for such employee as his number of years of credited service before January 1, 1963, with respect to which he qualified for the benefits of section 911(a) (or corresponding provisions of prior revenue laws) bears to his total number of years of credited service.
(5) Amounts not includible in gross income of employee under subtitle A of the Code or prior income tax laws. Amounts contributed by an employer which were not includible in the gross income of the employee under Subtitle A of the Code or prior income tax laws, but which would have been includible therein had they been paid directly to the employee, do not constitute consideration paid or contributed by the employee for the purposes of section 72. For example, contributions made by an employer under a qualified employees’ trust or plan, which contributions would have been includible in the gross income of the employee had such contributions been paid to him directly as compensation, do not constitute consideration paid or contributed by the employee. Accordingly, the aggregate amount of premiums or other consideration paid or contributed by an employee, insofar as compensatory employer contributions are concerned, consists solely of the (i) sum of all amounts actually contributed by the employee, plus (ii) contributions in the nature of compensation which are deemed to be paid or contributed by the employee under this paragraph.
(b) Contributions in the nature of death benefits. In the case of an employee’s beneficiary, the aggregate amount of premiums or other consideration paid or deemed to be paid or contributed by the employee shall also include:
(1) Amounts (other than amounts paid as an annuity) to the extent such amounts are excludable from the beneficiary’s gross income as a death benefit under section 101(b), and
(2) Any amount or amounts of death benefits which are treated as additional consideration contributed by the employee under section 101(b)(2)(D) and the regulations thereunder, or which were excludable from the beneficiary’s gross income as a death benefit under section 22(b)(1)(B) of the Internal Revenue Code of 1939 and the regulations thereunder.
(c) Amounts “made available” to an employee or his beneficiary. Any amount which, although not actually paid, is made available to and includable in the gross income of an employee or his beneficiary under the rules of sections 402 and 403 and the regulations thereunder, shall be considered an amount contributed by the employee and shall be aggregated with amounts, if any, to which paragraphs (a) and (b) of this section apply for the purpose of determining the aggregate amount of premiums or other consideration paid by the employee.
(d) Amounts includable in gross income of employee when his rights under annuity contract change to nonforfeitable rights. Any amount which, by reason of section 403(d) and after the application of paragraph (b) of § 1.403 (b)-1, is required to be included in an employee’s gross income for the year when his rights under an annuity contract change from forfeitable to nonforfeitable rights shall be considered an amount contributed by the employee and shall be aggregated with amounts, if any, to which paragraphs (a), (b), and (c) of this section apply for the purpose of determining the aggregate amount of premiums or other consideration paid or contributed by the employee for such annuity contract. In other words, if, under section 403(d), an employee of an organization exempt from tax under section 501(a) or 521(a) is required to include an amount in gross income by reason of his rights under an annuity contract changing from forfeitable to nonforfeitable rights, such amount, to the extent it is not excludable from gross income under paragraph (b) of § 1.403 (b)-1, shall be considered an amount contributed by such employee for the annuity contract.
§ 1.72-9 Tables.
The following tables are to be used in connection with computations under section 72 and the regulations thereunder. Tables I, II, IIA, III, and IV are to be used if the investment in the contract does not include a post-June 1986 investment in the contract (as defined in § 1.72-6(d)(3)). Tables V, VI, VIA, VII, and VIII are to be used if the investment in the contract includes a post-June 1986 investment in the contract (as defined in § 1.72-6(d)(3)).
In the case of a contract under which amounts are received as an annuity after June 30, 1986, a taxpayer receiving such amounts may elect to treat the entire investment in the contract as post-June 1986 investment in the contract and thus apply Tables V through VIII. A taxpayer may make the election for any taxable year in which such amounts are received by attaching to the taxpayer’s return for such taxable year a statement that the taxpayer is electing under § 1.72-9 to treat the entire investment in the contract as post-June 1986 investment in the contract. The statement must contain the taxpayer’s name, address, and taxpayer identification number. The election is irrevocable and applies with respect to all amounts that the taxpayer receives as an annuity under the contract in the taxable year for which the election is made or in any subsequent taxable year. (Note that for purposes of the examples in §§ 1.72-4 through 1.72-11 the election described in this section is disregarded (i.e., it assumed that the taxpayer does not make an election under this section).) See also § 1.72-6(d)(3) for rules treating the entire investment in a contract as post-June 1986 investment in a contract if the annuity starting date of the contract is after June 30, 1986, and the contract provides for a disqualifying form of payment or settlement, such as an option to receive a lump sum in full discharge of the obligation under the contract. In addition, see § 1.72-6(d) for special rules concerning the tables to be used and the separate computations required if the investment in the contract includes both a pre-July 1986 investment in the contract and a post-June 1986 investment in the contract and the election described in § 1.72-6(d)(6) is made with respect to the contract.
Table I—Ordinary Life Annuities—One Life—Expected Return Multiples
| Ages | Multiples | |
|---|---|---|
| Male | Female | |
| 6 | 11 | 65.0 |
| 7 | 12 | 64.1 |
| 8 | 13 | 63.2 |
| 9 | 14 | 62.3 |
| 10 | 15 | 61.4 |
| 11 | 16 | 60.4 |
| 12 | 17 | 59.5 |
| 13 | 18 | 58.6 |
| 14 | 19 | 57.7 |
| 15 | 20 | 56.7 |
| 16 | 21 | 55.8 |
| 17 | 22 | 54.9 |
| 18 | 23 | 53.9 |
| 19 | 24 | 53.0 |
| 20 | 25 | 52.1 |
| 21 | 26 | 51.1 |
| 22 | 27 | 50.2 |
| 23 | 28 | 49.3 |
| 24 | 29 | 48.3 |
| 25 | 30 | 47.4 |
| 26 | 31 | 46.5 |
| 27 | 32 | 45.6 |
| 28 | 33 | 44.6 |
| 29 | 34 | 43.7 |
| 30 | 35 | 42.8 |
| 31 | 36 | 41.9 |
| 32 | 37 | 41.0 |
| 33 | 38 | 40.0 |
| 34 | 39 | 39.1 |
| 35 | 40 | 38.2 |
| 36 | 41 | 37.3 |
| 37 | 42 | 36.5 |
| 38 | 43 | 35.6 |
| 39 | 44 | 34.7 |
| 40 | 45 | 33.8 |
| 41 | 46 | 33.0 |
| 42 | 47 | 32.1 |
| 43 | 48 | 31.2 |
| 44 | 49 | 30.4 |
| 45 | 50 | 29.6 |
| 46 | 51 | 28.7 |
| 47 | 52 | 27.9 |
| 48 | 53 | 27.1 |
| 49 | 54 | 26.3 |
| 50 | 55 | 25.5 |
| 51 | 56 | 24.7 |
| 52 | 57 | 24.0 |
| 53 | 58 | 23.2 |
| 54 | 59 | 22.4 |
| 55 | 60 | 21.7 |
| 56 | 61 | 21.0 |
| 57 | 62 | 20.3 |
| 58 | 63 | 19.6 |
| 59 | 64 | 18.9 |
| 60 | 65 | 18.2 |
| 61 | 66 | 17.5 |
| 62 | 67 | 16.9 |
| 63 | 68 | 16.2 |
| 64 | 69 | 15.6 |
| 65 | 70 | 15.0 |
| 66 | 71 | 14.4 |
| 67 | 72 | 13.8 |
| 68 | 73 | 13.2 |
| 69 | 74 | 12.6 |
| 70 | 75 | 12.1 |
| 71 | 76 | 11.6 |
| 72 | 77 | 11.0 |
| 73 | 78 | 10.5 |
| 74 | 79 | 10.1 |
| 75 | 80 | 9.6 |
| 76 | 81 | 9.1 |
| 77 | 82 | 8.7 |
| 78 | 83 | 8.3 |
| 79 | 84 | 7.8 |
| 80 | 85 | 7.5 |
| 81 | 86 | 7.1 |
| 82 | 87 | 6.7 |
| 83 | 88 | 6.3 |
| 84 | 89 | 6.0 |
| 85 | 90 | 5.7 |
| 86 | 91 | 5.4 |
| 87 | 92 | 5.1 |
| 88 | 93 | 4.8 |
| 89 | 94 | 4.5 |
| 90 | 95 | 4.2 |
| 91 | 96 | 4.0 |
| 92 | 97 | 3.7 |
| 93 | 98 | 3.5 |
| 94 | 99 | 3.3 |
| 95 | 100 | 3.1 |
| 96 | 101 | 2.9 |
| 97 | 102 | 2.7 |
| 98 | 103 | 2.5 |
| 99 | 104 | 2.3 |
| 100 | 105 | 2.1 |
| 101 | 106 | 1.9 |
| 102 | 107 | 1.7 |
| 103 | 108 | 1.5 |
| 104 | 109 | 1.3 |
| 105 | 110 | 1.2 |
| 106 | 111 | 1.0 |
| 107 | 112 | .8 |
| 108 | 113 | .7 |
| 109 | 114 | .6 |
| 110 | 115 | .5 |
| 111 | 116 | 0 |
Table II—Ordinary Joint Life and Last Survivor Annuities—Two Lives—Expected Return Multiples
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | ||
| Female 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | ||
| 6 | 11 | 73.5 | 73.0 | 72.6 | 72.2 | 71.8 | 71.4 | 71.0 | 70.7 | 70.4 | 70.0 | 69.7 | 69.5 | 69.2 | 68.9 | 68.7 |
| 7 | 12 | 73.0 | 72.6 | 72.1 | 71.7 | 71.3 | 70.9 | 70.5 | 70.1 | 69.8 | 69.4 | 69.1 | 68.8 | 68.5 | 68.3 | 68.0 |
| 8 | 13 | 72.6 | 72.1 | 71.6 | 71.2 | 70.8 | 70.4 | 70.0 | 69.6 | 69.2 | 68.9 | 68.5 | 68.2 | 67.9 | 67.6 | 67.3 |
| 9 | 14 | 72.2 | 71.7 | 71.2 | 70.7 | 70.3 | 69.9 | 69.4 | 69.0 | 68.7 | 68.3 | 67.9 | 67.6 | 67.3 | 67.0 | 66.7 |
| 10 | 15 | 71.8 | 71.3 | 70.8 | 70.3 | 69.8 | 69.4 | 68.9 | 68.5 | 68.1 | 67.7 | 67.4 | 67.0 | 66.7 | 66.4 | 66.1 |
| 11 | 16 | 71.4 | 70.9 | 70.4 | 69.9 | 69.4 | 68.9 | 68.5 | 68.0 | 67.6 | 67.2 | 66.8 | 66.5 | 66.1 | 65.8 | 65.4 |
| 12 | 17 | 71.0 | 70.5 | 70.0 | 69.4 | 68.9 | 68.5 | 68.0 | 67.5 | 67.1 | 66.7 | 66.3 | 65.9 | 65.5 | 65.2 | 64.8 |
| 13 | 18 | 70.7 | 70.1 | 69.6 | 69.0 | 68.5 | 68.0 | 67.5 | 67.1 | 66.6 | 66.2 | 65.8 | 65.4 | 65.0 | 64.6 | 64.2 |
| 14 | 19 | 70.4 | 69.8 | 69.2 | 68.7 | 68.1 | 67.6 | 67.1 | 66.6 | 66.1 | 65.7 | 65.3 | 64.8 | 64.4 | 64.0 | 63.7 |
| 15 | 20 | 70.0 | 69.4 | 68.9 | 68.3 | 67.7 | 67.2 | 66.7 | 66.2 | 65.7 | 65.2 | 64.8 | 64.3 | 63.9 | 63.5 | 63.1 |
| 16 | 21 | 69.7 | 69.1 | 68.5 | 67.9 | 67.4 | 66.8 | 66.3 | 65.8 | 65.3 | 64.8 | 64.3 | 63.8 | 63.4 | 63.0 | 62.6 |
| 17 | 22 | 69.5 | 68.8 | 68.2 | 67.6 | 67.0 | 66.5 | 65.9 | 65.4 | 64.8 | 64.3 | 63.8 | 63.4 | 62.9 | 62.5 | 62.0 |
| 18 | 23 | 69.2 | 68.5 | 67.9 | 67.3 | 66.7 | 66.1 | 65.5 | 65.0 | 64.4 | 63.9 | 63.4 | 62.9 | 62.4 | 62.0 | 61.5 |
| 19 | 24 | 68.9 | 68.3 | 67.6 | 67.0 | 66.4 | 65.8 | 65.2 | 64.6 | 64.0 | 63.5 | 63.0 | 62.5 | 62.0 | 61.5 | 61.0 |
| 20 | 25 | 68.7 | 68.0 | 67.3 | 66.7 | 66.1 | 65.4 | 64.8 | 64.2 | 63.7 | 63.1 | 62.6 | 62.0 | 61.5 | 61.0 | 60.6 |
| Male | Female | Ages | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | ||
| Female 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | ||
| 6 | 11 | 68.4 | 68.2 | 68.0 | 67.8 | 67.6 | 67.5 | 67.3 | 67.1 | 67.0 | 66.8 | 66.7 | 66.6 | 66.5 | 66.4 |
| 7 | 12 | 67.8 | 67.5 | 67.3 | 67.1 | 66.9 | 66.7 | 66.5 | 66.4 | 66.2 | 66.1 | 65.9 | 65.8 | 65.7 | 65.6 |
| 8 | 13 | 67.1 | 66.8 | 66.6 | 66.4 | 66.2 | 66.0 | 65.8 | 65.6 | 65.4 | 65.3 | 65.1 | 65.0 | 64.9 | 64.7 |
| 9 | 14 | 66.4 | 66.2 | 65.9 | 65.7 | 65.4 | 65.2 | 65.0 | 64.8 | 64.7 | 64.5 | 64.3 | 64.2 | 64.1 | 63.9 |
| 10 | 15 | 65.8 | 65.5 | 65.2 | 65.0 | 64.7 | 64.5 | 64.3 | 64.1 | 63.9 | 63.7 | 63.6 | 63.4 | 63.3 | 63.1 |
| 11 | 16 | 65.1 | 64.8 | 64.6 | 64.3 | 64.1 | 63.8 | 63.6 | 63.4 | 63.2 | 63.0 | 62.8 | 62.6 | 62.5 | 62.3 |
| 12 | 17 | 64.5 | 64.2 | 63.9 | 63.6 | 63.4 | 63.1 | 62.9 | 62.7 | 62.4 | 62.2 | 62.0 | 61.9 | 61.7 | 61.5 |
| 13 | 18 | 63.9 | 63.6 | 63.3 | 63.0 | 62.7 | 62.4 | 62.2 | 61.9 | 61.7 | 61.5 | 61.3 | 61.1 | 60.9 | 60.8 |
| 14 | 19 | 63.3 | 63.0 | 62.7 | 62.3 | 62.0 | 61.8 | 61.5 | 61.2 | 61.0 | 60.8 | 60.6 | 60.4 | 60.2 | 60.0 |
| 15 | 20 | 62.7 | 62.4 | 62.0 | 61.7 | 61.4 | 61.1 | 60.8 | 60.6 | 60.3 | 60.1 | 59.8 | 59.6 | 59.4 | 59.2 |
| 16 | 21 | 62.2 | 61.8 | 61.4 | 61.1 | 60.8 | 60.5 | 60.2 | 59.9 | 59.6 | 59.4 | 59.1 | 58.9 | 58.7 | 58.5 |
| 17 | 22 | 61.6 | 61.2 | 60.9 | 60.5 | 60.2 | 59.8 | 59.5 | 59.2 | 58.9 | 58.7 | 58.4 | 58.2 | 57.9 | 57.7 |
| 18 | 23 | 61.1 | 60.7 | 60.3 | 59.9 | 59.6 | 59.2 | 58.9 | 58.6 | 58.3 | 58.0 | 57.7 | 57.5 | 57.2 | 57.0 |
| 19 | 24 | 60.6 | 60.2 | 59.7 | 59.4 | 59.0 | 58.6 | 58.3 | 57.9 | 57.6 | 57.3 | 57.0 | 56.8 | 56.5 | 56.3 |
| 20 | 25 | 60.1 | 59.6 | 59.2 | 58.8 | 58.4 | 58.0 | 57.7 | 57.3 | 57.0 | 56.7 | 56.4 | 56.1 | 55.8 | 55.6 |
| 21 | 26 | 59.6 | 59.1 | 58.7 | 58.3 | 57.9 | 57.5 | 57.1 | 56.7 | 56.4 | 56.0 | 55.7 | 55.4 | 55.1 | 54.9 |
| 22 | 27 | 59.1 | 58.7 | 58.2 | 57.7 | 57.3 | 56.9 | 56.5 | 56.1 | 55.8 | 55.4 | 55.1 | 54.8 | 54.5 | 54.2 |
| 23 | 28 | 58.7 | 58.2 | 57.7 | 57.2 | 56.8 | 56.4 | 55.9 | 55.5 | 55.2 | 54.8 | 54.4 | 54.1 | 53.8 | 53.5 |
| 24 | 29 | 58.3 | 57.7 | 57.2 | 56.8 | 56.3 | 55.8 | 55.4 | 55.0 | 54.6 | 54.2 | 53.8 | 53.5 | 53.2 | 52.8 |
| 25 | 30 | 57.9 | 57.3 | 56.8 | 56.3 | 55.8 | 55.3 | 54.9 | 54.4 | 54.0 | 53.6 | 53.2 | 52.9 | 52.5 | 52.2 |
| 26 | 31 | 57.5 | 56.9 | 56.4 | 55.8 | 55.3 | 54.8 | 54.4 | 53.9 | 53.5 | 53.1 | 52.7 | 52.3 | 51.9 | 51.6 |
| 27 | 32 | 57.1 | 56.5 | 55.9 | 55.4 | 54.9 | 54.4 | 53.9 | 53.4 | 53.0 | 52.5 | 52.1 | 51.7 | 51.3 | 50.9 |
| 28 | 33 | 56.7 | 56.1 | 55.5 | 55.0 | 54.4 | 53.9 | 53.4 | 52.9 | 52.4 | 52.0 | 51.6 | 51.1 | 50.7 | 50.3 |
| 29 | 34 | 56.4 | 55.8 | 55.2 | 54.6 | 54.0 | 53.5 | 53.0 | 52.4 | 52.0 | 51.5 | 51.0 | 50.6 | 50.2 | 49.3 |
| 30 | 35 | 56.0 | 55.4 | 54.8 | 54.2 | 53.6 | 53.1 | 52.5 | 52.0 | 51.5 | 51.0 | 50.5 | 50.1 | 49.6 | 49.2 |
| 31 | 36 | 55.7 | 55.1 | 54.4 | 53.8 | 53.2 | 52.7 | 52.1 | 51.6 | 51.0 | 50.5 | 50.0 | 49.5 | 49.1 | 48.7 |
| 32 | 37 | 55.4 | 54.8 | 54.1 | 53.5 | 52.9 | 52.3 | 51.7 | 51.1 | 50.6 | 50.1 | 49.5 | 49.1 | 48.6 | 48.1 |
| 33 | 38 | 55.1 | 54.5 | 53.8 | 53.2 | 52.5 | 51.9 | 51.3 | 50.7 | 50.2 | 49.6 | 49.1 | 48.6 | 48.1 | 47.6 |
| 34 | 39 | 54.9 | 54.2 | 53.5 | 52.8 | 52.2 | 51.6 | 50.9 | 50.3 | 49.8 | 49.2 | 48.7 | 48.1 | 47.6 | 47.1 |
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | ||
| Female 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | ||
| 6 | 11 | 66.3 | 66.2 | 66.1 | 66.0 | 65.9 | 65.9 | 65.8 | 65.7 | 65.7 | 65.6 | 65.6 | 65.5 | 65.5 | 65.5 | 65.4 |
| 7 | 12 | 65.4 | 65.3 | 65.3 | 65.2 | 65.1 | 65.0 | 64.9 | 64.9 | 64.8 | 64.8 | 64.7 | 64.7 | 64.6 | 64.6 | 64.5 |
| 8 | 13 | 64.6 | 64.5 | 64.4 | 64.3 | 64.2 | 64.2 | 64.1 | 64.0 | 64.0 | 63.9 | 63.8 | 63.8 | 63.7 | 63.7 | 63.7 |
| 9 | 14 | 63.8 | 63.7 | 63.6 | 63.5 | 63.4 | 63.3 | 63.2 | 63.2 | 63.1 | 63.0 | 63.0 | 62.9 | 62.9 | 62.8 | 62.8 |
| 10 | 15 | 63.0 | 62.9 | 62.8 | 62.7 | 62.6 | 62.5 | 62.4 | 62.3 | 62.2 | 62.2 | 62.1 | 62.0 | 62.0 | 61.9 | 61.9 |
| 11 | 16 | 62.2 | 62.1 | 61.9 | 61.8 | 61.7 | 61.6 | 61.5 | 61.4 | 61.4 | 61.3 | 61.2 | 61.2 | 61.1 | 61.0 | 61.0 |
| 12 | 17 | 61.4 | 61.3 | 61.1 | 61.0 | 60.9 | 60.8 | 60.7 | 60.6 | 60.5 | 60.4 | 60.4 | 60.3 | 60.2 | 60.2 | 60.1 |
| 13 | 18 | 60.6 | 60.5 | 60.3 | 60.2 | 60.1 | 60.0 | 59.9 | 59.8 | 59.7 | 59.6 | 59.5 | 59.4 | 59.4 | 59.3 | 59.2 |
| 14 | 19 | 59.8 | 59.7 | 59.5 | 59.4 | 59.3 | 59.1 | 59.0 | 58.9 | 58.8 | 58.7 | 58.6 | 58.6 | 58.5 | 58.4 | 58.4 |
| 15 | 20 | 59.0 | 58.9 | 58.7 | 58.6 | 58.4 | 58.3 | 58.2 | 58.1 | 58.0 | 57.9 | 57.8 | 57.7 | 57.6 | 57.6 | 57.5 |
| 16 | 21 | 58.3 | 58.1 | 57.9 | 57.8 | 57.6 | 57.5 | 57.4 | 57.2 | 57.1 | 57.0 | 56.9 | 56.8 | 56.8 | 56.7 | 56.6 |
| 17 | 22 | 57.5 | 57.3 | 57.2 | 57.0 | 56.8 | 56.7 | 56.6 | 56.4 | 56.3 | 56.2 | 56.1 | 56.0 | 55.9 | 55.8 | 55.7 |
| 18 | 23 | 56.8 | 56.6 | 56.4 | 56.2 | 56.0 | 55.9 | 55.7 | 55.6 | 55.5 | 55.4 | 55.2 | 55.1 | 55.1 | 55.0 | 54.9 |
| 19 | 24 | 56.0 | 55.8 | 55.6 | 55.4 | 55.3 | 55.1 | 54.9 | 54.8 | 54.7 | 54.5 | 54.4 | 54.3 | 54.2 | 54.1 | 54.0 |
| 20 | 25 | 55.3 | 55.1 | 54.9 | 54.7 | 54.5 | 54.3 | 54.1 | 54.0 | 53.8 | 53.7 | 53.6 | 53.5 | 53.4 | 53.3 | 53.2 |
| 21 | 26 | 54.6 | 54.4 | 54.1 | 53.9 | 53.7 | 53.5 | 53.4 | 53.2 | 53.0 | 52.9 | 52.8 | 52.6 | 52.5 | 52.4 | 52.3 |
| 22 | 27 | 53.9 | 53.6 | 53.4 | 53.2 | 53.0 | 52.8 | 52.6 | 52.4 | 52.2 | 52.1 | 51.9 | 51.8 | 51.7 | 51.6 | 51.5 |
| 23 | 28 | 53.2 | 52.9 | 52.7 | 52.5 | 52.2 | 52.0 | 51.8 | 51.6 | 51.5 | 51.3 | 51.1 | 51.0 | 50.9 | 50.7 | 50.6 |
| 24 | 29 | 52.5 | 52.3 | 52.0 | 51.7 | 51.5 | 51.3 | 51.1 | 50.9 | 50.7 | 50.5 | 50.3 | 50.2 | 50.0 | 49.9 | 49.8 |
| 25 | 30 | 51.9 | 51.6 | 51.3 | 51.0 | 50.8 | 50.5 | 50.3 | 50.1 | 49.9 | 49.7 | 49.6 | 49.4 | 49.2 | 49.1 | 49.0 |
| 26 | 31 | 51.2 | 50.9 | 50.6 | 50.3 | 50.1 | 49.8 | 49.6 | 49.4 | 49.2 | 49.0 | 48.8 | 48.6 | 48.4 | 48.3 | 48.1 |
| 27 | 32 | 50.6 | 50.3 | 50.0 | 49.7 | 49.4 | 49.1 | 48.9 | 48.6 | 48.4 | 48.2 | 48.0 | 47.8 | 47.6 | 47.5 | 47.3 |
| 28 | 33 | 50.0 | 49.6 | 49.3 | 49.0 | 48.7 | 48.4 | 48.2 | 47.9 | 47.7 | 47.5 | 47.2 | 47.1 | 46.9 | 46.7 | 46.5 |
| 29 | 34 | 49.4 | 49.0 | 48.7 | 48.3 | 48.0 | 47.7 | 47.5 | 47.2 | 47.0 | 46.7 | 46.5 | 46.3 | 46.1 | 45.9 | 45.7 |
| 30 | 35 | 48.8 | 48.4 | 48.1 | 47.7 | 47.4 | 47.1 | 46.8 | 46.5 | 46.2 | 46.0 | 45.8 | 45.5 | 45.3 | 45.2 | 45.0 |
| 31 | 36 | 48.2 | 47.8 | 47.5 | 47.1 | 46.8 | 46.4 | 46.1 | 45.8 | 45.6 | 45.3 | 45.0 | 44.8 | 44.6 | 44.4 | 44.2 |
| 32 | 37 | 47.7 | 47.3 | 46.9 | 46.5 | 46.1 | 45.8 | 45.5 | 45.2 | 44.9 | 44.6 | 44.3 | 44.1 | 43.9 | 43.7 | 43.4 |
| 33 | 38 | 47.2 | 46.7 | 46.3 | 45.9 | 45.5 | 45.2 | 44.8 | 44.5 | 44.2 | 43.9 | 43.7 | 43.4 | 43.2 | 42.9 | 42.7 |
| 34 | 39 | 46.7 | 46.2 | 45.8 | 45.4 | 45.0 | 44.6 | 44.2 | 43.9 | 43.6 | 43.3 | 43.0 | 42.7 | 42.5 | 42.2 | 42.0 |
| Male | Female | Ages | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | ||
| Female 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | ||
| 6 | 11 | 65.4 | 65.4 | 65.3 | 65.3 | 65.3 | 65.3 | 65.3 | 65.2 | 65.2 | 65.2 | 65.2 | 65.2 | 65.2 | 65.2 |
| 7 | 12 | 64.5 | 64.5 | 64.4 | 64.4 | 64.4 | 64.4 | 64.3 | 64.3 | 64.3 | 64.3 | 64.3 | 64.3 | 64.3 | 64.2 |
| 8 | 13 | 63.6 | 63.6 | 63.5 | 63.5 | 63.5 | 63.5 | 63.4 | 63.4 | 63.4 | 63.4 | 63.4 | 63.4 | 63.3 | 63.3 |
| 9 | 14 | 62.7 | 62.7 | 62.7 | 62.6 | 62.6 | 62.6 | 62.5 | 62.5 | 62.5 | 62.5 | 62.5 | 62.4 | 62.4 | 62.4 |
| 10 | 15 | 61.8 | 61.8 | 61.8 | 61.7 | 61.7 | 61.7 | 61.6 | 61.6 | 61.6 | 61.6 | 61.6 | 61.5 | 61.5 | 61.5 |
| 11 | 16 | 61.0 | 60.9 | 60.9 | 60.8 | 60.8 | 60.8 | 60.7 | 60.7 | 60.7 | 60.7 | 60.6 | 60.6 | 60.6 | 60.6 |
| 12 | 17 | 60.1 | 60.0 | 60.0 | 59.9 | 59.9 | 59.9 | 59.8 | 59.8 | 59.8 | 59.8 | 59.7 | 59.7 | 59.7 | 59.7 |
| 13 | 18 | 59.2 | 59.1 | 59.1 | 59.0 | 59.0 | 59.0 | 58.9 | 58.9 | 58.9 | 58.9 | 58.8 | 58.8 | 58.8 | 58.8 |
| 14 | 19 | 58.3 | 58.2 | 58.2 | 58.2 | 58.1 | 58.1 | 58.0 | 58.0 | 58.0 | 57.9 | 57.9 | 57.9 | 57.9 | 57.9 |
| 15 | 20 | 57.4 | 57.4 | 57.3 | 57.3 | 57.2 | 57.2 | 57.1 | 57.1 | 57.1 | 57.0 | 57.0 | 57.0 | 57.0 | 56.9 |
| 16 | 21 | 56.5 | 56.5 | 56.4 | 56.4 | 56.3 | 56.3 | 56.2 | 56.2 | 56.2 | 56.1 | 56.1 | 56.1 | 56.1 | 56.0 |
| 17 | 22 | 55.7 | 55.6 | 55.5 | 55.5 | 55.4 | 55.4 | 55.3 | 55.3 | 55.3 | 55.2 | 55.2 | 55.2 | 55.1 | 55.1 |
| 18 | 23 | 54.8 | 54.7 | 54.7 | 54.6 | 54.6 | 54.5 | 54.5 | 54.4 | 54.4 | 54.3 | 54.3 | 54.3 | 54.2 | 54.2 |
| 19 | 24 | 53.9 | 53.9 | 53.8 | 53.7 | 53.7 | 53.6 | 53.6 | 53.5 | 53.5 | 53.4 | 53.4 | 53.4 | 53.3 | 53.3 |
| 20 | 25 | 53.1 | 53.0 | 52.9 | 52.8 | 52.8 | 52.7 | 52.7 | 52.6 | 52.6 | 52.5 | 52.5 | 52.4 | 52.4 | 52.4 |
| 21 | 26 | 52.2 | 52.1 | 52.0 | 52.0 | 51.9 | 51.8 | 51.8 | 51.7 | 51.7 | 51.6 | 51.6 | 51.5 | 51.5 | 51.5 |
| 22 | 27 | 51.4 | 51.3 | 51.2 | 51.1 | 51.0 | 51.0 | 50.9 | 50.8 | 50.8 | 50.7 | 50.7 | 50.6 | 50.6 | 50.6 |
| 23 | 28 | 50.5 | 50.4 | 50.3 | 50.2 | 50.2 | 50.1 | 50.0 | 50.0 | 49.9 | 49.8 | 49.8 | 49.7 | 49.7 | 49.7 |
| 24 | 29 | 49.7 | 49.6 | 49.5 | 49.4 | 49.3 | 49.2 | 49.1 | 49.1 | 49.0 | 49.0 | 48.9 | 48.9 | 48.8 | 48.8 |
| 25 | 30 | 48.8 | 48.7 | 48.6 | 48.5 | 48.4 | 48.3 | 48.3 | 48.2 | 48.1 | 48.1 | 48.0 | 48.0 | 47.9 | 47.9 |
| 26 | 31 | 48.0 | 47.9 | 47.8 | 47.7 | 47.6 | 47.5 | 47.4 | 47.3 | 47.3 | 47.2 | 47.1 | 47.1 | 47.0 | 47.0 |
| 27 | 32 | 47.2 | 47.1 | 46.9 | 46.8 | 46.7 | 46.6 | 46.5 | 46.5 | 46.4 | 46.3 | 46.2 | 46.2 | 46.1 | 46.1 |
| 28 | 33 | 46.4 | 46.3 | 46.1 | 46.0 | 45.9 | 45.8 | 45.7 | 45.6 | 45.5 | 45.4 | 45.4 | 45.3 | 45.2 | 45.2 |
| 29 | 34 | 45.6 | 45.4 | 45.3 | 45.2 | 45.1 | 44.9 | 44.8 | 44.7 | 44.7 | 44.6 | 44.5 | 44.4 | 44.4 | 44.3 |
| 30 | 35 | 44.8 | 44.6 | 44.5 | 44.4 | 44.2 | 44.1 | 44.0 | 43.9 | 43.8 | 43.7 | 43.6 | 43.6 | 43.5 | 43.4 |
| 31 | 36 | 44.0 | 43.9 | 43.7 | 43.6 | 43.4 | 43.3 | 43.2 | 43.1 | 43.0 | 42.9 | 42.8 | 42.7 | 42.6 | 42.0 |
| 32 | 37 | 43.3 | 43.1 | 42.9 | 42.8 | 42.6 | 42.5 | 42.4 | 42.2 | 42.1 | 42.0 | 41.9 | 41.9 | 41.8 | 41.7 |
| 33 | 38 | 42.5 | 42.3 | 42.1 | 42.0 | 41.8 | 41.7 | 41.5 | 41.4 | 41.3 | 41.2 | 41.1 | 41.0 | 40.9 | 40.8 |
| 34 | 39 | 41.8 | 41.6 | 41.4 | 41.2 | 41.0 | 40.9 | 40.7 | 40.6 | 40.5 | 40.4 | 40.3 | 40.2 | 40.1 | 40.0 |
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | ||
| Female 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | ||
| 6 | 11 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 |
| 7 | 12 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.2 | 64.1 | 64.1 |
| 8 | 13 | 63.3 | 63.3 | 63.3 | 63.3 | 63.3 | 63.3 | 63.3 | 63.3 | 63.3 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 |
| 9 | 14 | 62.4 | 62.4 | 62.4 | 62.4 | 62.4 | 62.4 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 |
| 10 | 15 | 61.5 | 61.5 | 61.5 | 61.5 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 |
| 11 | 16 | 60.6 | 60.6 | 60.6 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 |
| 12 | 17 | 59.7 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.6 | 59.5 | 59.5 |
| 13 | 18 | 58.8 | 58.7 | 58.7 | 58.7 | 58.7 | 58.7 | 58.7 | 58.7 | 58.7 | 58.7 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 |
| 14 | 19 | 57.8 | 57.8 | 57.8 | 57.8 | 57.8 | 57.8 | 57.8 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 |
| 15 | 20 | 56.9 | 56.9 | 56.9 | 56.9 | 56.9 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 |
| 16 | 21 | 56.0 | 56.0 | 56.0 | 56.0 | 55.9 | 55.9 | 55.9 | 55.9 | 55.9 | 55.9 | 55.9 | 55.9 | 55.9 | 55.9 | 55.8 |
| 17 | 22 | 55.1 | 55.1 | 55.1 | 55.0 | 55.0 | 55.0 | 55.0 | 55.0 | 55.0 | 55.0 | 55.0 | 54.9 | 54.9 | 54.9 | 54.9 |
| 18 | 23 | 54.2 | 54.2 | 54.1 | 54.1 | 54.1 | 54.1 | 54.1 | 54.1 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 |
| 19 | 24 | 53.3 | 53.2 | 53.2 | 53.2 | 53.2 | 53.2 | 53.2 | 53.1 | 53.1 | 53.1 | 53.1 | 53.1 | 53.1 | 53.1 | 53.1 |
| 20 | 25 | 52.4 | 52.3 | 52.3 | 52.3 | 52.3 | 52.2 | 52.2 | 52.2 | 52.2 | 52.2 | 52.2 | 52.2 | 52.2 | 52.1 | 52.1 |
| 21 | 26 | 51.4 | 51.4 | 51.4 | 51.4 | 51.3 | 51.3 | 51.3 | 51.3 | 51.3 | 51.3 | 51.3 | 51.2 | 51.2 | 51.2 | 51.2 |
| 22 | 27 | 50.5 | 50.5 | 50.5 | 50.5 | 50.4 | 50.4 | 50.4 | 50.4 | 50.4 | 50.3 | 50.3 | 50.3 | 50.3 | 50.3 | 50.3 |
| 23 | 28 | 49.6 | 49.6 | 49.6 | 49.5 | 49.5 | 49.5 | 49.5 | 49.5 | 49.4 | 49.4 | 49.4 | 49.4 | 49.4 | 49.4 | 49.4 |
| 24 | 29 | 48.7 | 48.7 | 48.7 | 48.6 | 48.6 | 48.6 | 48.6 | 48.5 | 48.5 | 48.5 | 48.5 | 48.5 | 48.5 | 48.4 | 48.4 |
| 25 | 30 | 47.8 | 47.8 | 47.8 | 47.7 | 47.7 | 47.7 | 47.6 | 47.6 | 47.6 | 47.6 | 47.6 | 47.5 | 47.5 | 47.5 | 47.5 |
| 26 | 31 | 46.9 | 46.9 | 46.8 | 46.8 | 46.8 | 46.8 | 46.7 | 46.7 | 46.7 | 46.7 | 46.6 | 46.6 | 46.6 | 46.6 | 46.6 |
| 27 | 32 | 46.0 | 46.0 | 45.9 | 45.9 | 45.9 | 45.8 | 45.8 | 45.8 | 45.8 | 45.7 | 45.7 | 45.7 | 45.7 | 45.7 | 45.7 |
| 28 | 33 | 45.1 | 45.1 | 45.1 | 45.0 | 45.0 | 44.9 | 44.9 | 44.9 | 44.9 | 44.8 | 44.8 | 44.8 | 44.8 | 44.8 | 44.8 |
| 29 | 34 | 44.3 | 44.2 | 44.2 | 44.1 | 44.1 | 44.0 | 44.0 | 44.0 | 44.0 | 43.9 | 43.9 | 43.9 | 43.9 | 43.9 | 43.8 |
| 30 | 35 | 43.4 | 43.3 | 43.3 | 43.2 | 43.2 | 43.1 | 43.1 | 43.1 | 43.1 | 43.0 | 43.0 | 43.0 | 43.0 | 42.9 | 42.9 |
| 31 | 36 | 42.5 | 42.4 | 42.4 | 42.3 | 42.3 | 42.3 | 42.2 | 42.2 | 42.2 | 42.1 | 42.1 | 42.1 | 42.1 | 42.0 | 42.0 |
| 32 | 37 | 41.6 | 41.6 | 41.5 | 41.5 | 41.4 | 41.4 | 41.3 | 41.3 | 41.3 | 41.2 | 41.2 | 41.2 | 41.2 | 41.1 | 41.1 |
| 33 | 38 | 40.8 | 40.7 | 40.7 | 40.6 | 40.5 | 40.5 | 40.5 | 40.4 | 40.4 | 40.3 | 40.3 | 40.3 | 40.3 | 40.2 | 40.2 |
| 34 | 39 | 39.9 | 39.9 | 39.8 | 39.7 | 39.7 | 39.6 | 39.6 | 39.5 | 39.5 | 39.5 | 39.4 | 39.4 | 39.4 | 39.3 | 39.3 |
| Male | Female | Ages | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | ||
| Female 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | ||
| 6 | 11 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.1 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 |
| 7 | 12 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 |
| 8 | 13 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 |
| 9 | 14 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 |
| 10 | 15 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 |
| 11 | 16 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.5 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 |
| 12 | 17 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 |
| 13 | 18 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 |
| 14 | 19 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 |
| 15 | 20 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 | 56.8 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 |
| 16 | 21 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 |
| 17 | 22 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 |
| 18 | 23 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 54.0 | 53.9 |
| 19 | 24 | 53.1 | 53.1 | 53.1 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 |
| 20 | 25 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 |
| 21 | 26 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 |
| 22 | 27 | 50.3 | 50.3 | 50.3 | 50.3 | 50.3 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 |
| 23 | 28 | 49.4 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 |
| 24 | 29 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 |
| 25 | 30 | 47.5 | 47.5 | 47.5 | 47.5 | 47.5 | 47.5 | 47.5 | 47.5 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 |
| 26 | 31 | 46.6 | 46.6 | 46.6 | 46.6 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 |
| 27 | 32 | 45.7 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 |
| 28 | 33 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 | 44.7 |
| 29 | 34 | 43.8 | 43.8 | 43.8 | 43.8 | 43.8 | 43.8 | 43.8 | 43.8 | 43.8 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 |
| 30 | 35 | 42.9 | 42.9 | 42.9 | 42.9 | 42.9 | 42.9 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 |
| 31 | 36 | 42.0 | 42.0 | 42.0 | 42.0 | 42.0 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 |
| 32 | 37 | 41.1 | 41.1 | 41.1 | 41.1 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 |
| 33 | 38 | 40.2 | 40.2 | 40.2 | 40.2 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 |
| 34 | 39 | 39.3 | 39.3 | 39.3 | 39.3 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 |
| Male | Female | Ages | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | ||
| Female 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | ||
| 6 | 11 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 | 65.0 |
| 7 | 12 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 | 64.1 |
| 8 | 13 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 | 63.2 |
| 9 | 14 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 | 62.3 |
| 10 | 15 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 | 61.4 |
| 11 | 16 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 | 60.4 |
| 12 | 17 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 | 59.5 |
| 13 | 18 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 | 58.6 |
| 14 | 19 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 | 57.7 |
| 15 | 20 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 | 56.7 |
| 16 | 21 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 | 55.8 |
| 17 | 22 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 | 54.9 |
| 18 | 23 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 | 53.9 |
| 19 | 24 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 | 53.0 |
| 20 | 25 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 | 52.1 |
| 21 | 26 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.2 | 51.1 | 51.1 | 51.1 | 51.1 | 51.1 | 51.1 | 51.1 | 51.1 | 51.1 | 51.1 |
| 22 | 27 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 | 50.2 |
| 23 | 28 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 | 49.3 |
| 24 | 29 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.4 | 48.3 | 48.3 |
| 25 | 30 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 | 47.4 |
| 26 | 31 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 | 46.5 |
| 27 | 32 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 | 45.6 |
| 28 | 33 | 44.7 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 | 44.6 |
| 29 | 34 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 | 43.7 |
| 30 | 35 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 | 42.8 |
| 31 | 36 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 | 41.9 |
| 32 | 37 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 | 41.0 |
| 33 | 38 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.1 | 40.0 |
| 34 | 39 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.2 | 39.1 | 39.1 | 39.1 | 39.1 | 39.1 |
| Male | Female | Ages | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | ||
| Female 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | ||
| 35 | 40 | 46.2 | 45.7 | 45.3 | 44.8 | 44.4 | 44.0 | 43.6 | 43.3 | 43.0 | 42.6 | 42.3 | 42.0 | 41.8 |
| 36 | 41 | 45.7 | 45.2 | 44.8 | 44.3 | 43.9 | 43.5 | 43.1 | 42.7 | 42.3 | 42.0 | 41.7 | 41.4 | 41.1 |
| 37 | 42 | 45.3 | 44.8 | 44.3 | 43.8 | 43.4 | 42.9 | 42.5 | 42.1 | 41.8 | 41.4 | 41.1 | 40.7 | 40.4 |
| 38 | 43 | 44.8 | 44.3 | 43.8 | 43.3 | 42.9 | 42.4 | 42.0 | 41.6 | 41.2 | 40.8 | 40.5 | 40.1 | 39.8 |
| 39 | 44 | 44.4 | 43.9 | 43.4 | 42.9 | 42.4 | 41.9 | 41.5 | 41.0 | 40.6 | 40.2 | 39.9 | 39.5 | 39.2 |
| 40 | 45 | 44.0 | 43.5 | 42.9 | 42.4 | 41.9 | 41.4 | 41.0 | 40.5 | 40.1 | 39.7 | 39.3 | 38.9 | 38.6 |
| 41 | 46 | 43.6 | 43.1 | 42.5 | 42.0 | 41.5 | 41.0 | 40.5 | 40.0 | 39.6 | 39.2 | 38.8 | 38.4 | 38.0 |
| 42 | 47 | 43.3 | 42.7 | 42.1 | 41.6 | 41.0 | 40.5 | 40.0 | 39.6 | 39.1 | 38.7 | 38.2 | 37.8 | 37.5 |
| 43 | 48 | 43.0 | 42.3 | 41.8 | 41.2 | 40.6 | 40.1 | 39.6 | 39.1 | 38.6 | 38.2 | 37.7 | 37.3 | 36.9 |
| 44 | 49 | 42.6 | 42.0 | 41.4 | 40.8 | 40.2 | 39.7 | 39.2 | 38.7 | 38.2 | 37.7 | 37.2 | 36.8 | 36.4 |
| 45 | 50 | 42.3 | 41.7 | 41.1 | 40.5 | 39.9 | 39.3 | 38.8 | 38.2 | 37.7 | 37.2 | 36.8 | 36.3 | 35.9 |
| 46 | 51 | 42.0 | 41.4 | 40.7 | 40.1 | 39.5 | 38.9 | 38.4 | 37.8 | 37.3 | 36.8 | 36.3 | 35.9 | 35.4 |
| 47 | 52 | 41.8 | 41.1 | 40.4 | 39.8 | 39.2 | 38.6 | 38.0 | 37.5 | 36.9 | 36.4 | 35.9 | 35.4 | 35.0 |
| Male | Female | Ages | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | ||
| Female 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | ||
| 35 | 40 | 41.5 | 41.3 | 41.0 | 40.8 | 40.6 | 40.4 | 40.3 | 40.1 | 40.0 | 39.8 | 39.7 | 39.6 | 39.5 |
| 36 | 41 | 40.8 | 40.6 | 40.3 | 40.1 | 39.9 | 39.7 | 39.5 | 39.3 | 39.2 | 39.0 | 38.9 | 38.8 | 38.6 |
| 37 | 42 | 40.2 | 39.9 | 39.6 | 39.4 | 39.2 | 39.0 | 38.8 | 38.6 | 38.4 | 38.3 | 38.1 | 38.0 | 37.9 |
| 38 | 43 | 39.5 | 39.2 | 39.0 | 38.7 | 38.5 | 38.3 | 38.1 | 37.9 | 37.7 | 37.5 | 37.3 | 37.2 | 37.1 |
| 39 | 44 | 38.9 | 38.6 | 38.3 | 38.0 | 37.8 | 37.6 | 37.3 | 37.1 | 36.9 | 36.8 | 36.6 | 36.4 | 36.3 |
| 40 | 45 | 38.3 | 38.0 | 37.7 | 37.4 | 37.1 | 36.9 | 36.6 | 36.4 | 36.2 | 36.0 | 35.9 | 35.7 | 35.5 |
| 41 | 46 | 37.7 | 37.3 | 37.0 | 36.7 | 36.5 | 36.2 | 36.0 | 35.7 | 35.5 | 35.3 | 35.1 | 35.0 | 34.8 |
| 42 | 47 | 37.1 | 36.8 | 36.4 | 36.1 | 35.8 | 35.6 | 35.3 | 35.1 | 34.8 | 34.6 | 34.4 | 34.2 | 34.1 |
| 43 | 48 | 36.5 | 36.2 | 35.8 | 35.5 | 35.2 | 34.9 | 34.7 | 34.4 | 34.2 | 33.9 | 33.7 | 33.5 | 33.3 |
| 44 | 49 | 36.0 | 35.6 | 35.3 | 34.9 | 34.6 | 34.3 | 34.0 | 33.8 | 33.5 | 33.3 | 33.0 | 32.8 | 32.6 |
| 45 | 50 | 35.5 | 35.1 | 34.7 | 34.4 | 34.0 | 33.7 | 33.4 | 33.1 | 32.9 | 32.6 | 32.4 | 32.2 | 31.9 |
| 46 | 51 | 35.0 | 34.6 | 34.2 | 33.8 | 33.5 | 33.1 | 32.8 | 32.5 | 32.2 | 32.0 | 31.7 | 31.5 | 31.3 |
| 47 | 52 | 34.5 | 34.1 | 33.7 | 33.3 | 32.9 | 32.6 | 32.2 | 31.9 | 31.6 | 31.4 | 31.1 | 30.9 | 30.6 |
| 48 | 53 | 34.0 | 33.6 | 33.2 | 32.8 | 32.4 | 32.0 | 31.7 | 31.4 | 31.1 | 30.8 | 30.5 | 30.2 | 30.0 |
| 49 | 54 | 33.6 | 33.1 | 32.7 | 32.3 | 31.9 | 31.5 | 31.2 | 30.8 | 30.5 | 30.2 | 29.9 | 29.6 | 29.4 |
| 50 | 55 | 33.2 | 32.7 | 32.3 | 31.8 | 31.4 | 31.0 | 30.6 | 30.3 | 29.9 | 29.6 | 29.3 | 29.0 | 28.8 |
| 51 | 56 | 32.8 | 32.3 | 31.8 | 31.4 | 30.9 | 30.5 | 30.1 | 29.8 | 29.4 | 29.1 | 28.8 | 28.5 | 28.2 |
| 52 | 57 | 32.4 | 31.9 | 31.4 | 30.9 | 30.5 | 30.1 | 29.7 | 29.3 | 28.9 | 28.6 | 28.2 | 27.9 | 27.6 |
| 53 | 58 | 32.0 | 31.5 | 31.0 | 30.5 | 30.1 | 29.6 | 29.2 | 28.8 | 28.4 | 28.1 | 27.7 | 27.4 | 27.1 |
| 54 | 59 | 31.7 | 31.2 | 30.6 | 30.1 | 29.7 | 29.2 | 28.8 | 28.3 | 27.9 | 27.6 | 27.2 | 26.9 | 26.5 |
| 55 | 60 | 31.4 | 30.8 | 30.3 | 29.8 | 29.3 | 28.8 | 28.3 | 27.9 | 27.5 | 27.1 | 26.7 | 26.4 | 26.0 |
| 56 | 61 | 31.1 | 30.5 | 29.9 | 29.4 | 28.9 | 28.4 | 27.9 | 27.5 | 27.1 | 26.7 | 26.3 | 25.9 | 25.5 |
| 57 | 62 | 30.8 | 30.2 | 29.6 | 29.1 | 28.6 | 28.1 | 27.6 | 27.1 | 26.7 | 26.2 | 25.8 | 25.4 | 25.1 |
| 58 | 63 | 30.5 | 29.9 | 29.3 | 28.8 | 28.2 | 27.7 | 27.2 | 26.7 | 26.3 | 25.8 | 25.4 | 25.0 | 24.6 |
| 59 | 64 | 30.2 | 29.6 | 29.0 | 28.5 | 27.9 | 27.4 | 26.9 | 26.4 | 25.9 | 25.4 | 25.0 | 24.6 | 24.2 |
| 60 | 65 | 30.0 | 29.4 | 28.8 | 28.2 | 27.6 | 27.1 | 26.5 | 26.0 | 25.5 | 25.1 | 24.6 | 24.2 | 23.8 |
| Male | Female | Ages | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | ||
| Female 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | ||
| 35 | 40 | 39.4 | 39.3 | 39.2 | 39.1 | 39.0 | 38.9 | 38.9 | 38.8 | 38.8 | 38.7 | 38.7 | 38.6 | 38.6 |
| 36 | 41 | 38.5 | 38.4 | 38.3 | 38.2 | 38.2 | 38.1 | 38.0 | 38.0 | 37.9 | 37.9 | 37.8 | 37.8 | 37.7 |
| 37 | 42 | 37.7 | 37.6 | 37.5 | 37.4 | 37.3 | 37.3 | 37.2 | 37.1 | 37.1 | 37.0 | 36.9 | 36.9 | 36.9 |
| 38 | 43 | 36.9 | 36.8 | 36.7 | 36.6 | 36.5 | 36.4 | 36.4 | 36.3 | 36.2 | 36.2 | 36.1 | 36.0 | 36.0 |
| 39 | 44 | 36.2 | 36.0 | 35.9 | 35.8 | 35.7 | 35.6 | 35.5 | 35.5 | 35.4 | 35.3 | 35.3 | 35.2 | 35.2 |
| 40 | 45 | 35.4 | 35.3 | 35.1 | 35.0 | 34.9 | 34.8 | 34.7 | 34.6 | 34.6 | 34.5 | 34.4 | 34.4 | 34.3 |
| 41 | 46 | 34.6 | 34.5 | 34.4 | 34.2 | 34.1 | 34.0 | 33.9 | 33.8 | 33.8 | 33.7 | 33.6 | 33.5 | 33.5 |
| 42 | 47 | 33.9 | 33.7 | 33.6 | 33.5 | 33.4 | 33.2 | 33.1 | 33.0 | 33.0 | 32.9 | 32.8 | 32.7 | 32.7 |
| 43 | 48 | 33.2 | 33.0 | 32.9 | 32.7 | 32.6 | 32.5 | 32.4 | 32.3 | 32.2 | 32.1 | 32.0 | 31.9 | 31.9 |
| 44 | 49 | 32.5 | 32.3 | 32.1 | 32.0 | 31.8 | 31.7 | 31.6 | 31.5 | 31.4 | 31.3 | 31.2 | 31.1 | 31.1 |
| 45 | 50 | 31.8 | 31.6 | 31.4 | 31.3 | 31.1 | 31.0 | 30.8 | 30.7 | 30.6 | 30.5 | 30.4 | 30.4 | 30.3 |
| 46 | 51 | 31.1 | 30.9 | 30.7 | 30.5 | 30.4 | 30.2 | 30.1 | 30.0 | 29.9 | 29.8 | 29.7 | 29.6 | 29.5 |
| 47 | 52 | 30.4 | 30.2 | 30.0 | 29.8 | 29.7 | 29.5 | 29.4 | 29.3 | 29.1 | 29.0 | 28.9 | 28.8 | 28.7 |
| 48 | 53 | 29.8 | 29.5 | 29.3 | 29.2 | 29.0 | 28.8 | 28.7 | 28.5 | 28.4 | 28.3 | 28.2 | 28.1 | 28.0 |
| 49 | 54 | 29.1 | 28.9 | 28.7 | 28.5 | 28.3 | 28.1 | 28.0 | 27.8 | 27.7 | 27.6 | 27.5 | 27.4 | 27.3 |
| 50 | 55 | 28.5 | 28.3 | 28.1 | 27.8 | 27.6 | 27.5 | 27.3 | 27.1 | 27.0 | 26.9 | 26.7 | 26.6 | 26.5 |
| 51 | 56 | 27.9 | 27.7 | 27.4 | 27.2 | 27.0 | 26.8 | 26.6 | 26.5 | 26.3 | 26.2 | 26.0 | 25.9 | 25.8 |
| 52 | 57 | 27.3 | 27.1 | 26.8 | 26.6 | 26.4 | 26.2 | 26.0 | 25.8 | 25.7 | 25.5 | 25.4 | 25.2 | 25.1 |
| 53 | 58 | 26.8 | 26.5 | 26.2 | 26.0 | 25.8 | 25.6 | 25.4 | 25.2 | 25.0 | 24.8 | 24.7 | 24.6 | 24.4 |
| 54 | 59 | 26.2 | 25.9 | 25.7 | 25.4 | 25.2 | 25.0 | 24.7 | 24.6 | 24.4 | 24.2 | 24.0 | 23.9 | 23.8 |
| 55 | 60 | 25.7 | 25.4 | 25.1 | 24.9 | 24.6 | 24.4 | 24.1 | 23.9 | 23.8 | 23.6 | 23.4 | 23.3 | 23.1 |
| 56 | 61 | 25.2 | 24.9 | 24.6 | 24.3 | 24.1 | 23.8 | 23.6 | 23.4 | 23.2 | 23.0 | 22.8 | 22.6 | 22.5 |
| 57 | 62 | 24.7 | 24.4 | 24.1 | 23.8 | 23.5 | 23.3 | 23.0 | 22.8 | 22.6 | 22.4 | 22.2 | 22.0 | 21.9 |
| 58 | 63 | 24.3 | 23.9 | 23.6 | 23.3 | 23.0 | 22.7 | 22.5 | 22.2 | 22.0 | 21.8 | 21.6 | 21.4 | 21.3 |
| 59 | 64 | 23.8 | 23.5 | 23.1 | 22.8 | 22.5 | 22.2 | 21.9 | 21.7 | 21.5 | 21.2 | 21.0 | 20.9 | 20.7 |
| 60 | 65 | 23.4 | 23.0 | 22.7 | 22.3 | 22.0 | 21.7 | 21.4 | 21.2 | 20.9 | 20.7 | 20.5 | 20.3 | 20.1 |
| 61 | 66 | 23.0 | 22.6 | 22.2 | 21.9 | 21.6 | 21.3 | 21.0 | 20.7 | 20.4 | 20.2 | 20.0 | 19.8 | 19.6 |
| 62 | 67 | 22.6 | 22.2 | 21.8 | 21.5 | 21.1 | 20.8 | 20.5 | 20.2 | 19.9 | 19.7 | 19.5 | 19.2 | 19.0 |
| 63 | 68 | 22.2 | 21.8 | 21.4 | 21.1 | 20.7 | 20.4 | 20.1 | 19.8 | 19.5 | 19.2 | 19.0 | 18.7 | 18.5 |
| 64 | 69 | 21.9 | 21.5 | 21.1 | 20.7 | 20.3 | 20.0 | 19.6 | 19.3 | 19.0 | 18.7 | 18.5 | 18.2 | 18.0 |
| 65 | 70 | 21.6 | 21.1 | 20.7 | 20.3 | 19.9 | 19.6 | 19.2 | 18.9 | 18.6 | 18.3 | 18.0 | 17.8 | 17.5 |
| 66 | 71 | 21.3 | 20.8 | 20.4 | 20.0 | 19.6 | 19.2 | 18.8 | 18.5 | 18.2 | 17.9 | 17.6 | 17.3 | 17.1 |
| 67 | 72 | 21.0 | 20.5 | 20.1 | 19.6 | 19.2 | 18.8 | 18.5 | 18.1 | 17.8 | 17.5 | 17.2 | 16.9 | 16.7 |
| 68 | 73 | 20.7 | 20.2 | 19.8 | 19.3 | 18.9 | 18.5 | 18.1 | 17.8 | 17.4 | 17.1 | 16.8 | 16.5 | 16.2 |
| 69 | 74 | 20.4 | 19.9 | 19.5 | 19.0 | 18.6 | 18.2 | 17.8 | 17.4 | 17.1 | 16.7 | 16.4 | 16.1 | 15.8 |
| 70 | 75 | 20.2 | 19.7 | 19.2 | 18.7 | 18.3 | 17.9 | 17.5 | 17.1 | 16.7 | 16.4 | 16.1 | 15.8 | 15.5 |
| 71 | 76 | 20.0 | 19.5 | 19.0 | 18.5 | 18.0 | 17.6 | 17.2 | 16.8 | 16.4 | 16.1 | 15.7 | 15.4 | 15.1 |
| 72 | 77 | 19.8 | 19.2 | 18.7 | 18.2 | 17.8 | 17.3 | 16.9 | 16.5 | 16.1 | 15.8 | 15.4 | 15.1 | 14.8 |
| 73 | 78 | 19.6 | 19.0 | 18.5 | 18.0 | 17.5 | 17.1 | 16.7 | 16.2 | 15.8 | 15.5 | 15.1 | 14.8 | 14.4 |
| Male | Female | Ages | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 | 85 | ||
| Female 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | ||
| 35 | 40 | 38.6 | 38.5 | 38.5 | 38.5 | 38.4 | 38.4 | 38.4 | 38.4 | 38.4 | 38.4 | 38.3 | 38.3 |
| 36 | 41 | 37.7 | 37.6 | 37.6 | 37.6 | 37.6 | 27.5 | 37.5 | 37.5 | 37.5 | 37.5 | 37.5 | 37.4 |
| 37 | 42 | 36.8 | 36.8 | 36.7 | 36.7 | 36.7 | 36.7 | 36.6 | 36.6 | 36.6 | 36.6 | 36.6 | 36.6 |
| 38 | 43 | 36.0 | 35.9 | 35.9 | 35.9 | 35.8 | 35.8 | 35.8 | 35.8 | 35.7 | 35.7 | 35.7 | 35.7 |
| 39 | 44 | 35.1 | 35.1 | 35.0 | 35.0 | 35.0 | 34.9 | 34.9 | 34.9 | 34.9 | 34.8 | 34.8 | 34.8 |
| 40 | 45 | 34.3 | 34.2 | 34.2 | 34.1 | 34.1 | 34.1 | 34.1 | 34.0 | 34.0 | 34.0 | 34.0 | 34.0 |
| 41 | 46 | 33.4 | 33.4 | 33.3 | 33.3 | 33.3 | 33.2 | 33.2 | 33.2 | 33.2 | 33.1 | 33.1 | 33.1 |
| 42 | 47 | 32.6 | 32.6 | 32.5 | 32.5 | 32.4 | 32.4 | 32.4 | 32.3 | 32.3 | 32.3 | 32.3 | 32.3 |
| 43 | 48 | 31.8 | 31.8 | 31.7 | 31.7 | 31.6 | 31.6 | 31.5 | 31.5 | 31.5 | 31.5 | 31.4 | 31.4 |
| 44 | 49 | 31.0 | 30.9 | 30.9 | 30.8 | 30.8 | 30.8 | 30.7 | 30.7 | 30.7 | 30.6 | 30.6 | 30.6 |
| 45 | 50 | 30.2 | 30.1 | 30.1 | 30.0 | 30.0 | 29.9 | 29.9 | 29.9 | 29.8 | 29.8 | 29.8 | 29.8 |
| 46 | 51 | 29.4 | 29.4 | 29.3 | 29.2 | 29.2 | 29.2 | 29.1 | 29.1 | 29.0 | 29.0 | 29.0 | 28.9 |
| 47 | 52 | 28.7 | 28.6 | 28.5 | 28.5 | 28.4 | 28.4 | 28.3 | 28.3 | 28.2 | 28.2 | 28.2 | 28.1 |
| 48 | 53 | 27.9 | 27.8 | 27.8 | 27.7 | 27.6 | 27.6 | 27.5 | 27.5 | 27.5 | 27.4 | 27.4 | 27.4 |
| 49 | 54 | 27.2 | 27.1 | 27.0 | 26.9 | 26.9 | 26.8 | 26.8 | 26.7 | 26.7 | 26.6 | 26.6 | 26.6 |
| 50 | 55 | 26.4 | 26.3 | 26.3 | 26.2 | 26.1 | 26.1 | 26.0 | 26.0 | 25.9 | 25.9 | 25.8 | 25.8 |
| 51 | 56 | 25.7 | 25.6 | 25.5 | 25.5 | 25.4 | 25.3 | 25.3 | 25.2 | 25.2 | 25.1 | 25.1 | 25.0 |
| 52 | 57 | 25.0 | 24.9 | 24.8 | 24.7 | 24.7 | 24.6 | 24.5 | 24.5 | 24.4 | 24.4 | 24.3 | 24.3 |
| 53 | 58 | 24.3 | 24.2 | 24.1 | 24.0 | 23.9 | 23.9 | 23.8 | 23.7 | 23.7 | 23.6 | 23.6 | 23.5 |
| 54 | 59 | 23.6 | 23.5 | 23.4 | 23.3 | 23.2 | 23.2 | 23.1 | 23.0 | 23.0 | 22.9 | 22.9 | 22.8 |
| 55 | 60 | 23.0 | 22.9 | 22.8 | 22.7 | 22.6 | 22.5 | 22.4 | 22.3 | 22.3 | 22.2 | 22.2 | 22.1 |
| 56 | 61 | 22.3 | 22.2 | 22.1 | 22.0 | 21.9 | 21.8 | 21.7 | 21.6 | 21.6 | 21.5 | 21.5 | 21.4 |
| 57 | 62 | 21.7 | 21.6 | 21.5 | 21.3 | 21.2 | 21.1 | 21.1 | 21.0 | 20.9 | 20.8 | 20.8 | 20.7 |
| 58 | 63 | 21.1 | 21.0 | 20.8 | 20.7 | 20.6 | 20.5 | 20.4 | 20.3 | 20.2 | 20.2 | 20.1 | 20.0 |
| 59 | 64 | 20.5 | 20.4 | 20.2 | 20.1 | 20.0 | 19.9 | 19.8 | 19.7 | 19.6 | 19.5 | 19.4 | 19.4 |
| 60 | 65 | 19.9 | 19.8 | 19.6 | 19.5 | 19.4 | 19.3 | 19.1 | 19.0 | 19.0 | 18.9 | 18.8 | 18.7 |
| 61 | 66 | 19.4 | 19.2 | 19.1 | 18.9 | 18.8 | 18.7 | 18.5 | 18.4 | 18.3 | 18.3 | 18.2 | 18.1 |
| 62 | 67 | 18.8 | 18.7 | 18.5 | 18.3 | 18.2 | 18.1 | 18.0 | 17.8 | 17.7 | 17.7 | 17.6 | 17.5 |
| 63 | 68 | 18.3 | 18.1 | 18.0 | 17.8 | 17.6 | 17.5 | 17.4 | 17.3 | 17.2 | 17.1 | 17.0 | 16.9 |
| 64 | 69 | 17.8 | 17.6 | 17.4 | 17.3 | 17.1 | 17.0 | 16.8 | 16.7 | 16.6 | 16.5 | 16.4 | 16.3 |
| 65 | 70 | 17.3 | 17.1 | 16.9 | 16.7 | 16.6 | 16.4 | 16.3 | 16.2 | 16.0 | 15.9 | 15.8 | 15.8 |
| 66 | 71 | 16.9 | 16.6 | 16.4 | 16.3 | 16.1 | 15.9 | 15.8 | 15.6 | 15.5 | 15.4 | 15.3 | 15.2 |
| 67 | 72 | 16.4 | 16.2 | 16.0 | 15.8 | 15.6 | 15.4 | 15.3 | 15.1 | 15.0 | 14.9 | 14.8 | 14.7 |
| 68 | 73 | 16.0 | 15.7 | 15.5 | 15.3 | 15.1 | 15.0 | 14.8 | 14.6 | 14.5 | 14.4 | 14.3 | 14.2 |
| 69 | 74 | 15.6 | 15.3 | 15.1 | 14.9 | 14.7 | 14.5 | 14.3 | 14.2 | 14.0 | 13.9 | 13.8 | 13.7 |
| 70 | 75 | 15.2 | 14.9 | 14.7 | 14.5 | 14.3 | 14.1 | 13.9 | 13.7 | 13.6 | 13.4 | 13.3 | 13.2 |
| 71 | 76 | 14.8 | 14.5 | 14.3 | 14.1 | 13.8 | 13.6 | 13.5 | 13.3 | 13.1 | 13.0 | 12.8 | 12.7 |
| 72 | 77 | 14.5 | 14.2 | 13.9 | 13.7 | 13.5 | 13.2 | 13.0 | 12.9 | 12.7 | 12.5 | 12.4 | 12.3 |
| 73 | 78 | 14.1 | 13.8 | 13.6 | 13.3 | 13.1 | 12.9 | 12.7 | 12.5 | 12.3 | 12.1 | 12.0 | 11.8 |
| 74 | 79 | 13.8 | 13.5 | 13.2 | 13.0 | 12.7 | 12.5 | 12.3 | 12.1 | 11.9 | 11.7 | 11.6 | 11.4 |
| 75 | 80 | 13.5 | 13.2 | 12.9 | 12.6 | 12.4 | 12.2 | 11.9 | 11.7 | 11.5 | 11.4 | 11.2 | 11.0 |
| 76 | 81 | 13.2 | 12.9 | 12.6 | 12.3 | 12.1 | 11.8 | 11.6 | 11.4 | 11.2 | 11.0 | 10.8 | 10.7 |
| 77 | 82 | 13.0 | 12.6 | 12.3 | 12.1 | 11.8 | 11.5 | 11.3 | 11.1 | 10.8 | 10.7 | 10.5 | 10.3 |
| 78 | 83 | 12.7 | 12.4 | 12.1 | 11.8 | 11.5 | 11.2 | 11.0 | 10.7 | 10.5 | 10.3 | 10.1 | 10.0 |
| 79 | 84 | 12.5 | 12.2 | 11.8 | 11.5 | 11.2 | 11.0 | 10.7 | 10.5 | 10.2 | 10.0 | 9.8 | 9.6 |
| 80 | 85 | 12.3 | 11.9 | 11.6 | 11.3 | 11.0 | 10.7 | 10.4 | 10.2 | 10.0 | 9.7 | 9.5 | 9.3 |
| 81 | 86 | 12.1 | 11.7 | 11.4 | 11.1 | 10.7 | 10.5 | 10.2 | 9.9 | 9.7 | 9.5 | 9.3 | 9.1 |
| 82 | 87 | 11.9 | 11.5 | 11.2 | 10.8 | 10.5 | 10.2 | 10.0 | 9.7 | 9.4 | 9.2 | 9.0 | 8.8 |
| 83 | 88 | 11.7 | 11.4 | 11.0 | 10.7 | 10.3 | 10.0 | 9.7 | 9.5 | 9.2 | 9.0 | 8.7 | 8.5 |
| 84 | 89 | 11.6 | 11.2 | 10.8 | 10.5 | 10.1 | 9.8 | 9.5 | 9.3 | 9.0 | 8.7 | 8.5 | 8.3 |
| 85 | 90 | 11.4 | 11.0 | 10.7 | 10.3 | 10.0 | 9.6 | 9.3 | 9.1 | 8.8 | 8.5 | 8.3 | 8.1 |
| Male | Female | Ages | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | ||
| Female 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | ||
| 35 | 40 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 |
| 36 | 41 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 |
| 37 | 42 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 |
| 38 | 43 | 35.7 | 35.7 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 |
| 39 | 44 | 34.8 | 34.8 | 34.8 | 34.8 | 34.8 | 34.8 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 |
| 40 | 45 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 | 33.9 |
| 41 | 46 | 33.1 | 33.1 | 33.1 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 |
| 42 | 47 | 32.2 | 32.2 | 32.2 | 32.2 | 32.2 | 32.2 | 32.2 | 32.2 | 32.2 | 32.1 | 32.1 | 32.1 |
| 43 | 48 | 31.4 | 31.4 | 31.4 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 |
| 44 | 49 | 30.6 | 30.5 | 30.5 | 30.5 | 30.5 | 30.5 | 30.5 | 30.5 | 30.5 | 30.5 | 30.5 | 30.4 |
| 45 | 50 | 29.7 | 29.7 | 29.7 | 29.7 | 29.7 | 29.7 | 29.7 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 |
| 46 | 51 | 28.9 | 28.9 | 28.9 | 28.9 | 28.9 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 |
| 47 | 52 | 28.1 | 28.1 | 28.1 | 28.1 | 28.0 | 28.0 | 28.0 | 28.0 | 28.0 | 28.0 | 28.0 | 28.0 |
| 48 | 53 | 27.3 | 27.3 | 27.3 | 27.3 | 27.2 | 27.2 | 27.2 | 27.2 | 27.2 | 27.2 | 27.2 | 27.2 |
| 49 | 54 | 26.5 | 26.5 | 26.5 | 26.5 | 26.5 | 26.4 | 26.4 | 26.4 | 26.4 | 26.4 | 26.4 | 26.4 |
| 50 | 55 | 25.8 | 25.7 | 25.7 | 25.7 | 25.7 | 25.7 | 25.6 | 25.6 | 25.6 | 25.6 | 25.6 | 25.6 |
| 51 | 56 | 25.0 | 25.0 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 | 24.8 | 24.8 | 24.8 | 24.8 |
| 52 | 57 | 24.3 | 24.2 | 24.2 | 24.2 | 24.1 | 24.1 | 24.1 | 24.1 | 24.1 | 24.1 | 24.1 | 24.0 |
| 53 | 58 | 23.5 | 23.5 | 23.4 | 23.4 | 23.4 | 23.4 | 23.4 | 23.3 | 23.3 | 23.3 | 23.3 | 23.3 |
| 54 | 59 | 22.8 | 22.7 | 22.7 | 22.7 | 22.7 | 22.6 | 22.6 | 22.6 | 22.6 | 22.6 | 22.6 | 22.5 |
| 55 | 60 | 22.1 | 22.0 | 22.0 | 22.0 | 21.9 | 21.9 | 21.9 | 21.9 | 21.8 | 21.8 | 21.8 | 21.8 |
| 56 | 61 | 21.4 | 21.3 | 21.3 | 21.3 | 21.2 | 21.2 | 21.2 | 21.1 | 21.1 | 21.1 | 21.1 | 21.1 |
| 57 | 62 | 20.7 | 20.6 | 20.6 | 20.6 | 20.5 | 20.5 | 20.5 | 20.4 | 20.4 | 20.4 | 20.4 | 20.4 |
| 58 | 63 | 20.0 | 19.9 | 19.9 | 19.9 | 19.8 | 19.8 | 19.8 | 19.8 | 19.7 | 19.7 | 19.7 | 19.7 |
| 59 | 64 | 19.3 | 19.3 | 19.2 | 19.2 | 19.2 | 19.1 | 19.1 | 19.1 | 19.0 | 19.0 | 19.0 | 19.0 |
| Male | Female | Ages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | ||
| Female 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | ||
| 35 | 40 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.3 | 38.2 | 38.2 | 38.2 | 38.2 | 38.2 |
| 36 | 41 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.4 | 37.3 |
| 37 | 42 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 | 36.5 |
| 38 | 43 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 | 35.6 |
| 39 | 44 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 | 34.7 |
| 40 | 45 | 33.9 | 33.8 | 33.8 | 33.8 | 33.8 | 33.8 | 33.8 | 33.8 | 33.8 | 33.8 | 33.8 |
| 41 | 46 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 | 33.0 |
| 42 | 47 | 32.1 | 32.1 | 32.1 | 32.1 | 32.1 | 32.1 | 32.1 | 32.1 | 32.1 | 32.1 | 32.1 |
| 43 | 48 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 | 31.3 |
| 44 | 49 | 30.4 | 30.4 | 30.4 | 30.4 | 30.4 | 30.4 | 30.4 | 30.4 | 30.4 | 30.4 | 30.4 |
| 45 | 50 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 | 29.6 |
| 46 | 51 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.8 | 28.7 |
| 47 | 52 | 28.0 | 28.0 | 28.0 | 28.0 | 28.0 | 28.0 | 28.0 | 27.9 | 27.9 | 27.9 | 27.9 |
| 48 | 53 | 27.2 | 27.2 | 27.2 | 27.2 | 27.2 | 27.1 | 27.1 | 27.1 | 27.1 | 27.1 | 27.1 |
| 49 | 54 | 26.4 | 26.4 | 26.4 | 26.4 | 26.4 | 26.3 | 26.3 | 26.3 | 26.3 | 26.3 | 26.3 |
| 50 | 55 | 25.6 | 25.6 | 25.6 | 25.6 | 25.6 | 25.6 | 25.6 | 25.6 | 25.5 | 25.5 | 25.5 |
| 51 | 56 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.7 |
| 52 | 57 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 |
| 53 | 58 | 23.3 | 23.3 | 23.3 | 23.3 | 23.3 | 23.3 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 |
| 54 | 59 | 22.5 | 22.5 | 22.5 | 22.5 | 22.5 | 22.5 | 22.5 | 22.5 | 22.5 | 22.5 | 22.5 |
| 55 | 60 | 21.8 | 21.8 | 21.8 | 21.8 | 21.8 | 21.8 | 21.8 | 21.8 | 21.8 | 21.7 | 21.7 |
| 56 | 61 | 21.1 | 21.1 | 21.1 | 21.1 | 21.1 | 21.0 | 21.0 | 21.0 | 21.0 | 21.0 | 21.0 |
| 57 | 62 | 20.4 | 20.4 | 20.4 | 20.3 | 20.3 | 20.3 | 20.3 | 20.3 | 20.3 | 20.3 | 20.3 |
| 58 | 63 | 19.7 | 19.7 | 19.7 | 19.6 | 19.6 | 19.6 | 19.6 | 19.6 | 19.6 | 19.6 | 19.6 |
| 59 | 64 | 19.0 | 19.0 | 19.0 | 19.0 | 19.0 | 18.9 | 18.9 | 18.9 | 18.9 | 18.9 | 18.9 |
| Male | Female | Ages | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | ||
| Female 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | ||
| 60 | 65 | 18.7 | 18.6 | 18.6 | 18.5 | 18.5 | 18.5 | 18.4 | 18.4 | 18.4 | 18.4 | 18.3 | 18.3 |
| 61 | 66 | 18.1 | 18.0 | 17.9 | 17.9 | 17.9 | 17.8 | 17.8 | 17.8 | 17.7 | 17.7 | 17.7 | 17.7 |
| 62 | 67 | 17.4 | 17.4 | 17.3 | 17.3 | 17.2 | 17.2 | 17.1 | 17.1 | 17.1 | 17.1 | 17.0 | 17.0 |
| 63 | 68 | 16.8 | 16.8 | 16.7 | 16.7 | 16.6 | 16.6 | 16.5 | 16.5 | 16.5 | 16.4 | 16.4 | 16.4 |
| 64 | 69 | 16.2 | 16.2 | 16.1 | 16.1 | 16.0 | 16.0 | 15.9 | 15.9 | 15.9 | 15.8 | 15.8 | 15.8 |
| 65 | 70 | 15.7 | 15.6 | 15.5 | 15.5 | 15.4 | 15.4 | 15.3 | 15.3 | 15.3 | 15.2 | 15.2 | 15.2 |
| 66 | 71 | 15.1 | 15.0 | 15.0 | 14.9 | 14.8 | 14.8 | 14.7 | 14.7 | 14.7 | 14.6 | 14.6 | 14.6 |
| 67 | 72 | 14.6 | 14.5 | 14.4 | 14.4 | 14.3 | 14.2 | 14.2 | 14.1 | 14.1 | 14.1 | 14.1 | 14.0 |
| 68 | 73 | 14.1 | 14.0 | 13.9 | 13.8 | 13.8 | 13.7 | 13.6 | 13.6 | 13.6 | 13.5 | 13.5 | 13.5 |
| 69 | 74 | 13.6 | 13.5 | 13.4 | 13.3 | 13.2 | 13.2 | 13.1 | 13.1 | 13.0 | 13.0 | 13.0 | 12.9 |
| 70 | 75 | 13.1 | 13.0 | 12.9 | 12.8 | 12.7 | 12.7 | 12.6 | 12.5 | 12.5 | 12.5 | 12.4 | 12.4 |
| 71 | 76 | 12.6 | 12.5 | 12.4 | 12.3 | 12.2 | 12.2 | 12.1 | 12.1 | 12.0 | 12.0 | 11.9 | 11.9 |
| 72 | 77 | 12.1 | 12.0 | 11.9 | 11.8 | 11.8 | 11.7 | 11.6 | 11.6 | 11.5 | 11.5 | 11.4 | 11.4 |
| 73 | 78 | 11.7 | 11.6 | 11.5 | 11.4 | 11.3 | 11.2 | 11.2 | 11.1 | 11.0 | 11.0 | 11.0 | 10.9 |
| 74 | 79 | 11.3 | 11.2 | 11.1 | 11.0 | 10.9 | 10.8 | 10.7 | 10.7 | 10.6 | 10.6 | 10.5 | 10.5 |
| 75 | 80 | 10.9 | 10.8 | 10.7 | 10.5 | 10.5 | 10.4 | 10.3 | 10.2 | 10.2 | 10.1 | 10.1 | 10.0 |
| 76 | 81 | 10.5 | 10.4 | 10.3 | 10.2 | 10.1 | 10.0 | 9.9 | 9.8 | 9.7 | 9.7 | 9.7 | 9.6 |
| 77 | 82 | 10.2 | 10.0 | 9.9 | 9.8 | 9.7 | 9.6 | 9.5 | 9.4 | 9.3 | 9.3 | 9.2 | 9.2 |
| 78 | 83 | 9.8 | 9.7 | 9.5 | 9.4 | 9.3 | 9.2 | 9.1 | 9.0 | 9.0 | 8.9 | 8.9 | 8.8 |
| 79 | 84 | 9.5 | 9.3 | 9.2 | 9.2 | 8.9 | 8.8 | 8.8 | 8.7 | 8.6 | 8.5 | 8.5 | 8.4 |
| 80 | 85 | 9.2 | 9.0 | 8.9 | 8.7 | 8.6 | 8.5 | 8.4 | 8.3 | 8.3 | 8.2 | 8.1 | 8.1 |
| 81 | 86 | 8.9 | 8.7 | 8.6 | 8.4 | 8.3 | 8.2 | 8.1 | 8.0 | 7.9 | 7.9 | 7.8 | 7.7 |
| 82 | 87 | 8.6 | 8.4 | 8.3 | 8.1 | 8.0 | 7.9 | 7.8 | 7.7 | 7.6 | 7.5 | 7.5 | 7.4 |
| 83 | 88 | 8.3 | 8.2 | 8.0 | 7.9 | 7.7 | 7.6 | 7.5 | 7.4 | 7.3 | 7.2 | 7.2 | 7.1 |
| 84 | 89 | 8.1 | 7.9 | 7.8 | 7.6 | 7.5 | 7.3 | 7.2 | 7.1 | 7.0 | 7.0 | 6.9 | 6.8 |
| Male | Female | Ages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | ||
| Female 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | ||
| 60 | 65 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.2 | 18.2 | 18.2 | 18.2 |
| 61 | 66 | 17.7 | 17.7 | 17.6 | 17.6 | 17.6 | 17.6 | 17.6 | 17.6 | 17.6 | 17.6 | 17.5 |
| 62 | 67 | 17.0 | 17.0 | 17.0 | 17.0 | 17.0 | 17.0 | 16.9 | 16.9 | 16.9 | 16.9 | 16.9 |
| 63 | 68 | 16.4 | 16.4 | 16.4 | 16.3 | 16.3 | 16.3 | 16.3 | 16.3 | 16.3 | 16.3 | 16.2 |
| 64 | 69 | 15.8 | 15.8 | 15.7 | 15.7 | 15.7 | 15.7 | 15.7 | 15.7 | 15.7 | 15.7 | 15.6 |
| 65 | 70 | 15.2 | 15.2 | 15.1 | 15.1 | 15.1 | 15.1 | 15.1 | 15.1 | 15.1 | 15.0 | 15.0 |
| 66 | 71 | 14.6 | 14.6 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.4 | 14.4 |
| 67 | 72 | 14.0 | 14.0 | 14.0 | 14.0 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 | 13.8 |
| 68 | 73 | 13.5 | 13.4 | 13.4 | 13.4 | 13.4 | 13.4 | 13.3 | 13.3 | 13.3 | 13.3 | 13.2 |
| 69 | 74 | 12.9 | 12.9 | 12.9 | 12.8 | 12.8 | 12.8 | 12.8 | 12.8 | 12.8 | 12.7 | 12.7 |
| 70 | 75 | 12.4 | 12.4 | 12.3 | 12.3 | 12.3 | 12.3 | 12.3 | 12.2 | 12.2 | 12.2 | 12.1 |
| 71 | 76 | 11.9 | 11.9 | 11.8 | 11.8 | 11.8 | 11.8 | 11.7 | 11.7 | 11.7 | 11.7 | 11.6 |
| 72 | 77 | 11.4 | 11.4 | 11.3 | 11.3 | 11.3 | 11.3 | 11.2 | 11.2 | 11.2 | 11.2 | 11.1 |
| 73 | 78 | 10.9 | 10.9 | 10.9 | 10.8 | 10.8 | 10.8 | 10.7 | 10.7 | 10.7 | 10.7 | 10.6 |
| 74 | 79 | 10.5 | 10.4 | 10.4 | 10.4 | 10.3 | 10.3 | 10.3 | 10.3 | 10.2 | 10.2 | 10.1 |
| 75 | 80 | 10.0 | 10.0 | 9.9 | 9.9 | 9.9 | 9.8 | 9.8 | 9.8 | 9.8 | 9.7 | |
| 76 | 81 | 9.6 | 9.5 | 9.5 | 9.5 | 9.4 | 9.4 | 9.4 | 9.4 | 9.3 | 9.3 | |
| 77 | 82 | 9.2 | 9.1 | 9.1 | 9.1 | 9.0 | 9.0 | 9.0 | 8.9 | 8.9 | 8.9 | |
| 78 | 83 | 8.8 | 8.7 | 8.7 | 8.7 | 8.6 | 8.6 | 8.5 | 8.5 | 8.5 | 8.4 | |
| 79 | 84 | 8.4 | 8.4 | 8.3 | 8.3 | 8.2 | 8.2 | 8.2 | 8.1 | 8.1 | 8.0 | |
| 80 | 85 | 8.0 | 8.0 | 7.9 | 7.9 | 7.9 | 7.8 | 7.8 | 7.7 | 7.7 | 7.6 | |
| 81 | 86 | 7.7 | 7.6 | 7.6 | 7.6 | 7.5 | 7.5 | 7.4 | 7.4 | 7.3 | 7.3 | |
| 82 | 87 | 7.4 | 7.3 | 7.3 | 7.2 | 7.2 | 7.1 | 7.1 | 7.0 | 7.0 | 6.9 | |
| 83 | 88 | 7.1 | 7.0 | 6.9 | 6.9 | 6.8 | 6.8 | 6.7 | 6.7 | 6.7 | 6.6 | |
| 84 | 89 | 6.8 | 6.7 | 6.6 | 6.6 | 6.5 | 6.5 | 6.4 | 6.4 | 6.3 | ||
| Male | Female | Ages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | ||
| Female 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | ||
| 85 | 90 | 7.9 | 7.7 | 7.5 | 7.4 | 7.2 | 7.1 | 7.0 | 6.9 | 6.8 | 6.7 | 6.6 |
| 86 | 91 | 7.7 | 7.5 | 7.3 | 7.1 | 7.0 | 6.8 | 6.7 | 6.6 | 6.5 | 6.4 | 6.4 |
| 87 | 92 | 7.5 | 7.3 | 7.1 | 6.9 | 6.8 | 6.6 | 6.5 | 6.4 | 6.3 | 6.2 | 6.1 |
| 88 | 93 | 7.3 | 7.1 | 6.9 | 6.7 | 6.6 | 6.4 | 6.3 | 6.2 | 6.1 | 6.0 | 5.9 |
| 89 | 94 | 7.1 | 6.9 | 6.7 | 6.5 | 6.4 | 6.2 | 6.1 | 6.0 | 5.9 | 5.8 | 5.7 |
| 90 | 95 | 7.0 | 6.8 | 6.6 | 6.4 | 6.2 | 6.1 | 5.9 | 5.8 | 5.7 | 5.6 | 5.5 |
| 91 | 96 | 6.8 | 6.6 | 6.4 | 6.2 | 6.1 | 5.9 | 5.8 | 5.7 | 5.5 | 5.4 | 5.3 |
| 92 | 97 | 6.7 | 6.5 | 6.3 | 6.1 | 5.9 | 5.8 | 5.6 | 5.5 | 5.4 | 5.3 | 5.2 |
| 93 | 98 | 6.6 | 6.4 | 6.2 | 6.0 | 5.8 | 5.7 | 5.5 | 5.4 | 5.2 | 5.1 | 5.0 |
| 94 | 99 | 6.5 | 6.3 | 6.1 | 5.9 | 5.7 | 5.5 | 5.4 | 5.2 | 5.1 | 5.0 | 4.9 |
| 95 | 100 | 6.4 | 6.2 | 6.0 | 5.8 | 5.6 | 5.4 | 5.3 | 5.1 | 5.0 | 4.9 | 4.7 |
| 96 | 101 | 6.4 | 6.1 | 5.9 | 5.7 | 5.5 | 5.3 | 5.2 | 5.0 | 4.9 | 4.7 | 4.6 |
| 97 | 102 | 6.3 | 6.1 | 5.8 | 5.6 | 5.4 | 5.2 | 5.1 | 4.9 | 4.8 | 4.6 | 4.5 |
| 98 | 103 | 6.2 | 6.0 | 5.8 | 5.5 | 5.3 | 5.1 | 5.0 | 4.8 | 4.7 | 4.5 | 4.4 |
| 99 | 104 | 6.2 | 5.9 | 5.7 | 5.5 | 5.2 | 5.1 | 4.9 | 4.7 | 4.6 | 4.4 | 4.3 |
| Male | Female | Ages | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | ||
| Female 102 | 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | ||
| 85 | 90 | 6.6 | 6.5 | 6.4 | 6.4 | 6.3 | 6.2 | 6.2 | 6.1 | 6.1 | 6.0 |
| 86 | 91 | 6.3 | 6.2 | 6.2 | 6.1 | 6.0 | 6.0 | 5.9 | 5.9 | 5.8 | 5.7 |
| 87 | 92 | 6.1 | 6.0 | 5.9 | 5.8 | 5.8 | 5.7 | 5.6 | 5.6 | 5.5 | 5.4 |
| 88 | 93 | 5.8 | 5.8 | 5.7 | 5.6 | 5.5 | 5.5 | 5.4 | 5.3 | 5.3 | 5.1 |
| 89 | 94 | 5.6 | 5.5 | 5.5 | 5.4 | 5.3 | 5.2 | 5.2 | 5.1 | 5.0 | |
| 90 | 95 | 5.4 | 5.3 | 5.2 | 5.2 | 5.1 | 5.0 | 4.9 | 4.9 | 4.8 | |
| 91 | 96 | 5.2 | 5.1 | 5.1 | 5.0 | 4.9 | 4.8 | 4.7 | 4.6 | 4.5 | |
| 92 | 97 | 5.1 | 5.0 | 4.9 | 4.8 | 4.7 | 4.6 | 4.5 | 4.4 | ||
| 93 | 98 | 4.9 | 4.8 | 4.7 | 4.6 | 4.5 | 4.4 | 4.3 | 4.2 | ||
| 94 | 99 | 4.8 | 4.7 | 4.6 | 4.5 | 4.4 | 4.3 | 4.1 | |||
| 95 | 100 | 4.6 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 4.0 | |||
| 96 | 101 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 3.9 | ||||
| 97 | 102 | 4.4 | 4.3 | 4.1 | 4.0 | 3.9 | 3.7 | ||||
| 98 | 103 | 4.3 | 4.1 | 4.0 | 3.9 | 3.7 | |||||
| 99 | 104 | 4.1 | 4.0 | 3.9 | 3.7 | ||||||
Table IIa—Annuities for Joint Life Only—Two Lives—Expected Return Multiples
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | ||
| Female 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | ||
| 6 | 11 | 56.6 | 56.1 | 55.7 | 55.1 | 54.6 | 54.1 | 53.5 | 52.9 | 52.3 | 51.7 | 51.1 | 50.5 | 49.8 | 49.1 | 48.4 |
| 7 | 12 | 56.1 | 55.7 | 55.2 | 54.7 | 54.2 | 53.7 | 53.1 | 52.6 | 52.0 | 51.4 | 50.8 | 50.2 | 49.5 | 48.9 | 48.2 |
| 8 | 13 | 55.7 | 55.2 | 54.8 | 54.3 | 53.8 | 53.3 | 52.8 | 52.2 | 51.6 | 51.1 | 50.5 | 49.9 | 49.2 | 48.6 | 47.9 |
| 9 | 14 | 55.1 | 54.7 | 54.3 | 53.8 | 53.3 | 52.9 | 52.3 | 51.8 | 51.3 | 50.7 | 50.1 | 49.5 | 48.9 | 48.3 | 47.7 |
| 10 | 15 | 54.6 | 54.2 | 53.8 | 53.3 | 52.9 | 52.4 | 51.9 | 51.4 | 50.9 | 50.3 | 49.8 | 49.2 | 48.6 | 48.0 | 47.4 |
| 11 | 16 | 54.1 | 53.7 | 53.3 | 52.9 | 52.4 | 52.0 | 51.5 | 51.0 | 50.5 | 50.0 | 49.4 | 48.8 | 48.3 | 47.7 | 47.1 |
| 12 | 17 | 53.5 | 53.1 | 52.8 | 52.3 | 51.9 | 51.5 | 51.0 | 50.6 | 50.1 | 49.6 | 49.0 | 48.5 | 47.9 | 47.3 | 46.7 |
| 13 | 18 | 52.9 | 52.6 | 52.2 | 51.8 | 51.4 | 51.0 | 50.6 | 50.1 | 49.6 | 49.1 | 48.6 | 48.1 | 47.5 | 47.0 | 46.4 |
| 14 | 19 | 52.3 | 52.0 | 51.6 | 51.3 | 50.9 | 50.5 | 50.1 | 49.6 | 49.2 | 48.7 | 48.2 | 47.7 | 47.2 | 46.6 | 46.1 |
| 15 | 20 | 51.7 | 51.4 | 51.1 | 50.7 | 50.3 | 50.0 | 49.6 | 49.1 | 48.7 | 48.2 | 47.8 | 47.3 | 46.8 | 46.2 | 45.7 |
| 16 | 21 | 51.1 | 50.8 | 50.5 | 50.1 | 49.8 | 49.4 | 49.0 | 48.6 | 48.2 | 47.8 | 47.3 | 46.8 | 46.3 | 45.8 | 45.3 |
| 17 | 22 | 50.5 | 50.2 | 49.9 | 49.5 | 49.2 | 48.8 | 48.5 | 48.1 | 47.7 | 47.3 | 46.8 | 46.4 | 45.9 | 45.4 | 44.9 |
| 18 | 23 | 49.8 | 49.5 | 49.2 | 48.9 | 48.6 | 48.3 | 47.9 | 47.5 | 47.2 | 46.8 | 46.3 | 45.9 | 45.4 | 45.0 | 44.5 |
| 19 | 24 | 49.1 | 48.9 | 48.6 | 48.3 | 48.0 | 47.7 | 47.3 | 47.0 | 46.6 | 46.2 | 45.8 | 45.4 | 45.0 | 44.5 | 44.0 |
| 20 | 25 | 48.4 | 48.2 | 47.9 | 47.7 | 47.4 | 47.1 | 46.7 | 46.4 | 46.1 | 45.7 | 45.3 | 44.9 | 44.5 | 44.0 | 43.6 |
| Male | Female | Ages | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | ||
| Female 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | ||
| 6 | 11 | 47.7 | 47.0 | 46.3 | 45.6 | 44.8 | 44.1 | 43.3 | 42.5 | 41.8 | 41.0 | 40.2 | 39.4 | 38.6 | 37.8 |
| 7 | 12 | 47.5 | 46.8 | 46.1 | 45.4 | 44.6 | 43.9 | 43.2 | 42.4 | 41.6 | 40.9 | 40.1 | 39.3 | 38.5 | 37.7 |
| 8 | 13 | 47.3 | 46.6 | 45.9 | 45.2 | 44.5 | 43.7 | 43.0 | 42.2 | 41.5 | 40.7 | 39.9 | 39.2 | 38.4 | 37.6 |
| 9 | 14 | 47.0 | 46.3 | 45.6 | 45.0 | 44.2 | 43.5 | 42.8 | 42.1 | 41.3 | 40.6 | 39.8 | 39.0 | 38.3 | 37.5 |
| 10 | 15 | 46.7 | 46.1 | 45.4 | 44.7 | 44.0 | 43.3 | 42.6 | 41.9 | 41.1 | 40.4 | 39.7 | 38.9 | 38.1 | 37.4 |
| 11 | 16 | 46.4 | 45.8 | 45.1 | 44.5 | 43.8 | 43.1 | 42.4 | 41.7 | 41.0 | 40.2 | 39.5 | 38.8 | 38.0 | 37.2 |
| 12 | 17 | 46.1 | 45.5 | 44.9 | 44.2 | 43.6 | 42.9 | 42.2 | 41.5 | 40.8 | 40.1 | 39.3 | 38.6 | 37.9 | 37.1 |
| 13 | 18 | 45.8 | 45.2 | 44.6 | 43.9 | 43.3 | 42.6 | 42.0 | 41.3 | 40.6 | 39.9 | 39.2 | 38.4 | 37.7 | 37.0 |
| 14 | 19 | 45.5 | 44.9 | 44.3 | 43.7 | 43.0 | 42.4 | 41.7 | 41.0 | 40.4 | 39.7 | 39.0 | 38.3 | 37.5 | 36.8 |
| 15 | 20 | 45.1 | 44.6 | 44.0 | 43.4 | 42.7 | 42.1 | 41.5 | 40.8 | 40.1 | 39.5 | 38.8 | 38.1 | 37.4 | 36.6 |
| 16 | 21 | 44.8 | 44.2 | 43.6 | 43.0 | 42.4 | 41.8 | 41.2 | 40.5 | 39.9 | 39.2 | 38.6 | 37.9 | 37.2 | 36.5 |
| 17 | 22 | 44.4 | 43.8 | 43.3 | 42.7 | 42.1 | 41.5 | 40.9 | 40.3 | 39.6 | 39.0 | 38.3 | 37.7 | 37.0 | 36.3 |
| 18 | 23 | 44.0 | 43.5 | 42.9 | 42.4 | 41.8 | 41.2 | 40.6 | 40.0 | 39.4 | 38.7 | 38.1 | 37.4 | 36.8 | 36.1 |
| 19 | 24 | 43.6 | 43.1 | 42.5 | 42.0 | 41.4 | 40.9 | 40.3 | 39.7 | 39.1 | 38.5 | 37.8 | 37.2 | 36.5 | 35.9 |
| 20 | 25 | 43.1 | 42.6 | 42.1 | 41.6 | 41.1 | 40.5 | 40.0 | 39.4 | 38.8 | 38.2 | 37.6 | 36.9 | 36.3 | 35.7 |
| 21 | 26 | 42.7 | 42.2 | 41.7 | 41.2 | 40.7 | 40.2 | 39.6 | 39.1 | 38.5 | 37.9 | 37.3 | 36.7 | 36.1 | 35.4 |
| 22 | 27 | 42.2 | 41.8 | 41.3 | 40.8 | 40.3 | 39.8 | 39.3 | 38.7 | 38.2 | 37.6 | 37.0 | 36.4 | 35.8 | 35.2 |
| 23 | 28 | 41.7 | 41.3 | 40.8 | 40.4 | 39.9 | 39.4 | 38.9 | 38.4 | 37.8 | 37.3 | 36.7 | 36.1 | 35.5 | 34.9 |
| 24 | 29 | 41.2 | 40.8 | 40.4 | 39.9 | 39.5 | 39.0 | 38.5 | 38.0 | 37.5 | 36.9 | 36.4 | 35.8 | 35.2 | 34.6 |
| 25 | 30 | 40.7 | 40.3 | 39.9 | 39.5 | 39.0 | 38.6 | 38.1 | 37.6 | 37.1 | 36.6 | 36.0 | 35.5 | 34.9 | 34.4 |
| 26 | 31 | 40.2 | 39.8 | 39.4 | 39.0 | 38.6 | 38.1 | 37.7 | 37.2 | 36.7 | 36.2 | 35.7 | 35.2 | 34.6 | 34.1 |
| 27 | 32 | 39.6 | 39.3 | 38.9 | 38.5 | 38.1 | 37.7 | 37.2 | 36.8 | 36.3 | 35.8 | 35.3 | 34.8 | 34.3 | 33.7 |
| 28 | 33 | 39.1 | 38.7 | 38.4 | 38.0 | 37.6 | 37.2 | 36.8 | 36.3 | 35.9 | 35.4 | 34.9 | 34.5 | 33.9 | 33.4 |
| 29 | 34 | 38.5 | 38.2 | 37.8 | 37.5 | 37.1 | 36.7 | 36.3 | 35.9 | 35.5 | 35.0 | 34.6 | 34.1 | 33.6 | 33.1 |
| 30 | 35 | 37.9 | 37.6 | 37.3 | 36.9 | 36.6 | 36.2 | 35.8 | 35.4 | 35.0 | 34.6 | 34.1 | 33.7 | 33.2 | 32.7 |
| 31 | 36 | 37.3 | 37.0 | 36.7 | 36.4 | 36.0 | 35.7 | 35.3 | 34.9 | 34.6 | 34.1 | 33.7 | 33.3 | 32.8 | 32.3 |
| 32 | 37 | 36.7 | 36.4 | 36.1 | 35.8 | 35.5 | 35.2 | 34.8 | 34.5 | 34.1 | 33.7 | 33.3 | 32.9 | 32.4 | 32.0 |
| 33 | 38 | 36.1 | 35.8 | 35.5 | 35.2 | 34.9 | 34.6 | 34.3 | 33.9 | 33.6 | 33.2 | 32.8 | 32.4 | 32.0 | 31.6 |
| 34 | 39 | 35.4 | 35.2 | 34.9 | 34.6 | 34.4 | 34.1 | 33.7 | 33.4 | 33.1 | 32.7 | 32.3 | 32.0 | 31.6 | 31.1 |
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | ||
| Female 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 | ||
| 6 | 11 | 37.0 | 36.2 | 35.4 | 34.6 | 33.8 | 33.0 | 32.2 | 31.4 | 30.6 | 29.8 | 29.0 | 28.2 | 27.5 | 26.7 | 25.9 |
| 7 | 12 | 36.9 | 36.1 | 35.3 | 34.5 | 33.7 | 32.9 | 32.1 | 31.3 | 30.5 | 29.8 | 29.0 | 28.2 | 27.4 | 26.7 | 25.9 |
| 8 | 13 | 36.8 | 36.0 | 35.2 | 34.4 | 33.7 | 32.9 | 32.1 | 31.3 | 30.5 | 29.7 | 28.9 | 28.2 | 27.4 | 26.6 | 25.9 |
| 9 | 14 | 36.7 | 35.9 | 35.1 | 34.4 | 33.6 | 32.8 | 32.0 | 31.2 | 30.4 | 29.7 | 28.9 | 28.1 | 27.3 | 26.6 | 25.8 |
| 10 | 15 | 36.6 | 35.8 | 35.1 | 34.3 | 33.5 | 32.7 | 31.9 | 31.2 | 30.4 | 29.6 | 28.8 | 28.1 | 27.3 | 26.5 | 25.8 |
| 11 | 16 | 36.5 | 35.7 | 34.9 | 34.2 | 33.4 | 32.6 | 31.9 | 31.1 | 30.3 | 29.5 | 28.8 | 28.0 | 27.3 | 26.5 | 25.7 |
| 12 | 17 | 36.4 | 35.6 | 34.8 | 34.1 | 33.3 | 32.5 | 31.8 | 31.0 | 30.2 | 29.5 | 28.7 | 28.0 | 27.2 | 26.4 | 25.7 |
| 13 | 18 | 36.2 | 35.5 | 34.7 | 34.0 | 33.2 | 32.4 | 31.7 | 30.9 | 30.2 | 29.4 | 28.7 | 27.9 | 27.1 | 26.4 | 25.7 |
| 14 | 19 | 36.1 | 35.3 | 34.6 | 33.8 | 33.1 | 32.3 | 31.6 | 30.8 | 30.1 | 29.3 | 28.6 | 27.8 | 27.1 | 26.3 | 25.6 |
| 15 | 20 | 35.9 | 35.2 | 34.5 | 33.7 | 33.0 | 32.2 | 31.5 | 30.7 | 30.0 | 29.3 | 28.5 | 27.8 | 27.0 | 26.3 | 25.6 |
| 16 | 21 | 35.8 | 35.0 | 34.3 | 33.6 | 32.9 | 32.1 | 31.4 | 30.6 | 29.9 | 29.2 | 28.4 | 27.7 | 27.0 | 26.2 | 25.5 |
| 17 | 22 | 35.6 | 34.9 | 34.2 | 33.4 | 32.7 | 32.0 | 31.3 | 30.5 | 29.8 | 29.1 | 28.3 | 27.6 | 26.9 | 26.2 | 25.4 |
| 18 | 23 | 35.4 | 34.7 | 34.0 | 33.3 | 32.6 | 31.9 | 31.2 | 30.4 | 29.7 | 29.0 | 28.3 | 27.5 | 26.8 | 26.1 | 25.4 |
| 19 | 24 | 35.2 | 34.5 | 33.8 | 33.1 | 32.4 | 31.7 | 31.0 | 30.3 | 29.6 | 28.9 | 28.2 | 27.4 | 26.7 | 26.0 | 25.3 |
| 20 | 25 | 35.0 | 34.3 | 33.7 | 33.0 | 32.3 | 31.6 | 30.9 | 30.2 | 29.5 | 28.8 | 28.1 | 27.3 | 26.6 | 25.9 | 25.2 |
| 21 | 26 | 34.8 | 34.1 | 33.5 | 32.8 | 32.1 | 31.4 | 30.7 | 30.0 | 29.3 | 28.6 | 27.9 | 27.2 | 26.5 | 25.8 | 25.1 |
| 22 | 27 | 34.5 | 33.9 | 33.3 | 32.6 | 31.9 | 31.3 | 30.6 | 29.9 | 29.2 | 28.5 | 27.8 | 27.1 | 26.4 | 25.7 | 25.1 |
| 23 | 28 | 34.3 | 33.7 | 33.0 | 32.4 | 31.7 | 31.1 | 30.4 | 29.7 | 29.1 | 28.4 | 27.7 | 27.0 | 26.3 | 25.6 | 25.0 |
| 24 | 29 | 34.0 | 33.4 | 32.8 | 32.2 | 31.5 | 30.9 | 30.2 | 29.6 | 28.9 | 28.2 | 27.6 | 26.9 | 26.2 | 25.5 | 24.9 |
| 25 | 30 | 33.8 | 33.2 | 32.6 | 32.0 | 31.3 | 30.7 | 30.1 | 29.4 | 28.8 | 28.1 | 27.4 | 26.8 | 26.1 | 25.4 | 24.8 |
| 26 | 31 | 33.5 | 32.9 | 32.3 | 31.7 | 31.1 | 30.5 | 29.9 | 29.2 | 28.6 | 27.9 | 27.3 | 26.6 | 26.0 | 25.3 | 24.6 |
| 27 | 32 | 33.2 | 32.6 | 32.1 | 31.5 | 30.9 | 30.3 | 29.6 | 29.0 | 28.4 | 27.8 | 27.1 | 26.5 | 25.8 | 25.2 | 24.5 |
| 28 | 33 | 32.9 | 32.3 | 31.8 | 31.2 | 30.6 | 30.0 | 29.4 | 28.8 | 28.2 | 27.6 | 27.0 | 26.3 | 25.7 | 25.0 | 24.4 |
| 29 | 34 | 32.6 | 32.0 | 31.5 | 30.9 | 30.4 | 29.8 | 29.2 | 28.6 | 28.0 | 27.4 | 26.8 | 26.2 | 25.5 | 24.9 | 24.3 |
| 30 | 35 | 32.2 | 31.7 | 31.2 | 30.6 | 30.1 | 29.5 | 29.0 | 28.4 | 27.8 | 27.2 | 26.6 | 26.0 | 25.4 | 24.7 | 24.1 |
| 31 | 36 | 31.9 | 31.4 | 30.9 | 30.3 | 29.8 | 29.3 | 28.7 | 28.1 | 27.6 | 27.0 | 26.4 | 25.8 | 25.2 | 24.6 | 24.0 |
| 32 | 37 | 31.5 | 31.0 | 30.5 | 30.0 | 29.5 | 29.0 | 28.4 | 27.9 | 27.3 | 26.8 | 26.2 | 25.6 | 25.0 | 24.4 | 23.8 |
| 33 | 38 | 31.1 | 30.7 | 30.2 | 29.7 | 29.2 | 28.7 | 28.2 | 27.6 | 27.1 | 26.5 | 26.0 | 25.4 | 24.8 | 24.2 | 23.6 |
| 34 | 39 | 30.7 | 30.3 | 29.8 | 29.3 | 28.9 | 28.4 | 27.9 | 27.3 | 26.8 | 26.3 | 25.7 | 25.2 | 24.6 | 24.0 | 23.5 |
| Male | Female | Ages | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | ||
| Female 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | ||
| 6 | 11 | 25.2 | 24.4 | 23.7 | 22.9 | 22.2 | 21.5 | 20.8 | 20.1 | 19.4 | 18.7 | 18.0 | 17.4 | 16.7 | 16.1 |
| 7 | 12 | 25.1 | 24.4 | 23.6 | 22.9 | 22.2 | 21.5 | 20.8 | 20.1 | 19.4 | 18.7 | 18.0 | 17.4 | 16.7 | 16.1 |
| 8 | 13 | 25.1 | 24.4 | 23.6 | 22.9 | 22.2 | 21.4 | 20.7 | 20.0 | 19.4 | 18.7 | 18.0 | 17.4 | 16.7 | 16.1 |
| 9 | 14 | 25.1 | 24.3 | 23.6 | 22.9 | 22.1 | 21.4 | 20.7 | 20.0 | 19.3 | 18.7 | 18.0 | 17.3 | 16.7 | 16.1 |
| 10 | 15 | 25.0 | 24.3 | 23.6 | 22.8 | 22.1 | 21.4 | 20.7 | 20.0 | 19.3 | 18.6 | 18.0 | 17.3 | 16.7 | 16.1 |
| 11 | 16 | 25.0 | 24.3 | 23.5 | 22.8 | 22.1 | 21.4 | 20.7 | 20.0 | 19.3 | 18.6 | 18.0 | 17.3 | 16.7 | 16.1 |
| 12 | 17 | 25.0 | 24.2 | 23.5 | 22.8 | 22.1 | 21.4 | 20.7 | 20.0 | 19.3 | 18.6 | 18.0 | 17.3 | 16.7 | 16.0 |
| 13 | 18 | 24.9 | 24.2 | 23.5 | 22.7 | 22.0 | 21.3 | 20.6 | 19.9 | 19.3 | 18.6 | 17.9 | 17.3 | 16.7 | 16.0 |
| 14 | 19 | 24.9 | 24.1 | 23.4 | 22.7 | 22.0 | 21.3 | 20.6 | 19.9 | 19.2 | 18.6 | 17.9 | 17.3 | 16.6 | 16.0 |
| 15 | 20 | 24.8 | 24.1 | 23.4 | 22.7 | 22.0 | 21.3 | 20.6 | 19.9 | 19.2 | 18.5 | 17.9 | 17.3 | 16.6 | 16.0 |
| 16 | 21 | 24.8 | 24.0 | 23.3 | 22.6 | 21.9 | 21.2 | 20.5 | 19.9 | 19.2 | 18.5 | 17.9 | 17.2 | 16.6 | 16.0 |
| 17 | 22 | 24.7 | 24.0 | 23.3 | 22.6 | 21.9 | 21.2 | 20.5 | 19.8 | 19.2 | 18.5 | 17.8 | 17.2 | 16.6 | 16.0 |
| 18 | 23 | 24.7 | 23.9 | 23.2 | 22.5 | 21.8 | 21.1 | 20.5 | 19.8 | 19.1 | 18.5 | 17.8 | 17.2 | 16.6 | 15.9 |
| 19 | 24 | 24.6 | 23.9 | 23.2 | 22.5 | 21.8 | 21.1 | 20.4 | 19.8 | 19.1 | 18.4 | 17.8 | 17.2 | 16.5 | 15.9 |
| 20 | 25 | 24.5 | 23.8 | 23.1 | 22.4 | 21.7 | 21.1 | 20.4 | 19.7 | 19.1 | 18.4 | 17.8 | 17.1 | 16.5 | 15.9 |
| 21 | 26 | 24.4 | 23.7 | 23.1 | 22.4 | 21.7 | 21.0 | 20.3 | 19.7 | 19.0 | 18.4 | 17.7 | 17.1 | 16.5 | 15.9 |
| 22 | 27 | 24.4 | 23.7 | 23.0 | 22.3 | 21.6 | 21.0 | 20.3 | 19.6 | 19.0 | 18.3 | 17.7 | 17.1 | 16.5 | 15.9 |
| 23 | 28 | 24.3 | 23.6 | 22.9 | 22.2 | 21.6 | 20.9 | 20.2 | 19.6 | 18.9 | 18.3 | 17.7 | 17.0 | 16.4 | 15.8 |
| 24 | 29 | 24.2 | 23.5 | 22.8 | 22.2 | 21.5 | 20.8 | 20.2 | 19.5 | 18.9 | 18.3 | 17.6 | 17.0 | 16.4 | 15.8 |
| 25 | 30 | 24.1 | 23.4 | 22.8 | 22.1 | 21.4 | 20.8 | 20.1 | 19.5 | 18.8 | 18.2 | 17.6 | 17.0 | 16.4 | 15.8 |
| 26 | 31 | 24.0 | 23.3 | 22.7 | 22.0 | 21.4 | 20.7 | 20.1 | 19.4 | 18.8 | 18.2 | 17.5 | 16.9 | 16.3 | 15.7 |
| 27 | 32 | 23.9 | 23.2 | 22.6 | 21.9 | 21.3 | 20.6 | 20.0 | 19.4 | 18.7 | 18.1 | 17.5 | 16.9 | 16.3 | 15.7 |
| 28 | 33 | 23.8 | 23.1 | 22.5 | 21.8 | 21.2 | 20.6 | 19.9 | 19.3 | 18.7 | 18.1 | 17.4 | 16.8 | 16.2 | 15.6 |
| 29 | 34 | 23.6 | 23.0 | 22.4 | 21.7 | 21.1 | 20.5 | 19.8 | 19.2 | 18.6 | 18.0 | 17.4 | 16.8 | 16.2 | 15.6 |
| 30 | 35 | 23.5 | 22.9 | 22.3 | 21.6 | 21.0 | 20.4 | 19.8 | 19.1 | 18.5 | 17.9 | 17.3 | 16.7 | 16.1 | 15.6 |
| 31 | 36 | 23.4 | 22.7 | 22.1 | 21.5 | 20.9 | 20.3 | 19.7 | 19.1 | 18.5 | 17.9 | 17.3 | 16.7 | 16.1 | 15.5 |
| 32 | 37 | 23.2 | 22.6 | 22.0 | 21.4 | 20.8 | 20.2 | 19.6 | 19.0 | 18.4 | 17.8 | 17.2 | 16.6 | 16.0 | 15.5 |
| 33 | 38 | 23.1 | 22.5 | 21.9 | 21.3 | 20.7 | 20.1 | 19.5 | 18.9 | 18.3 | 17.7 | 17.1 | 16.5 | 16.0 | 15.4 |
| 34 | 39 | 22.9 | 22.3 | 21.7 | 21.1 | 20.5 | 20.0 | 19.4 | 18.8 | 18.2 | 17.6 | 17.0 | 16.5 | 15.9 | 15.3 |
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | ||
| Female 69 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | ||
| 6 | 11 | 15.5 | 14.9 | 14.3 | 13.7 | 13.1 | 12.6 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.6 | 9.1 | 8.7 | 8.2 |
| 7 | 12 | 15.5 | 14.9 | 14.3 | 13.7 | 13.1 | 12.6 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.6 | 9.1 | 8.7 | 8.2 |
| 8 | 13 | 15.5 | 14.9 | 14.3 | 13.7 | 13.1 | 12.6 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.6 | 9.1 | 8.7 | 8.2 |
| 9 | 14 | 15.5 | 14.9 | 14.3 | 13.7 | 13.1 | 12.6 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.7 | 8.2 |
| 10 | 15 | 15.4 | 14.8 | 14.3 | 13.7 | 13.1 | 12.6 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.7 | 8.2 |
| 11 | 16 | 15.4 | 14.8 | 14.2 | 13.7 | 13.1 | 12.6 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.7 | 8.2 |
| 12 | 17 | 15.4 | 14.8 | 14.2 | 13.7 | 13.1 | 12.5 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 13 | 18 | 15.4 | 14.8 | 14.2 | 13.6 | 13.1 | 12.5 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 14 | 19 | 15.4 | 14.8 | 14.2 | 13.6 | 13.1 | 12.5 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 15 | 20 | 15.4 | 14.8 | 14.2 | 13.6 | 13.1 | 12.5 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 16 | 21 | 15.4 | 14.8 | 14.2 | 13.6 | 13.1 | 12.5 | 12.0 | 11.5 | 11.0 | 10.5 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 17 | 22 | 15.4 | 14.8 | 14.2 | 13.6 | 13.0 | 12.5 | 12.0 | 11.5 | 10.9 | 10.5 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 18 | 23 | 15.3 | 14.7 | 14.2 | 13.6 | 13.0 | 12.5 | 12.0 | 11.4 | 10.9 | 10.4 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 19 | 24 | 15.3 | 14.7 | 14.1 | 13.6 | 13.0 | 12.5 | 12.0 | 11.4 | 10.9 | 10.4 | 10.0 | 9.5 | 9.1 | 8.6 | 8.2 |
| 20 | 25 | 15.3 | 14.7 | 14.1 | 13.6 | 13.0 | 12.5 | 11.9 | 11.4 | 10.9 | 10.4 | 10.0 | 9.5 | 9.0 | 8.6 | 8.2 |
| 21 | 26 | 15.3 | 14.7 | 14.1 | 13.5 | 13.0 | 12.5 | 11.9 | 11.4 | 10.9 | 10.4 | 9.9 | 9.5 | 9.0 | 8.6 | 8.2 |
| 22 | 27 | 15.3 | 14.7 | 14.1 | 13.5 | 13.0 | 12.4 | 11.9 | 11.4 | 10.9 | 10.4 | 9.9 | 9.5 | 9.0 | 8.6 | 8.2 |
| 23 | 28 | 15.2 | 14.6 | 14.1 | 13.5 | 13.0 | 12.4 | 11.9 | 11.4 | 10.9 | 10.4 | 9.9 | 9.5 | 9.0 | 8.6 | 8.2 |
| 24 | 29 | 15.2 | 14.6 | 14.0 | 13.5 | 12.9 | 12.4 | 11.9 | 11.4 | 10.9 | 10.4 | 9.9 | 9.5 | 9.0 | 8.6 | 8.2 |
| 25 | 30 | 15.2 | 14.6 | 14.0 | 13.5 | 12.9 | 12.4 | 11.9 | 11.4 | 10.9 | 10.4 | 9.9 | 9.5 | 9.0 | 8.6 | 8.2 |
| 26 | 31 | 15.1 | 14.6 | 14.0 | 13.4 | 12.9 | 12.4 | 11.9 | 11.3 | 10.8 | 10.4 | 9.9 | 9.4 | 9.0 | 8.6 | 8.2 |
| 27 | 32 | 15.1 | 14.5 | 14.0 | 13.4 | 12.9 | 12.4 | 11.8 | 11.3 | 10.8 | 10.4 | 9.9 | 9.4 | 9.0 | 8.6 | 8.2 |
| 28 | 33 | 15.1 | 14.5 | 13.9 | 13.4 | 12.9 | 12.3 | 11.8 | 11.3 | 10.8 | 10.3 | 9.9 | 9.4 | 9.0 | 8.6 | 8.1 |
| 29 | 34 | 15.0 | 14.5 | 13.9 | 13.4 | 12.8 | 12.3 | 11.8 | 11.3 | 10.8 | 10.3 | 9.9 | 9.4 | 9.0 | 8.5 | 8.1 |
| 30 | 35 | 15.0 | 14.4 | 13.9 | 13.3 | 12.8 | 12.3 | 11.8 | 11.3 | 10.8 | 10.3 | 9.8 | 9.4 | 9.0 | 8.5 | 8.1 |
| 31 | 36 | 14.9 | 14.4 | 13.8 | 13.3 | 12.8 | 12.2 | 11.7 | 11.2 | 10.8 | 10.3 | 9.8 | 9.4 | 8.9 | 8.5 | 8.1 |
| 32 | 37 | 14.9 | 14.3 | 13.8 | 13.3 | 12.7 | 12.2 | 11.7 | 11.2 | 10.7 | 10.3 | 9.8 | 9.4 | 8.9 | 8.5 | 8.1 |
| 33 | 38 | 14.8 | 14.3 | 13.8 | 13.2 | 12.7 | 12.2 | 11.7 | 11.2 | 10.7 | 10.2 | 9.8 | 9.3 | 8.9 | 8.5 | 8.1 |
| 34 | 39 | 14.8 | 14.2 | 13.7 | 13.2 | 12.7 | 12.2 | 11.7 | 11.2 | 10.7 | 10.2 | 9.8 | 9.3 | 8.9 | 8.5 | 8.1 |
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | ||
| Female 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | 98 | ||
| 6 | 11 | 7.8 | 7.4 | 7.1 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 7 | 12 | 7.8 | 7.4 | 7.1 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 8 | 13 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 9 | 14 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 10 | 15 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 11 | 16 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 12 | 17 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 13 | 18 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.3 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 14 | 19 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 15 | 20 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 16 | 21 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 17 | 22 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 18 | 23 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 19 | 24 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 20 | 25 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 21 | 26 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 22 | 27 | 7.8 | 7.4 | 7.0 | 6.7 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 23 | 28 | 7.8 | 7.4 | 7.0 | 6.6 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.8 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 24 | 29 | 7.8 | 7.4 | 7.0 | 6.6 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 25 | 30 | 7.8 | 7.4 | 7.0 | 6.6 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 26 | 31 | 7.8 | 7.4 | 7.0 | 6.6 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 27 | 32 | 7.7 | 7.4 | 7.0 | 6.6 | 6.3 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 28 | 33 | 7.7 | 7.4 | 7.0 | 6.6 | 6.3 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 29 | 34 | 7.7 | 7.3 | 7.0 | 6.6 | 6.3 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 30 | 35 | 7.7 | 7.3 | 7.0 | 6.6 | 6.3 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 31 | 36 | 7.7 | 7.3 | 7.0 | 6.6 | 6.3 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 32 | 37 | 7.7 | 7.3 | 7.0 | 6.6 | 6.3 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 4.0 | 3.7 | 3.5 |
| 33 | 38 | 7.7 | 7.3 | 6.9 | 6.6 | 6.2 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 | 3.9 | 3.7 | 3.5 |
| 34 | 39 | 7.7 | 7.3 | 6.9 | 6.6 | 6.2 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 |
| Male | Female | Ages | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | ||
| Female 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | ||
| 6 | 11 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 7 | 12 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 8 | 13 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 9 | 14 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 10 | 15 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 11 | 16 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 12 | 17 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 13 | 18 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 14 | 19 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 15 | 20 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 16 | 21 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 17 | 22 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 18 | 23 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 19 | 24 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 20 | 25 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 21 | 26 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 22 | 27 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 23 | 28 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 24 | 29 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 25 | 30 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 26 | 31 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 27 | 32 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 28 | 33 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 29 | 34 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 30 | 35 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 31 | 36 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 32 | 37 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 33 | 38 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 34 | 39 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| Male | Female | Ages | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | ||
| Female 40 | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | ||
| 35 | 40 | 30.3 | 29.9 | 29.4 | 29.0 | 28.5 | 28.0 | 27.5 | 27.0 | 26.5 | 26.0 | 25.5 | 24.9 | 24.4 |
| 36 | 41 | 29.9 | 29.5 | 29.0 | 28.6 | 28.2 | 27.7 | 27.2 | 26.7 | 26.2 | 25.7 | 25.2 | 24.7 | 24.2 |
| 37 | 42 | 29.4 | 29.0 | 28.6 | 28.2 | 27.8 | 27.3 | 26.9 | 26.4 | 25.9 | 25.5 | 25.0 | 24.4 | 23.9 |
| 38 | 43 | 29.0 | 28.6 | 28.2 | 27.8 | 27.4 | 27.0 | 26.5 | 26.1 | 25.6 | 25.2 | 24.7 | 24.2 | 23.7 |
| 39 | 44 | 28.5 | 28.2 | 27.8 | 27.4 | 27.0 | 26.6 | 26.2 | 25.8 | 25.3 | 24.8 | 24.4 | 23.9 | 23.4 |
| 40 | 45 | 28.0 | 27.7 | 27.3 | 27.0 | 26.6 | 26.2 | 25.8 | 25.4 | 25.0 | 24.5 | 24.1 | 23.6 | 23.1 |
| 41 | 46 | 27.5 | 27.2 | 26.9 | 26.5 | 26.2 | 25.8 | 25.4 | 25.0 | 24.6 | 24.2 | 23.8 | 23.3 | 22.9 |
| 42 | 47 | 27.0 | 26.7 | 26.4 | 26.1 | 25.8 | 25.4 | 25.0 | 24.6 | 24.2 | 23.8 | 23.4 | 23.0 | 22.6 |
| 43 | 48 | 26.5 | 26.2 | 25.9 | 25.6 | 25.3 | 25.0 | 24.6 | 24.2 | 23.9 | 23.5 | 23.1 | 22.7 | 22.2 |
| 44 | 49 | 26.0 | 25.7 | 25.5 | 25.2 | 24.8 | 24.5 | 24.2 | 23.8 | 23.5 | 23.1 | 22.7 | 22.3 | 21.9 |
| 45 | 50 | 25.5 | 25.2 | 25.0 | 24.7 | 24.4 | 24.1 | 23.8 | 23.4 | 23.1 | 22.7 | 22.4 | 22.0 | 21.6 |
| 46 | 51 | 24.9 | 24.7 | 24.4 | 24.2 | 23.9 | 23.6 | 23.3 | 23.0 | 22.7 | 22.3 | 22.0 | 21.6 | 21.2 |
| 47 | 52 | 24.4 | 24.2 | 23.9 | 23.7 | 23.4 | 23.1 | 22.9 | 22.6 | 22.2 | 21.9 | 21.6 | 21.2 | 20.9 |
| Male | Female | Ages | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 48 | 49 | 50 | 51 | 52 | 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | ||
| Female 53 | 54 | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | ||
| 35 | 40 | 23.8 | 23.3 | 22.7 | 22.1 | 21.6 | 21.0 | 20.4 | 19.8 | 19.3 | 18.7 | 18.1 | 17.5 | 17.0 |
| 36 | 41 | 23.6 | 23.1 | 22.5 | 22.0 | 21.4 | 20.8 | 20.3 | 19.7 | 19.1 | 18.6 | 18.0 | 17.4 | 16.9 |
| 37 | 42 | 23.4 | 22.9 | 22.3 | 21.8 | 21.2 | 20.7 | 20.1 | 19.6 | 19.0 | 18.4 | 17.9 | 17.3 | 16.8 |
| 38 | 43 | 23.2 | 22.6 | 22.1 | 21.6 | 21.1 | 20.5 | 20.0 | 19.4 | 18.9 | 18.3 | 17.8 | 17.2 | 16.7 |
| 39 | 44 | 22.9 | 22.4 | 21.9 | 21.4 | 20.9 | 20.3 | 19.8 | 19.3 | 18.7 | 18.2 | 17.7 | 17.1 | 16.6 |
| 40 | 45 | 22.7 | 22.2 | 21.7 | 21.2 | 20.7 | 20.1 | 19.6 | 19.1 | 18.6 | 18.0 | 17.5 | 17.0 | 16.5 |
| 41 | 46 | 22.4 | 21.9 | 21.4 | 20.9 | 20.4 | 19.9 | 19.4 | 18.9 | 18.4 | 17.9 | 17.4 | 16.9 | 16.3 |
| 42 | 47 | 22.1 | 21.6 | 21.2 | 20.7 | 20.2 | 19.7 | 19.2 | 18.7 | 18.2 | 17.7 | 17.2 | 16.7 | 16.2 |
| 43 | 48 | 21.8 | 21.4 | 20.9 | 20.5 | 20.0 | 19.5 | 19.0 | 18.6 | 18.1 | 17.6 | 17.1 | 16.6 | 16.1 |
| 44 | 49 | 21.5 | 21.1 | 20.6 | 20.2 | 19.8 | 19.3 | 18.8 | 18.4 | 17.9 | 17.4 | 16.9 | 16.4 | 15.9 |
| 45 | 50 | 21.2 | 20.8 | 20.4 | 19.9 | 19.5 | 19.1 | 18.6 | 18.1 | 17.7 | 17.2 | 16.7 | 16.3 | 15.8 |
| 46 | 51 | 20.9 | 20.5 | 20.1 | 19.7 | 19.2 | 18.8 | 18.4 | 17.9 | 17.5 | 17.0 | 16.6 | 16.1 | 15.6 |
| 47 | 52 | 20.5 | 20.1 | 19.8 | 19.4 | 19.0 | 18.5 | 18.1 | 17.7 | 17.3 | 16.8 | 16.4 | 15.9 | 15.5 |
| 48 | 53 | 20.2 | 19.8 | 19.4 | 19.1 | 18.7 | 18.3 | 17.9 | 17.5 | 17.0 | 16.6 | 16.2 | 15.7 | 15.3 |
| 49 | 54 | 19.8 | 19.5 | 19.1 | 18.8 | 18.4 | 18.0 | 17.6 | 17.2 | 16.8 | 16.4 | 16.0 | 15.5 | 15.1 |
| 50 | 55 | 19.4 | 19.1 | 18.8 | 18.4 | 18.1 | 17.7 | 17.3 | 16.9 | 16.6 | 16.2 | 15.8 | 15.3 | 14.9 |
| 51 | 56 | 19.1 | 18.8 | 18.4 | 18.1 | 17.8 | 17.4 | 17.0 | 16.7 | 16.3 | 15.9 | 15.5 | 15.1 | 14.7 |
| 52 | 57 | 18.7 | 18.4 | 18.1 | 17.8 | 17.4 | 17.1 | 16.8 | 16.4 | 16.0 | 15.7 | 15.3 | 14.9 | 14.5 |
| 53 | 58 | 18.3 | 18.0 | 17.7 | 17.4 | 17.1 | 16.8 | 16.4 | 16.1 | 15.8 | 15.4 | 15.1 | 14.7 | 14.3 |
| 54 | 59 | 17.9 | 17.6 | 17.3 | 17.0 | 16.8 | 16.4 | 16.1 | 15.8 | 15.5 | 15.1 | 14.8 | 14.4 | 14.1 |
| 55 | 60 | 17.5 | 17.2 | 16.9 | 16.7 | 16.4 | 16.1 | 15.8 | 15.5 | 15.2 | 14.9 | 14.5 | 14.2 | 13.9 |
| 56 | 61 | 17.0 | 16.8 | 16.6 | 16.3 | 16.0 | 15.8 | 15.5 | 15.2 | 14.9 | 14.6 | 14.3 | 13.9 | 13.6 |
| 57 | 62 | 16.6 | 16.4 | 16.2 | 15.9 | 15.7 | 15.4 | 15.1 | 14.9 | 14.6 | 14.3 | 14.0 | 13.7 | 13.4 |
| 58 | 63 | 16.2 | 16.0 | 15.8 | 15.5 | 15.3 | 15.1 | 14.8 | 14.5 | 14.3 | 14.0 | 13.7 | 13.4 | 13.1 |
| 59 | 64 | 15.7 | 15.5 | 15.3 | 15.1 | 14.9 | 14.7 | 14.4 | 14.2 | 13.9 | 13.7 | 13.4 | 13.1 | 12.8 |
| 60 | 65 | 15.3 | 15.1 | 14.9 | 14.7 | 14.5 | 14.3 | 14.1 | 13.9 | 13.6 | 13.4 | 13.1 | 12.8 | 12.6 |
| Male | Female | Ages | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | ||
| Female 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 74 | 76 | 77 | 78 | ||
| 35 | 40 | 16.4 | 15.8 | 15.3 | 14.7 | 14.2 | 13.7 | 13.1 | 12.6 | 12.1 | 11.6 | 11.1 | 10.7 | 10.2 |
| 36 | 41 | 16.3 | 15.8 | 15.2 | 14.7 | 14.1 | 13.6 | 13.1 | 12.6 | 12.1 | 11.6 | 11.1 | 10.6 | 10.2 |
| 37 | 42 | 16.2 | 15.7 | 15.1 | 14.6 | 14.1 | 13.6 | 13.0 | 12.5 | 12.0 | 11.5 | 11.1 | 10.6 | 10.1 |
| 38 | 43 | 16.1 | 15.6 | 15.1 | 14.5 | 14.0 | 13.5 | 13.0 | 12.5 | 12.0 | 11.5 | 11.0 | 10.6 | 10.1 |
| 39 | 44 | 16.0 | 15.5 | 15.0 | 14.5 | 13.9 | 13.4 | 12.9 | 12.4 | 11.9 | 11.5 | 11.0 | 10.5 | 10.1 |
| 40 | 45 | 15.9 | 15.4 | 14.9 | 14.4 | 13.9 | 13.4 | 12.9 | 12.4 | 11.9 | 11.4 | 11.0 | 10.5 | 10.0 |
| 41 | 46 | 15.8 | 15.3 | 14.8 | 14.3 | 13.8 | 13.3 | 12.8 | 12.3 | 11.8 | 11.4 | 10.9 | 10.5 | 10.0 |
| 42 | 47 | 15.7 | 15.2 | 14.7 | 14.2 | 13.7 | 13.2 | 12.7 | 12.3 | 11.8 | 11.3 | 10.9 | 10.4 | 10.0 |
| 43 | 48 | 15.6 | 15.1 | 14.6 | 14.1 | 13.6 | 13.1 | 12.7 | 12.2 | 11.7 | 11.3 | 10.8 | 10.4 | 9.9 |
| 44 | 49 | 15.5 | 15.0 | 14.5 | 14.0 | 13.5 | 13.1 | 12.6 | 12.1 | 11.7 | 11.2 | 10.8 | 10.3 | 9.9 |
| 45 | 50 | 15.3 | 14.8 | 14.4 | 13.9 | 13.4 | 13.0 | 12.5 | 12.0 | 11.6 | 11.1 | 10.7 | 10.3 | 9.8 |
| 46 | 51 | 15.2 | 14.7 | 14.2 | 13.8 | 13.3 | 12.9 | 12.4 | 12.0 | 11.5 | 11.1 | 10.6 | 10.2 | 9.8 |
| 47 | 52 | 15.0 | 14.6 | 14.1 | 13.7 | 13.2 | 12.8 | 12.3 | 11.9 | 11.4 | 11.0 | 10.6 | 10.1 | 9.7 |
| 48 | 53 | 14.9 | 14.4 | 14.0 | 13.5 | 13.1 | 12.6 | 12.2 | 11.8 | 11.3 | 10.9 | 10.5 | 10.1 | 9.7 |
| 49 | 54 | 14.7 | 14.3 | 13.8 | 13.4 | 13.0 | 12.5 | 12.1 | 11.7 | 11.3 | 10.8 | 10.4 | 10.0 | 9.6 |
| 50 | 55 | 14.5 | 14.1 | 13.7 | 13.3 | 12.8 | 12.4 | 12.0 | 11.6 | 11.2 | 10.7 | 10.3 | 9.9 | 9.5 |
| 51 | 56 | 14.3 | 13.9 | 13.5 | 13.1 | 12.7 | 12.3 | 11.9 | 11.5 | 11.1 | 10.7 | 10.3 | 9.9 | 9.5 |
| 52 | 57 | 14.1 | 13.7 | 13.3 | 12.9 | 12.5 | 12.1 | 11.7 | 11.3 | 10.9 | 10.6 | 10.2 | 9.8 | 9.4 |
| 53 | 58 | 13.9 | 13.6 | 13.2 | 12.8 | 12.4 | 12.0 | 11.6 | 11.2 | 10.8 | 10.5 | 10.1 | 9.7 | 9.3 |
| 54 | 59 | 13.7 | 13.4 | 13.0 | 12.6 | 12.2 | 11.9 | 11.5 | 11.1 | 10.7 | 10.3 | 10.0 | 9.6 | 9.2 |
| 55 | 60 | 13.5 | 13.2 | 12.8 | 12.4 | 12.1 | 11.7 | 11.3 | 11.0 | 10.6 | 10.2 | 9.9 | 9.5 | 9.1 |
| 56 | 61 | 13.3 | 12.9 | 12.6 | 12.2 | 11.9 | 11.5 | 11.2 | 10.8 | 10.5 | 10.1 | 9.8 | 9.4 | 9.0 |
| 57 | 62 | 13.0 | 12.7 | 12.4 | 12.1 | 11.7 | 11.4 | 11.0 | 10.7 | 10.3 | 10.0 | 9.6 | 9.3 | 8.9 |
| 58 | 63 | 12.8 | 12.5 | 12.2 | 11.8 | 11.5 | 11.2 | 10.9 | 10.5 | 10.2 | 9.8 | 9.5 | 9.2 | 8.8 |
| 59 | 64 | 12.6 | 12.3 | 11.9 | 11.6 | 11.3 | 11.0 | 10.7 | 10.4 | 10.0 | 9.7 | 9.4 | 9.1 | 8.7 |
| 60 | 65 | 12.3 | 12.0 | 11.7 | 11.4 | 11.1 | 10.8 | 10.5 | 10.2 | 9.9 | 9.6 | 9.3 | 8.9 | 8.6 |
| 61 | 66 | 12.0 | 11.8 | 11.5 | 11.2 | 10.9 | 10.6 | 10.3 | 10.0 | 9.7 | 9.4 | 9.1 | 8.8 | 8.5 |
| 62 | 67 | 11.8 | 11.5 | 11.2 | 11.0 | 10.7 | 10.4 | 10.1 | 9.8 | 9.6 | 9.3 | 9.0 | 8.7 | 8.4 |
| 63 | 68 | 11.5 | 11.2 | 11.0 | 10.7 | 10.5 | 10.2 | 9.9 | 9.7 | 9.4 | 9.1 | 8.8 | 8.5 | 8.2 |
| 64 | 69 | 11.2 | 11.0 | 10.7 | 10.5 | 10.2 | 10.0 | 9.7 | 9.5 | 9.2 | 8.9 | 8.7 | 8.4 | 8.1 |
| 65 | 70 | 10.9 | 10.7 | 10.5 | 10.2 | 10.0 | 9.8 | 9.5 | 9.3 | 9.0 | 8.8 | 8.5 | 8.2 | 8.0 |
| 66 | 71 | 10.6 | 10.4 | 10.2 | 10.0 | 9.8 | 9.5 | 9.3 | 9.1 | 8.8 | 8.6 | 8.3 | 8.1 | 7.8 |
| 67 | 72 | 10.3 | 10.1 | 9.9 | 9.7 | 9.5 | 9.3 | 9.1 | 8.9 | 8.6 | 8.4 | 8.1 | 7.9 | 7.7 |
| 68 | 73 | 10.0 | 9.8 | 9.7 | 9.5 | 9.3 | 9.1 | 8.9 | 8.6 | 8.4 | 8.2 | 8.0 | 7.7 | 7.5 |
| 69 | 74 | 9.7 | 9.6 | 9.4 | 9.2 | 9.0 | 8.8 | 8.6 | 8.4 | 8.2 | 8.0 | 7.8 | 7.6 | 7.3 |
| 70 | 75 | 9.4 | 9.3 | 9.1 | 8.9 | 8.8 | 8.6 | 8.4 | 8.2 | 8.0 | 7.8 | 7.6 | 7.4 | 7.2 |
| 71 | 76 | 9.1 | 9.0 | 8.8 | 8.7 | 8.5 | 8.3 | 8.1 | 8.0 | 7.8 | 7.6 | 7.4 | 7.2 | 7.0 |
| 72 | 77 | 8.8 | 8.7 | 8.5 | 8.4 | 8.2 | 8.1 | 7.9 | 7.7 | 7.6 | 7.4 | 7.2 | 7.0 | 6.8 |
| 73 | 78 | 8.5 | 8.4 | 8.2 | 8.1 | 8.0 | 7.8 | 7.7 | 7.5 | 7.3 | 7.2 | 7.0 | 6.8 | 6.7 |
| Male | Female | Ages | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 74 | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | ||
| Female 79 | 80 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 89 | 90 | 91 | ||
| 35 | 40 | 9.7 | 9.3 | 8.9 | 8.5 | 8.1 | 7.7 | 7.3 | 6.9 | 6.6 | 6.2 | 5.9 | 5.6 | 5.3 |
| 36 | 41 | 9.7 | 9.3 | 8.9 | 8.4 | 8.0 | 7.7 | 7.3 | 6.9 | 6.6 | 6.2 | 5.9 | 5.6 | 5.3 |
| 37 | 42 | 9.7 | 9.3 | 8.8 | 8.4 | 8.0 | 7.6 | 7.3 | 6.9 | 6.5 | 6.2 | 5.9 | 5.6 | 5.3 |
| 38 | 43 | 9.7 | 9.2 | 8.8 | 8.4 | 8.0 | 7.6 | 7.2 | 6.9 | 6.5 | 6.2 | 5.9 | 5.6 | 5.3 |
| 39 | 44 | 9.6 | 9.2 | 8.8 | 8.4 | 8.0 | 7.6 | 7.2 | 6.9 | 6.5 | 6.2 | 5.9 | 5.6 | 5.3 |
| 40 | 45 | 9.6 | 9.2 | 8.8 | 8.4 | 8.0 | 7.6 | 7.2 | 6.9 | 6.5 | 6.2 | 5.9 | 5.5 | 5.2 |
| 41 | 46 | 9.6 | 9.2 | 8.7 | 8.3 | 7.9 | 7.6 | 7.2 | 6.8 | 6.5 | 6.2 | 5.8 | 5.5 | 5.2 |
| 42 | 47 | 9.5 | 9.1 | 8.7 | 8.3 | 7.9 | 7.5 | 7.2 | 6.8 | 6.5 | 6.2 | 5.8 | 5.5 | 5.2 |
| 43 | 48 | 9.5 | 9.1 | 8.7 | 8.3 | 7.9 | 7.5 | 7.2 | 6.8 | 6.5 | 6.1 | 5.8 | 5.5 | 5.2 |
| 44 | 49 | 9.5 | 9.0 | 8.6 | 8.2 | 7.9 | 7.5 | 7.1 | 6.8 | 6.4 | 6.1 | 5.8 | 5.5 | 5.2 |
| 45 | 50 | 9.4 | 9.0 | 8.6 | 8.2 | 7.8 | 7.5 | 7.1 | 6.8 | 6.4 | 6.1 | 5.8 | 5.5 | 5.2 |
| 46 | 51 | 9.4 | 9.0 | 8.6 | 8.2 | 7.8 | 7.4 | 7.1 | 6.7 | 6.4 | 6.1 | 5.8 | 5.5 | 5.2 |
| 47 | 52 | 9.3 | 8.9 | 8.5 | 8.1 | 7.8 | 7.4 | 7.1 | 6.7 | 6.4 | 6.1 | 5.8 | 5.5 | 5.2 |
| 48 | 53 | 9.3 | 8.9 | 8.5 | 8.1 | 7.7 | 7.4 | 7.0 | 6.7 | 6.4 | 6.0 | 5.7 | 5.4 | 5.1 |
| 49 | 54 | 9.2 | 8.8 | 8.4 | 8.1 | 7.7 | 7.3 | 7.0 | 6.7 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 |
| 50 | 55 | 9.1 | 8.8 | 8.4 | 8.0 | 7.7 | 7.3 | 7.0 | 6.6 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 |
| 51 | 56 | 9.1 | 8.7 | 8.3 | 8.0 | 7.6 | 7.3 | 6.9 | 6.6 | 6.3 | 6.0 | 5.7 | 5.4 | 5.1 |
| 52 | 57 | 9.0 | 8.6 | 8.3 | 7.9 | 7.6 | 7.2 | 6.9 | 6.6 | 6.2 | 5.9 | 5.6 | 5.4 | 5.1 |
| 53 | 58 | 8.9 | 8.6 | 8.2 | 7.9 | 7.5 | 7.2 | 6.9 | 6.5 | 6.2 | 5.9 | 5.6 | 5.3 | 5.1 |
| 54 | 59 | 8.9 | 8.5 | 8.2 | 7.8 | 7.5 | 7.1 | 6.8 | 6.5 | 6.2 | 5.9 | 5.6 | 5.3 | 5.0 |
| 55 | 60 | 8.8 | 8.4 | 8.1 | 7.7 | 7.4 | 7.1 | 6.8 | 6.4 | 6.1 | 5.8 | 5.6 | 5.3 | 5.0 |
| 56 | 61 | 8.7 | 8.4 | 8.0 | 7.7 | 7.3 | 7.0 | 6.7 | 6.4 | 6.1 | 5.8 | 5.5 | 5.3 | 5.0 |
| 57 | 62 | 8.6 | 8.3 | 7.9 | 7.6 | 7.3 | 7.0 | 6.7 | 6.4 | 6.1 | 5.8 | 5.5 | 5.2 | 5.0 |
| 58 | 63 | 8.5 | 8.2 | 7.9 | 7.5 | 7.2 | 6.9 | 6.6 | 6.3 | 6.0 | 5.7 | 5.5 | 5.2 | 4.9 |
| 59 | 64 | 8.4 | 8.1 | 7.8 | 7.5 | 7.1 | 6.8 | 6.5 | 6.3 | 6.0 | 5.7 | 5.4 | 5.2 | 4.9 |
| 60 | 65 | 8.3 | 8.0 | 7.7 | 7.4 | 7.1 | 6.8 | 6.5 | 6.2 | 5.9 | 5.6 | 5.4 | 5.1 | 4.9 |
| 61 | 66 | 8.2 | 7.9 | 7.6 | 7.3 | 7.0 | 6.7 | 6.4 | 6.1 | 5.9 | 5.6 | 5.3 | 5.1 | 4.8 |
| 62 | 67 | 8.1 | 7.8 | 7.5 | 7.2 | 6.9 | 6.6 | 6.4 | 6.1 | 5.8 | 5.5 | 5.3 | 5.0 | 4.8 |
| 63 | 68 | 8.0 | 7.7 | 7.4 | 7.1 | 6.8 | 6.6 | 6.3 | 6.0 | 5.7 | 5.5 | 5.2 | 5.0 | 4.7 |
| 64 | 69 | 7.8 | 7.6 | 7.3 | 7.0 | 6.7 | 6.5 | 6.2 | 5.9 | 5.7 | 5.4 | 5.2 | 4.9 | 4.7 |
| 65 | 70 | 7.7 | 7.4 | 7.2 | 6.9 | 6.6 | 6.4 | 6.1 | 5.9 | 5.6 | 5.4 | 5.1 | 4.9 | 4.7 |
| 66 | 71 | 7.6 | 7.3 | 7.1 | 6.8 | 6.5 | 6.3 | 6.0 | 5.8 | 5.5 | 5.3 | 5.1 | 4.8 | 4.6 |
| 67 | 72 | 7.4 | 7.2 | 6.9 | 6.7 | 6.4 | 6.2 | 6.0 | 5.7 | 5.5 | 5.2 | 5.0 | 4.8 | 4.6 |
| 68 | 73 | 7.3 | 7.0 | 6.8 | 6.6 | 6.3 | 6.1 | 5.9 | 5.6 | 5.4 | 5.2 | 4.9 | 4.7 | 4.5 |
| 69 | 74 | 7.1 | 6.9 | 6.7 | 6.4 | 6.2 | 6.0 | 5.8 | 5.5 | 5.3 | 5.1 | 4.9 | 4.7 | 4.5 |
| 70 | 75 | 7.0 | 6.8 | 6.5 | 6.3 | 6.1 | 5.9 | 5.7 | 5.4 | 5.2 | 5.0 | 4.8 | 4.6 | 4.4 |
| 71 | 76 | 6.8 | 6.6 | 6.4 | 6.2 | 6.0 | 5.8 | 5.6 | 5.3 | 5.1 | 4.9 | 4.7 | 4.5 | 4.3 |
| 72 | 77 | 6.6 | 6.4 | 6.3 | 6.1 | 5.9 | 5.7 | 5.5 | 5.3 | 5.0 | 4.9 | 4.7 | 4.5 | 4.3 |
| 73 | 78 | 6.5 | 6.3 | 6.1 | 5.9 | 5.7 | 5.5 | 5.3 | 5.1 | 5.0 | 4.8 | 4.6 | 4.4 | 4.2 |
| 74 | 79 | 6.3 | 6.1 | 6.0 | 5.8 | 5.6 | 5.4 | 5.2 | 5.0 | 4.9 | 4.7 | 4.5 | 4.3 | 4.1 |
| 75 | 80 | 6.1 | 6.0 | 5.8 | 5.6 | 5.5 | 5.3 | 5.1 | 4.9 | 4.8 | 4.6 | 4.4 | 4.2 | 4.1 |
| 76 | 81 | 6.0 | 5.8 | 5.6 | 5.5 | 5.3 | 5.2 | 5.0 | 4.8 | 4.7 | 4.5 | 4.3 | 4.1 | 4.0 |
| 77 | 82 | 5.8 | 5.6 | 5.5 | 5.3 | 5.2 | 5.0 | 4.9 | 4.7 | 4.5 | 4.4 | 4.2 | 4.1 | 3.9 |
| 78 | 83 | 5.6 | 5.5 | 5.3 | 5.2 | 5.0 | 4.9 | 4.7 | 4.6 | 4.4 | 4.3 | 4.1 | 4.0 | 3.8 |
| 79 | 84 | 5.4 | 5.3 | 5.2 | 5.0 | 4.9 | 4.7 | 4.6 | 4.5 | 4.3 | 4.2 | 4.0 | 3.9 | 3.7 |
| 80 | 85 | 5.2 | 5.1 | 5.0 | 4.9 | 4.7 | 4.6 | 4.5 | 4.3 | 4.2 | 4.1 | 3.9 | 3.8 | 3.6 |
| 81 | 86 | 5.0 | 4.9 | 4.8 | 4.7 | 4.6 | 4.5 | 4.3 | 4.2 | 4.1 | 3.9 | 3.8 | 3.7 | 3.6 |
| 82 | 87 | 4.9 | 4.8 | 4.7 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 4.0 | 3.8 | 3.7 | 3.6 | 3.5 |
| 83 | 88 | 4.7 | 4.6 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 3.9 | 3.8 | 3.7 | 3.6 | 3.5 | 3.4 |
| 84 | 89 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 4.0 | 3.9 | 3.8 | 3.7 | 3.6 | 3.5 | 3.4 | 3.3 |
| 85 | 90 | 4.3 | 4.2 | 4.1 | 4.1 | 4.0 | 3.9 | 3.8 | 3.7 | 3.6 | 3.5 | 3.4 | 3.3 | 3.2 |
| 86 | 91 | 4.1 | 4.1 | 4.0 | 3.9 | 3.8 | 3.7 | 3.6 | 3.6 | 3.5 | 3.4 | 3.3 | 3.2 | 3.1 |
| Male | Female | Ages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | ||
| Female 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | ||
| 35 | 40 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 |
| 36 | 41 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 |
| 37 | 42 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 |
| 38 | 43 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.8 | 2.6 |
| 39 | 44 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.3 | 3.0 | 2.8 | 2.6 |
| 40 | 45 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.3 | 3.0 | 2.8 | 2.6 |
| 41 | 46 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.2 | 3.0 | 2.8 | 2.6 |
| 42 | 47 | 4.9 | 4.7 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.2 | 3.0 | 2.8 | 2.6 |
| 43 | 48 | 4.9 | 4.7 | 4.4 | 4.1 | 3.9 | 3.7 | 3.5 | 3.2 | 3.0 | 2.8 | 2.6 |
| 44 | 49 | 4.9 | 4.7 | 4.4 | 4.1 | 3.9 | 3.7 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 45 | 50 | 4.9 | 4.6 | 4.4 | 4.1 | 3.9 | 3.7 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 46 | 51 | 4.9 | 4.6 | 4.4 | 4.1 | 3.9 | 3.7 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 47 | 52 | 4.9 | 4.6 | 4.4 | 4.1 | 3.9 | 3.7 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 48 | 53 | 4.9 | 4.6 | 4.4 | 4.1 | 3.9 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 49 | 54 | 4.9 | 4.6 | 4.3 | 4.1 | 3.9 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 50 | 55 | 4.8 | 4.6 | 4.3 | 4.1 | 3.9 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 51 | 56 | 4.8 | 4.6 | 4.3 | 4.1 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 52 | 57 | 4.8 | 4.5 | 4.3 | 4.1 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 53 | 58 | 4.8 | 4.5 | 4.3 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 54 | 59 | 4.8 | 4.5 | 4.3 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 55 | 60 | 4.7 | 4.5 | 4.3 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 |
| 56 | 61 | 4.7 | 4.5 | 4.2 | 4.0 | 3.8 | 3.6 | 3.3 | 3.1 | 2.9 | 2.8 | 2.6 |
| 57 | 62 | 4.7 | 4.5 | 4.2 | 4.0 | 3.8 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.6 |
| 58 | 63 | 4.7 | 4.4 | 4.2 | 4.0 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 |
| 59 | 64 | 4.6 | 4.4 | 4.2 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 |
| Male | Female | Ages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | ||
| Female 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | ||
| 35 | 40 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 36 | 41 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.8 | 0.7 |
| 37 | 42 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 38 | 43 | 2.5 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 39 | 44 | 2.4 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 40 | 45 | 2.4 | 2.2 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 41 | 46 | 2.4 | 2.2 | 2.1 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 42 | 47 | 2.4 | 2.2 | 2.0 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 43 | 48 | 2.4 | 2.2 | 2.0 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 44 | 49 | 2.4 | 2.2 | 2.0 | 1.9 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 45 | 50 | 2.4 | 2.2 | 2.0 | 1.8 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 46 | 51 | 2.4 | 2.2 | 2.0 | 1.8 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 47 | 52 | 2.4 | 2.2 | 2.0 | 1.8 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 48 | 53 | 2.4 | 2.2 | 2.0 | 1.8 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 49 | 54 | 2.4 | 2.2 | 2.0 | 1.8 | 1.7 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 50 | 55 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 51 | 56 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 52 | 57 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 53 | 58 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 54 | 59 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 55 | 60 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 56 | 61 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 |
| 57 | 62 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 0.9 | 0.8 | 0.7 |
| 58 | 63 | 2.4 | 2.2 | 2.0 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 0.9 | 0.8 | 0.7 |
| 59 | 64 | 2.3 | 2.2 | 2.0 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 0.9 | 0.8 | 0.7 |
| Male | Female | Ages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | 97 | ||
| Female 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | ||
| 60 | 65 | 4.6 | 4.4 | 4.1 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 |
| 61 | 66 | 4.6 | 4.3 | 4.1 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 |
| 62 | 67 | 4.5 | 4.3 | 4.1 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 |
| 63 | 68 | 4.5 | 4.3 | 4.1 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.9 | 2.7 | 2.5 |
| 64 | 69 | 4.5 | 4.2 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.7 | 2.5 |
| 65 | 70 | 4.4 | 4.2 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 | 2.5 |
| 66 | 71 | 4.4 | 4.2 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.6 | 2.4 |
| 67 | 72 | 4.3 | 4.1 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 3.0 | 2.8 | 2.6 | 2.4 |
| 68 | 73 | 4.3 | 4.1 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.8 | 2.6 | 2.4 |
| 69 | 74 | 4.2 | 4.0 | 3.8 | 3.6 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.6 | 2.4 |
| 70 | 75 | 4.2 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.1 | 2.9 | 2.7 | 2.5 | 2.4 |
| 71 | 76 | 4.1 | 3.9 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.9 | 2.7 | 2.5 | 2.3 |
| 72 | 77 | 4.1 | 3.9 | 3.7 | 3.5 | 3.3 | 3.2 | 3.0 | 2.8 | 2.7 | 2.5 | 2.3 |
| 73 | 78 | 4.0 | 3.8 | 3.7 | 3.5 | 3.3 | 3.1 | 3.0 | 2.8 | 2.6 | 2.5 | 2.3 |
| 74 | 79 | 3.9 | 3.8 | 3.6 | 3.4 | 3.3 | 3.1 | 2.9 | 2.8 | 2.6 | 2.4 | 2.3 |
| 75 | 80 | 3.9 | 3.7 | 3.5 | 3.4 | 3.2 | 3.0 | 2.9 | 2.7 | 2.6 | 2.4 | 2.2 |
| 76 | 81 | 3.8 | 3.6 | 3.5 | 3.3 | 3.2 | 3.0 | 2.8 | 2.7 | 2.5 | 2.4 | 2.2 |
| 77 | 82 | 3.7 | 3.6 | 3.4 | 3.3 | 3.1 | 3.0 | 2.8 | 2.6 | 2.5 | 2.3 | 2.2 |
| 78 | 83 | 3.7 | 3.5 | 3.4 | 3.2 | 3.1 | 2.9 | 2.7 | 2.6 | 2.4 | 2.3 | 2.1 |
| 79 | 84 | 3.6 | 3.4 | 3.3 | 3.1 | 3.0 | 2.8 | 2.7 | 2.5 | 2.4 | 2.2 | 2.1 |
| 80 | 85 | 3.5 | 3.4 | 3.2 | 3.1 | 2.9 | 2.8 | 2.6 | 2.5 | 2.3 | 2.2 | 2.0 |
| 81 | 86 | 3.4 | 3.3 | 3.1 | 3.0 | 2.9 | 2.7 | 2.6 | 2.4 | 2.3 | 2.1 | 2.0 |
| 82 | 87 | 3.3 | 3.2 | 3.1 | 2.9 | 2.8 | 2.7 | 2.5 | 2.4 | 2.2 | 2.1 | 2.0 |
| 83 | 88 | 3.2 | 3.1 | 3.0 | 2.9 | 2.7 | 2.6 | 2.5 | 2.3 | 2.2 | 2.0 | 1.9 |
| 84 | 89 | 3.1 | 3.0 | 2.9 | 2.8 | 2.7 | 2.5 | 2.4 | 2.3 | 2.1 | 2.0 | 1.9 |
| Male | Female | Ages | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | 107 | 108 | ||
| Female 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | ||
| 60 | 65 | 2.3 | 2.1 | 2.0 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 0.9 | 0.8 | 0.7 |
| 61 | 66 | 2.3 | 2.1 | 2.0 | 1.8 | 1.6 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 |
| 62 | 67 | 2.3 | 2.1 | 1.9 | 1.8 | 1.6 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 |
| 63 | 68 | 2.3 | 2.1 | 1.9 | 1.7 | 1.6 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 |
| 64 | 69 | 2.3 | 2.1 | 1.9 | 1.7 | 1.6 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 |
| 65 | 70 | 2.3 | 2.1 | 1.9 | 1.7 | 1.6 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 |
| 66 | 71 | 2.3 | 2.1 | 1.9 | 1.7 | 1.5 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 |
| 67 | 72 | 2.2 | 2.1 | 1.9 | 1.7 | 1.5 | 1.4 | 1.2 | 1.0 | 0.9 | 0.7 | 0.7 |
| 68 | 73 | 2.2 | 2.0 | 1.9 | 1.7 | 1.5 | 1.4 | 1.2 | 1.0 | 0.9 | 0.7 | 0.7 |
| 69 | 74 | 2.2 | 2.0 | 1.8 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.9 | 0.7 | 0.6 |
| 70 | 75 | 2.2 | 2.0 | 1.8 | 1.7 | 1.5 | 1.3 | 1.2 | 1.0 | 0.9 | 0.7 | 0.6 |
| 71 | 76 | 2.2 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.2 | 1.0 | 0.9 | 0.7 | 0.6 |
| 72 | 77 | 2.1 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 | 0.6 |
| 73 | 78 | 2.1 | 1.9 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 | 0.6 |
| 74 | 79 | 2.1 | 1.9 | 1.7 | 1.6 | 1.4 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 | 0.6 |
| 75 | 80 | 2.1 | 1.9 | 1.7 | 1.6 | 1.4 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 | |
| 76 | 81 | 2.0 | 1.9 | 1.7 | 1.5 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 | |
| 77 | 82 | 2.0 | 1.8 | 1.7 | 1.5 | 1.4 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 | |
| 78 | 83 | 2.0 | 1.8 | 1.6 | 1.5 | 1.3 | 1.2 | 1.0 | 0.9 | 0.8 | 0.7 | |
| 79 | 84 | 1.9 | 1.8 | 1.6 | 1.5 | 1.3 | 1.2 | 1.0 | 0.9 | 0.8 | 0.7 | |
| 80 | 85 | 1.9 | 1.7 | 1.6 | 1.4 | 1.3 | 1.1 | 1.0 | 0.9 | 0.7 | 0.7 | |
| 81 | 86 | 1.8 | 1.7 | 1.5 | 1.4 | 1.3 | 1.1 | 1.0 | 0.8 | 0.7 | 0.6 | |
| 82 | 87 | 1.8 | 1.7 | 1.5 | 1.4 | 1.2 | 1.1 | 1.0 | 0.8 | 0.7 | 0.6 | |
| 83 | 88 | 1.8 | 1.6 | 1.5 | 1.3 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 | 0.6 | |
| 84 | 89 | 1.7 | 1.6 | 1.4 | 1.3 | 1.2 | 1.0 | 0.9 | 0.8 | 0.7 | ||
| Male | Female | Ages | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 | 95 | 96 | ||
| Female 92 | 93 | 94 | 95 | 96 | 97 | 98 | 99 | 100 | 101 | ||
| 85 | 90 | 3.1 | 2.9 | 2.8 | 2.7 | 2.6 | 2.5 | 2.3 | 2.2 | 2.1 | 1.9 |
| 86 | 91 | 3.0 | 2.8 | 2.7 | 2.6 | 2.5 | 2.4 | 2.3 | 2.1 | 2.0 | 1.9 |
| 87 | 92 | 2.9 | 2.8 | 2.6 | 2.5 | 2.4 | 2.3 | 2.2 | 2.1 | 1.9 | 1.8 |
| 88 | 93 | 2.8 | 2.7 | 2.6 | 2.4 | 2.3 | 2.2 | 2.1 | 2.0 | 1.9 | 1.7 |
| 89 | 94 | 2.6 | 2.6 | 2.5 | 2.4 | 2.2 | 2.1 | 2.0 | 1.9 | 1.8 | 1.7 |
| 90 | 95 | 2.5 | 2.4 | 2.4 | 2.3 | 2.2 | 2.0 | 1.9 | 1.8 | 1.7 | 1.6 |
| 91 | 96 | 2.4 | 2.3 | 2.2 | 2.2 | 2.1 | 2.0 | 1.9 | 1.7 | 1.6 | 1.5 |
| 92 | 97 | 2.3 | 2.2 | 2.1 | 2.0 | 2.0 | 1.9 | 1.8 | 1.7 | 1.6 | 1.5 |
| 93 | 98 | 2.2 | 2.1 | 2.0 | 1.9 | 1.9 | 1.8 | 1.7 | 1.6 | 1.5 | 1.4 |
| 94 | 99 | 2.1 | 2.0 | 1.9 | 1.8 | 1.7 | 1.7 | 1.6 | 1.5 | 1.4 | 1.3 |
| 95 | 100 | 1.9 | 1.9 | 1.8 | 1.7 | 1.6 | 1.6 | 1.5 | 1.4 | 1.3 | 1.2 |
| 96 | 101 | 1.8 | 1.7 | 1.7 | 1.6 | 1.5 | 1.5 | 1.4 | 1.3 | 1.2 | 1.1 |
| 97 | 102 | 1.7 | 1.6 | 1.6 | 1.5 | 1.4 | 1.4 | 1.3 | 1.2 | 1.1 | 1.1 |
| 98 | 103 | 1.6 | 1.5 | 1.4 | 1.4 | 1.3 | 1.3 | 1.2 | 1.1 | 1.0 | 1.0 |
| 99 | 104 | 1.4 | 1.4 | 1.3 | 1.3 | 1.2 | 1.1 | 1.1 | 1.0 | 1.0 | 0.9 |
| Male | Female | Ages | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Male 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 | 105 | 106 | ||
| Female 102 | 103 | 104 | 105 | 106 | 107 | 108 | 109 | 110 | 111 | ||
| 85 | 90 | 1.8 | 1.7 | 1.5 | 1.4 | 1.3 | 1.1 | 1.0 | 0.9 | 0.8 | 0.7 |
| 86 | 91 | 1.7 | 1.6 | 1.5 | 1.3 | 1.2 | 1.1 | 1.0 | 0.8 | 0.7 | 0.7 |
| 87 | 92 | 1.7 | 1.6 | 1.4 | 1.3 | 1.2 | 1.1 | 0.9 | 0.8 | 0.7 | 0.6 |
| 88 | 93 | 1.6 | 1.5 | 1.4 | 1.3 | 1.1 | 1.0 | 0.9 | 0.8 | 0.7 | 0.6 |
| 89 | 94 | 1.6 | 1.4 | 1.3 | 1.2 | 1.1 | 1.0 | 0.9 | 0.7 | 0.7 | |
| 90 | 95 | 1.5 | 1.4 | 1.3 | 1.2 | 1.0 | 0.9 | 0.8 | 0.7 | 0.6 | |
| 91 | 96 | 1.4 | 1.3 | 1.2 | 1.1 | 1.0 | 0.9 | 0.8 | 0.7 | 0.6 | |
| 92 | 97 | 1.4 | 1.3 | 1.1 | 1.0 | 0.9 | 0.8 | 0.7 | 0.7 | ||
| 93 | 98 | 1.3 | 1.2 | 1.1 | 1.0 | 0.9 | 0.8 | 0.7 | 0.6 | ||
| 94 | 99 | 1.2 | 1.1 | 1.0 | 0.9 | 0.8 | 0.7 | 0.7 | |||
| 95 | 100 | 1.1 | 1.0 | 1.0 | 0.9 | 0.8 | 0.7 | 0.6 | |||
| 96 | 101 | 1.1 | 1.0 | 0.9 | 0.8 | 0.7 | 0.7 | ||||
| 97 | 102 | 1.0 | 0.9 | 0.8 | 0.7 | 0.7 | 0.6 | ||||
| 98 | 103 | 0.9 | 0.8 | 0.7 | 0.7 | 0.6 | |||||
| 99 | 104 | 0.8 | 0.7 | 0.7 | 0.6 | ||||||
Table III—Percent Value of Refund Feature
| Ages | Duration of guaranteed amount—[Years] | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 |
| 6 | 11 | 1 | 1 | 1 | 1 | 1 | ||||||||
| 7 | 12 | 1 | 1 | 1 | 1 | 1 | ||||||||
| 8 | 13 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 9 | 14 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 10 | 15 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 11 | 16 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 12 | 17 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 13 | 18 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 14 | 19 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 15 | 20 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 16 | 21 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 17 | 22 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 18 | 23 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 19 | 24 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 20 | 25 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 21 | 26 | 1 | 1 | 1 | 1 | 1 | 1 | |||||||
| 22 | 27 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | ||||||
| 23 | 28 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | ||||||
| 24 | 29 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | ||||||
| 25 | 30 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | ||||||
| 26 | 31 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |||||
| 27 | 32 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |||||
| 28 | 33 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | |||||
| 29 | 34 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | |||||
| 30 | 35 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | ||||
| 31 | 36 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | ||||
| 32 | 37 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | ||||
| 33 | 38 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | |||
| 34 | 39 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | |||
| 35 | 40 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | |||
| 36 | 41 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 3 | |||
| 37 | 42 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 3 | 3 | ||
| 38 | 43 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 3 | 3 | ||
| 39 | 44 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | ||
| 40 | 45 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 3 | 4 | ||
| 41 | 46 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 3 | 4 | ||
| 42 | 47 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 3 | 4 | 4 | ||
| 43 | 48 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 4 | 4 | 4 | |
| 44 | 49 | 1 | 1 | 1 | 1 | 2 | 2 | 3 | 3 | 3 | 4 | 4 | 5 | |
| 45 | 50 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 4 | 4 | 5 | 5 | |
| 46 | 51 | 1 | 1 | 1 | 2 | 2 | 3 | 3 | 3 | 4 | 4 | 5 | 5 | |
| 47 | 52 | 1 | 1 | 1 | 2 | 2 | 3 | 3 | 4 | 4 | 5 | 5 | 6 | |
| 48 | 53 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 4 | 5 | 5 | 6 | 6 | |
| 49 | 54 | 1 | 1 | 2 | 2 | 3 | 3 | 4 | 4 | 5 | 5 | 6 | 7 | |
| 50 | 55 | 1 | 1 | 2 | 2 | 3 | 3 | 4 | 5 | 5 | 6 | 7 | 7 | |
| 51 | 56 | 1 | 1 | 2 | 3 | 3 | 4 | 4 | 5 | 6 | 6 | 7 | 8 | |
| 52 | 57 | 1 | 1 | 2 | 2 | 3 | 3 | 4 | 5 | 5 | 6 | 7 | 8 | 8 |
| 53 | 58 | 1 | 1 | 2 | 2 | 3 | 4 | 4 | 5 | 6 | 7 | 7 | 8 | 9 |
| 54 | 59 | 1 | 1 | 2 | 2 | 3 | 4 | 5 | 5 | 6 | 7 | 8 | 9 | 10 |
| 55 | 60 | 1 | 1 | 2 | 3 | 3 | 4 | 5 | 6 | 7 | 8 | 8 | 9 | 10 |
| 56 | 61 | 1 | 1 | 2 | 3 | 4 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 |
| 57 | 62 | 1 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 |
| 58 | 63 | 1 | 2 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 12 | 13 |
| 59 | 64 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 14 |
| 60 | 65 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 10 | 11 | 12 | 13 | 15 |
| 61 | 66 | 1 | 2 | 3 | 4 | 5 | 6 | 8 | 9 | 10 | 12 | 13 | 14 | 16 |
| 62 | 67 | 1 | 2 | 3 | 4 | 6 | 7 | 8 | 10 | 11 | 12 | 14 | 15 | 17 |
| 63 | 68 | 1 | 2 | 4 | 5 | 6 | 7 | 9 | 10 | 12 | 13 | 15 | 16 | 18 |
| 64 | 69 | 1 | 3 | 4 | 5 | 7 | 8 | 9 | 11 | 13 | 14 | 16 | 17 | 19 |
| 65 | 70 | 1 | 3 | 4 | 6 | 7 | 9 | 10 | 12 | 13 | 15 | 17 | 19 | 20 |
| 66 | 71 | 1 | 3 | 4 | 6 | 8 | 9 | 11 | 13 | 14 | 16 | 18 | 20 | 22 |
| 67 | 72 | 2 | 3 | 5 | 6 | 8 | 10 | 12 | 14 | 15 | 17 | 19 | 21 | 23 |
| 68 | 73 | 2 | 3 | 5 | 7 | 9 | 11 | 13 | 14 | 16 | 18 | 21 | 23 | 25 |
| 69 | 74 | 2 | 4 | 6 | 7 | 9 | 11 | 13 | 16 | 18 | 20 | 22 | 24 | 26 |
| 70 | 75 | 2 | 4 | 6 | 8 | 10 | 12 | 14 | 17 | 19 | 21 | 23 | 26 | 28 |
| 71 | 76 | 2 | 4 | 6 | 9 | 11 | 13 | 15 | 18 | 20 | 22 | 25 | 27 | 29 |
| 72 | 77 | 2 | 5 | 7 | 9 | 12 | 14 | 16 | 19 | 21 | 24 | 26 | 29 | 31 |
| 73 | 78 | 2 | 5 | 7 | 10 | 12 | 15 | 18 | 20 | 23 | 25 | 28 | 30 | 33 |
| 74 | 79 | 3 | 5 | 8 | 11 | 13 | 16 | 19 | 22 | 24 | 27 | 30 | 32 | 35 |
| 75 | 80 | 3 | 6 | 8 | 11 | 14 | 17 | 20 | 23 | 26 | 29 | 31 | 34 | 37 |
| 76 | 81 | 3 | 6 | 9 | 12 | 15 | 18 | 21 | 24 | 27 | 30 | 33 | 36 | 39 |
| 77 | 82 | 3 | 7 | 10 | 13 | 16 | 20 | 23 | 26 | 29 | 32 | 35 | 38 | 41 |
| 78 | 83 | 4 | 7 | 11 | 14 | 17 | 21 | 24 | 28 | 31 | 34 | 37 | 40 | 43 |
| 79 | 84 | 4 | 8 | 11 | 15 | 19 | 22 | 26 | 29 | 33 | 36 | 39 | 42 | 45 |
| 80 | 85 | 4 | 8 | 12 | 16 | 20 | 24 | 27 | 31 | 34 | 38 | 41 | 44 | 47 |
| 81 | 86 | 4 | 9 | 13 | 17 | 21 | 25 | 29 | 33 | 36 | 40 | 43 | 46 | 49 |
| 82 | 87 | 5 | 9 | 14 | 18 | 23 | 27 | 31 | 35 | 38 | 42 | 45 | 48 | 51 |
| 83 | 88 | 5 | 10 | 15 | 19 | 24 | 28 | 33 | 37 | 40 | 44 | 47 | 50 | 53 |
| 84 | 89 | 5 | 11 | 16 | 21 | 26 | 30 | 34 | 38 | 42 | 46 | 49 | 52 | 55 |
| 85 | 90 | 6 | 11 | 17 | 22 | 27 | 32 | 36 | 41 | 44 | 48 | 51 | 55 | 57 |
| Ages | Duration of guaranteed amount—[Years] | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 | 26 |
| 6 | 11 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 7 | 12 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 8 | 13 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 9 | 14 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 10 | 15 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| 11 | 16 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| 12 | 17 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| 13 | 18 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 |
| 14 | 19 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 |
| 15 | 20 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 |
| 16 | 21 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 |
| 17 | 22 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 |
| 18 | 23 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
| 19 | 24 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
| 20 | 25 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 |
| 21 | 26 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 |
| 22 | 27 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 |
| 23 | 28 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 |
| 24 | 29 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 |
| 25 | 30 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 3 |
| 26 | 31 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 4 |
| 27 | 32 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 |
| 28 | 33 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 |
| 29 | 34 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 |
| 30 | 35 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 |
| 31 | 36 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 |
| 32 | 37 | 2 | 2 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 6 |
| 33 | 38 | 2 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 |
| 34 | 39 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 7 |
| 35 | 40 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 7 | 7 |
| 36 | 41 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 7 | 7 | 8 |
| 37 | 42 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 8 |
| 38 | 43 | 3 | 4 | 4 | 4 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 8 | 9 |
| 39 | 44 | 4 | 4 | 4 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 8 | 9 | 9 |
| 40 | 45 | 4 | 4 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 8 | 9 | 9 | 10 |
| 41 | 46 | 4 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 8 | 9 | 9 | 10 | 11 |
| 42 | 47 | 5 | 5 | 5 | 6 | 6 | 7 | 8 | 8 | 9 | 9 | 10 | 11 | 12 |
| 43 | 48 | 5 | 6 | 6 | 7 | 8 | 8 | 9 | 9 | 10 | 11 | 12 | 12 | |
| 44 | 49 | 5 | 6 | 6 | 7 | 7 | 8 | 9 | 9 | 10 | 11 | 12 | 12 | 13 |
| 45 | 50 | 6 | 6 | 7 | 7 | 8 | 9 | 9 | 10 | 11 | 12 | 12 | 13 | 14 |
| 46 | 51 | 6 | 7 | 7 | 8 | 9 | 9 | 10 | 11 | 12 | 12 | 13 | 14 | 15 |
| 47 | 52 | 7 | 7 | 8 | 9 | 9 | 10 | 11 | 12 | 12 | 13 | 14 | 15 | 16 |
| 48 | 53 | 7 | 8 | 8 | 9 | 10 | 11 | 12 | 12 | 13 | 14 | 15 | 16 | 17 |
| 49 | 54 | 8 | 8 | 9 | 10 | 11 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 |
| 50 | 55 | 8 | 9 | 10 | 11 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 20 |
| 51 | 56 | 9 | 10 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 20 | 21 |
| 52 | 57 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 20 | 21 | 22 |
| 53 | 58 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 19 | 20 | 21 | 22 | 24 |
| 54 | 59 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 20 | 21 | 22 | 24 | 25 |
| 55 | 60 | 11 | 13 | 14 | 15 | 16 | 17 | 18 | 20 | 21 | 22 | 24 | 25 | 26 |
| 56 | 61 | 12 | 13 | 15 | 16 | 17 | 18 | 20 | 21 | 22 | 24 | 25 | 27 | 28 |
| 57 | 62 | 13 | 14 | 16 | 17 | 18 | 20 | 21 | 22 | 24 | 25 | 27 | 28 | 30 |
| 58 | 63 | 14 | 15 | 17 | 18 | 19 | 21 | 22 | 24 | 25 | 27 | 28 | 30 | 31 |
| 59 | 64 | 15 | 16 | 18 | 19 | 21 | 22 | 24 | 25 | 27 | 28 | 30 | 31 | 33 |
| 60 | 65 | 16 | 18 | 19 | 20 | 22 | 24 | 25 | 27 | 28 | 30 | 32 | 33 | 35 |
| 61 | 66 | 17 | 19 | 20 | 22 | 23 | 25 | 27 | 28 | 30 | 32 | 33 | 35 | 37 |
| 62 | 67 | 18 | 20 | 22 | 23 | 25 | 27 | 28 | 30 | 32 | 33 | 35 | 37 | 38 |
| 63 | 68 | 20 | 21 | 23 | 25 | 26 | 28 | 30 | 32 | 33 | 35 | 37 | 39 | 40 |
| 64 | 69 | 21 | 23 | 24 | 26 | 28 | 30 | 32 | 33 | 35 | 37 | 39 | 41 | 42 |
| 65 | 70 | 22 | 24 | 26 | 28 | 30 | 32 | 33 | 35 | 37 | 39 | 41 | 42 | 44 |
| 66 | 71 | 24 | 26 | 28 | 29 | 31 | 33 | 35 | 37 | 39 | 41 | 43 | 44 | 46 |
| 67 | 72 | 25 | 27 | 29 | 31 | 33 | 35 | 37 | 39 | 41 | 43 | 45 | 46 | 48 |
| 68 | 73 | 27 | 29 | 31 | 33 | 35 | 37 | 39 | 41 | 43 | 45 | 47 | 48 | 50 |
| 69 | 74 | 28 | 30 | 33 | 35 | 37 | 39 | 41 | 43 | 45 | 47 | 48 | 50 | 52 |
| 70 | 75 | 30 | 32 | 34 | 37 | 39 | 41 | 43 | 45 | 47 | 49 | 50 | 52 | 54 |
| 71 | 76 | 32 | 34 | 36 | 39 | 41 | 43 | 45 | 47 | 49 | 51 | 52 | 54 | 56 |
| 72 | 77 | 34 | 36 | 38 | 41 | 43 | 45 | 47 | 49 | 51 | 53 | 54 | 56 | 58 |
| 73 | 78 | 35 | 38 | 40 | 43 | 45 | 47 | 49 | 51 | 53 | 55 | 56 | 58 | 59 |
| 74 | 79 | 37 | 40 | 42 | 45 | 47 | 49 | 51 | 53 | 55 | 57 | 58 | 60 | 61 |
| 75 | 80 | 39 | 42 | 44 | 47 | 49 | 51 | 53 | 55 | 57 | 58 | 60 | 62 | 63 |
| 76 | 81 | 41 | 44 | 46 | 49 | 51 | 53 | 55 | 57 | 59 | 60 | 62 | 63 | 65 |
| 77 | 82 | 43 | 46 | 48 | 51 | 53 | 55 | 57 | 59 | 61 | 62 | 64 | 65 | 66 |
| 78 | 83 | 45 | 48 | 50 | 53 | 55 | 57 | 59 | 61 | 62 | 64 | 65 | 67 | 68 |
| 79 | 84 | 48 | 50 | 53 | 55 | 57 | 59 | 61 | 63 | 64 | 66 | 67 | 68 | 70 |
| 80 | 85 | 50 | 52 | 55 | 57 | 59 | 61 | 63 | 64 | 66 | 67 | 69 | 70 | 71 |
| 81 | 86 | 52 | 54 | 57 | 59 | 61 | 63 | 65 | 66 | 68 | 69 | 70 | 72 | 73 |
| 82 | 87 | 54 | 56 | 59 | 61 | 63 | 65 | 66 | 68 | 69 | 71 | 72 | 73 | 74 |
| 83 | 88 | 56 | 58 | 61 | 63 | 65 | 66 | 68 | 70 | 71 | 72 | 73 | 74 | 75 |
| 84 | 89 | 58 | 60 | 63 | 65 | 67 | 68 | 70 | 71 | 73 | 74 | 75 | 76 | 77 |
| 85 | 90 | 60 | 62 | 65 | 67 | 68 | 70 | 71 | 73 | 74 | 75 | 76 | 77 | |
| Ages | Duration of guaranteed amount—[Years] | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 | 35 |
| 6 | 11 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
| 7 | 12 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 |
| 8 | 13 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 |
| 9 | 14 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 |
| 10 | 15 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 |
| 11 | 16 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 |
| 12 | 17 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 |
| 13 | 18 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 |
| 14 | 19 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 3 |
| 15 | 20 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 3 |
| 16 | 21 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 3 | 4 |
| 17 | 22 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 |
| 18 | 23 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 |
| 19 | 24 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 4 |
| 20 | 25 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 4 | 5 |
| 21 | 26 | 3 | 3 | 3 | 4 | 4 | 4 | 4 | 5 | 5 |
| 22 | 27 | 3 | 3 | 4 | 4 | 4 | 4 | 5 | 5 | 5 |
| 23 | 28 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 5 |
| 24 | 29 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 5 | 6 |
| 25 | 30 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 6 |
| 26 | 31 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 6 | 7 |
| 27 | 32 | 4 | 5 | 5 | 5 | 6 | 6 | 6 | 7 | 7 |
| 28 | 33 | 5 | 5 | 5 | 6 | 6 | 6 | 7 | 7 | 8 |
| 29 | 34 | 5 | 5 | 6 | 6 | 6 | 7 | 7 | 8 | 8 |
| 30 | 35 | 5 | 6 | 6 | 6 | 7 | 7 | 8 | 8 | 9 |
| 31 | 36 | 6 | 6 | 6 | 7 | 7 | 8 | 8 | 9 | 9 |
| 32 | 37 | 6 | 7 | 7 | 7 | 8 | 8 | 9 | 10 | 10 |
| 33 | 38 | 7 | 7 | 7 | 8 | 8 | 9 | 10 | 10 | 11 |
| 34 | 39 | 7 | 8 | 8 | 9 | 9 | 10 | 10 | 11 | 12 |
| 35 | 40 | 8 | 8 | 9 | 9 | 10 | 10 | 11 | 12 | 12 |
| 36 | 41 | 8 | 9 | 9 | 10 | 10 | 11 | 12 | 13 | 13 |
| 37 | 42 | 9 | 9 | 10 | 11 | 11 | 12 | 13 | 13 | 14 |
| 38 | 43 | 9 | 10 | 11 | 11 | 12 | 13 | 13 | 14 | 15 |
| 39 | 44 | 10 | 11 | 11 | 12 | 13 | 14 | 14 | 15 | 16 |
| 40 | 45 | 11 | 11 | 12 | 13 | 14 | 15 | 15 | 16 | 17 |
| 41 | 46 | 11 | 12 | 13 | 14 | 15 | 16 | 16 | 17 | 18 |
| 42 | 47 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 18 | 19 |
| 43 | 48 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 |
| 44 | 49 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 |
| 45 | 50 | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 |
| 46 | 51 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 24 | 25 |
| 47 | 52 | 17 | 18 | 19 | 20 | 21 | 23 | 24 | 25 | 26 |
| 48 | 53 | 18 | 19 | 20 | 22 | 23 | 24 | 25 | 26 | 28 |
| 49 | 54 | 19 | 21 | 22 | 23 | 24 | 25 | 27 | 28 | 29 |
| 50 | 55 | 21 | 22 | 23 | 24 | 26 | 27 | 28 | 29 | 31 |
| 51 | 56 | 22 | 23 | 25 | 26 | 27 | 28 | 30 | 31 | 32 |
| 52 | 57 | 23 | 25 | 26 | 27 | 29 | 30 | 31 | 33 | 34 |
| 53 | 58 | 25 | 26 | 28 | 29 | 30 | 32 | 33 | 34 | 36 |
| 54 | 59 | 26 | 28 | 29 | 31 | 32 | 33 | 35 | 36 | 38 |
| 55 | 60 | 28 | 29 | 31 | 32 | 34 | 35 | 36 | 38 | 39 |
| 56 | 61 | 29 | 31 | 32 | 34 | 35 | 37 | 38 | 40 | 41 |
| 57 | 62 | 31 | 33 | 34 | 36 | 37 | 39 | 40 | 41 | 43 |
| 58 | 63 | 33 | 34 | 36 | 37 | 39 | 40 | 42 | 43 | 45 |
| 59 | 64 | 35 | 36 | 38 | 39 | 41 | 42 | 44 | 45 | 47 |
| 60 | 65 | 36 | 38 | 40 | 41 | 43 | 44 | 46 | 47 | 48 |
| 61 | 66 | 38 | 40 | 41 | 43 | 44 | 46 | 47 | 49 | 50 |
| 62 | 67 | 40 | 42 | 43 | 45 | 46 | 48 | 49 | 51 | 52 |
| 63 | 68 | 42 | 44 | 45 | 47 | 48 | 50 | 51 | 52 | 54 |
| 64 | 69 | 44 | 46 | 47 | 49 | 50 | 52 | 53 | 54 | 55 |
| 65 | 70 | 46 | 47 | 49 | 50 | 52 | 53 | 55 | 56 | 57 |
| 66 | 71 | 48 | 49 | 51 | 52 | 54 | 55 | 56 | 58 | 59 |
| 67 | 72 | 50 | 51 | 53 | 54 | 56 | 57 | 58 | 59 | 61 |
| 68 | 73 | 52 | 53 | 55 | 56 | 57 | 59 | 60 | 61 | 62 |
| 69 | 74 | 53 | 55 | 56 | 58 | 59 | 60 | 62 | 63 | 64 |
| 70 | 75 | 55 | 57 | 58 | 60 | 61 | 62 | 62 | 64 | 65 |
| 71 | 76 | 57 | 59 | 60 | 61 | 63 | 64 | 65 | 66 | 67 |
| 72 | 77 | 59 | 60 | 62 | 63 | 64 | 65 | 66 | 67 | 68 |
| 73 | 78 | 61 | 62 | 64 | 65 | 66 | 67 | 68 | 69 | 70 |
| 74 | 79 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 71 |
| 75 | 80 | 64 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 72 |
| 76 | 81 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | |
| 77 | 82 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | ||
| 78 | 83 | 69 | 70 | 71 | 72 | 73 | 74 | |||
| 79 | 84 | 71 | 72 | 73 | 74 | 75 | ||||
| 80 | 85 | 72 | 73 | 74 | 75 | |||||
| 81 | 86 | 74 | 75 | 75 | ||||||
| 82 | 87 | 75 | 76 | |||||||
| 83 | 88 | 76 | ||||||||
| 84 | 89 | |||||||||
| 85 | 90 | |||||||||
| Ages | Duration of guaranteed amount—[Years] | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 |
| 86 | 91 | 6 | 12 | 18 | 24 | 29 | 34 | 38 | 43 | 47 | 50 | 54 | 57 | 59 | 62 |
| 87 | 92 | 7 | 13 | 19 | 25 | 31 | 36 | 40 | 45 | 49 | 52 | 56 | 59 | 61 | 64 |
| 88 | 93 | 7 | 14 | 21 | 27 | 32 | 38 | 42 | 47 | 51 | 55 | 58 | 61 | 63 | 66 |
| 89 | 94 | 8 | 15 | 22 | 28 | 34 | 40 | 45 | 49 | 53 | 57 | 60 | 63 | 65 | 68 |
| 90 | 95 | 8 | 16 | 23 | 30 | 36 | 42 | 47 | 51 | 55 | 59 | 62 | 65 | 67 | 70 |
| 91 | 96 | 9 | 17 | 25 | 32 | 38 | 44 | 49 | 53 | 57 | 61 | 64 | 67 | 69 | 71 |
| 92 | 97 | 9 | 18 | 26 | 34 | 40 | 46 | 51 | 55 | 59 | 63 | 66 | 69 | 71 | 73 |
| 93 | 98 | 10 | 20 | 28 | 36 | 42 | 48 | 53 | 58 | 62 | 65 | 68 | 70 | 73 | 75 |
| 94 | 99 | 11 | 21 | 30 | 37 | 44 | 50 | 55 | 60 | 64 | 67 | 70 | 72 | 74 | 76 |
| 95 | 100 | 12 | 22 | 31 | 39 | 46 | 52 | 58 | 62 | 66 | 69 | 72 | 74 | 76 | 78 |
| 96 | 101 | 12 | 24 | 33 | 42 | 49 | 55 | 60 | 64 | 68 | 71 | 73 | 76 | 78 | 79 |
| 97 | 102 | 13 | 25 | 35 | 44 | 51 | 57 | 62 | 66 | 70 | 73 | 75 | 77 | 79 | |
| 98 | 103 | 14 | 27 | 37 | 46 | 54 | 60 | 65 | 69 | 72 | 75 | 77 | 79 | ||
| 99 | 104 | 15 | 29 | 40 | 49 | 56 | 62 | 67 | 71 | 74 | 77 | 79 | |||
| 100 | 105 | 17 | 31 | 43 | 52 | 59 | 65 | 70 | 74 | 76 | 79 | ||||
| 101 | 106 | 18 | 33 | 46 | 55 | 63 | 68 | 73 | 76 | 79 | |||||
| 102 | 107 | 20 | 36 | 49 | 59 | 66 | 71 | 75 | 78 | ||||||
| 103 | 108 | 22 | 40 | 53 | 62 | 69 | 74 | 78 | |||||||
| 104 | 109 | 24 | 43 | 57 | 66 | 73 | 77 | ||||||||
| 105 | 110 | 27 | 48 | 61 | 70 | 76 | |||||||||
| 106 | 111 | 53 | 66 | 74 | |||||||||||
| 107 | 112 | 35 | 53 | 71 | |||||||||||
| 108 | 113 | 40 | 64 | ||||||||||||
| Ages | Duration of guaranteed amount—[Years] | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | 25 |
| 86 | 91 | 64 | 66 | 68 | 70 | 72 | 73 | 74 | 75 | 76 | 77 | |
| 87 | 92 | 66 | 68 | 70 | 72 | 73 | 74 | 76 | 77 | 78 | ||
| 88 | 93 | 68 | 70 | 72 | 73 | 75 | 76 | 77 | 78 | |||
| 89 | 94 | 70 | 72 | 73 | 75 | 76 | 77 | 78 | ||||
| 90 | 95 | 72 | 73 | 75 | 76 | 77 | 79 | |||||
| 91 | 96 | 73 | 75 | 76 | 78 | 79 | ||||||
| 92 | 97 | 75 | 76 | 78 | 79 | |||||||
| 93 | 98 | 76 | 78 | 79 | ||||||||
| 94 | 99 | 78 | 79 | |||||||||
| 95 | 100 | 79 | ||||||||||
Table IV—Temporary Life Annuities
1—One Life—Expected Return Multiples
[See footnote at end of table]
| Ages | Temporary period—maximum duration of annuity—[Years] | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 |
| 0 to 8 | 0 to 13 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 9 | 14 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 10 | 15 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 11 | 16 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 12 | 17 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 13 | 18 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 14 | 19 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 15 | 20 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 16 | 21 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 17 | 22 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 18 | 23 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 19 | 24 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 20 | 25 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 21 | 26 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 22 | 27 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 23 | 28 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 24 | 29 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 25 | 30 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 26 | 31 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 27 | 32 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 28 | 33 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 29 | 34 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 30 | 35 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 31 | 36 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 32 | 37 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 33 | 38 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 34 | 39 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.9 | 9.8 |
| 35 | 40 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.9 | 9.8 |
| 36 | 41 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.9 | 9.8 |
| 37 | 42 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.8 | 9.8 |
| 38 | 43 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.8 | 9.8 |
| 39 | 44 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.9 | 8.8 | 9.8 |
| 40 | 45 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.8 | 9.7 |
| 41 | 46 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.8 | 9.7 |
| 42 | 47 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.8 | 9.7 |
| 43 | 48 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.8 | 9.7 |
| 44 | 49 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.8 | 7.8 | 8.7 | 9.7 |
| 45 | 50 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.9 | 6.8 | 7.8 | 8.7 | 9.6 |
| 46 | 51 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.9 | 6.8 | 7.8 | 8.7 | 9.6 |
| 47 | 52 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.9 | 6.8 | 7.7 | 8.7 | 9.6 |
| 48 | 53 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.9 | 6.8 | 7.7 | 8.6 | 9.5 |
| 49 | 54 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.8 | 7.7 | 8.6 | 9.5 |
| 50 | 55 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.8 | 7.7 | 8.6 | 9.5 |
| 51 | 56 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.7 | 7.7 | 8.6 | 9.4 |
| 52 | 57 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.7 | 7.6 | 8.5 | 9.4 |
| 53 | 58 | 1.0 | 2.0 | 2.9 | 3.9 | 4.9 | 5.8 | 6.7 | 7.6 | 8.5 | 9.3 |
| 54 | 59 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.8 | 6.7 | 7.6 | 8.4 | 9.3 |
| 55 | 60 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.8 | 6.7 | 7.5 | 8.4 | 9.2 |
| 56 | 61 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.7 | 6.6 | 7.5 | 8.4 | 9.2 |
| 57 | 62 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.7 | 6.6 | 7.5 | 8.3 | 9.1 |
| 58 | 63 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.7 | 6.6 | 7.4 | 8.3 | 9.1 |
| 59 | 64 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.7 | 6.5 | 7.4 | 8.2 | 9.0 |
| 60 | 65 | 1.0 | 2.0 | 2.9 | 3.8 | 4.8 | 5.6 | 6.5 | 7.3 | 8.1 | 8.9 |
| 61 | 66 | 1.0 | 2.0 | 2.9 | 3.8 | 4.7 | 5.6 | 6.5 | 7.3 | 8.1 | 8.8 |
| 62 | 67 | 1.0 | 2.0 | 2.9 | 3.8 | 4.7 | 5.6 | 6.4 | 7.2 | 8.0 | 8.8 |
| 63 | 68 | 1.0 | 2.0 | 2.9 | 3.8 | 4.7 | 5.6 | 6.4 | 7.2 | 7.9 | 8.7 |
| 64 | 69 | 1.0 | 1.9 | 2.9 | 3.8 | 4.7 | 5.5 | 6.3 | 7.1 | 7.9 | 8.6 |
| 65 | 70 | 1.0 | 1.9 | 2.9 | 3.8 | 4.6 | 5.5 | 6.3 | 7.1 | 7.8 | 8.5 |
| 66 | 71 | 1.0 | 1.9 | 2.9 | 3.8 | 4.6 | 5.4 | 6.2 | 7.0 | 7.7 | 8.4 |
| 67 | 72 | 1.0 | 1.9 | 2.9 | 3.7 | 4.6 | 5.4 | 6.2 | 6.9 | 7.6 | 8.3 |
| 68 | 73 | 1.0 | 1.9 | 2.8 | 3.7 | 4.6 | 5.4 | 6.1 | 6.8 | 7.5 | 8.2 |
| 69 | 74 | 1.0 | 1.9 | 2.8 | 3.7 | 4.5 | 5.3 | 6.1 | 6.8 | 7.4 | 8.0 |
| 70 | 75 | 1.0 | 1.9 | 2.8 | 3.7 | 4.5 | 5.3 | 6.0 | 6.7 | 7.3 | 7.9 |
| 71 | 76 | 1.0 | 1.9 | 2.8 | 3.7 | 4.5 | 5.2 | 5.9 | 6.6 | 7.2 | 7.8 |
| 72 | 77 | 1.0 | 1.9 | 2.8 | 3.6 | 4.4 | 5.2 | 5.8 | 6.5 | 7.1 | 7.6 |
| 73 | 78 | 1.0 | 1.9 | 2.8 | 3.6 | 4.4 | 5.1 | 5.8 | 6.4 | 7.0 | 7.5 |
| 74 | 79 | 1.0 | 1.9 | 2.8 | 3.6 | 4.3 | 5.0 | 5.7 | 6.3 | 6.8 | 7.3 |
| 75 | 80 | 1.0 | 1.9 | 2.7 | 3.5 | 4.3 | 5.0 | 5.6 | 6.2 | 6.7 | 7.1 |
| 76 | 81 | 1.0 | 1.9 | 2.7 | 3.5 | 4.2 | 4.9 | 5.5 | 6.1 | 6.5 | 7.0 |
| 77 | 82 | 1.0 | 1.9 | 2.7 | 3.5 | 4.2 | 4.8 | 5.4 | 5.9 | 6.4 | 6.8 |
| 78 | 83 | 1.0 | 1.9 | 2.7 | 3.4 | 4.1 | 4.7 | 5.3 | 5.8 | 6.2 | 6.6 |
| 79 | 84 | 1.0 | 1.8 | 2.7 | 3.4 | 4.1 | 4.7 | 5.2 | 5.7 | 6.1 | 6.4 |
| 80 | 85 | 1.0 | 1.8 | 2.6 | 3.4 | 4.0 | 4.6 | 5.1 | 5.5 | 5.9 | 6.2 |
| 81 | 86 | 1.0 | 1.8 | 2.6 | 3.3 | 3.9 | 4.5 | 5.0 | 5.4 | 5.7 | 6.0 |
| 82 | 87 | 1.0 | 1.8 | 2.6 | 3.3 | 3.9 | 4.4 | 4.8 | 5.2 | 5.6 | 5.8 |
| 83 | 88 | .9 | 1.8 | 2.6 | 3.2 | 3.8 | 4.3 | 4.7 | 5.1 | 5.4 | 5.6 |
| 84 | 89 | .9 | 1.8 | 2.5 | 3.2 | 3.7 | 4.2 | 4.6 | 4.9 | 5.2 | 5.4 |
| 85 | 90 | .9 | 1.8 | 2.5 | 3.1 | 3.6 | 4.1 | 4.5 | 4.8 | 5.0 | 5.2 |
| 86 | 91 | .9 | 1.8 | 2.5 | 3.1 | 3.6 | 4.0 | 4.3 | 4.6 | 4.8 | 5.0 |
| Ages | Temporary period—maximum duration of annuity—[Years] | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 |
| 0 to 8 | 0 to 13 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 9 | 14 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 10 | 15 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 11 | 16 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 12 | 17 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 13 | 18 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 14 | 19 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 15 | 20 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.7 | 19.7 |
| 16 | 21 | 10.9 | 11.9 | 12.9 | 13.9 | 14.8 | 15.8 | 16.8 | 17.8 | 18.7 | 19.7 |
| 17 | 22 | 10.9 | 11.9 | 12.9 | 13.9 | 14.8 | 15.8 | 16.8 | 17.8 | 18.7 | 19.7 |
| 18 | 23 | 10.9 | 11.9 | 12.9 | 13.9 | 14.8 | 15.8 | 16.8 | 17.8 | 18.7 | 19.7 |
| 19 | 24 | 10.9 | 11.9 | 12.9 | 13.9 | 14.8 | 15.8 | 16.8 | 17.7 | 18.7 | 19.7 |
| 20 | 25 | 10.9 | 11.9 | 12.9 | 13.9 | 14.8 | 15.8 | 16.8 | 17.7 | 18.7 | 19.7 |
| 21 | 26 | 10.9 | 11.9 | 12.9 | 13.8 | 14.8 | 15.8 | 16.8 | 17.7 | 18.7 | 19.6 |
| 22 | 27 | 10.9 | 11.9 | 12.9 | 13.8 | 14.8 | 15.8 | 16.7 | 17.7 | 18.7 | 19.6 |
| 23 | 28 | 10.9 | 11.9 | 12.9 | 13.8 | 14.8 | 15.8 | 16.7 | 17.7 | 18.7 | 19.6 |
| 24 | 29 | 10.9 | 11.9 | 12.9 | 13.8 | 14.8 | 15.8 | 16.7 | 17.7 | 18.6 | 19.6 |
| 25 | 30 | 10.9 | 11.9 | 12.8 | 13.8 | 14.8 | 15.7 | 16.7 | 17.7 | 18.6 | 19.6 |
| 26 | 31 | 10.9 | 11.9 | 12.8 | 13.8 | 14.8 | 15.7 | 16.7 | 17.6 | 18.6 | 19.5 |
| 27 | 32 | 10.9 | 11.9 | 12.8 | 13.8 | 14.8 | 15.7 | 16.7 | 17.6 | 18.6 | 19.5 |
| 28 | 33 | 10.9 | 11.8 | 12.8 | 13.8 | 14.7 | 15.7 | 16.6 | 17.6 | 18.5 | 19.5 |
| 29 | 34 | 10.9 | 11.8 | 12.8 | 13.8 | 14.7 | 15.7 | 16.6 | 17.6 | 18.5 | 19.4 |
| 30 | 35 | 10.9 | 11.8 | 12.8 | 13.7 | 14.7 | 15.6 | 16.6 | 17.5 | 18.4 | 19.4 |
| 31 | 36 | 10.8 | 11.8 | 12.8 | 13.7 | 14.7 | 15.6 | 16.5 | 17.5 | 18.4 | 19.3 |
| 32 | 37 | 10.8 | 11.8 | 12.7 | 13.7 | 14.6 | 15.6 | 16.5 | 17.4 | 18.4 | 19.3 |
| 33 | 38 | 10.8 | 11.8 | 12.7 | 13.7 | 14.6 | 15.6 | 16.5 | 17.4 | 18.3 | 19.2 |
| 34 | 39 | 10.8 | 11.8 | 12.7 | 13.6 | 14.6 | 15.5 | 16.4 | 17.4 | 18.3 | 19.2 |
| 35 | 40 | 10.8 | 11.7 | 12.7 | 13.6 | 14.6 | 15.5 | 16.4 | 17.3 | 18.2 | 19.1 |
| 36 | 41 | 10.8 | 11.7 | 12.7 | 13.6 | 14.5 | 15.4 | 16.3 | 17.2 | 18.1 | 19.0 |
| 37 | 42 | 10.8 | 11.7 | 12.6 | 13.6 | 14.5 | 15.4 | 16.3 | 17.2 | 18.1 | 18.9 |
| 38 | 43 | 10.7 | 11.7 | 12.6 | 13.5 | 14.4 | 15.3 | 16.2 | 17.1 | 18.0 | 18.9 |
| 39 | 44 | 10.7 | 11.6 | 12.6 | 13.5 | 14.4 | 15.3 | 16.2 | 17.1 | 17.9 | 18.8 |
| 40 | 45 | 10.7 | 11.6 | 12.5 | 13.5 | 14.4 | 15.2 | 16.1 | 17.0 | 17.8 | 18.7 |
| 41 | 46 | 10.7 | 11.6 | 12.5 | 13.4 | 14.3 | 15.2 | 16.1 | 16.9 | 17.8 | 18.6 |
| 42 | 47 | 10.6 | 11.6 | 12.5 | 13.4 | 14.3 | 15.1 | 16.0 | 16.8 | 17.7 | 18.5 |
| 43 | 48 | 10.6 | 11.5 | 12.4 | 13.3 | 14.2 | 15.1 | 15.9 | 16.7 | 17.6 | 18.4 |
| 44 | 49 | 10.6 | 11.5 | 12.4 | 13.3 | 14.1 | 15.0 | 15.8 | 16.7 | 17.5 | 18.3 |
| 45 | 50 | 10.5 | 11.4 | 12.3 | 13.2 | 14.1 | 14.9 | 15.7 | 16.6 | 17.4 | 18.1 |
| 46 | 51 | 10.5 | 11.4 | 12.3 | 13.2 | 14.0 | 14.8 | 15.7 | 16.5 | 17.2 | 18.0 |
| 47 | 52 | 10.5 | 11.4 | 12.2 | 13.1 | 13.9 | 14.7 | 15.6 | 16.3 | 17.1 | 17.8 |
| 48 | 53 | 10.4 | 11.3 | 12.2 | 13.0 | 13.8 | 14.7 | 15.4 | 16.2 | 17.0 | 17.7 |
| 49 | 54 | 10.4 | 11.3 | 12.1 | 12.9 | 13.8 | 14.6 | 15.3 | 16.1 | 16.8 | 17.5 |
| 50 | 55 | 10.3 | 11.2 | 12.0 | 12.9 | 13.7 | 14.5 | 15.2 | 16.0 | 16.7 | 17.4 |
| 51 | 56 | 10.3 | 11.1 | 12.0 | 12.8 | 13.6 | 14.3 | 15.1 | 15.8 | 16.5 | 17.2 |
| 52 | 57 | 10.2 | 11.1 | 11.9 | 12.7 | 13.5 | 14.2 | 14.9 | 15.6 | 16.3 | 17.0 |
| 53 | 58 | 10.2 | 11.0 | 11.8 | 12.6 | 13.4 | 14.1 | 14.8 | 15.5 | 16.1 | 16.8 |
| 54 | 59 | 10.1 | 10.9 | 11.7 | 12.5 | 13.2 | 14.0 | 14.6 | 15.3 | 15.9 | 16.5 |
| 55 | 60 | 10.1 | 10.9 | 11.6 | 12.4 | 13.1 | 13.8 | 14.5 | 15.1 | 15.7 | 16.3 |
| 56 | 61 | 10.0 | 10.8 | 11.5 | 12.3 | 13.0 | 13.7 | 14.3 | 14.9 | 15.5 | 16.1 |
| 57 | 62 | 9.9 | 10.7 | 11.4 | 12.2 | 12.8 | 13.5 | 14.1 | 14.7 | 15.3 | 15.8 |
| 58 | 63 | 9.8 | 10.6 | 11.3 | 12.0 | 12.7 | 13.3 | 13.9 | 14.5 | 15.0 | 15.5 |
| 59 | 64 | 9.8 | 10.5 | 11.2 | 11.9 | 12.5 | 13.2 | 13.7 | 14.3 | 14.8 | 15.3 |
| 60 | 65 | 9.7 | 10.4 | 11.1 | 11.7 | 12.4 | 13.0 | 13.5 | 14.0 | 14.5 | 15.0 |
| 61 | 66 | 9.6 | 10.3 | 11.0 | 11.6 | 12.2 | 12.8 | 13.3 | 13.8 | 14.2 | 14.7 |
| 62 | 67 | 9.5 | 10.2 | 10.8 | 11.4 | 12.0 | 12.5 | 13.1 | 13.5 | 14.0 | 14.3 |
| 63 | 68 | 9.4 | 10.0 | 10.7 | 11.3 | 11.8 | 12.3 | 12.8 | 13.2 | 13.7 | 14.0 |
| 64 | 69 | 9.3 | 9.9 | 10.5 | 11.1 | 11.6 | 12.1 | 12.5 | 13.0 | 13.3 | 13.7 |
| 65 | 70 | 9.1 | 9.8 | 10.3 | 10.9 | 11.4 | 11.9 | 12.3 | 12.7 | 13.0 | 13.3 |
| 66 | 71 | 9.0 | 9.6 | 10.2 | 10.7 | 11.2 | 11.6 | 12.0 | 12.4 | 12.7 | 13.0 |
| 67 | 72 | 8.9 | 9.5 | 10.0 | 10.5 | 10.9 | 11.3 | 11.7 | 12.0 | 12.3 | 12.6 |
| 68 | 73 | 8.7 | 9.3 | 9.8 | 10.3 | 10.7 | 11.1 | 11.4 | 11.7 | 12.0 | 12.2 |
| 69 | 74 | 8.6 | 9.1 | 9.6 | 10.0 | 10.4 | 10.8 | 11.1 | 11.4 | 11.6 | 11.8 |
| 70 | 75 | 8.4 | 8.9 | 9.4 | 9.8 | 10.2 | 10.5 | 10.8 | 11.0 | 11.2 | 11.4 |
| 71 | 76 | 8.3 | 8.7 | 9.2 | 9.6 | 9.9 | 10.2 | 10.4 | 10.7 | 10.9 | 11.0 |
| 72 | 77 | 8.1 | 8.6 | 8.9 | 9.3 | 9.6 | 9.9 | 10.1 | 10.3 | 10.5 | 10.6 |
| 73 | 78 | 7.9 | 8.3 | 8.7 | 9.0 | 9.3 | 9.6 | 9.8 | 9.9 | 10.1 | 10.2 |
| 74 | 79 | 7.7 | 8.1 | 8.5 | 8.8 | 9.0 | 9.2 | 9.4 | 9.6 | 9.7 | 9.8 |
| 75 | 80 | 7.6 | 7.9 | 8.2 | 8.5 | 8.7 | 8.9 | 9.1 | 9.2 | 9.3 | 9.4 |
| 76 | 81 | 7.4 | 7.7 | 8.0 | 8.2 | 8.4 | 8.6 | 8.7 | 8.8 | 8.9 | 9.0 |
| 77 | 82 | 7.1 | 7.5 | 7.7 | 7.9 | 8.1 | 8.3 | 8.4 | 8.5 | 8.5 | 8.6 |
| 78 | 83 | 6.9 | 7.2 | 7.4 | 7.6 | 7.8 | 7.9 | 8.0 | 8.1 | 8.2 | 8.2 |
| 79 | 84 | 6.7 | 7.0 | 7.2 | 7.3 | 7.5 | 7.6 | 7.7 | 7.7 | 7.8 | 7.8 |
| 80 | 85 | 6.5 | 6.7 | 6.9 | 7.1 | 7.2 | 7.3 | 7.3 | 7.4 | 7.4 | 7.4 |
| 81 | 86 | 6.3 | 6.5 | 6.6 | 6.8 | 6.9 | 6.9 | 7.0 | 7.0 | 7.1 | |
| 82 | 87 | 6.0 | 6.2 | 6.4 | 6.5 | 6.5 | 6.6 | 6.7 | 6.7 | ||
| 83 | 88 | 5.8 | 6.0 | 6.1 | 6.2 | 6.2 | 6.3 | 6.3 | |||
| 84 | 89 | 5.6 | 5.7 | 5.8 | 5.9 | 5.9 | 6.0 | ||||
| 85 | 90 | 5.3 | 5.5 | 5.5 | 5.6 | 5.6 | |||||
| 86 | 91 | 5.1 | 5.2 | 5.3 | 5.3 | ||||||
| Ages | Temporary period—maximum duration of annuity—[Years] | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Male | Female | 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 |
| 0 to 8 | 0 to 13 | 20.7 | 21.7 | 22.7 | 23.6 | 24.6 | 25.6 | 26.5 | 27.5 | 28.4 | 29.4 |
| 9 | 14 | 20.7 | 21.7 | 22.7 | 23.6 | 24.6 | 25.5 | 26.5 | 27.5 | 28.4 | 29.4 |
| 10 | 15 | 20.7 | 21.7 | 22.7 | 23.6 | 24.6 | 25.5 | 26.5 | 27.5 | 28.4 | 29.4 |
| 11 | 16 | 20.7 | 21.7 | 22.6 | 23.6 | 24.6 | 25.5 | 26.5 | 27.4 | 28.4 | 29.3 |
| 12 | 17 | 20.7 | 21.7 | 22.6 | 23.6 | 24.6 | 25.5 | 26.5 | 27.4 | 28.4 | 29.3 |
| 13 | 18 | 20.7 | 21.7 | 22.6 | 23.6 | 24.6 | 25.5 | 26.5 | 27.4 | 28.4 | 29.3 |
| 14 | 19 | 20.7 | 21.7 | 22.6 | 23.6 | 24.5 | 25.5 | 26.4 | 27.4 | 28.3 | 29.3 |
| 15 | 20 | 20.7 | 21.6 | 22.6 | 23.6 | 24.5 | 25.5 | 26.4 | 27.4 | 28.3 | 29.2 |
| 16 | 21 | 20.7 | 21.6 | 22.6 | 23.6 | 24.5 | 25.5 | 26.4 | 27.3 | 28.3 | 29.2 |
| 17 | 22 | 20.7 | 21.6 | 22.6 | 23.5 | 24.5 | 25.4 | 26.4 | 27.3 | 28.2 | 29.2 |
| 18 | 23 | 20.7 | 21.6 | 22.6 | 23.5 | 24.5 | 25.4 | 26.3 | 27.3 | 28.2 | 29.1 |
| 19 | 24 | 20.6 | 21.6 | 22.5 | 23.5 | 24.4 | 25.4 | 26.3 | 27.2 | 28.1 | 29.1 |
| 20 | 25 | 20.6 | 21.6 | 22.5 | 23.5 | 24.4 | 25.3 | 26.3 | 27.2 | 28.1 | 29.0 |
| 21 | 26 | 20.6 | 21.5 | 22.5 | 23.4 | 24.4 | 25.3 | 26.2 | 27.1 | 28.0 | 28.9 |
| 22 | 27 | 20.6 | 21.5 | 22.5 | 23.4 | 24.3 | 25.3 | 26.2 | 27.1 | 28.0 | 28.9 |
| 23 | 28 | 20.6 | 21.5 | 22.4 | 23.4 | 24.3 | 25.2 | 26.1 | 27.0 | 27.9 | 28.8 |
| 24 | 29 | 20.5 | 21.5 | 22.4 | 23.3 | 24.2 | 25.2 | 26.1 | 27.0 | 27.8 | 28.7 |
| 25 | 30 | 20.5 | 21.4 | 22.4 | 23.3 | 24.2 | 25.1 | 26.0 | 26.9 | 27.8 | 28.6 |
| 26 | 31 | 20.5 | 21.4 | 22.3 | 23.2 | 24.1 | 25.0 | 25.9 | 26.8 | 27.7 | 28.5 |
| 27 | 32 | 20.4 | 21.3 | 22.3 | 23.2 | 24.1 | 25.0 | 25.8 | 26.7 | 27.6 | 28.4 |
| 28 | 33 | 20.4 | 21.3 | 22.2 | 23.1 | 24.0 | 24.9 | 25.8 | 26.6 | 27.5 | 28.3 |
| 29 | 34 | 20.3 | 21.2 | 22.1 | 23.0 | 23.9 | 24.8 | 25.7 | 26.5 | 27.4 | 28.2 |
| 30 | 35 | 20.3 | 21.2 | 22.1 | 23.0 | 23.8 | 24.7 | 25.6 | 26.4 | 27.2 | 28.1 |
| 31 | 36 | 20.2 | 21.1 | 22.0 | 22.9 | 23.8 | 24.6 | 25.5 | 26.3 | 27.1 | 27.9 |
| 32 | 37 | 20.2 | 21.1 | 21.9 | 22.8 | 23.7 | 24.5 | 25.4 | 26.2 | 27.0 | 27.8 |
| 33 | 38 | 20.1 | 21.0 | 21.9 | 22.7 | 23.6 | 24.4 | 25.2 | 26.0 | 26.8 | 27.6 |
| 34 | 39 | 20.0 | 20.9 | 21.8 | 22.6 | 23.5 | 24.3 | 25.1 | 25.9 | 26.7 | 27.4 |
| 35 | 40 | 20.0 | 20.8 | 21.7 | 22.5 | 23.3 | 24.2 | 25.0 | 25.7 | 26.5 | 27.2 |
| 36 | 41 | 19.9 | 20.7 | 21.6 | 22.4 | 23.2 | 24.0 | 24.8 | 25.6 | 26.3 | 27.0 |
| 37 | 42 | 19.8 | 20.6 | 21.5 | 22.3 | 23.1 | 23.9 | 24.6 | 25.4 | 26.1 | 26.8 |
| 38 | 43 | 19.7 | 20.5 | 21.4 | 22.2 | 23.0 | 23.7 | 24.5 | 25.2 | 25.9 | 26.6 |
| 39 | 44 | 19.6 | 20.4 | 21.2 | 22.0 | 22.8 | 23.6 | 24.3 | 25.0 | 25.7 | 26.4 |
| 40 | 45 | 19.5 | 20.3 | 21.1 | 21.9 | 22.6 | 23.4 | 24.1 | 24.8 | 25.5 | 26.1 |
| 41 | 46 | 19.4 | 20.2 | 21.0 | 21.7 | 22.5 | 23.2 | 23.9 | 24.6 | 25.2 | 25.9 |
| 42 | 47 | 19.3 | 20.1 | 20.8 | 21.6 | 22.3 | 23.0 | 23.7 | 24.3 | 25.0 | 25.6 |
| 43 | 48 | 19.2 | 19.9 | 20.7 | 21.4 | 22.1 | 22.8 | 23.4 | 24.1 | 24.7 | 25.3 |
| 44 | 49 | 19.0 | 19.8 | 20.5 | 21.2 | 21.9 | 22.6 | 23.2 | 23.8 | 24.4 | 25.0 |
| 45 | 50 | 18.9 | 19.6 | 20.3 | 21.0 | 21.7 | 22.3 | 22.9 | 23.5 | 24.1 | 24.6 |
| 46 | 51 | 18.7 | 19.4 | 20.1 | 20.8 | 21.5 | 22.1 | 22.7 | 23.2 | 23.8 | 24.3 |
| 47 | 52 | 18.6 | 19.3 | 19.9 | 20.6 | 21.2 | 21.8 | 22.4 | 22.9 | 23.4 | 23.9 |
| 48 | 53 | 18.4 | 19.1 | 19.7 | 20.4 | 21.0 | 21.5 | 22.1 | 22.6 | 23.1 | 23.5 |
| 49 | 54 | 18.2 | 18.9 | 19.5 | 20.1 | 20.7 | 21.2 | 21.7 | 22.2 | 22.7 | 23.1 |
| 50 | 55 | 18.0 | 18.7 | 19.3 | 19.8 | 20.4 | 20.9 | 21.4 | 21.9 | 22.3 | 22.7 |
| 51 | 56 | 17.8 | 18.4 | 19.0 | 19.6 | 20.1 | 20.6 | 21.1 | 21.5 | 21.9 | 22.3 |
| 52 | 57 | 17.6 | 18.2 | 18.7 | 19.3 | 19.8 | 20.2 | 20.7 | 21.1 | 21.5 | 21.8 |
| 53 | 58 | 17.4 | 17.9 | 18.5 | 19.0 | 19.4 | 19.9 | 20.3 | 20.7 | 21.0 | 21.3 |
| 54 | 59 | 17.1 | 17.7 | 18.2 | 18.7 | 19.1 | 19.5 | 19.9 | 20.2 | 20.6 | 20.8 |
| 55 | 60 | 16.9 | 17.4 | 17.9 | 18.3 | 18.7 | 19.1 | 19.5 | 19.8 | 20.1 | 20.3 |
| 56 | 61 | 16.6 | 17.1 | 17.5 | 18.0 | 18.4 | 18.7 | 19.0 | 19.3 | 19.6 | 19.8 |
| 57 | 62 | 16.3 | 16.8 | 17.2 | 17.6 | 18.0 | 18.3 | 18.6 | 18.9 | 19.1 | 19.3 |
| 58 | 63 | 16.0 | 16.5 | 16.9 | 17.2 | 17.6 | 17.9 | 18.1 | 18.4 | 18.6 | 18.8 |
| 59 | 64 | 15.7 | 16.1 | 16.5 | 16.8 | 17.1 | 17.4 | 17.7 | 17.9 | 18.1 | 18.2 |
| 60 | 65 | 15.4 | 15.8 | 16.1 | 16.4 | 16.7 | 17.0 | 17.2 | 17.4 | 17.5 | 17.7 |
| 61 | 66 | 15.1 | 15.4 | 15.7 | 16.0 | 16.3 | 16.5 | 16.7 | 16.9 | 17.0 | 17.1 |
| 62 | 67 | 14.7 | 15.0 | 15.3 | 15.6 | 15.8 | 16.0 | 16.2 | 16.3 | 16.4 | 16.5 |
| 63 | 68 | 14.4 | 14.6 | 14.9 | 15.1 | 15.3 | 15.5 | 15.7 | 15.8 | 15.9 | 16.0 |
| 64 | 69 | 14.0 | 14.3 | 14.5 | 14.7 | 14.9 | 15.0 | 15.2 | 15.3 | 15.3 | 15.4 |
| 65 | 70 | 13.6 | 13.8 | 14.1 | 14.2 | 14.4 | 14.5 | 14.6 | 14.7 | 14.8 | 14.9 |
| 66 | 71 | 13.2 | 13.4 | 13.6 | 13.8 | 13.9 | 14.0 | 14.1 | 14.2 | 14.2 | 14.3 |
| 67 | 72 | 12.8 | 13.0 | 13.2 | 13.3 | 13.4 | 13.5 | 13.6 | 13.7 | 13.7 | 13.7 |
| 68 | 73 | 12.4 | 12.6 | 12.7 | 12.8 | 12.9 | 13.0 | 13.1 | 13.1 | 13.2 | 13.2 |
| 69 | 74 | 12.0 | 12.1 | 12.3 | 12.4 | 12.4 | 12.5 | 12.6 | 12.6 | 12.6 | 12.6 |
| 70 | 75 | 11.6 | 11.7 | 11.8 | 11.9 | 12.0 | 12.0 | 12.0 | 12.1 | 12.1 | 12.1 |
| 71 | 76 | 11.2 | 11.3 | 11.3 | 11.4 | 11.5 | 11.5 | 11.5 | 11.6 | 11.6 | |
| 72 | 77 | 10.7 | 10.8 | 10.9 | 10.9 | 11.0 | 11.0 | 11.0 | 11.0 | ||
| 73 | 78 | 10.3 | 10.4 | 10.4 | 10.5 | 10.5 | 10.5 | 10.5 | |||
| 74 | 79 | 9.9 | 9.9 | 10.0 | 10.0 | 10.1 | 10.1 | ||||
| 75 | 80 | 9.5 | 9.5 | 9.6 | 9.6 | 9.6 | |||||
| 76 | 81 | 9.1 | 9.1 | 9.1 | 9.1 | ||||||
| 77 | 82 | 8.6 | 8.7 | 8.7 | |||||||
| 78 | 83 | 8.2 | 8.3 | ||||||||
| 79 | 84 | 7.8 | |||||||||
Footnote to Table IV:
1 The multiples in this table are not applicable to annuities for a term certain; for such cases see paragraph (c) of § 1.72-5.
Table V—Ordinary Life Annuities One Life—Expected Return Multiples
| Age | Multiple |
|---|---|
| 5 | 76.6 |
| 6 | 75.6 |
| 7 | 74.7 |
| 8 | 73.7 |
| 9 | 72.7 |
| 10 | 71.7 |
| 11 | 70.7 |
| 12 | 69.7 |
| 13 | 68.8 |
| 14 | 67.8 |
| 15 | 66.8 |
| 16 | 65.8 |
| 17 | 64.8 |
| 18 | 63.9 |
| 19 | 62.9 |
| 20 | 61.9 |
| 21 | 60.9 |
| 22 | 59.9 |
| 23 | 59.0 |
| 24 | 58.0 |
| 25 | 57.0 |
| 26 | 56.0 |
| 27 | 55.1 |
| 28 | 54.1 |
| 29 | 53.1 |
| 30 | 52.2 |
| 31 | 51.2 |
| 32 | 50.2 |
| 33 | 49.3 |
| 34 | 48.3 |
| 35 | 47.3 |
| 36 | 46.4 |
| 37 | 45.4 |
| 38 | 44.4 |
| 39 | 43.5 |
| 40 | 42.5 |
| 41 | 41.5 |
| 42 | 40.6 |
| 43 | 39.6 |
| 44 | 38.7 |
| 45 | 37.7 |
| 46 | 36.8 |
| 47 | 35.9 |
| 48 | 34.9 |
| 49 | 34.0 |
| 50 | 33.1 |
| 51 | 32.2 |
| 52 | 31.3 |
| 53 | 30.4 |
| 54 | 29.5 |
| 55 | 28.6 |
| 56 | 27.7 |
| 57 | 26.8 |
| 58 | 25.9 |
| 59 | 25.0 |
| 60 | 24.2 |
| 61 | 23.3 |
| 62 | 22.5 |
| 63 | 21.6 |
| 64 | 20.8 |
| 65 | 20.0 |
| 66 | 19.2 |
| 67 | 18.4 |
| 68 | 17.6 |
| 69 | 16.8 |
| 70 | 16.0 |
| 71 | 15.3 |
| 72 | 14.6 |
| 73 | 13.9 |
| 74 | 13.2 |
| 75 | 12.5 |
| 76 | 11.9 |
| 77 | 11.2 |
| 78 | 10.6 |
| 79 | 10.0 |
| 80 | 9.5 |
| 81 | 8.9 |
| 82 | 8.4 |
| 83 | 7.9 |
| 84 | 7.4 |
| 85 | 6.9 |
| 86 | 6.5 |
| 87 | 6.1 |
| 88 | 5.7 |
| 89 | 5.3 |
| 90 | 5.0 |
| 91 | 4.7 |
| 92 | 4.4 |
| 93 | 4.1 |
| 94 | 3.9 |
| 95 | 3.7 |
| 96 | 3.4 |
| 97 | 3.2 |
| 98 | 3.0 |
| 99 | 2.8 |
| 100 | 2.7 |
| 101 | 2.5 |
| 102 | 2.3 |
| 103 | 2.1 |
| 104 | 1.9 |
| 105 | 1.8 |
| 106 | 1.6 |
| 107 | 1.4 |
| 108 | 1.3 |
| 109 | 1.1 |
| 110 | 1.0 |
| 111 | .9 |
| 112 | .8 |
| 113 | .7 |
| 114 | .6 |
| 115 | .5 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 |
|---|---|---|---|---|---|---|---|---|---|---|
| 5 | 83.8 | 83.3 | 82.8 | 82.4 | 82.0 | 81.6 | 81.2 | 80.9 | 80.6 | 80.3 |
| 6 | 83.3 | 82.8 | 82.3 | 81.8 | 81.4 | 81.0 | 80.6 | 80.3 | 79.9 | 79.6 |
| 7 | 82.8 | 82.3 | 81.8 | 81.3 | 80.9 | 80.4 | 80.0 | 79.6 | 79.3 | 78.9 |
| 8 | 82.4 | 81.8 | 81.3 | 80.8 | 80.3 | 79.9 | 79.4 | 79.0 | 78.6 | 78.3 |
| 9 | 82.0 | 81.4 | 80.9 | 80.3 | 79.8 | 79.3 | 78.9 | 78.4 | 78.0 | 77.6 |
| 10 | 81.6 | 81.0 | 80.4 | 79.9 | 79.3 | 78.8 | 78.3 | 77.9 | 77.4 | 77.0 |
| 11 | 81.2 | 80.6 | 80.0 | 79.4 | 78.9 | 78.3 | 77.8 | 77.3 | 76.9 | 76.4 |
| 12 | 80.9 | 80.3 | 79.6 | 79.0 | 78.4 | 77.9 | 77.3 | 76.8 | 76.3 | 75.9 |
| 13 | 80.6 | 79.9 | 79.3 | 78.6 | 78.0 | 77.4 | 76.9 | 76.3 | 75.8 | 75.3 |
| 14 | 80.3 | 79.6 | 78.9 | 78.3 | 77.6 | 77.0 | 76.4 | 75.9 | 75.3 | 74.8 |
| 15 | 80.0 | 79.3 | 78.6 | 77.9 | 77.3 | 76.6 | 76.0 | 75.4 | 74.9 | 74.3 |
| 16 | 79.8 | 79.0 | 78.3 | 77.6 | 76.9 | 76.3 | 75.6 | 75.0 | 74.4 | 73.9 |
| 17 | 79.5 | 78.8 | 78.0 | 77.3 | 76.6 | 75.9 | 75.3 | 74.6 | 74.0 | 73.4 |
| 18 | 79.3 | 78.5 | 77.8 | 77.0 | 76.3 | 75.6 | 74.9 | 74.3 | 73.6 | 73.0 |
| 19 | 79.1 | 78.3 | 77.5 | 76.8 | 76.0 | 75.3 | 74.6 | 73.9 | 73.3 | 72.6 |
| 20 | 78.9 | 78.1 | 77.3 | 76.5 | 75.8 | 75.0 | 74.3 | 73.6 | 72.9 | 72.3 |
| 21 | 78.7 | 77.9 | 77.1 | 76.3 | 75.5 | 74.8 | 74.0 | 73.3 | 72.6 | 71.9 |
| 22 | 78.6 | 77.7 | 76.9 | 76.1 | 75.3 | 74.5 | 73.8 | 73.0 | 72.3 | 71.6 |
| 23 | 78.4 | 77.6 | 76.7 | 75.9 | 75.1 | 74.3 | 73.5 | 72.8 | 72.0 | 71.3 |
| 24 | 78.3 | 77.4 | 76.6 | 75.7 | 74.9 | 74.1 | 73.3 | 72.6 | 71.8 | 71.1 |
| 25 | 78.2 | 77.3 | 76.4 | 75.6 | 74.8 | 73.9 | 73.1 | 72.3 | 71.6 | 70.8 |
| 26 | 78.0 | 77.2 | 76.3 | 75.4 | 74.6 | 73.8 | 72.9 | 72.1 | 71.3 | 70.6 |
| 27 | 77.9 | 77.1 | 76.2 | 75.3 | 74.4 | 73.6 | 72.8 | 71.9 | 71.1 | 70.3 |
| 28 | 77.8 | 76.9 | 76.1 | 75.2 | 74.3 | 73.4 | 72.6 | 71.8 | 70.9 | 70.1 |
| 29 | 77.7 | 76.8 | 76.0 | 75.1 | 74.2 | 73.3 | 72.5 | 71.6 | 70.8 | 70.0 |
| 30 | 77.7 | 76.8 | 75.9 | 75.0 | 74.1 | 73.2 | 72.3 | 71.5 | 70.6 | 69.8 |
| 31 | 77.6 | 76.7 | 75.8 | 74.9 | 74.0 | 73.1 | 72.2 | 71.3 | 70.5 | 69.6 |
| 32 | 77.5 | 76.6 | 75.7 | 74.8 | 73.9 | 73.0 | 72.1 | 71.2 | 70.3 | 69.5 |
| 33 | 77.5 | 76.5 | 75.6 | 74.7 | 73.8 | 72.9 | 72.0 | 71.1 | 70.2 | 69.3 |
| 34 | 77.4 | 76.5 | 75.5 | 74.6 | 73.7 | 72.8 | 71.9 | 71.0 | 70.1 | 69.2 |
| 35 | 77.3 | 76.4 | 75.5 | 74.5 | 73.6 | 72.7 | 71.8 | 70.9 | 70.0 | 69.1 |
| 36 | 77.3 | 76.3 | 75.4 | 74.5 | 73.5 | 72.6 | 71.7 | 70.8 | 69.9 | 69.0 |
| 37 | 77.2 | 76.3 | 75.4 | 74.4 | 73.5 | 72.6 | 71.6 | 70.7 | 69.8 | 68.9 |
| 38 | 77.2 | 76.2 | 75.3 | 74.4 | 73.4 | 72.5 | 71.6 | 70.6 | 69.7 | 68.8 |
| 39 | 77.2 | 76.2 | 75.3 | 74.3 | 73.4 | 72.4 | 71.5 | 70.6 | 69.6 | 68.7 |
| 40 | 77.1 | 76.2 | 75.2 | 74.3 | 73.3 | 72.4 | 71.4 | 70.5 | 69.6 | 68.6 |
| 41 | 77.1 | 76.1 | 75.2 | 74.2 | 73.3 | 72.3 | 71.4 | 70.4 | 69.5 | 68.6 |
| 42 | 77.0 | 76.1 | 75.1 | 74.2 | 73.2 | 72.3 | 71.3 | 70.4 | 69.4 | 68.5 |
| 43 | 77.0 | 76.1 | 75.1 | 74.1 | 73.2 | 72.2 | 71.3 | 70.3 | 69.4 | 68.5 |
| 44 | 77.0 | 76.0 | 75.1 | 74.1 | 73.1 | 72.2 | 71.2 | 70.3 | 69.3 | 68.4 |
| 45 | 77.0 | 76.0 | 75.0 | 74.1 | 73.1 | 72.2 | 71.2 | 70.2 | 69.3 | 68.4 |
| 46 | 76.9 | 76.0 | 75.0 | 74.0 | 73.1 | 72.1 | 71.2 | 70.2 | 69.3 | 68.3 |
| 47 | 76.9 | 75.9 | 75.0 | 74.0 | 73.1 | 72.1 | 71.1 | 70.2 | 69.2 | 68.3 |
| 48 | 76.9 | 75.9 | 75.0 | 74.0 | 73.0 | 72.1 | 71.1 | 70.1 | 69.2 | 68.2 |
| 49 | 76.9 | 75.9 | 74.9 | 74.0 | 73.0 | 72.0 | 71.1 | 70.1 | 69.1 | 68.2 |
| 50 | 76.9 | 75.9 | 74.9 | 73.9 | 73.0 | 72.0 | 71.0 | 70.1 | 69.1 | 68.2 |
| 51 | 76.8 | 75.9 | 74.9 | 73.9 | 73.0 | 72.0 | 71.0 | 70.1 | 69.1 | 68.1 |
| 52 | 76.8 | 75.9 | 74.9 | 73.9 | 72.9 | 72.0 | 71.0 | 70.0 | 69.1 | 68.1 |
| 53 | 76.8 | 75.8 | 74.9 | 73.9 | 72.9 | 71.9 | 71.0 | 70.0 | 69.0 | 68.1 |
| 54 | 76.8 | 75.8 | 74.8 | 73.9 | 72.9 | 71.9 | 71.0 | 70.0 | 69.0 | 68.1 |
| 55 | 76.8 | 75.8 | 74.8 | 73.9 | 72.9 | 71.9 | 70.9 | 70.0 | 69.0 | 68.0 |
| 56 | 76.8 | 75.8 | 74.8 | 73.8 | 72.9 | 71.9 | 70.9 | 69.9 | 69.0 | 68.0 |
| 57 | 76.8 | 75.8 | 74.8 | 73.8 | 72.9 | 71.9 | 70.9 | 69.9 | 69.0 | 68.0 |
| 58 | 76.8 | 75.8 | 74.8 | 73.8 | 72.8 | 71.9 | 70.9 | 69.9 | 68.9 | 68.0 |
| 59 | 76.7 | 75.8 | 74.8 | 73.8 | 72.8 | 71.9 | 70.9 | 69.9 | 68.9 | 68.0 |
| 60 | 76.7 | 75.8 | 74.8 | 73.8 | 72.8 | 71.8 | 70.9 | 69.9 | 68.9 | 67.9 |
| 61 | 76.7 | 75.7 | 74.8 | 73.8 | 72.8 | 71.8 | 70.9 | 69.9 | 68.9 | 67.9 |
| 62 | 76.7 | 75.7 | 74.8 | 73.8 | 72.8 | 71.8 | 70.8 | 69.9 | 68.9 | 67.9 |
| 63 | 76.7 | 75.7 | 74.8 | 73.8 | 72.8 | 71.8 | 70.8 | 69.9 | 68.9 | 67.9 |
| 64 | 76.7 | 75.7 | 74.7 | 73.8 | 72.8 | 71.8 | 70.8 | 69.8 | 68.9 | 67.9 |
| 65 | 76.7 | 75.7 | 74.7 | 73.8 | 72.8 | 71.8 | 70.8 | 69.8 | 68.9 | 67.9 |
| 66 | 76.7 | 75.7 | 74.7 | 73.7 | 72.8 | 71.8 | 70.8 | 69.8 | 68.9 | 67.9 |
| 67 | 76.7 | 75.7 | 74.7 | 73.7 | 72.8 | 71.8 | 70.8 | 69.8 | 68.8 | 67.9 |
| 68 | 76.7 | 75.7 | 74.7 | 73.7 | 72.8 | 71.8 | 70.8 | 69.8 | 68.8 | 67.9 |
| 69 | 76.7 | 75.7 | 74.7 | 73.7 | 72.7 | 71.8 | 70.8 | 69.8 | 68.8 | 67.8 |
| 70 | 76.7 | 75.7 | 74.7 | 73.7 | 72.7 | 71.8 | 70.8 | 69.8 | 68.8 | 67.8 |
| 71 | 76.7 | 75.7 | 74.7 | 73.7 | 72.7 | 71.8 | 70.8 | 69.8 | 68.8 | 67.8 |
| 72 | 76.7 | 75.7 | 74.7 | 73.7 | 72.7 | 71.8 | 70.8 | 69.8 | 68.8 | 67.8 |
| 73 | 76.7 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.8 | 69.8 | 68.8 | 67.8 |
| 74 | 76.7 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.8 | 69.8 | 68.8 | 67.8 |
| 75 | 76.7 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.8 | 69.8 | 68.8 | 67.8 |
| 76 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.8 | 69.8 | 68.8 | 67.8 |
| 77 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.8 | 69.8 | 68.8 | 67.8 |
| 78 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 79 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 80 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 81 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 82 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 83 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 84 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 85 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 86 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 87 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 88 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.8 | 68.8 | 67.8 |
| 89 | 76.6 | 75.7 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 90 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 91 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 92 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 93 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 94 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 95 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 96 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 97 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 98 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 99 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 100 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 101 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 102 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 103 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 104 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 105 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 106 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 107 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 108 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 109 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 110 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 111 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 112 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 113 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 114 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
| 115 | 76.6 | 75.6 | 74.7 | 73.7 | 72.7 | 71.7 | 70.7 | 69.7 | 68.8 | 67.8 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 |
|---|---|---|---|---|---|---|---|---|---|---|
| 15 | 73.8 | 73.3 | 72.9 | 72.4 | 72.0 | 71.6 | 71.3 | 70.9 | 70.6 | 70.3 |
| 16 | 73.3 | 72.8 | 72.3 | 71.9 | 71.4 | 71.0 | 70.7 | 70.3 | 70.0 | 69.6 |
| 17 | 72.9 | 72.3 | 71.8 | 71.3 | 70.9 | 70.5 | 70.0 | 69.7 | 69.3 | 69.0 |
| 18 | 72.4 | 71.9 | 71.3 | 70.8 | 70.4 | 69.0 | 69.5 | 69.9 | 68.7 | 68.3 |
| 19 | 72.0 | 71.4 | 70.9 | 70.4 | 69.8 | 69.4 | 68.9 | 68.5 | 68.1 | 67.7 |
| 20 | 71.6 | 71.0 | 70.5 | 69.9 | 69.4 | 68.8 | 68.4 | 67.9 | 67.5 | 67.1 |
| 21 | 71.3 | 70.7 | 70.0 | 69.5 | 68.9 | 68.4 | 67.9 | 67.4 | 66.9 | 66.5 |
| 22 | 70.9 | 70.3 | 69.7 | 69.0 | 68.5 | 67.9 | 67.4 | 66.9 | 66.4 | 65.9 |
| 23 | 70.6 | 70.0 | 69.3 | 68.7 | 68.1 | 67.5 | 66.9 | 66.4 | 65.9 | 65.4 |
| 24 | 70.3 | 69.6 | 69.0 | 68.3 | 67.7 | 67.1 | 66.5 | 65.9 | 65.4 | 64.9 |
| 25 | 70.1 | 69.3 | 68.6 | 68.0 | 67.3 | 66.7 | 66.1 | 65.5 | 64.9 | 64.4 |
| 26 | 69.8 | 69.1 | 68.3 | 67.6 | 67.0 | 66.3 | 65.7 | 65.1 | 64.5 | 63.9 |
| 27 | 69.6 | 68.8 | 68.1 | 67.3 | 66.7 | 66.0 | 65.3 | 64.7 | 64.1 | 63.5 |
| 28 | 69.3 | 68.6 | 67.8 | 67.1 | 66.4 | 65.7 | 65.0 | 64.3 | 63.7 | 63.1 |
| 29 | 69.1 | 68.4 | 67.6 | 66.8 | 66.1 | 65.4 | 64.7 | 64.0 | 63.3 | 62.7 |
| 30 | 69.0 | 68.2 | 67.4 | 66.6 | 65.8 | 65.1 | 64.4 | 63.7 | 63.0 | 62.3 |
| 31 | 68.8 | 68.0 | 67.2 | 66.4 | 65.6 | 64.8 | 64.1 | 63.4 | 62.7 | 62.0 |
| 32 | 68.6 | 67.8 | 67.0 | 66.2 | 65.4 | 64.6 | 63.8 | 63.1 | 62.4 | 61.7 |
| 33 | 68.5 | 67.6 | 66.8 | 66.0 | 65.2 | 64.4 | 63.6 | 62.8 | 62.1 | 61.4 |
| 34 | 68.3 | 67.5 | 66.6 | 65.8 | 65.0 | 64.2 | 63.4 | 62.6 | 61.9 | 61.1 |
| 35 | 68.2 | 67.4 | 66.5 | 65.6 | 64.8 | 64.0 | 63.2 | 62.4 | 61.6 | 60.9 |
| 36 | 68.1 | 67.2 | 66.4 | 65.5 | 64.7 | 63.8 | 63.0 | 62.2 | 61.4 | 60.6 |
| 37 | 68.0 | 67.1 | 66.2 | 65.4 | 64.5 | 63.7 | 62.8 | 62.0 | 61.2 | 60.4 |
| 38 | 67.9 | 67.0 | 66.1 | 65.2 | 64.4 | 63.5 | 62.7 | 61.8 | 61.0 | 60.2 |
| 39 | 67.8 | 66.9 | 66.0 | 65.1 | 64.2 | 63.4 | 62.5 | 61.7 | 60.8 | 60.0 |
| 40 | 67.7 | 66.8 | 65.9 | 65.0 | 64.1 | 63.3 | 62.4 | 61.5 | 60.7 | 59.9 |
| 41 | 67.7 | 66.7 | 65.8 | 64.9 | 64.0 | 63.1 | 62.3 | 61.4 | 60.5 | 59.7 |
| 42 | 67.6 | 66.7 | 65.7 | 64.8 | 63.9 | 63.0 | 62.2 | 61.3 | 60.4 | 59.6 |
| 43 | 67.5 | 66.6 | 65.7 | 64.8 | 63.8 | 62.9 | 62.1 | 61.2 | 60.3 | 59.4 |
| 44 | 67.5 | 66.5 | 65.6 | 64.7 | 63.8 | 62.9 | 62.0 | 61.1 | 60.2 | 59.3 |
| 45 | 67.4 | 66.5 | 65.5 | 64.6 | 63.7 | 62.8 | 61.9 | 61.0 | 60.1 | 59.2 |
| 46 | 67.4 | 66.4 | 65.4 | 64.6 | 63.6 | 62.7 | 61.8 | 60.9 | 60.0 | 59.1 |
| 47 | 67.3 | 66.4 | 65.4 | 64.5 | 63.6 | 62.6 | 61.7 | 60.8 | 59.9 | 59.0 |
| 48 | 67.3 | 66.3 | 65.4 | 64.4 | 63.5 | 62.6 | 61.6 | 60.7 | 59.8 | 58.9 |
| 49 | 67.2 | 66.3 | 65.3 | 64.4 | 63.5 | 62.5 | 61.6 | 60.7 | 59.7 | 58.8 |
| 50 | 67.2 | 66.2 | 65.3 | 64.3 | 63.4 | 62.5 | 61.5 | 60.6 | 59.7 | 58.8 |
| 51 | 67.2 | 66.2 | 65.3 | 64.3 | 63.4 | 62.4 | 61.5 | 60.5 | 59.6 | 58.7 |
| 52 | 67.1 | 66.2 | 65.2 | 64.3 | 63.3 | 62.4 | 61.4 | 60.5 | 59.6 | 58.6 |
| 53 | 67.1 | 66.2 | 65.2 | 64.2 | 63.3 | 62.3 | 61.4 | 60.4 | 59.5 | 58.6 |
| 54 | 67.1 | 66.1 | 65.2 | 64.2 | 63.2 | 62.3 | 61.3 | 60.4 | 59.5 | 58.5 |
| 55 | 67.1 | 66.1 | 65.1 | 64.2 | 63.2 | 62.3 | 61.3 | 60.4 | 59.4 | 58.5 |
| 56 | 67.0 | 66.1 | 65.1 | 64.1 | 63.2 | 62.2 | 61.3 | 60.3 | 59.4 | 58.4 |
| 57 | 67.0 | 66.1 | 65.1 | 64.1 | 63.2 | 62.2 | 61.2 | 60.3 | 59.3 | 58.4 |
| 58 | 67.0 | 66.0 | 65.1 | 64.1 | 63.1 | 62.2 | 61.2 | 60.3 | 59.3 | 58.4 |
| 59 | 67.0 | 66.0 | 65.0 | 64.1 | 63.1 | 62.1 | 61.2 | 60.2 | 59.3 | 58.3 |
| 60 | 67.0 | 66.0 | 65.0 | 64.1 | 63.1 | 62.1 | 61.2 | 60.2 | 59.2 | 58.3 |
| 61 | 67.0 | 66.0 | 65.0 | 64.0 | 63.1 | 62.1 | 61.1 | 60.2 | 59.2 | 58.3 |
| 62 | 66.9 | 66.0 | 65.0 | 64.0 | 63.1 | 62.1 | 61.1 | 60.2 | 59.2 | 58.2 |
| 63 | 66.9 | 66.0 | 65.0 | 64.0 | 63.0 | 62.1 | 61.1 | 60.1 | 59.2 | 58.2 |
| 64 | 66.9 | 65.9 | 65.0 | 64.0 | 63.0 | 62.1 | 61.1 | 60.1 | 59.2 | 58.2 |
| 65 | 66.9 | 65.9 | 65.0 | 64.0 | 63.0 | 62.0 | 61.1 | 60.1 | 59.1 | 58.2 |
| 66 | 66.9 | 65.9 | 64.9 | 64.0 | 63.0 | 62.0 | 61.1 | 60.1 | 59.1 | 58.2 |
| 67 | 66.9 | 65.9 | 64.9 | 64.0 | 63.0 | 62.0 | 61.1 | 60.1 | 59.1 | 58.1 |
| 68 | 66.9 | 65.9 | 64.9 | 64.0 | 63.0 | 62.0 | 61.0 | 60.1 | 59.1 | 58.1 |
| 69 | 66.9 | 65.9 | 64.9 | 63.9 | 63.0 | 62.0 | 61.0 | 60.0 | 59.1 | 58.1 |
| 70 | 66.9 | 65.9 | 64.9 | 63.9 | 63.0 | 62.0 | 61.0 | 60.0 | 59.1 | 58.1 |
| 71 | 66.9 | 65.9 | 64.9 | 63.9 | 62.9 | 62.0 | 61.0 | 60.0 | 59.1 | 58.1 |
| 72 | 66.9 | 65.9 | 64.9 | 63.9 | 62.9 | 62.0 | 61.0 | 60.0 | 59.0 | 58.1 |
| 73 | 66.8 | 65.9 | 64.9 | 63.9 | 62.9 | 62.0 | 61.0 | 60.0 | 59.0 | 58.1 |
| 74 | 66.8 | 65.9 | 64.9 | 63.9 | 62.9 | 62.0 | 61.0 | 60.0 | 59.0 | 58.1 |
| 75 | 66.8 | 65.9 | 64.9 | 63.9 | 62.9 | 61.9 | 61.0 | 60.0 | 59.0 | 58.1 |
| 76 | 66.8 | 65.9 | 64.9 | 63.9 | 62.9 | 61.9 | 61.0 | 60.0 | 59.0 | 58.0 |
| 76 | 66.8 | 65.9 | 64.9 | 63.9 | 62.9 | 61.9 | 61.0 | 60.0 | 59.0 | 58.0 |
| 77 | 66.8 | 65.9 | 64.9 | 63.9 | 63.9 | 62.9 | 61.0 | 60.0 | 59.0 | 58.0 |
| 78 | 66.8 | 65.8 | 64.9 | 63.9 | 62.9 | 61.9 | 61.0 | 60.0 | 59.0 | 58.0 |
| 79 | 66.8 | 65.8 | 64.9 | 63.9 | 62.9 | 61.9 | 61.0 | 60.0 | 59.0 | 58.0 |
| 80 | 66.8 | 65.9 | 64.9 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 81 | 66.8 | 65.8 | 64.9 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 82 | 66.8 | 65.8 | 64.9 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 83 | 66.8 | 65.8 | 64.9 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 84 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 85 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 86 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 87 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 88 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 89 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 90 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 91 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 60.0 | 59.0 | 58.0 |
| 92 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 93 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 94 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 95 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 96 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 97 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 98 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 99 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 100 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 101 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 102 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 103 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 104 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 105 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 106 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 107 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 108 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 109 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 110 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 111 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 112 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 113 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 114 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
| 115 | 66.8 | 65.8 | 64.8 | 63.9 | 62.9 | 61.9 | 60.9 | 59.9 | 59.0 | 58.0 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 |
|---|---|---|---|---|---|---|---|---|---|---|
| 25 | 63.9 | 63.4 | 62.9 | 62.5 | 62.1 | 61.7 | 61.3 | 61.0 | 60.7 | 60.4 |
| 26 | 63.4 | 62.9 | 62.4 | 61.9 | 61.5 | 61.1 | 60.7 | 60.4 | 60.0 | 59.7 |
| 27 | 62.9 | 62.4 | 61.9 | 61.4 | 60.9 | 60.5 | 60.1 | 59.7 | 59.4 | 59.0 |
| 28 | 62.5 | 61.9 | 61.4 | 60.9 | 60.4 | 60.0 | 59.5 | 59.1 | 58.7 | 58.4 |
| 29 | 62.1 | 61.5 | 60.9 | 60.4 | 59.9 | 59.4 | 59.0 | 58.5 | 58.1 | 57.7 |
| 30 | 61.7 | 61.1 | 60.5 | 60.0 | 59.4 | 58.9 | 58.4 | 58.0 | 57.5 | 57.1 |
| 31 | 61.3 | 60.7 | 60.1 | 59.5 | 59.0 | 58.4 | 57.9 | 57.4 | 57.0 | 56.5 |
| 32 | 61.0 | 60.4 | 59.7 | 59.1 | 58.5 | 58.0 | 57.4 | 56.9 | 56.4 | 56.0 |
| 33 | 60.7 | 60.0 | 59.4 | 58.7 | 58.1 | 57.5 | 57.0 | 56.4 | 55.9 | 55.5 |
| 34 | 60.4 | 59.7 | 59.0 | 58.4 | 57.7 | 57.1 | 56.5 | 56.0 | 55.5 | 54.9 |
| 35 | 60.1 | 59.4 | 58.7 | 58.0 | 57.4 | 56.7 | 56.1 | 55.6 | 55.0 | 54.5 |
| 36 | 59.9 | 59.1 | 58.4 | 57.7 | 57.0 | 56.4 | 55.8 | 55.1 | 54.6 | 54.0 |
| 37 | 59.6 | 58.9 | 58.1 | 57.4 | 56.7 | 56.0 | 55.4 | 54.8 | 54.2 | 53.6 |
| 38 | 59.4 | 58.6 | 57.9 | 57.9 | 56.4 | 55.7 | 55.1 | 54.4 | 53.8 | 53.2 |
| 39 | 59.2 | 58.4 | 57.7 | 56.9 | 56.2 | 55.4 | 54.7 | 54.1 | 53.4 | 52.8 |
| 40 | 59.0 | 58.2 | 57.4 | 56.7 | 55.9 | 55.2 | 54.5 | 53.8 | 53.1 | 52.4 |
| 41 | 58.9 | 58.0 | 57.2 | 56.4 | 55.7 | 54.9 | 54.2 | 53.5 | 52.8 | 52.1 |
| 42 | 58.7 | 57.9 | 57.1 | 56.2 | 55.5 | 54.7 | 53.9 | 53.2 | 52.5 | 51.8 |
| 43 | 58.6 | 57.7 | 56.9 | 56.1 | 55.3 | 54.5 | 53.7 | 52.9 | 52.2 | 51.5 |
| 44 | 58.4 | 57.6 | 56.7 | 55.9 | 55.1 | 54.3 | 53.5 | 52.7 | 52.0 | 51.2 |
| 45 | 58.3 | 57.4 | 56.6 | 55.7 | 54.9 | 54.1 | 53.3 | 52.5 | 51.7 | 51.0 |
| 46 | 58.2 | 57.3 | 56.5 | 55.6 | 54.8 | 53.9 | 53.1 | 52.3 | 51.5 | 50.7 |
| 47 | 58.1 | 57.2 | 56.3 | 55.5 | 54.6 | 53.8 | 52.9 | 52.1 | 51.3 | 50.5 |
| 48 | 58.0 | 57.1 | 56.2 | 55.3 | 54.5 | 53.6 | 52.8 | 51.9 | 51.1 | 50.3 |
| 49 | 57.9 | 57.0 | 56.1 | 55.2 | 54.4 | 53.5 | 52.6 | 51.8 | 51.0 | 50.1 |
| 50 | 57.8 | 56.9 | 56.0 | 55.1 | 54.2 | 53.4 | 52.5 | 51.7 | 50.8 | 50.0 |
| 51 | 57.8 | 56.9 | 55.9 | 55.0 | 54.1 | 53.3 | 52.4 | 51.5 | 50.7 | 49.8 |
| 52 | 57.7 | 56.8 | 55.9 | 55.0 | 54.1 | 53.2 | 52.3 | 51.4 | 50.5 | 49.7 |
| 53 | 57.6 | 56.7 | 55.8 | 54.9 | 54.0 | 53.1 | 52.2 | 51.3 | 50.4 | 49.6 |
| 54 | 57.6 | 56.7 | 55.7 | 54.8 | 53.9 | 53.0 | 52.1 | 51.2 | 50.3 | 49.4 |
| 55 | 57.5 | 56.6 | 55.7 | 54.7 | 53.8 | 52.9 | 52.0 | 51.1 | 40.2 | 49.3 |
| 56 | 57.5 | 56.5 | 55.6 | 54.7 | 53.8 | 52.8 | 51.9 | 51.0 | 50.1 | 49.2 |
| 57 | 57.4 | 56.5 | 55.6 | 54.6 | 53.7 | 52.8 | 51.9 | 50.9 | 50.0 | 49.1 |
| 58 | 57.4 | 56.5 | 55.5 | 54.6 | 53.6 | 52.7 | 51.8 | 50.9 | 50.0 | 49.1 |
| 59 | 57.4 | 56.4 | 55.5 | 54.5 | 53.6 | 52.7 | 51.7 | 50.8 | 49.9 | 49.0 |
| 60 | 57.3 | 56.4 | 55.4 | 54.5 | 53.6 | 52.6 | 51.7 | 50.8 | 49.8 | 48.9 |
| 61 | 57.3 | 56.4 | 55.4 | 54.5 | 53.5 | 52.6 | 51.6 | 50.7 | 49.8 | 48.9 |
| 62 | 57.3 | 56.3 | 55.4 | 54.4 | 53.5 | 52.5 | 51.6 | 50.7 | 49.7 | 48.8 |
| 63 | 57.3 | 56.3 | 55.3 | 54.4 | 53.4 | 52.5 | 51.6 | 50.6 | 49.7 | 48.7 |
| 64 | 57.2 | 56.3 | 55.3 | 54.4 | 53.4 | 52.5 | 51.5 | 50.6 | 49.6 | 48.7 |
| 65 | 57.2 | 56.3 | 55.3 | 54.3 | 53.4 | 52.4 | 51.5 | 50.5 | 49.6 | 48.7 |
| 66 | 57.2 | 56.2 | 55.3 | 54.3 | 53.4 | 52.4 | 51.5 | 50.5 | 49.6 | 48.6 |
| 67 | 57.2 | 56.2 | 55.3 | 54.3 | 53.3 | 52.4 | 51.4 | 50.5 | 49.5 | 48.6 |
| 68 | 57.2 | 56.2 | 55.2 | 54.3 | 53.3 | 52.4 | 51.4 | 50.4 | 49.5 | 48.6 |
| 69 | 57.1 | 56.2 | 55.2 | 54.3 | 53.3 | 52.3 | 51.4 | 50.4 | 49.5 | 48.5 |
| 70 | 57.1 | 56.2 | 55.2 | 54.2 | 53.3 | 52.3 | 51.4 | 50.4 | 49.4 | 48.5 |
| 71 | 57.1 | 56.2 | 55.2 | 54.2 | 53.3 | 52.3 | 51.3 | 50.4 | 49.4 | 48.5 |
| 72 | 57.1 | 56.1 | 55.2 | 54.2 | 53.2 | 52.3 | 51.3 | 50.4 | 49.4 | 48.5 |
| 73 | 57.1 | 56.1 | 55.2 | 54.2 | 53.2 | 52.3 | 51.3 | 50.3 | 49.4 | 48.4 |
| 74 | 57.1 | 56.1 | 55.2 | 54.2 | 53.2 | 52.3 | 51.3 | 50.3 | 49.4 | 48.4 |
| 75 | 57.1 | 56.1 | 55.1 | 54.2 | 53.2 | 52.2 | 51.3 | 50.3 | 49.4 | 48.4 |
| 76 | 57.1 | 56.1 | 55.1 | 54.2 | 53.2 | 52.2 | 51.3 | 50.3 | 49.3 | 48.4 |
| 77 | 57.1 | 56.1 | 55.1 | 54.2 | 53.2 | 52.2 | 51.3 | 50.3 | 49.3 | 48.4 |
| 78 | 57.1 | 56.1 | 55.1 | 54.2 | 53.2 | 52.2 | 51.3 | 50.3 | 49.3 | 48.4 |
| 79 | 57.1 | 56.1 | 55.1 | 54.1 | 53.2 | 52.2 | 51.2 | 50.3 | 49.3 | 48.4 |
| 80 | 57.1 | 56.1 | 55.1 | 54.1 | 53.2 | 52.2 | 51.2 | 50.3 | 49.3 | 48.3 |
| 81 | 57.0 | 56.1 | 55.1 | 54.1 | 53.2 | 52.2 | 51.2 | 50.3 | 49.3 | 48.3 |
| 82 | 57.0 | 56.1 | 55.1 | 54.1 | 53.2 | 52.2 | 51.2 | 50.3 | 49.3 | 48.3 |
| 83 | 57.0 | 56.1 | 55.1 | 54.1 | 53.2 | 52.2 | 51.2 | 50.3 | 49.3 | 48.3 |
| 84 | 57.0 | 56.1 | 55.1 | 54.1 | 53.2 | 52.2 | 51.2 | 50.3 | 49.3 | 48.3 |
| 85 | 57.0 | 56.1 | 55.1 | 54.1 | 53.2 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 86 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 87 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 88 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 89 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 90 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 91 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 92 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 93 | 57.0 | 56.1 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 94 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 95 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 96 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 97 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 98 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 99 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 100 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 101 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 102 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 103 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 104 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 105 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 106 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 107 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 108 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 109 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 110 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 111 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 112 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 113 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 114 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
| 115 | 57.0 | 56.0 | 55.1 | 54.1 | 53.1 | 52.2 | 51.2 | 50.2 | 49.3 | 48.3 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 |
|---|---|---|---|---|---|---|---|---|---|---|
| 35 | 54.0 | 53.5 | 53.0 | 52.6 | 52.2 | 51.8 | 51.4 | 51.1 | 50.8 | 50.5 |
| 36 | 53.5 | 53.0 | 52.5 | 52.0 | 51.6 | 51.2 | 50.8 | 50.4 | 50.1 | 49.8 |
| 37 | 53.0 | 52.5 | 52.0 | 51.5 | 51.0 | 50.6 | 50.2 | 49.8 | 49.5 | 49.1 |
| 38 | 52.6 | 52.0 | 51.5 | 51.0 | 50.5 | 50.0 | 49.6 | 49.2 | 48.8 | 48.5 |
| 39 | 52.2 | 51.6 | 51.0 | 50.5 | 50.0 | 49.5 | 49.1 | 48.6 | 48.2 | 47.8 |
| 40 | 51.8 | 51.2 | 50.6 | 50.0 | 49.5 | 49.0 | 48.5 | 48.1 | 47.6 | 47.2 |
| 41 | 51.4 | 50.8 | 50.2 | 49.6 | 49.1 | 48.5 | 48.0 | 47.5 | 47.1 | 46.7 |
| 42 | 51.1 | 50.4 | 49.8 | 49.2 | 48.6 | 48.1 | 47.5 | 47.0 | 46.6 | 46.1 |
| 43 | 50.8 | 50.1 | 49.5 | 48.8 | 48.2 | 47.6 | 47.1 | 46.6 | 46.0 | 45.6 |
| 44 | 50.5 | 49.8 | 49.1 | 48.5 | 47.8 | 47.2 | 46.7 | 46.1 | 45.6 | 45.1 |
| 45 | 50.2 | 49.5 | 48.8 | 48.1 | 47.5 | 46.9 | 46.3 | 45.7 | 45.1 | 44.6 |
| 46 | 50.0 | 49.2 | 48.5 | 47.8 | 47.2 | 46.5 | 45.9 | 45.3 | 44.7 | 44.1 |
| 47 | 49.7 | 49.0 | 48.3 | 47.5 | 46.8 | 46.2 | 45.5 | 44.9 | 44.3 | 43.7 |
| 48 | 49.5 | 48.8 | 48.0 | 47.3 | 46.6 | 45.9 | 45.2 | 44.5 | 43.9 | 43.3 |
| 49 | 49.3 | 48.5 | 47.8 | 47.0 | 46.3 | 45.6 | 44.9 | 44.2 | 43.6 | 42.9 |
| 50 | 49.2 | 48.4 | 47.6 | 46.8 | 46.0 | 45.3 | 44.6 | 43.9 | 43.2 | 42.6 |
| 51 | 49.0 | 48.2 | 47.4 | 46.6 | 45.8 | 45.1 | 44.3 | 43.6 | 42.9 | 44.2 |
| 52 | 48.8 | 48.0 | 47.2 | 46.4 | 45.6 | 44.8 | 44.1 | 43.3 | 42.6 | 41.9 |
| 53 | 48.7 | 47.9 | 47.0 | 46.2 | 45.4 | 44.6 | 43.9 | 43.1 | 42.4 | 41.7 |
| 54 | 48.6 | 47.7 | 46.9 | 46.0 | 45.2 | 44.4 | 43.6 | 42.9 | 42.1 | 41.4 |
| 55 | 48.5 | 47.6 | 46.7 | 45.9 | 45.1 | 44.2 | 43.4 | 42.7 | 41.9 | 41.2 |
| 56 | 48.3 | 47.5 | 46.6 | 45.8 | 44.9 | 44.1 | 43.3 | 42.5 | 41.7 | 40.9 |
| 57 | 48.3 | 47.4 | 46.5 | 45.6 | 44.8 | 43.9 | 43.1 | 42.3 | 41.5 | 40.7 |
| 58 | 48.2 | 47.3 | 46.4 | 45.5 | 44.7 | 43.8 | 43.0 | 42.1 | 41.3 | 40.5 |
| 59 | 48.1 | 47.2 | 46.3 | 45.4 | 44.5 | 43.7 | 42.8 | 42.0 | 41.2 | 40.4 |
| 60 | 48.0 | 47.1 | 46.2 | 45.3 | 44.4 | 43.6 | 42.7 | 41.9 | 41.0 | 40.2 |
| 61 | 47.9 | 47.0 | 46.1 | 45.2 | 44.3 | 43.5 | 42.6 | 41.7 | 40.9 | 40.0 |
| 62 | 47.9 | 47.0 | 46.0 | 45.1 | 44.2 | 43.4 | 42.5 | 41.6 | 40.8 | 39.9 |
| 63 | 47.8 | 46.9 | 46.0 | 45.1 | 44.2 | 43.3 | 42.4 | 41.5 | 40.6 | 39.8 |
| 64 | 47.8 | 46.8 | 45.9 | 45.0 | 44.1 | 43.2 | 42.3 | 41.4 | 40.5 | 39.7 |
| 65 | 47.7 | 46.8 | 45.9 | 44.9 | 44.0 | 43.1 | 42.2 | 41.3 | 40.4 | 39.6 |
| 66 | 47.7 | 46.7 | 45.8 | 44.9 | 44.0 | 43.1 | 42.2 | 41.3 | 40.4 | 39.5 |
| 67 | 47.6 | 46.7 | 45.8 | 44.8 | 43.9 | 43.0 | 42.1 | 41.2 | 40.3 | 39.4 |
| 68 | 47.6 | 46.7 | 45.7 | 44.8 | 43.9 | 42.9 | 42.0 | 41.1 | 40.2 | 39.3 |
| 69 | 47.6 | 46.6 | 45.7 | 44.8 | 43.8 | 42.9 | 42.0 | 41.1 | 40.2 | 39.3 |
| 70 | 47.5 | 46.6 | 45.7 | 44.7 | 43.8 | 42.9 | 41.9 | 41.0 | 40.1 | 39.2 |
| 71 | 47.5 | 46.6 | 45.6 | 44.7 | 43.8 | 42.8 | 41.9 | 41.0 | 40.1 | 39.1 |
| 72 | 47.5 | 46.6 | 45.6 | 44.7 | 43.7 | 42.8 | 41.9 | 40.9 | 40.0 | 39.1 |
| 73 | 47.5 | 46.5 | 45.6 | 44.6 | 43.7 | 42.8 | 41.8 | 40.9 | 40.0 | 39.0 |
| 74 | 47.5 | 46.5 | 45.6 | 44.6 | 43.7 | 42.7 | 41.8 | 40.9 | 39.9 | 39.0 |
| 75 | 47.4 | 46.5 | 45.5 | 44.6 | 43.6 | 42.7 | 41.8 | 40.8 | 39.9 | 39.0 |
| 76 | 47.4 | 46.5 | 45.5 | 44.6 | 43.6 | 42.7 | 41.7 | 40.8 | 39.9 | 38.9 |
| 77 | 47.4 | 46.5 | 45.5 | 44.6 | 43.6 | 42.7 | 41.7 | 40.8 | 39.8 | 38.9 |
| 78 | 47.4 | 46.4 | 45.5 | 44.5 | 43.6 | 42.6 | 41.7 | 40.7 | 39.8 | 38.9 |
| 79 | 47.4 | 46.4 | 45.5 | 44.5 | 43.6 | 42.6 | 41.7 | 40.7 | 39.8 | 38.9 |
| 80 | 47.4 | 46.4 | 45.5 | 44.5 | 43.6 | 42.6 | 41.7 | 40.7 | 39.8 | 38.8 |
| 81 | 47.4 | 46.4 | 45.5 | 44.5 | 43.5 | 42.6 | 41.6 | 40.7 | 39.8 | 38.8 |
| 82 | 47.4 | 46.4 | 45.4 | 44.5 | 43.5 | 42.6 | 41.6 | 40.7 | 39.7 | 38.8 |
| 83 | 47.4 | 46.4 | 45.4 | 44.5 | 43.5 | 42.6 | 41.6 | 40.7 | 39.7 | 38.8 |
| 84 | 47.4 | 46.4 | 45.4 | 44.5 | 43.5 | 42.6 | 41.6 | 40.7 | 39.7 | 38.8 |
| 85 | 47.4 | 46.4 | 45.4 | 44.5 | 43.5 | 42.6 | 41.6 | 40.7 | 39.7 | 38.8 |
| 86 | 47.3 | 46.4 | 45.4 | 44.5 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.8 |
| 87 | 47.3 | 46.4 | 45.4 | 44.5 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.7 |
| 88 | 47.3 | 46.4 | 45.4 | 44.5 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.7 |
| 89 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.7 |
| 90 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.7 |
| 91 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 39.7 |
| 92 | 47.3 | 46.4 | 45.4 | 44.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 38.7 |
| 93 | 47.3 | 46.4 | 45.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 39.7 | 38.7 |
| 94 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.7 |
| 95 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.7 |
| 96 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.7 | 38.7 |
| 97 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.6 | 38.7 |
| 98 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.6 | 40.6 | 39.6 | 38.7 |
| 99 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 100 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 101 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 102 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 103 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 104 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 105 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 106 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 107 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 108 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 109 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 110 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 111 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 112 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 113 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 114 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 114 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
| 115 | 47.3 | 46.4 | 45.4 | 44.4 | 43.5 | 42.5 | 41.5 | 40.6 | 39.6 | 38.7 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 |
|---|---|---|---|---|---|---|---|---|---|---|
| 45 | 44.1 | 43.6 | 43.2 | 42.7 | 42.3 | 42.0 | 41.6 | 41.3 | 41.0 | 40.7 |
| 46 | 43.6 | 43.1 | 42.6 | 42.2 | 41.8 | 41.4 | 41.0 | 40.6 | 40.3 | 40.0 |
| 47 | 43.2 | 42.6 | 42.1 | 41.7 | 41.2 | 40.8 | 40.4 | 40.0 | 39.7 | 39.3 |
| 48 | 42.7 | 42.2 | 41.7 | 41.2 | 40.7 | 40.2 | 39.8 | 39.4 | 39.0 | 38.7 |
| 49 | 42.3 | 41.8 | 41.2 | 40.7 | 40.2 | 39.7 | 39.3 | 38.8 | 38.4 | 38.1 |
| 50 | 42.0 | 41.4 | 40.8 | 40.2 | 39.7 | 39.2 | 38.7 | 38.3 | 37.9 | 37.5 |
| 51 | 41.6 | 41.0 | 40.4 | 39.8 | 39.3 | 38.7 | 38.2 | 37.8 | 37.3 | 36.9 |
| 52 | 41.3 | 40.6 | 40.0 | 39.4 | 38.8 | 38.3 | 37.8 | 37.3 | 36.8 | 36.4 |
| 53 | 41.0 | 40.3 | 39.7 | 39.0 | 38.4 | 37.9 | 37.3 | 36.8 | 36.3 | 35.8 |
| 54 | 40.7 | 40.0 | 39.3 | 38.7 | 38.1 | 37.5 | 36.9 | 36.4 | 35.8 | 35.3 |
| 55 | 40.4 | 39.7 | 39.0 | 38.4 | 37.7 | 37.1 | 36.5 | 35.9 | 35.4 | 34.9 |
| 56 | 40.2 | 39.5 | 38.7 | 38.1 | 37.4 | 36.8 | 36.1 | 35.6 | 35.0 | 34.4 |
| 57 | 40.0 | 39.2 | 38.5 | 37.8 | 37.1 | 36.4 | 35.8 | 35.2 | 34.6 | 34.0 |
| 58 | 39.7 | 39.0 | 38.2 | 37.5 | 36.8 | 36.1 | 35.5 | 34.8 | 34.2 | 33.6 |
| 59 | 39.6 | 38.8 | 38.0 | 37.3 | 36.6 | 35.9 | 35.2 | 34.5 | 33.9 | 33.3 |
| 60 | 39.4 | 38.6 | 37.8 | 37.1 | 36.3 | 35.6 | 34.9 | 34.2 | 33.6 | 32.9 |
| 61 | 39.2 | 38.4 | 37.6 | 36.9 | 36.1 | 35.4 | 34.6 | 33.9 | 33.3 | 32.6 |
| 62 | 39.1 | 38.3 | 37.5 | 36.7 | 35.9 | 35.1 | 34.4 | 33.7 | 33.0 | 32.3 |
| 63 | 38.9 | 38.1 | 37.3 | 36.5 | 35.7 | 34.9 | 34.2 | 33.5 | 32.7 | 32.0 |
| 64 | 38.8 | 38.0 | 37.2 | 36.3 | 35.5 | 34.8 | 34.0 | 33.2 | 32.5 | 31.8 |
| 65 | 38.7 | 37.9 | 37.0 | 36.2 | 35.4 | 34.6 | 33.8 | 33.0 | 32.3 | 31.6 |
| 66 | 38.6 | 37.8 | 36.9 | 36.1 | 35.2 | 34.4 | 33.6 | 32.9 | 32.1 | 31.4 |
| 67 | 38.5 | 37.7 | 36.8 | 36.0 | 35.1 | 34.3 | 33.5 | 32.7 | 31.9 | 31.2 |
| 68 | 38.4 | 37.6 | 36.7 | 35.8 | 35.0 | 34.2 | 33.4 | 32.5 | 31.8 | 31.0 |
| 69 | 38.4 | 37.5 | 36.6 | 35.7 | 34.9 | 34.1 | 33.2 | 32.4 | 31.6 | 30.8 |
| 70 | 38.3 | 37.4 | 36.5 | 35.7 | 34.8 | 34.0 | 33.1 | 32.3 | 31.5 | 30.7 |
| 71 | 38.2 | 37.3 | 36.5 | 35.6 | 34.7 | 33.9 | 33.0 | 32.2 | 31.4 | 30.5 |
| 72 | 38.2 | 37.3 | 36.4 | 35.5 | 34.6 | 33.8 | 32.9 | 32.1 | 31.2 | 30.4 |
| 73 | 38.1 | 37.2 | 36.3 | 35.4 | 34.6 | 33.7 | 32.8 | 32.0 | 31.1 | 30.3 |
| 74 | 38.1 | 37.2 | 36.3 | 35.4 | 34.5 | 33.6 | 32.8 | 31.9 | 31.1 | 30.2 |
| 75 | 38.1 | 37.1 | 36.2 | 35.3 | 34.5 | 33.6 | 32.7 | 31.8 | 31.0 | 30.1 |
| 76 | 38.0 | 37.1 | 36.2 | 35.3 | 34.4 | 33.5 | 32.6 | 31.8 | 30.9 | 30.1 |
| 77 | 38.0 | 37.1 | 36.2 | 35.3 | 34.4 | 33.5 | 32.6 | 31.7 | 30.8 | 30.0 |
| 78 | 38.0 | 37.0 | 36.1 | 35.2 | 34.3 | 33.4 | 32.5 | 31.7 | 30.8 | 29.9 |
| 79 | 37.9 | 37.0 | 36.1 | 35.2 | 34.3 | 33.4 | 32.5 | 31.6 | 30.7 | 29.9 |
| 80 | 37.9 | 37.0 | 36.1 | 35.2 | 34.2 | 33.4 | 32.5 | 31.6 | 30.7 | 29.8 |
| 81 | 37.9 | 37.0 | 36.0 | 35.1 | 34.2 | 33.3 | 32.4 | 31.5 | 30.7 | 29.8 |
| 82 | 37.9 | 36.9 | 36.0 | 35.1 | 34.2 | 33.3 | 32.4 | 31.5 | 30.6 | 29.7 |
| 83 | 37.9 | 36.9 | 36.0 | 35.1 | 34.2 | 33.3 | 32.4 | 31.5 | 30.6 | 29.7 |
| 84 | 37.8 | 36.9 | 36.9 | 35.0 | 34.2 | 33.2 | 32.3 | 31.4 | 30.6 | 29.7 |
| 85 | 37.8 | 36.9 | 36.0 | 35.1 | 34.1 | 33.2 | 32.3 | 31.4 | 30.5 | 29.6 |
| 86 | 38.8 | 36.9 | 36.0 | 35.0 | 34.1 | 33.2 | 32.3 | 31.4 | 30.5 | 29.6 |
| 87 | 37.8 | 36.9 | 35.9 | 35.0 | 34.1 | 33.2 | 32.3 | 31.4 | 30.5 | 29.6 |
| 88 | 37.8 | 36.9 | 35.9 | 35.0 | 34.1 | 33.2 | 32.3 | 31.4 | 30.5 | 29.6 |
| 89 | 37.8 | 36.9 | 35.9 | 35.0 | 34.1 | 33.2 | 32.3 | 31.4 | 30.5 | 29.6 |
| 90 | 37.8 | 36.9 | 35.9 | 35.0 | 34.1 | 33.2 | 32.3 | 31.3 | 30.5 | 29.6 |
| 91 | 37.8 | 36.8 | 35.9 | 35.0 | 34.1 | 33.2 | 32.2 | 31.3 | 30.4 | 29.5 |
| 92 | 37.8 | 36.8 | 35.9 | 35.0 | 34.1 | 33.2 | 32.2 | 31.3 | 30.4 | 29.5 |
| 93 | 37.8 | 36.8 | 35.9 | 35.0 | 34.1 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 94 | 37.8 | 36.8 | 35.9 | 35.0 | 34.1 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 95 | 37.8 | 36.8 | 35.9 | 35.0 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 96 | 37.8 | 36.8 | 35.9 | 35.0 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 97 | 37.8 | 36.8 | 35.9 | 35.0 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 98 | 37.8 | 36.8 | 35.9 | 35.0 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 99 | 37.8 | 36.8 | 35.9 | 35.0 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 101 | 37.8 | 36.8 | 35.9 | 35.0 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 102 | 37.8 | 36.8 | 35.9 | 35.0 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 103 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 104 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 105 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 106 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 107 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 108 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 109 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 110 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 111 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 112 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 113 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 114 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
| 115 | 37.7 | 36.8 | 35.9 | 34.9 | 34.0 | 33.1 | 32.2 | 31.3 | 30.4 | 29.5 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 |
|---|---|---|---|---|---|---|---|---|---|---|
| 55 | 34.4 | 33.9 | 33.5 | 33.1 | 32.7 | 32.3 | 32.0 | 31.7 | 31.4 | 31.1 |
| 56 | 33.9 | 33.4 | 33.0 | 32.5 | 32.1 | 31.7 | 31.4 | 31.0 | 30.7 | 30.4 |
| 57 | 33.5 | 33.0 | 32.5 | 32.0 | 31.6 | 31.2 | 30.8 | 30.4 | 30.1 | 29.8 |
| 58 | 33.1 | 32.5 | 32.0 | 31.5 | 31.1 | 30.6 | 30.2 | 29.9 | 29.5 | 29.2 |
| 59 | 32.7 | 32.1 | 31.6 | 31.1 | 30.6 | 30.1 | 29.7 | 29.3 | 28.9 | 28.6 |
| 60 | 32.3 | 31.7 | 31.2 | 30.6 | 30.1 | 29.7 | 29.2 | 28.8 | 28.4 | 28.0 |
| 61 | 32.0 | 31.4 | 30.8 | 30.2 | 29.7 | 29.2 | 28.7 | 28.3 | 27.8 | 27.4 |
| 62 | 31.7 | 31.0 | 30.4 | 29.9 | 29.3 | 28.8 | 28.3 | 27.8 | 27.3 | 26.9 |
| 63 | 31.4 | 30.7 | 30.1 | 29.5 | 28.9 | 28.4 | 27.8 | 27.3 | 26.9 | 26.4 |
| 64 | 31.1 | 30.4 | 29.8 | 29.2 | 28.6 | 28.0 | 27.4 | 26.9 | 26.4 | 25.9 |
| 65 | 30.9 | 30.2 | 29.5 | 28.9 | 28.2 | 27.6 | 27.1 | 26.5 | 26.0 | 25.5 |
| 66 | 30.6 | 29.9 | 29.2 | 28.6 | 27.9 | 27.3 | 26.7 | 26.1 | 25.6 | 25.1 |
| 67 | 30.4 | 29.7 | 29.0 | 28.3 | 27.6 | 27.0 | 26.4 | 25.8 | 25.2 | 24.7 |
| 68 | 30.2 | 29.5 | 28.8 | 28.1 | 27.4 | 26.7 | 26.1 | 25.5 | 24.9 | 24.3 |
| 69 | 30.1 | 29.3 | 28.6 | 27.8 | 27.1 | 26.5 | 25.8 | 25.2 | 24.6 | 24.0 |
| 70 | 29.9 | 29.1 | 28.4 | 27.6 | 26.9 | 26.2 | 25.6 | 24.9 | 24.3 | 23.7 |
| 71 | 29.7 | 29.0 | 28.2 | 27.5 | 26.7 | 26.0 | 25.3 | 24.7 | 24.0 | 23.4 |
| 72 | 29.6 | 28.8 | 28.1 | 27.3 | 26.5 | 25.8 | 25.1 | 24.4 | 23.8 | 23.1 |
| 73 | 29.5 | 28.7 | 27.9 | 27.1 | 26.4 | 25.6 | 24.9 | 24.2 | 23.5 | 22.9 |
| 74 | 29.4 | 28.6 | 27.8 | 27.0 | 26.2 | 25.5 | 24.7 | 24.0 | 23.3 | 22.7 |
| 75 | 29.3 | 28.5 | 27.7 | 26.9 | 26.1 | 25.3 | 24.6 | 23.8 | 23.1 | 22.4 |
| 76 | 29.2 | 28.4 | 27.6 | 26.8 | 26.0 | 25.2 | 24.4 | 23.7 | 23.0 | 22.3 |
| 77 | 29.1 | 28.3 | 27.5 | 26.7 | 25.9 | 25.1 | 24.3 | 23.6 | 22.8 | 22.1 |
| 78 | 29.1 | 28.2 | 27.4 | 26.6 | 25.8 | 25.0 | 24.2 | 23.4 | 22.7 | 21.9 |
| 79 | 29.0 | 28.2 | 27.3 | 26.5 | 25.7 | 24.9 | 24.1 | 23.3 | 22.6 | 21.8 |
| 80 | 29.0 | 28.1 | 27.3 | 26.4 | 25.6 | 24.8 | 24.0 | 23.2 | 22.4 | 21.7 |
| 81 | 28.9 | 28.1 | 27.2 | 26.4 | 25.5 | 24.7 | 23.9 | 23.1 | 22.3 | 21.6 |
| 82 | 28.9 | 28.0 | 27.2 | 26.3 | 25.5 | 24.6 | 23.8 | 23.0 | 22.3 | 21.5 |
| 83 | 28.8 | 28.0 | 27.1 | 26.3 | 25.4 | 24.6 | 23.8 | 23.0 | 22.2 | 21.4 |
| 84 | 28.8 | 27.9 | 27.1 | 26.2 | 25.4 | 24.5 | 23.7 | 22.9 | 22.1 | 21.3 |
| 85 | 28.8 | 27.9 | 27.0 | 26.2 | 25.3 | 24.5 | 23.7 | 22.8 | 22.0 | 21.3 |
| 86 | 28.7 | 27.9 | 27.0 | 26.1 | 25.3 | 24.5 | 23.6 | 22.8 | 22.0 | 21.2 |
| 87 | 28.7 | 27.8 | 27.0 | 26.1 | 25.3 | 24.4 | 23.6 | 22.8 | 21.9 | 21.1 |
| 88 | 28.7 | 27.8 | 27.0 | 26.1 | 25.2 | 24.4 | 23.5 | 22.7 | 21.9 | 21.1 |
| 89 | 28.7 | 27.8 | 26.9 | 26.1 | 25.2 | 24.4 | 23.5 | 22.7 | 21.9 | 21.1 |
| 90 | 28.7 | 27.8 | 26.9 | 26.1 | 25.2 | 24.3 | 23.5 | 22.7 | 21.8 | 21.0 |
| 91 | 28.7 | 27.8 | 26.9 | 26.0 | 25.2 | 24.3 | 23.5 | 22.6 | 21.8 | 21.0 |
| 92 | 28.6 | 27.8 | 26.9 | 26.0 | 25.2 | 24.3 | 23.5 | 22.6 | 21.8 | 21.0 |
| 93 | 28.6 | 27.8 | 26.9 | 26.0 | 25.1 | 24.3 | 23.4 | 22.6 | 21.8 | 20.9 |
| 94 | 28.6 | 27.7 | 26.9 | 26.0 | 25.1 | 24.3 | 23.4 | 22.6 | 21.7 | 20.9 |
| 95 | 28.6 | 27.7 | 26.9 | 26.0 | 25.1 | 24.3 | 23.4 | 22.6 | 21.7 | 20.9 |
| 96 | 28.6 | 27.7 | 26.9 | 26.0 | 25.1 | 24.2 | 23.4 | 22.6 | 21.7 | 20.9 |
| 97 | 28.6 | 27.7 | 26.8 | 26.0 | 25.1 | 24.2 | 23.4 | 22.5 | 21.7 | 20.9 |
| 98 | 28.6 | 27.7 | 26.8 | 26.0 | 25.1 | 24.2 | 23.4 | 22.5 | 21.7 | 20.9 |
| 99 | 28.6 | 27.7 | 26.8 | 26.0 | 25.1 | 24.2 | 23.4 | 22.5 | 21.7 | 20.9 |
| 100 | 28.6 | 27.7 | 26.8 | 26.0 | 25.1 | 24.2 | 23.4 | 22.5 | 21.7 | 20.8 |
| 101 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.4 | 22.5 | 21.7 | 20.8 |
| 102 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.7 | 20.8 |
| 103 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.7 | 20.8 |
| 104 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 105 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 106 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 107 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 108 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 109 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 110 | 28.6 | 27.7 | 26.8 | 25.9 | 25.1 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 111 | 28.6 | 27.7 | 26.8 | 25.9 | 25.0 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 112 | 28.6 | 27.7 | 26.8 | 25.9 | 25.0 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 113 | 28.6 | 27.7 | 26.8 | 25.9 | 25.0 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 114 | 28.6 | 27.7 | 26.8 | 25.9 | 25.0 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
| 115 | 28.6 | 27.7 | 26.8 | 25.9 | 25.0 | 24.2 | 23.3 | 22.5 | 21.6 | 20.8 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 |
|---|---|---|---|---|---|---|---|---|---|---|
| 65 | 25.0 | 24.6 | 24.2 | 23.8 | 23.4 | 23.1 | 22.8 | 22.5 | 22.2 | 22.0 |
| 66 | 24.6 | 24.1 | 23.7 | 23.3 | 22.9 | 22.5 | 22.2 | 21.9 | 21.6 | 21.4 |
| 67 | 24.2 | 23.7 | 23.2 | 22.8 | 22.4 | 22.0 | 21.7 | 21.3 | 21.0 | 20.8 |
| 68 | 23.8 | 23.3 | 22.8 | 22.3 | 21.9 | 21.5 | 21.2 | 20.8 | 20.5 | 20.2 |
| 69 | 23.4 | 22.9 | 22.4 | 21.9 | 21.5 | 21.1 | 20.7 | 20.3 | 20.0 | 19.6 |
| 70 | 23.1 | 22.5 | 22.0 | 21.5 | 21.1 | 20.6 | 20.2 | 19.8 | 19.4 | 19.1 |
| 71 | 22.8 | 22.2 | 21.7 | 21.2 | 20.7 | 20.2 | 19.8 | 19.4 | 19.0 | 18.6 |
| 72 | 22.5 | 21.9 | 21.3 | 20.8 | 20.3 | 19.8 | 19.4 | 18.9 | 18.5 | 18.2 |
| 73 | 22.2 | 21.6 | 21.0 | 20.5 | 20.0 | 19.4 | 19.0 | 18.5 | 18.1 | 17.7 |
| 74 | 22.0 | 21.4 | 20.8 | 20.2 | 19.6 | 19.1 | 18.6 | 18.2 | 17.7 | 17.3 |
| 75 | 21.8 | 21.1 | 20.5 | 19.9 | 19.3 | 18.8 | 18.3 | 17.8 | 17.3 | 16.9 |
| 76 | 21.6 | 20.9 | 20.3 | 19.7 | 19.1 | 18.5 | 18.0 | 17.5 | 17.0 | 16.5 |
| 77 | 21.4 | 20.7 | 20.1 | 19.4 | 18.8 | 18.3 | 17.7 | 17.2 | 16.7 | 16.2 |
| 78 | 21.2 | 20.5 | 19.9 | 19.2 | 18.6 | 18.0 | 17.5 | 16.9 | 16.4 | 15.9 |
| 79 | 21.1 | 20.4 | 19.7 | 19.0 | 18.4 | 17.8 | 17.2 | 16.7 | 16.1 | 15.6 |
| 80 | 21.0 | 20.2 | 19.5 | 18.9 | 18.2 | 17.6 | 17.0 | 16.4 | 15.9 | 15.4 |
| 81 | 20.8 | 20.1 | 19.4 | 18.7 | 18.1 | 17.4 | 16.8 | 16.2 | 15.7 | 15.1 |
| 82 | 20.7 | 20.0 | 19.3 | 18.6 | 17.9 | 17.3 | 16.6 | 16.0 | 15.5 | 14.9 |
| 83 | 20.6 | 19.9 | 19.2 | 18.5 | 17.8 | 17.1 | 16.5 | 15.9 | 15.3 | 14.7 |
| 84 | 20.5 | 19.8 | 19.1 | 18.4 | 17.7 | 17.0 | 16.3 | 15.7 | 15.1 | 14.5 |
| 85 | 20.5 | 19.7 | 19.0 | 18.3 | 17.6 | 16.9 | 16.2 | 15.6 | 15.0 | 14.4 |
| 86 | 20.4 | 19.6 | 18.9 | 18.2 | 17.5 | 16.8 | 16.1 | 15.5 | 14.8 | 14.2 |
| 87 | 20.4 | 19.6 | 18.8 | 18.1 | 17.4 | 16.7 | 16.0 | 15.4 | 14.7 | 14.1 |
| 88 | 20.3 | 19.5 | 18.8 | 18.0 | 17.3 | 16.6 | 15.9 | 15.3 | 14.6 | 14.0 |
| 89 | 20.3 | 19.5 | 18.7 | 18.0 | 17.2 | 16.5 | 15.8 | 15.2 | 14.5 | 13.9 |
| 90 | 20.2 | 19.4 | 18.7 | 17.9 | 17.2 | 16.5 | 15.8 | 15.1 | 14.5 | 13.8 |
| 91 | 20.2 | 19.4 | 18.6 | 17.9 | 17.1 | 16.4 | 15.7 | 15.0 | 14.4 | 13.7 |
| 92 | 20.2 | 19.4 | 18.6 | 17.8 | 17.1 | 16.4 | 15.7 | 15.0 | 14.3 | 13.7 |
| 93 | 20.1 | 19.3 | 18.6 | 17.8 | 17.1 | 16.3 | 15.6 | 14.9 | 14.3 | 13.6 |
| 94 | 20.1 | 19.3 | 18.5 | 17.8 | 17.0 | 16.3 | 15.6 | 14.9 | 14.2 | 13.6 |
| 95 | 20.1 | 19.3 | 18.5 | 17.8 | 17.0 | 16.3 | 15.6 | 14.9 | 14.2 | 13.5 |
| 96 | 20.1 | 19.3 | 18.5 | 17.7 | 17.0 | 16.2 | 15.5 | 14.8 | 14.2 | 13.5 |
| 97 | 20.1 | 19.3 | 18.5 | 17.7 | 17.0 | 16.2 | 15.5 | 14.8 | 14.1 | 13.5 |
| 98 | 20.1 | 19.3 | 18.5 | 17.7 | 16.9 | 16.2 | 15.5 | 14.8 | 14.1 | 13.4 |
| 99 | 20.0 | 19.2 | 18.5 | 17.7 | 16.9 | 16.2 | 15.5 | 14.7 | 14.1 | 13.4 |
| 100 | 20.0 | 19.2 | 18.4 | 17.7 | 16.9 | 16.2 | 15.4 | 14.7 | 14.0 | 13.4 |
| 101 | 20.0 | 19.2 | 18.4 | 17.7 | 16.9 | 16.1 | 15.4 | 14.7 | 14.0 | 13.3 |
| 102 | 20.0 | 19.2 | 18.4 | 17.6 | 16.9 | 16.1 | 15.4 | 14.7 | 14.0 | 13.3 |
| 103 | 20.0 | 19.2 | 18.4 | 17.6 | 16.9 | 16.1 | 15.4 | 14.7 | 14.0 | 13.3 |
| 104 | 20.0 | 19.2 | 18.4 | 17.6 | 16.9 | 16.1 | 15.4 | 14.7 | 14.0 | 13.3 |
| 105 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.1 | 15.4 | 14.6 | 13.9 | 13.3 |
| 106 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.1 | 15.3 | 14.6 | 13.9 | 13.3 |
| 107 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.1 | 15.3 | 14.6 | 13.9 | 13.2 |
| 108 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.1 | 15.3 | 14.6 | 13.9 | 13.2 |
| 109 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.1 | 15.3 | 14.6 | 13.9 | 13.2 |
| 110 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.1 | 15.3 | 14.6 | 13.9 | 13.2 |
| 111 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.0 | 15.3 | 14.6 | 13.9 | 13.2 |
| 112 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.0 | 15.3 | 14.6 | 13.9 | 13.2 |
| 113 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.0 | 15.3 | 14.6 | 13.9 | 13.2 |
| 114 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.0 | 15.3 | 14.6 | 13.9 | 13.2 |
| 115 | 20.0 | 19.2 | 18.4 | 17.6 | 16.8 | 16.0 | 15.3 | 14.6 | 13.9 | 13.2 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 |
|---|---|---|---|---|---|---|---|---|---|---|
| 75 | 16.5 | 16.1 | 15.8 | 15.4 | 15.1 | 14.9 | 14.6 | 14.4 | 14.2 | 14.0 |
| 76 | 16.1 | 15.7 | 15.4 | 15.0 | 14.7 | 14.4 | 14.1 | 13.9 | 13.7 | 13.5 |
| 77 | 15.8 | 15.4 | 15.0 | 14.6 | 14.3 | 14.0 | 13.7 | 13.4 | 13.2 | 13.0 |
| 78 | 15.4 | 15.0 | 14.6 | 14.2 | 13.9 | 13.5 | 13.2 | 13.0 | 12.7 | 12.5 |
| 79 | 15.1 | 14.7 | 14.3 | 13.9 | 13.5 | 13.2 | 12.8 | 12.5 | 12.3 | 12.0 |
| 80 | 14.9 | 14.4 | 14.0 | 13.5 | 13.2 | 12.8 | 12.5 | 12.2 | 11.9 | 11.6 |
| 81 | 14.6 | 14.1 | 13.7 | 13.2 | 12.8 | 12.5 | 12.1 | 11.8 | 11.5 | 11.2 |
| 82 | 14.4 | 13.9 | 13.4 | 13.0 | 12.5 | 12.2 | 11.8 | 11.5 | 11.1 | 10.9 |
| 83 | 14.2 | 13.7 | 13.2 | 12.7 | 12.3 | 11.9 | 11.5 | 11.1 | 10.8 | 10.5 |
| 84 | 14.0 | 13.5 | 13.0 | 12.5 | 12.0 | 11.6 | 11.2 | 10.9 | 10.5 | 10.2 |
| 85 | 13.8 | 13.3 | 12.8 | 12.3 | 11.8 | 11.4 | 11.0 | 10.6 | 10.2 | 9.9 |
| 86 | 13.7 | 13.1 | 12.6 | 12.1 | 11.6 | 11.2 | 10.8 | 10.4 | 10.0 | 9.7 |
| 87 | 13.5 | 13.0 | 12.4 | 11.9 | 11.4 | 11.0 | 10.6 | 10.1 | 9.8 | 9.4 |
| 88 | 13.4 | 12.8 | 12.3 | 11.8 | 11.3 | 10.8 | 10.4 | 10.0 | 9.6 | 9.2 |
| 89 | 13.3 | 12.7 | 12.2 | 11.6 | 11.1 | 10.7 | 10.2 | 9.8 | 9.4 | 9.0 |
| 90 | 13.2 | 12.6 | 12.1 | 11.5 | 11.0 | 10.5 | 10.1 | 9.6 | 9.2 | 8.8 |
| 91 | 13.1 | 12.5 | 12.0 | 11.4 | 10.9 | 10.4 | 9.9 | 9.5 | 9.1 | 8.7 |
| 92 | 13.1 | 12.5 | 11.9 | 11.3 | 10.8 | 10.3 | 9.8 | 9.4 | 8.9 | 8.5 |
| 93 | 13.0 | 12.4 | 11.8 | 11.3 | 10.7 | 10.2 | 9.7 | 9.3 | 8.8 | 8.4 |
| 94 | 12.9 | 12.3 | 11.7 | 11.2 | 10.6 | 10.1 | 9.6 | 9.2 | 8.7 | 8.3 |
| 95 | 12.9 | 12.3 | 11.7 | 11.1 | 10.6 | 10.1 | 9.6 | 9.1 | 8.6 | 8.2 |
| 96 | 12.9 | 12.2 | 11.6 | 11.1 | 10.5 | 10.0 | 9.5 | 9.0 | 8.5 | 8.1 |
| 97 | 12.8 | 12.2 | 11.6 | 11.0 | 10.5 | 9.9 | 9.4 | 8.9 | 8.5 | 8.0 |
| 98 | 12.8 | 12.2 | 11.5 | 11.0 | 10.4 | 9.9 | 9.4 | 8.9 | 8.4 | 8.0 |
| 99 | 12.7 | 12.1 | 11.5 | 10.9 | 10.4 | 9.8 | 9.3 | 8.8 | 8.3 | 7.9 |
| 100 | 12.7 | 12.1 | 11.5 | 10.9 | 10.3 | 9.8 | 9.2 | 8.7 | 8.3 | 7.8 |
| 101 | 12.7 | 12.1 | 11.4 | 10.8 | 10.3 | 9.7 | 9.2 | 8.7 | 8.2 | 7.8 |
| 102 | 12.7 | 12.0 | 11.4 | 10.8 | 10.2 | 9.7 | 9.2 | 8.7 | 8.2 | 7.7 |
| 103 | 12.6 | 12.0 | 11.4 | 10.8 | 10.2 | 9.7 | 9.1 | 8.6 | 8.1 | 7.7 |
| 104 | 12.6 | 12.0 | 11.4 | 10.8 | 10.2 | 9.6 | 9.1 | 8.6 | 8.1 | 7.6 |
| 105 | 12.6 | 12.0 | 11.3 | 10.7 | 10.2 | 9.6 | 9.1 | 8.5 | 8.0 | 7.6 |
| 106 | 12.6 | 11.9 | 11.3 | 10.7 | 10.1 | 9.6 | 9.0 | 8.5 | 8.0 | 7.5 |
| 107 | 12.6 | 11.9 | 11.3 | 10.7 | 10.1 | 9.6 | 9.0 | 8.5 | 8.0 | 7.5 |
| 108 | 12.6 | 11.9 | 11.3 | 10.7 | 10.1 | 9.5 | 9.0 | 8.5 | 8.0 | 7.5 |
| 109 | 12.6 | 11.9 | 11.3 | 10.7 | 10.1 | 9.5 | 9.0 | 8.4 | 7.9 | 7.5 |
| 110 | 12.6 | 11.9 | 11.3 | 10.7 | 10.1 | 9.5 | 9.0 | 8.4 | 7.9 | 7.4 |
| 111 | 12.5 | 11.9 | 11.3 | 10.7 | 10.1 | 9.5 | 8.9 | 8.4 | 7.9 | 7.4 |
| 112 | 12.5 | 11.9 | 11.3 | 10.6 | 10.1 | 9.5 | 8.9 | 8.4 | 7.9 | 7.4 |
| 113 | 12.5 | 11.9 | 11.2 | 10.6 | 10.0 | 9.5 | 8.9 | 8.4 | 7.9 | 7.4 |
| 114 | 12.5 | 11.9 | 11.2 | 10.6 | 10.0 | 9.5 | 8.9 | 8.4 | 7.9 | 7.4 |
| 115 | 12.5 | 11.9 | 11.2 | 10.6 | 10.0 | 9.5 | 8.9 | 8.4 | 7.9 | 7.4 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 |
|---|---|---|---|---|---|---|---|---|---|---|
| 85 | 9.6 | 9.3 | 9.1 | 8.9 | 8.7 | 8.5 | 8.3 | 8.2 | 8.0 | 7.9 |
| 86 | 9.3 | 9.1 | 8.8 | 8.6 | 8.3 | 8.2 | 8.0 | 7.8 | 7.7 | 7.6 |
| 87 | 9.1 | 8.8 | 8.5 | 8.3 | 8.1 | 7.9 | 7.7 | 7.5 | 7.4 | 7.2 |
| 88 | 8.9 | 8.6 | 8.3 | 8.0 | 7.8 | 7.6 | 7.4 | 7.2 | 7.1 | 6.9 |
| 89 | 8.7 | 8.3 | 8.1 | 7.8 | 7.5 | 7.3 | 7.1 | 6.9 | 6.8 | 6.6 |
| 90 | 8.5 | 8.2 | 7.9 | 7.6 | 7.3 | 7.1 | 6.9 | 6.7 | 6.5 | 6.4 |
| 91 | 8.3 | 8.0 | 7.7 | 7.4 | 7.1 | 6.9 | 6.7 | 6.5 | 6.3 | 6.2 |
| 92 | 8.2 | 7.8 | 7.5 | 7.2 | 6.9 | 6.7 | 6.5 | 6.3 | 6.1 | 5.9 |
| 93 | 8.0 | 7.7 | 7.4 | 7.1 | 6.8 | 6.5 | 6.3 | 6.1 | 5.9 | 5.8 |
| 94 | 7.9 | 7.6 | 7.2 | 6.9 | 6.6 | 6.4 | 6.2 | 5.9 | 5.8 | 5.6 |
| 95 | 7.8 | 7.5 | 7.1 | 6.8 | 6.5 | 6.3 | 6.0 | 5.8 | 5.6 | 5.4 |
| 96 | 7.7 | 7.3 | 7.0 | 6.7 | 6.4 | 6.1 | 5.9 | 5.7 | 5.5 | 5.3 |
| 97 | 7.6 | 7.3 | 6.9 | 6.6 | 6.3 | 6.0 | 5.8 | 5.5 | 5.3 | 5.1 |
| 98 | 7.6 | 7.2 | 6.8 | 6.5 | 6.2 | 5.9 | 5.6 | 5.4 | 5.2 | 5.0 |
| 99 | 7.5 | 7.1 | 6.7 | 6.4 | 6.1 | 5.8 | 5.5 | 5.3 | 5.1 | 4.9 |
| 100 | 7.4 | 7.0 | 6.6 | 6.3 | 6.0 | 5.7 | 5.4 | 5.2 | 5.0 | 4.8 |
| 101 | 7.3 | 6.9 | 6.6 | 6.2 | 5.9 | 5.6 | 5.3 | 5.1 | 4.9 | 4.7 |
| 102 | 7.3 | 6.9 | 6.5 | 6.2 | 5.8 | 5.5 | 5.3 | 5.0 | 4.8 | 4.6 |
| 103 | 7.2 | 6.8 | 6.4 | 6.1 | 5.8 | 5.5 | 5.2 | 4.9 | 4.7 | 4.5 |
| 104 | 7.2 | 6.8 | 6.4 | 6.0 | 5.7 | 5.4 | 5.1 | 4.8 | 4.6 | 4.4 |
| 105 | 7.1 | 6.7 | 6.3 | 6.0 | 5.6 | 5.3 | 5.0 | 4.8 | 4.5 | 4.3 |
| 106 | 7.1 | 6.7 | 6.3 | 5.9 | 5.6 | 5.3 | 5.0 | 4.7 | 4.5 | 4.2 |
| 107 | 7.1 | 6.6 | 6.2 | 5.9 | 5.5 | 5.2 | 4.9 | 4.6 | 4.4 | 4.2 |
| 108 | 7.0 | 6.6 | 6.2 | 5.8 | 5.5 | 5.2 | 4.9 | 4.6 | 4.3 | 4.1 |
| 109 | 7.0 | 6.6 | 6.2 | 5.8 | 5.5 | 5.1 | 4.8 | 4.5 | 4.3 | 4.1 |
| 110 | 7.0 | 6.6 | 6.2 | 5.8 | 5.4 | 5.1 | 4.8 | 4.5 | 4.3 | 4.0 |
| 111 | 7.0 | 6.5 | 6.1 | 5.7 | 5.4 | 5.1 | 4.8 | 4.5 | 4.2 | 4.0 |
| 112 | 7.0 | 6.5 | 6.1 | 5.7 | 5.4 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 |
| 113 | 6.9 | 6.5 | 6.1 | 5.7 | 5.4 | 5.0 | 4.7 | 4.4 | 4.2 | 3.9 |
| 114 | 6.9 | 6.5 | 6.1 | 5.7 | 5.3 | 5.0 | 4.7 | 4.4 | 4.1 | 3.9 |
| 115 | 6.9 | 6.5 | 6.1 | 5.7 | 5.3 | 5.0 | 4.7 | 4.4 | 4.1 | 3.9 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 |
|---|---|---|---|---|---|---|---|---|---|---|
| 95 | 5.3 | 5.1 | 5.0 | 4.8 | 4.7 | 4.6 | 4.5 | 4.4 | 4.3 | 4.2 |
| 96 | 5.1 | 5.0 | 4.8 | 4.7 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 4.0 |
| 97 | 5.0 | 4.8 | 4.7 | 4.5 | 4.4 | 4.3 | 4.1 | 4.0 | 3.9 | 3.8 |
| 98 | 4.8 | 4.7 | 4.5 | 4.4 | 4.2 | 4.1 | 4.0 | 3.9 | 3.8 | 3.7 |
| 99 | 4.7 | 4.5 | 4.4 | 4.2 | 4.1 | 4.0 | 3.8 | 3.7 | 3.6 | 3.5 |
| 100 | 4.6 | 4.4 | 4.3 | 4.1 | 4.0 | 3.8 | 3.7 | 3.6 | 3.5 | 3.3 |
| 101 | 4.5 | 4.3 | 4.1 | 4.0 | 3.8 | 3.7 | 3.6 | 3.4 | 3.3 | 3.2 |
| 102 | 4.4 | 4.2 | 4.0 | 3.9 | 3.7 | 3.6 | 3.4 | 3.3 | 3.2 | 3.1 |
| 103 | 4.3 | 4.1 | 3.9 | 3.8 | 3.6 | 3.5 | 3.3 | 3.2 | 3.0 | 2.9 |
| 104 | 4.2 | 4.0 | 3.8 | 3.7 | 3.5 | 3.3 | 3.2 | 3.1 | 2.9 | 2.8 |
| 105 | 4.1 | 3.9 | 3.7 | 3.6 | 3.4 | 3.2 | 3.1 | 2.9 | 2.8 | 2.7 |
| 106 | 4.0 | 3.8 | 3.6 | 3.5 | 3.3 | 3.1 | 3.0 | 2.8 | 2.7 | 2.5 |
| 107 | 4.0 | 3.8 | 3.6 | 3.4 | 3.2 | 3.1 | 2.9 | 2.7 | 2.6 | 2.4 |
| 108 | 3.9 | 3.7 | 3.5 | 3.3 | 3.1 | 3.0 | 2.8 | 2.7 | 2.5 | 2.3 |
| 109 | 3.8 | 3.6 | 3.4 | 3.3 | 3.1 | 2.9 | 2.7 | 2.6 | 2.4 | 2.3 |
| 110 | 3.8 | 3.6 | 3.4 | 3.2 | 3.0 | 2.8 | 2.7 | 2.5 | 2.3 | 2.2 |
| 111 | 3.8 | 3.5 | 3.3 | 3.2 | 3.0 | 2.8 | 2.6 | 2.4 | 2.3 | 2.1 |
| 112 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.8 | 2.6 | 2.4 | 2.2 | 2.1 |
| 113 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.4 | 2.2 | 2.0 |
| 114 | 3.7 | 3.5 | 3.3 | 3.1 | 2.9 | 2.7 | 2.5 | 2.3 | 2.1 | 2.0 |
| 115 | 3.7 | 3.4 | 3.2 | 3.0 | 2.8 | 2.7 | 2.5 | 2.3 | 2.1 | 1.9 |
Table VI—Ordinary Joint Life and Last Survivor Annuities; Two Lives—Expected Return Multiples
| Ages | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | 114 | 115 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 105 | 2.5 | 2.4 | 2.3 | 2.2 | 2.1 | 2.0 | 2.0 | 1.9 | 1.8 | 1.8 | 1.8 |
| 106 | 2.4 | 2.3 | 2.2 | 2.1 | 2.0 | 1.9 | 1.8 | 1.7 | 1.7 | 1.6 | 1.6 |
| 107 | 2.3 | 2.2 | 2.1 | 1.9 | 1.8 | 1.7 | 1.7 | 1.6 | 1.5 | 1.5 | 1.4 |
| 108 | 2.2 | 2.1 | 1.9 | 1.8 | 1.7 | 1.6 | 1.5 | 1.5 | 1.4 | 1.3 | 1.3 |
| 109 | 2.1 | 2.0 | 1.8 | 1.7 | 1.6 | 1.5 | 1.4 | 1.3 | 1.3 | 1.2 | 1.1 |
| 110 | 2.0 | 1.9 | 1.7 | 1.6 | 1.5 | 1.4 | 1.3 | 1.2 | 1.1 | 1.1 | 1.0 |
| 111 | 2.0 | 1.8 | 1.7 | 1.5 | 1.4 | 1.3 | 1.2 | 1.1 | 1.0 | .9 | .9 |
| 112 | 1.9 | 1.7 | 1.6 | 1.5 | 1.3 | 1.2 | 1.1 | 1.0 | .9 | .8 | .8 |
| 113 | 1.8 | 1.7 | 1.5 | 1.4 | 1.3 | 1.1 | 1.0 | .9 | .8 | .7 | .7 |
| 114 | 1.8 | 1.6 | 1.5 | 1.3 | 1.2 | 1.1 | .9 | .8 | .7 | .6 | .6 |
| 115 | 1.8 | 1.6 | 1.4 | 1.3 | 1.1 | 1.0 | .9 | .8 | .7 | .6 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 |
|---|---|---|---|---|---|---|---|---|---|---|
| 5 | 69.5 | 69.0 | 68.4 | 67.9 | 67.3 | 66.7 | 66.1 | 65.5 | 64.8 | 64.1 |
| 6 | 69.0 | 68.5 | 68.0 | 67.5 | 66.9 | 66.4 | 65.8 | 65.1 | 64.5 | 63.8 |
| 7 | 68.4 | 68.0 | 67.5 | 67.0 | 66.5 | 66.0 | 65.4 | 64.8 | 64.2 | 63.5 |
| 8 | 67.9 | 67.5 | 67.0 | 66.6 | 66.1 | 65.5 | 65.0 | 64.4 | 63.8 | 63.2 |
| 9 | 67.3 | 66.9 | 66.5 | 66.1 | 65.6 | 65.1 | 64.6 | 64.0 | 63.4 | 62.8 |
| 10 | 66.7 | 66.4 | 66.0 | 65.5 | 65.1 | 64.6 | 64.1 | 63.6 | 63.0 | 62.5 |
| 11 | 66.1 | 65.8 | 65.4 | 65.0 | 64.6 | 64.1 | 63.6 | 63.1 | 62.6 | 62.1 |
| 12 | 65.5 | 65.1 | 64.8 | 64.4 | 64.0 | 63.6 | 63.1 | 62.7 | 62.2 | 61.7 |
| 13 | 64.8 | 64.5 | 64.2 | 63.8 | 63.4 | 63.0 | 62.6 | 62.2 | 61.7 | 61.2 |
| 14 | 64.1 | 63.8 | 63.5 | 63.2 | 62.8 | 62.5 | 62.1 | 61.7 | 61.2 | 60.7 |
| 15 | 63.4 | 63.1 | 62.9 | 62.6 | 62.2 | 61.9 | 61.5 | 61.1 | 60.7 | 60.2 |
| 16 | 62.7 | 62.4 | 62.2 | 61.9 | 61.6 | 61.3 | 60.9 | 60.5 | 60.1 | 59.7 |
| 17 | 61.9 | 61.7 | 61.5 | 61.2 | 60.9 | 60.6 | 60.3 | 59.9 | 59.6 | 59.2 |
| 18 | 61.2 | 61.0 | 60.7 | 60.5 | 60.2 | 60.0 | 59.7 | 59.3 | 59.0 | 58.6 |
| 19 | 60.4 | 60.2 | 60.0 | 59.8 | 59.5 | 59.3 | 59.0 | 58.7 | 58.4 | 58.0 |
| 20 | 59.6 | 59.4 | 59.2 | 59.0 | 58.8 | 58.6 | 58.3 | 58.0 | 57.7 | 57.4 |
| 21 | 58.8 | 58.7 | 58.5 | 58.3 | 58.1 | 57.8 | 57.6 | 57.3 | 57.1 | 56.8 |
| 22 | 58.0 | 57.8 | 57.7 | 57.5 | 57.3 | 57.1 | 56.9 | 56.6 | 56.4 | 56.1 |
| 23 | 57.2 | 57.0 | 56.9 | 56.7 | 56.5 | 56.4 | 56.1 | 55.9 | 55.7 | 55.4 |
| 24 | 56.3 | 56.2 | 56.1 | 55.9 | 55.8 | 55.6 | 55.4 | 55.2 | 55.0 | 54.7 |
| 25 | 55.5 | 55.4 | 55.2 | 55.1 | 55.0 | 54.8 | 54.6 | 54.4 | 54.2 | 54.0 |
| 26 | 54.6 | 54.5 | 54.4 | 54.3 | 54.1 | 54.0 | 53.8 | 53.7 | 53.5 | 53.3 |
| 27 | 53.8 | 53.7 | 53.6 | 53.4 | 53.3 | 53.2 | 53.0 | 52.9 | 52.7 | 52.5 |
| 28 | 52.9 | 52.8 | 52.7 | 52.6 | 52.5 | 52.4 | 52.2 | 52.1 | 51.9 | 51.7 |
| 29 | 52.0 | 51.9 | 51.8 | 51.7 | 51.6 | 51.5 | 51.4 | 51.3 | 51.1 | 51.0 |
| 30 | 51.1 | 51.0 | 51.0 | 50.9 | 50.8 | 50.7 | 50.6 | 50.4 | 50.3 | 50.2 |
| 31 | 50.2 | 50.2 | 50.1 | 50.0 | 49.9 | 49.8 | 49.7 | 49.6 | 49.5 | 49.3 |
| 32 | 49.3 | 49.3 | 49.2 | 49.1 | 49.0 | 49.0 | 48.9 | 48.8 | 48.6 | 48.5 |
| 33 | 48.4 | 48.4 | 48.3 | 48.2 | 48.2 | 48.1 | 48.0 | 47.9 | 47.8 | 47.7 |
| 34 | 47.5 | 47.5 | 47.4 | 47.4 | 47.3 | 47.2 | 47.1 | 47.0 | 47.0 | 46.8 |
| 35 | 46.6 | 46.6 | 46.5 | 46.5 | 46.4 | 46.3 | 46.3 | 46.2 | 46.1 | 46.0 |
| 36 | 45.7 | 45.7 | 45.6 | 45.6 | 45.5 | 45.4 | 45.4 | 45.3 | 45.2 | 45.1 |
| 37 | 44.8 | 44.7 | 44.7 | 44.6 | 44.6 | 44.5 | 44.5 | 44.4 | 44.3 | 44.3 |
| 38 | 43.9 | 43.8 | 43.8 | 43.7 | 43.7 | 43.6 | 43.6 | 43.5 | 43.5 | 43.4 |
| 39 | 42.9 | 42.9 | 42.9 | 42.8 | 42.8 | 42.7 | 42.7 | 42.6 | 42.6 | 42.5 |
| 40 | 42.0 | 42.0 | 42.0 | 41.9 | 41.9 | 41.8 | 41.8 | 41.7 | 41.7 | 41.6 |
| 41 | 41.1 | 41.1 | 41.0 | 41.0 | 41.0 | 40.9 | 40.9 | 40.8 | 40.8 | 40.7 |
| 42 | 40.2 | 40.1 | 40.1 | 40.1 | 40.1 | 40.0 | 40.0 | 39.9 | 39.9 | 39.8 |
| 43 | 39.2 | 39.2 | 39.2 | 39.2 | 39.1 | 39.1 | 39.1 | 39.0 | 39.0 | 39.0 |
| 44 | 38.3 | 38.3 | 38.3 | 38.3 | 38.2 | 38.2 | 38.2 | 38.1 | 38.1 | 38.1 |
| 45 | 37.4 | 37.4 | 37.4 | 37.3 | 37.3 | 37.3 | 37.3 | 37.2 | 37.2 | 37.2 |
| 46 | 36.5 | 36.5 | 36.5 | 36.4 | 36.4 | 36.4 | 36.4 | 36.3 | 36.3 | 36.3 |
| 47 | 35.6 | 35.6 | 35.5 | 35.5 | 35.5 | 35.5 | 35.5 | 35.4 | 35.4 | 35.4 |
| 48 | 34.7 | 34.7 | 34.6 | 34.6 | 34.6 | 34.6 | 34.6 | 34.5 | 34.5 | 34.5 |
| 49 | 33.8 | 33.8 | 33.7 | 33.7 | 33.7 | 33.7 | 33.7 | 33.7 | 33.6 | 33.6 |
| 50 | 32.9 | 32.9 | 32.8 | 32.8 | 32.8 | 32.8 | 32.8 | 32.8 | 32.7 | 32.7 |
| 51 | 32.0 | 32.0 | 31.9 | 31.9 | 31.9 | 31.9 | 31.9 | 31.9 | 31.9 | 31.8 |
| 52 | 31.1 | 31.1 | 31.1 | 31.0 | 31.0 | 31.0 | 31.0 | 31.0 | 31.0 | 30.9 |
| 53 | 30.2 | 30.2 | 30.2 | 30.2 | 30.1 | 30.1 | 30.1 | 30.1 | 30.1 | 30.1 |
| 54 | 29.3 | 29.3 | 29.3 | 29.3 | 29.3 | 29.2 | 29.2 | 29.2 | 29.2 | 29.2 |
| 55 | 28.4 | 28.4 | 28.4 | 28.4 | 28.4 | 28.4 | 28.4 | 28.3 | 28.3 | 28.3 |
| 56 | 27.5 | 27.5 | 27.5 | 27.5 | 27.5 | 27.5 | 27.5 | 27.5 | 27.5 | 27.5 |
| 57 | 26.7 | 26.7 | 26.7 | 26.6 | 26.6 | 26.6 | 26.6 | 26.6 | 26.6 | 26.6 |
| 58 | 25.8 | 25.8 | 25.8 | 25.8 | 25.8 | 25.8 | 25.8 | 25.7 | 25.7 | 25.7 |
| 59 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 | 24.9 |
| 60 | 24.1 | 24.1 | 24.1 | 24.1 | 24.1 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 |
| 61 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 | 23.2 |
| 62 | 22.4 | 22.4 | 22.4 | 22.4 | 22.4 | 22.4 | 22.3 | 22.3 | 22.3 | 22.3 |
| 63 | 21.5 | 21.5 | 21.5 | 21.5 | 21.5 | 21.5 | 21.5 | 21.5 | 21.5 | 21.5 |
| 64 | 20.7 | 20.7 | 20.7 | 20.7 | 20.7 | 20.7 | 20.7 | 20.7 | 20.7 | 20.7 |
| 65 | 19.9 | 19.9 | 19.9 | 19.9 | 19.9 | 19.9 | 19.9 | 19.9 | 19.9 | 19.9 |
| 66 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 |
| 67 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 |
| 68 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 |
| 69 | 16.8 | 16.8 | 16.8 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 |
| 70 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 |
| 71 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.2 |
| 72 | 14.6 | 14.6 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 |
| 73 | 13.9 | 13.9 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 |
| 74 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 |
| 75 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 |
| 76 | 11.9 | 11.9 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 |
| 77 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 |
| 78 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 |
| 79 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 |
| 80 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.4 | 9.4 |
| 81 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 |
| 82 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 |
| 83 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 |
| 84 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 |
| 85 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 |
| 86 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 |
| 87 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 |
| 88 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 |
| 89 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 |
| 90 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
| 91 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 |
| 92 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 |
| 93 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| 95 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.6 | 3.6 | 3.6 | 3.6 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 15 | 16 | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 |
|---|---|---|---|---|---|---|---|---|---|---|
| 15 | 59.8 | 59.3 | 58.8 | 58.2 | 57.6 | 57.0 | 56.4 | 55.8 | 55.1 | 54.5 |
| 16 | 59.3 | 58.8 | 58.3 | 57.8 | 57.2 | 56.7 | 56.1 | 55.5 | 54.8 | 54.2 |
| 17 | 58.8 | 58.3 | 57.8 | 57.3 | 56.8 | 56.3 | 55.7 | 55.1 | 54.5 | 53.9 |
| 18 | 58.2 | 57.8 | 57.3 | 56.9 | 56.4 | 55.9 | 55.3 | 54.7 | 54.2 | 53.5 |
| 19 | 57.6 | 57.2 | 56.8 | 56.4 | 55.9 | 55.4 | 54.9 | 54.4 | 53.8 | 53.2 |
| 20 | 57.0 | 56.7 | 56.3 | 55.9 | 55.4 | 54.9 | 54.5 | 53.9 | 53.4 | 52.8 |
| 21 | 56.4 | 56.1 | 55.7 | 55.3 | 54.9 | 54.5 | 54.0 | 53.5 | 53.0 | 52.4 |
| 22 | 55.8 | 55.5 | 55.1 | 54.7 | 54.4 | 53.9 | 53.5 | 53.0 | 52.5 | 52.0 |
| 23 | 55.1 | 54.8 | 54.5 | 54.2 | 53.8 | 53.4 | 53.0 | 52.5 | 52.1 | 51.6 |
| 24 | 54.5 | 54.2 | 53.9 | 53.5 | 53.2 | 52.8 | 52.4 | 52.0 | 51.6 | 51.1 |
| 25 | 53.8 | 53.5 | 53.2 | 52.9 | 52.6 | 52.2 | 51.9 | 51.5 | 51.1 | 50.6 |
| 26 | 53.0 | 52.8 | 52.5 | 52.3 | 52.0 | 51.6 | 51.3 | 50.9 | 50.5 | 50.1 |
| 27 | 52.3 | 52.1 | 51.8 | 51.6 | 51.3 | 51.0 | 50.7 | 50.3 | 50.0 | 49.6 |
| 28 | 51.5 | 51.3 | 51.1 | 50.9 | 50.6 | 50.3 | 50.0 | 49.7 | 49.4 | 49.0 |
| 29 | 50.8 | 50.6 | 50.4 | 50.2 | 49.9 | 49.7 | 49.4 | 49.1 | 48.8 | 48.4 |
| 30 | 50.0 | 49.8 | 49.6 | 49.4 | 49.2 | 49.0 | 48.7 | 48.4 | 48.1 | 47.8 |
| 31 | 49.2 | 49.0 | 48.9 | 48.7 | 48.5 | 48.3 | 48.0 | 47.8 | 47.5 | 47.2 |
| 32 | 48.4 | 48.2 | 48.1 | 47.9 | 47.7 | 47.5 | 47.3 | 47.1 | 46.8 | 46.5 |
| 33 | 47.6 | 47.4 | 47.3 | 47.1 | 47.0 | 46.8 | 46.6 | 46.3 | 46.1 | 45.9 |
| 34 | 46.7 | 46.6 | 46.5 | 46.3 | 46.2 | 46.0 | 45.8 | 45.6 | 45.4 | 45.2 |
| 35 | 45.9 | 45.8 | 45.7 | 45.5 | 45.4 | 45.2 | 45.1 | 44.9 | 44.7 | 44.4 |
| 36 | 45.0 | 44.9 | 44.8 | 44.7 | 44.6 | 44.4 | 44.3 | 44.1 | 43.9 | 43.7 |
| 37 | 44.2 | 44.1 | 44.0 | 43.9 | 43.8 | 43.6 | 43.5 | 43.3 | 43.2 | 43.0 |
| 38 | 43.3 | 43.2 | 43.1 | 43.0 | 42.9 | 42.8 | 42.7 | 42.5 | 42.4 | 42.2 |
| 39 | 42.4 | 42.4 | 42.3 | 42.2 | 42.1 | 42.0 | 41.9 | 41.7 | 41.6 | 41.4 |
| 40 | 41.6 | 41.5 | 41.4 | 41.3 | 41.2 | 41.1 | 41.0 | 40.9 | 40.8 | 40.6 |
| 41 | 40.7 | 40.6 | 40.5 | 40.5 | 40.4 | 40.3 | 40.2 | 40.1 | 40.0 | 39.8 |
| 42 | 39.8 | 39.7 | 39.7 | 39.6 | 39.5 | 39.4 | 39.4 | 39.3 | 39.1 | 39.0 |
| 43 | 38.9 | 38.9 | 38.8 | 38.7 | 38.7 | 38.6 | 38.5 | 38.4 | 38.3 | 38.2 |
| 44 | 38.0 | 38.0 | 37.9 | 37.9 | 37.8 | 37.7 | 37.7 | 37.6 | 37.5 | 37.4 |
| 45 | 37.1 | 37.1 | 37.0 | 37.0 | 36.9 | 36.9 | 36.8 | 36.7 | 36.6 | 36.5 |
| 46 | 36.2 | 36.2 | 36.2 | 36.1 | 36.1 | 36.0 | 35.9 | 35.9 | 35.8 | 35.7 |
| 47 | 35.3 | 35.3 | 35.3 | 35.2 | 35.2 | 35.1 | 35.1 | 35.0 | 34.9 | 34.9 |
| 48 | 34.5 | 34.4 | 34.4 | 34.4 | 34.3 | 34.3 | 34.2 | 34.2 | 34.1 | 34.0 |
| 49 | 33.6 | 33.5 | 33.5 | 33.5 | 33.4 | 33.4 | 33.4 | 33.3 | 33.2 | 33.2 |
| 50 | 32.7 | 32.7 | 32.6 | 32.6 | 32.6 | 32.5 | 32.5 | 32.4 | 32.4 | 32.3 |
| 51 | 31.8 | 31.8 | 31.8 | 31.7 | 31.7 | 31.7 | 31.6 | 31.6 | 31.5 | 31.5 |
| 52 | 30.9 | 30.9 | 30.9 | 30.9 | 30.8 | 30.8 | 30.8 | 30.7 | 30.7 | 30.6 |
| 53 | 30.0 | 30.0 | 30.0 | 30.0 | 30.0 | 29.9 | 29.9 | 29.9 | 29.8 | 29.8 |
| 54 | 29.2 | 29.2 | 29.1 | 29.1 | 29.1 | 29.1 | 29.0 | 29.0 | 29.0 | 28.9 |
| 55 | 28.3 | 28.3 | 28.3 | 28.3 | 28.2 | 28.2 | 28.2 | 28.2 | 28.1 | 28.1 |
| 56 | 27.4 | 27.4 | 27.4 | 27.4 | 27.4 | 27.3 | 27.3 | 27.3 | 27.3 | 27.2 |
| 57 | 26.6 | 26.6 | 26.5 | 26.5 | 26.5 | 26.5 | 26.5 | 26.5 | 26.4 | 26.4 |
| 58 | 25.7 | 25.7 | 25.7 | 25.7 | 25.7 | 25.6 | 25.6 | 25.6 | 25.6 | 25.6 |
| 59 | 24.9 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.8 | 24.7 | 24.7 |
| 60 | 24.0 | 24.0 | 24.0 | 24.0 | 24.0 | 23.9 | 23.9 | 23.9 | 23.9 | 23.9 |
| 61 | 23.2 | 23.2 | 23.1 | 23.1 | 23.1 | 23.1 | 23.1 | 23.1 | 23.1 | 23.0 |
| 62 | 22.3 | 22.3 | 22.3 | 22.3 | 22.3 | 22.3 | 22.3 | 22.2 | 22.2 | 22.2 |
| 63 | 21.5 | 21.5 | 21.5 | 21.5 | 21.5 | 21.4 | 21.4 | 21.4 | 21.4 | 21.4 |
| 64 | 20.7 | 20.7 | 20.7 | 20.6 | 20.6 | 20.6 | 20.6 | 20.6 | 20.6 | 20.6 |
| 65 | 19.9 | 19.8 | 19.8 | 19.8 | 19.8 | 19.8 | 19.8 | 19.8 | 19.8 | 19.8 |
| 66 | 19.1 | 19.0 | 19.0 | 19.0 | 19.0 | 19.0 | 19.0 | 19.0 | 19.0 | 19.0 |
| 67 | 18.3 | 18.3 | 18.3 | 18.3 | 18.2 | 18.2 | 18.2 | 18.2 | 18.2 | 18.2 |
| 68 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.5 | 17.4 | 17.4 |
| 69 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 | 16.7 |
| 70 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 15.9 | 15.9 | 15.9 | 15.9 |
| 71 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 |
| 72 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 |
| 73 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 |
| 74 | 13.2 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 |
| 75 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 |
| 76 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 |
| 77 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 |
| 78 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 |
| 79 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 |
| 80 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 |
| 81 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 |
| 82 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 |
| 83 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.8 | 7.8 |
| 84 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 |
| 85 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 |
| 86 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 |
| 87 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 |
| 88 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 |
| 89 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 |
| 90 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
| 91 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 |
| 92 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 |
| 93 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| 95 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | 33 | 34 |
|---|---|---|---|---|---|---|---|---|---|---|
| 25 | 50.2 | 49.7 | 49.2 | 48.6 | 48.1 | 47.5 | 46.9 | 46.2 | 45.6 | 44.9 |
| 26 | 49.7 | 49.2 | 48.7 | 48.2 | 47.7 | 47.1 | 46.5 | 45.9 | 45.3 | 44.6 |
| 27 | 49.2 | 48.7 | 48.3 | 47.8 | 47.3 | 46.7 | 46.2 | 45.6 | 45.0 | 44.3 |
| 28 | 48.6 | 48.2 | 47.8 | 47.3 | 46.8 | 46.3 | 45.8 | 45.2 | 44.6 | 44.0 |
| 29 | 48.1 | 47.7 | 47.3 | 46.8 | 46.4 | 45.9 | 45.4 | 44.8 | 44.3 | 43.7 |
| 30 | 47.5 | 47.1 | 46.7 | 46.3 | 45.9 | 45.4 | 44.9 | 44.4 | 43.9 | 43.3 |
| 31 | 46.9 | 46.5 | 46.2 | 45.8 | 45.4 | 44.9 | 44.5 | 44.0 | 43.5 | 42.9 |
| 32 | 46.2 | 45.9 | 45.6 | 45.2 | 44.8 | 44.4 | 44.0 | 43.5 | 43.0 | 42.5 |
| 33 | 45.6 | 45.3 | 45.0 | 44.6 | 44.3 | 43.9 | 43.5 | 43.0 | 42.6 | 42.1 |
| 34 | 44.9 | 44.6 | 44.3 | 44.0 | 43.7 | 43.3 | 42.9 | 42.5 | 42.1 | 41.6 |
| 35 | 44.2 | 44.0 | 43.7 | 43.4 | 43.1 | 42.7 | 42.4 | 42.0 | 41.6 | 41.1 |
| 36 | 43.5 | 43.3 | 43.0 | 42.7 | 42.4 | 42.1 | 41.8 | 41.4 | 41.0 | 40.6 |
| 37 | 42.8 | 42.5 | 42.3 | 42.1 | 41.8 | 41.5 | 41.2 | 40.8 | 40.5 | 40.1 |
| 38 | 42.0 | 41.8 | 41.6 | 41.4 | 41.1 | 40.8 | 40.6 | 40.2 | 39.9 | 39.5 |
| 39 | 41.3 | 41.1 | 40.9 | 40.7 | 40.4 | 40.2 | 39.9 | 39.6 | 39.3 | 39.0 |
| 40 | 40.5 | 40.3 | 40.1 | 39.9 | 39.7 | 39.5 | 39.2 | 39.0 | 38.7 | 38.4 |
| 41 | 39.7 | 39.5 | 39.4 | 39.2 | 39.0 | 38.8 | 38.5 | 38.3 | 38.0 | 37.7 |
| 42 | 38.9 | 38.8 | 38.6 | 38.4 | 38.3 | 38.1 | 37.8 | 37.6 | 37.4 | 37.1 |
| 43 | 38.1 | 38.0 | 37.8 | 37.7 | 37.5 | 37.3 | 37.1 | 36.9 | 36.7 | 36.4 |
| 44 | 37.3 | 37.2 | 37.0 | 36.9 | 36.7 | 36.6 | 36.4 | 36.2 | 36.0 | 35.8 |
| 45 | 36.5 | 36.3 | 36.2 | 36.1 | 36.0 | 35.8 | 35.6 | 35.5 | 35.3 | 35.1 |
| 46 | 35.6 | 35.5 | 35.4 | 35.3 | 35.2 | 35.0 | 34.9 | 34.7 | 34.5 | 34.4 |
| 47 | 34.8 | 34.7 | 34.6 | 34.5 | 34.4 | 34.3 | 34.1 | 34.0 | 33.8 | 33.6 |
| 48 | 34.0 | 33.9 | 33.8 | 33.7 | 33.6 | 33.5 | 33.4 | 33.2 | 33.1 | 32.9 |
| 49 | 33.1 | 33.0 | 33.0 | 32.9 | 32.8 | 32.7 | 32.6 | 32.4 | 32.3 | 32.2 |
| 50 | 32.3 | 32.2 | 32.1 | 32.1 | 32.0 | 31.9 | 31.8 | 31.7 | 31.5 | 31.4 |
| 51 | 31.4 | 31.4 | 31.3 | 31.2 | 31.2 | 31.1 | 31.0 | 30.9 | 30.8 | 30.6 |
| 52 | 30.6 | 30.5 | 30.5 | 30.4 | 30.3 | 30.3 | 30.2 | 30.1 | 30.0 | 29.9 |
| 53 | 29.7 | 29.7 | 29.6 | 29.6 | 29.5 | 29.5 | 29.4 | 29.3 | 29.2 | 29.1 |
| 54 | 28.9 | 28.9 | 28.8 | 28.8 | 28.7 | 28.6 | 28.6 | 28.5 | 28.4 | 28.3 |
| 55 | 28.1 | 28.0 | 28.0 | 27.9 | 27.9 | 27.8 | 27.8 | 27.7 | 27.6 | 27.5 |
| 56 | 27.2 | 27.2 | 27.1 | 27.1 | 27.0 | 27.0 | 26.9 | 26.9 | 26.8 | 26.7 |
| 57 | 26.4 | 26.3 | 26.3 | 26.3 | 26.2 | 26.2 | 26.1 | 26.1 | 26.0 | 25.9 |
| 58 | 25.5 | 25.5 | 25.5 | 25.4 | 25.4 | 25.4 | 25.3 | 25.3 | 25.2 | 25.1 |
| 59 | 24.7 | 24.7 | 24.6 | 24.6 | 24.6 | 24.5 | 24.5 | 24.5 | 24.4 | 24.3 |
| 60 | 23.9 | 23.8 | 23.8 | 23.8 | 23.8 | 23.7 | 23.7 | 23.6 | 23.6 | 23.5 |
| 61 | 23.0 | 23.0 | 23.0 | 23.0 | 22.9 | 22.9 | 22.9 | 22.8 | 22.8 | 22.7 |
| 62 | 22.2 | 22.2 | 22.2 | 22.1 | 22.1 | 22.1 | 22.1 | 22.0 | 22.0 | 21.9 |
| 63 | 21.4 | 21.4 | 21.3 | 21.3 | 21.3 | 21.3 | 21.3 | 21.2 | 21.2 | 21.2 |
| 64 | 20.6 | 20.6 | 20.5 | 20.5 | 20.5 | 20.5 | 20.5 | 20.4 | 20.4 | 20.4 |
| 65 | 19.8 | 19.8 | 19.7 | 19.7 | 19.7 | 19.7 | 19.7 | 19.6 | 19.6 | 19.6 |
| 66 | 19.0 | 19.0 | 19.0 | 18.9 | 18.9 | 18.9 | 18.9 | 18.9 | 18.8 | 18.8 |
| 67 | 18.2 | 18.2 | 18.2 | 18.2 | 18.2 | 18.1 | 18.1 | 18.1 | 18.1 | 18.1 |
| 68 | 17.4 | 17.4 | 17.4 | 17.4 | 17.4 | 17.4 | 17.4 | 17.3 | 17.3 | 17.3 |
| 69 | 16.7 | 16.7 | 16.7 | 16.6 | 16.6 | 16.6 | 16.6 | 16.6 | 16.6 | 16.6 |
| 70 | 15.9 | 15.9 | 15.9 | 15.9 | 15.9 | 15.9 | 15.9 | 15.9 | 15.8 | 15.8 |
| 71 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.2 | 15.1 | 15.1 | 15.1 |
| 72 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.5 | 14.4 | 14.4 | 14.4 |
| 73 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.8 | 13.7 | 13.7 |
| 74 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 | 13.1 |
| 75 | 12.5 | 12.5 | 12.5 | 12.4 | 12.4 | 12.4 | 12.4 | 12.4 | 12.4 | 12.4 |
| 76 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 | 11.8 |
| 77 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.1 |
| 78 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.5 |
| 79 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 |
| 80 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 |
| 81 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 |
| 82 | 8.4 | 8.4 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 |
| 83 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 |
| 84 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 |
| 85 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 |
| 86 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 |
| 87 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 |
| 88 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 |
| 89 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 |
| 90 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
| 91 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 |
| 92 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 |
| 93 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| 95 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 35 | 36 | 37 | 38 | 39 | 40 | 41 | 42 | 43 | 44 |
|---|---|---|---|---|---|---|---|---|---|---|
| 35 | 40.7 | 40.2 | 39.7 | 39.2 | 38.6 | 38.0 | 37.4 | 36.8 | 36.2 | 35.5 |
| 36 | 40.2 | 39.7 | 39.3 | 38.7 | 38.2 | 37.7 | 37.1 | 36.5 | 35.9 | 35.2 |
| 37 | 39.7 | 39.3 | 38.8 | 38.3 | 37.8 | 37.3 | 36.7 | 36.2 | 35.6 | 34.9 |
| 38 | 39.2 | 38.7 | 38.3 | 37.9 | 37.4 | 36.9 | 36.3 | 35.8 | 35.2 | 34.6 |
| 39 | 38.6 | 38.2 | 37.8 | 37.4 | 36.9 | 36.4 | 35.9 | 35.4 | 34.9 | 34.3 |
| 40 | 38.0 | 37.7 | 37.3 | 36.9 | 36.4 | 36.0 | 35.5 | 35.0 | 34.5 | 34.0 |
| 41 | 37.4 | 37.1 | 36.7 | 36.3 | 35.9 | 35.5 | 35.1 | 34.6 | 34.1 | 33.6 |
| 42 | 36.8 | 36.5 | 36.2 | 35.8 | 35.4 | 35.0 | 34.6 | 34.1 | 33.7 | 33.2 |
| 43 | 36.2 | 35.9 | 35.6 | 35.2 | 34.9 | 34.5 | 34.1 | 33.7 | 33.2 | 32.8 |
| 44 | 35.5 | 35.2 | 34.9 | 34.6 | 34.3 | 34.0 | 33.6 | 33.2 | 32.8 | 32.3 |
| 45 | 34.8 | 34.6 | 34.3 | 34.0 | 33.7 | 33.4 | 33.0 | 32.7 | 32.3 | 31.8 |
| 46 | 34.1 | 33.9 | 33.7 | 33.4 | 33.1 | 32.8 | 32.5 | 32.1 | 31.8 | 31.4 |
| 47 | 33.4 | 33.2 | 33.0 | 32.8 | 32.5 | 32.2 | 31.9 | 31.6 | 31.2 | 30.8 |
| 48 | 32.7 | 32.5 | 32.3 | 32.1 | 31.8 | 31.6 | 31.3 | 31.0 | 30.7 | 30.3 |
| 49 | 32.0 | 31.8 | 31.6 | 31.4 | 31.2 | 30.9 | 30.7 | 30.4 | 30.1 | 29.8 |
| 50 | 31.3 | 31.1 | 30.9 | 30.7 | 30.5 | 30.3 | 30.0 | 29.8 | 29.5 | 29.2 |
| 51 | 30.5 | 30.4 | 30.2 | 30.0 | 29.8 | 29.6 | 29.4 | 29.2 | 28.9 | 28.6 |
| 52 | 29.7 | 29.6 | 29.5 | 29.3 | 29.1 | 28.9 | 28.7 | 28.5 | 28.3 | 28.0 |
| 53 | 29.0 | 28.9 | 28.7 | 28.6 | 28.4 | 28.2 | 28.1 | 27.9 | 27.6 | 27.4 |
| 54 | 28.2 | 28.1 | 28.0 | 27.8 | 27.7 | 27.5 | 27.4 | 27.2 | 27.0 | 26.8 |
| 55 | 27.4 | 27.3 | 27.2 | 27.1 | 27.0 | 26.8 | 26.7 | 26.5 | 26.3 | 26.1 |
| 56 | 26.7 | 26.6 | 26.5 | 26.3 | 26.2 | 26.1 | 26.0 | 25.8 | 25.6 | 25.4 |
| 57 | 25.9 | 25.8 | 25.7 | 25.6 | 25.5 | 25.4 | 25.2 | 25.1 | 24.9 | 24.8 |
| 58 | 25.1 | 25.0 | 24.9 | 24.8 | 24.7 | 24.6 | 24.5 | 24.4 | 24.2 | 24.1 |
| 59 | 24.3 | 24.2 | 24.1 | 24.1 | 24.0 | 23.9 | 23.8 | 23.6 | 23.5 | 23.4 |
| 60 | 23.5 | 23.4 | 23.4 | 23.3 | 23.2 | 23.1 | 23.0 | 22.9 | 22.8 | 22.7 |
| 61 | 22.7 | 22.6 | 22.6 | 22.5 | 22.4 | 22.4 | 22.3 | 22.2 | 22.1 | 22.0 |
| 62 | 21.9 | 21.9 | 21.8 | 21.7 | 21.7 | 21.6 | 21.5 | 21.4 | 21.3 | 21.2 |
| 63 | 21.1 | 21.1 | 21.0 | 21.0 | 20.9 | 20.8 | 20.8 | 20.7 | 20.6 | 20.5 |
| 64 | 20.3 | 20.3 | 20.2 | 20.2 | 20.1 | 20.1 | 20.0 | 20.0 | 19.9 | 19.8 |
| 65 | 19.6 | 19.5 | 19.5 | 19.4 | 19.4 | 19.3 | 19.3 | 19.2 | 19.1 | 19.1 |
| 66 | 18.8 | 18.8 | 18.7 | 18.7 | 18.6 | 18.6 | 18.5 | 18.5 | 18.4 | 18.4 |
| 67 | 18.0 | 18.0 | 18.0 | 17.9 | 17.9 | 17.9 | 17.8 | 17.8 | 17.7 | 17.6 |
| 68 | 17.3 | 17.3 | 17.2 | 17.2 | 17.2 | 17.1 | 17.1 | 17.0 | 17.0 | 16.9 |
| 69 | 16.5 | 16.5 | 16.5 | 16.5 | 16.4 | 16.4 | 16.4 | 16.3 | 16.3 | 16.2 |
| 70 | 15.8 | 15.8 | 15.8 | 15.7 | 15.7 | 15.7 | 15.6 | 15.6 | 15.6 | 15.5 |
| 71 | 15.1 | 15.1 | 15.1 | 15.0 | 15.0 | 15.0 | 15.0 | 14.9 | 14.9 | 14.9 |
| 72 | 14.4 | 14.4 | 14.4 | 14.3 | 14.3 | 14.3 | 14.3 | 14.2 | 14.2 | 14.2 |
| 73 | 13.7 | 13.7 | 13.7 | 13.7 | 13.7 | 13.6 | 13.6 | 13.6 | 13.6 | 13.5 |
| 74 | 13.1 | 13.0 | 13.0 | 13.0 | 13.0 | 13.0 | 13.0 | 12.9 | 12.9 | 12.9 |
| 75 | 12.4 | 12.4 | 12.4 | 12.4 | 12.3 | 12.3 | 12.3 | 12.3 | 12.3 | 12.2 |
| 76 | 11.8 | 11.8 | 11.7 | 11.7 | 11.7 | 11.7 | 11.7 | 11.7 | 11.6 | 11.6 |
| 77 | 11.1 | 11.1 | 11.1 | 11.1 | 11.1 | 11.1 | 11.1 | 11.1 | 11.0 | 11.0 |
| 78 | 10.5 | 10.5 | 10.5 | 10.5 | 10.5 | 10.5 | 10.5 | 10.5 | 10.5 | 10.4 |
| 79 | 10.0 | 10.0 | 9.9 | 9.9 | 9.9 | 9.9 | 9.9 | 9.9 | 9.9 | 9.9 |
| 80 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.4 | 9.3 | 9.3 | 9.3 |
| 81 | 8.9 | 8.8 | 8.8 | 8.8 | 8.8 | 8.8 | 8.8 | 8.8 | 8.8 | 8.8 |
| 82 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 | 8.3 |
| 83 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 | 7.8 |
| 84 | 7.3 | 7.3 | 7.3 | 7.3 | 7.3 | 7.3 | 7.3 | 7.3 | 7.3 | 7.3 |
| 85 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 |
| 86 | 6.5 | 6.5 | 6.5 | 6.5 | 6.4 | 6.4 | 6.4 | 6.4 | 6.4 | 6.4 |
| 87 | 6.1 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 |
| 88 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.6 | 5.6 | 5.6 |
| 89 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 |
| 90 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
| 91 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.6 | 4.6 |
| 92 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 |
| 93 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| 95 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.6 | 2.6 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 45 | 46 | 47 | 48 | 49 | 50 | 51 | 52 | 53 | 54 |
|---|---|---|---|---|---|---|---|---|---|---|
| 45 | 31.4 | 30.9 | 30.5 | 30.0 | 29.4 | 28.9 | 28.3 | 27.7 | 27.1 | 26.5 |
| 46 | 30.9 | 30.5 | 30.0 | 29.6 | 29.1 | 28.5 | 28.0 | 27.4 | 26.9 | 26.3 |
| 47 | 30.5 | 30.0 | 29.6 | 29.2 | 28.7 | 28.2 | 27.7 | 27.1 | 26.6 | 26.0 |
| 48 | 30.0 | 29.6 | 29.2 | 28.7 | 28.3 | 27.8 | 27.3 | 26.8 | 26.3 | 25.7 |
| 49 | 29.4 | 29.1 | 28.7 | 28.3 | 27.9 | 27.4 | 26.9 | 26.5 | 25.9 | 25.4 |
| 50 | 28.9 | 28.5 | 28.2 | 27.4 | 27.4 | 27.0 | 26.5 | 26.1 | 25.6 | 25.1 |
| 51 | 28.3 | 28.0 | 27.7 | 27.3 | 26.9 | 26.5 | 26.1 | 25.7 | 25.2 | 24.7 |
| 52 | 27.7 | 27.4 | 27.1 | 26.8 | 26.5 | 26.1 | 25.7 | 25.3 | 24.8 | 24.4 |
| 53 | 27.1 | 26.9 | 26.6 | 26.3 | 25.9 | 25.6 | 25.2 | 24.8 | 24.4 | 24.0 |
| 54 | 26.5 | 26.3 | 26.0 | 25.7 | 25.4 | 25.1 | 24.7 | 24.4 | 24.0 | 23.6 |
| 55 | 25.9 | 25.7 | 25.4 | 25.1 | 24.9 | 24.6 | 24.2 | 23.9 | 23.5 | 23.2 |
| 56 | 25.2 | 25.0 | 24.8 | 24.6 | 24.3 | 24.0 | 23.7 | 23.4 | 23.1 | 22.7 |
| 57 | 24.6 | 24.4 | 24.2 | 24.0 | 23.7 | 23.5 | 23.2 | 22.9 | 22.6 | 22.2 |
| 58 | 23.9 | 23.7 | 23.5 | 23.3 | 23.1 | 22.9 | 22.6 | 22.4 | 22.1 | 21.7 |
| 59 | 23.2 | 23.1 | 22.9 | 22.7 | 22.5 | 22.3 | 22.1 | 21.8 | 21.5 | 21.2 |
| 60 | 22.5 | 22.4 | 22.2 | 22.1 | 21.9 | 21.7 | 21.5 | 21.2 | 21.0 | 20.7 |
| 61 | 21.8 | 21.7 | 21.6 | 21.4 | 21.2 | 21.1 | 20.9 | 20.6 | 20.4 | 20.2 |
| 62 | 21.1 | 21.0 | 20.9 | 20.7 | 20.6 | 20.4 | 20.2 | 20.0 | 19.8 | 19.6 |
| 63 | 20.4 | 20.3 | 20.2 | 20.1 | 19.9 | 19.8 | 19.6 | 19.4 | 19.2 | 19.0 |
| 64 | 19.7 | 19.6 | 19.5 | 19.4 | 19.3 | 19.1 | 19.0 | 18.8 | 18.6 | 18.5 |
| 65 | 19.0 | 18.9 | 18.8 | 18.7 | 18.6 | 18.5 | 18.3 | 18.2 | 18.0 | 17.9 |
| 66 | 18.3 | 18.2 | 18.1 | 18.0 | 17.9 | 17.8 | 17.7 | 17.6 | 17.4 | 17.3 |
| 67 | 17.6 | 17.5 | 17.4 | 17.3 | 17.3 | 17.2 | 17.1 | 16.9 | 16.8 | 16.7 |
| 68 | 16.9 | 16.8 | 16.7 | 16.7 | 16.6 | 16.5 | 16.4 | 16.3 | 16.2 | 16.1 |
| 69 | 16.2 | 16.1 | 16.1 | 16.0 | 15.9 | 15.8 | 15.8 | 15.7 | 15.6 | 15.4 |
| 70 | 15.5 | 15.4 | 15.4 | 15.3 | 15.3 | 15.2 | 15.1 | 15.0 | 14.9 | 14.8 |
| 71 | 14.8 | 14.8 | 14.7 | 14.7 | 14.6 | 14.5 | 14.5 | 14.4 | 14.3 | 14.2 |
| 72 | 14.1 | 14.1 | 14.1 | 14.0 | 14.0 | 13.9 | 13.8 | 13.8 | 13.7 | 13.6 |
| 73 | 13.5 | 13.5 | 13.4 | 13.4 | 13.3 | 13.3 | 13.2 | 13.2 | 13.1 | 13.0 |
| 74 | 12.8 | 12.8 | 12.8 | 12.7 | 12.7 | 12.7 | 12.6 | 12.6 | 12.5 | 12.4 |
| 75 | 12.2 | 12.2 | 12.2 | 12.1 | 12.1 | 12.1 | 12.0 | 12.0 | 11.9 | 11.9 |
| 76 | 11.6 | 11.6 | 11.6 | 11.5 | 11.5 | 11.5 | 11.4 | 11.4 | 11.3 | 11.3 |
| 77 | 11.0 | 11.0 | 11.0 | 10.9 | 10.9 | 10.9 | 10.8 | 10.8 | 10.8 | 10.7 |
| 78 | 10.4 | 10.4 | 10.4 | 10.4 | 10.3 | 10.3 | 10.3 | 10.2 | 10.2 | 10.2 |
| 79 | 9.9 | 9.8 | 9.8 | 9.8 | 9.8 | 9.8 | 9.7 | 9.7 | 9.7 | 9.6 |
| 80 | 9.3 | 9.3 | 9.3 | 9.3 | 9.2 | 9.2 | 9.2 | 9.2 | 9.1 | 9.1 |
| 81 | 8.8 | 8.8 | 8.7 | 8.7 | 8.7 | 8.7 | 8.7 | 8.7 | 8.6 | 8.6 |
| 82 | 8.3 | 8.2 | 8.2 | 8.2 | 8.2 | 8.2 | 8.2 | 8.2 | 8.1 | 8.1 |
| 83 | 7.8 | 7.8 | 7.7 | 7.7 | 7.7 | 7.7 | 7.7 | 7.7 | 7.7 | 7.6 |
| 84 | 7.3 | 7.3 | 7.3 | 7.3 | 7.3 | 7.2 | 7.2 | 7.2 | 7.2 | 7.2 |
| 85 | 6.8 | 6.8 | 6.8 | 6.8 | 6.8 | 6.8 | 6.8 | 6.8 | 6.8 | 6.7 |
| 86 | 6.4 | 6.4 | 6.4 | 6.4 | 6.4 | 6.4 | 6.4 | 6.4 | 6.3 | 6.3 |
| 87 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 6.0 | 5.9 |
| 88 | 5.6 | 5.6 | 5.6 | 5.6 | 5.6 | 5.6 | 5.6 | 5.6 | 5.6 | 5.6 |
| 89 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.2 | 5.2 | 5.2 | 5.2 |
| 90 | 5.0 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 |
| 91 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 |
| 92 | 4.4 | 4.4 | 4.4 | 4.3 | 4.3 | 4.3 | 4.3 | 4.3 | 4.3 | 4.3 |
| 93 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.9 | 3.9 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 |
| 95 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 55 | 56 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 |
|---|---|---|---|---|---|---|---|---|---|---|
| 55 | 22.7 | 22.3 | 21.9 | 21.4 | 20.9 | 20.4 | 19.9 | 19.4 | 18.8 | 18.3 |
| 56 | 22.3 | 21.9 | 21.5 | 21.1 | 20.6 | 20.1 | 19.6 | 19.1 | 18.6 | 18.0 |
| 57 | 21.9 | 21.5 | 21.1 | 20.7 | 20.3 | 19.8 | 19.3 | 18.8 | 18.3 | 17.8 |
| 58 | 21.4 | 21.1 | 20.7 | 20.3 | 19.9 | 19.5 | 19.0 | 18.5 | 18.0 | 17.5 |
| 59 | 20.9 | 20.6 | 20.3 | 19.9 | 19.5 | 19.1 | 18.7 | 18.2 | 17.7 | 17.3 |
| 60 | 20.4 | 20.1 | 19.8 | 19.5 | 19.1 | 18.7 | 18.3 | 17.9 | 17.4 | 17.0 |
| 61 | 29.9 | 19.6 | 19.3 | 19.0 | 18.7 | 18.3 | 17.9 | 17.5 | 17.1 | 16.7 |
| 62 | 19.4 | 19.1 | 18.8 | 18.5 | 18.2 | 17.9 | 17.5 | 17.1 | 16.8 | 16.3 |
| 63 | 18.8 | 18.6 | 18.3 | 18.0 | 17.7 | 17.4 | 17.1 | 16.8 | 16.4 | 16.0 |
| 64 | 18.3 | 18.0 | 17.8 | 17.5 | 17.3 | 17.0 | 16.7 | 16.3 | 16.0 | 15.6 |
| 65 | 17.7 | 17.5 | 17.3 | 17.0 | 16.8 | 16.5 | 16.2 | 15.9 | 15.6 | 15.3 |
| 66 | 17.1 | 16.9 | 16.7 | 16.5 | 16.3 | 16.0 | 15.8 | 15.5 | 15.2 | 14.9 |
| 67 | 16.5 | 16.3 | 16.2 | 16.0 | 15.8 | 15.5 | 15.3 | 15.0 | 14.7 | 14.5 |
| 68 | 15.9 | 15.8 | 15.6 | 15.4 | 15.2 | 15.0 | 14.8 | 14.6 | 14.3 | 14.0 |
| 69 | 15.3 | 15.2 | 15.0 | 14.9 | 14.7 | 14.5 | 14.3 | 14.1 | 13.9 | 13.6 |
| 70 | 14.7 | 14.6 | 14.5 | 14.3 | 14.2 | 14.0 | 13.8 | 13.6 | 13.4 | 13.2 |
| 71 | 14.1 | 14.0 | 13.9 | 13.8 | 13.6 | 13.5 | 13.3 | 13.1 | 12.9 | 12.7 |
| 72 | 13.5 | 13.4 | 13.3 | 13.2 | 13.1 | 12.9 | 12.8 | 12.6 | 12.4 | 12.3 |
| 73 | 13.0 | 12.9 | 12.8 | 12.7 | 12.5 | 12.4 | 12.3 | 12.1 | 12.0 | 11.8 |
| 74 | 12.4 | 12.3 | 12.2 | 12.1 | 12.0 | 11.9 | 11.8 | 11.6 | 11.5 | 11.3 |
| 75 | 11.8 | 11.7 | 11.7 | 11.6 | 11.5 | 11.4 | 11.3 | 11.1 | 11.0 | 10.9 |
| 76 | 11.2 | 11.2 | 11.1 | 11.0 | 10.9 | 10.9 | 10.8 | 10.6 | 10.5 | 10.4 |
| 77 | 10.7 | 10.6 | 10.6 | 10.5 | 10.4 | 10.3 | 10.3 | 10.2 | 10.0 | 9.9 |
| 78 | 10.1 | 10.1 | 10.0 | 10.0 | 9.9 | 9.8 | 9.8 | 9.7 | 9.6 | 9.5 |
| 79 | 9.6 | 9.6 | 9.5 | 9.5 | 9.4 | 9.3 | 9.3 | 9.2 | 9.1 | 9.0 |
| 80 | 9.1 | 9.0 | 9.0 | 9.0 | 8.9 | 8.9 | 8.8 | 8.7 | 8.7 | 8.6 |
| 81 | 8.6 | 8.5 | 8.5 | 8.5 | 8.4 | 8.4 | 8.3 | 8.3 | 8.2 | 8.1 |
| 82 | 8.1 | 8.1 | 8.0 | 8.0 | 8.0 | 7.9 | 7.9 | 7.8 | 7.8 | 7.7 |
| 83 | 7.6 | 7.6 | 7.6 | 7.5 | 7.5 | 7.5 | 7.4 | 7.4 | 7.3 | 7.3 |
| 84 | 7.2 | 7.1 | 7.1 | 7.1 | 7.1 | 7.0 | 7.0 | 7.0 | 6.9 | 6.9 |
| 85 | 6.7 | 6.7 | 6.7 | 6.7 | 6.6 | 6.6 | 6.6 | 6.5 | 6.5 | 6.5 |
| 86 | 6.3 | 6.3 | 6.3 | 6.3 | 6.2 | 6.2 | 6.2 | 6.2 | 6.1 | 6.1 |
| 87 | 5.9 | 5.9 | 5.9 | 5.9 | 5.9 | 5.8 | 5.8 | 5.8 | 5.8 | 5.7 |
| 88 | 5.6 | 5.5 | 5.5 | 5.5 | 5.5 | 5.5 | 5.5 | 5.4 | 5.4 | 5.4 |
| 89 | 5.2 | 5.2 | 5.2 | 5.2 | 5.2 | 5.1 | 5.1 | 5.1 | 5.1 | 5.1 |
| 90 | 4.9 | 4.9 | 4.9 | 4.9 | 4.9 | 4.8 | 4.8 | 4.8 | 4.8 | 4.8 |
| 91 | 4.6 | 4.6 | 4.6 | 4.6 | 4.6 | 4.5 | 4.5 | 4.5 | 4.5 | 4.5 |
| 92 | 4.3 | 4.3 | 4.3 | 4.3 | 4.3 | 4.3 | 4.3 | 4.2 | 4.2 | 4.2 |
| 93 | 4.1 | 4.1 | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 | 4.0 |
| 94 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.8 | 3.7 |
| 95 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.6 | 3.5 | 3.5 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.3 | 3.3 | 3.3 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.1 | 3.1 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 |
| 101 | 2.5 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.2 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.7 | 1.7 | 1.7 | 1.7 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 65 | 66 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 74 |
|---|---|---|---|---|---|---|---|---|---|---|
| 65 | 14.9 | 14.5 | 14.1 | 13.7 | 13.3 | 12.9 | 12.5 | 12.0 | 11.6 | 11.2 |
| 66 | 14.5 | 14.2 | 13.8 | 13.4 | 13.1 | 12.6 | 12.2 | 11.8 | 11.4 | 11.0 |
| 67 | 14.1 | 13.8 | 13.5 | 13.1 | 12.8 | 12.4 | 12.0 | 11.6 | 11.2 | 10.8 |
| 68 | 13.7 | 13.4 | 13.1 | 12.8 | 12.5 | 12.1 | 11.7 | 11.4 | 11.0 | 10.6 |
| 69 | 13.3 | 13.1 | 12.8 | 12.5 | 12.1 | 11.8 | 11.4 | 11.1 | 10.7 | 10.4 |
| 70 | 12.9 | 12.6 | 12.4 | 12.1 | 11.8 | 11.5 | 11.2 | 10.8 | 10.5 | 10.1 |
| 71 | 12.5 | 12.2 | 12.0 | 11.7 | 11.4 | 11.2 | 10.9 | 10.5 | 10.2 | 9.9 |
| 72 | 12.0 | 11.8 | 11.6 | 11.4 | 11.1 | 10.8 | 10.5 | 10.2 | 9.9 | 9.6 |
| 73 | 11.6 | 11.4 | 11.2 | 11.0 | 10.7 | 10.5 | 10.2 | 9.9 | 9.7 | 9.4 |
| 74 | 11.2 | 11.0 | 10.8 | 10.6 | 10.4 | 10.1 | 9.9 | 9.6 | 9.4 | 9.1 |
| 75 | 10.7 | 10.5 | 10.4 | 10.2 | 10.0 | 9.8 | 9.5 | 9.3 | 9.1 | 8.8 |
| 76 | 10.3 | 10.1 | 9.9 | 9.8 | 9.6 | 9.4 | 9.2 | 9.0 | 8.8 | 8.5 |
| 77 | 9.8 | 9.7 | 9.5 | 9.4 | 9.2 | 9.0 | 8.8 | 8.6 | 8.4 | 8.2 |
| 78 | 9.4 | 9.2 | 9.1 | 9.0 | 8.8 | 8.7 | 8.5 | 8.3 | 8.1 | 7.9 |
| 79 | 8.9 | 8.8 | 8.7 | 8.6 | 8.4 | 8.3 | 8.1 | 8.0 | 7.8 | 7.6 |
| 80 | 8.5 | 8.4 | 8.3 | 8.2 | 8.0 | 7.9 | 7.8 | 7.6 | 7.5 | 7.3 |
| 81 | 8.0 | 8.0 | 7.9 | 7.9 | 7.7 | 7.5 | 7.4 | 7.3 | 7.1 | 7.0 |
| 82 | 7.6 | 7.5 | 7.5 | 7.4 | 7.3 | 7.2 | 7.1 | 6.9 | 6.8 | 6.7 |
| 83 | 7.2 | 7.1 | 7.1 | 7.0 | 6.9 | 6.8 | 6.7 | 6.6 | 6.5 | 6.4 |
| 84 | 6.8 | 6.7 | 6.7 | 6.6 | 6.5 | 6.4 | 6.4 | 6.3 | 6.2 | 6.0 |
| 85 | 6.4 | 6.4 | 6.3 | 6.2 | 6.2 | 6.1 | 6.0 | 5.9 | 5.8 | 5.7 |
| 86 | 6.0 | 6.0 | 5.9 | 5.9 | 5.8 | 5.8 | 5.7 | 5.6 | 5.5 | 5.4 |
| 87 | 5.7 | 5.6 | 5.6 | 5.6 | 5.5 | 5.4 | 5.4 | 5.3 | 5.2 | 5.2 |
| 88 | 5.3 | 5.3 | 5.3 | 5.2 | 5.2 | 5.1 | 5.1 | 5.0 | 5.0 | 4.9 |
| 89 | 5.0 | 5.0 | 5.0 | 4.9 | 4.9 | 4.8 | 4.8 | 4.7 | 4.7 | 4.6 |
| 90 | 4.7 | 4.7 | 4.7 | 4.6 | 4.6 | 4.6 | 4.5 | 4.5 | 4.4 | 4.4 |
| 91 | 4.5 | 4.4 | 4.4 | 4.4 | 4.3 | 4.3 | 4.3 | 4.2 | 4.2 | 4.1 |
| 92 | 4.2 | 4.2 | 4.1 | 4.1 | 4.1 | 4.1 | 4.0 | 4.0 | 3.9 | 3.9 |
| 93 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.8 | 3.8 | 3.8 | 3.7 | 3.7 |
| 94 | 3.7 | 3.7 | 3.7 | 3.7 | 3.6 | 3.6 | 3.6 | 3.6 | 3.5 | 3.5 |
| 95 | 3.5 | 3.5 | 3.5 | 3.5 | 3.4 | 3.4 | 3.4 | 3.4 | 3.3 | 3.3 |
| 96 | 3.3 | 3.3 | 3.3 | 3.3 | 3.3 | 3.2 | 3.2 | 3.2 | 3.2 | 3.1 |
| 97 | 3.1 | 3.1 | 3.1 | 3.1 | 3.1 | 3.1 | 3.0 | 3.0 | 3.0 | 3.0 |
| 98 | 2.9 | 2.9 | 2.9 | 2.9 | 2.9 | 2.9 | 2.9 | 2.9 | 2.8 | 2.8 |
| 99 | 2.8 | 2.8 | 2.8 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.6 |
| 100 | 2.6 | 2.6 | 2.6 | 2.6 | 2.6 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 101 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.4 | 2.3 | 2.3 |
| 102 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 | 2.2 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.0 | 2.0 | 2.0 | 2.0 | 2.0 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | .19 | 1.9 |
| 105 | 1.7 | 1.7 | 1.7 | 1.7 | .17 | 1.7 | 1.7 | 1.7 | 1.7 | 1.7 |
| 106 | 1.6 | 1.6 | .16 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.5 | 1.5 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .6 | .6 | .6 | .6 | .6 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .5 | .5 | .5 | .5 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 75 | 76 | 77 | 78 | 79 | 80 | 81 | 82 | 83 | 84 |
|---|---|---|---|---|---|---|---|---|---|---|
| 75 | 8.6 | 8.3 | 8.0 | 7.7 | 7.4 | 7.1 | 6.8 | 6.5 | 6.2 | 5.9 |
| 76 | 8.3 | 8.0 | 7.8 | 7.5 | 7.2 | 6.9 | 6.7 | 6.4 | 6.1 | 5.8 |
| 77 | 8.0 | 7.8 | 7.5 | 7.3 | 7.0 | 6.8 | 6.5 | 6.2 | 5.9 | 5.7 |
| 78 | 7.7 | 7.5 | 7.3 | 7.0 | 6.8 | 6.6 | 6.3 | 6.0 | 5.8 | 5.5 |
| 79 | 7.4 | 7.2 | 7.0 | 6.8 | 6.6 | 6.3 | 6.1 | 5.9 | 5.6 | 5.4 |
| 80 | 7.1 | 6.9 | 6.8 | 6.6 | 6.3 | 6.1 | 5.9 | 5.7 | 5.5 | 5.2 |
| 81 | 6.8 | 6.7 | 6.5 | 6.3 | 6.1 | 5.9 | 5.7 | 5.5 | 5.3 | 5.1 |
| 82 | 6.5 | 6.4 | 6.2 | 6.0 | 5.9 | 5.7 | 5.5 | 5.3 | 5.1 | 4.9 |
| 83 | 6.2 | 6.1 | 5.9 | 5.8 | 5.6 | 5.5 | 5.3 | 5.1 | 4.9 | 4.7 |
| 84 | 5.9 | 5.8 | 5.7 | 5.5 | 5.4 | 5.2 | 5.1 | 4.9 | 4.7 | 4.6 |
| 85 | 5.6 | 5.5 | 5.4 | 5.3 | 5.2 | 5.0 | 4.9 | 4.7 | 4.6 | 4.4 |
| 86 | 5.4 | 5.3 | 5.1 | 5.0 | 4.9 | 4.8 | 4.7 | 4.5 | 4.4 | 4.2 |
| 87 | 5.1 | 5.0 | 4.9 | 4.8 | 4.7 | 4.6 | 4.4 | 4.3 | 4.2 | 4.1 |
| 88 | 4.8 | 4.7 | 4.6 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 4.0 | 3.9 |
| 89 | 4.5 | 4.5 | 4.4 | 4.3 | 4.2 | 4.1 | 4.0 | 3.9 | 3.8 | 3.7 |
| 90 | 4.3 | 4.2 | 4.2 | 4.1 | 4.0 | 3.9 | 3.8 | 3.8 | 3.7 | 3.5 |
| 91 | 4.1 | 4.0 | 4.0 | 3.9 | 3.8 | 3.7 | 3.7 | 3.6 | 3.5 | 3.4 |
| 92 | 3.9 | 3.8 | 3.7 | 3.7 | 3.6 | 3.6 | 3.5 | 3.4 | 3.3 | 3.2 |
| 93 | 3.7 | 3.6 | 3.6 | 3.5 | 3.4 | 3.4 | 3.3 | 3.2 | 3.2 | 3.1 |
| 94 | 3.5 | 3.4 | 3.4 | 3.3 | 3.3 | 3.2 | 3.2 | 3.1 | 3.0 | 3.0 |
| 95 | 3.3 | 3.2 | 3.2 | 3.2 | 3.1 | 3.1 | 3.0 | 3.0 | 2.9 | 2.8 |
| 96 | 3.1 | 3.1 | 3.0 | 3.0 | 3.0 | 2.9 | 2.9 | 2.8 | 2.8 | 2.7 |
| 97 | 2.9 | 2.9 | 2.9 | 2.9 | 2.8 | 2.8 | 2.7 | 2.7 | 2.6 | 2.6 |
| 98 | 2.8 | 2.8 | 2.7 | 2.7 | 2.7 | 2.6 | 2.6 | 2.6 | 2.5 | 2.5 |
| 99 | 2.6 | 2.6 | 2.6 | 2.6 | 2.5 | 2.5 | 2.5 | 2.4 | 2.4 | 2.3 |
| 100 | 2.5 | 2.5 | 2.4 | 2.4 | 2.4 | 2.4 | 2.3 | 2.3 | 2.3 | 2.2 |
| 101 | 2.3 | 2.3 | 2.3 | 2.3 | 2.2 | 2.2 | 2.2 | 2.2 | 2.1 | 2.1 |
| 102 | 2.2 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.0 | 2.0 | 2.0 | 2.0 |
| 103 | 2.0 | 2.0 | 2.0 | 2.0 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.8 |
| 104 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.7 | 1.7 | 1.7 |
| 105 | 1.7 | 1.7 | 1.7 | 1.7 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 106 | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.5 | 1.4 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.3 | 1.3 | 1.3 | 1.3 |
| 108 | 1.3 | 1.2 | 1.2 | 1.2 | 1.2 | 1.2 | 1.2 | 1.2 | 1.2 | 1.2 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .8 | .8 |
| 112 | .8 | .8 | .8 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 113 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 114 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 85 | 86 | 87 | 88 | 89 | 90 | 91 | 92 | 93 | 94 |
|---|---|---|---|---|---|---|---|---|---|---|
| 85 | 4.2 | 4.1 | 3.9 | 3.8 | 3.6 | 3.4 | 3.3 | 3.2 | 3.0 | 2.9 |
| 86 | 4.1 | 3.9 | 3.8 | 3.6 | 3.5 | 3.3 | 3.2 | 3.1 | 2.9 | 2.8 |
| 87 | 3.9 | 3.8 | 3.6 | 3.5 | 3.4 | 3.2 | 3.1 | 3.0 | 2.8 | 2.7 |
| 88 | 3.8 | 3.6 | 3.5 | 3.4 | 3.2 | 3.1 | 3.0 | 2.9 | 2.8 | 2.6 |
| 89 | 3.6 | 3.5 | 3.4 | 3.2 | 3.1 | 3.0 | 2.9 | 2.8 | 2.7 | 2.6 |
| 90 | 3.4 | 3.3 | 3.2 | 3.1 | 3.0 | 2.9 | 2.8 | 2.7 | 2.6 | 2.5 |
| 91 | 3.3 | 3.2 | 3.1 | 3.0 | 2.9 | 2.8 | 2.7 | 2.6 | 2.5 | 2.4 |
| 92 | 3.2 | 3.1 | 3.0 | 2.9 | 2.8 | 2.7 | 2.6 | 2.5 | 2.4 | 2.3 |
| 93 | 3.0 | 2.9 | 2.8 | 2.8 | 2.7 | 2.6 | 2.5 | 2.4 | 2.3 | 2.3 |
| 94 | 2.9 | 2.8 | 2.7 | 2.6 | 2.6 | 2.5 | 2.4 | 2.3 | 2.3 | 2.2 |
| 95 | 2.8 | 2.7 | 2.6 | 2.5 | 2.5 | 2.4 | 2.3 | 2.2 | 2.2 | 2.1 |
| 96 | 2.6 | 2.6 | 2.5 | 2.4 | 2.4 | 2.3 | 2.2 | 2.2 | 2.1 | 2.0 |
| 97 | 2.5 | 2.5 | 2.4 | 2.3 | 2.3 | 2.2 | 2.2 | 2.1 | 2.0 | 2.0 |
| 98 | 2.4 | 2.4 | 2.3 | 2.2 | 2.2 | 2.1 | 2.1 | 2.0 | 2.0 | 1.9 |
| 99 | 2.3 | 2.2 | 2.2 | 2.1 | 2.1 | 2.0 | 2.0 | 1.9 | 1.9 | 1.8 |
| 100 | 2.2 | 2.1 | 2.1 | 2.0 | 2.0 | 1.9 | 1.9 | 1.9 | 1.8 | 1.8 |
| 101 | 2.1 | 2.0 | 2.0 | 1.9 | 1.9 | 1.9 | 1.8 | 1.8 | 1.7 | 1.7 |
| 102 | 1.9 | 1.9 | 1.9 | 1.8 | 1.8 | 1.8 | 1.7 | 1.7 | 1.6 | 1.6 |
| 103 | 1.8 | 1.8 | 1.8 | 1.7 | 1.7 | 1.7 | 1.6 | 1.6 | 1.5 | 1.5 |
| 104 | 1.7 | 1.7 | 1.6 | 1.6 | 1.6 | 1.5 | 1.5 | 1.5 | 1.5 | 1.4 |
| 105 | 1.6 | 1.5 | 1.5 | 1.5 | 1.5 | 1.4 | 1.4 | 1.4 | 1.4 | 1.3 |
| 106 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.3 | 1.3 | 1.3 | 1.3 | 1.2 |
| 107 | 1.3 | 1.3 | 1.3 | 1.3 | 1.2 | 1.2 | 1.2 | 1.2 | 1.2 | 1.2 |
| 108 | 1.2 | 1.2 | 1.2 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 109 | 1.1 | 1.1 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 110 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 111 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 112 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 113 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 114 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 95 | 96 | 97 | 98 | 99 | 100 | 101 | 102 | 103 | 104 |
|---|---|---|---|---|---|---|---|---|---|---|
| 95 | 2.0 | 2.0 | 1.9 | 1.8 | 1.8 | 1.7 | 1.6 | 1.6 | 1.5 | 1.4 |
| 96 | 2.0 | 1.9 | 1.9 | 1.8 | 1.7 | 1.7 | 1.6 | 1.5 | 1.5 | 1.4 |
| 97 | 1.9 | 1.9 | 1.8 | 1.7 | 1.7 | 1.6 | 1.6 | 1.5 | 1.4 | 1.3 |
| 98 | 1.8 | 1.8 | 1.7 | 1.7 | 1.6 | 1.6 | 1.5 | 1.5 | 1.4 | 1.3 |
| 99 | 1.8 | 1.7 | 1.7 | 1.6 | 1.6 | 1.5 | 1.5 | 1.4 | 1.4 | 1.3 |
| 100 | 1.7 | 1.7 | 1.6 | 1.6 | 1.5 | 1.5 | 1.4 | 1.4 | 1.3 | 1.3 |
| 101 | 1.6 | 1.6 | 1.6 | 1.5 | 1.5 | 1.4 | 1.4 | 1.3 | 1.3 | 1.2 |
| 102 | 1.6 | 1.5 | 1.5 | 1.5 | 1.4 | 1.4 | 1.3 | 1.3 | 1.2 | 1.2 |
| 103 | 1.5 | 1.5 | 1.4 | 1.4 | 1.4 | 1.3 | 1.3 | 1.2 | 1.2 | 1.1 |
| 104 | 1.4 | 1.4 | 1.3 | 1.3 | 1.3 | 1.3 | 1.2 | 1.2 | 1.1 | 1.1 |
| 105 | 1.3 | 1.3 | 1.3 | 1.2 | 1.2 | 1.2 | 1.2 | 1.1 | 1.1 | 1.0 |
| 106 | 1.2 | 1.2 | 1.2 | 1.2 | 1.1 | 1.1 | 1.1 | 1.1 | 1.0 | 1.0 |
| 107 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.0 | 1.0 | 1.0 | 1.0 | 9 |
| 108 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | .9 | .9 | .9 |
| 109 | 1.0 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .8 | .8 |
| 110 | .9 | .9 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 111 | .8 | .8 | .8 | .8 | .8 | .7 | .7 | .7 | .7 | .7 |
| 112 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .6 | .6 |
| 113 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 114 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIaa—Annuities for Joint Life Only; Two Lives—Expected Return Multiples
| Ages | 105 | 106 | 107 | 108 | 109 | 110 | 111 | 112 | 113 | 114 | 115 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 105 | 1.0 | 1.0 | .9 | .9 | .8 | .7 | .7 | .6 | .6 | .5 | .5 |
| 106 | 1.0 | .9 | .9 | .8 | .8 | .7 | .7 | .6 | .6 | .5 | .5 |
| 107 | .9 | .9 | .8 | .8 | .7 | .7 | .7 | .6 | .6 | .5 | .5 |
| 108 | .9 | .8 | .8 | .8 | .7 | .7 | .6 | .6 | .5 | .5 | .5 |
| 109 | .8 | .8 | .7 | .7 | .7 | .7 | .6 | .6 | .5 | .5 | .5 |
| 110 | .7 | .7 | .7 | .7 | .7 | .6 | .6 | .6 | .5 | .5 | .5 |
| 111 | .7 | .7 | .7 | .6 | .6 | .6 | .6 | .5 | .5 | .5 | .5 |
| 112 | .6 | .6 | .6 | .6 | .6 | .6 | .5 | .5 | .5 | .5 | .5 |
| 113 | .6 | .6 | .6 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
| 114 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VII—Percent Value of Refund Feature; Duration of Guaranteed Amount
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
| 5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 6 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 7 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 8 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 9 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 10 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 11 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 12 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 13 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 14 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 15 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 16 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 17 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 18 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 19 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 20 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 21 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 22 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 23 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 24 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 25 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 26 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 27 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 28 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 29 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 30 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 31 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 32 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 33 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 34 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 35 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 36 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 37 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 |
| 38 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 |
| 39 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 |
| 40 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 |
| 41 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 |
| 42 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 |
| 43 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 |
| 44 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 |
| 45 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 |
| 46 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 |
| 47 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 |
| 48 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 |
| 49 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 2 |
| 50 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 2 |
| 51 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 2 | 2 |
| 52 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 2 | 2 |
| 53 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 54 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 55 | 0 | 0 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| 56 | 0 | 0 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 3 |
| 57 | 0 | 0 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 |
| 58 | 0 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 |
| 59 | 0 | 1 | 1 | 1 | 1 | 2 | 2 | 3 | 3 | 4 |
| 60 | 0 | 1 | 1 | 1 | 2 | 2 | 2 | 3 | 3 | 4 |
| 61 | 0 | 1 | 1 | 1 | 2 | 2 | 3 | 3 | 4 | 4 |
| 62 | 0 | 1 | 1 | 2 | 2 | 2 | 3 | 4 | 4 | 5 |
| 63 | 0 | 1 | 1 | 2 | 2 | 3 | 3 | 4 | 5 | 5 |
| 64 | 0 | 1 | 1 | 2 | 2 | 3 | 4 | 4 | 5 | 6 |
| 65 | 0 | 1 | 2 | 2 | 3 | 3 | 4 | 5 | 6 | 6 |
| 66 | 1 | 1 | 2 | 2 | 3 | 4 | 5 | 5 | 6 | 7 |
| 67 | 1 | 1 | 2 | 3 | 3 | 4 | 5 | 6 | 7 | 8 |
| 68 | 1 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 |
| 69 | 1 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 10 |
| 70 | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 11 |
| 71 | 1 | 2 | 3 | 4 | 5 | 6 | 8 | 9 | 10 | 12 |
| 72 | 1 | 2 | 3 | 4 | 6 | 7 | 8 | 10 | 11 | 13 |
| 73 | 1 | 2 | 4 | 5 | 6 | 8 | 9 | 11 | 13 | 14 |
| 74 | 1 | 3 | 4 | 5 | 7 | 9 | 10 | 12 | 14 | 16 |
| 75 | 1 | 3 | 4 | 6 | 8 | 9 | 11 | 13 | 15 | 17 |
| 76 | 2 | 3 | 5 | 7 | 9 | 10 | 12 | 15 | 17 | 19 |
| 77 | 2 | 4 | 5 | 7 | 9 | 12 | 14 | 16 | 18 | 21 |
| 78 | 2 | 4 | 6 | 8 | 10 | 13 | 15 | 18 | 20 | 23 |
| 79 | 2 | 4 | 7 | 9 | 11 | 14 | 17 | 19 | 22 | 25 |
| 80 | 2 | 5 | 7 | 10 | 13 | 15 | 18 | 21 | 24 | 27 |
| 81 | 3 | 5 | 8 | 11 | 14 | 17 | 20 | 23 | 26 | 29 |
| 82 | 3 | 6 | 9 | 12 | 15 | 19 | 22 | 25 | 28 | 32 |
| 83 | 3 | 7 | 10 | 13 | 17 | 20 | 24 | 27 | 31 | 34 |
| 84 | 4 | 7 | 11 | 15 | 19 | 22 | 26 | 30 | 33 | 37 |
| 85 | 4 | 8 | 12 | 16 | 20 | 24 | 28 | 32 | 36 | 40 |
| 86 | 4 | 9 | 13 | 18 | 22 | 27 | 31 | 35 | 39 | 42 |
| 87 | 5 | 10 | 15 | 20 | 24 | 29 | 33 | 37 | 41 | 45 |
| 88 | 5 | 11 | 16 | 21 | 26 | 31 | 36 | 40 | 44 | 48 |
| 89 | 6 | 12 | 18 | 23 | 28 | 33 | 38 | 43 | 47 | 50 |
| 90 | 7 | 13 | 19 | 25 | 31 | 36 | 41 | 45 | 49 | 53 |
| 91 | 7 | 14 | 21 | 27 | 33 | 38 | 43 | 48 | 52 | 55 |
| 92 | 8 | 15 | 22 | 29 | 35 | 40 | 45 | 50 | 54 | 58 |
| 93 | 9 | 17 | 24 | 31 | 37 | 43 | 48 | 52 | 56 | 60 |
| 94 | 9 | 18 | 26 | 33 | 39 | 45 | 50 | 54 | 58 | 62 |
| 95 | 10 | 19 | 27 | 35 | 41 | 47 | 52 | 57 | 60 | 64 |
| 96 | 11 | 20 | 29 | 36 | 43 | 49 | 54 | 59 | 62 | 66 |
| 97 | 11 | 21 | 30 | 38 | 45 | 51 | 56 | 61 | 64 | 68 |
| 98 | 12 | 23 | 32 | 40 | 47 | 53 | 58 | 63 | 66 | 69 |
| 99 | 13 | 24 | 34 | 42 | 49 | 55 | 60 | 65 | 68 | 71 |
| 100 | 14 | 26 | 36 | 44 | 52 | 58 | 63 | 67 | 70 | 73 |
| 101 | 14 | 27 | 38 | 47 | 54 | 60 | 65 | 69 | 72 | 75 |
| 102 | 15 | 29 | 40 | 49 | 56 | 62 | 67 | 71 | 74 | 77 |
| 103 | 17 | 31 | 42 | 52 | 59 | 65 | 69 | 73 | 76 | 78 |
| 104 | 18 | 33 | 45 | 55 | 62 | 67 | 72 | 75 | 78 | 80 |
| 105 | 19 | 36 | 48 | 58 | 65 | 70 | 74 | 77 | 80 | 82 |
| 106 | 21 | 38 | 51 | 61 | 68 | 73 | 77 | 79 | 82 | 84 |
| 107 | 23 | 42 | 55 | 64 | 71 | 75 | 79 | 81 | 84 | 85 |
| 108 | 25 | 45 | 58 | 67 | 73 | 78 | 81 | 83 | 85 | 87 |
| 109 | 28 | 49 | 62 | 71 | 76 | 80 | 83 | 85 | 87 | 88 |
| 110 | 31 | 52 | 66 | 74 | 79 | 82 | 85 | 87 | 88 | 89 |
| 111 | 34 | 57 | 70 | 77 | 82 | 85 | 87 | 88 | 90 | 91 |
| 112 | 37 | 61 | 73 | 80 | 84 | 87 | 88 | 90 | 91 | 92 |
| 113 | 41 | 66 | 77 | 83 | 86 | 88 | 90 | 91 | 92 | 93 |
| 114 | 45 | 70 | 80 | 85 | 88 | 90 | 92 | 93 | 93 | 94 |
| 115 | 50 | 75 | 83 | 88 | 90 | 92 | 93 | 94 | 94 | 95 |
Table VII—Percent Value of Refund Feature; Duration of Guaranteed Amount
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | |
| 5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 6 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 7 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 8 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 9 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 10 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 11 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 12 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 13 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 14 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 15 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 16 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 17 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 18 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 19 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 20 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 |
| 21 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 |
| 22 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 |
| 23 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 |
| 24 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 |
| 25 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 |
| 26 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 |
| 27 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 |
| 28 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 |
| 29 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 |
| 30 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 31 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 32 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 33 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 34 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 35 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 36 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 37 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 38 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 |
| 39 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 |
| 40 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 41 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| 42 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 |
| 43 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 3 |
| 44 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 3 | 3 |
| 45 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 |
| 46 | 1 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 |
| 47 | 1 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 4 |
| 48 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 4 | 4 |
| 49 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 4 | 4 | 4 |
| 50 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 4 | 4 | 5 |
| 51 | 2 | 2 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 |
| 52 | 2 | 2 | 3 | 3 | 3 | 4 | 4 | 5 | 5 | 5 |
| 53 | 2 | 3 | 3 | 3 | 4 | 4 | 5 | 5 | 5 | 6 |
| 54 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 6 | 7 |
| 55 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 6 | 7 | 7 |
| 56 | 3 | 3 | 4 | 4 | 5 | 5 | 6 | 7 | 7 | 8 |
| 57 | 3 | 4 | 4 | 5 | 5 | 6 | 6 | 7 | 8 | 9 |
| 58 | 4 | 4 | 5 | 5 | 6 | 6 | 7 | 8 | 9 | 9 |
| 59 | 4 | 5 | 5 | 6 | 6 | 7 | 8 | 9 | 9 | 10 |
| 60 | 4 | 5 | 6 | 6 | 7 | 8 | 9 | 10 | 10 | 11 |
| 61 | 5 | 6 | 6 | 7 | 8 | 9 | 10 | 10 | 11 | 13 |
| 62 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 |
| 63 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 |
| 64 | 7 | 8 | 8 | 9 | 10 | 12 | 13 | 14 | 15 | 17 |
| 65 | 7 | 8 | 9 | 10 | 12 | 13 | 14 | 15 | 17 | 18 |
| 66 | 8 | 9 | 10 | 12 | 13 | 14 | 15 | 17 | 18 | 20 |
| 67 | 9 | 10 | 11 | 13 | 14 | 15 | 17 | 18 | 20 | 22 |
| 68 | 10 | 11 | 13 | 14 | 15 | 17 | 19 | 20 | 22 | 24 |
| 69 | 11 | 12 | 14 | 15 | 17 | 19 | 20 | 22 | 24 | 26 |
| 70 | 12 | 14 | 15 | 17 | 19 | 20 | 22 | 24 | 26 | 28 |
| 71 | 13 | 15 | 17 | 18 | 20 | 22 | 24 | 26 | 28 | 30 |
| 72 | 15 | 17 | 18 | 20 | 22 | 24 | 26 | 28 | 30 | 32 |
| 73 | 16 | 18 | 20 | 22 | 24 | 26 | 28 | 31 | 33 | 35 |
| 74 | 18 | 20 | 22 | 24 | 26 | 28 | 31 | 33 | 35 | 37 |
| 75 | 19 | 22 | 24 | 26 | 28 | 31 | 33 | 35 | 38 | 40 |
| 76 | 21 | 24 | 26 | 28 | 31 | 33 | 36 | 38 | 40 | 43 |
| 77 | 23 | 26 | 28 | 31 | 33 | 36 | 38 | 41 | 43 | 45 |
| 78 | 25 | 28 | 31 | 33 | 36 | 38 | 41 | 43 | 46 | 48 |
| 79 | 28 | 30 | 33 | 36 | 38 | 41 | 44 | 46 | 48 | 51 |
| 80 | 30 | 33 | 36 | 38 | 41 | 44 | 46 | 49 | 51 | 53 |
| 81 | 32 | 35 | 38 | 41 | 44 | 47 | 49 | 51 | 54 | 56 |
| 82 | 35 | 38 | 41 | 44 | 47 | 49 | 52 | 54 | 56 | 58 |
| 83 | 38 | 41 | 44 | 47 | 49 | 52 | 54 | 57 | 59 | 61 |
| 84 | 40 | 44 | 47 | 49 | 52 | 55 | 57 | 59 | 61 | 63 |
| 85 | 43 | 46 | 49 | 52 | 55 | 57 | 59 | 62 | 63 | 65 |
| 86 | 46 | 49 | 52 | 55 | 57 | 60 | 62 | 64 | 66 | 67 |
| 87 | 48 | 52 | 55 | 57 | 60 | 62 | 64 | 66 | 68 | 69 |
| 88 | 51 | 54 | 57 | 60 | 62 | 64 | 66 | 68 | 70 | 71 |
| 89 | 54 | 57 | 60 | 62 | 65 | 67 | 68 | 70 | 72 | 73 |
| 90 | 56 | 59 | 62 | 64 | 67 | 69 | 70 | 72 | 74 | 75 |
| 91 | 59 | 62 | 64 | 67 | 69 | 71 | 72 | 74 | 75 | 76 |
| 92 | 61 | 64 | 66 | 69 | 71 | 72 | 74 | 75 | 77 | 78 |
| 93 | 63 | 66 | 68 | 70 | 72 | 74 | 75 | 77 | 78 | 79 |
| 94 | 65 | 68 | 70 | 72 | 74 | 75 | 77 | 78 | 79 | 80 |
| 95 | 67 | 69 | 72 | 74 | 75 | 77 | 78 | 79 | 81 | 82 |
| 96 | 69 | 71 | 73 | 75 | 77 | 78 | 80 | 81 | 82 | 83 |
| 97 | 70 | 73 | 75 | 77 | 78 | 80 | 81 | 82 | 83 | 84 |
| 98 | 72 | 74 | 76 | 78 | 79 | 81 | 82 | 83 | 84 | 85 |
| 99 | 74 | 76 | 78 | 79 | 81 | 82 | 83 | 84 | 85 | 86 |
| 100 | 75 | 78 | 79 | 81 | 82 | 83 | 84 | 85 | 86 | 86 |
| 101 | 77 | 79 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 87 |
| 102 | 79 | 81 | 82 | 83 | 84 | 85 | 86 | 87 | 88 | 88 |
| 103 | 80 | 82 | 83 | 85 | 86 | 87 | 87 | 88 | 89 | 89 |
| 104 | 82 | 84 | 85 | 86 | 87 | 88 | 88 | 89 | 90 | 90 |
| 105 | 84 | 85 | 86 | 87 | 88 | 89 | 89 | 90 | 90 | 91 |
| 106 | 85 | 86 | 87 | 88 | 89 | 90 | 90 | 91 | 91 | 92 |
| 107 | 87 | 88 | 89 | 89 | 90 | 91 | 91 | 92 | 92 | 93 |
| 108 | 88 | 89 | 90 | 90 | 91 | 92 | 92 | 93 | 93 | 93 |
| 109 | 89 | 90 | 91 | 92 | 92 | 93 | 93 | 93 | 94 | 94 |
| 110 | 90 | 91 | 92 | 92 | 93 | 93 | 94 | 94 | 94 | 95 |
| 111 | 92 | 92 | 93 | 93 | 94 | 94 | 95 | 95 | 95 | 95 |
| 112 | 93 | 93 | 94 | 94 | 95 | 95 | 95 | 96 | 96 | 96 |
| 113 | 94 | 94 | 95 | 95 | 95 | 96 | 96 | 96 | 96 | 97 |
| 114 | 95 | 95 | 95 | 96 | 96 | 96 | 97 | 97 | 97 | 97 |
| 115 | 95 | 96 | 96 | 96 | 97 | 97 | 97 | 97 | 97 | 98 |
Table VII—Percent Value of Refund Feature; Duration of Guaranteed Amount
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | |
| 5 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 6 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 7 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| 8 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 |
| 9 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 |
| 10 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 |
| 11 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 |
| 12 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 |
| 13 | 0 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 |
| 14 | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 |
| 15 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 16 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 17 | 0 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 18 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 19 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 20 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 21 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 22 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 23 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 24 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 25 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 26 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 27 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 |
| 28 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 |
| 29 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 30 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| 31 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 |
| 32 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 |
| 33 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
| 34 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 |
| 35 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 |
| 36 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 |
| 37 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 |
| 38 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 4 |
| 39 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 4 | 4 |
| 40 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 |
| 41 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 |
| 42 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 |
| 43 | 3 | 3 | 3 | 4 | 4 | 4 | 4 | 5 | 5 | 6 |
| 44 | 3 | 3 | 4 | 4 | 4 | 4 | 5 | 5 | 6 | 6 |
| 45 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 7 |
| 46 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 7 | 7 |
| 47 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 7 | 7 | 8 |
| 48 | 4 | 5 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 9 |
| 49 | 5 | 5 | 5 | 6 | 6 | 7 | 8 | 8 | 9 | 10 |
| 50 | 5 | 5 | 6 | 6 | 7 | 8 | 8 | 9 | 10 | 10 |
| 51 | 5 | 6 | 6 | 7 | 8 | 8 | 9 | 10 | 11 | 11 |
| 52 | 6 | 7 | 7 | 8 | 8 | 9 | 10 | 11 | 11 | 12 |
| 53 | 7 | 7 | 8 | 8 | 9 | 10 | 11 | 12 | 13 | 14 |
| 54 | 7 | 8 | 8 | 9 | 10 | 11 | 12 | 13 | 14 | 15 |
| 55 | 8 | 9 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 |
| 56 | 9 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 18 |
| 57 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 17 | 18 | 19 |
| 58 | 10 | 11 | 12 | 13 | 14 | 16 | 17 | 18 | 19 | 21 |
| 59 | 11 | 12 | 13 | 15 | 16 | 17 | 18 | 20 | 21 | 22 |
| 60 | 12 | 14 | 15 | 16 | 17 | 19 | 20 | 21 | 23 | 24 |
| 61 | 14 | 15 | 16 | 17 | 19 | 20 | 22 | 23 | 25 | 26 |
| 62 | 15 | 16 | 18 | 19 | 20 | 22 | 23 | 25 | 27 | 28 |
| 63 | 16 | 18 | 19 | 21 | 22 | 24 | 25 | 27 | 29 | 30 |
| 64 | 18 | 19 | 21 | 23 | 24 | 26 | 28 | 29 | 31 | 33 |
| 65 | 20 | 21 | 23 | 25 | 26 | 28 | 30 | 31 | 33 | 35 |
| 66 | 21 | 23 | 25 | 27 | 28 | 30 | 32 | 34 | 35 | 37 |
| 67 | 23 | 25 | 27 | 29 | 31 | 32 | 34 | 36 | 38 | 40 |
| 68 | 25 | 27 | 29 | 31 | 33 | 35 | 37 | 38 | 40 | 42 |
| 69 | 28 | 29 | 31 | 33 | 35 | 37 | 39 | 41 | 43 | 44 |
| 70 | 30 | 32 | 34 | 36 | 38 | 40 | 42 | 43 | 45 | 47 |
| 71 | 32 | 34 | 36 | 38 | 40 | 42 | 44 | 46 | 47 | 49 |
| 72 | 35 | 37 | 39 | 41 | 43 | 45 | 46 | 48 | 50 | 51 |
| 73 | 37 | 39 | 41 | 43 | 45 | 47 | 49 | 51 | 52 | 54 |
| 74 | 40 | 42 | 44 | 46 | 48 | 50 | 51 | 53 | 54 | 56 |
| 75 | 42 | 44 | 46 | 48 | 50 | 52 | 54 | 55 | 57 | 58 |
| 76 | 45 | 47 | 49 | 51 | 53 | 54 | 56 | 58 | 59 | 60 |
| 77 | 47 | 50 | 51 | 53 | 55 | 57 | 58 | 60 | 61 | 62 |
| 78 | 50 | 52 | 54 | 56 | 57 | 59 | 61 | 62 | 63 | 64 |
| 79 | 53 | 55 | 56 | 58 | 60 | 61 | 63 | 64 | 65 | 66 |
| 80 | 55 | 57 | 59 | 60 | 62 | 63 | 65 | 66 | 67 | 68 |
| 81 | 58 | 59 | 61 | 63 | 64 | 66 | 67 | 68 | 69 | 70 |
| 82 | 60 | 62 | 63 | 65 | 66 | 68 | 69 | 70 | 71 | 72 |
| 83 | 62 | 64 | 66 | 67 | 68 | 70 | 71 | 72 | 73 | 74 |
| 84 | 65 | 66 | 68 | 69 | 70 | 71 | 72 | 73 | 74 | 75 |
| 85 | 67 | 68 | 70 | 71 | 72 | 73 | 74 | 75 | 76 | 77 |
| 86 | 69 | 70 | 72 | 73 | 74 | 75 | 76 | 77 | 77 | 78 |
| 87 | 71 | 72 | 73 | 75 | 76 | 76 | 77 | 78 | 79 | 80 |
| 88 | 73 | 74 | 75 | 76 | 77 | 78 | 79 | 80 | 80 | 81 |
| 89 | 74 | 76 | 77 | 78 | 79 | 79 | 80 | 81 | 81 | 82 |
| 90 | 76 | 77 | 78 | 79 | 80 | 81 | 81 | 82 | 83 | 83 |
| 91 | 78 | 79 | 79 | 80 | 81 | 82 | 83 | 83 | 84 | 84 |
| 92 | 79 | 80 | 81 | 82 | 82 | 83 | 84 | 84 | 85 | 85 |
| 93 | 80 | 81 | 82 | 83 | 83 | 84 | 85 | 85 | 86 | 86 |
| 94 | 81 | 82 | 83 | 84 | 84 | 85 | 85 | 86 | 86 | 87 |
| 95 | 82 | 83 | 84 | 85 | 85 | 86 | 86 | 87 | 87 | 88 |
| 96 | 83 | 84 | 85 | 86 | 86 | 87 | 87 | 88 | 88 | 88 |
| 97 | 84 | 85 | 86 | 86 | 87 | 87 | 88 | 88 | 89 | 89 |
| 98 | 85 | 86 | 87 | 87 | 88 | 88 | 89 | 89 | 89 | 90 |
| 99 | 86 | 87 | 87 | 88 | 88 | 89 | 89 | 90 | 90 | 90 |
| 100 | 87 | 88 | 88 | 89 | 89 | 90 | 90 | 90 | 91 | 91 |
| 101 | 88 | 89 | 89 | 90 | 90 | 90 | 91 | 91 | 91 | 92 |
| 102 | 89 | 89 | 90 | 90 | 91 | 91 | 91 | 92 | 92 | 92 |
| 103 | 90 | 90 | 91 | 91 | 91 | 92 | 92 | 92 | 93 | 93 |
| 104 | 91 | 91 | 91 | 92 | 92 | 92 | 93 | 93 | 93 | 93 |
| 105 | 91 | 92 | 92 | 92 | 93 | 93 | 93 | 94 | 94 | 94 |
| 106 | 92 | 93 | 93 | 93 | 93 | 94 | 94 | 94 | 94 | 95 |
| 107 | 93 | 93 | 94 | 94 | 94 | 94 | 95 | 95 | 95 | 95 |
| 108 | 94 | 94 | 94 | 94 | 95 | 95 | 95 | 95 | 95 | 96 |
| 109 | 94 | 95 | 95 | 95 | 95 | 95 | 96 | 96 | 96 | 96 |
| 110 | 95 | 95 | 95 | 96 | 96 | 96 | 96 | 96 | 96 | 96 |
| 111 | 96 | 96 | 96 | 96 | 96 | 96 | 97 | 97 | 97 | 97 |
| 112 | 96 | 96 | 96 | 97 | 97 | 97 | 97 | 97 | 97 | 97 |
| 113 | 97 | 97 | 97 | 97 | 97 | 97 | 97 | 98 | 98 | 98 |
| 114 | 97 | 97 | 97 | 98 | 98 | 98 | 98 | 98 | 98 | 98 |
| 115 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 |
Table VII—Percent Value of Refund Feature; Duration of Guaranteed Amount
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | |
| 5 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 6 | 0 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 7 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 8 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 9 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 10 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 11 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 12 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 13 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 14 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 15 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 16 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 17 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 |
| 18 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 |
| 19 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 |
| 20 | 1 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 |
| 21 | 1 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 |
| 22 | 1 | 1 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 |
| 23 | 1 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
| 24 | 1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 |
| 25 | 1 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 |
| 26 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 |
| 27 | 2 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 |
| 28 | 2 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 |
| 29 | 2 | 2 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 4 |
| 30 | 2 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 |
| 31 | 2 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 |
| 32 | 2 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 |
| 33 | 3 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 |
| 34 | 3 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 |
| 35 | 3 | 3 | 3 | 4 | 4 | 4 | 5 | 5 | 5 | 6 |
| 36 | 3 | 4 | 4 | 4 | 4 | 5 | 5 | 5 | 6 | 6 |
| 37 | 4 | 4 | 4 | 4 | 5 | 5 | 6 | 6 | 6 | 7 |
| 38 | 4 | 4 | 5 | 5 | 5 | 6 | 6 | 7 | 7 | 8 |
| 39 | 4 | 5 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 8 |
| 40 | 5 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 8 | 9 |
| 41 | 5 | 5 | 6 | 6 | 7 | 7 | 8 | 9 | 9 | 10 |
| 42 | 6 | 6 | 6 | 7 | 7 | 8 | 9 | 9 | 10 | 11 |
| 43 | 6 | 7 | 7 | 8 | 8 | 9 | 9 | 10 | 11 | 12 |
| 44 | 7 | 7 | 8 | 8 | 9 | 10 | 10 | 11 | 12 | 13 |
| 45 | 7 | 8 | 8 | 9 | 10 | 10 | 11 | 12 | 13 | 14 |
| 46 | 8 | 9 | 9 | 10 | 11 | 11 | 12 | 13 | 14 | 15 |
| 47 | 9 | 9 | 10 | 11 | 12 | 12 | 13 | 14 | 15 | 16 |
| 48 | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 |
| 49 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 |
| 50 | 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 20 | 21 |
| 51 | 12 | 13 | 14 | 15 | 16 | 17 | 19 | 20 | 21 | 22 |
| 52 | 13 | 14 | 15 | 17 | 18 | 19 | 20 | 21 | 23 | 24 |
| 53 | 15 | 16 | 17 | 18 | 19 | 20 | 22 | 23 | 24 | 26 |
| 54 | 16 | 17 | 18 | 19 | 21 | 22 | 23 | 25 | 26 | 28 |
| 55 | 17 | 18 | 20 | 21 | 22 | 24 | 25 | 27 | 28 | 30 |
| 56 | 19 | 20 | 21 | 23 | 24 | 26 | 27 | 29 | 30 | 32 |
| 57 | 20 | 22 | 23 | 25 | 26 | 28 | 29 | 31 | 32 | 34 |
| 58 | 22 | 24 | 25 | 27 | 28 | 30 | 31 | 33 | 34 | 36 |
| 59 | 24 | 25 | 27 | 28 | 30 | 32 | 33 | 35 | 36 | 38 |
| 60 | 26 | 27 | 29 | 31 | 32 | 34 | 35 | 37 | 38 | 40 |
| 61 | 28 | 29 | 31 | 33 | 34 | 36 | 37 | 39 | 40 | 42 |
| 62 | 30 | 32 | 33 | 35 | 36 | 38 | 40 | 41 | 42 | 44 |
| 63 | 32 | 34 | 35 | 37 | 39 | 40 | 42 | 43 | 45 | 46 |
| 64 | 34 | 36 | 38 | 39 | 41 | 42 | 44 | 45 | 47 | 48 |
| 65 | 37 | 38 | 40 | 42 | 43 | 45 | 46 | 47 | 49 | 50 |
| 66 | 39 | 41 | 42 | 44 | 45 | 47 | 48 | 50 | 51 | 52 |
| 67 | 41 | 43 | 45 | 46 | 48 | 49 | 50 | 52 | 53 | 54 |
| 68 | 44 | 45 | 47 | 48 | 50 | 51 | 52 | 54 | 55 | 56 |
| 69 | 46 | 48 | 49 | 51 | 52 | 53 | 54 | 56 | 57 | 58 |
| 70 | 48 | 50 | 51 | 53 | 54 | 55 | 57 | 58 | 59 | 60 |
| 71 | 51 | 52 | 54 | 55 | 56 | 57 | 59 | 60 | 61 | 62 |
| 72 | 53 | 54 | 56 | 57 | 58 | 59 | 60 | 62 | 62 | 63 |
| 73 | 55 | 57 | 58 | 59 | 60 | 61 | 62 | 63 | 64 | 65 |
| 74 | 57 | 59 | 60 | 61 | 62 | 63 | 64 | 65 | 66 | 67 |
| 75 | 59 | 61 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 |
| 76 | 62 | 63 | 64 | 65 | 66 | 67 | 68 | 69 | 69 | 70 |
| 77 | 64 | 65 | 66 | 67 | 68 | 69 | 70 | 70 | 71 | 72 |
| 78 | 66 | 67 | 68 | 69 | 70 | 70 | 71 | 72 | 73 | 73 |
| 79 | 67 | 68 | 69 | 70 | 71 | 72 | 73 | 73 | 74 | 75 |
| 80 | 69 | 70 | 71 | 72 | 73 | 74 | 74 | 75 | 76 | 76 |
| 81 | 71 | 72 | 73 | 74 | 74 | 75 | 76 | 76 | 77 | 78 |
| 82 | 73 | 74 | 74 | 75 | 76 | 77 | 77 | 78 | 78 | 79 |
| 83 | 74 | 75 | 76 | 77 | 77 | 78 | 79 | 79 | 80 | 80 |
| 84 | 76 | 77 | 77 | 78 | 79 | 79 | 80 | 80 | 81 | 81 |
| 85 | 78 | 78 | 79 | 79 | 80 | 81 | 81 | 82 | 82 | 83 |
| 86 | 79 | 80 | 80 | 81 | 81 | 82 | 82 | 83 | 83 | 84 |
| 87 | 80 | 81 | 81 | 82 | 83 | 83 | 83 | 84 | 84 | 85 |
| 88 | 82 | 82 | 83 | 83 | 84 | 84 | 85 | 85 | 85 | 86 |
| 89 | 83 | 83 | 84 | 84 | 85 | 85 | 85 | 86 | 86 | 87 |
| 90 | 84 | 84 | 85 | 85 | 86 | 86 | 86 | 87 | 87 | 87 |
| 91 | 85 | 85 | 86 | 86 | 87 | 87 | 87 | 88 | 88 | 88 |
| 92 | 86 | 86 | 87 | 87 | 87 | 88 | 88 | 88 | 89 | 89 |
| 93 | 87 | 87 | 87 | 88 | 88 | 88 | 89 | 89 | 89 | 90 |
| 94 | 87 | 88 | 88 | 88 | 89 | 89 | 89 | 90 | 90 | 90 |
| 95 | 88 | 88 | 89 | 89 | 89 | 90 | 90 | 90 | 91 | 91 |
| 96 | 89 | 89 | 89 | 90 | 90 | 90 | 91 | 91 | 91 | 91 |
| 97 | 89 | 90 | 90 | 90 | 91 | 91 | 91 | 91 | 92 | 92 |
| 98 | 90 | 90 | 91 | 91 | 91 | 91 | 92 | 92 | 92 | 92 |
| 99 | 91 | 91 | 91 | 92 | 92 | 92 | 92 | 92 | 93 | 93 |
| 100 | 91 | 92 | 92 | 92 | 92 | 92 | 93 | 93 | 93 | 93 |
| 101 | 92 | 92 | 92 | 93 | 93 | 93 | 93 | 93 | 94 | 94 |
| 102 | 92 | 93 | 93 | 93 | 93 | 94 | 94 | 94 | 94 | 94 |
| 103 | 93 | 93 | 93 | 94 | 94 | 94 | 94 | 94 | 94 | 95 |
| 104 | 94 | 94 | 94 | 94 | 94 | 95 | 95 | 95 | 95 | 95 |
| 105 | 94 | 94 | 95 | 95 | 95 | 95 | 95 | 95 | 95 | 95 |
| 106 | 95 | 95 | 95 | 95 | 95 | 95 | 96 | 96 | 96 | 96 |
| 107 | 95 | 95 | 96 | 96 | 96 | 96 | 96 | 96 | 96 | 96 |
| 108 | 96 | 96 | 96 | 96 | 96 | 96 | 96 | 96 | 97 | 97 |
| 109 | 96 | 96 | 96 | 97 | 97 | 97 | 97 | 97 | 97 | 97 |
| 110 | 97 | 97 | 97 | 97 | 97 | 97 | 97 | 97 | 97 | 97 |
| 111 | 97 | 97 | 97 | 97 | 97 | 97 | 98 | 98 | 98 | 98 |
| 112 | 97 | 97 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 |
| 113 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 |
| 114 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 98 | 99 |
| 115 | 98 | 98 | 98 | 99 | 99 | 99 | 99 | 99 | 99 | 99 |
Table VIII—Temporary Life Annuities;
1 One Life—Expected Return Multiples
[See footnote at end of tables]
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | |
| 5 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 6 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 7 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 8 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 9 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 10 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 11 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 12 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 13 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 14 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 15 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 16 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 17 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 18 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 19 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 20 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 21 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 22 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 23 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 24 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 25 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 26 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 27 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 28 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 29 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 30 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 31 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 32 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 33 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 34 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 35 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 36 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 10.0 |
| 37 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 9.9 |
| 38 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 9.9 |
| 39 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 9.0 | 9.9 |
| 40 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 41 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 42 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 8.0 | 8.9 | 9.9 |
| 43 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 44 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 45 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 7.0 | 7.9 | 8.9 | 9.9 |
| 46 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 47 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 48 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.9 |
| 49 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 6.0 | 6.9 | 7.9 | 8.9 | 9.8 |
| 50 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.9 | 9.8 |
| 51 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.9 | 9.8 |
| 52 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.8 | 9.8 |
| 53 | 1.0 | 2.0 | 3.0 | 4.0 | 5.0 | 5.9 | 6.9 | 7.9 | 8.8 | 9.8 |
| 54 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.9 | 8.8 | 9.8 |
| 55 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.8 | 9.7 |
| 56 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.8 | 9.7 |
| 57 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.8 | 9.7 |
| 58 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.9 | 7.8 | 8.7 | 9.7 |
| 59 | 1.0 | 2.0 | 3.0 | 4.0 | 4.9 | 5.9 | 6.8 | 7.8 | 8.7 | 9.6 |
| 60 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.9 | 6.8 | 7.8 | 8.7 | 9.6 |
| 61 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.9 | 6.8 | 7.7 | 8.7 | 9.6 |
| 62 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.8 | 7.7 | 8.6 | 9.5 |
| 63 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.8 | 7.7 | 8.6 | 9.5 |
| 64 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.7 | 7.6 | 8.5 | 9.4 |
| 65 | 1.0 | 2.0 | 3.0 | 3.9 | 4.9 | 5.8 | 6.7 | 7.6 | 8.5 | 9.3 |
| 66 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.8 | 6.7 | 7.6 | 8.4 | 9.3 |
| 67 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.7 | 6.6 | 7.5 | 8.4 | 9.2 |
| 68 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.7 | 6.6 | 7.5 | 8.3 | 9.1 |
| 69 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.7 | 6.6 | 7.4 | 8.2 | 9.0 |
| 70 | 1.0 | 2.0 | 2.9 | 3.9 | 4.8 | 5.6 | 6.5 | 7.3 | 8.1 | 8.9 |
| 71 | 1.0 | 2.0 | 2.9 | 3.8 | 4.7 | 5.6 | 6.5 | 7.3 | 8.1 | 8.8 |
| 72 | 1.0 | 2.0 | 2.9 | 3.8 | 4.7 | 5.6 | 6.4 | 7.2 | 8.0 | 8.7 |
| 73 | 1.0 | 2.0 | 2.9 | 3.8 | 4.7 | 5.5 | 6.3 | 7.1 | 7.9 | 8.6 |
| 74 | 1.0 | 1.9 | 2.9 | 3.8 | 4.6 | 5.5 | 6.3 | 7.0 | 7.7 | 8.4 |
| 75 | 1.0 | 1.9 | 2.9 | 3.8 | 4.6 | 5.4 | 6.2 | 6.9 | 7.6 | 8.3 |
| 76 | 1.0 | 1.9 | 2.8 | 3.7 | 4.6 | 5.4 | 6.1 | 6.8 | 7.5 | 8.1 |
| 77 | 1.0 | 1.9 | 2.8 | 3.7 | 4.5 | 5.3 | 6.0 | 6.7 | 7.3 | 7.9 |
| 78 | 1.0 | 1.9 | 2.8 | 3.7 | 4.5 | 5.2 | 5.9 | 6.6 | 7.2 | 7.7 |
| 79 | 1.0 | 1.9 | 2.8 | 3.6 | 4.4 | 5.1 | 5.8 | 6.4 | 7.0 | 7.5 |
| 80 | 1.0 | 1.9 | 2.8 | 3.6 | 4.4 | 5.1 | 5.7 | 6.3 | 6.8 | 7.3 |
| 81 | 1.0 | 1.9 | 2.8 | 3.6 | 4.3 | 5.0 | 5.6 | 6.1 | 6.6 | 7.0 |
| 82 | 1.0 | 1.9 | 2.7 | 3.5 | 4.2 | 4.9 | 5.4 | 6.0 | 6.4 | 6.8 |
| 83 | 1.0 | 1.9 | 2.7 | 3.5 | 4.1 | 4.8 | 5.3 | 5.8 | 6.2 | 6.5 |
| 84 | 1.0 | 1.8 | 2.7 | 3.4 | 4.1 | 4.6 | 5.2 | 5.6 | 6.0 | 6.3 |
| 85 | 1.0 | 1.8 | 2.6 | 3.3 | 4.0 | 4.5 | 5.0 | 5.4 | 5.7 | 6.0 |
| 86 | 1.0 | 1.8 | 2.6 | 3.3 | 3.9 | 4.4 | 4.8 | 5.2 | 5.5 | 5.7 |
| 87 | .9 | 1.8 | 2.5 | 3.2 | 3.8 | 4.3 | 4.7 | 5.0 | 5.3 | 5.5 |
| 88 | .9 | 1.8 | 2.5 | 3.1 | 3.7 | 4.1 | 4.5 | 4.8 | 5.0 | 5.2 |
| 89 | .9 | 1.8 | 2.5 | 3.1 | 3.6 | 4.0 | 4.3 | 4.6 | 4.8 | 4.9 |
| 90 | .9 | 1.7 | 2.4 | 3.0 | 3.4 | 3.8 | 4.1 | 4.4 | 4.5 | 4.7 |
| 91 | .9 | 1.7 | 2.4 | 2.9 | 3.3 | 3.7 | 4.0 | 4.2 | 4.3 | 4.4 |
| 92 | .9 | 1.7 | 2.3 | 2.8 | 3.2 | 3.5 | 3.8 | 4.0 | 4.1 | 4.2 |
| 93 | .9 | 1.7 | 2.3 | 2.7 | 3.1 | 3.4 | 3.6 | 3.8 | 3.9 | 4.0 |
| 94 | .9 | 1.6 | 2.2 | 2.7 | 3.0 | 3.3 | 3.5 | 3.6 | 3.7 | 3.8 |
| 95 | .9 | 1.6 | 2.2 | 2.6 | 2.9 | 3.1 | 3.3 | 3.4 | 3.5 | 3.6 |
| 96 | .9 | 1.6 | 2.1 | 2.5 | 2.8 | 3.0 | 3.2 | 3.3 | 3.3 | 3.4 |
| 97 | .9 | 1.6 | 2.1 | 2.4 | 2.7 | 2.9 | 3.0 | 3.1 | 3.2 | 3.2 |
| 98 | .9 | 1.5 | 2.0 | 2.4 | 2.6 | 2.8 | 2.9 | 3.0 | 3.0 | 3.0 |
| 99 | .9 | 1.5 | 2.0 | 2.3 | 2.5 | 2.6 | 2.7 | 2.8 | 2.8 | 2.8 |
| 100 | .9 | 1.5 | 1.9 | 2.2 | 2.4 | 2.5 | 2.6 | 2.6 | 2.6 | 2.7 |
| 101 | .8 | 1.4 | 1.8 | 2.1 | 2.3 | 2.4 | 2.4 | 2.5 | 2.5 | 2.5 |
| 102 | .8 | 1.4 | 1.8 | 2.0 | 2.1 | 2.2 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | .8 | 1.4 | 1.7 | 1.9 | 2.0 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | .8 | 1.3 | 1.6 | 1.8 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | .8 | 1.3 | 1.5 | 1.7 | 1.7 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | .8 | 1.2 | 1.4 | 1.5 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | .7 | 1.1 | 1.3 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | .7 | 1.1 | 1.2 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | .7 | 1.0 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | .7 | .9 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .6 | .8 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .6 | .7 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .6 | .6 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .5 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIII—Temporary Life Annuities;
1 One Life—Expected Return Multiples
[See footnote at end of tables]
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 11 | 12 | 13 | 14 | 15 | 16 | 17 | 18 | 19 | 20 | |
| 5 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 18.0 | 19.0 | 19.9 |
| 6 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 18.0 | 19.0 | 19.9 |
| 7 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 18.0 | 19.0 | 19.9 |
| 8 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 18.0 | 18.9 | 19.9 |
| 9 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 18.0 | 18.9 | 19.9 |
| 10 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 18.0 | 18.9 | 19.9 |
| 11 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 17.9 | 18.9 | 19.9 |
| 12 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 17.9 | 18.9 | 19.9 |
| 13 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 17.0 | 17.9 | 18.9 | 19.9 |
| 14 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 16.9 | 17.9 | 18.9 | 19.9 |
| 15 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 16.9 | 17.9 | 18.9 | 19.9 |
| 16 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 16.0 | 16.9 | 17.9 | 18.9 | 19.9 |
| 17 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 18 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 19 | 11.0 | 12.0 | 13.0 | 14.0 | 15.0 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 20 | 11.0 | 12.0 | 13.0 | 14.0 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 21 | 11.0 | 12.0 | 13.0 | 14.0 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 22 | 11.0 | 12.0 | 13.0 | 14.0 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 23 | 11.0 | 12.0 | 13.0 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 24 | 11.0 | 12.0 | 13.0 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 25 | 11.0 | 12.0 | 13.0 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 26 | 11.0 | 12.0 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 27 | 11.0 | 12.0 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.9 |
| 28 | 11.0 | 12.0 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.8 |
| 29 | 11.0 | 12.0 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.9 | 19.8 |
| 30 | 11.0 | 11.9 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.8 | 19.8 |
| 31 | 11.0 | 11.9 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.9 | 18.8 | 19.8 |
| 32 | 11.0 | 11.9 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.8 | 18.8 | 19.8 |
| 33 | 11.0 | 11.9 | 12.9 | 13.9 | 14.9 | 15.9 | 16.9 | 17.8 | 18.8 | 19.8 |
| 34 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.9 | 16.8 | 17.8 | 18.8 | 19.8 |
| 35 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.9 | 16.8 | 17.8 | 18.8 | 19.7 |
| 36 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.8 | 19.7 |
| 37 | 10.9 | 11.9 | 12.9 | 13.9 | 14.9 | 15.8 | 16.8 | 17.8 | 18.7 | 19.7 |
| 38 | 10.9 | 11.9 | 12.9 | 13.9 | 14.8 | 15.8 | 16.8 | 17.8 | 18.7 | 19.7 |
| 39 | 10.9 | 11.9 | 12.9 | 13.9 | 14.8 | 15.8 | 16.8 | 17.7 | 18.7 | 19.6 |
| 40 | 10.9 | 11.9 | 12.9 | 13.8 | 14.8 | 15.8 | 16.7 | 17.7 | 18.7 | 19.6 |
| 41 | 10.9 | 11.9 | 12.9 | 13.8 | 14.8 | 15.8 | 16.7 | 17.7 | 18.6 | 19.6 |
| 42 | 10.9 | 11.9 | 12.8 | 13.8 | 14.8 | 15.7 | 16.7 | 17.6 | 18.6 | 19.5 |
| 43 | 10.9 | 11.9 | 12.8 | 13.8 | 14.8 | 15.7 | 16.7 | 17.6 | 18.6 | 19.5 |
| 44 | 10.9 | 11.8 | 12.8 | 13.8 | 14.7 | 15.7 | 16.6 | 17.6 | 18.5 | 19.4 |
| 45 | 10.9 | 11.8 | 12.8 | 13.8 | 14.7 | 15.7 | 16.6 | 17.5 | 18.5 | 19.4 |
| 46 | 10.9 | 11.8 | 12.8 | 13.7 | 14.7 | 15.6 | 16.6 | 17.5 | 18.4 | 19.3 |
| 47 | 10.8 | 11.8 | 12.8 | 13.7 | 14.7 | 15.6 | 16.5 | 17.5 | 18.4 | 19.3 |
| 48 | 10.8 | 11.8 | 12.7 | 13.7 | 14.6 | 15.6 | 16.5 | 17.4 | 18.3 | 19.2 |
| 49 | 10.8 | 11.8 | 12.7 | 13.7 | 14.6 | 15.5 | 16.4 | 17.4 | 18.3 | 19.2 |
| 50 | 10.8 | 11.7 | 12.7 | 13.6 | 14.6 | 15.5 | 16.4 | 17.3 | 18.2 | 19.1 |
| 51 | 10.8 | 11.7 | 12.7 | 13.6 | 14.5 | 15.4 | 16.3 | 17.2 | 18.1 | 19.0 |
| 52 | 10.8 | 11.7 | 12.6 | 13.6 | 14.5 | 15.4 | 16.3 | 17.2 | 18.0 | 18.9 |
| 53 | 10.7 | 11.7 | 12.6 | 13.5 | 14.4 | 15.3 | 16.2 | 17.1 | 18.0 | 18.8 |
| 54 | 10.7 | 11.6 | 12.6 | 13.5 | 14.4 | 15.3 | 16.2 | 17.0 | 17.9 | 18.7 |
| 55 | 10.7 | 11.6 | 12.5 | 13.4 | 14.3 | 15.2 | 16.1 | 16.9 | 17.8 | 18.6 |
| 56 | 10.7 | 11.6 | 12.5 | 13.4 | 14.3 | 15.1 | 16.0 | 16.8 | 17.6 | 18.4 |
| 57 | 10.6 | 11.5 | 12.4 | 13.3 | 14.2 | 15.1 | 15.9 | 16.7 | 17.5 | 18.3 |
| 58 | 10.6 | 11.5 | 12.4 | 13.3 | 14.1 | 15.0 | 15.8 | 16.6 | 17.4 | 18.1 |
| 59 | 10.6 | 11.4 | 12.3 | 13.2 | 14.0 | 14.9 | 15.7 | 16.4 | 17.2 | 17.9 |
| 60 | 10.5 | 11.4 | 12.3 | 13.1 | 13.9 | 14.7 | 15.5 | 16.3 | 17.0 | 17.7 |
| 61 | 10.5 | 11.3 | 12.2 | 13.0 | 13.8 | 14.6 | 15.4 | 16.1 | 16.8 | 17.5 |
| 62 | 10.4 | 11.3 | 12.1 | 12.9 | 13.7 | 14.5 | 15.2 | 15.9 | 16.6 | 17.2 |
| 63 | 10.3 | 11.2 | 12.0 | 12.8 | 13.6 | 14.3 | 15.0 | 15.7 | 16.3 | 17.0 |
| 64 | 10.3 | 11.1 | 11.9 | 12.7 | 13.4 | 14.1 | 14.8 | 15.5 | 16.1 | 16.7 |
| 65 | 10.2 | 11.0 | 11.8 | 12.5 | 13.2 | 13.9 | 14.6 | 15.2 | 15.8 | 16.3 |
| 66 | 10.1 | 10.9 | 11.6 | 12.4 | 13.1 | 13.7 | 14.4 | 14.9 | 15.5 | 16.0 |
| 67 | 10.0 | 10.8 | 11.5 | 12.2 | 12.9 | 13.5 | 14.1 | 14.7 | 15.2 | 15.6 |
| 68 | 9.9 | 10.6 | 11.4 | 12.0 | 12.7 | 13.3 | 13.8 | 14.3 | 14.8 | 15.3 |
| 69 | 9.8 | 10.5 | 11.2 | 11.8 | 12.4 | 13.0 | 13.5 | 14.0 | 14.4 | 14.8 |
| 70 | 9.6 | 10.3 | 11.0 | 11.6 | 12.2 | 12.7 | 13.2 | 13.7 | 14.0 | 14.4 |
| 71 | 9.5 | 10.2 | 10.8 | 11.4 | 11.9 | 12.4 | 12.9 | 13.3 | 13.6 | 13.9 |
| 72 | 9.4 | 10.0 | 10.6 | 11.2 | 11.7 | 12.1 | 12.5 | 12.9 | 13.2 | 13.5 |
| 73 | 9.2 | 9.8 | 10.4 | 10.9 | 11.4 | 11.8 | 12.1 | 12.5 | 12.7 | 13.0 |
| 74 | 9.0 | 9.6 | 10.1 | 10.6 | 11.0 | 11.4 | 11.7 | 12.0 | 12.3 | 12.5 |
| 75 | 8.8 | 9.4 | 9.9 | 10.3 | 10.7 | 11.0 | 11.3 | 11.6 | 11.8 | 12.0 |
| 76 | 8.6 | 9.1 | 9.6 | 10.0 | 10.3 | 10.6 | 10.9 | 11.1 | 11.3 | 11.4 |
| 77 | 8.4 | 8.9 | 9.3 | 9.7 | 10.0 | 10.2 | 10.5 | 10.6 | 10.8 | 10.9 |
| 78 | 8.2 | 8.6 | 9.0 | 9.3 | 9.6 | 9.8 | 10.0 | 10.2 | 10.3 | 10.4 |
| 79 | 7.9 | 8.3 | 8.7 | 9.0 | 9.2 | 9.4 | 9.5 | 9.7 | 9.8 | 9.8 |
| 80 | 7.7 | 8.0 | 8.3 | 8.6 | 8.8 | 9.0 | 9.1 | 9.2 | 9.3 | 9.3 |
| 81 | 7.4 | 7.7 | 8.0 | 8.2 | 8.4 | 8.5 | 8.6 | 8.7 | 8.8 | 8.8 |
| 82 | 7.1 | 7.4 | 7.6 | 7.8 | 8.0 | 8.1 | 8.2 | 8.2 | 8.3 | 8.3 |
| 83 | 6.8 | 7.1 | 7.3 | 7.4 | 7.5 | 7.6 | 7.7 | 7.8 | 7.8 | 7.8 |
| 84 | 6.5 | 6.7 | 6.9 | 7.0 | 7.1 | 7.2 | 7.3 | 7.3 | 7.3 | 7.4 |
| 85 | 6.2 | 6.4 | 6.6 | 6.7 | 6.7 | 6.8 | 6.8 | 6.9 | 6.9 | 6.9 |
| 86 | 5.9 | 6.1 | 6.2 | 6.3 | 6.4 | 6.4 | 6.4 | 6.5 | 6.5 | 6.5 |
| 87 | 5.6 | 5.8 | 5.9 | 5.9 | 6.0 | 6.0 | 6.0 | 6.1 | 6.1 | 6.1 |
| 88 | 5.3 | 5.4 | 5.5 | 5.6 | 5.6 | 5.6 | 5.7 | 5.7 | 5.7 | 5.7 |
| 89 | 5.1 | 5.1 | 5.2 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 |
| 90 | 4.8 | 4.9 | 4.9 | 4.9 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
| 91 | 4.5 | 4.6 | 4.6 | 4.6 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 |
| 92 | 4.3 | 4.3 | 4.3 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 |
| 93 | 4.0 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.8 | 3.8 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| 95 | 3.6 | 3.6 | 3.6 | 3.6 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIII—Temporary Life Annuities;
1 One Life—Expected Return Multiples
[See footnote at end of tables]
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 21 | 22 | 23 | 24 | 25 | 26 | 27 | 28 | 29 | 30 | |
| 5 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.9 | 28.9 | 29.9 |
| 6 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.9 | 28.9 | 29.9 |
| 7 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.9 | 28.9 | 29.9 |
| 8 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.9 | 28.9 | 29.8 |
| 9 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.9 | 28.9 | 29.8 |
| 10 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.9 | 28.8 | 29.8 |
| 11 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.9 | 28.8 | 29.8 |
| 12 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.8 | 28.8 | 29.8 |
| 13 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.9 | 27.8 | 28.8 | 29.8 |
| 14 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.8 | 27.8 | 28.8 | 29.8 |
| 15 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.9 | 26.8 | 27.8 | 28.8 | 29.8 |
| 16 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.8 | 26.8 | 27.8 | 28.8 | 29.8 |
| 17 | 20.9 | 21.9 | 22.9 | 23.9 | 24.9 | 25.8 | 26.8 | 27.8 | 28.8 | 29.8 |
| 18 | 20.9 | 21.9 | 22.9 | 23.9 | 24.8 | 25.8 | 26.8 | 27.8 | 28.8 | 29.7 |
| 19 | 20.9 | 21.9 | 22.9 | 23.9 | 24.8 | 25.8 | 26.8 | 27.8 | 28.8 | 29.7 |
| 20 | 20.9 | 21.9 | 22.9 | 23.8 | 24.8 | 25.8 | 26.8 | 27.8 | 28.7 | 29.7 |
| 21 | 20.9 | 21.9 | 22.9 | 23.8 | 24.8 | 25.8 | 26.8 | 27.8 | 28.7 | 29.7 |
| 22 | 20.9 | 21.9 | 22.8 | 23.8 | 24.8 | 25.8 | 26.8 | 27.7 | 28.7 | 29.7 |
| 23 | 20.9 | 21.9 | 22.8 | 23.8 | 24.8 | 25.8 | 26.7 | 27.7 | 28.7 | 29.7 |
| 24 | 20.9 | 21.8 | 22.8 | 23.8 | 24.8 | 25.8 | 26.7 | 27.7 | 28.7 | 29.6 |
| 25 | 20.9 | 21.8 | 22.8 | 23.8 | 24.8 | 25.7 | 26.7 | 27.7 | 28.6 | 29.6 |
| 26 | 20.8 | 21.8 | 22.8 | 23.8 | 24.8 | 25.7 | 26.7 | 27.7 | 28.6 | 29.6 |
| 27 | 20.8 | 21.8 | 22.8 | 23.8 | 24.7 | 25.7 | 26.7 | 27.6 | 28.6 | 29.5 |
| 28 | 20.8 | 21.8 | 22.8 | 23.7 | 24.7 | 25.7 | 26.6 | 27.6 | 28.6 | 29.5 |
| 29 | 20.8 | 21.8 | 22.8 | 23.7 | 24.7 | 25.7 | 26.6 | 27.6 | 28.5 | 29.5 |
| 30 | 20.8 | 21.8 | 22.7 | 23.7 | 24.7 | 25.6 | 26.6 | 27.5 | 28.5 | 29.4 |
| 31 | 20.8 | 21.8 | 22.7 | 23.7 | 24.6 | 25.6 | 26.6 | 27.5 | 28.4 | 29.4 |
| 32 | 20.8 | 21.7 | 22.7 | 23.7 | 24.6 | 25.6 | 26.5 | 27.5 | 28.4 | 29.3 |
| 33 | 20.8 | 21.7 | 22.7 | 23.6 | 24.6 | 25.5 | 26.5 | 27.4 | 28.4 | 29.3 |
| 34 | 20.7 | 21.7 | 22.7 | 23.6 | 24.6 | 25.5 | 26.4 | 27.4 | 28.3 | 29.2 |
| 35 | 20.7 | 21.7 | 22.6 | 23.6 | 24.5 | 25.5 | 26.4 | 27.3 | 28.2 | 29.2 |
| 36 | 20.7 | 21.6 | 22.6 | 23.5 | 24.5 | 25.4 | 26.3 | 27.3 | 28.2 | 29.1 |
| 37 | 20.7 | 21.6 | 22.6 | 23.5 | 24.4 | 25.4 | 26.3 | 27.2 | 28.1 | 29.0 |
| 38 | 20.6 | 21.6 | 22.5 | 23.4 | 24.4 | 25.3 | 26.2 | 27.1 | 28.0 | 28.9 |
| 39 | 20.6 | 21.5 | 22.5 | 23.4 | 24.3 | 25.2 | 26.1 | 27.0 | 27.9 | 28.8 |
| 40 | 20.6 | 21.5 | 22.4 | 23.3 | 24.3 | 25.2 | 26.1 | 27.0 | 27.8 | 28.7 |
| 41 | 20.5 | 21.4 | 22.4 | 23.3 | 24.2 | 25.1 | 26.0 | 26.9 | 27.7 | 28.6 |
| 42 | 20.5 | 21.4 | 22.3 | 23.2 | 24.1 | 25.0 | 25.9 | 26.8 | 27.6 | 28.5 |
| 43 | 20.4 | 21.3 | 22.2 | 23.2 | 24.0 | 24.9 | 25.8 | 26.6 | 27.5 | 28.3 |
| 44 | 20.4 | 21.3 | 22.2 | 23.1 | 24.0 | 24.8 | 25.7 | 26.5 | 27.3 | 28.2 |
| 45 | 20.3 | 21.2 | 22.1 | 23.0 | 23.9 | 24.7 | 25.6 | 26.4 | 27.2 | 28.0 |
| 46 | 20.2 | 21.1 | 22.0 | 22.9 | 23.8 | 24.6 | 25.4 | 26.2 | 27.0 | 27.8 |
| 47 | 20.2 | 21.1 | 21.9 | 22.8 | 23.6 | 24.5 | 25.3 | 26.1 | 26.8 | 27.6 |
| 48 | 20.1 | 21.0 | 21.8 | 22.7 | 23.5 | 24.3 | 25.1 | 25.9 | 26.6 | 27.4 |
| 49 | 20.0 | 20.9 | 21.7 | 22.6 | 23.4 | 24.2 | 25.0 | 25.7 | 26.4 | 27.1 |
| 50 | 19.9 | 20.8 | 21.6 | 22.4 | 23.2 | 24.0 | 24.8 | 25.5 | 26.2 | 26.9 |
| 51 | 19.8 | 20.7 | 21.5 | 22.3 | 23.1 | 23.8 | 24.6 | 25.3 | 25.9 | 26.6 |
| 52 | 19.7 | 20.6 | 21.4 | 22.1 | 22.9 | 23.6 | 24.3 | 25.0 | 25.7 | 26.3 |
| 53 | 19.6 | 20.4 | 21.2 | 22.0 | 22.7 | 23.4 | 24.1 | 24.7 | 25.3 | 25.9 |
| 54 | 19.5 | 20.3 | 21.0 | 21.8 | 22.5 | 23.2 | 23.8 | 24.4 | 25.0 | 25.6 |
| 55 | 19.3 | 20.1 | 20.8 | 21.6 | 22.2 | 22.9 | 23.5 | 24.1 | 24.6 | 25.2 |
| 56 | 19.2 | 19.9 | 20.6 | 21.3 | 22.0 | 22.6 | 23.2 | 23.7 | 24.3 | 24.7 |
| 57 | 19.0 | 19.7 | 20.4 | 21.1 | 21.7 | 22.3 | 22.8 | 23.4 | 23.8 | 24.3 |
| 58 | 18.8 | 19.5 | 20.2 | 20.8 | 21.4 | 21.9 | 22.5 | 22.9 | 23.4 | 23.8 |
| 59 | 18.6 | 19.3 | 19.9 | 20.5 | 21.1 | 21.6 | 22.0 | 22.5 | 22.9 | 23.2 |
| 60 | 18.4 | 19.0 | 19.6 | 20.2 | 20.7 | 21.2 | 21.6 | 22.0 | 22.4 | 22.7 |
| 61 | 18.1 | 18.7 | 19.3 | 19.8 | 20.3 | 20.7 | 21.1 | 21.5 | 21.8 | 22.1 |
| 62 | 17.8 | 18.4 | 18.9 | 19.4 | 19.9 | 20.3 | 20.6 | 21.0 | 21.2 | 21.5 |
| 63 | 17.5 | 18.1 | 18.5 | 19.0 | 19.4 | 19.8 | 20.1 | 20.4 | 20.6 | 20.8 |
| 64 | 17.2 | 17.7 | 18.1 | 18.6 | 18.9 | 19.3 | 19.5 | 19.8 | 20.0 | 20.2 |
| 65 | 16.8 | 17.3 | 17.7 | 18.1 | 18.4 | 18.7 | 18.9 | 19.2 | 19.3 | 19.5 |
| 66 | 16.5 | 16.9 | 17.3 | 17.6 | 17.9 | 18.1 | 18.3 | 18.5 | 18.7 | 18.8 |
| 67 | 16.1 | 16.4 | 16.8 | 17.1 | 17.3 | 17.5 | 17.7 | 17.9 | 18.0 | 18.1 |
| 68 | 15.6 | 16.0 | 16.3 | 16.5 | 16.7 | 16.9 | 17.1 | 17.2 | 17.3 | 17.4 |
| 69 | 15.2 | 15.5 | 15.7 | 16.0 | 16.1 | 16.3 | 16.4 | 16.5 | 16.6 | 16.7 |
| 70 | 14.7 | 15.0 | 15.2 | 15.4 | 15.5 | 15.7 | 15.8 | 15.8 | 15.9 | 15.9 |
| 71 | 14.2 | 14.4 | 14.6 | 14.8 | 14.9 | 15.0 | 15.1 | 15.2 | 15.2 | 15.2 |
| 72 | 13.7 | 13.9 | 14.1 | 14.2 | 14.3 | 14.4 | 14.4 | 14.5 | 14.5 | 14.5 |
| 73 | 13.2 | 13.3 | 13.5 | 13.6 | 13.7 | 13.7 | 13.8 | 13.8 | 13.8 | 13.9 |
| 74 | 12.6 | 12.8 | 12.9 | 13.0 | 13.0 | 13.1 | 13.1 | 13.1 | 13.2 | 13.2 |
| 75 | 12.1 | 12.2 | 12.3 | 12.4 | 12.4 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 |
| 76 | 11.5 | 11.6 | 11.7 | 11.8 | 11.8 | 11.8 | 11.8 | 11.9 | 11.9 | 11.9 |
| 77 | 11.0 | 11.1 | 11.1 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 |
| 78 | 10.4 | 10.5 | 10.5 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 |
| 79 | 9.9 | 9.9 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 |
| 80 | 9.4 | 9.4 | 9.4 | 9.4 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 |
| 81 | 8.8 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 |
| 82 | 8.3 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 |
| 83 | 7.8 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 |
| 84 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 |
| 85 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 |
| 86 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 |
| 87 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 |
| 88 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 |
| 89 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 |
| 90 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
| 91 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 |
| 92 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 |
| 93 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| 95 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
Table VIII—Temporary Life Annuities;
1 One Life—Expected Return Multiples
[See footnote at end of tables]
| Age | Years— | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 31 | 32 | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | |
| 5 | 30.8 | 31.8 | 32.8 | 33.8 | 34.8 | 35.8 | 36.8 | 37.7 | 38.7 | 39.7 |
| 6 | 30.8 | 31.8 | 32.8 | 33.8 | 34.8 | 35.8 | 36.8 | 37.7 | 38.7 | 39.7 |
| 7 | 30.8 | 31.8 | 32.8 | 33.8 | 34.8 | 35.8 | 36.7 | 37.7 | 38.7 | 39.7 |
| 8 | 30.8 | 31.8 | 32.8 | 33.8 | 34.8 | 35.7 | 36.7 | 37.7 | 38.7 | 39.7 |
| 9 | 30.8 | 31.8 | 32.8 | 33.8 | 34.8 | 35.7 | 36.7 | 37.7 | 38.7 | 39.6 |
| 10 | 30.8 | 31.8 | 32.8 | 33.8 | 34.7 | 35.7 | 36.7 | 37.7 | 38.6 | 39.6 |
| 11 | 30.8 | 31.8 | 32.8 | 33.8 | 34.7 | 35.7 | 36.7 | 37.7 | 38.6 | 39.6 |
| 12 | 30.8 | 31.8 | 32.8 | 33.7 | 34.7 | 35.7 | 36.7 | 37.6 | 38.6 | 39.6 |
| 13 | 30.8 | 31.8 | 32.7 | 33.7 | 34.7 | 35.7 | 36.6 | 37.6 | 38.6 | 39.5 |
| 14 | 30.8 | 31.8 | 32.7 | 33.7 | 34.7 | 35.7 | 36.6 | 37.6 | 38.6 | 39.5 |
| 15 | 30.8 | 31.7 | 32.7 | 33.7 | 34.7 | 35.6 | 36.6 | 37.6 | 38.5 | 39.5 |
| 16 | 30.8 | 31.7 | 32.7 | 33.7 | 34.6 | 35.6 | 36.6 | 37.5 | 38.5 | 39.4 |
| 17 | 30.7 | 31.7 | 32.7 | 33.7 | 34.6 | 35.6 | 36.5 | 37.5 | 38.5 | 39.4 |
| 18 | 30.7 | 31.7 | 32.7 | 33.6 | 34.6 | 35.6 | 36.5 | 37.5 | 38.4 | 39.4 |
| 19 | 30.7 | 31.7 | 32.6 | 33.6 | 34.6 | 35.5 | 36.5 | 37.4 | 38.4 | 39.3 |
| 20 | 30.7 | 31.7 | 32.6 | 33.6 | 34.5 | 35.5 | 36.4 | 37.4 | 38.3 | 39.3 |
| 21 | 30.7 | 31.6 | 32.6 | 33.6 | 34.5 | 35.5 | 36.4 | 37.4 | 38.3 | 39.2 |
| 22 | 30.6 | 31.6 | 32.6 | 33.5 | 34.5 | 35.4 | 36.4 | 37.3 | 38.2 | 39.2 |
| 23 | 30.6 | 31.6 | 32.5 | 33.5 | 34.4 | 35.4 | 36.3 | 37.3 | 38.2 | 39.1 |
| 24 | 30.6 | 31.5 | 32.5 | 33.5 | 34.4 | 35.3 | 36.3 | 37.2 | 38.1 | 39.0 |
| 25 | 30.6 | 31.5 | 32.5 | 33.4 | 34.3 | 35.3 | 36.2 | 37.1 | 38.1 | 39.0 |
| 26 | 30.5 | 31.5 | 32.4 | 33.4 | 34.3 | 35.2 | 36.2 | 37.1 | 38.0 | 38.9 |
| 27 | 30.5 | 31.4 | 32.4 | 33.3 | 34.2 | 35.2 | 36.1 | 37.0 | 37.9 | 38.8 |
| 28 | 30.5 | 31.4 | 32.3 | 33.3 | 34.2 | 35.1 | 36.0 | 36.9 | 37.8 | 38.7 |
| 29 | 30.4 | 31.4 | 32.3 | 33.2 | 34.1 | 35.0 | 35.9 | 36.8 | 37.7 | 38.6 |
| 30 | 30.4 | 31.3 | 32.2 | 33.1 | 34.1 | 35.0 | 35.8 | 36.7 | 37.6 | 38.5 |
| 31 | 30.3 | 31.2 | 32.2 | 33.1 | 34.0 | 34.9 | 35.8 | 36.6 | 37.5 | 38.3 |
| 32 | 30.3 | 31.2 | 32.1 | 33.0 | 33.9 | 34.8 | 35.6 | 36.5 | 37.4 | 38.2 |
| 33 | 30.2 | 31.1 | 32.0 | 32.9 | 33.8 | 34.7 | 35.5 | 36.4 | 37.2 | 38.0 |
| 34 | 30.1 | 31.0 | 31.9 | 32.8 | 33.7 | 34.6 | 35.4 | 36.2 | 37.1 | 37.9 |
| 35 | 30.1 | 31.0 | 31.8 | 32.7 | 33.6 | 34.4 | 35.3 | 36.1 | 36.9 | 37.7 |
| 36 | 30.0 | 30.9 | 31.7 | 32.6 | 33.5 | 34.3 | 35.1 | 35.9 | 36.7 | 37.4 |
| 37 | 29.9 | 30.8 | 31.6 | 32.5 | 33.3 | 34.1 | 34.9 | 35.7 | 36.5 | 37.2 |
| 38 | 29.8 | 30.7 | 31.5 | 32.3 | 33.2 | 34.0 | 34.7 | 35.5 | 36.2 | 37.0 |
| 39 | 29.7 | 30.5 | 31.4 | 32.2 | 33.0 | 33.8 | 34.5 | 35.3 | 36.0 | 36.7 |
| 40 | 29.6 | 30.4 | 31.2 | 32.0 | 32.8 | 33.6 | 34.3 | 35.0 | 35.7 | 36.4 |
| 41 | 29.4 | 30.2 | 31.0 | 31.8 | 32.6 | 33.3 | 34.1 | 34.7 | 35.4 | 36.0 |
| 42 | 29.3 | 30.1 | 30.9 | 31.6 | 32.4 | 33.1 | 33.8 | 34.4 | 35.1 | 35.7 |
| 43 | 29.1 | 29.9 | 30.7 | 31.4 | 32.1 | 32.8 | 33.5 | 34.1 | 34.7 | 35.3 |
| 44 | 28.9 | 29.7 | 30.5 | 31.2 | 31.9 | 32.5 | 33.2 | 33.8 | 34.3 | 34.9 |
| 45 | 28.8 | 29.5 | 30.2 | 30.9 | 31.6 | 32.2 | 32.8 | 33.4 | 33.9 | 34.4 |
| 46 | 28.5 | 29.3 | 30.0 | 30.6 | 31.3 | 31.9 | 32.4 | 33.0 | 33.5 | 33.9 |
| 47 | 28.3 | 29.0 | 29.7 | 30.3 | 30.9 | 31.5 | 32.0 | 32.5 | 33.0 | 33.4 |
| 48 | 28.1 | 28.7 | 29.4 | 30.0 | 30.6 | 31.1 | 31.6 | 32.1 | 32.5 | 32.9 |
| 49 | 27.8 | 28.4 | 29.0 | 29.6 | 30.2 | 30.7 | 31.1 | 31.5 | 31.9 | 32.3 |
| 50 | 27.5 | 28.1 | 28.7 | 29.2 | 29.7 | 30.2 | 30.6 | 31.0 | 31.4 | 31.7 |
| 51 | 27.2 | 27.8 | 28.3 | 28.8 | 29.3 | 29.7 | 30.1 | 30.4 | 30.7 | 31.0 |
| 52 | 26.8 | 27.4 | 27.9 | 28.4 | 28.8 | 29.2 | 29.5 | 29.8 | 30.1 | 30.3 |
| 53 | 26.5 | 27.0 | 27.4 | 27.9 | 28.3 | 28.6 | 28.9 | 29.2 | 29.4 | 29.6 |
| 54 | 26.1 | 26.5 | 27.0 | 27.4 | 27.7 | 28.0 | 28.3 | 28.5 | 28.7 | 28.9 |
| 55 | 25.6 | 26.1 | 26.5 | 26.8 | 27.1 | 27.4 | 27.6 | 27.8 | 28.0 | 28.1 |
| 56 | 25.2 | 25.6 | 25.9 | 26.2 | 26.5 | 26.7 | 26.9 | 27.1 | 27.2 | 27.3 |
| 57 | 24.7 | 25.0 | 25.3 | 25.6 | 25.8 | 26.0 | 26.2 | 26.3 | 26.5 | 26.5 |
| 58 | 24.1 | 24.4 | 24.7 | 25.0 | 25.2 | 25.3 | 25.5 | 25.6 | 25.7 | 25.7 |
| 59 | 23.6 | 23.8 | 24.1 | 24.3 | 24.4 | 24.6 | 24.7 | 24.8 | 24.9 | 24.9 |
| 60 | 23.0 | 23.2 | 23.4 | 23.6 | 23.7 | 23.8 | 23.9 | 24.0 | 24.0 | 24.1 |
| 61 | 22.3 | 22.5 | 22.7 | 22.9 | 23.0 | 23.1 | 23.1 | 23.2 | 23.2 | 23.3 |
| 62 | 21.7 | 21.9 | 22.0 | 22.1 | 22.2 | 22.3 | 22.3 | 22.4 | 22.4 | 22.4 |
| 63 | 21.0 | 21.1 | 21.3 | 21.4 | 21.4 | 21.5 | 21.5 | 21.6 | 21.6 | 21.6 |
| 64 | 20.3 | 20.4 | 20.5 | 20.6 | 20.6 | 20.7 | 20.7 | 20.7 | 20.8 | 20.8 |
| 65 | 19.6 | 19.7 | 19.8 | 19.8 | 19.9 | 19.9 | 19.9 | 19.9 | 19.9 | 20.0 |
| 66 | 18.9 | 19.0 | 19.0 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 | 19.1 |
| 67 | 18.2 | 18.2 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.3 | 18.4 | 18.4 |
| 68 | 17.4 | 17.5 | 17.5 | 17.5 | 17.5 | 17.6 | 17.6 | 17.6 | 17.6 | 17.6 |
| 69 | 16.7 | 16.7 | 16.8 | 16.8 | 16.8 | 16.8 | 16.8 | 16.8 | 16.8 | 16.8 |
| 70 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 | 16.0 |
| 71 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 | 15.3 |
| 72 | 14.6 | 14.6 | 14.6 | 14.6 | 14.6 | 14.6 | 14.6 | 14.6 | 14.6 | 14.6 |
| 73 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 | 13.9 |
| 74 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 | 13.2 |
| 75 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 | 12.5 |
| 76 | 11.9 | 11.9 | 11.9 | 11.9 | 11.9 | 11.9 | 11.9 | 11.9 | 11.9 | 11.9 |
| 77 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 | 11.2 |
| 78 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 | 10.6 |
| 79 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 | 10.0 |
| 80 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 | 9.5 |
| 81 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 | 8.9 |
| 82 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 | 8.4 |
| 83 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 | 7.9 |
| 84 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 | 7.4 |
| 85 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 | 6.9 |
| 86 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 |
| 87 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 | 6.1 |
| 88 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 | 5.7 |
| 89 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 | 5.3 |
| 90 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 | 5.0 |
| 91 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 | 4.7 |
| 92 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 | 4.4 |
| 93 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 | 4.1 |
| 94 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 | 3.9 |
| 95 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 | 3.7 |
| 96 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 | 3.4 |
| 97 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 | 3.2 |
| 98 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 | 3.0 |
| 99 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 | 2.8 |
| 100 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 | 2.7 |
| 101 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 | 2.5 |
| 102 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 | 2.3 |
| 103 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 | 2.1 |
| 104 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 | 1.9 |
| 105 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 | 1.8 |
| 106 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 | 1.6 |
| 107 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 | 1.4 |
| 108 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 | 1.3 |
| 109 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 | 1.1 |
| 110 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 | 1.0 |
| 111 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 | .9 |
| 112 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 | .8 |
| 113 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 | .7 |
| 114 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 | .6 |
| 115 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 | .5 |
1 The multiples in this table are not applicable to annuities for a term certain; for such cases see paragraph (c) of § 1.72-5.
§ 1.72-10 Effect of transfer of contracts on investment in the contract.
(a) If a contract to which section 72 applies, or any interest therein, is transferred for a valuable consideration, by assignment or otherwise, only the actual value of the consideration given for such transfer and the amount of premiums or other consideration subsequently paid by the transferee shall be included in the transferee’s aggregate of premiums or other consideration paid. In accordance with the provisions of section 72(g)(3) and paragraph (b) of § 1.72-4, an annuity starting date shall be determined for the transferee without regard to the annuity starting date, if any, of the transferor. In determining the transferee’s investment in the contract, the aggregate amount of premiums or other consideration paid shall be reduced by all amounts received by the transferee before the receipt of an amount as an annuity or before the annuity starting date, whichever is the later, to the extent that such amounts were excludable from his gross income under the applicable income tax law at the time of receipt. For the treatment of amounts received by the transferee subsequent to both the annuity starting date and the date of receipt of a payment as an annuity, but not received as annuity payments, see § 1.72-11. For a limitation on adjustments to the basis of annuity contracts sold, see section 1021.
(b) In the case of a transfer of such a contract without valuable consideration, the annuity starting date and the expected return under the contract shall be determined as though no such transfer had taken place. See paragraph (b) of § 1.72-4. The transferee shall include the aggregate of premiums or other consideration paid or deemed to have been paid by his transferor in the aggregate of premiums or other consideration as though paid by him. In determining the transferee’s investment in the contract, the transferee’s aggregate amount of premiums or other consideration paid (as so found) shall be reduced by all amounts either received or deemed to have been received by himself or his transferor before the annuity starting date, or before the date on which an amount is first received as an annuity, whichever is the later, to the extent that such amounts were excludable from the gross income of the actual recipient under the applicable income tax law at the time of receipt. For treatment of amounts received subsequent to both the above dates by such transferee, but not received as annuity payments, see § 1.72-11.
§ 1.72-11 Amounts not received as annuity payments.
(a) Introductory. (1) This section applies to amounts received under a contract to which section 72 applies if either:
(i) Paragraph (b) of § 1.72-2 is inapplicable to such amounts.
(ii) Paragraph (b) of § 1.72-2 is applicable but the annuity payments received differ either in amount, duration, or both, from those originally provided under the contract, or
(iii) Paragraph (b) of § 1.72 is applicable, but such annuity payments are received by a beneficiary after the death of an annuitant (or annuitants) in full discharge of the obligation under the contract and solely because of a guarantee.
(2) The principles of this section apply, to the extent appropriate thereto, to amounts paid which are taxable under section 72 (except, for taxable years beginning before January 1, 1964, section 72(e)(3)) in accordance with sections 402 and 403 and the regulations thereunder. However, if contributions used to purchase the contract include amounts for which a deduction was allowed under section 404 as contributions on behalf of an owner-employee, the rules of this section are modified by the rules of paragraph (b) of § 1.72-17. Further, in applying the provisions of this section, the aggregate premiums or other consideration paid shall not include contributions on behalf of self-employed individuals to the extent that deductions were allowed under section 404 for such contributions. Nor, shall the aggregate of premiums or other consideration paid include amounts used to purchase life, accident, health, or other insurance protection for an owner-employee. See paragraph (b)(4) of § 1.72-16 and paragraph (c) of § 1.72-17. The principles of this section also apply to payments made in the manner described in paragraph (b)(3)(i) of § 1.72-2.
(b) Amounts received in the nature of dividends or similar distributions. (1) If dividends (or payments in the nature of dividends or a return of premiums or other consideration) are received under a contract to which section 72 applies and such payments are received before the annuity starting date or before the date on which an amount is first received as an annuity, whichever is the later, such payments are includible in the gross income of the recipient only to the extent that they, taken together with all previous payments received under the contract which were excludable from the gross income of the recipient under the applicable income tax law, exceed the aggregate of premiums or other consideration paid or deemed to have been paid by the recipient. Such payments shall also be subtracted from the consideration paid (or deemed paid) both for the purpose of determining an exclusion ratio to be applied to subsequent amounts paid as an annuity and for the purpose of determining the applicability of section 72(d) and § 1.72-13, relating to employee contributions recoverable in three years.
(2) If dividends or payments in the nature of dividends are paid under a contract to which section 72 applies and such payments are received on or after the annuity starting date or the date on which an amount is first received as an annuity, whichever is later, such payments shall be fully includible in the gross income of the recipient. The receipt of such payments shall not affect the aggregate of premiums or other consideration paid nor the amounts contributed or deemed to have been contributed by an employee as otherwise calculated for purposes of section 72. Since the investment in the contract and the expected return are not affected by a payment which is fully includible in the gross income of the recipient under this rule, the exclusion ratio will not be affected by such payment and will continue to be applied to amounts received as annuity payments in the future as though such payment had not been made. This subparagraph shall apply to amounts received under a contract described in paragraph (b)(3)(i) of § 1.72-2 to the extent that the amounts received exceed the portion of the investment in the contract allocable to each taxable year in accordance with paragraph (d)(3) of § 1.72-4. Hence, such excess is fully includible in the gross income of the recipient.
(c) Amounts received in the nature of a refund of the consideration under a contract and in full discharge of the obligation thereof. (1) Any amount received under a contract to which section 72 applies, if it is at least in part a refund of the consideration paid, including amounts payable to a beneficiary after the death of an annuitant by reason of a provision in the contract for a life annuity with minimum period of payments certain or with a minimum amount which must be paid in any event, shall be considered an amount received in the nature of a refund of the consideration paid for such contract. If such an amount is in full discharge of an obligation to pay a fixed amount (whether in a lump sum or otherwise) or to pay amounts for a fixed number of years (including amounts described in paragraph (b)(3)(i) of § 1.72-2), it shall be included in the gross income of the recipient only to the extent that it, when added to amounts previously received under the contract which were excludable from gross income under the law applicable at the time of receipt, exceeds the aggregate of premiums or other consideration paid. See section 73(e)(2)(A). This paragraph shall not apply if the total of the amounts to be paid in discharge of the obligation can in any event exceed the total of the annuity payments which would otherwise fully discharge the obligation. For rules to be applied in such a case, see paragraph (e) of this section.
(2) The principles of subparagraph (1) of this paragraph may be illustrated by the following examples:
| A’s investment in the contract (unadjusted) | $3,600 | |
| Multiple from Table III of § 1.72-9 for male, age 60, where duration of guaranteed amount is 10 years (percent) | 11 | |
| Subtract value of the refund feature to the nearest dollar (11 percent of $3,600) | 396 | |
| Investment in the contract adjusted for the present value of the refund feature without discount for interest | 3,204 | |
| Aggregate of premiums or other consideration paid | 3,600 | |
| A’s exclusion ratio ($3,204 ÷ $16,380 [$900 × 18.2]) (percent) | 19.6 | |
| Subtract amount excludable during five years A received payments (19.6 percent of $4,500 [$900 × 5]) | 882 | |
| Remainder of aggregate of premiums or other consideration paid excludable from gross income of B under section 72(e) | 2,718 | |
| A’s investment in the contract (unadjusted) | $3,600 |
| Multiple from Table VII, age 60, 10 years (percent) | 4 |
| Subtract value of the refund feature (4 percent of $3,600 | $144 |
| Investment in the contract adjusted for the present value of the refund feature without discount for interest | $3,456 |
| Aggregate of premiums or other consideration paid | $3,600.00 |
| A’s exclusion ratio ($3,456 ÷ $21,780 [$900 × 24.2]) (percent) | 15.9 |
| Subtract amount excludable during five years A received payments (15.9 percent of $4,500 [$900 × 5]) | $715.50 |
| Remainder of aggregate of premiums or other consideration paid excludable from gross income of B under section 72(e) | $2,884.50 |
(3) For the purpose of applying the rule contained in subparagraph (1) of this paragraph, it is immaterial whether the recipient of the amount received in full discharge of the obligation is the same person as the recipient of amounts previously received under the contract which were excludable from gross income, except in the case of a contract transferred for a valuable consideration, with respect to which see paragraph (a) of § 1.72-10. For the limit on the tax, for taxable years beginning before January 1, 1964, attributable to the receipt of a lump sum to which this paragraph applies, see paragraph (g) of this section.
(d) Amounts received upon the surrender, redemption, or maturity of a contract. (1) Any amount received upon the surrender, redemption, or maturity of a contract to which section 72 applies, which is not received as an annuity under the regulations of paragraph (b) of § 1.72-2, shall be included in the gross income of the recipient to the extent that it, when added to amounts previously received under the contract and which were excludable from the gross income of the recipient under the law applicable at the time of receipt, exceeds the aggregate of premiums or other consideration paid. See section 72(e)(2)(B). If amounts are to be received as an annuity, whether in lieu of or in addition to amounts described in the preceding sentence, such amounts shall be included in the gross income of the recipient in accordance with the provisions of paragraph (e) or (f) of this section, whichever is applicable. The rule stated in the first sentence of this paragraph shall not apply to payments received as an annuity or otherwise after the date of the first receipt of an amount as an annuity subsequent to the maturity, redemption, or surrender of the original contract. If amounts are so received and are other than amounts received as an annuity, they are includible in the gross income of the recipient. See section 72(e)(1)(A) and paragraph (b)(2) of this section.
(2) For the purpose of applying the rule contained in subparagraph (1) of this paragraph, it is immaterial whether the recipient of the amount received upon the surrender, redemption, or maturity of the contract is the same as the recipient of amounts previously received under the contract which were excludable from gross income, except in the case of a contract transferred for a valuable consideration, with respect to which see paragraph (a) of § 1.72-10. For the limit on the amount of tax, for taxable years beginning before January 1, 1964, attributable to the receipt of certain lump sums to which this paragraph applies, see paragraph (g) of this section.
(e) Periodic payments received for a different term. If, after the date on which an amount is first received as an annuity under a contract to which section 72 applies, the terms of the contract are modified or the annuity obligations are exchanged so that periodic payments are to be received for a different term than originally provided under the contract (whether or not accompanied by the receipt of a lump sum to which paragraph (d) of this section applies), the rules of this paragraph shall apply to such payments. Hence, the provisions of section 72(e) and paragraphs (b), (c), (d), and (f) of this section are inapplicable for the purpose of determining the includibility of such payments in gross income and the general principles of section 72 with respect to the use of an exclusion ratio shall be applied to such payments as if they were provided under a new contract received in exchange for the contract providing the original annuity payments. If such payments are received as the result of the surrender, redemption, or discharge of a contract to which section 72 applies, they shall be considered to be received as an annuity under a contract exchanged for the contract whose redemption, surrender, or discharge was involved. For the purpose of determining the extent to which the payments so received are to be included in the gross income of the recipient, an exclusion ratio shall be determined for such contract as of the later of January 1, 1954, or the first day of the first period for which an amount is received as an annuity thereunder, whichever is the later. See paragraph (b) of § 1.72-4. In determining the investment in the contract for this purpose, any lump sum amount received at the time of the exchange shall not be considered an amount to which paragraph (a)(2) of § 1.72-6 applies. However, such lump sum shall be subtracted from the aggregate of premiums or other consideration paid to the extent it is excludable as an amount not received as an annuity under this section as if it were an amount received before the annuity starting date of the contract obtained in exchange.
(f) Periodic payments received for the same term after a lump sum withdrawal. (1) If, after the date of the first receipt of a payment as an annuity, the annuitant receives a lump sum and is thereafter to receive annuity payments in a reduced amount under the contract for the same term, life, or lives as originally specified in the contract, a portion of the contract shall be considered to have been surrendered or redeemed in consideration of the payment of such lump sum and the exclusion ratio originally determined for the contract shall continue to apply to the amounts received as an annuity without regard to the fact that such amounts are less than the original amounts which were to be paid periodically. The lump sum shall be includible in the gross income of the recipient in accordance with the provisions of subparagraph (2) of this paragraph. However, except in the case of amounts to which sections 402 and 403 apply, the tax, for taxable years beginning before January 1, 1964, attributable to the inclusion of all or part of the lump sum in gross income shall not exceed the amount determined under section 72(e)(3) and paragraph (g) of this section. For taxable years beginning after December 31, 1963, such amounts may be taken into account in computations under sections 1301 through 1305 (relating to income averaging).
(2) There shall be excluded from gross income that portion of the lump sum which bears the same ratio to the aggregate premiums or other consideration paid for the contract, as reduced by all amounts previously received under the contract and excludable from the gross income of the recipient under the applicable income tax law, as:
(i) In the case of payments to be made in the manner described in paragraph (b)(2) of § 1.72-2, the amount of the reduction in the annuity payments to be made thereafter bears to the annuity payments originally provided under the contract, or
(ii) In the case of a contract providing for payments to be made in the manner described in paragraph (b)(3)(i) of § 1.72-2, the amount of the reduction in the number of units per period to be paid thereafter bears to the number of units per period payable under the contract immediately before the lump sum withdrawal.
(3) This paragraph may be illustrated by the following examples:
| Aggregate of premiums or other consideration paid | $20,000 |
| Less amounts received as an annuity to the extent they were excludable from A’s income | $5,000 |
| Remainder of the consideration | $15,000 |
| Ratio of the reduction in the amount of the annuity payments to the original annuity payments | 25/$100 or |
| Lump sum received | $4,000 |
| Less one-fourth of the remainder of the consideration ( | $3,750 |
| Portion of the lump sum includible in gross income | $250 |
| Aggregate of premiums or other consideration paid | $30,000 |
| Total amount received and excludable from gross income | $10,000 |
| Remainder of the consideration | $20,000 |
| Ratio of units discontinued to the total units originally provided | |
| Lump sum received at the time of reduction in the number of units to be paid | $11,000 |
| Less one-half of the remainder of the consideration ( | $10,000 |
| Portion of the lump sum received and includible in gross income | $1,000 |
| Remainder of the consideration less the portion of such remainder attributable to the excludable portion of the lump sum ($20,000−$10,000) | $10,000 |
| Remainder of the consideration properly allocable to each taxable year for the remaining 10 years ($10,000 ÷ 10) | $1,000 |
(g) Limit on tax attributable to the receipt of a lump sum. (1) For taxable years beginning before January 1, 1964, if the entire amount of the proceeds received upon the redemption, maturity, surrender, or discharge of a contract to which section 72 applies is received in a lump sum and paragraph (c), (d), or (f) of this section is applicable in determining the portion of such amount which is includible in gross income, the tax attributable to such portion shall not exceed the tax which would have been attributable thereto had such portion been received ratably in the taxable year in which received and the 2 preceding taxable years. The amount of tax attributable to the includible portion of the lump sum received shall be the lesser of:
(i) The difference between the amount of tax for the taxable year of receipt computed by including such portion in gross income and the amount of tax for such taxable year computed by excluding such portion from gross income; or
(ii) The difference between the total amount of tax for the taxable year of receipt and the 2 preceding taxable years computed by including one-third of such portion in gross income for each of the 3 taxable years, and the total amount of the tax for the taxable year of receipt and the 2 preceding taxable years computed by entirely excluding such portion from the gross income of all 3 taxable years.
(2) For taxable years beginning after December 31, 1963, any amount includible in gross income to which this section relates may be taken into account in computations under sections 1301 through 1305 (relating to income averaging).
(h) Amounts deemed to be paid or received by a transferee. Amounts deemed to have been paid or received by a transferee for the purposes of § 1.72-10 shall also be deemed to have been so paid or received by such transferee for the purposes of this section. Thus, if a donee is deemed to have paid the premiums or other consideration actually paid by his transferor for the purposes of section 72(g) and paragraph (b) of § 1.72-10, such consideration shall be deemed premiums or other consideration paid by the donee for the purposes of this section.
§ 1.72-12 Effect of taking an annuity in lieu of a lump sum upon the maturity of a contract.
If a contract to which section 72 applies provides for the payment of a lump sum in full discharge of the obligation thereunder and the obligee entitled thereto, prior to receiving any portion of such lump sum and within 60 days after the date on which such lump sum first becomes payable, exercises an option or irrevocably agrees with the obligor to take, in lieu thereof, payments which will constitute “amounts received as an annuity”, as that term is defined in paragraph (b) of § 1.72-2, no part of such lump sum shall be deemed to have been received by the obligee at the time he was first entitled thereto merely because he would have been entitled to such amount had he not exercised the option or made such an agreement with the obligor.
§ 1.72-13 Special rule for employee contributions recoverable in three years.
(a) Amounts received as an annuity. (1) Section 72(d) provides a special rule for the treatment of amounts received as an annuity by an employee (or by the beneficiary or beneficiaries of an employee) under a contract to which section 72 applies. This special rule is applicable only in the event that:
(i) At least part of the consideration paid for the contract is contributed by the employer, and
(ii) The aggregate amount receivable as an annuity under such contract by the employee (or by his beneficiary or beneficiaries if the employee died before any amount was received as an annuity under the contract) within the 3-year period beginning on the date (whether or not before January 1, 1954) on which an amount is first received as an annuity equals or exceeds the total consideration contributed (or deemed contributed under section 72(f) and § 1.72-8) by the employee as of such date as reduced by all amounts previously received and excludable from the gross income of the recipient under the applicable income tax law.
(2) If the aggregate amount receivable as an annuity under the contract within three years from the date on which an amount is first received as an annuity thereunder will not equal or exceed the consideration contributed (or deemed contributed) by the employee in accordance with the provisions of § 1.72-8, computed as of such date, the special rule of section 72(d) shall not apply to amounts received as an annuity under the contract and the general rules of section 72 shall apply thereto.
(3) The aggregate of the amounts receivable as an annuity within the prescribed 3-year period shall be the total of all annuity payments anticipatable by an employee (or a beneficiary or beneficiaries of an employee, if the employee died before any amount was received as an annuity) under the contract as a whole as defined in paragraph (a) of § 1.72-2. See paragraph (a)(3) of § 1.72-2 for rules for determining what constitutes “the contract” in the case of distributions from an employees’ trust or plan.
(4) If subparagraphs (1) and (3) of this paragraph apply to amounts received as an annuity under a contract, the rule prescribed in subparagraph (1) of this paragraph shall apply to all amounts so received thereunder regardless of the fact that they may be payable (i) to more than one beneficiary, (ii) for the same or different intervals, (iii) in different sums, or (iv) for a different period certain, life, or lives.
(5) For purposes of section 72(d), contributions which are made with respect to a self-employed individual and which are allowed as a deduction under section 404(a) are not considered contributions by the employee, but such contributions are considered contributions by the employer. A contribution which is deemed paid in a prior taxable year under the provisions of section 404(a)(6) shall be considered made with respect to a self-employed individual if the individual on whose behalf the contribution is made was self-employed for the taxable year in which the contribution is deemed paid, whether or not such individual is self-employed at the time the contribution is actually paid. Contributions with respect to a self-employed individual who is an owner-employee used to purchase life, accident, health, or other insurance protection for such owner-employee shall not be treated as consideration for the contract contributed by the employee in computing the employee contributions for purposes of section 72(d).
(b) Amounts not received as an annuity. If the rule of paragraph (a) of this section applies to a contract and, after the date on which an annuity payment is first received, amounts are received other than as an annuity under such contract in a taxable year to which the Code applies, they shall be included in the gross income of the recipient in accordance with the provisions of § 1.72-11. Thus, if such amounts are received as a dividend or a similar distribution after the date on which an amount is first received as an annuity under the contract, they shall be included in the gross income of the recipient (in accordance with section 72(e)(1)(A) and paragraph (b)(2) of § 1.72-11. All other amounts not received as an annuity shall be included in the gross income of the recipient in accordance with the provisions of section 72(e)(1)(B) and paragraph (c), (d), or (f), whichever is applicable, of § 1.72-11. See section 72(e)(2).
(c) Amounts received after the exhaustion of employee contributions. (1) Amounts received under a contract to which the rule of paragraph (a) of this section applies (whether or not such amounts are received as an annuity) shall be included in the gross income of the recipient if such amounts are received after the date on which the aggregate of all amounts excluded from gross income by the recipients under section 72(d) and prior income tax laws equalled or exceeded the consideration contributed (or deemed contributed) by the employee.
(2) If the rule of paragraph (a) of this section applies to amounts received by an employee (or his beneficiary or beneficiaries) under a joint and survivor annuity contract, payments made to a prior annuitant may entirely exhaust the amounts excludable from gross income. In such case, amounts paid to the surviving annuitant (or annuitants) shall be included in gross income by such recipients.
(d) Application of section 72(d) to a contract, trust, or plan providing for payments in a manner described in paragraph (b)(3)(i) of § 1.72-2. For the purpose of applying section 72(d) and this section, any amount received in the nature of a periodic payment under a contract, trust, or plan which provides for the payment of amounts in a manner described in paragraph (b)(3)(i) of § 1.72-2 shall be considered an amount received as an annuity notwithstanding the provisions of any other section of the regulations under section 72. The special exclusion rule of section 72(d) and paragraph (a) of this section shall apply to all amounts so received if the first amount received, when multiplied by the number of periodic payments to be made within the three years beginning on the date of its receipt, results in an amount in excess of the aggregate premiums or other consideration contributed (or deemed contributed) by the employee as of that date. If more than one series of periodic payments is to be paid under the same contract, trust, or plan, all payments anticipatable, whether because fixed in amount or determinable in the manner described in the preceding sentence, shall be aggravated for the purpose of determining the applicability of section 72 (d) to the contract, trust, or plan as a whole.
(e) Inapplicability of section 72(d) and this section. Section 72(d) and this section do not apply to:
(1) Amounts received as proceeds of a life insurance contract to which section 101(a) applies, nor to
(2) Amounts paid to a surviving annuitant under a joint and survivor annuity contract to which paragraph (b)(3) of § 1.72-5 applies, nor to
(3) Amounts paid to an annuitant under Chapter 73 of title 10 of the United States Code with respect to which section 72(o) and § 1.122-1 apply.
§ 1.72-14 Exceptions from application of principles of section 72.
(a) Payments of interest. If any amount is received under an agreement to pay interest on a sum or sums held by the obligor, such amount shall not be excludable from the gross income of the recipient under the provisions of section 72 to the extent that it is an actual interest payment. See section 72(j). An amount shall be considered to be held under an agreement to pay interest thereon if the amount payable after the term of the annuity (whether for a term certain or for a life or lives) is substantially equal to or larger than the aggregate amount of premiums or other consideration paid therefor. For this purpose, however, the aggregate amount of premiums or other consideration paid shall include all contributions made by an employer and not merely those to which section 72(f) applies.
(b) Alimony payments. To the extent that payments made to a wife are includable in her gross income by reason of either or both section 71 and 682, they shall not be excluded from the wife’s gross income under the principles of section 72 although made under a contract to which that section applies. However, section 72 shall apply in the case of amounts received under such a contract if a husband and wife are entitled to make and do make a single return jointly.
(c) Certain “face-amount certificates.” The principles of section 72 do not apply to “face-amount certificates” described in section 72(1) which were issued before January 1, 1955.
(d) Employer plans. The provisions of §§ 1.72-1 to 1.72-13, inclusive, shall be disregarded to the extent that they are inconsistent with the treatment of amounts received provided in section 402 (relating to the taxability of a beneficiary of an employees’ trust), section 403 (relating to the taxation of employee annuities), or the regulations under either of such sections.
§ 1.72-15 Applicability of section 72 to accident or health plans.
(a) Applicability of section. This section provides the rules for determining the taxation of amounts received from an employer-established plan which provides for distributions that are taxable under section 72 (or for distributions that are taxable under section 402 (a)(2) or (e), or section 403(a)(2), in the case of lump sum distributions) and which also provides for distributions that may be excludable from gross income under section 104 or 105 as accident or health benefits. For example, this section will apply to a pension plan described in section 401 and exempt under section 501 which provides for the payment of pensions at retirement and the payment of an earlier pension in the event of permanent disability. This section will also apply to a profit-sharing plan described in section 401 and exempt under section 501 which provides for periodic distribution of the amount standing to the account of a participant during any period that the participant is absent from work due to a personal injury or sickness and for the distribution of any balance standing to the account of the participant upon his separation from service. For purposes of this section, the term “contributions of the employee” includes contributions by the employer which were includible in the employee’s gross income. Paragraphs (d), (h), and (i) of this section apply for taxable years beginning on or after January 1, 2015.
(b) General rule. Section 72 does not apply to any amount received as an accident or health benefit, and the tax treatment of any such amount shall be determined under sections 104 and 105. See paragraphs (c) and (d) of this section, paragraph (d) of § 1.104-1, and §§ 1.105-1 through 1.105-5. Section 72 (or, in the case of certain total distributions, section 402(a)(2) or section 403(a)(2)) does apply to any amount which is received under a plan to which this section applies and which is not an accident or health benefit. See paragraph (e) of this section.
(c) Accident or health benefits attributable to employee contributions. (1) If a plan to which this section applies provides that any portion of the accident or health benefits is attributable to the contributions of the employee to such plan, then such portion of such benefits is excludable from gross income under section 104(a)(3) and paragraph (d) of § 1.104-1. Neither section 72 nor section 105 applies to any accident or health benefits (whether paid before or after retirement) attributable to contributions of the employee. Since such portion is excludable under section 104(a)(3), such portion is not subject to the dollar limitation of section 105(d) and if such portion is payable after the retirement of the employee, it is excludable without regard to the provisions of § 1.105-4 and section 72.
(2) In determining the taxation of any amounts received as accident or health benefits from a plan to which this section applies, the first step is to determine the portion, if any, of the contributions of the employee which is used to provide the accident or health benefits and the portion of the accident or health benefits attributable to such portion of the employee’s contributions. If such a plan expressly provides that the accident or health benefits are provided in whole or in part by employee contributions and the portion of employee contributions to be used for such purpose, the contributions so used will be treated as used to provide accident or health benefits. However, if the plan does not expressly provide that the accident or health benefits are to be provided with employee contributions and the portion of employee contributions to be used for such purpose, it will be presumed that none of the employee contributions is used to provide such benefits. Thus, in the case of a contributory pension plan, it will be presumed that the disability pension is provided by employer contributions, unless the plan expressly provides otherwise, or in the case of a contributory profit-sharing plan providing that a portion of the amount standing to the account of each participant will be used to purchase accident or health insurance, it will be presumed that such insurance is purchased with employer contributions, unless the plan expressly provides otherwise. Similarly, unless the plan expressly provides otherwise, it will be presumed that if a contributory profit-sharing plan provides for periodic distributions from the account of a participant during any absence from work because of a personal injury or sickness, all such distributions which do not exceed the contributions of the employer plus earnings thereon are provided by employer contributions.
(3) Any employee contributions that are treated under subparagraph (2) of this paragraph as used to provide accident or health benefits shall not be included for any purpose under section 72 as employee contributions or as aggregate premiums or other consideration paid. Thus, in the case of a pension plan, or in the case of a profit-sharing plan providing that a portion of the amount standing to the account of each participant will be used to purchase accident or health insurance, any employee whose contributions are so used must make the adjustment provided by this subparagraph irrespective of whether such employee receives any accident or health benefits under such plan. However, in the case of a profit-sharing plan providing for periodic distributions from the account of a participant during any absence from work because of a personal injury or sickness, an adjustment under this subparagraph is required only when an employee receives distributions in excess of the employer contributions and earnings thereon or receives distributions consisting in whole or in part of his own contributions.
(4) If any of the employee contributions are treated under subparagraph (2) of this paragraph as used to provide any of the accident or health benefits, the portion of the benefits attributable to employee contributions shall be determined in accordance with § 1.105-1. Any accident or health benefits that are excludable under section 104(a)(3) shall not be included in the expected return for purposes of section 72.
(d) Accident or health benefits attributable to employer contributions. Any amounts received as accident or health benefits and not attributable to contributions of the employee are includible in gross income except to the extent that the amounts are excludable from gross income under section 105(b) or (c) and the regulations under those sections. See § 1.402(a)-1(e) for rules relating to the use of a qualified plan under section 401(a) to pay premiums for accident or health insurance.
(e) Other benefits under the plan. The taxability of amounts that are received under a plan to which this section applies and that are not accident or health benefits is determined under section 72 (or, in the case of certain total distributions, under section 402(a)(2) or section 403(a)(2)) without regard to any exclusion or inclusion of accident or health benefits under sections 104 and 105. For example, the investment in the contract or aggregate premiums paid is determined without regard to the exclusion of any amount under section 104 or 105, and the annuity starting date is determined without regard to the receipt of any accident or health benefits. However, if any employee contributions are used to provide any accident or health benefits, the investment in the contract or aggregate premiums paid must be adjusted as provided in paragraph (c)(3) of this section.
(f) [Reserved]
(g) Payments to or on behalf of a self-employed individual. A self-employed individual is not considered an employee for purposes of section 105, relating to amounts received by employees under accident and health plans, nor for purposes of excluding under section 104(a)(3) amounts received by him under an accident and health plan as referred to in section 105(e). See section 105(g) and paragraph (a) of § 1.105-1. Therefore, the other paragraphs of this section are not applicable to amounts received by or on behalf of a self-employed individual. Except where accident or health benefits are provided through an insurance contract or an arrangement having the effect of insurance, all amounts received by or on behalf of a self-employed individual from a plan described in section 401(a) and exempt under section 501(a) or a plan described in section 403(a) shall be taxed as otherwise provided in section 72, 402, or 403. If the accident or health benefits are paid under an insurance contract or under an arrangement having the effect of insurance, section 104(a)(3) shall apply. Section 72 shall not apply to any amounts received under such circumstances.
(h) Medical benefits for retired employees, etc. See § 1.402(a)-1(e)(2) for rules relating to the payment of medical benefits described in section 401(h) under a qualified pension or annuity plan.
(i) Special rules—(1) In general. For purposes of section 72(b) and (d) and this section, the taxpayer must maintain such records as are necessary to substantiate the amount treated as an investment in the taxpayer’s annuity contract.
(2) Delegation to Commissioner. The Commissioner may prescribe a form and instructions with respect to the taxpayer’s past and current treatment of amounts received under section 72 or 105, and the taxpayer’s computation, or recomputation, of the taxpayer’s investment in his or her annuity contract. This form may be required to be filed with the taxpayer’s returns for years in which the amounts are excluded under section 72 or 105.
§ 1.72-16 Life insurance contracts purchased under qualified employee plans.
(a) Applicability of section. This section provides rules for the tax treatment of premiums paid under qualified pension, annuity, or profit-sharing plans for the purchase of life insurance contracts and rules for the tax treatment of the proceeds of such a life insurance contract and of annuity contracts purchased under such plans. For purposes of this section, the term “life insurance contract” means a retirement income, an endowment, or other contract providing life insurance protection. The rules of this section apply to plans covering only common-law employees as well as to plans covering self-employed individuals.
(b) Treatment of cost of life insurance protection. (1) The rules of this paragraph are applicable to any life insurance contract—
(i) Purchased as a part of a plan described in section 403(a), or
(ii) Purchased by a trust described in section 401(a) which is exempt from tax under section 501(a) if the proceeds of such contract are payable directly or indirectly to a participant in such trust or to a beneficiary of such participant.
(2) If under a plan or trust described in subparagraph (1) of this paragraph, amounts which were allowed as a deduction under section 404, or earnings of the trust, are applied toward the purchase of a life insurance contract described in subparagraph (1) of this paragraph, the cost of the life insurance protection under such contract shall be included in the gross income of the participant for the taxable year or years in which such contributions or earnings are so applied.
(3) If the amount payable upon death at any time during the year exceeds the cash value of the insurance policy at the end of the year, the entire amount of such excess is considered current life insurance protection. The cost of such insurance will be considered to be a reasonable net premium cost, as determined by the Commissioner, for such amount of insurance for the appropriate period.
(4) The amount includible in the gross income of the employee under this paragraph shall be considered as premiums or other consideration paid or contributed by the employee only with respect to any benefits attributable to the contract (within the meaning of paragraph (a)(3) of § 1.72-2) providing the life insurance protection. However, if under the rules of this paragraph an owner-employee is required to include any amounts in his gross income, such amounts shall not in any case be treated as part of his investment in the contract.
(5) The determination of the cost of life insurance protection may be illustrated by the following example:
(6) This paragraph shall not apply if the trust has a right under any circumstances to retain any part of the proceeds of the life insurance contract. But see paragraph (c)(4) of this section relating to the taxability of the distribution of such proceeds to a beneficiary.
(c) Treatment of proceeds of life insurance and annuity contracts. (1) If under a qualified pension, annuity, or profit-sharing plan, there is purchased either—
(i) A life insurance contract described in paragraph (b)(1) of this section, and the employee either paid the cost of the insurance or was taxable on the cost of the insurance under paragraph (b) of this section, or
(ii) An annuity contract,
(2)(i) In the case of an annuity contract, the death benefit is the accumulation of the premiums (plus earnings thereon) which is intended to fund pension or other deferred benefits under a pension, annuity, or profit-sharing plan. Such death benefits are not in the nature of life insurance and are not excludable from gross income under section 101(a).
(ii) In the case of a life insurance contract under which there is a reserve accumulation which is intended to fund pension or other deferred benefits under a pension, annuity, or profit-sharing plan, such reserve accumulation constitutes the source of the cash value of the contract and approximates the amount of such cash value. The portion of the proceeds paid upon the death of the insured employee which is equal to the cash value immediately before death is not excludable from gross income under section 101(a). The remaining portion, if any, of the proceeds paid to the beneficiary by reason of the death of the insured employee—that is, the amount in excess of the cash value—constitutes current insurance protection and is excludable under section 101(a).
(iii) The death benefit under an annuity contract, or the portion of the death proceeds under a life insurance contract which is equal to the cash value of the contract immediately before death, constitutes a distribution under the plan consisting in whole or in part of deferred compensation and is taxable to the beneficiary in accordance with section 72(m)(3) and the provisions of this paragraph, except to the extent that the limited exclusion from income provided in section 101(b) is applicable.
(iv) In the case of a life insurance contract under which the benefits are paid at a date or dates later than the death of the employee, section 101(d) is applicable only to the portion of the benefits which is attributable to the amount excludable under section 101(a). The portion of such benefits which is attributable to the cash value of the contract immediately before death is taxable under section 72, and in such case, any amount excludable under section 101(b) is treated as additional consideration paid by the employee in accordance with section 101(b)(2)(D).
(3) The application of the rules under subparagraph (2) of this paragraph with respect to the taxability of proceeds of a life insurance contract paid by reason of the death of an insured common-law employee who has paid no contributions under the plan is illustrated by the following examples:
| Total face amount of the contract payable in a lump sum at time of death | $25,000 |
| Cash value of the contract immediately before death | 11,000 |
| Excess over cash value, excludable under section 101(a) | 14,000 |
| Cash value subject to limited exclusion under section 101(b) | 11,000 |
| Excludable under section 101(b) (assuming that there is no other death benefit paid by or on behalf of any employer with respect to the employee) | 5,000 |
| Balance taxable in accordance with section 402(a)(2) or 403(a)(2) (assuming a total distribution in one taxable year of the distributee) | 6,000 |
| Portion of premiums taxed to employee under the provisions of paragraph (b) of this section and considered as contributions of the employee | 940 |
| Balance taxable as long-term capital gain | 5,060 |
| Amount actually contributed by the employee | 0 |
| Amount considered contributed by employee by reason of section 101(b) | $5,000 |
| Portion of premiums taxed to employee under the provisions of paragraph (b) of this section and considered as contributions of the employee | $940 |
| Investment in the contract | $5,940 |
| Expected return, 10 × $1,320 | $13,200 |
| Exclusion ratio, $5,940 ÷ $13,200 | 0.45 |
| Annual exclusion, 0.45 × $1,320 | $594 |
(4) If an employee neither paid the total cost of the life insurance protection provided under a life insurance contract, nor was taxable under paragraph (b) of this section with respect thereto, no part of the proceeds of such a contract which are paid to the beneficiaries of the employee as a death benefit is excludable under section 101(a). The entire distribution is taxable to the beneficiaries under section 402(a) or 403(a) except to the extent that a limited exclusion may be allowable under section 101(b).
§ 1.72-17 Special rules applicable to owner-employees.
(a) In general. Under section 401(c) and section 403(a), certain self-employed individuals may participate in qualified pension, annuity, and profit-sharing plans, and the amounts received by such individuals from such plans are taxable under section 72. Section 72(m) and this section contain special rules for the taxation of amounts received from qualified pension, profit-sharing, or annuity plans covering an owner-employee. For purposes of section 72 and the regulations thereunder, the term “employee” shall include the self-employed individual who is treated as an employee by section 401(c)(1) (see paragraph (b) of § 1.401-10), and the term “owner-employee” has the meaning assigned to it in section 401(c)(3) (see paragraph (d) of § 1.401-10). See also paragraph (a)(2) of § 1.401-10 for the rule for determining when a plan covers an owner-employee. For purposes of this section, a self-employed individual may not treat as consideration for the contract contributed by the employee any contributions under the plan for which deductions were allowed under section 404 and which, consequently, are considered employer contributions.
(b) Certain amounts received before annuity starting date. (1) The rules of this paragraph are applicable to amounts received from a qualified pension, profit-sharing, or annuity plan by an employee (or his beneficiary) who is or was an owner-employee with respect to such plan when such amounts—
(i) Are received before the annuity starting date; and
(ii) Are not received as an annuity.
(2) Amounts to which this paragraph applies shall be included in the recipient’s gross income for the taxable year in which received. However, the sum of the amounts so included under this subparagraph in all taxable years shall not exceed the aggregate deductions allowed under section 404 for premiums or other consideration paid under the plan on behalf of the employee while he was an owner-employee, including any such deductions taken in the taxable year of receipt.
(3) Any amounts to which this paragraph applies and which are not includible in gross income under the rules of subparagraph (2) of this paragraph shall be subject to the provisions of section 72(e) and § 1.72-11. However, for taxable years beginning before January 1, 1964, section 72(e)(3), as in effect before such date, shall not apply to such amounts. For taxable years beginning after December 31, 1963, such amounts (other than amounts subject to a penalty under section 72(m)(5) and paragraph (e) of this section) may be taken into account in computations under sections 1301 through 1305 (relating to income averaging).
(4) Under section 401(d)(4), a qualified pension, profit-sharing, or annuity plan may not provide for distributions to an owner-employee before he reaches age 59
(5) The rules of this paragraph are not applicable to amounts credited to an individual in his capacity as a policy-holder of an annuity, endowment, or life insurance contract which are in the nature of a dividend or refund of premium, and which are applied in accordance with paragraph (a)(4) of § 1.404(a)-8 towards the purchase of benefits under the policy.
(6) The rules of this paragraph may be illustrated by the following example:
(c) Amounts paid for life, accident, health, or other insurance. Amounts used to purchase life, accident, health, or other insurance protection for an owner-employee shall not be taken into account in computing the following:
(1) The aggregate amount of premiums or other consideration paid for the contract for purposes of determining the investment in the contract under section 72(c)(1)(A) and § 1.72-6;
(2) The consideration for the contract contributed by the employee for purposes of section 72(d)(1) and § 1.72-13, which provide the method of taxing employees’ annuities where the employee’s contributions will be recoverable within 3 years; and
(3) The aggregate premiums or other consideration paid for purposes of section 72(e)(1)(B) and § 1.72-11, which provide the rules for taxing amounts not received as annuities prior to the annuity starting date.
(d) Amounts constructively received. (1) If during any taxable year an owner-employee assigns or pledges (or agrees to assign or pledge) any portion of his interest in a trust described in section 401(a) which is exempt from tax under section 501(a), or any portion of the value of a contract purchased as part of a plan described in section 403(a), such portion shall be treated as having been received by such owner-employee as a distribution from the trust or as an amount received under the contract during such taxable year.
(2) If during any taxable year an owner-employee receives, either directly or indirectly, any amount from any insurance company as a loan under a contract purchased by a trust described in section 401(a) which is exempt from tax under section 501(a) or purchased as part of a plan described in section 403(a), and issued by such insurance company, such amount shall be treated as an amount received under the contract during such taxable year. An owner-employee will be considered to have received an amount under a contract if a premium, which is otherwise in default, is paid by the insurance company in the form of a loan against the cash surrender value of the contract. Further, an owner-employee will be considered to have received an amount to which this subparagraph applies if an amount is received from the issuer of a face-amount certificate as a loan under such a certificate purchased as part of a qualified trust or plan.
(e) Penalties applicable to certain amounts received by owner-employees. (1)(i) The rules of this paragraph are applicable to amounts, to the extent includable in gross income, received from a trust described in section 401(a) or under a plan described in section 403(a) by or on behalf of an individual who is or has been an owner-employee with respect to such plan or trust—
(a) Which are received before the owner-employee reaches the age 59
(b) Which are in excess of the benefits provided for such owner-employee under the plan formula (see subdivision (iii) of this subparagraph), or
(c) Which are received by reason of a distribution of the owner-employee’s entire interest under the provisions of section 401(e)(2)(E), relating to excess contributions on behalf of an owner-employee which are willfully made.
(ii) The amounts referred to in subdivision (i)(a) of this subparagraph do not include—
(a) Amounts received by reason of the owner-employee becoming disabled, or
(b) Amounts received by the owner-employee in his capacity as a policy-holder of an annuity, endowment, or life insurance contract which are in the nature of a dividend or similar distribution.
(iii) This paragraph applies to amounts described in subdivision (i)(b) of this subparagraph (relating to excess benefits) even though a portion of such amounts may be attributable to contributions made on behalf of an individual while he was not an owner-employee and even though the amounts are received by his successor. However, these amounts do not include the portion of a distribution to which section 402(a)(2) or 403(a)(2) (relating to certain total distributions in one taxable year) applies.
(iv)(a) For purposes of subdivision (i)(a) of this subparagraph, the portion of any distribution or payment attributable to contributions on behalf of an employee-participant while he was an owner-employee includes the contributions made on his behalf while he was an owner-employee and the increments in value attributable to such contributions.
(b) The increments in value of an individual’s account may be allocated to contributions on his behalf while he was an owner-employee either by maintaining a separate account, or an accounting, which reflects the actual increment attributable to such contributions, or by the method described in (c) of this subdivision.
(c) Where an individual is covered under the same plan both as an owner-employee and as a nonowner-employee, the portion of the increment in value of his interest attributable to contributions made on his behalf while he was an owner-employee may be determined by multiplying the total increment in value in his account by a fraction. The numerator of the fraction is the total contributions made on behalf of the individual as an owner-employee, weighted for the number of years that each contribution was in the plan. The denominator is the total contributions made on behalf of the individual, whether or not an owner-employee, weighted for the number of years each contribution was in the plan. The contributions are weighted for the number of years in the plan by multiplying each contribution by the number of years it was in the plan. For purposes of this computation, any forfeiture allocated to the account of the individual is treated as a contribution to the account made at the time so allocated.
(d) The method described in (c) of this subdivision may be illustrated by the following example:
| A | B | C | |
|---|---|---|---|
| Contribution | Number of years contribution was in trust— | Contribution weighted for years in trust (A × B) | |
| 1972 | $1,000 | 0 | 0 |
| 1971 | 800 | 1 | 800 |
| 1970 | 1,200 | 2 | 2,400 |
| 1969 | 600 | 3 | 1,800 |
| 1968 | 200 | 4 | 800 |
| 1967 | 400 | 5 | 2,000 |
| 1966 | 2,000 | 6 | 12,000 |
| 1965 | 1,000 | 7 | 7,000 |
| 1964 | 1,500 | 8 | 12,000 |
| 1963 | 900 | 9 | 8,100 |
| Total | $9,600 | 46,900 |
(2)(i) If the aggregate of the amounts to which this paragraph applies received by any person in his taxable year equals or exceeds $2,500 the tax with respect to such amount shall be the greater of—
(a) The increase in tax attributable to the inclusion of the amounts so received in his gross income for the taxable year in which received, or
(b) 110 percent of the aggregate increase in taxes, for such taxable year and the four immediately preceding taxable years, which would have resulted if such amounts had been included in such person’s gross income ratably over such taxable years. However, if deductions were allowed under section 404 for contributions to the plan on behalf of the individual as an owner-employee for less than four prior taxable years (whether or not consecutive), the number of immediately preceding taxable years taken into account shall be the number of prior taxable years in which such deductions were allowed.
(ii) If the aggregate of the amounts to which this paragraph applies received by any person in his taxable year is less than $2,500, the tax with respect to such amounts shall be 110 percent of the increase in tax which results from including such amounts in the person’s gross income for the taxable year in which received.
(3)(i) For purposes of making the ratable inclusion computations of subparagraph (2)(i) of this paragraph, the taxable income of the recipient for each taxable year involved (notwithstanding section 63, relating to definition of taxable income) shall be treated as being not less than the amount required to be treated as includible in the taxable year pursuant to the ratable inclusion.
(ii) For purposes of subparagraph (2)(i)(a) and (ii) of this paragraph, the recipient’s taxable income (notwithstanding section 63, relating to definition of taxable income) shall be treated as being not less than the aggregate of the amounts to which this paragraph applies reduced by the deductions allowed the recipient for such taxable year under section 151 (relating to deductions for personal exemptions).
(iii) In any case in which the application of subdivision (i) or (ii) of this subparagraph results in an increase in taxable income for any taxable year, the resulting increase in taxes imposed by section 1 or 3 for such taxable year shall be reduced by the credits against tax provided by section 31 (tax withheld on wages) and section 39 (certain uses of gasoline and lubricating oil), but shall not be reduced by any other credits against tax.
(4) The application of the rules of subparagraph (2)(i) and (3) of this paragraph may be illustrated by the following example:
(f) Meaning of disabled. (1) For taxable years beginning after December 31, 1966, section 72(m)(7) provides that an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. In determining whether an individual’s impairment makes him unable to engage in any substantial gainful activity, primary consideration shall be given to the nature and severity of his impairment. Consideration shall also be given to other factors such as the individual’s education, training, and work experience. The substantial gainful activity to which section 72(m)(7) refers is the activity, or a comparable activity, in which the individual customarily engaged prior to the arising of the disability (or prior to retirement if the individual was retired at the time the disability arose).
(2) Whether or not the impairment in a particular case constitutes a disability is to be determined with reference to all the facts in the case. The following are examples of impairments which would ordinarily be considered as preventing substantial gainful activity:
(i) Loss of use of two limbs;
(ii) Certain progressive diseases which have resulted in the physical loss or atrophy of a limb, such as diabetes, multiple sclerosis, or Buerger’s disease;
(iii) Diseases of the heart, lungs, or blood vessels which have resulted in major loss of heart or lung reserve as evidenced by X-ray, electrocardiogram, or other objective findings, so that despite medical treatment breathlessness, pain, or fatigue is produced on slight exertion, such as walking several blocks, using public transportation, or doing small chores;
(iv) Cancer which is inoperable and progressive;
(v) Damage to the brain or brain abnormality which has resulted in severe loss of judgment, intellect, orientation, or memory;
(vi) Mental diseases (e.g. psychosis or severe psychoneurosis) requiring continued institutionalization or constant supervision of the individual;
(vii) Loss or diminution of vision to the extent that the affected individual has a central visual acuity of no better than 20/200 in the better eye after best correction, or has a limitation in the fields of vision such that the widest diameter of the visual fields subtends an angle no greater than 20 degrees;
(viii) Permanent and total loss of speech;
(ix) Total deafness uncorrectible by a hearing aid.
(3) In order to meet the requirements of section 72(m)(7), an impairment must be expected either to continue for a long and indefinite period or to result in death. Ordinarily, a terminal illness because of disease or injury would result in disability. Indefinite is used in the sense that it cannot reasonably be anticipated that the impairment will, in the foreseeable future, be so diminished as no longer to prevent substantial gainful activity. For example, an individual who suffers a bone fracture which prevents him from working for an extended period of time will not be considered disabled, if his recovery can be expected in the foreseeable future; if the fracture persistently fails to knit, the individual would ordinarily be considered disabled.
(4) An impairment which is remediable does not constitute a disability within the meaning of section 72(m)(7). An individual will not be deemed disabled if, with reasonable effort and safety to himself, the impairment can be diminished to the extent that the individual will not be prevented by the impairment from engaging in his customary or any comparable substantial gainful activity.
(g) Years to which this section applies. This section applies to taxable years ending before September 3, 1974. For taxable years ending after September 2, 1974, see § 1.72-17A.
§ 1.72-17A Special rules applicable to employee annuities and distributions under deferred compensation plans to self-employed individuals and owner-employees.
(a) In general. Section 72(m) and this section contain special rules for the taxation of amounts received from qualified pension, profit-sharing, or annuity plans covering an owner-employee. This section applies to such amounts for taxable years of the recipient ending after September 2, 1974, unless another date is specified. For purposes of this section, the term “employee” shall include the self-employed individual who is treated as an employee by section 401(c)(1), and the term “owner-employee” has the meaning assigned to it in section 401(c)(3). Paragraph (b) of this section provides rules dealing with the computation of consideration paid by self-employed individuals and paragraph (c) of this section provides rules dealing with such computation when insurance is purchased for owner-employees. Paragraph (d) of this section provides rules for constructive receipt and, for purposes of these rules, treats as an owner-employee an individual for whose benefit an individual retirement account or annuity described in section 408 (a) or (b) is maintained after December 31, 1974. Paragraph (e) of this section provides rules for penalties provided by section 72(m)(5) with respect to certain distributions received by owner-employees or their successors. Paragraph (f) of this section provides rules for determining whether a person is disabled within the meaning of section 72(m)(7). See § 1.72-16, relating to life insurance contracts purchased under qualified employee plans, for rules under section 72(m)(3).
(b) Computation of consideration paid by self-employed individuals. Under section 72(m)(2), consideration paid or contributed for the contract by any self-employed individual shall for purposes of section 72 be deemed not to include any contributions paid or contributed under a plan described in paragraph (a), or any other plan of deferred compensation described in section 404(a) (whether or not qualified), if the contributions are—
(1) Paid under such plan with respect to a time during which the employee was an employee only by reason of sections 401(c)(1) and 404(a)(8), and
(2) Deductible under section 404 by the employer, including an employer within the meaning of sections 401(c)(4) and 404(a)(8), of such self-employed individual at the time of such payment, or subsequent to such time of payment.
(c) Amounts paid for life, accident, health, or other insurance. Under section 72(m)(2), amounts used to purchase life, accident, health, or other insurance protection for an owner-employee shall not be taken into account in computing the following:
(1) The aggregate amount of premiums or other consideration paid for the contract for purposes of determining the investment in the contract under section 72(c)(1)(A) and § 1.72-6;
(2) The consideration for the contract contributed by the employee for purposes of section 72(d)(1) and § 1.72-13, which provide the method of taxing employee’s annuities where the employee’s contributions will be recoverable within 3 years; and
(3) The aggregate premiums or other consideration paid for purposes of section 72(e)(1)(B) and § 1.72-11, which provide the rules for taxing amounts not received as annuities prior to the annuity starting date.
(d) Amounts constructively received. (1) The references in this paragraph (d) to section 72(m)(4) are to that section as in effect on August 13, 1982. Section 236(b)(1) of the Tax Equity and Fiscal Responsibility Act of 1982 (96 Stat. 324) repealed section 72(m)(4), generally effective for assignments, pledges and loans made after August 13, 1982, and added section 72(p). See section 72(p) and § 1.72(p)-1 for rules governing the income tax treatment of certain assignments, pledges and loans from qualified employer plans made after August 13, 1982.
(2) Under section 72(m)(4)(A), if during any taxable year an owner-employee assigns or pledges (or agrees to assign or pledge) any portion of his interest in a trust described in section 401(a) which is exempt from tax under section 501(a), or any portion of the value of a contract purchased as part of a plan described in section 403(a), such portion shall be treated as having been received by such owner-employee as a distribution from the trust or as an amount received under the contract during such taxable year.
(3)(i) Under paragraphs (4)(A) and (6) of section 72(m), if after December 31, 1974, during any taxable year an individual for whose benefit an individual retirement account or annuity described in section 408 (a) or (b) is maintained assigns or pledges (or agrees to assign or pledge) any portion of his interest in such account or annuity, such portion shall be treated as having been received by such individual as a distribution from such account or trust during such taxable year. See subsections (d) and (f) of section 408 and the regulations thereunder for the tax treatment of an amount treated as a distribution under this subparagraph.
(ii) Notwithstanding subdivision (i) of this subparagraph, if an individual retirement account or annuity, or portion thereof, is subject to the additional tax imposed by section 408(f), that amount shall be deemed not to be a distribution under section 72(m)(4)(A) and subdivision (i) of this subparagraph.
(4) Under section 72(m)(4)(B), if during any taxable year an owner-employee receives, either directly or indirectly, any amount from any insurance company as a loan under a contract purchased by a trust described in section 401(a) which is exempt from tax under section 501(a) or purchased as part of a plan described in section 403(a), and issued by such insurance company, such amount shall be treated as an amount received under the contract during such taxable year. An owner-employee will be considered to have received an amount under a contract if a premium, which is otherwise in default, is paid by the insurance company in the form of a loan against the cash surrender value of the contract. Further, an owner-employee will be considered to have received an amount to which this subparagraph applies if an amount is received from the issuer of a face-amount certificate as a loan under such a certificate purchased as part of a qualified trust or plan.
(e) Penalties applicable to certain amounts received with respect to owner-employees under section 72(m)(5). (1)(i) For taxable years of the recipient beginning after December 31, 1975, if any person receives an amount to which subparagraph (2) of this paragraph applies, his tax under Chapter 1 for the taxable year in which such amount is received shall be increased by an amount equal to 10 percent of the portion of the amount so received which is includible in his gross income for such taxable year.
(ii) For taxable years of the recipient beginning before January 1, 1976, see subparagraph (3) of this paragraph.
(2)(i) This subparagraph is applicable to amounts, to the extent includible in gross income, received from a qualified trust described in section 401(a) or under a plan described in section 403(a) by or on behalf of an individual who is or has been an owner-employee with respect to such trust or plan—
(A) Which are received before the owner-employee reaches the age of 59
(B) Which are in excess of the benefits provided for such owner-employee under the plan formula (see subdivision (iii) of this subparagraph), or
(C) Which are subject to the transitional rules with respect to willful excess contributions made on behalf of an owner-employee in his employer’s taxable years which begin before January 1, 1976 (see subdivision (v) of this subparagraph).
(ii) The amounts referred to in subdivision (i)(A) of this subparagraph do not include—
(A) Amounts received by reason of the owner-employee becoming disabled (see paragraph (f) of this section).
(B) Amounts received by the owner-employee in his capacity as a policyholder of an annuity, endowment, or life insurance contract which are in the nature of a dividend or similar distribution, or
(C) Amounts attributable to contributions (and increments in value thereon) made for years for which the recipient was not an owner-employee.
(iii) This subparagraph applies to amounts described in subdivision (i)(B) of this subparagraph (relating to benefits in excess of the plan formula) even though a portion of such amounts may be attributable to contributions made on behalf of an individual while he was not an owner-employee and even if he is deceased and the amounts are received by his successor.
(iv)(A) The rules described in subdivisions (i)(A) and (iii) of this subparagraph, relating to the treatment under section 72(m)(5)(A)(i) of certain premature distributions, may be illustrated by the following example:
| Calendar years | A | B | C | D |
|---|---|---|---|---|
| X contributions on behalf of A deductible under sec. 404 | A’s contributions made as an employee | Increments in value attributable to column A yearly contributions | Increments in value attributable to column B yearly contributions | |
| 1977 | 0 | 0 | 0 | 0 |
| 1976 | $7,500 | $2,500 | $900 | $300 |
| 1975 | 7,500 | 2,500 | 4,000 | 1,300 |
| 1974 | 7,500 | 2,500 | 1,800 | 700 |
| 1973 | 2,500 | 2,500 | 1,200 | 1,200 |
| 1972 | 2,500 | 2,500 | 1,300 | 1,300 |
| Totals | 27,500 | 12,500 | 9,200 | 4,800 |
| X contributions on behalf of A made in years A was an owner-employee: | |
| 1974 | $7,500 |
| 1973 | 2,500 |
| 1972 | 2,500 |
| Total | 12,500 |
| Increments in value attributable to such contributions: | |
| 1974 | 1,800 |
| 1973 | 1,200 |
| 1972 | 1,300 |
| Total | 4,300 |
| Increments in value attributable to contributions made by A as an employee for years in which he was an owner-employee: | |
| 1974 | 700 |
| 1973 | 1,200 |
| 1972 | 1,300 |
| Total | 3,200 |
| Grand total | 20,000 |
(B) The increments in value of an individual’s account may be allocated to contributions on his behalf, by his employer or by such individual as an owner-employee, while he was an owner-employee either by maintaining a separate account, or an accounting, which reflects the actual increment attributable to such contributions, or by the method described in (C) of this subdivision.
(C) Where an individual is covered under the same plan both as an owner-employee and as a non-owner-employee, the portion of the increment in value of his interest attributable to contributions made on his behalf while he was an owner-employee may be determined by multiplying the total increment in value in his account by a fraction. The numerator of the fraction is the total contributions made on behalf of the individual as an owner-employee, weighted for the number of years that each contribution was in the plan. The denominator is the total contributions made on behalf of the individual, whether or not as an owner-employee, weighted for the number of years each contribution was in the plan. The contributions are weighted for the number of years in the plan by multiplying each contribution by the number of years it was in the plan. For purposes of this computation, any forfeiture allocated to the account of the individual is treated as a contribution to the account made at the time so allocated. For purposes of this computation, where the individual has received a prior distribution from such account, an appropriate adjustment must be made to reflect such prior distribution.
(D) The method described in (C) of this subdivision may be illustrated by the following example:
| A | B | C | |
|---|---|---|---|
| Contribution | Number of years contribution was in trust | Contribution weighted for years in trust (A × B) | |
| 1982 | $1,000 | 0 | 0 |
| 1981 | 800 | 1 | 800 |
| 1980 | 1,200 | 2 | 2,400 |
| 1979 | 600 | 3 | 1,800 |
| 1978 | 200 | 4 | 800 |
| 1977 | 400 | 5 | 2,000 |
| 1976 | 2,000 | 6 | 12,000 |
| 1975 | 1,000 | 7 | 7,000 |
| 1974 | 1,500 | 8 | 12,000 |
| 1973 | 900 | 9 | 8,100 |
| Total | 9,600 | 46,900 |
(E)(1) The rules set forth in subdivision (iv)(E)(2) of this subparagraph shall be used to determine the amounts to which subdivision (i)(A) of this subparagraph applies in the case of a distribution of less than the entire balance of the employee’s account from a plan in which he has been covered at different times as owner-employee or as an employee other than an owner-employee.
(2) Distributions or payments from a plan for any employee taxable year shall be deemed to be attributable to contributions to the plan, and increments thereon, in the following order—
(i) Excess contributions, within the meaning of section 4972 (b), designated as such by the trustee;
(ii) Employee contributions;
(iii) Employer contributions, other than those described in (i), and the increments in value attributable to the employee’s own contributions and his employer’s contributions on the basis of the taxable years of his employer in succeeding order of time whether or not the employee was an owner-employee for any such year.
(v) The amounts referred to in subdivision (i)(C) of this subparagraph are amounts which are received by reason of a distribution of the owner-employee’s entire interest under the provisions of section 401(e)(2)(E), as in effect on September 1, 1974, relating to excess contributions on behalf of an owner-employee which are willfully made. Notwithstanding the preceding sentence, an owner-employee’s entire interest in all plans with respect to which he is an owner-employee (within the meaning of subsections (d)(8)(C) and (e)(2)(E)(ii) of section 401, as in effect on September 1, 1974) does not include any distribution or payment attributable to his employer’s contributions or his own contributions made with respect to his employer’s taxable years beginning after December 31, 1975. However, his entire interest in all plans does include all of the distribution or payment attributable to his employer’s contributions and his own contributions made with respect to all of his employer’s taxable years beginning before January 1, 1976, if any portion thereof is attributable in whole or in part to such a willful excess contribution and such entire interest is received because of a willful excess contribution pursuant to section 401(e)(2)(E)(ii). A distribution or payment is described in the preceding sentence even though it is received in an owner-employee’s taxable year beginning after December 31, 1975. For purposes of computing the increments in value attributable to employer taxable years which begin before January 1, 1976, and such increments attributable to such years beginning after December 31, 1975, the rules specified in subdivision (iv)(B), (C), (D), and (E) of this subparagraph shall be applied to the extent applicable.
(3)(i) For taxable years of the recipient beginning before January 1, 1976, the tax with respect to amounts to which subparagraph (2) of this paragraph applies shall be computed under subparagraphs (B), (C), (D), and (E) of section 72(m)(5) as such subparagraphs were in effect prior to the amendments made by subsections (g)(1) and (2)(A) of section 2001 of the Employee Retirement Income Security Act of 1974 (88 Stat. 957) except as provided in subdivisions (ii) and (iii) of this subparagraph (see paragraph (e) of § 1.72-17). For purposes of the preceding sentence, amounts to which subparagraph (2) of this paragraph applies in the case of an amount described in section 72(m)(5)(A)(i) shall be determined under subdivisions (i)(a) and (ii) of § 1.72-17(e)(1), except as provided in subdivision (ii) of this subparagraph. For purposes of the first sentence of this subdivision, amounts to which subparagraph (2) of this paragraph applies in the case of an amount described in section 72(m)(5)(A)(ii) shall be determined under subdivisions (i)(b) and (iii) of § 1.72-17(e)(1), except as provided in subdivision (iii) of this subparagraph.
(ii) For purposes of applying section 72(m)(5)(A)(i), after the amendment made by section 2001(h)(3) of such Act, and subdivisions (i)(a) and (ii) of § 1.72-17(e)(1), to a distribution or payment received in recipient taxable years ending after September 2, 1974, and beginning before January 1, 1976, with respect to contributions made on behalf of an owner-employee which were made by him as an owner-employee (that is, employee contributions within the meaning of section 401(c)(5)(B)) the portion of any distribution or payment attributable to such contributions shall not include such contributions but shall include the increments in value attributable to such contributions.
(iii) For purposes of applying section 72(m)(5)(D) and subdivisions (i)(b) and (iii) of § 1.72-17(e)(1) to recipient taxable years beginning after December 31, 1973, and beginning before January 1, 1976, in the case of distributions or payments made after December 31, 1973, the amounts to which section 402 (a)(2) or 403(a)(2) applies after the amendments made by section 2005(b) (1) and (2) of such Act (88 Stat. 990 and 991) (which are amounts to which subdivision (i)(b) of § 1.72-17(e)(1) does not apply) shall be deemed to be the amount which is treated as a gain from the sale or exchange of a capital asset held for more than 6 months under either of such sections.
(f) Meaning of disabled. (1) Section 72(m)(7) provides that an individual shall be considered to be disabled if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or to be of long-continued and indefinite duration. In determining whether an individual’s impairment makes him unable to engage in any substantial gainful activity, primary consideration shall be given to the nature and severity of his impairment. Consideration shall also be given to other factors such as the individual’s education, training, and work experience. The substantial gainful activity to which section 72(m)(7) refers is the activity, or a comparable activity, in which the individual customarily engaged prior to the arising of the disability or prior to retirement if the individual was retired at the time the disability arose.
(2) Whether or not the impairment in a particular case constitutes a disability is to be determined with reference to all the facts in the case. The following are examples of impairments which would ordinarily be considered as preventing substantial gainful activity:
(i) Loss of use of two limbs;
(ii) Certain progressive diseases which have resulted in the physical loss or atrophy of a limb, such as diabetes, multiple sclerosis, or Buerger’s disease;
(iii) Diseases of the heart, lungs, or blood vessels which have resulted in major loss of heart or lung reserve as evidenced by X-ray, electrocardiogram, or other objective findings, so that despite medical treatment breathlessness, pain, or fatigue is produced on slight exertion, such as walking several blocks, using public transportation, or doing small chores;
(iv) Cancer which is inoperable and progressive;
(v) Damage to the brain or brain abnormality which has resulted in severe loss of judgment, intellect, orientation, or memory;
(vi) Mental diseases (e.g. psychosis or severe psychoneurosis) requiring continued institutionalization or constant supervision of the individual;
(vii) Loss or diminution of vision to the extent that the affected individual has a central visual acuity of no better than 20/200 in the better eye after best correction, or has a limitation in the fields of vision such that the widest diameter of the visual fields subtends an angle no greater than 20 degrees;
(viii) Permanent and total loss of speech;
(ix) Total deafness uncorrectible by a hearing aid.
(3) In order to meet the requirements of section 72(m)(7), an impairment must be expected either to continue for a long and indefinite period or to result in death. Ordinarily, a terminal illness because of disease or injury would result in disability. The term “indefinite” is used in the sense that it cannot reasonably be anticipated that the impairment will, in the foreseeable future, be so diminished as no longer to prevent substantial gainful activity. For example, an individual who suffers a bone fracture which prevents him from working for an extended period of time will not be considered disabled, if his recovery can be expected in the foreseeable future; if the fracture persistently fails to knit, the individual would ordinarily be considered disabled.
(4) An impairment which is remediable does not constitute a disability within the meaning of section 72(m)(7). An individual will not be deemed disabled if, with reasonable effort and safety to himself, the impairment can be diminished to the extent that the individual will not be prevented by the impairment from engaging in his customary or any comparable substantial gainful activity.
§ 1.72-18 Treatment of certain total distributions with respect to self-employed individuals.
(a) In general. The Self-Employed Individuals Tax Retirement Act of 1962 permits self-employed individuals to be treated as employees for purposes of participation in pension, profit-sharing, and annuity plans described in sections 401(a) and 403(a). In general, amounts received by a distributee or payee which are attributable to contributions made on behalf of a participant while he was self-employed are taxed in the same manner as amounts which are attributable to contributions made on behalf of a common-law employee. However, such amounts which are paid in one taxable year representing the total distributions payable to a distributee or payee with respect to an employee are not eligible for the capital gains treatment of section 402(a)(2) or 403(a)(2). This section sets forth the treatment of such distributions, except where such a distribution is subject to the penalties of section 72(m)(5) and paragraph (e) of § 1.72-17.
(b) Distributions to which this section applies. (1)(i) Except as provided in subparagraphs (2) and (3) of this paragraph, this section applies to amounts distributed to a distributee in one taxable year of the distributee in the case of an employees’ trust described in section 401(a) which is exempt under section 501(a), or to amounts paid to a payee in one taxable year of the payee in the case of an annuity plan described in section 403(a), which constitute the total distributions payable, or the total amounts payable, to the distributee or payee with respect to an employee.
(ii) For the total distributions or amounts payable to a distributee or payee to be considered paid within one taxable year of the distributee or payee for purposes of this section, all amounts to the credit of the employee-participant through the end of such taxable year which are payable to the distributee or payee must be distributed or paid within such taxable year. Thus, the provisions of this section are not applicable to a distribution or payment to a distributee or payee if the trust or plan retains any amounts after the close of such taxable year which are payable to the same distributee or payee even though the amounts retained may be attributable to contributions on behalf of the employee-participant while he was a common-law employee in the business with respect to which the plan was established.
(iii) For purposes of this section, the total amounts payable to a distributee or the amounts to the credit of the employee do not include United States Retirement Plan Bonds held by a trust to the credit of the employee. Thus, a distribution to a distributee by a qualified trust may constitute a distribution to which this section applies even though the trust retains retirement plan bonds registered in the name of the employee on whose behalf the distribution is made which are to be distributed to the same distributee. Moreover, the proceeds of a retirement bond received as part of a distribution which constitutes the total distributions payable to the distributee are not entitled to the special tax treatment of this section.
(iv) If the amounts payable to a distributee from a qualified trust with respect to an employee-participant includes an annuity contract, such contract must be distributed along with all other amounts payable to the distributee in order to have a distribution to which this section applies. However, the proceeds of an annuity contract received in a total distribution will not be entitled to the tax treatment of this section unless the contract is surrendered in the taxable year of the distributee in which the total distribution was received.
(v) In the case of a qualified annuity plan, the term “total amounts” means all annuities payable to a payee. If more than one annuity contract is received under the plan by a distributee, this section shall not apply to an amount received on surrender of any such contracts unless all contracts under the plan payable to the payee are surrendered within one taxable year of the payee.
(vi)(a) The provisions of this section are applicable where the total amounts payable to a distributee or payee are paid within one taxable year of the distributee or payee whether or not a portion of the employee-participant’s interest which is payable to another distributee or payee is paid within the same taxable year. However, a distributee or payee who, in prior taxable years received amounts (except amounts described in (b) of this subdivision) after the employee-participant ceases to be eligible for additional contributions to be made on his behalf, does not receive a distribution or payment to which this section applies, even though the total amount remaining to be paid to such distributee or payee with respect to such employee is paid within one taxable year. On the other hand, a distribution to a distributee or payee prior to the time that the employee-participant ceases to be eligible for additional contributions on his behalf does not preclude the application of this section to a later distribution to the same distributee or payee.
(b) The receipt of an amount which constitutes—
(1) A payment in the nature of a dividend or similar distribution to an individual in his capacity as a policyholder of an annuity, endowment, or life insurance contract, or
(2) A return of excess contributions which were not willfully made,
(vii) For purposes of this section, the total amounts payable to a distributee or payee, or the amounts to the credit of the employee, do not include any amounts which have been placed in a separate account for the funding of medical benefits described in section 401(h) as defined in paragraph (a) of § 1.401-14. Thus, a distribution by a qualified trust or annuity plan may constitute a distribution to which this section applies even though amounts attributable to the funding of section 401(h) medical benefits as defined in paragraph (a) of § 1.401-14 are not so distributed.
(2) This section shall apply—
(i) Only if the distribution or payment is made—
(a) On account of the employee’s death at any time,
(b) After the employee has attained the age 59
(c) After the employee has become disabled; and
(ii) Only to so much of the distribution or payment as is attributable to contributions made on behalf of an employee while he was a self-employed individual in the business with respect to which the plan was established. Any distribution or payment, or any portion thereof, which is not so attributable shall be subject to the rules of taxation which apply to any distribution or payment that is attributable to contributions on behalf of common-law employees.
(3) This section shall not apply to—
(i) Distributions or payments to which the penalty provisions of section 72(m)(5) and paragraph (e) of § 1.72-17 apply,
(ii) Distributions or payments from a trust or plan made to or on behalf of an individual prior to the time such individual ceases to be eligible for additional contributions (except the contribution attributable to the last year of service) to be made to the trust or plan on his behalf as a self-employed individual, and
(iii) Distributions or payments made to the employee from a plan or trust unless contributions which were allowed as a deduction under section 404 have been made on behalf of such employee as a self-employed individual under such trust or plan for 5 or more taxable years (whether or not consecutive) prior to the taxable year in which such distributions or payments are made. Distributions or payments to which this section does not apply by reason of this subdivision are taxed as otherwise provided in section 72. However, for taxable years beginning before January 1, 1964, section 72(e)(3), as in effect before such date, is not applicable. For taxable years beginning after December 31, 1963, such distributions or payments may be taken into account in computations under sections 1301 through 1305 (relating to income averaging).
(4) The portion of any distribution or payment attributable to contributions on behalf of an employee-participant while he was self-employed includes the contributions made on his behalf while he was self-employed and the increments in value attributable to such contributions. Where the amounts to the credit of an employee-participant include amounts attributable to contributions on his behalf while he was a self-employed individual and amounts attributable to contributions on his behalf while he was a common-law employee, the increment in value attributable to the employee-participant’s interest shall be allocated to the contributions on his behalf while he was self-employed either by maintaining a separate account, or an accounting, which reflects the actual increment attributable to such contributions, or by the method described in paragraph (e)(1)(iv)(c) of § 1.72-17. However, if the latter method is used, the numerator of the fraction is the total contributions made on behalf of the individual as a self-employed individual, weighted for the number of years that each contribution was in the plan.
(c) Amounts includible in gross income. (1) Where a total distribution or payment to which this section applies is made to one distributee or payee and includes the total amount remaining to the credit of the employee-participant on whose behalf the distribution or payment was made, the distributee or payee shall include in gross income an amount equal to the portion of the distribution or payment which exceeds the employee-participant’s investment in the contract. For purposes of this paragraph, the investment in the contract shall be reduced by any amounts previously received from the plan or trust by or on behalf of the employee-participant which were excludable from gross income as a return of the investment in the contract.
(2) In the case of a distribution to which this section applies and which is made to more than one distributee or payee, each element of the amounts to the credit of an employee-participant shall be allocated among the several distributees or payees on the basis of the ratio of the value of the distributee’s or payee’s distribution or payment to the total amount to the credit of the employee-participant. The elements to be so allocated include the investment in the contract, the increments in value, and the portion of the amounts to the credit of the employee-participant which is attributable to the contributions on behalf of the employee-participant while he was a self-employed individual.
(d) Computation of tax. (1) The tax attributable to the amounts to which this section applies for the taxable year in which such amounts are received is the greater of—
(i) 5 times the increase in tax which would result from the inclusion in gross income of the recipient of 20 percent of so much of the amount so received as is includible in gross income, or
(ii) 5 times the increase which would result if the taxable income of the recipient for such taxable year equaled 20 percent of the excess of the aggregate of the amounts so received and includible in gross income over the amount of the deductions allowed the recipient for such taxable year under section 151 (relating to deduction for personal exemptions).
(2) The application of the rules of this paragraph may be illustrated by the following example:
§ 1.72(e)-1T Treatment of distributions where substantially all contributions are employee contributions (temporary).
Q-1: How did the Tax Reform Act (TRA) of 1984 change the law with regard to the treatment of non-annuity distributions (i.e., amounts distributed prior to the annuity starting date and not received as annuities) from a qualified plan that is treated as a single contract under section 72 and under which substantially all of the contributions are employee contributions?
A-1: (a) Prior to the amendment of section 72(e) by the TRA of 1984, non-annuity distributions from such a qualified plan generally were allocable, first, to nondeductible employee contributions and thus were not includible in gross income. After distributions equaled the balance of nondeductible employee contributions, further non-annuity distributions generally were includible in gross income.
(b) Pursuant to section 72(e)(7), as added by the TRA of 1984, non-annuity distributions from such a qualified plan that are allocable to investment in the plan after August 13, 1982 (as determined in accordance with section 72(e)(5)(B)), generally will be treated, first, as allocable to income and, second, as allocable to nondeductible employee contributions. Distributions allocable to income are includible in gross income. Distributions allocable to nondeductible employee contributions are not includible in gross income.
Q-2: To which qualified plans and contracts does section 72(e)(7) apply?
A-2: Section 72(e)(7) applies to any plan or contract under which substantially all of the contributions are employee contributions if—
(a) Such plan is described in section 401(a) and the related trust or trusts are exempt from tax under section 501(a); or
(b) Such contract is—
(1) Purchased by a trust described in (a) above,
(2) Purchased as part of a plan described in section 403(a), or
(3) Described in section 403(b).
Q-3: What is the definition of a qualified plan or contract under which substantially all of the contributions are employee contributions?
A-3: (a) A qualified plan or contract under which substantially all of the contributions are employee contributions is a plan or contract with respect to which 85 percent or more of the total contributions during the “representative period” are employee contributions. The “representative period” means the five-plan-year period preceding the plan year during which a distribution occurs. However, if less than 85 percent of the total contributions for all plan years during which the plan or contract is in existence prior to the plan year of distribution are employee contributions, then the plan or contract is not one with respect to which substantially all of the contributions are employee contributions.
(b) For purposes of the 85 percent test, contributions made to a predecessor plan or contract are aggregated with contributions made to the plan or contract to which the 85 percent test is being applied (the successor plan or contract). For purposes of the preceding sentence, a predecessor plan or contract is a plan or contract the terms of which are substantially the same as the successor plan or contract.
Q-4: What is the definition of employee contributions for purposes of section 72(e)(7)?
A-4: For purposes of section 72(e)(7), employee contributions are those amounts contributed by the employee and those amounts considered contributed by the employee under section 72(f). For example, amounts contributed to a section 401(k) qualified cash or deferred arrangement, pursuant to an employee’s election to defer such amounts, are employer contributions to the extent that such amounts are not currently includible in gross income. In addition, deductible employee contributions under section 72(o) are disregarded in their entirety (i.e., treated as neither employee contributions nor employer contributions) in determining whether substantially all the contributions are employee contributions.
Q-5: How is the 85 percent test of section 72(e)(7) applied to a qualified plan or contract?
A-5: (a) Except as provided in paragraphs (b), (c), and (d), the 85 percent test is applied separately with respect to each contract under section 72.
(b) If a single qualified plan described in section 401(a) or section 403(a) comprises more than one contract under section 72, regardless of whether such plan includes multiple trusts or combinations of profit-sharing and pension features, these contracts are aggregated for purposes of applying the 85 percent test. Thus, if substantially all of the contributions under a qualified plan comprising two contracts under section 72 are employee contributions, section 72(e)(5)(D) shall not apply to non-annuity distributions under either of the contracts.
(c) With respect to the plans maintained by the Federal Government or by instrumentalities of the Federal Government, the 85 percent test shall be applied by aggregating all such plans. This aggregation rule applies only to those plans that are actively administered by the Federal Government or an instrumentality thereof. Thus, if a plan of the Federal Government is administered by a commercial financial institution, it would not be aggregated with other plans of the Federal Government and its instrumentalities for purposes of applying the 85 percent test.
(d) In the case of a contract described in section 403(b), the 85 percent test is applied separately to each such contract.
Q-6: Is a loan from a qualified plan or contract described in section 72(e)(7) treated as a distribution under section 72(e)(4)(A)?
A-6: Yes. Pursuant to section 72(e)(4)(A), if an employee receives, either directly or indirectly, any amount as a loan from a qualified plan or contract described in section 72(e)(7), such amount shall be treated as a distribution from the plan or contract of an amount not received as an annuity. Similarly, if an employee assigns or pledges, or agrees to assign or pledge, any portion of the value of any qualified plan or contract, such portion shall be treated as a distribution from the plan or contract of an amount not received as an annuity.
Q-7: Does the five percent penalty for premature distributions from annuity contracts, as described in section 72(q), apply to distributions from a qualified plan or contract described in section 72(e)(7)?
A-7: No.
Q-8: When is section 72(e)(7) effective?
A-8: Section 72(e)(7) is effective for amounts received or loans made on or after October 17, 1984. For purposes of this effective date provision, loan amounts outstanding on October 16, 1984, which are renegotiated, extended, renewed, or revised after that date generally are treated as loans made on the date of the renegotiation, etc.
§ 1.72(p)-1 Loans treated as distributions.
The questions and answers in this section provide guidance under section 72(p) pertaining to loans from qualified employer plans (including government plans and tax-sheltered annuities and employer plans that were formerly qualified). The examples included in the questions and answers in this section are based on the assumption that a bona fide loan is made to a participant from a qualified defined contribution plan pursuant to an enforceable agreement (in accordance with paragraph (b) of Q&A-3 of this section), with adequate security and with an interest rate and repayment terms that are commercially reasonable. (The particular interest rate used, which is solely for illustration, is 8.75 percent compounded annually.) In addition, unless the contrary is specified, it is assumed in the examples that the amount of the loan does not exceed 50 percent of the participant’s nonforfeitable account balance, the participant has no other outstanding loan (and had no prior loan) from the plan or any other plan maintained by the participant’s employer or any other person required to be aggregated with the employer under section 414(b), (c) or (m), and the loan is not excluded from section 72(p) as a loan made in the ordinary course of an investment program as described in Q&A-18 of this section. The regulations and examples in this section do not provide guidance on whether a loan from a plan would result in a prohibited transaction under section 4975 of the Internal Revenue Code or on whether a loan from a plan covered by title I of the Employee Retirement Income Security Act of 1974 (88 Stat. 829) (ERISA) would be consistent with the fiduciary standards of ERISA or would result in a prohibited transaction under section 406 of ERISA. The questions and answers are as follows:
Q-1: In general, what does section 72(p) provide with respect to loans from a qualified employer plan?
A-1: (a) Loans. Under section 72(p), an amount received by a participant or beneficiary as a loan from a qualified employer plan is treated as having been received as a distribution from the plan (a deemed distribution), unless the loan satisfies the requirements of Q&A-3 of this section. For purposes of section 72(p) and this section, a loan made from a contract that has been purchased under a qualified employer plan (including a contract that has been distributed to the participant or beneficiary) is considered a loan made under a qualified employer plan.
(b) Pledges and assignments. Under section 72(p), if a participant or beneficiary assigns or pledges (or agrees to assign or pledge) any portion of his or her interest in a qualified employer plan as security for a loan, the portion of the individual’s interest assigned or pledged (or subject to an agreement to assign or pledge) is treated as a loan from the plan to the individual, with the result that such portion is subject to the deemed distribution rule described in paragraph (a) of this Q&A-1. For purposes of section 72(p) and this section, any assignment or pledge of (or agreement to assign or to pledge) any portion of a participant’s or beneficiary’s interest in a contract that has been purchased under a qualified employer plan (including a contract that has been distributed to the participant or beneficiary) is considered an assignment or pledge of (or agreement to assign or pledge) an interest in a qualified employer plan. However, if all or a portion of a participant’s or beneficiary’s interest in a qualified employer plan is pledged or assigned as security for a loan from the plan to the participant or the beneficiary, only the amount of the loan received by the participant or the beneficiary, not the amount pledged or assigned, is treated as a loan.
Q-2: What is a qualified employer plan for purposes of section 72(p)?
A-2: For purposes of section 72(p) and this section, a qualified employer plan means—
(a) A plan described in section 401(a) which includes a trust exempt from tax under section 501(a);
(b) An annuity plan described in section 403(a);
(c) A plan under which amounts are contributed by an individual’s employer for an annuity contract described in section 403(b);
(d) Any plan, whether or not qualified, established and maintained for its employees by the United States, by a State or political subdivision thereof, or by an agency or instrumentality of the United States, a State or a political subdivision of a State; or
(e) Any plan which was (or was determined to be) described in paragraph (a), (b), (c), or (d) of this Q&A-2.
Q-3: What requirements must be satisfied in order for a loan to a participant or beneficiary from a qualified employer plan not to be a deemed distribution?
A-3: (a) In general. A loan to a participant or beneficiary from a qualified employer plan will not be a deemed distribution to the participant or beneficiary if the loan satisfies the repayment term requirement of section 72(p)(2)(B), the level amortization requirement of section 72(p)(2)(C), and the enforceable agreement requirement of paragraph (b) of this Q&A-3, but only to the extent the loan satisfies the amount limitations of section 72(p)(2)(A).
(b) Enforceable agreement requirement. A loan does not satisfy the requirements of this paragraph unless the loan is evidenced by a legally enforceable agreement (which may include more than one document) and the terms of the agreement demonstrate compliance with the requirements of section 72(p)(2) and this section. Thus, the agreement must specify the amount and date of the loan and the repayment schedule. The agreement does not have to be signed if the agreement is enforceable under applicable law without being signed. The agreement must be set forth either—
(1) In a written paper document; or
(2) In a document that is delivered through an electronic medium under an electronic system that satisfies the requirements of § 1.401(a)-21 of this chapter.
Q-4: If a loan from a qualified employer plan to a participant or beneficiary fails to satisfy the requirements of Q&A-3 of this section, when does a deemed distribution occur?
A-4: (a) Deemed distribution. For purposes of section 72, a deemed distribution occurs at the first time that the requirements of Q&A-3 of this section are not satisfied, in form or in operation. This may occur at the time the loan is made or at a later date. If the terms of the loan do not require repayments that satisfy the repayment term requirement of section 72(p)(2)(B) or the level amortization requirement of section 72(p)(2)(C), or the loan is not evidenced by an enforceable agreement satisfying the requirements of paragraph (b) of Q&A-3 of this section, the entire amount of the loan is a deemed distribution under section 72(p) at the time the loan is made. If the loan satisfies the requirements of Q&A-3 of this section except that the amount loaned exceeds the limitations of section 72(p)(2)(A), the amount of the loan in excess of the applicable limitation is a deemed distribution under section 72(p) at the time the loan is made. If the loan initially satisfies the requirements of section 72(p)(2)(A), (B) and (C) and the enforceable agreement requirement of paragraph (b) of Q&A-3 of this section, but payments are not made in accordance with the terms applicable to the loan, a deemed distribution occurs as a result of the failure to make such payments. See Q&A-10 of this section regarding when such a deemed distribution occurs and the amount thereof and Q&A-11 of this section regarding the tax treatment of a deemed distribution.
(b) Examples. The following examples illustrate the rules in paragraph (a) of this Q&A-4 and are based upon the assumptions described in the introductory text of this section:
(ii) Under section 72(p), the participant has a deemed distribution of $20,000 (the excess of $70,000 over $50,000) at the time of the loan, because the loan exceeds the $50,000 limit in section 72(p)(2)(A)(i). The remaining $50,000 is not a deemed distribution.
(ii) Because the amount of the loan is $5,000 more than 50% of the participant’s nonforfeitable account balance, the participant has a deemed distribution of $5,000 at the time of the loan. The remaining $15,000 is not a deemed distribution. (Note also that, if the loan is secured solely by the participant’s account balance, the loan may be a prohibited transaction under section 4975 because the loan may not satisfy 29 CFR 2550.408b-1(f)(2).)
(ii) Because the repayment period exceeds the maximum five-year period in section 72(p)(2)(B)(i), the participant has a deemed distribution of $50,000 at the time the loan is made.
(ii) As a result of the failure to satisfy the requirement that the loan be repaid in level monthly installments, the participant has a deemed distribution. See paragraph (c) of Q&A-10 of this section regarding when such a deemed distribution occurs and the amount thereof.
Q-5: What is a principal residence for purposes of the exception in section 72(p)(2)(B)(ii) from the requirement that a loan be repaid in five years?
A-5: Section 72(p)(2)(B)(ii) provides that the requirement in section 72(p)(2)(B)(i) that a plan loan be repaid within five years does not apply to a loan used to acquire a dwelling unit which will within a reasonable time be used as the principal residence of the participant (a principal residence plan loan). For this purpose, a principal residence has the same meaning as a principal residence under section 121.
Q-6: In order to satisfy the requirements for a principal residence plan loan, is a loan required to be secured by the dwelling unit that will within a reasonable time be used as the principal residence of the participant?
A-6: A loan is not required to be secured by the dwelling unit that will within a reasonable time be used as the participant’s principal residence in order to satisfy the requirements for a principal residence plan loan.
Q-7: What tracing rules apply in determining whether a loan qualifies as a principal residence plan loan?
A-7: The tracing rules established under section 163(h)(3)(B) apply in determining whether a loan is treated as for the acquisition of a principal residence in order to qualify as a principal residence plan loan.
Q-8: Can a refinancing qualify as a principal residence plan loan?
A-8: (a) Refinancings. In general, no, a refinancing cannot qualify as a principal residence plan loan. However, a loan from a qualified employer plan used to repay a loan from a third party will qualify as a principal residence plan loan if the plan loan qualifies as a principal residence plan loan without regard to the loan from the third party.
(b) Example. The following example illustrates the rules in paragraph (a) of this Q&A-8 and is based upon the assumptions described in the introductory text of this section:
(ii) Because the plan loan satisfies the requirements to qualify as a principal residence plan loan (taking into account the tracing rules of section 163(h)(3)(B)), the plan loan qualifies for the exception in section 72(p)(2)(B)(ii).
Q-9: Does the level amortization requirement of section 72(p)(2)(C) apply when a participant is on a leave of absence without pay?
A-9: (a) Leave of absence. The level amortization requirement of section 72(p)(2)(C) does not apply for a period, not longer than one year (or such longer period as may apply under section 414(u) and paragraph (b) of this Q&A-9), that a participant is on a bona fide leave of absence, either without pay from the employer or at a rate of pay (after applicable employment tax withholdings) that is less than the amount of the installment payments required under the terms of the loan. However, the loan (including interest that accrues during the leave of absence) must be repaid by the latest permissible term of the loan and the amount of the installments due after the leave ends must not be less than the amount required under the terms of the original loan.
(b) Military service. In accordance with section 414(u)(4), if a plan suspends the obligation to repay a loan made to an employee from the plan for any part of a period during which the employee is performing service in the uniformed services (as defined in 38 U.S.C. chapter 43), whether or not qualified military service, such suspension shall not be taken into account for purposes of section 72(p) or this section. Thus, if a plan suspends loan repayments for any part of a period during which the employee is performing military service described in the preceding sentence, such suspension shall not cause the loan to be deemed distributed even if the suspension exceeds one year and even if the term of the loan is extended. However, the loan will not satisfy the repayment term requirement of section 72(p)(2)(B) and the level amortization requirement of section 72(p)(2)(C) unless loan repayments resume upon the completion of such period of military service and the loan is repaid thereafter by amortization in substantially level installments over a period that ends not later than the latest permissible term of the loan.
(c) Latest permissible term of a loan. For purposes of this Q&A-9, the latest permissible term of a loan is the latest date permitted under section 72(p)(2)(B) (i.e., five years from the date of the loan, assuming that the replacement loan does not qualify for the exception at section 72(p)(2)(B)(ii) for principal residence plan loans) plus any additional period of suspension permitted under paragraph (b) of this Q&A-9.
(d) Examples. The following examples illustrate the rules of this Q&A-9 and are based upon the assumptions described in the introductory text of this section:
(ii) Because the loan satisfies the requirements of section 72(p)(2), the participant does not have a deemed distribution. Alternatively, section 72(p)(2) would be satisfied if the participant continued the monthly installments of $825 after resuming active employment and on June 30, 2008 repaid the full balance remaining due.
(ii) Because the loan satisfies the requirements of section 72(p)(2) and paragraph (b) of this Q&A-9, the participant does not have a deemed distribution. Alternatively, section 72(p)(2) would also be satisfied if the amount of each monthly installment after April 19, 2006, is increased to $930 in order to repay the loan by June 30, 2010 (without any balance remaining due then).
Q-10: If a participant fails to make the installment payments required under the terms of a loan that satisfied the requirements of Q&A-3 of this section when made, when does a deemed distribution occur and what is the amount of the deemed distribution?
A-10: (a) Timing of deemed distribution. Failure to make any installment payment when due in accordance with the terms of the loan violates section 72(p)(2)(C) and, accordingly, results in a deemed distribution at the time of such failure. However, the plan administrator may allow a cure period and section 72(p)(2)(C) will not be considered to have been violated if the installment payment is made not later than the end of the cure period, which period cannot continue beyond the last day of the calendar quarter following the calendar quarter in which the required installment payment was due.
(b) Amount of deemed distribution. If a loan satisfies Q&A-3 of this section when made, but there is a failure to pay the installment payments required under the terms of the loan (taking into account any cure period allowed under paragraph (a) of this Q&A-10), then the amount of the deemed distribution equals the entire outstanding balance of the loan (including accrued interest) at the time of such failure.
(c) Example. The following example illustrates the rules in paragraphs (a) and (b) of this Q&A-10 and is based upon the assumptions described in the introductory text of this section:
(ii) As a result of the failure to satisfy the requirement that the loan be repaid in level installments pursuant to section 72(p)(2)(C), the participant has a deemed distribution on November 30, 2003, which is the last day of the three-month cure period for the August 31, 2003 installment. The amount of the deemed distribution is $17,157, which is the outstanding balance on the loan at November 30, 2003. Alternatively, if the plan administrator had allowed a cure period through the end of the next calendar quarter, there would be a deemed distribution on December 31, 2003 equal to $17,282, which is the outstanding balance of the loan at December 31, 2003.
Q-11: Does section 72 apply to a deemed distribution as if it were an actual distribution?
A-11: (a) Tax basis. If the employee’s account includes after-tax contributions or other investment in the contract under section 72(e), section 72 applies to a deemed distribution as if it were an actual distribution, with the result that all or a portion of the deemed distribution may not be taxable.
(b) Section 72(t) and (m). Section 72(t) (which imposes a 10 percent tax on certain early distributions) and section 72(m)(5) (which imposes a separate 10 percent tax on certain amounts received by a 5-percent owner) apply to a deemed distribution under section 72(p) in the same manner as if the deemed distribution were an actual distribution.
Q-12: Is a deemed distribution under section 72(p) treated as an actual distribution for purposes of the qualification requirements of section 401, the distribution provisions of section 402, the distribution restrictions of section 401(k)(2)(B) or 403(b)(11), or the vesting requirements of § 1.411(a)-7(d)(5) (which affects the application of a graded vesting schedule in cases involving a prior distribution)?
A-12: No; thus, for example, if a participant in a money purchase plan who is an active employee has a deemed distribution under section 72(p), the plan will not be considered to have made an in-service distribution to the participant in violation of the qualification requirements applicable to money purchase plans. Similarly, the deemed distribution is not eligible to be rolled over to an eligible retirement plan and is not considered an impermissible distribution of an amount attributable to elective contributions in a section 401(k) plan. See also § 1.402(c)-2, Q&A-4(d) and § 1.401(k)-1(d)(5)(iii).
Q-13: How does a reduction (offset) of an account balance in order to repay a plan loan differ from a deemed distribution?
A-13: (a) Difference between deemed distribution and plan loan offset amount. (1) Loans to a participant from a qualified employer plan can give rise to two types of taxable distributions—
(i) A deemed distribution pursuant to section 72(p); and
(ii) A distribution of an offset amount.
(2) As described in Q&A-4 of this section, a deemed distribution occurs when the requirements of Q&A-3 of this section are not satisfied, either when the loan is made or at a later time. A deemed distribution is treated as a distribution to the participant or beneficiary only for certain tax purposes and is not a distribution of the accrued benefit. A distribution of a plan loan offset amount (as defined in § 1.402(c)-2, Q&A-9(b)) occurs when, under the terms governing a plan loan, the accrued benefit of the participant or beneficiary is reduced (offset) in order to repay the loan (including the enforcement of the plan’s security interest in the accrued benefit). A distribution of a plan loan offset amount could occur in a variety of circumstances, such as where the terms governing the plan loan require that, in the event of the participant’s request for a distribution, a loan be repaid immediately or treated as in default.
(b) Plan loan offset. In the event of a plan loan offset, the amount of the account balance that is offset against the loan is an actual distribution for purposes of the Internal Revenue Code, not a deemed distribution under section 72(p). Accordingly, a plan may be prohibited from making such an offset under the provisions of section 401(a), 401(k)(2)(B) or 403(b)(11) prohibiting or limiting distributions to an active employee. See § 1.402(c)-2, Q&A-9(c), Example 6. See also Q&A-19 of this section for rules regarding the treatment of a loan after a deemed distribution.
Q-14: How is the amount includible in income as a result of a deemed distribution under section 72(p) required to be reported?
A-14: The amount includible in income as a result of a deemed distribution under section 72(p) is required to be reported on Form 1099-R (or any other form prescribed by the Commissioner).
Q-15: What withholding rules apply to plan loans?
A-15: To the extent that a loan, when made, is a deemed distribution or an account balance is reduced (offset) to repay a loan, the amount includible in income is subject to withholding. If a deemed distribution of a loan or a loan repayment by benefit offset results in income at a date after the date the loan is made, withholding is required only if a transfer of cash or property (excluding employer securities) is made to the participant or beneficiary from the plan at the same time. See §§ 35.3405-1, f-4, and 31.3405(c)-1, Q&A-9 and Q&A-11, of this chapter for further guidance on withholding rules.
Q-16: If a loan fails to satisfy the requirements of Q&A-3 of this section and is a prohibited transaction under section 4975, is the deemed distribution of the loan under section 72(p) a correction of the prohibited transaction?
A-16: No, a deemed distribution is not a correction of a prohibited transaction under section 4975. See §§ 141.4975-13 and 53.4941(e)-1(c)(1) of this chapter for guidance concerning correction of a prohibited transaction.
Q-17: What are the income tax consequences if an amount is transferred from a qualified employer plan to a participant or beneficiary as a loan, but there is an express or tacit understanding that the loan will not be repaid?
A-17: If there is an express or tacit understanding that the loan will not be repaid or, for any reason, the transaction does not create a debtor-creditor relationship or is otherwise not a bona fide loan, then the amount transferred is treated as an actual distribution from the plan for purposes of the Internal Revenue Code, and is not treated as a loan or as a deemed distribution under section 72(p).
Q-18: If a qualified employer plan maintains a program to invest in residential mortgages, are loans made pursuant to the investment program subject to section 72(p)?
A-18: (a) Residential mortgage loans made by a plan in the ordinary course of an investment program are not subject to section 72(p) if the property acquired with the loans is the primary security for such loans and the amount loaned does not exceed the fair market value of the property. An investment program exists only if the plan has established, in advance of a specific investment under the program, that a certain percentage or amount of plan assets will be invested in residential mortgages available to persons purchasing the property who satisfy commercially customary financial criteria. A loan will not be considered as made under an investment program if—
(1) Any of the loans made under the program matures upon a participant’s termination from employment;
(2) Any of the loans made under the program is an earmarked asset of a participant’s or beneficiary’s individual account in the plan; or
(3) The loans made under the program are made available only to participants or beneficiaries in the plan.
(b) Paragraph (a)(3) of this Q&A-18 shall not apply to a plan which, on December 20, 1995, and at all times thereafter, has had in effect a loan program under which, but for paragraph (a)(3) of this Q&A-18, the loans comply with the conditions of paragraph (a) of this Q&A-18 to constitute residential mortgage loans in the ordinary course of an investment program.
(c) No loan that benefits an officer, director, or owner of the employer maintaining the plan, or their beneficiaries, will be treated as made under an investment program.
(d) This section does not provide guidance on whether a residential mortgage loan made under a plan’s investment program would result in a prohibited transaction under section 4975, or on whether such a loan made by a plan covered by title I of ERISA would be consistent with the fiduciary standards of ERISA or would result in a prohibited transaction under section 406 of ERISA. See 29 CFR 2550.408b-1.
Q-19: If there is a deemed distribution under section 72(p), is the interest that accrues thereafter on the amount of the deemed distribution an indirect loan for income tax purposes and what effect does the deemed distribution have on subsequent loans?
A-19: (a) General rule. Except as provided in paragraph (b) of this Q&A-19, a deemed distribution of a loan is treated as a distribution for purposes of section 72. Therefore, a loan that is deemed to be distributed under section 72(p) ceases to be an outstanding loan for purposes of section 72, and the interest that accrues thereafter under the plan on the amount deemed distributed is disregarded for purposes of applying section 72 to the participant or the beneficiary. Even though interest continues to accrue on the outstanding loan (and is taken into account for purposes of determining the tax treatment of any subsequent loan in accordance with paragraph (b) of this Q&A-19), this additional interest is not treated as an additional loan (and thus, does not result in an additional deemed distribution) for purposes of section 72(p). However, a loan that is deemed distributed under section 72(p) is not considered distributed for all purposes of the Internal Revenue Code. See Q&A-11 through Q&A-16 of this section.
(b) Effect on subsequent loans—(1) Application of section 72(p)(2)(A). A loan that is deemed distributed under section 72(p) (including interest accruing thereafter) and that has not been repaid (such as by a plan loan offset) is considered outstanding for purposes of applying section 72(p)(2)(A) to determine the maximum amount of any subsequent loan to the participant or beneficiary.
(2) Additional security for subsequent loans. If a loan is deemed distributed to a participant or beneficiary under section 72(p) and has not been repaid (such as by a plan loan offset), then no payment made thereafter to the participant or beneficiary is treated as a loan for purposes of section 72(p)(2) unless the loan otherwise satisfies section 72(p)(2) and this section and either of the following conditions is satisfied:
(i) There is an arrangement among the plan, the participant or beneficiary, and the employer, enforceable under applicable law, under which repayments will be made by payroll withholding. For this purpose, an arrangement will not fail to be enforceable merely because a party has the right to revoke the arrangement prospectively.
(ii) The plan receives adequate security from the participant or beneficiary that is in addition to the participant’s or beneficiary’s accrued benefit under the plan.
(3) Condition no longer satisfied. If, following a deemed distribution that has not been repaid, a payment is made to a participant or beneficiary that satisfies the conditions in paragraph (b)(2) of this Q&A-19 for treatment as a plan loan and, subsequently, before repayment of the second loan, the conditions in paragraph (b)(2) of this Q&A-19 are no longer satisfied with respect to the second loan (for example, if the loan recipient revokes consent to payroll withholding), the amount then outstanding on the second loan is treated as a deemed distribution under section 72(p).
Q-20: May a participant refinance an outstanding loan or have more than one loan outstanding from a plan?
A-20: (a) Refinancings and multiple loans—(1) General rule. A participant who has an outstanding loan that satisfies section 72(p)(2) and this section may refinance that loan or borrow additional amounts if, under the facts and circumstances, the loans collectively satisfy the amount limitations of section 72(p)(2)(A) and the prior loan and the additional loan each satisfy the requirements of section 72(p)(2)(B) and (C) and this section. For this purpose, a refinancing includes any situation in which one loan replaces another loan.
(2) Loans that repay a prior loan and have a later repayment date. For purposes of section 72(p)(2) and this section (including the amount limitations of section 72(p)(2)(A)), if a loan that satisfies section 72(p)(2) is replaced by a loan (a replacement loan) and the term of the replacement loan ends after the latest permissible term of the loan it replaces (the replaced loan), then the replacement loan and the replaced loan are both treated as outstanding on the date of the transaction. For purposes of the preceding sentence, the latest permissible term of the replaced loan is the latest date permitted under section 72(p)(2)(C) (i.e., five years from the original date of the replaced loan, assuming that the replaced loan does not qualify for the exception at section 72(p)(2)(B)(ii) for principal residence plan loans and that no additional period of suspension applied to the replaced loan under Q&A-9 (b) of this section). Thus, for example, if the term of the replacement loan ends after the latest permissible term of the replaced loan and the sum of the amount of the replacement loan plus the outstanding balance of all other loans on the date of the transaction, including the replaced loan, fails to satisfy the amount limitations of section 72(p)(2)(A), then the replacement loan results in a deemed distribution. This paragraph (a)(2) does not apply to a replacement loan if the terms of the replacement loan would satisfy section 72(p)(2) and this section determined as if the replacement loan consisted of two separate loans, the replaced loan (amortized in substantially level payments over a period ending not later than the last day of the latest permissible term of the replaced loan) and, to the extent the amount of the replacement loan exceeds the amount of the replaced loan, a new loan that is also amortized in substantially level payments over a period ending not later than the last day of the latest permissible term of the replacement loan.
(b) Examples. The following examples illustrate the rules of this Q&A-20 and are based on the assumptions described in the introductory text of this section:
(ii) Under section 72(p)(2)(A), the amount of the new loan, when added to the outstanding balance of all other loans from the plan, must not exceed $50,000 reduced by the excess of the highest outstanding balance of loans from the plan during the 1-year period ending on December 31, 2005, over the outstanding balance of loans from the plan on January 1, 2006, with such outstanding balance to be determined immediately prior to the new $40,000 loan. Because the term of the new loan ends later than the term of the loan it replaces, under paragraph (a)(2) of this Q&A-20, both the new loan and the loan it replaces must be taken into account for purposes of applying section 72(p)(2), including the amount limitations in section 72(p)(2)(A). The amount of the new loan is $40,000, the outstanding balance on January 1, 2006, of the loan it replaces is $33,322, and the highest outstanding balance of loans from the plan during 2005 was $40,000. Accordingly, under section 72(p)(2)(A), the sum of the new loan and the outstanding balance on January 1, 2006, of the loan it replaces must not exceed $50,000 reduced by $6,678 (the excess of the $40,000 maximum outstanding loan balance during 2005 over the $33,322 outstanding balance on January 1, 2006, determined immediately prior to the new loan) and, thus, must not exceed $43,322. The sum of the new loan ($40,000) and the outstanding balance on January 1, 2006, of the loan it replaces ($33,322) is $73,322. Since $73,322 exceeds the $43,322 limit under section 72(p)(2)(A) by $30,000, there is a deemed distribution of $30,000 on January 1, 2006.
(iii) However, no deemed distribution would occur if, under the terms of the refinanced loan, the amount of the first 16 installments on the refinanced loan were equal to $2,907, which is the sum of the $2,491 originally scheduled quarterly installment payment amount under the first loan, plus $416 (which is the amount required to repay, in level quarterly installments over 5 years beginning on January 1, 2006, the excess of the refinanced loan over the January 1, 2006, balance of the first loan ($40,000 minus $33,322 equals $6,678)), and the amount of the 4 remaining installments was equal to $416. The refinancing would not be subject to paragraph (a)(2) of this Q&A-20 because the terms of the new loan would satisfy section 72(p)(2) and this section (including the substantially level amortization requirements of section 72(p)(2)(B) and (C)) determined as if the new loan consisted of 2 loans, one of which is in the amount of the first loan ($33,322) and is amortized in substantially level payments over a period ending December 31, 2009 (the last day of the term of the first loan) and the other of which is in the additional amount ($6,678) borrowed under the new loan. Similarly, the transaction also would not result in a deemed distribution (and would not be subject to paragraph (a)(2) of this Q&A-20) if the terms of the refinanced loan provided for repayments to be made in level quarterly installments (of $2,990 each) over the next 16 quarters.
(ii) The transaction does not result in a deemed distribution (and is not subject to paragraph (a)(2) of this Q&A-20) because the terms of the new loan would satisfy section 72(p)(2) and this section (including the substantially level amortization requirements of section 72(p)(2)(B) and (C)) determined as if the new loan consisted of 2 loans, one of which is in the amount of the first loan ($33,322) and is amortized in substantially level payments over a period ending December 31, 2009 (the last day of the term of the first loan), and the other of which is in the additional amount ($6,678) borrowed under the new loan. The transaction would also not result in a deemed distribution (and not be subject to paragraph (a)(2) of this Q&A-20) if the terms of the new loan provided for repayments to be made in level quarterly installments (of $2,931 each) over the next 16 quarters.
Q-21: Is a participant’s tax basis under the plan increased if the participant repays the loan after a deemed distribution?
A-21: (a) Repayments after deemed distribution. Yes, if the participant or beneficiary repays the loan after a deemed distribution of the loan under section 72(p), then, for purposes of section 72(e), the participant’s or beneficiary’s investment in the contract (tax basis) under the plan increases by the amount of the cash repayments that the participant or beneficiary makes on the loan after the deemed distribution. However, loan repayments are not treated as after-tax contributions for other purposes, including sections 401(m) and 415(c)(2)(B).
(b) Example. The following example illustrates the rules in paragraph (a) of this Q&A-21 and is based on the assumptions described in the introductory text of this section:
(ii) Because the participant repaid $22,577 after the deemed distribution that occurred on December 31, 2003, the participant has investment in the contract (tax basis) equal to $22,577 (14 payments of $1,245 each plus a single payment of $5,147) as of December 31, 2007.
Q-22: When is the effective date of section 72(p) and the regulations in this section?
A-22: (a) Statutory effective date. Section 72(p) generally applies to assignments, pledges, and loans made after August 13, 1982.
(b) Regulatory effective date. This section applies to assignments, pledges, and loans made on or after January 1, 2002.
(c) Loans made before the regulatory effective date—(1) General rule. A plan is permitted to apply Q&A-19 and Q&A-21 of this section to a loan made before the regulatory effective date in paragraph (b) of this Q&A-22 (and after the statutory effective date in paragraph (a) of this Q&A-22) if there has not been any deemed distribution of the loan before the transition date or if the conditions of paragraph (c)(2) of this Q&A-22 are satisfied with respect to the loan.
(2) Consistency transition rule for certain loans deemed distributed before the regulatory effective date. (i) The rules in this paragraph (c)(2) of this Q&A-22 apply to a loan made before the regulatory effective date in paragraph (b) of this Q&A-22 (and after the statutory effective date in paragraph (a) of this Q&A-22) if there has been any deemed distribution of the loan before the transition date.
(ii) The plan is permitted to apply Q&A-19 and Q&A-21 of this section to the loan beginning on any January 1, but only if the plan reported, in Box 1 of Form 1099-R, for a taxable year no later than the latest taxable year that would be permitted under this section (if this section had been in effect for all loans made after the statutory effective date in paragraph (a) of this Q&A-22), a gross distribution of an amount at least equal to the initial default amount. For purposes of this section, the initial default amount is the amount that would be reported as a gross distribution under Q&A-4 and Q&A-10 of this section and the transition date is the January 1 on which a plan begins applying Q&A-19 and Q&A-21 of this section to a loan.
(iii) If a plan applies Q&A-19 and Q&A-21 of this section to such a loan, then the plan, in its reporting and withholding on or after the transition date, must not attribute investment in the contract (tax basis) to the participant or beneficiary based upon the initial default amount.
(iv) This paragraph (c)(2)(iv) of this Q&A-22 applies if—
(A) The plan attributed investment in the contract (tax basis) to the participant or beneficiary based on the deemed distribution of the loan;
(B) The plan subsequently made an actual distribution to the participant or beneficiary before the transition date; and
(C) Immediately before the transition date, the initial default amount (or, if less, the amount of the investment in the contract so attributed) exceeds the participant’s or beneficiary’s investment in the contract (tax basis). If this paragraph (c)(2)(iv) of this Q&A-22 applies, the plan must treat the excess (the loan transition amount) as a loan amount that remains outstanding and must include the excess in the participant’s or beneficiary’s income at the time of the first actual distribution made on or after the transition date.
(3) Examples. The rules in paragraph (c)(2) of this Q&A-22 are illustrated by the following examples, which are based on the assumptions described in the introductory text of this section (and, except as specifically provided in the examples, also assume that no distributions are made to the participant and that the participant has no investment in the contract with respect to the plan). Example 1, Example 2, and Example 4 of this paragraph (c)(3) of this Q&A-22 illustrate the application of the rules in paragraph (c)(2) of this Q&A-22 to a plan that, before the transition date, did not treat interest accruing after the initial deemed distribution as resulting in additional deemed distributions under section 72(p). Example 3 of this paragraph (c)(3) of this Q&A-22 illustrates the application of the rules in paragraph (c)(2) of this Q&A-22 to a plan that, before the transition date, treated interest accruing after the initial deemed distribution as resulting in additional deemed distributions under section 72(p). The examples are as follows:
(ii) For the year 2003, the plan must report a gross distribution of $60,000 in Box 1 of Form 1099-R and a taxable amount of $60,000 in Box 2 of Form 1099-R.
(ii) For the year 2003, the plan must report a gross distribution of $60,000 in Box 1 of Form 1099-R and a taxable amount of $54,000 in Box 2 of Form 1099-R.
(ii) For the year 2003, the plan must report a gross distribution of $180,000 in Box 1 of Form 1099-R and a taxable amount of $164,590 in Box 2 of Form 1099-R ($180,000 minus the remaining tax basis of $15,410).
(ii) In accordance with paragraph (c)(2)(iv) of this Q&A-22, the plan must report in Box 1 of Form 1099-R a gross distribution of $64,000 and in Box 2 of Form 1099-R a taxable amount for the participant for the year 2003 equal to $64,000 (the sum of the $60,000 paid in the year 2003 plus $4,000 as the loan transition amount).
(d) Effective date for Q&A-19(b)(2) and Q&A-20. Q&A-19(b)(2) and Q&A-20 of this section apply to assignments, pledges, and loans made on or after January 1, 2004.
§ 1.73-1 Services of child.
(a) Compensation for personal services of a child shall, regardless of the provisions of State law relating to who is entitled to the earnings of the child, and regardless of whether the income is in fact received by the child, be deemed to be the gross income of the child and not the gross income of the parent of the child. Such compensation, therefore, shall be included in the gross income of the child and shall be reflected in the return rendered by or for such child. The income of a minor child is not required to be included in the gross income of the parent for income tax purposes. For requirements for making the return by such child, or for such child by his guardian, or other person charged with the care of his person or property, see section 6012.
(b) In the determination of taxable income or adjusted gross income, as the case may be, all expenditures made by the parent or the child attributable to amounts which are includible in the gross income of the child and not of the parent solely by reason of section 73 are deemed to have been paid or incurred by the child. In such determination, the child is entitled to take deductions not only for expenditures made on his behalf by his parent which would be commonly considered as business expenses, but also for other expenditures such as charitable contributions made by the parent in the name of the child and out of the child’s earnings.
(c) For purposes of section 73, the term “parent” includes any individual who is entitled to the services of the child by reason of having parental rights and duties in respect of the child. See section 6201(c) and the regulations in Part 301 of this chapter (Procedure and Administration) for assessment of tax against the parent in certain cases.
§ 1.74-1 Prizes and awards.
(a) Inclusion in gross income. (1) Section 74(a) requires the inclusion in gross income of all amounts received as prizes and awards, unless such prizes or awards qualify as an exclusion from gross income under subsection (b), or unless such prize or award is a scholarship or fellowship grant excluded from gross income by section 117. Prizes and awards which are includible in gross income include (but are not limited to) amounts received from radio and television giveaway shows, door prizes, and awards in contests of all types, as well as any prizes and awards from an employer to an employee in recognition of some achievement in connection with his employment.
(2) If the prize or award is not made in money but is made in goods or services, the fair market value of the goods or services is the amount to be included in income.
(b) Exclusion from gross income. Section 74(b) provides an exclusion from gross income of any amount received as a prize or award, if (1) such prize or award was made primarily in recognition of past achievements of the recipient in religious, charitable, scientific, educational, artistic, literary, or civic fields; (2) the recipient was selected without any action on his part to enter the contest or proceedings; and (3) the recipient is not required to render substantial future services as a condition to receiving the prize or award. Thus, such awards as the Nobel prize and the Pulitzer prize would qualify for the exclusion. Section 74(b) does not exclude prizes or awards from an employer to an employee in recognition of some achievement in connection with his employment.
(c) Scholarships and fellowship grants. See section 117 and the regulations thereunder for provisions relating to scholarships and fellowship grants.
(a) In general. (1) Section 75 requires certain adjustments to be made by dealers in securities with respect to premiums paid on municipal bonds which are held for sale to customers in the ordinary course of the trade or business. The adjustments depend upon the method of accounting used by the taxpayer in computing the gross income from the trade or business. See paragraphs (b) and (c) of this section.
(2) The term “municipal bond” under section 75 means any obligation issued by a government or political subdivision thereof if the interest on the obligation is excludable from gross income under section 103. However, such term does not include an obligation—
(i) If the earliest maturity or call date of the obligation is more than 5 years from the date of acquisition by the taxpayer or the obligation is sold or otherwise disposed of by the taxpayer within 30 days after the date of acquisition by him, and
(ii) If, in case of an obligation acquired after December 31, 1957, the amount realized upon its sale (or, in the case of any other disposition, its fair market value at the time of disposition) is higher than its adjusted basis.
(3) The term “cost of securities sold” means the amount ascertained by subtracting the inventory value of the closing inventory of a taxable year from the sum of the inventory value of the opening inventory for such year and the cost of securities and other property purchased during such year which would properly be included in the inventory of the taxpayer if on hand at the close of the taxable year.
(b) Inventories not valued at cost. (1) In the case of a dealer in securities who computes gross income from his trade or business by the use of inventories and values such inventories on any basis other than cost, the adjustment required by section 75 is, except as provided in subparagraph (2) of this paragraph, the reduction of “cost of securities sold” by the amount equal to the amortizable bond premium which would be disallowed as a deduction under section 171(a)(2) with respect to the municipal bond if the dealer were an ordinary investor holding such bond. Such amortizable bond premium is computed under section 171(b) by reference to the cost or other original basis of the bond on the date of acquisition (determined without regard to section 1013, relating to inventory value on a subsequent date).
(2) With respect to an obligation acquired after December 31, 1957, which has as its earliest maturity or call date a date more than five years from the date on which it was acquired by the taxpayer, the following rules shall apply:
(i) If the taxpayer holds the obligation at the end of the taxable year, he is not required by section 75 to reduce the “cost of securities sold” for such year with respect to the obligation.
(ii) If the taxpayer sells or otherwise disposes of the obligation during the taxable year, he shall reduce the “cost of securities sold” for the taxable year of the sale or disposition unless he sold the obligation for more than its adjusted basis or otherwise disposed of it when its fair market value was more than its adjusted basis. For purposes of determining whether or not the taxpayer sold the obligation for more than its adjusted basis, or otherwise disposed of it when its fair market value was more than its adjusted basis, the amount realized on the sale of the obligation, or the fair market value of the obligation, shall not include any amount attributable to interest, and the adjusted basis shall be computed without regard to any adjustment for amortization of bond premium required under sections 75 and 1016(a)(6). The amount of the reduction referred to in the first sentence of this subdivision is the total amount by which the adjusted basis of the obligation would be required to be reduced under section 1016(a)(5) were the obligation subject to the amortizable bond premium provisions of section 171; that is, the amount of the amortizable bond premium attributable to the period during which the obligation was held which would be disallowed as a deduction under section 171(a)(2) if the taxpayer were an ordinary investor.
(3) This paragraph may be illustrated by the following examples:
| Bond | Date acquired | Date sold | Adjustment to “cost of securities sold” for— | ||
|---|---|---|---|---|---|
| 1954 | 1955 | 1956 | |||
| A | July 1, 1954 | Dec. 31, 1954 | $6 | ||
| B | July 1, 1954 | Dec. 31, 1955 | 6 | $12 | |
| C | July 1, 1954 | Jun. 30, 1956 | 6 | 12 | $6 |
| Total | 18 | 24 | 6 | ||
| Bond | Date sold | Sale price | Adjustment to “cost of securities sold” for— | ||
|---|---|---|---|---|---|
| 1958 | 1959 | 1960 | |||
| D | Feb. 1, 1959 | $1,090 | $12 | $1 | |
| E | Jan. 30, 1958 | 1,100 | None | ||
| F | Jan. 30, 1958 | 1,000 | 1 | ||
| G | Dec. 31, 1960 | 1,065 | None | None | None |
| H | Dec. 31, 1960 | 1,050 | None | None | $18 |
| Total | 13 | 1 | 18 | ||
(c) Inventories not used or inventories valued at cost. (1) In the case of a dealer in securities who computes gross income from his trade or business without the use of inventories or by use of inventories valued at cost, the adjustment required by section 75 is a reduction of the adjusted basis of each municipal bond sold or otherwise disposed of during the taxable year. The amount of such reduction is the total amount by which the adjusted basis of the bond would be required to be reduced under section 1016(a)(5) were the bond subject to the amortizable bond premium provisions of section 171; that is, the amount of the amortizable bond premium attributable to the period during which the bond was held which would be disallowed as a deduction under section 171(a)(2) if the taxpayer were an ordinary investor.
(2) Subparagraph (1) of this paragraph may be illustrated by the following example:
| Bond | Date acquired | Date sold | Adjustment for— | ||
|---|---|---|---|---|---|
| 1954 | 1955 | 1956 | |||
| I | Jan. 1, 1954 | Dec. 31,1954 | $12 | ||
| J | Jan. 1,1954 | June 30,1955 | None | $18 | |
| K | Jan. 1,1954 | Dec. 31,1956 | None | None | $36 |
(d) Bonds acquired before July 1, 1950. Under section 203(c) of the Revenue Act of 1950, adjustment is required for a municipal bond acquired before July 1, 1950, only with respect to taxable years beginning on or after that date. Accordingly, if the municipal bond was acquired before July 1, 1950, then for purposes of section 75 the amortizable bond premium under section 171 must be computed after adjusting the bond premium to the extent proper to reflect unamortized bond premium for so much of the holding period (as determined under section 1223) as precedes the taxable year of the dealer beginning on or after July 1, 1950. Thus, in example (1) of paragraph (b) and in the example in paragraph (c) of this section, the first taxable year beginning on or after July 1, 1950, is, for each dealer, the taxable year beginning January 1, 1951. If each dealer had purchased for $1,060 on April 1, 1950, a municipal bond having a face obligation of $1,000 and maturing April 1, 1955, and had sold such bond on February 28, 1955, the adjustment under section 75 would be computed as follows:
| Dealer | Dealer | |
|---|---|---|
| Bond premium | $60 | $60 |
| Adjustment for holding period prior to Jan. 1, 1951 | 9 | 9 |
| Amortizable bond premium to maturity, as adjusted | 51 | 51 |
| Amortizable bond premium per month | 1 | 1 |
| Total adjustments under sec. (o), 1939 Code, for years 1951-53 | 36 | None |
| Adjustment under sec. 75 for 1954 | 12 | None |
| Adjustment under sec. 75 for 1955 | 2 | 50 |
§ 1.77-1 Election to consider Commodity Credit Corporation loans as income.
A taxpayer who receives a loan from the Commodity Credit Corporation may, at his election, include the amount of such loan in his gross income for the taxable year in which the loan is received. If a taxpayer makes such an election (or has made such an election under section 123 of the Internal Revenue Code of 1939 or under section 223(d) of the Revenue Act of 1939 (53 Stat. 897)), then for subsequent taxable years he shall include in his gross income all amounts received during those years as loans from the Commodity Credit Corporation, unless he secures the permission of the Commissioner to change to a different method of accounting. Application for permission to change such method of accounting and the basis upon which the return is made shall be filed with the Commission of Internal Revenue, Washington, D.C. 20224, within 90 days after the beginning of the taxable year to be covered by the return.
§ 1.77-2 Effect of election to consider commodity credit loans as income.
(a) If a taxpayer elects or has elected under section 77, section 123 of the Internal Revenue Code of 1939, or section 223(d) of the Revenue Act of 1939 (53 Stat. 897), as amended, to include in his gross income the amount of a loan from the Commodity Credit Corporation for the taxable year in which it is received, then—
(1) No part of the amount realized by the Commodity Credit Corporation upon the sale or other disposition of the commodity pledged for such loan shall be recognized as income to the taxpayer, unless the taxpayer receives an amount in addition to that advanced to him as the loan, in which event such additional amount shall be included in the gross income of the taxpayer for the taxable year in which it is received, and
(2) No deductible loss to the taxpayer shall be recognized on account of any deficiency realized by the Commodity Credit Corporation on such loan if the taxpayer was relieved from liability for such deficiency.
(b) The application of paragraph (a) of this section may be illustrated by the following example:
§ 1.78-1 Gross up for deemed paid foreign tax credit.
(a) Taxes deemed paid by certain domestic corporations treated as a dividend. If a domestic corporation chooses to have the benefits of the foreign tax credit under section 901 for any taxable year, an amount that is equal to the U.S. dollar amount of foreign income taxes deemed to be paid by the corporation for the year under section 960 (in the case of section 960(d), determined without regard to the phrase “80 percent of” in section 960(d)(1)) is, to the extent provided by this section, treated as a dividend (a section 78 dividend) received by the domestic corporation from the foreign corporation. A section 78 dividend is treated as a dividend for all purposes of the Code, except that it is not treated as a dividend for purposes of section 245 or 245A, and does not increase the earnings and profits of the domestic corporation or decrease the earnings and profits of the foreign corporation. Any reduction under section 907(a) of the foreign income taxes deemed paid with respect to combined foreign oil and gas income does not affect the amount treated as a section 78 dividend. See § 1.907(a)-1(e)(3). Similarly, any reduction under section 901(e) of the foreign income taxes deemed paid with respect to foreign mineral income does not affect the amount treated as a section 78 dividend. See § 1.901-3(a)(2)(i), (b)(2)(i)(b), and (d) Example 8. Any reduction under section 6038(c)(1)(B) in the foreign taxes paid or accrued by a foreign corporation is taken into account in determining foreign taxes deemed paid and the amount treated as a section 78 dividend. See, for example, § 1.6038-2(k)(5) Example 1. To the extent provided in the Code, section 78 does not apply to any tax not allowed as a credit. See, for example, sections 901(j)(3), 901(k)(7), 901(l)(4), 901(m)(6), and 908(b). For rules on determining the source of a section 78 dividend in computing the limitation on the foreign tax credit under section 904, see §§ 1.861-3(a)(3), 1.862-1(a)(1)(ii), and 1.904-5(m)(6). For rules on assigning a section 78 dividend to a separate category, see § 1.904-4.
(b) Date on which section 78 dividend is received. A section 78 dividend is considered received by a domestic corporation on the date on which—
(1) The corporation includes in gross income under section 951(a)(1)(A) the amounts by reason of which there are deemed paid under section 960(a) the foreign income taxes that give rise to that section 78 dividend, notwithstanding that the foreign income taxes may be carried back or carried over to another taxable year and deemed to be paid or accrued in such other taxable year under section 904(c); or
(2) The corporation includes in gross income under section 951A(a) the amounts by reason of which there are deemed paid under section 960(d) the foreign income taxes that give rise to that section 78 dividend.
(c) Applicability date. This section applies to taxable years of foreign corporations that begin after December 31, 2017, and to taxable years of United States shareholders in which or with which such taxable years of foreign corporations end. The second sentence of paragraph (a) of this section also applies to section 78 dividends that are received after December 31, 2017, by reason of taxes deemed paid under section 960(a) with respect to a taxable year of a foreign corporation beginning before January 1, 2018.
§ 1.79-0 Group-term life insurance—definitions of certain terms.
The following definitions apply for purposes of section 79, this section, and §§ 1.79-1, 1.79-2, and 1.79-3.
Carried directly or indirectly. A policy of life insurance is “carried directly or indirectly” by an employer if—
(a) The employer pays any part of the cost of the life insurance directly or through another person; or
(b) The employer or two or more employers arrange for payment of the cost of the life insurance by their employees and charge at least one employee less than the cost of his or her insurance, as determined under Table I of § 1.79-3(d)(2), and at least one other employee more than the cost of his or her insurance, determined in the same way.
Employee. An “employee” is—
(a) A person who performs services if his or her relationship to the person for whom services are performed is the legal relationship of employer and employee described in § 31.3401(c)-1; or
(b) A full-time life insurance salesperson described in section 7701(a)(20); or
(c) A person who formerly performed services as an employee.
Group of employees. A “group of employees” is all employees of an employer, or less than all employees if membership in the group is determined solely on the basis of age, marital status, or factors related to employment. Examples of factors related to employment are membership in a union some or all of whose members are employed by the employer, duties performed, compensation received, and length of service. Ordinarily the purchase of something other than group-term life insurance is not a factor related to employment. For example, if an employer provides credit life insurance to all employees who purchase automobiles, these employees are not a “group of employees” because membership is not determined solely on the basis of age, marital status, or factors related to employment. On the other hand, participation in an employer’s pension, profit-sharing or accident and health plan is considered a factor related to employment even if employees are required to contribute to the cost of the plan. Ownership of stock in the employer corporation is not a factor related to employment. However, participation in an employer’s stock bonus plan may be a factor related to employment and a “group of employees” may include employees who own stock in the employer corporation.
Permanent benefit. A “permanent benefit” is an economic value extending beyond one policy year (for example, a paid-up or cash surrender value) that is provided under a life insurance policy. However, the following features are not permanent benefits:
(a) A right to convert (or continue) life insurance after group life insurance coverage terminates;
(b) Any other feature that provides no economic benefit (other than current insurance protection) to the employee; or
(c) A feature under which term life insurance is provided at a level premium for a period of five years or less.
Policy. The term “policy” includes two or more obligations of an insurer (or its affiliates) that are sold in conjunction. Obligations that are offered or available to members of a group of employees are sold in conjunction if they are offered or available because of the employment relationship. The actuarial sufficiency of the premium charged for each obligation is not taken into account in determining whether the obligations are sold in conjunction. In addition, obligations may be sold in conjunction even if the obligations are contained in separate documents, each document is filed with and approved by the applicable state insurance commission, or each obligation is independent of any other obligation. Thus, a group of individual contracts under which life insurance is provided to a group of employees may be a policy. Similarly, two benefits provided to a group of employees, one term life insurance and the other a permanent benefit, may be a policy, even if one of the benefits is provided only to employees who decline the other benefit. However, an employer may elect to treat two or more obligations each of which provides no permanent benefits as separate policies if the premiums are properly allocated among such policies. An employer also may elect to treat an obligation which provides permanent benefits as a separate policy if—
(a) The insurer sells the obligation directly to the employee who pays the full cost thereof;
(b) The participation of the employer with respect to sales of the obligation to employees is limited to selection of the insurer and the type of coverage and to sales assistance activities such as providing employee lists to the insurer, permitting the insurer to use the employer’s premises for solicitation, and collecting premiums through payroll deduction;
(c) The insurer sells the obligation on the same terms and in substantial amounts to individuals who do not purchase (and whose employers do not purchase) any other obligation from the insurer; and
(d) No employer-provided benefit is conditioned on purchase of the obligation.
§ 1.79-1 Group-term life insurance—general rules.
(a) What is group-term life insurance? Life insurance is not group-term life insurance for purposes of section 79 unless it meets the following conditions:
(1) It provides a general death benefit that is excludable from gross income under section 101(a).
(2) It is provided to a group of employees.
(3) It is provided under a policy carried directly or indirectly by the employer.
(4) The amount of insurance provided to each employee is computed under a formula that precludes individual selection. This formula must be based on factors such as age, years of service, compensation, or position. This condition may be satisfied even if the amount of insurance provided is determined under a limited number of alternative schedules that are based on the amount each employee elects to contribute. However, the amount of insurance provided under each schedule must be computed under a formula that precludes individual selection.
(b) May group-term life insurance be combined with other benefits? No part of the life insurance provided under a policy that provides a permanent benefit is group-term life insurance unless—
(1) The policy or the employer designates in writing the part of the death benefit provided to each employee that is group-term life insurance; and
(2) The part of the death benefit that is provided to an employee and designated as the group-term life insurance benefit for any policy year is not less than the difference between the total death benefit provided under the policy and the employee’s deemed death benefit (DDB) at the end of the policy year determined under paragraph (d)(3) of this section.
(c) May a group include fewer than 10 employees? (1) As a general rule, life insurance provided to a group of employees cannot qualify as group-term life insurance for purposes of section 79 unless, at some time during the calendar year, it is provided to at least 10 full-time employees who are members of the group of employees. For purposes of this rule, all life insurance provided under policies carried directly or indirectly by the employer is taken into account in determining the number of employees to whom life insurance is provided.
(2) The general rule of paragraph (c)(1) of this section does not apply if the following conditions are met:
(i) The insurance is provided to all full-time employees of the employer or, if evidence of insurability affects eligibility, to all full-time employees who provide evidence of insurability satisfactory to the insurer.
(ii) The amount of insurance provided is computed either as a uniform percentage of compensation or on the basis of coverage brackets established by the insurer. However, the amount computed under either method may be reduced in the case of employees who do not provide evidence of insurability satisfactory to the insurer. In general, no bracket may exceed 2
(iii) Evidence of insurability affecting employee’s eligibility for insurance or the amount of insurance provided to that employee is limited to a medical questionnaire completed by the employee that does not require a physical examination.
(3) The general rule of paragraph (c)(1) of this section does not apply if the following conditions are met:
(i) The insurance is provided under a common plan to the employees of two or more unrelated employers.
(ii) The insurance is restricted to, but mandatory for, all employees of the employer who belong to or are represented by an organization (such as a union) that carries on substantial activities in addition to obtaining insurance.
(iii) Evidence of insurability does not affect an employee’s eligibility for insurance or the amount of insurance provided to that employee.
(4) For purposes of paragraph (c) (2) and (3) of this section, employees are not taken into account if they are denied insurance for the following reasons:
(i) They are not eligible for insurance under the terms of the policy because they have not been employed for a waiting period, specified in the policy, which does not exceed six months.
(ii) They are part-time employees. Employees whose customary employment is for not more than 20 hours in any week, or 5 months in any calendar year, are presumed to be part-time employees.
(iii) They have reached the age of 65.
(5) For purposes of paragraph (c) (1) and (2) of this section, insurance is considered to be provided to an employee who elects not to receive insurance unless, in order to receive the insurance, the employee is required to contribute to the cost of benefits other than term life insurance. Thus, if an employee could receive term life insurance by contributing to its cost, the employee is taken into account in determining whether the insurance is provided to 10 or more employees even if such employee elects not to receive the insurance. However, an employee who must contribute to the cost of permanent benefits to obtain term life insurance is not taken into account in determining whether the term life insurance is provided to 10 or more employees unless the term life insurance is actually provided to such employee.
(d) How much must an employee receiving permanent benefits include in income?—(1) In general. If an insurance policy that meets the requirements of this section provides permanent benefits to an employee, the cost of the permanent benefits reduced by the amount paid for permanent benefits by the employee is included in the employee’s income. The cost of the permanent benefits is determined under the formula in paragraph (d)(2) of this section.
(2) Formula for determining cost of the permanent benefits. In each policy year the cost of the permanent benefits for any particular employee must be no less than:
(3) Formula for determining deemed death benefit. The deemed death benefit (DDB) at the end of any policy year for any particular employee is equal to—
(4) Mortality tables and interest rates used. For purposes of paragraph (d) (2) and (3) of this section, the net level premium reserve (R) and the net single premium (X or Y) shall be based on the 1958 CSO Mortality Table and 4 percent interest.
(5) Dividends. If an insurance policy that meets the requirements of this section provides permanent benefits, part or all of the dividends under the policy may be includible in the employee’s income. If the employee pays nothing for the permanent benefits, all dividends under the policy that are actually or constructively received by the employee are includible in the employee’s income. In all other cases, the amount of dividends included in the employee’s income is equal to:
(6) Different policy and taxable years. (i) If a policy year begins in one employee taxable year and ends in another employee taxable year, the cost of the permanent benefits, determined under the formula in paragraph (d)(2) of this section, is allocated between the employee taxable years.
(ii) The cost of permanent benefits for a policy year is allocated first to the employee taxable year in which the policy year begins. The cost of permanent benefits allocated to that policy year is equal to:
(iii) Any part of the cost of permanent benefits that is not allocated to the employee taxable year in which the policy year begins is allocated to the subsequent employee taxable year.
(iv) The cost of permanent benefits for an employee taxable year is the sum of the costs of permanent benefits allocated to that year under paragraph (d)(6) (ii) and (iii) of this section.
(7) Example. The provisions of this paragraph may be illustrated by the following example:
| (1) Cost of permanent benefits | $350 |
| (2) Amounts considered paid by A for permanent benefits ( | 150 |
| (3) Line (1) minus line (2) | 200 |
| (4) Cost of $70,000 of group-term life insurance under Table I of § 1.79-3 | 126 |
| (5) Cost of $50,000 of group-term life insurance under Table I of § 1.79-3 | 90 |
| (6) Cost of group-term insurance in excess of $50,000 (line (4) minus line(5)) | 36 |
| (7) Amount considered paid by A for group-term life insurance (70 × $2) | 140 |
| (8) Line (6) minus line (7) (but not less than 0) | 0 |
| (9) Amount includible in income (line (3) plus line (8)) | 200 |
(e) What is the effect of State law limits? Section 79 does not apply to life insurance in excess of the limits under applicable state law on the amount of life insurance that can be provided to an employee under a single contract of group-term life insurance.
(f) Cross references. (1) See section 79(b) and § 1.79-2 for rules relating to group-term life insurance provided to certain retired individuals.
(2) See section 61(a) and the regulations thereunder for rules relating to life insurance not meeting the requirements of section 79, this section, or § 1.79-2, such as insurance provided on the life of a non-employee (for example, an employee’s spouse), insurance not provided as compensation for personal services performed as an employee, insurance not provided under a policy carried directly or indirectly by the employer, or permanent benefits.
(3) See sections 106 and § 1.106-1 for rules relating to certain insurance that does not provide general death benefits, such as travel insurance or accident and health insurance (including amounts payable under a double indemnity clause or rider).
(g) [Reserved]
(h) Effective date. Section 1.79-0 applies to insurance provided in employee taxable years beginning on or after January 1, 1977 (except as provided in 26 CFR 1.79-1(g) (revised as of April 1, 1983) with respect to insurance provided in employee taxable years beginning in 1977). Sections 1.79-1 through 1.79-3 apply to insurance provided in employee taxable years beginning after December 31, 1982. See 26 CFR 1.79-1 through 1.79-3 (revised as of April 1, 1983) for rules applicable to insurance provided in employee taxable years beginning before January 1, 1983.
§ 1.79-2 Exceptions to the rule of inclusion.
(a) In general. (1) Section 79(b) provides exceptions for the cost of group-term life insurance provided under certain policies otherwise described in section 79(a). The policy or policies of group-term life insurance which are described in section 79(a) but which qualify for one of the exceptions set forth in section 79(b) are described in paragraphs (b) through (d) of this section. Paragraph (b) of this section discusses the exception provided in section 79(b) (1); paragraph (c) of this section discusses the exception provided in section 79(b)(2); and paragraph (d) of this section discusses the exception provided in section 79(b)(3).
(2)(i) If a policy of group-term life insurance qualifies for an exception provided by section 79(b), then the amount equal to the cost of such insurance is excluded from the application of the provisions of section 79(a).
(ii) If a policy, or portion of a policy of group-term life insurance qualifies for an exception provided by section 79(b), the amount (if any) paid by the employee toward the purchase of such insurance is not to be taken into account as an amount referred to in section 79 (a)(2). In the case of a policy or policies of group-term life insurance which qualify for an exception provided by section 79(b) (1) or (3), the amount paid by the employee which is not to be taken into account as an amount referred to in section 79(a) (2) is the amount paid by the employee for the particular policy or policies of group-term life insurance which qualify for an exception provided under such section. If the exception provided in section 79(b)(2) is applicable only to a portion of the group-term life insurance on the employee’s life, the amount considered to be paid by the employee toward the purchase of such portion is the amount equal to the excess of the cost of such portion of the insurance over the amount otherwise includible in the employee’s gross income with respect to the group-term life insurance on his life carried directly or indirectly by such employer.
(iii) The rules of this subparagraph may be illustrated by the following example:
(b) Retired and disabled employees—(1) In general. Section 79(b)(1) provides an exception for the cost of group-term life insurance on the life of an individual which is provided under a policy or policies otherwise described in section 79(a) if the individual has terminated his employment (as defined in subparagraph (2) of this paragraph) with such employer and either has reached the retirement age with respect to such employer (as defined in subparagraph (3) of this paragraph), or has become disabled (as defined in subparagraph (4)(i) of this paragraph). If an individual who has terminated his employment attains retirement age or has become disabled during his taxable year, or if an employee who has attained retirement age or has become disabled terminates his employment during the taxable year, the exception provided by section 79(b)(1) applies only to the portion of the cost of group-term life insurance which is provided subsequent to the happening of the last event which qualifies the policy of insurance on the employee’s life for the exception provided in such section.
(2) Termination of employment. For purposes of section 79(b)(1), an individual has terminated his employment with an employer providing such individual group-term life insurance when such individual no longer renders services to that employer as an employee of such employer.
(3) Retirement age. For purposes of section 79(b)(1) and this section, the meaning of the term “retirement age” is determined in accordance with the following rules—
(i)(a) If the employee is covered under a written pension or annuity plan of the employer providing such individual group-term life insurance on his life (whether or not such plan is qualified under section 401(a) or 403(a)), then his retirement age shall be considered to be the earlier of—
(1) The earliest age indicated by such plan at which an active employee has the right (or an inactive individual would have the right had he continued in employment) to retire without disability and without the consent of his employer and receive immediate retirement benefits computed at either the full rate or a rate proportionate to completed service as set forth in the normal retirement formula of the plan, i.e., without actuarial or similar reduction because of retirement before some later specified age, or
(2) The age at which it has been the practice of the employer to terminate, due to age, the services of the class of employees to which he last belonged.
(b) For purposes of (a) of this subdivision, if an employee is covered under more than one pension or annuity plan of the employer, his retirement age shall be determined with regard to that plan which covers that class of employees of the employer to which the employee last belonged. If the class of employees to which the employee last belonged is covered under more than one pension or annuity plan, then the employee’s retirement age shall be determined with regard to that plan which covers the greatest number of the employer’s employees.
(ii) In the absence of a written employee’s pension or annuity plan described in subdivision (i) of this subparagraph, retirement age is the age, if any, at which it has been the practice of the employer to terminate, due to age, the services of the class of employees to which the particular employee last belonged, provided such age is reasonable in view of all the pertinent facts and circumstances.
(iii) If neither subdivision (i) or (ii) of this subparagraph applies, the retirement age is considered to be age 65.
(4) Disabled. (i) For taxable years beginning after December 31, 1966, an individual is considered disabled for purposes of section 79(b)(1) and subparagraph (1) of this paragraph if he is disabled within the meaning of section 72(m)(7) and paragraph (f) of § 1.72-17. For taxable years beginning before January 1, 1967, an individual is considered disabled for purposes of section 79(b)(1) and subparagraph (1) of this paragraph if he is disabled within the meaning of section 213(g)(3), relating to the meaning of disabled, but the determination of the individual’s status shall be made without regard to the provisions of section 213(g)(4), relating to the determination of status.
(ii)(a) In any taxable year in which an individual seeks to apply the exception set forth in section 79(b)(1) by reason of his being disabled within the meaning of subdivision (i) of this subparagraph, and in which the aggregate amount of insurance on the individual’s life subject to the rule of inclusion set forth in section 79(a), but determined without regard to the amount of any insurance subject to any exception set forth in section 79(b), is greater than $50,000 of such insurance, the substantiation required by (b) or (c) of this subdivision must be submitted with the individual’s tax return.
(b) For the first taxable year for which the individual seeks to apply the exception set forth in section 79(b)(1) by reason of his being disabled within the meaning of subdivision (i) of this subparagraph, there must be submitted with his income tax return a doctor’s statement as to his impairment. There must also be submitted with the return a statement by the individual with respect to the effect of the impairment upon his substantial gainful activity, and the date such impairment occurred. For subsequent taxable years, the taxpayer may, in lieu of such statements, submit a statement declaring the continued existence (without substantial diminution) of the impairment and its continued effect upon his substantial gainful activity.
(c) In lieu of the substantiation required to be submitted by (b) of this subdivision for the taxable year, the individual may submit a signed statement issued to him by the insurer to the effect that the individual is disabled within the meaning of subdivision (i) of this paragraph. Such statement must set forth the basis for the insurer’s determination that the individual was so disabled, and, for the first taxable year in which the individual is so disabled, the date such disability occurred.
(c) Employer or charity a beneficiary—(1) General rule. Section 79(b)(2) provides an exception with respect to the amounts referred to in section 79 (a) for the cost of any portion of the group-term life insurance on the life of an employee provided during part or all of the taxable year of the employee under which the employer is directly or indirectly the beneficiary, or under which a person described in section 170(c) (relating to definition of charitable contributions) is the sole beneficiary, for the entire period during such taxable year for which the employee receives such insurance.
(2) Employer is a beneficiary. For purposes of section 79(b)(2) and subparagraph (1) of this paragraph, the determination of whether the employer is directly or indirectly the beneficiary under a policy or policies of group-term life insurance depends upon the facts and circumstances of the particular case. Such determination is not made solely with regard to whether the employer possesses all the incidents of ownership in the policy. Thus, for example, if the employer is the nominal beneficiary under a policy of group-term life insurance on the life of his employee but there is an arrangement whereby the employer is required to pay over all (or a portion) of the proceeds of such policy to the employee’s estate or his beneficiary, the employer is not considered a beneficiary under such policy (or such portion of the policy).
(3) Charity a beneficiary. (i) For purposes of section 79(b)(2) and subparagraph (1) of this paragraph, a person described in section 170(c) is a beneficiary under a policy providing group-term life insurance if such person is designated the beneficiary under the policy by any assignment or designation of beneficiary under the policy which, under the law of the jurisdiction which is applicable to the policy, has the effect of making such person the beneficiary under such policy (whether or not such designation is revocable during the taxable year). Such a designation may be made by the employee with respect to any portion of the group-term life insurance on his life. However, no deduction is allowed under section 170, relating to charitable, etc., contributions and gifts, with respect to any such assignment or designation.
(ii) A person described in section 170(c) must be designated the sole beneficiary under the policy or portion of the policy. Such requirement is satisfied if the person described in section 170(c) is the beneficiary under such policy or portion of the policy, and there is no contingent or similar beneficiary under such policy or such portion other than a person described in section 170(c). A general “preference beneficiary clause” in a policy governing payment where there is no designated beneficiary in existence at the death of the employee will not of itself be considered to create a contingent or similar beneficiary. A person described in section 170(c) may be designated the beneficiary under a portion of the policy if such person is designated the sole beneficiary under a beneficiary designation which is expressed, for example, as a fraction of the amount of insurance on the insured’s life.
(iii) If a person described in section 170(c) is designated, before May 1, 1964, the beneficiary under the policy (or portion thereof) and such person remains the beneficiary for the period beginning May 1, 1964, and ending with the close of the first taxable year of the employee ending after April 30, 1964, such person shall be treated as the beneficiary under the policy (or the portion thereof) for the period beginning January 1, 1964, and ending April 30, 1964.
(d) Insurance contracts purchased under qualified employee plans. (1) Section 79(b)(3) provides an exception with respect to the cost of any group-term life insurance which is provided under a life insurance contract purchased as a part of a plan described in section 403(a), or purchased by a trust described in section 401(a) which is exempt from tax under section 501(a) if the proceeds of such contract are payable directly or indirectly to a participant in such trust or to a beneficiary of such participant. The provisions of section 72(m)(3) and § 1.72-16 apply to the cost of such group-term life insurance, and, therefore, no part of such cost is excluded from the gross income of the employee by reason of the provisions of section 79.
(2) Whether the life insurance protection on an employee’s life is provided under a qualified employee plan referred to in subparagraph (1) of this paragraph depends upon the provisions of such plan. In determining whether a pension, profit-sharing, stock bonus, or annuity plan satisfies the requirements for qualification set forth in sections 401(a) or 403(a), only group-term life insurance which is provided under such plan is taken into account.
§ 1.79-3 Determination of amount equal to cost of group-term life insurance.
(a) In general. This section prescribes the rules for determining the amount equal to the cost of group-term life insurance on an employee’s life which is to be included in his gross income pursuant to the rule of inclusion set forth in section 79(a). Such amount is determined by—
(1) Computing the cost of the portion of the group-term life insurance on the employee’s life to be taken into account (determined in accordance with the rules set forth in paragraph (b) of this section) for each “period of coverage” (as defined in paragraph (c) of this section) and aggregating the costs so determined, then
(2) Reducing the amount determined under subparagraph (1) of this paragraph by the amount determined in accordance with the rules set forth in paragraph (e) of this section, relating to the amount paid by the employee toward the purchase of group-term life insurance.
(b) Determination of the portion of the group-term life insurance on the employee’s life to be taken into account. (1) For each “period of coverage” (as defined in paragraph (c) of this section), the portion of the group-term life insurance to be taken into account in computing the amount includible in an employee’s gross income for purposes of paragraph (a)(1) of this section is the sum of the proceeds payable upon the death of the employee under each policy, or portion of a policy, of group-term life insurance on such employee’s life to which the rule of inclusion set forth in section 79(a) applies, less $50,000 of such insurance. Thus, the amount of any proceeds payable under a policy, or portion of a policy, which qualifies for one of the exceptions to the rule of inclusion provided by section 79(b) is not taken into account. For the regulations relating to such exceptions to the rule of inclusion, see § 1.79-2.
(2) For purposes of making the computation required by subparagraph (1) of this paragraph in any case in which the amount payable under the policy, or portion thereof, varies during the period of coverage, the amount payable under such policy during such period is considered to be the average of the amount payable under such policy at the beginning and the end of such period.
(3)(i) For purposes of making the computation required by subparagraph (1) of this paragraph in any case in which the amount payable under the policy is not payable as a specific amount upon the death of the employee in full discharge of the liability of the insurer, and such form of payment is not one of alternative methods of payment, the amount payable under such policy is the present value of the agreement by the insurer under the policy to make the payments to the beneficiary or beneficiaries entitled to such amounts upon the employee’s death. For each period of coverage, such present value is to be determined as if the first and last day of such period is the date of death of the employee.
(ii) The present value of the agreement by the insurer under the policy to make payments shall be determined by the use of the mortality tables and interest rate employed by the insurer with respect to such a policy in calculating the amount held by the insurer (as defined in section 101(d)(2)), unless the Commissioner otherwise determines that a particular mortality table and interest rate, representative of the mortality table and interest rate used by commercial insurance companies with respect to such policies, shall be used to determine the present value of the policy for purposes of this subdivision.
(iii) For purposes of making the computation required by subdivision (i) of this subparagraph in any case in which it is necessary to determine the age of an employee’s beneficiary and such beneficiary remains the same (under the policy, or the portion of the policy, with respect to which the determination of the present value of the agreement of the insurer to pay benefits is being made) for the entire period during the employee’s taxable year for which such policy is in effect, the age of such beneficiary is such beneficiary’s age at his nearest birthday on June 30th of the calendar year.
(iv) If the policy of group-term life insurance on the employee’s life is such that the present value of the agreement by the insurer under the policy to pay benefits cannot be determined by the rules prescribed in this subparagraph, the taxpayer may submit with his return a computation of such present value, consistent with the actuarial and other assumptions set forth in this subparagraph, showing the appropriate factors applied in his case. Such computation shall be subject to the approval of the Commissioner upon examination of such return.
(c) Period of coverage. For purposes of this section, the phrase “period of coverage” means any one calendar month period, or part thereof, during the employee’s taxable year during which the employee is provided group-term life insurance on his life to which the rule of inclusion set forth in section 79(a) applies. The phrase “part thereof” as used in the preceding sentence means any continuous period which is less than the one calendar month period referred to in the preceding sentence for which premiums are charged by the insurer.
(d) The cost of the portion of the group-term life insurance on an employee’s life. (1) This paragraph sets forth the rules for determining the cost, for each period of coverage, of the portion of the group-term life insurance on the employee’s life to be taken into account in computing the amount includible in the employee’s gross income for purposes of paragraph (a)(1) of this section. The portion of the group-term life insurance on the employee’s life to be taken into account is determined in accordance with the provisions of paragraph (b) of this section. Table I, which is set forth in subparagraph (2) of this paragraph, determines the cost for each $1,000 of such portion of the group-term life insurance on the employee’s life for each one-month period. The cost of the portion of the group-term life insurance on the employee’s life for each period of coverage of one month is obtained by multiplying the number of thousand dollars of such insurance computed to the nearest tenth which is provided during such period by the appropriate amount set forth in Table I. In any case in which group-term life insurance is provided for a period of coverage of less than one month, the amount set forth in Table I is prorated over such period of coverage.
(2) For the cost of group-term life insurance provided after June 30, 1999, the following table sets forth the cost of $1,000 of group-term life insurance provided for one month, computed on the basis of 5-year age brackets. See 26 CFR 1.79-3(d)(2) in effect prior to July 1, 1999, and contained in the 26 CFR part 1 edition revised as of April 1, 1999, for a table setting forth the cost of group-term life insurance provided before July 1, 1999. For purposes of Table I, the age of the employee is the employee’s attained age on the last day of the employee’s taxable year.
Table I—Uniform Premiums for $1,000 of Group-Term Life Insurance Protection
| 5-year age bracket | Cost per $1,000 of protection for one month |
|---|---|
| Under 25 | $0.05 |
| 25 to 29 | .06 |
| 30 to 34 | .08 |
| 35 to 39 | .09 |
| 40 to 44 | .10 |
| 45 to 49 | .15 |
| 50 to 54 | .23 |
| 55 to 59 | .43 |
| 60 to 64 | .66 |
| 65 to 69 | 1.27 |
| 70 and above | 2.06 |
(3) The net premium cost of group-term life insurance as provided in Table I of subparagraph (2) of this paragraph applies only to the cost of group-term life insurance subject to the rule of inclusion set forth in section 79(a). Therefore, such net premium cost is not applicable to the determination of the cost of group-term life insurance provided under a policy which is not subject to such rule of inclusion.
(e) Effective date—(1) General effective date for table. Except as provided in paragraph (e)(2) of this section, the table in paragraph (d)(2) of this section is applicable July 1, 1999. Until January 1, 2000, an employer may calculate imputed income for all its employees under age 30 using the 5-year age bracket for ages 25 to 29.
(2) Effective date for table for purposes of § 1.79-0. For a policy of life insurance issued under a plan in existence on June 30, 1999, which would not be treated as carried directly or indirectly by an employer under § 1.79-0 (taking into account the Table I in effect on that date), until January 1, 2003, an employer may use either the table in paragraph (d)(2) of this section or the table in effect prior to July 1, 1999 (as described in paragraph (d)(2) of this section) for determining if the policy is carried directly or indirectly by the employer.
(f) Amount paid by the employee toward the purchase of group-term life insurance. (1) Except as otherwise provided in subparagraph (2) of this paragraph, if an employee pays any amount toward the purchase of group-term life insurance provided for a taxable year which is subject to the rule of inclusion set forth in paragraph (a)(2) of § 1.79-1, the sum of all such amounts is the amount referred to in section 79(a)(2) and paragraph (a)(2) of this section. The rule of the preceding sentence applies even though the payments made by the employee are made with respect to a period of coverage during which no portion of the group-term life insurance on his life is taken into account under paragraph (b)(1) of this section.
(2) In determining the amount paid by the employee for purposes of section 79(a)(2) and paragraph (a)(2) of this section, there is not taken into account any amounts paid by the employee for group-term life insurance provided (or to be provided) for a different taxable year (other than amounts applicable to regular pay periods extending into the next taxable year). Thus, for example, if part of an employee’s payment during a taxable year represents a prepayment for insurance to be provided after his retirement, such part does not reduce the amount includible in his gross income for the current taxable year. Furthermore, in determining such amount, there is not taken into account any amount paid by an employee toward the purchase of group-term life insurance which qualifies for one of the exceptions described in section 79(b). The amount paid by an employee toward the purchase of group-term life insurance which qualifies for one of the exceptions described in section 79(b) is determined under the rules of paragraph (a)(2) of § 1.79-2.
(3) If payments are made by the employer and his employees to provide group-term life insurance which is subject to the rule of inclusion set forth in section 79(a) as well as to provide other benefits for the employees, and if the amount paid by the employee toward the purchase of such insurance cannot be determined by the provisions of the policy or plan under which such benefits are provided, then the determination of the portion of the cost of group-term life insurance (computed in accordance with the provisions of this section) which is attributable to the contributions of the employee shall be made in accordance with the provisions of this subparagraph. The amount paid by the employee toward the purchase of all the group-term life insurance on his life for his taxable year (or for the portion of his taxable year if such portion is the basis of the computation) under such group policy shall be an amount determined first by ascertaining the total amount paid by all employees who are covered for multiple benefits which is allocable toward the purchase of group-term life insurance on their lives for the year, and then by ascertaining the pro rata portion of such total amount attributable to the individual employee. The total amount paid by all employees who are covered for multiple benefits which is allocable toward the purchase of group-term life insurance on their lives with respect to such year shall be an amount which bears the same ratio to the total amount paid by all employees for multiple benefits with respect to such year as the aggregate premiums paid to the insurer for group-term life insurance on such employees’ lives with respect to such year bears to the aggregate premiums paid to the insurer for such multiple benefits with respect to such year. The pro rata portion of such total amount attributable to the individual employee for the cost of group-term life insurance on his life shall be an amount which bears the same ratio to the total amount paid by all employees which is allocable toward the purchase of group-term insurance on their lives with respect to such year as the amount of group-term life insurance on the life of the employee at a specified time during the year, as determined by the employer, bears to the total amount of group-term life insurance on the lives of all employees insured for such multiple benefits at such time.
(g) Effect of provision of other benefits—(1) In general. This paragraph discusses the effect of the provision of certain benefits other than group-term life insurance on the life of the employee if the provision of such benefits is contingent upon the underwriting of group-term life insurance on the employee’s life to which the rule of inclusion set forth in section 79(a) applies.
(2) Dependent coverage. An amount equal to the cost of group-term life insurance on the life of the spouse or other family member of the employee which is provided under a policy of group-term life insurance carried directly or indirectly by his employer is not subject to the provisions of section 79 since it is not on the life of the employee. See paragraph (d)(2)(ii)(b) of § 1.61-2 for rules regarding the tax treatment of such insurance.
(3) Disability provisions. Payments made for disability benefits provided under a group-term life insurance contract are considered to constitute payments made for accident and health insurance. Thus, employer contributions to provide such benefits are excluded from gross income by reason of the provisions of section 106.
(4) Cost of other benefits. If a benefit described in this paragraph is provided under a policy under which both the employer and his employees contribute, then, except as otherwise provided in this subparagraph, the employer and the employees will be treated as contributing toward the payment of such benefit at the same rate as they contribute toward the cost of group-term life insurance on the employees’ lives. A separate allocation of employer and employee contributions for such benefits is permissible only if—
(i) Such separate allocation is set forth in the group policy and is applicable to all the employees covered under such policy;
(ii) Such separate allocation is followed in transactions between the insurer and the group-policyholder; and
(iii) The allocation set forth in the policy satisfies the requirements of the law of the jurisdiction which is applicable to the contract regarding any minimum or maximum contribution rate by the employer or the employees.
§ 1.79-4T Questions and answers relating to the nondiscrimination requirements for group-term life insurance (temporary).
Q-1: When does section 79, as amended by the Tax Reform Act of 1984, become effective?
A-1: (a) Generally, section 79, as amended, applies to taxable years (of the employee receiving insurance coverage) beginning after December 31, 1983. There are, however, several exceptions to this effective date where there is coverage under a group-term life insurance plan of the employer that was in existence on January 1, 1984, or a comparable successor to such a plan maintained by the employer or a successor employer.
(b) First, the new rules of section 79 (b) and (e), that require the inclusion in income of a retired employee of amounts attributable to the cost of group-term life insurance in excess of $50,000 and that include former employees within the definition of the term “employee,” will not apply to any employee who retired from employment on or before January 1, 1984.
(c) Second, in the case of an individual who retires after January 1, 1984, and before January 1, 1987, the new rules of section 79 (b) and (e) do not apply if (1) the individual attained age 55 on or before January 1, 1984, and (2) the plan was maintained by the same employer who employed the individual during 1983, or by a successor employer.
(d) Third, in the case of an individual who retires after December 31, 1986, the new rules of section 79 (b) and (e) do not apply if (1) the individual attained age 55 on or before January 1, 1984, (2) the plan was maintained by the same employer who employed the individual during 1983, or by a successor employer, and (3) the plan is not, after December 31, 1986, a discriminatory group-term life insurance plan (not taking into account any group-term life insurance coverage provided to employees who retired before January 1, 1987).
(e) For purposes of determining whether a plan is, after December 31, 1986, a discriminatory group-term life insurance plan, there shall be ignored any insurance coverage provided pursuant to a state law requirement that an insurer continue to provide insurance coverage for a period of time not in excess of two months following the termination of a policy.
Q-2: What is meant by a “group-term life insurance plan of the employer that was in existence on January 1, 1984”?
A-2: A group-term life insurance plan of the employer was in existence on January 1, 1984, only if the group policy or policies providing group-term life insurance benefits under the plan were executed on or before January 1, 1984, and were not terminated prior to such date. The applicability of section 79, as amended, to an employee will not be affected by the transfer of the employee between employers treated as a single employer under section 79(d)(7) if the employee continues, after the transfer, to be provided with group-term life insurance benefits under a plan that is comparable (determined under the principles set forth in Q&A 3) to the plan provided by the former employer.
Q-3: When is a plan of group-term life insurance a “comparable successor” to another such plan?
A-3: A plan of group-term life insurance will be a comparable successor to another plan of group-term life insurance (the first plan) only if the plan does not differ from the first plan in any significant aspect with respect to individuals who are potentially eligible for benefits provided under the grandfather provisions in Q&A 1. These individuals consist of those persons who are covered under a plan of group-term life insurance of the employer that was in existence on January 1, 1984, or a comparable successor to such a plan maintained by the employer or a successor employer, and who either retired on or before January 1, 1984, or who both attained age 55 on or before January 1, 1984, and were employed by the employer maintaining the plan (or a predecessor of that employer) during the year 1983. Accordingly, if significant additional or reduced benefits are provided only to individuals who are not described in the preceding sentence, the plan will be considered a comparable successor plan. A plan will not fail to be a comparable successor plan merely because the employer purchases a policy or policies identical to the employer’s first plan from a different insurance company. If the new plan provides significant additional or reduced benefits (either as to the type or amount available) to employees, or provides benefits to a category of employees that was formerly excluded from participating in the plan, the plan is generally not a comparable successor to the first plan. However, a plan will not be considered as providing significant additional or reduced benefits merely because a participant’s coverage is based on a percentage of compensation and the participant’s compensation for the taxable year has been increased or decreased. Furthermore, a plan will not be considered a non-comparable successor plan merely because it is amended, either to decrease benefits provided to key employees or to increase benefits provided to non-key employees, solely in order to comply with the nondiscrimination requirements of section 79(d). Finally, a plan will not be considered a non-comparable successor plan merely because a policy that is part of a discriminatory plan is terminated in order to end discriminatory coverage.
Q-4: For purposes of determining the effective date of section 79, as amended by the Tax Reform Act of 1984, what is a “successor employer”?
A-4: A successor employer is an employer who employs a group of individuals formerly employed by another employer as a result of a business merger, acquisition or division.
Q-5: Under what circumstances will separate policies of group-term life insurance of an employer be considered to be a single plan in determining whether the employer’s plan of group-term life insurance is discriminatory?
A-5: All policies providing group-term life insurance to a common key employee or key employees (as defined in this Q&A) carried directly or indirectly by an employer (or by a group of employers described in section 79(d)(7)) will be considered as a single plan for purposes of determining whether an employer’s group-term life insurance plan is discriminatory. For example, if a key employee receives $50,000 of group-term life insurance coverage under one policy and the same key employee receives an additional $250,000 of coverage under a separate group-term life insurance policy, the two policies will be treated as a single plan in determining whether the group-term life insurance provided by the employer is discriminatory. If it is discriminatory, the key employees covered by either policy will not receive the benefit of section 79(a)(1) or section 79(c) for either policy. The result is the same even if each policy, considered alone, would be nondiscriminatory. A policy that provides group-term life insurance to a key employee and a policy under which the same key employee is eligible to receive group-term life insurance upon separation from service will be considered to provide group-term life insurance to a common key employee. In addition, an employer may treat two or more policies that do not provide group-term life insurance to a common key employee as constituting a single plan for purposes of satisfying the nondiscrimination provisions of section 79(d). For example, if the employer provides group-term life insurance coverage for non-key employees under one policy and provides group-term life insurance coverage for key employees under a second policy, the two policies may be considered together in determining whether the requirements of section 79(d) are satisfied with regard to the second policy. For purposes of this section, the term “key employee” has the meaning given to such term by paragraph (1) of section 416(i), except that subparagraph (A)(iv) of such paragraph shall be applied by not taking into account employees described in section 79(d)(3)(B) who are not participants in the plan. For purposes of this section, all references to “plan year” or “plan years” in section 416(g)(4)(C) and section 416(i) shall be deleted and replaced with “taxable year of the employer” or “taxable years of the employer,” respectively.
Q-6: In the case of a discriminatory group-term life insurance plan, what amounts should be included in the gross income of a key employee?
A-6: (a) In the case of a discriminatory group-term life insurance plan, each key employee must include in gross income for the taxable year the cost of his or her insurance benefit for that year provided by the employer under the plan.
(b) The cost of group-term life insurance coverage provided by an employer for a key employee during the employee’s taxable year is determined by apportioning the net premium (group premium less policy dividends, premium refunds or experience rating credits) allocable to the group-term life insurance coverage during the key employee’s taxable year, less the actual cost allocated to other key employees pursuant to the method described in the subparagraph (d) of this answer, if applicable, among the covered employees. In the event that the employer has other forms and types of coverage with the same insurer, the employer must make a reasonable allocation of the total premiums paid to the insurer. For example, where an employer has both health insurance coverage and a plan of group-term life insurance with the same insurer, and there is no volume discount, the net premium for the plan of group-term life insurance must include the excess, if any, of the payments the employer makes for the health insurance coverage over the payments the employer would make for such coverage if the plan of group-term life insurance for which this calculation is being made did not exist.
(c) In general, the portion of the net premium for group-term life insurance that should be apportioned to a key employee, other than a key employee to whom the method in subparagraph (d) of this answer is applicable, is determined by: (1) Calculating a “tabular” premium for the entire group (with the exception of all key employees to whom the method in subparagraph (d) of this answer is applicable), in the manner described below, (2) determining the ratio of the total actual net premium (less the actual cost allocated to key employees pursuant to the method in the subparagraph (d) of this answer) to the total tabular premium and (3) multiplying the tabular premium for the key employee at his or her attained age by such ratio. Thus, if the total actual net premium is 125 percent of the total tabular premium for all covered employees and the tabular premium at the key employee’s attained age is $2.00 per thousand per month, the cost for such employee would be $2.50 per thousand per month ($2.00 times 125 percent). For these purposes the table used to calculate tabular premiums will be determined as follows:
(i) If the group policy contains a reasonable table (based on recognized mortality assumptions) of premium rates on an attained age basis (which table may use age brackets not exceeding five years) with reference to which the group premium is determined, such table will be used;
(ii) If such table is not available, the 1960 Basic Group Table published by the Society of Actuaries will be used.
(d) In cases where the mortality charge for group-term life insurance coverage provided to a key employee is calculated separately by the insurer (for example, where the charge for the coverage provided to a key employee is based on a medical examination) and the amount of such mortality charge plus a proportionate share of the loading charge for the coverage provided to the group is higher than the amount that would be allocable to such employee under the allocation method in subparagraph (c) the cost of group-term life insurance coverage for that employee shall be that higher amount.
Q-7: Must all active and former employees be considered in applying the coverage tests in section 79(d)(3) to determine whether or not a plan of group-term life insurance is discriminatory with respect to coverage?
A-7: No. Generally, a plan of group-term life insurance which covers both active and former employees will not satisfy the nondiscrimination requirements of section 79(d) unless the coverage tests in section 79(d)(3) are satisfied with respect to both the active and the former employees of the employer, except to the extent they are excluded from tests for discrimination by application of the grandfather provisions set forth in Q&A 1. However, for purposes of determining whether a plan is discriminatory with respect to coverage, the coverage tests must be applied separately to active and former employees. In addition, if the plan limits participation by former employees to employees who retired from employment with the employer, then only retired employees must be considered in applying the coverage tests to former employees. Also, in applying the coverage tests in section 79(d)(3), the employer may make reasonable mortality assumptions regarding former employees who are not covered under the plan but must be considered in applying the coverage tests. Furthermore, only those former employees who terminated employment on or after the earliest date of termination from employment for any former employee covered by the plan must be considered. Finally, for purposes of determining whether a plan of group-term life insurance of the employer (or a successor employer) that was in existence on January 1, 1984 (or a comparable successor to such a plan) is discriminatory, after December 31, 1986, with respect to group-term life insurance coverage for former employees, coverage provided to employees who retired on or before December 31, 1986, shall not be taken into account.
Q-8: Will a group-term life insurance plan be considered discriminatory if active employees receive greater benefits as a percentage of compensation than former employees, or vice versa?
A-8: No. For purposes of determining whether a plan is discriminatory with respect to the type and amount of benefits available, insurance coverage for former employees must be tested separately from insurance coverage for active employees. For example, a group-term life insurance plan that provides group-term life insurance benefits equal to 200 percent of compensation for all active employees and 100 percent of final compensation (based on the average annual compensation for the final five years) for all former employees would satisfy the nondiscrimination requirements of section 79(d). However, a group-term life insurance plan that provides group-term life insurance benefits equal to 200 percent of compensation for all active employees and 100 percent of final compensation (based on the average annual compensation for the final five years) only for key employees who are no longer employed by the employer (or a successor employer) would not satisfy the nondiscrimination requirement of section 79(d)(2)(A).
Q-9: Under what circumstances will the amount of benefits available under a plan of group-term life insurance be considered not to discriminate in favor of participants who are key employees?
A-9: A plan of group-term life insurance will be considered not to discriminate in favor of participants who are key employees, as to the amount of benefits available, if the plan provides a fixed amount of insurance which is the same for all covered employees. In other circumstances, the determination of whether a plan is nondiscriminatory will be based on all of the facts and circumstances. Such plans will be considered not to discriminate in favor of participants who are key employees, as to the amount of benefits available, if the plan contains no group of employees described in the following sentence that, if tested separately, would fail to satisfy the requirements of section 79(d)(2)(A). The group subject to separate testing under the preceding sentence consists of a key employee and all other participants (including other key employees) who receive, under the plan, an amount of insurance (as a multiple of compensation (either total compensation or the basic or regular rate of compensation)) that is equal to or greater than the amount of insurance received by such key employee. As described in Q&As 7&8, active and former employees are tested separately under section 79(d)(2)(A).
In determining the groups of employees that are tested separately for this purpose, allowance shall be made for reasonable differences in amount of insurance (as a multiple of compensation) due to rounding, the use of compensation brackets or other similar factors. Thus, if a plan bases group-term life insurance coverage on “compensation brackets,” it is not intended that any participants will be treated as receiving an amount of insurance (as a multiple of compensation) that is greater (or less) than that of any other participant merely because the first participant’s compensation is at the lower (or higher) end of a compensation bracket while the second participant’s compensation is at the higher (or lower) end of a compensation bracket. However, any compensation brackets utilized by a plan will be examined to determine if the brackets, or compensation groupings, result in discrimination in favor of key employees. In addition, a plan does not meet the requirements for nondiscrimination as to the type and amount of benefits available under the plan unless all types of benefits (including permanent benefits) and all terms and conditions with respect to such benefits which are available to any participant who is a key employee are also available on a nondiscriminatory basis to non-key employee participants.
Q-10: How is additional coverage purchased by employees under a plan of group-term life insurance treated for purposes of determining whether a plan of group-term life insurance is discriminatory?
A-10: (a) The extent to which employees purchase additional coverage under a plan of group-term life insurance is not taken into account for purposes of determining whether a plan of group-term life insurance is discriminatory. For example, a plan providing insurance to all employees of 1 times annual compensation, which gives all employees the option to purchase additional insurance of 1 times annual compensation at their own expense, would not be considered discriminatory as to the type and amount of benefits available, even if the group (or groups) of participants who purchase additional insurance, if tested separately, would not satisfy the requirements of section 79(d)(2)(A). Solely for this purpose, the choice of an amount of group-term life insurance as a benefit under a cafeteria plan will be treated as the purchase of group-term life insurance by an employee. If additional insurance coverage is available to any key employee that is not available, on a nondiscriminatory basis, to non-key employees, the plan will be considered discriminatory, even if the full cost of such additional insurance coverage is paid by the employee(s) electing such benefits.
(b) If the employer bears a part of the expense of any additional coverage that is purchased by an employee under a plan of group-term life insurance, the additional insurance shall be treated, in part, as an amount of insurance provided by the employer under the plan and, in part, as an amount of insurance purchased by the employee. Except to the extent provided in subparagraph (a) above, the portion of insurance treated as an amount of insurance purchased by the employee is not taken into account for purposes of determining whether the plan is discriminatory. Whether such insurance (together with any other insurance provided by the employer under the plan) will cause the plan to be considered to discriminate in favor of participants who are key employees is determined under the rules of Q&A 9.
Q-11: What effect do the provisions of section 79(d)(1) have if a plan of group-term life insurance is discriminatory for only part of a year?
A-11: If a plan of group-term life insurance is discriminatory at any time during the key employee’s taxable year, then it is a discriminatory group-term life insurance plan for that taxable year and the provisions of section 79(d)(1) will be applicable with respect to all group-term life insurance costs allocable to that employee for that year.
Q-12: Are the section 79(d) provisions independent from the requirements contained in Treas. Reg. § 1.79-1?
A-12: Yes. Treasury regulation § 1.79-1(c)(1) provides that life insurance provided to a group of employees cannot qualify as group-term life insurance if it is provided to less than ten full-time employees unless certain requirements are satisfied. The satisfaction of these requirements does not guarantee that the plan will be nondiscriminatory, and vice versa. Treasury regulation § 1.79-1(a)(4) provides that life insurance is not group-term life insurance unless the amount of insurance provided to each employee is computed under a formula that precludes individual selection. The mere fact that a life insurance policy is nondiscriminatory is not determinative as to whether the policy precludes individual selection, and vice versa.
§ 1.82-1 Payments for or reimbursements of expenses of moving from one residence to another residence attributable to employment or self-employment.
(a) Reimbursements in gross income—(1) In general. Any amount received or accrued, directly or indirectly, by an individual as a payment for or reimbursement of expenses of moving from one residence to another residence attributable to employment or self-employment is includible in gross income under section 82 as compensation for services in the taxable year received or accrued. For rules relating to the year a deduction may be allowed for expenses of moving from one residence to another residence, see section 217 and the regulations thereunder.
(2) Amounts received or accrued as reimbursement or payment. For purposes of this section, amounts are considered as being received or accrued by an individual as reimbursement or payment whether received in the form of money, property, or services. A cash basis taxpayer will include amounts in gross income under section 82 when they are received or treated as received by him. Thus, for example, if an employer moves an employee’s household goods and personal effects from the employee’s old resident to his new residence using the employer’s facilities, the employee is considered as having received a payment in the amount of the fair market value of the services furnished at the time the services are furnished by the employer. If the employer pays a mover for moving the employee’s household goods and personal effects, the employee is considered as having received the payment at the time the employer pays the mover, rather than at the time the mover moves the employee’s household goods and personal effects. Where an employee receives a loan or advance from an employer to enable him to pay his moving expenses, the employee will not be deemed to have received a reimbursement of moving expenses until such time as he accounts to his employer if he is not required to repay such loan or advance and if he makes such accounting within a reasonable time. Such loan or advance will be deemed to be a reimbursement of moving expenses at the time of such accounting to the extent used by the employee for such moving expenses.
(3) Direct or indirect payments or reimbursements. For purposes of this section amounts are considered as being received or accrued whether received directly (paid or provided to an individual by an employer, a client, a customer, or similar person) or indirectly (paid to a third party on behalf of an individual by an employer, a client, a customer, or similar person). Thus, if an employer pays a mover for the expenses of moving an employee’s household goods and personal effects from one residence to another residence, the employee has indirectly received a payment which is includible in his gross income under section 82.
(4) Expenses of moving from one residence to another residence. An expense of moving from one residence to another residence is any expenditure, cost, loss, or similar item paid or incurred in connection with a move from one residence to another residence. Moving expenses include (but are not limited to) any expenditure, cost, loss, or similar item directly or indirectly resulting from the acquisition, sale, or exchange of property, the transportation of goods or property, or travel (by the taxpayer or any other person) in connection with a change in residence. Such expenses include items described in section 217(b) (relating to the definition of moving expenses), irrespective of the dollar limitations contained in section 217(b)(3) and the conditions contained in section 217(c), as well as items not described in section 217 (b), such as a loss sustained on the sale or exchange of personal property, storage charges, taxes, or expenses of refitting rugs or draperies.
(5) Attributable to employment or self-employment. Any amount received or accrued from an employer, a client, a customer, or similar person in connection with the performance of services for such employer, client, customer, or similar person, is attributable to employment or self-employment. Thus, for example, if an employer reimburses an employee for a loss incurred on the sale of the employee’s house, reimbursement is attributable to the performance of services if made because of the employer-employee relationship. Similarly, if an employer in order to prevent an employee’s sustaining a loss on a sale of a house acquires the property from the employee at a price in excess of fair market value, the employee is considered to have received a payment attributable to employment to the extent that such payment exceeds the fair market value of the property.
(b) Effective date—(1) In general. Except as provided in subparagraph (2) of this paragraph, paragraph (a) of this section is applicable only to amounts received or accrued in taxable years beginning after December 31, 1969.
(2) Election with respect to payments or reimbursements for expenses paid or incurred before January 1, 1971. Paragraph (a) of this section does not apply with respect to moving expenses paid or incurred before January 1, 1971, in connection with the commencement of work by an employee at a new principal place of work where such employee had been notified by his employer on or before December 19, 1969, of such move and the employee makes an election under paragraph (h) of § 1.217-2.
§ 1.83-1 Property transferred in connection with the performance of services.
(a) Inclusion in gross income—(1) General rule. Section 83 provides rules for the taxation of property transferred to an employee or independent contractor (or beneficiary thereof) in connection with the performance of services by such employee or independent contractor. In general, such property is not taxable under section 83(a) until it has been transferred (as defined in § 1.83-3(a)) to such person and become substantially vested (as defined in § 1.83-3(b)) in such person. In that case, the excess of—
(i) The fair market value of such property (determined without regard to any lapse restriction, as defined in § 1.83-3(i)) at the time that the property becomes substantially vested, over
(ii) The amount (if any) paid for such property,
(2) Life insurance. The cost of life insurance protection under a life insurance contract, retirement income contract, endowment contract, or other contract providing life insurance protection is taxable generally under section 61 and the regulations thereunder during the period such contract remains substantially nonvested (as defined in § 1.83-3(b)). For the taxation of life insurance protection under a split-dollar life insurance arrangement (as defined in § 1.61-22(b)(1) or (2)), see § 1.61-22.
(3) Cross references. For rules concerning the treatment of employers and other transferors of property in connection with the performance of services, see section 83(h) and § 1.83-6. For rules concerning the taxation of beneficiaries of an employees’ trust that is not exempt under section 501(a), see section 402(b) and the regulations thereunder.
(b) Subsequent sale, forfeiture, or other disposition of nonvested property. (1) If substantially nonvested property (that has been transferred in connection with the performance of services) is subsequently sold or otherwise disposed of to a third party in an arm’s length transaction while still substantially nonvested, the person who performed such services shall realize compensation in an amount equal to the excess of—
(i) The amount realized on such sale or other disposition, over
(ii) The amount (if any) paid for such property.
(2) If substantially nonvested property that has been transferred in connection with the performance of services to the person performing such services is forfeited while still substantially nonvested and held by such person, the difference between the amount paid (if any) and the amount received upon forfeiture (if any) shall be treated as an ordinary gain or loss. This paragraph (b)(2) does not apply to property to which § 1.83-2(a) applies.
(3) This paragraph (b) shall not apply to, and no gain shall be recognized on, any sale, forfeiture, or other disposition described in this paragraph to the extent that any property received in exchange therefor is substantially nonvested. Instead, section 83 and this section shall apply with respect to such property received (as if it were substituted for the property disposed of).
(c) Dispositions of nonvested property not at arm’s length. If substantially nonvested property (that has been transferred in connection with the performance of services) is disposed of in a transaction which is not at arm’s length and the property remains substantially nonvested, the person who performed such services realizes compensation equal in amount to the sum of any money and the fair market value of any substantially vested property received in such disposition. Such amount of compensation is includible in his gross income in accordance with his method of accounting. However, such amount of compensation shall not exceed the fair market value of the property disposed of at the time of disposition (determined without regard to any lapse restriction), reduced by the amount paid for such property. In addition, section 83 and these regulations shall continue to apply with respect to such property, except that any amount previously includible in gross income under this paragraph (c) shall thereafter be treated as an amount paid for such property. For example, if in 1971 an employee pays $50 for a share of stock which has a fair market value of $100 and is substantially monvested at that time and later in 1971 (at a time when the property still has a fair market value of $100 and is still substantially nonvested) the employee disposes of, in a transaction not at arm’s length, the share of stock to his wife for $10, the employee realizes compensation of $10 in 1971. If in 1972, when the share of stock has a fair market value of $120, it becomes substantially vested, the employee realizes additional compensation in 1972 in the amount of $60 (the $120 fair market value of the stock less both the $50 price paid for the stock and the $10 taxed as compensation in 1971). For purposes of this paragraph, if substantially nonvested property has been transferred to a person other than the person who performed the services, and the transferee dies holding the property while the property is still substantially nonvested and while the person who performed the services is alive, the transfer which results by reason of the death of such transferee is a transfer not at arm’s length.
(d) Certain transfers upon death. If substantially nonvested property has been transferred in connection with the performance of services and the person who performed such services dies while the property is still substantially nonvested, any income realized on or after such death with respect to such property under this section is income in respect of a decedent to which the rules of section 691 apply. In such a case the income in respect of such property shall be taxable under section 691 (except to the extent not includible under section 101(b)) to the estate or beneficiary of the person who performed the services, in accordance with section 83 and the regulations thereunder. However, if an item of income is realized upon such death before July 21, 1978, because the property became substantially vested upon death, the person responsible for filing decedent’s income tax return for decedent’s last taxable year may elect to treat such item as includible in gross income for decedent’s last taxable year by including such item in gross income on the return or amended return filed for decedent’s last taxable year.
(e) Forfeiture after substantial vesting. If a person is taxable under section 83(a) when the property transferred becomes substantially vested and thereafter the person’s beneficial interest in such property is nevertheless forfeited pursuant to a lapse restriction, any loss incurred by such person (but not by a beneficiary of such person) upon such forfeiture shall be an ordinary loss to the extent the basis in such property has been increased as a result of the recognition of income by such person under section 83(a) with respect to such property.
(f) Examples. The provisions of this section may be illustrated by the following examples:
§ 1.83-2 Election to include in gross income in year of transfer.
(a) In general. If property is transferred (within the meaning of § 1.83-3(a)) in connection with the performance of services, the person performing such services may elect to include in gross income under section 83(b) the excess (if any) of the fair market value of the property at the time of transfer (determined without regard to any lapse restriction, as defined in § 1.83-3(i)) over the amount (if any) paid for such property, as compensation for services. The fact that the transferee has paid full value for the property transferred, realizing no bargain element in the transaction, does not preclude the use of the election as provided for in this section. If this election is made, the substantial vesting rules of section 83(a) and the regulations thereunder do not apply with respect to such property, and except as otherwise provided in section 83(d)(2) and the regulations thereunder (relating to the cancellation of a nonlapse restriction), any subsequent appreciation in the value of the property is not taxable as compensation to the person who performed the services. Thus, property with respect to which this election is made shall be includible in gross income as of the time of transfer, even though such property is substantially nonvested (as defined in § 1.83-3(b)) at the time of transfer, and no compensation will be includible in gross income when such property becomes substantially vested (as defined in § 1.83-3(b)). In computing the gain or loss from the subsequent sale or exchange of such property, its basis shall be the amount paid for the property increased by the amount included in gross income under section 83(b). If property for which a section 83(b) election is in effect is forfeited while substantially nonvested, such forfeiture shall be treated as a sale or exchange upon which there is realized a loss equal to the excess (if any) of—
(1) The amount paid (if any) for such property, over,
(2) The amount realized (if any) upon such forfeiture.
(b) Time for making election. Except as provided in the following sentence, the election referred to in paragraph (a) of this section shall be filed not later than 30 days after the date the property was transferred (or, if later, January 29, 1970) and may be filed prior to the date of transfer. Any statement filed before February 15, 1970, which was amended not later than February 16, 1970, in order to make it conform to the requirements of paragraph (e) of this section, shall be deemed a proper election under section 83(b).
(c) Manner of making election. The election referred to in paragraph (a) of this section is made by filing one copy of a written statement with the internal revenue office with which the person who performed the services files his return.
(d) Additional copies. The person who performed the services shall also submit a copy of the statement referred to in paragraph (c) of this section to the person for whom the services are performed. In addition, if the person who performs the services and the transferee of such property are not the same person, the person who performs the services shall submit a copy of such statement to the transferee of the property.
(e) Content of statement. The statement shall be signed by the person making the election and shall indicate that it is being made under section 83(b) of the Code, and shall contain the following information:
(1) The name, address and taxpayer identification number of the taxpayer;
(2) A description of each property with respect to which the election is being made;
(3) The date or dates on which the property is tansferred and the taxable year (for example, “calendar year 1970” or “fiscal year ending May 31, 1970”) for which such election was made;
(4) The nature of the restriction or restrictions to which the property is subject;
(5) The fair market value at the time of transfer (determined without regard to any lapse restriction, as defined in § 1.83-3(i)) of each property with respect to which the election is being made;
(6) The amount (if any) paid for such property; and
(7) With respect to elections made after July 21, 1978, a statement to the effect that copies have been furnished to other persons as provided in paragraph (d) of this section.
(f) Revocability of election. An election under section 83(b) may not be revoked except with the consent of the Commissioner. Consent will be granted only in the case where the transferee is under a mistake of fact as to the underlying transaction and must be requested within 60 days of the date on which the mistake of fact first became known to the person who made the election. In any event, a mistake as to the value, or decline in the value, of the property with respect to which an election under section 83(b) has been made or a failure to perform an act contemplated at the time of transfer of such property does not constitute a mistake of fact.
(g) Effective/applicability date. Paragraph (c) of this section applies to property transferred on or after January 1, 2016.
§ 1.83-3 Meaning and use of certain terms.
(a) Transfer—(1) In general. For purposes of section 83 and the regulations thereunder, a transfer of property occurs when a person acquires a beneficial ownership interest in such property (disregarding any lapse restriction, as defined in § 1.83-3(i)). For special rules applying to the transfer of a life insurance contract (or an undivided interest therein) that is part of a split-dollar life insurance arrangement (as defined in § 1.61-22(b)(1) or (2)), see § 1.61-22(g).
(2) Option. The grant of an option to purchase certain property does not constitute a transfer of such property. However, see § 1.83-7 for the extent to which the grant of the option itself is subject to section 83. In addition, if the amount paid for the transfer of property is an indebtedness secured by the transferred property, on which there is no personal liability to pay all or a substantial part of such indebtedness, such transaction may be in substance the same as the grant of an option. The determination of the substance of the transaction shall be based upon all the facts and circumstances. The factors to be taken into account include the type of property involved, the extent to which the risk that the property will decline in value has been transferred, and the likelihood that the purchase price will, in fact, be paid. See also § 1.83-4(c) for the treatment of forgiveness of indebtedness that has constituted an amount paid.
(3) Requirement that property be returned. Similarly, no transfer may have occurred where property is transferred under conditions that require its return upon the happening of an event that is certain to occur, such as the termination of employment. In such a case, whether there is, in fact, a transfer depends upon all the facts and circumstances. Factors which indicate that no transfer has occurred are described in paragraph (a) (4), (5), and (6) of this section.
(4) Similarity to option. An indication that no transfer has occurred is the extent to which the conditions relating to a transfer are similar to an option.
(5) Relationship to fair market value. An indication that no transfer has occurred is the extent to which the consideration to be paid the transferee upon surrendering the property does not approach the fair market value of the property at the time of surrender. For purposes of paragraph (a) (5) and (6) of this section, fair market value includes fair market value determined under the rules of § 1.83-5(a)(1), relating to the valuation of property subject to nonlapse restrictions. Therefore, the existence of a nonlapse restriction referred to in § 1.83-5(a)(1) is not a factor indicating no transfer has occurred.
(6) Risk of loss. An indication that no transfer has occurred is the extent to which the transferee does not incur the risk of a beneficial owner that the value of the property at the time of transfer will decline substantially. Therefore, for purposes of this (6), risk of decline in property value is not limited to the risk that any amount paid for the property may be lost.
(7) Examples. The provisions of this paragraph may be illustrated by the following examples:
(b) Substantially vested and substantially nonvested property. For purposes of section 83 and the regulations thereunder, property is substantially nonvested when it is subject to a substantial risk of forfeiture, within the meaning of paragraph (c) of this section, and is nontransferable, within the meaning of paragraph (d) of this section. Property is substantially vested for such purposes when it is either transferable or not subject to a substantial risk of forfeiture.
(c) Substantial risk of forfeiture—(1) In general. For purposes of section 83 and these regulations, whether a risk of forfeiture is substantial or not depends upon the facts and circumstances. Except as set forth in paragraphs (j) and (k) of this section, a substantial risk of forfeiture exists only if rights in property that are transferred are conditioned, directly or indirectly, upon the future performance (or refraining from performance) of substantial services by any person, or upon the occurrence of a condition related to a purpose of the transfer if the possibility of forfeiture is substantial. Property is not transferred subject to a substantial risk of forfeiture if at the time of transfer the facts and circumstances demonstrate that the forfeiture condition is unlikely to be enforced. Further, property is not transferred subject to a substantial risk of forfeiture to the extent that the employer is required to pay the fair market value of a portion of such property to the employee upon the return of such property. The risk that the value of property will decline during a certain period of time does not constitute a substantial risk of forfeiture. A nonlapse restriction, standing by itself, will not result in a substantial risk of forfeiture. A restriction on the transfer of property, whether contractual or by operation of applicable law, will result in a substantial risk of forfeiture only if and to the extent that the restriction is described in paragraph (j) or (k) of this section. For this purpose, transfer restrictions that will not result in a substantial risk of forfeiture include, but are not limited to, restrictions that if violated, whether by transfer or attempted transfer of the property, would result in the forfeiture of some or all of the property, or liability by the employee for any damages, penalties, fees, or other amount.
(2) Illustrations of substantial risks of forfeiture. The regularity of the performance of services and the time spent in performing such services tend to indicate whether services required by a condition are substantial. The fact that the person performing services has the right to decline to perform such services without forfeiture may tend to establish that services are insubstantial. Where stock is transferred to an underwriter prior to a public offering and the full enjoyment of such stock is expressly or impliedly conditioned upon the successful completion of the underwriting, the stock is subject to a substantial risk of forfeiture. Where an employee receives property from an employer subject to a requirement that it be returned if the total earnings of the employer do not increase, such property is subject to a substantial risk of forfeiture. On the other hand, requirements that the property be returned to the employer if the employee is discharged for cause or for committing a crime will not be considered to result in a substantial risk of forfeiture. An enforceable requirement that the property be returned to the employer if the employee accepts a job with a competing firm will not ordinarily be considered to result in a substantial risk of forfeiture unless the particular facts and circumstances indicate to the contrary. Factors which may be taken into account in determining whether a convenant not to compete constitutes a substantial risk of forfeiture are the age of the employee, the availability of alternative employment opportunities, the likelihood of the employee’s obtaining such other employment, the degree of skill possessed by the employee, the employee’s health, and the practice (if any) of the employer to enforce such covenants. Similarly, rights in property transferred to a retiring employee subject to the sole requirement that it be returned unless he renders consulting services upon the request of his former employer will not be considered subject to a substantial risk of forfeiture unless he is in fact expected to perform substantial services.
(3) Enforcement of forfeiture condition. In determining whether the possibility of forfeiture is substantial in the case of rights in property transferred to an employee of a corporation who owns a significant amount of the total combined voting power or value of all classes of stock of the employer corporation or of its parent corporation, there will be taken into account (i) the employee’s relationship to other stockholders and the extent of their control, potential control and possible loss of control of the corporation, (ii) the position of the employee in the corporation and the extent to which he is subordinate to other employees, (iii) the employee’s relationship to the officers and directors of the corporation, (iv) the person or persons who must approve the employee’s discharge, and (v) past actions of the employer in enforcing the provisions of the restrictions. For example, if an employee would be considered as having received rights in property subject to a substantial risk of forfeiture, but for the fact that the employee owns 20 percent of the single class of stock in the transferor corporation, and if the remaining 80 percent of the class of stock is owned by an unrelated individual (or members of such an individual’s family) so that the possibility of the corporation enforcing a restriction on such rights is substantial, then such rights are subject to a substantial risk of forfeiture. On the other hand, if 4 percent of the voting power of all the stock of a corporation is owned by the president of such corporation and the remaining stock is so diversely held by the public that the president, in effect, controls the corporation, then the possibility of the corporation enforcing a restriction on rights in property transferred to the president is not substantial, and such rights are not subject to a substantial risk of forfeiture.
(4) Examples. The rules contained in paragraph (c)(1) of this section may be illustrated by the following examples. In each example it is assumed that, if the conditions on transfer are not satisfied, the forfeiture provision will be enforced.
(b) The following chart illustrates the fair market value of the bonus stock and the fair market value of the portion of bonus stock that becomes substantially vested on November 25, for the following years:
| Year | Fair market value of | |
|---|---|---|
| All stock | Portion of stock that becomes vested | |
| 1972 | $200 | $20 |
| 1973 | 300 | 30 |
| 1974 | 150 | 15 |
| 1975 | 150 | 15 |
| 1976 | 100 | 10 |
(d) Transferability of property. For purposes of section 83 and the regulations thereunder, the rights of a person in property are transferable if such person can transfer any interest in the property to any person other than the transferor of the property, but only if the rights in such property of such transferee are not subject to a substantial risk of forfeiture. Accordingly, property is transferable if the person performing the services or receiving the property can sell, assign, or pledge (as collateral for a loan, or as security for the performance of an obligation, or for any other purpose) his interest in the property to any person other than the transferor of such property and if the transferee is not required to give up the property or its value in the event the substantial risk of forfeiture materializes. On the other hand, property is not considered to be transferable merely because the person performing the services or receiving the property may designate a beneficiary to receive the property in the event of his death.
(e) Property. For purposes of section 83 and the regulations thereunder, the term “property” includes real and personal property other than either money or an unfunded and unsecured promise to pay money or property in the future. The term also includes a beneficial interest in assets (including money) which are transferred or set aside from the claims of creditors of the transferor, for example, in a trust or escrow account. See, however, § 1.83-8(a) with respect to employee trusts and annuity plans subject to section 402(b) and section 403(c). In the case of a transfer of a life insurance contract, retirement income contract, endowment contract, or other contract providing life insurance protection, or any undivided interest therein, the policy cash value and all other rights under such contract (including any supplemental agreements thereto and whether or not guaranteed), other than current life insurance protection, are treated as property for purposes of this section. However, in the case of the transfer of a life insurance contract, retirement income contract, endowment contract, or other contract providing life insurance protection, which was part of a split-dollar arrangement (as defined in § 1.61-22(b)) entered into (as defined in § 1.61-22(j)) on or before September 17, 2003, and which is not materially modified (as defined in § 1.61-22(j)(2)) after September 17, 2003, only the cash surrender value of the contract is considered to be property. Where rights in a contract providing life insurance protection are substantially nonvested, see § 1.83-1(a)(2) for rules relating to taxation of the cost of life insurance protection.
(f) Property transferred in connection with the performance of services. Property transferred to an employee or an independent contractor (or beneficiary thereof) in recognition of the performance of, or the refraining from performance of, services is considered transferred in connection with the performance of services within the meaning of section 83. The existence of other persons entitled to buy stock on the same terms and conditions as an employee, whether pursuant to a public or private offering may, however, indicate that in such circumstances a transfer to the employee is not in recognition of the performance of, or the refraining from performance of, services. The transfer of property is subject to section 83 whether such transfer is in respect of past, present, or future services.
(g) Amount paid. For purposes of section 83 and the regulations thereunder, the term “amount paid” refers to the value of any money or property paid for the transfer of property to which section 83 applies, and does not refer to any amount paid for the right to use such property or to receive the income therefrom. Such value does not include any stated or unstated interest payments. For rules regarding the calculation of the amount of unstated interest payments, see § 1.483-1(c). When section 83 applies to the transfer of property pursuant to the exercise of an option, the term “amount paid” refers to any amount paid for the grant of the option plus any amount paid as the exercise price of the option. For rules regarding the forgiveness of indebtedness treated as an amount paid, see § 1.83-4(c).
(h) Nonlapse restriction. For purposes of section 83 and the regulations thereunder, a restriction which by its terms will never lapse (also referred to as a “nonlapse restriction”) is a permanent limitation on the transferability of property—
(1) Which will require the transferee of the property to sell, or offer to sell, such property at a price determined under a formula, and
(2) Which will continue to apply to and be enforced against the transferee or any subsequent holder (other than the transferor).
(i) Lapse restriction. For purposes of section 83 and the regulations thereunder, the term “lapse restriction” means a restriction other than a nonlapse restriction as defined in paragraph (h) of this section, and includes (but is not limited to) a restriction that carries a substantial risk of forfeiture.
(j) Sales which may give rise to suit under section 16(b) of the Securities Exchange Act of 1934—(1) In general. For purposes of section 83 and the regulations thereunder if the sale of property at a profit within six months after the purchase of the property could subject a person to suit under section 16(b) of the Securities Exchange Act of 1934, the person’s rights in the property are treated as subject to a substantial risk of forfeiture and as not transferable until the earlier of (i) the expiration of such six-month period, or (ii) the first day on which the sale of such property at a profit will not subject the person to suit under section 16(b) of the Securities Exchange Act of 1934. However, whether an option is “transferable by the optionee” for purposes of § 1.83-7(b)(2)(i) is determined without regard to section 83(c)(3) and this paragraph (j).
(2) Examples. The provisions of this paragraph may be illustrated by the following examples:
(ii) Assume the same facts as in paragraph (i) of this Example 4 except that Q exercises the nonstatutory option on October 30, 2013 when Y stock is trading at more than $10 per share. The shares acquired are subject to a substantial risk of forfeiture under section 83(c)(3) as a result of section 16(b) through December 1, 2013.
(iii) Assume the same facts as in paragraph (i) of this Example 4 except that on November 5, 2013, Q also purchases 100 shares of Y common stock on the public market. The purchase of the shares is not a transaction exempt from section 16(b) of the Securities Exchange Act of 1934. Because no exemption from section 16(b) was available for the November 5, 2013 purchase of shares, the section 16(b) liability period with respect to such shares will last for a period of six months after the November 5, 2013 purchase of shares. Notwithstanding the non-exempt purchase of Y common stock on November 5, 2013, the shares acquired by Q pursuant to the December 15, 2013 exercise of the option are not subject to a substantial risk of forfeiture under section 83(c)(3) as a result of section 16(b). As a result, section 83(c)(3) does not preclude taxation under section 83 when the shares acquired pursuant to the December 15, 2013 exercise of the option are transferred to Q.
(k) For purposes of section 83 and the regulations thereunder, property is subject to substantial risk of forfeiture and is not transferable so long as the property is subject to a restriction on transfer to comply with the “Pooling-of-Interests Accounting” rules set forth in Accounting Series Release Numbered 130 ((10/5/72) 37 FR 20937; 17 CFR 211.130) and Accounting Series Release Numbered 135 ((1/18/73) 38 FR 1734; 17 CFR 211.135).
(l) Effective/applicability date. This section applies to property transferred on or after January 1, 2013. For rules relating to property transferred before that date, see § 1.83-3 as contained in 26 CFR part 1 (as of April 1, 2012).
§ 1.83-4 Special rules.
(a) Holding period. Under section 83(f), the holding period of transferred property to which section 83(a) applies shall begin just after such property is substantially vested. However, if the person who has performed the services in connection with which property is transferred has made an election under section 83(b), the holding period of such property shall begin just after the date such property is transferred. If property to which section 83 and the regulations thereunder apply is transferred at arm’s length, the holding period of such property in the hands of the transferee shall be determined in accordance with the rules provided in section 1223.
(b) Basis. (1) Except as provided in paragraph (b)(2) of this section, if property to which section 83 and the regulations thereunder apply is acquired by any person (including a person who acquires such property in a subsequent transfer which is not at arm’s length), while such property is still substantially nonvested, such person’s basis for the property shall reflect any amount paid for such property and any amount includible in the gross income of the person who performed the services (including any amount so includible as a result of a disposition by the person who acquired such property.) Such basis shall also reflect any adjustments to basis provided under sections 1015, 1016, and 1022.
(2) If property to which § 1.83-1 applies is transferred at arm’s length, the basis of the property in the hands of the transferee shall be determined under section 1012 and the regulations thereunder.
(c) Forgiveness of indebtedness treated as an amount paid. If an indebtedness that has been treated as an amount paid under § 1.83-1(a)(1)(ii) is subsequently cancelled, forgiven or satisfied for an amount less than the amount of such indebtedness, the amount that is not, in fact, paid shall be includible in the gross income of the service provider in the taxable year in which such cancellation, forgiveness or satisfaction occurs.
(d) Effective/applicability date. The provisions in this section are applicable for taxable years beginning on or after July 21, 1978. The provisions of paragraph (b)(1) of this section relating to section 1022 are effective on and after January 19, 2017.
§ 1.83-5 Restrictions that will never lapse.
(a) Valuation. For purposes of section 83 and the regulations thereunder, in the case of property subject to a nonlapse restriction (as defined in § 1.83-3(h)), the price determined under the formula price will be considered to be the fair market value of the property unless established to the contrary by the Commissioner, and the burden of proof shall be on the commissioner with respect to such value. If stock in a corporation is subject to a nonlapse restriction which requires the transferee to sell such stock only at a formula price based on book value, a reasonable multiple of earnings or a reasonable combination thereof, the price so determined will ordinarily be regarded as determinative of the fair market value of such property for purposes of section 83. However, in certain circumstances the formula price will not be considered to be the fair market value of property subject to such a formula price restriction, even though the formula price restriction is a substantial factor in determining such value. For example, where the formula price is the current book value of stock, the book value of the stock at some time in the future may be a more accurate measure of the value of the stock than the current book value of the stock for purposes of determining the fair market value of the stock at the time the stock becomes substantially vested.
(b) Cancellation—(1) In general. Under section 83(d)(2), if a nonlapse restriction imposed on property that is subject to section 83 is cancelled, then, unless the taxpayer establishes—
(i) That such cancellation was not compensatory, and
(ii) That the person who would be allowed a deduction, if any, if the cancellation were treated as compensatory, will treat the transaction as not compensatory, as provided in paragraph (c)(2) of this section, the excess of the fair market value of such property (computed without regard to such restriction) at the time of cancellation, over the sum of—
(iii) The fair market value of such property (computed by taking the restriction into account) immediately before the cancellation, and
(iv) The amount, if any, paid for the cancellation, shall be treated as compensation for the taxable year in which such cancellation occurs. Whether there has been a noncompensatory cancellation of a nonlapse restriction under section 83(d)(2) depends upon the particular facts and circumstances. Ordinarily the fact that the employee or independent contractor is required to perform additional services or that the salary or payment of such a person is adjusted to take the cancellation into account indicates that such cancellation has a compensatory purpose. On the other hand, the fact that the original purpose of a restriction no longer exists may indicate that the purpose of such cancellation is noncompensatory. Thus, for example, if a so-called “buy-sell” restriction was imposed on a corporation’s stock to limit ownership of such stock and is being cancelled in connection with a public offering of the stock, such cancellation will generally be regarded as noncompensatory. However, the mere fact that the employer is willing to forego a deduction under section 83(h) is insufficient evidence to establish a noncompensatory cancellation of a nonlapse restriction. The refusal by a corporation or shareholder to repurchase stock of the corporation which is subject to a permanent right of first refusal will generally be treated as a cancellation of a nonlapse restriction. The preceding sentence shall not apply where there is no nonlapse restriction, for example, where the price to be paid for the stock subject to the right of first refusal is the fair market value of the stock. Section 83(d)(2) and this (1) do not apply where immediately after the cancellation of a nonlapse restriction the property is still substantially nonvested and no section 83(b) election has been made with respect to such property. In such a case the rules of section 83(a) and § 1.83-1 shall apply to such property.
(2) Evidence of noncompensatory cancellation. In addition to the information necessary to establish the factors described in paragraph (b)(1) of this section, the taxpayer shall request the employer to furnish the taxpayer with a written statement indicating that the employer will not treat the cancellation of the nonlapse restriction as a compensatory event, and that no deduction will be taken with respect to such cancellation. The taxpayer shall file such written statement with his income tax return for the taxable year in which or with which such cancellation occurs.
(c) Examples. The provisions of this section may be illustrated by the following examples:
§ 1.83-6 Deduction by employer.
(a) Allowance of deduction—(1) General rule. In the case of a transfer of property in connection with the performance of services, or a compensatory cancellation of a nonlapse restriction described in section 83(d) and § 1.83-5, a deduction is allowable under section 162 or 212 to the person for whom the services were performed. The amount of the deduction is equal to the amount included as compensation in the gross income of the service provider under section 83 (a), (b), or (d)(2), but only to the extent the amount meets the requirements of section 162 or 212 and the regulations thereunder. The deduction is allowed only for the taxable year of that person in which or with which ends the taxable year of the service provider in which the amount is included as compensation. For purposes of this paragraph, any amount excluded from gross income under section 79 or section 101(b) or subchapter N is considered to have been included in gross income.
(2) Special Rule. For purposes of paragraph (a)(1) of this section, the service provider is deemed to have included the amount as compensation in gross income if the person for whom the services were performed satisfies in a timely manner all requirements of section 6041 or section 6041A, and the regulations thereunder, with respect to that amount of compensation. For purposes of the preceding sentence, whether a person for whom services were performed satisfies all requirements of section 6041 or section 6041A, and the regulations thereunder, is determined without regard to § 1.6041-3(c) (exception for payments to corporations). In the case of a disqualifying disposition of stock described in section 421(b), an employer that otherwise satisfies all requirements of section 6041 and the regulations thereunder will be considered to have done so timely for purposes of this paragraph (a)(2) if Form W-2 or Form W-2c, as appropriate, is furnished to the employee or former employee, and is filed with the federal government, on or before the date on which the employer files the tax return claiming the deduction relating to the disqualifying disposition.
(3) Exceptions. Where property is substantially vested upon transfer, the deduction shall be allowed to such person in accordance with his method of accounting (in conformity with sections 446 and 461). In the case of a transfer to an employee benefit plan described in § 1.162-10(a) or a transfer to an employees’ trust or annuity plan described in section 404(a)(5) and the regulations thereunder, section 83(h) and this section do not apply.
(4) Capital expenditure, etc. No deduction is allowed under section 83(h) to the extent that the transfer of property constitutes a capital expenditure, an item of deferred expense, or an amount properly includible in the value of inventory items. In the case of a capital expenditure, for example, the basis of the property to which such capital expenditure relates shall be increased at the same time and to the same extent as any amount includible in the employee’s gross income in respect of such transfer. Thus, for example, no deduction is allowed to a corporation in respect of a transfer of its stock to a promoter upon its organization, notwithstanding that such promoter must include the value of such stock in his gross income in accordance with the rules under section 83.
(5) Transfer of life insurance contract (or an undivided interest therein)—(i) General rule. In the case of a transfer of a life insurance contract (or an undivided interest therein) described in § 1.61-22(c)(3) in connection with the performance of services, a deduction is allowable under paragraph (a)(1) of this section to the person for whom the services were performed. The amount of the deduction, if allowable, is equal to the sum of the amount included as compensation in the gross income of the service provider under § 1.61-22(g)(1) and the amount determined under § 1.61-22(g)(1)(ii).
(ii) Effective date—(A) General rule. Paragraph (a)(5)(i) of this section applies to any split-dollar life insurance arrangement (as defined in § 1.61-22(b)(1) or (2)) entered into after September 17, 2003. For purposes of this paragraph (a)(5), an arrangement is entered into as determined under § 1.61-22(j)(1)(ii).
(B) Modified arrangements treated as new arrangements. If an arrangement entered into on or before September 17, 2003 is materially modified (within the meaning of § 1.61-22(j)(2)) after September 17, 2003, the arrangement is treated as a new arrangement entered into on the date of the modification.
(6) Effective date. Paragraphs (a)(1) and (2) of this section apply to deductions for taxable years beginning on or after January 1, 1995. However, taxpayers may also apply paragraphs (a)(1) and (2) of this section when claiming deductions for taxable years beginning before that date if the claims are not barred by the statute of limitations. Paragraphs (a) (3) and (4) of this section are effective as set forth in § 1.83-8(b).
(b) Recognition of gain or loss. Except as provided in section 1032, at the time of a transfer of property in connection with the performance of services the transferor recognizes gain to the extent that the transferor receives an amount that exceeds the transferor’s basis in the property. In addition, at the time a deduction is allowed under section 83(h) and paragraph (a) of this section, gain or loss is recognized to the extent of the difference between (1) the sum of the amount paid plus the amount allowed as a deduction under section 83(h), and (2) the sum of the taxpayer’s basis in the property plus any amount recognized pursuant to the previous sentence.
(c) Forfeitures. If, under section 83(h) and paragraph (a) of this section, a deduction, an increase in basis, or a reduction of gross income was allowable (disregarding the reasonableness of the amount of compensation) in respect of a transfer of property and such property is subsequently forfeited, the amount of such deduction, increase in basis or reduction of gross income shall be includible in the gross income of the person to whom it was allowable for the taxable year of forfeiture. The basis of such property in the hands of the person to whom it is forfeited shall include any such amount includible in the gross income of such person, as well as any amount such person pays upon forfeiture.
(d) Special rules for transfers by shareholders—(1) Transfers. If a shareholder of a corporation transfers property to an employee of such corporation or to an independent contractor (or to a beneficiary thereof), in consideration of services performed for the corporation, the transaction shall be considered to be a contribution of such property to the capital of such corporation by the shareholder, and immediately thereafter a transfer of such property by the corporation to the employee or independent contractor under paragraphs (a) and (b) of this section. For purposes of this (1), such a transfer will be considered to be in consideration for services performed for the corporation if either the property transferred is substantially nonvested at the time of transfer or an amount is includible in the gross income of the employee or independent contractor at the time of transfer under § 1.83-1(a)(1) or § 1.83-2(a). In the case of such a transfer, any money or other property paid to the shareholder for such stock shall be considered to be paid to the corporation and transferred immediately thereafter by the corporation to the shareholder as a distribution to which section 302 applies. For special rules that may applyto a corporation’s transfer of its own stock to any person in consideration of services performed for another corporation or partnership, see § 1.1032-3. The preceding sentence applies to transfers of stock and amounts paid for such stock occurring on or after May 16, 2000.
(2) Forfeiture. If, following a transaction described in paragraph (d)(1) of this section, the transferred property is forfeited to the shareholder, paragraph (c) of this section shall apply both with respect to the shareholder and with respect to the corporation. In addition, the corporation shall in the taxable year of forfeiture be allowed a loss (or realize a gain) to offset any gain (or loss) realized under paragraph (b) of this section. For example, if a shareholder transfers property to an employee of the corporation as compensation, and as a result the shareholder’s basis of $200x in such property is allocated to his stock in such corporation and such corporation recognizes a short-term capital gain of $800x, and is allowed a deduction of $1,000x on such transfer, upon a subsequent forfeiture of the property to the shareholder, the shareholder shall take $200x into gross income, and the corporation shall take $1,000x into gross income and be allowed a short-term capital loss of $800x.
(e) Options. [Reserved]
(f) Reporting requirements. [Reserved]
§ 1.83-7 Taxation of nonqualified stock options.
(a) In general. If there is granted to an employee or independent contractor (or beneficiary thereof) in connection with the performance of services, an option to which section 421 (relating generally to certain qualified and other options) does not apply, section 83(a) shall apply to such grant if the option has a readily ascertainable fair market value (determined in accordance with paragraph (b) of this section) at the time the option is granted. The person who performed such services realizes compensation upon such grant at the time and in the amount determined under section 83(a). If section 83(a) does not apply to the grant of such an option because the option does not have a readily ascertainable fair market value at the time of grant, sections 83(a) and 83(b) shall apply at the time the option is exercised or otherwise disposed of, even though the fair market value of such option may have become readily ascertainable before such time. If the option is exercised, sections 83(a) and 83(b) apply to the transfer of property pursuant to such exercise, and the employee or independent contractor realizes compensation upon such transfer at the time and in the amount determined under section 83(a) or 83(b). If the option is sold or otherwise disposed of in an arm’s length transaction, sections 83(a) and 83(b) apply to the transfer of money or other property received in the same manner as sections 83(a) and 83(b) would have applied to the transfer of property pursuant to an exercise of the option. The preceding sentence does not apply to a sale or other disposition of the option to a person related to the service provider that occurs on or after July 2, 2003. For this purpose, a person is related to the service provider if—
(1) The person and the service provider bear a relationship to each other that is specified in section 267(b) or 707(b)(1), subject to the modifications that the language “20 percent” is used instead of “50 percent” each place it appears in sections 267(b) and 707(b)(1), and section 267(c)(4) is applied as if the family of an individual includes the spouse of any member of the family; or
(2) The person and the service provider are engaged in trades or businesses under common control (within the meaning of section 52(a) and (b)); provided that a person is not related to the service provider if the person is the service recipient with respect to the option or the grantor of the option.
(b) Readily ascertainable defined—(1) Actively traded on an established market. Options have a value at the time they are granted, but that value is ordinarily not readily ascertainable unless the option is actively traded on an established market. If an option is actively traded on an established market, the fair market value of such option is readily ascertainable for purposes of this section by applying the rules of valuation set forth in § 20.2031-2.
(2) Not actively traded on an established market. When an option is not actively traded on an established market, it does not have a readily ascertainable fair market value unless its fair market value can otherwise be measured with reasonable accuracy. For purposes of this section, if an option is not actively traded on an established market, the option does not have a readily ascertainable fair market value when granted unless the taxpayer can show that all of the following conditions exist:
(i) The option is transferable by the optionee;
(ii) The option is exerciseable immediately in full by the optionee;
(iii) The option or the property subject to the option is not subject to any restriction or condition (other than a lien or other condition to secure the payment of the purchase price) which has a significant effect upon the fair market value of the option; and
(iv) The fair market value of the option privilege is readily ascertainable in accordance with paragraph (b)(3) of this section.
(3) Option privilege. The option privilege in the case of an option to buy is the opportunity to benefit during the option’s exercise period from any increase in the value of property subject to the option during such period, without risking any capital. Similarly, the option privilege in the case of an option to sell is the opportunity to benefit during the exercise period from a decrease in the value of property subject to the option. For example, if at some time during the exercise period of an option to buy, the fair market value of the property subject to the option is greater than the option’s exercise price, a profit may be realized by exercising the option and immediately selling the property so acquired for its higher fair market value. Irrespective of whether any such gain may be realized immediately at the time an option is granted, the fair market value of an option to buy includes the value of the right to benefit from any future increase in the value of the property subject to the option (relative to the option exercise price), without risking any capital. Therefore, the fair market value of an option is not merely the difference that may exist at a particular time between the option’s exercise price and the value of the property subject to the option, but also includes the value of the option privilege for the remainder of the exercise period. Accordingly, for purposes of this section, in determining whether the fair market value of an option is readily ascertainable, it is necessary to consider whether the value of the entire option privilege can be measured with reasonable accuracy. In determining whether the value of the option privilege is readily ascertainable, and in determining the amount of such value when such value is readily ascertainable, it is necessary to consider—
(i) Whether the value of the property subject to the option can be ascertained;
(ii) The probability of any ascertainable value of such property increasing or decreasing; and
(iii) The length of the period during which the option can be exercised.
(c) Reporting requirements. [Reserved]
(d) This section applies on and after July 2, 2003. For transactions prior to that date, see § 1.83-7 as published in 26 CFR part 1 (revised as of April 1, 2003).
§ 1.83-8 Applicability of section and transitional rules.
(a) Scope of section 83. Section 83 is not applicable to—
(1) A transaction concerning an option to which section 421 applies;
(2) A transfer to or from a trust described in section 401(a) for the benefit of employees or their beneficiaries, or a transfer under an annuity plan that meets the requirements of section 404(a)(2) for the benefit of employees or their beneficiaries;
(3) The transfer of an option without a readily ascertainable fair market value (as defined in § 1.83-7(b)(1)); or
(4) The transfer of property pursuant to the exercise of an option with a readily ascertainable fair market value at the date of grant. Section 83 applies to a transfer to or from a trust or under an annuity plan for the benefit of employees, independent contractors, or their beneficiaries (except as provided in paragraph (a)(2) of this section), but to the extent a transfer is subject to section 402(b) or 403(c), section 83 applies to such a transfer only as provided for in section 402(b) or 403(c).
(b) Transitional rules—(1) In general. Except as otherwise provided in this paragraph, section 83 and the regulations thereunder shall apply to property transferred after June 30, 1969.
(2) Binding written contracts. Section 83 and the regulations thereunder shall not apply to property transferred pursuant to a binding written contract entered into before April 22, 1969. For purposes of this paragraph, a binding written contract means only a written contract under which the employee or independent contractor has an enforceable right to compel the transfer of property or to obtain damages upon the breach of such contract. A contract which provides that a person’s right to such property is contingent upon the happening of an event (including the passage of time) may satisfy the requirements of this paragraph. However, if the event itself, or the determination of whether the event has occurred, rests with the board of directors or any other individual or group acting on behalf of the employer (other than an arbitrator), the contract will not be treated as giving the person an enforceable right for purposes of this paragraph.
(3) Options granted before April 22, 1969. Section 83 shall not apply to property received upon the exercise of an option granted before April 22, 1969.
(4) Certain written plans. Section 83 shall not apply to property transferred (whether or not by the exercise of an option) before May 1, 1970, pursuant to a written plan adopted and approved before July 1, 1969. A plan is to be considered as having been adopted and approved before July 1, 1969, only if prior to such date the transferor of the property undertook an ascertainable course of conduct which under applicable State law does not require further approval by the board of directors or the stockholders of any corporation. For example, if a corporation transfers property to an employee in connection with the performance of services pursuant to a plan adopted and approved before July 1, 1969, by the board of directors of such corporation, it is not necessary that the stockholders have adopted or approved such plan if State law does not require such approval. However, such approval is necessary if required by the articles of incorporation or the bylaws or if, by its terms, such plan will not become effective without such approval.
(5) Certain options granted pursuant to a binding written contract. Section 83 shall not apply to property transferred before January 1, 1973, upon the exercise of an option granted pursuant to a binding written contract (as defined in paragraph (b)(2) of this section) entered into before April 22, 1969, between a corporation and the transferor of such property requiring the transferor to grant options to employees of such corporation (or a subsidiary of such corporation) to purchase a determinable number of shares of stock of such corporation, but only if the transferee was an employee of such corporation (or a subsidiary of such corporation) on or before April 22, 1969.
(6) Certain tax free exchanges. Section 83 shall not apply to property transferred in exchange for (or pursuant to the exercise of a conversion privilege contained in) property transferred before July 1, 1969, or in exchange for property to which section 83 does not apply (by reason of paragraphs (1), (2), (3), or (4) of section 83(i)), if section 354, 355, 356, or 1036 (or so much of section 1031 as relates to section 1036) applies, or if gain or loss is not otherwise required to be recognized upon the exercise of such conversion privilege, and if the property received in such exchange is subject to restrictions and conditions substantially similar to those to which the property given in such exchange was subject.
§ 1.84-1 Transfer of appreciated property to political organizations.
(a) Transfer defined. A transfer after May 7, 1974, of property to a political organization (as defined in section 527(e)(1), and including a newsletter fund to the extent provided under section 527(g)) is treated as a sale of the property to the political organization if the fair market value of the property exceeds its adjusted basis. The transferor is treated as having realized an amount equal to the fair market value of the property on the date of the transfer. For purposes of this section, a transfer is any assignment, conveyance, or delivery of property other than a bona fide sale for an adequate and full consideration in money or money’s worth, whether the transfer is in trust or otherwise, whether the transfer is direct or indirect and whether the property is real or personal, tangible or intangible. Thus, for example, a sale at less than fair market value (other than an ordinary trade discount), or a receipt of property by a political organization under an agency agreement entitling the organization to sell the property and retain all or a portion of the proceeds of the sale, is a transfer within the meaning, of this section. The term “transfer” also includes an illegal contribution of property.
(b) Amount realized. A transferor to whom this section applies realizes an amount equal to the fair market value of the property on the date of the transfer. For purposes of this section, the definition of fair market value set forth in § 1.170A-1(c) (2) and (3) is incorporated by reference.
(c) Amount recognized. A transferor to whom this section applies is treated as having sold the property to the political organization on the date of the transfer. Therefore, the rules of chapter 1 of subtitle A (relating to income tax) apply to the gain realized under this section as if this gain were an amount realized upon the sale of the property. These rules include those of section 55 and section 56 (relating to minimum tax for tax preference), section 306 (relating to disposition of certain stock), section 1201 (relating to the alternative tax on certain capital gains), section 1245 (relating to gain from dispositions of certain depreciable property), and section 1250 (relating to gain from dispositions of certain depreciable realty).
(d) Holding period. The holding period of property transferred to a political organization to which this section applies begins on the day after the date of acquisition of the property by the political organization.
§ 1.85-1 Unemployment compensation.
(a) Introduction. Section 85 prescribes rules relating to the inclusion in gross income of unemployment compensation (as defined in paragraph (b)(1) of this section) paid in taxable years beginning after December 31, 1978, pursuant to governmental programs. In general, these rules provide that unemployment compensation paid pursuant to governmental programs is includible in the gross income of a taxpayer if the taxpayer’s modified adjusted gross income (as defined in paragraph (b)(2) of this section) exceeds a statutory base amount (as defined in paragraph (b)(3) of this section). If there is such an excess, however, the amount included in gross income is limited under paragraph (c)(1) of this section to the lesser of one-half of such excess or the amount of the unemployment compensation. If such taxpayer’s modified adjusted gross income does not exceed the applicable statutory base amount, none of the unemployment compensation is included in the taxpayer’s gross income.
(b) Definitions—(1) Unemployment compensation—(i) General rule. Except as provided in paragraph (b)(1)(iii) of this section, the term “unemployment compensation” means any amount received under a law of the United States, or of a State, which is in the nature of unemployment compensation. Thus, section 85 applies only to unemployment compensation paid pursuant to governmental programs and does not apply to amounts paid pursuant to private nongovernmental unemployment compensation plans (which are includible in income without regard to section 85). Generally, unemployment compensation programs are those designed to protect taxpayers against the loss of income caused by involuntary layoff. Ordinarily, unemployment compensation is paid in cash and on a periodic basis. The amount of the payments is usually computed in accordance with formula based on the taxpayer’s length of prior employment and wages. Such payments, however, may be made in a lump sum or other than in cash or on some other basis.
(ii) Disability and worker’s compensation payments. Amounts in the nature of unemployment compensation also include cash disability payments made pursuant to a governmental program as a substitute for case unemployment payments to an unemployed taxpayer who is ineligible for such payments solely because of the disability. Usually these disability payments are paid in the same weekly amount and for the same period as the unemployment compensation benefits to which the unemployed taxpayer otherwise would have been entitled. Amounts received under workmen’s compensation acts as compensation for personal injuries or sickness are not amounts in the nature of unemployment compensation. See section 104(a)(1) relating to the exclusion from gross income of such amounts.
(iii) Employee contributions to a governmental plan. If a governmental unemployment compensation program is funded in part by an employee’s contribution which is not deductible by the employee, an amount paid to such employee under the program is not to be considered unemployment compensation until an amount equal to the total nondeductible contributions paid by the employee to such program has been paid to such employee.
(iv) Examples of governmental unemployment compensation programs. Governmental unemployment compensation programs include (but are not limited to) programs established under:
(A) A State law approved by the Secretary of Labor pursuant to section 3304 of the Internal Revenue Code of 1954.
(B) Chapter 85 of title 5, United States Code, relating to unemployment compensation for Federal employees generally and for ex-servicemen.
(C) Trade Act of 1974, sections 231 and 232 (19 U.S.C. 2291 and 2292).
(D) Disaster Relief Act of 1974, section 407 (42 U.S.C. 5177).
(E) The Airline Deregulation Act of 1978 (49 U.S.C. 1552(b)).
(F) The Railroad Unemployment Insurance Act, section 2 (45 U.S.C. 352).
(2) Modified adjusted gross income. The term “modified adjusted gross income” means the sum of the following amounts:
(i) Adjusted gross income (as defined in section 62);
(ii) All disability payments of the type that are eligible for exclusion from gross income under section 105(d); and
(iii) All amounts of unemployment compensation (as defined in paragraph (b)(1) of this section).
(3) Base amount. The term “base amount” means—
(i) $25,000 in the case of a joint return under section 6013.
(ii) Zero in the case of a taxpayer who—
(A) Is married (within the meaning of section 143) at the close of the taxable year,
(B) Does not file a joint return for such taxable year, and
(C) Does not live apart (as defined in paragraph (b)(4) of this section) from his or her spouse at all times during the taxable year.
(iii) $20,000 in the case of all other taxpayers.
(4) Living apart. A taxpayer does not “live apart” from his or her spouse at all times during a taxable year if for any period during the taxable year the taxpayer is a member of the same household as such taxpayer’s spouse. A taxpayer is a member of a household for any period, including temporary absences due to special circumstances, during which the household is the taxpayer’s place of abode. A temporary absence due to special circumstances includes a nonpermanent absence caused by illness, education, business, vacation, or military service.
(c) Limitations—(1) General rule. If for a taxable year, a taxpayer’s modified adjusted gross income does not exceed the applicable statutory base amount, no amount of unemployment compensation is included in gross income for the taxable year. If there is such an excess, the taxpayer includes in gross income for the taxable year the lesser of the following:
(i) One-half of the excess of the taxpayer’s modified adjusted gross income over such taxpayer’s base amount, or
(ii) The amount of unemployment compensation.
(2) Exception for fraudulently received unemployment compensation. If a taxpayer fraudulently receives unemployment compensation under any governmental unemployment compensation program, then the entire amount of such fraudulently received unemployment compensation must be included in the taxpayer’s gross income for the taxable year in which the benefits were received. Thus, the limitation in section 85 and in paragraph (c)(1) of this section, does not apply to such amounts.
(3) Examples. The application of this paragraph may be illustrated by the following examples:
(d) Cross reference. See section 6050B, relating to the requirement that every person who makes payments of unemployment compensation aggregating $10 or more to any individual during any calendar year file an information return with the Internal Revenue Service.
§ 1.88-1 Nuclear decommissioning costs.
(a) In general. Section 88 provides that the amount of nuclear decommissioning costs directly or indirectly charged to the customers of a taxpayer that is engaged in the furnishing or sale of electric energy generated by a nuclear power plant must be included in the gross income of such taxpayer in the same manner as amounts charged for electric energy. For this purpose, decommissioning costs directly or indirectly charged to the customers of a taxpayer include all decommissioning costs that consumers are liable to pay by reason of electric energy furnished by the taxpayer during the taxable year, whether payable to the taxpayer, a trust, State government, or other entity, and even though the taxpayer may not control the investment or current expenditure of the amount and the amount may not be paid to the taxpayer at the time decommissioning costs are incurred. However, decommissioning costs payable to a taxpayer holding a qualified leasehold interest (as described in paragraph (b)(2)(ii) of § 1.468A-1) are included in the gross income of such taxpayer, and not in the gross income of the lessor.
(b) Examples. The following examples illustrate the application of the principles of paragraph (a) of this section:
(c) Cross reference. For special rules relating to the deduction for amounts paid to a nuclear decommissioning fund, see § 1.468A-1 through § 1.468A-5, 1.468A-7, 1.468A-8.
(d) Effective date. (1) Section 88 and this section apply to nuclear decommissioning costs directly or indirectly charged to the customers of a taxpayer on or after July 18, 1984, and with respect to taxable years ending on or after such date.
(2) If the amount of nuclear decommissioning costs directly or indirectly charged to the customers of a taxpayer before July 18, 1984, was includible in gross income in a different manner than amounts charged for electric energy, such amount must be included in gross income for the taxable year in which includible in gross income under the method of accounting of the taxpayer that was in effect when such amount was charged to customers.
Items Specifically Excluded From Gross Income
§ 1.101-1 Exclusion from gross income of proceeds of life insurance contracts payable by reason of death.
(a)(1) In general. Section 101(a)(1) states the general rule that the proceeds of life insurance policies, if paid by reason of the death of the insured, are excluded from the gross income of the recipient. Death benefit payments having the characteristics of life insurance proceeds payable by reason of death under contracts, such as workmen’s compensation insurance contracts, endowment contracts, or accident and health insurance contracts, issued on or before December 31, 1984, are covered by this provision. The exclusion from gross income allowed by section 101(a) applies whether payment is made to the estate of the insured or to any beneficiary (individual, corporation, or partnership) and whether it is made directly or in trust. The extent to which this exclusion applies in cases where life insurance policies have been transferred for a valuable consideration is stated in section 101(a)(2) and in paragraph (b) of this section. In cases where the proceeds of a life insurance policy, payable by reason of the death of the insured, are paid other than in a single sum at the time of such death, the amounts to be excluded from gross income may be affected by the provisions of section 101 (c) (relating to amounts held under agreements to pay interest) or section 101(d) (relating to amounts payable at a date later than death). See §§ 1.101-3 and 1.101-4. However, neither section 101(c) nor section 101(d) applies to a single sum payment which does not exceed the amount payable at the time of death even though such amount is actually paid at a date later than death. If the life insurance contract is an employer-owned life insurance contract within the definition of section 101(j)(3), the amount to be excluded from gross income may be affected by the provisions of section 101(j).
(2) Cross references. For rules governing the taxability of insurance proceeds constituting benefits payable on the death of an employee—
(i) Under pension, profit-sharing, or stock bonus plans described in section 401(a) and exempt from tax under section 501(a), or under annuity plans described in section 403(a), see section 72 (m)(3) and paragraph (c) of § 1.72-16;
(ii) Under annuity contracts to which § 1.403(b)-3 applies, see § 1.403(b)-7; or
(iii) Under eligible State deferred compensation plans described in section 457(b), see paragraph (c) of § 1.457-1.
(b) Transfers of life insurance policies. (1) Transfer of an interest in a life insurance contract for valuable consideration—(i) In general. In the case of a transfer of an interest in a life insurance contract for valuable consideration, including a reportable policy sale for valuable consideration, the amount of the proceeds attributable to the interest that is excludable from gross income under section 101(a)(1) is limited under section 101(a)(2) to the sum of the actual value of the consideration for the transfer paid by the transferee and the premiums and other amounts subsequently paid by the transferee with respect to the interest. For exceptions to this general rule for certain transfers for valuable consideration that are not reportable policy sales, see paragraph (b)(1)(ii) of this section. The application of section 101(d), (f) or (j), which is not addressed in paragraph (b) of this section, may further limit the amount of the proceeds excludable from gross income.
(ii) Exceptions—(A) Exception for carryover basis transfers. The limitation described in paragraph (b)(1)(i) of this section does not apply to the transfer of an interest in a life insurance contract for valuable consideration if each of the following requirements are satisfied. First, the transfer is not a reportable policy sale. Second, the basis of the interest, for the purpose of determining gain or loss with respect to the transferee, is determinable in whole or in part by reference to the basis of the interest in the hands of the transferor (see section 101(a)(2)(A)). Third, paragraph (b)(1)(ii)(B) of this section does not apply. In the case of a transfer described in this paragraph (b)(1)(ii)(A), the amount of the proceeds attributable to the interest that is excludable from gross income under section 101(a)(1) is limited to the sum of the amount that would have been excludable by the transferor if the transfer had not occurred and the premiums and other amounts subsequently paid by the transferee with respect to the interest. The preceding sentence applies without regard to whether the interest previously has been transferred and the nature of any prior transfer of the interest.
(B) Exception for transfers to certain persons—(1) In general. The limitation described in paragraph (b)(1)(i) of this section does not apply to the transfer of an interest in a life insurance contract for valuable consideration if both of the following requirements are satisfied. First, the transfer is not a reportable policy sale and the interest was not previously transferred for valuable consideration in a reportable policy sale. Second, the interest is transferred to the insured, a partner of the insured, a partnership in which the insured is a partner, or a corporation in which the insured is a shareholder or officer (see section 101(a)(2)(B)).
(2) Transfers to certain persons subsequent to a reportable policy sale. Except as provided in paragraph (b)(1)(ii)(B)(3) of this section, if a transfer of an interest in a life insurance contract would be described in paragraph (b)(1)(ii)(B)(1) of this section, but for the fact that the interest previously was transferred for valuable consideration in a reportable policy sale (whether in the immediately preceding transfer or an earlier transfer), then the amount of the proceeds attributable to the interest that is excludable from gross income under section 101(a)(1) is limited to the sum of—
(i) The higher of the amount that would have been excludable by the transferor if the transfer had not occurred or the actual value of the consideration for the transfer paid by the transferee; and
(ii) The premiums and other amounts subsequently paid by the transferee with respect to the interest.
(3) Transfers to the insured subsequent to a reportable policy sale—(i) Except as provided in paragraph (b)(1)(ii)(B)(3)(ii) of this section, to the extent that an interest (or portion of an interest) in a life insurance contract that was transferred for valuable consideration in a reportable policy sale subsequently is transferred to the insured for valuable consideration, the limitations described in paragraph (b)(1)(i) of this section and paragraph (b)(1)(ii)(B)(2) of this section do not apply. To the extent that fair market value is not paid by the insured for the transferred interest, the transfer of the portion of the interest with a value in excess of the consideration paid will be treated as a gift under the bargain sale rule in paragraph (b)(2)(iii) of this section.
(ii) This paragraph (b)(1)(ii)(B)(3)(ii) applies with respect to an interest described in paragraph (b)(1)(ii)(B)(3)(i) of this section (or portion of such an interest) that subsequently is transferred by the insured to any other person. If all subsequent transfers of the interest (or portion of the interest) are gratuitous transfers that are not reportable policy sales, the amount of the proceeds excluded from gross income is determined under paragraph (b)(2)(i) of this section, taking into account the application of paragraph (b)(1)(ii)(B)(3)(i) of this section to the insured’s acquisition of the interest. If any subsequent transfer of the interest (or portion of the interest) is for valuable consideration or is a reportable policy sale, the amount of the policy proceeds excludable from gross income is determined in accordance with paragraph (b) of this section; if the amount that would have been excludable from gross income by the insured following the transaction described in paragraph (b)(1)(ii)(B)(3)(i) of this section if no subsequent transfer had occurred is relevant, that amount is determined under paragraph (b)(1)(ii)(B)(2) of this section. Paragraph (g)(8) (Example 8) of this section and paragraph (g)(9) (Example 9) of this section illustrate the application of this paragraph (b)(1)(ii)(B)(3)(ii).
(2) Other transfers—(i) Gratuitous transfer of an interest in a life insurance contract. To the extent that a transfer of an interest in a life insurance contract is gratuitous, including a reportable policy sale that is not for valuable consideration, the amount of the proceeds attributable to the interest that is excludable from gross income under section 101(a)(1) is limited to the sum of the amount of the proceeds attributable to the gratuitously transferred interest that would have been excludable by the transferor if the transfer had not occurred and the premiums and other amounts subsequently paid by the transferee with respect to the interest. However, if an interest in a life insurance contract is transferred gratuitously to the insured, and that interest has not previously been transferred for value in a reportable policy sale, the entire amount of the proceeds attributable to the interest transferred to the insured is excludable from gross income.
(ii) Partial transfers. When only part of an interest in a life insurance contract is transferred, the transferor’s exclusion is ratably apportioned between or among the several parts. If multiple parts of an interest are transferred, the transfer of each part is treated as a separate transaction, with each transaction subject to the rule under paragraph (b) of this section that is applicable to the type of transfer involved.
(iii) Bargain sales. When the transfer of an interest in a life insurance contract is in part a transfer for valuable consideration and in part a gratuitous transfer, the transfer of each part is treated as a separate transaction for purposes of determining the amount of the proceeds attributable to the interest that is excludable from gross income under section 101(a)(1). Each separate transaction is subject to the rule under paragraph (b) of this section that is applicable to the type of transfer involved.
(3) Determination of amounts paid by the transferee. For purposes of paragraphs (b)(1) and (2) of this section, in determining the amounts, if any, of consideration paid by the transferee for the transfer of an interest in a life insurance contract and premiums and other amounts subsequently paid by the transferee with respect to that interest, the amounts paid by the transferee are reduced, but not below zero, by amounts received by the transferee under the life insurance contract that are not received as an annuity, to the extent excludable from gross income under section 72(e).
(c) Reportable policy sale—(1) In general. Except as provided in paragraph (c)(2) of this section, a reportable policy sale for purposes of this section and section 6050Y is any direct or indirect acquisition of an interest in a life insurance contract if the acquirer has, at the time of the acquisition, no substantial family, business, or financial relationship with the insured apart from the acquirer’s interest in the life insurance contract.
(2) Exceptions. None of the following transactions is a reportable policy sale:
(i) A transfer of an interest in a life insurance contract between entities with the same beneficial owners, if the ownership interest of each beneficial owner in the transferor entity does not vary by more than a 20 percent ownership interest from that beneficial owner’s ownership interest in the transferee entity. In a series of transfers, the prior sentence is applied by comparing the beneficial owners’ ownership interest in the first transferor entity and the last transferee entity. For purposes of this paragraph (c)(2)(i), each beneficial owner of a trust is deemed to have an ownership interest determined by the broadest possible exercise of a trustee’s discretion in that beneficial owner’s favor. Paragraph (g)(13) (Example 13) of this section provides an illustration of the application of this paragraph (c)(2)(i).
(ii) A transfer between corporations that are members of an affiliated group (as defined in section 1504(a)) that files a consolidated U.S. income tax return for the taxable year in which the transfer occurs.
(iii) The indirect acquisition of an interest in a life insurance contract by a person if—
(A) A partnership, trust, or other entity in which an ownership interest is being acquired directly or indirectly holds the interest in the life insurance contract and acquired that interest before January 1, 2019, or acquired that interest in a reportable policy sale reported in compliance with section 6050Y(a) and § 1.6050Y-2; or
(B) Immediately before the acquisition, no more than 50 percent of the gross value of the assets (as determined under paragraph (f)(4) of this section) of the partnership, trust, or other entity that directly or indirectly holds the interest in the life insurance contract, and in which an ownership interest is being directly acquired, consists of life insurance contracts, provided that, after the acquisition, with respect to that partnership, trust, or other entity, the person indirectly acquiring the interest in the life insurance contract and his or her family members own, in the aggregate—
(1) With respect to an S corporation, stock possessing 5 percent or less of the total combined voting power of all classes of stock entitled to vote and 5 percent or less of the total value of shares of all classes of stock of the S corporation;
(2) With respect to a trust or decedent’s estate, 5 percent or less of the corpus and 5 percent or less of the annual income (taking into account, for the purpose of determining any person’s ownership interest, the maximum amount of income and corpus that could be distributed to or held for the benefit of that person); or
(3) With respect to a partnership or other entity that is not a corporation or a trust, 5 percent or less of the capital interest and 5 percent or less of the profits interest.
(iv) The acquisition of a life insurance contract by an insurance company that issues a life insurance contract in an exchange pursuant to section 1035.
(v) The acquisition of a life insurance contract by a policyholder in an exchange pursuant to section 1035, if the policyholder has a substantial family, business, or financial relationship with the insured, apart from its interest in the life insurance contract, at the time of the exchange.
(d) Substantial relationship—(1) Substantial family relationship. For purposes of this section, a substantial family relationship means the relationship between an individual and any family member of that individual as defined in paragraph (f)(3) of this section. In addition, a substantial family relationship exists between an individual and his or her former spouse with regard to the transfer of an interest in a life insurance contract to (or in trust for the benefit of) that former spouse incident to divorce.
(2) Substantial business relationship. For purposes of this section, a substantial business relationship between the insured and the acquirer exists in each of the following situations:
(i) The insured is a key person (as defined in section 264) of, or materially participates (within the meaning of section 469) in, an active trade or business as an owner, employee, or contractor, and at least 80 percent of that trade or business is owned (directly or indirectly, through one or more partnerships, trusts, or other entities) by the acquirer or the beneficial owners of the acquirer.
(ii) The acquirer acquires an active trade or business and acquires the interest in the life insurance contract either as part of that acquisition or from a person owning significant property leased to the acquired trade or business or life insurance policies held to facilitate the succession of the ownership of the business if—
(A) The insured—
(1) Is an employee within the meaning of section 101(j)(5)(A) of the acquired trade or business immediately preceding the acquisition (for purposes of this paragraph (d)(2)(ii)(A)(1), however, the reference in section 101(j)(5)(A) to highly compensated employee within the meaning of section 414(q) does not include a former employee); or
(2) Was a director, highly compensated employee, or highly compensated individual within the meaning of section 101(j)(2)(A)(ii) of the acquired trade or business, and the acquirer, immediately after the acquisition, has ongoing financial obligations to the insured with respect to the insured’s employment by the trade or business (for example, the life insurance contract is maintained by the acquirer to fund current or future retirement, pension, or survivorship obligations based on the insured’s relationship with the entity or to fund a buy-out of the insured’s interest in the acquired trade or business); and
(B) The acquirer either carries on the acquired trade or business or uses a significant portion of the acquired business assets in an active trade or business that does not include investing in interests in life insurance contracts.
(3) Substantial financial relationship. For purposes of this section, a substantial financial relationship between the insured and the acquirer exists in each of the following situations:
(i) The acquirer (directly or indirectly, through one or more partnerships, trusts, or other entities of which it is a beneficial owner) has, or the beneficial owners of the acquirer have, a common investment (other than the interest in the life insurance contract) with the insured and a buy-out of the insured’s interest in the common investment by the co-investor(s) after the insured’s death is reasonably foreseeable.
(ii) The acquirer maintains the life insurance contract on the life of the insured to provide funds to purchase assets of or to satisfy liabilities of the insured or the insured’s estate, heirs, legatees, or other successors in interest, or to satisfy other liabilities arising upon or by reason of the death of the insured.
(iii) The acquirer is an organization described in sections 170(c), 2055(a), and 2522(a) that previously received from the insured either financial support in a substantial amount or significant volunteer support or that meets other requirements prescribed in guidance published in the Internal Revenue Bulletin (see § 601.601(d)(2) of this chapter) for establishing that a substantial financial relationship exists between the insured and the organization.
(4) Special rules. Paragraphs (d)(4)(i), (ii), and (iii) of this section apply for purposes of determining whether a substantial relationship (whether family, business, or financial) exists under paragraph (d)(1), (2), or (3) of this section, respectively.
(i) Indirect acquisitions. The acquirer of an interest in a life insurance contract in an indirect acquisition is deemed to have a substantial business or financial relationship with the insured if the direct holder of the interest in the life insurance contract has a substantial business or financial relationship with the insured immediately before and after the date the acquirer acquires its interest.
(ii) Acquisitions by certain persons. The sole fact that an acquirer is a partner of the insured, a partnership in which the insured is a partner, or a corporation in which the insured is a shareholder or officer, is not sufficient to establish a substantial business or financial relationship with the insured. In addition, an acquirer need not be a partner of the insured, a partnership in which the insured is a partner, or a corporation in which the insured is a shareholder or officer to have a substantial business or financial relationship with the insured.
(iii) Acquisitions by those with differing types of substantial relationships. A substantial family, business, or financial relationship exists between the insured and a partnership, trust, or other entity if each beneficial owner of that partnership, trust, or other entity has a substantial family, business, or financial relationship with the insured. For example, a substantial family, business, or financial relationship exists between the insured and a trust if each trust beneficiary is a family member of the insured or an organization described in paragraph (d)(3)(iii) of this section.
(e) Interest in a life insurance contract—(1) Definition. For purposes of this section and section 6050Y, the term interest in a life insurance contract means the interest held by any person that has taken title to or possession of the life insurance contract (also referred to as a life insurance policy), in whole or part, for state law purposes, including any person that has taken title or possession as nominee for another person, and the interest held by any person that has an enforceable right to receive all or a part of the proceeds of a life insurance contract or to any other economic benefits of the policy as described in § 20.2042-1(c)(2) of this chapter, such as the enforceable right to designate a contract beneficiary. Any person named as the owner in the life insurance contract generally is the owner (or an owner) of the contract and holds an interest in the contract.
(2) Transfer of an interest in a life insurance contract. For purposes of this section and section 6050Y, the term transfer of an interest in a life insurance contract means the transfer of any interest in the life insurance contract, including any transfer of title to, possession of, or legal or beneficial ownership of the life insurance contract itself. The creation of an enforceable right to receive all or a part of the proceeds of a life insurance contract constitutes the transfer of an interest in the life insurance contract. The following events are not a transfer of an interest in a life insurance contract: The revocable designation of a beneficiary of the policy proceeds (until the designation becomes irrevocable other than by reason of the death of the insured); the pledging or assignment of a policy as collateral security; and the issuance of a life insurance contract to a policyholder, other than the issuance of a policy in an exchange pursuant to section 1035.
(3) Acquisition of an interest in a life insurance contract. For purposes of this section and section 6050Y, the acquisition of an interest in a life insurance contract may be direct or indirect.
(i) Direct acquisition of an interest in a life insurance contract. For purposes of this section and section 6050Y, the transfer of an interest in a life insurance contract results in the direct acquisition of the interest by the transferee (acquirer).
(ii) Indirect acquisition of an interest in a life insurance contract. For purposes of this section and section 6050Y, an indirect acquisition of an interest in a life insurance contract occurs when a person (acquirer) becomes a beneficial owner of a partnership, trust, or other entity that holds (whether directly or indirectly) the interest (whether legal or beneficial) in the life insurance contract. For purposes of this paragraph (e)(3)(ii), the term other entity does not include a C corporation, unless more than 50 percent of the gross value of the assets of the C corporation consists of life insurance contracts (as determined under paragraph (f)(4) of this section) immediately before the indirect acquisition.
(f) Definitions. The following definitions apply for purposes of this section:
(1) Beneficial owner. A beneficial owner of a partnership, trust, or other entity is an individual or C corporation with an ownership interest in that entity. The interest may be held directly or indirectly, through one or more other partnerships, trusts, or other entities. For instance, an individual that directly owns an interest in a partnership (P1), which directly owns an interest in another partnership (P2), is an indirect beneficial owner of P2 and any assets or other entities owned by P2 directly or indirectly. For purposes of this paragraph (f)(1), the beneficial owners of a trust include those who may receive current distributions of trust income or corpus and those who could receive distributions if the trust were to terminate currently.
(2) C corporation. The term C corporation has the meaning given to it in section 1361(a)(2).
(3) Family member. With respect to any individual, the term family member refers to any person described in paragraphs (f)(3)(i) through (vi) of this section. For purposes of this paragraph (f)(3), full effect is given to a legal adoption, and a step-child is deemed to be a descendant. The family members of an individual include:
(i) The individual;
(ii) The individual’s spouse or a person with whom the individual is in a registered domestic partnership, civil union, or other similar relationship established under state law;
(iii) Any parent, grandparent, or great-grandparent of the individual or of the person described in paragraph (f)(3)(ii) of this section and any spouse of such parent, grandparent, or great-grandparent, or person with whom the parent, grandparent, or great-grandparent is in a registered domestic partnership, civil union, or other similar relationship established under state law;
(iv) Any lineal descendant of the individual or of any person described in paragraph (f)(3)(ii) or (iii) of this section;
(v) Any spouse of a lineal descendant described in paragraph (f)(3)(iv) of this section and any person with whom such a lineal descendant is in a registered domestic partnership, civil union, or other similar relationship established under state law; and
(vi) Any lineal descendant of a person described in paragraph (f)(3)(v) of this section.
(4) Gross value of assets—(i) Determination of gross value of assets. Except as provided in paragraph (f)(4)(ii) or (iii) of this section, for purposes of paragraphs (c)(2)(iii)(B) and (e)(3)(ii) of this section, the term gross value of assets means, with respect to any entity, the fair market value of the entity’s assets, including assets beneficially owned by the entity under paragraph (f)(1) of this section as a beneficial owner of a partnership, trust, or other entity.
(ii) Determination of gross value of assets of publicly traded entity. For purposes of determining the gross value of assets of an entity that is publicly traded, if the entity’s annual Form 10-K filed with the United States Securities and Exchange Commission (or equivalent annual filing if the entity is publicly traded in a non-U.S. jurisdiction) for the period immediately preceding a person’s acquisition of an ownership interest in the entity does not contain information demonstrating that more than 50 percent of the gross value of the entity’s assets consists of life insurance contracts, that person may assume that no more than 50 percent of the gross value of the entity’s assets consists of life insurance contracts, unless that person has actual knowledge or reason to know that more than 50 percent of the gross value of the entity’s assets consists of life insurance contracts.
(iii) Safe harbor definition of gross value of assets. An entity may choose to determine the gross value of all the entity’s assets for purposes of this section using the following alternative definition of gross value of assets:
(A) In the case of assets that are life insurance policies or annuity or endowment contracts that have cash values, the cash surrender value as defined in section 7702(f)(2)(A); and
(B) In the case of assets not described in paragraph (f)(4)(iii)(A) of this section, the adjusted bases (within the meaning of section 1016) of such assets.
(5) Transfer for valuable consideration. A transfer for valuable consideration means any transfer of an interest in a life insurance contract for cash or other consideration reducible to a money value.
(g) Examples. The application of this section is illustrated by the following examples. Each example assumes that the transferee did not receive any amounts under the life insurance contract other than the amounts described in the examples. With the exception of paragraph (g)(7) (Example 7) of this section, the bargain sale rules set forth in paragraph (b)(2)(iii) of this section do not apply in the examples because the consideration paid for the policy transferred is fair market value:
(1) Example 1. A is the initial policyholder of a $100,000 insurance policy on A’s life. A sells the policy to B, A’s child, for $6,000, its fair market value. B is not a partner in a partnership in which A is a partner. B receives the proceeds of $100,000 upon the death of A. Because the transfer to B was for valuable consideration, and none of the exceptions in paragraph (b)(1)(ii) of this section applies, the amount of the proceeds B may exclude from B’s gross income under this section is limited under paragraph (b)(1)(i) of this section to $6,000 plus any premiums and other amounts paid by B with respect to the policy subsequent to the transfer.
(2) Example 2. The facts are the same as in Example 1 in paragraph (g)(1) of this section except that, before A’s death, B gratuitously transfers the policy back to A. A’s estate receives the proceeds of $100,000 on A’s death. Because the transfer from B to A is a gratuitous transfer to the insured, and the preceding transfer from A to B was not a reportable policy sale, the amount of the proceeds A’s estate may exclude from gross income under this section is not limited by paragraph (b)(2)(i) of this section.
(3) Example 3. The facts are the same as in Example 1 in paragraph (g)(1) of this section except that, before A’s death, B sells the policy back to A for its fair market value. A’s estate receives the proceeds of $100,000 on A’s death. The transfer from A to B is not a reportable policy sale because the acquirer B has a substantial family relationship with the insured, A. The transfer from B to A also is not a reportable policy sale because the acquirer A has a substantial family relationship with the insured, A. Accordingly, paragraph (b)(1)(ii)(B)(1) of this section applies to the transfer to A, and the amount of the proceeds A’s estate may exclude from gross income is not limited by paragraph (b) of this section.
(4) Example 4. A is the initial policyholder of a $100,000 insurance policy on A’s life. A transfers the policy for $6,000, its fair market value, to an individual, C, who does not have a substantial family, business, or financial relationship with A. The transfer from A to C is a reportable policy sale. C receives the proceeds of $100,000 on A’s death. The amount of the proceeds C may exclude from C’s gross income under this section is limited under paragraph (b)(1)(i) of this section to $6,000 plus any premiums and other amounts paid by C with respect to the policy subsequent to the transfer.
(5) Example 5. The facts are the same as in Example 4 in paragraph (g)(4) of this section, except that before A’s death, C transfers the policy to D, a partner of A who co-owns real property with A, for $8,000, the policy’s fair market value. D receives the proceeds of $100,000 on A’s death. The transfer from C to D is not a reportable policy sale because the acquirer D has a substantial financial relationship with the insured, A. However, because that transfer follows a reportable policy sale (the transfer from A to C), the amount of the proceeds that D may exclude from gross income under this section is limited by paragraph (b)(1)(ii)(B)(2) of this section to the sum of—
(i) The higher of the amount C could have excluded had the transfer to D not occurred ($6,000 plus any premiums and other amounts paid by C with respect to the policy subsequent to the transfer to C, as described in Example 4 in paragraph (g)(4) of this section) or the actual value of the consideration for that transfer paid by D ($8,000); and
(ii) Any premiums and other amounts paid by D with respect to the policy subsequent to the transfer to D.
(6) Example 6. The facts are the same as in Example 4 in paragraph (g)(4) of this section, except that before A’s death, C transfers the policy back to A for $8,000, its fair market value. A’s estate receives the proceeds of $100,000 on A’s death. The transfer from C to A is not a reportable policy sale because the acquirer A has a substantial family relationship with the insured, A. Although the transfer follows a reportable policy sale (the initial transfer from A to C), A’s estate may exclude all of the policy proceeds from gross income because paragraph (b)(1)(ii)(B)(3)(i) of this section applies and, therefore, the amount of the proceeds that A may exclude from gross income is not limited by paragraph (b)(1)(i) of this section or (b)(1)(ii)(B)(2) of this section.
(7) Example 7. The facts are the same as in Example 6 in paragraph (g)(6) of this section, except that C transfers the policy back to A for $4,000, rather than its fair market value of $8,000. A’s estate receives the proceeds of $100,000 on A’s death. Because A did not pay fair market value for the policy, the transfer is bifurcated and treated as a bargain sale under paragraph (b)(2)(iii) of this section. A therefore is treated as having purchased 50% of the policy interest for valuable consideration equal to fair market value and as having received 50% of the policy interest in a gratuitous transfer. The transfer from C to A is not a reportable policy sale because the acquirer, A, has a substantial family relationship with the insured, A, but the transfer from C to A follows a reportable policy sale (the transfer from A to C).
(i) Treatment of policy interest purchased by A. A’s estate may exclude from income all of the policy proceeds related to the 50% policy interest transferred for valuable consideration ($50,000) because, under paragraph (b)(1)(ii)(B)(3)(i) of this section, the amount of the proceeds that may be excluded from gross income is not limited by paragraph (b)(1)(i) of this section or (b)(1)(ii)(B)(2) of this section.
(ii) Treatment of policy interest gratuitously transferred to A. The amount of the policy proceeds related to the 50% policy interest transferred gratuitously that A’s estate may exclude from income is limited under paragraph (b)(2)(i) of this section to the sum of the amount C could have excluded with respect to 50% of the policy had the transfer back to A not occurred (that is, 50% of the $6,000 that C paid A for the policy, plus 50% of any premiums and other amounts paid by C with respect to the policy subsequent to the transfer to C), plus 50% of any premiums and other amounts paid by A with respect to the policy subsequent to the transfer to A.
(8) Example 8. The facts are the same as in Example 6 in paragraph (g)(6) of this section, except that, before A’s death, A gratuitously transfers 50% of the policy interest to B, A’s child, and sells 50% of the policy interest for its fair market value to an individual, E, who does not have a substantial family, business, or financial relationship with A. B and E each receive $50,000 of the proceeds on A’s death. Paragraph (b)(1)(ii)(B)(3)(ii) of this section applies to determine the amount of the proceeds that B and E may exclude from gross income because the policy interests transferred to B and E were first transferred for valuable consideration in a reportable policy sale (the transfer by A to C) and then transferred to the insured, A, for fair market value.
(i) Treatment of policy interest transferred to B. With respect to the portion of the policy interest transferred to B, because the transfer to B was the only transfer subsequent to the transfer to A and the transfer to B was gratuitous and not a reportable policy sale, under paragraph (b)(1)(ii)(B)(3)(ii) of this section, the amount of the policy proceeds excludable from gross income by B is determined under paragraph (b)(2)(i) of this section, taking into account the application of paragraph (b)(1)(ii)(B)(3)(i) of this section to A’s acquisition of the interest. Under paragraph (b)(2)(i) of this section, the amount of the proceeds B may exclude is limited to the sum of the amount A could have excluded had the transfer to B not occurred, and any premiums and other amounts paid by B with respect to the policy subsequent to the transfer to B. As described in Example 6 in paragraph (g)(6) of this section, under paragraph (b)(1)(ii)(B)(3)(i) of this section, the amount of the proceeds that A may exclude from gross income is not limited by paragraph (b)(1)(i) of this section or (b)(1)(ii)(B)(2) of this section. Accordingly, the amount of the proceeds that B may exclude from gross income is not limited by paragraph (b) of this section.
(ii) Treatment of policy interest transferred to E. With respect to the portion of the policy interest transferred to E, because the transfer to E was not gratuitous and was a reportable policy sale, under paragraph (b)(1)(ii)(B)(3)(ii) of this section, the amount of the policy proceeds excludable from gross income by E is determined in accordance with paragraph (b) of this section. Accordingly, because the transfer to E was for valuable consideration, the amount excludable from gross income by E is limited by paragraph (b)(1)(i) of this section unless an exception in paragraph (b)(1)(ii) of this section applies. Because the transfer from A to E is a reportable policy sale, none of the exceptions in paragraph (b)(1)(ii) of this section apply. Therefore, the amount of the proceeds E may exclude from gross income under this section is limited by paragraph (b)(1)(i) of this section to the sum of the consideration paid by E and the premiums and other amounts paid by E with respect to the policy subsequent to the transfer to E.
(9) Example 9. The facts are the same as in Example 8 in paragraph (g)(8) of this section, except that, before A’s death, B transfers B’s policy interest to Partnership F, whose partners are A and other family members of A, in exchange for a partnership interest in Partnership F. Partnership F receives $50,000 of the proceeds on A’s death. With respect to the policy interest transferred to Partnership F, paragraph (b)(1)(ii)(B)(3)(ii) of this section applies to determine the amount of the proceeds that Partnership F may exclude from gross income for the reasons described in Example 8 in paragraph (g)(8) of this section.
(i) Treatment of policy interest transferred to Partnership F. The transfer to Partnership F was not a reportable policy sale. However, because the transfer to Partnership F was not gratuitous, the amount of the policy proceeds excludable from gross income by Partnership F is determined in accordance with paragraph (b) of this section as if the amount that would have been excludable from gross income by A following the transfer to A, if no subsequent transfer had occurred, was determined under paragraph (b)(1)(ii)(B)(2) of this section. Because B’s transfer to Partnership F was a transfer for valuable consideration to a partnership in which the insured is a partner that was preceded by a reportable policy sale (the transfer to C), the amount of the proceeds Partnership F may exclude from gross income under this section is limited under paragraph (b)(1)(ii)(B)(2) of this section to the higher of the amount that would have been excludable by B if the transfer to Partnership F had not occurred or the actual value of the consideration for the policy paid by Partnership F, plus any premiums and other amounts paid by Partnership F with respect to the policy subsequent to the transfer to Partnership F.
(ii) Amount that B could have excluded. Because the transfer from A to B was a gratuitous transfer, the amount of the proceeds B could have excluded from gross income under this section if the transfer to Partnership F had not occurred is limited under paragraph (b)(2)(i) of this section to the sum of the amount A could have excluded had the transfer to B not occurred, and any premiums and other amounts paid by B with respect to the policy subsequent to the transfer to B.
(iii) Amount that A could have excluded. As described in paragraph (g)(9)(i) of this section, the amount of the proceeds A could have excluded under this section if the transfer to B had not occurred must be determined under paragraph (b)(1)(ii)(B)(2) of this section in accordance with paragraph (b)(1)(ii)(B)(3)(ii) of this section. Under paragraph (b)(1)(ii)(B)(2) of this section, the amount that would have been excludable by A is limited to the higher of the amount that would have been excludable by C if the transfer to A had not occurred ($6,000 plus premiums and other amounts subsequently paid by C) or the actual value of the consideration for the policy paid by A ($8,000), plus any premiums and other amounts paid by A with respect to the policy subsequent to the transfer to A.
(10) Example 10. A is the initial policyholder of a $100,000 insurance policy on A’s life. A contributes the policy to Corporation X in exchange for stock. Corporation X’s basis in the policy is determinable in whole or in part by reference to A’s basis in the policy. Corporation X conducts an active trade or business that it wholly owns, and A materially participates in that active trade or business as an employee of Corporation X. Corporation X receives the proceeds of $100,000 on A’s death. A’s contribution of the policy to Corporation X is not a reportable policy sale because Corporation X has a substantial business relationship with A under paragraph (d)(2)(i) of this section. Although Corporation X’s basis in the policy is determinable in whole or in part by reference to A’s basis in the policy, paragraph (b)(1)(ii)(A) of this section does not apply because the insured, A, is a shareholder of Corporation X and the other requirements under paragraph (b)(1)(ii)(B) of this section are satisfied. Accordingly, paragraph (b)(1)(ii)(B) of this section applies, and paragraph (b)(1)(ii)(A) of this section is inapplicable. Under paragraph (b)(1)(ii)(B)(1) of this section, Corporation X’s exclusion is not limited by paragraph (b) of this section.
(11) Example 11. The facts are the same as in Example 10 in paragraph (g)(10) of this section, except that Corporation X transfers its active trade or business and the policy on A’s life to Corporation Y in a tax-free reorganization at a time when A is still employed by Corporation X, but is no longer a shareholder of Corporation X. Corporation Y’s basis in the policy is determinable in whole or in part by reference to Corporation X’s basis in the policy, and Corporation Y carries on the trade or business acquired from Corporation X. Corporation Y receives the proceeds of $100,000 on A’s death. The transfer from Corporation X to Corporation Y is not a reportable policy sale because Corporation Y has a substantial business relationship with A under paragraph (d)(2)(ii) of this section. The amount of the proceeds that Corporation Y may exclude from gross income is limited under paragraph (b)(1)(ii)(A) of this section to the sum of the amount that would have been excludable by Corporation X had the transfer to Corporation Y not occurred, plus any premiums and other amounts paid by Corporation Y with respect to the policy subsequent to the transfer. Accordingly, because Corporation X’s exclusion is not limited by paragraph (b) of this section, as described in Example 10 in paragraph (g)(10) of this section, Corporation Y’s exclusion is not limited by paragraph (b) of this section.
(12) Example 12. A is the initial policyholder of a $100,000 insurance policy on A’s life. A contributes the policy to a C corporation, Corporation W, in exchange for stock. After the acquisition, A owns less than 20% of the outstanding stock of Corporation W and owns stock possessing less than 20% of the total combined voting power of all stock of Corporation W and is therefore not a key person with respect to Corporation W under section 264(e)(3). Corporation W’s basis in the policy is determinable in whole or in part by reference to A’s basis in the policy. However, no substantial family, business, or financial relationship exists between A and Corporation W, so A’s contribution of the policy to Corporation W is a reportable policy sale. Corporation W receives the proceeds of $100,000 on A’s death. Under paragraph (b)(1)(i) of this section, the amount of the proceeds Corporation W may exclude from gross income is limited to the actual value of the stock exchanged for the policy, plus any premiums and other amounts paid by Corporation W with respect to the policy subsequent to the transfer. The exceptions in paragraph (b)(1)(ii) of this section do not apply because the transfer to Corporation W is a reportable policy sale.
(13) Example 13. Partnership X and Partnership Y are owned by individuals A, B, and C. A holds 40% of the capital and profits interest of Partnership X and 20% of the capital and profits interest of Partnership Y. B holds 35% of the capital and profits interest of Partnership X and 40% of the capital and profits interest of Partnership Y. C holds 25% of the capital and profits interest of Partnership X and 40% of the capital and profits interest of Partnership Y. Partnership X is the initial policyholder of a $100,000 insurance policy on the life of A. Partnership Y purchases the policy from Partnership X. Under paragraph (c)(2)(i) of this section, this transfer is not a reportable policy sale because the ownership interest of each beneficial owner in Partnership X does not vary from that owner’s interest in Partnership Y by more than a 20% ownership interest. A’s ownership varies by a 20% interest, B’s ownership varies by a 5% interest, and C’s ownership varies by a 15% interest.
(14) Example 14. Partnership X conducts an active trade or business and is the initial policyholder of a $100,000 insurance policy on the life of its full-time employee, A. A materially participates in Partnership X’s active trade or business in A’s capacity as an employee. Individual B acquires a 10% profits interest in Partnership X in exchange for a cash payment of $1,000,000. Under paragraphs (d)(1) through (3) of this section, B does not have a substantial family, business, or financial relationship with A. Under paragraph (d)(4)(i) of this section, however, B is deemed to have a substantial business relationship with A because, under paragraph (d)(2)(i) of this section, Partnership X (the direct policyholder) has a substantial business relationship with A. Accordingly, although the acquisition of the 10% partnership interest by B is an indirect acquisition of a 10% interest in the insurance policy covering A’s life, the acquisition is not a reportable policy sale.
(15) Example 15. The facts are the same as in Example 14 in paragraph (g)(14) of this section, except that A is no longer an employee of Partnership X, and Partnership X has no substantial family, business, or financial relationship with A, when B acquires the profits interest in Partnership X. Also, B acquires only a 5% profits interest in exchange for a cash payment of $500,000. Partnership X does not own an interest in any other life insurance policies, and the gross value of its assets is $10 million. Although neither Partnership X nor B has a substantial family, business, or financial relationship with A at the time of B’s indirect acquisition of an interest in the policy covering A’s life, because B’s profits interest in Partnership X does not exceed 5%, and because no more than 50% of Partnership X’s asset value consists of life insurance contracts, the exception in paragraph (c)(2)(iii)(B) of this section applies, and B’s indirect acquisition of an interest in the policy covering A’s life is not a reportable policy sale.
(16) Example 16. A is the initial policyholder of a $100,000 insurance policy on A’s life. A sells the policy for its fair market value. As a result of the sale, Bank X holds legal title to the life insurance contract as the nominee of Partnership B, and Partnership B has the enforceable right to designate the contract beneficiary. Under paragraphs (d)(1) through (4) of this section, neither Bank X nor Partnership B has a substantial family, business, or financial relationship with the insured, A, at the time of the sale. Accordingly, the transfer of legal title to the policy to Bank X is a reportable policy sale under paragraph (c)(1) of this section, unless an exception set forth in paragraph (c)(2) of this section applies. The same is true of the transfer of the economic benefits of the policy to Partnership B. At a later date, Partnership B sells its economic interest in the policy to Partnership C for fair market value. Bank X continues to hold legal title to the life insurance contract, but now holds it as Partnership C’s nominee. Partnership C has no substantial family, business, or financial relationship with the insured, A, under paragraphs (d)(1) through (4) of this section at the time of the transfer. Accordingly, Partnership C’s acquisition of the economic interest in the policy from Partnership B is a reportable policy sale under paragraph (c)(1) of this section, unless an exception set forth in paragraph (c)(2) of this section applies.
§ 1.101-2 Employees’ death benefits.
(a) In general. (1) Section 101(b) states the general rule that amounts up to $5,000 which are paid to the beneficiaries or the estate of an employee, or former employee, by or on behalf of an employer and by reason of the death of the employee shall be excluded from the gross income of the recipient. This exclusion from gross income applies whether payment is made to the estate of the employee or to any beneficiary (individual, corporation, or partnership), whether it is made directly or in trust, and whether or not it is made pursuant to a contractual obligation of the employer. The exclusion applies whether payment is made in a single sum or otherwise, subject to the provisions of section 101 (c), relating to amounts held under an agreement to pay interest thereon (see § 1.101-3). The exclusion from gross income also applies to any amount not actually paid which is otherwise taxable to a beneficiary of an employee because it was made available as a distribution from an employee’s trust.
(2) The exclusion does not apply to amounts constituting income payable to the employee during his life as compensation for his services, such as bonuses or payments for unused leave or uncollected salary, nor to certain other amounts with respect to which the deceased employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living (see section 101(b)(2)(B) and paragraph (d) of this section). Further, the exclusion does not apply to amounts received as an annuity under a joint and survivor annuity obligation where the employee was the primary annuitant and the annuity starting date occurred before the death of the employee (see section 101 (b)(2)(C) and paragraph (e)(1)(ii) of this section). In the case of amounts received by a beneficiary as an annuity (but not as a survivor under a joint and survivor annuity with respect to which the employee was the primary annuitant), the exclusion is applied indirectly by means of the provisions of section 72 and the regulations thereunder (see section 101(b)(2)(D) and paragraph (e)(1) (iii) and (iv) of this section). Thus, for example, the exclusion applies to amounts which are received by a survivor of an employee retired on disability under the provisions of the Civil Service retirement law (5 U.S.C. 8301 or any former corresponding provisions of law) or the Retired Serviceman’s Family Protection Plan or Survivor Benefit Plan (10 U.S.C. 1431 et seq.), provided such employee dies before attaining mandatory retirement age (as defined in § 1.105-4 (a)(3)(i)(B)).
(3) The total amount excludable with respect to any employee may not exceed $5,000, regardless of the number of employers or the number of beneficiaries. For allocation of the exclusion among beneficiaries, see paragraph (c) of this section. For rules governing the taxability of benefits payable on the death of an employee under pension, profitsharing, or stock bonus plans described in section 401(a) and exempt under section 501(a), under annuity plans described in section 403(a), or under annuity contracts to which paragraph (a) or (b) of § 1.403(b)-1 applies, see sections 72(m)(3), 402(a), and 403 and the regulations thereunder.
(b) Payments under certain employee benefit plans—(1) In general. Where a payment is made by reason of the death of an employee by an employer-provided welfare fund or a trust, including a stock bonus, pension, or profitsharing trust described in section 401 (a), or by an insurance company (if such payment does not constitute “life insurance” within the purview of section 101(a), the payment shall be considered to have been made by or on behalf of the employer to the extent that it exceeds amounts contributed by, or deemed contributed by, the deceased employee.
(2) Cross references. For provisions governing the taxability of distributions payable on the death of an employee participant—
(i) Under a trust described in section 401(a) and exempt from tax under section 501(a), see paragraph (c) of § 1.72-16 and paragraph (a)(5) of § 1.402 (a)-1;
(ii) Under an annuity plan described in section 403(a), see paragraph (c) of § 1.72-16 and paragraph (c) of § 1.403 (a)-1;
(iii) Under annuity contracts to which paragraph (a) or (b) of § 1.403 (b)-1 applies, see paragraph (c) (2) and (3) of § 1.403(b)-1;
(iv) Under eligible State deferred compensation plans described in section 457 (b), see paragraph (c) of § 1.457-1.
(c) Allocation of the exclusion. (1) Where the aggregate payments by or on behalf of an employer or employers as death benefits to the beneficiaries or the estate of a deceased employee exceed $5,000, the $5,000 exclusion shall be apportioned among them in the same proportion as the amount received by or the present value of the amount payable to each bears to the total death benefits paid or payable by or on behalf of the employer or employers.
(2) The application of the rule in subparagraph (1) of this paragraph may be illustrated by the following example:
(d) Nonforfeitable rights. (1) Except as provided in subparagraphs (3) and (4) of this paragraph, the exclusion provided by section 101(b) does not apply to amounts with respect to which the deceased employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living. Section 101(b)(2)(B). For the purpose of section 101(b) and this paragraph, an employee shall be considered to have had a nonforfeitable right with respect to—
(i) Any amount to which he would have been entitled—
(a) If he had made an appropriate election or demand, or
(b) Upon termination of his employment (see examples (5) and (6) of subparagraph (2) of this paragraph); or
(ii) The present value (immediately before his death) of—
(a) Amounts payable as an annuity (as defined in paragraph (b) of § 1.72-2, whether immediate or deferred) by or on behalf of the employer (see example (1) of subparagraph (2) of this paragraph), or
(b) Amounts which would have been so payable if the employee had terminated his employment and continued to live;
(iii) Any amount to the extent it is paid in lieu of amounts described in either subdivision (i) or (ii) of this subparagraph. See examples (2), (3), and (4) of subparagraph (2) of this paragraph.
(2) The application of paragraph (d)(1) of this section may be illustrated by the following examples, in which it is assumed that the plans are not “qualified plans” and that no employer is an organization referred to in section 170(b)(1)(A) (ii) or (vi) or a religious organization (other than a trust) which is exempt from tax under section 501(a):
(3)(i) Notwithstanding the rule stated in subparagraph (1) of this paragraph and illustrated in subparagraph (2) of this paragraph, the exclusion from gross income provided by section 101(b) applies to the receipt of certain amounts, paid under “qualified” plans, with respect to which the deceased employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living (see section 101(b)(2)(B) (i) and (ii)). The payments to which this exclusion applies are—
(a) “Total distributions payable” by a stock bonus, pension, or profit-sharing trust described in section 401(a) which is exempt from tax under section 501(a), and
(b) “Total amounts” paid under an annuity contract under a plan described in section 403(a), provided such distributions or amounts are paid in full within one taxable year of the distributee (see example (3) of subdivision (ii) of this subparagraph). For the purposes of applying section 101(b), “Total distributions payable” means the balance to the credit of an employee which becomes payable to a distributee on account of the employee’s death, either before or after separation from the service (see section 402(a)(3)(C), the regulations thereunder, and examples (2) and (4) of subdivision (ii) of this subparagraph); and “total amounts” means the balance to the credit of an employee which becomes payable to the payee by reason of the employee’s death, either before or after separation from the service (see section 403(a)(2)(B), the regulations thereunder, and example (1) of subdivision (ii) of this subparagraph). See subparagraph (4) of this paragraph relating to the exclusion of amounts which are received under annuity contracts purchased by certain exempt organizations and with respect to which the deceased employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living.
(ii) The application of the provisions of subdivision (i) of this subparagraph may be illustrated by the following examples:
(4)(i) Notwithstanding the rule stated in subparagraph (1) of this paragraph and illustrated in subparagraph (2) of this paragraph, the exclusion from gross income under section 101(b) also applies (but only to the extent provided in the next sentence) to amounts with respect to which the deceased employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living—
(a) If such amounts are paid under an annuity contract purchased by an employer which is an organization referred to in section 170(b)(1)(A) (ii) or (vi) or which is a religious organization (other than a trust) and which is exempt from tax under section 501(a).
(b) If such amounts are paid as part of a “total payment” with respect to the deceased employee; and
(c) If such “total payment” is paid in full within one taxable year of the payee beginning after December 31, 1957.
(ii) This subparagraph does not relate to any amounts with respect to which the deceased employee did not possess, immediately before his death, a nonforfeitable right to receive the amounts while living. Such amounts are excludable under the provisions of section 101(b) without regard to section 101(b)(2)(B) and this subparagraph. Thus, if a “total payment” received by a beneficiary of a deceased employee under an annuity contract purchased by an organization described in subdivision (i)(a) of this subparagraph consists both of amounts with respect to which the deceased employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living and of amounts with respect to which the deceased employee did not possess such a nonforfeitable right, only those amounts with respect to which the deceased employee possessed such a nonforfeitable right are amounts to which this subparagraph applies. Therefore, for purposes of computing the ratio described in subdivision (i) of this subparagraph in such a case, there shall be taken into account only the employer contributions attributable to those amounts with respect to which the deceased employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living. See example (3) of subdivision (v) of this subparagraph. In no event, however, may the total amount excludable under section 101(b) with respect to any employee exceed $5,000 (See paragraph (a)(3) of this section).
(iii)(a) In any case when the deceased employee’s interest in the employer’s contributions for an annuity contract was forfeitable at the time the contributions were made but, at a subsequent date prior to his death, such interest changed to a nonforfeitable interest, then, for purposes of computing the ratio described in subdivision (i) of this subparagraph, the cash surrender value of the contract on the date of the change (except to the extent attributable to employee contributions) shall be considered as the amount contributed by the employer for the contract. In such a case, if only part of the deceased employee’s interest in the annuity changed from a forfeitable to a nonforfeitable interest, then only the corresponding part of the cash surrender value of the contract on the date of the change shall be considered as the amount contributed by the employer for the contract. Similarly, if part of the deceased employee’s interest in the annuity contract changed from a forfeitable to a nonforfeitable interest on a particular date and another part of his interest so changed on a subsequent date, it is necessary, in order to compute the amount contributed by the employer for the contract, to first determine (under the rules in the preceding sentence) the amount that is considered as the amount contributed by the employer with respect to each change, and then to add these amounts together. For purposes of computing the ratio described in subdivision (i) of this subparagraph in all of the above cases, the amount contributed by the employer that was excludable from the employee’s gross income under paragraph (b) of § 1.403(b)-1 is that amount which, under paragraph (b)(2) of such section, was considered as employer contributions and which, under such paragraph (b) of § 1.403(b)-1, was excludable from the deceased employee’s gross income for the taxable year in which the change occurred.
(b) This subdivision (iii) may be illustrated by the following examples:
(iv) For purposes of this subparagraph, an annuity contract will be considered to have been purchased by an employer which is an organization referred to in section 170(b)(1)(A) (ii) or (vi) or which is a religious organization (other than a trust) and which is exempt from tax under section 501(a), if any of the contributions paid toward the purchase price of such contract by the employer were paid at a time when the employer was such an organization. Thus an annuity contract may be regarded as purchased by such an organization even though part of the organization’s contributions for such annuity contract were paid at a time when the organization was not such an exempt organization.
(v) The application of this subparagraph may be illustrated by the following examples:
| ( | $4,000 |
| ( | $3,000 |
| ( | $3,000 |
| ( | 100% |
| ( | $4,000 |
| ( | $3,000 |
| ( | $3,000 |
| ( | $2,000 |
| ( | 67% |
| ( | $2,000 |
| ( | $3,000 |
| ( | $2,400 |
| ( | $2,500 |
| ( | $1,500 |
| ( | 60% |
| ( | $1,440 |
| ( | $4,440 |
(e) Annuity payments. (1) Where death benefits are paid in the form of annuity payments, the following rules shall govern for purposes of the exclusion provided in section 101(b):
(i) The exclusion from gross income provided by section 101(b) does not apply to amounts, paid as an annuity, with respect to which the employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living, or to amounts paid as an annuity in lieu thereof. See paragraph (d) of this section.
(ii) Under section 101(b)(2)(C), no exclusion is allowable for amounts received by a surviving annuitant under a joint and survivor’s annuity contract if the annuity starting date (as defined in section 72(c)(4) and paragraph (b) of § 1.72-4) occurs before the death of the employee. If the annuity starting date occurs after the death of the employee, the joint and survivor’s annuity contract shall be treated as an annuity to which section 101(b)(2)(D) applies. See subdivision (iii) of this subparagraph.
(iii)(a) Subject to the other limitations stated in section 101(b) and in this section (see section 101(b)(2)(D)), the amount to which the exclusion of section 101(b) shall apply, with respect to “amounts received as an annuity” (as defined in paragraph (b) of § 1.72-2) shall be the amount by which the present value of the annuity to be paid to the beneficiary, computed as of the date of the employee’s death, exceeds the value (if any) of whichever of the following is the larger:
(1) Amounts contributed by the employee (determined in accordance with the provisions of section 72 and the regulations thereunder), or
(2) Amounts with respect to which the employee possessed, immediately before his death, a nonforfeitable right to receive the amounts while living, or amounts paid in lieu thereof (see paragraph (d) of this section).
(b) The present value of an annuity (immediately before the death of the employee), to the employee, or (immediately after the death of the employee), to his estate or beneficiary, shall be determined as follows:
(1) In the case of an annuity paid by an insurance company or by an organization (other than an insurance company) regularly engaged in issuing annuity contracts with an insurance company as the coinsurer or reinsurer of the obligations under the contract, by use of the discount interest rates and mortality tables used by the insurance company involved to determine the installment benefits; and
(2) In the case of an annuity issued after November 23, 1984, to which paragraph (e)(1)(iii)(b)(1) of this section is not applicable, by use of the appropriate tables in § 20.2031-7 of this chapter (Estate Tax Regulations).
(iv) Any amount subject to section 101(b)(2)(D) which is excludable under section 101(b) (see subdivision (iii) of this subparagraph) shall, for purposes of section 72, be treated as additional consideration paid by the employee. See paragraph (b) of § 1.72-8.
(v) Where more than one beneficiary, or more than one death benefit, is involved, the exclusion provided by section 101(b) shall be apportioned to the various beneficiaries and benefits in accordance with the proportion that the present value of each benefit bears to the total present value of all the benefits.
(2) The application of the principles of this paragraph may be illustrated by the following examples:
(ii) The computation of the exclusion applicable to the interests of W and C (assuming that the payments will not be made by an insurance company or some other organization regularly engaged in issuing annuity contracts) is, by application of the tables in § 20.2031-7 of this chapter (Estate Tax Regulations), as follows: The present value of W’s interest is $26,243.60, determined by multiplying the annual payment of $2,000 by 13.1218 (the factor in Table I for a person aged 55); the present value of C’s interest is $11,517.40, determined by multiplying the yearly payment of $1,000 by 11.5174 (the factor in Table II for payments for a term certain of 15 years). The present value of both annuities is $37,761 and (assuming no other death benefits are involved), the total amount excludable is $5,000, because the total present value of the annuities exceeds the employee’s nonforfeitable interest by more than $5,000 ($37,761 minus $18,000 equal $19,761). The exclusion allocable to W’s interest is $26,243.60/$37,761 times $5,000, or $3,474.96; the exclusion allocable to C’s interest is $11,517.40/$37,761 times $5,000, or $1,525.04. That portion of the death benefit exclusion as so determined for each beneficiary is to be treated as consideration paid by the employee for purposes of section 72.
(f) Distributions on behalf of a self- employed individual. (1) Under sections 401(c)(1) and 403(a)(3), certain self-employed individuals may be covered by a pension or profit-sharing plan described in section 401(a) and exempt under section 501(a) or under an annuity plan described in section 403(a). However, a payment pursuant to the provisions of any such plan by reason of the death of an individual who participated in such a plan as a self-employed individual immediately before his retirement or death to the beneficiary or estate of such individual does not qualify for the exclusion provided by section 101(b).
(2) The application of this paragraph may be illustrated by the following examples:
§ 1.101-3 Interest payments.
(a) Applicability of section 101(c). Section 101(c) provides that if any amount excluded from gross income by section 101(a) (relating to life insurance proceeds) or section 101(b) (relating to employees’ death benefits) is held under an agreement to pay interest thereon, the interest payments shall be included in gross income. This provision applies to payments made (either by an insurer or by or on behalf of an employer) of interest earned on any amount so excluded from gross income which is held without substantial diminution of the principal amount during the period when such interest payments are being made or credited to the beneficiaries or estate of the insured or the employee. For example, if a monthly payment is $100, of which $99 represents interests and $1 represents diminution of the principal amount, the principal amount shall be considered held under an agreement to pay interest thereon and the interest payment shall be included in the gross income of the recipient. Section 101(c) applies whether the election to have an amount held under an agreement to pay interest thereon is made by the insured or employee or by his beneficiaries or estate, and whether or not an interest rate is explicitly stated in the agreement. Section 101(d), relating to the payment of life insurance proceeds at a date later than death, shall not apply to any amount to which section 101(c) applies. See section 101(d)(4). However, both section 101(c) and section 101(d) may apply to payments received under a single life insurance contract. For provisions relating to the application of this rule to payments received under a permanent life insurance policy with a family income rider attached, see paragraph (h) of § 1.101-4.
(b) Determination of “present value”. For the purpose of determining whether section 101(c) or section 101(d) applies, the present value (at the time of the insured’s death) of any amount which is to be paid at a date later than death shall be determined by the use of the interest rate and mortality tables used by the insurer in determining the size of the payments to be made.
§ 1.101-4 Payment of life insurance proceeds at a date later than death.
(a) In general. (1)(i) Section 101(d) states the provisions governing the exclusion from gross income of amounts (other than those to which section 101(c) applies) received under a life insurance contract and paid by reason of the death of the insured which are paid to a beneficiary on a date or dates later than the death of the insured. However, if the amounts payable as proceeds of life insurance to which section 101(a)(1) applies cannot in any event exceed the amount payable at the time of the insured’s death, such amounts are fully excludable from the gross income of the recipient (or recipients) without regard to the actual time of payment and no further determination need be made under this section. Section 101(d)(1)(A) provides an exclusion from gross income of any amount determined by a proration, under applicable regulations, of “an amount held by an insurer with respect to any beneficiary”. The quoted phrase is defined in section 101(d)(2). For the regulations governing the method of computation of this proration, see paragraphs (c) through (f) of this section. The prorated amounts are to be excluded from the gross income of the beneficiary regardless of the taxable year in which they are actually received (see example (2) of subparagraph (2) of this paragraph).
(ii) Section 101(d)(1)(B) provides an additional exclusion where life insurance proceeds are paid to the surviving spouse of an insured. For purposes of this exclusion, the term “surviving spouse” means the spouse of the insured as of the date of death, including a spouse legally separated, but not under a decree of absolute divorce (section 101(d)(3)). To the extent that the total payments, under one or more agreements, made in excess of the amounts determined by proration under section 101(d)(1)(A) do not exceed $1,000 in the taxable year of receipt, they shall be excluded from the gross income of the surviving spouse (whether or not payment of any part of such amounts is guaranteed by the insurer). Amounts excludable under section 101(d)(1)(B) are not “prorated” amounts.
(2) The principles of this paragraph may be illustrated by the following examples:
| Fixed payment (including guaranteed interest) | $16,500 |
| Excess interest | 1,350 |
| Total payment | 17,850 |
| Prorated amount | 15,000 |
| Excess over prorated amount | 2,850 |
| Annual excess over prorated amount excludable under section 101(d)(1)(B) | 1,000 |
| Amount includible in gross income | 1,850 |
(b) Amount held by an insurer. (1) For the purpose of the proration referred to in section 101(d)(1), an “amount held by an insurer with respect to any beneficiary” means an amount equal to the present value to such beneficiary (as of the date of death of the insured) of an agreement by the insurer under a life insurance policy (whether as an option or otherwise) to pay such beneficiary an amount or amounts at a date or dates later than the death of the insured (section 101(d)(2)). The present value of such agreement is to be computed as if the agreement under the life insurance policy had been entered into on the date of death of the insured, except that such value shall be determined by the use of the mortality table and interest rate used by the insurer in calculating payments to be made to the beneficiary under such agreement. Where an insurance policy provides an option for the payment of a specific amount upon the death of the insured in full discharge of the contract, such lump sum is the amount held by the insurer with respect to all beneficiaries (or their beneficiaries) under the contract. See, however, paragraph (e) of this section.
(2) In the case of two or more beneficiaries, the “amount held by the insurer” with respect to each beneficiary depends on the relationship of the different benefits payable to such beneficiaries. Where the amounts payable to two or more beneficiaries are independent of each other, the “amount held by the insurer with respect to each beneficiary” shall be determined and prorated over the periods involved independently. Thus, if a certain amount per month is to be paid to A for his life, and, concurrently, another amount per month is to be paid to B for his life, the “amount held by the insurer” shall be determined and prorated for both A and B independently, but the aggregate shall not exceed the total present value of such payments to both. On the other hand, if the obligation to pay B was contingent on his surviving A, the “amount held by the insurer” shall be considered an amount held with respect to both beneficiaries simultaneously. Furthermore, it is immaterial whether B is a named beneficiary or merely the ultimate recipient of payments for a term of years. For the special rules governing the computation of the proration of the “amount held by an insurer” in determining amounts excludable under the provisions of section 101(d), see paragraphs (c) to (f), inclusive, of this section.
(3) Notwithstanding any other provision of this section, if the policy was transferred for a valuable consideration, the total “amount held by an insurer” cannot exceed the sum of the consideration paid plus any premiums or other consideration paid subsequent to the transfer if the provisions of section 101(a)(2) and paragraph (b) of § 1.101-1 limit the excludability of the proceeds to such total.
(c) Treatment of payments for life to a sole beneficiary. If the contract provides for the payment of a specified lump sum, but, pursuant to an agreement between the beneficiary and the insurer, payments are to be made during the life of the beneficiary in lieu of such lump sum, the lump sum shall be divided by the life expectancy of the beneficiary determined in accordance with the mortality table used by the insurer in determining the benefits to be paid. However, if payments are to be made to the estate or beneficiary of the primary beneficiary in the event that the primary beneficiary dies before receiving a certain number of payments or a specified total amount, such lump sum shall be reduced by the present value (at the time of the insured’s death) of amounts which may be paid by reason of the guarantee, in accordance with the provisions of paragraph (e) of this section, before making this calculation. To the extent that payments received in each taxable year do not exceed the amount found from the above calculation, they are “prorated amounts” of the “amount held by an insurer” and are excludable from the gross income of the beneficiary without regard to whether he lives beyond the life expectancy used in making the calculation. If the contract in question does not provide for the payment of a specific lump sum upon the death of the insured as one of the alternative methods of payment, the present value (at the time of the death of the insured) of the payments to be made the beneficiary, determined in accordance with the interest rate and mortality table used by the insurer in determining the benefits to be paid, shall be used in the above calculation in lieu of a lump sum.
(d) Treatment of payments to two or more beneficiaries—(1) Unrelated payments. If payments are to be made to two or more beneficiaries, but the payments to be made to each are to be made without regard to whether or not payments are made or continue to be made to the other beneficiaries, the present value (at the time of the insured’s death) of such payments to each beneficiary shall be determined independently for each such beneficiary. The present value so determined shall then be divided by the term for which the payments are to be made. If the payments are to be made for the life of the beneficiary, the divisor shall be the life expectancy of the beneficiary. To the extent that payments received by a beneficiary do not exceed the amount found from the above calculation, they are “prorated amounts” of the “amount held by an insurer” with respect to such beneficiary and are excludable from the gross income of the beneficiary without regard to whether he lives beyond any life expectancy used in making the calculation. For the purpose of the calculation described above, both the “present value” of the payments to be made periodically and the “life expectancy” of the beneficiary shall be determined in accordance with the interest rate and mortality table used by the insurer in determining the benefits to be paid. If payments are to be made to the estate or beneficiary of a primary beneficiary in the event that such beneficiary dies before receiving a certain number of payments or a specified total amount, the “present value” of payments to such beneficiary shall not include the present value (at the time of the insured’s death) of amounts which may be paid by reason of such a guarantee. See paragraph (e) of this section.
(2) Related payments. If payments to be made to two or more beneficiaries are in the nature of a joint and survivor annuity (as described in paragraph (b) of § 1.72-5), the present value (at the time of the insured’s death) of the payments to be made to all such beneficiaries shall be divided by the life expectancy of such beneficiaries as a group. To the extent that the payments received by a beneficiary do not exceed the amount found from the above calculation, they are “prorated amounts” of the “amount held by an insurer” with respect to such beneficiary and are excludable from the gross income of the beneficiary without regard to whether all the beneficiaries involved live beyond the life expectancy used in making the calculation. For the purpose of the calculation described above, both the “present value” of the payments to be made periodically and the “life expectancy” of all the beneficiaries as a group shall be determined in accordance with the interest rate and mortality table used by the insurer in determining the benefits to be paid. If the contract provides that certain payments are to be made in the event that all the beneficiaries of the group die before a specified number of payments or a specified total amount is received by them, the present value of payments to be made to the group shall not include the present value (at the time of the insured’s death) of amounts which may be paid by reason of such a guarantee. See paragraph (e) of this section.
(3) Payments to secondary beneficiaries. Payments made by reason of the death of a beneficiary (or beneficiaries) under a contract providing that such payments shall be made in the event that the beneficiary (or beneficiaries) die before receiving a specified number of payments or a specified total amount shall be excluded from the gross income of the recipient to the extent that such payments are made solely by reason of such guarantee.
(e) Treatment of present value of guaranteed payments. In the case of payments which are to be made for a life or lives under a contract providing that further amounts shall be paid upon the death of the primary beneficiary (or beneficiaries) in the event that such beneficiary (or beneficiaries) die before receiving a specified number of payments or a specified total amount, the present value (at the time of the insured’s death) of all payments to be made under the contract shall not include, for purposes of prorating the amount held by the insurer, the present value of the payments which may be made to the estate or beneficiary of the primary beneficiary. In such a case, any lump sum amount used to measure the value of the amount held by an insurer with respect to the primary beneficiary must be reduced by the value at the time of the insured’s death of any amounts which may be paid by reason of the guarantee provided for a secondary beneficiary or the estate of the primary beneficiary before prorating such lump sum over the life or lives of the primary beneficiaries. Such present value (of the guaranteed payment) shall be determined by the use of the interest rate and mortality tables used by the insurer in determining the benefits to be paid.
(f) Treatment of payments not paid periodically. Payments made to beneficiaries other than periodically shall be included in the gross income of the recipients, but only to the extent that they exceed amounts payable at the time of the death of the insured to each such beneficiary or, where no such amounts are specified, the present value of such payments at that time.
(g) Examples. The principles of this section may be illustrated by the following examples:
(h) Applicability of both section 101(c) and 101(d) to payments under a single life insurance contract—(1) In general. Section 101(d) shall not apply to interest payments on any amount held by an insurer under an agreement to pay interest thereon (see sections 101(c) and 101(d)(4) and § 1.101-3). On the other hand, both section 101(c) and section 101(d) may be applicable to payments received under a single life insurance contract, if such payments consist both of interest on an amount held by an insurer under an agreement to pay interest thereon and of amounts held by the insurer and paid on a date or dates later than the death of the insured. One instance when both section 101(c) and section 101(d) may be applicable to payments received under a single life insurance contract is in the case of a permanent life insurance policy with a family income rider attached. A typical family income rider is one which provides additional term insurance coverage for a specified number of years from the register date of the basic policy. Under the policy with such a rider, if the insured dies at any time during the term period, the beneficiary is entitled to receive (i) monthly payments of a specified amount commencing as of the date of death and continuing for the balance of the term period, and (ii) a lump sum payment of the proceeds under the basic policy to be paid at the end of the term period. If the insured dies after the expiration of the term period, the beneficiary receives only the proceeds under the basic policy. If the insured dies before the expiration of the term period, part of each monthly payment received by the beneficiary during the term period consists of interest on the proceeds of the basic policy (such proceeds being retained by the insurer until the end of the term period). The remaining part consists of an installment (principal plus interest) of the proceeds of the terms insurance purchased under the family income rider. The amount of term insurance which is provided under the family income rider is, therefore, that amount which, at the date of the insured’s death, will provide proceeds sufficient to fund such remaining part of each monthly payment. Since the proceeds under the basic policy are held by the insurer until the end of the term period, that portion of each monthly payment which consists of interest on such proceeds is interest on an amount held by an insurer under an agreement to pay interest thereon and is includible in gross income under section 101(c). On the other hand, since the remaining portion of each monthly payment consists of an installment payment (principal plus interest) of the proceeds of the term insurance, it is a payment of an amount held by the insurer and paid on a date later than the death of the insured to which section 101(d) and this section applies (including the $1,000 exclusion allowed the surviving spouse under section 101(d)(1)(B)). The proceeds of the basic policy, when received in a lump sum at the end of the term period, are excludable from gross income under section 101(a).
(2) Example of tax treatment of amounts received under a family income rider. The following example illustrates the application of the principles contained in subparagraph (1) of this paragraph to payments received under a permanent life insurance policy with a family income rider attached:
| ( | $1,000.00 |
| ( | 185.00 |
| ( | 815.00 |
| ( | 789.14 |
| ( | 25.86 |
(3) Limitation on amount considered to be an “amount held by an insurer”. See paragraph (b)(3) of this section for a limitation on the amount which shall be considered an “amount held by an insurer” in the case of proceeds of life insurance which are paid subsequent to the transfer of the policy for a valuable consideration.
(4) Effective date. The provisions of this paragraph are applicable only with respect to amounts received during taxable years beginning after October 28, 1961, irrespective of the date of the death of the insured.
§ 1.101-5 [Reserved]
§ 1.101-6 Effective date.
(a) Except as otherwise provided in paragraph (h)(4) of § 1.101-4, the provisions of section 101 of the Internal Revenue Code of 1954 and §§ 1.101-1, 1.101-2, 1.101-3, and 1.101-4 are applicable only with respect to amounts received by reason of the death of an insured or an employee occurring after August 16, 1954. In the case of such amounts, these sections are applicable even though the receipt of such amounts occurred in a taxable year beginning before January 1, 1954, to which the Internal Revenue Code of 1939 applies.
(b) Notwithstanding paragraph (a) of this section, for purposes of determining whether a transfer of an interest in a life insurance contract is a reportable policy sale or a payment of death benefits is a payment of reportable death benefits subject to the reporting requirements of section 6050Y and §§ 1.6050Y-1 through 1.6050Y-4, § 1.101-1(b) through (g) apply to reportable policy sales made after December 31, 2018, and to reportable death benefits paid after December 31, 2018. For any other purpose, including for purposes of determining the amount of the proceeds of life insurance contracts payable by reason of death excluded from gross income under section 101, § 1.101-1(b) through (g) apply to amounts paid by reason of the death of the insured under a life insurance contract, or interest therein, transferred after October 31, 2019. However, under section 7805(b)(7), a taxpayer may apply the rules set forth in § 1.101-1(b) through (g) of the final regulations, in their entirety, with respect to all amounts paid by reason of the death of the insured under a life insurance contract, or interest therein, transferred after December 31, 2017, and on or before October 31, 2019.
§ 1.101-7 Mortality table used to determine exclusion for deferred payments of life insurance proceeds.
(a) Mortality table. Notwithstanding any provision of § 1.101-4 that otherwise would permit the use of a mortality table not described in this section, the mortality table set forth in § 1.72-7(c)(1) must be used to determine—
(1) The amount held by an insurer with respect to a beneficiary for purposes of section 101(d)(2) and § 1.101-4; and
(2) The period or periods with respect to which payments are to be made for purposes of section 101(d)(1) and § 1.101-4.
(b) Examples. The principles of this section may be illustrated by the following examples:
(c) Effective date. This section applies to amounts received with respect to deaths occurring after October 22, 1986, in taxable years ending after October 22, 1986.
§ 1.102-1 Gifts and inheritances.
(a) General rule. Property received as a gift, or received under a will or under statutes of descent and distribution, is not includible in gross income, although the income from such property is includible in gross income. An amount of principal paid under a marriage settlement is a gift. However, see section 71 and the regulations thereunder for rules relating to alimony or allowances paid upon divorce or separation. Section 102 does not apply to prizes and awards (see section 74 and § 1.74-1) nor to scholarships and fellowship grants (see section 117 and the regulations thereunder).
(b) Income from gifts and inheritances. The income from any property received as a gift, or under a will or statute of descent and distribution shall not be excluded from gross income under paragraph (a) of this section.
(c) Gifts and inheritances of income. If the gift, bequest, devise, or inheritance is of income from property, it shall not be excluded from gross income under paragraph (a) of this section. Section 102 provides a special rule for the treatment of certain gifts, bequests, devises, or inheritances which by their terms are to be paid, credited, or distributed at intervals. Except as provided in section 663(a)(1) and paragraph (d) of this section, to the extent any such gift, bequest, devise, or inheritance is paid, credited, or to be distributed out of income from property, it shall be considered a gift, bequest, devise, or inheritance of income from property. Section 102 provides the same treatment for amounts of income from property which is paid, credited, or to be distributed under a gift or bequest whether the gift or bequest is in terms of a right to payments at intervals (regardless of income) or is in terms of a right to income. To the extent the amounts in either case are paid, credited, or to be distributed at intervals out of income, they are not to be excluded under section 102 from the taxpayer’s gross income.
(d) Effect of Subchapter J. Any amount required to be included in the gross income of a beneficiary under sections 652, 662, or 668 shall be treated for purposes of this section as a gift, bequest, devise, or inheritance of income from property. On the other hand, any amount excluded from the gross income of a beneficiary under section 663(a)(1) shall be treated for purposes of this section as property acquired by gift, bequest, devise, or inheritance.
(e) Income taxed to grantor or assignor. Section 102 is not intended to tax a donee upon the same income which is taxed to the grantor of a trust or assignor of income under section 61 or sections 671 through 677, inclusive.
§ 1.103-1 Interest upon obligations of a State, territory, etc.
(a) Interest upon obligations of a State, territory, a possession of the United States, the District of Columbia, or any political subdivision thereof (hereinafter collectively or individually referred to as “State or local governmental unit”) is not includable in gross income, except as provided under section 103 (c) and (d) and the regulations thereunder.
(b) Obligations issued by or on behalf of any State or local governmental unit by constituted authorities empowered to issue such obligations are the obligations of such a unit. However, section 103(a)(1) and this section do not apply to industrial development bonds except as otherwise provided in section 103(c). See section 103(c) and §§ 1.103-7 through 1.103-12 for the rules concerning interest paid on industrial development bonds. See section 103(d) for rules concerning interest paid on arbitrage bonds. Certificates issued by a political subdivision for public improvements (such as sewers, sidewalks, streets, etc.) which are evidence of special assessments against specific property, which assessments become a lien against such property and which the political subdivision is required to enforce, are, for purposes of this section, obligations of the political subdivision even though the obligations are to be satisfied out of special funds and not out of general funds or taxes. The term “political subdivision”, for purposes of this section denotes any division of any State or local governmental unit which is a municipal corporation or which has been delegated the right to exercise part of the sovereign power of the unit. As thus defined, a political subdivision of any State or local governmental unit may or may not, for purposes of this section, include special assessment districts so created, such as road, water, sewer, gas, light, reclamation, drainage, irrigation, levee, school, harbor, port improvement, and similar districts and divisions of any such unit.
§§ 1.103-2–1.103-6 [Reserved]
§ 1.103-7 Industrial development bonds.
(a) In general. Under section 103(c)(1) and this section, an industrial development bond issued after April 30, 1968, shall be treated as an obligation not described in section 103(a)(1) and § 1.103-1. Accordingly, interest paid on such a bond is includable in gross income unless the bond was issued by a State, or local governmental unit to finance certain exempt facilities (see section 103(c)(4) and § 1.103-8), to finance an industrial park (see section 103(c)(5) and § 1.103-9), or as part of an exempt small issue (see section 103(c)(6) and § 1.103-10). For applicable rules when an industrial development bond is held by a substantial user (or a person related to a substantial user) of such an exempt facility, or an industrial park, or a facility financed with the proceeds of such an exempt small issue, see section 103(c)(7) and § 1.103-11. See also § 1.103-12 for the transitional provisions concerning the interest paid on certain industrial development bonds issued before January 1, 1969, and certain other industrial development bonds. Even if section 103(c) does not prevent a bond from being treated as an obligation described in section 103(a)(1) and § 1.103-1, such bond shall nevertheless be treated as an obligation which is not described in section 103(a)(1) and § 1.103-1 if under section 103(d) it is an arbitrage bond. For purposes of section 103(c), the term “issue” includes a single obligation such as a single note issued in connection with a bank loan as well as a series of notes or bonds.
(b) Industrial development bonds—(1) Definition. For purposes of this section, the term “industrial development bond” means any obligation—
(i) Which is issued as part of an issue all or a major portion of the proceeds of which are to be used directly or indirectly in any trade or business carried on by any person who is not an exempt person (as defined in subparagraph (2) of this paragraph), and
(ii) The payment of the principal or interest on which, under the terms of such obligation or any underlying arrangement (as described in subparagraph (4) of this paragraph), is in whole or in major part (i.e., major portion)—
(a) Secured by any interest in property used or to be used in a trade or business,
(b) Secured by any interest in payments in respect of property used or to be used in a trade or business, or
(c) To be derived from payments in respect of property, or borrowed money, used or to be used in a trade or business.
(2) Exempt person. The term “exempt person” means a governmental unit as defined in this subparagraph, or an organization which is described in section 501(c)(3) and this subparagraph and is exempt from taxation under section 501(a). For purposes of this subparagraph, the term “governmental unit” means a State or local governmental unit (as defined in § 1.103-1). For purposes of this subparagraph, the term “governmental unit” also includes the United States of America (or an agency or instrumentality of the United States of America), but only in the case of obligations (i) issued on or before August 3, 1972, or (ii) issued after August 3, 1972, with respect to which a bond resolution or any other official action was taken and in reliance on such action either (a) construction of such facility to be financed with such obligations commenced or (b) a binding contract was entered into, or an irrevocable bid was submitted, prior to August 3, 1972, or (iii) issued after August 3, 1972, with respect to a program approved by Congress prior to such date but only if (a) a portion of such program has been financed by obligations issued prior to such date, to which section 103(a) applied pursuant to a ruling issued by the Commissioner or his delegate prior to such date and (b) construction of one or more facilities comprising a part of such program commenced prior to such date. For purposes of this subparagraph, a tax-exempt organization is an exempt person only with respect to a trade or business it carries on which is not an unrelated trade or business. Whether a particular trade or business carried on by a tax-exempt organization is an unrelated trade or business is determined by applying the rules of section 513(a) (relating to general rule for unrelated trade or business) and the regulations thereunder to the tax-exempt organization without regard to whether the organization is an organization subject to the tax imposed by section 511 (relating to imposition of tax on unrelated business income of charitable, etc., organizations).
(3) Trade or business test. (i) The trade or business test relates to the use of the proceeds of a bond issue. The test is met if all or a major portion of the proceeds of a bond issue is used in a trade or business carried on by a nonexempt person. For example, if all or a major portion of the proceeds of a bond issue is to be loaned to one or more private business users, or is to be used to acquire, construct, or reconstruct facilities to be leased or sold to such private business users, and such proceeds or facilities are to be used in trades or businesses carried on by them, such proceeds are to be used in a trade or business carried on by persons who are not exempt persons, and the debt obligations comprising the bond issue satisfy the trade or business test. If, however, less than a major portion of the proceeds of an issue is to be loaned to nonexempt persons or is to be used to acquire or construct facilities which will be used in a trade or business carried on by a nonexempt person, the debt obligations will not be industrial development bonds. Also, when publicly-owned facilities which are intended for general public use, such as toll roads or bridges, are constructed with the proceeds of a bond issue and used by nonexempt persons in their trades or businesses on the same basis as other members of the public, such use does not constitute a use in the trade or business of a nonexempt person for purposes of the trade or business test.
(ii) In determining whether a debt obligation meets the trade or business test, the indirect, as well as the direct, use of the proceeds is to be taken into account. For example, the debt obligations comprising a bond issue do not fail to satisfy the trade or business test merely because the State or local governmental unit uses the proceeds to engage in a series of financing transactions for property to be used by private business users in trades or businesses carried on by them. Similarly, if such proceeds are to be used to construct facilities to be leased or sold to any nonexempt person for use in a trade or business it carries on, such proceeds are to be used in a trade or business carried on by a nonexempt person and the debt obligations comprising such issue satisfy the trade or business test. If such proceeds are to be used to construct facilities to be leased or sold to an exempt person who will, in turn, lease or sell the facilities to a nonexempt person for use in a trade or business, such proceeds are to be used in a trade or business carried on by a nonexempt person and the debt obligations comprising such issue satisfy the trade or business test. In addition, proceeds will be treated as being used in the trade or business of a nonexempt person in situations involving other arrangements, whether in a single transaction or in a series of transactions, whereby a nonexempt person uses property acquired with the proceeds of a bond issue in its trade or business.
(iii) The use of more than 25 percent of the proceeds of an issue of obligations in the trades or businesses of nonexempt persons will constitute the use of a major portion of such proceeds in such manner. In the case of the direct or indirect use of the proceeds of an issue of obligations or the direct or indirect use of a facility constructed, reconstructed, or acquired with such proceeds, the use by all nonexempt persons in their trades or businesses must be aggregated to determine whether the trade or business test is satisfied. If more than 25 percent of the proceeds of a bond issue is used in the trades or businesses of nonexempt persons, the trade or business test is satisfied. For special rules with respect to the acquisition of the output of facilities, see subparagraph (5) of this paragraph.
(4) Security interest test. The security interest test relates to the nature of the security for, and the source of, the payment of either the principal or interest on a bond issue. The nature of the security for, and the source of, the payment may be determined from the terms of the bond indenture or on the basis of an underlying arrangement. An underlying arrangement to provide security for, or the source of, the payment of the principal or interest on an obligation may result from separate agreements between the parties or may be determined on the basis of all the facts and circumstances surrounding the issuance of the bonds. The property which is the security for, or the source of, the payment of either the principal or interest on a debt obligation need not be property acquired with bond proceeds. The security interest test is satisfied if, for example, a debt obligation is secured by unimproved land or investment securities used, directly or indirectly, in any trade or business carried on by any private business user. A pledge of the full faith and credit of a State or local governmental unit will not prevent a debt obligation from otherwise satisfying the security interest test. For example, if the payment of either the principal or interest on a bond issue is secured by both a pledge of the full faith and credit of a State or local governmental unit and any interest in property used or to be used in a trade or business, the bond issue satisfies the security interest test. For rules with respect to the acquisition of the output of facilities see subparagraph (5) of this paragraph.
(5) Trade or business test and security interest test with respect to certain output contracts. (i) The use by one or more nonexempt persons of a major portion of the subparagraph (5) output of facilities such as electric energy, gas, or water facilities constructed, reconstructed, or acquired with the proceeds of an issue satisfies the trade or business test and the security interest test if such use has the effect of transferring to nonexempt persons the benefits of ownership of such facilities, and the burdens of paying the debt service on governmental obligations used directly or indirectly to finance such facilities, so as to constitute the indirect use by them of a major portion of such proceeds. Such benefits and burdens are transferred and a major portion of the proceeds of an issue is used indirectly by the users of the subparagraph (5) output of such a facility which is owned and operated by an exempt person where—
(a)(1) One nonexempt person agrees pursuant to a contract to take, or to take or pay for, a major portion (more than 25 percent) of the subparagraph (5) output (within the meaning of subdivision (ii) of this subparagraph) of such a facility (whether or not conditional upon the production of such output) or (2) two or more nonexempt persons, each of which pays annually a guaranteed minimum payment exceeding 3 percent of the average annual debt service with respect to the obligations in question, agree, pursuant to contracts, to take, or to take or pay for, a major portion (more than 25 percent) of the subparagraph (5) output of such a facility (whether or not conditioned upon the production of such output), and
(b) Payment made or to be made with respect to such contract or contracts by such nonexempt person or persons exceeds a major part (more than 25 percent) of the total debt service with respect to such issue of obligations.
(ii) For purposes of this subparagraph—
(a) Where a contract described in subdivision (i) of this subparagraph may be extended by the issuer of obligations described therein, the term of the contract shall be considered to include the period for which such contract may be so extended.
(b) The subparagraph (5) output of a facility shall be determined by multiplying the number of units produced or to be produced by the facility in 1 year by the number of years in the contract term of the issue of obligations issued to provide such facility. The number of units produced or to be produced by a facility in 1 year shall be determined by reference to its nameplate capacity (or where there is no nameplate capacity, its maximum capacity) without any reduction for reserves or other unutilized capacity. The contract term of an issue begins on the date the output of a facility is first taken, pursuant to a take or a take or pay contract, by a nonexempt person and ends on the latest maturity date of any obligation of the issue (determined without regard to any optional redemption dates). If, however, on or before the date of issue of a prior issue of governmental obligations issued to provide a facility, the issuer makes a commitment in the bond indenture or related document to refinance such prior issue with one or more subsequent issues of governmental obligations, then the contract term of the issue shall be determined with regard to the latest redemption date of any obligation of the last such refinancing issue with respect to such facility (determined without regard to any optional redemption dates). Where it appears that the term of an issue (or the terms of two or more issues) is extended for purposes of extending the contract term of an issue and thereby increasing the subparagraph (5) output of the facility provided by such issue, the subparagraph (5) output of such facility shall be determined by the Commissioner without regard to the provisions of this subdivision (b).
(c) The total debt service with respect to an issue of obligations shall be the total dollar amount (excluding any penalties) payable with respect to such issue over its entire term. The entire term of an issue begins on its date of issue and ends on the latest maturity date of any obligation of the issue (determined without regard to any optional redemption dates). If, however, on or before the date of issue of a prior issue of governmental obligations the issuer makes a commitment in the bond indenture or related document to refinance such prior issue with one or more subsequent issues of governmental obligations, the entire term of the issue shall be determined with regard to the latest redemption date of any obligation of the last such refinancing issue (determined without regard to any optional redemption dates).
(d) Two or more nonexempt persons who are related persons (within the meaning of section 103(c)(6)(C)) shall be treated as one nonexempt person.
(c) Examples. The application of the rules contained in section 103(c) (2) and (3) and paragraph (b) of this section are illustrated by the following examples:
(b) The facts are the same as in paragraph (a) of this example except that corporation Y enters into a long-term agreement with C that Y will rent more than one-fourth of the rooms on an annual basis for a period approximately equal to one half of the term of the bonds. The bonds are industrial development bonds because (1) a major portion of the proceeds used to construct the hotel is to be used in the trade or business of corporation Y (a nonexempt person) and (2) a major portion of the principal and interest on such issue will be derived from payments in respect of the property used in the trade or business of Y.
(b) The facts are the same as in paragraph (a) of this example except that corporation Y will lease four floors, and the costs allocated to these floors are in excess of 25 percent of D’s investment in the land and building. The bonds are industrial development bonds because (1) a major portion of the building is to be used in the trade or business of a nonexempt person, and (2) a major portion of the principal and interest on such issue is secured by the rental payments on the building.
(d) Certain refunding issues—(1) General rule. In the case of an issue of obligations issued to refund the outstanding face amount of an issue of obligations, the proceeds of the refunding issue will be considered to be used for the purpose for which the proceeds of the issue to be refunded were used. The rules of this subparagraph shall apply regardless of the date of issuance of the issue to be refunded and shall apply to refunding issues to be issued to refund prior refunding issues.
(2) Obligations issued prior to effective date. In the case of an issue of obligations issued to refund the outstanding face amount of an issue of obligations issued on or before April 30, 1968 (or before January 1, 1969, if the transitional rules of § 1.103-12 are applicable) which would have been industrial development bonds within the meaning of section 103(c)(2) had they been issued after such date, the refunding issue shall not be considered to be an issue of industrial development bonds if it does not make funds available for any purpose other than the debt service on the obligations. For rules as to arbitrage bonds, see section 103(d).
(3) Examples. The provisions of this paragraph may be illustrated by the following examples:
§ 1.103-8 Interest on bonds to finance certain exempt facilities.
(a) In general—(1) General rule. (i) Under section 103(b)(4), interest paid on an issue of obligations issued by a State or local governmental unit (as defined in § 1.103-1) is not includable in gross income if substantially all of the proceeds of such issue is to be used to provide one or more of the exempt facilities listed in subparagraphs (A) through (J) of section 103(b)(4) and in this section. However, interest on an obligation of such issue is includable in gross income if the obligation is held by a substantial user or a related person (as described in section 103(b)(13) and § 1.103-11). If substantially all of the proceeds of a bond issue is to be used to provide such exempt facilities, the debt obligations are treated as obligations described in section 103(a)(1) and § 1.103-1 even though such obligations are industrial development bonds as defined in section 103(b)(2) and § 1.103-7. Substantially all of the proceeds of an issue of governmental obligations are used to provide an exempt facility if 90 percent or more of such proceeds are so used. For purposes of this “substantially all” test, two rules apply. First, proceeds are reduced by amounts properly allocable on a pro rata basis between providing the exempt facility and other uses of the proceeds. Second, amounts used to provide an exempt facility include amounts paid or incurred which are chargeable to the facility’s capital account or would be so chargeable either with a proper election by a taxpayer (for example, under section 266) or but for a proper election by a taxpayer to deduct such amounts. In the event the amount payable with respect to an issue during each annual period over its term is less than the amount of interest accruing thereon in such period, e.g., in the case of an issue sold by the issuer for less than its face amount, see paragraph (a)(6) of this section to determine the amount of proceeds of the issue.
(ii) The provisions of subdivision (i) of this subparagraph shall also apply to an issue of obligations substantially all of the proceeds of which is to be used to provide exempt facilities described in this section and for either or both of the following purposes: (a) To acquire or develop land as the site for an industrial park described in section 103(b)(5) and § 1.103-9, (b) to provide facilities to be used by an exempt person.
(iii) Section 103(b)(4) only becomes applicable where the bond issue meets both the trade or business and the security interest tests so that obligations are industrial development bonds within the meaning of section 103(b)(2). For rules as to exempt facilities including property functionally related and subordinate to such facilities, see subparagraph (3) of this paragraph. For rules with respect to the ultimate use of proceeds of obligations, see subparagraph (4) of this paragraph. For rules which limit the application of the provisions of this section see subparagraph (5) of this paragraph. For the interrelationship of the rules provided in this section and the exemption for certain small issues provided in section 103(b)(6), see § 1.103-10.
(2) Public use requirement. To qualify under section 103(b)(4) and this section as an exempt facility, a facility must serve or be available on a regular basis for general public use, or be a part of a facility so used, as contrasted with similar types of facilities which are constructed for the exclusive use of a limited number of nonexempt persons in their trades or businesses. For example, a private dock or wharf owned by or leased to, and serving only a single manufacturing plant would not qualify as a facility for general public use, but a hangar or repair facility at a municipal airport, or a dock or a wharf, would qualify even if it is owned by, or leased or permanently assigned to, a nonexempt person provided that such nonexempt person directly serves the general public, such as a common passenger carrier or freight carrier. Similarly, an airport owned or operated by a nonexempt person for general public use is a facility for public use, as is a dock or wharf which is a part of a public port. However, a landing strip which, by reason of a formal or informal agreement or by reason of geographic location, will not be available for general public use does not satisfy the public use requirement. Sewage or solid waste disposal facilities and air or water pollution control facilities, described in sections 103(b)(4) (E) and (F) and paragraphs (f) and (g) of this section, will be treated in all events as serving a general public use although they may be part of a nonpublic facility such as a manufacturing facility used in the trade or business of a nonexempt user.
(3) Functionally related and subordinate. An exempt facility includes any land, building, or other property functionally related and subordinate to such facility. Property is not functionally related and subordinate to a facility if it is not of a character and size commensurate with the character and size of such facility. Since substantially all of the proceeds of a bond issue must be used for the exempt facility (or for any combination of exempt facilities, industrial parks, and facilities to be used by exempt persons), including property functionally related and subordinate thereto, an insubstantial amount of the proceeds of a bond issue may be used for facilities which are neither exempt facilities (or a combination of exempt facilities, industrial parks and facilities to be used by exempt persons) nor functionally related and subordinate to exempt facilities. Thus, for example, where substantially all of the proceeds of an urban redevelopment bond issue are to be used by a State urban redevelopment agency for residential real property for family units within the meaning of section 103(b)(4)(A) and paragraph (b) of this section, an insubstantial amount may be used for an industrial or commercial project or for any other purpose that is not functionally related and subordinate to the residential real property for family units.
(4) Ultimate use of proceeds. The question whether substantially all of the proceeds of an issue of obligations are to be used to provide one or more of the exempt facilities listed in subparagraphs (A) through (J) of section 103(b)(4) and in this section is to be resolved by reference to the ultimate use of such proceeds. For example, such proceeds will be treated as used to provide residential rental property whether the State or local governmental unit (i) constructs such property and leases or sells it to any person who is not an exempt person for use in such person’s trade or business of leasing such property; (ii) lends the proceeds to any such person for such purpose; or (iii) lends the proceeds to banks or other financial institutions in order to increase the supply of funds for mortgage lending under conditions requiring such banks or other financial institutions to use such proceeds only for further lending for residential rental property.
(5) Limitation. (i) A facility qualifies under this section only to the extent that there is a valid reimbursement allocation under § 1.150-2 with respect to expenditures that are incurred before the issue date of the bonds to provide the facility and that are to be paid with the proceeds of the issue. In addition, if the original use of the facility begins before the issue date of the bonds, the facility does not qualify under this section if any person that was a substantial user of the facility at any time during the 5-year period before the issue date or any related person to that user receives (directly or indirectly) 5 percent or more of the proceeds of the issue for the user’s interest in the facility and is a substantial user of the facility at any time during the 5-year period after the issue date, unless—
(A) An official intent for the facility is adopted under § 1.150-2 within 60 days after the date on which acquisition, construction, or reconstruction of that facility commenced; and
(B) For an acquisition, no person that is a substantial user or related person after the acquisition date was also a substantial user more than 60 days before the date on which the official intent was adopted.
(ii) A facility, the original use of which commences (or the acquisition of which occurs) on or after the issue date of bonds to provide that facility, qualifies under this section only to the extent that an official intent for the facility is adopted under § 1.150-2 by the issuer of the bonds within 60 days after the commencement of the construction, reconstruction, or acquisition of that facility. Temporary construction or other financing of a facility prior to the issuance of the bonds to provide that facility will not cause that facility to be one that does not qualify under this paragraph (a)(5)(ii).
(iii) For purposes of paragraph (a)(5)(i) of this section, substantial user has the meaning used in section 147(a)(1), related person has the meaning used in section 144(a)(3), and a user that is a governmental unit within the meaning of § 1.103-1 is disregarded.
(iv) Except to the extent provided in §§ 1.142-4(d), 1.148-11A(i), and 1.150-2(j), this paragraph (a)(5) applies to bonds issued after June 30, 1993, and sold before July 8, 1997. See § 1.142-4(d) for rules relating to bonds sold on or after July 8, 1997.
(6) Deep discount obligations. (i) Except as otherwise provided in paragraph (a)(7) of this section, the proceeds of any issue of obligations sold by the issuer after June 4, 1982, shall include any imputed proceeds of the issue. The imputed proceeds of an issue equal the sum of the amounts of imputed proceeds for each annual period (hereinafter, bond year) over the term of the issue.
(ii) The amount of imputed proceeds for a bond year equals—
(a) The sum of the amounts of interest that will accrue with respect to each obligation that is part of the issue in such year, reduced (but not below zero) by
(b) The sum of the amounts of principal and interest that become payable with respect to the issue in that bond year.
(iii) Interest will be deemed to accrue with respect to an obligation on an amount that, as of the commencement of that year, is equal to the sum of—
(a) The purchase price (as defined in § 1.103-13(d)(2)) allocable to the obligation and
(b) The aggregate of the amounts of interest accruing in each prior bond year with respect to the obligation, reduced by all amounts that became payable with respect to the obligation in prior bond years. Any amount that becomes payable during the 30 day period following any bond year will be deemed to have become payable in such bond year. Thus, to the extent interest on an obligation accruing during a bond year does not become payable within 30 days from the end of such year, it is treated as reinvested under the same terms as the obligation. For purposes of this subparagraph (6), the rate at which such interest accrues is equal to the yield of the obligation. Yield is computed in the same manner as set forth in § 1.103-13(c)(1)(ii) for computing yield on governmental obligations (assuming annual compounding of interest). Such computations shall be made without regard to optional call dates.
(7) Deep discount obligations; special rules. (i) There are no imputed proceeds with respect to an obligation if—
(a) The obligation does not have a stated interest rate (determinable at the date of issue) that increases over the term of the obligation, and
(b) The purchase price of the obligation is at least 95 percent of its face amount.
(ii) If the actual rate at which interest is to accrue over the term of an obligation is indeterminable at the date of issue then, in computing the yield of the obligation for purposes of this paragraph, such rate shall be determined as if the conditions as of the date of issue will not change over the term of the obligation. Thus, for example, if interest on an obligation is to be paid semiannually at a rate equal to 80 percent of the yield on six month Treasury bills at the most recent public sale immediately prior to the corresponding interest payment date and the yield on six month Treasury bills sold immediately preceding the issue date is 10 percent, then the six month Treasury bill rate is deemed to be a constant 10 percent for purposes of determining the amount of imputed proceeds of the issue. Therefore, all interest payments on the obligation would be deemed to be made at a rate of 8 percent.
(8) Examples. The principles of this paragraph may be illustrated by the following examples:
| Date | Purchase price plus accumulated interest | Interest | Imputed proceeds |
|---|---|---|---|
| Aug. 1, 1983 | $18,627,639.69 | $1,862,763.97 | $1,862,763.97 |
| Aug. 1, 1984 | 20,490,403.68 | 2,049,040.37 | 2,049,040.37 |
| Aug. 1, 1985 | 22,539,444.03 | 2,253,944.40 | 2,253,944.40 |
| Aug. 1, 1986 | 24,793,388.43 | 2,479,338.84 | 2,479,338.84 |
| Aug. 1, 1987 | 27,272,727.27 | 2,727,272.73 | 0 |
| Total imputed proceeds | 8,645,087.58 |
[Amount allocable to each series]
| Date | 1983 series at 8 percent | 1984 series at 8.5 percent | 1985 series at 8.75 percent | 1986 series at 9.25 percent | 1987 series at 9.75 percent | Interest accruing on issue* | Amount due | Imputed proceeds |
|---|---|---|---|---|---|---|---|---|
| July 1, 1983 | 2,939,814.82 | 2,697,020.54 | 2,468,629.60 | 2,228.732.51 | 1,595,185.06 | 0 | ||
| 235,185.18 | 229,246.75 | 216,005.09 | 206,157.76 | 155,530.54 | 1,042,125.32 | 3,175,000 | ||
| July 1, 1984 | 2,926,267.29 | 2,684,634.69 | 2,434,890.27 | 1,750,715.60 | 0 | |||
| 248,732.71 | 234,905.54 | 225,227.35 | 170,694.77 | 879,560.37 | 3,175,000 | |||
| July 1, 1985 | 2,919,540.23 | 2,660,117.62 | 1,921,410.37 | 0 | ||||
| 255,459.77 | 246,060.88 | 187,337.51 | 688,858.16 | 3,175,000 | ||||
| July 1, 1986 | 2,906,178.50 | 2,108,747.88 | 0 | |||||
| 268,821.50 | 205,602.92 | 474,424.42 | 3,175,000 | |||||
| July 1, 1987 | 2,314,350.80 | 0 | ||||||
| 225,649.20 | 225,649.20 | 2,540,000 | ||||||
| Total | 15,240,000 |
*This column (interest accruing on the issue) contains the sums of the interest that accrues on each series in each bond year. The amount of interest accruing on the issue is computed by adding the amount of interest accruing on each series outstanding for that bond year (the bottom number in the line for each bond year). The amount of interest annually accruing on each series also is added to the purchase price of the series to determine the amount of interest accruing in subsequent years, inasmuch as there are no payments with respect to the outstanding series prior to maturity. Thus, the “principal” amount, of the top of the two numbers given in such line for each bond year, is the purchase price allocable to that series plus the amount of interest that accrued on that series in prior years.
| Maturity | Purchase price |
|---|---|
| July 1, 1983 | $1,990,000 |
| July 1, 1984 | $1,980,000 |
| July 1, 1985 | $1,980,000 |
| July 1, 1986 | $1,970,000 |
| July 1, 1987 | $1,970,000 |
| July 1, 1988 | $1,970,000 |
| July 1, 1989 | $1,960,000 |
| July 1, 1990 | $1,960,000 |
| July 1, 1991 | $1,960,000 |
| July 1, 1992 | $1,960,000 |
(b) Residential rental property—(1) General rule for obligations issued after April 24, 1979. Section 103(b)(1) shall not apply to any obligation which is issued after April 24, 1979, and is part of an issue substantially all of the proceeds of which are to be used to provide a residential rental project in which 20 percent or more of the units are to be occupied by individuals or families of low or moderate income (as defined in paragraph (b)(8)(v) of this section). In the case of a targeted area project, the minimum percentage of units which are to be occupied by individuals of low or moderate income is 15 percent. See generally § 1.103-7 for rules relating to refunding issues.
(2) Registration requirement. Any obligation (including any refunding obligation) issued after December 31, 1981, to provide a residential rental project must be issued as part of an issue, each obligation of which is in registered form (as defined in paragraph (b)(8)(ii) of this section).
(3) Transitional rule. For purposes of this section, obligations issued after April 24, 1979, may be treated as issued before April 25, 1979, if the transitional requirements of section 1104 of the Mortgage Subsidy Bond Tax Act of 1980 (94 Stat. 2670) are satisfied.
(4) Residential rental project. (i) In general. A residential rental project is a building or structure, together with any functionally related and subordinate facilities, containing one or more similarly constructed units—
(a) Which are used on other than a transient basis, and
(b) Which satisfy the requirements of paragraph (b)(5)(i) of this section and are available to members of the general public in accordance with the requirement of paragraph (a)(2) of this section.
(ii) Multiple buildings. (a) Proximate buildings or structures (hereinafter “buildings”) which have similarly constructed units are treated as part of the same project if they are owned for Federal tax purposes by the same person and if the buildings are financed pursuant to a common plan.
(b) Buildings are proximate if they are located on a single tract of land. The term “tract” means any parcel or parcels of land which are contiguous except for the interposition of a road, street, stream or similar property. Otherwise, parcels are contiguous if their boundaries meet at one or more points.
(c) A common plan of financing exists if, for example, all such buildings are provided by the same issue or several issues subject to a common indenture.
(iii) Functionally related and subordinate facilities. Under paragraph (a)(3) of this section, facilities that are functionally related and subordinate to residential rental projects include facilities for use by the tenants, for example, swimming pools, other recreational facilities, parking areas, and other facilities which are reasonably required for the project, for example, heating and cooling equipment, trash disposal equipment or units for resident managers or maintenance personnel.
(iv) Owner-occupied residences. For purposes of section 103 (b)(4)(A) and this paragraph (b), the term “residential rental project” does not include any building or structure which contains fewer than five units, one unit of which is occupied by an owner of the units.
(5) Requirement must be continuously satisfied—(i) Rental requirement. Once available for occupancy, each unit (as defined in paragraph (b)(8)(i) of this section) in a residential rental project must be rented or available for rental on a continuous basis during the longer of—
(a) The remaining term of the obligation, or
(b) The qualified project period (as defined in paragraph (b)(7) of this section).
(ii) Low or moderate income occupancy requirement. Individuals or families of low or moderate income must occupy that percentage of completed units in such project applicable to the project under paragraph (b)(1) of this section continuously during the qualified project period. For this purpose, a unit occupied by an individual or family who at the commencement of the occupancy is of low or moderate income is treated as occupied by such an individual or family during their tenancy in such unit, even though they subsequently cease to be of low or moderate income. Moreover, such unit is treated as occupied by an individual or family of low or moderate income until reoccupied, other than for a temporary period, at which time the character of the unit shall be redetermined. In no event shall such temporary period exceed 31 days.
(6) Effect of post-issuance noncompliance—(i) In general. Unless corrected within a reasonable period, noncompliance with the requirements of this paragraph (b) shall cause the project to be treated as other than a project described in section 103 (b)(4)(A) and this paragraph (b) as of the date of issue. After an issue to provide such project ceases to qualify, subsequent conformity with the requirements will not alter the taxable status of such issue.
(ii) Correction of noncompliance. If the issuer corrects any noncompliance arising from events occurring after the issuance of the obligation within a reasonable period, such noncompliance (e.g., an unauthorized sublease) shall not cause the project to be a project not described in this paragraph (b). A reasonable period is at least 60 days after such error is first discovered or would have been discovered by the exercise of reasonable diligence.
(iii) Involuntary loss. (a) The requirements of paragraph (b) shall cease to apply to a project in the event of involuntary noncompliance caused by fire, seizure, requisition, foreclosure, transfer of title by deed in lieu of foreclosure, change in a Federal law or an action of a Federal agency after the date of issue which prevents an issuer from enforcing the requirements of this paragraph, or condemnation or similar event but only if, within a reasonable period, either the obligation used to provide such project is retired or amounts received as a consequence of such event are used to provide a project which meets the requirement of section 103 (b)(4)(A) and this paragraph (b).
(b) The provisions of paragraph (b)(6)(iii)(a) of this section shall cease to apply to a project subject to foreclosure, transfer of title by deed in lieu of foreclosure or similar event if, at anytime during that part of the qualified project period subsequent to such event, the obligor on the acquired purpose obligation (as defined in § 1.103-13(b)(4)(iv)(a)) or a related person (as defined in § 1.103-10(e)) obtains an ownership interest in such project for tax purposes.
(7) Qualified project period. The term “qualified project period” means—
(i) For obligations issued after April 24, 1979, and prior to September 4, 1982, a period of 20 years commencing on the later of the date that the project becomes available for occupancy or the date of issue of the obligations. The requirement of paragraph (b)(5)(ii) of this section shall be deemed met if the owner of the project contracts with a Federal or state agency to maintain at least 20 percent (or 15 percent in the case of targeted areas) of the units for low or moderate income individuals or families (as defined in paragraph (b)(8)(v) of this section) for 20 years in consideration for rent subsidies for such individuals or families for such period.
(ii) For obligations issued after September 3, 1982, a period beginning on the later of the first day on which at least 10 percent of the units in the project are first occupied or the date of issue of an obligation described in section 103(b)(4)(A) and this paragraph and ending on the later of the date—
(a) Which is 10 years after the date on which at least 50 percent of the units in the project are first occupied,
(b) Which is a qualified number of days after the date on which any of the units in the project is first occupied, or
(c) On which any assistance provided with respect to the project under section 8 of the United States Housing Act of 1937 terminates.
(8) Other definitions. For purposes of this paragraph—
(i) Unit. The term “unit” means any accommodation containing separate and complete facilities for living, sleeping, eating, cooking, and sanitation. Such accommodations may be served by centrally located equipment, such as air conditioning or heating. Thus, for example, an apartment containing a living area, a sleeping area, bathing and sanitation facilities, and cooking facilities equipped with a cooking range, refrigerator, and sink, all of which are separate and distinct from other apartments, would constitute a unit.
(ii) In registered form. The term “in registered form” has the same meaning as in section 6049. With respect to obligations issued after December 31, 1982, such term shall have the same meaning as prescribed in section 103(j) (including the regulations thereunder).
(iii) Targeted area project. The term “targeted area project” means a project located in a qualified census tract (as defined in § 6a.103A-2(b)(4)) or an area of chronic economic distress (as defined in § 6a.103A-2(b)(5)).
(iv) Building or structure. The term “building or structure” generally means a discrete edifice or other man-made construction consisting of an independent foundation, outer walls, and roof. A single unit which is not an entire building but is merely a part of a building is not a building or structure within the meaning of this section. As such, while single townhouses are not buildings if their foundation, outer walls, and roof are not independent, detached houses and rowhouses are buildings.
(v) Low or moderate income. Individuals and families of low or moderate income shall be determined in a manner consistent with determinations of lower income families under section 8 of the United States Housing Act of 1937, as amended, except that the percentage of median gross income which qualifies as low or moderate income shall be 80 percent. Therefore, occupants of a unit are considered individuals or families of low or moderate income only if their adjusted income (computed in the manner prescribed with § 1.167(k)-3(b)(3)) does not exceed 80 percent of the median gross income for the area. Notwithstanding the foregoing, the occupants of a unit shall not be considered to be of low or moderate income if all the occupants are students (as defined in section 151(e)(4)), no one of whom is entitled to file a joint return under section 6013. The method of determining low or moderate income in effect on the date of issue will be determinative for such issue, even if such method is subsequently changed. In the event programs under section 8(f) of the Housing Act of 1937, as amended, are terminated prior to the date of issue, the applicable method shall be that in effect immediately prior to the date of such termination.
(9) Examples. The following examples illustrate the application of this paragraph (b).
(10) Obligations issued before April 25, 1979—(i) General rules. Section 103(b)(1) shall not apply to obligations issued before April 25, 1979, which are part of an issue substantially all of the proceeds of which are to be used to provide residential real property for family units. In order to qualify under this paragraph (b) as an exempt facility, the facility must satisfy the public use requirement of paragraph (a)(2) of this section by being available for use by members of the general public.
(ii) Family units defined. For purposes of this paragraph (b) the term “family unit” means a building or any portion thereof which contains complete living facilities which are to be used on other than a transient basis by one or more persons, and facilities functionally related and subordinate thereto. Thus, an apartment which is to be used on other than a transient basis as a residence by a single person or by a family and which contains complete facilities for living, sleeping, eating, cooking, and sanitation, constitutes a family unit. Such a unit may be served by centrally located machinery and equipment as in a typical apartment building. To qualify as a family unit, the living facilities must be a separate, self-contained building or constitute one unit in a building substantially all of which consists of similar units, together with functionally related and subordinate facilities and areas. Hotels, motels, dormitories, fraternity and sorority houses, rooming houses, hospitals, sanitariums, rest homes, and trailer parks and courts for use on a transient basis do not constitute residential real property for family units.
(iii) Functionally related and subordinate facilities. Under paragraph (a)(3) of this section, facilities which are functionally related and subordinate to residential real property actually used for family units include, for example, facilities for use by the occupants such as a swimming pool, a parking area, and recreational facilities.
(c) Sports facilities—(1) General rule. Section 103(b)(4)(B) provides that section 103(b)(1) shall not apply to obligations issued by a State or local governmental unit which are part of an issue substantially all of the proceeds of which are to be used to provide sports facilities. In order to qualify as an exempt facility under section 103(b)(4)(B) and this paragraph, the facility must satisfy the public use requirement of paragraph (a)(2) of this section by being available for use by members of the general public either as participants or as spectators.
(2) Sports facility defined. (i) For purposes of section 103(b)(4)(B) and this paragraph, the term “sports facilities” includes both outdoor and indoor facilities. The facility may be designed either as a spectator or as a participation facility. For example, the term includes both indoor and outdoor stadiums for baseball, football, ice hockey, or other sports events, as well as facilities for the participation of the general public in sports activities, such as golf courses, ski slopes, swimming pools, tennis courts, and gymnasiums. The term does not include, however, facilities such as a golf course, swimming pool, or tennis court, which are constructed for use by members of a private club or as integral or subordinate parts of a hotel or motel, or the use of which will be restricted to a special class or group or to guests of a particular hotel or motel, since they are not facilities for the use of the general public as required by paragraph (a)(2) of this section.
(ii) Under paragraph (a)(3) of this section, facilities which are functionally related and subordinate to a sports facility, such as a parking lot, clubhouse, ski slope warming house, bath house, or ski tow, are considered to be part of a sports facility. A ski lodge which consists primarily of overnight accommodations is not functionally related and subordinate to a sports facility.
(d) Convention or trade show facilities—(1) General rule. Section 103(b)(4)(C) provides that section 103(b)(1) shall not apply to obligations issued by a State or local governmental unit which are a part of an issue substantially all of the proceeds of which are to be used to provide convention or trade show facilities. In order to qualify under section 103(b)(4)(C) and this paragraph as an exempt facility, the facility must satisfy the public use requirement of paragraph (a)(2) of this section by being available for an appropriate charge or rental, on a rate scale basis, for use by members of the general public. The public use requirement is not satisfied if the use of a convention or trade show facility is limited by long-term leases to a single user or group of users.
(2) Convention or trade show facilities defined. For purposes of section 103(b)(4)(C) and this paragraph, the term “convention or trade show facilities” means special-purpose buildings or structures, such as meeting halls and display areas, which are generally used to house a convention or trade show, including, under paragraph (a)(3) of this section, facilities functionally related and subordinate to such facilities such as parking lots or railroad sidings. A hotel or motel which is available to the general public, whether or not it is intended primarily to house persons attending or participating in a convention or trade show, is neither a convention or trade show facility nor functionally related and subordinate thereto.
(e) Certain transportation facilities—(1) General rule. Section 103(b)(4)(D) provides that section 103(b)(1) shall not apply to obligations issued by a State or local governmental unit which are part of an issue substantially all of the proceeds of which are to be used to provide (i) airports, docks, wharves, mass commuting facilities, or public parking facilities, or (ii) storage or training facilities directly related to any such facility. In order to qualify under section 103(b)(4)(D) and this paragraph as an exempt facility, the facility must satisfy the public use requirement of paragraph (a)(2) of this section by being available for use by members of the general public or for use by common carriers or charter carriers which serve members of the general public. A dock or wharf which is part of a public port (or a public port to be constructed in accordance with a plan which has been finally adopted on the date the obligations in question are issued) satisfies the public use test. A parking lot will be available for use by the general public unless more than an insubstantial portion thereof will be used exclusively by or for the benefit of a nonexempt person by reason of a formal or informal agreement or by reason of the remote geographic location of the facility.
(2) Definitions. For purposes of section 103(b)(4)(D) and this paragraph—
(i) With respect to bonds sold at or before 5:00 p.m. EST on December 29, 1978, an airport includes service accommodations for the public such as terminals, retail stores in such terminals, runways, hangars, loading facilities, repair shops, parking areas, and facilities which, under paragraph (a)(3) of this section, are functionally related and subordinate to the airport, such as facilities for the preparation of in-flight meals, restaurants, and accommodations for temporary or overnight use by passengers, and other facilities functionally related to the needs or convenience of passengers, shipping companies, and airlines. The term “airport” does not include a landing strip which, by reason of a formal or informal agreement, or by reason of geographic location, will not be available for general public use.
(ii) With respect to bonds sold after 5:00 p.m. EST on December 29, 1978—
(a) An airport includes facilities which are directly related and essential to—
(1) Servicing aircraft or enabling aircraft to take off and land, or
(2) Transferring passengers or cargo to or from aircraft.
(b) Under paragraph (a)(3) of this section, an airport includes facilities other than those described in paragraph (e)(2)(ii)(a) only if they are functionally related and subordinate to an airport (as defined in paragraph (e)(2)(ii)(a)). A facility (or part thereof) is not functionally related and subordinate to an airport if the facility (or part thereof)—
(1) Is not of a character and size commensurate with the character and size of the airport at or adjacent to which the facility is located, or
(2) Is not located at or adjacent to that airport.
(c) As an illustration of the rules of this paragraph (e)(2)(ii), an office building (or office space within a building) or a computer facility, either of which serves a system-wide or regional function of an airline, is not considered part of an airport since that facility is not described in either paragraph (e)(2)(ii)(a) or (b). However, a maintenance or overhaul facility which services aircraft is considered part of an airport under paragraph (e)(2)(ii)(a) since that facility is directly related and essential to servicing aircraft and must be located where aircraft take off and land in order to perform its function.
(d) A hotel located at or adjacent to an airport satisfies the requirements of paragraph (e)(2)(ii)(b), that is, it is of a character and size commensurate with the character and size of the airport at or adjacent to which it is located, if the number of guest rooms in the hotel is reasonable for the size of the airport, taking into account the current and projected passenger usage of the terminal facility. If the hotel contains meeting rooms, the number and size of these rooms must be in reasonable proportion to the number of guest rooms in the hotel. Limited recreational facilities will not prevent the hotel from being of a character and size commensurate with the character and size of the airport.
(iii) A dock or wharf includes property which, under paragraph (a)(3) of this section, is functionally related and subordinate to a dock or wharf such as the structure alongside which a vessel docks, the equipment needed to receive and to discharge cargo and passengers from the vessel, such as cranes and conveyors, related storage, handling, office, and passenger areas, and similar facilities.
(iv) A mass commuting facility includes real property together with improvements and personal property used therein, such as machinery, equipment, and furniture, serving the general public commuting on a day-to-day basis by bus, subway, rail, ferry, or other conveyance which moves over prescribed routes. Such property also includes terminals and facilities which, under paragraph (a)(3) of this section, are functionally related and subordinate to the mass commuting facility, such as parking garages, car barns, and repair shops. Use of mass commuting facilities by noncommuters in common with commuters is immaterial. Thus, a terminal leased to a common carrier bus line which serves both commuters and long distance travelers would qualify as an exempt facility.
(3) Related storage or training facility. Section 103 (b)(4)(D) includes only those storage and training facilities which are both (i) directly related to a facility to which subparagraph (1)(i) or (ii) of this paragraph applies and (ii) physically located on or adjacent to such a facility. For example, a storage facility would include a grain elevator, silo, warehouse, or oil and gas storage tank used in connection with a dock or wharf and located on or adjacent to such dock or wharf. Similarly, a training facility would include a building located at or adjacent to an airport for the training of flight personnel or a paved area immediately adjoining a bus garage used to train bus drivers.
(4) Examples. The principles of this paragraph may be illustrated by the following examples:
(f) Certain public utility facilities—(1) General rule. (i) Section 103(b)(4)(E) provides that section 103(b)(1) shall not apply to obligations issued by a State or local governmental unit which are part of an issue substantially all of the proceeds of which are to be used to provide sewage disposal facilities, solid waste disposal facilities, or facilities for the local furnishing of electric energy or gas. In order to qualify under section 103(b)(4)(E) as an exempt facility, the facility must satisfy the public use requirement of paragraph (a)(2) of this section. A public utility facility described in this subparagraph (with the exception of sewage and solid waste disposal facilities which will be treated in all events as serving the general public) will satisfy the public use requirement only if such facility, or the output thereof, is available for use by members of the general public.
(ii) A facility for the local furnishing of electric energy or gas is, for purposes of applying the public use test in paragraph (a)(2) of this section, available for use by members of the general public if (a) the owner or operator of the facility is obligated, by a legislative enactment, local ordinance, regulation, or the equivalent thereof, to furnish electric energy or gas to all persons who desire such services and who are within the service area of the owner or operator of such facility, and (b) it is reasonably expected that such facility will serve or be available to a large segment of the general public in such service area. For rules with respect to facilities for the furnishing of water, see paragraph (h) of this section.
(2) Definitions. For purposes of section 103(b)(4)(E) and this paragraph—
(i) The term “sewage disposal facilities” means any property used for the collection, storage, treatment, utilization, processing, or final disposal of sewage.
(ii) The term “facilities for the local furnishing of electric energy or gas” means property which—
(a) Is either property of a character subject to the allowance for depreciation provided in section 167 or land,
(b) Is used to produce, collect, generate, transmit, store, distribute, or convey electric energy or gas.
(c) Is used in the trade or business of furnishing electric energy or gas, and
(d) Is a part of a system providing service to the general populace of one or more communities or municipalities, but in no event more than 2 contiguous counties (or a political equivalent) whether or not such counties are located in one State.
(g) Air or water pollution control facilities—(1) General rule. Section 103(b)(4)(F) provides that section 103(b)(1) shall not apply to obligations issued by a State or local governmental unit which are part of an issue substantially all of the proceeds of which are to be used to provide air or water pollution control facilities. Such facilities are in all events treated as serving the general public and, thus, satisfy the public use requirement of paragraph (a)(2) of this section.
(2) Definitions. (i) For purposes of section 103(b)(4)(F) and this paragraph, property is a pollution control facility to the extent that the test of either subdivision (iii) or (iv) of this subparagraph is satisfied, but only if—
(a) It is property which is described in subdivision (ii) of this subparagraph and is either of a character subject to the allowance for depreciation provided in section 167 or land, and
(b) Either (1) a Federal, State, or local agency exercising jurisdiction has certified that the facility, as designed, is in furtherance of the purpose of abating or controlling atmospheric pollutants or contaminants, or water pollution, as the case may be, or (2) the facility is designed to meet or exceed applicable Federal, State, and local requirements for the control of atmospheric pollutants or contaminants, or water pollution, as the case may be, in effect at the time the obligations, the proceeds of which are to be used to provide such facilities, are issued.
(ii) Property is described in this subdivision if it is property to be used, in whole or in part, to abate or control water or atmospheric pollution or contamination by removing, altering, disposing, or storing pollutants, contaminants, wastes, or heat. In the case of property to be used to control water pollution, such property includes the necessary intercepting sewers, pumping, power, and other equipment, and their appurtenances. For rules relating to facilities which remove pollutants from fuel or certain other items, see subdivision (vi) of this subparagraph.
(iii) In the case of an expenditure for property which is designed for no significant purpose other than the control of pollution, the total expenditure for such property satisfies the test of this subdivision. Thus, where property which is to serve no function other than the control of pollution is to be added to an existing manufacturing or production facility, the total expenditure for such property satisfies the test of this subdivision. Also, if an expenditure for property would not be made but for the purpose of controlling pollution, and if the expenditure has no significant purpose other than the purpose of pollution control, the total expenditure for such property satisfies the test of this subdivision even though such property serves one or more functions in addition to its function as a pollution control facility.
(iv) In the case of property to be placed in service for the purpose of controlling pollution and for a significant purpose other than controlling pollution, only the incremental cost of such facility satisfies the test of this subdivision. The “incremental cost” of property is the excess of its total cost over that portion of its cost expended for a purpose other than the control of pollution.
(v) An expenditure has a significant purpose other than the control of pollution if it results in an increase in production or capacity, or in a material extension of the useful life of a manufacturing or production facility or a part thereof.
(h) Water facilities—(1) General rule. Section 103(b)(4)(G) provides that section 103(b)(1) shall not apply to obligations issued by a State or local governmental unit which are part of an issue substantially all of the proceeds of which are to be used to provide facilities for the furnishing of water which are available, on reasonable demand, to members of the general public. A water facility will satisfy the public use test of paragraph (a)(2) of this section if it will provide water, on reasonable demand, to any member of the general public within the service area of the water system of which such facility is a part.
(2) Definition. For purposes of section 103(b)(4)(G) and this paragraph, the “water facilities” include artesian wells, reservoirs, dams, related equipment and pipelines, and other facilities used to furnish water for domestic, industrial, irrigation, or other purposes.
(3) Effective date. The provisions of this paragraph apply in the case of facilities provided by obligations issued after January 1, 1969. In the case of facilities provided by obligations issued on or before such date to which section 103(b) is applicable, the provisions of paragraph (f) of this section shall apply. For such purposes, wherever the term “local furnishing of electric energy or gas” appears in paragraph (f) of this section, such term shall be deemed to read “local furnishing of electric energy, gas, or water.”
(i) Examples. The application of section 103(b)(4) and this section are illustrated by the following examples:
§ 1.103-9 Interest on bonds to finance industrial parks.
(a) General rule. (1) Under section 103(c)(5), interest paid on an issue of obligations issued by a State or local governmental unit (as defined in § 1.103-1) is not includable in gross income if substantially all of the proceeds of such issue is to be used to finance the acquisition or development of land as the site for an industrial park (referred to in this section as “industrial park bonds”). However, interest on an obligation of such an issue is includable in gross income if the obligation is held by a substantial user or a related person (as described in section 103(c)(7) and § 1.103-11). If substantially all of the proceeds of a bond issue is to be so used to finance an industrial park, the debt obligations are treated as obligations described in section 103(a)(1) and § 1.103-1 even though such obligations are industrial development bonds within the meaning of section 103(c)(2) and § 1.103-7. Whether substantially all of the proceeds of an issue of governmental obligations are used to finance an industrial park is determined consistently with the rules for exempt facilities in § 1.103-8(a)(1)(i).
(2) The provisions of subparagraph (1) of this paragraph shall also apply to an issue of obligations substantially all of the proceeds of which is to be used to acquire or develop land as the site for an industrial park described in section 103(c)(5) and this section and for either or both of the following purposes: (i) To finance exempt facilities described in section 103(c)(4) and § 1.103-8, (ii) to finance facilities to be used by an exempt person.
(3) Section 103(c)(5) only becomes applicable where the bond issue meets both the trade or business and the security interest tests so that the obligations are industrial development bonds within the meaning of section 103(c)(2). For the interrelationship of the rules provided in this section and the exemption for certain small issues provided in section 103(c)(6), see § 1.103-10.
(b) Definition of an industrial park. For purposes of section 103(c)(5) and this section, the term “industrial park” means a tract of land, other than a tract of land intended for use by a single enterprise, suitable primarily for use as building sites by a group of enterprises engaged in industrial, distribution, or wholesale businesses if either—
(1) The control and administration of the tract is vested in an exempt person (within the meaning of paragraph (b)(2) of § 1.103-7), or
(2) The uses of the tract are normally (i) regulated by protective minimum restrictions, ordinarily including the size of individual sites, parking and loading regulations, and building setback lines, and (ii) designed to be compatible, under a comprehensive plan, with the community in which the industrial park is located and with the uses of the surrounding land.
(c) Development of land defined. For purposes of section 103(c)(5) and this section, the term “development of land” includes the provision of certain improvements to an industrial park site if such improvements are incidental to the use of the land as an industrial park. Such incidental improvements include the building or installation of incidental water, sewer, sewage and waste disposal, drainage, or similar facilities (whether surface, subsurface, or both). Such incidental improvements include the provision of incidental transportation facilities, such as hard-surface roads (including curbs and gutters) and railroad spurs and sidings; power distribution facilities, such as gas and electric lines; and communication facilities. The provision of structures or buildings of any kind is not included within the meaning of the term “development of land,” except for those structures or buildings which are necessary in connection with the incidental improvements encompassed by the term, such as, for example, a water pumphouse and storage tank needed in connection with the incidental provision of water facilities in an industrial park.
(d) Examples. The application of the rules contained in section 103(c)(5) and this section are illustrated by the following examples:
§ 1.103-10 Exemption for certain small issues of industrial development bonds.
(a) In general. Section 103(b)(6) applies to certain industrial development bond issues (referred to in this section as “exempt small issues”) and bonds issued to refund certain issues (referred to in this section as “exempt small refunding issues”). If an issue is an exempt small issue or an exempt small refunding issue, then under the requirements of section 103(b)(6) and this section the interest paid on the debt obligations is not includable in gross income, and the obligations are treated as obligations described in section 103(a)(1) and § 1.103-1, even though such obligations are industrial development bonds as defined in section 103(b)(2) and § 1.103-7. However, interest on an obligation of such an issue is includable in gross income if the obligation is held by a substantial user of the financed facilities or a related person (as described in section 103(b)(7) and § 1.103-11). Section 103(b)(6) only becomes applicable where the bond issue meets both the trade or business and the security interest tests so that the obligations are industrial development bonds within the meaning of section 103(b)(2). For bonds issued before January 1, 1979, in taxable years ending before such date, and for capital expenditures made before January 1, 1979, with respect to such bonds, paragraphs (b), (c), and (d) of this section shall be applied by substituting $5 million for $10 million.
(b) Small issue exemption—(1) $1 million or less. Section 103(b)(6)(A) provides that section 103(b)(1) shall not apply to any debt obligation issued by a State or local governmental unit as part of an issue where—
(i) The aggregate authorized face amount of such issue (determined by aggregating the outstanding face amount of any prior exempt small issues described in paragraph (d) of this section and the face amount of the issue of obligations in question) is $1 million or less; and
(ii) Substantially all of the proceeds of such issue is to be used for the acquisition, construction, reconstruction, or improvement of land or property of a character subject to the allowance for depreciation under section 167. Proceeds which are loaned to a borrower for use as working capital or to finance inventory are not used in the manner described in the preceding sentence. Whether substantially all of the proceeds of an issue of governmental obligations are used in such manner is determined consistently with the rules for exempt facilities in § 1.103-8(a)(1)(i). Any obligation which is an industrial development bond within the meaning of section 103(b)(2) and which satisfies the $1 million small issue exemption requirements is an exempt small issue. See paragraph (c)(1) of this section for the treatment of refunding issues of $1 million or less.
(2) $10 million or less. (i) Under section 103(b)(6)(D), the issuing State or local governmental unit may elect to have an aggregate authorized face amount of $10 million or less, in lieu of the $1 million exemption otherwise provided for in section 103(b)(6)(A), with respect to issues of obligations that are industrial development bonds (within the meaning of section 103(b)(2)) issued after October 24, 1968. If the election is made in a timely manner, the bonds will be treated as obligations of a State or local governmental unit described in section 103(a)(1) and § 1.103-1 if the sum of—
(a) The aggregate face amount of the issue including the aggregate outstanding face amount of any prior $1 million or $10 million exempt small issues taken into account under section 103(b)(6)(B) and paragraph (d) of this section, and
(b) The aggregate amount of “section 103(b)(6)(D) capital expenditures” (within the meaning of paragraph (b)(2)(ii) of this section),
(ii) The term “section 103(b)(6)(D) capital expenditure” is defined in this subdivision. Special rules for applying such definition in the case of certain expenditures paid or incurred by a State or local governmental unit are prescribed in subdivision (iii) of this subparagraph. Except as excluded by subdivision (iv) or (v) of this subparagraph, an expenditure (regardless of how paid, whether in cash, notes, or stock in a taxable or nontaxable transaction) is a section 103(b)(6)(D) capital expenditure if—
(a) The capital expenditure was financed other than out of the proceeds of issues to the extent such issues are taken into account under paragraph (b)(2)(i)(a) of this section.
(b) The capital expenditures were paid or incurred during the 6-year period which begins 3 years before the date of issuance of the issue in question and ends 3 years after such date,
(c) The principal user of the facility in connection with which the property resulting from the capital expenditures is used and the principal user of the facility financed by the proceeds of the issue in question is the same person or are two or more related persons (as defined in section 103(b)(6)(C) and paragraph (e) of this section),
(d) Both facilities referred to in (c) of this subdivision were (during the period described in (b) of this subdivision or a part thereof) located in the same incorporated municipality or in the same county outside of the incorporated municipalities in such county), and
(e) The capital expenditures were properly chargeable to the capital account of any person or State or local governmental unit (whether or not such person is the principal user of the facility or a related person) determined, for this purpose, without regard to any rule of the Code which permits expenditures properly chargeable to capital account to be treated as current expenses. With respect to obligations issued on or after August 8, 1972, determinations under the preceding sentence shall be made by including any expenditure which may, under any rule or election under the Code, be treated as a capital expenditure (whether or not such expenditure is so treated). With respect to obligations issued on or after August 8, 1972, for purposes of this subparagraph, capital expenditures made with respect to a contiguous or integrated facility which is located on both sides of a border between two or more political jurisdictions are made with respect to a facility located in all such jurisdictions and, therefore, shall be treated as if they were made in each such political jurisdiction.
(iii) Amounts properly chargeable to capital account under subdivision (ii) (e) of this subparagraph include capital expenditures made by a State or local governmental unit with respect to an exempt facility or an industrial park, within the 6-year period described in subdivision (ii)(b) of this subparagraph, out of the proceeds of bond issues to which section 103(b)(1) did not apply by reason of section 103(b) (4) or (5) (relating to certain exempt activities and industrial parks). Thus, for example, the cost to the lessor of a leased plantsite financed out of the proceeds of an issue for an exempt air pollution control facility under section 103(b)(4)(F) and paragraph (g) of § 1.103-8 would constitute a section 103(b)(6)(D) capital expenditure. However, in the case of an industrial park, only the land costs allocated on an area basis to the plantsite and the actual cost of any improvements made on the plantsite, or to be used principally in connection with the actual plantsite occupied by a principal user or a related person, shall be taken into account as capital expenditures. Where the actual amount of capital expenditures made with respect to a facility by a person (including a State or local governmental unit) other than the user of such facility (or a related person) cannot be ascertained, the fair market value of the property with respect to which the capital expenditures were made, at the time of such capital expenditures, shall be deemed to be the amount of such capital expenditures. In the case of a transaction which is not in form a purchase but which is treated as a purchase for Federal income tax purposes, the purchase price for Federal income tax purposes shall constitute a capital expenditure.
(iv) A section 103(b)(6)(D) capital expenditure shall not include any “excluded expenditure” described in (a) through (e) of this subdivision (iv).
(a) A capital expenditure is an excluded expenditure if either it is made by a public utility company which is not the principal user of the facility financed by the proceeds of the issue in question (or a related person) with respect to property of such company, or it is made by a State or local governmental unit with respect to property of such unit, and if in either case it meets all of the following three conditions: Such property of such company or unit (as the case may be) must be used to provide gas, water, sewage disposal services, electric energy, or telephone service. Such property must be installed in, or connected to, the facility but must not consist of property which is such an integral part of the facility that the cost of such property is ordinarily included as part of the acquisition, construction, or reconstruction cost of such facility. Such property must be of a type normally paid for by the user (or a related person) in the form of periodic fees based upon time or use.
(b) A capital expenditure is an excluded expenditure if it is made by a person other than the user, a related person, or a State or local governmental unit and if it is made with respect to tangible personal property (within the meaning of paragraph (c) of § 1.48-1), or intangible personal property, leased to the user (or a related person) of a facility. However, the preceding sentence shall apply only if such personal property is leased by the manufacturer of such tangible or intangible personal property, or by a person in the trade or business of leasing property the same as, or similar to, such personal property, and only if, pursuant to general business practice, property of such type is ordinarily the subject of a lease.
(c) A capital expenditure is an excluded expenditure if it is made to replace property damaged or destroyed by fire, storm, or other casualty, to the extent that these expenditures do not exceed in dollar amount the fair market value (determined immediately before the casualty) of the property replaced.
(d) A capital expenditure is an excluded expenditure if it is required by a change made after the date of issue in a Federal or State law, or a local ordinance which has general application, or if it is required by a change made after such date in rules and regulations of general application issued under such law or ordinance.
(e) A capital expenditure is an excluded expenditure if it is required by or arises out of circumstances which could not reasonably be foreseen on the date of issue or which arise out of a mistake of law or fact. However, the aggregate dollar amount taken into account under this subdivision (e) with respect to any issue may not exceed $1 million. With respect to expenditures incurred prior to December 11, 1971, the dollar amount specified in the preceding sentence shall be $250,000.
(v)(a) If the assets of a corporation are acquired by another corporation in a transaction to which section 381(a) (relating to carryovers in certain corporate acquisitions) applies, the exchange of consideration by the acquiring corporation for such assets is not a section 103(b)(6)(D) capital expenditure by such acquiring corporation.
(b) However, if an exchange referred to in (a) of this subdivision occurs during the 6-year period beginning 3 years before the date of issuance of an issue of obligations and ending 3 years after such date, the transferor and transferee shall be treated as having been related persons for the portion of such 6-year period preceding the date of the exchange for purposes of determining whether section 103(b)(6)(D) capital expenditures have been made. For purposes of this subdivision (b), the date of an exchange to which section 381 applies shall be the date of distribution or transfer within the meaning of paragraph (b) of § 1.381(b)-1.
(c) If section 351(a) applies to a transfer of property to a corporation solely in exchange for its stock or securities, the issuance of such stock or securities in such exchange is not a section 103(b)(6)(D) capital expenditure by such corporation.
(d) However, if such a transfer referred to in (c) of this subdivision occurs during the 6-year period beginning 3 years before the date of issuance of an issue of obligations and ending 3 years after such date, and if, with respect to the property transferred, expenditures made within such period would have been section 103(b)(6)(D) capital expenditures if the transferor and transferee had been related persons for such period, then such expenditures shall be considered to be section 103(b)(6)(D) capital expenditures made by the transferee. In addition, if a transferor and transferee are related persons immediately following such transfer, such transferor and transferee shall also be treated as having been related persons for the portion of such 6-year period preceding the date of such transfer.
(e) For purposes of this subdivision (v), the term “issue of obligations” means an issue being tested for purposes of qualifying or continuing to qualify under an election pursuant to section 103(b)(6)(D) as to which an amount which would be a section 103(b)(6)(D) capital expenditure solely by reason of (b) or (d) of this subdivision must be taken into account.
(f) If with respect to an issue of obligations an expenditure would not have been a section 103(b)(6)(D) capital expenditure but for the application of (b) or (d) of this subdivision, and if such section 103(b)(6)(D) capital expenditure has the effect of making taxable the interest on an issue of obligations which qualified for exemption under section 103(b)(6)(A) and this paragraph, the loss of tax exemption for such interest shall begin not earlier than the date of such exchange or transfer referred to in this subdivision (v).
(vi) The issuer may make the election provided by section 103(b)(6)(D) and this paragraph (b)(2) (assuming that the bonds otherwise qualify under section 103(b)(6) by noting the election affirmatively at or before the time of issuance of the issue in question on its books or records with respect to the issue. The term “books or records” includes the bond resolution or other similar legislation for the issue in question as well as the bond transcript or other compilation of bond and bond-related documents. If the issuer fails to make an election at the time and in the manner prescribed in this paragraph (b)(2), the issue will not be treated as described in section 103(b)(6)(D), and interest thereon will be includible in gross income.
(c) Refunding or refinancing issue exemption—(1) $1 million or less refunding issue. Section 103(b)(6)(A) also provides that section 103(b)(1) shall not apply to any debt obligation issued by a State or local governmental unit as part of an issue the aggregate authorized face amount of which is $1 million or less, if substantially all of the proceeds of such issue are to be used—
(i) To redeem part of all of a prior issue substantially all of the proceeds of which were used to acquire, construct, reconstruct, or improve land or property of a character subject to the allowance for depreciation, or
(ii) To redeem part or all of a prior exempt small refunding issue.
(2) 10 million or less refinancing issue. Section 103(b)(6)(H) provides that section 103(b)(1) shall not apply to any debt obligation issued by a governmental unit as part of an issue which is $10 million or less if the condition of section 103(b)(6)(H) is met and if substantially all of the proceeds are to be used—
(i) To redeem part or all of one or more prior exempt small issues, or
(ii) To redeem part or all of one or more prior exempt small refunding issues.
(d) Certain prior issues taken into account—(1) In general. Section 103(b)(6)(B) provides, in effect, that if (i) a prior issue specified in subparagraph (2) of this paragraph is an exempt small issue (including for this purpose an exempt small refunding issue) under section 103(b)(6)(A) and this section, and (ii) such prior issue is outstanding at the time of issuance of a subsequent issue, then in determining the aggregate face amount of such subsequent issue (for purposes of determining whether such issue is a $1 million or $10 million exempt small issue under section 103(b)(6)(A) and this section) there shall be taken into account the outstanding face amount of such prior exempt small issue. For purposes of this paragraph, the outstanding face amount of a prior exempt small issue does not include the face amount of any obligation which is to be redeemed from the proceeds of such subsequent issue.
(2) Prior issues specified. The face amount of an outstanding prior exempt small issue is taken into account under subparagraph (1) of this paragraph if—
(i) The proceeds of both the prior exempt small issue and of the subsequent issue (whether or not the State or local governmental unit issuing such obligation is the same unit for each such issue) are or will be used primarily with respect to facilities located or to be located in the same incorporated municipality or located or to be located in the same county outside of an incorporated municipality in such county (and, for purposes of this subdivision, on or after August 8, 1972, a contiguous or integrated facility which is located on both sides of a border between two or more political jurisdictions shall be treated as if it is entirely within each such political jurisdiction), and
(ii) The principal user of the financed facilities referred to in subdivision (i) of this subparagraph is or will be the same person or two or more related persons (as defined in section 103(b)(6)(C) and paragraph (e) of this section).
(3) Rules of application. The rules of this paragraph shall apply—
(i) Only in the case of outstanding prior exempt small issues which are industrial development bonds to which section 103(b)(1) would have applied but for the provisions of section 103(b)(6). Thus, for example, the provisions of this paragraph do not apply in respect of a prior issue of obligations issued on or before April 30, 1968. In addition, the provisions of this paragraph do not apply in respect of a prior issue for an exempt facility under section 103(b)(4) and § 1.103-8, or for an industrial park under section 103(b)(5) and § 1.103-9, whether or not the issue might also have qualified as an exempt small issue under section 103(b)(6)(A) and this section.
(ii) To all prior exempt small issues which meet the requirements of this paragraph. Thus, for example, in determining the aggregate face amount of an issue under section 103(b)(6)(A), the outstanding face amount of prior $1 million or $10 million exempt small issues which meet the requirements of this paragraph shall be taken into account in determining the aggregate face amount of a subsequent issue being tested for the $1 million small issue exemption. Similarly, in determining the aggregate face amount of an issue under section 103(b)(6)(A) and (D), the outstanding face amount of prior $1 million or $10 million exempt small issues which meet the requirements of this paragraph shall be taken into account in determining the aggregate face amount of a subsequent issue being tested for the $10 million small issue exemption.
(e) Related persons. For purposes of section 103(b) and §§ 1.103-7 through 1.103-11, the term “related person” means a person who is related to another person if, on the date of issue of an issue of obligations—
(1) The relationship between such persons would result in a disallowance of losses under section 267 (relating to disallowance of losses, etc., between related taxpayers) and section 707(b) (relating to losses disallowed, etc., between partners and controlled partnerships) and the regulations thereunder, or
(2) Such persons are members of the same controlled group of corporations, as defined in section 1563(a), relating to definition of controlled group of corporations (except that “more than 50 percent” shall be substituted for “at least 80 percent” each place it appears in section 1563(a)) and the regulations thereunder.
(f) Disqualification of certain small issues. (1) Section 103(b)(6) shall not apply to any obligation issued after April 24, 1979, which is part of an issue, a significant portion of the proceeds of which are to be used directly or indirectly to provide residential real property for family units. For purposes of the preceding sentence, the term “residential real property for family units” means residential rental projects (within the meaning of § 1.103-8(b)) and owner-occupied residences (within the meaning of section 103A).
(2) For purposes of paragraph (f)(1), a significant portion of the proceeds of an issue are used to provide residential real property for family units if 5 percent or more of the proceeds are so used.
(g) Examples. The application of the rules contained in section 103(b)(6) and this section are illustrated by the following examples:
§ 1.103-11 Bonds held by substantial users.
(a) In general. Section 103(c) (4), (5), or (6) (relating respectively to interest on bonds to finance certain exempt facilities, interest on bonds to finance industrial parks, and the exemption for certain small issues of industrial development bonds) does not apply, as provided in section 103(c)(7), with respect to any obligation for any period during which such obligation is held either by a person who is a substantial user of the facilities with respect to which the proceeds of such obligation were used or by a related person (within the meaning of section 103(c)(6)(C) and paragraph (e) of § 1.103-10). Therefore, in such a case, interest paid on such an obligation is includable in the gross income of a substantial user (or related person) for any period during which such obligation is held by such user (or related person).
(b) Substantial user. In general, a substantial user of a facility includes any nonexempt person who regularly uses a part of such facility in his trade or business. However, unless a facility, or a part thereof, is constructed, reconstructed, or acquired specifically for a nonexempt person or persons, such a nonexempt person shall be considered to be a substantial user of a facility only if (1) the gross revenue derived by such user with respect to such facility is more than 5 percent of the total revenue derived by all users of such facility or (2) the amount of area of the facility occupied by such user is more than 5 percent of the entire usable area of the facility. Under certain facts and circumstances, where a nonexempt person has a contractual or preemptive right to the exclusive use of property or a portion of property, such person may be a substantial user of such property. A substantial user may also be a lessee or sublessee of all or any portion of the facility. A licensee or similar person may also be a substantial user where his use is regular and is not merely a casual, infrequent, or sporadic use of the facility. Absent special circumstances, individuals who are physically present on or in the facility as employees of a substantial user shall not be deemed to be substantial users.
(c) Examples. The application of section 103(c)(7) and this section are illustrated by the following examples:
§ 1.103-16 Obligations of certain volunteer fire departments.
(a) General rule. An obligation of a volunteer fire department issued after December 31, 1980, shall be treated as an obligation of a political subdivision of a State for purposes of section 103(a)(1) if—
(1) The volunteer fire department is a qualified volunteer fire department within the meaning of paragraph (b) of this section, and
(2) Substantially all of the proceeds of the issue of which the obligation is a part are to be used for the acquisition, construction, reconstruction, or improvement of a fire house or fire truck used or to be used by the qualified volunteer fire department.
(b) Definition of qualified volunteer fire department. For purposes of this section, the term “qualified volunteer fire department” means an organization—
(1) That is organized and operated to provide firefighting services or emergency medical services in an area within the jurisdiction of a political subdivision, and
(2) That is required to furnish firefighting services by written agreement with the political subdivision, and
(3) That serves persons in an area within the jurisdiction of the political subdivision that is not provided with any other firefighting services.
(c) “Substantially all” test. Substantially all of the proceeds of an issue are used for the purposes specified in paragraph (a)(2) of this section if 90 percent or more of the proceeds are so used. Thus, for example, if more than 10 percent of the proceeds of an obligation issued by a qualified volunteer fire department are used for the purchase of an ambulance or for rescue equipment not to be used in providing fire fighting services, interest on the obligation is not exempt from tax under section 103(i) and this section. In computing this percentage—
(1) Costs are allocated between providing a firehouse or firetruck and other uses of the proceeds on a pro rata basis; and
(2) The rules set forth in § 1.103-8(a)(1)(i), relating to amounts allocable to exempt and nonexempt uses and amounts chargeable to capital account, apply.
(d) Refunding issues. An obligation which is part of an issue issued by a qualified volunteer fire department after December 31, 1980, part or all of the proceeds of which issue are used directly or indirectly to pay principal, interest, call premium, or reasonable incidental costs of refunding a prior issue qualifies as an obligation of a political subdivision under section 103(i) and this section only if—
(1) The prior issue was issued by a qualified volunteer fire department;
(2) Substantially all of the proceeds of the prior issue were used for the purposes described in paragraph (a)(2) of this section;
(3) The prior issue was issued after December 31, 1980; and
(4) The refunding issue is issued not more than 180 days before the date on which the last obligation of the prior issue is discharged (within the meaning of § 1.103-13)(b)(11)).
(e) Examples. The provisions of this section may be illustrated by the following examples:
§ 1.103A-2 Qualified mortgage bond.
(a)-(j) [Reserved]
(k) Information reporting requirement—(1) In general. An issue meets the requirements of this paragraph only if the issuer in good faith attempted to meet the information reporting requirements of this paragraph. Except as otherwise provided in paragraph (k)(5)(iv) of this section, the requirements of this paragraph apply to qualified veterans’ mortgage bonds issued after July 18, 1984, and to qualified mortgage bonds issued after December 31, 1984. With respect to bonds issued after December 31, 1986, see the regulations under section 149(e).
(2) Information required. (i) The issuer must, based on information and reasonable expectations determined as of the date of issue, submit on Form 8038 the information required therein; the issuer need not however, include the information required by Form 8038 that is relevant only to obligations described in section 103(l)(1) and the regulations thereunder. The information that must be submitted includes—
(A) The name, address, and employer identification number of the issuer,
(B) The date of issue,
(C) The face amount of each obligation which is part of the issue,
(D) The total purchase price of the issue,
(E) The amount allocated to a reasonably required reserve or replacement fund,
(F) The amount of lendable proceeds,
(G) The stated interest rate of each maturity,
(H) The term of each maturity,
(I) In the case of an issue of qualified mortgage bonds, whether the issuer has elected under § 6a.103A-2(i)(4)(v) to pay arbitrage to the United States,
(J) In the case of an issue of qualified mortgage bonds, the issuer’s market limitation as of the date of issue (as defined in § 6a.103A-2(g)), the amount of qualified mortgage bonds that the issuer has elected not to issue under section 25(c)(2) and the regulations thereunder, and the aggregate amount of qualified mortgage bonds issued to date by the issuer during the calendar year, and
(K) In the case of an issue of qualified veterans’ mortgage bonds, the issuer’s State veterans limit (as defined in section 103A(o)(3)(B) and the regulations thereunder) and the aggregate amount of qualified veterans’ mortgage bonds issued to date by the issuer during the calendar year and prior to the date of issue of the issue for which the Form 8038 is being submitted.
(ii) With respect to issues issued after December 31, 1984, the issuer must submit a report containing information on the borrowers of the original proceeds of such issues. The report must be filed for each reporting period in which the original proceeds of any of such issues are used to provide mortgages. The issuer is not responsible for false information provided by a borrower if the issuer did not know or have reason to know that the information was false. The report must be filed on the form prescribed by the Internal Revenue Service. If no form is prescribed, or if the form prescribed is not readily available, the issuer may use its own form provided that such form is in the format set forth in paragraph (k)(3) of this section and contains the information required by this paragraph (k)(2)(ii). The report must be titled “Qualified Mortgage Bond Information Report” or “Qualified Veterans’ Mortgage Bond Information Report”, and must include the name, address, and TIN of the issuer, the reporting period for which the information is provided, and the following tables containing information concerning the borrowers of the original proceeds of the issues subject to the requirements of this paragraph (k)(2)(ii) with respect to mortgages provided during the reporting period for which the report is filed:
(A) A table titled “Number of Mortgage Loans by Income and Acquisition Cost” showing the number of mortgage loans (other than those issued in connection with qualified home improvement and rehabilitation loans) made during the reporting period according to the annualized gross income of the borrowers (categorized in the following intervals of income:
(1) Did not have a present ownership interest in a principal residence at any time during the 3-year period ending on the date the mortgage is executed (i.e., satisfied the 3-year requirement) and purchased residences in targeted areas,
(2) Satisfied the 3-year requirement and purchased residences not located in targeted areas,
(3) Did have a present ownership interest in a principal residence at any time during the 3-year period ending on the date the mortgage is executed (i.e., did not satisfy the 3-year requirement) and purchased residences in targeted areas, and
(4) Did not satisfy the 3-year requirement and purchased residences not located in targeted areas.
(B) A table titled “Volume of Mortgage Loans by Income and Acquisition Cost” showing the total principal amount of the mortgage loans (other than qualified home improvement and rehabilitation loans) provided during the reporting period according to annualized gross income (categorized in the same intervals of income as the preceding table) and according to the acquisition cost of the residences acquired (categorized in the same acquisition cost intervals as the preceding table). For each interval of income and acquisition cost the table must also be categorized according to the total principal amount of the mortgage loans of borrowers that—
(1) Satisfied the 3-year requirement and purchased residences in targeted areas,
(2) Satisfied the 3-year requirement and purchased residences not located in targeted areas,
(3) Did not satisfy the 3-year requirement and purchased residences in targeted areas, and
(4) Did not satisfy the 3-year requirement and purchased residences not located in targeted areas.
(C) For issues other than qualified veterans’ mortgage bonds, a table titled “Mortgage Subsidy Bonds for Qualified Home Improvement and Rehabilitation Loans” showing the number of borrowers obtaining qualified home improvement loans and qualified rehabilitation loans and the total of the principal amounts of such loans; the information contained in the table must also be categorized according to whether the residences with respect to which the loans were provided are located in targeted areas.
(3) Format. (i) With respect to the report required by paragraph (k)(2)(ii) of this section, if no form is prescribed by the Internal Revenue Service, or if the prescribed form is not readily available, the issuer must submit the report in the format specified in this paragraph (k)(3).
(ii) With respect to issues of qualified mortgage bonds, the format of the report specified in this paragraph (k)(3) is the following:
Number of Mortgage Loans by Income and Acquisition Cost
| 3-year requirement: Annualized gross monthly income of borrowers | Satisfied | Not Satisfied | Totals | ||
|---|---|---|---|---|---|
| Nontargeted area | Targeted area | Nontargeted area | Targeted area | ||
| $0 to $9,999 | |||||
| $10,000 to $19,999 | |||||
| $20,000 to $29,999 | |||||
| $30,000 to $39,999 | |||||
| $40,000 to $49,999 | |||||
| $50,000 to $74,999 | |||||
| $75,000 or more | |||||
| Total | |||||
| Acquisition Cost | |||||
| $0 to $19,999 | |||||
| $20,000 to $39,999 | |||||
| $40,000 to $59,999 | |||||
| $60,000 to $79,999 | |||||
| $80,000 to $99,999 | |||||
| $100,000 to $119,999 | |||||
| $120,000 to $149,999 | |||||
| $150,000 to $199,999 | |||||
| $200,000 or more | |||||
| Total | |||||
Volume of Mortgage Loans by Income and Acquisition Cost
| 3-year requirement: Annualized gross monthly income of borrowers | Satisfied | Not Satisfied | Totals | ||
|---|---|---|---|---|---|
| Nontargeted area | Targeted area | Nontargeted area | Targeted area | ||
| $0 to $9,999 | |||||
| $10,000 to $19,999 | |||||
| $20,000 to $29,999 | |||||
| $30,000 to $39,999 | |||||
| $40,000 to $49,999 | |||||
| $50,000 to $74,999 | |||||
| $75,000 or more | |||||
| Total | |||||
| Acquisition Cost | |||||
| $0 to $19,999 | |||||
| $20,000 to $39,999 | |||||
| $40,000 to $59,999 | |||||
| $60,000 to $79,999 | |||||
| $80,000 to $99,999 | |||||
| $100,000 to $119,999 | |||||
| $120,000 to $149,999 | |||||
| $150,000 to $199,999 | |||||
| $200,000 or more | |||||
| Total | |||||
Mortgage Subsidy Bonds for Qualified Home Improvement and Rehabilitation Loans
| Nontargeted area | Targeted area | Totals | |
|---|---|---|---|
| Number of qualified home improvement loans | |||
| Volume of qualified home improvement loans | |||
| Number of qualified rehabilitation loans | |||
| Volume of qualified rehabilitation loans |
(iii) The format of the report specified in this paragraph (k)(3) for qualified veterans’ mortgage bonds is the following:
Number of Mortgage Loans by Income and Acquisition Cost
| 3-year requirement: annualized gross monthly income of borrowers | Satisfied | Not satisfied | Totals |
|---|---|---|---|
| $0 to $9,999 | |||
| $10,000 to $19,999 | |||
| $20,000 to $29,999 | |||
| $30,000 to $39,999 | |||
| $40,000 to $49,999 | |||
| $50,000 to $74,999 | |||
| $75,000 or more | |||
| Total | |||
| Acquistion Cost | |||
| $0 to $19,999 | |||
| $20,000 to $39,999 | |||
| $40,000 to $59,999 | |||
| $60,000 to $79,999 | |||
| $80,000 to $99,999 | |||
| $100,000 to $119,999 | |||
| $120,000 to $149,999 | |||
| $150,000 to $199,999 | |||
| $200,000 or more | |||
| Total |
Number of Mortgage Loans by Income and Acquisition Cost
| 3-year requirement: annualized gross monthly income of borrowers | Satisfied | Not satisfied | Totals |
|---|---|---|---|
| $0 to $9,999 | |||
| $10,000 to $19,999 | |||
| $20,000 to $29,999 | |||
| $30,000 to $39,999 | |||
| $40,000 to $49,999 | |||
| $50,000 to $74,999 | |||
| $75,000 or more | |||
| Total | |||
| Acquistion Cost | |||
| $0 to $19,999 | |||
| $20,000 to $39,999 | |||
| $40,000 to $59,999 | |||
| $60,000 to $79,999 | |||
| $80,000 to $99,999 | |||
| $100,000 to $119,999 | |||
| $120,000 to $149,999 | |||
| $150,000 to $199,999 | |||
| $200,000 or more | |||
| Total |
(4) Definitions and special rules. (i) For purposes of this paragraph the term “annualized gross income” means the borrower’s gross monthly income muliplied by 12. Gross monthly income is the sum of monthly gross pay, any additional income from investments, pensions, Veterans Administration (VA) compensation, part-time employment, bonuses, dividends, interest, current overtime pay, net rental income, etc., and other income (such as alimony and child support, if the borrower has chosen to disclose such income). Information with respect to gross monthly income may be obtained from available loan documents, e.g., the sum of lines 23D and 23E on the Application for VA or FmHA Home Loan Guaranty or for HUD/FHA Insured Mortgage (VA Form 26-1802a, HUD 92900, Jan. 1982), or the total line from the Gross Monthly Income section of FHLMC Residential Loan Application form (FHLMC 65 Rev. 8/78). With respect to obligations issued prior to October 1, 1985, issuers may submit data based on annualized gross income or, instead, based on the adjusted income (as defined in § 1.167(k)-3(b)(3)) of the mortgagor’s family for the previous calendar year. If data is submitted based on adjusted income, the issuer must note this fact in the report.
(ii) For purposes of this paragraph, the term “reporting period” means the following periods:
(A) The period beginning January 1, 1985, and ending on September 30, 1985,
(B) The period beginning on October 1, 1985, and ending on June 30, 1986, and
(C) After June 30, 1986, each 1-year period beginning July 1 and ending June 30.
(iii) See the regulations under section 103(l) for the definitions of the terms “date of issue”, “maturity”, and “term of issue”.
(iv) For purposes of this paragraph, verification of information concernig a borrower’s gross monthly income with other available information concerning the borrower’s income (e.g., Federal income tax returns) is not required. In determining whether a borrower acquiring a residence in a targeted area satisfies the 3-year requirement, the issuer may rely on a statement signed by the borrower.
(5) Time for filing. (i) The report required by paragraph (k)(2)(i) of this section shall be filed not later than the 15th day of the second calendar month after the close of the calendar quarter in which the obligation is issued. The statement may be filed at any time before such date but must be complete based on facts and reasonable expectations as of the date of issue. The statement need not be amended to report information learned subsequent to the date of issue or to reflect changed circumstances with respect to the issuer.
(ii) The report required by paragraph (k)(2)(ii) of this section (relating to use of proceeds) shall be filed not later than the 15th day of the second calendar month after the close of the reporting period, except that the report for the reporting period ending September 30, 1985, is due not later than February 15, 1986. The report may be filed at any time before such date but must be complete based on facts and reasonable expectations as of the date the report is filed. The report need not be amended to reflect information learned subsequent to the date the report is filed or to reflect changed circumstances with respect to any borrower.
(iii) The Commissioner may grant an extension of time for the filing of a report required by paragraph (k)(2) (i) or (ii) of this section if there is reasonable cause for the failure to file such report in a timely fashion.
(iv) An issue of qualified veterans’ mortgage bonds issued after July 18, 1984, and prior to January 1, 1985, will be treated as satisfying the information reporting requirement of this paragraph if a Form 8038 with respect to the issue is properly filed not later than February 15, 1985; the report described in paragraph (k)(2)(ii) of this section need not be filed with respect to such issues.
(6) Place for filing. The reports required by paragraph (k)(2) (i) and (ii) of this section are to be filed at the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255.
(l) Policy statement—(1) In general. (i) For obligations issued after December 31, 1984, an issue meets the requirements of this paragraph only if the applicable elected representative of the governmental unit which is the issuer (or on behalf of which the issuing authority is empowered to issue qualified mortgage bonds) has published (after a public hearing following reasonable public notice) the report described in paragraph (l)(3) of this section by the last day of the year preceding the year in which such issue is issued and a copy of such report has been submitted to the Commissioner on or before such last day. The Commissioner may grant an extension of time for publishing and filing the report if there is reasonable cause for the failure to publish or file such report in a timely fashion. The requirements of this paragraph will be treated as met if the issuer in good faith attempted to meet the policy statement requirements of this paragraph.
(ii) With respect to reports required by paragraph (l)(1)(i) of this section to be published and submitted to the Commissioner not later than December 31, 1984, the Commissioner has determined that there is reasonable cause for the failure to publish or file such reports in a timely fashion; such a report will be considered published and filed in a timely fashion if, not later than March 11, 1985, the report is published (after a public hearing following reasonable public notice) and a copy is submitted to the Commissioner. In addition, any report submitted not later than December 31, 1984, with respect to which an issuer in good faith attempted to satisfy the requirements of section 103A(j)(5) shall be treated as substantially satisfying the requirements of this paragraph. For example, with respect to a report submitted not later than December 31, 1984, an issuer shall not be treated as failing to satisfy the requirements of section 103A(j)(5) based on the fact that (A) the notice of public hearing failed to state the manner in which affected residents may obtain copies of the proposed report prior to the hearing, or (B) the proposed report was not available prior to or at the public hearing. With respect to reports required to be published and submitted to the Commissioner not later than December 31, 1986, the Commissioner has determined that there is a reasonable cause for the failure to publish and file such reports in a timely fashion; such reports will be considered published and filed in a timely fashion if, not later than December 31, 1987, the report is published (after having a public hearing following reasonable public notice) and a copy is submitted to the Commissioner.
(2) Definitions and special rules. (i) In the case of an issuer that issues qualified mortgage bonds on behalf of one or more governmental units, a single report may be filed provided that such report is signed (A) by the applicable elected representative of each governmental unit on whose behalf obligations have been issued during any preceding calendar year or (B) by the Governor of the State in which the issuer is located.
(ii) See notice 103(k)(2)(E) and the regulations thereunder for the definition of the term “applicable elected representative”.
(iii) In the case of qualified mortgage bonds issued by, or on behalf of, a governmental unit that did not reasonably expect during the preceding calendar year to issue (or have issued on its behalf by any other issuer) qualified mortgage bonds during the current calendar year, the requirements of this paragraph will be treated as met if the applicable governmental unit which is the issuer (or on behalf of which the issuing authority is empowered to issue qualified mortgage bonds) has published (after a public hearing following reasonable public notice) the report described in paragraph (l)(3) of this section prior to the issuance of any qualified mortgage bonds and a copy of such report has been submitted to the Commissioner prior to such issuance.
(iv) For purposes of this paragraph a report will be considered to be “published” when the applicable elected representative of the governmental unit has made copies of the report available for distribution to the public. Reasonable public notice of the manner in which copies of the report may be obtained must be provided; such notice may be included as part of the public notice required by paragraph (l)(4) of this section.
(3) Report. (i) A report is described in this paragraph (l)(3) if it contains the issuer’s name, TIN, and the title “Policy Report Under Section 103A” stated on the cover page of the report and if it includes—
(A) A statement of the policies of the issuer with respect to housing, development, and low-income housing assistance which such issuer is to follow in issuing qualified mortgage bonds and mortgage credit certificates, and
(B) An assessment of the compliance of such issuer during the 1-year period preceding the date of the report with—
(1) The statement of policy on qualified mortgage bonds and mortgage credit certificates that was set forth in the previous report, if any, of the issuer, and
(2) The intent of Congress that State and local governments are expected to use their authority to issue qualified mortgage bonds and mortgage credit certificates to the greatest extent feasible (taking into account prevailing interest rates and conditions in the housing market) to assist lower income families to afford home ownership before assisting higher income families.
(ii) For example, a report described in this paragraph (l)(3) may (but is not required to) contain—
(A) A specific statement of the policies with respect to housing, development, and low-income housing assistance which the issuer is to follow in issuing qualified mortgage bonds and mortgage credit certificates, including, for example, a statement as to—
(1) With respect to housing policies, (i) whether the proceeds will be used to provide financing for the acquisition of residences, to provide qualified home improvement loans, or to provide qualified rehabilitation loans; (ii) whether all or a portion of the proceeds will be targeted to new, existing, or any other particular class or type of housing; (iii) how the existence of a need or absence of a need for such targeting has been determined; (iv) the method by which the proceeds will be targeted; (v) any other pertinent information relating to the issuer’s housing policies; and (vi) how the housing policies relate to the issuer’s development and low-income housing assistance policies;
(2) With respect to development policies, (i) whether all or a portion of the proceeds will be targeted to specific areas (including targeted areas as described in § 6a.103A-2(b)(3)); (ii) a description of the areas to which the proceeds will be targeted; (iii) the reasons for selecting such areas; (iv) whether proceeds targeted to each area are to be used to finance redevelopment of existing housing or new construction; (v) any other pertinent information relating to the issuer’s development policies; and (vi) how the development policies relate to the issuer’s low-income housing assistance policies; and
(3) With respect to low-income housing assistance policies, (i) whether all or a portion of the proceeds will be targeted to low-income (i.e., 80 percent of median income), moderate-income (i.e., 100 percent of median income), or any other class of borrowers; (ii) the method by which the proceeds will be targeted to such borrowers; and (iii) any other pertinent information relating to the issuer’s low-income housing assistance policies;
(B) An assessment of the compliance of the governmental unit or issuing authority during the twelve-month period ending with the date of the report with the statement of housing, development, and low-income housing assistance policies with respect to qualified mortgage bonds and mortgage credit certificates that were set forth in the report, if any, published in the preceding year with respect to such governmental unit, including, for example, a statement as to whether the governmental unit or issuing authority successfully implemented its policies and, if not, an analysis of the reasons for such failure; and
(C) An assessment of the compliance of the governmental unit or issuing authority during the twelve-month period ending with the date of the report with the intent of Congress that State and local governments are expected to use their authority to issue qualified mortgage bonds and mortgage credit certificates to the greatest extent feasible (taking into account prevailing interest rates and conditions in the housing market) to assist lower income families to afford home ownership before assisting higher income families, including, for example, a description of (1) the method used by the governmental unit or issuing authority to distribute proceeds, (2) whether and how that method enabled the governmental unit or issuing authority to assist lower income families before higher income families, and (3) any income levels that have been defined and used by the governmental unit or issuing authority in connection with distribution of the proceeds (no specific definition of lower income and higher income is imposed on governmental units or issuing authorities).
(iii) For purposes of the assessments of compliance required by paragraph (l)(3)(i)(B) of this section to be included in the report, the “date of the report” means June 30. For purposes of the report required to be filed prior to January 1, 1986, an issuer need not perform these assessments of compliance with respect to any period prior to January 1, 1985.
(iv) An issuer that fails to establish policies with respect to the criteria provided in paragraph (l)(3)(i) of this section will not be treated as failing to satisfy the requirements of this paragraph. Thus, for example, an issuer may state in its report that none of the proceeds of the issue will be targeted to specific areas. Similarly, an issuer that fails to successfully implement its policies will not be treated as failing to satisfy the requirements of this paragraph.
(4) Public hearing. The public hearing required by paragraph (l)(1) of this section means a forum providing a reasonable opportunity for interested individuals to express their views, both orally and in writing, on the report that the applicable representative proposes to publish to satisfy the requirements of this paragraph (l). A public hearing held prior to January 1, 1985, will not fail to satisfy the requirements of this paragraph (l)(4) merely because the proposed policy statement was not available prior to the public hearing. In general, a governmental unit may select its own procedure for the hearing, provided that interested individuals have a reasonable opportunity to express their views. Thus, it may impose reasonable requirements on persons who wish to participate in the hearing, such as a requirement that persons desiring to speak at the hearing so request in writing at least 24 hours before the hearing or that they limit their oral remarks to 10 minutes. For purposes of this public hearing requirement, it is not necessary that the applicable elected representative who will publish the report be present at the hearing, that a report on the hearing be submitted to that official, or that State administrative procedural requirements for public hearings in general be observed. However, compliance with such State procedural requirements (except those at variance with a specific requirement set forth in this paragraph) will generally assure that the hearing satisfies the requirements of this paragraph. The hearing may be conducted by any individual appointed or employed to perform such function by the governmental unit, its agencies, or by the issuer. Thus, for example, for a report to be issued by an issuing authority that acts on behalf of a county, the hearing may be conducted by the issuing authority, the county, or an appointee or employee of either.
(5) Reasonable public notice. (i) The reasonable public notice required by paragraph (l)(1) of this section means published notice which is reasonably designed to inform residents of the geographical area within the jurisdiction of the governmental unit that will publish the report. The notice must state the time and place for the hearing and contain the information required by paragraph (l)(5)(ii) of this section. Notice is presumed reasonable if published no fewer than 14 days before the hearing. Notice is presumed reasonably designed to inform affected residents only if published in one or more newspapers of general circulation available to residents of that locality or if announced by radio or televison broadcast to those residents.
(ii) The notice of hearing described in this paragraph (l)(5) must state—
(A) The time and place for the hearing,
(B) Any applicable limitations regarding participation in the hearing,
(C) With respect to any notice of hearing published after December 31, 1984, the manner in which affected residents may obtain copies of the proposed report prior to the hearing, and
(D) With respect to any notice of hearing published after December 31, 1984, that the hearing will involve the issuer’s policies with respect to housing, development, and low-income housing assistance which the issuer is to follow in issuing qualified mortgage bonds and mortgage credit certificates.
(6) Procedure for public hearings of multiple jurisdiction issuers. In the case of an issuer that issues qualified mortgage bonds on behalf of two or more governmental units (“multiple jurisdiction issuer”), each governmental unit on whose behalf the issuer reasonably expects to issue qualified mortgage bonds during the succeeding calendar year must hold a public hearing following reasonable public notice prior to the publication of the report required by this paragraph. A multiple jurisdiction issuer may hold a combined hearing as long as the combined hearing is a joint undertaking that provides all residents of the participating governmental units (i.e., each governmental unit on whose behalf qualified mortgage bonds were issued by the authority and each governmental unit on whose behalf the authority reasonably expects to issue qualified mortgage bonds during the succeeding calendar year) a reasonable opportunity to be heard. The location of any combined hearing is presumed to provide a reasonable opportunity for all affected residents to be heard if it is no farther than 100 miles from the seat of government of each participating governmental unit beyond whose geographic jurisdiction the hearing is conducted.
(7) Place for filing. The report is to be filed with the Internal Revenue Service Center, Philadelphia, Pennsylvania 19255.
(m) State certification requirements—(1) In general. An issue meets the requirements of this paragraph only if the issuer in good faith attempted to meet the State certification requirements of this paragraph. The requirements of this paragraph apply to obligations issued after December 31, 1984; see section 149(e) and the regulations thereunder with respect to obligations issued after December 31, 1986.
(2) Certification. (i) An issue satisfied the requirements of section 103A(j)(4) and this paragraph (m)(2) only if the State official designated by law (or, if there is no State official, the Governor) certifies on or before the later of the date of issue or October 3, 1985, following a request for such certification by the issuer, that, as of the date the certification is executed, the issue meets the requirements of section 103A(g) and the regulations thereunder (relating to volume limitation). In the case of any constitutional home rule city, the certification shall be made by the chief executive officer of the city. To the extent consistent with State and local law, the Governor (or the chief executive officer of any constitutional home rule city) may delegate the responsibility to execute the certification required by this paragraph.
(ii) The certifying official need not perform an independent investigation in order to determine whether the issue meets the requirements of section 103A(g). In determining the aggregate amount of qualified mortgage bonds previously issued by an issuer during a calendar year, the certifying official may rely on copies of the reports submitted, to date, by the issuer pursuant to section 103A(j)(3) for other issues of qualified mortgage bonds issued during that year and copies of any elections previously made pursuant to section 25(c)(2) not to issue qualified mortgage bonds, together with an affidavit executed by an officer of the issuer responsible for issuing the bonds stating that the issuer has not, to date during the calendar year, issued any other qualified mortgage bonds, the amount, if any, of the issuer’s market limitation that it has, to date during the calendar year, surrendered to other issuing authorities, and that it has not, to date during the calendar year, made any other elections not to issue qualified mortgage bonds. If, based on such information, the certifying official determines that, as of the date the certification is executed, the issue will not exceed the issuer’s market limitation for the year, the official may certify that the issue meets the requirements of section 103A(g).
(3) Special rule. If 15 days elapse after the issuer files a proper request for the certification described in paragraph (m)(2) of this section and the issuer has not received from the State official designated by law (or, if there is no State official, the Governor) certification that the issue meets the requirements of section 103A(g) and § 6a.103A-2(g) or, in the alternative, a statement that the issue does not meet such requirements, the issuer may, instead, submit an affidavit executed by an officer of the issuer responsible for issuing the bonds stating that—
(i) The issue meets the requirements of section 103(A)(g) and § 6a.103A-2(g),
(ii) At least 15 days before the execution of the affidavit the issuer filed a proper request for the certification described in paragraph (m)(2) of this section, and
(iii) The State official designated by law (or, if there is no State official, the Governor) has not provided the certification described in paragraph (m)(2) of this section.
(4) Filing. The certification (or affidavit) required by this paragraph shall be filed with the Internal Revenue Service Center, Philadelphia, PA 19255. The certification (or affidavit) shall be submitted with the Form 8038 required to be filed by section 103A(j)(3) and paragraph (k) of this § 1.103A-2. The Commissioner may grant an extension of time for filing the certification (or affidavit) if there is a reasonable cause for the failure to file such statement in a timely fashion.
(5) Effect of certification. The fact that an issuer obtains the certification (or affidavit) described in this paragraph does not ensure that the requirements of paragraph (g) of § 6a.103A-2 are met. Obligations that do not meet the requirements of paragraph (g) of § 6a.103A-2 are not described in section 103(a).
§ 1.104-1 Compensation for injuries or sickness.
(a) In general. Section 104(a) provides an exclusion from gross income with respect to certain amounts described in paragraphs (b), (c), (d) and (e) of this section, which are received for personal injuries or sickness, except to the extent that such amounts are attributable to (but not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year. See section 213 and the regulations thereunder.
(b) Amounts received under workmen’s compensation acts. Section 104(a)(1) excludes from gross income amounts which are received by an employee under a workmen’s compensation act (such as the Longshoremen’s and Harbor Workers’ Compensation Act, 33 U.S.C., c. 18), or under a statute in the nature of a workmen’s compensation act which provides compensation to employees for personal injuries or sickness incurred in the course of employment. Section 104(a)(1) also applies to compensation which is paid under a workmen’s compensation act to the survivor or survivors of a deceased employee. However, section 104(a)(1) does not apply to a retirement pension or annuity to the extent that it is determined by reference to the employee’s age or length of service, or the employee’s prior contributions, even though the employee’s retirement is occasioned by an occupational injury or sickness. Section 104(a)(1) also does not apply to amounts which are received as compensation for a nonoccupational injury or sickness nor to amounts received as compensation for an occupational injury or sickness to the extent that they are in excess of the amount provided in the applicable workmen’s compensation act or acts. See, however, §§ 1.105-1 through 1.105-5 for rules relating to exclusion of such amounts from gross income.
(c) Damages received on account of personal physical injuries or physical sickness—(1) In general. Section 104(a)(2) excludes from gross income the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness. Emotional distress is not considered a physical injury or physical sickness. However, damages for emotional distress attributable to a physical injury or physical sickness are excluded from income under section 104(a)(2). Section 104(a)(2) also excludes damages not in excess of the amount paid for medical care (described in section 213(d)(1)(A) or (B)) for emotional distress. For purposes of this paragraph (c), the term damages means an amount received (other than workers’ compensation) through prosecution of a legal suit or action, or through a settlement agreement entered into in lieu of prosecution.
(2) Cause of action and remedies. The section 104(a)(2) exclusion may apply to damages recovered for a personal physical injury or physical sickness under a statute, even if that statute does not provide for a broad range of remedies. The injury need not be defined as a tort under state or common law.
(3) Effective/applicability date. This paragraph (c) applies to damages paid pursuant to a written binding agreement, court decree, or mediation award entered into or issued after September 13, 1995, and received after January 23, 2012. Taxpayers also may apply these final regulations to damages paid pursuant to a written binding agreement, court decree, or mediation award entered into or issued after September 13, 1995, and received after August 20, 1996. If applying these final regulations to damages received after August 20, 1996, results in an overpayment of tax, the taxpayer may file a claim for refund before the period of limitations under section 6511 expires. To qualify for a refund of tax on damages paid after August 20, 1996, under a written binding agreement, court decree, or mediation award entered into or issued after September 13, 1995, a taxpayer must meet the requirements of section 1605 of the Small Business Job Protection Act of 1996, Public Law 104-188 (110 Stat. 1838).
(d) Accident or health insurance. Section 104(a)(3) excludes from gross income amounts received through accident or health insurance for personal injuries or sickness (other than amounts received by an employee, to the extent that such amounts (1) are attributable to contributions of the employer which were not includible in the gross income of the employee, or (2) are paid by the employer). Similar treatment is also accorded to amounts received under accident or health plans and amounts received from sickness or disability funds. See section 105(e) and § 1.105-5. If, therefore, an individual purchases a policy accident or health insurance out of his own funds, amounts received thereunder for personal injuries or sickness are excludable from his gross income under section 104(a)(3). See, however, section 213 and the regulations thereunder as to the inclusion in gross income of amounts attributable to deductions allowed under section 213 for any prior taxable year. Section 104(a)(3) also applies to amounts received by an employee for personal injuries or sickness from a fund which is maintained exclusively by employee contributions. Conversely, if an employer is either the sole contributor to such a fund, or is the sole purchaser of a policy of accident or health insurance for his employees (on either a group or individual basis), the exclusion provided under section 104(a)(3) does not apply to any amounts received by his employees through such fund or insurance. If the employer and his employees contribute to a fund or purchase insurance which pays accident or health benefits to employees, section 104(a)(3) does not apply to amounts received thereunder by employees to the extent that such amounts are attributable to the employer’s contributions. See § 1.105-1 for rules relating to the determination of the amount attributable to employer contributions. Although amounts paid by or on behalf of an employer to an employee for personal injuries or sickness are not excludable from the employee’s gross income under section 104(a)(3), they may be excludable therefrom under section 105. See §§ 1.105-1 through 1.105-5, inclusive. For treatment of accident or health benefits paid to or on behalf of a self- employed individual by a trust described in section 401(a) which is exempt under section 501(a) or under a plan described in section 403(a), see paragraph (g) of § 1.72-15.
(e) Amounts received as pensions, etc., for certain personal injuries or sickness. (1) Section 104(a)(4) excludes from gross income amounts which are received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country, or in the Coast and Geodetic Survey, or the Public Health Service. For purposes of this section, that part of the retired pay of a member of an armed force, computed under formula No. 1 or 2 of 10 U.S.C. 1401, or under 10 U.S.C. 1402(d), on the basis of years of service, which exceeds the retired pay that he would receive if it were computed on the basis of percentage of disability is not considered as a pension, annuity, or similar allowance for personal injury or sickness, resulting from active service in the armed forces of any country, or in the Coast and Geodetic Survey, or the Public Health Service (see 10 U.S.C. 1403 (formerly 37 U.S.C. 272(h), section 402(h) of the Career Compensation Act of 1949)). See paragraph (a)(3)(i)(a) of § 1.105-4 for the treatment of retired pay in excess of the part computed on the basis of percentage of disability as amounts received through a wage continuation plan. For the rules relating to certain reduced uniformed services retirement pay, see paragraph (c)(2) of § 1.122-1. For rules relating to a waiver by a member or former member of the uniformed services of a portion of disability retired pay in favor of a pension or compensation receivable under the laws administered by the Veterans Administration (38 U.S.C. 3105), see § 1.122-1(c)(3). For rules relating to a reduction of the disability retired pay of a member or former member of the uniformed services under the Dual Compensation Act of 1964 (5 U.S.C. 5531) by reason of Federal employment, see § 1.122-1(c)(4).
(2) Section 104(a)(4) excludes from gross income amounts which are received by a participant in the Foreign Service Retirement and Disability System in a taxable year of such participant ending after September 8, 1960, as a disability annuity payable under the provisions of section 831 of the Foreign Service Act of 1946, as amended (22 U.S.C. 1081; 60 Stat. 1021). However, if any amount is received by a survivor of a disabled or incapacitated participant, such amount is not excluded from gross income by reason of the provisions of section 104(a)(4).
§ 1.105-1 Amounts attributable to employer contributions.
(a) In general. Under section 105(a), amounts received by an employee through accident or health insurance for personal injuries or sickness must be included in his gross income to the extent that such amounts (1) are attributable to contributions of the employer which were not includible in the gross income of the employee, or (2) are paid by the employer, unless such amounts are excluded therefrom under section 105(b), (c), or (d). For purposes of this section, the term “amounts received by an employee through an accident or health plan” refers to any amounts received through accident or health insurance, and also to any amounts which, under section 105(e), are treated as being so received. See § 1.105-5. In determining the extent to which amounts received for personal injuries or sickness by an employee through an accident or health plan are subject to the provisions of section 105(a), rather than section 104(a)(3), the provisions of paragraphs (b), (c), (d), and (e) of this section shall apply. A self-employed individual is not an employee for purposes of section 105 and §§ 1.105-1 through 1.105-5. See paragraph (g) of § 1.72-15. Thus, such an individual will not be treated as an employee with respect to benefits described in section 105 received from a plan in which he participates as an employee within the meaning of section 401(c)(1) at the time he, his spouse, or any of his dependents becomes entitled to receive such benefits.
(b) Noncontributory plans. All amounts received by employees through an accident or health plan which is financed solely by their employer, either by payment of premiums on an accident or health insurance policy (whether on a group or individual basis), by contributions to a fund which pays accident or health benefits, or by direct payment of the benefits under the plan, are subject to the provisions of section 105(a), except to the extent that they are excludable under section 105(b), (c), or (d). This rule may be illustrated by the following examples:
(c) Contributory plans. (1) In the case of amounts received by an employee through an accident or health plan which is financed partially by his employer and partially by contributions of the employee, section 105(a) applies to the extent that such amounts are attributable to contributions of the employer which were not includible in the employee’s gross income. The portion of such amounts which is attributable to such contributions of the employer shall be determined in accordance with paragraph (d) of this section in the case of an insured plan, or paragraph (e) of this section in the case of a noninsured plan. As used in this section, the phrase “contributions of the employer” means employer contributions which were not includible in the gross income of the employee. See section 106 for the exclusion from an employee’s gross income of employer contributions to accident or health plans.
(2) A separate determination of the portion of the amounts received under the accident or health plan which is attributable to the contributions of the employer shall be made with respect to each class of employees in any case where the plan provides that some classes of covered employees contribute but others do not, or that the employer will make different contributions for different classes of employees, or that different classes of employees will make different contributions, and where in any such case both the contributions of the employer on account of each such class of employees and the contributions of such class of employees can be ascertained. For example, if employees contribute during the first year of employment but not thereafter, there will have to be a separate determination for first year employees, provided that the amount of the contributions of the employer on account of first-year employees and the contributions of such first-year employees can be ascertained for the required periods to apply the rules of paragraph (d) or (e) of this section. If in such a case the contributions of the employer to the plan on account of first-year employees are not distinguishable from his other contributions to the plan, then the determination shall be made for all employees under the plan, and such determination shall be used by all employees under the plan.
(3) Except as provided in paragraph (c)(2) of § 1.72-15, if the plan provides accident or health benefits as well as other benefits for the employees, and if the respective contributions made by the employer and the employees to provide the accident or health benefits cannot be ascertained, the determination of the portion of the accident or health benefits received under such plan which is attributable to the contributions of the employer shall be made in accordance with the rules of paragraph (d) or (e) of this section on the basis of the contributions of the employer and of the employees to the entire plan.
(4) A determination of the portion attributable to the contributions of the employer, once made in accordance with the rules of this section, shall as to such portion be used for all purposes. For example, if an employee receives amounts under a wage continuation plan during the month of January and terminates his services during February, the portion of such amounts which is attributable to the contributions of the employer may be determined in order to provide the employee with such information at the time he is provided his Form W-2. The determination made for such purpose will also be used by the employee to report his income for his taxable year in which such amounts are received, without regard to the experience under the plan for the rest of the year.
(d) Insured plans—(1) Individual policies. If an amount is received from an insurance company by an employee under an individual policy of accident or health insurance purchased by contributions of the employer and the employee, the portion of the amount received which is attributable to the employer’s contributions shall be an amount which bears the same ratio to the amount received as the portion of the premiums paid by the employer for the current policy year bears to the total premiums paid by the employer and the employee for that year. This rule may be illustrated by the following example:
(2) Group policies. If the accident or health coverage is provided under or is a part of a group insurance policy purchased by contributions of the employer and of the employees, and the net premiums for such coverage for a period of at least three policy years are known at the beginning of the calendar year, the portion of any amount received by an employee which is attributable to the contributions of the employer for such coverage shall be an amount which bears the same ratio to the amount received as the portion of the net premiums contributed by the employer for the last three policy years which are known at the beginning of the calendar year, bears to the total of the net premiums contributed by the employer and all employees for such policy years. If the net premiums for such coverage for a period of at least three policy years are not known at the beginning of the calendar year but are known for at least one policy year, such determination shall be made by using the net premiums for such coverage which are known at the beginning of the calendar year. If the net premiums for such coverage are not known at the beginning of the calendar year for even one policy year, such determination shall be made by using either (i) a reasonable estimate of the net premiums for the first policy year, or (ii) if the net premiums for a policy year are ascertained during the calendar year, by using such net premiums. These rules may be illustrated by the following example:
(e) Noninsured plans. If the accident or health benefits are a part of a noninsured plan to which the employer and the employees contribute, and such plan has been in effect for at least three years before the beginning of the calendar year, the portion of the amount received which is attributable to the employer’s contributions shall be an amount which bears the same ratio to the amount received as the contributions of the employer for the period of three calendar years next preceding the year of receipt bear to the total contributions of the employer and all the employees for such period. If, at the beginning of the calendar year of receipt, such plan has not been in effect for three years but has been in effect for at least one year, such determination shall be based upon the contributions made during the 1-year or 2-year period during which the plan has been in effect. If such plan has not been in effect for one full year at the beginning of the calendar year of receipt, such determination may be based upon the portion of the year of receipt preceding the time when the determination is made, or such determination may be made periodically (such as monthly or quarterly) and used throughout the succeeding period. For example, if an employee terminates his services on April 15, 1955, and 1955 is the first year the plan has been in effect, such determination may be based upon the contributions of the employer and the employees during the period beginning with January 1 and ending with April 15, or during the month of March, or during the quarter consisting of January, February, and March.
§ 1.105-2 Amounts expended for medical care.
Section 105(b) provides an exclusion from gross income with respect to the amounts referred to in section 105(a) (see § 1.105-1) which are paid, directly or indirectly, to the taxpayer to reimburse him for expenses incurred for the medical care (as defined in section 213(e)) of the taxpayer, his spouse, and his dependents (as defined in section 152). However, the exclusion does not apply to amounts which are attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year. See section 213 and the regulations thereunder. Section 105(b) applies only to amounts which are paid specifically to reimburse the taxpayer for expenses incurred by him for the prescribed medical care. Thus, section 105(b) does not apply to amounts which the taxpayer would be entitled to receive irrespective of whether or not he incurs expenses for medical care. For example, if under a wage continuation plan the taxpayer is entitled to regular wages during a period of absence from work due to sickness or injury, amounts received under such plan are not excludable from his gross income under section 105(b) even though the taxpayer may have incurred medical expenses during the period of illness. Such amounts may, however, be excludable from his gross income under section 105(d). See § 1.105-4. If the amounts are paid to the taxpayer solely to reimburse him for expenses which he incurred for the prescribed medical care, section 105(b) is applicable even though such amounts are paid without proof of the amount of the actual expenses incurred by the taxpayer, but section 105(b) is not applicable to the extent that such amounts exceed the amount of the actual expenses for such medical care. If the taxpayer incurs an obligation for medical care, payment to the obligee in discharge of such obligation shall constitute indirect payment to the taxpayer as reimbursement for medical care. Similarly, payment to or on behalf of the taxpayer’s spouse or dependents shall constitute indirect payment to the taxpayer.
Section 105(c) provides an exclusion from gross income with respect to the amounts referred to in section 105(a) to the extent that such amounts (a) constitute payments for the permanent loss or permanent loss of use of a member or function of the body, or the permanent disfigurement, of the taxpayer, his spouse, or a dependent (as defined in section 152), and (b) are computed with reference to the nature of the injury without regard to the period the employee is absent from work. Loss of use or disfigurement shall be considered permanent when it may reasonably be expected to continue for the life of the individual. For purposes of section 105(c), loss or loss of use of a member or function of the body includes the loss or loss of use of an appendage of the body, the loss of an eye, the loss of substantially all of the vision of an eye, and the loss of substantially all of the hearing in one or both ears. The term “disfigurement” shall be given a reasonable interpretation in the light of all the particular facts and circumstances. Section 105(c) does not apply if the amount of the benefits is determined by reference to the period the employee is absent from work. For example, if an employee is absent from work as a result of the loss of an arm, and under the accident and health plan established by his employer, he is to receive $125 a week so long as he is absent from work for a period not in excess of 52 weeks, section 105(c) is not applicable to such payments. See, however, section 105(d) and § 1.105-4. However, for purposes of section 105(c), it is immaterial whether an amount is paid in a lump sum or in installments. Section 105(c) does not apply to amounts which are treated as workmen’s compensation under paragraph (b) of § 1.104-1, or to amounts paid by reason of the death of the employee (see section 101).
§ 1.105-5 Accident and health plans.
(a) In general. Sections 104(a)(3) and 105 (b), (c), and (d) exclude from gross income certain amounts received through accident or health insurance. Section 105(e) provides that for purposes of sections 104 and 105 amounts received through an accident or health plan for employees, and amounts received from a sickness and disability fund for employees maintained under the law of a State, a Territory, or the District of Columbia, shall be treated as amounts received through accident or health insurance. In general, an accident or health plan is an arrangement for the payment of amounts to employees in the event of personal injuries or sickness. A plan may cover one or more employees, and there may be different plans for different employees or classes of employees. An accident or health plan may be either insured or noninsured, and it is not necessary that the plan be in writing or that the employee’s rights to benefits under the plan be enforceable. However, if the employee’s rights are not enforceable, an amount will be deemed to be received under a plan only if, on the date the employee became sick or injured, the employee was covered by a plan (or a program, policy, or custom having the effect of a plan) providing for the payment of amounts to the employee in the event of personal injuries or sickness, and notice or knowledge of such plan was reasonably available to the employee. It is immaterial who makes payment of the benefits provided by the plan. For example, payment may be made by the employer, a welfare fund, a State sickness or disability benefits fund, an association of employers or employees, or by an insurance company.
(b) Self-employed individuals. Under section 105(g), a self-employed individual is not treated as an employee for purposes of section 105. Therefore, for example, benefits paid under an accident or health plan as referred to in section 105(e) to or on behalf of an individual who is self-employed in the business with respect to which the plan is established will not be treated as received through accident and health insurance for purposes of sections 104(a)(3) and 105.
§ 1.105-11 Self-insured medical reimbursement plan.
(a) In general. Under section 105(a), amounts received by an employee through a self-insured medical reimbursement plan which are attributable to contributions of the employer, or are paid by the employer, are included in the employee’s gross income unless such amounts are excludable under section 105(b). For amounts reimbursed to a highly compensated individual to be fully excludable from such individual’s gross income under section 105(b), the plan must satisfy the requirements of section 105(h) and this section. Section 105(h) is not satisfied if the plan discriminates in favor of highly compensated individuals as to eligibility to participate or benefits. All or a portion of the reimbursements or payments on behalf of such individuals under a discriminatory plan are not excludable from gross income under section 105(b). However, benefits paid to participants who are not highly compensated individuals may be excluded from gross income if the requirements of section 105(b) are satisfied, even if the plan is discriminatory.
(b) Self-insured medical reimbursement plan—(1) General rule—(i) Definition. A self-insured medical reimbursement plan is a separate written plan for the benefit of employees which provides for reimbursement of employee medical expenses referred to in section 105(b). A plan or arrangement is self-insured unless reimbursement is provided under an individual or group policy of accident or health insurance issued by a licensed insurance company or under an arrangement in the nature of a prepaid health care plan that is regulated under federal or state law in a manner similar to the regulation of insurance companies. Thus, for example, a plan of a health maintenance organization, established under the Health Maintenance Organization Act of 1973, would qualify as a prepaid health care plan. In addition, this section applies to a self-insured medical reimbursement plan, determined in accordance with the rules of this section, maintained by an employee organization described in section 501(c)(9).
(ii) Shifting of risk. A plan underwritten by a policy of insurance or a prepaid health care plan that does not involve the shifting of risk to an unrelated third party is considered self-insured for purposes of this section. Accordingly, a cost-plus policy or a policy which in effect merely provides administrative or bookkeeping services is considered self-insured for purposes of this section. However, a plan is not considered self-insured merely because one factor the insurer uses in determining the premium is the employer’s prior claims experience.
(iii) Captive insurance company. A plan underwritten by a policy of insurance issued by a captive insurance company is not considered self-insured for purposes of this section if for the plan year the premiums paid by companies unrelated to the captive insurance company equal or exceed 50 percent of the total premiums received and the policy of insurance is similar to policies sold to such unrelated companies.
(2) Other rules. The rules of this section apply to a self-insured portion of an employer’s medical plan or arrangement even if the plan is in part underwritten by insurance. For example, if an employer’s medical plan reimburses employees for benefits not covered under the insured portion of an overall plan, or for deductible amounts under the insured portions, such reimbursement is subject to the rules of this section. However, a plan which reimburses employees for premiums paid under an insured plan is not subject to this section. In addition, medical expense reimbursements not described in the plan are not paid pursuant to a plan for the benefit of employees, and therefore are not excludable from gross income under section 105(b). Such reimbursements will not affect the determination of whether or not a plan is discriminatory.
(c) Prohibited discrimination—(1) In general. A self-insured medical reimbursement plan does not satisfy the requirements of section 105(h) and this paragraph for a plan year unless the plan satisfies subparagraphs (2) and (3) of this paragraph. However, a plan does not fail to satisfy the requirements of this paragraph merely because benefits under the plan are offset by benefits paid under a self-insured or insured plan of the employer or another employer, or by benefits paid under Medicare or other Federal or State law or similar foreign law. A self-insured plan may take into account the benefits provided under another plan only to the extent that the type of benefit subject to reimbursement is the same under both plans. For example, an amount reimbursed to an employee for a hospital expense under a medical plan maintained by the employer of the employee’s spouse may be offset against the self-insured benefit where the self-insured plan covering the employee provides the same type of hospital benefit.
(2) Eligibility to participate—(i) Percentage test. A plan satisfies the requirements of this subparagraph if it benefits—
(A) Seventy percent or more of all employees, or
(B) Eighty percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan.
(ii) Classification test. A plan satisfies the requirements of this subparagraph if it benefits such employees as qualify under a classification of employees set up by the employer which is found by the Internal Revenue Service not to be discriminatory in favor of highly compensated individuals. In general, this determination will be made based upon the facts and circumstances of each case, applying the same standards as are applied under section 410(b)(1)(B) (relating to qualified pension, profit-sharing and stock bonus plans), without regard to the special rules in section 401(a)(5) concerning eligibility to participate.
(iii) Exclusion of certain employees. Under section 105(h)(3), for purposes of this subparagraph (2), there may be excluded from consideration:
(A) Employees who have not completed 3 years of service prior to the beginning of the plan year. For purposes of this section years of service may be determined by any method that is reasonable and consistent. A determination made in the same manner as (and not requiring service in excess of how) a year of service is determined under section 410(a)(3) shall be deemed to be reasonable. For purposes of the 3-year rule, all of an employee’s years of service with the employer prior to a separation from service are not taken into account. For purposes of the 3-year rule, an employee’s years of service prior to age 25, as a part-time or seasonal employee, as a member of a collective bargaining unit, or as a nonresident alien, as each is described in this subdivision, are not excluded by reason of being so described from counting towards satisfaction of the rule. In addition, if the employer is a predecessor employer (determined in a manner consistent with section 414(a)), service for such predecessor is treated as service for the employer.
(B) Employees who have not attained age 25 prior to the beginning of the plan year.
(C) Part-time employees whose customary weekly employment is less than 35 hours, if other employees in similar work with the same employer (or, if no employees of the employer are in similar work, in similar work in the same industry and location) have substantially more hours, and seasonal employees whose customary annual employment is less than 9 months, if other employees in similar work with the same employer (or, if no employees of the employer are in similar work, in similar work in the same industry and location) have substantially more months. Notwithstanding the preceding sentence, any employee whose customary weekly employment is less than 25 hours or any employee whose customary annual employment is less than 7 months may be considered as a part-time or seasonal employee.
(D) Employees who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Commissioner finds to be a collective bargaining agreement, if accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. For purposes of determining whether such bargaining occurred, it is not material that such employees are not covered by another medical plan or that the plan was not considered in such bargaining.
(E) Employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(b) and the regulations thereunder) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3) and the regulations thereunder).
(3) Nondiscriminatory benefits—(i) In general. In general, benefits subject to reimbursement under a plan must not discriminate in favor of highly compensated individuals. Plan benefits will not satisfy the requirements of this subparagraph unless all the benefits provided for participants who are highly compensated individuals are provided for all other participants. In addition, all the benefits available for the dependents of employees who are highly compensated individuals must also be available on the same basis for the dependents of all other employees who are participants. A plan that provides optional benefits to participants will be treated as providing a single benefit with respect to the benefits covered by the option provided that (A) all eligible participants may elect any of the benefits covered by the option and (B) there are either no required employee contributions or the required employee contributions are the same amount. This test is applied to the benefits subject to reimbursement under the plan rather than the actual benefit payments or claims under the plan. The presence or absence of such discrimination will be determined by considering the type of benefit subject to reimbursement provided highly compensated individuals, as well as the amount of the benefit subject to reimbursement. A plan may establish a maximum limit for the amount of reimbursement which may be paid a participant for any single benefit, or combination of benefits. However, any maximum limit attributable to employer contributions must be uniform for all participants and for all dependents of employees who are participants and may not be modified by reason of a participant’s age or years of service. In addition, if a plan covers employees who are highly compensated individuals, and the type or the amount of benefits subject to reimbursement under the plan are in proportion to employee compensation, the plan discriminates as to benefits.
(ii) Discriminatory operation. Not only must a plan not discriminate on its face in providing benefits in favor of highly compensated individuals, the plan also must not discriminate in favor of such employees in actual operation. The determination of whether plan benefits discriminate in operation in favor of highly compensated individuals is made on the basis of the facts and circumstances of each case. A plan is not considered discriminatory merely because highly compensated individuals participating in the plan utilize a broad range of plan benefits to a greater extent than do other employees participating in the plan. In addition, if a plan (or a particular benefit provided by a plan) is terminated, the termination would cause the plan benefits to be discriminatory if the duration of the plan (or benefit) has the effect of discriminating in favor of highly compensated individuals. Accordingly, the prohibited discrimination may occur where the duration of a particular benefit coincides with the period during which a highly compensated individual utilizes the benefit.
(iii) Retired employees. To the extent that an employer provides benefits under a self-insured medical reimbursement plan to a retired employee that would otherwise be excludible from gross income under section 105(b), determined without regard to section 105(h), such benefits shall not be considered a discriminatory benefit under this paragraph (c). The preceding sentence shall not apply to a retired employee who was a highly compensated individual unless the type, and the dollar limitations, of benefits provided retired employees who were highly compensated individuals are the same for all other retired participants. If this subdivision applies to a retired participant, that individual is not considered an employee for purposes of determining the highest paid 25 percent of all employees under paragraph (d) of this section solely by reason of receiving such plan benefits.
(4) Multiple plans, etc.—(i) General rule. An employer may designate two or more plans as constituting a single plan that is intended to satisfy the requirements of section 105(h)(2) and paragraph (c) of this section, in which case all plans so designated shall be considered as a single plan in determining whether the requirements of such section are satisfied by each of the separate plans. A determination that the combination of plans so designated does not satisfy such requirements does not preclude a determination that one or more of such plans, considered separately, satisfies such requirements. A single plan document may be utilized by an employer for two or more separate plans provided that the employer designates the plans that are to be considered separately and the applicable provisions of each separate plan.
(ii) Other rules. If the designated combined plan discriminates as to eligibility to participate or benefits, the amount of excess reimbursement will be determined under the rules of section 105(h)(7) and paragraph (e) of this section by taking into account all reimbursements made under the combined plan.
(iii) H.M.O. participants. For purposes of section 105(h)(2)(A) and paragraph (c)(2) of this section, a self-insured plan will be deemed to benefit an employee who has enrolled in a health maintenance organization (HMO) that is offered on an optional basis by the employer in lieu of coverage under the self-insured plan if, with respect to that employee, the employer’s contributions to the HMO plan equal or exceed those that would be made to the self-insured plan, and if the HMO plan is designated in accordance with subdivision (i) with the self-insured plan as a single plan. For purposes of section 105(h) and this section, except as provided in the preceding sentence, employees covered by, and benefits under, the HMO plan are not treated as part of the self-insured plan.
(d) Highly compensated individuals defined. For purposes of section 105(h) and this section, the term “highly compensated individual” means an individual who is—
(1) One of the 5 highest paid officers,
(2) A shareholder who owns (with the application of section 318) more than 10 percent in value of the stock of the employer, or
(3) Among the highest paid 25 percent of all employees (including the 5 highest paid officers, but not including employees excludable under paragraph (c)(2)(iii) of this section who are not participants in any self-insured medical reimbursement plan of the employer, whether or not designated as a single plan under paragraph (c)(4) of this section, or in a health maintenance organization plan).
(e) Excess reimbursement of highly compensated individual—(1) In general. For purposes of section 105(h) and this section, a reimbursement paid to a highly compensated individual is an excess reimbursement if it is paid pursuant to a plan that fails to satisfy the requirements of paragraph (c)(2) or (c)(3) for the plan year. The amount reimbursed to a highly compensated individual which constitutes an excess reimbursement is not excludable from such individual’s gross income under section 105(b).
(2) Discriminatory benefit. In the case of a benefit available to highly compensated individuals but not to all other participants (or which otherwise discriminates in favor of highly compensated individuals as opposed to other participants), the amount of excess reimbursement equals the total amount reimbursed to the highly compensated individual with respect to the benefit.
(3) Discriminatory coverage. In the case of benefits (other than discriminatory benefits described in subparagraph (2)) paid to a highly compensated individual under a plan which fails to satisfy the requirements of paragraph (c)(2) relating to nondiscrimination in eligibility to participate, the amount of excess reimbursement is determined by multiplying the total amount reimbursed to the individual by a fraction. The numerator of the fraction is the total amount reimbursed during that plan year to all highly compensated individuals. The denominator of the fraction is the total amount reimbursed during that plan year to all participants. In computing the fraction and the total amount reimbursed to the individual, discriminatory benefits described in subparagraph (2) are not taken into account. Accordingly, any amount which is included in income by reason of the benefit’s not being available to all other participants will not be taken into account.
(4) Examples. The provisions of this paragraph are illustrated by the following examples:
| Employee | Compensation | Reimbursable amount paid |
|---|---|---|
| A | $100,000 | $5,000 |
| B | 25,000 | 1,250 |
| C | 15,000 | 750 |
| D | 10,000 | 500 |
| E | 10,000 | 500 |
| F | 8,000 | 400 |
| 8,400 |
(f) Certain controlled groups. For purposes of applying the provisions of section 105(h) and this section, all employees who are treated as employed by a single employer under section 414 (b) and (c), and the regulations thereunder (relating to special rules for qualified pension, profit-sharing and stock bonus plans), shall be treated as employed by a single employer.
(g) Exception for medical diagnostic procedures—(1) In general. For purposes of applying section 105(h) and this section, reimbursements paid under a plan for medical diagnostic procedures for an employee, but not a dependent, are not considered to be a part of a plan described in this section. The medical diagnostic procedures include routine medical examinations, blood tests, and X-rays. Such procedures do not include expenses incurred for the treatment, cure or testing of a known illness or disability, or treatment or testing for a physical injury, complaint or specific symptom of a bodily malfunction. For example, a routine dental examination with X-rays is a medical diagnostic procedure, but X-rays and treatment for a specific complaint are not. In addition, such procedures do not include any activity undertaken for exercise, fitness, nutrition, recreation, or the general improvement of health unless they are for medical care as defined in section 213(e). The diagnostic procedures must be performed at a facility which provides no services (directly or indirectly) other than medical, and ancillary, services. For purposes of the preceding sentence, physical proximity between a medical facility and nonmedical facilities will not for that reason alone cause the medical facility not to qualify. For example, an employee’s annual physical examination conducted at the employee’s personal physician’s office is not considered a part of the medical reimbursement plan and therefore is not subject to the nondiscrimination requirements. Accordingly, the amount reimbursed may be excludable from the employee’s income if the requirements of section 105(b) are satisfied.
(2) Transportation, etc. expenses. Transportation expenses primarily for an allowable diagnostic procedure are included within the exception described in this paragraph, but only to the extent they are ordinary and necessary. Transportation undertaken merely for the general improvement of health, or in connection with a vacation, is not within the scope of this exception, nor are any incidental expenses for food or lodging; therefore, amounts reimbursed for such expenses may be excess reimbursements under paragraph (e).
(h) Time of inclusion. Excess reimbursments (determined under paragraph (e)) paid to a highly compensated individual for a plan year will be considered as received in the taxable year of the individual in which (or with which) the plan year ends. The particular plan year to which reimbursements relate shall be determined under the plan provisions. In the absence of plan provisions reimbursements shall be attributed to the plan year in which payment is made. For example, under a calendar year plan an excess reimbursement paid to A in 1981 on account of an expense incurred and subject to reimbursement for the 1980 plan year under the terms of the plan will be considered as received in 1980 by A.
(i) Self-insured contributory plan. A medical plan subject to this section may provide for employer and employee contributions. See § 1.105-1(c). The tax treatment of reimbursements attributable to employee contributions is determined under section 104(a)(3). The tax treatment of reimbursements attributable to employer contributions is determined under section 105. The amount of reimbursements which are attributable to contributions of the employer shall be determined in accordance with § 1.105-1(e).
(j) Effective date. Section 105(h) and this section are effective for taxable years beginning after December 31, 1979 and for amounts reimbursed after December 31, 1979. In determining plan discrimination and the taxability of excess reimbursements made for a plan year beginning in 1979 and ending in 1980, a plan’s eligibility and benefit requirements as well as actual reimbursements made in the plan year during 1979, will not be taken into account. In addition, this section does not apply to expenses which are incurred in 1979 and paid in 1980.
(k) Special rules—(1) Relation to cafeteria plans. If a self-insured medical reimbursement plan is included in a cafeteria plan as described in section 125, the rules of this section will determine the status of a benefit as a taxable or nontaxable benefit, and the rules of section 125 will determine whether an employee is taxed as though he elected all available taxable benefits (including taxable benefits under a discriminatory medical reimbursement plan). This rule is illustrated by the following example:
(2) Benefit subject to reimbursement. For purposes of this section, a benefit subject to reimbursement is a benefit described in the plan under which a claim for reimbursement or for a payment directly to the health service provider may be filed by a plan participant. It does not refer to actual claims or benefit reimbursements paid under a plan.
§ 1.106-1 Contributions by employer to accident and health plans.
(a) The gross income of an employee does not include the contributions that the employer makes to an accident or health plan for compensation (through insurance or otherwise) to the employee for personal injuries or sickness incurred by the employee, the employee’s spouse, the employee’s dependents (as defined in section 152 determined without regard to section 152(b)(1), (b)(2), or (d)(1)(B)), or any child (as defined in section 152(f)(1)) of the employee who as of the end of the taxable year has not attained age 27. The employer may contribute to an accident or health plan either by paying the premium (or a portion of the premium) on a policy of accident or health insurance covering one or more of his employees, or by contributing to a separate trust or fund (including a fund referred to in section 105(e)) which provides accident or health benefits directly or through insurance to one or more of his employees. However, if such insurance policy, trust, or fund provides other benefits in addition to accident or health benefits, section 106 applies only to the portion of the employer’s contribution which is allocable to accident or health benefits. See paragraph (d) of § 1.104-1 and §§ 1.105-1 through 1.105-5, inclusive, for regulations relating to exclusion from an employee’s gross income of amounts received through accident or health insurance and through accident or health plans. For the treatment of the payment of premiums for accident or health insurance from a qualified trust under section 401(a), see §§ 1.72-15 and 1.402(a)-1(e).
(b) Effective/applicability date. The first and last sentences of paragraph (a) of this section apply for taxable years beginning on or after January 1, 2015.
§ 1.107-1 Rental value of parsonages.
(a) In the case of a minister of the gospel, gross income does not include (1) the rental value of a home, including utilities, furnished to him as a part of his compensation, or (2) the rental allowance paid to him as part of his compensation to the extent such allowance is used by him to rent or otherwise provide a home. In order to qualify for the exclusion, the home or rental allowance must be provided as remuneration for services which are ordinarily the duties of a minister of the gospel. In general, the rules provided in § 1.1402(c)-5 will be applicable to such determination. Examples of specific services the performance of which will be considered duties of a minister for purposes of section 107 include the performance of sacerdotal functions, the conduct of religious worship, the administration and maintenance of religious organizations and their integral agencies, and the performance of teaching and administrative duties at theological seminaries. Also, the service performed by a qualified minister as an employee of the United States (other than as a chaplain in the Armed Forces, whose service is considered to be that of a commissioned officer in his capacity as such, and not as a minister in the exercise of his ministry), or a State, Territory, or possession of the United States, or a political subdivision of any of the foregoing, or the District of Columbia, is in the exercise of his ministry provided the service performed includes such services as are ordinarily the duties of a minister.
(b) For purposes of section 107, the term “home” means a dwelling place (including furnishings) and the appurtenances thereto, such as a garage. The term “rental allowance” means an amount paid to a minister to rent or otherwise provide a home if such amount is designated as rental allowance pursuant to official action taken prior to January 1, 1958, by the employing church or other qualified organization, or if such amount is designated as rental allowance pursuant to official action taken in advance of such payment by the employing church or other qualified organization when paid after December 31, 1957. The designation of an amount as rental allowance may be evidenced in an employment contract, in minutes of or in a resolution by a church or other qualified organization or in its budget, or in any other appropriate instrument evidencing such official action. The designation referred to in this paragraph is a sufficient designation if it permits a payment or a part thereof to be identified as a payment of rental allowance as distinguished from salary or other remuneration.
(c) A rental allowance must be included in the minister’s gross income in the taxable year in which it is received, to the extent that such allowance is not used by him during such taxable year to rent or otherwise provide a home. Circumstances under which a rental allowance will be deemed to have been used to rent or provide a home will include cases in which the allowance is expended (1) for rent of a home, (2) for purchase of a home, and (3) for expenses directly related to providing a home. Expenses for food and servants are not considered for this purpose to be directly related to providing a home. Where the minister rents, purchases, or owns a farm or other business property in addition to a home, the portion of the rental allowance expended in connection with the farm or business property shall not be excluded from his gross income.
§ 1.108-1 [Reserved]
(a) General rules. The acquisition of outstanding indebtedness by a person related to the debtor from a person who is not related to the debtor results in the realization by the debtor of income from discharge of indebtedness (to the extent required by section 61(a)(12) and section 108) in an amount determined under paragraph (f) of this section. Income realized pursuant to the preceding sentence is excludible from gross income to the extent provided in section 108(a). The rules of this paragraph apply if indebtedness is acquired directly by a person related to the debtor in a direct acquisition (as defined in paragraph (b) of this section) or if a holder of indebtedness becomes related to the debtor in an indirect acquisition (as defined in paragraph (c) of this section).
(b) Direct acquisition. An acquisition of outstanding indebtedness is a direct acquisition under this section if a person related to the debtor (or a person who becomes related to the debtor on the date the indebtedness is acquired) acquires the indebtedness from a person who is not related to the debtor. Notwithstanding the foregoing, the Commissioner may provide by Revenue Procedure or other published guidance that certain acquisitions of indebtedness described in the preceding sentence are not direct acquisitions for purposes of this section.
(c) Indirect acquisition—(1) In general. An indirect acquisition is a transaction in which a holder of outstanding indebtedness becomes related to the debtor, if the holder acquired the indebtedness in anticipation of becoming related to the debtor.
(2) Proof of anticipation of relationship. In determining whether indebtedness was acquired by a holder in anticipation of becoming related to the debtor, all relevant facts and circumstances will be considered. Such facts and circumstances include, but are not limited to, the intent of the parties at the time of the acquisition, the nature of any contacts between the parties (or their respective affiliates) before the acquisition, the period of time for which the holder held the indebtedness, and the significance of the indebtedness in proportion to the total assets of the holder group (as defined in paragraph (c)(5) of this section). For example, if a holder acquired the indebtedness in the ordinary course of its portfolio investment activities and the holder’s acquisition of the indebtedness preceded any discussions concerning the acquisition of the holder by the debtor (or by a person related to the debtor) or the acquisition of the debtor by the holder (or by a person related to the holder), as the case may be, these facts, taken together, would ordinarily establish that the holder did not acquire the indebtedness in anticipation of becoming related to the debtor. The absence of discussions between the debtor and the holder (or their respective affiliates), however, does not by itself establish that the holder did not acquire the indebtedness in anticipation of becoming related to the debtor (if, for example, the facts and circumstances show that the holder was considering a potential acquisition of or by the debtor, or the relationship is created within a relatively short period of time of the acquisition, or the indebtedness constitutes a disproportionate portion of the holder group’s assets).
(3) Indebtedness acquired within 6 months of becoming related. Notwithstanding any other provision of this paragraph (c), a holder of indebtedness is treated as having acquired the indebtedness in anticipation of becoming related to the debtor if the holder acquired the indebtedness less than 6 months before the date the holder becomes related to the debtor.
(4) Disclosure of potential indirect acquisition—(i) In general. If a holder of outstanding indebtedness becomes related to the debtor under the circumstances described in paragraph (c)(4)(ii) or (iii) of this section, the debtor is required to attach the statement described in paragraph (c)(4)(iv) of this section to its tax return (or to a qualified amended return within the meaning of § 1.6664-2(c)(3)) for the taxable year in which the debtor becomes related to the holder, unless the debtor reports its income on the basis that the holder acquired the indebtedness in anticipation of becoming related to the debtor. Disclosure under this paragraph (c)(4) is in addition to, and is not in substitution for, any disclosure required to be made under section 6662, 6664 or 6694.
(ii) Indebtedness represents more than 25 percent of holder group’s assets—(A) In general. Disclosure under this paragraph (c)(4) is required if, on the date the holder becomes related to the debtor, indebtedness of the debtor represents more than 25 percent of the fair market value of the total gross assets of the holder group (as defined in paragraph (c)(5) of this section).
(B) Determination of total gross assets. In determining the total gross assets of the holder group, total gross assets do not include any cash, cash item, marketable stock or security, short-term indebtedness, option, futures contract, notional principal contract, or similar item (other than indebtedness of the debtor), nor do total gross assets include any asset in which the holder has substantially reduced its risk of loss. In addition, total gross assets do not include any ownership interest in or indebtedness of a member of the holder group.
(iii) Indebtedness acquired within 6 to 24 months of becoming related. Disclosure under this paragraph (c)(4) is required if the holder acquired the indebtedness 6 months or more before the date the holder becomes related to the debtor, but less than 24 months before that date.
(iv) Contents of statement. A statement under this paragraph (c)(4) must include the following—
(A) A caption identifying the statement as disclosure under § 1.108-2(c);
(B) An identification of the indebtedness with respect to which disclosure is made;
(C) The amount of such indebtedness and the amount of income from discharge of indebtedness is section 108(e)(4) were to apply;
(D) Whether paragraph (c)(4)(ii) or (iii) of this section applies to the transaction; and
(E) A statement describing the facts and circumstances supporting the debtor’s position that the holder did not acquire the indebtedness in anticipation of becoming related to the debtor.
(v) Failure to disclose. In addition to any other penalties that may apply, if a debtor fails to provide a statement required by this paragraph (c)(4), the holder is presumed to have acquired the indebtedness in anticipation of becoming related to the debtor unless the facts and circumstances clearly established that the holder did not acquire the indebtedness in anticipation of becoming related to the debtor.
(5) Holder group. For purposes of this paragraph (c), the holder group consists of the holder of the indebtedness and all persons who are both—
(i) Related to the holder before the holder becomes related to the debtor; and
(ii) Related to the debtor after the holder becomes related to the debtor.
(6) Holding period—(i) Suspensions. The running of the holding periods set forth in paragraphs (c)(3) and (c)(4)(iii) of this section is suspended during any period in which the holder or any person related to the holder is protected (directly or indirectly) against risk of loss by an option, a short sale, or any other device or transaction.
(ii) Tacking. For purposes of paragraphs (c)(3) and (c)(4)(iii) of this section, the period for which a holder held the debtor’s indebtedness includes—
(A) The period for which the indebtedness was held by a corporation to whose attributes the holder succeeded pursuant to section 381; and
(B) The period (ending on the date on which the holder becomes related to the debtor) for which the indebtedness was held continuously by members of the holder group (as defined in paragraph (c)(5) of this section).
(d) Definitions—(1) Acquisition date. For purposes of this section, the acquisition date is the date on which a direct acquisition of indebtedness or an indirect acquisition of indebtedness occurs.
(2) Relationship. For purposes of this section, persons are considered related if they are related within the meaning of sections 267(b) or 707(b)(1). However—
(i) Sections 267(b) and 707(b)(1) are applied as if section 267(c)(4) provided that the family of an individual consists of the individual’s spouse, the individual’s children, grandchildren, and parents, and any spouse of the individual’s children or grandchildren; and
(ii) Two entities that are treated as a single employer under subsection (b) or (c) of section 414 are treated as having a relationship to each other that is described in section 267(b).
(e) Exceptions—(1) Indebtedness retired within one year. This section does not apply to a direct or indirect acquisition of indebtedness with a stated maturity date on or before the date that is one year after the acquisition date, if the indebtedness is, in fact, retired on or before its stated maturity date.
(2) Acquisitions by securities dealers. (i) This section does not apply to a direct acquisition or an indirect acquisition of indebtedness by a dealer that acquires and disposes of such indebtedness in the ordinary course of its business of dealing in securities if—
(A) The dealer accounts for the indebtedness as a security held primarily for sale to customers in the ordinary course of business;
(B) The dealer disposes of the indebtedness (or it matures while held by the dealer) within a period consistent with the holding of the indebtedness for sale to customers in the ordinary course of business, taking into account the terms of the indebtedness and the conditions and practices prevailing in the markets for similar indebtedness during the period in which it is held; and
(C) The dealer does not sell or otherwise transfer the indebtedness to a person related to the debtor (other than in a sale to a dealer that in turn meets the requirements of this paragraph (e)(2)).
(ii) A dealer will continue to satisfy the conditions of this paragraph (e)(2) with respect to indebtedness that is exchanged for successor indebtedness in a transaction in which unrelated holders also exchange indebtedness of the same issue, provided that the conditions of this paragraph (e)(2) are met with respect to the successor indebtedness.
(iii) For purposes of this paragraph (e)(2), if the period consistent with the holding of indebtedness for sale to customers in the ordinary course of business is 30 days or less, the dealer is considered to dispose of indebtedness within that period if the aggregate principal amount of indebtedness of that issue sold by the dealer to customers in the ordinary course of business (or that mature and are paid while held by the dealer) in the calendar month following the month in which the indebtedness is acquired equals or exceeds the aggregate principal amount of indebtedness of that issue held in the dealer’s inventory at the close of the month in which the indebtedness is acquired. If the period consistent with the holding of indebtedness for sale to customers in the ordinary course of business is greater than 30 days, the dealer is considered to dispose of the indebtedness within that period if the aggregate principal amount of indebtedness of that issue sold by the dealer to customers in the ordinary course of business (or that mature and are paid while held by the dealer) within that period equals or exceeds the aggregate principal amount of indebtedness of that issue held in inventory at the close of the day on which the indebtedness was acquired.
(f) Amount of discharge of indebtedness income realized—(1) Holder acquired the indebtedness by purchase on or less than six months before the acquisition date. Except as otherwise provided in this paragraph (f), the amount of discharge of indebtedness income realized under paragraph (a) of this section is measured by reference to the adjusted basis of the related holder (or of the holder that becomes related to the debtor) in the indebtedness on the acquisition date if the holder acquired the indebtedness by purchase on or less than six months before the acquisition date. For purposes of this paragraph (f), indebtedness is acquired “by purchase” if the indebtedness in the hands of the holder is not substituted basis property within the meaning of section 7701(a)(42). However, indebtedness is also considered acquired by purchase within six months before the acquisition date if the holder acquired the indebtedness as transferred basis property (within the meaning of section 7701(a)(43)) from a person who acquired the indebtedness by purchase on or less than six months before the acquisition date.
(2) Holder did not acquire the indebtedness by purchase on or less than six months before the acquisition date. Except as otherwise provided in this paragraph (f), the amount of discharge of indebtedness income realized under paragraph (a) of this section is measured by reference to the fair market value of the indebtedness on the acquisition date if the holder (or the transferor to the holder in a transferred basis transaction) did not acquire the indebtedness by purchase on or less than six months before the acquisition date.
(3) Acquisitions of indebtedness in nonrecognition transactions. [Reserved]
(4) Avoidance transactions. The amount of discharge of indebtedness income realized by the debtor under paragraph (a) of this section is measured by reference to the fair market value of the indebtedness on the acquisition date if the indebtedness is acquired in a direct or an indirect acquisition in which a principal purpose for the acquisition is the avoidance of federal income tax.
(g) Correlative adjustments—(1) Deemed issuance. For income tax purposes, if a debtor realizes income from discharge of its indebtedness in a direct or an indirect acquisition under this section (whether or not the income is excludible under section 108(a)), the debtor’s indebtedness is treated as new indebtedness issued by the debtor to the related holder on the acquisition date (the deemed issuance). The new indebtedness is deemed issued with an issue price equal to the amount used under paragraph (f) of this section to compute the amount realized by the debtor under paragraph (a) of this section (i.e., either the holder’s adjusted basis or the fair market value of the indebtedness, as the case may be). Under section 1273(a)(1), the excess of the stated redemption price at maturity (as defined in section 1273(a)(2)) of the indebtedness over its issue price is original issue discount (OID) which, to the extent provided in sections 163 and 1272, is deductible by the debtor and includible in the gross income of the related holder. Notwithstanding the foregoing, the Commissioner may provide by Revenue Procedure or other published guidance that the indebtedness is not treated as newly issued indebtedness for purposes of designated provisions of the income tax laws.
(2) Treatment of related holder. The related holder does not recognize any gain or loss on the deemed issuance described in paragraph (g)(1) of this section. The related holder’s adjusted basis in the indebtedness remains the same as it was immediately before the deemed issuance. The deemed issuance is treated as a purchase of the indebtedness by the related holder for purposes of section 1272(a)(7) (pertaining to reduction of original issue discount where a subsequent holder pays acquisition premium) and section 1276 (pertaining to acquisitions of debt at a market discount).
(3) Loss deferral on disposition of indebtedness acquired in certain exchanges. (i) Any loss otherwise allowable to a related holder on the disposition at any time of indebtedness acquired in a direct or indirect acquisition (whether or not any discharge of indebtedness income was realized under paragraph (a) of this section) is deferred until the date the debtor retires the indebtedness if—
(A) The related holder acquired the debtor’s indebtedness in exchange for its own indebtedness; and
(B) The issue price of the related holder’s indebtedness was not determined by reference to its fair market value (e.g., the issue price was determined under section 1273(b)(4) or 1274(a) or any other provision of applicable law).
(ii) Any comparable tax benefit that would otherwise be available to the holder, debtor, or any person related to either, in any other transaction that directly or indirectly results in the disposition of the indebtedness is also deferred until the date the debtor retires the indebtedness.
(4) Examples. The following examples illustrate the application of this paragraph (g). In each example, all taxpayers are calendar-year taxpayers, no taxpayer is insolvent or under the jurisdiction of a court in a title 11 case and no indebtedness is qualified farm indebtedness described in section 108(g).
(ii) Under section 61(a)(12), section 108(e)(4), and paragraphs (a) and (f) of this section, S realizes $1,000,000 of income from discharge of indebtedness on January 1, 1992.
(iii) Under paragraph (g)(1) of this section, the indebtedness is treated as issued to P on January 1, 1992, with an issue price of $9,000,000. Under section 1273(a), the $1,000,000 excess of the stated redemption price at maturity of the indebtedness ($10,000,000) over its issue price ($9,000,000) is original issue discount, which is includible in gross income by P and deductible by S over the remaining term of the indebtedness under sections 163(e) and 1272(a).
(iv) Accordingly, S deducts and P includes in income original issue discount, in addition to stated interest, as follows: in 1992, $289,144.88; in 1993, $331,286.06; and in 1994, $379,569.06.
(ii) Under section 61(a)(12), section 108(e)(4), and paragraphs (a) and (f) of this section, P realizes $1,578,582.83 in income from discharge of indebtedness ($7,578,582.83 minus $6,000,000) on January 1, 1992.
(iii) Under paragraph (g)(1) of this section, the indebtedness is treated as issued to S on January 1, 1992, with an issue price of $6,000,000. Under section 1273(a), the $4,000,000 excess of the stated redemption price at maturity of the indebtedness ($10,000,000) over its issue price ($6,000,000) is orignial issue discount, which is includible in gross income by S and deductible by P over the remaining term of the indebtedness under sections 163(e) and 1272(a).
(iv) Accordingly, P deducts and S includes in income original issue discount as follows: in 1992, $817,316.20; in 1993, $928,650.49; in 1994, $1,055,150.67; and in 1995, $1,198,882.64.
(h) Effective date. This section applies to any transaction described in paragraph (a) and in either paragraph (b) or (c) of this section with an acquisition date on or after March 21, 1991. Although this section does not apply to direct or indirect acquisitions occurring before March 21, 1991, section 108(e)(4) is effective for any transaction after December 31, 1980, subject to the rules of section 7 of the Bankruptcy Tax Act of 1980 (Pub. L. 96-589, 94 Stat. 3389, 3411). Taxpayers may use any reasonable method of determining the amount of discharge of indebtedness income realized and the treatment of correlative adjustments under section 108(e)(4) for acquisitions of indebtedness before March 21, 1991, if such method is applied consistently by both the debtor and related holder.
§ 1.108-3 Intercompany losses and deductions.
(a) General rule. This section applies to certain losses and deductions from the sale, exchange, or other transfer of property between corporations that are members of a consolidated group or a controlled group (an intercompany transaction). See section 267(f) (controlled groups) and § 1.1502-13 (consolidated groups) for applicable definitions. For purposes of determining the attributes to which section 108(b) applies, a loss or deduction not yet taken into account under section 267(f) or § 1.1502-13 (an intercompany loss or deduction) is treated as basis described in section 108(b) that the transferor retains in property. To the extent a loss not yet taken into account is reduced under this section, it cannot subsequently be taken into account under section 267(f) or § 1.1502-13. For example, if S and B are corporations filing a consolidated return, and S sells land with a $100 basis to B for $90 and the $10 loss is deferred under section 267(f) and § 1.1502-13, the deferred loss is treated for purposes of section 108(b) as $10 of basis that S has in land (even though S has no remaining interest in the land sold to B) and is subject to reduction under section 108(b)(2)(E). Similar principles apply, with appropriate adjustments, if S and B are members of a controlled group and S’s loss is deferred only under section 267(f).
(b) Effective date. This section applies with respect to discharges of indebtedness occurring on or after September 11, 1995.
§ 1.108-4 Election to reduce basis of depreciable property under section 108(b)(5) of the Internal Revenue Code .
(a) Description. An election under section 108(b)(5) is available whenever a taxpayer excludes discharge of indebtedness income (COD income) from gross income under sections 108(a)(1)(A), (B), or (C) (concerning title 11 cases, insolvency, and qualified farm indebtedness, respectively). See sections 108(d)(2) and (3) for the definitions of title 11 case and insolvent. See section 108(g)(2) for the definition of qualified farm indebtedness.
(b) Time and manner. To make an election under section 108(b)(5), a taxpayer must enter the appropriate information on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment), and attach the form to the timely filed (including extensions) Federal income tax return for the taxable year in which the taxpayer has COD income that is excluded from gross income under section 108(a). An election under this section may be revoked only with the consent of the Commissioner.
(c) Effective date. This section applies to elections concerning discharges of indebtedness occurring on or after October 22, 1998.
§ 1.108-5 Time and manner for making election under the Omnibus Budget Reconciliation Act of 1993.
(a) Description. Section 108(c)(3)(C), as added by section 13150 of the Omnibus Budget Reconciliation Act of 1993 (Pub. L. 103-66, 107 Stat. 446), allows certain noncorporate taxpayers to elect to treat certain indebtedness described in section 108(c)(3) that is discharged after December 31, 1992, as qualified real property business indebtedness. This discharged indebtedness is excluded from gross income to the extent allowed by section 108.
(b) Time and manner for making election. The election described in this section must be made on the timely-filed (including extensions) Federal income tax return for the taxable year in which the taxpayer has discharge of indebtedness income that is excludible from gross income under section 108(a). The election is to be made on a completed Form 982, in accordance with that Form and its instructions.
(c) Revocability of election. The election described in this section is revocable with the consent of the Commissioner.
(d) Effective date. The rules set forth in this section are effective December 27, 1993.
§ 1.108-6 Limitations on the exclusion of income from the discharge of qualified real property business indebtedness.
(a) Indebtedness in excess of value. With respect to any qualified real property business indebtedness that is discharged, the amount excluded from gross income under section 108(a)(1)(D) (concerning discharges of qualified real property business indebtedness) shall not exceed the excess, if any, of the outstanding principal amount of that indebtedness immediately before the discharge over the net fair market value of the qualifying real property, as defined in § 1.1017-1(c)(1), immediately before the discharge. For purposes of this section, net fair market value means the fair market value of the qualifying real property (notwithstanding section 7701(g)), reduced by the outstanding principal amount of any qualified real property business indebtedness (other than the discharged indebtedness) that is secured by such property immediately before and after the discharge. Also, for purposes of section 108(c)(2)(A) and this section, outstanding principal amount means the principal amount of indebtedness together with all additional amounts owed that, immediately before the discharge, are equivalent to principal, in that interest on such amounts would accrue and compound in the future, except that outstanding principal amount shall not include amounts that are subject to section 108(e)(2) and shall be adjusted to account for unamortized premium and discount consistent with section 108(e)(3).
(b) Overall limitation. The amount excluded from gross income under section 108(a)(1)(D) shall not exceed the aggregate adjusted bases of all depreciable real property held by the taxpayer immediately before the discharge (other than depreciable real property acquired in contemplation of the discharge) reduced by the sum of any—
(1) Depreciation claimed for the taxable year the taxpayer excluded discharge of indebtedness from gross income under section 108(a)(1)(D); and
(2) Reductions to the adjusted bases of depreciable real property required under section 108(b) or section 108(g) for the same taxable year.
(c) Effective date. This section applies to discharges of qualified real property business indebtedness occurring on or after October 22, 1998.
§ 1.108-7 Reduction of attributes.
(a) In general. (1) If a taxpayer excludes discharge of indebtedness income (COD income) from gross income under section 108(a)(1)(A), (B), or (C), then the amount excluded shall be applied to reduce the following tax attributes of the taxpayer in the following order:
(i) Net operating losses.
(ii) General business credits.
(iii) Minimum tax credits.
(iv) Capital loss carryovers.
(v) Basis of property.
(vi) Passive activity loss and credit carryovers.
(vii) Foreign tax credit carryovers.
(2) The taxpayer may elect under section 108(b)(5), however, to apply any portion of the excluded COD income to reduce first the basis of depreciable property. To the extent the excluded COD income is not so applied, the taxpayer must then reduce any remaining tax attributes in the order specified in section 108(b)(2). If the excluded COD income exceeds the sum of the taxpayer’s tax attributes, the excess is permanently excluded from the taxpayer’s gross income. For rules relating to basis reductions required by sections 108(b)(2)(E) and 108(b)(5), see sections 1017 and 1.1017-1. For rules relating to the time and manner for making an election under section 108(b)(5), see § 1.108-4.
(b) Carryovers and carrybacks. The tax attributes subject to reduction under section 108(b)(2) and paragraph (a)(1) of this section that are carryovers to the taxable year of the discharge, or that may be carried back to taxable years preceding the year of the discharge, are taken into account by the taxpayer for the taxable year of the discharge or the preceding years, as the case may be, before such attributes are reduced pursuant to section 108(b)(2) and paragraph (a)(1) of this section.
(c) Transactions to which section 381 applies. If a taxpayer realizes COD income that is excluded from gross income under section 108(a) either during or after a taxable year in which the taxpayer is the distributor or transferor of assets in a transaction described in section 381(a), any tax attributes to which the acquiring corporation succeeds, including the basis of property acquired by the acquiring corporation in the transaction, must reflect the reductions required by section 108(b). For this purpose, all attributes listed in section 108(b)(2) immediately prior to the transaction described in section 381(a), but after the determination of tax for the year of the distribution or transfer of assets, including basis of property, will be available for reduction under section 108(b)(2). However, the basis of stock or securities of the acquiring corporation, if any, received by the taxpayer in exchange for the transferred assets shall not be available for reduction under section 108(b)(2).
(d) Special rules for S corporations—(1) In general. If an S corporation excludes COD income from gross income under section 108(a)(1)(A), (B), or (C), the amount excluded shall be applied to reduce the S corporation’s tax attributes under paragraph (a)(1) of this section. For purposes of paragraph (a)(1)(i) of this section, the aggregate amount of the shareholders’ losses or deductions that are disallowed for the taxable year of the discharge under section 1366(d)(1), including disallowed losses or deductions of a shareholder that transfers all of the shareholder’s stock in the S corporation during the taxable year of the discharge, is treated as the net operating loss tax attribute (deemed NOL) of the S corporation for the taxable year of the discharge.
(2) Allocation of excess losses or deductions—(i) In general. If the amount of an S corporation’s deemed NOL exceeds the amount of the S corporation’s COD income that is excluded from gross income under section 108(a)(1)(A), (B), or (C), the excess deemed NOL shall be allocated to the shareholder or shareholders of the S corporation as a loss or deduction that is disallowed under section 1366(d) for the taxable year of the discharge.
(ii) Multiple shareholders—(A) In general. If an S corporation has multiple shareholders, to determine the amount of the S corporation’s excess deemed NOL to be allocated to each shareholder under paragraph (d)(2)(i) of this section, calculate with respect to each shareholder the shareholder’s excess amount. The shareholder’s excess amount is the amount (if any) by which the shareholder’s losses or deductions disallowed under section 1366(d)(1) (before any reduction under paragraph (a)(1) of this section) exceed the amount of COD income that would have been taken into account by that shareholder under section 1366(a) had the COD income not been excluded under section 108(a).
(B) Shareholders with a shareholder’s excess amount. Each shareholder that has a shareholder’s excess amount, as determined under paragraph (d)(2)(ii)(A) of this section, is allocated an amount equal to the S corporation’s excess deemed NOL multiplied by a fraction, the numerator of which is the shareholder’s excess amount and the denominator of which is the sum of all shareholders’ excess amounts.
(C) Shareholders with no shareholder’s excess amount. If a shareholder does not have a shareholder’s excess amount as determined in paragraph (d)(2)(ii)(A) of this section, none of the S corporation’s excess deemed NOL shall be allocated to that shareholder.
(iii) Terminating shareholder. Any amount of the S corporation’s excess deemed NOL allocated under paragraph (d)(2) of this section to a shareholder that had transferred all of the shareholder’s stock in the corporation during the taxable year of the discharge is permanently disallowed under § 1.1366-2(a)(6), unless the transfer of stock is described in section 1041(a). If the transfer of stock is described in section 1041(a), the amount of the S corporation’s excess deemed NOL allocated to the transferor under paragraph (d)(2) of this section shall be treated as a loss or deduction incurred by the corporation in the succeeding taxable year with respect to the transferee. See section 1366(d)(2)(B).
(3) Character of excess losses or deductions allocated to a shareholder. The character of an S corporation’s excess deemed NOL that is allocated to a shareholder under paragraph (d)(2) of this section consists of a proportionate amount of each item of the shareholder’s loss or deduction that is disallowed for the taxable year of the discharge under section 1366(d)(1).
(4) Information requirements. If an S corporation excludes COD income from gross income under section 108(a) for a taxable year, each shareholder of the S corporation during the taxable year of the discharge must report to the S corporation the amount of the shareholder’s losses and deductions that are disallowed for the taxable year of the discharge under section 1366(d)(1), even if that amount is zero. If a shareholder fails to report the amount of the shareholder’s losses and deductions that are disallowed for the taxable year of the discharge under section 1366(d)(1) to the S corporation, or if the S corporation knows that the amount reported by the shareholder is inaccurate, or if the information, as reported, appears to be incomplete or incorrect, the S corporation may rely on its own books and records, as well as other information available to the S corporation, to determine the amount of the shareholder’s losses and deductions that are disallowed for the taxable year of the discharge under section 1366(d)(1), provided that the S corporation knows or reasonably believes that its information presents an accurate reflection of the shareholder’s disallowed losses and deductions under section 1366(d)(1). The S corporation must report to each shareholder the amount of the S corporation’s excess deemed NOL that is allocated to that shareholder under paragraph (d)(2) of this section, even if that amount is zero, in accordance with applicable forms and instructions.
(e) Examples. The following examples illustrate the application of this section:
(ii) Analysis. Pursuant to paragraph (b) of this section, X takes into account the net operating loss carryover from Year 3 in computing its taxable income for Year 4 before any portion of the COD income excluded under section 108(a)(1)(A) is applied to reduce tax attributes. Thus, the amount of the net operating loss carryover that is reduced under section 108(b)(2) and paragraph (a) of this section is $50,000.
(ii) Analysis. Pursuant to paragraph (b) of this section and section 172, the net operating loss sustained in Year 4 is carried back to Years 2 and 3 before any portion of the COD income excluded under section 108(a)(1)(A) is applied to reduce tax attributes. Thus, the amount of the net operating loss that is reduced under section 108(b)(2) and paragraph (a) of this section is $50,000.
(ii) Analysis. On the distribution of Y stock to X’s creditors, under section 108(a)(1)(A), X is entitled to exclude from gross income the debt discharge amount of $100,000. (Under section 108(e)(8), X is treated as satisfying $100,000 of the debt owed the creditors for $100,000, the fair market value of the Y stock transferred to those creditors.) In Year 2, X has no taxable income or loss because its gross income is exactly offset by the depreciation deduction. As a result of the depreciation deduction, X’s basis in the asset is reduced by $10,000 to $65,000. Pursuant to paragraph (c) of this section, the amount of X’s net operating loss to which Y succeeds pursuant to section 381 and the basis of X’s property transferred to Y must take into account the reductions required by section 108(b). Pursuant to paragraph (a) of this section, X’s net operating loss carryover in the amount of $80,000 is reduced by $80,000 of the COD income excluded under section 108(a)(1). In addition, X’s basis in the asset is reduced by $20,000, the extent to which the COD income excluded under section 108(a)(1) did not reduce the net operating loss. Accordingly, as a result of the reorganization, there is no net operating loss to which Y succeeds under section 381. Pursuant to section 361, X recognizes no gain or loss on the transfer of its property to Y. Pursuant to section 362(b), Y’s basis in the asset acquired from X is $45,000.
(ii) Analysis. As in Example 3, on the distribution of Y stock to X’s creditors, under section 108(a)(1)(A), X is entitled to exclude from gross income the debt discharge amount of $100,000. In addition, in Year 2, X has no taxable income or loss because its gross income is exactly offset by the depreciation deduction. As a result of the depreciation deduction, X’s basis in the asset is reduced by $10,000 to $65,000. Pursuant to paragraph (c) of this section, the amount of X’s net operating loss to which Y succeeds pursuant to section 381 and the basis of X’s property transferred to Y must take into account the reductions required by section 108(b). As a result of the election under section 108(b)(5), X’s basis in the asset is reduced by $65,000 to $0. In addition, X’s net operating loss is reduced by $35,000, the extent to which the amount excluded from income under section 108(a)(1)(A) does not reduce X’s asset basis. Accordingly, as a result of the reorganization, Y succeeds to X’s net operating loss in the amount of $45,000 under section 381. Pursuant to section 361, X recognizes no gain or loss on the transfer of its property to Y. Pursuant to section 362(b), Y’s basis in the asset acquired from X is $0.
(ii) Allocation. Under section 108(b)(2)(A), X’s $45,000 of excluded COD income reduces the $60,000 deemed NOL to $15,000. Therefore, X has a $15,000 excess net operating loss (excess deemed NOL) to allocate to its shareholders. Under paragraph (d)(2)(ii)(C) of this section, none of the $15,000 excess deemed NOL is allocated to A because A’s section 1366(d) losses and deductions immediately prior to the section 108(b)(2)(A) reduction ($10,000) do not exceed A’s share of the excluded COD income for 2008 ($15,000). Thus, A has no shareholder’s excess amount. Each of B’s and C’s respective section 1366(d) losses and deductions immediately prior to the section 108(b)(2)(A) reduction exceed each of B’s and C’s respective shares of the excluded COD income for 2008. B’s excess amount is $5,000 ($20,000−$15,000) and C’s excess amount is $15,000 ($30,000−$15,000). Therefore, the total of all shareholders’ excess amounts is $20,000. Under paragraph (d)(2) of this section, X will allocate $3,750 of the $15,000 excess deemed NOL to B ($15,000 × $5,000/$20,000) and $11,250 of the $15,000 excess deemed NOL to C ($15,000 × $15,000/$20,000). These amounts are treated as losses and deductions disallowed under section 1366(d)(1) for the taxable year of the discharge. Accordingly, at the beginning of 2010, A has no section 1366(d)(2) carryovers, B has $3,750 of carryovers, and C has $11,250 of carryovers.
(iii) Character. Immediately prior to the section 108(b)(2)(A) reduction, B’s $20,000 of section 1366(d) losses and deductions consisted of $8,000 of long-term capital losses, $7,000 of section 1231 losses, and $5,000 of ordinary losses. After the section 108(b)(2)(A) tax attribute reduction, X will allocate $3,750 of the excess deemed NOL to B. Under paragraph (d)(3) of this section, the $3,750 excess deemed NOL allocated to B consists of $1,500 of long-term capital losses (($8,000/$20,000) × $3,750), $1,312.50 of section 1231 losses (($7,000/$20,000) × $3,750), and $937.50 of ordinary losses (($5,000/$20,000) × $3,750). As a result, at the beginning of 2010, B’s $3,750 of section 1366(d)(2) carryovers consist of $1,500 of long-term capital losses, $1,312.50 of section 1231 losses, and $937.50 of ordinary losses.
(ii) Under section 108(b)(2)(A), X’s $12,000 of excluded COD income reduces the $20,000 deemed NOL to $8,000. Therefore, X has an $8,000 excess net operating loss (excess deemed NOL) to allocate to its shareholders. Under paragraph (d)(2)(ii)(C) of this section, none of the $8,000 excess deemed NOL is allocated to C because C’s section 1366(d) losses and deductions immediately prior to the section 108(b)(2)(A) reduction ($2,000) do not exceed C’s share of the excluded COD income for 2008 ($3,000). However, each of A’s and B’s respective section 1366(d) losses and deductions immediately prior to the section 108(b)(2)(A) reduction exceed each of A’s and B’s respective shares of the excluded COD income for 2009. A’s excess amount is $2,000 ($5,000−$3,000) and B’s excess amount is $7,000 ($13,000−$6,000). Therefore, the total of all shareholders’ excess amounts is $9,000. Under paragraph (d)(2) of this section, X will allocate $1,777.78 of the $8,000 excess deemed NOL to A ($8,000 × $2,000/$9,000) and $6,222.22 of the $8,000 excess deemed NOL to B ($8,000 × $7,000/$9,000). However, because A transferred all of her shares of stock in X in a transaction not described in section 1041(a), A’s $1,777.78 of section 1366(d) losses and deductions are permanently disallowed under paragraph (d)(2)(iii) of this section. Accordingly, at the beginning of 2010, B has $6,222.22 of section 1366(d)(2) carryovers and C has no section 1366(d)(2) carryovers.
(f) Effective/applicability date—(1) Paragraphs (a), (b), (c), and Examples 1, 2, 3, and 4 of paragraph (e) of this section apply to discharges of indebtedness occurring on or after May 10, 2004.
(2) Paragraph (d) and Examples 5, 6, and 7 of paragraph (e) of this section apply to discharges of indebtedness occurring on or after October 30, 2009. Paragraph (d)(2)(iii) of this section applies on and after July 23, 2014. For rules that apply before that date, see 26 CFR part 1 (revised as of April 1, 2014).
§ 1.108-8 Indebtedness satisfied by partnership interest.
(a) In general. For purposes of determining income of a debtor from discharge of indebtedness (COD income), if a debtor partnership transfers a capital or profits interest in the partnership to a creditor in satisfaction of its recourse or nonrecourse indebtedness (a debt-for-equity exchange), the partnership is treated as having satisfied the indebtedness with an amount of money equal to the fair market value of the partnership interest.
(b) Determination of fair market value—(1) In general. All the facts and circumstances are considered in determining the fair market value of a partnership interest transferred by a debtor partnership to a creditor in satisfaction of the debtor partnership’s indebtedness (debt-for-equity interest) for purposes of paragraph (a) of this section. If the fair market value of the debt-for-equity interest does not equal the fair market value of the indebtedness exchanged, then general tax law principles shall apply to account for the difference.
(2) Safe harbor—(i) General rule. For purposes of paragraph (a) of this section, the fair market value of a debt-for-equity interest is deemed to be equal to the liquidation value of the debt-for-equity interest, as defined in paragraph (b)(2)(iii) of this section, if the following requirements are satisfied—
(A) The creditor, debtor partnership, and its partners treat the fair market value of the indebtedness as being equal to the liquidation value of the debt-for-equity interest for purposes of determining the tax consequences of the debt-for-equity exchange;
(B) If, as part of the same overall transaction, the debtor partnership transfers more than one debt-for-equity interest to one or more creditors, then each creditor, debtor partnership, and its partners treat the fair market value of each debt-for-equity interest transferred by the debtor partnership to such creditors as equal to its liquidation value;
(C) The debt-for-equity exchange is a transaction that has terms that are comparable to terms that would be agreed to by unrelated parties negotiating with adverse interests; and
(D) Subsequent to the debt-for-equity exchange, the debtor partnership does not redeem the debt-for-equity interest, and no person bearing a relationship to the debtor partnership or its partners that is specified in section 267(b) or section 707(b) purchases the debt-for-equity interest, as part of a plan at the time of the debt-for-equity exchange that has as a principal purpose the avoidance of COD income by the debtor partnership.
(ii) Tiered-partnership rule. For purposes of this paragraph (b)(2), the liquidation value of a debt-for-equity interest in a partnership (upper-tier partnership) that directly or indirectly owns an interest in one or more partnerships (lower-tier partnership(s)) is determined by taking into account the liquidation value of such lower-tier partnership interests.
(iii) Definition of liquidation value. For purposes of this paragraph (b)(2), the liquidation value of a debt-for-equity interest equals the amount of cash that the creditor would receive with respect to the debt-for-equity interest if, immediately after the debt-for-equity exchange, the partnership sold all of its assets (including goodwill, going concern value, and any other intangibles) for cash equal to the fair market value of those assets and then liquidated.
(c) Example. The following example illustrates the provisions of this section:
(ii) Because the requirements in paragraph (b)(2) of this section are satisfied, the fair market value of C’s debt-for-equity interest in AB partnership for purposes of determining AB partnership’s COD income is the liquidation value of C’s debt-for-equity interest, or $700. Accordingly, AB partnership is treated as satisfying the $1,000 indebtedness for $700 under section 108(e)(8).
(d) Effective/applicability date. This section applies to debt-for-equity exchanges occurring on or after November 17, 2011.
§ 1.108-9 Application of the bankruptcy and the insolvency provisions of section 108 to grantor trusts and disregarded entities.
(a) General rule—(1) Owner is the taxpayer. For purposes of applying section 108(a)(1)(A) and (B) to discharge of indebtedness income of a grantor trust or a disregarded entity, neither the grantor trust nor the disregarded entity shall be considered to be the “taxpayer,” as that term is used in section 108(a)(1) and (d)(1) through (3). Rather, for purposes of section 108(a)(1)(A) and (B) and (d)(1) through (3) and subject to section 108(d)(6), the owner of the grantor trust or the owner of the disregarded entity is the “taxpayer.”
(2) The bankruptcy exclusion. If indebtedness of a grantor trust or a disregarded entity is discharged in a title 11 case, section 108(a)(1)(A) applies to that discharged indebtedness only if the owner of the grantor trust or the owner of the disregarded entity is under the jurisdiction of the court in a title 11 case as the title 11 debtor. If the grantor trust or the disregarded entity is under the jurisdiction of the court in a title 11 case as the title 11 debtor, but the owner of the grantor trust or the owner of the disregarded entity is not, section 108(a)(1)(A) does not apply to the discharge of indebtedness income.
(3) The insolvency exclusion. Section 108(a)(1)(B) applies to the discharged indebtedness of a grantor trust or a disregarded entity only to the extent the owner of the grantor trust or the owner of the disregarded entity is insolvent. If the grantor trust or the disregarded entity is insolvent, but the owner of the grantor trust or the owner of the disregarded entity is solvent, section 108(a)(1)(B) does not apply to the discharge of indebtedness income.
(b) Application to partnerships. Under section 108(d)(6), in the case of a partnership, section 108(a)(1)(A) and (B) applies at the partner level. If a partnership holds an interest in a grantor trust or a disregarded entity, the applicability of section 108(a)(1)(A) and (B) to the discharge of indebtedness income is tested by looking to each partner to whom the income is allocable.
(c) Definitions—(1) Disregarded entity. For purposes of this section, a disregarded entity is an entity that is disregarded as an entity separate from its owner for Federal income tax purposes. See § 301.7701-2(c)(2)(i) of this chapter, the Procedure and Administration Regulations. Examples of disregarded entities include a domestic single-member limited liability company that does not elect to be classified as a corporation for Federal income tax purposes pursuant to § 301.7701-3 of this chapter, a corporation that is a qualified REIT subsidiary (within the meaning of section 856(i)(2)), and a corporation that is a qualified subchapter S subsidiary (within the meaning of section 1361(b)(3)(B)).
(2) Grantor trust. For purposes of this section, a grantor trust is any portion of a trust that is treated under subpart E of part I of subchapter J of chapter 1 of subtitle A of title 26 of the United States Code as being owned by the grantor or another person.
(3) Owner. Notwithstanding any other provision of this section to the contrary, neither a grantor trust nor a disregarded entity shall be considered an owner for purposes of this section.
(4) Title 11 debtor. For purposes of this section, a title 11 debtor is a debtor in a case under title 11 of the United States Code, as defined in 11 U.S.C. 101(13).
(d) Applicability date. The rules of this section apply to discharge of indebtedness income occurring on or after June 10, 2016.
§ 1.108(c)-1T [Reserved]
§ 1.108(i)-0 Definitions and effective/applicability dates.
(a) Definitions. For purposes of regulations under section 108(i)—
(1) Acquisition. An acquisition, with respect to any applicable debt instrument, includes an acquisition of the debt instrument for cash or other property, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, the contribution of the debt instrument to capital, the complete forgiveness of the indebtedness by the holder of the debt instrument, and a direct or an indirect acquisition within the meaning of § 1.108-2.
(2) Applicable debt instrument. An applicable debt instrument is a debt instrument that was issued by a C corporation or any other person in connection with the conduct of a trade or business by such person. In the case of an intercompany obligation (as defined in § 1.1502-13(g)(2)(ii)), applicable debt instrument includes only an instrument for which COD income is realized upon the instrument’s deemed satisfaction under § 1.1502-13(g)(5).
(3) C corporation issuer. C corporation issuer means a C corporation that issues a debt instrument with any deferred OID deduction.
(4) C corporation partner. A C corporation partner is a C corporation that is a direct or indirect partner of an electing partnership or a related partnership.
(5) COD income. COD income means income from the discharge of indebtedness, as determined under sections 61(a)(12) and 108(a) and the regulations under those sections.
(6) COD income amount. A COD income amount is a partner’s distributive share of COD income with respect to an applicable debt instrument of an electing partnership.
(7) Debt instrument. Debt instrument means a bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness (within the meaning of section 1275(a)(1)).
(8) Deferral period. For a reacquisition that occurs in 2009, deferral period means the taxable year of the reacquisition and the four taxable years following such taxable year. For a reacquisition that occurs in 2010, deferral period means the taxable year of the reacquisition and the three taxable years following such taxable year.
(9) Deferred amount. A deferred amount is the portion of a partner’s COD income amount with respect to an applicable debt instrument that is deferred under section 108(i).
(10) Deferred COD income. Deferred COD income means COD income that is deferred under section 108(i).
(11) Deferred item. A deferred item is any item of deferred COD income or deferred OID deduction that has not been previously taken into account under section 108(i).
(12) Deferred OID deduction. A deferred OID deduction means an otherwise allowable deduction for OID that is deferred under section 108(i)(2) with respect to a debt instrument issued (or treated as issued under section 108(e)(4)) in a debt-for-debt exchange described in section 108(i)(2)(A) or a deemed debt-for-debt exchange described in § 1.108(i)-3(a).
(13) Deferred section 465 amount. A deferred section 465 amount is described in paragraph (d)(3) of § 1.108(i)-2.
(14) Deferred section 752 amount. A deferred section 752 amount is described in paragraph (b)(3) of § 1.108(i)-2.
(15) Direct partner. A direct partner is a person that owns a direct interest in a partnership.
(16) Electing corporation. An electing corporation is a C corporation with deferred COD income by reason of a section 108(i) election.
(17) Electing entity. An electing entity is an entity that is a taxpayer that makes an election under section 108(i).
(18) Electing member. An electing member is an electing corporation that is a member of an affiliated group that files a consolidated return.
(19) Electing partnership. An electing partnership is a partnership that makes an election under section 108(i).
(20) Electing S corporation. An electing S corporation is an S corporation that makes an election under section 108(i).
(21) Included amount. An included amount is the portion of a partner’s COD income amount with respect to an applicable debt instrument that is not deferred under section 108(i) and is included in the partner’s distributive share of partnership income for the taxable year of the partnership in which the reacquisition occurs.
(22) Inclusion period. The inclusion period is the five taxable years following the last taxable year of the deferral period.
(23) Indirect partner. An indirect partner is a person that owns an interest in a partnership through an S corporation and/or one or more partnerships.
(24) Issuing entity. An issuing entity is any entity that is—
(i) A related partnership;
(ii) A related S corporation;
(iii) An electing partnership that issues a debt instrument (or is treated as issuing a debt instrument under section 108(e)(4)) in a debt-for-debt exchange described in section 108(i)(2)(A) or a deemed debt-for-debt exchange described in § 1.108(i)-3(a); or
(iv) An electing S corporation that issues a debt instrument (or is treated as issuing a debt instrument under section 108(e)(4)) in a debt-for-debt exchange described in section 108(i)(2)(A) or a deemed debt-for-debt exchange described in § 1.108(i)-3(a).
(25) OID. OID means original issue discount, as determined under sections 1271 through 1275 (and the regulations under those sections). If the amount of OID with respect to a debt instrument is less than a de minimis amount as determined under § 1.1273-1(d), the OID is treated as zero for purposes of section 108(i)(2).
(26) Reacquisition. A reacquisition, with respect to any applicable debt instrument, is any event occurring after December 31, 2008 and before January 1, 2011, that causes COD income with respect to such applicable debt instrument, including any acquisition of the debt instrument by the debtor that issued (or is otherwise the obligor under) the debt instrument or a person related to such debtor (within the meaning of section 108(i)(5)(A)).
(27) Related partnership. A related partnership is a partnership that is related to the electing entity (within the meaning of section 108(i)(5)(A)) and that issues a debt instrument in a debt-for-debt exchange described in section 108(i)(2)(A) or a deemed debt-for-debt exchange described in § 1.108(i)-3(a).
(28) Related S corporation. A related S corporation is an S corporation that is related to the electing entity (within the meaning of section 108(i)(5)(A)) and that issues a debt instrument in a debt-for-debt exchange described in section 108(i)(2)(A) or a deemed debt-for-debt exchange described in § 1.108(i)-3(a).
(29) Separate interest. A separate interest is a direct interest in an electing partnership or in a partnership or S corporation that is a direct or indirect partner of an electing partnership.
(30) S corporation partner. An S corporation partner is an S corporation that is a direct or indirect partner of an electing partnership or a related partnership.
(b) Effective/Applicability dates—(1) In general. The rules of this section, § 1.108(i)-1, and § 1.108(i)-2, apply on or after July 2, 2013, to reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008. In addition, the rules of § 1.108(i)-3 apply on or after July 2, 2013, to debt instruments issued after December 31, 2008, in connection with reacquisitions of applicable debt instruments in taxable years ending after December 31, 2008.
(2) Prior periods. For rules applying before July 2, 2013, see § 1.108(i)-0T, § 1.108(i)-1T, § 1.108(i)-2T, and § 1.108(i)-3T, as contained in 26 CFR part 1, revised April 1, 2013.
§ 1.108(i)-1 Deferred discharge of indebtedness income and deferred original issue discount deductions of C corporations.
(a) Overview. Section 108(i)(1) provides an election for the deferral of COD income arising in connection with the reacquisition of an applicable debt instrument. An electing corporation generally includes deferred COD income ratably over the inclusion period. Paragraph (b) of this section provides rules for the mandatory acceleration of an electing corporation’s remaining deferred COD income, the mandatory acceleration of a C corporation issuer’s deferred OID deductions, and for the elective acceleration of an electing member’s (other than the common parent’s) remaining deferred COD income. Paragraph (c) of this section provides examples illustrating the application of the mandatory and elective acceleration rules. Paragraph (d) of this section provides rules for the computation of an electing corporation’s earnings and profits. Paragraph (e) of this section refers to the effective/applicability dates.
(b) Acceleration events—(1) Deferred COD income. Except as otherwise provided in paragraphs (b)(2) and (3) of this section, and § 1.108(i)-2(b)(6) (in the case of a corporate partner), an electing corporation’s deferred COD income is taken into account ratably over the inclusion period.
(2) Mandatory acceleration events. An electing corporation takes into account all of its remaining deferred COD income, including its share of an electing partnership’s deferred COD income, immediately before the occurrence of any one of the events described in this paragraph (b)(2) (mandatory acceleration events), regardless of whether the electing corporation is in a title 11 or similar case at the time the mandatory acceleration event occurs.
(i) Changes in tax status. The electing corporation changes its tax status. For purposes of the preceding sentence, an electing corporation is treated as changing its tax status if it becomes one of the following entities:
(A) A tax-exempt entity as defined in § 1.337(d)-4(c)(2).
(B) An S corporation as defined in section 1361(a)(1).
(C) A qualified subchapter S subsidiary as defined in section 1361(b)(3)(B).
(D) An entity operating on a cooperative basis within the meaning of section 1381.
(E) A regulated investment company (RIC) as defined in section 851 or a real estate investment trust (REIT) as defined in section 856.
(F) A qualified REIT subsidiary as defined in section 856(i), but only if the qualified REIT subsidiary was not a REIT immediately before it became a qualified REIT subsidiary.
(ii) Cessation of corporate existence—(A) In general. The electing corporation ceases to exist for Federal income tax purposes.
(B) Exception for section 381(a) transactions—(1) In general. The electing corporation is not treated as ceasing to exist and is not required to take into account its remaining deferred COD income solely because its assets are acquired in a transaction to which section 381(a) applies. In such a case, the acquiring corporation succeeds to the electing corporation’s remaining deferred COD income and becomes subject to section 108(i) and the regulations thereunder, including all reporting requirements, as if the acquiring corporation were the electing corporation. A transaction is not treated as one to which section 381(a) applies for purposes of this paragraph (b)(2)(ii)(B) in the following circumstances—
(i) The acquisition of the assets of an electing corporation by an S corporation, if the acquisition is described in section 1374(d)(8);
(ii) The acquisition of the assets of an electing corporation by a RIC or REIT, if the acquisition is described in § 1.337(d)-7(a)(2)(ii);
(iii) The acquisition of the assets of a domestic electing corporation by a foreign corporation;
(iv) The acquisition of the assets of a foreign electing corporation by a domestic corporation, if as a result of the transaction, one or more exchanging shareholders include in income as a deemed dividend the all earnings and profits amount with respect to stock in the foreign electing corporation pursuant to § 1.367(b)-3(b)(3);
(v) The acquisition of the assets of an electing corporation by a tax-exempt entity as defined in § 1.337(d)-4(c)(2); or
(vi) The acquisition of the assets of an electing corporation by an entity operating on a cooperative basis within the meaning of section 1381.
(2) Special rules for consolidated groups—(i) Liquidations. For purposes of paragraph (b)(2)(ii)(B) of this section, the acquisition of assets by distributee members of a consolidated group upon the liquidation of an electing corporation is not treated as a transaction to which section 381(a) applies, unless immediately prior to the liquidation, one of the distributee members owns stock in the electing corporation meeting the requirements of section 1504(a)(2) (without regard to § 1.1502-34). See § 1.1502-80(g).
(ii) Taxable years. In the case of an intercompany transaction to which section 381(a) applies, the transaction does not cause the transferor or distributor to have a short taxable year for purposes of determining the taxable year of the deferral and inclusion period.
(iii) Net value acceleration rule—(A) In general. The electing corporation engages in an impairment transaction and, immediately after the transaction, the gross value of the electing corporation’s assets (gross asset value) is less than one hundred and ten percent of the sum of its total liabilities and the tax on the net amount of its deferred items (the net value floor) (the net value acceleration rule). Impairment transactions are any transactions, however effected, that impair an electing corporation’s ability to pay the amount of Federal income tax liability on its deferred COD income and include, for example, distributions (including section 381(a) transactions), redemptions, below-market sales, charitable contributions, and the incurrence of additional indebtedness without a corresponding increase in asset value. Value-for-value sales or exchanges (for example, an exchange to which section 351 or section 721 applies), or mere declines in the market value of the electing corporation’s assets are not impairment transactions. In addition, an electing corporation’s investments and expenditures in pursuance of its good faith business judgment are not impairment transactions. For purposes of determining an electing corporation’s gross asset value, the amount of any distribution that is not treated as an impairment transaction under paragraph (b)(2)(iii)(D) of this section (distributions and charitable contributions consistent with historical practice) or under paragraph (b)(2)(iii)(E) of this section (special rules for RICs and REITs) is treated as an asset of the electing corporation. Solely for purposes of computing the amount of the net value floor, the tax on the deferred items is determined by applying the highest rate of tax specified in section 11(b) for the taxable year.
(B) Transactions integrated. Any transaction that occurs before the reacquisition of an applicable debt instrument, but that occurs pursuant to the same plan as the reacquisition, is taken into account in determining whether the gross asset value of the electing corporation is less than the net value floor.
(C) Corrective action to restore net value. An electing corporation is not required to take into account its deferred COD income under the net value acceleration rule of paragraph (b)(2)(iii)(A) of this section if, before the due date of the electing corporation’s return (including extensions), value is restored in a transaction in an amount equal to the lesser of—
(1) The amount of value that was removed from the electing corporation in one or more impairment transactions (net of amounts previously restored under this paragraph (b)(2)(iii)(C)); or
(2) The amount by which the electing corporation’s net value floor exceeds its gross asset value.
For example, assume an electing corporation incurs $50 of debt, distributes the $50 of proceeds to its shareholder, and immediately after the distribution, the electing corporation’s gross asset value is below the net value floor by $25. The electing corporation may avoid the inclusion of its remaining deferred COD income if value of at least $25 is restored to it before the due date of the electing corporation’s tax return (including extensions) for the taxable year that includes the distribution. The value that must be restored is determined at the time of the impairment transaction on a net value basis (for example, additional borrowings by an electing corporation do not restore value).
(D) Exceptions for distributions and charitable contributions that are consistent with historical practice. An electing corporation’s distributions are not treated as impairment transactions (and are not taken into account as a reduction of the electing corporation’s gross asset value when applying the net value acceleration rule to any impairment transaction), to the extent that the distributions are described in section 301(c) and the amount of these distributions, in the aggregate, for the applicable taxable year (applicable distribution amount) does not exceed the annual average amount of section 301(c) distributions over the preceding three taxable years (average distribution amount). If an electing corporation’s applicable distribution amount exceeds its average distribution amount (excess amount), then the amount of the impairment transaction equals the excess amount. Appropriate adjustments must be made to take into account any issuances or redemptions of stock, or similar transactions, occurring during the taxable year of distribution or any of the preceding three taxable years. If the electing corporation has a short taxable year for the year of the distribution or for any of the preceding three taxable years, the amounts are determined on an annualized basis. If an electing corporation has been in existence for less than three years, the period during which the electing corporation has been in existence is substituted for the preceding three taxable years. For purposes of determining an electing corporation’s average distribution amount, the electing corporation does not take into account the distribution history of a distributor or transferor in a transaction to which section 381(a) applies (other than a transaction described in section 368(a)(1)(F)). Rules similar to those prescribed in this paragraph (b)(2)(iii)(D) also apply to an electing corporation’s charitable contributions (within the meaning of section 170(c)) that are consistent with its historical practice.
(E) Special rules for RICs and REITs—(1) Distributions. Notwithstanding paragraph (b)(2)(iii)(D) of this section, in the case of a RIC or REIT, any distribution with respect to stock that is treated as a dividend under section 852 or 857 is not treated as an impairment transaction (and is not taken into account as a reduction in gross asset value when applying the net value acceleration rule to any impairment transaction).
(2) Redemptions by RICs. Any redemption of a redeemable security, as defined in 15 U.S.C. section 80a-2(a)(32), by a RIC in the ordinary course of business is not treated as an impairment transaction (and is not taken into account as a reduction in gross asset value when applying the net value acceleration rule to any impairment transaction).
(F) Special rules for consolidated groups—(1) Impairment transactions and net value acceleration rule. In the case of an electing member, the determination of whether the member has engaged in an impairment transaction is made on a group-wide basis. An electing member is treated as engaging in an impairment transaction if any member’s transaction impairs the group’s ability to pay the tax liability associated with all electing members’ deferred COD income. Accordingly, intercompany transactions are not impairment transactions. Similarly, the net value acceleration rule is applied by reference to the gross asset value of all members (excluding stock of members whether or not described in section 1504(a)(4)), the liabilities of all members, and the tax on all members’ deferred items. For example, assume P is the common parent of the P-S consolidated group, S has a section 108(i) election in effect, and S makes a $100 distribution to P which, on a separate entity basis, would reduce S’s gross asset value below the net value floor. S’s intercompany distribution to P is not an impairment transaction. However, if P makes a $100 distribution to its shareholder, P’s distribution is an impairment transaction (unless the distribution is consistent with its historical practice under paragraph (b)(2)(iii)(D) of this section), and the net value acceleration rule is applied by reference to the assets, liabilities, and deferred items of the P-S group.
(2) Departing member. If an electing member that previously engaged in one or more impairment transactions on a separate entity basis ceases to be a member of a consolidated group (departing member), the cessation is treated as an impairment transaction and the net value acceleration rule under paragraph (b)(2)(iii)(A) of this section is applied to the departing member on a separate entity basis immediately after ceasing to be a member (and taking into account the impairment transaction(s) that occurred on a separate entity basis). If the departing member’s gross asset value is below the net value floor, the departing member’s remaining deferred COD income is taken into account immediately before the departing member ceases to be a member (unless value is restored under paragraph (b)(2)(iii)(C) of this section). If the departing member’s deferred COD income is not accelerated, the departing member is subject to the reporting requirements of section 108(i) on a separate entity basis. If the departing member becomes a member of another consolidated group, the cessation is treated as an impairment transaction and the net value acceleration rule under paragraph (b)(2)(iii)(A) of this section is applied by reference to the assets, liabilities, and the tax on deferred items of the members of the acquiring group immediately after the transaction. If the acquiring group’s gross asset value is below the net value floor, the departing member’s remaining deferred COD income is taken into account immediately before the departing member ceases to be a member (unless value is restored under paragraph (b)(2)(iii)(C) of this section). If the departing member’s remaining deferred COD income is not accelerated, the common parent of the acquiring group succeeds to the reporting requirements of section 108(i) with respect to the departing member.
(3) Elective acceleration for certain consolidated group members—(i) In general. An electing member (other than the common parent) of a consolidated group may elect at any time to accelerate in full (and not in part) the inclusion of its remaining deferred COD income with respect to all applicable debt instruments by filing a statement described in paragraph (b)(3)(ii) of this section. Once made, an election to accelerate deferred COD income under this paragraph (b)(3) is irrevocable.
(ii) Time and manner for making election—(A) In general. The election to accelerate the inclusion of an electing member’s remaining deferred COD income with respect to all applicable debt instruments is made on a statement attached to a timely filed tax return (including extensions) for the year in which the deferred COD income is taken into account. The election is made by the common parent on behalf of the electing member. See § 1.1502-77(a).
(B) Additional information. The statement must include—
(1) Label. A label entitled “SECTION 1.108(i)-1 ELECTION AND INFORMATION STATEMENT BY [INSERT NAME AND EMPLOYER IDENTIFICATION NUMBER OF THE ELECTING MEMBER]”; and
(2) Required Information. An identification of each applicable debt instrument to which an election under this paragraph (b)(3) applies and the corresponding amount of—
(i) Deferred COD income that is accelerated under this paragraph (b)(3); and
(ii) Deferred OID deductions that are accelerated under paragraph (b)(4) of this section.
(4) Deferred OID deductions—(i) In general. Except as otherwise provided in paragraph (b)(4)(ii) of this section and § 1.108(i)-2(b)(6) (in the case of a C corporation partner), a C corporation issuer’s deferred OID deductions are taken into account ratably over the inclusion period.
(ii) OID acceleration events. A C corporation issuer takes into account all of its remaining deferred OID deductions with respect to a debt instrument immediately before the occurrence of any one of the events described in this paragraph (b)(4)(ii), regardless of whether the C corporation issuer is in a title 11 or similar case.
(A) Inclusion of deferred COD income. An electing entity or its owners take into account all of the remaining deferred COD income to which the C corporation issuer’s deferred OID deductions relate. If, under § 1.108(i)-2(b) or (c), an electing entity or its owners take into account only a portion of the deferred COD income to which the deferred OID deductions relate, then the C corporation issuer takes into account a proportionate amount of the remaining deferred OID deductions.
(B) Changes in tax status. The C corporation issuer changes its tax status within the meaning of paragraph (b)(2)(i) of this section.
(C) Cessation of corporate existence—(1) In general. The C corporation issuer ceases to exist for Federal income tax purposes.
(2) Exception for section 381(a) transactions—(i) In general. A C corporation issuer is not treated as ceasing to exist and does not take into account its remaining deferred OID deductions in a transaction to which section 381(a) applies, taking into account the application of § 1.1502-34, as appropriate. See § 1.1502-80(g). This exception does not apply to a transaction that is not treated as one to which section 381(a) applies under paragraph (b)(2)(iii)(B)(1) of this section.
(ii) Taxable years. In the case of an intercompany transaction to which section 381(a) applies, the transaction does not cause the transferor or distributor to have a short taxable year for purposes of determining the taxable year of the deferral and inclusion period.
(c) Examples. The application of this section is illustrated by the following examples. Unless otherwise stated, P, S, S1, and X are domestic C corporations, and each files a separate return on a calendar year basis:
(ii) Analysis. Under paragraph (b)(2)(iii)(A) of this section, S’s distribution is an impairment transaction. Immediately following the distribution, S’s gross asset value of $100 is less than the net value floor of $154. Accordingly, under the net value acceleration rule of paragraph (b)(2)(iii)(A) of this section, S takes into account its $400 of deferred COD income immediately before the distribution.
(iii) Corrective action to restore value. The facts are the same as in paragraph (i) of this Example 1, except that P contributes assets with a value of $25 to S before the due date of S’s 2010 return (including extensions). Because P restores $25 of value to S (the lesser of the amount of value removed in the distribution ($25) or the amount by which S’s net value floor exceeds its gross asset value ($54)), under paragraph (b)(2)(iii)(C) of this section, S does not take into account its $400 of deferred COD income.
(ii) Amount of impairment transaction. Under paragraph (b)(2)(iii)(D) of this section, P’s 2009 distributions are not treated as impairment transactions (and are not taken into account as a reduction of P’s gross asset value when applying the net value acceleration rule to any impairment transaction), to the extent that the aggregate amount distributed in 2009 (the applicable distribution amount) does not exceed the annual average amount of distributions (the average distribution amount) over the preceding three taxable years. Accordingly, P’s applicable distribution amount for 2009 is $25 million, and its average distribution amount is $10 million ($20 million (2006) plus $5 million (2007) plus $5 million (2008) divided by 3). The reverse stock split in 2006 is not a transaction requiring an adjustment to the determination of the average distribution amount. Because P’s applicable distribution amount of $25 million exceeds its average distribution amount of $10 million, under paragraph (b)(2)(iii)(D) of this section, the amount of P’s 2009 distribution that is treated as an impairment transaction is $15 million. The balance of the 2009 distribution, $10 million, is not treated as an impairment transaction (and is not taken into account as a reduction in P’s gross asset value when applying the net value acceleration rule to any impairment transaction).
(iii) Distribution history. The facts are the same as in paragraph (i) of this Example 2, except that in 2010, P merges into X in a transaction to which section 381(a) applies, with X succeeding to P’s deferred COD income, and X makes a distribution to its shareholders. For purposes of determining whether X’s distribution is consistent with its historical practice, the average distribution amount is determined solely with respect to X’s distribution history.
(ii) Debt-laden distributee. The facts are the same as in paragraph (i) of this Example 3, except that in the liquidation, S distributes $100 of assets to P, a holding company whose only asset is its stock in S. Assume that immediately following the distribution, P’s gross asset value is $100, P has $60 of liabilities, and the Federal income tax on the $400 of deferred COD income is $140. Under paragraph (b)(2) of this section, S must take into account all of its remaining deferred COD income upon the occurrence of any one of the mandatory acceleration events. Although S ceases its corporate existence as a result of the liquidation, S is not required to take into account its remaining deferred COD income under the exception in paragraph (b)(2)(ii)(B) of this section because its assets are acquired in a transaction to which section 381(a) applies. However, under paragraph (b)(2)(iii)(A) of this section, S’s distribution to P is an impairment transaction and the net value acceleration rule is applied with respect to the assets, liabilities, and deferred items of P (S’s successor). Immediately following the distribution, P’s gross asset value of $100 is less than the net value floor of $220 [110% × ($60 + $140)]. Accordingly, under the net value acceleration rule of paragraph (b)(2)(iii)(A) of this section, S is required to take into account its $400 of deferred COD income immediately before the distribution, unless value is restored to P pursuant to paragraph (b)(2)(iii)(C) of this section.
(iii) Foreign acquirer. The facts are the same as in paragraph (i) of this Example 3, except that P is a foreign corporation. Although S’s assets are acquired in a transaction to which section 381(a) applies, under paragraph (b)(2)(ii)(B)(1)(iii) of this section, the exception to accelerated inclusion does not apply and S takes into account its remaining deferred COD income immediately before the liquidation. See also section 367(e)(2) and the regulations thereunder.
(iv) Section 338 transaction. P, the common parent of a consolidated group (P group), owns all the stock of S1, one of the members of the P group. In 2009, S1 reacquires its own indebtedness and realizes $30 of COD income. Pursuant to an election under section 108(i), S1 defers recognition of the entire $30 of COD income. In 2010, P sells all the stock of S1 to X, an unrelated corporation, for $300, and P and X make a timely section 338(h)(10) election with respect to the sale. Under paragraph (b)(2)(ii)(A) of this section, an electing corporation takes into account its remaining deferred COD income when it ceases its existence for Federal income tax purposes unless the exception in paragraph (b)(2)(ii)(B) of this section applies. Pursuant to section 338(h)(10) and the regulations, S1 is treated as transferring all of its assets to an unrelated person in exchange for consideration that includes the discharge of its liabilities. This deemed value-for-value exchange is not an impairment transaction. Following the deemed sale, while S1 is still a member of the P group, S1 is treated as distributing all of its assets to P and as ceasing its existence. Under these facts, the distribution of all of S1’s assets constitutes a deemed liquidation, and is a transaction to which sections 332 and 381(a) apply. Although S1 ceases its corporate existence as a result of the liquidation, S1 is not required to take into account its remaining deferred COD income under the exception in paragraph (b)(2)(ii)(B) of this section because its assets are acquired in a transaction to which section 381(a) applies. P succeeds to S1’s remaining deferred COD income and to S1’s reporting requirements as if P were the electing corporation. Under paragraph (b)(2)(iii)(F)(1) of this section, the intercompany distribution from S1 to P is not an impairment transaction.
(d) Earnings and profits—(1) In general. Deferred COD income increases earnings and profits in the taxable year that it is realized and not in the taxable year or years that the deferred COD income is includible in gross income. Deferred OID deductions decrease earnings and profits in the taxable year or years in which the deduction would be allowed without regard to section 108(i).
(2) Exceptions—(i) RICs and REITs. Notwithstanding paragraph (d)(1) of this section, deferred COD income increases earnings and profits of a RIC or REIT in the taxable year or years in which the deferred COD income is includible in gross income and not in the year that the deferred COD income is realized. Deferred OID deductions decrease earnings and profits of a RIC or REIT in the taxable year or years that the deferred OID deductions are deductible.
(ii) Alternative minimum tax. For purposes of calculating alternative minimum taxable income, any items of deferred COD income or deferred OID deduction increase or decrease, respectively, adjusted current earnings under section 56(g)(4) in the taxable year or years that the item is includible or deductible.
(e) Effective/applicability dates. For effective/applicability dates, see § 1.108(i)-0(b).
§ 1.108(i)-2 Application of section 108(i) to partnerships and S corporations.
(a) Overview. Under section 108(i), a partnership or an S corporation may elect to defer COD income arising in connection with a reacquisition of an applicable debt instrument for the deferral period. COD income deferred under section 108(i) is included in gross income ratably over the inclusion period, or earlier upon the occurrence of any acceleration event described in paragraph (b)(6) or (c)(3) of this section. If a debt instrument is issued (or treated as issued under section 108(e)(4)) in a debt-for-debt exchange described in section 108(i)(2)(A) or a deemed debt-for-debt exchange described in § 1.108(i)-3(a), some or all of the deductions for OID with respect to such debt instrument must be deferred during the deferral period. The aggregate amount of OID deductions deferred during the deferral period is generally allowed as a deduction ratably over the inclusion period, or earlier upon the occurrence of any acceleration event described in paragraph (b)(6) or (c)(3) of this section. Paragraph (b) of this section provides rules that apply to partnerships. Paragraph (c) of this section provides rules that apply to S corporations. Paragraph (d) of this section provides general rules that apply to partnerships and S corporations. Paragraph (e) of this section provides election procedures and reporting requirements. Paragraph (f) of this section contains the effective/applicability date. See § 1.108(i)-0(a) for definitions that apply to this section.
(b) Specific rules applicable to partnerships—(1) Allocation of COD income and partner’s deferred amounts. An electing partnership that defers any portion of COD income realized from a reacquisition of an applicable debt instrument under section 108(i) must allocate all of the COD income with respect to the applicable debt instrument to its direct partners that are partners in the electing partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of the partners under section 704 and the regulations under section 704, including § 1.704-1(b)(2)(iii), without regard to section 108(i). The electing partnership may determine, in any manner, the portion, if any, of a partner’s COD income amount with respect to an applicable debt instrument that is the deferred amount, and the portion, if any, that is the included amount. However, no partner’s deferred amount with respect to an applicable debt instrument may exceed that partner’s COD income amount with respect to such applicable debt instrument, and the aggregate amount of the partners’ COD income amounts and deferred amounts with respect to each applicable debt instrument must equal the electing partnership’s COD income amount and deferred amount, respectively, with respect to each such applicable debt instrument.
(2) Basis adjustments and capital account maintenance—(i) Basis adjustments. The adjusted basis of a partner’s interest in a partnership is not increased under section 705(a)(1) by the partner’s deferred amount in the taxable year of the reacquisition. The adjusted basis of a partner’s interest in a partnership is not decreased under section 705(a)(2) by the partner’s share of any deferred OID deduction in the taxable year in which the deferred OID accrues. The adjusted basis of a partner’s interest in a partnership is adjusted under section 705(a) by the partner’s share of the electing partnership’s deferred items for the taxable year in which the partner takes into account such deferred items under this section.
(ii) Capital account maintenance. For purposes of maintaining a partner’s capital account under § 1.704-1(b)(2)(iv) and notwithstanding § 1.704-1(b)(2)(iv)(n), the capital account of a partner of a partnership is adjusted under § 1.704-1(b)(2)(iv) for a partner’s share of an electing partnership’s deferred items as if no election under section 108(i) were made.
(3) Deferred section 752 amount—(i) In general. An electing partnership shall determine, for each of its direct partners with a deferred amount, the partner’s deferred section 752 amount, if any, with respect to an applicable debt instrument. A partner’s deferred section 752 amount with respect to an applicable debt instrument equals the decrease in the partner’s share of a partnership liability under section 752(b) resulting from the reacquisition of the applicable debt instrument that is not treated as a current distribution of money under section 752(b) by reason of section 108(i)(6) (deferred section 752 amount). A partner’s deferred section 752 amount is treated as a distribution of money by the partnership to the partner under section 752(b) at the same time and, to the extent remaining, in the same amount as the partner recognizes the deferred amount with respect to the applicable debt instrument.
(ii) Electing partnership’s computation of a partner’s deferred section 752 amount. To compute a partner’s deferred section 752 amount, the electing partnership must first determine the amount of gain that its direct partner would recognize in the taxable year of a reacquisition under section 731 as a result of the reacquisition of one or more applicable debt instruments during the taxable year absent the deferral provided in the second sentence of section 108(i)(6) (the section 108(i)(6) deferral). If a direct partner of an electing partnership would not recognize any gain under section 731 as a result of the reacquisition of one or more applicable debt instruments during the taxable year absent the section 108(i)(6) deferral, the partner will not have a deferred section 752 amount with respect to any applicable debt instrument that is reacquired during the taxable year. If a direct partner of an electing partnership would recognize gain under section 731 as a result of the reacquisition of one or more applicable debt instruments during the taxable year absent the section 108(i)(6) deferral, the partner’s deferred section 752 amount for all applicable debt instruments that are reacquired during the taxable year is equal to the lesser of the partner’s aggregate deferred amounts from the electing partnership for all applicable debt instruments reacquired during the taxable year, or the gain that the partner would recognize in the taxable year of the reacquisitions under section 731 as a result of the reacquisitions absent the section 108(i)(6) deferral. In determining the amount of gain that the direct partner would recognize in the taxable year of a reacquisition under section 731 as a result of the reacquisition of one or more applicable debt instruments during the taxable year absent the section 108(i)(6) deferral, the rule under § 1.731-1(a)(1)(ii) applies to any deemed distribution of money under section 752(b) resulting from a decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or drawing of money. The amount of any deemed distribution of money under section 752(b) resulting from a decrease in the partner’s share of a reacquired applicable debt instrument that is treated as an advance or drawing of money under § 1.731-1(a)(1)(ii) is determined as if no COD income resulting from the reacquisition of the applicable debt instrument is deferred under section 108(i).
(iii) Multiple section 108(i) elections. If a direct partner of an electing partnership has a deferred section 752 amount under paragraph (b)(3)(ii) of this section for the taxable year of a reacquisition, and the partner has a deferred amount with respect to more than one applicable debt instrument from the electing partnership for which a section 108(i) election is made in that taxable year, the partner’s deferred section 752 amount with respect to each such applicable debt instrument equals the partner’s deferred section 752 amount as determined under paragraph (b)(3)(ii) of this section, multiplied by a ratio, the numerator of which is the partner’s deferred amount with respect to such applicable debt instrument, and the denominator of which is the partner’s aggregate deferred amounts from the electing partnership for all applicable debt instruments reacquired during the taxable year.
(iv) Electing partnership’s request for information. At the request of an electing partnership, each direct partner of the electing partnership that has a deferred amount with respect to such partnership must provide to the electing partnership a written statement containing information requested by the partnership that is necessary to determine the partner’s deferred section 752 amount (such as the partner’s adjusted basis in the partner’s interest in the electing partnership). The written statement must be signed under penalties of perjury and provided to the requesting partnership within 30 days of the date of the request by the electing partnership.
(v) Examples. The following examples illustrate the rules under paragraph (b)(3) of this section:
(ii) Under paragraph (b)(3)(ii) of this section, the amount of gain that A would recognize under section 731 as a result of the reacquisitions absent the section 108(i)(6) deferral is $200. Thus, A’s deferred section 752 amount with respect to debt one and debt two equals $200 (the lesser of A’s aggregate deferred amounts with respect to debt one and debt two of $250, or gain that A would recognize under section 731 in 2009, as a result of the reacquisitions absent the section 108(i)(6) deferral, of $200). Under paragraph (b)(3)(iii) of this section, $120 of A’s $200 deferred section 752 amount relates to debt one ($200 × $150/$250) and $80 relates to debt two ($200 × $100/$250).
(iii) Under paragraph (b)(3)(ii) of this section, the amount of gain that B would recognize under section 731 as a result of the reacquisitions absent the section 108(i)(6) deferral is $50. Thus, B’s deferred section 752 amount with respect to debt one and debt two equals $50 (the lesser of B’s aggregate deferred amounts with respect to debt one and debt two of $100, or gain that B would recognize under section 731 in 2009, as a result of the reacquisitions absent the section 108(i)(6) deferral, of $50). Under paragraph (b)(3)(iii) of this section, $37.50 of B’s $50 deferred section 752 amount relates to debt one ($50 × $75/$100) and $12.50 relates to debt two ($50 × $25/$100).
(iv) A will recognize $50 of deferred COD income ($30 with respect to debt one and $20 with respect to debt two) in each of the five taxable years of the inclusion period, provided there are no earlier acceleration events under paragraph (b)(6) of this section. Under paragraph (b)(3)(i) of this section, A will be treated as receiving a $30 deemed distribution under section 752(b) with respect to debt one and a $20 deemed distribution with respect to debt two in each of the first, second, third, and fourth taxable years of the inclusion period. A will not have any remaining deferred section 752 amounts in the fifth taxable year of the inclusion period.
(v) B will recognize $20 of deferred COD income ($15 with respect to debt one and $5 with respect to debt two) in each of the five taxable years of the inclusion period, provided there are no earlier acceleration events under paragraph (b)(6) of this section. Under paragraph (b)(3)(i) of this section, B will be treated as receiving a $15 deemed distribution under section 752(b) with respect to debt one and a $5 deemed distribution with respect to debt two in the first and second taxable year of the inclusion period, and a $7.50 deemed distribution under section 752(b) with respect to debt one ($10 × $15/$20) and a $2.50 deemed distribution with respect to debt two ($10 × $5/$20) in the third taxable year of the inclusion period. B will not have any remaining deferred section 752 amounts in the fourth and fifth taxable years of the inclusion period.
(ii) In determining the amount of gain that A would recognize under section 731 as a result of the reacquisitions absent the section 108(i)(6) deferral, Partnership first increases A’s $50 adjusted basis in his interest in Partnership by A’s distributive share of Partnership income (other than the deferred amounts relating to debt one and debt two) of $100, and then decreases A’s adjusted basis in Partnership by deemed distributions under section 752(b) of $250 and, thereafter, by A’s distributive share of Partnership losses of $250, but only to the extent that A’s basis is not reduced below zero. Under paragraph (b)(3)(ii) of this section, the amount of gain that A would recognize under section 731 as a result of the reacquisitions absent section 108(i)(6) deferral is $100. Thus, A’s deferred section 752 amount with respect to debt one and debt two equals $100 (the lesser of A’s aggregate deferred amounts with respect to debt one and debt two of $250, or gain that A would recognize under section 731 as a result of the reacquisitions absent the deferral section 108(i)(6) deferral of $100). Under paragraph (b)(3)(iii) of this section, A’s deferred section 752 amount with respect to debt one is $60 ($100 × $150/$250), and A’s deferred section 752 amount with respect to debt two is $40 ($100 × $100/$250). A’s $250 of Partnership losses are suspended under section 704(d).
(iii) In determining the amount of gain that B would recognize under section 731 as a result of the reacquisitions absent the section 108(i)(6) deferral, Partnership first increases B’s $50 adjusted basis in his interest in Partnership by B’s distributive share of Partnership income (other than the deferred amounts relating to debt one and debt two) of $250 ($100 other income plus $150 included amount with respect to debt one and debt two), and then decreases B’s adjusted basis in Partnership by deemed distributions under section 752(b) of $250 and, thereafter, by B’s distributive share of Partnership losses of $250, but only to the extent that B’s basis is not reduced below zero. Under paragraph (b)(3)(ii) of this section, B would not recognize any gain under section 731 as a result of the reacquisitions absent the section 108(i)(6) deferral. Thus, B has no deferred section 752 amount with respect to either debt one or debt two. B may deduct his distributive share of Partnership losses to the extent of $50, with the remaining $200 suspended under section 704(d).
(4) Tiered partnerships—(i) In general. If a partnership (upper-tier partnership) is a direct or indirect partner of an electing partnership and directly or indirectly receives an allocation of a COD income amount from the electing partnership, all or a portion of which is deferred under section 108(i), the upper-tier partnership must allocate its COD income amount to its partners that are partners in the upper-tier partnership immediately before the reacquisition in the manner in which the income would be included in the distributive shares of the partners under section 704 and the regulations under section 704, including § 1.704-1(b)(2)(iii), without regard to section 108(i). The upper-tier partnership may determine, in any manner, the portion, if any, of a partner’s COD income amount with respect to an applicable debt instrument that is the deferred amount, and the portion, if any, that is the included amount. However, no partner’s deferred amount with respect to an applicable debt instrument may exceed that partner’s COD income amount with respect to such applicable debt instrument, and the aggregate amount of the partners’ COD income amounts and deferred amounts with respect to each applicable debt instrument must equal the upper-tier partnership’s COD income amount and deferred amount, respectively, with respect to each such applicable debt instrument.
(ii) Deferred section 752 amount. The computation of a partner’s deferred section 752 amount, as described in paragraph (b)(3)(ii) of this section, is calculated only for direct partners of the electing partnership. An upper-tier partnership’s deferred section 752 amount with respect to an applicable debt instrument of the electing partnership is allocated only to those partners of the upper-tier partnership that have a deferred amount with respect to that applicable debt instrument, and in proportion to such partners’ share of the upper-tier partnership’s deferred amount with respect to that applicable debt instrument. A partner’s share of the upper-tier partnership’s deferred section 752 amount with respect to an applicable debt instrument must not exceed that partner’s share of the upper-tier partnership’s deferred amount with respect to the applicable debt instrument to which the deferred section 752 amount relates. The deferred section 752 amount of a partner of an upper-tier partnership is treated as a distribution of money by the upper-tier partnership to the partner under section 752(b), at the same time and, to the extent remaining, in the same amount as the partner recognizes the deferred amount with respect to the applicable debt instrument.
(iii) Examples. The following examples illustrate the rules under paragraph (b)(4) of this section:
(ii) XYZ has two equal partners, individuals X and Y. X and Y share equally in XYZ’s liabilities. XYZ allocates the $250 COD income amount from PRS equally between X and Y ($125 each). XYZ determines that X has a deferred amount of $100 and an included amount of $25. All $125 of Y’s COD income amount is Y’s included amount. For 2009, each of X’s and Y’s share of XYZ’s $250 decrease in liability with respect to the reacquired applicable debt instrument of PRS is $125.
(iii) Under paragraph (b)(3)(ii) of this section, PRS determines that XYZ has a deferred section 752 amount of $50. Therefore, for 2009, of XYZ’s $250 share of the decrease in PRS’s reacquired applicable debt instrument, $200 is treated as a deemed distribution under section 752(b) and $50 is the deferred section 752 amount.
(iv) Under paragraph (b)(4)(ii) of this section, none of XYZ’s $50 deferred section 752 amount is allocated to Y because Y does not have a deferred amount with respect to the reacquired applicable debt interest. XYZ’s entire $50 of deferred section 752 amount is allocated to X. Therefore, of X’s $125 share of the XYZ’s decrease in liability with respect to the reacquired applicable debt instrument of PRS, $75 is treated as a deemed distribution under section 752(b) and $50 is X’s deferred section 752 amount. Y’s $125 share of XYZ’s decrease in liability with respect to the reacquired applicable debt instrument of PRS is treated as a deemed distribution under section 752(b) and none is a deferred section 752 amount.
(ii) Under paragraph (b)(4)(ii) of this section, none of XYZ’s $50 deferred section 752 amount is allocated to Y because Y does not have a deferred amount with respect to the reacquired applicable debt instrument. XYZ’s $50 deferred section 752 amount is allocated to X and Z in proportion to X’s and Z’s share of XYZ’s deferred amount, or $25 each ($50 × ($50/$100)). Therefore, of X’s $62.50 share of XYZ’s decrease in liability with respect to the reacquired applicable debt instrument, $37.50 is treated as a deemed distribution under section 752(b) and $25 is X’s deferred section 752 amount. All of Y’s $62.50 share of XYZ’s decrease in liability with respect to the reacquired applicable debt instrument is treated as a deemed distribution under section 752(b). Of Z’s $125 share of XYZ’s decrease in liability with respect to the reacquired applicable debt instrument, $100 is treated as a deemed distribution under section 752(b) and $25 is Z’s deferred section 752 amount.
(5) S corporation partner—(i) In general. If an S corporation partner has a deferred amount with respect to an applicable debt instrument of an electing partnership, such deferred amount is shared pro rata only among those shareholders that are shareholders of the S corporation partner immediately before the reacquisition of the applicable debt instrument.
(ii) Basis adjustments. The adjusted basis of a shareholder’s stock in an S corporation partner is not increased under section 1367(a)(1) by the shareholder’s share of the S corporation partner’s deferred amount in the taxable year of the reacquisition. The adjusted basis of a shareholder’s stock in an S corporation partner is not decreased under section 1367(a)(2) by the shareholder’s share of the S corporation partner’s deferred OID deduction in the taxable year in which the deferred OID accrues. The adjusted basis of a shareholder’s stock in an S corporation partner is adjusted under section 1367(a) by the shareholder’s share of the S corporation partner’s share of the electing partnership’s deferred items for the taxable year in which the shareholder takes into account its share of such deferred items under this section.
(iii) Accumulated adjustments account. The accumulated adjustments account (AAA), as defined in section 1368(e)(1), of an S corporation partner that has a deferred amount with respect to an applicable debt instrument of an electing partnership is not increased by its deferred amount in the taxable year of the reacquisition. The AAA of an S corporation partner is not decreased by its share of any deferred OID deduction in the taxable year in which the deferred OID accrues. The AAA of an S corporation partner is adjusted under section 1368(e) by a shareholder’s share of the S corporation partner’s share of the electing partnership’s deferred items for the S period (as defined in section 1368(e)(2)) in which the shareholder of the S corporation partner takes into account its share of the deferred items under this section.
(6) Acceleration of deferred items—(i) Electing partnership-level events
(A) General rules. Except as provided in paragraph (b)(6)(iii) of this section, a direct or indirect partner’s share of an electing partnership’s deferred items is accelerated and must be taken into account by such partner—
(1) In the taxable year in which the electing partnership liquidates;
(2) In the taxable year in which the electing partnership sells, exchanges, transfers (including contributions and distributions), or gifts substantially all of its assets;
(3) In the taxable year in which the electing partnership ceases doing business; or
(4) In the taxable year that includes the day before the day on which the electing partnership files a petition in a title 11 or similar case.
(B) Substantially all requirement. For purposes of this paragraph (b)(6), substantially all of a partnership’s assets means assets representing at least 90 percent of the fair market value of the net assets, and at least 70 percent of the fair market value of the gross assets, held by the partnership immediately prior to the sale, exchange, transfer, or gift. For purposes of applying the rule in paragraph (b)(6)(i)(A)(2) of this section, a sale, exchange, transfer, or gift by any direct or indirect lower-tier partnership of the electing partnership (lower-tier partnership) of all or part of its assets is not treated as a sale, exchange, transfer, or gift of the assets of any partnership that holds, directly or indirectly, an interest in such lower-tier partnership. However, for purposes of applying the rule in paragraph (b)(6)(i)(A)(2) of this section, a sale, exchange, transfer, or gift of substantially all of the assets of a transferee partnership (as described in paragraph (b)(6)(iii)(A)(1) of this section), or of a lower-tier partnership that received assets of the electing partnership from a transferee partnership or another lower-tier partnership in a transaction governed all or in part by section 721, is treated as a sale, exchange, transfer, or gift by the holder of an interest in such transferee partnership or lower-tier partnership of its entire interest in that transferee partnership or lower-tier partnership.
(ii) Direct or indirect partner-level events—(A) General rules. Except as provided in paragraph (b)(6)(iii) of this section, a direct or indirect partner’s share of an electing partnership’s deferred items with respect to a separate interest is accelerated and must be taken into account by such partner in the taxable year in which—
(1) The partner dies or liquidates;
(2) The partner sells, exchanges (including redemptions treated as exchanges under section 302), transfers (including contributions and distributions), or gifts (including transfers treated as gifts under section 1041) all or a portion of its separate interest;
(3) The partner’s separate interest is redeemed within the meaning of paragraph (b)(6)(ii)(B)(2) of this section; or
(4) The partner abandons its separate interest.
(B) Meaning of terms; special rules—(1) Partial transfers. For purposes of paragraph (b)(6)(ii)(A)(2) of this section, if a partner sells, exchanges (including redemptions treated as exchanges under section 302), transfers (including contributions and distributions), or gifts (including transfers treated as gifts under section 1041) a portion of its separate interest, such partner’s share of the electing partnership’s deferred items with respect to the separate interest proportionate to the separate interest sold, exchanged, transferred, or gifted is accelerated and must be taken into account by such partner.
(2) Redemptions. For purposes of paragraph (b)(6)(ii)(A)(3) of this section, a partner’s separate interest is redeemed if the partner receives a distribution of cash and/or property in complete liquidation of such separate interest.
(3) S corporation partners. In addition to the rules in paragraphs (b)(6)(i) and (ii) of this section, an S corporation partner’s share of the electing partnership’s deferred items is accelerated and the shareholders of the S corporation partner must take into account their respective shares of the S corporation partner’s share of the electing partnership’s deferred items in the taxable year in which the S corporation partner’s election under section 1362(a) terminates.
(4) C corporation partners. In addition to the rules in paragraphs (b)(6)(i), (ii), and (iii) of this section, the acceleration rules in § 1.108(i)-1(b) and the earnings and profits rules in § 1.108(i)-1(d) apply to partners that are electing corporations.
(iii) Events not constituting acceleration. Notwithstanding the rules in paragraphs (b)(6)(i) and (ii) of this section, a direct or indirect partner’s share of an electing partnership’s deferred items with respect to a separate interest is not accelerated by any of the events described in this paragraph (b)(6)(iii).
(A) Section 721 contributions—(1) Electing partnership contributions. A direct or indirect partner’s share of an electing partnership’s deferred items is not accelerated if the electing partnership contributes all or a portion of its assets in a transaction governed all or in part by section 721(a) to another partnership (transferee partnership) in exchange for an interest in the transferee partnership provided that the electing partnership does not terminate under section 708(b)(1)(A) or transfer its assets and liabilities in a transaction described in section 708(b)(2)(A) or section 708(b)(2)(B). See paragraph (b)(6)(iii)(D) of this section for transactions governed by section 708(b)(2)(A). Notwithstanding the rules in this paragraph (b)(6)(iii)(A)(1), the rules in paragraphs (b)(6)(i)(A) and (b)(6)(ii)(A) of this section apply to any part of the transaction to which section 721(a) does not apply.
(2) Partner contributions. A direct or indirect partner’s share of an electing partnership’s deferred items with respect to a separate interest is not accelerated if the holder of such interest (contributing partner) contributes its entire separate interest (contributed separate interest) in a transaction governed all or in part by section 721(a) to another partnership (transferee partnership) in exchange for an interest in the transferee partnership provided that the partnership in which the separate interest is held does not terminate under section 708(b)(1)(A) or transfer its assets and liabilities in a transaction described in section 708(b)(2)(A) or section 708(b)(2)(B). See paragraph (b)(6)(iii)(D) of this section for transactions governed by section 708(b)(2)(A). The transferee partnership becomes subject to section 108(i), including all reporting requirements under this section, with respect to the contributing partner’s share of the electing partnership’s deferred items associated with the contributed separate interest. The transferee partnership must allocate and report the share of the electing partnership’s deferred items that is associated with the contributed separate interest to the contributing partner to the same extent that such share of the electing partnership’s deferred items would have been allocated and reported to the contributing partner in the absence of such contribution. Notwithstanding the rules in this paragraph (b)(6)(iii)(A)(2), the rules in paragraph (b)(6)(ii)(A) of this section apply to any part of the transaction to which section 721(a) does not apply.
(B) Section 1031 exchanges. A direct or indirect partner’s share of the electing partnership’s deferred items is not accelerated if the electing partnership transfers property held for productive use in a trade or business or for investment in exchange for property of like kind which is to be held either for productive use in a trade or business or for investment in a transaction to which section 1031(a)(1) applies. Notwithstanding the rules in this paragraph (b)(6)(iii)(B), to the extent the electing partnership receives money or other property which does not meet the requirements of section 1031(a) (boot) in the exchange, a proportionate amount of the property transferred by the electing partnership equal to the proportion of the boot to the total consideration received in the exchange shall be treated as sold for purposes of paragraph (b)(6)(i)(A)(2) of this section.
(C) Section 708(b)(1)(B) terminations. A direct or indirect partner’s share of the deferred items of an electing partnership with respect to a separate interest is not accelerated if the electing partnership or a partnership that is a direct or indirect partner of the electing partnership terminates under section 708(b)(1)(B). Notwithstanding the rules in this paragraph (b)(6)(iii)(C), the rules in paragraph (b)(6)(ii)(A) of this section apply to the event that causes the termination under section 708(b)(1)(B) to the extent not otherwise excepted under paragraph (b)(6)(iii) of this section.
(D) Section 708(b)(2)(A) mergers or consolidations. A direct or indirect partner’s share of the deferred items of an electing partnership with respect to a separate interest is not accelerated if the partnership in which the separate interest is held (the merger transaction partnership) merges into or consolidates with another partnership in a transaction to which section 708(b)(2)(A) applies. The resulting partnership or new partnership, as determined under § 1.708-1(c)(1), becomes subject to section 108(i), including all reporting requirements under this section, to the same extent that the merger transaction partnership was so subject prior to the transaction, and must allocate and report any merger transaction partnership’s deferred items to the same extent and to the same partners that the merger transaction partnership allocated and reported such items prior to such transaction. Notwithstanding the rules in this paragraph (b)(6)(iii)(D), the rules in paragraphs (b)(6)(i)(A)(2) and (b)(6)(ii)(A)(2) of this section apply to that portion of the transaction that is treated as a sale, and the rules of (b)(6)(ii)(A)(3) apply if, as part of the transaction, the partner’s separate interest is redeemed and the partner does not receive an interest in the resulting partnership with respect to such separate interest.
(E) Certain distributions of separate interests. If a partnership (upper-tier partnership) that is a direct or indirect partner of an electing partnership distributes its entire separate interest (distributed separate interest) to one or more of its partners (distributee partners) that have a share of the electing partnership’s deferred items from upper-tier partnership with respect to the distributed separate interest, the distributee partners’ shares of the electing partnership’s deferred items with respect to such distributed separate interest are not accelerated. The partnership, the separate interest in which was distributed, must allocate and report the share of the electing partnership’s deferred items associated with the distributed separate interest only to such distributee partners that had a share of the electing partnership’s deferred items from the upper-tier partnership with respect to the distributed separate interest prior to the distribution. This paragraph (b)(6)(iii)(E) does not apply if the electing partnership terminates under section 708(b)(1)(A).
(F) Section 381 transactions. A C corporation partner’s share of an electing partnership’s deferred items is not accelerated if, as part of a transaction described in paragraph (b)(6)(ii)(A) of this section, the assets of the C corporation partner are acquired by another C corporation (acquiring C corporation) in a transaction that is treated, under § 1.108(i)-1(b)(2)(ii)(B), as a transaction to which section 381(a) applies. An S corporation partner’s share of an electing partnership’s deferred items is not accelerated if, as part of a transaction described in paragraph (b)(6)(ii)(A) of this section, the assets of the S corporation partner are acquired by another S corporation (acquiring S corporation) in a transaction to which section 381(a) applies. In such cases, the acquiring C corporation or acquiring S corporation, as the case may be, succeeds to the C corporation partner’s or the S corporation partner’s remaining share of the electing partnership’s deferred items and becomes subject to section 108(i), including all reporting requirements under this section, as if the acquiring C corporation or acquiring S corporation were the C corporation partner or the S corporation partner, respectively. The acquiring S corporation must allocate and report the S corporation partner’s deferred items to the same extent as the S corporation partner would have been required to allocate and report those deferred items, and only to those shareholders of the S corporation partner who had a share of the S corporation partner’s deferred items from the electing partnership prior to the transaction. This paragraph (b)(6)(iii)(F) does not apply if the electing partnership terminates under section 708(b)(1)(A).
(G) Intercompany transfers. A C corporation partner’s share of an electing partnership’s deferred items is not accelerated if, as part of a transaction described in paragraph (b)(6)(ii)(A) of this section, the C corporation partner transfers its entire separate interest in an intercompany transaction, as described in § 1.1502-13(b)(1)(i), and the electing partnership does not terminate under section 708(b)(1)(A) as a result of the intercompany transaction.
(H) Retirement of a debt instrument. See § 1.108(i)-3(c)(1) for rules regarding the retirement of a debt instrument that is subject to section 108(i).
(I) Other non-acceleration events. A direct or indirect partner’s share of an electing partnership’s deferred items is not accelerated with respect to any transaction if the Commissioner makes a determination by published guidance that such transaction is not an acceleration event under the rules of this paragraph (b)(6).
(iv) Related partnerships. A direct or indirect partner’s share of a related partnership’s deferred OID deduction (as determined in paragraph (d)(2) of this section) that has not previously been taken into account is accelerated and taken into account by the direct or indirect partner in the taxable year in which, and to the extent that, the deferred COD income to which the related partnership’s deferred OID deduction relates is taken into account by the electing entity or its owners.
(v) Examples. The following examples illustrate the rules under this paragraph (b)(6):
(i) Electing partnership (EP) has three partners, MT1, MT2, and UT, each of which is a partnership. The partners of MT1 are X and UT. The partners of MT2 are Y, UT, and B. The partners of UT are A, B, and C. In addition to their interests in the partnerships noted, MT1, MT2, and UT own other assets.
(ii) Within the meaning of paragraph (a)(29) of § 1.108(i)-0, A and C each hold one separate interest (their interests in UT), B holds two separate interests (its interests in UT and MT2), UT holds three separate interests (its interests in MT1, MT2, and EP), MT1 and MT2 each hold one separate interest (their interests in EP), and X and Y each hold one separate interest (their interests in MT1 and MT2, respectively) with respect to EP.
(i) The facts are the same as in Example 1, except that A, as a direct partner of UT, has a share of EP’s deferred items with respect to UT’s interests in MT1 and EP. A does not have a share of EP’s deferred items with respect to UT’s interest in MT2. B, as a direct partner of UT, has a share of EP’s deferred items with respect to UT’s interest in MT1 and MT2, but not with respect to UT’s interest in EP. B also has a share of EP’s deferred items with respect to its separate interest in MT2. C does not have any share of EP’s deferred items with respect to UT’s interest in MT1, MT2, or EP.
(ii) UT distributes 40 percent of its separate interest in MT1 to A in redemption of A’s interest in UT. Under paragraphs (b)(6)(ii)(A)(2) and (b)(6)(ii)(B)(1) of this section, a portion of UT’s interest in MT1 has been transferred and a corresponding portion (40 percent) of UT’s share of EP’s deferred items from MT1 is accelerated. Thus, 40 percent of A’s and B’s share of EP’s deferred items from UT with respect to UT’s interest in MT1 is accelerated. Further, because A’s interest in UT is redeemed within the meaning of paragraph (b)(6)(ii)(B)(2) of this section, all of A’s shares of EP’s deferred items from UT are accelerated under paragraph (b)(6)(ii)(A)(3) of this section. UT continues to allocate and report to B its remaining share of EP’s deferred items from its separate interest in MT1 that was not distributed to A.
(iii) UT distributes its entire separate interest in MT1 to B (other than in redemption of B’s interest in UT). Under paragraph (b)(6)(ii)(A)(2) of this section, UT’s share of EP’s deferred items from MT1 would be accelerated. However, because UT distributes its entire separate interest in MT1 to B, B’s share of EP’s deferred items from UT with respect to UT’s separate interest in MT1 is not accelerated under paragraph (b)(6)(iii)(E) of this section. MT1 allocates and reports to B B’s share of EP’s deferred items from UT’s separate interest in MT1 that was distributed to B.
(iv) UT distributes its entire separate interest in MT1 to A and B (other than in redemption of their interests in UT). Under paragraph (b)(6)(iii)(E) of this section, none of A’s or B’s shares of EP’s deferred items from UT with respect to UT’s separate interest in MT1 is accelerated, and MT1 allocates and reports to A and B their respective share of EP’s deferred items from UT’s separate interest in MT1 that was distributed to A and B.
(i) Individual A holds a 50 percent partnership interest in UTP, a partnership that holds a 50 percent interest in EP, a partnership that makes an election to defer COD income under section 108(i). A’s share of UTP’s deferred amount with respect to EP’s election under section 108(i) is $100. During a taxable year within the deferral period, A sells 25 percent of his partnership interest in UTP to an unrelated third party.
(ii) Under paragraphs (b)(6)(ii)(A)(2) and (b)(6)(ii)(B)(1) of this section, 25 percent of A’s $100 deferred amount is accelerated as a result of A’s partial sale of his interest in UTP. Thus, A must recognize $25 of his deferred amount in the taxable year of the sale. A’s remaining deferred amount is $75.
(i) A and B are equal partners in partnership AB. On January 1, 2009, AB reacquires an applicable debt instrument and makes an election under section 108(i) to defer $400 of COD income. A and B each have a deferred amount with respect to the applicable debt instrument of $200. On January 1, 2010, A sells its entire 50 percent interest in AB to C in a transfer that terminates the partnership under section 708(b)(1)(B).
(ii) Under paragraph (b)(6)(iii)(C) of this section, the technical termination of AB under section 708(b)(1)(B) does not cause A’s or B’s shares of AB’s deferred items to be accelerated. However, A’s $200 deferred amount is accelerated under paragraph (b)(6)(ii)(A)(2) of this section as a result of the sale.
(i) A, B, and C are equal partners in partnership X, which has made an election under section 108(i) to defer $150 of COD income. The fair market value of each interest in partnership X is $100. A, B, and C each has a deferred amount of $50 with respect to partnership X’s election under section 108(i). E, F, and G are partners in partnership Y. Partnership X and partnership Y merge in a taxable year during the deferral period of partnership X’s election under section 108(i). Under section 708(b)(2)(A), the resulting partnership is considered a continuation of partnership Y and partnership X is considered terminated. Under state law, partnerships X and Y undertake the assets-over form of § 1.708-1(c)(3)(i) to accomplish the merger. C does not want to become a partner in partnership Y, and partnership X does not have the resources to redeem C’s interest before the merger. C, partnership X, and partnership Y enter into a merger agreement that satisfies the requirements of § 1.708-1(c)(4) and specifies that partnership Y will purchase C’s interest in partnership X for $100 before the merger, and as part of the agreement, C consents to treat the transaction in a manner that is consistent with the agreement. As part of the merger, partnership X receives from partnership Y $100 (which will be distributed to C immediately before the merger), $100 (which will be distributed equally to A and B ($50 each)), and interests in partnership Y with a value of $100 (which will be distributed equally to A and B) in exchange for partnership X’s assets and liabilities.
(ii) Under the general rule of paragraph (b)(6)(iii)(D) of this section, and except as provided below, the deferred items of partnership X are not accelerated as a result of the merger with partnership Y. Partnership Y, the resulting partnership that is considered the continuation of partnership X, becomes subject to section 108(i), including all reporting requirements under section 108(i), to the same extent that partnership X was subject to such rules. Under paragraph (b)(6)(iii)(D) of this section, partnership Y must allocate and report partnership X’s deferred items to A and B in the same manner as partnership X had prior to the merger transaction.
(iii) Under § 1.708-1(c)(4), C is treated as selling its interest in partnership X immediately before the merger. As a result, C’s $50 deferred amount is accelerated under paragraph (b)(6)(ii)(A)(2) of this section.
(iv) Under section 707(a)(2)(B), partnership X is deemed to have sold a portion of its assets to partnership Y. Because partnership X is not treated as selling substantially all of its assets under paragraph (b)(6)(i)(B) of this section, A’s and B’s deferred amounts are not accelerated under paragraph (b)(6)(i)(A)(2) of this section.
(v) Because A’s and B’s interests in partnership X are redeemed within the meaning of paragraph (b)(6)(ii)(B)(2) of this section, all of their shares of partnership X’s deferred items would be accelerated under paragraph (b)(6)(ii)(A)(3). However, because they receive an interest in partnership Y in the merger, none of A’s and B’s share of partnership X’s deferred items is accelerated.
(7) Withholding under section 1446. See section 1446 regarding withholding by a partnership on a foreign partner’s share of income effectively connected with a U.S. trade or business.
(c) Specific rules applicable to S corporations—(1) Deferred COD income. An electing S corporation’s COD income deferred under section 108(i) (an S corporation’s deferred COD income) is shared pro rata among those shareholders that are shareholders of the electing S corporation immediately before the reacquisition of the applicable debt instrument. Any COD income deferred under section 108(i) is taken into account under section 1366(a) by those shareholders in the inclusion period, or earlier upon the occurrence of an acceleration event described in paragraph (c)(3) of this section.
(2) Basis adjustments and accumulated adjustments account—(i) Basis adjustments. The adjusted basis of a shareholder’s stock in an electing S corporation is not increased under section 1367(a)(1) by the shareholder’s share of the S corporation’s deferred COD income in the taxable year of the reacquisition. The adjusted basis of a shareholder’s stock in an electing S corporation or a related S corporation is not decreased under section 1367(a)(2) by the shareholder’s share of the S corporation’s deferred OID deduction in the taxable year in which the deferred OID accrues. The adjusted basis of a shareholder’s stock in an electing S corporation or a related S corporation is adjusted under section 1367(a) by the shareholder’s share of the S corporation’s deferred items for the taxable year in which the shareholder takes into account its share of the deferred items under this section.
(ii) Accumulated adjustments account. The AAA of an electing S corporation is not increased by the S corporation’s deferred COD income in the taxable year of a reacquisition. The AAA of an electing S corporation or a related S corporation is not decreased by the S corporation’s deferred OID deduction in the taxable year in which the deferred OID accrues. The AAA of an electing S corporation or a related S corporation is adjusted under section 1368(e) by a shareholder’s share of the S corporation’s deferred items for the S period (as defined in section 1368(e)(2)) in which a shareholder of the S corporation takes into account its share of the deferred items under this section.
(3) Acceleration of deferred items—(i) Electing S corporation-level events—(A) General rules. Except as provided in paragraph (c)(3)(iii) of this section, a shareholder’s share of an electing S corporation’s deferred items is accelerated and must be taken into account by such shareholder—
(1) In the taxable year in which the electing S corporation liquidates;
(2) In the taxable year in which the electing S corporation sells, exchanges, transfers (including contributions and distributions), or gifts substantially all of its assets;
(3) In the taxable year in which the electing S corporation ceases doing business;
(4) In the taxable year in which the electing S corporation’s election under section 1362(a) terminates; or
(5) In the taxable year that includes the day before the day on which the electing S corporation files a petition in a title 11 or similar case.
(B) Substantially all requirement. For purposes of this paragraph (c)(3), substantially all of an electing S corporation’s or partnership’s assets means assets representing at least 90 percent of the fair market value of the net assets, and at least 70 percent of the fair market value of the gross assets, held by the S corporation or partnership immediately prior to the sale, exchange, transfer, or gift. For purposes of applying the rule in paragraph (c)(3)(i)(A)(2) of this section, a sale, exchange, transfer, or gift by any direct or indirect lower-tier partnership of the electing S corporation (lower-tier partnership) of all or part of its assets is not treated as a sale, exchange, transfer, or gift of the assets of any person that holds, directly or indirectly, an interest in such lower-tier partnership. However, for purposes of applying the rule in paragraph (c)(3)(i)(A)(2) of this section, a sale, exchange, transfer, or gift of substantially all of the assets of a transferee partnership (as described in paragraph (c)(3)(iii)(A) of this section), or of a lower-tier partnership that received assets of the electing S corporation from a transferee partnership of the electing S corporation or another lower-tier partnership in a transaction governed all or in part by section 721, is treated as a sale, exchange, transfer, or gift by the holder of an interest in such transferee partnership or lower-tier partnership of its entire interest in that transferee partnership or lower-tier partnership.
(ii) Shareholder events—(A) General rules. Except as provided in paragraph (c)(3)(iii) of this section, a shareholder’s share of an electing S corporation’s deferred items is accelerated and must be taken into account by such shareholder in the taxable year in which—
(1) The shareholder dies;
(2) The shareholder sells, exchanges (including redemptions treated as exchanges under section 302), transfers (including contributions and distributions), or gifts (including transfers treated as gifts under section 1041) all or a portion of its interest in the electing S corporation; or
(3) The shareholder abandons its interest in the electing S corporation.
(B) Partial transfers. For purposes of paragraph (c)(3)(ii)(A)(2) of this section, if a shareholder of an electing S corporation sells, exchanges (including redemptions treated as exchanges under section 302), transfers (including contributions or distributions), or gifts (including transfers treated as gifts under section 1041) a portion of its interest in the electing S corporation, such shareholder’s share of the electing S corporation’s deferred items proportionate to the interest that was sold, exchanged, transferred, or gifted is accelerated and must be taken into account by such shareholder.
(iii) Events not constituting acceleration. Notwithstanding the rules in paragraphs (c)(3)(i) and (ii) of this section, a shareholder’s share of an electing S corporation’s deferred items is not accelerated by any of the events described in this paragraph (c)(3)(iii).
(A) Electing S corporation’s contributions. A shareholder’s share of an electing S corporation’s deferred items is not accelerated if the electing S corporation contributes all or a portion of its assets in a transaction governed all or in part by section 721(a) to a partnership (transferee partnership) in exchange for an interest in the transferee partnership. Notwithstanding the rules in this paragraph (c)(3)(iii)(A), the rules in paragraph (c)(3)(i)(A) of this section apply to any part of the transaction to which section 721(a) does not apply.
(B) Section 1031 exchanges. A shareholder’s share of an electing S corporation’s deferred items is not accelerated if the electing S corporation transfers property held for productive use in a trade or business or for investment in exchange for property of like kind which is to be held either for productive use in a trade or business or for investment in a transaction to which section 1031(a)(1) applies. Notwithstanding the rules in this paragraph (c)(3)(iii)(B), to the extent the electing S corporation receives money or other property which does not meet the requirements of section 1031(a) (boot) in the exchange, a proportionate amount of the property transferred by the electing S corporation equal to the proportion of the boot to the total consideration received in the exchange shall be treated as sold for purposes of paragraph (c)(3)(i)(A)(2) of this section.
(C) Section 381 transactions. A shareholder’s share of an electing S corporation’s deferred items is not accelerated if, as part of a transaction described in paragraph (c)(3)(i)(A) of this section, the electing S corporation’s assets are acquired by another S corporation (acquiring S corporation) in a transaction to which section 381(a) applies. In such a case, the acquiring S corporation succeeds to the electing S corporation’s remaining deferred items and becomes subject to section 108(i), including all reporting requirements under this section, as if the acquiring S corporation were the electing S corporation. The acquiring S corporation must allocate and report the electing S corporation’s deferred items to the same extent that the electing S corporation would have been required to allocate and report those deferred items, and only to those shareholders who had a share of the electing S corporation’s deferred items prior to the transaction.
(D) Retirement of a debt instrument. See § 1.108(i)-3(c)(1) for rules regarding the retirement of a debt instrument that is subject to section 108(i).
(E) Other non-acceleration events. A shareholder’s share of an electing S corporation’s deferred items is not accelerated with respect to any transaction if the Commissioner makes a determination by published guidance that such transaction is not an acceleration event under the rules of this paragraph (c)(3).
(iv) Related S corporations. A shareholder’s share of a related S corporation’s deferred OID deduction (as determined in paragraph (d)(2) of this section) that has not previously been taken into account is accelerated and taken into account by the shareholder in the taxable year in which, and to the extent that, deferred COD income to which the related S corporation’s deferred OID deduction relates is taken into account by the electing entity or its owners.
(d) General rules applicable to partnerships and S corporations—(1) Applicable debt instrument (trade or business requirement). The determination of whether a debt instrument issued by a partnership or an S corporation is treated as a debt instrument issued in connection with the conduct of a trade or business by the partnership or S corporation for purposes of this section is based on all the facts and circumstances. However, a debt instrument issued by a partnership or an S corporation shall be treated as an applicable debt instrument for purposes of this section if the electing partnership or electing S corporation can establish that—
(i) The gross fair market value of the trade or business assets of the partnership or S corporation that issued the debt instrument represented at least 80 percent of the gross fair market value of that partnership’s or S corporation’s total assets on the date of issuance;
(ii) The trade or business expenditures of the partnership or S corporation that issued the debt instrument represented at least 80 percent of the partnership’s or S corporation’s total expenditures for the taxable year of issuance;
(iii) At least 95 percent of interest paid or accrued on the debt instrument issued by the partnership or S corporation was allocated to one or more trade or business expenditures under § 1.163-8T for the taxable year of issuance;
(iv) At least 95 percent of the proceeds from the debt instrument issued by the partnership or S corporation were used by the partnership or S corporation to acquire one or more trades or businesses within six months from the date of issuance; or
(v) The partnership or S corporation issued the debt instrument to a seller of a trade or business to acquire the trade or business.
(2) Deferral of OID at entity level—(i) In general. For each taxable year during the deferral period, an issuing entity determines the amount of its deferred OID deduction with respect to a debt instrument, if any. An issuing entity’s deferred OID deduction for a taxable year is the lesser of:
(A) The OID that accrues in a current taxable year during the deferral period with respect to the debt instrument (less any of such OID that is allowed as a deduction in the current taxable year as a result of an acceleration event), or
(B) The excess, if any, of the electing entity’s deferred COD income (less the aggregate amount of such deferred COD income that has been included in income in the current taxable year and any previous taxable year during the deferral period) over the aggregate amount of OID that accrued in previous taxable years during the deferral period with respect to the debt instrument (less the aggregate amount of such OID that has been allowed as a deduction in the current taxable year and any previous taxable year during the deferral period).
(ii) Excess deferred OID deduction. If, as a result of an acceleration event during a taxable year in the deferral period, an issuing entity’s aggregate deferred OID deduction for previous taxable years with respect to a debt instrument (less the aggregate amount of such deferred OID deduction that has been allowed as a deduction in a previous taxable year during the deferral period) exceeds the amount of the electing entity’s deferred COD income (less the aggregate amount of such deferred COD income that has been included in income in the current taxable year and any previous taxable year during the deferral period), the excess deferred OID deduction shall be allowed as a deduction in the taxable year in which the acceleration event occurs.
(iii) Examples. The following examples illustrate the rules under paragraph (d)(2) of this section:
(ii) Under paragraph (d)(2) of this section, AB partnership’s deferred OID deduction for 2009 is the lesser of: $28 of OID that accrues on the new debt instrument in 2009, or the excess of AB partnership’s deferred COD income of $50 over the aggregate amount of OID that accrued on the debt instrument in previous taxable years during the deferral period of $0, or $50. Thus, all $28 of the OID that accrues on the debt instrument in 2009 is deferred under section 108(i).
(iii) Under paragraph (d)(2) of this section, AB partnership’s deferred OID deduction for 2010 is the lesser of: $29 of OID that accrues on the new debt instrument in 2010, or the excess of AB partnership’s deferred COD income of $50 over the aggregate amount of OID that accrued on the debt instrument in previous taxable years during the deferral period of $28, or $22. Thus, $22 of the $29 of OID that accrues in 2010 is deferred under section 108(i). A, B, and C will each defer $7.33 of the $9.67 of accrued OID that was allocated to each of them.
(ii) Under paragraph (d)(2) of this section, ABC partnership’s deferred OID deduction for 2012 is the lesser of: $23.25 ($31 of OID that accrues on the new debt instrument in 2012 less $7.75 of this OID that is allowed as a deduction to A in 2012) or $9.75 (the excess of $75 (ABC partnership’s deferred COD income of $150 less A’s share of ABC partnership’s deferred COD income that is included in A’s income for 2012 of $75) over $65.25 (the aggregate amount of OID that accrued in previous taxable years of $87 less the aggregate amount of such OID that has been allowed as a deduction by A in 2012 of $21.75)). Thus, of the $31 of OID that accrues in 2012, $9.75 is deferred under section 108(i).
(3) Effect of an election under section 108(i) on recapture amounts under section 465(e)—(i) In general. To the extent that a decrease in a partner’s or shareholder’s amount at risk (as defined in section 465) in an activity as a result of a reacquisition of an applicable debt instrument would cause a partner with a deferred amount or a shareholder with a share of the S corporation’s deferred COD income to have income under section 465(e) in the taxable year of the reacquisition, such decrease (not to exceed the partner’s deferred amount or the shareholder’s share of the S corporation’s deferred COD income with respect to that applicable debt instrument) (deferred section 465 amount) shall not be taken into account for purposes of determining the partner’s or shareholder’s amount at risk in an activity under section 465 as of the close of the taxable year of the reacquisition. A partner’s or shareholder’s deferred section 465 amount is treated as a decrease in the partner’s or shareholder’s amount at risk in an activity at the same time, and to the extent remaining in the same amount, as the partner recognizes its deferred amount or the S corporation shareholder recognizes its share of the S corporation’s deferred COD income.
(ii) Example. The following example illustrates the rules in paragraph (d)(3) of this section:
(ii) Under paragraph (d)(3)(i) of this section, $50 of the $250 decrease in A’s and B’s amount at risk in Activity is the deferred section 465 amount for each of A and B and is not taken into account for purposes of determining A’s and B’s amount at risk in Activity at the close of 2009. In taxable year 2014, A’s and B’s amount at risk in Activity is decreased by $20 (deferred section 465 amount that equals the deferred amount included in A’s and B’s gross income in 2014). In taxable year 2015, A’s and B’s amount at risk in Activity is decreased by $20 for the deferred section 465 amount that equals the deferred amount included in A’s and B’s gross income in 2015. In taxable year 2016, A’s and B’s amount at risk in Activity is decreased by $10 (the remaining amount of the deferred section 465 amount).
(e) Election procedures and reporting requirements—(1) Partnerships—(i) In general. A partnership makes an election under section 108(i) by following procedures outlined in guidance and applicable forms and instructions issued by the Commissioner. An electing partnership (or its successor) must provide to its partners certain information as required by guidance and applicable forms and instructions issued by the Commissioner.
(ii) Tiered passthrough entities. A partnership that is a direct or indirect partner of an electing partnership (or its successor) or a related partnership or an S corporation partner must provide to its partners or shareholders, as the case may be, certain information as required by guidance and applicable forms and instructions issued by the Commissioner.
(iii) Related partnerships. A related partnership must provide to its partners certain information as required by guidance and applicable forms and instructions issued by the Commissioner.
(2) S corporations—(i) In general. An S corporation makes an election under section 108(i) by following procedures outlined in guidance and applicable forms and instructions issued by the Commissioner. An electing S corporation (or its successor) must provide to its shareholders certain information as required by guidance and applicable forms and instructions issued by the Commissioner.
(ii) Related S corporations. A related S corporation must provide to its shareholders certain information as required by guidance and applicable forms and instructions issued by the Commissioner.
(f) Effective/applicability dates. For the applicability dates of this section, see § 1.108(i)-0(b).
§ 1.108(i)-3 Rules for the deduction of OID.
(a) Deemed debt-for-debt exchanges—(1) In general. For purposes of section 108(i)(2) (relating to deferred OID deductions that arise in certain debt-for-debt exchanges involving the reacquisition of an applicable debt instrument), if the proceeds of any debt instrument are used directly or indirectly by the issuer or a person related to the issuer (within the meaning of section 108(i)(5)(A)) to reacquire an applicable debt instrument, the debt instrument shall be treated as issued for the applicable debt instrument being reacquired. Therefore, section 108(i)(2) may apply, for example, to a debt instrument issued by a corporation for cash in which some or all of the proceeds are used directly or indirectly by the corporation’s related subsidiary in the reacquisition of the subsidiary’s applicable debt instrument.
(2) Directly or indirectly. Whether the proceeds of an issuance of a debt instrument are used directly or indirectly to reacquire an applicable debt instrument depends upon all of the facts and circumstances surrounding the issuance and the reacquisition. The proceeds of an issuance of a debt instrument will be treated as being used indirectly to reacquire an applicable debt instrument if—
(i) At the time of the issuance of the debt instrument, the issuer of the debt instrument anticipated that an applicable debt instrument of the issuer or a person related to the issuer would be reacquired by the issuer, and the debt instrument would not have been issued if the issuer had not so anticipated such reacquisition;
(ii) At the time of the issuance of the debt instrument, the issuer of the debt instrument or a person related to the issuer anticipated that an applicable debt instrument would be reacquired by a related person and the related person receives cash or property that it would not have received unless the reacquisition had been so anticipated; or
(iii) At the time of the reacquisition, the issuer or a person related to the issuer foresaw or reasonably should have foreseen that the issuer or a person related to the issuer would be required to issue a debt instrument, which it would not have otherwise been required to issue if the reacquisition had not occurred, in order to meet its future economic needs.
(b) Proportional rule for accruals of OID. For purposes of section 108(i)(2), if only a portion of the proceeds from the issuance of a debt instrument are used directly or indirectly to reacquire an applicable debt instrument, the rules of section 108(i)(2)(A) will apply to the portion of OID on the debt instrument that is equal to the portion of the proceeds from such instrument used to reacquire the outstanding applicable debt instrument. Except as provided in the last sentence of section 108(i)(2)(A), the amount of deferred OID deduction that is subject to section 108(i)(2)(A) for a taxable year is equal to the product of the amount of OID that accrues in the taxable year under section 1272 or section 1275 (and the regulations under those sections), whichever section is applicable, and a fraction, the numerator of which is the portion of the total proceeds from the issuance of the debt instrument used directly or indirectly to reacquire the applicable debt instrument and the denominator of which is the total proceeds from the issuance of the debt instrument.
(c) No acceleration—(1) Retirement. Retirement of a debt instrument subject to section 108(i)(2) does not accelerate deferred OID deductions.
(2) Cross-reference. See § 1.108(i)-1 and § 1.108(i)-2 for rules relating to the acceleration of deferred OID deductions.
(d) Examples. The application of this section is illustrated by the following examples. Unless otherwise stated, all taxpayers in the following examples are calendar-year taxpayers, and P and S each file separate returns:
(ii) Analysis. Under the facts, at the time of P’s issuance of its $160,000 debt instrument, P anticipated that the loan proceeds would be used to reacquire the debt of S, and P’s debt instrument would not have been issued for an amount greater than $90,000 if P had not anticipated that S would use the proceeds to reacquire its debt. Pursuant to paragraph (a) of this section, the proceeds from P’s issuance of its debt instrument are treated as being used indirectly to reacquire S’s applicable debt instrument. Therefore, section 108(i)(2)(B) applies to P’s debt instrument and P’s OID deductions on its debt instrument are subject to deferral under section 108(i)(2)(A). However, because only a portion of the proceeds from P’s debt instrument are used by S to reacquire its applicable debt instrument, only a portion of P’s total OID deductions will be deferred under section 108(i)(2)(A). See section 108(i)(2)(B). Accordingly, a maximum of $17,500 ($40,000 × $70,000/$160,000) of P’s $40,000 total OID deductions is subject to deferral under section 108(i)(2)(A). Under paragraph (b) of this section, the amount of P’s deferred OID deduction each taxable year under section 108(i)(2)(A) is equal to the product of the amount of OID that accrues in the taxable year under section 1272 for the debt instrument and a fraction ($70,000/$160,000). As a result, P’s deferred OID deductions are the following amounts: $4,015.99 for 2010 ($9,179.40 × $70,000/$160,000); $4,246.39 for 2011 ($9,706.04 × $70,000/$160,000); $4,490.01 for 2012 ($10,262.88 × $70,000/$160,000); and $4,747.61 for 2013 ($10,851.68 × $70,000/$160,000).
(ii) Analysis. The maximum amount of P’s deferred OID deductions under section 108(i)(2)(A) is $10,000 rather than $17,500 because S made a section 108(i) election for only $10,000 of the $30,000 of COD income. Under section 108(i)(2)(A), because the amount of OID that accrues prior to 2014 attributable to the portion of the debt instrument issued to indirectly reacquire S’s applicable debt instrument under paragraph (b) of this section ($17,500) exceeds the amount of deferred COD income under section 108(i) ($10,000), P’s deferred OID deductions are the following amounts: $4,015.99 for 2010; $4,246.39 for 2011; $1,737.62 for 2012; and $0 for 2013.
(ii) Analysis. Under paragraph (c)(1) of this section, the retirement of P’s debt instrument is not an acceleration event for the deferred OID deductions of $4,015.99 for 2010, $4,246.39 for 2011, and $4,490.01 for 2012. Except as provided in § 1.108(i)-1(b)(4), these amounts will be taken into account during the inclusion period. P, however, paid a repurchase premium of $10,851.68 in 2012 ($200,000 minus the adjusted issue price of $189,148.32) to retire the debt instrument. If otherwise allowable, P may deduct this amount in 2012 under § 1.163-7(c).
(e) Effective/applicability dates. For effective/applicability dates, see § 1.108(i)-0(b).
§ 1.109-1 Exclusion from gross income of lessor of real property of value of improvements erected by lessee.
(a) Income derived by a lessor of real property upon the termination, through forfeiture or otherwise, of the lease of such property and attributable to buildings erected or other improvements made by the lessee upon the leased property is excluded from gross income. However, where the facts disclose that such buildings or improvements represent in whole or in part a liquidation in kind of lease rentals, the exclusion from gross income shall not apply to the extent that such buildings or improvements represent such liquidation. The exclusion applies only with respect to the income realized by the lessor upon the termination of the lease and has no application to income, if any, in the form of rent, which may be derived by a lessor during the period of the lease and attributable to buildings erected or other improvements made by the lessee. It has no application to income which may be realized by the lessor upon the termination of the lease but not attributable to the value of such buildings or improvements. Neither does it apply to income derived by the lessor subsequent to the termination of the lease incident to the ownership of such buildings or improvements.
(b) The provisions of this section may be illustrated by the following example:
§ 1.110-1 Qualified lessee construction allowances.
(a) Overview. Amounts provided to a lessee by a lessor for property to be constructed and used by the lessee pursuant to a lease are not includible in the lessee’s gross income if the amount is a qualified lessee construction allowance under paragraph (b) of this section.
(b) Qualified lessee construction allowance—(1) In general. A qualified lessee construction allowance means any amount received in cash (or treated as a rent reduction) by a lessee from a lessor—
(i) Under a short-term lease of retail space;
(ii) For the purpose of constructing or improving qualified long-term real property for use in the lessee’s trade or business at that retail space; and
(iii) To the extent the amount is expended by the lessee in the taxable year received on the construction or improvement of qualified long-term real property for use in the lessee’s trade or business at that retail space.
(2) Definitions—(i) Qualified long-term real property is nonresidential real property under section 168(e)(2)(B) that is part of, or otherwise present at, the retail space referred to in paragraph (b)(1)(i) of this section and which reverts to the lessor at the termination of the lease. Thus, qualified long-term real property does not include property qualifying as section 1245 property under section 1245(a)(3).
(ii) Short-term lease is a lease (or other agreement for occupancy or use) of retail space for 15 years or less (as determined pursuant to section 168(i)(3)).
(iii) Retail space is nonresidential real property under section 168(e)(2)(B) that is leased, occupied, or otherwise used by the lessee in its trade or business of selling tangible personal property or services to the general public. The term retail space includes not only the space where the retail sales are made, but also space where activities supporting the retail activity are performed (such as an administrative office, a storage area, and employee lounge). Examples of services typically sold to the general public include services provided by hair stylists, tailors, shoe repairmen, doctors, lawyers, accountants, insurance agents, stock brokers, securities dealers (including dealers who sell securities out of inventory), financial advisors and bankers. For purposes of this paragraph (b)(2)(iii), a taxpayer is selling to the general public if the products or services for sale are made available to the general public, even if the product or service is targeted to certain customers or clients.
(3) Purpose requirement. An amount will meet the requirement in paragraph (b)(1)(ii) of this section only to the extent that the lease agreement for the retail space expressly provides that the construction allowance is for the purpose of constructing or improving qualified long-term real property for use in the lessee’s trade or business at the retail space. An ancillary agreement between the lessor and the lessee providing for a construction allowance, executed contemporaneously with the lease or during the term of the lease, is considered a provision of the lease agreement for purposes of the preceding sentence, provided the agreement is executed before payment of the construction allowance.
(4) Expenditure requirement—(i) In general. Expenditures referred to in paragraph (b)(1)(iii) of this section may be treated as being made first from the lessee’s construction allowance. Tracing of the construction allowance to the actual lessee expenditures for the construction or improvement of qualified long-term real property is not required. However, the lessee should maintain accurate records of the amount of the qualified lessee construction allowance received and the expenditures made for qualified long-term real property.
(ii) Time when expenditures deemed made. For purposes of paragraph (b)(1)(iii) of this section, an amount is deemed to have been expended by a lessee in the taxable year in which the construction allowance was received by the lessee if—
(A) The amount is expended by the lessee within 8
(B) The amount is a reimbursement from the lessor for amounts expended by the lessee in a prior year and for which the lessee has not claimed any depreciation deductions.
(5) Consistent treatment by lessor. Qualified long-term real property constructed or improved with any amount excluded from a lessee’s gross income by reason of paragraph (a) of this section must be treated as nonresidential real property owned by the lessor (for purposes of depreciation under 168(e)(2)(B) and determining gain or loss under section 168(i)(8)(B)). For purposes of the preceding sentence, the lessor must treat the construction allowance as fully expended in the manner required by paragraph (b)(1)(iii) of this section unless the lessor is notified by the lessee in writing to the contrary. General tax principles apply for purposes of determining when the lessor may begin depreciation of its nonresidential real property. The lessee’s exclusion from gross income under paragraph (a) of this section, however, is not dependent upon the lessor’s treatment of the property as nonresidential real property.
(c) Information required to be furnished—(1) In general. The lessor and the lessee described in paragraph (b) of this section who are paying and receiving a qualified lessee construction allowance, respectively, must furnish the information described in paragraph (c)(3) of this section in the time and manner prescribed in paragraph (c)(2) of this section.
(2) Time and manner for furnishing information. The requirement to furnish information under paragraph (c)(1) of this section is met by attaching a statement with the information described in paragraph (c)(3) of this section to the lessor’s or the lessee’s, as applicable, timely filed (including extensions) Federal income tax return for the taxable year in which the construction allowance was paid by the lessor or received by the lessee (either in cash or treated as a rent reduction), as applicable. A lessor or a lessee may report the required information for several qualified lessee construction allowances on a combined statement. However, a lessor’s or a lessee’s failure to provide information with respect to each lease will be treated as a separate failure to provide information for purposes of paragraph (c)(4) of this section.
(3) Information required—(i) Lessor. The statement provided by the lessor must contain the lessor’s name (and, in the case of a consolidated group, the parent’s name), employer identification number, taxable year and the following information for each lease:
(A) The lessee’s name (in the case of a consolidated group, the parent’s name).
(B) The address of the lessee.
(C) The employer identification number of the lessee.
(D) The location of the retail space (including mall or strip center name, if applicable, and store name).
(E) The amount of the construction allowance.
(F) The amount of the construction allowance treated by the lessor as nonresidential real property owned by the lessor.
(ii) Lessee. The statement provided by the lessee must contain the lessee’s name (and, in the case of a consolidated group, the parent’s name), employer identification number, taxable year and the following information for each lease:
(A) The lessor’s name (in the case of a consolidated group, the parent’s name).
(B) The address of the lessor.
(C) The employer identification number of the lessor.
(D) The location of the retail space (including mall or strip center name, if applicable, and store name).
(E) The amount of the construction allowance.
(F) The amount of the construction allowance that is a qualified lessee construction allowance under paragraph (b) of this section.
(4) Failure to furnish information. A lessor or a lessee that fails to furnish the information required in this paragraph (c) may be subject to a penalty under section 6721.
(d) Effective date. This section is applicable to leases entered into on or after October 5, 2000.
§ 1.111-1 Recovery of certain items previously deducted or credited.
(a) General. Section 111 provides that income attributable to the recovery during any taxable year of bad debts, prior taxes, and delinquency amounts shall be excluded from gross income to the extent of the “recovery exclusion” with respect to such items. The rule of exclusion so prescribed by statute applies equally with respect to all other losses, expenditures and accruals made the basis of deductions from gross income for prior taxable years, including war losses referred to in section 127 of the Internal Revenue Code of 1939, but not including deductions with respect to depreciation, depletion, amortization, or amortizable bond premiums. The term “recovery exclusion” as used in this section means an amount equal to the portion of the bad debts, prior taxes, and delinquency amounts (the items specifically referred to in section 111), and of all other items subject to the rule of exclusion which, when deducted or credited for a prior taxable year, did not result in a reduction of any tax of the taxpayer under subtitle A (other than the accumulated earnings tax imposed by section 531 or the personal holding company tax imposed by section 541) of the Internal Revenue Code of 1954 or corresponding provisions of prior income tax laws (other than the World War II excess profits tax imposed under subchapter E, chapter 2 of the Internal Revenue Code of 1939).
(1) Section 111 items. The term “section 111 items” as used in this section means bad debts, prior taxes, delinquency amounts, and all other items subject to the rule of exclusion, for which a deduction or credit was allowed for a prior taxable year. If a bad debt was previously charged against a reserve by a taxpayer on the reserve method of treating bad debts, it was not deducted, and it is therefore not considered a section 111 item. Bad debts, prior taxes, and delinquency amounts are defined in section 111(b) (1), (2), and (3), respectively. An example of a delinquency amount is interest on delinquent taxes. An example of the other items not expressly referred to in section 111 but nevertheless subject to the rule of exclusion is a loss sustained upon the sale of stock and later recovered, in whole or in part, through an action against the party from whom such stock had been purchased.
(2) Definition of “recovery”. Recoveries result from the receipt of amounts in respect of the previously deducted or credited section 111 items, such as from the collection or sale of a bad debt, refund or credit of taxes paid, or cancellation of taxes accrued. Care should be taken in the case of bad debts which were treated as only partially worthless in prior years to distinguish between the item described in section 111, that is, the part of such debt which was deducted, and the part not previously deducted, which is not a section 111 item and is considered the first part collected. The collection of the part not deducted is not considered a “recovery”. Furthermore, the term “recovery” does not include the gain resulting from the receipt of an amount on account of a section 111 item which, together with previous such receipts, exceeds the deduction or credit previously allowed for such item. For instance, a $100 corporate bond purchased for $40 and later deducted as worthless is subsequently collected to the extent of $50. The $10 gain (excess of $50 collection over $40 cost) is not a recovery of a section 111 item. Such gain is in no case excluded from gross income under section 111, regardless of whether the $40 recovery is or is not excluded.
(3) Treatment of debt deducted in more than one year by reason of partial worthlessness. In the case of a bad debt deducted in part for two or more prior years, each such deduction of a part of the debt is considered a separate section 111 item. A recovery with respect to such debt is considered first a recovery of those items (or portions thereof), resulting from such debt, for which there are recovery exclusions. If there are recovery exclusions for two or more items resulting from the same bad debt, such items are considered recovered in the order of the taxable years for which they were deducted, beginning with the latest. The recovery exclusion for any such item is determined by considering the recovery exclusion with respect to the prior year for which such item was deducted as being first used to offset all other applicable recoveries in the year in which the bad debt is recovered.
(4) Special provisions as to worthless bonds, etc., which are treated as capital losses. Certain bad debts arising from the worthlessness of securities and certain nonbusiness bad debts are treated as losses from the sale or exchange of capital assets. See sections 165(g) and 166(d). The amounts of the deductions allowed for any year under section 1211 on account of such losses for such year are considered to be section 111 items. Any part of such losses which, under section 1211, is a deduction for a subsequent year through the capital loss carryover (any later receipt of an amount with respect to such deducted loss is a recovery) is considered a section 111 item for the year in which such loss was sustained.
(b) Computation of recovery exclusion—(1) Amount of recovery exclusion allowable for year of recovery. For the year of any recovery, the section 111 items which were deducted or credited for one prior year are considered as a group and the recovery thereon is considered separately from recoveries of any items which were deducted or credited for other years. This recovery is excluded from gross income to the extent of the recovery exclusion with respect to this group of items as (i) determined for the original year for which such items were deducted or credited (see subparagraph (2) of this paragraph) and (ii) reduced by the excludable recoveries in intervening years on account of all section 111 items for such original year. A taxpayer claiming a recovery exclusion shall submit, at the time the exclusion is claimed, the computation of the recovery exclusion claimed for the original year for which the items were deducted or credited, and computations showing the amount recovered in intervening years on account of the section 111 items deducted or credited for the original year.
(2) Determination of recovery exclusion for original year for which items were deducted or credited. (i) The recovery exclusion for the taxable year for which section 111 items were deducted or credited (that is, the “original taxable year”) is the portion of the aggregate amount of such deductions and credits which could be disallowed without causing an increase in any tax of the taxpayer imposed under subtitle A (other than the accumulated earnings tax imposed by section 531 or the personal holding company tax imposed by section 541) of the Internal Revenue Code of 1954 or corresponding provisions of prior income tax laws (other than the World War II excess profits tax imposed under subchapter E, chapter 2 of the Internal Revenue Code of 1939). For the purpose of such recovery exclusion, consideration must be given to the effect of net operating loss carryovers and carrybacks or capital loss carryovers.
(ii) This rule shall be applied by determining the recovery exclusion as the aggregate amount of the section 111 items for the original year for which such items were deducted or credited reduced by whichever of the following amounts is the greater:
(a) The difference between (1) the taxable income for such original year and (2) the taxable income computed without regard to the section 111 items for such original year.
(b) In the case of a taxpayer subject to any income tax in lieu of normal tax or surtax or both (except the alternative tax on capital gains imposed by section 1201, which is disregarded), the difference between (1) the income subject to such tax for such original year and (2) the income subject to such tax computed without regard to the section 111 items for such original year.
(iii) The determination of the recovery exclusion for original taxable years subject to the provisions of the Internal Revenue Code of 1939 shall be made under 26 CFR (1939) 39.22(b)(12)-1(b)(2) (Regulations 118).
(3) Example. The provisions of this paragraph may be illustrated by the following example:
| With deduction of section 111 items | Without deduction of section 111 items | |
|---|---|---|
| Gross income | $25,000 | $25,000 |
| Less deductions: | ||
| Depreciation | 20,000 | 20,000 |
| Business bad debts and taxes | 6,300 | |
| Personal exemption | 600 | 600 |
| 26,900 | 20,600 | |
| Taxable income or (loss) | (1,900) | 4,400 |
| Adjustment under section 172(d)(3) | 600 | |
| Net operating loss | (1,300) |
(c) Provisions as to taxes imposed by section 531 (relating to the accumulated earnings tax) and section 541 (relating to the tax on personal holding companies). A recovery exclusion allowed for purposes of subtitle A (other than section 531 or section 541) of the Internal Revenue Code of 1954 shall also be allowed for the purpose of determining the accumulated earnings tax under section 531 or the personal holding company tax under section 541 regardless of whether or not the section 111 items on which such recovery exclusion is based resulted in a reduction of the tax under section 531 or section 541 of the Internal Revenue Code of 1954 (or corresponding provisions of prior income tax laws) for the prior taxable year. Furthermore, if there is recovery of a section 111 item which was not allowable as a deduction or credit for the prior taxable year for purposes of Subtitle A (not including section 531 or section 541) or corresponding provisions of prior income tax laws (other than Subchapter E, Chapter 2 of the Internal Revenue Code of 1939, relating to World War II excess profits tax), but was allowable for such prior taxable year in determining the tax under section 531 or section 541 (or corresponding provisions of prior income tax laws) then for the purpose of determining the tax under section 531 or section 541 a recovery exclusion shall be allowable with respect to such recovery if the section 111 item did not result in a reduction of the tax under section 531 or section 541 (or corresponding provisions of prior income tax laws).
§ 1.112-1 Combat zone compensation of members of the Armed Forces.
(a) Combat zone compensation exclusion—(1) Amount excluded. In addition to the exemptions and credits otherwise applicable, section 112 excludes from gross income the following compensation of members of the Armed Forces:
(i) Enlisted personnel. Compensation received for active service as a member below the grade of commissioned officer in the Armed Forces of the United States for any month during any part of which the member served in a combat zone or was hospitalized at any place as a result of wounds, disease, or injury incurred while serving in the combat zone.
(ii) Commissioned officers. Compensation not exceeding the monthly dollar limit received for active service as a commissioned officer in the Armed Forces of the United States for any month during any part of which the officer served in a combat zone or was hospitalized at any place as a result of wounds, disease, or injury incurred while serving in the combat zone. The monthly dollar limit is the monthly amount excludable from the officer’s income under section 112(b) as amended. Beginning in 1966, the monthly dollar limit for periods of active service after 1965 became $500. As of September 10, 1993, the monthly dollar limit continues to be $500.
(2) Time limits on exclusion during hospitalization. Compensation received for service for any month of hospitalization that begins more than 2 years after the date specified by the President in an Executive Order as the date of the termination of combatant activities in the combat zone cannot be excluded under section 112. Furthermore, compensation received while hospitalized after January 1978 for wounds, disease, or injury incurred in the Vietnam combat zone designated by Executive Order 11216 cannot be excluded under section 112.
(3) Special terms. A commissioned warrant officer is not a commissioned officer under section 112(b) and is entitled to the exclusion allowed to enlisted personnel under section 112(a). Compensation, for the purpose of section 112, does not include pensions and retirement pay. Armed Forces of the United States is defined (and members of the Armed Forces are described) in section 7701(a)(15).
(4) Military compensation only. Only compensation paid by the Armed Forces of the United States to members of the Armed Forces can be excluded under section 112, except for compensation paid by an agency or instrumentality of the United States or by an international organization to a member of the Armed Forces whose military active duty status continues during the member’s assignment to the agency or instrumentality or organization on official detail. Compensation paid by other employers (whether private enterprises or governmental entities) to members of the Armed Forces cannot be excluded under section 112 even if the payment is made to supplement the member’s military compensation or is labeled by the employer as compensation for active service in the Armed Forces of the United States. Compensation paid to civilian employees of the federal government, including civilian employees of the Armed Forces, cannot be excluded under section 112, except as provided in section 112(d)(2) (which extends the exclusion to compensation of civilian employees of the federal government in missing status due to the Vietnam conflict).
(b) Service in combat zone—(1) Active service. The exclusion under section 112 applies only if active service is performed in a combat zone. A member of the Armed Forces is in active service if the member is actually serving in the Armed Forces of the United States. Periods during which a member of the Armed Forces is absent from duty on account of sickness, wounds, leave, internment by the enemy, or other lawful cause are periods of active service. A member of the Armed Forces in active service in a combat zone who becomes a prisoner of war or missing in action in the combat zone is deemed, for the purpose of section 112, to continue in active service in the combat zone for the period for which the member is treated as a prisoner of war or as missing in action for military pay purposes.
(2) Combat zone status. Except as provided in paragraphs (e) and (f) of this section, service is performed in a combat zone only if it is performed in an area which the President of the United States has designated by Executive Order, for the purpose of section 112, as an area in which Armed Forces of the United States are or have been engaged in combat, and only if it is performed on or after the date designated by the President by Executive Order as the date of the commencing of combatant activities in that zone and on or before the date designated by the President by Executive Order as the date of the termination of combatant activities in that zone.
(3) Partial month service. If a member of the Armed Forces serves in a combat zone for any part of a month, the member is entitled to the exclusion for that month to the same extent as if the member has served in that zone for the entire month. If a member of the Armed Forces is hospitalized for a part of a month as a result of wounds, disease, or injury incurred while serving in that zone, the member is entitled to the exclusion for the entire month.
(4) Payment time and place. The time and place of payment are irrelevant in considering whether compensation is excludable under section 112; rather, the time and place of the entitlement to compensation determine whether the compensation is excludable under section 112. Thus, compensation can be excluded under section 112 whether or not it is received outside a combat zone, or while the recipient is hospitalized, or in a year different from that in which the service was rendered for which the compensation is paid, provided that the member’s entitlement to the compensation fully accrued in a month during which the member served in the combat zone or was hospitalized as a result of wounds, disease, or injury incurred while serving in the combat zone. For this purpose, entitlement to compensation fully accrues upon the completion of all actions required of the member to receive the compensation. Compensation received by a member of the Armed Forces for services rendered while in active service can be excluded under section 112 even though payment is received subsequent to discharge or release from active service. Compensation credited to a deceased member’s account for a period subsequent to the established date of the member’s death and received by the member’s estate can be excluded from the gross income of the estate under section 112 to the same extent that it would have been excluded from the gross income of the member had the member lived and received the compensation.
(5) Examples of combat zone compensation. The rules of this section are illustrated by the following examples:
(c) Hospitalization—(1) Presumption of combat zone injury. If an individual is hospitalized for wound, disease, or injury while serving in a combat zone, the wound, disease, or injury will be presumed to have been incurred while serving in a combat zone, unless the contrary clearly appears. In certain cases, however, a wound, disease, or injury may have been incurred while serving in a combat zone even though the individual was not hospitalized for it while so serving. In exceptional cases, a wound, disease, or injury will not have been incurred while serving in a combat zone even though the individual was hospitalized for it while so serving.
(2) Length of hospitalization. An individual is hospitalized only until the date the individual is discharged from the hospital.
(3) Examples of combat zone injury. The rules of this paragraph (c) are illustrated by the following examples:
(d) Married members. The exclusion under section 112 applies without regard to the marital status of the recipient of the compensation. If both spouses meet the requirements of the statute, then each spouse is entitled to the benefit of an exclusion. In the case of a husband and wife domiciled in a State recognized for Federal income tax purposes as a community property State, any exclusion from gross income under section 112 operates before apportionment of the gross income of the spouses under community property law. For example, a husband and wife are domiciled in a community property State and the member spouse is entitled, as a commissioned officer, to the benefit of the exclusion under section 112(b) of $500 for each month. The member receives $7,899 as compensation for active service for 3 months in a combat zone. Of that amount, $1,500 is excluded from gross income under section 112(b) and $6,399 is taken into account in determining the gross income of both spouses.
(e) Service in area outside combat zone—(1) Combat zone treatment. For purposes of section 112, a member of the Armed Forces who performs military service in an area outside the area designated by Executive Order as a combat zone is deemed to serve in that combat zone while the member’s service is in direct support of military operations in that zone and qualifies the member for the special pay for duty subject to hostile fire or imminent danger authorized under section 310 of title 37 of the United States Code, as amended (37 U.S.C. 310) (hostile fire/imminent danger pay).
(2) Examples of combat zone treatment. The examples in this paragraph (e)(2) are based on the following circumstances: Certain areas, airspace, and adjacent waters are designated as a combat zone for purposes of section 112 as of May 1. Some members of the Armed Forces are stationed in the combat zone; others are stationed in two foreign countries outside the combat zone, named Nearby Country and Destination Country.
(f) Nonqualifying presence in combat zone—(1) Inapplicability of exclusion. The following members of the Armed Forces are not deemed to serve in a combat zone within the meaning of section 112(a)(1) or section 112(b)(1) or to be hospitalized as a result of wounds, disease, or injury incurred while serving in a combat zone within the meaning of section 112(a)(2) or section 112(b)(2)—
(i) Members present in a combat zone while on leave from a duty station located outside a combat zone;
(ii) Members who pass over or through a combat zone during the course of a trip between two points both of which lie outside a combat zone; or
(iii) Members present in a combat zone solely for their own personal convenience.
(2) Exceptions for temporary duty or special pay. Paragraph (f)(1) of this section does not apply to members of the Armed Forces who—
(i) Are assigned on official temporary duty to a combat zone (including official temporary duty to the airspace of a combat zone); or
(ii) Qualify for hostile fire/imminent danger pay.
(3) Examples of nonqualifying presence and its exceptions. The examples in this paragraph (f)(3) are based on the following circumstances: Certain areas, airspace, and adjacent waters are designated as a combat zone for purposes of section 112 as of May 1. Some members of the Armed Forces are stationed in the combat zone; others are stationed in two foreign countries outside the combat zone, named Nearby Country and Destination Country.
§ 1.113-1 Mustering-out payments for members of the Armed Forces.
For the purposes of the exclusion from gross income under section 113 of mustering-out payments with respect to service in the Armed Forces, mustering-out payments are payments made to any recipients pursuant to the provisions of 38 U.S.C. 2105 (formerly section 5 of the Mustering-out Payment Act of 1944 and section 505 of the Veterans’ Readjustment Assistance Act of 1952).
§ 1.117-1 Exclusion of amounts received as a scholarship or fellowship grant.
(a) In general. Any amount received by an individual as a scholarship at an educational institution or as a fellowship grant, including the value of contributed services and accommodations, shall be excluded from the gross income of the recipient, subject to the limitations set forth in section 117(b) and § 1.117-2. The exclusion from gross income of an amount which is a scholarship or fellowship grant is controlled solely by section 117. Accordingly, to the extent that a scholarship or a fellowship grant exceeds the limitations of section 117(b) and § 1.117-2, it is includible in the gross income of the recipient notwithstanding the provisions of section 102 relating to exclusion from gross income of gifts, or section 74(b) relating to exclusion from gross income of certain prizes and awards. For definitions, see § 1.117-3.
(b) Exclusion of amounts received to cover expenses. (1) Subject to the limitations provided in subparagraph (2) of this paragraph, any amount received by an individual to cover expenses for travel (including meals and lodging while traveling and an allowance for travel of the individual’s family), research, clerical help, or equipment is excludable from gross income provided that such expenses are incident to a scholarship or fellowship grant which is excludable from gross income under section 117(a)(1). If, however, only a portion of a scholarship or fellowship grant is excludable from gross income under section 117(a)(1) because of the part-time employment limitation contained in section 117(b)(1) or because of the expiration of the 36-month period described in section 117(b)(2)(B), only the amount received to cover expenses incident to such excludable portion is excludable from gross income. The requirement that these expenses be incident to the scholarship or the fellowship grant means that the expenses of travel, research, clerical help, or equipment must be incurred by the individual in order to effectuate the purpose for which the scholarship or the fellowship grant was awarded.
(2)(i) In the case of a scholarship or fellowship grant which is awarded after July 28, 1956, the exclusion provided under subparagraph (1) of this paragraph is not applicable unless the amount received by the individual is specifically designated to cover expenses for travel, research, clerical help, or equipment.
(ii) In the case of a scholarship or fellowship grant awarded before July 29, 1956, the exclusion provided under subparagraph (1) of this paragraph is not applicable unless the recipient establishes, by competent evidence, that the amount was received to cover expenses for travel, research, clerical help, or equipment, but such amount need not be specifically designated. The fact that the recipient actually incurred expenses for travel, research, clerical help, or equipment is not sufficient to establish that the amount was received to cover such expenses.
(iii) The exclusion provided under subparagraph (1) of this paragraph is applicable only to the extent that the amount received for travel, research, clerical help, or equipment is actually expended for such expenses by the recipient during the term of the scholarship or fellowship grant and within a reasonable time before and after such term.
(3) The portion of any amount received to cover the expenses described in subparagraph (1) of this paragraph which is not actually expended for such expenses within the exclusion period described in subparagraph (2) of this paragraph shall, if not returned to the grantor within this period, be included in the gross income of the recipient for the taxable year in which such exclusion period expires.
§ 1.117-2 Limitations.
(a) Individuals who are candidates for degrees—(1) In general. Under the limitations provided by section 117(b)(1) in the case of an individual who is a candidate for a degree at an educational institution, the exclusion from gross income shall not apply (except as otherwise provided in subparagraph (2) of this paragraph) to that portion of any amount received as payment for teaching, research, or other services in the nature of parttime employment required as a condition to receiving the scholarship or fellowship grant. Payments for such part-time employment shall be included in the gross income of the recipient in an amount determined by reference to the rate of compensation ordinarily paid for similar services performed by an individual who is not the recipient of a scholarship or a fellowship grant. A typical example of employment under this subparagraph is the case of an individual who is required, as a condition to receiving the scholarship or the fellowship grant, to perform part-time teaching services. A requirement that the individual shall furnish periodic reports to the grantor of the scholarship or the fellowship grant for the purpose of keeping the grantor informed as to the general progress of the individual shall not be deemed to constitute the performance of services in the nature of part-time employment.
(2) Exception. If teaching, research, or other services are required of all candidates (whether or not recipients of scholarships or fellowship grants) for a particular degree as a condition to receiving the degree, such teaching, research, or other services on the part of the recipient of a scholarship or fellowship grant who is a candidate for such degree shall not be regarded as part-time employment within the meaning of this paragraph. Thus, if all candidates for a particular education degree are required, as part of their regular course of study or curriculum, to perform part-time practice teaching services, such services are not to be regarded as part-time employment within the meaning of this paragraph.
(b) Individuals who are not candidates for degrees—(1) Conditions for exclusion. In the case of an individual who is not a candidate for a degree at an educational institution, the exclusion from gross income of an amount received as a scholarship or a fellowship grant shall apply (to the extent provided in subparagraph (2) of this paragraph) only if the grantor of the scholarship or fellowship grant is—
(i) An organization described in section 501(c)(3) which is exempt from tax under section 501(a),
(ii) The United States or an instrumentality or agency thereof, or a State, a territory, or a possession of the United States, or any political subdivision thereof, or the District of Columbia, or
(iii) For taxable years beginning after December 31, 1961, a foreign government, an international organization, or a binational or multinational educational and cultural foundation or commission created or continued pursuant to section 103 of the Mutual Educational and Cultural Exchange Act of 1961 (22 U.S.C. 2453).
(2) Extent of exclusion. (i) In the case of an individual who is not a candidate for a degree, the amount received as a scholarship or a fellowship grant which is excludable from gross income under section 117(a)(1) shall not exceed an amount equal to $300 times the number of months for which the recipient received amounts under the scholarship or fellowship grant during the taxable year. In determining the number of months during the period for which the recipient received amounts under a scholarship or fellowship grant, computation shall be made on the basis of whole calendar months. A whole calendar month means a period of time terminating with the day of the succeeding month numerically corresponding to the day of the month of its beginning, less one, except that if there be no corresponding day of the succeeding month the period terminates with the last day of the succeeding month. For purposes of this computation a fractional part of a calendar month consisting of a period of time including 15 days or more shall be considered to be a whole calendar month and a fractional part of a calendar month consisting of a period of time including 14 days or less shall be disregarded. For example, if an individual receives a fellowship grant on September 13 which is to expire on June 12 of the following year, the grant shall be considered to have extended for a period of 9 months. If in the preceding example the grant expired on June 27, instead of June 12, the grant shall be considered to have extended for a period of 10 months.
(ii) No exclusion shall be allowed under section 117(a)(1) to an individual who is not a candidate for a degree after the recipient has, as an individual who is not a candidate for a degree, been entitled to an exclusion under that section for a period of 36 months. This limitation applies if the individual has received any amount which was either excluded or excludable from his gross income under section 117(a)(1) for any prior 36 months, whether or not consecutive. For example, if the individual received a fellowship grant of $7,200 for 3 years (which he elected to receive in 36 monthly installments of $200), his exclusion period would be exhausted even though he did not in any of the 36 months make use of the maximum exclusion. Accordingly, such individual would be entitled to no further exclusion from gross income with respect to any additional grants which he may receive as an individual who is not a candidate for a degree.
(iii) If an individual who is not a candidate for a degree receives amounts from more than one scholarship or fellowship grant during the taxable year, the total amounts received in the taxable year shall be aggregated for the purpose of computing the amount which may be excludable from gross income for such taxable year. If amounts are received from more than one scholarship or fellowship grant during the same month or months within the taxable year, such month or months shall be counted only once for the purpose of determining the number of months for which the individual received such amounts under the scholarships or fellowship grants during the taxable year. For example, if an individual receives a fellowship grant from one source for the months of January to June of the taxable year and also receives a fellowship grant from another source for the months of March through December of the same taxable year, he shall be considered to have received amounts for 12 months of the taxable year. See example (4) in subparagraph (3) of this paragraph for further illustration.
(3) Examples. The application of this paragraph may be further illustrated by the following examples, it being assumed that in each example the grantor is a grantor who is described in section 117(b)(2)(A) and subparagraph (1) of this paragraph:
(ii) For the calendar year 1955, F receives $1,400 from Grant A which he is entitled to exclude from gross income since it does not exceed an amount equal to $300 times the number of months (7) for which he received amounts under the grant in the taxable year.
(iii) For the calendar year 1956, F receives $3,600 as the aggregate of amounts received under fellowship grants ($2,400 from Grant A and $1,200 from Grant B). F will be entitled to exclude the entire amount of $3,600 from gross income for the calendar year 1956 since such amount does not exceed an amount equal to $300 times the number of months (12) for which he received amounts under the grants in the taxable year.
(iv) For the calendar year 1957, F receives $4,600 as the aggregate of amounts received under fellowship grants ($1,000 from Grant A and $3,600 from Grant B). F will be entitled to exclude $3,600 ($300 × 12) from gross income for the calendar year 1957 and he will have to include $1,000 in gross income.
(v) For the calendar year 1958, F receives $2,400 from Grant B. F is entitled to exclude $1,500 ($300 × 5) from gross income for the calendar year 1958 and he will have to include $900 in gross income. While F receives amounts under fellowship Grant B for 8 months during the calendar year 1958, he is limited to an amount equal to $300 times 5 (months) because of the fact that he has already been entitled to exclude (and has in fact excluded) amounts received as a fellowship grant for a period of 31 months. Accordingly, he can only exclude amounts received under the fellowship grant for 5 months during the calendar year 1958, because of the 36-month limitation period. The fact that he was entitled to exclude only $1,400 ($200 a month for 7 months) instead of the maximum amount of $2,100 ($300 × 7) in 1955, is immaterial and the limitation period of 36 months is applicable.
(vi) The following chart illustrates the computation of the number of months for which F received amounts under the fellowship grants during the respective taxable years and the computation of the total amounts received under the fellowship grants during each taxable year:
| Period for which received and source | Number of months | Amounts received |
|---|---|---|
| 1955: | ||
| June 1 to December 31 | 7 | |
| Grant A | $1,400 | |
| Grant B | None | |
| Aggregate | 7 | 1,400 |
| 1956: | ||
| January 1 to August 31 | 8 | |
| Grant A | 1,600 | |
| Grant B | None | |
| September 1 to December 31 | 4 | |
| Grant A | 800 | |
| Grant B | 1,200 | |
| Aggregate | 12 | 3,600 |
| 1957: | ||
| January 1 to May 31 | 5 | |
| Grant A | 1,000 | |
| Grant B | 1,500 | |
| June 1 to December 31 | 7 | |
| Grant A | None | |
| Grant B | 2,100 | |
| Aggregate | 12 | 4,600 |
| 1958: | ||
| January 1 to August 31 | 8 | |
| Grant A | None | |
| Grant B | 2,400 | |
| Aggregate | 2,400 |
§ 1.117-3 Definitions.
(a) Scholarship. A scholarship generally means an amount paid or allowed to, or for the benefit of, a student, whether an undergraduate or a graduate, to aid such individual in pursuing his studies. The term includes the value of contributed services and accommodations (see paragraph (d) of this section) and the amount of tuition, matriculation, and other fees which are furnished or remitted to a student to aid him in pursuing his studies. The term also includes any amount received in the nature of a family allowance as a part of a scholarship. However, the term does not include any amount provided by an individual to aid a relative, friend, or other individual in pursuing his studies where the grantor is motivated by family or philanthropic considerations. If an educational institution maintains or participates in a plan whereby the tuition of a child of a faculty member of such institution is remitted by any other participating educational institution attended by such child, the amount of the tuition so remitted shall be considered to be an amount received as a scholarship.
(b) Educational organization. For definition of “educational organization” paragraphs (a) and (b) of section 117 adopt the definition of that term which is prescribed in section 151(e)(4). Accordingly, for purposes of section 117 the term “educational organization” means only an educational organization which normally maintains a regular faculty and curriculum and normally has a regularly organized body of students in attendance at the place where its educational activities are carried on. See section 151(e)(4) and regulations thereunder.
(c) Fellowship grant. A fellowship grant generally means an amount paid or allowed to, or for the benefit of, an individual to aid him in the pursuit of study or research. The term includes the value of contributed services and accommodations (see paragraph (d) of this section) and the amount of tuition, matriculation, and other fees which are furnished or remitted to an individual to aid him in the pursuit of study or research. The term also includes any amount received in the nature of a family allowance as a part of a fellowship grant. However, the term does not include any amount provided by an individual to aid a relative, friend, or other individual in the pursuit of study or research where the grantor is motivated by family or philanthropic considerations.
(d) Contributed services and accommodations. The term “contributed services and accommodations” means such services and accommodations as room, board, laundry service, and similar services or accommodations which are received by an individual as a part of a scholarship or fellowship grant.
(e) Candidate for a degree. The term “candidate for a degree” means an individual, whether an undergraduate or a graduate, who is pursuing studies or conducting research to meet the requirements for an academic or professional degree conferred by colleges or universities. It is not essential that such study or research be pursued or conducted at an educational institution which confers such degrees if the purpose thereof is to meet the requirements for a degree of a college or university which does confer such degrees. A student who receives a scholarship for study at a secondary school or other educational institution is considered to be a “candidate for a degree.”
§ 1.117-4 Items not considered as scholarships or fellowship grants.
The following payments or allowances shall not be considered to be amounts received as a scholarship or a fellowship grant for the purpose of section 117:
(a) Educational and training allowances to veterans. Educational and training allowances to a veteran pursuant to section 400 of the Servicemen’s Readjustment Act of 1944 (58 Stat. 287) or pursuant to 38 U.S.C. 1631 (formerly section 231 of the Veterans’ Readjustment Assistance Act of 1952).
(b) Allowances to members of the Armed Forces of the United States. Tuition and subsistence allowances to members of the Armed Forces of the United States who are students at an educational institution operated by the United States or approved by the United States for their education and training, such as the United States Naval Academy and the United States Military Academy.
(c) Amounts paid as compensation for services or primarily for the benefit of the grantor. (1) Except as provided in paragraph (a) of §§ 1.117-2 and 1.117-5, any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research, if such amount represents either compensation for past, present, or future employment services or represents payment for services which are subject to the direction or supervision of the grantor.
(2) Any amount paid or allowed to, or on behalf of, an individual to enable him to pursue studies or research primarily for the benefit of the grantor.
§ 1.117-5 Federal grants requiring future service as a Federal employee.
(a) In general. Under section 117(c), amounts received by an individual under a Federal program as a scholarship or grant for qualified tuition and expenses at an institution of higher education are excluded from the gross income of the recipient even though the recipient is required to perform future service as a Federal employee. See paragraph (c) of this section for the definitions of the terms “qualified tuition and expenses” and “institution of higher education.”
(b) Exception for uniformed services scholarship programs. The requirements of this section do not apply to amounts received before 1985 by a member of a uniformed service who entered training before 1981 under the Armed Forces Health Professions Scholarship Program, National Public Health Service Corps Scholarship Training Program, or other substantially similar Federal programs requiring the recipient to work for a uniformed Federal service after completion of studies. These awards are governed by section 4 of Pub. L. 93-483 as amended by Pub. L. 95-171, Pub. L. 95-600 and Pub. L. 96-167. See section 101(3) of title 37, United States Code for the definition of the term “uniformed service.”
(c) Definitions—(1) Qualified tuition and related expenses. For purposes of section 117(c) and this section, qualified tuition and related expenses are those amounts which under the terms of the Federal program are required to be used and in fact are used for payment of:
(i) Tuition and fees that are required for the recipient’s enrollment or attendance at an institution of higher education; and
(ii) Those amounts used for payment of fees, books, supplies and equipment required for courses of instruction at such an institution.
(2) Institution of higher education. To qualify as an institution of higher education under this section, the institution must be a public or other nonprofit institution in any state which—
(i) Admits as regular students only individuals who have a certificate of graduation from a high school or the recognized equivalent of such a certificate;
(ii) Is legally authorized within the state to provide a program of education beyond high school; and
(iii) Provides an education program for which it awards a bachelor’s or higher degree or which is acceptable for full credit towards such a degree, or which trains and prepares students for gainful employment in a recognized health profession. For purposes of this section, recognized health professions are those health professions which are supervised or monitored by appropriate state or Federal agencies or governing professional associations and which require members to be currently licensed or certified in order to practice.
(3) Service as a Federal employee—(i) In general. Except as otherwise provided in paragraph (c)(3)(ii) of this section, service as a Federal employee refers to employment of the recipient by the Federal government to work directly for the Federal government. Thus, Federal grants or scholarships which do not require the recipient to work directly for the Federal government are not governed by the rules of this section.
(ii) Service in a health manpower shortage area. For purposes of this section an obligation under a grant for the recipient to serve in a health related field in a health manpower shortage area as designated by the Secretary of Health and Human Services according to the criteria of the Public Health Services Act (42 U.S.C. 254(e)) and the regulations promulgated thereunder (42 CFR 5.1-5.4) will be considered an obligation to serve as a Federal employee.
(d) Records required for exclusion from gross income. To exclude amounts received under Federal programs requiring future services as a Federal employee, the recipient must maintain records that establish that the amounts received under such programs were used for qualified tuition and related expenses as defined in paragraph (c)(1) of this section. Qualifying uses may be established by providing to the Service, upon request, copies of relevant bills, receipts, cancelled checks or other convenient documentation or records which clearly reflect the use of the money received under the grant. The recipient must also submit, upon request, documentation establishing receipt of the grant and setting out the terms and requirements of the particular grant.
(e) Applicability of rules of §§ 117(a) and 117(b). Except where a different rule has been expressly provided in this section, amounts received under Federal grants requiring future service as a Federal employee, and which meet the requirements for exclusion from gross income under this section, are subject to the rules, limitations and definitions specified in §§ 117 (a) and (b) of the Code and §§ 1.117-1 through 1.117-4.
(f) Effective date. Except as provided in paragraph (b) of this section, this section will apply to amounts received after December 31, 1980 under Federal programs which meet the requirements of this section.
§ 1.118-1 Contributions to the capital of a corporation.
In the case of a corporation, section 118 provides an exclusion from gross income with respect to any contribution of money or property to the capital of the taxpayer. Thus, if a corporation requires additional funds for conducting its business and obtains such funds through voluntary pro rata payments by its shareholders, the amounts so received being credited to its surplus account or to a special account, such amounts do not constitute income, although there is no increase in the outstanding shares of stock of the corporation. In such a case the payments are in the nature of assessments upon, and represent an additional price paid for, the shares of stock held by the individual shareholders, and will be treated as an addition to and as a part of the operating capital of the company. Section 118 also applies to contributions to capital made by persons other than shareholders. For example, the exclusion applies to the value of land or other property contributed to a corporation by a governmental unit or by a civic group for the purpose of inducing the corporation to locate its business in a particular community, or for the purpose of enabling the corporation to expand its operating facilities. However, the exclusion does not apply to any money or property transferred to the corporation in consideration for goods or services rendered, or to subsidies paid for the purpose of inducing the taxpayer to limit production. See section 362 for the basis of property acquired by a corporation through a contribution to its capital by its stockholders or by nonstockholders.
§ 1.118-2 Contribution in aid of construction.
(a) Special rule for water and sewerage disposal utilities—(1) In general. For purposes of section 118, the term contribution to the capital of the taxpayer includes any amount of money or other property received from any person (whether or not a shareholder) by a regulated public utility that provides water or sewerage disposal services if—
(i) The amount is a contribution in aid of construction under paragraph (b) of this section;
(ii) In the case of a contribution of property other than water or sewerage disposal facilities, the amount satisfies the expenditure rule under paragraph (c) of this section; and
(iii) The amount (or any property acquired or constructed with the amount) is not included in the taxpayer’s rate base for ratemaking purposes.
(2) Definitions—(i) Regulated public utility has the meaning given such term by section 7701(a)(33), except that such term does not include any utility which is not required to provide water or sewerage disposal services to members of the general public in its service area.
(ii) Water or sewerage disposal facility is defined as tangible property described in section 1231(b) that is used predominately (80% or more) in the trade or business of furnishing water or sewerage disposal services.
(b) Contribution in aid of construction—(1) In general. For purposes of section 118(c) and this section, the term contribution in aid of construction means any amount of money or other property contributed to a regulated public utility that provides water or sewerage disposal services to the extent that the purpose of the contribution is to provide for the expansion, improvement, or replacement of the utility’s water or sewerage disposal facilities.
(2) Advances. A contribution in aid of construction may include an amount of money or other property contributed to a regulated public utility for a water or sewerage disposal facility subject to a contingent obligation to repay the amount, in whole or in part, to the contributor (commonly referred to as an advance). For example, an amount received by a utility from a developer to construct a water facility pursuant to an agreement under which the utility will pay the developer a percentage of the receipts from the facility over a fixed period may constitute a contribution in aid of construction. Whether an advance is a contribution or a loan is determined under general principles of federal tax law based on all the facts and circumstances. For the treatment of any amount of a contribution in aid of construction that is repaid by the utility to the contributor, see paragraphs (c)(2)(ii) and (d)(2) of this section.
(3) Customer connection fee—(i) In general. Except as provided in paragraph (b)(3)(ii) of this section, a customer connection fee is not a contribution in aid of construction under this paragraph (b) and generally is includible in income. The term customer connection fee includes any amount of money or other property transferred to the utility representing the cost of installing a connection or service line (including the cost of meters and piping) from the utility’s main water or sewer lines to the line owned by the customer or potential customer. A customer connection fee also includes any amount paid as a service charge for starting or stopping service.
(ii) Exceptions—(A) Multiple customers. Money or other property contributed for a connection or service line from the utility’s main line to the customer’s or the potential customer’s line is not a customer connection fee if the connection or service line serves, or is designed to serve, more than one customer. For example, a contribution for a split service line that is designed to serve two customers is not a customer connection fee. On the other hand, if a water or sewerage disposal utility treats an apartment or office building as one utility customer, then the cost of installing a connection or service line from the utility’s main water or sewer lines serving that single customer is a customer connection fee.
(B) Fire protection services. Money or other property contributed for public and private fire protection services is not a customer connection fee.
(4) Reimbursement for a facility previously placed in service—(i) In general. If a water or sewerage disposal facility is placed in service by the utility before an amount is contributed to the utility, the contribution is not a contribution in aid of construction under this paragraph (b) with respect to the cost of the facility unless, no later than 8
(ii) Example. The application of paragraph (b)(4)(i) of this section is illustrated by the following example:
(5) Classification by ratemaking authority. The fact that the applicable ratemaking authority classifies any money or other property received by a utility as a contribution in aid of construction is not conclusive as to its treatment under this paragraph (b).
(c) Expenditure rule—(1) In general. An amount satisfies the expenditure rule of section 118(c)(2) if the amount is expended for the acquisition or construction of property described in section 118(c)(2)(A), the amount is paid or incurred before the end of the second taxable year after the taxable year in which the amount was received as required by section 118(c)(2)(B), and accurate records are kept of contributions and expenditures as provided in section 118(c)(2)(C).
(2) Excess amount—(i) Includible in the utility’s income. An amount received by a utility as a contribution in aid of construction that is not expended for the acquisition or construction of water or sewerage disposal facilities as required by paragraph (c)(1) of this section (the excess amount) is not a contribution to the capital of the taxpayer under paragraph (a) of this section. Except as provided in paragraph (c)(2)(ii) of this section, such excess amount is includible in the utility’s income in the taxable year in which the amount was received.
(ii) Repayment of excess amount. If the excess amount described in paragraph (c)(2)(i) of this section is repaid, in whole or in part, either—
(A) Before the end of the time period described in paragraph (c)(1) of this section, the repayment amount is not includible in the utility’s income; or
(B) After the end of the time period described in paragraph (c)(1) of this section, the repayment amount may be deducted by the utility in the taxable year in which it is paid or incurred to the extent such amount was included in income.
(3) Example. The application of this paragraph (c) is illustrated by the following example:
(d) Adjusted basis—(1) Exclusion from basis. Except for a repayment described in paragraph (d)(2) of this section, to the extent that a water or sewerage disposal facility is acquired or constructed with an amount received as a contribution to the capital of the taxpayer under paragraph (a) of this section, the basis of the facility is reduced by the amount of the contribution. To the extent the water or sewerage disposal facility is acquired as a contribution to the capital of the taxpayer under paragraph (a) of this section, the basis of the contributed facility is zero.
(2) Repayment of contribution. If a contribution to the capital of the taxpayer under paragraph (a) of this section is repaid to the contributor, either in whole or in part, then the repayment amount is a capital expenditure in the taxable year in which it is paid or incurred, resulting in an increase in the property’s adjusted basis in such year. Capital expenditures allocated to depreciable property under paragraph (d)(3) of this section may be depreciated over the remaining recovery period for that property.
(3) Allocation of contributions. An amount treated as a capital expenditure under this paragraph (d) is to be allocated proportionately to the adjusted basis of each property acquired or constructed with the contribution based on the relative cost of such property.
(4) Example. The application of this paragraph (d) is illustrated by the following example:
(e) Statute of limitations—(1) Extension of statute of limitations. Under section 118(d)(1), the statutory period for assessment of any deficiency attributable to a contribution to capital under paragraph (a) of this section does not expire before the expiration of 3 years after the date the taxpayer notifies the Secretary in the time and manner prescribed in paragraph (e)(2) of this section.
(2) Time and manner of notification. Notification is made by attaching a statement to the taxpayer’s federal income tax return for the taxable year in which any of the reportable items in paragraphs (e)(2)(i) through (iii) of this section occur. The statement must contain the taxpayer’s name, address, employer identification number, taxable year, and the following information with respect to contributions of property other than water or sewerage disposal facilities that are subject to the expenditure rule described in paragraph (c) of this section—
(i) The amount of contributions in aid of construction expended during the taxable year for property described in section 118(c)(2)(A) (qualified property) as required under paragraph (c)(1) of this section, identified by taxable year in which the contributions were received;
(ii) The amount of contributions in aid of construction that the taxpayer does not intend to expend for qualified property as required under paragraph (c)(1) of this section, identified by taxable year in which the contributions were received; and
(iii) The amount of contributions in aid of construction that the taxpayer failed to expend for qualified property as required under paragraph (c)(1) of this section, identified by taxable year in which the contributions were received.
(f) Effective date. This section is applicable for any money or other property received by a regulated public utility that provides water or sewerage disposal services on or after January 11, 2001.
§ 1.119-1 Meals and lodging furnished for the convenience of the employer.
(a) Meals—(1) In general. The value of meals furnished to an employee by his employer shall be excluded from the employee’s gross income if two tests are met: (i) The meals are furnished on the business premises of the employer, and (ii) the meals are furnished for the convenience of the employer. The question of whether meals are furnished for the convenience of the employer is one of fact to be determined by analysis of all the facts and circumstances in each case. If the tests described in subdivisions (i) and (ii) of this subparagraph are met, the exclusion shall apply irrespective of whether under an employment contract or a statute fixing the terms of employment such meals are furnished as compensation.
(2) Meals furnished without a charge. (i) Meals furnished by an employer without charge to the employee will be regarded as furnished for the convenience of the employer if such meals are furnished for a substantial noncompensatory business reason of the employer. If an employer furnishes meals as a means of providing additional compensation to his employee (and not for a substantial noncompensatory business reason of the employer), the meals so furnished will not be regarded as furnished for the convenience of the employer. Conversely, if the employer furnishes meals to his employee for a substantial noncompensatory business reason, the meals so furnished will be regarded as furnished for the convenience of the employer, even though such meals are also furnished for a compensatory reason. In determining the reason of an employer for furnishing meals, the mere declaration that meals are furnished for a noncompensatory business reason is not sufficient to prove that meals are furnished for the convenience of the employer, but such determination will be based upon an examination of all the surrounding facts and circumstances. In subdivision (ii) of this subparagraph, there are set forth some of the substantial noncompensatory business reasons which occur frequently and which justify the conclusion that meals furnished for such a reason are furnished for the convenience of the employer. In subdivision (iii) of this subparagraph, there are set forth some of the business reasons which are considered to be compensatory and which, in the absence of a substantial noncompensatory business reason, justify the conclusion that meals furnished for such a reason are not furnished for the convenience of the employer. Generally, meals furnished before or after the working hours of the employee will not be regarded as furnished for the convenience of the employer, but see subdivision (ii) (d) and (f) of this subparagraph for some exceptions to this general rule. Meals furnished on nonworking days do not qualify for the exclusion under section 119. If the employee is required to occupy living quarters on the business premises of his employer as a condition of his employment (as defined in paragraph (b) of this section), the exclusion applies to the value of any meal furnished without charge to the employee on such premises.
(ii)(a) Meals will be regarded as furnished for a substantial noncompensatory business reason of the employer when the meals are furnished to the employee during his working hours to have the employee available for emergency call during his meal period. In order to demonstrate that meals are furnished to the employee to have the employee available for emergency call during the meal period, it must be shown that emergencies have actually occurred, or can reasonably be expected to occur, in the employer’s business which have resulted, or will result, in the employer calling on the employee to perform his job during his meal period.
(b) Meals will be regarded as furnished for a substantial noncompensatory business reason of the employer when the meals are furnished to the employee during his working hours because the employer’s business is such that the employee must be restricted to a short meal period, such as 30 or 45 minutes, and because the employee could not be expected to eat elsewhere in such a short meal period. For example, meals may qualify under this subdivision when the employer is engaged in a business in which the peak work load occurs during the normal lunch hours. However, meals cannot qualify under this subdivision (b) when the reason for restricting the time of the meal period is so that the employee can be let off earlier in the day.
(c) Meals will be regarded as furnished for a substantial noncompensatory business reason of the employer when the meals are furnished to the employee during his working hours because the employee could not otherwise secure proper meals within a reasonable meal period. For example, meals may qualify under this subdivision (c) when there are insufficient eating facilities in the vicinity of the employer’s premises.
(d) A meal furnished to a restaurant employee or other food service employee for each meal period in which the employee works will be regarded as furnished for a substantial noncompensatory business reason of the employer, irrespective of whether the meal is furnished during, immediately before, or immediately after the working hours of the employee.
(e) If the employer furnishes meals to employees at a place of business and the reason for furnishing the meals to each of substantially all of the employees who are furnished the meals is a substantial noncompensatory business reason of the employer, the meals furnished to each other employee will also be regarded as furnished for a substantial noncompensatory business reason of the employer.
(f) If an employer would have furnished a meal to an employee during his working hours for a substantial noncompensatory business reason, a meal furnished to such an employee immediately after his working hours because his duties prevented him from obtaining a meal during his working hours will be regarded as furnished for a substantial noncompensatory business reason.
(iii) Meals will be regarded as furnished for a compensatory business reason of the employer when the meals are furnished to the employee to promote the morale or goodwill of the employee, or to attract prospective employees.
(3) Meals furnished with a charge. (i) If an employer provides meals which an employee may or may not purchase, the meals will not be regarded as furnished for the convenience of the employer. Thus, meals for which a charge is made by the employer will not be regarded as furnished for the convenience of the employer if the employee has a choice of accepting the meals and paying for them or of not paying for them and providing his meals in another manner.
(ii) If an employer furnishes an employee meals for which the employee is charged an unvarying amount (for example, by subtraction from his stated compensation) irrespective of whether he accepts the meals, the amount of such flat charge made by the employer for such meals is not, as such, part of the compensation includible in the gross income of the employee; whether the value of the meals so furnished is excludable under section 119 is determined by applying the rules of subparagraph (2) of this paragraph. If meals furnished for an unvarying amount are not furnished for the convenience of the employer in accordance with the rules of subparagraph (2) of this paragraph, the employee shall include in gross income the value of the meals regardless of whether the value exceeds or is less than the amount charged for such meals. In the absence of evidence to the contrary, the value of the meals may be deemed to be equal to the amount charged for them.
(b) Lodging. The value of lodging furnished to an employee by the employer shall be excluded from the employee’s gross income if three tests are met:
(1) The lodging is furnished on the business premises of the employer,
(2) The lodging is furnished for the convenience of the employer, and
(3) The employee is required to accept such lodging as a condition of his employment.
(c) Business premises of the employer—(1) In general. For purposes of this section, the term “business premises of the employer” generally means the place of employment of the employee. For example, meals and lodging furnished in the employer’s home to a domestic servant would constitute meals and lodging furnished on the business premises of the employer. Similarly, meals furnished to cowhands while herding their employer’s cattle on leased land would be regarded as furnished on the business premises of the employer.
(2) Certain camps. For taxable years beginning after December 31, 1981, in the case of an individual who is furnished lodging by or on behalf of his employer in a camp (as defined in paragraph (d) of this section) in a foreign country (as defined in § 1.911-2(h)), the camp shall be considered to be part of the business premises of the employer.
(d) Camp defined—(1) In general. For the purposes of paragraph (c)(2) of this section, a camp is lodging that is all of the following:
(i) Provided by or on behalf of the employer for the convenience of the employer because the place at which the employee renders services is in a remote area where satisfactory housing is not available to the employee on the open market within a reasonable commuting distance of that place;
(ii) Located, as near as practicable, in the vicinity of the place at which the employee renders services; and
(iii) Furnished in a common area or enclave which is not available to the general public for lodging or accommodations and which normally accommodates ten or more employees.
(2) Satisfactory housing. For purposes of paragraph (d)(1)(i) of this section, facts and circumstances that may be relevant in determining whether housing available to the employee is satisfactory include, but are not limited to, the size and condition of living space and the availability and quality of utilities such as water, sewers or other waste disposal facilities, electricity, or heat. The general environment in which housing is located (e.g., climate, prevalence of insects, etc.) does not of itself make housing unsatisfactory. The general environment is relevant, however, if housing is inadequate to protect the occupants from environmental conditions. The individual employee’s income level is not relevant in determining whether housing is satisfactory; it may, however, be relevant in determining whether satisfactory housing is available to the employee (see paragraph (d)(3)(i)(B) of this section).
(3) Availability of satisfactory housing—(i) Facts and circumstances. For purposes of paragraph (d)(1)(i) of this section, facts and circumstances to be considered in determining whether satisfactory housing is available to the employee on the open market include but are not limited to:
(A) The number of housing units available on the open market in relation to the number of housing units required for the employer’s employees;
(B) The cost of housing available on the open market;
(C) The quality of housing available on the open market; and
(D) The presence of warfare or civil insurrection within the area where housing would be available which would subject U.S. citizens to unusual risk of personal harm or property loss.
(ii) Presumptions. Satisfactory housing will generally be considered to be unavailable to the employee on the open market if either of the following conditions is satisfied:
(A) The foreign government requires the employer to provide housing for its employees other than housing available on the open market; or
(B) An unrelated person awarding work to the employer requires that the employer’s employees occupy housing specified by such unrelated person.
(4) Reasonable commuting distance. For purposes of paragraph (d)(1)(i) of this section, in determining whether a commuting distance is reasonable, the accessibility of the place at which the employee renders services due to geographic factors, the quality of the roads, the customarily available transportation, and the usual travel time (at the time of day such travel would be required) to the place at which the employee renders services shall be taken into account.
(5) Common area or enclave. A cluster of housing units does not satisfy paragraph (d)(1)(iii) of this section if it is adjacent to or surrounded by substantially similar housing available to the general public. Two or more common areas or enclaves that house employees who work on the same project (for example, a highway project) are considered to be one common area or enclave in determining whether they normally accommodate ten or more employees.
(e) Rules. The exclusion provided by section 119 applies only to meals and lodging furnished in kind by or on behalf of an employer to his employee. If the employee has an option to receive additional compensation in lieu of meals or lodging in kind, the value of such meals and lodging is not excludable from gross income under section 119. However, the mere fact that an employee, at his option, may decline to accept meals tendered in kind will not of itself require inclusion of the value thereof in gross income. Cash allowances for meals or lodging received by an employee are includible in gross income to the extent that such allowances constitute compensation.
(f) Examples. The provisions of section 119 may be illustrated by the following examples:
§ 1.120-1 Statutory subsistence allowance received by police.
(a) Section 120 excludes from the gross income of an individual employed as a police official by a State, Territory, or possession of the United States, by any of their political subdivisions, or by the District of Columbia, any amount received as a statutory subsistence allowance to the extent that such allowance does not exceed $5 per day. For purposes of this section, the term “statutory subsistence allowance” means an amount which is designated as a subsistence allowance under the laws of a State, a Territory, or a possession of the United States, any political subdivision of any of the foregoing, or the District of Columbia and which is paid to an individual who is employed as a police official of such governmental unit. A subsistence allowance paid to a police official by any of the foregoing governmental units which is not so provided by statute may not be excluded from gross income under the provisions of section 120. The term “police official” includes an employee of any of the foregoing governmental units who has police duties, such as a sheriff, a detective, a policeman, or a State police trooper, however designated.
(b) The exclusion provided by section 120 is to be computed on a daily basis, that is, for each day for which the statutory allowance is paid. If the statute providing the allowance does not specify the daily amount of such allowance, the allowance shall be converted to a daily basis for the purpose of applying the limitation provided herein. For example, if a State statute provides for a weekly subsistence allowance, the daily amount is to be determined by dividing the weekly amount by the number of days for which the allowance is paid. Thus, if a State trooper receives a weekly statutory subsistence allowance of $40 would be $8, that is, $40 divided by 5 for 5 days of the week, the daily amount would be $8, that is, $40 divided by 5. However, for purposes of this section, only $5 per day may be excluded, or $25 on a weekly basis.
(c) Expenses in respect of which the allowance under section 120 is paid may not be deducted under any provision of the income tax laws except to the extent that (1) such expenses exceed the amount of the exclusion, and (2) the excess is otherwise allowable as a deduction. For example, if a State statute provides a subsistence allowance of $3 per day and the taxpayer, a state trooper, incurs expenditures of $4.50 for meals while away from home overnight on official police duties only $3 would be excludable under this section. Expenses relating to such exclusion ($3) may not be deducted under any provision of the income tax laws. However, the remaining $1.50 may be an allowable deduction under section 162 as traveling expenses while away from home in the performance of official duties. See § 1.162-2.
(d) In the case of taxable years ending after September 30, 1958, section 120 and this section do not apply to amounts received as a statutory subsistence allowance for any day after September 30, 1958.
§ 1.120-3 Notice of application for recognition of status of qualified group legal services plan.
(a) In general. In order for a plan to be a qualified group legal services plan for purposes of the exclusion from gross income provided by section 120(a), the plan must give notice to the Internal Revenue Service that it is applying for recognition of its status as a qualified plan. Paragraph (b) of this section describes how the notice is to be filed for the plan. Paragraph (c) of this section describes the action that the Internal Revenue Service will take in response to the notice submitted for the plan. Paragraph (d) of this section describes the period of plan qualification.
(b) Filing of notice—(1) In general. A notice of application for recognition of the status of a qualified group legal services plan must be filed with the key district director of internal revenue as described in § 601.201(n). The notice must be filed on Form 1024, Application for Recognition of Exemption Under section 501(a) or for Determination Under section 120, with the accompanying Schedule L, and must contain the information required by the form and any accompanying instructions. The form may be filed by either the employer adopting the plan or the person administering the plan. No Form 1024 and Schedule L may be filed for a plan before an employer adopts the plan, or proposes to adopt the plan contingent only upon the recognition of the plan as a qualified plan.
(2) Plans to which more than one employer contributes. In general, for purposes of section 120 the adoption of a plan by an employer constitutes the adoption of a separate plan to which that employer alone contributes, notwithstanding that, in form, the employer purports to adopt a plan with respect to which the employer is one of two or more contributing employers. Accordingly, a separate Schedule L must be filed pursuant to the instructions accompanying Form 1024 for each employer adopting a plan.
(3) Certain collectively bargained plans. Notwithstanding subparagraph (2) of this paragraph, if a plan to which more than one employer contributes is a plan to which this subparagraph (3) applies, the plan is treated as a single plan for purposes of section 120. Accordingly, only one Form 1024 and Schedule L is required to be filed for the plan, regardless of the number of employers originally adopting the plan. In addition, once a Form 1024 and Schedule L is filed, no additional filing is required with respect to an employer who thereafter adopts the plan. In general, this subparagraph (3) applies to any plan that is maintained pursuant to a collective bargaining agreement between employee representatives and more than one employer who is required by the plan instrument or other agreement to contribute to the plan with respect to employees (or their spouses or dependents) participating in the plan. This subparagraph does not apply, however, if all employers required to contribute to the plan are corporations which are members of a controlled group of corporations within the meaning of section 1563(a), determined without regard to section 1563(e)(3)(C). If all employers required to contribute to the plan are corporations which are members of such a controlled group, the filing requirements described in subparagraph (2) of this paragraph apply, notwithstanding that the plan is maintained pursuant to a collective bargaining agreement.
(c) Internal Revenue Service action on notice of application for recognition. The Internal Revenue Service will issue to the person submitting Form 1024 and Schedule L a ruling or determination letter stating that the plan is or is not a qualified group legal services plan. For general procedural rules, see § 601.201 (a) through (n), as that section relates to rulings and determination letters.
(d) Period of plan qualification—(1) In general. In the case of a favorable determination, the plan will be considered a qualified group legal services plan. If a Form 1024 and Schedule L required to be filed by or on behalf of an employer is filed before—
(i) The end of the first plan year (as determined under the plan),
(ii) The end of the plan year within which the employer adopts the plan, or
(iii) July 29, 1980,
(2) Plans in existence on June 4, 1976. (i) Notwithstanding paragraph (d)(1) of this section, a written group legal services plan providing for employer contributions which was in existence on June 4, 1976, will be considered a qualified group legal services plan for the period January 1, 1977, through April 2, 1977. However, if the plan is maintained pursuant to one or more agreements which were in effect on October 4, 1976, and which the Secretary of Labor finds to be collective bargaining agreements, the period of deemed qualification will extend beyond April 2, 1977, and end on the date on which the last of the collective bargaining agreements relating to the plan terminates. Extensions of a bargaining agreement which are agreed to after October 4, 1976, are to be disregarded. The period of deemed qualification for a plan maintained pursuant to a collective bargaining agreement will not, however, extend beyond December 31, 1981.
(ii) A written group legal services plan will be considered to have been in existence on June 4, 1976, if on or before that date the plan was reduced to writing and adopted by one or more employers. No amounts need have been contributed under the plan as of June 4, 1976.
(iii) Notwithstanding that a plan is a qualified plan for the period of deemed qualification described in this paragraph (d)(2), the rules of paragraphs (c) and (d)(1) of this section still apply with respect to a Form 1024 and Schedule L filed for the plan. For example, if a Form 1024 and Schedule L filed by or on behalf of an employer are filed before the latest of the 3 dates described in paragraph (d)(1) of this section, in the case of a favorable determination the plan will be a qualified plan from the date the plan is adopted by the employer (or, if later, January 1, 1977), and any period of deemed qualification and the period of qualification based upon the favorable determination will overlap. However, in the case of a plan to which this paragraph (d)(2) applies, if a Form 1024 and Schedule L required to be filed by or on behalf of an employer is not filed before the latest of the 3 dates described in paragraph (d)(1) of this section, the following rules shall apply. In general, if Form 1024 and Schedule L are filed before the end of the plan year following the plan year with or within which the plan’s period of deemed qualification expires, in the event of a favorable determination the plan will be a qualified plan with respect to the employer beginning on the earlier of the day following the date on which the period of deemed qualification expires or the date on which the Form 1024 and Schedule L are filed. The period of plan qualification with respect to an employer cannot, however, include any period before the employer adopts the plan. If the Form 1024 and Schedule L are not filed before the end of the plan year following the plan year with or within which the plan’s period of deemed qualification expires, in the case of a favorable determination the plan will be a qualified plan with respect to an employer from the later of the date of filing or adoption of the plan by the employer. The rules described in paragraph (d)(1) of this section relating to incomplete filings and plan modifications apply with respect to a filing described in this paragraph (d)(2).
(e) Effective date. This section is effective for notices of application for recognition of the status of a qualified group legal services plan filed after May 29, 1980.
§ 1.121-1 Exclusion of gain from sale or exchange of a principal residence.
(a) In general. Section 121 provides that, under certain circumstances, gross income does not include gain realized on the sale or exchange of property that was owned and used by a taxpayer as the taxpayer’s principal residence. Subject to the other provisions of section 121, a taxpayer may exclude gain only if, during the 5-year period ending on the date of the sale or exchange, the taxpayer owned and used the property as the taxpayer’s principal residence for periods aggregating 2 years or more.
(b) Residence—(1) In general. Whether property is used by the taxpayer as the taxpayer’s residence depends upon all the facts and circumstances. A property used by the taxpayer as the taxpayer’s residence may include a houseboat, a house trailer, or the house or apartment that the taxpayer is entitled to occupy as a tenant-stockholder in a cooperative housing corporation (as those terms are defined in section 216(b)(1) and (2)). Property used by the taxpayer as the taxpayer’s residence does not include personal property that is not a fixture under local law.
(2) Principal residence. In the case of a taxpayer using more than one property as a residence, whether property is used by the taxpayer as the taxpayer’s principal residence depends upon all the facts and circumstances. If a taxpayer alternates between 2 properties, using each as a residence for successive periods of time, the property that the taxpayer uses a majority of the time during the year ordinarily will be considered the taxpayer’s principal residence. In addition to the taxpayer’s use of the property, relevant factors in determining a taxpayer’s principal residence, include, but are not limited to—
(i) The taxpayer’s place of employment;
(ii) The principal place of abode of the taxpayer’s family members;
(iii) The address listed on the taxpayer’s federal and state tax returns, driver’s license, automobile registration, and voter registration card;
(iv) The taxpayer’s mailing address for bills and correspondence;
(v) The location of the taxpayer’s banks; and
(vi) The location of religious organizations and recreational clubs with which the taxpayer is affiliated.
(3) Vacant land—(i) In general. The sale or exchange of vacant land is not a sale or exchange of the taxpayer’s principal residence unless—
(A) The vacant land is adjacent to land containing the dwelling unit of the taxpayer’s principal residence;
(B) The taxpayer owned and used the vacant land as part of the taxpayer’s principal residence;
(C) The taxpayer sells or exchanges the dwelling unit in a sale or exchange that meets the requirements of section 121 within 2 years before or 2 years after the date of the sale or exchange of the vacant land; and
(D) The requirements of section 121 have otherwise been met with respect to the vacant land.
(ii) Limitations—(A) Maximum limitation amount. For purposes of section 121(b)(1) and (2) (relating to the maximum limitation amount of the section 121 exclusion), the sale or exchange of the dwelling unit and the vacant land are treated as one sale or exchange. Therefore, only one maximum limitation amount of $250,000 ($500,000 for certain joint returns) applies to the combined sales or exchanges of vacant land and the dwelling unit. In applying the maximum limitation amount to sales or exchanges that occur in different taxable years, gain from the sale or exchange of the dwelling unit, up to the maximum limitation amount under section 121(b)(1) or (2), is excluded first and each spouse is treated as excluding one-half of the gain from a sale or exchange to which section 121(b)(2)(A) and § 1.121-2(a)(3)(i) (relating to the limitation for certain joint returns) apply.
(B) Sale or exchange of more than one principal residence in 2-year period. If a dwelling unit and vacant land are sold or exchanged in separate transactions that qualify for the section 121 exclusion under this paragraph (b)(3), each of the transactions is disregarded in applying section 121(b)(3) (restricting the application of section 121 to only 1 sale or exchange every 2 years) to the other transactions but is taken into account as a sale or exchange of a principal residence on the date of the transaction in applying section 121(b)(3) to that transaction and the sale or exchange of any other principal residence.
(C) Sale or exchange of vacant land before dwelling unit. If the sale or exchange of the dwelling unit occurs in a later taxable year than the sale or exchange of the vacant land and after the date prescribed by law (including extensions) for the filing of the return for the taxable year of the sale or exchange of the vacant land, any gain from the sale or exchange of the vacant land must be treated as taxable on the taxpayer’s return for the taxable year of the sale or exchange of the vacant land. If the taxpayer has reported gain from the sale or exchange of the vacant land as taxable, after satisfying the requirements of this paragraph (b)(3) the taxpayer may claim the section 121 exclusion with regard to the sale or exchange of the vacant land (for any period for which the period of limitation under section 6511 has not expired) by filing an amended return.
(4) Examples. The provisions of this paragraph (b) are illustrated by the following examples:
(c) Ownership and use requirements—(1) In general. The requirements of ownership and use for periods aggregating 2 years or more may be satisfied by establishing ownership and use for 24 full months or for 730 days (365 × 2). The requirements of ownership and use may be satisfied during nonconcurrent periods if both the ownership and use tests are met during the 5-year period ending on the date of the sale or exchange.
(2) Use. (i) In establishing whether a taxpayer has satisfied the 2-year use requirement, occupancy of the residence is required. However, short temporary absences, such as for vacation or other seasonal absence (although accompanied with rental of the residence), are counted as periods of use.
(ii) Determination of use during periods of out-of-residence care. If a taxpayer has become physically or mentally incapable of self-care and the taxpayer sells or exchanges property that the taxpayer owned and used as the taxpayer’s principal residence for periods aggregating at least 1 year during the 5-year period preceding the sale or exchange, the taxpayer is treated as using the property as the taxpayer’s principal residence for any period of time during the 5-year period in which the taxpayer owns the property and resides in any facility (including a nursing home) licensed by a State or political subdivision to care for an individual in the taxpayer’s condition.
(3) Ownership—(i) Trusts. If a residence is owned by a trust, for the period that a taxpayer is treated under sections 671 through 679 (relating to the treatment of grantors and others as substantial owners) as the owner of the trust or the portion of the trust that includes the residence, the taxpayer will be treated as owning the residence for purposes of satisfying the 2-year ownership requirement of section 121, and the sale or exchange by the trust will be treated as if made by the taxpayer.
(ii) Certain single owner entities. If a residence is owned by an eligible entity (within the meaning of § 301.7701-3(a) of this chapter) that has a single owner and is disregarded for federal tax purposes as an entity separate from its owner under § 301.7701-3 of this chapter, the owner will be treated as owning the residence for purposes of satisfying the 2-year ownership requirement of section 121, and the sale or exchange by the entity will be treated as if made by the owner.
(4) Examples. The provisions of this paragraph (c) are illustrated by the following examples. The examples assume that § 1.121-3 (relating to the reduced maximum exclusion) does not apply to the sale of the property. The examples are as follows:
(d) Depreciation taken after May 6, 1997—(1) In general. The section 121 exclusion does not apply to so much of the gain from the sale or exchange of property as does not exceed the portion of the depreciation adjustments (as defined in section 1250(b)(3)) attributable to the property for periods after May 6, 1997. Depreciation adjustments allocable to any portion of the property to which the section 121 exclusion does not apply under paragraph (e) of this section are not taken into account for this purpose.
(2) Example. The provisions of this paragraph (d) are illustrated by the following example:
(e) Property used in part as a principal residence—(1) Allocation required. Section 121 will not apply to the gain allocable to any portion (separate from the dwelling unit) of property sold or exchanged with respect to which a taxpayer does not satisfy the use requirement. Thus, if a portion of the property was used for residential purposes and a portion of the property (separate from the dwelling unit) was used for non-residential purposes, only the gain allocable to the residential portion is excludable under section 121. No allocation is required if both the residential and non-residential portions of the property are within the same dwelling unit. However, section 121 does not apply to the gain allocable to the residential portion of the property to the extent provided by paragraph (d) of this section.
(2) Dwelling unit. For purposes of this paragraph (e), the term dwelling unit has the same meaning as in section 280A(f)(1), but does not include appurtenant structures or other property.
(3) Method of allocation. For purposes of determining the amount of gain allocable to the residential and non-residential portions of the property, the taxpayer must allocate the basis and the amount realized between the residential and the non-residential portions of the property using the same method of allocation that the taxpayer used to determine depreciation adjustments (as defined in section 1250(b)(3)), if applicable.
(4) Examples. The provisions of this paragraph (e) are illustrated by the following examples:
(ii) Because the stable and the 28 acres used in the business are separate from the dwelling unit, the allocation rules under this paragraph (e) apply and A must allocate the basis and amount realized between the portion of the property that he used as his principal residence and the portion of the property that he used for non-residential purposes. A determines that $14,000 of the gain is allocable to the non-residential-use portion of the property and that $10,000 of the gain is allocable to the portion of the property used as his residence. A must recognize the $14,000 of gain allocable to the non-residential-use portion of the property ($9,000 of which is unrecaptured section 1250 gain within the meaning of section 1(h), and $5,000 of which is adjusted net capital gain). A may exclude $10,000 of the gain from the sale of the property.
(ii) Because the portion of the property used in the antiques business is separate from the dwelling unit, the allocation rules under this paragraph (e) apply. B must allocate basis and amount realized between the portion of the property that she used as her principal residence and the portion of the property that she used for non-residential purposes. B determines that $4,000 of the gain is allocable to the non-residential portion of the property and that $17,000 of the gain is allocable to the portion of the property that she used as her principal residence.
(iii) B must recognize the $4,000 of gain allocable to the non-residential portion of the property (all of which is unrecaptured section 1250 gain within the meaning of section 1(h)). In addition, the section 121 exclusion does not apply to the gain allocable to the residential portion of the property to the extent of the depreciation adjustments attributable to the residential portion of the property for periods after May 6, 1997 ($3,000). Therefore, B may exclude $14,000 of the gain from the sale of the property.
(ii) Because the basement apartment and the upper floors of the townhouse are separate dwelling units, C must allocate the gain between the portion of the property that he used as his principal residence and the portion of the property that he used for non-residential purposes under paragraph (e) of this section. After allocating the basis and the amount realized between the residential and non-residential portions of the property, C determines that $6,000 of the gain is allocable to the non-residential portion of the property and that $12,000 of the gain is allocable to the portion of the property used as his residence. C must recognize the $6,000 of gain allocable to the non-residential portion of the property ($2,000 of which is unrecaptured section 1250 gain within the meaning of section 1(h), and $4,000 of which is adjusted net capital gain). C may exclude $12,000 of the gain from the sale of the property.
(f) Effective date. This section is applicable for sales and exchanges on or after Decmeber 24, 2002. For rules on electing to apply the provisions of this section retroactively, see § 1.121-4(j).
§ 1.121-2 Limitations.
(a) Dollar limitations—(1) In general. A taxpayer may exclude from gross income up to $250,000 of gain from the sale or exchange of the taxpayer’s principal residence. A taxpayer is eligible for only one maximum exclusion per principal residence.
(2) Joint owners. If taxpayers jointly own a principal residence but file separate returns, each taxpayer may exclude from gross income up to $250,000 of gain that is attributable to each taxpayer’s interest in the property, if the requirements of section 121 have otherwise been met.
(3) Special rules for joint returns—(i) In general. A husband and wife who make a joint return for the year of the sale or exchange of a principal residence may exclude up to $500,000 of gain if—
(A) Either spouse meets the 2-year ownership requirements of § 1.121-1(a) and (c);
(B) Both spouses meet the 2-year use requirements of § 1.121-1(a) and (c); and
(C) Neither spouse excluded gain from a prior sale or exchange of property under section 121 within the last 2 years (as determined under paragraph (b) of this section).
(ii) Other joint returns. For taxpayers filing jointly, if either spouse fails to meet the requirements of paragraph (a)(3)(i) of this section, the maximum limitation amount to be claimed by the couple is the sum of each spouse’s limitation amount determined on a separate basis as if they had not been married. For this purpose, each spouse is treated as owning the property during the period that either spouse owned the property.
(4) Examples. The provisions of this paragraph (a) are illustrated by the following examples. The examples assume that § 1.121-3 (relating to the reduced maximum exclusion) does not apply to the sale of the property. The examples are as follows:
(b) Application of section 121 to only 1 sale or exchange every 2 years—(1) In general. Except as otherwise provided in § 1.121-3 (relating to the reduced maximum exclusion), a taxpayer may not exclude from gross income gain from the sale or exchange of a principal residence if, during the 2-year period ending on the date of the sale or exchange, the taxpayer sold or exchanged other property for which gain was excluded under section 121. For purposes of this paragraph (b)(1), any sale or exchange before May 7, 1997, is disregarded.
(2) Example. The following example illustrates the rules of this paragraph (b). The example assumes that § 1.121-3 (relating to the reduced maximum exclusion) does not apply to the sale of the property. The example is as follows:
(c) Effective date. This section is applicable for sales and exchanges on or after December 24, 2002. For rules on electing to apply the provisions of this section retroactively, see § 1.121-4(j).
§ 1.121-3 Reduced maximum exclusion for taxpayers failing to meet certain requirements.
(a) In general. In lieu of the limitation under section 121(b) and § 1.121-2, a reduced maximum exclusion limitation may be available for a taxpayer who sells or exchanges property used as the taxpayer’s principal residence but fails to satisfy the ownership and use requirements described in § 1.121-1(a) and (c) or the 2-year limitation described in § 1.121-2(b).
(b) Primary reason for sale or exchange. In order for a taxpayer to claim a reduced maximum exclusion under section 121(c), the sale or exchange must be by reason of a change in place of employment, health, or unforeseen circumstances. If a safe harbor described in this section applies, a sale or exchange is deemed to be by reason of a change in place of employment, health, or unforeseen circumstances. If a safe harbor described in this section does not apply, a sale or exchange is by reason of a change in place of employment, health, or unforeseen circumstances only if the primary reason for the sale or exchange is a change in place of employment (within the meaning of paragraph (c) of this section), health (within the meaning of paragraph (d) of this section), or unforeseen circumstances (within the meaning of paragraph (e) of this section). Whether the requirements of this section are satisfied depends upon all the facts and circumstances. Factors that may be relevant in determining the taxpayer’s primary reason for the sale or exchange include (but are not limited to) the extent to which—
(1) The sale or exchange and the circumstances giving rise to the sale or exchange are proximate in time;
(2) The suitability of the property as the taxpayer’s principal residence materially changes;
(3) The taxpayer’s financial ability to maintain the property is materially impaired;
(4) The taxpayer uses the property as the taxpayer’s residence during the period of the taxpayer’s ownership of the property;
(5) The circumstances giving rise to the sale or exchange are not reasonably foreseeable when the taxpayer begins using the property as the taxpayer’s principal residence; and
(6) The circumstances giving rise to the sale or exchange occur during the period of the taxpayer’s ownership and use of the property as the taxpayer’s principal residence.
(c) Sale or exchange by reason of a change in place of employment—(1) In general. A sale or exchange is by reason of a change in place of employment if, in the case of a qualified individual described in paragraph (f) of this section, the primary reason for the sale or exchange is a change in the location of the individual’s employment.
(2) Distance safe harbor. A sale or exchange is deemed to be by reason of a change in place of employment (within the meaning of paragraph (c)(1) of this section) if—
(i) The change in place of employment occurs during the period of the taxpayer’s ownership and use of the property as the taxpayer’s principal residence; and
(ii) The qualified individual’s new place of employment is at least 50 miles farther from the residence sold or exchanged than was the former place of employment, or, if there was no former place of employment, the distance between the qualified individual’s new place of employment and the residence sold or exchanged is at least 50 miles.
(3) Employment. For purposes of this paragraph (c), employment includes the commencement of employment with a new employer, the continuation of employment with the same employer, and the commencement or continuation of self-employment.
(4) Examples. The following examples illustrate the rules of this paragraph (c):
(d) Sale or exchange by reason of health—(1) In general. A sale or exchange is by reason of health if the primary reason for the sale or exchange is to obtain, provide, or facilitate the diagnosis, cure, mitigation, or treatment of disease, illness, or injury of a qualified individual described in paragraph (f) of this section, or to obtain or provide medical or personal care for a qualified individual suffering from a disease, illness, or injury. A sale or exchange that is merely beneficial to the general health or well-being of an individual is not a sale or exchange by reason of health.
(2) Physician’s recommendation safe harbor. A sale or exchange is deemed to be by reason of health if a physician (as defined in section 213(d)(4)) recommends a change of residence for reasons of health (as defined in paragraph (d)(1) of this section).
(3) Examples. The following examples illustrate the rules of this paragraph (d):
(e) Sale or exchange by reason of unforeseen circumstances—(1) In general. A sale or exchange is by reason of unforeseen circumstances if the primary reason for the sale or exchange is the occurrence of an event that the taxpayer could not reasonably have anticipated before purchasing and occupying the residence. A sale or exchange by reason of unforeseen circumstances (other than a sale or exchange deemed to be by reason of unforeseen circumstances under paragraph (e)(2) or (3) of this section) does not qualify for the reduced maximum exclusion if the primary reason for the sale or exchange is a preference for a different residence or an improvement in financial circumstances.
(2) Specific event safe harbors. A sale or exchange is deemed to be by reason of unforeseen circumstances (within the meaning of paragraph (e)(1) of this section) if any of the events specified in paragraphs (e)(2)(i) through (iii) of this section occur during the period of the taxpayer’s ownership and use of the residence as the taxpayer’s principal residence:
(i) The involuntary conversion of the residence.
(ii) Natural or man-made disasters or acts of war or terrorism resulting in a casualty to the residence (without regard to deductibility under section 165(h)).
(iii) In the case of a qualified individual described in paragraph (f) of this section—
(A) Death;
(B) The cessation of employment as a result of which the qualified individual is eligible for unemployment compensation (as defined in section 85(b));
(C) A change in employment or self-employment status that results in the taxpayer’s inability to pay housing costs and reasonable basic living expenses for the taxpayer’s household (including amounts for food, clothing, medical expenses, taxes, transportation, court-ordered payments, and expenses reasonably necessary to the production of income, but not for the maintenance of an affluent or luxurious standard of living);
(D) Divorce or legal separation under a decree of divorce or separate maintenance; or
(E) Multiple births resulting from the same pregnancy.
(3) Designation of additional events as unforeseen circumstances. The Commissioner may designate other events or situations as unforeseen circumstances in published guidance of general applicability and may issue rulings addressed to specific taxpayers identifying other events or situations as unforeseen circumstances with regard to those taxpayers (see § 601.601(d)(2) of this chapter).
(4) Examples. The following examples illustrate the rules of this paragraph (e):
(f) Qualified individual. For purposes of this section, qualified individual means—
(1) The taxpayer;
(2) The taxpayer’s spouse;
(3) A co-owner of the residence;
(4) A person whose principal place of abode is in the same household as the taxpayer; or
(5) For purposes of paragraph (d) of this section, a person bearing a relationship specified in sections 152(a)(1) through 152(a)(8) (without regard to qualification as a dependent) to a qualified individual described in paragraphs (f)(1) through (4) of this section, or a descendant of the taxpayer’s grandparent.
(g) Computation of reduced maximum exclusion. (1) The reduced maximum exclusion is computed by multiplying the maximum dollar limitation of $250,000 ($500,000 for certain joint filers) by a fraction. The numerator of the fraction is the shortest of the period of time that the taxpayer owned the property during the 5-year period ending on the date of the sale or exchange; the period of time that the taxpayer used the property as the taxpayer’s principal residence during the 5-year period ending on the date of the sale or exchange; or the period of time between the date of a prior sale or exchange of property for which the taxpayer excluded gain under section 121 and the date of the current sale or exchange. The numerator of the fraction may be expressed in days or months. The denominator of the fraction is 730 days or 24 months (depending on the measure of time used in the numerator).
(2) Examples. The following examples illustrate the rules of this paragraph (g):
(ii) Because H and W have not each used the house as their principal residence for at least 2 years during the 5-year period preceding its sale, the maximum dollar limitation amount that may be claimed by H and W will not be $500,000, but the sum of each spouse’s limitation amount determined on a separate basis as if they had not been married. (See § 1.121-2(a)(3)(ii).)
(iii) H is eligible to exclude up to $250,000 of gain because he meets the requirements of section 121. W is not eligible to exclude the maximum dollar limitation amount. Instead, because the sale of the house is due to a change in place of employment, W is eligible to claim a reduced maximum exclusion of up to $125,000 of the gain (365/730 × $250,000). Therefore, H and W are eligible to exclude up to $375,000 of gain ($250,000 + $125,000) from the sale of the house.
(h) Effective dates. Paragraphs (a) and (g) of this section are applicable for sales and exchanges on or after December 24, 2002. Paragraphs (b) through (f) of this section are applicable for sales and exchanges on or after August 13, 2004.
§ 1.121-4 Special rules.
(a) Property of deceased spouse—(1) In general. For purposes of satisfying the ownership and use requirements of section 121, a taxpayer is treated as owning and using property as the taxpayer’s principal residence during any period that the taxpayer’s deceased spouse owned and used the property as a principal residence before death if—
(i) The taxpayer’s spouse is deceased on the date of the sale or exchange of the property; and
(ii) The taxpayer has not remarried at the time of the sale or exchange of the property.
(2) Example. The provisions of this paragraph (a) are illustrated by the following example. The example assumes that § 1.121-3 (relating to the reduced maximum exclusion) does not apply to the sale of the property. The example is as follows:
(b) Property owned by spouse or former spouse—(1) Property transferred to individual from spouse or former spouse. If a taxpayer obtains property from a spouse or former spouse in a transaction described in section 1041(a), the period that the taxpayer owns the property will include the period that the spouse or former spouse owned the property.
(2) Property used by spouse or former spouse. A taxpayer is treated as using property as the taxpayer’s principal residence for any period that the taxpayer has an ownership interest in the property and the taxpayer’s spouse or former spouse is granted use of the property under a divorce or separation instrument (as defined in section 71(b)(2)), provided that the spouse or former spouse uses the property as his or her principal residence.
(c) Tenant-stockholder in cooperative housing corporation. A taxpayer who holds stock as a tenant-stockholder in a cooperative housing corporation (as those terms are defined in section 216(b)(1) and (2)) may be eligible to exclude gain under section 121 on the sale or exchange of the stock. In determining whether the taxpayer meets the requirements of section 121, the ownership requirements are applied to the holding of the stock and the use requirements are applied to the house or apartment that the taxpayer is entitled to occupy by reason of the taxpayer’s stock ownership.
(d) Involuntary conversions—(1) In general. For purposes of section 121, the destruction, theft, seizure, requisition, or condemnation of property is treated as a sale of the property.
(2) Application of section 1033. In applying section 1033 (relating to involuntary conversions), the amount realized from the sale or exchange of property used as the taxpayer’s principal residence is treated as being the amount determined without regard to section 121, reduced by the amount of gain excluded from the taxpayer’s gross income under section 121.
(3) Property acquired after involuntary conversion. If the basis of the property acquired as a result of an involuntary conversion is determined (in whole or in part) under section 1033(b) (relating to the basis of property acquired through an involuntary conversion), then for purposes of satisfying the requirements of section 121, the taxpayer will be treated as owning and using the acquired property as the taxpayer’s principal residence during any period of time that the taxpayer owned and used the converted property as the taxpayer’s principal residence.
(4) Example. The provisions of this paragraph (d) are illustrated by the following example:
(ii) Because the destruction of the house is treated as a sale for purposes of section 121, A will exclude $250,000 of the realized gain from A’s gross income. For purposes of section 1033, the amount realized is then treated as being $150,000 ($400,000—$250,000) and the gain realized is $70,000 ($150,000 amount realized—$80,000 basis). A elects under section 1033 to recognize only $50,000 of the gain ($150,000 amount realized—$100,000 cost of new house). The remaining $20,000 of gain is deferred and A’s basis in the new house is $80,000 ($100,000 cost—$20,000 gain not recognized).
(iii) A will be treated as owning and using the new house as A’s principal residence during the 20-year period that A owned and used the destroyed house.
(e) Sales or exchanges of partial interests—(1) Partial interests other than remainder interests—(i) In general. Except as provided in paragraph (e)(2) of this section (relating to sales or exchanges of remainder interests), a taxpayer may apply the section 121 exclusion to gain from the sale or exchange of an interest in the taxpayer’s principal residence that is less than the taxpayer’s entire interest if the interest sold or exchanged includes an interest in the dwelling unit. For rules relating to the sale or exchange of vacant land, see § 1.121-1(b)(3).
(ii) Limitations—(A) Maximum limitation amount. For purposes of section 121(b)(1) and (2) (relating to the maximum limitation amount of the section 121 exclusion), sales or exchanges of partial interests in the same principal residence are treated as one sale or exchange. Therefore, only one maximum limitation amount of $250,000 ($500,000 for certain joint returns) applies to the combined sales or exchanges of the partial interests. In applying the maximum limitation amount to sales or exchanges that occur in different taxable years, a taxpayer may exclude gain from the first sale or exchange of a partial interest up to the taxpayer’s full maximum limitation amount and may exclude gain from the sale or exchange of any other partial interest in the same principal residence to the extent of any remaining maximum limitation amount, and each spouse is treated as excluding one-half of the gain from a sale or exchange to which section 121(b)(2)(A) and § 1.121-2(a)(3)(i)(relating to the limitation for certain joint returns) apply.
(B) Sale or exchange of more than one principal residence in 2-year period. For purposes of applying section 121(b)(3) (restricting the application of section 121 to only 1 sale or exchange every 2 years), each sale or exchange of a partial interest is disregarded with respect to other sales or exchanges of partial interests in the same principal residence, but is taken into account as of the date of the sale or exchange in applying section 121(b)(3) to that sale or exchange and the sale or exchange of any other principal residence.
(2) Sales or exchanges of remainder interests—(i) In general. A taxpayer may elect to apply the section 121 exclusion to gain from the sale or exchange of a remainder interest in the taxpayer’s principal residence.
(ii) Limitations—(A) Sale or exchange of any other interest. If a taxpayer elects to exclude gain from the sale or exchange of a remainder interest in the taxpayer’s principal residence, the section 121 exclusion will not apply to a sale or exchange of any other interest in the residence that is sold or exchanged separately.
(B) Sales or exchanges to related parties. This paragraph (e)(2) will not apply to a sale or exchange to any person that bears a relationship to the taxpayer that is described in section 267(b) or 707(b).
(iii) Election. The taxpayer makes the election under this paragraph (e)(2) by filing a return for the taxable year of the sale or exchange that does not include the gain from the sale or exchange of the remainder interest in the taxpayer’s gross income. A taxpayer may make or revoke the election at any time before the expiration of a 3-year period beginning on the last date prescribed by law (determined without regard to extensions) for the filing of the return for the taxable year in which the sale or exchange occurred.
(3) Example. The provisions of this paragraph (e) are illustrated by the following example:
(f) No exclusion for expatriates. The section 121 exclusion will not apply to any sale or exchange by an individual if the provisions of section 877(a) (relating to the treatment of expatriates) applies to the individual.
(g) Election to have section not apply. A taxpayer may elect to have the section 121 exclusion not apply to a sale or exchange of property. The taxpayer makes the election by filing a return for the taxable year of the sale or exchange that includes the gain from the sale or exchange of the taxpayer’s principal residence in the taxpayer’s gross income. A taxpayer may make an election under this paragraph (g) to have section 121 not apply (or revoke an election to have section 121 not apply) at any time before the expiration of a 3-year period beginning on the last date prescribed by law (determined without regard to extensions) for the filing of the return for the taxable year in which the sale or exchange occurred.
(h) Residences acquired in rollovers under section 1034. If a taxpayer acquires property in a transaction that qualifies under section 1034 (section 1034 property) for the nonrecognition of gain realized on the sale or exchange of another property and later sells or exchanges such property, in determining the period of the taxpayer’s ownership and use of the property under section 121 the taxpayer may include the periods that the taxpayer owned and used the section 1034 property as the taxpayer’s principal residence (and each prior residence taken into account under section 1223(7) in determining the holding period of the section 1034 property).
(i) [Reserved]
(j) Election to apply regulations retroactively. Taxpayers who would otherwise qualify under §§ 1.121-1 through 1.121-4 to exclude gain from a sale or exchange of a principal residence before December 24, 2002 but on or after May 7, 1997, may elect to apply §§ 1.121-1 through 1.121-4 for any years for which the period of limitation under section 6511 has not expired. The taxpayer makes the election under this paragraph (j) by filing a return for the taxable year of the sale or exchange that does not include the gain from the sale or exchange of the taxpayer’s principal residence in the taxpayer’s gross income. Taxpayers who have filed a return for the taxable year of the sale or exchange may elect to apply the provisions of these regulations for any years for which the period of limitation under section 6511 has not expired by filing an amended return.
(k) Audit protection. The Internal Revenue Service will not challenge a taxpayer’s position that a sale or exchange of a principal residence occurring before December 24, 2002 but on or after May 7, 1997, qualifies for the section 121 exclusion if the taxpayer has made a reasonable, good faith effort to comply with the requirements of section 121. Compliance with the provisions of the regulations project under section 121 (REG-105235-99 (2000-2 C.B. 447)) generally will be considered a reasonable, good faith effort to comply with the requirements of section 121.
(l) Effective date. This section is applicable for sales and exchanges on or after December 24, 2002. For rules on electing to apply the provisions retroactively, see paragraph (j) of this section.
§ 1.121-5 Suspension of 5-year period for certain members of the uniformed services and Foreign Service.
(a) In general. Under section 121(d)(9), a taxpayer who is serving (or whose spouse is serving) on qualified official extended duty as a member of the uniformed services or Foreign Service of the United States may elect to suspend the running of the 5-year period of ownership and use during such service but for not more than 10 years. The election does not suspend the running of the 5-year period for any period during which the running of the 5-year period with respect to any other property of the taxpayer is suspended by an election under section 121(d)(9).
(b) Manner of making election. The taxpayer makes the election under section 121(d)(9) and this section by filing a return for the taxable year of the sale or exchange of the taxpayer’s principal residence that does not include the gain in the taxpayer’s gross income.
(c) Application of election to closed years. A taxpayer who would otherwise qualify under §§ 1.121-1 through 1.121-4 to exclude gain from a sale or exchange of a principal residence on or after May 7, 1997, may elect to apply section 121(d)(9) and this section for any years for which a claim for refund is barred by operation of any law or rule of law by filing an amended return before November 11, 2004.
(d) Example. The provisions of this section are illustrated by the following example:
(e) Effective date. This section is applicable for sales and exchanges on or after May 7, 1997.
§ 1.122-1 Applicable rules relating to certain reduced uniformed services retirement pay.
(a) Rule applicable prior to January 1, 1966. In the case of a member or former member of the uniformed services of the United States (as defined in 37 U.S.C. 101(3)) who has made an election under Subchapter I of Chapter 73 of title 10 of the U.S. Code (also referred to in this section as the Retired Serviceman’s Family Protection Plan (10 U.S.C. 1431)) to receive a reduced amount of retired or retainer pay, gross income shall include the amount of any reduction made in his retired or retainer pay before January 1, 1966, by reason of such election, unless such reduction, or portion thereof, is otherwise excluded from gross income under Part III of Subchapter B of Chapter 1 of the Internal Revenue Code of 1954 or any other provision of law.
(b) Rule applicable after December 31, 1965—(1) In a case of a member or former member of the uniformed services of the United States (as defined in 37 U.S.C. 101(3)), gross income shall not include the amount of any reduction made in his or her retired or retainer pay after December 31, 1965, by reason of—
(i) An election made under the Retired Serviceman’s Family Protection Plan (10 U.S.C. 1431), or
(ii) The provisions of Subchapter II of Chapter 73 of title 10 of the U.S. Code (also referred to in this section as the Survivor Benefit Plan (10 U.S.C. 1447)).
(2)(i) In a case where a member or former member of the uniformed services has, pursuant to the election described in paragraph (a) of this section, received before January 1, 1966, a reduced amount of retired or retainer pay, he shall, after December 31, 1965, exclude from gross income under section 122(b) and this subdivision all amounts received as uniformed services retired or retainer pay until there has been so excluded an amount of retired or retainer pay equal to the “consideration for the contract” (as described in subdivision (iii) of this subparagraph).
(ii) Upon the death of a member or former member of the uniformed services, where the “consideration for the contract” (as described in subdivision (iii) of this subparagraph) has not been excluded in whole or in part from gross income under section 122(b) and subdivision (i) of this subparagraph, the survivor of such member who is receiving an annuity under Chapter 73 of title 10 of the U.S. Code shall, after December 31, 1965, exclude from gross income under section 72(o) and this subdivision such annuity payments received after December 31, 1965, until there has been so excluded annuity payments equalling the portion of the “consideration for the contract” not previously excluded under subdivision (i) of this subparagraph.
(iii) The term “consideration for the contract” as used in this subparagraph means—
(a) The total amount of the reductions, if any, before January 1, 1966, in retired or retainer pay by reason of an election under Subchapter I of Chapter 73 of title 10 of the United States Code, plus
(b) The total amount, if any, deposited by the serviceman at any time pursuant to the provisions of sections 1438 or 1452(d) of title 10 of the United States Code, plus
(c) The total amount, if any, excludable from income under section 101(b)(2)(D) and paragraph (a)(2) of § 1.101-2 with respect to a survivor annuity provided by such retired or retainer pay, minus
(d) The total amount, if any, excluded from income before January 1, 1966, pursuant to the provisions of section 72 (b) and (d) with respect to a survivor annuity provided by such retired or retainer pay.
(iv) In determining whether there has been a recovery of the “consideration for the contract” under subdivision (i) of this subparagraph, the exclusion of retired pay from income after December 31, 1965, under sections 104(a)(4) and 105(d) shall not be considered as recovery of all or part of the “consideration for the contract.”
(c) Special rules. In any of the following situations, the computation of the excludable portion of disability retired pay received by the member or former member of the uniformed services shall be governed by the following rules:
(1) An exclusion under section 122(a) and paragraph (b)(1) of this section is applicable only in the taxable year in which a reduction in retired pay is made under the Retired Serviceman’s Family Protection Plan (10 U.S.C. 1431) or the Survivor Benefit Plan (10 U.S.C. 1447).
(2) Where the member or former member of the uniformed services is entitled to exclude the whole or a portion of his retired pay under the provisions of section 104(a)(4) or section 105(d) and under section 122(a) and paragraph (b)(1) of this section, the exclusion under section 122(a) and paragraph (b)(1) of this section shall be applied prior to the exclusions under sections 104(a)(4) and 105(d).
(3) Where the member or former member of the uniformed services waives a portion of his disability retired pay, or such retired pay reduced under the Retired Serviceman’s Family Protection Plan (10 U.S.C. 1431),or the Survivor Benefit Plan (10 U.S.C. 1447) in favor of a nontaxable pension or compensation receivable under laws administered by the Veterans Administration (38 U.S.C. 3105), the waived amount of such disability retired pay, or reduced amount thereof, shall first be subtracted from any amounts which are excludable under the provisions of sections 104(a)(4) or 105(d) so as to reduce the amounts otherwise excludable under those sections.
(4) Where the member or former member of the uniformed services receives (before any forfeiture) disability retired pay (whether or not reduced under the Retired Serviceman’s Family Protection Plan) or the Survivor Benefit Plan which is partially excludable under section 104(a)(4), and also forfeits a portion of such disability retired pay under the Dual Compensation Act of 1964 (5 U.S.C. 5531 or any former corresponding provision of law), the amount of the forfeiture under such Act shall be applied against disability retired pay (before any forfeiture) in the same proportion that the excludable portion of such pay under section 104(a)(4) bears to the total amount of such pay after subtraction of any reduction under the Retired Serviceman’s Family Protection Plan (10 U.S.C. 1431) or the Survivor Benefit Plan (10 U.S.C. 1447).
(5) The exclusion provided by section 122(b) and paragraph (b)(2)(i) of this section shall be available with respect to repayments made upon removal from the temporary disability retired list even though such repayments were previously excluded from gross income under section 104(a)(4) or 105(d).
(d) Examples with respect to the Retired Serviceman’s Family Protection Plan. The rules discussed in this section relating to the Retired Serviceman’s Family Protection Plan (10 U.S.C. 1431) may be illustrated by the following examples:
| Gross retired pay | $11,250 |
| Less: Section 122(a) exclusion | (1,250) |
| Reduced retired pay | 10,000 |
| Less: Retired pay waived to receive V.A. compensation | (1,000) |
| Adjusted retired pay— | 9,000 |
| Less: | |
| (i) Excludable retired pay computed under section 104(a)(4) as limited by 10 U.S.C. 1403 | $4,500 |
| (ii) Less: Retired pay, not to exceed (i), waived to receive V.A. compensation | (1,000) |
| (iii) Net disability exclusion | (3,500) |
| Taxable retired pay before adjustment for Dual Compensation forfeiture | 5,500 |
| Less: | |
| Adjustment for Dual Compensation forfeiture of $4,088 | |
| 5500 ÷ 9000 × $4,088 = $2,498 (rounded) | (2,498) |
| Net taxable retired pay | 3,002 |
| Adjusted retired pay | $9,000 | |
| Less: | ||
| (i) Excludable retired pay under section (a)(4) as limited by 10 U.S.C. 1403 | $4,500 | |
| (ii) Excludable retired pay under section 105(d) | 5,200 | |
| (iii) Total | 9,700 | |
| (iv) Less: Retired pay, not to exceed (iii), waived to receive V.A. compensation “sick pay” exclusion | (1,000) | |
| (v) Net disability and “sick pay” exclusion | (8,700) | |
| Net taxable retired pay | 800 |
| Gross retired pay (75% × $4,000) | $3,000 | |
| Less: Section 122(a) exclusion | (500) | |
| Reduced retired pay | 2,500 | |
| Less: V.A. waiver | (1,300) | |
| Adjusted retired pay | 1,200 | |
| Less: | ||
| (i) Section 104(a)(4) exclusion | $800 | |
| (ii) Less: Retired pay, not to exceed (i), waived to receive V.A. compensation | (800) | |
| (iii) Net disability exclusion | 0 | |
| Net taxable retired pay | 1,200 |
(e) Principles applicable to the Survivor Benefit Plan. The principles illustrated by the examples set forth in paragraph (d) of this section apply to an annuity under the Survivor Benefit Plan (10 U.S.C. 1447).
§ 1.123-1 Exclusion of insurance proceeds for reimbursement of certain living expenses.
(a) In general. (1) Gross income does not include insurance proceeds received by an individual on or after January 1, 1969, pursuant to the terms of an insurance contract for indemnification of the temporary increase in living expenses resulting from the loss of use or occupancy of his principal residence, or a part thereof, due to damage or destruction by fire, storm, or other casualty. The term “other casualty” has the same meaning assigned to such term under section 165(c)(3). The exclusion also applies in the case of an individual who is denied access to his principal residence by governmental authorities because of the occurrence (or threat of occurrence) of such a casualty. The amount excludable under this section is subject to the limitation set forth in paragraph (b) of this section.
(2) This exclusion applies to amounts received as reimbursement or compensation for the reasonable and necessary increase in living expenses incurred by the insured and members of his household to maintain their customary standard of living during the loss period.
(3) This exclusion does not apply to an insurance recovery for the loss of rental income. Nor does the exclusion apply to any insurance recovery which compensates for the loss of, or damage to, real or personal property. See section 165(c)(3) relating to casualty losses; section 1231 relating to gain on an involuntary conversion of a capital asset held for more than 1 year (6 months for taxable years beginning before 1977; 9 months for taxable years beginning in 1977); and section 1033 relating to recognition of gain on an involuntary conversion. In the case of property used by an insured partially as a principal residence and partially for other purposes, the exclusion does not apply to the amount of insurance proceeds which compensates for the portion of increased expenses attributable to the nonresidential use of temporary replacement property during the loss period. In the case of denial of access to a principal residence by governmental authority, the exclusion provided by this section does not apply to an insurance recovery received by an individual as reimbursement for living expenses incurred by reason of a governmental condemnation or order not related to a casualty or the threat of a casualty.
(4)(i) Subject to the limitation set forth in paragraph (b), the amount excludable is the amount which is identified by the insurer as being paid exclusively for increased living expenses resulting from the loss of use or occupancy of the principal residence and pursuant to the terms of the insurance contract.
(ii) When a lump-sum insurance settlement includes, but does not specifically identify, compensation for property damage, loss of rental income, and increased living expenses, the amount of such settlement allocable to living expenses shall, in the case of uncontested claims, be that portion of the settlement which bears the same ratio to the total recovery as the amount of claimed increased living expense bears to the total amount of claimed losses and expenses, to the extent not in excess of the coverage limitations specified in the contract for such losses and expenses.
(iii) In the case of a lump-sum settlement involving contested claims, the insured shall establish the amount reasonably allocable to increased living expenses, consistent with the terms of the contract and other facts of the particular case.
(iv) In no event may the amount of a lump-sum settlement which is allocable to increased living expenses exceed the coverage limitation specified in the contract for increased living expenses. Where, however, a coverage limitation is applicable to the total amount payable for increased living expenses and, for example, loss of rental income, the amount of an unitemized settlement which is allocable to increased living expenses may not exceed the portion of the applicable coverage limitation which bears the same ratio to such limitation as the amount of increased living expenses bears to the sum of the amount of such increased living expenses and the amount, if any, of lost rental income.
(5) The portion of any insurance recovery for increased living expenses which exceeds the limitation set forth in paragraph (b) shall be included in gross income under section 61 of the Code.
(b) Limitation—(1) Amount excludable. The amount excludable under this section is limited to amounts received which are not in excess of the amount by which (i) total actual living expenses incurred by the insured and members of his household which result from the loss of use or occupancy of their residence exceed (ii) the total normal living expenses which would have been incurred during the loss period but are not incurred as a result of the loss of use or occupancy of the principal residence. Generally, the excludable amount represents such excess expenses actually incurred by reason of a casualty, or threat thereof, for renting suitable housing and for extraordinary expenses for transportation, food, utilities, and miscellaneous services during the period of repair or replacement of the damaged principal residence or denial of access by governmental authority.
(2) Actual living expenses. For purposes of this section, actual living expenses are the reasonable and necessary expenses incurred as a result of the loss of use or occupancy of the principal residence to maintain the insured and members of his household in accordance with their customary standard of living. Actual living expenses must be of such a nature as to qualify as a reimbursable expense under the terms of the applicable insurance contract without regard to monetary limitations upon coverage. Generally, actual living expenses include the cost during the loss period of temporary housing, utilities furnished at the place of temporary housing, meals obtained at restaurants which customarily would have been prepared in the residence, transportation, and other miscellaneous services. To the extent that the loss of use or occupancy of the principal residence results merely in an increase in the amount expended for items of living expenses normally incurred, such as food and transportation, only the increase in such costs shall be considered as actual living expenses in computing the limitation.
(3) Normal living expenses not incurred. Normal living expenses consist of the same categories of expenses comprising actual living expenses which would have been incurred but are not incurred as a result of the casualty or threat thereof. If the loss of use of the residence results in a decrease in the amount normally expended for a living expense item during the loss period, the item of normal living expense is considered not to have been incurred to the extent of the decrease for purposes of computing the limitation.
(4) Examples. The application of this paragraph (b) may be illustrated by the following examples:
Living Expenses
| Actual resulting from casualty | Normal not incurred | Increase (decrease) | |
|---|---|---|---|
| Housing | $200.00 | $200.00 | |
| Utilities | $75.00 | (75.00) | |
| Meals | 180.00 | 150.00 | 30.00 |
| Transportation | 20.00 | (20.00) | |
| Laundry | 25.00 | 10.00 | 150.00 |
| Total | 405.00 | 255.00 | 15.00 |
(c) Principal residence. Whether or not property is used by the insured taxpayer and members of his household as their principal residence depends upon all the facts and circumstances in each case. For purposes of this section, a principal residence may be a dwelling or an apartment leased to the insured as well as a dwelling or apartment owned by the insured.
§ 1.125-3 Effect of the Family and Medical Leave Act (FMLA) on the operation of cafeteria plans.
The following questions and answers provide guidance on the effect of the Family and Medical Leave Act (FMLA), 29 U.S.C. 2601 et seq., on the operation of cafeteria plans:
Q-1: May an employee revoke coverage or cease payment of his or her share of group health plan premiums when taking unpaid FMLA, 29 U.S.C. 2601 et seq., leave?
A-1: Yes. An employer must either allow an employee on unpaid FMLA leave to revoke coverage, or continue coverage but allow the employee to discontinue payment of his or her share of the premium for group health plan coverage (including a health flexible spending arrangement (FSA)) under a cafeteria plan for the period of the FMLA leave. See 29 CFR 825.209(e). FMLA does not require that an employer allow an employee to revoke coverage if the employer pays the employee’s share of premiums. As discussed in Q&A-3, if the employer continues coverage during an FMLA leave, the employer may recover the employee’s share of the premiums when the employee returns to work. FMLA also provides the employee a right to be reinstated in the group health plan coverage (including a health FSA) provided under a cafeteria plan upon returning from FMLA leave if the employee’s group health plan coverage terminated while on FMLA leave (either by revocation or due to nonpayment of premiums). Such an employee is entitled, to the extent required under FMLA, to be reinstated on the same terms as prior to taking FMLA leave (including family or dependent coverage), subject to any changes in benefit levels that may have taken place during the period of FMLA leave as provided in 29 CFR 825.215(d)(1). See 29 CFR 825.209(e) and 825.215(d). In addition, such an employee has the right to revoke or change elections under § 1.125-4 (e.g., because of changes in status or cost or coverage changes as provided under § 1.125-4) under the same terms and conditions as are available to employees participating in the cafeteria plan who are working and not on FMLA leave.
Q-2: Who is responsible for making premium payments under a cafeteria plan when an employee on FMLA leave continues group health plan coverage?
A-2: FMLA provides that an employee is entitled to continue group health plan coverage during FMLA leave whether or not that coverage is provided under a health FSA or other component of a cafeteria plan. See 29 CFR 825.209(b). FMLA permits an employer to require an employee who chooses to continue group health plan coverage while on FMLA leave to be responsible for the share of group health premiums that would be allocable to the employee if the employee were working, and, for this purpose, treats amounts paid pursuant to a pre-tax salary reduction agreement as amounts allocable to the employee. However, FMLA requires the employer to continue to contribute the share of the cost of the employee’s coverage that the employer was paying before the employee commenced FMLA leave. See 29 CFR 825.100(b) and 825.210(a).
Q-3: What payment options are required or permitted to be offered under a cafeteria plan to an employee who continues group health plan coverage while on unpaid FMLA leave, and what is the tax treatment of these payments?
A-3: (a) In general. Subject to the limitations described in paragraph (b) of this Q&A-3, a cafeteria plan may offer one or more of the following payment options, or a combination of these options, to an employee who continues group health plan coverage (including a health FSA) while on unpaid FMLA leave; provided that the payment options for employees on FMLA leave are offered on terms at least as favorable as those offered to employees not on FMLA leave. These options are referred to in this section as pre-pay, pay-as-you-go, and catch-up. See also the FMLA notice requirements at 29 CFR 825.301(b)(1)(iv).
(1) Pre-pay. (i) Under the pre-pay option, a cafeteria plan may permit an employee to pay, prior to commencement of the FMLA leave period, the amounts due for the FMLA leave period. However, FMLA provides that the employer may not mandate that an employee pre-pay the amounts due for the leave period. See 29 CFR 825.210(c)(3) and (4).
(ii) Contributions under the pre-pay option may be made on a pre-tax salary reduction basis from any taxable compensation (including from unused sick days or vacation days). However, see Q&A-5 of this section regarding additional restrictions on pre-tax salary reduction contributions when an employee’s FMLA leave spans two cafeteria plan years.
(iii) Contributions under the pre-pay option may also be made on an after-tax basis.
(2) Pay-as-you-go. (i) Under the pay-as-you-go option, employees may pay their share of the premium payments on the same schedule as payments would have been made if the employee were not on leave or under any other payment schedule permitted by the Labor Regulations at 29 CFR 825.210(c) (e.g., on the same schedule as payments are made under section 4980B (relating to coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), 26 U.S.C. 4980B), under the employer’s existing rules for payment by employees on leave without pay, or under any other system voluntarily agreed to between the employer and the employee that is not inconsistent with this section or with 29 CFR 825.210(c)).
(ii) Contributions under the pay-as-you-go option are generally made by the employee on an after-tax basis. However, contributions may be made on a pre-tax basis to the extent that the contributions are made from taxable compensation (e.g., from unused sick days or vacation days) that is due the employee during the leave period.
(iii) An employer is not required to continue the group health coverage of an employee who fails to make required premium payments while on FMLA leave, provided that the employer follows the notice procedures required under FMLA. See 29 CFR 825.212. However, if the employer chooses to continue the health coverage of an employee who fails to pay his or her share of the premium payments while on FMLA leave, FMLA permits the employer to recoup the premiums (to the extent of the employee’s share). See 29 CFR 825.212(b). Such recoupment may be made as set forth in paragraphs (a)(3)(i) and (ii) of this Q&A-3. See also Q&A-6 of this section regarding coverage under a health FSA when an employee fails to make the required premium payments while on FMLA leave.
(3) Catch-up. (i) Under the catch-up option, the employer and the employee may agree in advance that the group coverage will continue during the period of unpaid FMLA leave, and that the employee will not pay premiums until the employee returns from the FMLA leave. Where an employee is electing to use the catch-up option, the employer and the employee must agree in advance of the coverage period that: the employee elects to continue health coverage while on unpaid FMLA leave; the employer assumes responsibility for advancing payment of the premiums on the employee’s behalf during the FMLA leave; and these advance amounts are to be paid by the employee when the employee returns from FMLA leave.
(ii) When an employee fails to make required premium payments while on FMLA leave, an employer is permitted to utilize the catch-up option to recoup the employee’s share of premium payments when the employee returns from FMLA leave. See, e.g., 29 CFR 825.212(b). If the employer chooses to continue group coverage under these circumstances, the prior agreement of the employee, as set forth in paragraph (a)(3)(i) of this Q&A-3, is not required.
(iii) Contributions under the catch-up option may be made on a pre-tax salary reduction basis from any available taxable compensation (including from unused sick days and vacation days) after the employee returns from FMLA leave. The cafeteria plan may provide for the catch-up option to apply on a pre-tax salary reduction basis if premiums have not been paid on any other basis (i.e., have not been paid under the pre-pay or pay-as-you-go options or on a catch-up after-tax basis).
(iv) Contributions under the catch-up option may also be made on an after-tax basis.
(b) Exceptions. Whatever payment options are offered to employees on non-FMLA leave must be offered to employees on FMLA leave. In accordance with 29 CFR 825.210(c), cafeteria plans may offer one or more of the payment options described in paragraph (a) of this Q&A-3, with the following exceptions:
(1) FMLA does not permit the pre-pay option to be the sole option offered to employees on FMLA leave. However, the cafeteria plan may include pre-payment as an option for employees on FMLA leave, even if such option is not offered to employees on non-FMLA leave-without-pay.
(2) FMLA allows the catch-up option to be the sole option offered to employees on FMLA leave if and only if the catch-up option is the sole option offered to employees on non-FMLA leave-without-pay.
(3) If the pay-as-you-go option is offered to employees on non-FMLA leave-without-pay, the option must also be offered to employees on FMLA leave. The employer may also offer employees on FMLA leave the pre-pay option and/or the catch-up option.
(c) Voluntary waiver of employee payments. In addition to the foregoing payment options, an employer may voluntarily waive, on a nondiscriminatory basis, the requirement that employees who elect to continue group health coverage while on FMLA leave pay the amounts the employees would otherwise be required to pay for the leave period.
(d) Example. The following example illustrates this Q&A-3:
(ii) In this Example, Y’s cafeteria plan satisfies the conditions in this Q&A-3. Y’s cafeteria plan would also satisfy the conditions in this Q&A-3 if the plan provided for coverage to cease in the event the employee fails to make a premium payment when due during an unpaid FMLA leave.
Q-4: Do the special FMLA requirements concerning payment of premiums by an employee who continues group health plan coverage under a cafeteria plan apply if the employee is on paid FMLA leave?
A-4: No. The Labor Regulations provide that, if an employee’s FMLA leave is paid leave as described at 29 CFR 825.207 and the employer mandates that the employee continue group health plan coverage while on FMLA leave, the employee’s share of the premiums must be paid by the method normally used during any paid leave (e.g., by pre-tax salary reduction if the employee’s share of premiums were paid by pre-tax salary reduction before the FMLA leave began). See 29 CFR 825.210(b).
Q-5: What restrictions apply to contributions when an employee’s FMLA leave spans two cafeteria plan years?
A-5: (a) No amount will be included in an employee’s gross income due to participation in a cafeteria plan during FMLA leave, provided that the plan complies with other generally applicable cafeteria plan requirements. Among other requirements, a plan may not operate in a manner that enables employees on FMLA leave to defer compensation from one cafeteria plan year to a subsequent cafeteria plan year. See section 125(d)(2).
(b) The following example illustrates this Q&A-5:
(ii) Because A cannot defer compensation from one plan year to a subsequent plan year, A may pre-pay the premiums due in November and December (i.e., $100 per month) on a pre-tax basis, but A cannot pre-pay the premium payment due in January on a pre-tax basis. If A participates in the cafeteria plan in the subsequent plan year, A must either pre-pay for January on an after-tax basis or use another option (e.g., pay-as-you-go, catch-up, reduction in unused sick days, etc.) to make the premium payment due in January.
Q-6: Are there special rules concerning employees taking FMLA leave who participate in health FSAs offered under a cafeteria plan?
A-6: (a) In general. (1) A group health plan that is a flexible spending arrangement (FSA) offered under a cafeteria plan must conform to the generally applicable rules in this section concerning employees who take FMLA leave. Thus, to the extent required by FMLA (see 29 CFR 825.209(b)), an employer must—
(i) Permit an employee taking FMLA leave to continue coverage under a health FSA while on FMLA leave; and
(ii) If an employee is on unpaid FMLA leave, either—
(A) Allow the employee to revoke coverage; or
(B) Continue coverage, but allow the employee to discontinue payment of his or her share of the premium for the health FSA under the cafeteria plan during the unpaid FMLA leave period.
(2) Under FMLA, the plan must permit the employee to be reinstated in health coverage upon return from FMLA leave on the same terms as if the employee had been working throughout the leave period, without a break in coverage. See 29 CFR 825.214(a) and 825.215(d)(1) and paragraph (b)(2) of this Q&A-6. In addition, under FMLA, a plan may require an employee to be reinstated in health coverage upon return from a period of unpaid FMLA leave, provided that employees who return from a period of unpaid leave not covered by the FMLA are also required to resume participation upon return from leave.
(b) Coverage. (1) Regardless of the payment option selected under Q&A-3 of this section, for so long as the employee continues health FSA coverage (or for so long as the employer continues the health FSA coverage of an employee who fails to make the required contributions as described in Q&A-3(a)(2)(iii) of this section), the full amount of the elected health FSA coverage, less any prior reimbursements, must be available to the employee at all times, including the FMLA leave period.
(2)(i) If an employee’s coverage under the health FSA terminates while the employee is on FMLA leave, the employee is not entitled to receive reimbursements for claims incurred during the period when the coverage is terminated. If an employee subsequently elects or the employer requires the employee to be reinstated in the health FSA upon return from FMLA leave for the remainder of the plan year, the employee may not retroactively elect health FSA coverage for claims incurred during the period when the coverage was terminated. Upon reinstatement into a health FSA upon return from FMLA leave (either because the employee elects reinstatement or because the employer requires reinstatement), the employee has the right under FMLA: to resume coverage at the level in effect before the FMLA leave and make up the unpaid premium payments, or to resume coverage at a level that is reduced and resume premium payments at the level in effect before the FMLA leave. If an employee chooses to resume health FSA coverage at a level that is reduced, the coverage is prorated for the period during the FMLA leave for which no premiums were paid. In both cases, the coverage level is reduced by prior reimbursements.
(ii) FMLA requires that an employee on FMLA leave have the right to revoke or change elections (because of events described in § 1.125-4) under the same terms and conditions that apply to employees participating in the cafeteria plan who are not on FMLA leave. Thus, for example, if a group health plan offers an annual open enrollment period to active employees, then, under FMLA, an employee on FMLA leave when the open enrollment is offered must be offered the right to make election changes on the same basis as other employees. Similarly, if a group health plan decides to offer a new benefit package option and allows active employees to elect the new option, then, under FMLA, an employee on FMLA leave must be allowed to elect the new option on the same basis as other employees.
(3) The following examples illustrate the rules in this Q&A-6:
(ii) Employee B must be given a choice of resuming coverage at the level in effect before the FMLA leave (i.e., $1,200) and making up the unpaid premium payments ($300), or resuming health FSA coverage at a level that is reduced on a prorata basis for the period during the FMLA leave for which no premiums were paid (i.e., reduced for 3 months or
(ii) The results are the same as in Example 1, except that if B chooses to resume coverage at the level in effect before the FMLA leave, B’s coverage for the remainder of the year would equal $1,000 ($1,200 reduced by $200) and the monthly payments for the remainder of the year would still equal $150. If instead B chooses prorated coverage, B’s coverage for the remainder of the plan year would equal $700 ($1,200 prorated for 3 months, and then reduced by $200) and the monthly payments for the remainder of the year would still equal $100.
(ii) Thus, B’s monthly premium payments for the remainder of the plan year will be $150 ($100 + $50).
Q-7: Are employees entitled to non-health benefits while taking FMLA leave?
A-7: FMLA does not require an employer to maintain an employee’s non-health benefits (e.g., life insurance) during FMLA leave. An employee’s entitlement to benefits other than group health benefits under a cafeteria plan during a period of FMLA leave is to be determined by the employer’s established policy for providing such benefits when the employee is on non-FMLA leave (paid or unpaid). See 29 CFR 825.209(h). Therefore, an employee who takes FMLA leave is entitled to revoke an election of non-health benefits under a cafeteria plan to the same extent as employees taking non-FMLA leave are permitted to revoke elections of non-health benefits under a cafeteria plan. For example, election changes are permitted due to changes of status or upon enrollment for a new plan year. See § 1.125-4. However, FMLA provides that, in certain cases, an employer may continue an employee’s non-health benefits under the employer’s cafeteria plan while the employee is on FMLA leave in order to ensure that the employer can meet its responsibility to provide equivalent benefits to the employee upon return from unpaid FMLA. If the employer continues an employee’s non-health benefits during FMLA leave, the employer is entitled to recoup the costs incurred for paying the employee’s share of the premiums during the FMLA leave period. See 29 CFR 825.213(b). Such recoupment may be on a pre-tax basis. A cafeteria plan must, as required by FMLA, permit an employee whose coverage terminated while on FMLA leave (either by revocation or nonpayment of premiums) to be reinstated in the cafeteria plan on return from FMLA leave. See 29 CFR 825.214(a) and 825.215(d).
Q-8: What is the applicability date of the regulations in this section?
A-8: This section is applicable for cafeteria plan years beginning on or after January 1, 2002.
§ 1.125-4 Permitted election changes.
(a) Election changes. A cafeteria plan may permit an employee to revoke an election during a period of coverage and to make a new election only as provided in paragraphs (b) through (g) of this section. Section 125 does not require a cafeteria plan to permit any of these changes. See paragraph (h) of this section for special provisions relating to qualified cash or deferred arrangements, and paragraph (i) of this section for special definitions used in this section.
(b) Special enrollment rights—(1) In general. A cafeteria plan may permit an employee to revoke an election for coverage under a group health plan during a period of coverage and make a new election that corresponds with the special enrollment rights provided in section 9801(f).
(2) Examples. The following examples illustrate the application of this paragraph (b):
(ii) M‘s cafeteria plan may permit A to change A‘s salary reduction election to family coverage for salary not yet currently available. The increased salary reduction is permitted to reflect the cost of family coverage from the date of adoption. (A‘s adoption of D is also a change in status, and the election of family coverage is consistent with that change in status. Thus, under paragraph (c) of this section, M‘s cafeteria plan could permit A to elect family coverage prospectively in order to cover B, C, and D for the remaining portion of the period of coverage.)
(ii) M‘s cafeteria plan may permit E to change E‘s salary reduction election to reflect the change to family coverage under M‘s accident or health plan because the marriage would result in special enrollment rights under section 9801(f), pursuant to which an election of family coverage under M‘s accident or health plan would be required to be effective no later than the first day of the first calendar month beginning after the completed request for enrollment is received by the plan. Since no retroactive coverage is required in the event of marriage under section 9801(f), E‘s salary reduction election may only be changed on a prospective basis. (E‘s marriage to F is also a change in status under paragraph (c) of this section, as illustrated in Example 1 of paragraph (c)(4) of this section.)
(c) Changes in status—(1) Change in status rule. A cafeteria plan may permit an employee to revoke an election during a period of coverage with respect to a qualified benefits plan (defined in paragraph (i)(8) of this section) to which this paragraph (c) applies and make a new election for the remaining portion of the period (referred to in this section as an election change) if, under the facts and circumstances—
(i) A change in status described in paragraph (c)(2) of this section occurs; and
(ii) The election change satisfies the consistency rule of paragraph (c)(3) of this section.
(2) Change in status events. The following events are changes in status for purposes of this paragraph (c):
(i) Legal marital status. Events that change an employee’s legal marital status, including the following: marriage; death of spouse; divorce; legal separation; and annulment.
(ii) Number of dependents. Events that change an employee’s number of dependents, including the following: birth; death; adoption; and placement for adoption.
(iii) Employment status. Any of the following events that change the employment status of the employee, the employee’s spouse, or the employee’s dependent: a termination or commencement of employment; a strike or lockout; a commencement of or return from an unpaid leave of absence; and a change in worksite. In addition, if the eligibility conditions of the cafeteria plan or other employee benefit plan of the employer of the employee, spouse, or dependent depend on the employment status of that individual and there is a change in that individual’s employment status with the consequence that the individual becomes (or ceases to be) eligible under the plan, then that change constitutes a change in employment under this paragraph (c) (e.g., if a plan only applies to salaried employees and an employee switches from salaried to hourly-paid with the consequence that the employee ceases to be eligible for the plan, then that change constitutes a change in employment status under this paragraph (c)(2)(iii)).
(iv) Dependent satisfies or ceases to satisfy eligibility requirements. Events that cause an employee’s dependent to satisfy or cease to satisfy eligibility requirements for coverage on account of attainment of age, student status, or any similar circumstance.
(v) Residence. A change in the place of residence of the employee, spouse, or dependent.
(vi) Adoption assistance. For purposes of adoption assistance provided through a cafeteria plan, the commencement or termination of an adoption proceeding.
(3) Consistency rule—(i) Application to accident or health coverage and group-term life insurance. An election change satisfies the requirements of this paragraph (c)(3) with respect to accident or health coverage or group-term life insurance only if the election change is on account of and corresponds with a change in status that affects eligibility for coverage under an employer’s plan. A change in status that affects eligibility under an employer’s plan includes a change in status that results in an increase or decrease in the number of an employee’s family members or dependents who may benefit from coverage under the plan.
(ii) Application to other qualified benefits. An election change satisfies the requirements of this paragraph (c)(3) with respect to other qualified benefits if the election change is on account of and corresponds with a change in status that affects eligibility for coverage under an employer’s plan. An election change also satisfies the requirements of this paragraph (c)(3) if the election change is on account of and corresponds with a change in status that effects expenses described in section 129 (including employment-related expenses as defined in section 21(b)(2)) with respect to dependent care assistance, or expenses described in section 137 (including qualified adoption expenses as defined in section 137(d)) with respect to adoption assistance.
(iii) Application of consistency rule. If the change in status is the employee’s divorce, annulment or legal separation from a spouse, the death of a spouse or dependent, or a dependent ceasing to satisfy the eligibility requirements for coverage, an employee’s election under the cafeteria plan to cancel accident or health insurance coverage for any individual other than the spouse involved in the divorce, annulment or legal separation, the deceased spouse or dependent, or the dependent that ceased to satisfy the eligibility requirements for coverage, respectively, fails to correspond with that change in status. Thus, if a dependent dies or ceases to satisfy the eligibility requirements for coverage, the employee’s election to cancel accident or health coverage for any other dependent, for the employee, or for the employee’s spouse fails to correspond with that change in status. In addition, if an employee, spouse, or dependent gains eligibility for coverage under a family member plan (as defined in paragraph (i)(5) of this section) as a result of a change in marital status under paragraph (c)(2)(i) of this section or a change in employment status under paragraph (c)(2)(iii) of this section, an employee’s election under the cafeteria plan to cease or decrease coverage for that individual under the cafeteria plan corresponds with that change in status only if coverage for that individual becomes applicable or is increased under the family member plan. With respect to group-term life insurance and disability coverage (as defined in paragraph (i)(4) of this section), an election under a cafeteria plan to increase coverage (or an election to decrease coverage) in response to a change in status described in paragraph (c)(2) of this section is deemed to correspond with that change in status as required by paragraph (c)(3)(i) of this section.
(iv) Exception for COBRA. If the employee, spouse, or dependent becomes eligible for continuation coverage under the group health plan of the employee’s employer as provided in section 4980B or any similar state law, a cafeteria plan may permit the employee to elect to increase payments under the employer’s cafeteria plan in order to pay for the continuation coverage.
(4) Examples. The following examples illustrate the application of this paragraph (c):
(ii) Employee A‘s marriage to B is a change in status under paragraph (c)(2)(i) of this section, pursuant to which B has become eligible for coverage under M‘s health plan under paragraph (c)(3)(i) of this section. Two possible election changes by A correspond with the change in status: Employee A may elect family health coverage under M‘s plan to cover A and B; or A may cancel coverage under M‘s plan, if B elects family health coverage under N‘s plan to cover A and B. Thus, M‘s cafeteria plan may permit A to make either election change.
(iii) Employee A may also increase salary reduction contributions to fund coverage for B under the health FSA.
(ii) D‘s loss of eligibility for coverage under the terms of the health plan is a change in status under paragraph (c)(2)(iv) of this section. A revocation of C‘s election for family coverage and new election for employee-only coverage corresponds with the change in status. Thus, O‘s cafeteria plan may permit C to elect employee-only coverage.
(ii) The divorce is a change in status under paragraph (c)(2)(i). A change in the cafeteria plan election to cancel health coverage for F is consistent with that change in status. However, an election change to cancel E‘s or G‘s health coverage does not satisfy the consistency rule under paragraph (c)(3)(iii) of this section regarding cancellation of coverage for an employee’s other dependents in the event of divorce. Therefore, the cafeteria plan may not permit E to elect no coverage. However, an election to change to employee-plus-one-dependent health coverage would correspond with the change in status, and thus the cafeteria plan may permit E to elect employee-plus-one-dependent health coverage.
(iii) In addition, under paragraph (f)(4) of this section, if F makes an election change to cover G under F‘s employer’s plan, then E may make a corresponding change to elect employee-only coverage under P‘s cafeteria plan.
(ii) The transfer is a change in status under paragraph (c)(2)(iii) of this section (relating to a change in worksite), and, under the consistency rule in paragraph (c)(3) of this section, the cafeteria plan may permit A to make an election change to elect the indemnity option or HMO #2 or to cancel accident or health coverage.
(iii) The change in work location has no effect on A‘s eligibility under R’s health FSA, so no change in A’s health FSA is authorized under this paragraph (c).
(ii) C‘s termination of employment is a change in status under paragraph (c)(2)(iii) of this section, and the election change satisfies the consistency rule of paragraph (c)(3) of this section. Therefore, the cafeteria plan may permit B to elect family coverage under S‘s accident or health plan and to increase B‘s FSA coverage.
(ii) The divorce is a change in status under paragraph (c)(2)(i) of this section. Under paragraph (c)(3)(iii) of this section, either an increase or a decrease in coverage is consistent with this change in status. Thus, T‘s cafeteria plan may permit D to increase or to decrease D‘s group-term life insurance coverage.
(ii) F‘s termination of employment is a change in status under paragraph (c)(2)(iii) of this section, and the election change satisfies the consistency rule of paragraph (c)(3) of this section. Therefore, U‘s cafeteria plan may permit E to elect family vision coverage (covering E and G as well as F) under U‘s group health plan.
(ii) In this Example 8, under the facts and circumstances, a principal purpose of the termination of employment was to alter the election, and reinstatement of employment was understood at the time of termination. Accordingly, H does not have a change in status under paragraph (c)(2)(iii) of this section.
(iii) However, H‘s termination of employment would constitute a change in status, permitting a cancellation of coverage during the period of unemployment, if H‘s original cafeteria plan election for the period of coverage was reinstated upon resumption of employment (for example, if W‘s cafeteria plan contains a provision requiring an employee who resumes employment within 30 days, without any other intervening event that would permit a change in election, to return to the election in effect prior to termination of employment).
(iv) If, instead, H terminates employment and cancels coverage during a period of unemployment, and then returns to work more than 30 days following termination of employment, the cafeteria plan may permit H the option of returning to the election in effect prior to termination of employment or making a new election under the plan. Alternatively, the cafeteria plan may prohibit H from returning to the plan during that plan year.
(ii) When B turns 13, B ceases to satisfy the definition of qualifying individual under section 21(b)(1) of the Internal Revenue Code. Accordingly, B‘s attainment of age 13 is a change in status under paragraph (c)(2)(iv) of this section that affects A‘s employment-related expenses as defined in section 21(b)(2). Therefore, A may make a corresponding change under X‘s cafeteria plan to cancel coverage under the dependent care FSA.
(ii) The marriage is a change in status under paragraph (c)(2)(i) of this section. Under the consistency rule in paragraph (c)(3) of this section, Y‘s cafeteria plan may permit C to change his or her salary reduction contributions to reflect the change from employee-only indemnity to HMO family coverage, and Z may permit D to revoke coverage under Z‘s cafeteria plan.
(d) Judgment, decree, or order—(1) Conforming election change. This paragraph (d) applies to a judgment, decree, or order (order) resulting from a divorce, legal separation, annulment, or change in legal custody (including a qualified medical child support order as defined in section 609 of the Employee Retirement Income Security Act of 1974 (Public Law 93-406 (88 Stat. 829))) that requires accident or health coverage for an employee’s child or for a foster child who is a dependent of the employee. A cafeteria plan will not fail to satisfy section 125 if it—
(i) Changes the employee’s election to provide coverage for the child if the order requires coverage for the child under the employee’s plan; or
(ii) Permits the employee to make an election change to cancel coverage for the child if:
(A) The order requires the spouse, former spouse, or other individual to provide coverage for the child; and
(B) That coverage is, in fact, provided.
(2) Example. The following example illustrates the application of this paragraph (d):
(ii) Under this paragraph (d), M‘s cafeteria plan may change A‘s election from employee-only health coverage to employee-plus-one-dependent coverage in order to cover C.
(e) Entitlement to Medicare or Medicaid. If an employee, spouse, or dependent who is enrolled in an accident or health plan of the employer becomes entitled to coverage (i.e., becomes enrolled) under Part A or Part B of title XVIII of the Social Security Act (Medicare) (Public Law 89-97 (79 Stat. 291)) or title XIX of the Social Security Act (Medicaid) (Public Law 89-97 (79 Stat. 343)), other than coverage consisting solely of benefits under section 1928 of the Social Security Act (the program for distribution of pediatric vaccines), a cafeteria plan may permit the employee to make a prospective election change to cancel or reduce coverage of that employee, spouse, or dependent under the accident or health plan. In addition, if an employee, spouse, or dependent who has been entitled to such coverage under Medicare or Medicaid loses eligibility for such coverage, the cafeteria plan may permit the employee to make a prospective election to commence or increase coverage of that employee, spouse, or dependent under the accident or health plan.
(f) Significant cost or coverage changes—(1) In general. Paragraphs (f)(2) through (5) of this section set forth rules for election changes as a result of changes in cost or coverage. This paragraph (f) does not apply to an election change with respect to a health FSA (or on account of a change in cost or coverage under a health FSA).
(2) Cost changes—(i) Automatic changes. If the cost of a qualified benefits plan increases (or decreases) during a period of coverage and, under the terms of the plan, employees are required to make a corresponding change in their payments, the cafeteria plan may, on a reasonable and consistent basis, automatically make a prospective increase (or decrease) in affected employees’ elective contributions for the plan.
(ii) Significant cost changes. If the cost charged to an employee for a benefit package option (as defined in paragraph (i)(2) of this section) significantly increases or significantly decreases during a period of coverage, the cafeteria plan may permit the employee to make a corresponding change in election under the cafeteria plan. Changes that may be made include commencing participation in the cafeteria plan for the option with a decrease in cost, or, in the case of an increase in cost, revoking an election for that coverage and, in lieu thereof, either receiving on a prospective basis coverage under another benefit package option providing similar coverage or dropping coverage if no other benefit package option providing similar coverage is available. For example, if the cost of an indemnity option under an accident or health plan significantly increases during a period of coverage, employees who are covered by the indemnity option may make a corresponding prospective increase in their payments or may instead elect to revoke their election for the indemnity option and, in lieu thereof, elect coverage under another benefit package option including an HMO option (or drop coverage under the accident or health plan if no other benefit package option is offered).
(iii) Application of cost changes. For purposes of paragraphs (f)(2)(i) and (ii) of this section, a cost increase or decrease refers to an increase or decrease in the amount of the elective contributions under the cafeteria plan, whether that increase or decrease results from an action taken by the employee (such as switching between full-time and part-time status) or from an action taken by an employer (such as reducing the amount of employer contributions for a class of employees).
(iv) Application to dependent care. This paragraph (f)(2) applies in the case of a dependent care assistance plan only if the cost change is imposed by a dependent care provider who is not a relative of the employee. For this purpose, a relative is an individual who is related as described in section 152(a)(1) through (8), incorporating the rules of section 152(b)(1) and (2).
(3) Coverage changes—(i) Significant curtailment without loss of coverage. If an employee (or an employee’s spouse or dependent) has a significant curtailment of coverage under a plan during a period of coverage that is not a loss of coverage as described in paragraph (f)(3)(ii) of this section (for example, there is a significant increase in the deductible, the copay, or the out-of-pocket cost sharing limit under an accident or health plan), the cafeteria plan may permit any employee who had been participating in the plan and receiving that coverage to revoke his or her election for that coverage and, in lieu thereof, to elect to receive on a prospective basis coverage under another benefit package option providing similar coverage. Coverage under a plan is significantly curtailed only if there is an overall reduction in coverage provided under the plan so as to constitute reduced coverage generally. Thus, in most cases, the loss of one particular physician in a network does not constitute a significant curtailment.
(ii) Significant curtailment with loss of coverage. If an employee (or the employee’s spouse or dependent) has a significant curtailment that is a loss of coverage, the plan may permit that employee to revoke his or her election under the cafeteria plan and, in lieu thereof, to elect either to receive on a prospective basis coverage under another benefit package option providing similar coverage or to drop coverage if no similar benefit package option is available. For purposes of this paragraph (f)(3)(ii), a loss of coverage means a complete loss of coverage under the benefit package option or other coverage option (including the elimination of a benefits package option, an HMO ceasing to be available in the area where the individual resides, or the individual losing all coverage under the option by reason of an overall lifetime or annual limitation). In addition, the cafeteria plan may, in its discretion, treat the following as a loss of coverage—
(A) A substantial decrease in the medical care providers available under the option (such as a major hospital ceasing to be a member of a preferred provider network or a substantial decrease in the physicians participating in a preferred provider network or an HMO);
(B) A reduction in the benefits for a specific type of medical condition or treatment with respect to which the employee or the employee’s spouse or dependent is currently in a course of treatment; or
(C) Any other similar fundamental loss of coverage.
(iii) Addition or improvement of a benefit package option. If a plan adds a new benefit package option or other coverage option, or if coverage under an existing benefit package option or other coverage option is significantly improved during a period of coverage, the cafeteria plan may permit eligible employees (whether or not they have previously made an election under the cafeteria plan or have previously elected the benefit package option) to revoke their election under the cafeteria plan and, in lieu thereof, to make an election on a prospective basis for coverage under the new or improved benefit package option.
(4) Change in coverage under another employer plan. A cafeteria plan may permit an employee to make a prospective election change that is on account of and corresponds with a change made under another employer plan (including a plan of the same employer or of another employer) if—
(i) The other cafeteria plan or qualified benefits plan permits participants to make an election change that would be permitted under paragraphs (b) through (g) of this section (disregarding this paragraph (f)(4)); or
(ii) The cafeteria plan permits participants to make an election for a period of coverage that is different from the period of coverage under the other cafeteria plan or qualified benefits plan.
(5) Loss of coverage under other group health coverage. A cafeteria plan may permit an employee to make an election on a prospective basis to add coverage under a cafeteria plan for the employee, spouse, or dependent if the employee, spouse, or dependent loses coverage under any group health coverage sponsored by a governmental or educational institution, including the following—
(i) A State’s children’s health insurance program (SCHIP) under title XXI of the Social Security Act;
(ii) A medical care program of an Indian Tribal government (as defined in section 7701(a)(40)), the Indian Health Service, or a tribal organization;
(iii) A State health benefits risk pool; or
(iv) A Foreign government group health plan.
(6) Examples. The following examples illustrate the application of this paragraph (f):
(ii) Under these facts, the reduction in health insurance premiums is a reduction in cost. Accordingly, under paragraph (f)(2)(i) of this section, the cafeteria plan may automatically decrease the amount of salary reduction contributions of affected participants by an amount that corresponds to the premium change. However, the plan may not permit employees to change their health FSA elections to reflect the mid-year change in copayments under the indemnity plan.
(iii) Also, the decrease in co-payments is a significant benefit improvement and the addition of the HMO option is an addition of a benefit package option. Accordingly, under paragraph (f)(3)(ii) of this section, the cafeteria plan may permit eligible employees to make an election change to elect the indemnity plan or the new HMO option. However, the plan may not permit employees to change their health FSA elections to reflect differences in co-payments under the HMO option.
(ii) Under paragraph (f)(4)(ii) of this section, N‘s cafeteria plan may permit A to change A‘s election prospectively to family coverage under that plan effective September 1, 2001.
(ii) Q‘s addition of family coverage as an option under its health plan constitutes a new coverage option described in paragraph (f)(3)(ii) of this section. Accordingly, pursuant to paragraph (f)(4)(i) of this section, P‘s cafeteria plan may permit C to revoke C‘s health coverage election if D actually elects family health coverage under Q‘s accident or health plan. Employer P‘s plan may not permit C to change C‘s health FSA election.
(ii) E‘s change from the HMO to indemnity plan is not a change in cost or coverage under this paragraph (f), and none of the other election change rules under paragraphs (b) through (e) of this section apply.
(iii) Although R‘s health plan may permit E to make the change from the HMO to the indemnity plan, R‘s cafeteria plan may not permit E to make an election change to reflect the increased premium. Accordingly, if E switches from the HMO to the indemnity plan, E may pay the $40 per month additional cost on an after-tax basis.
(ii) The availability of dependent care services from the new child care provider (whether the new provider is a household employee or family member of A or B or a person who is independent of A and B) is a significant change in coverage similar to a benefit package option becoming available. Because the FSA is a dependent care FSA rather than a health FSA, the coverage rules of this section apply and M‘s cafeteria plan may permit A to elect to revoke A‘s previous election of coverage under the dependent care FSA, and make a corresponding new election to reflect the cost of the new child care provider.
(ii) The change in the number of hours of work performed by Y is a change in coverage. Thus, N‘s cafeteria plan may permit D to reduce D‘s previous election under the dependent care FSA to $4,000.
(ii) The raise in Z‘s salary is a significant increase in cost under paragraph (f)(2)(ii) of this section, and an increase in election to reflect the raise corresponds with that change in status. Thus, O‘s cafeteria plan may permit G to elect to increase G‘s election under the dependent care FSA.
(ii) Employer P‘s midyear addition of the HMO option is an addition of a benefit package option. Under paragraph (f) of this section, Employee J may change his or her salary reduction contributions to reflect the change from indemnity to HMO coverage, and also to reflect the change from employee plus one dependent to family coverage (however, an election of employee-only coverage under the new option would not correspond with the addition of a new option). Employer P may not permit J to change J‘s health FSA election.
(g) Special requirements relating to the Family and Medical Leave Act. An employee taking leave under the Family and Medical Leave Act (FMLA) (Public Law 103-3 (107 Stat. 6)) may revoke an existing election of accident or health plan coverage and make such other election for the remaining portion of the period of coverage as may be provided for under the FMLA. See § 1.125-3 for additional rules.
(h) Elective contributions under a qualified cash or deferred arrangement. The provisions of this section do not apply with respect to elective contributions under a qualified cash or deferred arrangement (within the meaning of section 401(k)) or employee contributions subject to section 401(m). Thus, a cafeteria plan may permit an employee to modify or revoke elections in accordance with section 401(k) and (m) and the regulations thereunder.
(i) Definitions. Unless otherwise provided, the definitions in paragraphs (i)(1) though (8) of this section apply for purposes of this section.
(1) Accident or health coverage. Accident or health coverage means coverage under an accident or health plan as defined in regulations under section 105.
(2) Benefit package option. A benefit package option means a qualified benefit under section 125(f) that is offered under a cafeteria plan, or an option for coverage under an underlying accident or health plan (such as an indemnity option, an HMO option, or a PPO option under an accident or health plan).
(3) Dependent. A dependent means a dependent as defined in section 152, except that, for purposes of accident or health coverage, any child to whom section 152(e) applies is treated as a dependent of both parents, and, for purposes of dependent care assistance provided through a cafeteria plan, a dependent means a qualifying individual (as defined in section 21(b)(1)) with respect to the employee.
(4) Disability coverage. Disability coverage means coverage under an accident or health plan that provides benefits due to personal injury or sickness, but does not reimburse expenses incurred for medical care (as defined in section 213(d)) of the employee or the employee’s spouse and dependents. For purposes of this section, disability coverage includes payments described in section 105(c).
(5) Family member plan. A family member plan means a cafeteria plan or qualified benefit plan sponsored by the employer of the employee’s spouse or the employee’s dependent.
(6) FSA, health FSA. An FSA means a qualified benefits plan that is a flexible spending arrangement as defined in section 106(c)(2) . A health FSA means a health or accident plan that is an FSA.
(7) Placement for adoption. Placement for adoption means placement for adoption as defined in regulations under section 9801.
(8) Qualified benefits plan. A qualified benefits plan means an employee benefit plan governing the provision of one or more benefits that are qualified benefits under section 125(f). A plan does not fail to be a qualified benefits plan merely because it includes an FSA, assuming that the FSA meets the requirements of section 125 and the regulations thereunder.
(9) Similar coverage. Coverage for the same category of benefits for the same individuals (e.g., family to family or single to single). For example, two plans that provide coverage for major medical are considered to be similar coverage. For purposes of this definition, a health FSA is not similar coverage with respect to an accident or health plan that is not a health FSA. A plan may treat coverage by another employer, such as a spouse’s or dependent’s employer, as similar coverage.
(j) Effective date—(1) General rule. Except as provided in paragraph (j)(2) of this section, this section is applicable for cafeteria plan years beginning on or after January 1, 2001.
(2) Delayed effective date for certain provisions. The following provisions are applicable for cafeteria plan years beginning on or after January 1, 2002: paragraph (c) of this section to the extent applicable to qualified benefits other than an accident or health plan or a group-term life insurance plan; paragraph (d)(1)(ii)(B) of this section (relating to a spouse, former spouse, or other individual obtaining accident or health coverage for an employee’s child in response to a judgment, decree, or order); paragraph (f) of this section (rules for election changes as a result of cost or coverage changes); and paragraph (i)(9) of this section (defining similar coverage).
§ 1.127-1 Amounts received under a qualified educational assistance program.
(a) Exclusion from gross income. The gross income of an employee does not include—
(1) Amounts paid to, or on behalf of the employee under a qualified educational assistance program described in § 1.127-2, or
(2) The value of education provided to the employee under such a program.
(b) Disallowance of excluded amounts as credit or deduction. Any amount excluded from the gross income of an employee under paragraph (a) of this section shall not be allowed as a credit or deduction to such employee under any other provision of this part.
(c) Amounts received under a nonqualified program. Any amount received under an educational assistance program that is not a “qualified program” described in § 1.127-2 will not be excluded from gross income under paragraph (a) of this section. All or part of the amounts received under such a nonqualified program may, however, be excluded under section 117 or deducted under section 162 or section 212 (as the case may be), if the requirements of such section are satisfied.
(d) Definitions. For rules relating to the meaning of the terms “employee” and “employer”, see paragraph (h) of § 1.127-2.
(e) Effective date. This section is effective for taxable years of the employee beginning after December 31, 1978, and before January 1, 1984.
§ 1.127-2 Qualified educational assistance program.
(a) In general. A qualified educational assistance program is a plan established and maintained by an employer under which the employer provides educational assistance to employees. To be a qualified program, the requirements described in paragraphs (b) through (g) of this section must be satisfied. It is not required that a program be funded or that the employer apply to the Internal Revenue Service for a determination that the plan is a qualified program. However, under § 601.201 (relating to rulings and determination letters), an employer may request that the Service determine whether a plan is a qualified program.
(b) Separate written plan. The program must be a separate written plan of the employer. This requirement means that the terms of the program must be set forth in a separate document or documents providing only educational assistance within the meaning of paragraph (c) of this section. The requirement for a separate plan does not, however, preclude an educational assistance program from being part of a more comprehensive employer plan that provides a choice of nontaxable benefits to employees.
(c) Educational assistance—(1) In general. The benefits provided under the program must consist solely of educational assistance. The term “educational assistance” means—
(i) The employer’s payment of expenses incurred by or on behalf of an employee for education, or
(ii) The employer’s provision of education to an employee.
(2) Alternative benefits. Benefits will not be considered to consist solely of educational assistance if the program, in form or in actual operation, provides employees with a choice between educational assistance and other remuneration includible in the employee’s gross income.
(3) Certain benefits not considered educational assistance. The term “educational assistance” does not include the employer’s payment for, or provision of—
(i) Tools or supplies (other than textbooks) that the employee may retain after completing a course of instruction,
(ii) Meals, lodging, or transportation, or
(iii) Education involving sports, games, or hobbies, unless such education involves the business of the employer or is required as part of a degree program. The phrase “sports, games, or hobbies” does not include education that instructs employees how to maintain and improve health so long as such education does not involve the use of athletic facilities or equipment and is not recreational in nature.
(4) Education defined. As used in section 127, § 1.127-1, and this section, the term “education” includes any form of instruction or training that improves or develops the capabilities of an individual. Education paid for or provided under a qualified program may be furnished directly by the employer, either alone or in conjunction with other employers, or through a third party such as an educational institution. Education is not limited to courses that are job related or part of a degree program.
(d) Exclusive benefit. The program may benefit only the employees of the employer, including, at the employer’s option, individuals who are employees within the meaning of paragraph (h)(1) of this section. A program that provides benefits to spouses or dependents of employees is not a qualified program within the meaning of this section.
(e) Prohibited discrimination—(1) Eligibility for benefits. The program must benefit the employer’s employees generally. Among those benefited may be employees who are officers, shareholders, self-employed or highly compensated. A program is not for the benefit of employees generally, however, if the program discriminates in favor of employees described in the preceding sentence (or in favor of their spouses and dependents who are themselves employees) in requirements relating to eligibility for benefits. Thus, although a program need not provide benefits for all employees, it must benefit those employees who qualify under a classification of employees that does not discriminate in favor of the employees with respect to whom discrimination is prohibited. The classification of employees to be considered benefited will consist of that group of employees who are actually eligible for educational assistance under the program, taking into account the eligibility requirements set forth in the written plan, the eligibility requirements reflected in the types of educational assistance available under the program, and any other conditions that may affect the availability of benefits under the program. Thus, for example, if an employer’s plan provides that all employees are eligible for educational assistance, yet limits that assistance to courses of study leading to postgraduate degrees in fields relating to the employer’s business, then only those employees able to pursue such a course of study are considered actually eligible for educational assistance under the program. Whether any classification of employees discriminates in favor of employees with respect to whom discrimination is prohibited will generally be determined by applying the same standards as are applied under section 410(b)(1)(B) (relating to qualified pension, profit-sharing and stock bonus plans), without regard to section 401(a)(5). For purposes of making this determination, there shall be excluded from consideration employees not covered by the program who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if the Internal Revenue Service finds that educational assistance benefits were the subject of good faith bargaining between the employee representatives and the employer or employers. For purposes of determining whether such bargaining occurred, it is not material that the employees are not covered by another educational assistance program or that the employer’s present program was not considered in the bargaining.
(2) Factors not considered in determining the existence of prohibited discrimination. A program shall not be considered discriminatory under this paragraph (e) merely because—
(i) Different types of educational assistance available under the program are utilized to a greater degree by employees with respect to whom discrimination is prohibited than by other employees, or
(ii) With respect to a course of study for which benefits are otherwise available, successful completion of the course, attaining a particular course grade, or satisfying a reasonable condition subsequent (such as remaining employed for one year after completing the course) are required or considered in determining the availability of benefits.
(f) Benefit limitation—(1) In general. Under section 127(b)(3), a program is a qualified program for a program year only if no more than 5% of the amounts paid or incurred by the employer for educational assistance benefits during the year are provided to the limitation class described in subparagraph (2). For purposes of this paragraph (f), the program year must be specified in the written plan as either the calendar year or the taxable year of the employer.
(2) Limitation class. The limitation class consists of—
(i) Shareholders. Individuals who, on any day of the program year, own more than 5% of the total number of shares of outstanding stock of the employer, or
(ii) Owners. In the case of an employer’s trade or business which is not incorporated, individuals who, on any day of the program year, own more than 5% of the capital or profits interest in the employer, and
(iii) Spouses or dependents. Individuals who are spouses or dependents of shareholders or owners described in subdivision (i) or (ii). For purposes of determining stock ownership, the attribution rules described in paragraph (h)(4) of this section apply. The regulations prescribed under section 414(c) are applicable in determining an individual’s interest in the capital or profits of an unincorporated trade or business.
(g) Notification of employees. A program is not a qualified program unless employees eligible to participate in the program are given reasonable notice of the terms and availability of the program.
(h) Definitions. For purposes of this section and § 1.127-1—
(1) Employee. The term “employee” includes—
(i) A retired, disabled or laid-off employee,
(ii) A present employee who is on leave, as, for example, in the Armed Forces of the United States, or
(iii) An individual who is self-employed within the meaning of section 401(c)(1).
(2) Employer. An individual who owns the entire interest in an unincorporated trade or business shall be treated as his or her own employer. A partnership is treated as the employer of each partner who is an employee within the meaning of section 401(c)(1).
(3) Officer. An officer is an individual who is an officer within the meaning of regulations prescribed under section 414(c).
(4) Shareholder. The term “shareholder” includes an individual who is a shareholder as determined by the attribution rules under section 1563 (d) and (e), without regard to section 1563(e)(3)(C).
(5) Highly compensated. The term “highly compensated” has the same meaning as it does for purposes of section 410(b)(1)(B).
(i) Substantiation. An employee receiving payments under a qualified educational assistance program must be prepared to provide substantiation to the employer such that it is reasonable to believe that payments or reimbursements made under the program constitute educational assistance within the meaning of paragraph (c) of this section.
§ 1.132-0 Outline of regulations under section 132.
The following is an outline of regulations in this section relating to exclusions from gross income for certain fringe benefits:
§ 1.132-1 (a) In general.
§ 1.132-1 (b) Definition of employee.
(1) No-additional-cost services and qualified employee discounts.
(2) Working condition fringes.
(3) On-premises athletic facilities.
(4) De minimis fringes.
(5) Dependent child.
§ 1.132-1 (c) Special rules for employers—Effect of section 414.
§ 1.132-1 (d) Customers not to include employees.
§ 1.132-1 (e) Treatment of on-premises athletic facilities.
(1) In general.
(2) Premises of the employer.
(3) Application of rules to membership in an athletic facility.
(4) Operation by the employer.
(5) Nonapplicability of nondiscrimination rules.
§ 1.132-1 (f) Nonapplicability of section 132 in certain cases.
(1) Tax treatment provided for in another section.
(2) Limited statutory exclusions.
§ 1.132-1 (g) Effective date.
§ 1.132-2 (a) In general.
(1) Definition.
(2) Excess capacity services.
(3) Cash rebates.
(4) Applicability of nondiscrimination rules.
(5) No substantial additional cost.
(6) Payments for telephone service.
§ 1.132-2 (b) Reciprocal agreements.
§ 1.132-2 (c) Example.
§ 1.132-3 (a) In general.
(1) Definition.
(2) Qualified property or services.
(3) No reciprocal agreement exception.
(4) Property of services provided without charge, at a reduced price, or by rebates.
(5) Property or services provided directly by the employer or indirectly through a third party.
(6) Applicability of nondiscrimination rules.
§ 1.132-3 (b) Employee discount.
(1) Definition.
(2) Price to customers.
(3) Damaged, distressed, or returned goods.
§ 1.132-3 (c) Gross profit percentage.
(1) In general.
(2) Line of business.
(3) Generally accepted accounting principles.
§ 1.132-3 (d) Treatment of leased sections of department stores.
(1) In general.
(2) Employees of the leased section.
§ 1.132-3 (e) Excess discounts.
§ 1.132-4 (a) In general.
(1) Applicability.
(2) Definition.
(3) Aggregation of two-digit classifications.
§ 1.132-4 (b) Grandfather rule for certain retail stores.
(1) In general.
(2) Taxable year of affiliated group.
(3) Definition of “sales”.
(4) Retired and disabled employees.
(5) Increase of employee discount.
§ 1.132-4 (c) Grandfather rule for telephone service provided to pre-divestiture retirees.
§ 1.132-4 (d) Special rule for certain affiliates of commercial airlines.
(1) General rule.
(2) “Airline affiliated group” defined.
(3) “Qualified affiliate” defined.
§ 1.132-4 (e) Grandfather rule for affiliated groups operating airlines.
§ 1.132-4 (f) Special rule for qualified air transportation organizations.
§ 1.132-4 (g) Relaxation of line of business requirement.
§ 1.132-4 (h) Line of business requirement does not expand benefits eligible for exclusion.
§ 1.132-5 (a) In general.
(1) Definition.
(2) Trade or business of the employee.
§ 1.132-5 (b) Vehicle allocation rules.
(1) In general.
(2) Use of different employer-provided vehicles.
(3) Provision of a vehicle and chauffeur services.
§ 1.132-5 (c) Applicability of substantiation requirements of sections 162 and 274(d).
(1) In general.
(2) Section 274(d) requirements.
§ 1.132-5 (d) Safe harbor substantiation rules.
(1) In general.
(2) Period for use of safe harbor rules.
§ 1.132-5 (e) Safe harbor substantiation rule for vehicles not used for personal purposes.
§ 1.132-5 (f) Safe harbor substantiation rule for vehicles not available to employees for personal use other than commuting.
§ 1.132-5 (g) Safe harbor substantiation rule for vehicles used in connection with the business of farming that are available to employees for personal use.
(1) In general.
(2) Vehicles available to more than one individual.
(3) Examples.
§ 1.132-5 (h) Qualified nonpersonal use vehicles.
(1) In general.
(2) Shared usage of qualified nonpersonal use vehicles.
§ 1.132-5 (i) [Reserved]
§ 1.132-5 (j) Application of section 280F.
§ 1.132-5 (k) Aircraft allocation rule.
§ 1.132-5 (l) [Reserved]
§ 1.132-5 (m) Employer-provided transportation for security concerns.
(1) In general.
(2) Demonstration of bona fide business-oriented security concerns.
(3) Application of security rules to spouses and dependents.
(4) Working condition safe harbor for travel on employer-provided aircraft.
(5) Bodyguard/chauffeur provided for a bona fide business-oriented security concern.
(6) Special valuation rule for government employees.
(7) Government employer and employee defined.
(8) Examples.
§ 1.132-5 (n) Product testing.
(1) In general.
(2) Employer-imposed limits.
(3) Discriminating classifications.
(4) Factors that negate the existence of a product testing program.
(5) Failure to meet the requirements of this paragraph (n).
(6) Example.
§ 1.132-5 (o) Qualified automobile demonstration use.
(1) In general.
(2) Full-time automobile salesman.
(3) Demonstration automobile.
(4) Substantial restrictions on personal use.
(5) Sales area.
(6) Applicability of substantiation requirements of sections 162 and 274(d).
(7) Special valuation rules.
§ 1.132-5 (p) Parking.
(1) In general.
(2) Reimbursement of parking expenses.
(3) Parking on residential property.
(4) Dates of applicability.
§ 1.132-5 (q) Nonapplicability of nondiscrimination rules.
§ 1.132-5 (r) Volunteers.
(1) In general.
(2) Limit on application of this paragraph.
(3) Definitions.
(4) Example.
§ 1.132-6 (a) In general.
§ 1.132-6 (b) Frequency.
(1) Employee-measured frequency.
(2) Employer-measured frequency.
§ 1.132-6 (c) Administrability.
§ 1.132-6 (d) Special rules.
(1) Transit passes.
(2) Occasional meal money or local transportation fare.
(3) Use of special rules or examples to establish a general rule.
(4) Benefits exceeding value and frequency limits.
§ 1.132-6 (e) Examples.
(1) Benefits excludable from income.
(2) Benefits not excludable as de minimis fringes.
§ 1.132-6 (f) Nonapplicability of nondiscrimination rules.
§ 1.132-7 (a) In general.
(1) Conditions for exclusion.
(2) Employer-operated eating facility for employees.
(3) Operation by the employer.
(4) Example.
§ 1.132-7 (b) Direct operating costs.
(1) In general.
(2) Multiple dining rooms or cafeterias.
(3) Payment to operator of facility.
§ 1.132-7 (c) Valuation of non-excluded meals provided at an employer-operated eating facility for employees.
§ 1.132-8 (a) Application of nondiscrimination rules.
(1) General rule.
(2) Consequences of discrimination.
(3) Scope of the nondiscrimination rules provided in this section.
§ 1.132-8 (b) Aggregation of Employees.
(1) Section 132(a) (1) and (2).
(2) Section 132(e)(2).
(3) Classes of employees who may be excluded.
§ 1.132-8 (c) Availability on substantially the same terms.
(1) General rule.
(2) Certain terms relating to priority.
§ 1.132-8 (d) Testing for discrimination.
(1) Classification test.
(2) Classifications that are per se discriminatory.
(3) Former employees.
(4) Restructuring of benefits.
(5) Employer-operated eating facilities for employees.
§ 1.132-8 (e) Cash bonuses or rebates.
§ 1.132-8 (f) Highly compensated employee.
(1) Government and non-government employees.
(2) Former employees.
§ 1.132-9 (a) Table of contents.
§ 1.132-9 (b) Questions and answers.
§ 1.132-1 Exclusion from gross income for certain fringe benefits.
(a) In general. Gross income does not include any fringe benefit which qualifies as a—
(1) No-additional-cost service,
(2) Qualified employee discount,
(3) Working condition fringe, or
(4) De minimis fringe.
(b) Definition of employee—(1) No-additional-cost services and qualified employee discounts. For purposes of section 132(a)(1) (relating to no-additional-cost services) and section 132(a)(2) (relating to qualified employee discounts), the term “employee” (with respect to a line of business of an employer means—
(i) Any individual who is currently employed by the employer in the line of business,
(ii) Any individual who was formerly employed by the employer in the line of business and who separated from service with the employer in the line of business by reason of retirement or disability, and
(iii) Any widow or widower of an individual who died while employed by the employer in the line of business or who separated from service with the employer in the line of business by reason of retirement or disability.
(2) Working condition fringes. For purposes of section 132(a)(3) (relating to working condition fringes), the term “employee” means—
(i) Any individual who is currently employed by the employer,
(ii) Any partner who performs services for the partnership,
(iii) Any director of the employer, and
(iv) Any independent contractor who performs services for the employer.
(3) On-premises athletic facilities. For purposes of section 132(h)(5) (relating to on-premises athletic facilities), the term “employee” means—
(i) Any individual who is currently employed by the employer,
(ii) Any individual who was formerly employed by the employer and who separated from service with the employer by reason of retirement or disability, and
(iii) Any widow or widower of an individual who died while employed by the employer or who separated from service with the employer by reason of retirement or disability.
(4) De minimis fringes. For purposes of section 132(a)(4) (relating to de minimis fringes), the term “employee” means any recipient of a fringe benefit.
(5) Dependent child. The term “dependent child” means any son, stepson, daughter, or stepdaughter of the employee who is a dependent of the employee, or both of whose parents are deceased and who has not attained age 25. Any child to whom section 152(e) applies will be treated as the dependent of both parents.
(c) Special rules for employers—Effect of section 414. All employees treated as employed by a single employer under section 414 (b), (c), (m), or (o) will be treated as employed by a single employer for purposes of this section. Thus, employees of one corporation that is part of a controlled group of corporations may under certain circumstances be eligible to receive section 132 benefits from the other corporations that comprise the controlled group. However, the aggregation of employers described in this paragraph (c) does not change the other requirements for an exclusion, such as the line of business requirement. Thus, for example, if a controlled group of corporations consists of two corporations that operate in different lines of business, the corporations are not treated as operating in the same line of business even though the corporations are treated as one employer.
(d) Customers not to include employees. For purposes of section 132 and the regulations thereunder, the term “customer” means any customer who is not an employee. However, the preceding sentence does not apply to section 132(c)(2) (relating to the gross profit percentage for determining a qualified employee discount). Thus, an employer that provides employee discounts cannot exclude sales made to employees in determining the aggregate sales to customers.
(e) Treatment of on-premises athletic facilities—(1) In general. Gross income does not include the value of any on-premises athletic facility provided by an employer to its employees. For purposes of section 132(h)(5) and this paragraph (e), the term “on-premises athletic facility” means any gym or other athletic facility (such as a pool, tennis court, or golf course)—
(i) Which is located on the premises of the employer, (ii) Which is operated by the employer, and (iii) Substantially all of the use of which during the calendar year is by employees of the employer, their spouses, and their dependent children.
(2) Premises of the employer. The athletic facility need not be located on the employer’s business premises. However, the athletic facility must be located on premises of the employer. The exclusion provided in this paragraph (e) applies whether the premises are owned or leased by the employer; in addition, the exclusion is available even if the employer is not a named lessee on the lease so long as the employer pays reasonable rent. The exclusion provided in this paragraph (e) does not apply to any athletic facility that is a facility for residential use. Thus, for example, a resort with accompanying athletic facilities (such as tennis courts, pool, and gym) would not qualify for the exclusion provided in this paragraph (e). An athletic facility is considered to be located on the employer’s premises if the facility is located on the premises of a voluntary employees’ beneficiary association funded by the employer.
(3) Application of rules to membership in an athletic facility. The exclusion provided in this paragraph (e) does not apply to any membership in an athletic facility (including health clubs or country clubs) unless the facility is owned (or leased) and operated by the employer and substantially all the use of the facility is by employees of the employer, their spouses, and their dependent children. Therefore, membership in a health club or country club not meeting the rules provided in this paragraph (e) would not qualify for the exclusion.
(4) Operation by the employer. An employer is considered to operate the athletic facility if the employer operates the facility through its own employees, or if the employer contracts out to another to operate the athletic facility. For example, if an employer hires an independent contractor to operate the athletic facility for the employer’s employees, the facility is considered to be operated by the employer. In addition, if an athletic facility is operated by more than one employer, it is considered to be operated by each employer. For purposes of paragraph (e) (1) (iii) of this section, substantially all of the use of a facility that is operated by more than one employer must be by employees of the various employers, their spouses, and their dependent children. Where the facility is operated by more than one employer, an employer that pays rent either directly to the owner of the premises or to a sublessor of the premises is eligible for the exclusion. If an athletic facility is operated by a voluntary employees’ beneficiary association funded by an employer, the employer is considered to operate the facility.
(5) Nonapplicability of nondiscrimination rules. The nondiscrimination rules of section 132 and § 1.132-8 do not apply to on-premises athletic facilities.
(f) Nonapplicability of section 132 in certain cases—(1) Tax treatment provided for in another section. If the tax treatment or a particular fringe benefit is expressly provided for in another section of Chapter 1 of the Internal Revenue Code of 1986, section 132 and the applicable regulations (except for section 132 (e) and the regulations thereunder) do not apply to such fringe benefit. For example, because section 129 provides an exclusion from gross income for amounts paid or incurred by an employer for dependent care assistance for an employee, the exclusions under section 132 and this section do not apply to the provision by an employer to an employee of dependent care assistance. Similarly, because section 117 (d) applies to tuition reductions, the exclusions under section 132 do not apply to free or discounted tuition provided to an employee by an organization operated by the employer, whether the tuition is for study at or below the graduate level. Of course, if the amounts paid by the employer are for education relating to the employee’s trade or business of being an employee of the employer so that, if the employee paid for the education, the amount paid could be deducted under section 162, the costs of the education may be eligible for exclusion as a working condition fringe.
(2) Limited statutory exclusions. If another section of Chapter 1 of the Internal Revenue Code of 1986 provides an exclusion from gross income based on the cost of the benefit provided to the employee and such exclusion is a limited amount, section 132 and the regulations thereunder may apply to the extent the cost of the benefit exceeds the statutory exclusion.
(g) Effective date. Sections 1.132-0, 1.132-1, 1.132-2, 1.132-3, 1.132-4, 1.132-5, 1.132-6, 1.132-7 and 1.132-8 are effective as of January 1, 1989, except that §§ 1.132-1(b)(1) with respect to the use of air transportation by a parent of an employee and 1.132-4(d) are effective as of January 1, 1985. Furthermore, in § 1.132-5, the eleventh sentence of paragraph (m)(1), Examples 6 and 7 in paragraph (m)(8), and paragraphs (m)(2)(i), (m)(2)(v), (m)(3)(iv), (m)(6), (m)(7), and (r) are effective December 30, 1992; however, taxpayers may treat the rules as applicable to benefits provided on or after January 1, 1989. For the applicable rules relating to employer-provided transportation for security concerns prior to December 30, 1992, see § 1.132-5(m) (as contained in 26 CFR part 1 (§§ 1.61 to 1.169) revised April 1, 1992).
§ 1.132-2 No-additional-cost services.
(a) In general—(1) Definition. Gross income does not include the value of a no-additional-cost service. A “no-additional-cost service” is any service provided by an employer to an employee for the employee’s personal use if—
(i) The service is offered for sale by the employer to its customers in the ordinary course of the line of business of the employer in which the employee performs substantial services, and
(ii) The employer incurs no substantial additional cost in providing the service to the employee (including foregone revenue and excluding any amount paid by or on behalf of the employee for the service).
(2) Excess capacity services. Services that are eligible for treatment as no-additional-cost services include excess capacity services such as hotel accommodations; transportation by aircraft, train, bus, subway, or cruise line; and telephone services. Services that are not eligible for treatment as no-additional-cost services are non-excess capacity services such as the facilitation by a stock brokerage firm of the purchase of stock. Employees who receive non-excess capacity services may, however, be eligible for a qualified employee discount of up to 20 percent of the value of the service provided. See § 1.132-3.
(3) Cash rebates. The exclusion for a no-additional-cost service applies whether the service is provided at no charge or at a reduced price. The exclusion also applies if the benefit is provided through a partial or total cash rebate of an amount paid for the service.
(4) Applicability of nondiscrimination rules. The exclusion for a no-additional-cost service applies to highly compensated employees only if the service is available on substantially the same terms to each member of a group of employees that is defined under a reasonable classification set up by the employer that does not discriminate in favor of highly compensated employees. See § 1.132-8.
(5) No substantial additional cost—(i) In general. The exclusion for a no-additional-cost service applies only if the employer does not incur substantial additional cost in providing the service to the employee. For purposes of the preceding sentence, the term “cost” includes revenue that is forgone because the service is provided to an employee rather than a nonemployee. (For purposes of determining whether any revenue is forgone, it is assumed that the employee would not have purchased the service unless it were available to the employee at the actual price charged to the employee.) Whether an employer incurs substantial additional cost must be determined without regard to any amount paid by the employee for the service. Thus, any reimbursement by the employee for the cost of providing the service does not affect the determination of whether the employer incurs substantial additional cost.
(ii) Labor intensive services. An employer must include the cost of labor incurred in providing services to employees when determining whether the employer has incurred substantial additional cost. An employer incurs substantial additional cost, whether non-labor costs are incurred, if a substantial amount of time is spent by the employer or its employees in providing the service to employees. This would be the result whether the time spent by the employer or its employees in providing the services would have been “idle,” or if the services were provided outside normal business hours. An employer generally incurs no substantial additional cost, however, if the services provided to the employee are merely incidental to the primary service being provided by the employer. For example, the in-flight services of a flight attendant and the cost of in-flight meals provided to airline employees traveling on a space-available basis are merely incidental to the primary service being provided (i.e., air transportation). Similarly, maid service provided to hotel employees renting hotel rooms on a space-available basis is merely incidental to the primary service being provided (i.e., hotel accommodations).
(6) Payments for telephone service. Payment made by an entity subject to the modified final judgment (as defined in section 559(c)(5) of the Tax Reform Act of 1984) of all or part of the cost of local telephone service provided to an employee by a person other than an entity subject to the modified final judgment shall be treated as telephone service provided to the employee by the entity making the payment for purposes of this section. The preceding sentence also applies to a rebate of the amount paid by the employee for the service and a payment to the person providing the service. This paragraph (a)(6) applies only to services and employees described in § 1.132-4 (c). For a special line of business rule relating to such services and employees, see § 1.132-4 (c).
(b) Reciprocal agreements. For purposes of the exclusion from gross income for a no-additional-cost service, an exclusion is available to an employee of one employer for a no-additional-cost service provided by an unrelated employer only if all of the following requirements are satisfied—
(1) The service provided to such employee by the unrelated employer is the same type of service generally provided to nonemployee customers by both the line of business in which the employee works and the line of business in which the service is provided to such employee (so that the employee would be permitted to exclude from gross income the value of the service if such service were provided directly by the employee’s employer);
(2) Both employers are parties to a written reciprocal agreement under which a group of employees of each employer, all of whom perform substantial services in the same line of business, may receive no-additional-cost services from the other employer; and
(3) Neither employer incurs any substantial additional cost (including forgone revenue) in providing such service to the employees of the other employer, or pursuant to such agreement. If one employer receives a substantial payment from the other employer with respect to the reciprocal agreement, the paying employer will be considered to have incurred a substantial additional cost pursuant to the agreement, and consequently services performed under the reciprocal agreement will not qualify for exclusion as no-additional-cost services.
(c) Example. The rules of this section are illustrated by the following example:
§ 1.132-3 Qualified employee discounts.
(a) In general—(1) Definition. Gross income does not include the value of a qualified employee discount. A “qualified employee discount” is any employee discount with respect to qualified property or services provided by an employer to an employee for use by the employee to the extent the discount does not exceed—
(i) The gross profit percentage multiplied by the price at which the property is offered to customers in the ordinary course of the employer’s line of business, for discounts on property, or
(ii) Twenty percent of the price at which the service is offered to customers, for discounts on services.
(2) Qualified property or services—(i) In general. The term “qualified property or services” means any property or services that are offered for sale to customers in the ordinary course of the line of business of the employer in which the employee performs substantial services. For rules relating to the line of business limitation, see § 1.132-4.
(ii) Exception for certain property. The term “qualified property” does not include real property and it does not include personal property (whether tangible or intangible) of a kind commonly held for investment. Thus, an employee may not exclude from gross income the amount of an employee discount provided on the purchase of securities, commodities, or currency, or of either residential or commercial real estate, whether or not the particular purchase is made for investment purposes.
(iii) Property and services not offered in ordinary course of business. The term “qualified property or services” does not include any property or services of a kind that is not offered for sale to customers in the ordinary course of the line of business of the employer. For example, employee discounts provided on property or services that are offered for sale primarily to employees and their families (such as merchandise sold at an employee store or through an employer-provided catalog service) may not be excluded from gross income. For rules relating to employer-operated eating facilities, see § 1.132-7, and for rules relating to employer-operated on-premises athletic facilities, see § 1.132-1(e).
(3) No reciprocal agreement exception. The exclusion for a qualified employee discount does not apply to property or services provided by another employer pursuant to a written reciprocal agreement that exists between employers to provide discounts on property and services to employees of the other employer.
(4) Property or services provided without charge, at a reduced price, or by rebates. The exclusion for a qualified employee discount applies whether the property or service is provided at no charge (in which case only part of the discount may be excludable as a qualified employee discount) or at a reduced price. The exclusion also applies if the benefit is provided through a partial or total cash rebate of an amount paid for the property or service.
(5) Property or services provided directly by the employer or indirectly through a third party. A qualified employee discount may be provided either directly by the employer or indirectly through a third party. For example, an employee of an appliance manufacturer may receive a qualified employee discount on the manufacturer’s appliances purchased at a retail store that offers such appliances for sale to customers. The employee may exclude the amount of the qualified employee discount whether the employee is provided the appliance at no charge or purchases it at a reduced price, or whether the employee receives a partial or total cash rebate from either the employer-manufacturer or the retailer. If an employee receives additional rights associated with the property that are not provided by the employee’s employer to customers in the ordinary course of the line of business in which the employee performs substantial services (such as the right to return or exchange the property or special warranty rights), the employee may only receive a qualified employee discount with respect to the property and not the additional rights. Receipt of such additional rights may occur, for example, when an employee of a manufacturer purchases property manufactured by the employee’s employer at a retail outlet.
(6) Applicability of nondiscrimination rules. The exclusion for a qualified employee discount applies to highly compensated employees only if the discount is available on substantially the same terms to each member of a group of employees that is defined under a reasonable classification set up by the employer that does not discriminate in favor of highly compensated employees. See § 1.132-8.
(b) Employee discount—(1) Definition. The term “employee discount” means the excess of—
(i) The price at which the property or service is being offered by the employer for sale to customers, over
(ii) The price at which the property or service is provided by the employer to an employee for use by the employee. A transfer of property by an employee without consideration is treated as use by the employee for purposes of this section. Thus, for example, if an employee receives a discount on property offered for sale by his employer to customers and the employee makes a gift of the property to his parent, the property will be considered to be provided for use by the employee; thus, the discount will be eligible for exclusion as a qualified employee discount.
(2) Price to customers—(i) Determined at time of sale. In determining the amount of an employee discount, the price at which the property or service is being offered to customers at the time of the employee’s purchase is controlling. For example, assume that an employer offers a product to customers for $20 during the first six months of a calendar year, but at the time the employee purchases the product at a discount, the price at which the product is being offered to customers is $25. In this case, the price from which the employee discount is measured is $25. Assume instead that, at the time the employee purchases the product at a discount, the price at which the product is being offered to customers is $15 and the price charged the employee is $12. The employee discount is measured from $15, the price at which the product is offered for sale to customers at the time of the employee purchase. Thus, the employee discount is $15 −$12, or $3.
(ii) Quantity discount not reflected. The price at which a property or service is being offered to customers cannot reflect any quantity discount unless the employee actually purchases the requisite quantity of the property or service.
(iii) Price to employer’s customers controls. In determining the amount of an employee discount, the price at which a property or service is offered to customers of the employee’s employer is controlling. Thus, the price at which the property is sold to the wholesale customers of a manufacturer will generally be lower than the price at which the same property is sold to the customers of a retailer. However, see paragraph (a)(5) of this section regarding the effect of a wholesaler providing to its employees additional rights not provided to customers of the wholesaler in the ordinary course of its business.
(iv) Discounts to discrete customer or consumer groups. Subject to paragraph (2)(ii) of this section, if an employer offers for sale property or services at one or more discounted prices to discrete customer or consumer groups, and sales at all such discounted prices comprise at least 35 percent of the employer’s gross sales for a representative period, then in determining the amount of an employee discount, the price at which such property or service is being offered to customers for purposes of this section is a discounted price. The applicable discounted price is the current undiscounted price, reduced by the percentage discount at which the greatest percentage of the employer’s discounted gross sales are made for such representative period. If sales at different percentage discounts equal the same percentage of the employer’s gross sales, the price at which the property or service is being provided to customers may be reduced by the average of the discounts offered to each of the two groups. For purposes of this section, a representative period is the taxable year of the employer immediately preceding the taxable year in which the property or service is provided to the employee at a discount. If more than one employer would be aggregated under section 414 (b), (c), (m), or (o), and not all of the employers have the same taxable year, the employers required to be aggregated must designate the 12-month period to be used in determining gross sales for a representative period. The 12-month period designated, however, must be used on a consistent basis.
(v) Examples. The rules provided in this paragraph (b)(2) are illustrated by the following examples:
(3) Damaged, distressed, or returned goods. If an employee pays at least fair market value for damaged, distressed, or returned property, such employee will not have income attributable to such purchase.
(c) Gross profit percentage—(1) In general—(i) General rule. An exclusion from gross income for an employee discount on qualified property is limited to the price at which the property is being offered to customers in the ordinary course of the employer’s line of business, multiplied by the employer’s gross profit percentage. The term “gross profit percentage” means the excess of the aggregate sales price of the property sold by the employer to customers (including employees) over the employer’s aggregate cost of the property, then divided by the aggregate sales price.
(ii) Calculation of gross profit percentage. The gross profit percentage must be calculated separately for each line of business based on the aggregate sales price and aggregate cost of property in that line of business for a representative period. For purposes of this section, a representative period is the taxable year of the employer immediately preceding the taxable year in which the discount is available. For example, if the aggregate amount of sales of property in an employer’s line of business for the prior taxable year was $800,000, and the aggregate cost of the property for the year was $600,000, the gross profit percentage would be 25 percent ($800,000 minus $600,000, then divided by $800,000). If two or more employers are required to aggregate under section 414 (b), (c), (m), or (o) (aggregated employer), and if all of the aggregated employers do not share the same taxable year, then the aggregated employers must designate the 12-month period to be used in determining the gross profit percentage. The 12-month period designated, however, must be used on a consistent basis. If an employee performs substantial services in more than one line of business, the gross profit percentage of the line of business in which the property is sold determines the amount of the excludable employee discount.
(iii) Special rule for employers in their first year of existence. An employer in its first year of existence may estimate the gross profit percentage of a line of business based on its mark-up from cost. Alternatively, an employer in its first year of existence may determine the gross profit percentage by reference to an appropriate industry average.
(iv) Redetermination of gross profit percentage. If substantial changes in an employer’s business indicate at any time that it is inappropriate for the prior year’s gross profit percentage to be used for the current year, the employer must, within a reasonable period, redetermine the gross profit percentage for the remaining portion of the current year as if such portion of the year were the first year of the employer’s existence.
(2) Line of business. In general, an employer must determine the gross profit percentage on the basis of all property offered to customers (including employees) in each separate line of business. An employer may instead select a classification of property that is narrower than the applicable line of business. However, the classification must be reasonable. For example, if an employer computes gross profit percentage according to the department in which products are sold, such classification is reasonable. Similarly, it is reasonable to compute gross profit percentage on the basis of the type of merchandise sold (such as high mark-up and low mark-up classifications). It is not reasonable, however, for an employer to classify certain low mark-up products preferred by certain employees (such as highly compensated employees) with high mark-up products or to classify certain high mark-up products preferred by other employees with low mark-up products.
(3) Generally accepted accounting principles. In general, the aggregate sales price of property must be determined in accordance with generally accepted accounting principles. An employer must compute the aggregate cost of property in the same manner in which it is computed for the employer’s Federal income tax liability; thus, for example, section 263A and the regulations thereunder apply in determining the cost of property.
(d) Treatment of leased sections of department stores—(1) In general—(i) General rule. For purposes of determining whether employees of a leased section of a department store may receive qualified employee discounts at the department store and whether employees of the department store may receive qualified employee discounts at the leased section of the department store, the leased section is treated as part of the line of business of the person operating the department store, and employees of the leased section are treated as employees of the person operating the department store as well as employees of their employer. The term “leased section of a department store” means a section of a department store where substantially all of the gross receipts of the leased section are from over-the-counter sales of property made under a lease, license, or similar arrangement where it appears to the general public that individuals making such sales are employed by the department store. A leased section of a department store which, in connection with the offering of beautician services, customarily makes sales of beauty aids in the ordinary course of business is deemed to derive substantially all of its gross receipts from over-the-counter sales of property.
(ii) Calculation of gross profit percentage. For purposes of paragraph (d) of this section, when calculating the gross profit percentage of property and services sold at a department store, sales of property and services sold at the department store, as well as sales of property and services sold at the leased section, are considered. The rule provided in the preceding sentence does not apply, however, if it is more reasonable to calculate the gross profit percentage for the department store and leased section separately, or if it would be inappropriate to combine them (such as where either the department store or the leased section but not both provides employee discounts).
(2) Employees of the leased section—(i) Definition. For purposes of this paragraph (d), “employees of the leased section” means all employees who perform substantial services at the leased section of the department store regardless of whether the employees engage in over-the-counter sales of property or services. The term “employee” has the same meaning as in section 132(f) and § 1.132-1(b)(1).
(ii) Discounts offered to either department store employees or employees of the leased section. If the requrements of this paragraph (d) are satisfied, employees of the leased section may receive qualified employee discounts at the department store whether or not employees of the department store are offered discounts at the leased section. Similarly, employees of the department store may receive a qualified employee discount at the leased section whether or not employees of the leased section are offered discounts at the department store.
(e) Excess discounts. Unless excludable under a provision of the Internal Revenue Code of 1986 other than section 132(a)(2), an employee discount provided on property is excludable to the extent of the gross profit percentage multiplied by the price at which the property is being offered for sale to customers. If an employee discount exceeds the gross profit percentage, the excess discount is includible in the employee’s income. For example, if the discount on employer-purchased property is 30 percent and the employer’s gross profit percentage for the period in the relevant line of business is 25 percent, then 5 percent of the price at which the property is being offered for sale to customers is includible in the empoyee’s income. With respect to services, an employee discount of up to 20 percent may be excludable. If an employee discount exceeds 20 percent, the excess discount is includible in the employee’s income. For example, assume that a commercial airline provides a pass to each of its employees permitting the employees to obtain a free round-trip coach ticket with a confirmed seat to any destination the airline services. Neither the exclusion of section 132(a)(1) (relating to no-additional-cost services) nor any other statutory exclusion applies to a flight taken primarily for personal purposes by an employee under this program. However, an employee discount of up to 20 percent may be excluded as a qualified employee discount. Thus, if the price charged to customers for the flight taken is $300 (under restrictions comparable to those actually placed on travel associated with the employee airline ticket), $60 is excludible from gross income as a qualified employee discount and $240 is includible in gross income.
§ 1.132-4 Line of business limitation.
(a) In general—(1) Applicability—(i) General rule. A no-additional-cost service or a qualified employee discount provided to an employee is only available with respect to property or services that are offered for sale to customers in the ordinary course of the same line of business in which the employee receiving the property or service performs substantial services. Thus, an employee who does not perform substantial services in a particular line of business of the employer may not exclude from income under section 132 (a)(1) or (a)(2) the value of services or employee discounts received on property or services in that line of business. For rules that relax the line of business requirement, see paragraphs (b) through (g) of this section.
(ii) Property and services sold to employees rather than customers. Because the property or services must be offered for sale to customers in the ordinary course of the same line of business in which the employee performs substantial services, the line of business limitation is not satisfied if the employer’s products or services are sold primarily to employees of the employer, rather than to customers. Thus, for example, an employer in the banking line of business is not considered in the variety store line of business if the employer establishes an employee store that offers variety store items for sale to the employer’s employees. See § 1.132-7 for rules relating to employer-operated eating facilities, and see § 1.132-1(e) for rules relating to employer-operated on-premises athletic facilities.
(iii) Performance of substantial services in more than one line of business. An employee who performs services in more than one of the employer’s lines of business may only exclude no-additional-cost services and qualified employee discounts in the lines of business in which the employee performs substantial services.
(iv) Performance of services that directly benefit more than one line of business—(A) In general. An employee who performs substantial services that directly benefit more than one line of business of an employer is treated as performing substantial services in all such line of business. For example, an employee who maintains accounting records for an employer’s three lines of business may receive qualified employee discounts in all three lines of business. Similarly, if an employee of a minor line of business of an employer that is significantly interrelated with a major line of business of the employer performs substantial services that directly benefit both the major and the minor lines of business, the employee is treated as performing substantial services for both the major and the minor lines of business.
(B) Examples. The rules provided in this paragraph (a)(1)(iv) are illustrated by the following examples:
(2) Definition—(i) In general. An employer’s line of business is determined by reference to the Enterprise Standard Industrial Classification Manual (ESIC Manual) prepared by the Statistical Policy Division of the U.S. Office of Management and Budget. An employer is considered to have more than one line of business if the employer offers for sale to customers property or services in more than one two-digit code classification referred to in the ESIC Manual.
(ii) Examples. Examples of two-digit classifications are general retail merchandise stores; hotels and other lodging places; auto repair, services, and garages; and food stores.
(3) Aggregation of two-digit classifications. If, pursuant to paragraph (a)(2) of this section, an employer has more than one line of business, such lines of business will be treated as a single line of business where and to the extent that one or more of the following aggregation rules apply:
(i) If it is uncommon in the industry of the employer for any of the separate lines of business of the employer to be operated without the others, the separate lines of business are treated as one line of business.
(ii) If it is common for a substantial number of employees (other than those employees who work at the headquarters or main office of the employer) to perform substantial services for more than one line of business of the employer, so that determination of which employees perform substantial services for which line or lines of business would be difficult, then the separate lines of business of the employer in which such employees perform substantial services are treated as one line of business. For example, assume that an employer operates a delicatessen with an attached service counter at which food is sold for consumption on the premises. Assume further that most but not all employees work both at the delicatessen and at the service counter. Under the aggregation rule of this paragraph (a)(3)(ii), the delicatessen and the service counter are treated as one line of business.
(iii) If the retail operations of an employer that are located on the same premises are in separate lines of business but would be considered to be within one line of business under paragraph (a)(2) of this section if the merchandise offered for sale in such lines of business were offered for sale at a department store, then the operations are treated as one line of business. For example, assume that on the same premises an employer sells both women’s apparel and jewelry. Because, if sold together at a department store, the operations would be part of the same line of business, the operations are treated as one line of business.
(b) Grandfather rule for certain retail stores—(1) In general. The line of business limitation may be relaxed under the special grandfather rule of this paragraph (b). Under this special grandfather rule, if—
(i) On October 5, 1983, at least 85 percent of the employees of one member of an affiliated group (as defined in section 1504 without regard to subsections (b)(2) and (b)(4) thereof) (“first member”) were entitled to receive employee discounts at retail department stores operated by another member of the affiliated group (“second member”), and
(ii) More than 50 percent of the previous year’s sales of the affiliated group are attributable to the operation of retail department stores, then, for purposes of the exclusion from gross income of a qualified employee discount, the first member is treated as engaged in the same line of business as the second member (the opeator of the retail department stores). Therefore, employees of the first member of the affiliated group may exclude from income qualified employee discounts received at the retail department stores operated by the second member. However, employees of the second member of the affiliated group may not under this paragraph (b)(1) exclude any discounts received on property or services offered for sale to customers by the first member of the affiliated group.
(2) Taxable year of affiliated group. If not all of the members of an affiliated group have the same taxable year, the affiliated group must designate the 12-month period to be used in determining the “previous year’s sales” (as referred to in the grandfather rule of this paragraph (b)). The 12-month period designated, however, must be used on a consistent basis.
(3) Definition of “sales.” For purposes of this paragraph (b), the term “sales” means the gross receipts of an affiliated group, based upon the accounting methods used by its members.
(4) Retired and disabled employees. For purposes of this paragraph (b), an employee includes any individual who was, or whose spouse was, formerly employed by the first member of an affiliated group and who separated from service with the member by reason of retirement or disability if the second member of the group provided employee discounts to that individual on October 5, 1983.
(5) Increase of employee discount. If, after October 5, 1983, the employee discount described in this paragraph (b) is increased, the grandfather rule of this paragraph (b) does not apply to the amount of the increase. For example, if on January 1, 1989, the employee discount is increased from 10 percent to 15 percent, the grandfather rule will not apply to the additional 5 percent discount.
(c) Grandfather rule for telephone service provided to predivestiture retirees. All entities subject to the modified final judgment (as defined in section 559(c)(5) of the Tax Reform Act of 1984) shall be treated as a single employer engaged in the same line of business for purposes of determining whether telephone service provided to certain employees is a no-additional-cost service. The preceding sentence applies only in the case of an employee who by reason of retirement or disability separated before January 1, 1984, from the service of an entity subject to the modified final judgment. This paragraph (c) only applies to services provided to such employees as of January 1, 1984. For a special no-additional-cost service rule relating to such employees and such services, see § 1.132-2(a)(6).
(d) Special rule for certain affiliates of commercial airlines—(1) General rule. If a qualified affiliate is a member of an airline affiliated group and employees of the qualified affiliate who are directly engaged in providing airline-related services are entitled to no-additional-cost service with respect to air transportation provided by such other member, then, for purposes of applying § 1.132-2 (relating to no-additional-cost services with respect to such air transportation), such qualified affiliate shall be treated as engaged in the same line of business as such other member.
(2) “Airline affiliated group” defined. An “airline affiliated group” is an affiliated group (as defined in section 1504 (a)) one of whose members operates a commercial airline that provides air transportation to customers on a per-seat basis.
(3) “Qualified affiliate” defined. A “qualified affiliate” is any corporation that is predominantly engaged in providing airline-related services. The term “airline-related services” means any of the following services provided in connection with air transportation:
(i) Catering,
(ii) Baggage handling,
(iii) Ticketing and reservations,
(iv) Flight planning and weather analysis, and
(v) Restaurants and gift shops located at an airport.
(e) Grandfather rule for affiliated groups operating airlines. The line of business limitation may be relaxed under the special grandfather rule of this paragraph (e). Under this special grandfather rule, if, as of September 12, 1984—
(1) An individual—
(i) Was an employee (within the meaning of § 1.132-1 (b)) of one member of an affiliated group (as defined in section 1504(a)) (“first corporation”), and
(ii) Was eligible for no-additional-cost services in the form of air transportation provided by another member of such affiliated group (“second corporation”),
(2) At least 50 percent of the individuals performing services for the first corporation were, or had been employees of, or had previously performed services for, the second corporation, and
(3) The primary business of the affiliated group was air transportation of passengers, then, for purposes of applying sections 132(a) (1) and (2), with respect to no-additional-cost services and qualified employee discounts provided after December 31, 1984, for that individual by the second corporation, the first corporation is treated as engaged in the same air transporation line of business as the second corporation. For purposes of the preceding sentence, an employee of the second corporation who is performing services for the first corporation is also treated as an employee of the first corporation.
(f) Special rule for qualified air transportation organizations. A qualified air transportation organization is treated as engaged in the line of business of providing air transportation with respect to any individual who performs services for the organization if those services are peformed primarily for persons engaged in providing air transportation, and are of a kind which (if performed on September 12, 1984) would qualify the individual for no-additional-cost services in the form of air transportation. The term “qualified air transportation organization” means any organization—
(1) If such organization (or a predecessor) was in existence on September 12, 1984,
(2) If such organization is—
(i) A tax-exempt organization under section(c)(6) whose membership is limited to entities engaged in the transportation by air of individuals or property for compensation or hire, or
(ii) Is a corporation all the stock of which is owned entirely by entities described in paragraph (f)(2)(i) of this section, and
(3) If such organization is operated in furtherance of the activities of its members or owners.
(g) Relaxation of line of business requirement. The line of business requirement may be relaxed under an elective grandfather rule provided in section 4977. For rules relating to the section 4977 election, see § 54.4977-1T.
(h) Line of business requirement does not expand benefits eligible for exclusion. The line of business requirement limits the benefits eligible for the no-additional-cost service and qualified employee discount exclusions to property or services provided by an employer to its customers in the ordinary course of the line of business of the employer in which the employee performs substantial services. The requirement is intended to ensure that employers do not offer, on a tax-free or reduced basis, property or services to employees that are not offered to the employer’s customers, even if the property or services offered to the customers and the employees are within the same line of business (as defined in this section).
§ 1.132-5 Working condition fringes.
(a) In general—(1) Definition. Gross income does not include the value of a working condition fringe. A “working condition fringe” is any property or service provided to an employee of an employer to the extent that, if the employee paid for the property or service, the amount paid would be allowable as a deduction under section 162 or 167.
(i) A service or property offered by an employer in connection with a flexible spending account is not excludable from gross income as a working condition fringe. For purposes of the preceding sentence, a flexible spending account is an agreement (whether or not written) entered into between an employer and an employee that makes available to the employee over a time period a certain level of unspecified non-cash benefits with a pre-determined cash value.
(ii) If, under section 274 or any other section, certain substantiation requirements must be met in order for a deduction under section 162 or 167 to be allowable, then those substantiation requirements apply when determining whether a property or service is excludable as a working condition fringe.
(iii) An amount that would be deductible by the employee under a section other than section 162 or 167, such as section 212, is not a working condition fringe.
(iv) A physical examination program provided by the employer is not excludable as a working condition fringe even if the value of such program might be deductible to the employee under section 213. The previous sentence applies without regard to whether the employer makes the program mandatory to some or all employees.
(v) A cash payment made by an employer to an employee will not qualify as a working condition fringe unless the employer requires the employee to—
(A) Use the payment for expenses in connection with a specific or pre-arranged activity or undertaking for which a deduction is allowable under section 162 or 167,
(B) Verify that the payment is actually used for such expenses, and
(C) Return to the employer any part of the payment not so used.
(vi) The limitation of section 67(a) (relating to the two-percent floor on miscellaneous itemized deductions) is not considered when determining the amount of a working condition fringe. For example, assume that an employer provides a $1,000 cash advance to Employee A and that the conditions of paragraph (a)(1)(v) of this section are not satisfied. Even to the extent A uses the allowance for expenses for which a deduction is allowable under section 162 and 167, because such cash payment is not a working condition fringe, section 67(a) applies. The $1,000 payment is includible in A’s gross income and subject to income and employment tax withholding. If, however, the conditions of paragraph (a)(1)(v) of this section are satisfied with respect to the payment, then the amount of A’s working condition fringe is determined without regard to section 67(a). The $1,000 payment is excludible from A’s gross income and not subject to income and employment tax reporting and withholding.
(2) Trade or business of the employee—(i) General. If the hypothetical payment for a property or service would be allowable as a deduction with respect to a trade or business of an employee other than the employee’s trade or business of being an employee of the employer, it cannot be taken into account for purposes of determining the amount, if any, of the working condition fringe.
(ii) Examples. The rule of paragraph (a)(2)(i) of this section may be illustrated by the following examples:
(b) Vehicle allocation rules—(1) In general—(i) General rule. In general, with respect to an employer-provided vehicle, the amount excludable as a working condition fringe is the amount that would be allowable as a deduction under section 162 or 167 if the employee paid for the availability of the vehicle. For example, assume that the value of the availability of an employer-provided vehicle for a full year is $2,000, without regard to any working condition fringe (i.e., assuming all personal use). Assume Further that the employee drives the vehicle 6,000 miles for his employer’s business and 2,000 miles for reasons other than the employer’s business. In this situation, the value of the working condition fringe is $2,000 multiplied by a fraction, the numerator of which is the business-use mileage (6,000 miles) and the denominator of which is the total mileage (8,000 miles). Thus, the value of the working condition fringe is $1,500. The total amount includible in the employee’s gross income on account of the availability of the vehicle is $500 ($2,000−$1,500). For purposes of this section, the term “vehicle” has the meaning given the term in § 1.61-21(e)(2). Generally, when determining the amount of an employee’s working condition fringe, miles accumulated on the vehicle by all employees of the employer during the period in which the vehicle is available to the employee are considered. For example, assume that during the year in which the vehicle is available to the employee in the above example, other employees accumulate 2,000 additional miles on the vehicle (while the employee is not in the automobile). In this case, the value of the working condition fringe is $2,000 multiplied by a fraction, the numerator of which is the business-use mileage by the employee (including all mileage (business and personal) accumulated by other employees) (8,000 miles) and the denominator of which is the total mileage (including all mileage accumulated by other employees) (10,000 miles). Thus, the value of the working condition fringe is $1,600; the total amount includible in the employee’s gross income on account of the availability of the vehicle is $400 ($2,000−$1,600). If, however, substantially all of the use of the automobile by other employees in the employer’s business is limited to a certain period, such as the last three months of the year, the miles driven by the other employees during that period would not be considered when determining the employee’s working condition fringe exclusion. Similarly, miles driven by other employees are not considered if the pattern of use of the employer-provided automobiles is designed to reduce Federal taxes. For example, assume that an employer provides employees A and B each with the availability of an employer-provided automobile and that A uses the automobile assigned to him 80 percent for the employer’s business and that B uses the automobile assigned to him 30 percent for the employer’s business. If A and B alternate the use of their assigned automobiles each week in such a way as to achieve a reduction in federal taxes, then the employer may count only miles placed on the automobile by the employee to whom the automobile is assigned when determining each employee’s working condition fringe.
(ii) Use by an individual other than the employee. For purposes of this section, if the availability of a vehicle to an individual would be taxed to an employee, use of the vehicle by the individual is included in references to use by the employee.
(iii) Provision of an expensive vehicle for personal use. If an employer provides an employee with a vehicle that an employee may use in part for personal purposes, there is no working condition fringe exclusion with respect to the personal miles driven by the employee; if the employee paid for the availability of the vehicle, he would not be entitled to deduct under section 162 or 167 any part of the payment attributable to personal miles. The amount of the inclusion is not affected by the fact that the employee would have chosen the availability of a less expensive vehicle. Moreover, the result is the same even though the decision to provide an expensive rather than an inexpensive vehicle is made by the employer for bona fide noncompensatory business reasons.
(iv) Total value inclusion. In lieu of excluding the value of a working condition fringe with respect of an automobile, an employer using the automobile lease valuation rule of § 1.61-21(d) may include in an employee’s gross income the entire Annual Lease Value of the automobile. Any deduction allowable to the employee under section 162 or 167 with respect to the automobile may be taken on the employee’s income tax return. The total inclusion rule of this paragraph (b)(1)(iv) is not available if the employer is valuing the use or availability of a vehicle under general valuation principles or a special valuation rule other than the automobile lease valuation rule. See §§ 1.162-25 and 1.162-25T for rules relating to the employee’s deduction.
(v) Shared usage. In calculating the working condition fringe benefit exclusion with respect to a vehicle provided for use by more than one employee, an employer shall compute the working condition fringe in a manner consistent with the allocation of the value of the vehicle under section 1.61-21(c)(2)(ii)(B).
(2) Use of different employer-provided vehicles. The working condition fringe exclusion must be applied on a vehicle-by-vehicle basis. For example, assume that automobile Y is available to employee D for 3 days in January and for 5 days in March, and automobile Z is available to D for a week in July. Assume further that the Daily Lease Value, as defined in § 1.61-21(d)(4)(ii), of each automobile is $50. For the eight days of availability of Y in January and March, D uses Y 90 percent for business (by mileage). During July, D uses Z 60 percent for business (by mileage). The value of the working condition fringe is determined separately for each automobile. Therefore, the working condition fringe for Y is $360 ($400 × .90) leaving an income inclusion of $40. The working condition fringe for Z is $210 ($350 × .60), leaving an income inclusion of $140. If the value of the availability of an automobile is determined under the Annual Lease Value rule for one period and Daily Lease Value rule for a second period (see § 1.61-21(d)), the working condition fringe exclusion must be calculated separately for the two periods.
(3) Provision of a vehicle and chauffeur services—(i) General rule. In general, with respect to the value of chauffeur services provided by an employer, the amount excludable as a working condition fringe is the amount that would be allowable as a deduction under section 162 and 167 if the employee paid for the chauffeur services. The working condition fringe with respect to a chauffeur is determined separately from the working condition fringe with respect to the vehicle. An employee may exclude from gross income the excess of the value of the chauffeur services over the value of the chauffeur services for personal purposes (such as commuting) as determined under § 1.61-21(b)(5). See § 1.61-21(b)(5) for additional rules and examples concerning the valuation of chauffeur services. See § 1.132-5(m)(5) for rules relating to an exclusion from gross income for the value of bodyguard/chauffeur services. When determining whether miles placed on the vehicle are for the employer’s business, miles placed on the vehicle by a chauffeur between the chauffeur’s residence and the place at which the chauffeur picks up (or drops off) the employee are with respect to the employee (but not the chauffeur) considered to be miles placed on the vehicle for the employer’s business and thus eligible for the working condition fringe exclusion. Thus, because miles placed on the vehicle by a chauffeur between the chauffeur’s residence and the place at which the chauffeur picks up (or drops off) the employee are not considered business miles with respect to the chauffeur, the value of the availability of the vehicle for commuting is includible in the gross income of the chauffeur. For general and special rules concerning the valuation of the use of employer-provided vehicles, see paragraphs (b) through (f) of § 1.61-21.
(ii) Examples. The rules of paragraph (b)(3)(i) of this section are illustrated by the following examples:
(c) Applicability of substantiation requirements of sections 162 and 274(d)—(1) In general. The value of property or services provided to an employee may not be excluded from the employee’s gross income as a working condition fringe, by either the employer or the employee, unless the applicable substantiation requirements of either section 274(d) or section 162 (whichever is applicable) and the regulations thereunder are satisfied. The substantiation requirements of section 274(d) apply to an employee even if the requirements of section 274 do not apply to the employee’s employer for deduction purposes (such as when the employer is a tax-exempt organization or a governmental unit).
(2) Section 274(d) requirements. The substantiation requirements of section 274(d) are satisfied by “adequate records or sufficient evidence corroborating the [employee’s] own statement”. Therefore, such records or evidence provided by the employee, and relied upon by the employer to the extent permitted by the regulations promulgated under section 274(d), will be sufficient to substantiate a working condition fringe exclusion.
(d) Safe harbor substantiation rules—(1) In general. Section 1.274-6T provides that the substantiation requirements of section 274(d) and the regulations thereunder may be satisfied, in certain circumstances, by using one or more of the safe harbor rules prescribed in § 1.274-6T. If the employer uses one of the safe harbor rules prescribed in § 1.274-6T during a period with respect to a vehicle (as defined in § 1.61-21(e)(2)), that rule must be used by the employer to substantiate a working condition fringe exclusion with respect to that vehicle during the period. An employer that is exempt from Federal income tax may still use one of the safe harbor rules (if the requirements of that section are otherwise met during a period) to substantiate a working condition fringe exclusion with respect to a vehicle during the period. If the employer uses one of the methods prescribed in § 1.274-6T during a period with respect to an employer-provided vehicle, that method may be used by an employee to substantiate a working condition fringe exclusion with respect to the same vehicle during the period, as long as the employee includes in gross income the amount allocated to the employee pursuant to § 1.274-6T and this section. (See § 1.61-21(c)(2) for other rules concerning when an employee must include in income the amount determined by the employer.) If, however, the employer uses the safe harbor rule prescribed in § 1.274-6T(a) (2) or (3) and the employee without the employer’s knowledge uses the vehicle for purposes other than de minimis personal use (in the case of the rule prescribed in § 1.274-6T(a)(2)), or for purposes other than de minimis personal use and commuting (in the case of the rule prescribed in § 1.274-6T(a)(3)), then the employees must include an additional amount in income for the unauthorized use of the vehicle.
(2) Period for use of safe harbor rules. The rules prescribed in this paragraph (d) assume that the safe harbor rules prescribed in § 1.274-6T are used for a one-year period. Accordingly, references to the value of the availability of a vehicle, amounts excluded as a working condition fringe, etc., are based on a one-year period. If the safe harbor rules prescribed in § 1.274-6T are used for a period of less than a year, the amounts referred to in the previous sentence must be adjusted accordingly. For purposes of this section, the term “personal use” has the same meaning as prescribed in § 1.274-6T (e)(5).
(e) Safe harbor substantiation rule for vehicles not used for personal purposes. For a vehicle described in § 1.274-6T(a)(2) (relating to certain vehicles not used for personal purposes), the working condition fringe exclusion is equal to the value of the availability of the vehicle if the employer uses the method prescribed in § 1.274-6T(a)(2).
(f) Safe harbor substantiation rule for vehicles not available to employees for personal use other than commuting. For a vehicle described in § 1.274-6T(a)(3) (relating to certain vehicles not used for personal purposes other than commuting), the working condition fringe exclusion is equal to the value of the availability of the vehicle for purposes other than commuting if the employer uses the method prescribed in § 1.274-6T(a)(3). This rule applies only if the special rule for valuing commuting use, as prescribed in § 1.61-21(f), is used and the amount determined under the special rule is either included in the employee’s income or reimbursed by the employee.
(g) Safe harbor substantiation rule for vehicles used in connection with the business of farming that are available to employees for personal use—(1) In general. For a vehicle described in § 1.274-6T(b) (relating to certain vehicles used in connection with the business of farming), the working condition fringe exclusion is calculated by multiplying the value of the availability of the vehicle by 75 percent.
(2) Vehicles available to more than one individual. If the vehicle is available to more than one individual, the employer must allocate the gross income inclusion attributable to the vehicle (25 percent of the value of the availability of the vehicle) among the employees (and other individuals whose use would not be attributed to an employee) to whom the vehicle was available. This allocation must be done in a reasonable manner to reflect the personal use of the vehicle by the individuals. An amount that would be allocated to a sole proprietor reduces the amounts that may be allocated to employees but is otherwise to be disregarded for purposes of this paragraph (g). For purposes of this paragraph (g), the value of the availability of a vehicle may be calculated as if the vehicle were available to only one employee continuously and without regard to any working condition fringe exclusion.
(3) Examples. The following examples illustrate a reasonable allocation of gross income with respect to an employer-provided vehicle between two employees:
(h) Qualified nonpersonal use vehicles—(1) In general. Except as provided in paragraph (h)(2) of this section, 100 percent of the value of the use of a qualified nonpersonal use vehicle (as described in § 1.274-5(k)) is excluded from gross income as a working condition fringe, provided that, in the case of a vehicle described in § 1.274-5(k)(3) through (8), the use of the vehicle conforms to the requirements of paragraphs (k)(3) through (8).
(2) Shared usage of qualified nonpersonal use vehicles. In general, a working condition fringe under this paragraph (h) is available to the driver and all passengers of a qualified nonpersonal use vehicle. However, a working condition fringe under this paragraph (h) is available only with respect to the driver and not with respect to any passengers of a qualified nonpersonal use vehicle described in § 1.274-5(k)(2)(ii)(L) or (P).
(i) [Reserved]
(j) Application of section 280F. In determining the amount, if any, of an employee’s working condition fringe, section 280F and the regulations thereunder do not apply. For example, assume that an employee has available for a calendar year an employer-provided automobile with a fair market value of $28,000. Assume further that the special rule provided in § 1.61-21(d) is used yielding an Annual Lease Value, as defined in § 1.61-21(d), of $7,750, and that all of the employee’s use of the automobile is for the employer’s business. The employee would be entitled to exclude as a working condition fringe the entire Annual Lease Value, despite the fact that if the employee paid for the availability of the automobile, an income inclusion would be required under § 1.280F-6(d)(1). This paragraph (j) does not affect the applicability of section 280F to the employer with respect to such employer-provided automobile, nor does it affect the applicability of section 274 to either the employer or the employee. For rules concerning substantiation of an employee’s working condition fringe, see paragraph (c) of this section.
(k) Aircraft allocation rule. In general, with respect to a flight on an employer-provided aircraft, the amount excludable as a working condition fringe is the amount that would be allowable as a deduction under section 162 or 167 if the employee paid for the flight on the aircraft. For example, if employee P and P’s spouse fly on P’s employer’s airplane primarily for business reasons of P’s employer so that P could deduct the expenses relating to the trip to the extent of P’s payments, the value of the flights is excludable from gross income as a working condition fringe. However, if P’s children accompany P on the trip primarily for personal reasons, the value of the flights by P’s children are includible in P’s gross income. See § 1.61-21 (g) for special rules for valuing personal flights on employer-provided aircraft.
(l) [Reserved]
(m) Employer-provided transportation for security concerns—(1) In general. The amount of a working condition fringe exclusion with respect to employer-provided transportation is the amount that would be allowable as a deduction under section 162 or 167 if the employee paid for the transportation. Generally, if an employee pays for transportation taken for primarily personal purposes, the employee may not deduct any part of the amount paid. Thus, the employee may not generally exclude the value of employer-provided transportation as a working condition fringe if such transportation is primarily personal. If, however, for bona fide business-oriented security concerns, the employee purchases transportation that provides him or her with additional security, the employee may generally deduct the excess of the amount actually paid for the transportation over the amount the employee would have paid for the same mode of transportation absent the bona fide business-oriented security concerns. This is the case whether or not the employee would have taken the same mode of transportation absent the bona fide business-oriented security concerns. With respect to a vehicle, the phrase “the same mode of transportation” means use of the same vehicle without the additional security aspects, such as bulletproof glass. With respect to air transportation, the phrase “the same mode of transportation” means comparable air transportation. These same rules apply to the determination of an employee’s working condition fringe exclusion. For example, if an employer provides an employee with a vehicle for commuting and, because of bona fide business-oriented security concerns, the vehicle is specially designed for security, then the employee may exclude from gross income the value of the special security design as a working condition fringe. The employee may not exclude the value of the commuting from income as a working condition fringe because commuting is a nondeductible personal expense. However, if an independent security study meeting the requirements of paragraph (m)(2)(v) of this section has been performed with respect to a government employee, the government employee may exclude the value of the personal use (other than commuting) of the employer-provided vehicle that the security study determines to be reasonable and necessary for local transportation. Similarly, if an employee travels on a personal trip in an employer-provided aircraft for bona fide business-oriented security concerns, the employee may exclude the excess, if any, of the value of the flight over the amount the employee would have paid for the same mode of transportation, but for the bona fide business-oriented security concerns. Because personal travel is a nondeductible expense, the employee may not exclude the total value of the trip as a working condition fringe.
(2) Demonstration of bona fide business-oriented security concerns—(i) In general. For purposes of this paragraph (m), a bona fide business-oriented security concern exists only if the facts and circumstances establish a specific basis for concern regarding the safety of the employee. A generalized concern for an employee’s safety is not a bona fide business-oriented security concern. Once a bona fide business-oriented security concern is determined to exist with respect to a particular employee, the employer must periodically evaluate the situation for purposes of determining whether the bona fide business-oriented security concern still exists. Example of factors indicating a specific basis for concern regarding the safety of an employee are—
(A) A threat of death or kidnapping of, or serious bodily harm to, the employee or a similarly situated employee because of either employee’s status as an employee of the employer; or
(B) A recent history of violent terrorist activity (such as bombings) in the geographic area in which the transportation is provided, unless that activity is focused on a group of individuals which does not include the employee (or a similarly situated employee of an employer), or occurs to a significant degree only in a location within the geographic area where the employee does not travel.
(ii) Establishment of overall security program. Notwithstanding anything in paragraph (m)(2)(i) of this section to the contrary, no bona fide business-oriented security concern will be deemed to exist unless the employee’s employer establishes to the satisfaction of the Commissioner that an overall security program has been provided with respect to the employee involved. An overall security program is deemed to exist if the requirements of paragraph (m)(2)(iv) of this section are satisfied (relating to an independent security study).
(iii) Overall security program—(A) Defined. An overall security program is one in which security is provided to protect the employee on a 24-hour basis. The employee must be protected while at the employee’s residence, while commuting to and from the employee’s workplace, and while at the employee’s workplace. In addition, the employee must be protected while traveling both at home and away from home, whether for business or personal purposes. An overall security program must include the provision of a bodyguard/chauffeur who is trained in evasive driving techniques; an automobile specially equipped for security; guards, metal detectors, alarms, or similar methods of controlling access to the employee’s workplace and residence; and, in appropriate cases, flights on the employer’s aircraft for business and personal reasons.
(B) Application. There is no overall security program when, for example, security is provided at the employee’s workplace but not at the employee’s residence. In addition, the fact that an employer requires an employee to travel on the employer’s aircraft, or in an employer-provided vehicle that contains special security features, does not alone constitute an overall security program. The preceding sentence applies regardless of the existence of a corporate or other resolution requiring the employee to travel in the employer’s aircraft or vehicle for personal as well as business reasons.
(iv) Effect of an independent security study. An overall security program with respect to an employee is deemed to exist if the conditions of this paragraph (m)(2)(iv) are satisfied:
(A) A security study is performed with respect to the employer and the employee (or a similarly situated employee of the employer) by an independent security consultant;
(B) The security study is based on an objective assessment of all facts and circumstances;
(C) The recommendation of the security study is that an overall security program (as defined in paragraph (m)(2)(iii) of this section) is not necessary and the recommendation is reasonable under the circumstances; and
(D) The employer applies the specific security recommendations contained in the security study to the employee on a consistent basis.
(v) Independent security study with respect to government employees. For purposes of establishing the existence of an overall security program under paragraph (m)(2)(ii) of this section with respect to a particular government employee, a security study conducted by the government employer (including an agency or instrumentality thereof) will be treated as a security study pursuant to paragraph (m)(2)(iv) of this section if, in lieu of the conditions of paragraphs (m)(2)(iv)(A) through (D) of this section, the following conditions are satisfied:
(A) The security study is conducted by a person expressly designated by the government employer as having the responsibility and independent authority to determine both the need for employer-provided security and the appropriate protective services in response to that determination;
(B) The security study is conducted in accordance with written internal procedures that require an independent and objective assessment of the facts and circumstances, such as the nature of the threat to the employee, the appropriate security response to that threat, an estimate of the length of time protective services will be necessary, and the extent to which employer-provided transportation may be necessary during the period of protection;
(C) With respect to employer-provided transportation, the security study evaluates the extent to which personal use, including commuting, by the employee and the employee’s spouse and dependents may be necessary during the period of protection and makes a recommendation as to what would be considered reasonable personal use during that period; and
(D) The employer applies the specific security recommendations contained in the study to the employee on a consistent basis.
(3) Application of security rules to spouses and dependents—(i) In general. If a bona fide business-oriented security concern exists with respect to an employee (because, for example, threats are made on the life of an employee), the bona fide business-oriented security concern is deemed to exist with respect to the employee’s spouse and dependents to the extent provided in this paragraph (m)(3).
(ii) Certain transportation. If a working condition fringe exclusion is available under this paragraph (m) for transportation in a vehicle or aircraft provided for a bona fide business-oriented security concern with respect to an employee, the requirements of this paragraph (m) are deemed to be satisfied with respect to transportation in the same vehicle or aircraft provided at the same time to the employee’s spouse and dependent children.
(iii) Other. Except as provided in paragraph (m)(3)(ii) of this section, a bona fide business oriented security concern is deemed to exist for the spouse and dependent children of the employer only if the requirements of paragraph (m)(2) (iii) or (iv) of this section are applied independently to such spouse and dependent children.
(iv) Spouses and dependents of government employees. The security rules of this paragraph (m)(3) apply to the spouse and dependents of a government employee. However, the value of local vehicle transportation provided to the government employee’s spouse and dependents for personal purposes, other than commuting, during the period that a bona fide business-oriented security concern exists with respect to the government employee will not be included in the government employee’s gross income if the personal use is determined to be reasonable and necessary by the security study described in paragraph (m)(2)(v) of this section.
(4) Working condition safe harbor for travel on employer-provided aircraft. Under the safe harbor rule of this paragraph (m)(4), if, for a bona fide business-oriented security concern, the employer requires that an employee travel on an employer-provided aircraft for a personal trip, the employer and the employee may exclude from the employee’s gross income, as a working condition fringe, the excess value of the aircraft trip over the safe harbor airfare without having to show what method of transportation the employee would have flown but for the bona fide business-oriented security concern. For purposes of the safe harbor rule of this paragraph (m)(4), the value of the safe harbor airfare is determined under the non-commercial flight valuation rule of § 1.61-21(g) (regardless of whether the employer or employee elects to use such valuation rule) by multiplying an aircraft multiple of 200-percent by the applicable cents-per-mile rates and the number of miles in the flight and then adding the applicable terminal charge. The value of the safe harbor airfare determined under this paragraph (m)(4) must be included in the employee’s income (to the extent not reimbursed by the employee) regardless of whether the employee or the employer uses the special valuation rule of § 1.61-21(g). The excess of the value of the aircraft trip over this amount may be excluded from gross income as a working condition fringe. If, for a bona fide business-oriented security concern, the employer requires that an employee’s spouse and dependents travel on an employer-provided aircraft for a personal trip, the special rule of this paragraph (m)(4) is available to exclude the excess value of the aircraft trips over the safe harbor airfares.
(5) Bodyguard/chauffeur provided for a bona fide business-oriented security concern. If an employer provides an employee with vehicle transportation and a bodyguard/chauffeur for a bona fide business-oriented security concern, and but for the bona fide business-oriented security concern the employee would not have had a bodyguard or a chauffeur, then the entire value of the services of the bodyguard/chauffeur is excludable from gross income as a working condition fringe. For purposes of this section, a bodyguard/chauffeur must be trained in evasive driving techniques. An individual who performs services as a driver for an employee is not a bodyguard/chauffeur if the individual is not trained in evasive driving techniques. Thus, no part of the value of the services of such an individual is excludable from gross income under this paragraph (m)(5). (See paragraph (b)(3) of this section for rules relating to the determination of the working condition fringe exclusion for chauffeur services.)
(6) Special valuation rule for government employees. If transportation is provided to a government employee for commuting during the period that a bona fide business-oriented security concern under § 1.132-5(m) exists, the commuting use may be valued by reference to the values set forth in § 1.61-21(e)(1)(i) or (f)(3) (vehicle cents-per-mile or commuting valuation of $1.50 per one-way commute, respectively) without regard to the additional requirements contained in § 1.61-21 (e) or (f) and is deemed to have met the requirements of § 1.61-21(c).
(7) Government employer and employee defined. For purposes of this paragraph (m), “government employer” includes any Federal, State, or local government unit, and any agency or instrumentality thereof. A “government employee” is any individual who is employed by the government employer.
(8) Examples. The provisions of this paragraph (m) may be illustrated by the following examples:
(n) Product testing—(1) In general. The fair market value of the use of consumer goods, which are manufactured for sale to nonemployees, for product testing and evaluation by an employee of the manufacturer outside the employer’s workplace, is excludible from gross income as a working condition fringe if—
(i) Consumer testing and evaluation of the product is an ordinary and necessary business expense of the employer;
(ii) Business reasons necessitate that the testing and evaluation of the product be performed off the employer’s business premises by employees (i.e., the testing and evaluation cannot be carried out adequately in the employer’s office or in laboratory testing facilities);
(iii) The product is furnished to the employee for purposes of testing and evaluation;
(iv) The product is made available to the employee for no longer than necessary to test and evaluate its performance and (to the extent not exhausted) must be returned to the employer at completion of the testing and evaluation period;
(v) The employer imposes limits on the employee’s use of the product that significantly reduce the value of any personal benefit to the employee; and
(vi) The employee must submit detailed reports to the employer on the testing and evaluation. The length of the testing and evaluation period must be reasonable in relation to the product being tested.
(2) Employer-imposed limits. The requirement of paragraph (n)(1)(v) of this section is satisfied if—
(i) The employer places limits on the employee’s ability to select among different models or varieties of the consumer product that is furnished for testing and evaluation purposes; and
(ii) The employer generally prohibits use of the product by persons other than the employee and, in appropriate cases, requires the employee, to purchase or lease at the employee’s own expense the same type of product as that being tested (so that personal use by the employee’s family will be limited). In addition, any charge by the employer for the personal use by an employee of a product being tested shall be taken into account in determining whether the requirement of paragraph (n)(1)(v) of this section is satisfied.
(3) Discriminating classifications. If an employer furnishes products under a testing and evaluation program only, or presumably, to certain classes of employees (such as highly compensated employees, as defined in § 1.132-8(g)), this fact may be relevant when determining whether the products are furnished for testing and evaluation purposes or for compensation purposes, unless the employer can show a business reason for the classification of employees to whom the products are furnished (e.g., that automobiles are furnished for testing and evaluation by an automobile manufacturer to its design engineers and supervisory mechanics).
(4) Factors that negate the existence of a product testing program. If an employer fails to tabulate and examine the results of the detailed reports submitted by employees within a reasonable period of time after expiration of the testing period, the program will not be considered a product testing program for purposes of the exclusion of this paragraph (n). Existence of one or more of the following factors may also establish that the program is not a bona fide product testing program for purposes of the exclusion of this paragraph (n):
(i) The program is in essence a leasing program under which employees lease the consumer goods from the employer for a fee;
(ii) The nature of the product and other considerations are insufficient to justify the testing program; or
(iii) The expense of the program outweighs the benefits to be gained from testing and evaluation.
(5) Failure to meet the requirements of this paragraph (n). The fair market value of the use of property for product testing and evaluation by an employee outside the employee’s workplace, under a product testing program that does not meet all of the requirements of this paragraph (n), is not excludable from gross income as a working condition fringe under this paragraph (n).
(6) Example. The rules of this paragraph (n) may be illustrated by the following example:
(o) Qualified automobile demonstration use—(1) In general. The value of qualified automobile demonstration use is excludable from gross income as a working condition fringe. “Qualified automobile demonstration use” is any use of a demonstration automobile by a full-time automobile salesman in the sales area in which the automobile dealer’s sales office is located if—
(i) Such use is provided primarily to facilitate the salesman’s performance of services for the employer; and
(ii) There are substantial restrictions on the personal use of the automobile by the salesman.
(2) Full-time automobile salesman—(i) Defined. The term “full-time automobile salesman” means any individual who—
(A) Is employed by an automobile dealer;
(B) Customarily spends at least half of a normal business day performing the functions of a floor salesperson or sales manager;
(C) Directly engages in substantial promotion and negotiation of sales to customers;
(D) Customarily works a number of hours considered full-time in the industry (but at a rate not less than 1,000 hours per year); and
(E) Derives at least 25 percent of his or her gross income from the automobi1e dealership directly as a result of the activities described in paragraphs (o)(2)(i) (B) and (C) of this section.
(ii) Use by an individual other than a full-time automobile salesman. Personal use of a demonstration automobile by an individual other than a full-time automobile salesman is not treated as a working condition fringe. Therefore, any personal use, including commuting use, of a demonstration automobile by a part-time salesman, automobile mechanic, or other individual who is not a full-time automobile salesman is not “qualified automobile demonstration use” and thus not excludable from gross income. This is the case whether or not the personal use is within the sales area (as defined in paragraph (o)(5) of this section).
(3) Demonstration automobile. The exclusion provided in this paragraph (o) applies only to qualified use of a demonstration automobile. A demonstration automobile is an automobile that is—
(i) Currently in the inventory of the automobile dealership; and
(ii) Available for test drives by customers during the normal business hours of the employee.
(4) Substantial restrictions on personal use. Substantial restrictions on the personal use of a demonstration automobile exist when all of the following conditions are satisfied:
(i) Use by individuals other than the full-time automobile salesmen (e.g., the salesman’s family) is prohibited;
(ii) Use for personal vacation trips is prohibited;
(iii) The storage of personal possessions in the automobile is prohibited; and
(iv) The total use by mileage of the automobile by the salesman outside the salesman’s normal working hours is limited.
(5) Sales area—(i) In general. Qualified automobile demonstration use consists of use in the sales area in which the automobile dealer’s sales office is located. The sales area is the geographic area surrounding the automobile dealer’s sales office from which the office regularly derives customers.
(ii) Sales area safe harbor. With respect to a particular full-time salesman, the automobile dealer’s sales area may be treated as the area within a radius of the larger of—
(A) 75 miles or
(B) The one-way commuting distance (in miles) of the particular salesman from the dealer’s sales office.
(6) Applicability of substantiation requirements of sections 162 and 274(d). Notwithstanding anything in this section to the contrary, the value of the use of a demonstration automobile may not be excluded from gross income as a working condition fringe, by either the employer or the employee, unless, with respect to the restrictions of paragraph (o)(4) of this section, the substantiation requirements of section 274(d) and the regulations thereunder are satisfied. See § 1.132-5(c) for general and safe harbor rules relating to the applicability of the substantiation requirements of section 274(d).
(7) Special valuation rules. See § 1.61-21(d)(6)(ii) for special rules that may be used to value the availability of demonstration automobiles.
(p) Parking—(1) In general. The value of parking provided to an employee on or near the business premises of the employer is excludable from gross income as a working condition fringe under the special rule of this paragraph (p). If the rules of this paragraph (p) are satisfied, the value of parking is excludable from gross income whether the amount paid by the employee for parking would be deductible under section 162. The working condition fringe exclusion applies whether the employer owns or rents the parking facility or parking space.
(2) Reimbursement of parking expenses. A reimbursement to the employee of the ordinary and necessary expenses of renting a parking space on or near the business premises of the employer is excludable from gross income as a working condition fringe, if, but for the parking expense, the employee would not have been entitled to receive and retain such amount from the employer. If, however an employee is entitled to retain a general transportation allowance or a similar benefit whether or not the employee has parking expenses, no portion of that allowance is excludable from gross income under this paragraph (p) even if it is used for parking expenses.
(3) Parking on residential property. With respect to an employee, this paragraph (p) does not apply to any parking facility or space located on property owned or leased by the employee for residential purposes.
(4) Dates of applicability. This paragraph (p) applies to benefits provided before January 1, 1993. For benefits provided after December 31, 1992, see § 1.132-9.
(q) Nonapplicability of nondiscrimination rules. Except to the extent provided in paragraph (n)(3) of this section (relating to discriminating classifications of a product testing program), the nondiscrimination rules of section 132 (h)(1) and § 1.132-8 do not apply in determining the amount, if any, of a working condition fringe.
(r) Volunteers—(1) In general. Solely for purposes of section 132(d) and paragraph (a)(1) of this section, a bona fide volunteer (including a director or officer) who performs services for an organization exempt from tax under section 501(a), or for a government employer (as defined in paragraph (m)(7) of this section), is deemed to have a profit motive under section 162.
(2) Limit on application of this paragraph. This paragraph (r) shall not be used to support treatment of the bona fide volunteer as having a profit motive for purposes of any provision of the Internal Revenue Code of 1986 (Code) other than section 132(d). Nothing in this paragraph (r) shall be interpreted as determining the employment status of a bona fide volunteer for purposes of any section of the Code other than section 132(d).
(3) Definitions—(i) Bona fide volunteer. For purposes of this paragraph (r), an individual is considered a “bona fide volunteer” if the individual does not have a profit motive for purposes of section 162. For example, an individual is considered a “bona fide volunteer” if the total value of the benefits provided with respect to the volunteer services is substantially less than the total value of the volunteer services the individual provides to an exempt organization or government employer.
(ii) Liability insurance coverage for a bona fide volunteer. For purposes of this paragraph (r), the receipt of liability insurance coverage by a volunteer, or an exempt organization or government employer’s undertaking to indemnify the volunteer for liability, does not by itself confer a profit motive on the volunteer, provided the insurance coverage or indemnification relates to acts performed by the volunteer in the discharge of duties, or the performance of services, on behalf of the exempt organization or government employer.
(4) Example. The following example illustrates the provisions of paragraph (r) of this section.
(s) Application of section 274(a)(3)—(1) In general. If an employer’s deduction under section 162(a) for dues paid or incurred for membership in any club organized for business, pleasure, recreation, or other social purpose is disallowed by section 274(a)(3), the amount, if any, of an employee’s working condition fringe benefit relating to an employer-provided membership in the club is determined without regard to the application of section 274(a) to the employee. To be excludible as a working condition fringe benefit, however, the amount must otherwise qualify for deduction by the employee under section 162(a). If an employer treats the amount paid or incurred for membership in any club organized for business, pleasure, recreation, or other social purpose as compensation under section 274(e)(2), then the expense is deductible by the employer as compensation and no amount may be excluded from the employee’s gross income as a working condition fringe benefit. See § 1.274-2(f)(2)(iii)(A).
(2) Treatment of tax-exempt employers. In the case of an employer exempt from taxation under subtitle A of the Internal Revenue Code, any reference in this paragraph (s) to a deduction disallowed by section 274(a)(3) shall be treated as a reference to the amount which would be disallowed as a deduction by section 274(a)(3) to the employer if the employer were not exempt from taxation under subtitle A of the Internal Revenue Code.
(3) Examples. The following examples illustrate this paragraph (s):
(t) Application of section 274(m)(3)—(1) In general. If an employer’s deduction under section 162(a) for amounts paid or incurred for the travel expenses of a spouse, dependent, or other individual accompanying an employee is disallowed by section 274(m)(3), the amount, if any, of the employee’s working condition fringe benefit relating to the employer-provided travel is determined without regard to the application of section 274(m)(3). To be excludible as a working condition fringe benefit, however, the amount must otherwise qualify for deduction by the employee under section 162(a). The amount will qualify for deduction and for exclusion as a working condition fringe benefit if it can be adequately shown that the spouse’s, dependent’s, or other accompanying individual’s presence on the employee’s business trip has a bona fide business purpose and if the employee substantiates the travel within the meaning of paragraph (c) of this section. If the travel does not qualify as a working condition fringe benefit, the employee must include in gross income as a fringe benefit the value of the employer’s payment of travel expenses with respect to a spouse, dependent, or other individual accompanying the employee on business travel. See §§ 1.61-21(a)(4) and 1.162-2(c). If an employer treats as compensation under section 274(e)(2) the amount paid or incurred for the travel expenses of a spouse, dependent, or other individual accompanying an employee, then the expense is deductible by the employer as compensation and no amount may be excluded from the employee’s gross income as a working condition fringe benefit. See § 1.274-2(f)(2)(iii)(A).
(2) Treatment of tax-exempt employers. In the case of an employer exempt from taxation under subtitle A of the Internal Revenue Code, any reference in this paragraph (t) to a deduction disallowed by section 274(m)(3) shall be treated as a reference to the amount which would be disallowed as a deduction by section 274(m)(3) to the employer if the employer were not exempt from taxation under subtitle A of the Internal Revenue Code.
§ 1.132-6 De minimis fringes.
(a) In general. Gross income does not include the value of a de minimis fringe provided to an employee. The term “de minimis fringe” means any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer’s employees) so small as to make accounting for it unreasonable or administratively impracticable.
(b) Frequency—(1) Employee-measured frequency. Generally, the frequency with which similar fringes are provided by the employer to the employer’s employees is determined by reference to the frequency with which the employer provides the fringes to each individual employee. For example, if an employer provides a free meal in kind to one employee on a daily basis, but not to any other employee, the value of the meals is not de minimis with respect to that one employee even though with respect to the employer’s entire workforce the meals are provided “infrequently.”
(2) Employer-measured frequency. Notwithstanding the rule of paragraph (b)(1) of this section, except for purposes of applying the special rules of paragraph (d)(2) of this section, where it would be administratively difficult to determine frequency with respect to individual employees, the frequency with which similar fringes are provided by the employer to the employer’s employees is determined by reference to the frequency with which the employer provides the fringes to the workforce as a whole. Therefore, under this rule, the frequency with which any individual employee receives such a fringe benefit is not relevant and in some circumstances, the de minimis fringe exclusion may apply with respect to a benefit even though a particular employee receives the benefit frequently. For example, if an employer exercises sufficient control and imposes significant restrictions on the personal use of a company copying machine so that at least 85 percent of the use of the machine is for business purposes, any personal use of the copying machine by particular employees is considered to be a de minimis fringe.
(c) Administrability. Unless excluded by a provision of chapter 1 of the Internal Revenue Code of 1986 other than section 132(a)(4), the value of any fringe benefit that would not be unreasonable or administratively impracticable to account for is includible in the employee’s gross income. Thus, except as provided in paragraph (d)(2) of this section, the provision of any cash fringe benefit is never excludable under section 132(a) as a de minimis fringe benefit. Similarly except as otherwise provided in paragraph (d) of this section, a cash equivalent fringe benefit (such as a fringe benefit provided to an employee through the use of a gift certificate or charge or credit card) is generally not excludable under section 132(a) even if the same property or service acquired (if provided in kind) would be excludable as a de minimis fringe benefit. For example, the provision of cash to an employee for a theatre ticket that would itself be excludable as a de minimis fringe (see paragraph (e)(1) of this section) is not excludable as a de minimis fringe.
(d) Special rules—(1) Transit passes. A public transit pass provided at a discount to defray an employee’s commuting costs may be excluded from the employee’s gross income as a de minimis fringe if such discount does not exceed $21 in any month. The exclusion provided in this paragraph (d)(1) also applies to the provision of tokens or fare cards that enable an individual to travel on the public transit system if the value of such tokens and fare cards in any month does not exceed by more than $21 the amount the employee paid for the tokens and fare cards for such month. Similarly, the exclusion of this paragraph (d)(1) applies to the provision of a voucher or similar instrument that is exchangeable solely for tokens, fare cards, or other instruments that enable the employee to use the public transit system if the value of such vouchers and other instruments in any month does not exceed $21. The exclusion of this paragraph (d)(1) also applies to reimbursements made by an employer to an employee after December 31, 1988, to cover the cost of commuting on a public transit system, provided the employee does not receive more than $21 in such reimbursements for commuting costs in any given month. The reimbursement must be made under a bona fide reimbursement arrangement. A reimbursement arrangement will be treated as bona fide if the employer establishes appropriate procedures for verifying on a periodic basis that the employee’s use of public transportation for commuting is consistent with the value of the benefit provided by the employer for that purpose. The amount of in-kind public transit commuting benefits and reimbursements provided during any month that are excludible under this paragraph (d)(1) is limited to $21. For months ending before July 1, 1991, the amount is $15 per month. The exclusion provided in this paragraph (d)(1) does not apply to the provision of any benefit to defray public transit expenses incurred for personal travel other than commuting.
(2) Occasional meal money or local transportation fare—(i) General rule. Meals, meal money or local transportation fare provided to an employee is excluded as a de minimis fringe benefit if the benefit provided is reasonable and is provided in a manner that satisfies the following three conditions:
(A) Occasional basis. The meals, meal money or local transportation fare is provided to the employee on an occasional basis. Whether meal money or local transportation fare is provided to an employee on an occasional basis will depend upon the frequency i.e., the availability of the benefit and regularity with which the benefit is provided by the employer to the employee. Thus, meals, meal money, or local transportation fare or a combination of such benefits provided to an employee on a regular or routine basis is not provided on an occasional basis.
(B) Overtime. The meals, meal money or local transportation fare is provided to an employee because overtime work necessitates an extension of the employee’s normal work schedule. This condition does not fail to be satisifed merely because the circumstances giving rise to the need for overtime work are reasonably foreseeable.
(C) Meal money. ln the case of a meal or meal money, the meal or meal money is provided to enable the employee to work overtime. Thus, for example, meals provided on the employer’s premises that are consumed during the period that the employee works overtime or meal money provided for meals consumed during such period satisfy this condition.
(ii) Applicability of other exclusions for certain meals and for transportation provided for security concerns. The value of meals furnished to an employee, an employee’s spouse, or any of the employee’s dependents by or on behalf of the employee’s employer for the convenience of the employer is excluded from the employee’s gross income if the meals are furnished on the business premises of the employer (see section 119). (For purposes of the exclusion under section 119, the definitions of an employee under § 1.132-1(b) do not apply.) If, for a bona fide business-oriented security concern, an employer provides an employee vehicle transportation that is specially designed for security (for example, the vehicle is equipped with bulletproof glass and armor plating), and the conditions of § 1.132-5(m) are satisfied, the value of the special security design is excludable from gross income as a working condition fringe if the employee would not have had such special security design but for the bona fide business-oriented security concern.
(iii) Special rule for employer-provided transportation provided in certain circumstances. (A) Partial exclusion of value. If an employer provides transportation (such as taxi fare to an employee for use in commuting to and/or from work because or unusual circumstances and because, based on the facts and circumstances, it is unsafe for the employee to use other available means of transportation, the excess of the value of each one-way trip over $1.50 per one-way commute is excluded from gross income. The rule of this paragraph (d)(2)(iii) is not available to a control employee as defined in § 1.61-21(f) (5) and (6).
(B) “Unusual circumstances”. Unusual circumstances are determined with respect to the employee receiving the transportation and are based on all facts and circumstances. An example of unusual circumstances would be when an employee is asked to work outside of his normal work hours (such as being called to the workplace at 1:00 am when the employee normally works from 8:00 am to 4:00 pm). Another example of unusual circumstances is a temporary change in the employee’s work schedule (such as working from 12 midnight to 8:00 am rather than from 8:00 am to 4:00 pm for a two-week period).
(C) “Unsafe conditions”. Factors indicating whether it is unsafe for an employee to use other available means of transportation are the history of crime in the geographic area surrounding the employee’s workplace or residence and the time of day during which the employee must commute.
(3) Use of special rules or examples to establish a general rule. The special rules provided in this paragraph (d) or examples provided in paragraph (e) of this section may not be used to establish any general rule permitting exclusion as a de minimis fringe. For example, the fact that $252 (i.e., $21 per month for 12 months) worth of public transit passes can be excluded from gross income as a de minimis fringe in 1992 does not mean that any fringe benefit with a value equal to or less than $252 may be excluded as a de minimis fringe. As another example, the fact that the commuting use of an employer-provided vehicle more than one day a month is an example of a benefit not excludable as a de minimis fringe (see paragraph (e)(2) of this section) does not mean that the commuting use of a vehicle up to 12 times per year is excludable from gross income as a de minimis fringe.
(4) Benefits exceeding value and frequency limits. If a benefit provided to an employee is not de minimis because either the value or frequency exceeds a limit provided in this paragraph (d), no amount of the benefit is considered to be a de minimis fringe. For example, if, in 1992, an employer provides a $50 monthly public transit pass, the entire $50 must be included in income, not just the excess value over $21.
(e) Examples—(1) Benefits excludable from income. Examples of de minimis fringe benefits are occasional typing of personal letters by a company secretary; occasional personal use of an employer’s copying machine, provided that the employer exercises sufficient control and imposes significant restrictions on the personal use of the machine so that at least 85 percent of the use of the machine is for business purposes; occasional cocktail parties, group meals, or picnics for employees and their guests; traditional birthday or holiday gifts of property (not cash) with a low fair market value; occasional theater or sporting event tickets; coffee, doughnuts, and soft drinks; local telephone calls; and flowers, fruit, books, or similar property provided to employees under special circumstances (e.g., on account of illness, outstanding performance, or family crisis).
(2) Benefits not excludable as de minimis fringes. Examples of fringe benefits that are not excludable from gross income as de minimis fringes are: season tickets to sporting or theatrical events; the commuting use of an employer-provided automobile or other vehicle more than one day a month; membership in a private country club or athletic facility, regardless of the frequency with which the employee uses the facility; employer-provided group-term life insurance on the life of the spouse or child of an employee; and use of employer-owned or leased facilities (such as an apartment, hunting lodge, boat, etc.) for a weekend. Some amount of the value of certain of these fringe benefits may be excluded from income under other statutory provisions, such as the exclusion for working condition fringes. See § 1.132-5.
(f) Nonapplicability of nondiscrimination rules. Except to the extent provided in § 1.132-7, the nondiscrimination rules of section 132(h)(1) and § 1.132-8 do not apply in determining the amount, if any, of a de minimis fringe. Thus, a fringe benefit may be excludable as a de minimis fringe even if the benefit is provided exclusively to highly compensated employees of the employer.
§ 1.132-7 Employer-operated eating facilities.
(a) In general—(1) Condition for exclusion—(i) General rule. The value of meals provided to employees at an employer-operated eating facility for employees is excludable from gross income as a de minimis fringe only if on an annual basis, the revenue from the facility equals or exceeds the direct operating costs of the facility.
(ii) Additional condition for highly compensated employees. With respect to any highly compensated employee, an exclusion is available under this section only if the condition set out in paragraph (a)(1)(i) of this section is satisfied and access to the facility is available on substantially the same terms to each member of a group of employees that is defined under a reasonable classification set up by the employer that does not discriminate in favor of highly compensated employees. See § 1.132-8. For purposes of this paragraph (a)(1)(ii), each dining room or cafeteria in which meals are served is treated as a separate eating facility, whether each such dining room or cafeteria has its own kitchen or other food-preparation area.
(2) Employer-operated eating facility for employees. An employer-operated eating facility for employees is a facility that meets all of the following conditions—
(i) The facility is owned or leased by the employer,
(ii) The facility is operated by the employer,
(iii) The facility is located on or near the business premises of the employer, and
(iv) The meals furnished at the facility are provided during, or immediately before or after, the employee’s workday.
(3) Operation by the employer. If an employer contracts with another to operate an eating facility for its employees, the facility is considered to be operated by the employer for purposes of this section. If an eating facility is operated by more than one employer, it is considered to be operated by each employer.
(4) Example. The provisions of this paragraph (a)(2) may be illustrated by the following example:
(b) Direct operating costs—(1) In general. For purposes of this section, the direct operating costs of an eating facility are—
(i) The cost of food and beverages, and
(ii) The cost of labor for personnel whose services relating to the facility are performed primarily on the premises of the eating facility. Direct operating costs do not include the labor cost attributable to personnel whose services relating to the facility are not performed primarily on the premises of the eating facility. Thus, for example, the labor costs attributable to cooks, waiters, and waitresses are included in direct operating costs, but the labor cost attributable to a manager of an eating facility whose services relating to the facility are not primarily performed on the premises of the eating facility is not included in direct operating costs. If an employee performs services relating to the facility both on and off the premises of the eating facility, only the portion of the total labor cost of the employee relating to the facility that bears the same proportion to such total labor cost as time spent on the premises bears to total time spent performing services relating to the facility is included in direct operating costs. For example, assume that 60 percent of the services of a cook in the above example are not related to the eating facility. Only 40 percent of the total labor cost of the cook is includible in direct operating costs. For purposes of this section, labor costs include all compensation required to be reported on a Form W-2 for income tax purposes and related employment taxes paid by the employer. In determining the direct operating costs of an eating facility, the employer may include as part of the facility, vending machines that are provided by the employer and located on the same premises as the other eating facilities operated by the employer.
(2) Multiple dining rooms or cafeterias. The direct operating costs test may be applied separately for each dining room or cafeteria. Alternatively, the direct operating costs test may be applied with respect to all the eating facilities operated by the employer.
(3) Payment to operator of facility. If an employer contracts with another to operate an eating facility for its employees, the direct operating costs of the facility consist both of direct operating costs, if any, incurred by the employer and the amount paid to the operator of the facility to the extent that such amount is attributable to what would be direct operating costs if the employer operated the facility directly.
(c) Valuation of non-excluded meals provided at an employer-operated eating facility for employees. If the exclusion for meals provided at an employer-operated eating facility for employees is not available, the recipient of meals provided at such facility must include in income the amount by which the fair market value of the meals provided exceeds the sum of—
(1) The amount, if any, paid for the meals, and
(2) The amount, if any, specifically excluded by another section of chapter 1 of this subtitle.
§ 1.132-8 Fringe benefit nondiscrimination rules.
(a) Application of nondiscrimination rules—(1) General rule. A highly compensated employee who receives a no-additional cost service, a qualified employee discount or a meal provided at an employer-operated eating facility for employees shall not be permitted to exclude such benefit from his or her income unless the benefit is available on substantially the same terms to:
(i) All employees of the employer; or
(ii) A group of employees of the employer which is defined under a reasonable classification set up by the employer that does not discriminate in favor of highly compensated employees. See paragraph (f) of this section for the definition of a highly compensated employee.
(2) Consequences of discrimination—(i) In general. If an employer maintains more than one fringe benefit program, i.e., either different fringe benefits being provided to the same group of employees, or different classifications of employees or the same fringe benefit being provided to two or more classifications of employees, the nondiscrimination requirements of section 132 will generally be applied separately to each such program. Thus, a determination that one fringe benefit program discriminates in favor of highly compensated employees generally will not cause other fringe benefit programs covering the same highly compensated employees to be treated as discriminatory. If the fringe benefits provided to a highly compensated individual do not satisfy the nondiscrimination rules provided in this section, such individual shall be unable to exclude from gross income any portion of the benefit. For example, if an employer offers a 20 percent discount (which otherwise satisfies the requirements for a qualified employee discount) to all non-highly compensated employees and a 35 percent discount to all highly compensated employees, the entire value of the 35 percent discount (not just the excess over 20 percent) is includible in the gross income and wages of the highly compensated employees who make purchases at a discount.
(ii) Exception—(A) Related fringe benefit programs. If one of a group of fringe benefit programs discriminates in favor of highly compensated employees, no related fringe benefit provided to such highly compensated employees under any other fringe benefit program may be excluded from the gross income of such highly compensated employees. For example, assume a department store provides a 20 percent merchandise discount to all employees under one fringe benefit program. Assume further that under a second fringe benefit program, the department store provides an additional 15 percent merchandise discount to a group of employees defined under a classification which discriminates in favor of highly compensated employees. Because the second fringe benefit program is discriminatory, the 15 percent merchandise discount provided to the highly compensated employees is not a qualified employee discount. In addition, because the 20 percent merchandise discount provided under the first fringe benefit program is related to the fringe benefit provided under the second fringe benefit program, the 20 percent merchandise discount provided the highly compensated employees is not a qualified employee discount. Thus, the entire 35 percent merchandise discount provided to the highly compensated employees is includible in such employees’ gross incomes.
(B) Employer operated eating facilities for employees. For purposes of paragraph (a)(2)(ii)(A) of this section, meals at different employer-operated eating facilities for employees are not related fringe benefits, so that a highly compensated employee may exclude from gross income the value of a meal at a nondiscriminatory facility even though any meals provided to him or her at a discriminatory facility cannot be excluded.
(3) Scope of the nondiscrimination rules provided in this section. The nondiscrimination rules provided in this section apply only to fringe benefits provided pursuant to section 132 (a)(1), (a)(2), and (e)(2). These rules have no application to any other employee benefit that may be subject to nondiscrimination requirements under any other section of the Code.
(b) Aggregation of employees—(1) Section 132(a) (1) and (2). For purposes of determining whether the exclusions for no-additional-cost services and qualified employee discounts are available to highly compensated employees, the nondiscrimination rules of this section are applied by aggregating the employees of all related employers (as defined in § 1.132-1(c)), except that employees in different lines of business (as defined in § 1.132-4) are not to be aggregated. Thus, in general, for purposes of this section, the term “employees of the employer” refers to all employees of the employer and any other entity that is a member of a group described in sections 414 (b), (c), (m), or (o) and that performs services within the same line of business as the employer which provides the particular fringe benefit. Employees in different lines of business will be aggregated, however, if the line of business limitation has been relaxed pursuant to paragraphs (b) through (g) of § 1.132-4.
(2) Section 132 (e) (2). For purposes of determining whether the exclusions for meals provided at employer-operated eating facilities are available to highly compensated, the nondiscrimination rules of this section are applied by aggregating the employees of all related employers (as defined in section § 1.132-1(c)) who regularly work at or near the premises on which the eating facility is located, except that employees in different lines of business (as defined in § 1.132-4) are not to be aggregated. The nondiscrimination rules of this section are applied separately to each eating facility. Each dining room or cafeteria in which meals are served is treated as a separate eating facility, regardless of whether each such dining room or cafeteria has its own kitchen or other food-preparation area.
(3) Classes of employees who may be excluded. For purposes of applying the nondiscrimination rules of this section to a particular fringe benefit program, there may be excluded from consideration employees who may be excluded from consideration under section 89(h), as enacted by the Tax Reform Act of 1986, Pub. L. 99-514, 100 Stat. 2085 (1986) and amended by the Technical and Miscellaneous Revenue Act of 1988, Pub. L. 100-647, 102 Stat. 3342 (1988).
(c) Availability on substantially the same terms—(1) General rule. The determination of whether a benefit is available on substantially the same terms shall be made upon the basis of the facts and circumstances of each situation. In general, however, if any one of the terms or conditions governing the availability of a particular benefit to one or more employees varies from any one of the terms or conditions governing the availability of a benefit made available to one or more other employees, such benefit shall not be considered to be available on substantially the same terms except to the extent otherwise provided in paragraph (c)(2) of this section. For example, if a department store provides a 20 percent qualified employee discount to all of its employees on all merchandise, the substantially the same terms requirement will be satisfied. Similarly, if the discount provided to all employees is 30 percent on certain merchandise (such as apparel), and 20 percent on all other merchandise, the substantially the same terms requirement will be satisfied. However, if a department store provides a 20 percent qualified employee discount to all employees, but as to the employees in certain departments, the discount is available upon hire, and as to the remaining departments, the discount is only available when an employee has completed a specified term of services, the 20 percent discount is not available on substantially the same terms to all of the employees of the employer. Similarly, if a greater discount is given to employees with more seniority, full-time work status, or a particular job description, such benefit (i.e., the discount) would not be available to all employees eligible for the discount on substantially the same terms, except to the extent otherwise provided in paragraph (c)(2) of this section. These examples also apply to no-additional-cost-services. Thus, if an employer charges non-highly compensated employees for a no-additional-cost service and does not charge highly compensated employees (or charges highly compensated employees a lesser amount), the substantially the same terms requirement will not be satisfied.
(2) Certain terms relating to priority. Certain fringe benefits made available to employees are available only in limited quantities that may be insufficient to meet employee demand. This situation may occur either because of employer policy (such as where an employer determines that only a certain number of units of a specific product will be made available to employees each year) or because of the nature of the fringe benefit (such as where an employer provides a no-additional-cost transportation service that is limited to the number of seats available just before departure). Under these circumstances, an employer may find it necessary to establish some method of allocating the limited fringe benefits among the employees eligible to receive the fringe benefits. The employer may establish the priorities described below.
(i) Priority on a first come, first served, or similar basis. A benefit shall not fail to be treated as available to a group of employees on substantially the same terms merely because the employer allocates the benefit among such employees on a “first come, first served” or lottery basis, provided that the same notice of the terms of availability is given to all employees in the group and the terms under which the benefit is provided to employees within the group are otherwise the same with respect to all employees. For purposes of the preceding sentence, a program that gives priority to employees who are the first to submit written requests for the benefit will constitute priority on a “first come, first served” basis. Similarly, if the employer regularly engages in the practice of allocating benefits on a priority basis to employees demonstrating a critical need, such benefit shall not fail to be treated as available on substantially the same terms to all of the employees with respect to whom such priority status is available as long as the determination is based upon uniform and objective criteria which have been communicated to all employees in the group of eligible employees. An example of a critical need would be priority transportation given to an employee in the event of a medical emergency involving the employee (or a member of the employee’s immediate family) or a recent death in the employee’s immediate family. Frustrated vacation plans or forfeited deposits would not be treated as giving rise to particularly critical needs.
(ii) Priority on the basis of seniority. Solely for purposes of § 1.132-8, a benefit shall not fail to be treated as available to a group of employees of the employer on substantially the same terms merely because the employer allocates the benefit among such employees on a seniority basis provided that:
(A) The same notice of the terms of availability is given to all employees in the group; and
(B) The average value of the benefit provided for each nonhighly compensated employee is at least 75% of that provided for each highly compensated employee. For purposes of this test, the average value of the benefit provided for each nonhighly compensated (highly compensated) employee is determined by taking the sum of the fair market values of such benefit provided to all the nonhighly compensated (highly compensated) employees, determined in accordance with § 1.61-21, and then dividing that sum by the total number of nonhighly compensated (highly compensated) employees of the employer. For purposes of determining the average value of the benefit provided for each employee, all employee’s of the employer are counted, including those who are not eligible to receive the benefit from the employer.
(d) Testing for discrimination—(1) Classification test. In the event that a benefit described in section 132 (a)(1), (a)(2) or (e)(2) is not available on substantially the same terms to all of the employees of the employer, no exclusion shall be available to a highly compensated employee for such benefit unless the program under which the benefit is provided satisfies the nondiscrimination standards set forth in this section. The nondiscrimination standard of this section will be satisfied only if the benefit is available on substantially the same terms to a group of employees of the employer which is defined under a reasonable classification established by the employer that does not discriminate in favor of highly compensated employees. The determination of whether a particular classification is discriminatory will generally depend upon the facts and circumstances involved, based upon principles similar to those applied for purposes of section 410(b)(2)(A)(i) or, for years commencing prior to January 1, 1988, section 410(b)(1)(B). Thus, in general, except as otherwise provided in this section, if a benefit is available on substantially the same terms to a group of employees which, when compared with all of the other employees of the employer, constitutes a nondiscriminatory classification under section 410(b)(2)(A)(i) (or, if applicable, section 410(b)(1)(B)), it shall be deemed to be nondiscriminatory.
(2) Classifications that are per se discriminatory. A classification that, on its face, makes fringe benefits available principally to highly compensated employees is per se discriminatory. In addition, a classification that is based on either an amount or rate of compensation is per se discriminatory if it favors those with the higher amount or rate of compensation. On the other hand, a classification that is based on factors such as seniority, full-time vs. part-time employment, or job description is not per se discriminatory but may be discriminatory as applied to the workforce of a particular employer.
(3) Former employees. When determining whether a classification is discriminatory, former employees shall be tested separately from other employees of the employer. Therefore, a classification is not discriminatory solely because the employer does not make fringe benefits available to any former employee. Whether a classification of former employees discriminates in favor of highly compensated employees will depend upon the particular facts and circumstances.
(4) Restructuring of benefits. For purposes of testing whether a particular group of employees would constitute a discriminatory classification for purposes of this section, an employer may restructure its fringe benefit program as described in this paragraph. If a fringe benefit is provided to more than one group of employees, and one or more such groups would constitute a discriminatory classification if considered by itself, then for purposes of this section, the employer may restructure its fringe benefit program so that all or some of the members of such group may be aggregated with another group, provided that each member of the restructured group will have available to him or her the same benefit upon the same terms and conditions. For example, assume that all highly compensated employees of an employer have fewer than five years of service and all nonhighly compensated employees have over five years of service. If the employer provided a five percent discount to employees with under five years of service and a ten percent discount to employees with over five years of service, the discount program available to the highly compensated employees would not satisfy the nondiscriminatory classification test; however, as a result of the rule described in this paragraph (d)(4), the employer could structure the program to consist of a five percent discount for all employees and a five percent additional discount for nonhighly compensated employees.
(5) Employer-operated eating facilities for employees—(i) General rule. If access to an employer-operated eating facility for employees is available to a classification of employees that discriminates in favor of highly compensated employees, then the classification will not be treated as discriminating in favor of highly compensated employees unless the facility is used by one or more executive group employees more than a de minimis amount.
(ii) Executive group employee. For purposes of this paragraph (d)(5), an employee is an “executive group employee” if the definition of paragraph (f)(1) of this section is satisfied. For purposes of identifying such employees, the phrase “top one percent of the employees” is substituted for the phrase “top ten percent of the employees” in section 414(q)(4) (relating to the definition of “top-paid group”).
(e) Cash bonuses or rebates. A cash bonus or rebate provided to an employee by an employer that is determined with reference to the value of employer-provided property or services purchased by the employee, is treated as an equivalent employee discount. For example, assume a department store provides a 20 percent merchandise discount to all employees under a fringe benefit program. In addition, assume that the department store provides cash bonuses to a group of employees defined under a classification which discriminates in favor of highly compensated employees. Assume further that such cash bonuses equal 15 percent of the value of merchandise purchased by each employee. This arrangement is substantively identical to the example described in paragraph (e)(2)(i) of this section concerning related fringe benefit programs. Thus, both the 20 percent merchandise discount and the 15 percent cash bonus provided to the highly compensated employees are includible in such employees’ gross incomes.
(f) Highly compensated employee—(1) Government and nongovernment employees. A highly compensated employee of any employer is any employee who, during the year or the preceding year—
(i) Was a 5-percent owner,
(ii) Received compensation from the employer in excess of $75,000,
(iii) Received compensation from the employer in excess of $50,000 and was in the top-paid group of employees for such year, or
(iv) Was at any time an officer and received compensation greater than 150 percent of the amount in effect under section 415(c)(1)(A) for such year.
(2) Former employees. A former employee shall be treated as a highly compensated employee if—
(i) The employee was a highly compensated employee when the employee separated from service, or
(ii) The employee was a highly compensated employee at any time after attaining age 55.
§ 1.132-9 Qualified transportation fringes.
(a) Table of contents. This section contains a list of the questions and answers in § 1.132-9.
(1) General rules.
Q-1. What is a qualified transportation fringe?
Q-2. What is transportation in a commuter highway vehicle?
Q-3. What are transit passes?
Q-4. What is qualified parking?
Q-5. May qualified transportation fringes be provided to individuals who are not employees?
Q-6. Must a qualified transportation fringe benefit plan be in writing?
(2) Dollar limitations.
Q-7. Is there a limit on the value of qualified transportation fringes that may be excluded from an employee’s gross income?
Q-8. What amount is includible in an employee’s wages for income and employment tax purposes if the value of the qualified transportation fringe exceeds the applicable statutory monthly limit?
Q-9. Are excludable qualified transportation fringes calculated on a monthly basis?
Q-10. May an employee receive qualified transportation fringes from more than one employer?
(3) Compensation reduction.
Q-11. May qualified transportation fringes be provided to employees pursuant to a compensation reduction agreement?
Q-12. What is a compensation reduction election for purposes of section 132(f)?
Q-13. Is there a limit to the amount of the compensation reduction?
Q-14. When must the employee have made a compensation reduction election and under what circumstances may the amount be paid in cash to the employee?
Q-15. May an employee whose qualified transportation fringe costs are less than the employee’s compensation reduction carry over this excess amount to subsequent periods?
(4) Expense reimbursements.
Q-16. How does section 132(f) apply to expense reimbursements?
Q-17. May an employer provide nontaxable cash reimbursement under section 132(f) for periods longer than one month?
Q-18. What are the substantiation requirements if an employer distributes transit passes?
Q-19. May an employer choose to impose substantiation requirements in addition to those described in this regulation?
(5) Special rules for parking and vanpools.
Q-20. How is the value of parking determined?
Q-21. How do the qualified transportation fringe rules apply to van pools?
(6) Reporting and employment taxes.
Q-22. What are the reporting and employment tax requirements for qualified transportation fringes?
(7) Interaction with other fringe benefits.
Q-23. How does section 132(f) interact with other fringe benefit rules?
(8) Application to individuals who are not employees.
Q-24. May qualified transportation fringes be provided to individuals who are partners, 2-percent shareholders of S-corporations, or independent contractors?
(9) Effective date.
Q-25. What is the effective date of this section?
(b) Questions and answers.
Q-1. What is a qualified transportation fringe?
A-1. (a) The following benefits are qualified transportation fringe benefits:
(1) Transportation in a commuter highway vehicle.
(2) Transit passes.
(3) Qualified parking.
(b) An employer may simultaneously provide an employee with any one or more of these three benefits.
Q-2. What is transportation in a commuter highway vehicle?
A-2. Transportation in a commuter highway vehicle is transportation provided by an employer to an employee in connection with travel between the employee’s residence and place of employment. A commuter highway vehicle is a highway vehicle with a seating capacity of at least 6 adults (excluding the driver) and with respect to which at least 80 percent of the vehicle’s mileage for a year is reasonably expected to be—
(a) For transporting employees in connection with travel between their residences and their place of employment; and
(b) On trips during which the number of employees transported for commuting is at least one-half of the adult seating capacity of the vehicle (excluding the driver).
Q-3. What are transit passes?
A-3. A transit pass is any pass, token, farecard, voucher, or similar item (including an item exchangeable for fare media) that entitles a person to transportation—
(a) On mass transit facilities (whether or not publicly owned); or
(b) Provided by any person in the business of transporting persons for compensation or hire in a highway vehicle with a seating capacity of at least 6 adults (excluding the driver).
Q-4. What is qualified parking?
A-4. (a) Qualified parking is parking provided to an employee by an employer—
(1) On or near the employer’s business premises; or
(2) At a location from which the employee commutes to work (including commuting by carpool, commuter highway vehicle, mass transit facilities, or transportation provided by any person in the business of transporting persons for compensation or hire).
(b) For purposes of section 132(f), parking on or near the employer’s business premises includes parking on or near a work location at which the employee provides services for the employer. However, qualified parking does not include—
(1) The value of parking provided to an employee that is excludable from gross income under section 132(a)(3) (as a working condition fringe), or
(2) Reimbursement paid to an employee for parking costs that is excludable from gross income as an amount treated as paid under an accountable plan. See § 1.62-2.
(c) However, parking on or near property used by the employee for residential purposes is not qualified parking.
(d) Parking is provided by an employer if—
(1) The parking is on property that the employer owns or leases;
(2) The employer pays for the parking; or
(3) The employer reimburses the employee for parking expenses (see Q/A-16 of this section for rules relating to cash reimbursements).
Q-5. May qualified transportation fringes be provided to individuals who are not employees?
A-5. An employer may provide qualified transportation fringes only to individuals who are currently employees of the employer at the time the qualified transportation fringe is provided. The term employee for purposes of qualified transportation fringes is defined in § 1.132-1(b)(2)(i). This term includes only common law employees and other statutory employees, such as officers of corporations. See Q/A-24 of this section for rules regarding partners, 2-percent shareholders, and independent contractors.
Q-6. Must a qualified transportation fringe benefit plan be in writing?
A-6. No. Section 132(f) does not require that a qualified transportation fringe benefit plan be in writing.
Q-7. Is there a limit on the value of qualified transportation fringes that may be excluded from an employee’s gross income?
A-7. (a) Transportation in a commuter highway vehicle and transit passes. Before January 1, 2002, up to $65 per month is excludable from the gross income of an employee for transportation in a commuter highway vehicle and transit passes provided by an employer. On January 1, 2002, this amount is increased to $100 per month.
(b) Parking. Up to $175 per month is excludable from the gross income of an employee for qualified parking.
(c) Combination. An employer may provide qualified parking benefits in addition to transportation in a commuter highway vehicle and transit passes.
(d) Cost-of-living adjustments. The amounts in paragraphs (a) and (b) of this Q/A-7 are adjusted annually, beginning with 2000, to reflect cost-of-living. The adjusted figures are announced by the Service before the beginning of the year.
Q-8. What amount is includible in an employee’s wages for income and employment tax purposes if the value of the qualified transportation fringe exceeds the applicable statutory monthly limit?
A-8. (a) Generally, an employee must include in gross income the amount by which the fair market value of the benefit exceeds the sum of the amount, if any, paid by the employee and any amount excluded from gross income under section 132(a)(5). Thus, assuming no other statutory exclusion applies, if an employer provides an employee with a qualified transportation fringe that exceeds the applicable statutory monthly limit and the employee does not make any payment, the value of the benefits provided in excess of the applicable statutory monthly limit is included in the employee’s wages for income and employment tax purposes. See § 1.61-21(b)(1).
(b) The following examples illustrate the principles of this Q/A-8:
(ii) In this Example 1, because the value of the monthly transit pass exceeds the statutory monthly limit by $10, $120 ($110—$100, times 12 months) must be included in D’s wages for income and employment tax purposes for the year with respect to the transit passes.
(ii) In this Example 2, because the fair market value of the qualified parking exceeds the statutory monthly limit by $20, $240 ($195—$175, times 12 months) must be included in Employee E’s wages for income and employment tax purposes for the year with respect to the qualified parking.
(ii) In this Example 3, because the sum of the amount paid by an employee ($45) plus the amount excludable for qualified parking ($175) is not less than the fair market value of the monthly benefit, no amount is includible in the employee’s wages for income and employment tax purposes with respect to the qualified parking.
Q-9. Are excludable qualified transportation fringes calculated on a monthly basis?
A-9. (a) In general. Yes. The value of transportation in a commuter highway vehicle, transit passes, and qualified parking is calculated on a monthly basis to determine whether the value of the benefit has exceeded the applicable statutory monthly limit on qualified transportation fringes. Except in the case of a transit pass provided to an employee, the applicable statutory monthly limit applies to qualified transportation fringes used by the employee in a month. Monthly exclusion amounts are not combined to provide a qualified transportation fringe for any month exceeding the statutory limit. A month is a calendar month or a substantially equivalent period applied consistently.
(b) Transit passes. In the case of transit passes provided to an employee, the applicable statutory monthly limit applies to the transit passes provided by the employer to the employee in a month for that month or for any previous month in the calendar year. In addition, transit passes distributed in advance for more than one month, but not for more than twelve months, are qualified transportation fringes if the requirements in paragraph (c) of this Q/A-9 are met (relating to the income tax and employment tax treatment of advance transit passes). The applicable statutory monthly limit under section 132(f)(2) on the combined amount of transportation in a commuter highway vehicle and transit passes may be calculated by taking into account the monthly limits for all months for which the transit passes are distributed. In the case of a pass that is valid for more than one month, such as an annual pass, the value of the pass may be divided by the number of months for which it is valid for purposes of determining whether the value of the pass exceeds the statutory monthly limit.
(c) Rule if employee’s employment terminates—(1) Income tax treatment. The value of transit passes provided in advance to an employee with respect to a month in which the individual is not an employee is included in the employee’s wages for income tax purposes.
(2) Reporting and employment tax treatment. Transit passes distributed in advance to an employee are excludable from wages for employment tax purposes under sections 3121, 3306, and 3401 (FICA, FUTA, and income tax withholding) if the employer distributes transit passes to the employee in advance for not more than three months and, at the time the transit passes are distributed, there is not an established date that the employee’s employment will terminate (for example, if the employee has given notice of retirement) which will occur before the beginning of the last month of the period for which the transit passes are provided. If the employer distributes transit passes to an employee in advance for not more than three months and at the time the transit passes are distributed there is an established date that the employee’s employment will terminate, and the employee’s employment does terminate before the beginning of the last month of the period for which the transit passes are provided, the value of transit passes provided for months beginning after the date of termination during which the employee is not employed by the employer is included in the employee’s wages for employment tax purposes. If transit passes are distributed in advance for more than three months, the value of transit passes provided for the months during which the employee is not employed by the employer is includible in the employee’s wages for employment tax purposes regardless of whether at the time the transit passes were distributed there was an established date of termination of the employee’s employment.
(d) Examples. The following examples illustrate the principles of this Q/A-9:
(ii) In this Example 1, because monthly exclusion amounts may not be combined to provide a benefit in any month greater than the applicable statutory limit, the amount by which the amount reimbursed for July exceeds the applicable statutory monthly limit ($180 minus $175 equals $5) is includible in Employee E’s wages for income and employment tax purposes.
(ii) In this Example 2, the value of the transit passes (three months times $65 equals $195) is excludable from F’s wages for income and employment tax purposes.
(ii) In this Example 3, because the value of the transit passes may be calculated by taking into account the monthly limits for all months for which the transit passes are distributed, the value of the transit passes (three months times $65 equals $195) is excludable from the employees’ wages for income and employment tax purposes.
(ii) In this Example 4, because at the time the transit passes were distributed there was not an established date of termination for Employee T, the value of the transit passes provided for June ($65) is excludable from T’s wages for employment tax purposes. However, the value of the transit passes distributed to Employee T for June ($65) is not excludable from T’s wages for income tax purposes.
(iii) If Employee T’s May 31 termination date was established at the time the transit passes were provided, the value of the transit passes provided for June ($65) is included in T’s wages for both income and employment tax purposes.
(ii) In this Example 5, the value of the transit passes provided to Employee X for the months September, October, November, and December ($65 times 4 months equals $260) of the year is included in X’s wages for income and employment tax purposes. The value of the transit passes provided to Employer F’s other employees is excludable from the employees’ wages for income and employment tax purposes.
(ii) In this Example 6, because the value of the transit passes distributed by Employer R does not exceed the applicable statutory monthly limit ($65), no portion of the value of the transit passes is included as wages for income and employment tax purposes.
Q-10. May an employee receive qualified transportation fringes from more than one employer?
A-10. (a) General rule. Yes. The statutory monthly limits described in Q/A-7 of this section apply to benefits provided by an employer to its employees. For this purpose, all employees treated as employed by a single employer under section 414(b), (c), (m), or (o) are treated as employed by a single employer. See section 414(t) and § 1.132-1(c). Thus, qualified transportation fringes paid by entities under common control under section 414(b), (c), (m), or (o) are combined for purposes of applying the applicable statutory monthly limit. In addition, an individual who is treated as a leased employee of the employer under section 414(n) is treated as an employee of that employer for purposes of section 132. See section 414(n)(3)(C).
(b) Examples. The following examples illustrate the principles of this Q/A-10:
(ii) In this Example 1, because M and N are unrelated employers, and the value of the monthly parking benefit provided by each is not more than the applicable statutory monthly limit, the parking benefits provided by each employer are excludable as qualified transportation fringes assuming that the other requirements of this section are satisfied.
(ii) In this Example 2, because M and N are treated as a single employer, the value of the monthly parking benefit provided by M and N must be combined for purposes of determining whether the applicable statutory monthly limit has been exceeded. Thus, the amount by which the value of the parking benefit exceeds the monthly limit ($200 minus the monthly limit amount of $175 equals $25) for each month in the year is includible in E’s wages for income and employment tax purposes.
Q-11. May qualified transportation fringes be provided to employees pursuant to a compensation reduction agreement?
A-11. Yes. An employer may offer employees a choice between cash compensation and any qualified transportation fringe. An employee who is offered this choice and who elects qualified transportation fringes is not required to include the cash compensation in income if—
(a) The election is pursuant to an arrangement described in Q/A-12 of this section;
(b) The amount of the reduction in cash compensation does not exceed the limitation in Q/A-13 of this section;
(c) The arrangement satisfies the timing and reimbursement rules in Q/A-14 and 16 of this section; and
(d) The related fringe benefit arrangement otherwise satisfies the requirements set forth elsewhere in this section.
Q-12. What is a compensation reduction election for purposes of section 132(f)?
A-12. (a) Election requirements generally. A compensation reduction arrangement is an arrangement under which the employer provides the employee with the right to elect whether the employee will receive either a fixed amount of cash compensation at a specified future date or a fixed amount of qualified transportation fringes to be provided for a specified future period (such as qualified parking to be used during a future calendar month). The employee’s election must be in writing or another form, such as electronic, that includes, in a permanent and verifiable form, the information required to be in the election. The election must contain the date of the election, the amount of the compensation to be reduced, and the period for which the benefit will be provided. The election must relate to a fixed dollar amount or fixed percentage of compensation reduction. An election to reduce compensation for a period by a set amount for such period may be automatically renewed for subsequent periods.
(b) Automatic election permitted. An employer may provide under its qualified transportation fringe benefit plan that a compensation reduction election will be deemed to have been made if the employee does not elect to receive cash compensation in lieu of the qualified transportation fringe, provided that the employee receives adequate notice that a compensation reduction will be made and is given adequate opportunity to choose to receive the cash compensation instead of the qualified transportation fringe. See § 1.401(a)-21 of this chapter for rules permitting the use of electronic media to make participant elections with respect to employee benefit arrangements.
Q-13. Is there a limit to the amount of the compensation reduction?
A-13. Yes. Each month, the amount of the compensation reduction may not exceed the combined applicable statutory monthly limits for transportation in a commuter highway vehicle, transit passes, and qualified parking. For example, for a year in which the statutory monthly limit is $65 for transportation in a commuter highway vehicle and transit passes, and $175 for qualified parking, an employee could elect to reduce compensation for any month by no more than $240 ($65 plus $175) with respect to qualified transportation fringes. If an employee were to elect to reduce compensation by $250 for a month, the excess $10 ($250 minus $240) would be includible in the employee’s wages for income and employment tax purposes.
Q-14. When must the employee have made a compensation reduction election and under what circumstances may the amount be paid in cash to the employee?
A-14. (a) The compensation reduction election must satisfy the requirements set forth under paragraphs (b), (c), and (d) of this Q/A-14.
(b) Timing of election. The compensation reduction election must be made before the employee is able currently to receive the cash or other taxable amount at the employee’s discretion. The determination of whether the employee is able currently to receive the cash does not depend on whether it has been constructively received for purposes of section 451. The election must specify that the period (such as a calendar month) for which the qualified transportation fringe will be provided must not begin before the election is made. Thus, a compensation reduction election must relate to qualified transportation fringes to be provided after the election. For this purpose, the date a qualified transportation fringe is provided is—
(1) The date the employee receives a voucher or similar item; or
(2) In any other case, the date the employee uses the qualified transportation fringe.
(c) Revocability of elections. The employee may not revoke a compensation reduction election after the employee is able currently to receive the cash or other taxable amount at the employee’s discretion. In addition, the election may not be revoked after the beginning of the period for which the qualified transportation fringe will be provided.
(d) Compensation reduction amounts not refundable. Unless an election is revoked in a manner consistent with paragraph (c) of this Q/A-14, an employee may not subsequently receive the compensation (in cash or any form other than by payment of a qualified transportation fringe under the employer’s plan). Thus, an employer’s qualified transportation fringe benefit plan may not provide that an employee who ceases to participate in the employer’s qualified transportation fringe benefit plan (such as in the case of termination of employment) is entitled to receive a refund of the amount by which the employee’s compensation reductions exceed the actual qualified transportation fringes provided to the employee by the employer.
(e) Examples. The following examples illustrate the principles of this Q/A-14:
(ii) In this Example 1, the arrangement satisfies the requirements of this Q/A-14 because the election is made before the employee is able currently to receive the cash and the election specifies the future period for which the qualified transportation fringes will be provided. The arrangement would also satisfy the requirements of this Q/A-14 and Q/A-13 of this section if employees are allowed to elect to reduce compensation up to $280 per month ($100 plus $180).
(iii) The arrangement would also satisfy the requirements of this Q/A-14 (and Q/A-13 of this section) if employees are allowed to make an election at any time before the first or the fifteenth day of the month to reduce their compensation payable on that payroll date by an amount not in excess of one-half of the applicable statutory monthly limit (depending on the type of qualified transportation fringe elected by the employee) and P provides a mass transit pass on or after the applicable payroll date for the compensation reduction amount elected by the employee for the payroll date or reimburses the cost of other qualified transportation fringes used by the employee on or after the payroll date up to the compensation reduction amount elected by the employee for that payroll date.
(ii) In this Example 2, $65 is included in Employee Q’s wages for income and employment tax purposes because the compensation reduction election fails to satisfy the requirement in this Q/A-14 and Q/A-12 of this section that the period for which the qualified transportation fringe will be provided not begin before the election is made to the extent the election relates to $65 worth of transit passes for January of the year. The $65 for February is not taxable because the election was for a future period that includes at least one day in February.
(iii) However, no amount would be included in Employee Q’s wages as a result of the election if $195 worth of mass transit passes were instead provided to Q for the months of February, March, and April (because the compensation reduction would relate solely to fringes to be provided for a period not beginning before the date of the election and the amount provided does not exceed the aggregate limit for the period, i.e., the sum of $65 for each of February, March, and April). See Q/A-9 of this section for rules governing transit passes distributed in advance for more than one month.
(ii) In this Example 3, no amount would be includible in Employee R’s wages for income and employment tax purposes because the compensation reduction related solely to parking on or near Employer R’s business premises used during a period not beginning before the date of the election and the amount reimbursed for parking used in any one month does not exceed the statutory monthly limitation.
Q-15. May an employee whose qualified transportation fringe costs are less than the employee’s compensation reduction carry over this excess amount to subsequent periods?
A-15. (a) Yes. An employee may carry over unused compensation reduction amounts to subsequent periods under the plan of the employee’s employer.
(b) The following example illustrates the principles of this Q/A-15:
(ii) In this Example, because Employee E is reimbursed in an amount not exceeding the applicable statutory monthly limit, and the reimbursement does not exceed the amount of employee-operated commuter highway vehicle expenses incurred during the month of January, the amount reimbursed ($65) is excludable from E’s wages for income and employment tax purposes.
Q-16. How does section 132(f) apply to expense reimbursements?
A-16. (a) In general. The term qualified transportation fringe includes cash reimbursement by an employer to an employee for expenses incurred or paid by an employee for transportation in a commuter highway vehicle or qualified parking. The term qualified transportation fringe also includes cash reimbursement for transit passes made under a bona fide reimbursement arrangement, but, in accordance with section 132(f)(3), only if permitted under paragraph (b) of this Q/A-16. The reimbursement must be made under a bona fide reimbursement arrangement which meets the rules of paragraph (c) of this Q/A-16. A payment made before the date an expense has been incurred or paid is not a reimbursement. In addition, a bona fide reimbursement arrangement does not include an arrangement that is dependent solely upon an employee certifying in advance that the employee will incur expenses at some future date.
(b) Special rule for transit passes—(1) In general. The term qualified transportation fringe includes cash reimbursement for transit passes made under a bona fide reimbursement arrangement, but, in accordance with section 132(f)(3), only if no voucher or similar item that may be exchanged only for a transit pass is readily available for direct distribution by the employer to employees. If a voucher is readily available, the requirement that a voucher be distributed in-kind by the employer is satisfied if the voucher is distributed by the employer or by another person on behalf of the employer (for example, if a transit operator credits amounts to the employee’s fare card as a result of payments made to the operator by the employer).
(2) Voucher or similar item. For purposes of the special rule in paragraph (b) of this Q/A-16, a transit system voucher is an instrument that may be purchased by employers from a voucher provider that is accepted by one or more mass transit operators (e.g., train, subway, and bus) in an area as fare media or in exchange for fare media. Thus, for example, a transit pass that may be purchased by employers directly from a voucher provider is a transit system voucher.
(3) Voucher provider. The term voucher provider means any person in the trade or business of selling transit system vouchers to employers, or any transit system or transit operator that sells vouchers to employers for the purpose of direct distribution to employees. Thus, a transit operator might or might not be a voucher provider. A voucher provider is not, for example, a third-party employee benefits administrator that administers a transit pass benefit program for an employer using vouchers that the employer could obtain directly.
(4) Readily available. For purposes of this paragraph (b), a voucher or similar item is readily available for direct distribution by the employer to employees if and only if an employer can obtain it from a voucher provider that—
(i) does not impose fare media charges that cause vouchers to not be readily available as described in paragraph (b)(5) of this section; and
(ii) does not impose other restrictions that cause vouchers to not be readily available as described in paragraph (b)(6) of this section.
(5) Fare media charges. For purposes of paragraph (b)(4) of this section, fare media charges relate only to fees paid by the employer to voucher providers for vouchers. The determination of whether obtaining a voucher would result in fare media charges that cause vouchers to not be readily available as described in this paragraph (b) is made with respect to each transit system voucher. If more than one transit system voucher is available for direct distribution to employees, the employer must consider the fees imposed for the lowest cost monthly voucher for purposes of determining whether the fees imposed by the voucher provider satisfy this paragraph. However, if transit system vouchers for multiple transit systems are required in an area to meet the transit needs of the individual employees in that area, the employer has the option of averaging the costs applied to each transit system voucher for purposes of determining whether the fare media charges for transit system vouchers satisfy this paragraph. Fare media charges are described in this paragraph (b)(5), and therefore cause vouchers to not be readily available, if and only if the average annual fare media charges that the employer reasonably expects to incur for transit system vouchers purchased from the voucher provider (disregarding reasonable and customary delivery charges imposed by the voucher provider, e.g., not in excess of $15) are more than 1 percent of the average annual value of the vouchers for a transit system.
(6) Other restrictions. For purposes of paragraph (b)(4) of this section, restrictions that cause vouchers to not be readily available are restrictions imposed by the voucher provider other than fare media charges that effectively prevent the employer from obtaining vouchers appropriate for distribution to employees. Examples of such restrictions include—
(i) Advance purchase requirements. Advance purchase requirements cause vouchers to not be readily available only if the voucher provider does not offer vouchers at regular intervals or fails to provide the voucher within a reasonable period after receiving payment for the voucher. For example, a requirement that vouchers may be purchased only once per year may effectively prevent an employer from obtaining vouchers for distribution to employees. An advance purchase requirement that vouchers be purchased not more frequently than monthly does not effectively prevent the employer from obtaining vouchers for distribution to employees.
(ii) Purchase quantity requirements. Purchase quantity requirements cause vouchers to not be readily available if the voucher provider does not offer vouchers in quantities that are reasonably appropriate to the number of the employer’s employees who use mass transportation (for example, the voucher provider requires a $1,000 minimum purchase and the employer seeks to purchase only $200 of vouchers).
(iii) Limitations on denominations of vouchers that are available. If the voucher provider does not offer vouchers in denominations appropriate for distribution to the employer’s employees, vouchers are not readily available. For example, vouchers provided in $5 increments up to the monthly limit are appropriate for distribution to employees, while vouchers available only in a denomination equal to the monthly limit are not appropriate for distribution to employees if the amount of the benefit provided to the employer’s employees each month is normally less than the monthly limit.
(7) Example. The following example illustrates the principles of this paragraph (b):
(ii) In this Example, vouchers for X are readily available for direct distribution by the employer to employees because the expected cost of the vouchers disbursed to M’s employees for the next calendar year is not more than 1 percent of the value of the vouchers (50 cents divided by $55 equals 0.91 percent), the delivery charges are disregarded because they are reasonable and customary, and there are no other restrictions that cause the vouchers to not be readily available. Thus, any reimbursement of mass transportation costs in X would not be a qualified transportation fringe.
(c) Substantiation requirements. Employers that make cash reimbursements must establish a bona fide reimbursement arrangement to establish that their employees have, in fact, incurred expenses for transportation in a commuter highway vehicle, transit passes, or qualified parking. For purposes of section 132(f), whether cash reimbursements are made under a bona fide reimbursement arrangement may vary depending on the facts and circumstances, including the method or methods of payment utilized within the mass transit system. The employer must implement reasonable procedures to ensure that an amount equal to the reimbursement was incurred for transportation in a commuter highway vehicle, transit passes, or qualified parking. The expense must be substantiated within a reasonable period of time. An expense substantiated to the payor within 180 days after it has been paid will be treated as having been substantiated within a reasonable period of time. An employee certification at the time of reimbursement in either written or electronic form may be a reasonable reimbursement procedure depending on the facts and circumstances. Examples of reasonable reimbursement procedures are set forth in paragraph (d) of this Q/A-16.
(d) Illustrations of reasonable reimbursement procedures. The following are examples of reasonable reimbursement procedures for purposes of paragraph (c) of this Q/A-16. In each case, the reimbursement is made at or within a reasonable period after the end of the events described in paragraphs (d)(1) through (d)(3) of this section.
(1) An employee presents to the employer a parking expense receipt for parking on or near the employer’s business premises, the employee certifies that the parking was used by the employee, and the employer has no reason to doubt the employee’s certification.
(2) An employee either submits a used time-sensitive transit pass (such as a monthly pass) to the employer and certifies that he or she purchased it or presents an unused or used transit pass to the employer and certifies that he or she purchased it and the employee certifies that he or she has not previously been reimbursed for the transit pass. In both cases, the employer has no reason to doubt the employee’s certification.
(3) If a receipt is not provided in the ordinary course of business (e.g., if the employee uses metered parking or if used transit passes cannot be returned to the user), the employee certifies to the employer the type and the amount of expenses incurred, and the employer has no reason to doubt the employee’s certification.
Q-17. May an employer provide nontaxable cash reimbursement under section 132(f) for periods longer than one month?
A-17. (a) General rule. Yes. Qualified transportation fringes include reimbursement to employees for costs incurred for transportation in more than one month, provided the reimbursement for each month in the period is calculated separately and does not exceed the applicable statutory monthly limit for any month in the period. See Q/A-8 and 9 of this section if the limit for a month is exceeded.
(b) Example. The following example illustrates the principles of this Q/A-17:
(ii) In this Example, because the value of the reimbursed expenses for each month did not exceed the applicable statutory monthly limit, the $300 reimbursement is excludable from R’s wages for income and employment tax purposes as a qualified transportation fringe.
Q-18. What are the substantiation requirements if an employer distributes transit passes?
A-18. There are no substantiation requirements if the employer distributes transit passes. Thus, an employer may distribute a transit pass for each month with a value not more than the statutory monthly limit without requiring any certification from the employee regarding the use of the transit pass.
Q-19. May an employer choose to impose substantiation requirements in addition to those described in this regulation?
A-19. Yes.
Q-20. How is the value of parking determined?
A-20. Section 1.61-21(b)(2) applies for purposes of determining the value of parking.
Q-21. How do the qualified transportation fringe rules apply to van pools?
A-21. (a) Van pools generally. Employer and employee-operated van pools, as well as private or public transit-operated van pools, may qualify as qualified transportation fringes. The value of van pool benefits which are qualified transportation fringes may be excluded up to the applicable statutory monthly limit for transportation in a commuter highway vehicle and transit passes, less the value of any transit passes provided by the employer for the month.
(b) Employer-operated van pools. The value of van pool transportation provided by or for an employer to its employees is excludable as a qualified transportation fringe, provided the van qualifies as a commuter highway vehicle as defined in section 132(f)(5)(B) and Q/A-2 of this section. A van pool is operated by or for the employer if the employer purchases or leases vans to enable employees to commute together or the employer contracts with and pays a third party to provide the vans and some or all of the costs of operating the vans, including maintenance, liability insurance and other operating expenses.
(c) Employee-operated van pools. Cash reimbursement by an employer to employees for expenses incurred for transportation in a van pool operated by employees independent of their employer are excludable as qualified transportation fringes, provided that the van qualifies as a commuter highway vehicle as defined in section 132(f)(5)(B) and Q/A-2 of this section. See Q/A-16 of this section for the rules governing cash reimbursements.
(d) Private or public transit-operated van pool transit passes. The qualified transportation fringe exclusion for transit passes is available for travel in van pools owned and operated either by public transit authorities or by any person in the business of transporting persons for compensation or hire. In accordance with paragraph (b) of Q/A-3 of this section, the van must seat at least 6 adults (excluding the driver). See Q/A-16(b) and (c) of this section for a special rule for cash reimbursement for transit passes and the substantiation requirements for cash reimbursement.
(e) Value of van pool transportation benefits. Section 1.61-21(b)(2) provides that the fair market value of a fringe benefit is based on all the facts and circumstances. Alternatively, transportation in an employer-provided commuter highway vehicle may be valued under the automobile lease valuation rule in § 1.61-21(d), the vehicle cents-per-mile rule in § 1.61-21(e), or the commuting valuation rule in § 1.61-21(f). If one of these special valuation rules is used, the employer must use the same valuation rule to value the use of the commuter highway vehicle by each employee who share the use. See § 1.61-21(c)(2)(i)(B).
(f) Qualified parking prime member. If an employee obtains a qualified parking space as a result of membership in a car or van pool, the applicable statutory monthly limit for qualified parking applies to the individual to whom the parking space is assigned. This individual is the prime member. In determining the tax consequences to the prime member, the statutory monthly limit amounts of each car pool member may not be combined. If the employer provides access to the space and the space is not assigned to a particular individual, then the employer must designate one of its employees as the prime member who will bear the tax consequences. The employer may not designate more than one prime member for a car or van pool during a month. The employer of the prime member is responsible for including the value of the qualified parking in excess of the statutory monthly limit in the prime member’s wages for income and employment tax purposes.
Q-22. What are the reporting and employment tax requirements for qualified transportation fringes?
A-22. (a) Employment tax treatment generally. Qualified transportation fringes not exceeding the applicable statutory monthly limit described in Q/A-7 of this section are not wages for purposes of the Federal Insurance Contributions Act (FICA), the Federal Unemployment Tax Act (FUTA), and federal income tax withholding. Any amount by which an employee elects to reduce compensation as provided in Q/A-11 of this section is not subject to the FICA, the FUTA, and federal income tax withholding. Qualified transportation fringes exceeding the applicable statutory monthly limit described in Q/A-7 of this section are wages for purposes of the FICA, the FUTA, and federal income tax withholding and are reported on the employee’s Form W-2, Wage and Tax Statement.
(b) Employment tax treatment of cash reimbursement exceeding monthly limits. Cash reimbursement to employees (for example, cash reimbursement for qualified parking) in excess of the applicable statutory monthly limit under section 132(f) is treated as paid for employment tax purposes when actually or constructively paid. See §§ 31.3121(a)-2(a), 31.3301-4, 31.3402(a)-1(b) of this chapter. Employers must report and deposit the amounts withheld in addition to reporting and depositing other employment taxes. See Q/A-16 of this section for rules governing cash reimbursements.
(c) Noncash fringe benefits exceeding monthly limits. If the value of noncash qualified transportation fringes exceeds the applicable statutory monthly limit, the employer may elect, for purposes of the FICA, the FUTA, and federal income tax withholding, to treat the noncash taxable fringe benefits as paid on a pay period, quarterly, semi-annual, annual, or other basis, provided that the benefits are treated as paid no less frequently than annually.
Q-23. How does section 132(f) interact with other fringe benefit rules?
A-23. For purposes of section 132, the terms working condition fringe and de minimis fringe do not include any qualified transportation fringe under section 132(f). If, however, an employer provides local transportation other than transit passes (without any direct or indirect compensation reduction election), the value of the benefit may be excludable, either totally or partially, under fringe benefit rules other than the qualified transportation fringe rules under section 132(f). See §§ 1.132-6(d)(2)(i) (occasional local transportation fare), 1.132-6(d)(2)(iii) (transportation provided under unusual circumstances), and 1.61-21(k) (valuation of local transportation provided to qualified employees). See also Q/A-4(b) of this section.
Q-24. May qualified transportation fringes be provided to individuals who are partners, 2-percent shareholders of S-corporations, or independent contractors?
A-24. (a) General rule. Section 132(f)(5)(E) states that self-employed individuals who are employees within the meaning of section 401(c)(1) are not employees for purposes of section 132(f). Therefore, individuals who are partners, sole proprietors, or other independent contractors are not employees for purposes of section 132(f). In addition, under section 1372(a), 2-percent shareholders of S corporations are treated as partners for fringe benefit purposes. Thus, an individual who is both a 2-percent shareholder of an S corporation and a common law employee of that S corporation is not considered an employee for purposes of section 132(f). However, while section 132(f) does not apply to individuals who are partners, 2-percent shareholders of S corporations, or independent contractors, other exclusions for working condition and de minimis fringes may be available as described in paragraphs (b) and (c) of this Q/A-24. See §§ 1.132-1(b)(2) and 1.132-1(b)(4).
(b) Transit passes. The working condition and de minimis fringe exclusions under section 132(a)(3) and (4) are available for transit passes provided to individuals who are partners, 2-percent shareholders, and independent contractors. For example, tokens or farecards provided by a partnership to an individual who is a partner that enable the partner to commute on a public transit system (not including privately-operated van pools) are excludable from the partner’s gross income if the value of the tokens and farecards in any month does not exceed the dollar amount specified in § 1.132-6(d)(1). However, if the value of a pass provided in a month exceeds the dollar amount specified in § 1.132-6(d)(1), the full value of the benefit provided (not merely the amount in excess of the dollar amount specified in § 1.132-6(d)(1)) is includible in gross income.
(c) Parking. The working condition fringe rules under section 132(d) do not apply to commuter parking. See § 1.132-5(a)(1). However, the de minimis fringe rules under section 132(e) are available for parking provided to individuals who are partners, 2-percent shareholders, or independent contractors that qualifies under the de minimis rules. See § 1.132-6(a) and (b).
(d) Example. The following example illustrates the principles of this Q/A-24:
(ii) In this Example, the value of the parking is not excluded under section 132(f), but may be excluded under section 132(e) if the parking is a de minimis fringe under § 1.132-6.
Q-25. What is the effective date of this section?
A-25. (a) Except as provided in paragraph (b) of this Q/A-25, this section is applicable for employee taxable years beginning after December 31, 2001. For this purpose, an employer may assume that the employee taxable year is the calendar year.
(b) The last sentence of paragraph (b)(5) of Q/A-16 of this section (relating to whether transit system vouchers for transit passes are readily available) is applicable for employee taxable years beginning after December 31, 2003. For this purpose, an employer may assume that the employee taxable year is the calendar year.
§ 1.133-1T Questions and answers relating to interest on certain loans used to acquire employer securities (temporary).
Q-1: What does section 133 provide?
A-1: In general, section 133 provides that certain commercial lenders may exclude from gross income fifty percent of the interest received with respect to securities acquisition loans. A securities acquisition loan is any loan to an employee stock ownership plan (ESOP) (as defined in section 4975(e)(7)) that qualifies as an exempt loan under §§ 54.4975-7 and -11 to the extent that the proceeds are used to acquire employer securities (within the meaning of section 409(l)) for the ESOP. A loan made to a corporation sponsoring an ESOP (or to a person related to such corporation under section 133(b)(2)) may also qualify as a securities acquisition loan to the extent and for the period that the proceeds are (a) loaned to the corporation’s ESOP under a loan that qualifies as an exempt loan under §§ 54.4975-7 and -11 and that has substantially similar terms as the loan from the commercial lender to the sponsoring corporation, and (b) used to acquire employer securities for the ESOP. The terms of the loan between the commercial lender and the sponsoring corporation (or a related corporation) and the loan between such corporation and the ESOP shall be treated as substantially similar only if the timing and rate at which employer securities would be released from encumbrance if the loan from the commercial lender were the exempt loan under the applicable rule of § 54.4975-7(b)(8) are substantially similar to the timing and rate at which employer securities will actually be released from encumbrance in accordance with such rule. For this purpose, if the loan from the commercial lender to the sponsoring corporation states a variable rate of interest and the loan between the corporation and the ESOP states a fixed rate of interest, whether the terms of the loans are substantially similar shall be determined at the time the obligations are initially issued by taking into account the adjustment interval on the variable rate loan and the maturity of the fixed rate loan. For example, if the rate on the loan from the commercial lender to the sponsoring corporation adjusts each six months and the loan from the corporation to the ESOP has a ten year term, the initial interest rate on the variable rate loan could be compared to the rate on the fixed rate loan by comparing the yields on 6 month and ten year Treasury obligations. Similarly, if the rates on the two loans are based on different compounding assumptions, whether the terms of the loans are substantially similar shall be determined by taking into account the different compounding assumptions. A securities acquisition loan may be evidenced by any note, bond, debenture, or certificate. Also, section 133(b)(2) provides that certain loans between related persons are not securities acquisition loans. In addition, a loan from a commercial lender to an ESOP or sponsoring corporation to purchase employer securities will not be treated as a securities acquisition loan to the extent that such loan is used, either directly or indirectly, to purchase employer securities from any other qualified plan, including any other ESOP, maintained by the employer or any other corporation which is a member of the same controlled group (as defined in section 409(l)(4)).
Q-2: What lenders are eligible to receive the fifty percent interest exclusion?
A-2: Under section 133(a), a bank (within the meaning of section 581), an insurance company to which subchapter L applies, or a corporation (other than a subchapter S corporation) actively engaged in the business of lending money may exclude from gross income fifty percent of the interest received with respect to a securities acquisition loan (as defined in Q&A-1 of § 1.133-1T). For purposes of section 133(a)(3), a corporation is actively engaged in the business of lending money if it lends money to the public on a regular and continuing basis (other than in connection with the purchase by the public of goods and services from the lender or a related party). A corporation is not actively engaged in the business of lending money if a predominant share of the original value of the loans it makes to unrelated parties (other than in connection with the purchase by the public of goods and services from the lender or a related party) are securities acquisition loans.
Q-3: May loans which qualify for the fifty percent interest exclusion under section 133 be syndicated to other lending institutions?
A-3: Securities acquisition loans under section 133 may be syndicated to other lending institutions provided that such lending institutions are described in section 133(a) (1), (2) or (3) and the loan was originated by a qualified holder. Subsequent holders of the debt instrument may qualify for the partial interest exclusion of section 133 if such holders satisfy the requirements of section 133 and such loan does not fail to be a securities acquisition loan under section 133(b)(2).
Q-4: When is section 133 effective?
A-4: Section 133 applies to securities acquisition loans made after July 18, 1984, and used to acquire employer securities after July 18, 1984. The provision does not apply to loans made after July 18, 1984, to the extent that such loans are renegotiations, directly or indirectly, of loans outstanding on such date. A loan extended to an ESOP or sponsoring corporation after July 18, 1984, will be treated as a renegotiation of an outstanding loan if the loan proceeds are used to refinance acquisitions of employer securities made prior to July 19, 1984. For example, if an ESOP borrowed money prior to July 19, 1984, to purchase employer securities and after July 18, 1984, borrows other funds from the same or a different commercial lender to repay the first loan, the second loan will be treated as a renegotiation of an outstanding loan to the extent of the repaid amount. Similarly, if, after July 18, 1984, an ESOP sells employer securities, uses the proceeds to retire a pre-July 19, 1984, loan and obtains a second loan to acquire replacement employer securities, the second loan will be treated as a renegotiation of an outstanding loan.