Academic journal article Journal of Accountancy

Cook Won't Excuse Estate from Table

Academic journal article Journal of Accountancy

Cook Won't Excuse Estate from Table

Article excerpt

Despite contrary holdings by other circuits, the Fifth Circuit recently held fast to its earlier decision in Cook v. Commissioner to once again overrule an estate's discounting of an annuity interest and restrict it to the valuation tables prescribed by IRC [section] 7520.

The decedent in the recent decision, James Bankston, received three annuities in a settlement resulting from injuries he suffered in an automobile accident. Each annuity guaranteed monthly or annual payments for at least 15 years. Under two of the contracts, payments could not be "anticipated, sold, assigned or encumbered." The third annuity provided that payments were "non-assignable." Bankston died in 1996 before receiving all of the payments, so his estate's administratrix, Tincy Anthony, had to estimate their present value for estate tax purposes. The estate initially used the tables but later requested a refund, arguing that the nontransferability clauses provided for an exception to the tables. The IRS and a district court in Louisiana did not agree (Anthony, 95 AFTP2d 2005-2905), and the estate appealed.

Estates of decedents who die after Dec. 13, 1995, are governed by Treas. Reg. [section] 20.7520-3(b)(ii), which provides an exception to using the tables when valuing a "restricted beneficial interest," that is, an annuity subject to "any contingency, power or other restriction." The estate interpreted "any ... other restriction" broadly and argued it encompassed the marketability restrictions. The regulation provides examples where the annuity tables should not be used, such as where an annuity is expected to exhaust the fund before the last possible payment is made, where the trust corpus may be invaded without the beneficiary's consent, or where the right to receive payments is contingent on the survival of a terminally ill individual. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.