(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:
Example 1. A life insurance policy provides only for the payment of $5,000 per year for the life of the beneficiary, A, beginning with the insured's death. If A is 59 years of age at the time of the insured's death, the period with respect to which the payments are to be made is 25 years. This period is determined by using the mortality table set forth in
§1.72-7(c)(1), and is shown in Table V of
§1.72-9 (which contains life expectancy tables determined using this mortality table). If the present value of the proceeds, determined by reference to the interest rate used by the insurance company and the mortality table set forth in
§1.72-7(c)(1), is $75,000, $3,000 of each $5,000 payment ($75,000 divided by 25) is excluded from the gross income of A.
Example 2. A life insurance policy provides for the payment of $82,500 in a lump sum to the beneficiary, A, at the death of the insured. Upon the insured's death, however, A selects an option for the payment of $2,000 per year for life and for the same amount to be paid after A's death to B for B's life. If A is 51 years of age and B is 28 years of age at the death of the insured, the period with respect to which the payments are to be made is 55 years. This period is determined by using the mortality table set forth in
§1.72-7(c)(1), and is shown in Table VI of
§1.72-9 (which contains life expectancy tables determined using this mortality table). Accordingly $1,500 of each $2,000 payment ($82,500 divided by 55) is excluded from the gross income of the recipient.
(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.
[T.D. 8161, 52 FR 35415, Sept. 21, 1987. Redesignated and amended by T.D. 8272, 54 FR 47980, Nov. 20, 1989]
