Forums Support Library CFP – Charitable Financial Planner Rev. Rul. 77-454 Report

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    • Kathleen Reynolds
      Post count: 428

      The Rev. Rul. 77-454 is part of the Section 7520 Reg. and it is also known as the “exhaustion test.” This report calculates a limit in the valuation of annuities. The Charitable Financial Planner shows the steps used to calculate the value of the exhausted annuity by splitting the annuity into two parts:

      • An annuity that lasts up to but does not include the period when the original annuity exhausts.
      • A single payment equal to the final partial payment of the original annuity.

      The two annuities are then added together. The total is the Value for Rev. Rul. 77-454 Test report.

      When Rev. Rul. 77-454 may apply for a Shorter of Term or Life calculation, the program includes a year-by-year Rev. Rul. 77-454 schedule. As for the mechanics of the 77-454 test, there are gray areas once you get beyond the simple case of an annual payment at the end of the period. The program uses an approach long followed for the similar Rev. Rul 77-374 test that is applied for Charitable Remainder Annuity Trust life cases. See George H. Moor Est., 43 TCM 1982-299, for the proposition that annual payments are adjusted by a payout frequency factor.

      See Rev. Rul. 77-374 for more information on this test.

      See the Section 25.7520-3(b)(2)(v) ruling for more information on the exhaustion test.

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