ORDER
LAWRENCE L. PIERSOL, District Judge.
On May 8, 2018, a hearing was held to determine Beverly Nelson's interest, if any, in the real property listed in the Complaint. The United States appeared by counsel, Natalie Loebner. Defendants Jeffrey Nelson, Beverly Nelson and the Minnehaha County Treasurer's Office did not appear in person or by counsel. The United States submitted evidence showing that Jeffrey Nelson holds title to the property. The United States admitted that, for purposes of these proceedings, Beverly Nelson is a non-delinquent taxpayer.
At the conclusion of the May 8 hearing, the Court ordered the United States to submit a brief regarding the issues whether South Dakota law provides Beverly Nelson with an interest in the subject property, including a homestead interest, and whether her interest, if any, would prohibit foreclosure on the property or would entitle Beverly Nelson to some proceeds from sale of the property. (Doc. 36.) The Court directed the United States to include an analysis of the Rodgers factors.1 See United States v. Rodgers, 461 U.S. 677, 710-11(1983). The Nelsons were also directed to brief those issues, but they did not do so.
On May 14, 2018, the United States submitted its post-hearing brief. (Doc. 37.) The United States agreed that Beverly Nelson has a homestead interest in the property and admitted that her possessory interest in the property should be considered by the Court in deciding whether to allow a forced sale of the property under 26 U.S.C. § 7403. The United States argued, however, that Beverly Nelson should not be compensated for the loss of her homestead interest because, under South Dakota law, a homestead interest is not a vested property right. The Nelsons did not respond to these arguments.
On May 25, 2018, after analyzing the factors set forth by the Supreme Court in Rodgers, this Court ruled that the United States should be allowed to force a sale of the property. (Doc. 40.) The ruling was based in large part on the determination that Beverly Nelson could be fully and fairly compensated for the loss ofher homestead interest out of the proceeds of the sale. The Court directed the parties to submit briefs regarding the value of Beverly Nelson's homestead interest, and recommendations for distribution of the proceeds from the sale.
Subsequently, the United States filed a motion for reconsideration, arguing that Beverly Nelson is not entitled to any compensation for her homestead interest because it is not a vested property right. (Doc. 41.) The Court denied the motion and ordered the United States to submit a brief regarding the valuation of Beverly Nelson's homestead interest, and allowing the Nelsons to respond. (Doc. 47.) The United States filed a brief, doc. 50, but the Nelsons did not file a response.
In its brief, the United States argued that South Dakota's homestead exemption in the amount of $60,000 is the best way to value a homestead interest. In support of its argument, the United States cited Kim v. Dome Entertainment Center, Inc., 748 F.3d 647 (5th Cir. 2014). A close reading of Kim does not support the proposition that the state homestead exemption is the best way to value a homestead interest. In Kim, a bankruptcy case, Mr. Kim claimed an unlimited homestead exemption under Texas law and 11 U.S.C. § 522(b)(3)(A) for the home the Kims purchased. Following Dome's objection, the bankruptcy court limited the exemption to $136,875 under § 522(p)—the provision adopted by Congress to override state law allowing for full exemptions of property in a bankruptcy proceeding due to homestead interests if the property was acquired within the 1215-day period preceding the date the petition was filed. Mr. Kim then sought a declaratory judgment in the bankruptcy court to determine Mrs. Kim's rights and claims by virtue of her separate homestead interest under Texas law and 11 U.S.C. § 541. The bankruptcy court granted partial summary judgment for Dome, holding that Mrs. Kim did not have "a separate and distinct exempt homestead interest in the property that would entitle her to compensation or to prevent the sale of the Property." In re Kim, 405 B.R. 179, 188 (N.D. Tex. Bankr. 2009). The Kims appealed.
The district court upheld the bankruptcy court's summary judgment, concluding that Mrs. Kim's homestead interest did not prevent the property from being subject to § 522(p) and that her homestead interest was not a property right that would entitle her to compensation after the forced sale of the residence. See Kim v. Kim, 2010 WL 11583180, *5 (N.D.Tex. Aug. 11, 2010).
On appeal, the Fifth Circuit clarified that a homestead interest may constitute a vested property right, and that a non-debtor spouse could be entitled to compensation from the sale of a property to which a homestead right attaches. Kim, 748 F.3d at 657 ("Dome argues, and the district court held, that based on the decision of our court in In re Rogers, Mrs. Kim's homestead rights are not a vested economic interest in the residence, and therefore, she is not entitled to compensation in the event of a forced sale. Dome and the district court misunderstand the holding in Rogers.") The Fifth Circuit recognized that Mrs. Kim had "a possessory interest in the real property by virtue of its homestead character." Id. at 661. The court noted, however, that the Kims "offered no insight" about the valuation of the homestead interest other than to argue Mrs. Kim should be compensated in accordance with the hypothetical in Rodgers. Id. at 662-63. Accordingly, the Fifth Circuit affirmed the district court's judgment, concluding that the Kims failed to adequately brief whether "the determination by Congress to permit an exemption of $136,875 for a debtor such as Mr. Kim would not be just compensation for Mrs. Kim's homestead interest since $136,875 in proceeds would be impressed with her homestead rights." Id. at 663.
Had the Kims offered some insight into the value of Mrs. Kim's homestead interest, it is possible that the Fifth Circuit would have compensated her with more than the $136,875 Mr. Kim received for his homestead interest in accordance with the bankruptcy law. The Kim decision does not support the United States' position that Beverly's homestead interest should be valued at $60,000 based on the South Dakota homestead exemption, and this Court was unable to find any authority supporting that proposition.
An earlier decision from the Fifth Circuit is more applicable here. See Harris v. United States, 764 F.2d 1126, 1130 (5th Cir. 1985). In Harris, the husband incurred a payroll tax liability and on June 2, 1979, the IRS filed a lien. On July 13, 1979, the wife was awarded the home by a judgment in a divorce proceeding. She later sold her home and the IRS wanted payment. The wife argued that she should be entitled to a life estate equivalent based on the single life tables and, alternatively, one-half of the proceeds because the house had been community property.
The Fifth Circuit explained in detail the components of ownership of a Texas homestead interest by a delinquent taxpayer and his non-liable spouse. Harris, 764 F.2d at 1129-32. First, each spouse owns a joint homestead interest, which is the economic equivalent of a joint life estate. Id. at 1131. Second, each spouse owns a contingent homestead interest or life estate, which would become a possessory interest in favor of the surviving spouse. Id. Finally, each spouse jointly owns the remainder interest in the property. Id. Under Rodgers, only the homestead interest of the non-liable spouse is protected and thus compensable upon foreclosure and sale. Id. The IRS is thus entitled to the value of the taxpayer spouse's interest in the homestead to the extent of its lien and to the remainder interest in the property at the time of the termination of the non-liable spouse's life estate. Id. The court in Harris further explained that "[w]e see no reason . . . to depart from the use of the Treasury tables in determining the value of [the] homestead estate," given that "their use in determining the present value of future interests in property has been long recognized and approved by the Supreme Court." Id. at 1130-31. The court held that, because both spouses were still alive, their interests should be decided based on the two life table, not the single life table as in Rodgers where only one party to the marriage was alive at the time of the foreclosure.2
This Court found instructive a case from the Western District of Texas that applied Harris. See United States v. Caraway, 2008 WL 2510668 (W.D. Texas April 24, 2008). Both parties had used the joint-life treasury tables to value the non-liable wife's homestead interest, but they came up with different numbers. Id. at *7. Neither party had presented the district court with information about their calculations, so the court asked for further briefing. Id. The United States filed a brief explaining that a homestead interest under Texas law is akin to a life estate. It submitted a declaration and calculations of a senior actuary with the IRS regarding how he computed the homestead interest of an innocent spouse of a delinquent taxpayer.3
The United States has the ability to have an IRS actuary prepare a valuation of Beverly Nelson's homestead interest as akin to a life estate,4 just as was done in Caraway.5 When the United States submits the valuation, it should explain the discount rate used and why that rate was used. Accordingly,
IT IS ORDERED:
1. That within 20 days from the date of this Order the United States shall submit a brief and an actuarial report computing the value of Beverly Nelson's homestead interest. The United States must explain the discount rate used and why that rate was used in the computation.
2. The Nelsons shall submit a responsive brief within 20 days of receipt of the United States' brief.
3. The United States shall file a reply brief within 10 days of receipt of the Nelsons' brief
IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v. Civil No. 1:06-cv-00972-SS
WILLIAM J. CARAWAY,
SUSIE J. CARAWAY, and
OPTION ONE MORTGAGE
CORPORATION, and WELLS FARGO
BANK; N.A. D/B/A
AMERICA'S SERVICING COMPANY,
Defendants.
UNITED STATES OF AMERICA'S MOTION AND BRIEF REGARDING VALUATION OF THE CARAWAYS' INTERESTS IN SPICEWOOD MESA
The United States submits this motion and brief as required by the Court's Order dated April 24th, 2008. The United States moves the Court for an order holding that William Caraway's interest in the homestead is 53.655%, and Susie Caraway's interest in the homestead is 46.345%.
The Court, in its April 24, 2008 Order, held that the United States' tax liens against William Caraway are foreclosed against the Spicewood Mesa property, the Caraways' homestead. Spicewood Mesa will be sold pursuant to an Order of Sale to be entered by this Court, and in its Order, the Court detailed the allocation of the proceeds of sale. William Caraway's net proceeds will be applied to his tax debts, and Susie Caraway's net proceeds will be paid to her because she is entitled to be compensated for her homestead interest in Spicewood Mesa. The Court has ordered additional briefing on the valuation of William and Susie Caraway's respective interests in the Spicewood Mesa property. The United States has submitted the declaration and calculations of Anthony J. Montanaro, a senior actuary with the IRS.
DISCUSSION
Mrs. Caraway's homestead interest is valued as if it was a life estate interest. Her interest is worth 46.345% of net equity while William Caraway's interest is worth 53.655%.1 In its April 24, 2008 Order, the Court cited Harris v. United States, 764 F.2d 1126 (5th Cir. 1985) as the controlling law for valuing respective interests in the circumstances of this case of William and Susie Caraway.
A. A Texas Homestead Interest is Akin to a Life Estate in Property
In Harris v. United States, the Fifth Circuit explained that a homestead interest under Texas law is akin to a life estate.2 There are various factors that make a homestead interest less valuable than a full life estate interest, but because those factors are too difficult to value, the Fifth Circuit held that the IRS should value homestead interests as full life estates.3 Therefore the Caraways' homestead interests in Spicewood Mesa should be valued as full life estates.
B. Treasury Publication 1457 is Applicable to Valuing the Carways' Homestead Interests
The Fifth Circuit also stated in Harris that the Treasury tables were the appropriate source for determining the value of homestead interests.4 Treasury Publication 1457, Actuarial Values, includes the applicable Treasury tables. The Caraways also agree that Treasury Publication 1457 includes the applicable Treasury tables.5
C. The IRS is Entitled to the Value of William Caraway's interest in the homestead as well as the Remainder Interest in the Property.
As this Court noted in its April 24, 2008 Order, "[T]he IRS [is] entitled to the value of [William Caraway's] interest in the homestead to the extent of its lien . . . The IRS [is] also entitled to the remainder interest in the property at the termination of [Susie Caraway's] life estate." In Harris v. United States, the Fifth Circuit described in detail the components of ownership of a homestead interest by a delinquent taxpayer and his non-liable spouse.
First, the Fifth Circuit held that the taxpayer and non-liable spouse owned a joint homestead interest in the residence, which is the economic equivalent of a joint life estate.6 Gov. Ex. B shows the value of the joint homestead interest of William and Susie Caraway defined as "Joint Income Interest," and each is allocated one-half of this interest. This represents the value of the homestead while both spouses remain alive. Mr. Montanaro's Declaration, attached as Gov. Ex. A, explains in more detail this calculation. Copies of relevant pages from Publication 1457, attached as Gov. Ex. C, support this calculation.
Second, the Fifth Circuit held that each spouse owned a contingent homestead interest or life estate, which would become a possessory interest in favor of the surviving spouse.7 This is defined as "Deferred Contingent Life Estate" on Gov. Ex. A, and both William and Susie Caraway are apportioned a contingent homestead interest. Naturally, the contingent homestead interests are different for each spouse because they differ in ages, and therefore the likelihood to survive the other is different. Mr. Montanaro's Declaration, attached as Gov. Ex. A, also explains in more detail this calculation. Copies of relevant pages from Publication 1457, attached as Gov. Ex. C, support this calculation.
Finally, the Fifth Circuit held that while both spouses jointly owned the remainder interest in the property, the IRS was able to take not only the remainder interest of the delinquent taxpayer, but also the remainder interest in the property at the termination of the non-liable spouse's life estate.8 Gov. Ex. B shows that the remainder interest in this property is listed as owned by the taxpayer, William J. Caraway, since the IRS is entitled to take it in its entirety.
These three components make up the taxpayer's share of the homestead interest as listed on Gov. Ex. B and are calculated in accordance with the Fifth Circuit's instructions.
D. The United States' Valuation Method in This Case is Identical to the Valuation Approved in the Harris Case
The United States' method of valuing the respective homestead interests of the Caraways is the same as the method that was used in Harris. In Harris, non-debtor spouse Sarah Harris argued that the district court erred in valuing her one-half interest in the homestead, and that her interest had been undervalued.9 In evaluating Sarah Harris' proceeds from the sale of the homestead property, the Fifth Circuit found that Sarah Harris would receive an amount in excess of her interest in the homestead, as computed by the United States.10 The Fifth Circuit's footnote states that Sarah's homestead interest was 50.98%. Mr. Montanaro referenced the applicable Treasury Publication 723A, Actuarial Values II: Factors at 6 Percent Involving One and Two Lives (1971)11, and recreated the United States' calculation of Sarah Harris' homestead interest.12 Mr. Montanaro's Declaration, attached as Gov. Ex. A, references this calculation, and copies of relevant pages from Publication 723A, attached as Gov. Ex. E, support this calculation.
E. The Caraways' Calculation in its Cross Motion for Summary Judgment is in Error
As this Court noted in its April 24, 2008 Order, "[T]he IRS [is] entitled to the value of [William Caraway's] interest in the homestead to the extent of its lien . . . The IRS [is] also entitled to the remainder interest in the property at the termination of [Susie Caraway's] life estate." The Caraways' calculation is in error because they ignore the life interest of William Caraway in the residence and only value his interest as the remainder after the death of himself and Susie Caraway. As stated in Mr. Phillips' declaration, the Caraways are simply lifting a remainder factor out of Table R(2) of Publication 1457, and assigning this factor to be William Caraway's interest in Spicewood Mesa. This is in error because Table R(2) represents the present worth of $1.00 at the death of the last to die of two individuals13 — which is solely a remainder interest. It is clear that the Fifth Circuit in Harris has stated that the IRS is entitled to not only the remainder interest in homestead property, but also the taxpayer's homestead interest.
CONCLUSION
The United States asks the court to find that William Caraway's interest in the homestead is 53.655%, and Susie Caraway's interest in the homestead is 46.345%.
JOHNNY K. SUTTON
United States Attorney
/s/ Moha P. Yepuri
MOHA P. YEPURI
Texas States Bar. No. 24046651
Trial Attorney, Tax Division
U.S. Department of Justice
717 N. Harwood, Suite 400
Dallas, Texas 75201
(214) 880-9767
(214) 880-9741 (FAX)
Moha.P.Yepuri@usdoj.gov
ATTORNEYS FOR THE UNITED STATES
GOVERNMENT EXHIBIT A
IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS AUSTIN DIVISION
UNITED STATES OF AMERICA,
Plaintiff,
v. Civil No. 1:06-cv-00972-SS
WILLIAM J. CARAWAY,
SUSIE J. CARAWAY, and
OPTION ONE MORTGAGE
CORPORATION, and WELLS FARGO
BANK, N.A. D/B/A
AMERICA'S SERVICING COMPANY,
Defendants.
DECLARATION OF ANTHONY J. MONTANARO
1. My name is Anthony J. Montanaro. I am a Senior Actuary with the IRS in TEGE, Actuarial Group 1, where I have done valuations of future interests since 1985. I hold a B.A. from Thomas Aquinas College (1982), and an M.A. in Mathematics from Binghamton University (1985). I have taught various math courses at Mary Washington College in Fredericksburg, VA, and the USDA Graduate School in Washington, DC. I am an expert in Charitable Remainder Trusts, Grantor Retained Trusts, annuity valuations, and Self-Canceling Installment Notes.
2. I am the primary author of IRS Publications 1457, 1458, and 1459: Actuarial Values, Book Aleph, Book Beth and Book Gimel. I am also responsible for working with developers in the valuation software market (e.g. NumberCruncher, Brentmark, Crescendo, Tiger Tables) to establish uniform standards in valuations. I am submitting this declaration in support of the United States' Motion and Brief Regarding the Valuation of the Caraways' Interests.
3. I was also asked to generate a computation of homestead interest of an innocent spouse of a delinquent taxpayer by counsel for the United States, Moha P. Yepuri for the defendant Susie J. Caraway. I generated the computation of homestead interest of an innocent spouse of a delinquent taxpayer, attached as Gov. Ex. B, and provided it to Ms. Yepuri.
4. I used the interest rate of 3.2% for the computation of homestead interest of an innocent spouse of a delinquent taxpayer for defendant Susie J. Caraway. This rate is the applicable federal rate as-defined under 26 U.S.C. § 7520, and Rev. Rul. 2008-24.
5 The actuarial values used in the computation of Gov. Ex. B are taken from IRS Publication 1457, Remainder, Income, and Annuity Factors — For One Life, Two Lives, and Terms Certain.
6. The interests held by the parties can be resolved into three types of components held individually or jointly. Initially, both spouses hold the right to the use of the property and share that right equally with each other while both are alive. This is a joint life estate in the property. This right as held by the innocent spouse is protected by the homestead law. Secondly, each spouse has the contingent right to the use of the property while alive after the death of the other spouse — contingent on the occurrence of surviving the other spouse. This is a contingent life estate. This component right as held by the innocent spouse is also protected under the homestead provisions. Lastly, there is the remainder interest in the property held jointly by the spouses. This is a joint & last survivor remainder interest (implying that the interest does not fall in until the second death of the spouses), which is not protected by the homestead statute.
7. Therefore, we must compute the joint life estate for two persons aged 62 and 40, and split this interest evenly between the two parties. Next we compute a separate contingent life estate for each spouse and allocate these values to each spouse independently. Finally, we compute the remainder interest which vests at the death of the last surviving spouse.
8. The published tables in section 20.2031-7 of the regulations and IRS Publication 1457 do not have factors for joint life estates. Publication 1457 does have single person life estate and remainder factors, and factors for a joint and last survivor life remainder interest. The factor for a joint-life only estate (payable only while both spouses survive) can be found from these tables using the relationship that a joint life estate factor equals 1.00000 minus the corresponding firstto-die remainder factor (since the two components equal the whole property interest), and the first-to-die remainder factor vesting at the death of the first to die of two persons is determined under a formula derived from the Society of Actuaries' Textbook on Life Contingencies by C.W. Jordan (Society of Actuaries, Chicago, 1967), page 215:
9. Thus the required joint life estate factor while both spouses are alive equals A + C — E, and this is computed at Line G of Gov. Ex. B.
10. The contingent life estate interest of x in the property is the right to the use of the property after the death of y for such time x still survives (if any). Expressed in other terms, this is the life estate interest in the property during x's life less that life estate shared during the period both x and y are alive. This is B minus G, computed at line I of Gov. Ex. B.
11. Correspondingly, the contingent life estate for y after the death of x is the life estate interest during y's life less the life estate shared during the period both x and y are alive. This is D minus G, computed at line N of Gov. Ex. B.
12. Finally, the remainder interest is determined with the last-to-die remainder factor from Table R(2) (line E), and assigned under the taxpayer's share since that interest is not protected within the homestead interest of Gov. Ex. B.
13. I was also asked by Ms. Yepuri to calculate the interests of two spouses, ages 52 and 43, at a 6% discount rate in 1985 of a homestead property. I prepared this calculation, and it is attached as Gov. Ex. D.
14. Government Exhibit E reflects true and correct copies of the relevant portions of tables from Treasury Publication 723A, Actuarial Values II: Factors at 6 Percent Involving One and Two Lives (1971). I copied and provided these portions of the tables to Ms. Yepuri.
I declare under penalty of perjury that the foregoing is true and correct.
Executed this 7th day of May, 2008.
ANTHONY J. MONTANARO.
GOVERNMENT EXHIBIT B
Computation of Homestead Interest of
Innocent Spouse of a Delinquent Taxpayer
Date May-08
Rate 3.2%
Required factors from Publication 1457
A Taxpayer Age 62 Remainder Factor from Table S 0.56777
B Taxpayer Life Estate Factor from Table S 0.43223
C Spouse Age 40 Remainder Factor from Table S 0.33031
D Spouse Life Estate Factor from Table S 0.66969
E Joint and Survivor Remainder Factor from Table R(2) 0.31056
Computation of First to Die Factors
F First-to-Die Remainder Factor (A+C-E) 0.58752
G First-to-Die Life Estate Factor (1-F) 0.41248
Taxpayer's Share
H One-half Joint Life Estate Interest (G/2) 0.20624
I Contingent Life Estate Interest (B-G) 0.01975
J Remainder Interest (E) 0.31056
K Total Taxpayer Interest (H+I+K) 0.53655
Spouse's Share
L One-half Joint Life Estate Interest (G/2) 0.20624
M Contingent Life Estate Interest (D-G) 0.25721
N Total Spouse Interest (L+M) 0.46345
Check
O Total Taxpayer's Interest (K) 0.53655
P Total Spouse's Interest (N) 0.46345
Q Total (should equal 1.00000) (0+P) 1.00000
GOVERNMENT EXHIBIT C
Section 1 Table S (3.2)
Single Life Factors Based on Life Table 90CM
Interest at 3.2 Percent
Life Life
Age Annuity Estate Remainder Age Annuity Estate Remainder
0 27.6484 .88475 .11525 55 16.0687 .51420 .48580
1 27.7980 .88954 .11046 56 15.7082 .50266 .49734
2 27.7080 .88666 .11334 57 15.3446 .49103 .50897
3 27.6083 .88347 .11653 58 14.9790 .47933 .52067
4 27.5023 .88007 .11993 59 14.6124 .46760 .53240
5 27.3908 .87651 .12349 60 14.2452 .45585 .54415
6 27.2749 .87280 .12720 61 13.8770 .44406 .55594
7 27.1544 .86894 .13106 62 13.5071 .43223 .56777
8 27.0297 .86495 .13505 63 13.1354 .42033 .57967
9 26.9002 .86081 .13919 64 12.7626 .40840 .59160
10 26.7657 .85650 .14350 65 12.3890 .39645 .60355
11 26.6266 .85205 .14795 66 12.0141 .38445 .61555
12 26.4831 .84746 .15254 67 11.6372 .37239 .62761
13 26.3362 .84276 .15724 68 11.2592 .36029 .63971
14 26.1876 .83800 .16200 69 10.8809 .34819 .65181
15 26.0380 .83322 .16678 70 10.5041 .33613 .66387
16 25.8878 .82841 .17159 71 10.1302 .32417 .67583
17 25.7365 .82357 .17643 72 9.7599 .31232 .68768
18 25.5833 .81867 .18133 73 9.3939 .30061 .69939
19 25.4270 .81366 .18634 74 9.0313 .28900 .71100
20 25.2666 .80853 .19147 75 8.6709 .27747 .72253
21 25.1018 .80326 .19674 76 8.3120 .26598 .73402
22 24.9328 .79785 .20215 77 7.9546 .25455 .74545
23 24.7589 .79229 .20771 78 7.5996 .24319 .75681
24 24.5799 .78655 .21344 79 7.2487 .23196 .76804
25 24.3953 .78065 .21935 80 6.9045 .22094 .77906
26 24.2050 .77456 .22544 81 6.5691 .21021 .78979
27 24.0084 .76827 .23173 82 6.2436 .19979 .80021
28 23.8064 .76180 .23820 83 5.9278 .18969 .81031
29 23.5987 .75516 .24484 84 5.6197 .17983 .82017
30 23.3855 .74834 .25166 85 5.3177 .17017 .82983
31 23.1670 .74134 .25866 86 5.0239 .16076 .83924
32 22.9429 .73417 .26583 87 4.7418 .15174 .84826
33 22.7128 .72681 .27319 88 4.4713 .14308 .85692
34 22.4770 .71926 .28074 89 4.2124 .13480 .86520
35 22.2347 .71151 .28849 90 3.9649 .12688 .87312
36 21.9863 .70356 .29644 91 3.7323 11943 .88057
37 21.7317 .69542 .30458 92 3.5185 .11259 .88741
38 21.4704 .68705 .31295 93 3.3223 .10631 .89369
39 21.2026 .67848 .32152 94 3.1406 .10050 .89950
40 20.9277 .66969 .33031 95 2.9693 .09502 .90498
41 20.6455 .66065 .33935 96 2.8092 .08989 .91011
42 20.3561 .65140 .34860 97 2.6615 .08517 .91483
43 20.0597 .64191 .35809 98 2.5234 .08075 .91925
44 19.7564 .63220 .36780 99 2.3894 .07646 .92354
45 19.4471 .62231 .37769 100 2.2597 .07231 .92769
46 19.1317 .61222 .38778 101 2.1325 .06824 .93176
47 18.8112 .60196 .39804 102 2.0080 .06426 .93574
48 18.4852 .59153 .40847 103 1.8850 .06032 .93968
49 18.1541 .58093 .41907 104 1.7545 .05614 .94386
50 17.8173 .57015 .42985 105 1.6270 .05207 .94793
51 17.4754 .55921 .44079 106 1.4652 .04689 .95311
52 17.1294 .54814 .45186 107 1.2711 .04067 .95933
53 16.7794 .53694 .46306 108 .9759 .03123 .96877
54 16.4258 .52563 .47437 109 .4845 .01550 .98450
Section 2 Table R(2)— Based on Life Table 90CW
Ages Interest Rate
O Y 2.2% 2.4% 2.6% 2.8% 3.0% 3.2% 3.4% 3.6% 3.8% 4.0% 4.2% 4.4% 4.6% 4.8% 5.0% 5.2% 5.4% 5.6% 5.8% 6.0%
61 59 .56865 .54137 .51557 .49118 .46810 .44627 .42560 .40603 .38750 .36994 .35330 .33752 .32256 .30837 .29490 .28211 .26997 .25844 .24749 .23708
61 60 .57422 .54713 .52150 .49724 .47427 .45251 .43191 .41238 .39387 .37632 .35967 .34387 .32888 .31465 .30113 .28829 .27609 .26450 .25347 .24298
61 61 .57959 .55270 .52723 .50310 .48024 .45858 .43804 .41856 .40008 .38254 .36589 .35009 .33507 .32081 .30725 .29436 .28211 .27045 .25936 .24880
62 0 .20808 .18231 .16005 .14079 .12411 .10964 .09707 .08613 .07660 .06828 .06101 .05465 .04907 .04417 .03985 .03605 .03269 .02972 .02709 .02476
62 1 .20806 .18204 .15954 .14007 .12318 .10852 .09578 .08470 .07503 .06660 .05923 .05278 .04712 .04215 .03779 .03395 .03056 .02756 .02491 .02256
62 2 .21215 .18592 .16320 .14349 .12637 .11149 .09854 .08725 .07739 .06877 .06123 .05461 .04881 .04371 .03921 .03525 .03176 .02866 .02592 .02349
62 3 .21645 .19000 .16705 .14711 .12977 .11467 .1015D .08999 .07994 .07113 .06341 .05664 .05068 .04543 .04081 .03672 .03311 .02991 .02708 .02455
62 4 22088 .19423 .17106 .15089 .13332 .11799 .10460 .09288 .08263 .07363 .06573 .05879 .05267 .04728 .04252 .03831 .03458 .03127 .02833 .02572
62 5 .22544 .19858 .17519 .15479 .13699 .12144 .10783 .09590 .08544 .07625 .06817 .06105 .05477 .04923 .04433 .03999 .03614 .03272 .02968 .02697
62 6 .23010 .20304 .17943 .15881 .14078 .12500 .11117 .09903 .08836 .07898 .07071 .06342 .05697 .05128 .04623 .04176 .03778 .03425 .03110 .02829
62 7 .23487 .20761 .18378 .16294 .14468 .12868 .11462 .10227 .09139 .08181 .07335 .06588 .05927 .05342 .04823 .04362 .03951 .03586 .03260 .02969
62 8 .23973 .21228 .18824 .16718 .14870 .13246 .11818 .10561 .09453 .08474 .07610 .06845 .06167 .05566 .05031 .04556 .04133 .03755 .03418 .03116
62 9 .24470 .21706 .19282 .17153 .15282 .13636 .12186 .10907 .09778 .08779 .07895 .07112 .06417 .05799 .05250 .04760 .04323 .03933 .03584 .03272
62 10 .24978 .22195 .19750 .17600 .15707 .14039 .12566 .11265 .10115 .D9096 .08192 .07390 .06678 .06043 .05478 .04974 .04523 .04120 .03759 .03436
62 11 .25496 .22695 .20230 .18059 .16143 .14452 .12958 .11635 .10463 .09423 .08500 .07679 .06949 .06297 .05716 .05197 .04732 .04316 .03943 .03607
62 12 .26023 .23205 .20720 .18528 .16591 .14877 .13360 .12015 .10822 .09762 .08818 .07979 .07230 .06561 .05964 .05429 .04950 .04520 .04134 .03787
62 13 .26558 .23723 .21219 .19006 .17047 .15311 .13772 .12405 .11190 .10109 .09146 .08287 .07519 .06833 .06219 .05669 .05175 .04732 .04333 .03974
62 14 .27099 .24247 .21724 .19490 .17510 .15752 .14191 .12802 .11565 .10463 .09480 .08601 .07815 .07112 .06481 .05915 .05406 .04949 .04537 .04165
62 15 .27643 .24776 .22235 .19981 .17979 .16199 .14616 .13205 .11947 .10824 .09820 .08922 .08117 .07396 .06748 .06166 .05643 .05171 .04745 .04361
62 16 .28192 .25310 .22750 .20476 .18454 .16652 .15047 .13614 .12335 .11190 .10166 .09248 .08425 .07686 .07021 .06422 .05883 .05397 .04958 .04561
62 17 .28746 .25849 .23272 .20978 .18935 .17112 .15485 .14030 .12729 .11564 .10519 .09582 .08739 .07982 .07300 .06685 .06130 .05629 .05176 .04765
62 18 .29306 .26394 .23801 .21488 .19424 .17580 .15931 .14455 .13132 .11946 .10881 .09923 .09062 .08286 .07586 .06954 .06384 .05868 .05400 .04977
62 19 .29874 .26949 .24339 .22008 .19924 .18059 .16388 .14890 .13546 .12339 .11253 .10275 .09394 .08600 .07882 .07234 .06647 .06116 .05634 .05196
62 20 .30452 .27514 .24888 .22539 .20435 .18549 .16857 .15338 .13972 .12744 .11637 .10639 .09739 .08925 .08190 .07524 .06921 .06374 .05877 .05426
62 21 .31040 .28090 .26448 .23081 .20958 .19052 .17339 .15799 .14411 .13161 .12034 .11016 .10096 .09263 .08510 .07827 .07207 .06644 .06132 .05666
62 22 .31637 .26676 .26019 .23635 .21493 .19567 .17833 .16271 .14863 .13592 .12443 .11405 .10465 .09614 .08841 .08141 .07504 .06925 .06397 .05917
62 23 .32245 .29272 .26602 .24202 .22041 .20095 .18341 .16758 .15328 .14036 .12867 .11808 .10848 .09977 .09186 .08467 .07813 .07218 .06675 .06179
62 24 .32862 .29880 .27197 .24780 .22602 .20637 .18862 .17259 .15808 .14494 .13304 .12225 .11245 .10354 .09545 .08808 .08136 .07524 .06966 .06454
62 25 .33491 .30500 .27804 .25373 .23177 .21193 .19398 .17774 .16302 .14968 .13757 .12657 .11657 .10747 .09918 .09162 .08473 .07844 .07269 .06742
62 26 .34130 .31131 .28424 .25977 .23765 .21762 .19948 .18304 .16811 .15456 .14224 .13103 .12083 .11153 .10305 .09531 .08824 .08178 .07586 .07044
62 27 .34780 .31775 .29056 .26596 .24367 .22347 .20513 .18849 .17336 .15960 .14707 .13566 .12525 .11576 .10708 .09916 .09190 .08526 .07918 .07359
62 2a .35440 .32428 .29700 .27226 .24982 .22944 .21092 .19408 .17875 .16478 .15205 .14043 .12982 .12013 .11126 .10314 .09571 .08889 .08263 .07689
62 29 .36109 .33092 .30355 .27869 .25609 .23555 .21685 .19981 .18428 .17011 .15717 .14535 .13454 .12465 .11559 .10728 .09966 .09266 .08623 .08032
62 30 .36787 .33766 .31020 .28522 .26249 .24178 .22290 .20568 .18995 .17558 .16244 .15042 .13941 .12931 .12006 .11156 .10375 .09657 .08997 .08389
62 31 .37473 .34448 .31695 .29187 .26900 .24814 .22909 .21168 .19576 .18119 .16785 .15563 .14442 .13412 .12467 .11598 .10799 .10063 .09385 .08760
62 32 .38167 .35140 .32381 .29862 .27563 .25462 .23540 .21781 .20171 .18695 .17341 .16098 .14957 .13908 .12943 .12055 .11237 .10483 .09787 .09145
62 33 .38869 .35841 .33076 .30549 .28237 .26122 .24184 .22408 .20779 .19284 .17911 .16649 .15488 .14419 .13434 .12527 .11690 .10918 .10204 .09544
62 34 .39578 .36550 .33781 .31245 .28923 .26794 .24841 .23048 .21401 .19887 .18495 .17213 .16033 .14944 .13941 .13014 .12158 .11367 .10636 .09959
62 35 .40294 .37268 .34495 .31952 .29619 .27478 .25510 .23701 .22037 .20505 .19094 .17793 .16593 .15486 .14462 .13517 .12642 .11833 .11083 .10389
62 36 .41017 .37993 .35217 .32668 .30326 .28173 .26191 .24367 .22686 .21136 .19707 .18387 .17168 .16041 .14999 .14034 .13141 .12313 .11546 .10834
62 37 .41745 .38724 .35947 .33393 .31043 .28878 .26884 .25044 .23347 .21780 .20333 .18995 .17757 .16611 .15550 .14567 .13655 .12809 .12023 .11293
62 38 .42480 .39463 .36686 .34127 .31769 .29595 .27588 .25734 .24021 .22438 .20973 .19617 .18361 .17196 .16117 .15115 .14184 .13320 .12516 .11769
62 39 .43218 .40207 .37431 .34869 .32505 .30320 .28302 .26435 .24707 .23108 .21626 .20252 .18978 .17796 .16698 .15677 .14728 .13846 .13024 .12259
62 40 .43961 .40957 .38182 .35618 .33248 .31056 .29026 .27147 .25405 .23790 .22292 .20901 .19610 .18409 .17293 .16254 .15288 .14387 .13548 .12765
62 41 .44708 .41711 .38939 .36375 .34000 .31800 .29761. .27869 .26114 .24485 .22971 .21564 .20255 .19037 .17903 .16846 .15862 .14943 .14086 .13286
62 42 .45457 .42469 .39701 .37137 .34758 .32552 .30504 .28601 .26834 .25190 .23661 .22238 .20912 .19677 .18526 .17452 .16450 .15514 .14640 .13822
62 43 .46208 .43230 .40467 .37903 .35522 .33310 .31254 .29341 .27562 .25905 .24362 .22923 .21582 .20330 .19162 .18071 .17051 .16098 .15207 .14372
62 44 .46959 .43991 .41235 .38673 .36290 .34074 .32010 .30089 .28298 .26629 .25072 .23619 .22262 .20994 .19810 .18702 .17666 .16695 .15787 .14936
62 45 .47708 .44752 .42003 .39444 .37061 .34841 .32771 .30841 .29040 .27359 .25789 .24322 .22951 .21668 .20467 .19343 .18290 .17304 .16379 .15511
62 46 .48454 .45511 .42770 .40215 .37832 .35610 .33535 .31597 .29787 .28095 .26513 .25033 .23647 .22350 .21134 .19994 .18925 .17923 .16981 .16097
GOVERNMENT EXHIBIT D
Computation of Homestead Interest of
Innocent Spouse of a Delinquent Taxpayer
Publication 723A
Interest Rate: 6.0%
Required factors from Publication 1457
A Taxpayer Age 52 Remainder Factor from Table A(1) 0.34440
B Taxpayer Life Estate Factor from Table A(1) 0.65560
C Spouse Age 43 Remainder Factor from Table A(2) 0.18038
D Spouse Life Estate Factor from Table A(2) 0.81962
E Joint and Survivor Remainder Factor from Table LT6 0.14442
Computation of First to Die Factors
F First-to-Die Remainder Factor (A + C - E) 0.38036
G First-to-Die Life Estate Factor (1 - F) 0.61964
Taxpayer's Share
H One-half Joint Life Estate Interest (G / 2) 0.30982
I Contingent Life Estate Interest (B - G) 0.03596
J Remainder Interest (E) 0.14442
K Total Taxpayer Interest (H + I + K) 0.49020
Spouse's Share
L One-half Joint Life Estate Interest (G / 2) 0.30982
M Contingent Life Estate Interest (D - G) 0.19998
N Total Spouse Interest (L + M) 0.50980
Check
O Total Taxpayer's Interest (K) 0.49020
P Total Spouse's Interest (N) 0.50980
Q Total (should equal 1.00000) (0 + P) 1.00000
GOVERNMENT EXHIBIT E
Table LT6
Last to die remainder factors. Two lives
Interest at 6 percent
Age Senior Junior Male and Junior Female and Junior
Diff. Age Age Female Male Female I Male
(1) (2) (3) (4) (5) (6) (7)
9 27 18 .03676 .04668 .03302 .04050
9 28 19 .03889 .04932 .03495 .04283
9 29 20 .04114 .05211 .03699 .04528
9 30 21 .04351 .05504 .03915 .04788
9 31 22 .04603 .05813 .04143 .05061
9 32 23 .04868 .06139 .04384 .05349
9 33 24 .05148 .06483 .04639 .05654
9 34 25 .05445 .06848 .04909 .05977
9 35 26 .05757 .07233 .05194 .06318
9 36 27 .06088 .07641 .05495 .06678
9 37 28 .06436 .08071 .05812 .07060
9 38 29 .06804 .08525 .06148 .07462
9 39 30 .07191 .09004 .06502 .07887
9 40 31 .07599 .09508 .06876 .08335
9 41 32 .08029 .10038 .07270 .08807
9 42 33 .08481 .10596 .07685 .09304
9 43 34 .08956 .11182 .08122 .09828
9 44 35 .09457 .11798 .08584 .10379
9 45 36 .09982 .12444 .09069 .10959
9 46 37 .10534 .13121 .09581 .11569
9 47 38 .11114 .13830 .10119 .12209
9 48 39 .11721 .14571 .10685 .12881
9 49 40 .12357 .15344 .11279 .13585
9 50 41 .13022 .16149 .11904 .14322
9 51 42 .13717 .16988 .12559 .15094
9 52 43 .14442 .17859 .13246 .15901
9 53 44 .15201 .18764 .13967 .16744
9 54 45 .15992 .19704 .14723 .17625
9 55 46 .16819 .20680 .15516 .18545
9 56 47 .17681 .21691 .16347 .19506
9 57 48 .18560 .22738 .17217 .20506
9 58 49 .19515 .23817 .18126 .21546
9 59 50 .20466 .24927 .19076 .22624
9 60 51 .21494 .26066 .20066 .23738
9 61 52 .22540 .27234 .21098 .24891
Table A (1)
Table single life, male, 6 percent, showing the
present worth of an annuity, of a life interest,
and of a remainder interest
Age Annuity Life Remainder Age Annuity Life Remainder
estate estate
(1) (2) (3) (4) (1) (2) (3) (4)
0 15.6175 .93705 .06295 35 13.8758 .83255 .16745
1 16.0362 .96217 .03783 36 13.7425 .82455 .17545
2 16.0283 .96170 .03830 37 13.6036 .81622 .18378
3 16.0089 .96053 .03947 38 13.4591 .80755 .19245
4 15.9841 .95905 .04095 39 13.3090 .79854 .20146
5 15.9553 .95732 .04268 40 13.1538 .78923 .21077
6 15.9233 .95540 .04460 41 12.9934 .77960 .22040
7 15.8885 .95331 .04669 42 12.8279 .76967 .23033
8 15.8508 .95105 .04895 43 12.6574 .75944 .24056
9 15.8101 .94861 .05139 44 12.4819 .74891 .25109
10 15.7663 .94598 .05402 45 12.3013 .73808 .26192
11 15.7194 .94316 .05684 46 12.1158 .72695 .27305
12 15.6698 .94019 .05981 47 11.9253 .71552 .28448
13 15.6180 .93708 .06292 48 11.7308 .70385 .29615
14 15.5651 .93391 .06609 49 11.5330 .69198 .30802
15 15.5115 .93069 .06931 50 11.3329 .67997 .32003
16 15.4576 .92746 .07254 51 11.1308 .66785 .33215
17 15.4031 .92419 .07581 52 10.9267 .65560 .34440
18 15.3481 .92089 .07911 53 10.7200 .64320 .35680
19 15.2918 .91751 .08249 54 10.5100 .63060 .36940
20 15.2339 .91403 .08597 55 10.2960 .61776 .38224
21 15.744 .91046 .08954 56 10.0777 .60466 .39534
22 15.1130 .90678 .09322 57 9.8552 .59131 .40869
23 15.0487 .90292 .09708 58 9.6297 .57778 .42222
24 14.9807 .89884 .10116 59 9.4028 .56417 .45563
25 14.9075 .89445 .10555 60 9.1753 .55052 .44948
26 14.8287 .88972 .11028 61 8.9478 .53687 .46313
27 14.7442 .88465 .11535 62 8.7202 .52321 .4/679
28 14.6542 .87925 .12075 63 8.4924 .50954 .49046
29 14.5588 .87353 .12647 64 8.2642 .49585 .50415
30 14.4584 .86750 .13250 65 8.0353 .48212 .51788
31 14.3528 .86117 .13883 66 7.8060 .46836 .53164
32 14.2418 .85451 .14549 67 7.5763 .45458 .54542
33 14.1254 .84752 .15248 68 7.3462 .44077 .55923
34 14.0034 .84020 .15980 69 7.1149 .42689 .57311
Table A (2)
Table single life, female, 6 percent, showing the
present worth of an annuity, of a life interest,
and of a remainder interest
Life Life
Age Annuity estate Remainder Age Annuity estate Remainder
(1) (2) (3) (4) (1) (2) (3) (4)
0 15.8072 .95383 .04617 35 14.5989 .87593 .12407
1 16.2284 .97370 .02630 36 14.4975 .86985 .13015
2 16.2287 .97372 .02628 37 14.3915 .86349 .13651
3 16.2180 .97308 .02692 38 14.2811 .85687 .14313
4 16.2029 .97217 .02783 39 14.1663 .84998 .15002
5 16.1850 .97110 .02890 40 14.0468 .84281 .15719
6 16.1648 .96989 .03011 41 13.9227 .83536 .16464
7 16.1421 .96853 .03147 42 13.7940 .82764 .17236
8 16.1172 .96703 .03297 43 13.6604 .81962 .18038
9 16.0901 .96541 .03459 44 13.5219 .81131 .18869
10 16.0608 .96365 .03635 45 13.3781 .80269 .19731
11 16.0293 .96176 .03824 46 13.2290 .79374 .20626
12 15.9958 .95975 .04025 47 13.0746 .78448 .21552
13 15.9607 .95764 .04236 48 12.9147 .77488 .22512
14 15.9239 .95543 .04457 49 12.7496 .76498 .23502
15 15.8856 .95314 .04686 50 12.5793 .75476 .24624
16 15.8460 .95076 .04924 51 12.4039 .74423 .25577
17 15.8048 .94829 .05171 52 12.2232 .73339 .26661
18 15.7620 .94572 .05428 53 12.0367 .72220 .27780
19 15.7172 .94303 .05697 54 11.4436 .71062 .28938
20 15.6701 .94021 .05979 55 11.6432 .69859 .30141
21 15.6207 .93724 .06276 56 11.4353 .68612 .31388
22 15.5687 .93412 .06588 57 11.2200 .67320 .32680
23 15.5141 .93085 .06915 58 10.9980 .65988 .34012
24 15.4565 .92739 .07261 59 10.7703 .64622 .35378
25 15.3959 .92375 .07625 60 10.5376 .63226 .36774
26 15.3322 .91993 .08007 61 10.3005 .61803 .38197
27 15.2652 .91591 .08409 62 10.0587 .60352 .39648
28 15.1946 .91168 .08832 63 9.8118 .58871 .41129
29 15.1208 .90725 .09275 64 9.5592 .57355 .42645
30 15.0432 .90259 .09741 65 9.3005 .55803 .44197
31 14.9622 .89773 .10227 66 9.0352 .54211 .45789
32 14.8775 .89265 .10735 67 8.7639 .52583 .47417
33 14.7888 .88733 .11267 68 8.4874 .50924 .49076
34 14.6960 .88176 .11824 69 8.2068 .49241 .50759
GOVERNMENT EXHIBIT F
USE OF TABLES
The factors set forth in this publication involving life contingencies are derived from the values of 1x taken from the Life Table for the Total Population appearing as Table 1, in "U.S. Decennial Life Tables for 1989-1991" published by the U.S. Department of Health and Human Services, Public Health Service, National Center for Health Statistics. Table 1 appears in this publication in Section 5, labeled as Table 90CM.
The factors in Sections 1 through 4 and Section 6 are based on interest rates ranging from 2.2 percent to 22.0 percent in intervals of 0.2 percent. The wide range of rates is shown pursuant to Section 7520 of the Internal Revenue Code, which requires the use of an interest rate of 120. percent of the annual mid-term applicable federal rate for the month in which the valuation date falls. All of the factors in this publication reflect annual compounding of interest.
Table S, Section 1, contains factors for the present worth of a life annuity, a life estate, and a remainder interest based on a single life.
Table R(2), Section 2, contains factors for the present worth of the remainder interest in $1.00 payable at the death of the last to die of two persons.
Table B, Section 3, contains factors for the present worth of an annuity, an income interest, and a remainder interest for a term certain.
Table H, Section 4, contains commutation tables for Dx, Nox, &Mmacr;.
Table 90CM, Section 5, is the underlying mortality table used to calculate factors involving life contingencies.
Table K, Section 6, contains adjustment factors for annuities payable at the end of annual, semi-annual, quarterly, monthly, and weekly periods.
The remainder factors in Table S of Section 1 and Table R(2) of Section 2 can be used to value remainder interests in pooled income funds. The "yearly rate of return" for the pooled income fund is used as the interest rate.
