CMFR Drops to 5.4 Percent -- Lowest Rate in 28 Years!

CMFR Drops to 5.4 Percent -- Lowest Rate in 28 Years!

News story posted in Revenue Rulings on 21 October 1998| comments
audience: National Publication | last updated: 18 May 2011
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Summary

For the first time since 1970, the discount rate used for purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest has fallen below 6 percent. Revenue Ruling 98-52 indicates that the charitable mid-term federal rate under Code Section 7520 for the month of November is 5.4 percent.

PGDC SUMMARY:

For the first time since 1970, the discount rate used for purposes of determining the present value of an annuity, an interest for life or a term of years, or a remainder or a reversionary interest has fallen below 6 percent. Revenue Ruling 98-52 indicates that the charitable mid-term federal rate under Code Section 7520 for the month of November is 5.4 percent.

POINTS TO PONDER:

With the AFR at a historic low, planners should visit the application of charitable lead trusts. An upcoming Planned Giving Online article will examine the tax economics of planned gifts in low interest rate environments.

Communications Division

Part I

Section 1274. -- Determination of Issue Price in the Case of Certain Debt Instruments Issued for Property

(Also Sections 42, 280G, 382, 412, 467, 468, 482, 483, 642, 807, 846, 1288, 7520, 7872.)

Rev. Rul. 98-52

[1] This revenue ruling provides various prescribed rates for federal income tax purposes for November 1998 (the current month.)

Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for purposes of section 1274(d) of the Internal Revenue Code.

Table 2 contains the short- term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month for purposes of section 1288(b).

Table 3 sets forth the adjusted federal long-term rate and the long- term tax-exempt rate described in section 382(f). Table 4 contains the appropriate percentages for determining the low-income housing credit described in section 42(b)(2) for buildings placed in service during the current month.

Finally, Table 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520.

                       REV. RUL. 98-52 TABLE 1 
          Applicable Federal Rates (AFR) for November 1998 
                       Period for Compounding 
                    Annual   Semiannual   Quarterly  Monthly
                    ______   __________   _________  _______
   Short-Term
   __________
         AFR        4.47%        4.42%       4.40%     4.38%
    110% AFR        4.92%        4.86%       4.83%     4.81%
    120% AFR        5.37%        5.30%       5.27%     5.24%
    130% AFR        5.83%        5.75%       5.71%     5.68% 
   Mid-Term
   _________
         AFR        4.51%        4.46%       4.44%     4.42%
    110% AFR        4.97%        4.91%       4.88%     4.86%
    120% AFR        5.42%        5.35%       5.31%     5.29%
    130% AFR        5.88%        5.80%       5.76%     5.73%
    150% AFR        6.80%        6.69%       6.63%     6.60%
    175% AFR        7.96%        7.81%       7.74%     7.69% 
   Long-Term
   _________
         AFR        5.10%        5.04%       5.01%     4.99%
    110% AFR        5.62%        5.54%       5.50%     5.48%
    120% AFR        6.14%        6.05%       6.00%     5.98%
    130% AFR        6.66%        6.55%       6.50%     6.46% 
                       REV. RUL. 98-52 TABLE 2 
                   Adjusted AFR for November 1998 
                       Period for Compounding 
                   Annual   Semiannual   Quarterly   Monthly
                   ______   __________   _________   _______
    Short-term
    adjusted AFR    3.30%     3.27%        3.26%       3.25% 
    Mid-term
    adjusted AFR    3.88%     3.84%        3.82%       3.81% 
    Long-term
    adjusted AFR    4.65%     4.60%        4.57%       4.56% 
                       REV. RUL. 98-52 TABLE 3 
              Rates Under Section 382 for November 1998 
Adjusted federal long-term rate for the current month - 4.65% 
Long-term tax-exempt rate for ownership changes during
the current month (the highest of the adjusted federal
long-term rates for the current month and the 
prior two months.) -                               5.02% 
                    REV. RUL. 98-52 TABLE 4 
           Appropriate Percentages Under Section 42(b)(2)
                          for November 1998 
Appropriate percentage for the 70% present value
low-income housing credit -                         8.12% 
Appropriate percentage for the 30% present value
low-income housing credit -                         3.48% 
                       REV. RUL. 98-52 TABLE 5 
              Rate Under Section 752 for November 1998 
Applicable federal rate for determining the present value
of an annuity, an interest for life or a term of years,
or a remainder or reversionary interest -           5.4%

$include:RR_NAL-talink$

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