Tax Facts

585 / What is the gift tax value of an annuity contract or of a donee’s interest in a joint and survivor annuity?

Where an annuity is purchased by a donor on his or her own life and immediately given to another, or when an annuity is purchased by one person for another on the latter’s life, the value of the gift is the premium paid for the contract.1 If a person purchases an annuity and gives the contract to another person at a later date after the annuity starting date (i.e., once annuity payments have begun), the gift tax value is the single premium the company would charge for an annuity providing payments of the same amount on the life of a person who is the annuitant’s age at the time of the gift.2 The value of a deferred premium-paying annuity is the terminal reserve, adjusted to the date of the gift, plus the unearned portion of the last premium payment ( Q 119).3

Joint and Survivor Annuity


Where a donor purchases a joint and survivor annuity for the benefit of the donor and another, the gift tax value is the cost of the annuity less the cost of a single life annuity for the donor.4
Example. A donor purchases from a life insurance company for $15,198 a joint and survivor annuity contract that provides for the payment of $60 a month to the donor during the donor’s lifetime, and then to the donor’s sibling for such time as the sibling may survive the donor. The premium that would have been charged by the company for an annuity of $60 monthly payable during the life of the donor alone is $10,690. The value of the gift is $4,508 ($15,198 less $10,690).5





1.     Treas. Reg. § 25.2512-6(a) (Ex.1).

2.     Treas. Reg. § 25.2512-6(a) (Ex. 2).

3.     Commissioner v. Edwards, 135 F.2d 574 (5th Cir. 1942).

4.     Treas. Reg. § 25.2512-6(a).

5.     Treas. Reg. § 25.2512-6(a) (Ex. 5).


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