939 / What special valuation rules apply to the transfer of qualified tangible property under Chapter 14?

Term interests in qualified tangible property are valued using actual sales or rentals that are comparable both as to the nature and character of the property and the duration of the term interest. Little weight is given appraisals in the absence of comparables. Tables used in valuing annuity, unitrust, estate, and remainder interests under IRC Section 7520 are not evidence of what a willing buyer would pay a willing seller for an interest in qualified tangible property.³ If the taxpayer cannot establish the value of the term interest, the interest is valued at zero.⁴

If, during the term, the term interest is converted into property other than qualified tangible property, the conversion is treated as a transfer of the unexpired portion of the term interest (valued as of the time of the original transfer) unless the trust is converted to a qualified annuity interest (see Q 938).⁵ If an addition or improvement is made to qualified tangible property such that the property would no longer be treated as qualified tangible property, the property is subject to the conversion rule above. If the addition or improvement would not change the nature of the qualified tangible property, the addition or improvement is treated as an additional transfer subject to IRC Section 2702.⁶