Shortly before the beginning of each month, the IRS, by issuance of a Revenue Ruling, publishes the applicable federal rates (“AFRs”) for the coming month. These interest rates are used for various purposes under the Internal Revenue Code of 1986, including imputed interest, original issue discount, and gift tax provisions. In particular, Table 5 in those Revenue Rulings sets forth the AFR under IRC Section 7520 (the “Section 7520 Rate”) that is to be used in the applicable month for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest.
In most cases, the presentation of the Section 7520 rate information on Internet Web sites will include not only the rate for the current month but also the rate for the two preceding months, as well as (when available) the rate for the coming month, as donors have the option of using the current month’s rate or the rate in either of the prior two months. The rate for the coming month is first published on or about the 20th of each month.
There are three kinds of basic AFR rates. They are:
- Short Term AFRs for instruments having a term of three (3) years or less.
- Mid Term AFRs for instruments having a term in excess of three (3) years but no greater than nine (9) years.
- Long Term AFRs for instruments having a term in excess of nine (9) years.
The rates under IRC Section 7520 (AFRs for determining the present value of an annuity, an interest for life or a term of years, or a remainder or reversionary interest) are determined from the rounded value of 120% of the annual Mid-Term rates.
The following Web sites contain Web pages that display matrices of all the IRC Section 7520 rates:
- Brentmark Software – (as published – two decimal places)
- Leimberg Associates Inc. & Leimberg & LeClair Inc. under Key Rates/Valuation (as rounded to nearest 2/10 of 1%, plus all AFRs from 1996 to date)
- Larry Katzenstein’s Tiger Tables site (as rounded to nearest 2/10 of 1%)
The following Web sites display all of the types of AFRs for various periods:
- RIA Web site (All AFRs for the last 12 months)
- TimeValueSoftware (All AFRs from Jan. ’96 forward only)
- Pillsbury Winthrop LLP Tax Page – Current AFRs with a comprehensive analysis of all types of AFRS. Click on “Current Section 7520 Rate” to see the current rate and view an explanation of the derivation of the section 7520 rate.
- The IRS Internal Revenue Bulletins – IRB 96-01 to date.
If you learn of another Web site that has this information on it, let us know at webmaster@actec.org