The use of private annuities to shelter gain on appreciated property has come to an abrupt halt, if the Internal Revenue Service has its way.Whether the IRS can withstand pressure to withdraw or substantially amend new proposed regs before they are made final, or whether the final regs can withstand judicial challenge, remains to be seen. For now, however, effective for annuity transactions after Oct. 18, 2006 (subject to a relatively brief six-month "estate planning" exception), the division between "old rule" and "new rule" is dramatic.
* Old rule: An unsecured promise to pay by a family member or corporation that is not in the business of issuing annuities has no ascertainable value, so no gain is currently recognized on the transfer of appreciated property to such an obligor.
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