Pursuant to a property settlement agreement, Victor transfers $1 million in trust for the benefit of his former wife. The trust provides that the income of the trust is to be paid to his former wife for her lifetime, with the remainder passing to Victor or his probate estate. Assuming Victor's former wife is age 40 at the time of the trust funding, what is the actuarial value of her life estate? Assume, alternatively, that the prevailing Federal midterm rate is 3.6 percent and 5.6 percent. a. The nature of the business and the history of the enterprise from its inception. b. The economic outlook in general and the condition and outlook of the specific industry in particular. c. The book value of the stock and the financial condition of the business. d. The earning capacity of the company e. The dividend-paying capacity. f. Whether or not the enterprise has goodwill or other intangible value. g. Sales of the stock and the size of the block of stock to be valued. h. The market price of stocks of corporations engaged in the same or a similar line of business having their stocks actively traded in a free and open market, either on an exchange or over-the-counter
It seems like there may be some confusion in your question as the points a-h appear to be factors for valuing a business or stock, not for calculating the actuarial value of a life estate. To calculate the actuarial value of the life estate for Victor's former wife, we would use IRS life expectancy tables and the applicable federal midterm rate. The IRS provides a "Single Life Expectancy" table (Table S) for this purpose. The calculation involves determining the present value of an annuity of $1 per year for the life of the beneficiary, using the applicable federal rate as the discount rate. The exact calculation can be complex and it's recommended to consult with a tax professional or use a software tool designed for this purpose. The result will depend on the exact age of Victor's former wife and the applicable federal rate at the time the trust is established. Please note that the actuarial value of the life estate could have implications for gift tax purposes at the time the trust is established.
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