Rev. Rul. 69-215
Rev. Rul. 69-215; 1969-1 C.B. 63
- Cross-Reference
26 CFR 1.170-1: Charitable, etc., contributions and gifts;
allowance of deduction. - Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
Revoked by Rev. Rul. 76-143
Advice has been requested whether a charitable contribution deduction is allowable under section 170 of the Internal Revenue Code of 1954 by reason of the payment of the annual premium due under a life insurance policy in the circumstances outlined below.
The taxpayer, aged 45, purchased a $1,000 whole life annual premium insurance policy on his life and gave a university an interest in the proceeds of the policy. The pertinent provisions of the policy with respect to beneficiaries and premium default are as follows:
1. The university is an irrevocable beneficiary of the death proceeds of the policy, but only to the extent of the cash value of the policy. The death proceeds in excess of the cash value are payable to a trust established by the (taxpayer) insured for the benefit of his family.
2. The university is not to receive any payment until the death of the insured or until a default in the payment of a premium. Upon premium default the university may elect to receive the cash value of the policy or to have the cash value applied to the purchase of reduced paid-up insurance or extended term insurance.
The cash value and the annual increase in the cash value of the policy during the first five years are shown in the following table:
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Policy year Age of insured at Cash value at Increase in
beginning of year end of year cash value
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1 45 $0.00 $0.00
2 46 24.00 24.00
3 47 48.00 24.00
4 48 73.00 25.00
5 49 98.00 25.00
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Section 170(a) of the Code provides, in part, that there shall be allowed as a deduction any charitable contribution as defined in subsection (c), payment of which is made within the taxable year. Charitable contributions as described in subsection (c) include contributions or gifts to or for the use of an organization that is organized and operated exclusively for charitable or educational purposes. The university is an organization of the type described in section 170(c) of the Code.
The university's interest in the cash value of the policy is vested but cannot take effect so long as the insured is alive and a premium is not in default.
Accordingly, the taxpayer is entitled to a charitable contribution deduction, subject to the limitations of section 170 of the Code, for the increase in the present value of the university's interest when an annual premium is paid. The immediate charitable gift that results from the payment of a premium is determined by multiplying the increase in the cash value of the policy by the rate per $1.00 of insurance that would be charged by the insurer for single premium whole life insurance on the insured's life at the insured's attained age, provided such rate can be established; otherwise, by the appropriate single life remainder factor from Table I of section 25.2512-5 of the Gift Tax Regulations, as illustrated in the table below.
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(1) (2) (3) (4) (5)
Increase in
Premium Attained Increase Remainder present value
payment age of in cash factor of university's
insured value from Table interest Col.
I (3) x Col. (4)
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1 45 $0.00 0.42336 $0.00
2 46 24.00 0.43441 10.43
3 47 24.00 0.44564 10.70
4 48 25.00 0.45703 11.43
5 49 25.00 0.46859 11.71
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This table reflects, in column (5), the deductible charitable contribution for the first five premiums paid.
- Cross-Reference
26 CFR 1.170-1: Charitable, etc., contributions and gifts;
allowance of deduction. - Code Sections
- LanguageEnglish
- Tax Analysts Electronic Citationnot available
