Pooled Income Funds

Pooled Income Fund Valuation Rates

Pooled income fund deductions are computed using a valuation rate rather than the IRS discount rate. The applicable valuation rate depends on the age and investment history of the fund.

Pooled income fund deductions are computed using a valuation rate rather than the IRS discount rate. The applicable valuation rate depends on the age and investment history of the fund. 

The mandated valuation rate for gifts to young funds funded in 2016 is 1.2%.

The valuation rate for gifts to old funds is the fund’s highest annual rate of return in the prior three years. This rate of return must be computed as described in Treas. Regs. 1.642-6(c)(2) and 1.642-6(c)(3).

How the mandated rate for young funds is calculated: 
The IRS mandated valuation rate for pooled income funds with less than three taxable years of experience is recalculated annually. It equals the highest annual average of the monthly IRS discount rates over the three prior calendar years, minus one percent and rounded to the nearest 0.2%. 

The adjusted annual average of the monthly IRS discount rates in 2013-2015 were:

  • 0.6% in 2013
  • 1.2% in 2014
  • 1.0% in 2015

As a result, the mandated rate for gifts to young funds in 2016 is 1.2%.

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Selecting a valuation rate for gifts made to a young pooled income fund: IRS final regulations stipulate that the valuation rate used to calculate the deduction earned by a gift to a young pooled income fund must equal the mandated rate for the year the gift is made.

How to determine the valuation rate for old funds: The income tax deduction for a gift made to a pooled income fund with three or more taxable years of experience (that has filed three or more tax returns) must be calculated using a valuation rate equal to the fund's highest annual return during the past three years. The method for calculating a fund's annual return is specified in Treasury Regulations section 1.642(c)-6(c) and is beyond the scope of this page.

The final regulations were issued on June 10, 1994, but are retroactive to May 1, 1989. However, the regulations state that gifts made from 5/1/89 to 6/9/94 may rely on earlier guidance that called for using the valuation rate mandated in the year a young fund was created (the birth rate), regardless of the mandated rate for the year of the gift.

Valuation Rate for Gifts to Young Funds

Year of Gift

Rate

2016

1.2%

2015

1.2%

2014

1.4%

2013

1.8%

2012

1.8%

2011

2.8%

2010

4.6%

2009

4.8%

2008

4.8%

2007

4.8%

2006

3.8%

2005

4.0%

2004

4.8%

2003

6.6%

2002

6.6%

2001

6.6%

2000

6.8%

1999

6.8%

1998

7.2%

1997

7.2%

1996

7.2%

1995

6.8%

1994

8.4%

1993

9.4%

1993

9.4%

1992

9.8%

1991

9.8%

1990

9.8%

5/1/89-12/31/89

9.4%

1/1/89-4/30/89

9.0%