Structured Settlement Factoring Transactions

A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. For information about these requirements, see Internal Revenue Code section 5891.

taxmap/pubs/p3920-005.htm#w32806e08

Worksheet B Illustrated. Figuring the Tax To Be Forgiven

(For Decedents Who Filed a Joint Return)

			(A) First Eligible Year (1994 or 2000)	(B) Second Eligible Year (1995 or 2001)	(C) Third Eligible Year (1996 or 2002)
1	Enter the years eligible for forgiveness.	1	2000	2001
2	Enter the decedent's taxable income. Figure taxable income as if a separate return had been filed. See the instructions.	2	$17,259	$14,295
3	Enter the decedent's *total tax.* See the instructions.	3	6,123	5,250
4	Enter the total, if any, of the decedent's taxes not eligible for forgiveness. See the instructions.	4	3,532	3,109
5	Subtract line 4 from line 3.	5	2,591	2,141
6	Enter the surviving spouse's taxable income. Figure taxable income as if a separate return had been filed. See the instructions for line 2.	6	29,025	29,850
7	Enter the surviving spouse's *total tax.* See the instructions.	7	5,277	5,391
8	Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4.	8	0	0
9	Subtract line 8 from line 7.	9	5,277	5,391
10	Add lines 5 and 9.	10	7,868	7,532
11	Enter the *total tax* from the joint return. See Table 1 on page 5 for the line number for years before 2002.	11	10,789	9,728
12	Add lines 4 and 8.	12	3,532	3,109
13	Subtract line 12 from line 11.	13	7,257	6,619
14	Divide line 5 by line 10. Enter the result as a decimal.	14	.329	.284
15	Tax to be forgiven. Multiply line 13 by line 14 and enter the result.	15	$2,388	$1,880
Note. If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. The IRS will determine the amount to be refunded.

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