Glossary

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Glossary2021-03-10T17:48:07-05:00

Brentmark, Inc. | Glossary  BRENTMARK GLOSSARY

Brentmark’s glossary of terms provides definitions for common terminology and acronyms found in our products, reports, website, published features, and across the financial, estate, retirement, and charitable planning industries.   Think we should include a new word or definition?  Send us your recommendation using the last tab “Submit Recommendation”.

ACTUARY –  A trained professional who assesses the financial consequences of risks and uses mathematics, statistics and financial theory to analyze and determine the financial impact of uncertain future events.

See Also: (Tab A) – Acturarial Table, (Tab E) – Enrolled Actuary, (Tab F) – Field Actuary,  (Tab I) – IRS Employee Plan Actuary, (Tab P) – Pension Actuary, Policy Actuary

ACTUARIAL TABLE – In actuarial science and demography, a life table (also called a mortality table or actuarial table) is a table which shows, for each age, what the probability is that a person of that age will die before their next birthday (“probability of death”). In other words, it represents the survivorship of people from a certain population.  They can also be explained as a long-term mathematical way to measure a population’s longevity.  Tables have been created by demographers including Graunt, Reed and Merrell, Keyfitz, and Greville.

See Also: (Tab A) – Acturary, (Tab L) – Life Table, (Tab M), Mortality Table, (Tab T) – Tables, (Tab §/Section) – §7520, (Tab Tables) – Actuarial Tables

ADJUSTED GROSS INCOME:  Adjusted Gross Income (AGI) is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments or contributions to a retirement account. Your AGI will never be more than your Gross Total Income on you return and in some cases may be lower.

See Also:  (Tab Acronyms) – (AGI) Adjusted Gross Income

ANNUITANT –The person entitled to receive the payments from an Annuity.

See Also: (Tab A) – Annuity, (Tab B) – Beneficiary, (Tab R) – Recipient

ANNUITY – An annuity is a contract that requires regular payments for more than one full year to the person entitled to receive the payments (annuitant).

See Also: (Tab A) – Annuitant, (Tab F) – Fixed Period Annuity, (Tab G) – Gift Annuity, (Tab S) – Single Life Annuity, (Tab T) – Tax-Sheltered Annuity,  (Tab V) – Variable Annuity

ASSET – An asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.

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BENEFICIARY – Any party that inherits the retirement account.

See Also: (Tab D) – Designated Beneficiary, (Tab R) – Retirement, Retirement Account

CHARITABLE LEAD TRUST: This is a split-interest trust that annually pays a fixed annuity or unitrust amount to a charitable organization for the lead period specified in the trust instrument. The lead period may be a term of years or it may be a period determined by the lifetime of one or more individuals, as described in Regulations sections 1.170A-6(c), 20.2055-2(e)(2)(vi) and (vii), and 25.2522(c)-3(c)(2)(vi) and (vii). The donor to the trust will have been allowed a deduction under one of the sections listed in section 4947(a)(2). At the end of the lead period, annual payments to the charitable organization cease, and the remaining corpus becomes payable, outright or in trust, to a noncharitable (private) beneficiary.

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CRT:  The terms “CRT” and “Section 664 Trust” are general references to charitable remainder trusts. These terms include CRATs and CRUTs.

See Also: (Tab §/Section Numbers) –  §664 Trust, (Tab C) – (CRAT) Charitable Remainder Annuity Trust, (CRUT) Charitable Remainder Unitrust

(CRAT) CHARITABLE REMAINDER ANNUITY TRUST:  This is a split-interest trust described in section 664(d)(1). It pays a fixed dollar (annuity) amount, at least annually, to one or more recipients, at least one of which isn’t a charitable organization. The annuity amount must be at least 5%, but cannot exceed 50%, of the initial net fair market value (FMV) of all property contributed to corpus, subject to the further requirement that the remainder interest in the trust (measured at the time property is transferred to the trust) must have a value of at least 10% of the FMV of the initial trust corpus. Payments to the recipient continue for a period of years. The period, if stated as a specific number, cannot exceed 20 years. The period can also be determined by the lifespan of one or more recipients. Whether the period is a fixed number of years, or is measured by an individual’s lifespan, the value of the remainder interest must be at least 10% of the FMV of the property transferred to the trust (as explained above). Upon termination of the recipient’s entitlement to the annuity amount, the remainder interest is transferred to, or is used by, a charitable organization described in section 170(c), or qualified employer securities are transferred to an employee stock ownership plan.

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(CRUT) CHARITABLE REMAINDER UNITRUST: This is a split-interest trust described in section 664(d)(2). It is similar in many respects to a CRAT except that the amount payable to the recipient annually (the unitrust amount) is a fixed percentage (not less than 5% but not more than 50%) of the net FMV of the trust’s assets, subject further to the requirement described above that the remainder interest must have a value of at least 10% of the value of the initial trust corpus, determined at the time property is transferred to the trust. Because the unitrust amount is calculated annually based upon the FMV of trust corpus, and isn’t a fixed amount determined upon the creation of the trust, the trustee must determine the FMV of the assets of the trust annually. Upon termination of the recipient’s entitlement to payments of the unitrust amount, the remainder interest is transferred to, or is used by, a charitable organization described in section 170(c), or qualified employer securities are transferred to an employee stock ownership plan. The trust agreement for a CRUT may allow the trustee to distribute less than the full unitrust amount in years when the trust income (as defined under section 643(b)) is less than the unitrust amount. A Net-Income Makeup Charitable Remainder Unitrust (NIMCRUT) is a charitable remainder unitrust that allows payment of the unitrust amount to be deferred in years when the unitrust amount exceeds trust income, with the deferred distributions being made up in a later year when the trust has sufficient income. A Net Income Charitable Remainder Unitrust (NICRUT) is a charitable remainder unitrust that allows for deferral of the unitrust payment (as described above), but does not provide for deferred distributions to be made up in future years.

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DESIGNATED BENEFICIARY:  A Beneficiary that is a person or qualified trust.

See Also: (Tab B) – Beneficiary, (Tab T) – Trust

DISQUALIFIED PERSON –  A disqualified person is:

  • A substantial contributor.
  • A foundation manager.
  • A person who owns more than 20% of a corporation, partnership, trust, or unincorporated enterprise, which is itself a substantial contributor.
  • A member of the family of an individual in the first three categories; or
  • A corporation, partnership, trust, or estate in which persons described in (1), (2), (3), or (4) above own a total beneficial interest of more than 35%.
  • For purposes of section 4943 (excess business holdings), a disqualified person also includes:
    • A private foundation which is effectively controlled (directly or indirectly) by the same persons who control the trust in question, or
    • A private foundation substantially all of the contributions to which were made (directly or indirectly) by the same person or persons described in (1), (2), or (3) above, or members of their families, within the meaning of section 4946(d), who made (directly or indirectly) substantially all of the contributions to the trust in question.
    • For purposes of section 4941 (self-dealing), a disqualified person also includes certain government officials. (See section 4946(c) and the related regulations.)

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ELIGIBLE DESIGNATED BENEFICIARY: A Designated Beneficiary is the surviving spouse, minor child of the plan owner, disabled beneficiary, chronically ill; and, does not fall under either of these categories (surviving spouse, minor child of the plan owner, disabled beneficiary, chronically ill)  and is not more than 10 years younger than the retirement account owner.

See Also: (Tab B) – Beneficiary, (Tab D) – Designated Beneficiary

ENROLLED ACTUARY:  Individuals who have satisfied the standards and qualifications of the Joint Board for the Enrollment of Actuaries and have been approved by the Board to perform actuarial services required under ERISA. These individuals have fulfilled knowledge and experience requirements related to pension laws and regulations, including:

  • ERISA;
  • the Internal Revenue Code;
  • Treasury Regulations;
  • IRS Revenue Rulings and IRS Notices;
  • PBCG Premium Payment Instructions, Regulations and Technical Updates; and
  • Department of Labor Regulations and Bulletins.

See Also: (Tab A) – Actuary, (Tab F) – Field Actuary, (Tab I) – IRS Employee Plan Actuary, (Tab P) – Pension Actuary, Policy Actuary

FAIR MARKET VALUE:  Fair market value (FMV) is the price that a property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.

See Also:  (Tab Acronyms) – (FMV) Fair Market Value

FAMILY FOUNDATIONA private non-profit organization established by an individual, family, or private business to support one or more charitable activities. The foundation is funded by its creator(s), who receive tax deductions for their contributions. These funds form the foundation’s endowment, which is invested in ways that will generate income to finance the foundation’s charities into the future. The foundation must distribute at least 5% of its assets toward its charitable endeavor.

See Also:  (Tab A) – Asset – (Tab C) – Charity, Contributions, (Tab D) – Deductions, Distributions, (Tab E) – Endowment – (Tab F) – Foundation,  (Tab P) – Private Foundation

FIELD ACTUARY:  Field actuaries teach new and current IRS employees. They speak at other professional seminars across the country. Sometimes policy and field actuaries work together on large teams for IRS projects.  They also perform the following duties:

  • Assist with retirement plan audits and attend related meetings with pension plan representatives;
  • Support revenue agents who work on determination letter applications by reviewing demonstrations, plan documents and answering technical questions;
  • Draft responses to information requests and review documents submitted to revenue agents;
  • Have expertise in topics including 403(b) arrangements, fully insured plans, governmental plans, employee plans team audits, multiemployer plans and PPA funding and benefit restriction issues; and
  • Assist with guidance projects such as developing new regulations.

See Also: (Tab A) – Acturarial Table, (Tab E) – Enrolled Actuary, (Tab F) – IRS Employee Plan Actuary, (Tab P) – Pension Actuary, Policy Actuary

FOUNDATION MANAGER:  A foundation manager is an officer, director, or trustee (or an individual who has powers or responsibilities similar to those of officers, directors, or trustees). In the case of any act or failure to act, the term “foundation manager” may also include an employee of the trust who has the authority to act.

See Also:  (Tab D) – Director, (Tab F) – Foundation, (Tab O) – Officers, (Tab P) – Private Foundation – (Tab T) – Trust, Trustee

GIFT ANNUITY – A charitable gift annuity is an arrangement between a donor and a non-profit organization in which the donor receives a regular payment for life based on the value of assets transferred to the organization. After the donor’s death, the assets are retained by the organization. The charitable gift annuity is a type of planned giving.

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IRS EMPLOYEE PLAN ACTUARY –  A trained professional who may either work as a:

  • Policy Actuary in Rulings and Agreements, or
  • Field Actuary in Examinations.

See Also: (Tab A) – Acturarial Table, (Tab E) – Enrolled Actuary, (Tab F) – Field Actuary,  (Tab P) – Pension Actuary, Policy Actuary

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LIFE TABLE – In actuarial science and demography, a life table (also called a mortality table or actuarial table) is a table which shows, for each age, what the probability is that a person of that age will die before their next birthday (“probability of death”). In other words, it represents the survivorship of people from a certain population.  They can also be explained as a long-term mathematical way to measure a population’s longevity.  Tables have been created by demographers including Graunt, Reed and Merrell, Keyfitz, and Greville.

See Also: (Tab A) – Acturary, Actuarial Table, (Tab M), Mortality Table, (Tab T) – Tables, (Tab §/Section) – §7520, (Tab Tables) – Actuarial Tables

MORTALITY BASIS –  

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MORTALITY RATE –  

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MORTALITY TABLE – In actuarial science and demography, a mortality table (also called a life table or actuarial table) is a table which shows, for each age, what the probability is that a person of that age will die before their next birthday (“probability of death”). In other words, it represents the survivorship of people from a certain population.  They can also be explained as a long-term mathematical way to measure a population’s longevity.  Tables have been created by demographers including Graunt, Reed and Merrell, Keyfitz, and Greville.

See Also: (Tab A) – Acturary, Actuarial Table (Tab L) – Life Table, (Tab T) – Tables, (Tab §/Section) – §7520, (Tab Tables) – Actuarial Tables

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POOLED INCOME FUN: This is a split-interest trust described in section 642(c)(5), which is created and administered by a charitable organization described in section 170(b)(1)(A) (other than in clauses (vii) or (viii)). Donors to the fund receive a lifetime income interest, based upon the rate of return earned by the trust (or such other rate as may be prescribed for a trust in existence for less than 3 years). Upon the death of the donor and the termination of his or her income interest, the charitable organization becomes entitled to the portion of the trust corpus attributable to the donor’s contribution, free of trust.

See Also:  (Tab C) – (CRAT) Charitable Remainder Annuity Trust, (CRUT) Charitable Remainder Unitrust, (Tab S) – Split Interest Trust, (Tab §/Section Numbers) –  §642(c)(5) Trust

PENSION ACTUARY – Pension Actuaries suggest methods to eliminate or reduce damage to parties if a future event occurs. They are primarily concerned with the payment of benefits, including death benefits, from a pension plan. Pension actuaries also calculate the required amount of an employer’s annual contribution to a defined benefit plan to ensure that current and future plan benefits are available to the participants. Many Pension Actuaries are also Enrolled Actuaries.

See Also: (Tab A) – Acturarial Table, (Tab E) – Enrolled Actuary, (Tab F) – Field Actuary,  (Tab I) – IRS Employee Plan Actuary, (Tab P) – Policy Actuary

POLICY ACTUARY – Training and certified professional who teach new and current IRS employees. They also speak at other professional seminars across the country. Sometimes policy and field actuaries work together on large teams for IRS projects.  Additionally, they also perform these duties:

  • Review private letter ruling requests about topics such as approvals of a plan’s change in its funding method or assumptions;
  • Assist with field agents’ technical advice requests;
  • Assist in drafting and reviewing regulations, revenue rulings, revenue procedures, notices and announcements;
  • Respond to taxpayers’ questions;
  • Provide expert reports and testimony in a court of law; and
  • Assist with special projects (for example, cash balance moratorium cases, promoter investigations (life and annuity insurance) and voluntary compliance cases.)

See Also: (Tab A) – Acturarial Table, (Tab E) – Enrolled Actuary, (Tab F) – Field Actuary,  (Tab I) – IRS Employee Plan Actuary, (Tab P) – Pension Actuary

(QOF) QUALIFIED OPPORTUNITY FUND:  A QOF is an investment vehicle that files either a partnership or corporate federal income tax return and is organized for the purpose of investing in QOZ property.

See Also:  (Tab Q) –  (QOZ) – Qualified Opportunity Zone, (QOZB) – Qualified Opportunity Zone Business, (QOZP) – Qualified Opportunity Zone Property –  (Tab Acronyms) – (QOF) – Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone, (QOZB) – Qualified Opportunity Zone Business, (QOZP) – Qualified Opportunity Zone Property

(QOZ) QUALIFIED OPPORTUNITY ZONE:  A QOZ is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.  Localities qualify as QOZs if they have been nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service (IRS).

See Also:  (Tab Q) –  (QOF) – Qualified Opportunity Fund, (QOZB) – Qualified Opportunity Zone Business, (QOZP) – Qualified Opportunity Zone Property –  (Tab Acronyms) – (QOF) – Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone, (QOZB) – Qualified Opportunity Zone Business, (QOZP) – Qualified Opportunity Zone Property

(QOZB) QUALIFIED OPPORTUNITY ZONE BUSINESS:  Each taxable year, a QOZ business must earn at least 50% of its gross income from business activities within a QOZ. The regulations provide three safe harbors that a business may use to meet this test. These safe harbors take into account any of the following:

  • Whether at least half of the aggregate hours of services received by the business were performed in a QOZ;
  • Whether at least half of the aggregate amounts that the business paid for services were for services performed in a QOZ; or
  • Whether necessary tangible property and necessary business functions to earn the income were located in a QOZ.

See Also:  (Tab Q) –  (QOF) – Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone, (QOZP) – Qualified Opportunity Zone Property –  (Tab Acronyms) – (QOF) – Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone, (QOZB) – Qualified Opportunity Zone Business, (QOZP) – Qualified Opportunity Zone Property

(QOZP) QUALIFIED OPPORTUNITY ZONE PROPERTY:  QOZ property is a QOF’s qualifying ownership interest in a corporation or partnership that operates a QOZ business in a QOZ or certain tangible property of the QOF that is used in a business in the QOZ. To be a qualifying ownership interest in a corporation or partnership, (1) the interest must be acquired after Dec. 31, 2017, solely in exchange for cash; (2) the corporation or partnership must be a QOZ business; and (3) for 90% of the holding period of that interest, the corporation or partnership was a QOZ business.

See Also:  (Tab Q) –  (QOF) – Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone, (QOZB) – Qualified Opportunity Zone Business –  (Tab Acronyms) – (QOF) – Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone, (QOZB) – Qualified Opportunity Zone Business, (QOZP) – Qualified Opportunity Zone Property

RECIPIENT:  A recipient is a beneficiary who receives the possession or beneficial enjoyment of the unitrust or annuity amount.

See Also: (Tab B) – Beneficiary, (Tabc C) – (CRUT) Charitable Remainder Unitrust 

SPLIT INTEREST TRUST:  A split-interest trust is a trust that:

  • Is not exempt from tax under section 501(a);
  • Has some unexpired interests that are devoted to purposes other than religious, charitable, or similar purposes described in section 170(c)(2)(B); and
  • Has amounts transferred in trust after May 26, 1969, for which a deduction was allowed under one of the sections listed in section 4947(a)(2).

A split-interest trust is subject to many of the same requirements and restrictions that are imposed on private foundations.

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(AGI) Adjusted Gross Income:  Adjusted Gross Income (AGI) is defined as gross income minus adjustments to income. Gross income includes your wages, dividends, capital gains, business income, retirement distributions as well as other income. Adjustments to Income include such items as Educator expenses, Student loan interest, Alimony payments, or contributions to a retirement account. Your AGI will never be more than your Gross Total Income on your return and in some cases may be lower.

See Also:  (Tab A) – Adjusted Gross Income

(FMV) FAIR MARKET VALUE:  Fair market value (FMV) is the price that property would sell for on the open market. It is the price that would be agreed on between a willing buyer and a willing seller, with neither being required to act, and both having reasonable knowledge of the relevant facts. If you put a restriction on the use of property you donate, the FMV must reflect that restriction.

See Also:  (Tab F) – (FMV) Fair Market Value

(QOF) QUALIFIED OPPORTUNITY FUND:  A QOF is an investment vehicle that files either a partnership or corporate federal income tax return and is organized for the purpose of investing in QOZ property.

See Also:  (Tab Q) – (QOF) Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone – (Tab Acronyms) – (QOZ) – Qualified Opportunity Zone

(QOZ) QUALIFIED OPPORTUNITY ZONE:  A QOZ is an economically distressed community where new investments, under certain conditions, may be eligible for preferential tax treatment.  Localities qualify as QOZs if they have been nominated for that designation by a state, the District of Columbia, or a U.S. territory and that nomination has been certified by the Secretary of the U.S. Treasury via his delegation of authority to the Internal Revenue Service (IRS).

See Also:  (Tab Q) – (QOF) Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone – (Tab Acronyms) – (QOZ) – Qualified Opportunity Zone

(QOZB) QUALIFIED OPPORTUNITY ZONE BUSINESS:  Each taxable year, a QOZ business must earn at least 50% of its gross income from business activities within a QOZ. The regulations provide three safe harbors that a business may use to meet this test. These safe harbors take into account any of the following:

  • Whether at least half of the aggregate hours of services received by the business were performed in a QOZ;
  • Whether at least half of the aggregate amounts that the business paid for services were for services performed in a QOZ; or
  • Whether necessary tangible property and necessary business functions to earn the income were located in a QOZ.

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(QOZP) QUALIFIED OPPORTUNITY ZONE PROPERTY:  QOZ property is a QOF’s qualifying ownership interest in a corporation or partnership that operates a QOZ business in a QOZ or certain tangible property of the QOF that is used in a business in the QOZ. To be a qualifying ownership interest in a corporation or partnership, (1) the interest must be acquired after Dec. 31, 2017, solely in exchange for cash; (2) the corporation or partnership must be a QOZ business; and (3) for 90% of the holding period of that interest, the corporation or partnership was a QOZ business.

See Also:  (Tab Q) – (QOF) Qualified Opportunity Fund, (QOZ) – Qualified Opportunity Zone – (Tab Acronyms) – (QOF) – Qualified Opportunity Fund – (QOZ) – Qualified Opportunity Zone

§642(c)(5) Trust:  This is a split-interest trust described in section 642(c)(5), which is created and administered by a charitable organization described in section 170(b)(1)(A) (other than in clauses (vii) or (viii)). Donors to the fund receive a lifetime income interest, based upon the rate of return earned by the trust (or such other rate as may be prescribed for a trust in existence for less than 3 years). Upon the death of the donor and the termination of his or her income interest, the charitable organization becomes entitled to the portion of the trust corpus attributable to the donor’s contribution, free of trust.

See Also:  (Tab P) – Pooled Income Fund

§664 Trust:  The terms “section 664 trust” and “CRT” are general references to charitable remainder trusts. These terms include CRATs and CRUTs.

See Also:  (Tab C) – (CRAT) Charitable Remainder Annuity Trust, (CRUT) Charitable Remainder Unitrust

§7520: Section 7520 of the Internal Revenue Code requires the use of a set of actuarial tables for valuing annuities, life estates, remainders, and reversions, for all purposes under Title 26 except for certain purposes stated in the statute or provided by regulation. These actuarial tables do not apply to valuations under Chapter 1, Subchapter D, (relating to qualified retirement arrangements), nor to section 72, (relating to computations for exclusion ratios for annuities), and for certain other limited purposes as provided by regulations at 1.7520-3(a), 20.7520-3(a), and 25.7520-3(a). (View Source)

See Also: (Tab A) – Annunity, Acturarial Table, (Tab L) – Life Estate, (Tab R)  – Remainders, Reversions

ACTUARIAL TABLE –  Section 7520 of the Internal Revenue Code requires the use of a set of actuarial tables for valuing annuities, life estates, remainders, and reversions, for all purposes under Title 26 except for certain purposes stated in the statute or provided by regulation. These actuarial tables do not apply to valuations under Chapter 1, Subchapter D, (relating to qualified retirement arrangements), nor to section 72, (relating to computations for exclusion ratios for annuities), and for certain other limited purposes as provided by regulations at 1.7520-3(a), 20.7520-3(a), and 25.7520-3(a). (View Source)

See Also: (Tab A) – Acturary, Actuarial Table, (Tab T) – Tables

MORTALITY TABLES –  

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