Bulletin No. 2002–17

Bulletin No. 2002–17

April 29, 2002

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

SPECIAL ANNOUNCEMENT

Announcement 2002–48, page 809.

New IRS brochure entitled Home-Based Business Tax

Avoidance Schemes. . .At A Glance. The schemes

described in the document claim to offer tax “relief,” but actually result in illegal tax avoidance. The promoters of these

schemes claim that by setting up a bogus home-based business, individual taxpayers can deduct most, or all, of their personal expenses as business expenses.

INCOME TAX

Rev. Rul. 2002–20, page 794.

Charitable remainder trusts; qualified charitable

remainder unitrusts; recipient trusts. This ruling provides

that, in three situations, a charitable remainder unitrust may

pay the unitrust amounts to a second trust for the life of an

individual, who is financially disabled as defined in section

6511(h)(2)(A) of the Code. In each situation, the use of the unitrust amounts by the second trust is consistent with the manner in which the individual’s own assets would be used, and the

individual is, therefore, considered to have received the unitrust

amounts directly from the charitable remainder unitrust for purposes of section 664(d)(2)(A). Rev. Rul. 76–270 amplified and

superseded.

Notice 2002–29, page 797.

Section 469 and gain recognition election. This document

explains the effect under section 469 of the Code of a deemed

sale of property on January 1, 2001, pursuant to an election

under section 311(e) of the Taxpayer Relief Act of 1997.

Announcement 2002–44, page 809.

Electronic submission of Form 8850. This document

announces that Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-toWork Credits, may be submitted electronically to State

Employment Security Agencies (SESAs) and sets forth the

requirements that any electronic system must meet.

ADMINISTRATIVE

Notice 2002–20, page 796.

Industry Issue Resolution Program. This document

announces that the Industry Issue Resolution (I I R) Program, a

pilot program aimed at resolving contentious tax issues involving business, is being made permanent and expanded to be

available to all business taxpayers. Taxpayers as well as industry associations and other groups representing taxpayers are

invited to suggest issues and possible options for resolution.

Rev. Rul. 2002–21, page 793.

Low-income housing credit; tax-exempt bond financing.

Amounts received from investing proceeds of tax-exempt

bonds are counted toward satisfying the 50-percent aggregate

basis test under section 42(h)(4)(B) of the Code.

(Continued on the next page)

Announcements of Declaratory Judgment Proceedings Under Section 7428 begin on page 810.

Finding Lists begin on page ii.

ADMINISTRATIVE

Notice 2002–30, page 797.

Credit for sales of fuel produced from a nonconventional

source, inflation adjustment factor, and reference price.

This notice publishes the nonconventional source fuel credit,

inflation adjustment factor, and reference price under section

29 of the Code for calendar year 2001. This data is used to

determine the credit allowable on sales of fuel produced from

a nonconventional source.

Rev. Proc. 2002–24, page 798.

Qualified mortgage bonds; mortgage credit certificates;

national median gross income. Guidance is provided concerning the use of the national and area median gross income

figures by issuers of qualified mortgage bonds and mortgage

credit certificates in determining the housing cost/income ratio

described in section 143(f) of the Code. Rev. Proc. 2001–35

obsoleted, except as provided in section 5.02 of this procedure.

April 29, 2002

Rev. Proc. 2002–25, page 800.

This procedure sets forth the maximum face amount of qualified zone academy bonds that may be issued by each state,

the District of Columbia, and the possessions of the United

States during 2002.

Rev. Proc. 2002–27, page 802.

Depreciation of tires. This document provides a safe harbor

method of accounting (the original tire capitalization method)

for the cost of original and replacement tires for certain

vehicles owned by taxpayers, procedures for a qualifying taxpayer to obtain automatic consent from the Commissioner to

change to the original tire capitalization method, and an

optional procedure for certain qualifying taxpayers to settle

open taxable years using the original tire capitalization method.

Rev. Proc. 2002–9 modified and amplified.

2002–17 I.R.B.

The IRS Mission

Provide America’s taxpayers top quality service by helping

them understand and meet their tax responsibilities and by

applying the tax law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument of

the Commissioner of Internal Revenue for announcing official

rulings and procedures of the Internal Revenue Service and for

publishing Treasury Decisions, Executive Orders, Tax Conventions, legislation, court decisions, and other items of general

interest. It is published weekly and may be obtained from the

Superintendent of Documents on a subscription basis. Bulletin

contents are consolidated semiannually into Cumulative Bulletins, which are sold on a single-copy basis.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application of

the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the Bulletin. All published rulings apply retroactively unless otherwise

indicated. Procedures relating solely to matters of internal

management are not published; however, statements of internal practices and procedures that affect the rights and duties

of taxpayers are published.

Revenue rulings represent the conclusions of the Service on

the application of the law to the pivotal facts stated in the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices, identifying

details and information of a confidential nature are deleted to

prevent unwarranted invasions of privacy and to comply with

statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions of

the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A, Tax

Conventions and Other Related Items, and Subpart B, Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and

Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings are issued by

the Department of the Treasury’s Office of the Assistant Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The first Bulletin for each month includes a cumulative index for

the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the first Bulletin of the succeeding semiannual

period, respectively.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

2002–17 I.R.B.

April 29, 2002

This page is reserved for missing children Tristen Thorne and Anna Torres

April 29, 2002

2002–17 I.R.B.

Part I. Rulings and Decisions Under the Internal Revenue Code of 1986

Section 25.—Interest on

Certain Home Mortgages

26 CFR 1.25–4T: Qualified mortgage credit certificate program (temporary).

Guidance is provided for the use of the national

and area median gross income figures by issuers of

qualified mortgage bonds and mortgage credit certificates in determining the housing cost/income

ratio described in section 143(f)(5) of the Code. See

Rev. Proc. 2002–24, page 798.

Section 42.—Low-Income

Housing Credit

26 CFR 1.42–1T: Limitation on low-income housing

credit allowed with respect to qualified low-income

buildings receiving housing credit allocations from

a state or local housing credit agency (temporary).

(Also §§ 103, 146.)

Low-income housing credit; taxexempt bond financing. Amounts

received from investing proceeds of taxexempt bonds are counted toward satisfying the 50-percent aggregate basis test

under section 42(h)(4)(B) of the Code.

Rev. Rul. 2002–21

ISSUE

Are amounts received from investing

proceeds of tax-exempt bonds counted

toward satisfying the 50-percent aggregate basis test under § 42(h)(4)(B) of the

Internal Revenue Code?

FACTS

Partnership was formed to develop and

operate in State X a low-income housing

building in accordance with § 42. In

December 1999, the State X bond-issuing

authority (Issuer) issued at par $5.7 million of tax-exempt housing bonds, and

loaned the $5.7 million to Partnership to

finance a portion of the construction of

the low-income housing project. Issuer

received an allocation of § 146 volume

cap in the amount of $5.7 million for the

bonds. Principal payments on this financing are to be applied within a reasonable

period to redeem the bonds.

Partnership’s aggregate basis for the

building and the land on which the build-

2002–17 I.R.B.

ing is located is $11.8 million. Partnership earned $300,000 in investment earnings from investing the original $5.7

million of proceeds of the bonds. The

sum of these amounts, $6 million, was

expended on construction of the building.

LAW AND ANALYSIS

Section 42(a) provides for a tax credit

for investment in qualified low-income

residential rental buildings placed in service after December 31, 1986.

Section 42(h)(1)(A) provides that the

amount of credit determined under § 42

for any taxable year with respect to any

building shall not exceed the housing

credit dollar amount allocated to the

building under § 42(h).

Section 42(h)(4)(A) provides that

§ 42(h)(1) does not apply to any portion

of the credit otherwise allowable under

§ 42(a) which is attributable to eligible

basis financed by any obligation the interest on which is exempt from tax under

§ 103 if—

(i) the obligation is taken into

account under § 146, and

(ii) principal payments on the financing are applied within a reasonable period

to redeem obligations the proceeds of

which were used to provide the financing.

Section 42(h)(4)(B) provides that, if

50 percent or more of the aggregate basis

of any building and the land on which the

building is located is financed with taxexempt

obligations

specified

in

§ 42(h)(4)(A), § 42(h)(1) does not apply

to any portion of the low-income housing

credit allowable under § 42(a) with

respect to the building.

Section 1.42–1T(f)(1) of the temporary

Income Tax Regulations provides that no

housing credit allocation is required in

order to claim a credit under § 42 with

respect to the entire qualified basis (as

defined in § 42(c)) of a qualified lowincome building if 70 percent or more of

the aggregate basis of the building and

the land on which the building is located

is financed with the proceeds of taxexempt bonds which are taken into

account for purposes of the volume cap

under § 146. The reference to 70 percent

in § 1.42–1T(f)(1) has been superseded

by an amendment to § 42(h)(4)(B), which

793

changed 70 percent to 50 percent. Revenue Reconciliation Act of 1989, P.L.

101–239, § 7108(j).

Except as otherwise provided, § 103

provides that gross income does not

include interest on any state or local

bond. An exception under § 103(b)(1) is

that interest on a private activity bond is

included in gross income unless it is a

qualified bond within the meaning of

§ 141. Generally, § 141(e)(2) requires that

a qualified bond meet the volume cap

requirements of § 146.

Section 146(a) provides that a private

activity bond issued as part of an issue

meets the volume cap requirements if the

aggregate face amount of the private

activity bonds issued pursuant to the

issue, when added to the aggregate face

amount of tax-exempt private activity

bonds previously issued by the issuing

authority during the calendar year, does

not exceed the authority’s volume cap for

the calendar year.

Proceeds is not specifically defined for

purposes of § 1.42–1T(f)(1). However,

for other purposes of the Code, taxexempt bond proceeds are generally

defined to include amounts received from

investing proceeds. See § 1.148–1(b) of

the Income Tax Regulations. Accordingly,

given the similarity of purposes for determining bond proceeds under § 1.42–

1T(f)(1) and the tax-exempt bond provisions of the Code, it is appropriate to treat

proceeds for purposes of § 1.42–1T(f)(1)

to include amounts received from investing proceeds.

In the present situation, Partnership

properly includes the $300,000 amount

from investing proceeds to determine if it

met the 50-percent aggregate basis test in

§ 42(h)(4)(B). Because $6 million

($5,700,000 plus $300,000) is greater

than 50 percent of the aggregate basis of

the building and the land ($11,800,000),

Partnership satisfies the 50-percent test in

§ 42(h)(4)(B).

HOLDING

Amounts received from investing proceeds of tax-exempt bonds are counted

toward satisfying the 50-percent aggregate basis test under § 42(h)(4)(B).

April 29, 2002

DRAFTING INFORMATION

Section 167.—Depreciation

The principal author of this revenue

ruling is Jack Malgeri of the Office of the

Associate Chief Counsel (Passthroughs

and Special Industries). For further information regarding this revenue ruling, contact Mr. Malgeri at (202) 622–3040 (not a

toll-free number).

If a taxpayer has a depreciable interest in a

qualifying vehicle and chooses to account for the

cost of original and replacement tires under the

original tire capitalization method, are the qualifying vehicle’s tires treated as part of the vehicle for

depreciation purposes? See Rev. Proc. 2002–27,

page 802.

as defined in section 6511(h)(2)(A) of the

Code. In each situation, the use of the

unitrust amounts by the second trust is

consistent with the manner in which the

individual’s own assets would be used,

and the individual is, therefore, considered to have received the unitrust

amounts directly from the charitable

remainder unitrust for purposes of section

664(d)(2)(A).

Section 168.—Accelerated

Cost Recovery System

Rev. Rul. 2002–20

Section 103.—Interest on

State and Local Bonds

26 CFR 1.103–1: Interest upon obligations of a

state, territory, etc.

Are amounts received from investing proceeds

of tax-exempt bonds counted toward satisfying the

50-percent aggregate basis test under § 42(h)(4)(B)

of the Internal Revenue Code? See Rev. Rul. 2002–

21, page 793.

Guidance is provided for the use of the national

and area median gross income figures by issuers of

qualified mortgage bonds and mortgage credit certificates in determining the housing cost/income

ratio described in section 143(f)(5) of the Code. See

Rev. Proc. 2002–24, page 798.

Section 143.—Mortgage

Revenue Bonds: Qualified

Mortgage Bond and Qualified

Veterans’ Mortgage Bond

26 CFR 6a.103A–2: Qualified mortgage bond.

Guidance is provided for the use of the national

and area median gross income figures by issuers of

qualified mortgage bonds and mortgage credit certificates in determining the housing cost/income

ratio described in section 143(f)(5) of the Code. See

Rev. Proc. 2002–24, page 798.

Section 146.—Volume Cap

Are amounts received from investing proceeds

of tax-exempt bonds counted toward satisfying the

50-percent aggregate basis test under § 42(h)(4)(B)

of the Internal Revenue Code? See Rev. Rul. 2002–

21, page 793.

Under the original tire capitalization method,

what is the applicable depreciation method, recovery period, and convention for the cost of a qualifying vehicle’s original tires for purposes of § 168 of

the Internal Revenue Code? See Rev. Proc. 2002–

27, page 802.

Section 446.—General Rule

for Methods of Accounting

May a trust qualify as a charitable

remainder unitrust under § 664 of the

Internal Revenue Code, if the unitrust

amounts are paid to a separate trust for

the life of an individual who is “financially

disabled,”

as

defined

in

§ 6511(h)(2)(A)?

FACTS

26 CFR 1.446.1: General rule for methods of

accounting.

If a taxpayer changes its treatment of the cost of

a qualifying vehicle’s original and replacement tires

to the original tire capitalization method, is this

change a change in method of accounting under

§ 446(e) of the Internal Revenue Code? See Rev.

Proc. 2002–27, page 802.

Section 481.—Adjustments

Required by Changes in

Method of Accounting

26 CFR 1.481–1: Adjustments in general.

If a taxpayer changes its treatment of the cost of

a qualifying vehicle’s original and replacement tires

to the original tire capitalization method, is an

adjustment under § 481 of the Internal Revenue

Code taken into account in computing taxable

income? See Rev. Proc. 2002–27, page 802.

Section 664.—Charitable

Remainder Trusts

26 CFR 1.664–3: Charitable remainder unitrust.

Charitable remainder trusts; qualified charitable remainder unitrusts;

recipient trusts. This ruling provides

that, in three situations, a charitable

remainder unitrust may pay the unitrust

amounts to a second trust for the life of

an individual, who is financially disabled

April 29, 2002

ISSUE

794

An individual concurrently creates

Trust A, a trust that otherwise qualifies as

a charitable remainder unitrust, and a

separate trust, Trust B. Under the governing instrument of Trust A, annual unitrust

amounts will be paid to Trust B for the

life of C. C is an individual who is financially disabled, that is, C is unable to

manage C’s own financial affairs by reason of a medically determinable physical

or mental impairment that can be

expected to result in death or that has

lasted or can be expected to last for a

continuous period of not less than 12

months.

Situation 1. Under the governing

instrument of Trust B, a designated portion of the amount it receives from Trust

A will be paid to C each month. If, at any

time in the sole judgment of the trustee,

the monthly payment to C is insufficient

to provide adequately for the care, support, and maintenance of C, or is insufficient for the needs of C for any reason,

additional amounts will be paid as needed

to or on behalf of C from Trust B. Upon

C’s death, the balance remaining in Trust

B will be distributed to C’s estate.

Situation 2. Under the governing

instrument of Trust B, the trustee may

make distributions of income and principal, as determined in the trustee’s sole

and absolute discretion, for the financial

aid and best interests of C in a manner

2002–17 I.R.B.

that supplements but does not supplant

any governmental benefits otherwise

available to C. Upon C’s death, the balance remaining in Trust B will be distributed to C’s estate.

Situation 3. Under the governing

instrument of Trust B, the trustee may

make distributions of income and principal, as determined in the trustee’s sole

and absolute discretion, for the financial

aid and best interests of C in a manner

that supplements but does not supplant

any governmental benefits otherwise

available to C. Upon C’s death, the governing instrument requires the trustee to

reimburse the state for the total costs of

medical assistance provided to C under

the state’s Medicaid plan. C is given a

testamentary general power of appointment over the balance remaining in Trust

B. If C fails to exercise the power, the

balance will be distributed, in equal

shares, to C’s sister and to X, a charitable

organization.

LAW AND ANALYSIS

A charitable remainder unitrust is a

trust from which a unitrust amount is payable at least annually during its term with

an irrevocable remainder interest held for

the benefit of charity. Under § 664

(d)(2)(A), the unitrust amount is a fixed

percentage (not less than 5 percent and

not more than 50 percent) of the net fair

market value of the trust assets, valued

annually. The unitrust amount is to be

paid to one or more persons (at least one

of which is not an organization described

in § 170(c) and, in the case of individuals,

only to an individual who is living at the

time of the creation of the trust) for a

2002–17 I.R.B.

term of years (not in excess of 20 years)

or for the life or lives of the individual or

individuals.

Section 1.664–3(a)(5)(i) of the Income

Tax Regulations provides that the period

for which the unitrust amount is payable

begins with the first year of the charitable

remainder trust and continues either for

the life or lives of a named individual or

individuals or for a term of years not to

exceed 20 years. Only an individual or an

organization described in § 170(c) may

receive an amount for the life of an individual.

In general, a charitable remainder unitrust may pay unitrust amounts to a second trust only for a term of 20 years or

less. In Situations 1, 2, and 3, the unitrust

amounts are payable to Trust B for the

life of C, not for a term of years. However, in each of these situations, the sole

function of Trust B is to receive and

administer the unitrust amounts for the

benefit of C, who is unable to manage C’s

own financial affairs by reason of a medically determinable mental or physical

impairment. Upon C’s death, the assets

remaining in Trust B will be distributed

either to C’s estate or, after reimbursing

the state for any Medicaid benefits provided to C, will be subject to C’s general

power of appointment. In these situations,

the use of the assets in Trust B during C’s

life and at C’s death is consistent with the

manner in which C’s own assets would be

used. C, therefore, is considered to have

received the unitrust amounts directly

from Trust A for purposes of § 664

(d)(2)(A). Accordingly, the term of Trust

A may be for the life of C and is not limited to a term of years.

795

The same result would apply if Trust A

were a charitable remainder annuity trust.

HOLDING

A trust may qualify as a charitable

remainder unitrust under § 664 if the unitrust amounts will be paid for the life of a

financially disabled individual to a separate trust that will administer these payments on behalf of that individual and,

upon the individual’s death, will distribute the remaining assets either to the individual’s estate or, after reimbursing the

state for any Medicaid benefits provided

to the individual, subject to the individual’s general power of appointment.

EFFECT ON OTHER REVENUE

RULINGS

Rev. Rul. 76–270 (1976–2 C.B. 194)

which addresses facts covered by Situation 1, is amplified and superseded.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Jan Bennett Geier of the Office

of Associate Chief Counsel (Passthroughs

and Special Industries). For further information regarding this revenue ruling, contact Ms. Geier at (202) 622–7830 (not a

toll-free call).

Section 1397E.—Credit to

Holders of Qualified Zone

Academy Bonds

What is the allocation for each State, the District

of Columbia, and each possession of the United

States of the national limitation amount of Qualified

Zone Academy Bonds for calendar year 2002? See

Rev. Proc. 2002–25, page 800.

April 29, 2002

Part III. Administrative, Procedural, and Miscellaneous

Industry Issue Resolution

Program

Notice 2002–20

1. INTRODUCTION

This Notice invites submission of

issues by taxpayers, representatives and

associations for resolution under the

Internal Revenue Service’s Industry Issue

Resolution (IIR) Program. Notice

2000–65 (2000–2 C.B. 599), announced

the Industry Issue Resolution Pilot Program. The objective of the pilot program

was to provide guidance to resolve frequently disputed tax issues common to a

significant number of large or mid-size

business taxpayers. This effort was part of

the IRS’s strategy to resolve issues in a

manner other than the traditional postfiling examination process. Seven issues

of the twenty-four submitted were

selected for the pilot program. Thus far,

five of the projects have resulted in published guidance.

After evaluating the pilot program and

concluding that it was highly successful,

the Service has determined that the IIR

program should be made permanent. The

objective is to provide guidance to

resolve frequently disputed or burdensome issues and the program is expanded

to address issues common to any size

business taxpayers. The Large and MidSize Business Division (LMSB) and

Small Business/Self-Employed Division

(SB/SE) will jointly undertake the operational responsibility for the projects in the

program. Resolution of contentious issues

other than by the examination process is a

strategic goal of both LMSB and SB/SE.

Taxpayers, as well as industry associations and other groups representing taxpayers, are invited to suggest issues and

possible options for resolution. Parties

submitting suggestions may be asked to

meet with government representatives

and to provide additional information.

After analysis and review, the Service, the

Office of Chief Counsel, and Treasury

intend to select issues to address in the

IIR program.

April 29, 2002

The form of resulting guidance may

vary depending on the issue. However,

the most likely form of guidance will be

a Revenue Ruling or a Revenue Procedure that permits taxpayers to adopt a recommended treatment of the issue on

future returns. In many cases, this may

require filing a request for a change in

method of accounting. For examples of

the types of guidance that could be issued

under this permanent program, see those

published as a result of the IIR pilot program on the Digital Daily at www.irs.gov.

Suggestions for issues for the IIR program should be forwarded as provided in

section 3 of this Notice by April 30, 2002.

LMSB, SB/SE, the Office of Chief Counsel and Treasury will evaluate the suggestions with a view to selecting issues

drawn from diverse industries. In reviewing potential issues for the program, the

selection criteria will include the suitability of the issue for the program, the likelihood that timely guidance can be provided, and the availability of appropriate

staffing and other resources. Projects

selected for the program are expected to

be included on the Treasury and IRS

Guidance Priorities List for the business

plan year ending in 2003. The principal

focus of the program is to resolve issues

arising in future years. However, depending on the circumstances, resolution also

may be provided for certain issues for

prior years.

Parties whose topics are accepted will

be notified and may be asked to provide

additional information and legal analysis

of the issue. The issues selected for the

program will be announced publicly.

2. ISSUES APPROPRIATE FOR THE

PROGRAM

The objective of the IIR program is to

provide guidance to resolve frequently

disputed or burdensome tax issues that

are common to a significant number of

business taxpayers. Therefore, issues

most appropriate to the program generally

will have two or more of the following

characteristics:

• There is uncertainty about the appropriate tax treatment of a given factual situation.

796

• The uncertainty results in frequent,

often repetitive examinations of the

same issue.

• The uncertainty results in significant

taxpayer burden.

• The issue is material and impacts a significant number of taxpayers, either

within an industry or across industry

lines.

• Factual determination is a major component of the issue.

The following issues are not suitable:

• Issues unique to one or a small number

of taxpayers.

• Issues under the jurisdiction of the

Commissioner, Tax Exempt and Government Entities Division (e.g.,

employee plans).

• Issues regarding transactions that lack a

bona fide business purpose or are done

with a significant purpose of reducing

or avoiding federal taxes.

• Issues involving transfer pricing or

international tax treaties.

3. REQUESTING CONSIDERATION

UNDER THE IIR PROGRAM

No particular format is required for

submissions in response to this Notice.

However, submissions should briefly

describe the proposed issue and explain

why there is a need for guidance. Submissions may include an analysis of how the

issue may be resolved. In addition, submissions should state the number of taxpayers estimated to be affected by the

issue. All submissions will be available

for public inspection and copying in their

entirety. Therefore, comments should not

include taxpayer-specific information of a

confidential nature. Letters should include

the name and telephone number of a person to contact should further clarification

be needed. Issues previously submitted

under the pilot program, but not selected,

must be resubmitted to be considered for

this permanent program.

Submission of issues for resolution

under the IIR program should be e-mailed

to PFTG2@IRS.gov. Alternatively, submissions may be faxed or mailed to:

2002–17 I.R.B.

Internal Revenue Service

Att’n: Alex Shojay

Office of Pre-filing and Technical

Services

Large and Mid-Size Business

Division LM:PFTG

Mint Building. 3rd Floor M-3-330

1111 Constitution Avenue NW

Washington, DC 20224

Fax: 202–283–8406

4. ADDITIONAL INFORMATION

ABOUT THE PROGRAM

Project staffing. The Service and

Treasury will staff each project with a

team (the IIR team) that will analyze such

information as may be appropriate and

propose a resolution. This resolution will

require the approval of those officials

normally responsible for approving the

type of guidance to be issued. IIR team

members will include appropriate personnel from LMSB and SB/SE, the Office of

Chief Counsel, Appeals and Treasury.

Other Service personnel, as needed, also

may be team members. In some circumstances, the Service may find it necessary

to hire outside experts.

Communication with requesting taxpayer or group and other interested

parties. As part of its efforts to formulate

a recommendation for a resolution position, the IIR team may meet with the submitting taxpayer or group, and possibly

with other interested parties. It is anticipated that the submitting party and other

interested parties will be given the opportunity to present factual data and legal

analysis. The IIR team may seek additional factual development or legal analysis from the submitting party or other

sources.

Any solicitation of input from affected

persons will be done within the requirements of the Federal Advisory Committee

Act (FACA). The Service does not intend

to form advisory committees during this

process. Input is welcome from interested

parties, but they will not be invited to

enter into negotiations or to participate in

the decision-making process with respect

to the proposed resolution of the issue.

Potential inspection of books and

records. An IIR team may consider the

inspection of an individual taxpayer’s

records desirable as part of the factual

research necessary to develop its position.

Although a team may request such

2002–17 I.R.B.

inspection, any such inspection will be

voluntary. Any inspection of a taxpayer’s

records under this program, whether at

the initiative of the taxpayer or the team,

will not preclude or impede (under

§ 7605(b) of the Internal Revenue Code

or any IRS administrative provisions) a

later examination or inspection of records

with respect to any tax year nor subject

the IRS to any procedural restrictions

(such as providing notice under

§ 7605(b)) that otherwise might apply

before beginning such examination or

inspection.

Disclosure of information provided

by interested parties. Interested parties

are encouraged to provide whatever information is necessary to permit the Service

and Treasury to reach an appropriate resolution of an issue. However, this information may be subject to disclosure under

the Freedom of Information Act (FOIA).

5. FURTHER INFORMATION

For further information regarding this

notice, contact Susan Blake, Senior Program Analyst, of the LMSB Pre-filing

and Technical Services Office at (202)

283–8414 (not a toll-free number).

Section 469 and Gain

Recognition Election Notice

Notice 2002–29

This notice explains the effect under

§ 469 of the Internal Revenue Code of a

deemed sale of property on January 1,

2001, pursuant to an election under

§ 311(e) of the Taxpayer Relief Act of

1997 (TRA 97) (1997–4 (Vol. 1) C. B. 1,

49–50).

Section 1(h), as amended in 1997, provides for a reduced capital gains rate for

qualified 5-year gain. Section

1(h)(2)(B)(ii) limits the amount of qualified 5-year gain to that determined by

taking into account only property for

which the holding period begins after

December 31, 2000. Section 311(e) of

TRA 97 provides that a noncorporate taxpayer may elect to treat a capital asset or

property used in the trade or business (as

defined in § 1231(b) of the Code) held by

the taxpayer on January 1, 2001, as having been sold on January 1, 2001, for an

797

amount equal to its fair market value and

as having been reacquired for an amount

equal to its fair market value on the same

date (mark-to-market election).

Section 469(g)(1)(A) provides that, if

a taxpayer disposes of the taxpayer’s

entire interest in any passive activity (or

former passive activity) in a fully taxable

transaction that does not involve a disposition to a related party, then the excess of

the loss from the activity for the taxable

year (including any suspended passive

activity loss) over any net income or gain

for the taxable year from all other passive

activities shall be treated as a loss which

is not from a passive activity. As a result,

if § 469(g)(1)(A) applies, the excess loss

from the activity over any net income

from all passive activities is no longer

subject to the limitations of § 469.

A question has arisen whether electing

a deemed sale of property under § 311(e)

of TRA 97 is treated as a disposition of

that property under § 469(g)(1)(A).

In a technical correction to § 311(e),

§ 414(a)(2) of the Job Creation and

Worker Assistance Act of 2002, Pub. L.

No. 107–147, 116 Stat. 21, clarifies that a

mark-to-market election is not a disposition for purposes of § 469(g)(1)(A). Thus,

the gain included in gross income by reason of a mark-to-market election may be

passive activity gross income that can be

offset by passive activity deductions, but

the election does not otherwise affect the

determination of the passive activity loss

that is disallowed under § 469.

The principal author of this notice is

Tara P. Volungis of the Office of Associate Chief Counsel (Passthroughs and Special Industries). For further information

regarding this notice, contact Ms. Volungis at (202) 622–3080 (not a toll-free

call).

Nonconventional Source Fuel

Credit, Section 29 Inflation

Adjustment Factor, and

Section 29 Reference Price

Notice 2002–30

This notice publishes the nonconventional source fuel credit, inflation adjustment factor, and reference price under

§ 29 of the Internal Revenue Code for

calendar year 2001. These are used to

April 29, 2002

determine the credit allowable on fuel

produced from a nonconventional source

under § 29. The calendar year 2001

inflation-adjusted credit applies to the

sales of barrel-of-oil equivalent of qualified fuels sold by a taxpayer to an unrelated person during the 2001 calendar

year, the domestic production of which is

attributable to the taxpayer.

BACKGROUND

Section 29(a) provides for a credit for

producing fuel from a nonconventional

source, measured in barrel-of-oil equivalent of qualified fuels, the production of

which is attributable to the taxpayer and

sold by the taxpayer to an unrelated person during the tax year. The credit is

equal to the product of $3.00 and the

appropriate inflation adjustment factor.

Section 29(b)(1) and (2) provides for a

phaseout of the credit. The credit allowable under § 29(a) must be reduced by an

amount which bears the same ratio to the

amount of the credit (determined without

regard to § 29(b)(1)) as the amount by

which the reference price for the calendar

year in which the sale occurs exceeds

$23.50 bears to $6.00. The $3.00 in

§ 29(a) and the $23.50 and $6.00 must

each be adjusted by multiplying these

amounts by the 2001 inflation adjustment

factor. In the case of gas from a tight formation, the $3.00 amount in § 29(a) must

not be adjusted.

Section 29(c)(1) defines the term

“qualified fuels” to include oil produced

from shale and tar sands; gas produced

from geopressurized brine, Devonian

shale, coal seams, or a tight formation, or

biomass; and liquid, gaseous, or solid

synthetic fuels produced from coal

(including lignite), including such fuels

when used as feedstocks.

Section 29(d)(1) provides that the

credit is to be applied only for sale of

qualified fuels the production of which is

within the United States (within the

meaning of § 638(1)) or a possession of

the United States (within the meaning of

§ 638(2)).

Section 29(d)(2)(A) requires that the

Secretary, not later than April 1 of each

calendar year, determine and publish in

the Federal Register the inflation adjustment factor and the reference price for the

preceding calendar year.

April 29, 2002

Section 29(d)(2)(B) defines “inflation

adjustment factor” for a calendar year as

the fraction the numerator of which is the

GNP implicit price deflator for the calendar year and the denominator of which is

the GNP implicit price deflator for calendar year 1979. The term “GNP implicit

price deflator” means the first revision of

the implicit price deflator for the gross

national product as computed and published by the Department of Commerce.

Section 29(d)(2)(C) defines “reference

price” to mean with respect to a calendar

year the Secretary’s estimate of the

annual average wellhead price per barrel

for all domestic crude oil the price of

which is not subject to regulation by the

United States.

Section 29(d)(3) provides that in the

case of a property or facility in which

more than one person has an interest,

except to the extent provided in regulations prescribed by the Secretary, production from the property or facility (as the

case may be) must be allocated among

the persons in proportion to their respective interests in the gross sales from the

property or facility.

Section 29(d)(5) and (6) provides that

the term “barrel-of-oil equivalent” with

respect to any fuel generally means that

amount of the fuel which has a Btu content of 5.8 million.

INFLATION ADJUSTMENT FACTOR

AND REFERENCE PRICE

The inflation adjustment factor for calendar year 2001 is 2.0917. The reference

price for calendar year 2001 is $21.86.

These amounts will be published in the

Federal Register on April 5, 2002.

PHASEOUT CALCULATION

Because the calendar year 2001 reference price does not exceed $23.50 multiplied by the inflation adjustment factor,

the phaseout of the credit provided for in

§ 29(b)(1) does not occur for any qualified fuel sold in calendar year 2001.

CREDIT AMOUNT

The nonconventional source fuel credit

under § 29(a) is $6.28 per barrel-of-oil

equivalent of qualified fuels ($3.00 x

2.0917). This amount will be published in

the Federal Register on April 5, 2002.

798

DRAFTING INFORMATION

CONTACT

The principal author of this notice is

Jaime Park of the Office of Associate

Chief Counsel (Passthroughs and Special

Industries). For further information

regarding this notice, contact Ms. Park at

(202) 622–3120 (not a toll-free call).

26 CFR 601.601: Rules and regulations.

(Also Part I, §§ 25, 103, 143; 1.25–4T, 1.103–1,

6a.103A–2.)

Rev. Proc. 2002–24

SECTION 1. PURPOSE

This revenue procedure provides guidance concerning the United States and

area median gross income figures that are

to be used by issuers of qualified mortgage bonds, as defined in § 143(a) of the

Internal Revenue Code, and issuers of

mortgage credit certificates, as defined in

§ 25(c), in computing the housing cost/

income ratio described in § 143(f)(5).

SECTION 2. BACKGROUND

.01 Section 103(a) provides that,

except as provided in § 103(b), gross

income does not include interest on any

state or local bond. Section 103(b)(1) provides that § 103(a) shall not apply to any

private activity bond that is not a “qualified bond” within the meaning of § 141.

Section 141(e) provides that the term

“qualified bond” includes any private

activity bond that (1) is a qualified mortgage bond, (2) meets the volume cap

requirements under § 146, and (3) meets

the applicable requirements under § 147.

.02 Section 143(a)(1) provides that the

term “qualified mortgage bond” means a

bond that is issued as part of a “qualified

mortgage issue”. Section 143(a)(2)(A)

provides that the term “qualified mortgage issue” means an issue of one or

more bonds by a state or political subdivision thereof, but only if (i) all proceeds

of the issue (exclusive of issuance costs

and a reasonably required reserve) are to

be used to finance owner-occupied residences; (ii) the issue meets the requirements of subsections (c), (d), (e), (f), (g),

(h), (i), and (m)(7) of § 143; (iii) the issue

does not meet the private business tests of

2002–17 I.R.B.

paragraphs (1) and (2) of § 141(b); and

(iv) with respect to amounts received

more than 10 years after the date of issuance, repayments of $250,000 or more of

principal on financing provided by the

issue are used not later than the close of

the first semi-annual period beginning

after the date the prepayment (or complete repayment) is received to redeem

bonds that are part of the issue.

.03 Section 143(f) imposes eligibility

requirements concerning the maximum

income of mortgagors for whom financing may be provided by qualified mortgage bonds. Section 25(c)(2)(A)(iii)(IV)

provides that recipients of mortgage

credit certificates must meet the income

requirements of § 143(f). Generally,

under §§ 143(f)(1) and 25(c)(2)(A)

(iii)(IV), these income requirements are

met only if all owner-financing under a

qualified mortgage bond and all certified

indebtedness amounts under a mortgage

credit certificate program are provided to

mortgagors whose family income is 115

percent or less of the applicable median

family income. Under § 143(f)(6), the

income limitation is reduced to 100 percent of the applicable median family

income if there are fewer than three individuals in the family of the mortgagor.

.04 Section 143(f)(4) provides that the

term “applicable median family income”

means the greater of (A) the area median

gross income for the area in which the

residence is located or (B) the statewide

median gross income for the state in

which the residence is located.

.05 Section 143(f)(5) provides for an

upward adjustment of the income limitations in certain high housing cost areas.

Under § 143(f)(5)(C), a high housing cost

area is a statistical area for which the

housing cost/income ratio is greater than

1.2. The housing cost/income ratio is

determined under § 143(f)(5)(D) by

dividing (a) the applicable housing price

ratio by (b) the ratio that the area median

gross income bears to the median gross

income for the United States. The applicable housing price ratio is the new housing price ratio (new housing average purchase price for the area divided by the

2002–17 I.R.B.

new housing average purchase price for

the United States) or the existing housing

price ratio (existing housing average area

purchase price divided by the existing

housing average purchase price for the

United States), whichever results in the

housing cost/income ratio being closer to

1. This income adjustment applies only to

bonds issued and nonissued bond

amounts elected after December 31,

1988.

.06 The Department of Housing and

Urban Development (HUD) has computed the median gross income for the

United States, the states, and statistical

areas within the states. The income information was released to the HUD regional

offices on January 31, 2002, and may be

obtained by calling the HUD reference

service at 1–800–245–2691. The income

information is also available at HUD’s

World Wide Web site, http:huduser.org\

datasets\il.html, which provides a menu

from which you may select the year and

type of data of interest. The Internal Revenue Service annually publishes only the

median gross income for the United

States.

.07 The most recent nationwide average purchase prices and average area purchase price safe harbor limitations were

published on September 6, 1994, in Rev.

Proc. 94–55 (1994–2 C.B. 716).

SECTION 3. APPLICATION

.01 When computing the housing cost/

income ratio under § 143(f)(5), issuers of

qualified mortgage bonds and mortgage

credit certificates must use $54,400 as the

median gross income for the United

States. See section 2.06 of this revenue

procedure.

.02 When computing the housing cost/

income ratio under § 143(f)(5), issuers of

qualified mortgage bonds and mortgage

credit certificates must use the area

median gross income figures released by

HUD on January 31, 2002. See section

2.06 of this revenue procedure.

799

SECTION 4. EFFECT ON OTHER

REVENUE PROCEDURES

.01 Rev. Proc. 2001–35 (2001–22 C.B.

1293) is obsolete except as provided in

section 5.02 of this revenue procedure.

.02 This revenue procedure does not

affect the effective date provisions of

Rev. Rul. 86–124 (1986–2 C.B. 27).

Those effective date provisions will

remain operative at least until the Service

publishes a new revenue ruling that conforms the approach to effective dates set

forth in Rev. Rul. 86–124 to the general

approach taken in this revenue procedure.

SECTION 5. EFFECTIVE DATES

.01 Issuers must use the United States

and area median gross income figures

specified in section 3 of this revenue procedure for commitments to provide

financing that are made, or (if the purchase precedes the financing commitment) for residences that are purchased,

in the period that begins on January 31,

2002, and ends on the date when these

United States and area median gross

income figures are rendered obsolete by a

new revenue procedure.

.02 Notwithstanding section 5.01 of

this revenue procedure, issuers may continue to rely on the United States and area

median gross income figures specified in

Rev. Proc. 2001–35 with respect to bonds

originally sold and nonissued bond

amounts elected not later than May 29,

2002, if the commitments or purchases

described in section 5.01 are made not

later than July 28, 2002.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Zoran Stojanovic of the

Office of Assistant Chief Counsel

(Exempt Organizations/Employment Tax/

Government Entities). For further information regarding this revenue procedure,

contact Mr. Stojanovic at (202) 622–3980

(not a toll-free call).

April 29, 2002

26 CFR 601.601: Rules and regulations.

(Also Part I, § 1397E.)

Rev. Proc. 2002–25

SECTION 1. PURPOSE

Pursuant to § 1397E(e)(2) of the Internal Revenue Code, this revenue procedure allocates among the States the 2002

national limitation amount of Qualified

Zone Academy Bonds (“Bond” or

“Bonds”) that may be issued for the calendar year 2002. For this purpose “State”

includes the District of Columbia and the

possessions of the United States.

SECTION 2. BACKGROUND

.01 Section 226 of the Taxpayer Relief

Act of 1997, Pub. L. 105–34, 111 Stat.

821 (1997), added § 1397E to the Internal

Revenue Code to provide a credit to holders of Bonds under certain circumstances

April 29, 2002

so that the Bonds generally can be issued

without discount or interest. Ninety-five

percent of Bond proceeds are to be used

for qualified purposes, as defined by

§ 1397E(d)(5), with respect to a qualified

zone

academy,

as

defined

by

§ 1397E(d)(4).

.02 Section 1397E(e)(1), as amended

by § 608 of the Job Creation and Worker

Assistance Act of 2002, Pub. L. 107–147,

116 Stat. 21 (2002), provides that the

national limitation amount of Bonds that

may be issued is $400 million for each of

the years 1998, 1999, 2000, 2001, 2002,

and 2003. This amount is to be allocated

among the States by the Secretary on the

basis of their respective populations

below the poverty level (as defined by the

Office of Management and Budget) and is

to be further allocated by each State to

qualified zone academies within the State.

.03 Section 1397E(e)(4), as amended,

by § 509 of the Tax Relief Extension Act

of 1999, Pub. L. 106–170, 113 Stat. 1860

(1999) provides that any carryforward of

a limitation amount may be carried only

to the first 2 years (3 years for carryforwards from 1998 or 1999) following the

unused limitation year. For this purpose a

limitation amount shall be treated as used

on a first-in first-out basis.

.04 Rev. Proc. 98–9 (1998–1 C.B.

341), Rev. Proc. 98–57 (1998–2 C.B.

682), Rev. Proc. 2000–10 (2000–1 C.B.

287), and Rev. Proc. 2001–14 (2001–1

C.B. 343), respectively, allocated the

national limitation for 1998, 1999, 2000,

and 2001 among the States.

SECTION 3. NATIONAL QUALIFIED

ZONE ACADEMY BOND

LIMITATION FOR 2002

The 2002 national limitation amount

for Bonds is $400 million. This amount is

allocated among the States as follows:

STATE

ALABAMA

MAXIMUM FACE

AMOUNT OF BONDS

THAT MAY BE

ISSUED DURING 2002

(thousands of dollars)

$ 7,683

ALASKA

ARIZONA

ARKANSAS

CALIFORNIA

COLORADO

634

7,061

5,589

53,149

4,105

CONNECTICUT

DELAWARE

DISTRICT OF COLUMBIA

FLORIDA

GEORGIA

HAWAII

IDAHO

ILLINOIS

2,621

862

898

19,196

10,400

1,376

1,927

16,827

INDIANA

IOWA

6,032

2,465

KANSAS

KENTUCKY

LOUISIANA

MAINE

MARYLAND

3,004

5,637

8,736

1,269

4,632

MASSACHUSETTS

MICHIGAN

7,528

11,884

800

2002–17 I.R.B.

STATE

MINNESOTA

MISSISSIPPI

MISSOURI

MAXIMUM FACE

AMOUNT OF BONDS

THAT MAY BE

ISSUED DURING 2002

(thousands of dollars)

3,411

4,284

5,266

MONTANA

NEBRASKA

NEVADA

NEW HAMPSHIRE

NEW JERSEY

NEW MEXICO

NEW YORK

1,628

1,771

2,035

766

7,970

3,578

29,441

NORTH CAROLINA

NORTH DAKOTA

10,903

730

OHIO

OKLAHOMA

OREGON

PENNSYLVANIA

RHODE ISLAND

13,847

6,032

4,572

12,710

1,017

SOUTH CAROLINA

SOUTH DAKOTA

TENNESSEE

4,787

802

9,814

TEXAS

UTAH

VERMONT

VIRGINIA

36,059

2,537

850

6,391

WASHINGTON

WEST VIRGINIA

WISCONSIN

WYOMING

7,097

2,968

6,199

646

AMERICAN SAMOA

GUAM

NORTHERN MARIANAS

PUERTO RICO

VIRGIN ISLANDS

418

426

381

26,727

422

SECTION 4. EFFECTIVE DATE

DRAFTING INFORMATION

This revenue procedure is effective

April 29, 2002, and applies to Bonds

issued after March 9, 2002.

The principal author of this revenue

procedure is Zoran Stojanovic of the

Office of Assistant Chief Counsel (Ex-

2002–17 I.R.B.

801

empt Organizations/Employment Tax/

Government Entities). For further information regarding this revenue procedure,

contact Mr. Stojanovic at (202) 622–3980

(not a toll-free call).

April 29, 2002

26 CFR 601.204: Changes in accounting periods

and in methods of accounting.

(Also Part I, §§ 167,168, 446, 481; 1.446–1,

1.481–1.)

Rev. Proc. 2002–27

SECTION 1. PURPOSE

This revenue procedure provides a safe

harbor method of accounting for the cost

of original and replacement tires for certain vehicles (original tire capitalization

method) used in various business activities. This revenue procedure also explains

how a taxpayer can obtain automatic consent from the Commissioner of Internal

Revenue to change to the original tire

capitalization method, including rules

relating to the limitations, terms, and conditions the Commissioner deems necessary to make the change. In addition, this

revenue procedure provides an optional

procedure for a taxpayer to settle open

taxable years using the original tire capitalization method if the taxpayer’s treatment of original and replacement tire

expenditures is an issue under consideration in examination, before an area

appeals office, or before the United States

Tax Court (Tax Court) or is an issue

pending in examination.

SECTION 2. BACKGROUND

.01 Section 162 of the Internal Revenue Code allows a deduction for all ordinary and necessary business expenses

paid or incurred during the taxable year in

carrying on any trade or business. However, § 263(a) prohibits a deduction for

capital expenditures. Capital expenditures

include the cost of acquisition, construction, or erection of buildings, machinery

and equipment, furniture and fixtures, and

similar property having a useful life substantially beyond the taxable year. Section

1.263(a)–2(a) of the Income Tax Regulations. These capital expenditures are subject to the allowance for depreciation.

.02 Section 167(a) provides a depreciation allowance for the exhaustion,

wear and tear of property used in a trade

or business or held for the production of

income. The depreciation deduction provided by § 167(a) for tangible property

placed in service after 1986 generally is

determined under § 168. This section prescribes two methods of accounting for

April 29, 2002

determining depreciation allowances: (1)

the general depreciation system (GDS) in

§ 168(a); and (2) the alternative depreciation system (ADS) in §168(g). Under

either depreciation system, the depreciation deduction is computed by using a

prescribed depreciation method, recovery

period, and convention. For purposes of

either GDS or ADS, the applicable recovery period is determined by reference to

class life or by statute.

Rev. Proc. 87–56 (1987–2 C.B. 674)

sets forth the class lives of property that

are necessary to compute the depreciation

allowances under § 168. The revenue procedure establishes two broad categories

of depreciable assets: (1) asset classes

00.11 through 00.4 that consist of specific

assets used in all business activities; and

(2) asset classes 01.1 through 80.0 that

consist of assets used in specific business

activities.

.03 Several court decisions and revenue rulings have considered the

expense-versus-capital expenditure issue

regarding truck tires. In W.H. Tompkins

Co. v. Commissioner, 47 B.T.A. 292

(1942), the court stated that the recovery

of the cost of short-lived truck tires and

tubes should not be associated with the

depreciation of much longer-lived trucks

because the tires and tubes are easily

separable from the truck and are not a

part of the truck’s mechanism. The court

held, therefore, that the cost of truck tires

and tubes consumable within the taxable

year are currently deductible as an

expense in the year of purchase. See also

Zelco, Inc. v. Commissioner, 331 F.2d

418, 421 (1st Cir. 1964) (a lessor of trailers and tractors used by interstate motor

carriers was not required to treat those

vehicles’ tires as a part of the leased

vehicles, and the cost of trailer and tractor tires and tubes with an average useful

life of 12 months could be deducted currently); Interstate Truck Service, Inc. v.

Commissioner, T.C. Memo. 1958–219 (a

taxpayer in the motor freight transportation business can currently deduct the

cost of tires and tubes on trucks, tractors,

and trailers because on average all of the

tires and tubes were consumable in less

than one year). In Rev. Rul. 59–249

(1959–2 C.B. 55), the Service announced

that it would follow the holdings of

Tompkins and Interstate for tires purchased on new commercial trucking

802

equipment and used in motor freight

transportation. Rev. Rul. 68–134 (1968–1

C.B. 63) discusses Zelco and holds that

the principles of Rev. Rul. 59–249 are

applicable to tires in the case of a taxpayer who is a purchaser-lessor of new

commercial trucking equipment.

Accordingly, truck, trailer, and tractor

tires are not treated as part of the vehicle

for depreciation purposes. Rather, these

tires are considered to be separate assets

and, as such, their cost is currently

deductible by a taxpayer provided they

are consumable in less than one year.

However, the cost of truck, trailer, and

tractor tires with an average useful life to

a taxpayer of more than one year cannot

be currently deducted as an operating

expense. Their cost must be capitalized

and recovered through depreciation.

Because truck, trailer, and tractor tires are

not considered part of the vehicle for

depreciation purposes, they are not associated with any of the specific transportation assets included in the specific asset

classes of Rev. Proc. 87–56 (that is, asset

classes 00.241, 00.242, 00.26, and 00.27).

Therefore, in accordance with § 168 and

Rev. Proc. 87–56, all truck, trailer, and

tractor tires that must be capitalized,

whether original or replacement, are

depreciated as assets used in specific

business activities (that is, asset classes

01.1 through 80.0 of Rev. Proc. 87–56).

For example, if a taxpayer’s business

activity is described in asset class 42.0,

Motor Transport—Freight, original and

replacement truck, trailer, and tractor

tires, like the other assets in this class,

would have a 5-year recovery period for

GDS purposes and an 8-year recovery

period for ADS purposes.

.04 Under § 446(b), the Commissioner

has broad authority to determine whether

a method of accounting clearly reflects

income. If a taxpayer ’s method of

accounting does not clearly reflect

income, the computation of taxable

income must be made under a method

that, in the opinion of the Secretary, does

clearly reflect income. See Thor Power

Tool Co. v. Commissioner, 439 U.S. 522

(1979) (1979–1 C.B. 167); Commissioner

v. Hansen, 360 U.S. 446 (1959) (1959–2

C.B. 460); § 1.446–1(c)(2)(ii).

.05 Section 446(e) and § 1.446–1(e)

provide that, except as otherwise provided, a taxpayer must secure the consent

2002–17 I.R.B.

of the Commissioner before changing a

method of accounting for federal income

tax purposes. Section 1.446–1(e)(3)(ii)

authorizes the Commissioner to prescribe

administrative procedures setting forth

the limitations, terms, and conditions

deemed necessary to permit a taxpayer to

obtain consent to change a method of

accounting.

.06 Since the issuance of the court

decisions and revenue rulings previously

discussed, the quality of tires has

improved significantly. Most tires manufactured in recent years have useful lives

in excess of a year, although some taxpayers, because of the nature of their

business activities, still consume their

tires within a year. To minimize disputes

regarding the useful lives of original tires

and replacement tires for certain vehicles,

the Internal Revenue Service will permit

a taxpayer that complies with the requirements of this revenue procedure to

account for the cost of original tires and

replacement tires for certain vehicles

using the original tire capitalization

method described in section 5 of this revenue procedure.

SECTION 3. DEFINITIONS

The following definitions apply solely

for purposes of this revenue procedure:

.01 Qualifying Vehicle. A qualifying

vehicle is a vehicle for which depreciation is determined under § 168 and that is

described in asset class 00.241, 00.242,

00.26, or 00.27 of Rev. Proc. 87–56, or a

converter dolly (converter gear) for which

depreciation is determined under § 168.

.02 Original Tires. Original tires are

the first set of tires installed on a qualifying vehicle acquired by the taxpayer

whether or not the vehicle was equipped

with tires when acquired.

.03 Replacement Tires. Replacement

tires are all other tires installed on a

qualifying vehicle following acquisition

of the vehicle by taxpayer.

fying vehicles under the original tire capitalization method described in section 5

of this revenue procedure.

.02 A taxpayer that chooses not to

account for the cost of original tires and

replacement tires for all of its qualifying

vehicles under the original tire capitalization method described in section 5 of this

revenue procedure must account for the

cost of these tires in accordance with section 2.03 of this revenue procedure.

SECTION 5. ORIGINAL TIRE

CAPITALIZATION METHOD

.01 In General. Under the original tire

capitalization method, a qualifying vehicle’s tires are treated as part of the vehicle

and not as separate assets. In addition,

under the original tire capitalization

method, the rotation of a tire from one

vehicle to another (for example, from a

tractor to a trailer) is not treated as a

change in use within the meaning of

§ 168(i)(5). A taxpayer that uses the original tire capitalization method described in

this section must use this method for the

original and replacement tires of all of its

qualifying vehicles.

.02 Description of Method. Under the

original tire capitalization method, a taxpayer:

(1) must capitalize the cost of the

original tires of a qualifying vehicle and

depreciate these tires under § 168 by

using the same depreciation method,

recovery period, and convention applicable to the vehicle on which the tires are

first installed;

(2) must treat the original tires of

the qualifying vehicle as being disposed

of at the same time the vehicle on which

the tires were first installed is disposed of

by the taxpayer; and

(3) must deduct the cost of the

replacement tires of the qualifying

vehicle as an expense in the taxable year

the replacement tires are installed on the

vehicle by the taxpayer.

SECTION 4. SCOPE

.01 This revenue procedure applies to

a taxpayer that has a depreciable interest

in its qualifying vehicles and that chooses

to account for the cost of original tires

and replacement tires for all of its quali-

2002–17 I.R.B.

SECTION 6. CHANGE IN METHOD

OF ACCOUNTING

.01 In General. A change in a taxpayer’s treatment of the cost of a qualifying

vehicle’s original tires and replacement

803

tires is a change in method of accounting

to which §§ 446 and 481 apply.

.02 Issue Not Under Consideration or

Not Pending. If a taxpayer within the

scope of this revenue procedure wants to

change to the original tire capitalization

method for its first or second taxable year

ending on or after December 31, 2001,

(year of change) and the treatment of its

qualifying vehicle’s original tires or

replacement tires is not an issue under

consideration in examination, before an

area appeals office, or before a federal

court (within the meaning of section 3.09

of Rev. Proc. 2002–9, 2002–3 I.R.B. 327,

as modified by Rev. Proc. 2002–19,

2002–13 I.R.B. 696, and as modified and

clarified by Announcement 2002–17,

2002–8 I.R.B. 561), or is not an issue

pending in examination (within the meaning of section 6.03(6) of Rev. Proc. 2002–

9), on April 3, 2002, the taxpayer must

follow the automatic change in method of

accounting provisions in Rev. Proc.

2002–9 (or its successor) with the following modifications:

(1) The scope limitations in section

4.02 of Rev. Proc. 2002–9 do not apply. If

the taxpayer is under examination, before

an area appeals office, or before a federal

court regarding any income tax issue

other than the treatment of its qualifying

vehicle’s original tires or replacement

tires, the taxpayer must provide a copy of

the Form 3115, Application for Change in

Accounting Method, to the examining

officer, appeals officer, or government

counsel (whichever is applicable) at the

same time it files the copy of the Form

3115 with the national office. The Form

3115 must contain the name(s) and telephone number(s) of the examining

officer, appeals officer, or government

counsel, as appropriate.

(2) To assist the Service in processing changes in method of accounting

under this section of the revenue procedure, and to ensure proper handling, section 6.02(4)(a) of Rev. Proc. 2002–9 is

modified to require that a Form 3115 filed

under this revenue procedure include the

statement: “Automatic Change Filed

Under Rev. Proc. 2002–27.” This statement should be legibly printed or typed

on the appropriate line on any Form 3115

filed under this revenue procedure.

April 29, 2002

(3) The change to the original tire

capitalization method will be made using

a “cut-off method.” Under the cut-off

method, only a qualifying vehicle’s original and replacement tires placed in service by a taxpayer on or after the beginning of the year of change are accounted

for under the original tire capitalization

method. A qualifying vehicle’s original

and replacement tires placed in service by

the taxpayer before the year of change

continue to be accounted for under the

taxpayer’s former method of accounting.

Because no items are duplicated or omitted from income when the cut-off method

is used to effect a change in accounting

method, no § 481(a) adjustment is necessary.

.03 Issue Under Consideration or

Issue Pending. If a taxpayer within the

scope of this revenue procedure wants to

change to the original tire capitalization

method for its year of change (as defined

in section 6.02 of this revenue procedure)

and the treatment of its qualifying vehicle’s original tires or replacement tires is

an issue under consideration in examination, before an area appeals office, or

before a federal court (within the meaning

of section 3.09 of Rev. Proc. 2002–9), or

is an issue pending in examination

(within the meaning of section 6.03(6) of

Rev. Proc. 2002–9), on April 3, 2002, the

taxpayer must follow the automatic

change in method of accounting provisions in Rev. Proc. 2002–9 (or its successor) with the following modifications:

(1) The scope limitations in section

4.02 of Rev. Proc. 2002–9 do not apply.

The taxpayer must provide a copy of the

Form 3115 to the examining officer,

appeals officer, or government counsel

(whichever is applicable) at the same time

it files the copy of the Form 3115 with

the national office. The Form 3115 must

contain the name(s) and telephone number(s) of the examining officer, appeals

officer, or government counsel, as appropriate.

(2) To assist the Service in processing changes in method of accounting

under this section of the revenue procedure, and to ensure proper handling, section 6.02(4)(a) of Rev. Proc. 2002–9 is

modified to require that a Form 3115 filed

under this revenue procedure include the

statement: “Automatic Change Filed

Under Rev. Proc. 2002–27.” This state-

April 29, 2002

ment should be legibly printed or typed

on the appropriate line on any Form 3115

filed under this revenue procedure.

(3) The change to the original tire

capitalization method will be made using

a cut-off method. Under the cut-off

method, only a qualifying vehicle’s original and replacement tires placed in service by a taxpayer on or after the beginning of the year of change are accounted

for under the original tire capitalization

method. A qualifying vehicle’s original

and replacement tires placed in service by

the taxpayer before the year of change

continue to be accounted for under the

taxpayer’s former method of accounting.

But see section 6.03(4) of this revenue

procedure. Because no items are duplicated or omitted from income when the

cut-off method is used to effect a change

in accounting method, no § 481(a) adjustment is necessary.

(4) Section 7 of Rev. Proc. 2002–9

does not apply. The taxpayer does not

receive audit protection in connection

with a change to the original tire capitalization method. Accordingly, the Service

may require the taxpayer to change its

method of accounting for a qualifying

vehicle’s original and replacement tires

for any taxable year before the year of

change.

.04 Special Rule for Certain Taxpayers

with Issue Under Consideration or Issue

Pending. If a taxpayer is within the scope

of this revenue procedure and the treatment of its qualifying vehicle’s original

tires or replacement tires is an issue under

consideration (within the meaning of section 3.09 of Rev. Proc. 2002–9) in examination, before an area appeals office, or

before the Tax Court, or is an issue pending in examination (within the meaning of

section 6.03(6) of Rev. Proc. 2002–9), on

April 3, 2002, the taxpayer may change to

the original tire capitalization method for

its first or second taxable year ending on

or after December 31, 2001, under section

6.03 of this revenue procedure or, alternatively, for an earlier taxable year under

section 7 of this revenue procedure. See

also section 6.05 of this revenue procedure for deemed consent situations.

.05 Special Rule for Certain Taxpayers

Deemed to Have Obtained Consent. A

taxpayer within the scope of this revenue

procedure will be deemed to have

obtained the consent of the Commissioner

804

to change to the original tire capitalization method (as described in section 5 of

this revenue procedure) for all of its

qualifying vehicles’ original tires and

replacement tires placed in service before

the year of change (as defined in section

6.02 of this revenue procedure) if: (1) the

taxpayer treated these tires in the same

manner as permitted under the original

tire capitalization method in all taxable

years since the tires were placed in service by the taxpayer; or (2) the taxpayer

changed its treatment of these tires in a

taxable year ending on or before December 31, 2001, for which an original federal income tax return has been filed as of

April 3, 2002, to the original tire capitalization method, with or without a § 481(a)

adjustment, and treated the tires under

that method in all taxable years since the

taxpayer changed to the original tire capitalization method. Any taxpayer described

in this section 6.05 will be deemed to

have obtained the consent of the Commissioner to change to the original tire capitalization method as of the beginning of

the first taxable year in which the taxpayer used the original tire capitalization

method, and is not required to file a Form

3115 under this section 6.

However, if the taxpayer’s treatment

of its qualifying vehicle’s original tires or

replacement tires is an issue under consideration in examination, before an area

appeals office, or before a federal court

(within the meaning of section 3.09 of

Rev. Proc. 2002–9), or is an issue pending

in examination (within the meaning of

section 6.03(6) of Rev. Proc. 2002–9), on

April 3, 2002, the taxpayer does not

receive audit protection in connection

with the change to the original tire capitalization method. Accordingly, the Service may require the taxpayer to change

its method of accounting for a qualifying

vehicle’s original and replacement tires

for any taxable year before the first taxable year in which the taxpayer used the

original tire capitalization method. The

procedures in section 7 of this revenue

procedure apply for any taxable year

before the first taxable year in which the

taxpayer used the original tire capitalization method if the taxpayer’s treatment of

its qualifying vehicle’s original tires or

replacement tires is an issue under consideration in examination, before an area

2002–17 I.R.B.

appeals office, or before the Tax Court, or

is an issue pending in examination, on

April 3, 2002.

.06 Changes Not Made under this Revenue Procedure. A taxpayer that wants to

change to the original tire capitalization

method described in section 5 of this revenue procedure that does not change its

method of accounting under section 6 or

7 of this revenue procedure must follow

the change in method of accounting provisions in Rev. Proc. 2002–9 (or any successor). This change must be made with a

§ 481(a) adjustment.

SECTION 7. OPTIONAL

SETTLEMENT FOR TAXPAYERS

UNDER EXAMINATION, BEFORE AN

AREA APPEALS OFFICE, OR

BEFORE THE TAX COURT

.01 In General. If a taxpayer is within

the scope of this revenue procedure, the

treatment of the cost of its qualifying

vehicles’ original tires or replacement

tires is an issue under consideration

(within the meaning of section 3.09 of

Rev. Proc. 2002–9) in examination,

before an area appeals office, or before

the Tax Court, or is an issue pending in

examination (within the meaning of section 6.03(6) of Rev. Proc. 2002–9), on

April 3, 2002, and the taxpayer does not

change to the original tire capitalization

method under section 6.03 of this revenue

procedure, the Service offers to settle the

original and replacement tires issue by

changing the taxpayer’s method of

accounting for the cost of original and

replacement tires to the original tire capitalization method in the earliest open taxable year after which there is no closed

taxable year.

.02 Terms of Settlement.

(1) The Service will change the taxpayer’s method of accounting for the cost

of original and replacement tires to the

original tire capitalization method

described in section 5 of this revenue procedure.

(2) The change to the original tire

capitalization method will be made using

a cut-off method in the earliest open taxable year after which there is no closed

taxable year.

(3) The taxpayer must reflect the

settlement on its federal income tax

returns for any affected succeeding taxable years. For example, an amount

2002–17 I.R.B.

required to be capitalized during a taxable

year covered by the settlement should be

depreciated in that taxable year and in

affected succeeding taxable years

(whether or not covered by the settlement) in accordance with the taxpayer’s

method of accounting for depreciation.

(4) The Service will not require the

taxpayer to change its method of accounting for the cost of its qualifying vehicles’

original and replacement tires to a method

other than the original tire capitalization

method for any taxable year for which a

federal income tax return has been filed

as of the date of the closing agreement or

other appropriate settlement agreement,

provided that:

(a) the taxpayer has complied with

all the applicable provisions of the closing agreement or other appropriate settlement agreement;

(b) there has been no taxpayer

fraud, malfeasance, or misrepresentation

of a material fact;

(c) there has been no change in

the material facts on which the closing

agreement or other appropriate settlement

agreement was based; and

(d) there has been no change in

the applicable law on which the closing

agreement or other appropriate settlement

agreement was based.

(5) The taxpayer must execute a

closing agreement under § 7121 or other

appropriate settlement agreement as

described in section 7.05 of this revenue

procedure.

.03 Procedures for Requesting the

Settlement.

(1) Initiating the request.

(a) Taxable years under examination or in Appeals. A taxpayer that wants

to request a settlement under this section

for taxable years under examination or in

Appeals must submit its request in writing to the first line examination manager

or appeals officer (whichever is applicable) on or before September 3, 2002.

(b) Taxable years before the Tax

Court. A taxpayer that wants to request a

settlement under this section for taxable

years before the Tax Court must submit

its request in writing to the Chief Counsel

attorney assigned to the case on or before

the earlier of September 3, 2002, or the

date that is 30 days before the date the

case is first set for trial, which is the date

scheduled for the calendar call.

805

(2) Statement of facts, law, and

arguments. The request for settlement

must include the following information:

(a) the taxpayer’s name, address,

telephone number, and taxpayer identification number;

(b) the taxable years covered by

the proposed settlement;

(c) the taxpayer’s earliest open

taxable year after which there is no closed

taxable year;

(d) the taxpayer’s current method

of accounting for the cost of its qualifying

vehicles’ original and replacement tires;

and

(e) a statement of the material

facts, including the capitalized amount

and the deductible amount computed

under the original tire capitalization

method for each taxable year under

examination, before an area appeals

office, or before the Tax Court, and an

explanation of the computations used to

determine those amounts.

(3) Perjury statement. The request

for settlement must be accompanied by

the following declaration: “Under penalties of perjury, I declare that I have examined this request, including accompanying

documents, and, to the best of my knowledge and belief, the request contains all

the relevant facts relating to the request,

and such facts are true, correct, and complete.” This declaration must be signed

by, or on behalf of, the taxpayer by an

individual with the authority to bind the

taxpayer in these matters. The declaration

may not be signed by the taxpayer’s representative.

.04 Procedures for Processing the

Request.

(1) Receipt of request acknowledged. The first line examination manager, appeals officer, or Chief Counsel

attorney (whichever is applicable) will

acknowledge receipt of the taxpayer’s

request for settlement in writing within 15

business days of receipt.

(2) Factual development. The first

line examination manager, appeals

officer, or Chief Counsel attorney (whichever is applicable) will contact the taxpayer to discuss any questions the Service

may have, or ask for additional information believed to be necessary to execute

the settlement (for example, to verify the

correctness of the taxpayer’s information).

April 29, 2002

(3) Acceptance. The first line

examination manager, appeals officer, or

Chief Counsel attorney (whichever is

applicable) will accept the taxpayer’s

request for settlement if the request complies with the applicable terms of this revenue procedure. For taxable years before

the Tax Court, the settlement is subject to

the approval of the Court.

(4) Notification of acceptance. The

first line examination manager, appeals

officer, or Chief Counsel attorney (whichever is applicable) will notify the taxpayer in writing when the Service agrees

to the settlement requested by the taxpayer.

.05 Procedures for Implementing the

Settlement.

(1) Closing agreement or other

appropriate settlement agreement required. A taxpayer implementing a settlement is required to execute a closing

agreement under § 7121 or other appropriate settlement agreement.

(2) Contents of closing agreement

or other appropriate settlement. A closing

agreement must comply with the requirements of Rev. Proc. 68–16 (1968–1 C.B.

770) and must be substantially in the

form set forth in the APPENDIX of this

revenue procedure. Settlement agreements in cases pending before the Tax

Court must conform substantially to the

provisions set forth in the APPENDIX of

this revenue procedure and must conform

to the rules and procedures of the Tax

Court.

(3) Review and execution of closing

agreement or other appropriate settlement.

(a) Taxpayers under examination.

The first line examination manager will

prepare a closing agreement. The first

line examination manager should submit

the closing agreement to the appropriate

Territory Manager (LMSB) or Territory

Manager, Compliance (SB/SE) (whichever is applicable) and his or her assigned

counsel for review prior to submitting the

closing agreement to the taxpayer for

execution. Failure by the examination

manager to submit the closing agreement

to the Territory Manager or his or her

assigned counsel for review will not

invalidate the closing agreement. After

the closing agreement has been executed

April 29, 2002

by the taxpayer, it will be executed on

behalf of the Service by the appropriate

Director, Field Operations (LMSB) or

Area Director, Field Compliance (SB/SE)

(whichever is applicable).

(b) Taxpayers before an area

appeals office. The appeals officer or

appeals team case leader will prepare a

closing agreement. After the closing

agreement has been executed by the taxpayer, it will be executed on behalf of the

Service by an authorized official from

Appeals.

(c) Taxpayers before the Tax

Court. For docketed taxable years before

the Tax Court, the taxpayer and the Chief

Counsel attorney must prepare an appropriate settlement document, settlement

stipulation, or stipulated decision document, pursuant to the rules and procedures of the court. The settlement document, settlement stipulation, or stipulated

decision document is subject to the

approval of the court.

(4) Amended returns.

(a) In general. In cases pending

before examination or appeals, the Service will make the adjustments necessary

to reflect the settlement to the taxpayer’s

returns for the taxable years under examination or before an area appeals office. In

cases pending before the Tax Court, the

settlement agreement will include adjustments necessary to reflect the settlement

with respect to the year(s) before the

court. The taxpayer is required to file

amended returns to reflect the settlement

for any other affected taxable years for

which a federal income tax return has

been filed as of the date of the closing

agreement or other appropriate settlement

agreement. The amended returns must

include the adjustments to taxable income

necessary to reflect the new method and

any collateral adjustments to taxable

income or tax liability resulting from the

change. A taxpayer eligible to file a qualified amended return under Rev. Proc.

94–69 (1994–2 C.B. 804) may satisfy the

requirements of this section by filing a

qualified amended return in accordance

with that revenue procedure.

(b) Time and manner. The taxpayer must file any required amended

returns prior to the date it executes the

closing agreement or other appropriate

806

settlement agreement. The taxpayer must

provide a copy of the amended returns to

the first line examination manager,

appeals officer, or Chief Counsel attorney

(whichever is applicable) before the closing agreement or other appropriate settlement agreement is executed.

.06 Effect on Other Offices of the Service. If a taxpayer is before an area

appeals office or the Tax Court regarding

the treatment of the cost of its qualifying

vehicles’ original and replacement tires

and does not settle this issue under the

provisions of this section 7, an appropriate representative from an area appeals

office or Chief Counsel office may settle

a particular taxpayer’s case involving this

issue on a more favorable or less favorable basis than provided in this revenue

procedure. For example, an appeals

officer may settle a case based on the hazards of litigation.

SECTION 8. EFFECTIVE DATE

01. In general. This revenue procedure

is effective for taxable years ending on or

after December 31, 2001.

02. Form 3115 pending with the Service. If a taxpayer filed a Form 3115 with

the national office to make the change in

method of accounting authorized by this

revenue procedure, and this Form 3115 is

pending with the national office on April

3, 2002, the taxpayer may make the

change under this revenue procedure.

However, the national office will process

the Form 3115 in accordance with the

authority under which it was filed unless

the taxpayer notifies the national office

by July 2, 2002, that it intends to make

the method change under this revenue

procedure. If the taxpayer timely notifies

the national office that it wants to make

the method change under this revenue

procedure, any user fee submitted with

the Form 3115 will be returned to the taxpayer.

SECTION 9. EFFECT ON OTHER

DOCUMENTS

Rev. Proc. 2002–9 is modified and

amplified to include this accounting

method change in section 2 of the

APPENDIX.

2002–17 I.R.B.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Mark Pitzer of the Office of

Associate Chief Counsel (Passthroughs

and Special Industries). For further information regarding this revenue procedure,

contact Charlotte Chyr at (202) 622–3110

(not a toll-free call).

APPENDIX

Department of the Treasury Internal Revenue Service

Closing Agreement on Final Determination Covering Specific Matters

Under § 7121 of the Internal Revenue Code, [insert taxpayer’s name, address, telephone number, and identifying number] (“the

taxpayer”) and the Commissioner of Internal Revenue (“the Commissioner”) make the following closing agreement:

WHEREAS:

1. The accounting method issue covered by this closing agreement is the taxpayer’s method of accounting for the cost of its

qualifying vehicles’ original and replacement tires. The definitions of qualifying vehicle, original tires, and replacement tires set

forth in section 3 of Rev. Proc. 2002–27, apply for purposes of this closing agreement.

2. The taxable year(s) covered by this closing agreement are [insert applicable taxable year(s) covered by the agreement].

3. Under the taxpayer’s present method of accounting for the cost of its qualifying vehicles’ original and replacement tires, the

taxpayer [describe in detail the taxpayer’s current method of accounting being changed: for example, “deducts the cost of its qualifying vehicles’ original and replacement tires when purchased”].

4. The taxpayer and the Commissioner relied on the following facts and representations in making this closing agreement: [insert

relevant facts, including the amounts capitalized or deducted under the original tire capitalization method for each taxable year

under examination, before an area appeals office, or before the Tax Court, an explanation of the computations used to determine

those amounts, and a statement of whether the amounts capitalized or deducted for each of those taxable years is taken into account

for federal income tax purposes].

5. [If applicable, insert:] The taxpayer has filed an amended return(s) for the taxable year(s) ended [insert applicable affected

succeeding taxable year(s) for which a federal income tax return has been filed as of the date of the closing agreement] to reflect

the change in method of accounting for the cost of the qualifying vehicles’ original and replacement tires described in this closing

agreement.

6. [If applicable, insert:] A stipulated decision has been entered by the [insert name of federal court] with respect to the taxable

year(s) ended [insert date(s)] that reflects taxable income for such year(s) computed using the original tire capitalization method

described in section 5 of Rev. Proc. 2002–27 for the cost of the qualifying vehicles’ original and replacement tires.

NOW IT IS HEREBY DETERMINED AND AGREED for federal income tax purposes:

1. That the Service is changing the taxpayer’s method of accounting for the cost of its qualifying vehicles’ original and replacement tires to the original tire capitalization method of accounting described in section 5 of Rev. Proc. 2002–27, for the taxable year

ended [insert earliest open taxable year after which there is no closed taxable year].

2. That the change in method of accounting is to be made on a cut-off basis.

3. That the adjustment(s) to tax attributable to the adjustment(s) to taxable income resulting from the change in the method of

accounting for the cost of the qualifying vehicles’ original and replacement tires (including the current year adjustment(s) and any

collateral adjustments to taxable income or tax liability resulting from the change) for each taxable year covered by the closing

agreement are as follows: [insert the adjustments to each taxable year covered by the closing agreement in table form].

4. That the change in method of accounting for the cost of the qualifying vehicles’ original and replacement tires is a change in

method of accounting within the meaning of Rev. Proc. 2002–27. As such, the provisions of § 446 and the regulations thereunder

apply to the original tire capitalization method of accounting described in section 5 of Rev. Proc. 2002–27 for the cost of the qualifying vehicles’ original and replacement tires.

5. That, under section 7.02(4) of Rev. Proc. 2002–27, the Service will not require the taxpayer to change its method of accounting for the cost of its qualifying vehicles’ original and replacement tires to a method other than the original tire capitalization

method for [insert taxable year(s) for which a federal income tax return has been filed as of the date of this closing agreement],

provided that: (a) the taxpayer has complied with all the applicable provisions of this closing agreement; (b) there has been no taxpayer fraud, malfeasance, or misrepresentation of a material fact; (c) there has been no change in the material facts on which this

closing agreement was based; and (d) there has been no change in the applicable law on which this closing agreement was based.

6. That the Service is not precluded from challenging the computation of the amounts capitalized or deducted for any taxable

year covered by this closing agreement on a basis unrelated to the original tire capitalization method (for example, that all or a

portion of the cost of a qualifying vehicle’s original or replacement tires is not incurred under § 461).

2002–17 I.R.B.

807

April 29, 2002

7. [If applicable, insert:] That the following additional conditions also apply: [insert, for example, conditions with respect to

waiving restrictions on assessment and collection, paying any tax, abating any overassessment, or refunding or crediting any tax

overpayment].

8. That the taxpayer accepts this settlement and agrees to the applicable terms of Rev. Proc. 2002–27.

This agreement is final and conclusive except:

(1) The matter it relates to may be reopened in the event of fraud, malfeasance, or misrepresentation of a material fact;

(2) It is subject to the Internal Revenue Code sections that expressly provide that effect be given to their provisions (including

any stated exception for § 7122) notwithstanding any law or rule of law; and

(3) If it relates to a tax period ending after the date of this agreement, it is subject to any law enacted after the agreement date,

that applies to the tax period.

By signing, the parties certify that they have read and agreed to the terms of this document.

Taxpayer (other than individual):

By:

Title:

Date:

Commissioner of Internal Revenue:

By:

Title:

Date:

Instructions

This agreement must be signed and filed in triplicate. (All copies must have original signatures.) The original and copies of the

agreement must be identical. The name of the taxpayer must be stated accurately. The agreement may relate to one or more years.

If an attorney or agent signs the agreement for the taxpayer, the power of attorney (or a copy) authorizing that person to sign

must be attached to the agreement.

If the taxpayer is a corporation, the agreement must be dated and signed with the name of the corporation, the signature and title

of an authorized officer or officers, or the signature of an authorized attorney or agent. It is not necessary that a copy of an enabling

corporate resolution be attached.

Use additional pages if necessary and identify them as part of this agreement.

Please see Rev. Proc. 68–16 (1968–1 C.B. 770) for a detailed description of practices and procedures applicable to most closing

agreements.

April 29, 2002

808

2002–17 I.R.B.

Part IV. Items of General Interest

Electronic Submission of

Form 8850

Announcement 2002–44

Form 8850

Employers submit Form 8850, PreScreening Notice and Certification

Request for the Work Opportunity and

Welfare-to-Work Credits, to State

Employment Security Agencies (SESAs)

as part of the process of obtaining those

tax credits. The Internal Revenue Service

will allow the electronic submission of

Forms 8850 with SESAs that choose to

establish a system to electronically

receive this form. In general, the electronic system must meet the requirements

described in paragraphs (1) through (6)

below.

For purposes of this announcement,

“employer” refers to an employer

required to submit a Form 8850 or an

authorized employer representative.

Requirements

(1) In General. The electronic system

must ensure that the information received

is the information sent, and it must document all occasions of access that result in

the submission of a Form 8850. In addition, the design and operation of the electronic system, including access procedures, must make it reasonably certain

that the persons signing the Form 8850,

accessing the system, and submitting the

Form 8850 are the job applicant and

employer identified in the form.

(2) Same Information as Paper Form

8850. The electronic submission must

provide the SESA with exactly the same

information as the paper Form 8850.

(3) Jurat and Signature Requirements.

The electronic submission must be signed

by the job applicant and the employer

under penalties of perjury.

(A) Jurat. The jurats (perjury statements) must contain the language that

appears on the paper Form 8850 for the

job applicant and the employer, respectively. The electronic system must inform

the job applicant and the employer that

they must make the declaration contained

in the applicable jurat and that the decla-

2002–17 I.R.B.

ration is made by signing the Form 8850.

The instructions and the language of each

jurat must immediately follow the information provided by the job applicant or

the employer, as applicable, and must

immediately precede that person’s electronic signature.

(B) Electronic Signatures. The electronic signatures must (1) identify the job

applicant whose name is on the electronic

Form 8850 and the employer submitting

the electronic Form 8850, and (2) authenticate and verify the submission. For this

purpose, the terms “authenticate” and

“verify” have the same meaning as they

do when applied to a written signature on

a paper Form 8850. An electronic signature can be in any form that satisfies the

foregoing requirements. The electronic

signature of the employer must be the

final entry in the submission.

(4) Copies of Electronic Form 8850.

The electronic system must enable the

employer to supply and, upon request by

the Internal Revenue Service, the

employer must supply (A) a hard copy of

the electronic Form 8850 submitted to the

SESA and (B) a statement that, to the best

of the employer’s knowledge, the electronic Form 8850 was submitted by the

employer with respect to the named job

applicant. The hard copy of the electronic

Form 8850 must provide exactly the same

information as, but need not be a facsimile of, the paper Form 8850.

(5) Retention of Forms 8850 by the

SESAs and Employers. Electronic Forms

8850 have the same status as paper Forms

8850. Therefore, guidance that applies to

paper Forms 8850 also applies to electronic Forms 8850. For example, as is the

case for paper Forms 8850, electronic

Forms 8850 are required to be retained by

employers under their established recordkeeping systems. For further information,

see Rev. Proc. 98–25 (1998–1 C.B. 689)

(information regarding the retention of

records within an Automatic Data Processing System).

809

Drafting Information

The principal author of this announcement is Robert Wheeler. For further information regarding this announcement, contact Karin Loverud at (202) 622–6080

(not a toll-free call).

IRS Issues Document Warning

Taxpayers to be Aware of

Home-Based Business Tax

Avoidance Schemes

Announcement 2002–48

The Internal Revenue Service just

released a new brochure entitled HomeBased Business Tax Avoidance Schemes

. . .At A Glance. The schemes described

in the document claim to offer tax

“relief,” but actually result in illegal tax

avoidance.

The promoters of these schemes claim

that by setting up a bogus home-based

business, individual taxpayers can deduct

most, or all, of their personal expenses as

business expenses. The brochure includes

some examples of personal expenses that

are not deductible but are commonly

claimed as business expenses in homebased business tax avoidance schemes.

The brochure explains that no matter

how convincing the claims that are found

in marketing materials for these schemes

may appear, nondeductible personal living expenses cannot be transformed into

deductible business expenses. The tax

code firmly establishes that a clear business purpose and profit motive must exist

in order to generate and claim allowable

business expenses.

Taxpayers who claimed such deductions on a past tax return should file an

amended return as soon as possible to

limit possible interest and penalties on top

of any taxes they might owe.

To find out more about home-based

business tax avoidance schemes, order

IRS Document 01300 (02–2002) by calling 1–800–829–2437, or visit

www.irs.gov.

April 29, 2002

Notice of Disposition of

Declaratory Judgment

Proceedings Under Section

7428

This announcement serves notice to

donors that on January 14, 2002, the

United States Tax Court entered a Decision accepting the agreement of the parties regarding the organization described

below. The organization listed below is

recognized as an organization described

April 29, 2002

in section 501(c)(3) which is exempt from

tax under section 501(a) for taxable years

prior to January 1, 2001. Pursuant to the

Decision, the organization listed below is

not recognized as an organization

described in section 501(c)(3) and is not

exempt from tax under section 501(a) for

taxable years beginning January 1, 2001.

Living Truth Ministries

Austin, TX

United States Tax Court entered a decision accepting the agreement of the parties that the organization listed below is

not recognized as an organization

described in section 501(c) and is not

exempt from taxation under section

501(a), effective October 1, 1996.

Endowment for Paso Del Norte

Schools, Inc.

El Paso, TX

This announcement serves notice to

donors that on February 15, 2002, the

810

2002–17 I.R.B.

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as“rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

effect:

Amplified describes a situation where

no change is being made in a prior published position, but the prior position is

being extended to apply to a variation of

the fact situation set forth therein. Thus, if

an earlier ruling held that a principle

applied to A, and the new ruling holds

that the same principle also applies to B,

the earlier ruling is amplified. (Compare

with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

has caused, or may cause, some confusion. It is not used where a position in a

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

to B, and the new ruling holds that it

applies to both A and B, the prior ruling

is modified because it corrects a published position. (Compare with amplified

and clarified, above).

Obsoleted describes a previously published ruling that is not considered determinative with respect to future transactions. This term is most commonly used

in a ruling that lists previously published

rulings that are obsoleted because of

changes in law or regulations. A ruling

may also be obsoleted because the substance has been included in regulations

subsequently adopted.

Revoked describes situations where the

position in the previously published ruling is not correct and the correct position

is being stated in the new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

that were previously published over a

period of time in separate rulings. If the

new ruling does more than restate the

substance of a prior ruling, a combination

of terms is used. For example, modified

and superseded describes a situation

where the substance of a previously published ruling is being changed in part and

is continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case,

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names of

countries, is published in a ruling and that

list is expanded by adding further names

in subsequent rulings. After the original

ruling has been supplemented several

times, a new ruling may be published that

includes the list in the original ruling and

the additions, and supersedes all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contributions Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign Corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Intemal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statements of Procedural Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

Abbreviations

The following abbreviations in current

use and formerly used will appear in

material published in the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

2002–17 I.R.B.

i

April 29, 2002

Numerical Finding List1

Notices:—Continued

Revenue Procedures—Continued:

Bulletins 2002–1 through 2002–16

2002–10, 2002–6 I.R.B. 490

2002–11, 2002–7 I.R.B. 526

2002–12, 2002–7 I.R.B. 526

2002–13, 2002–8 I.R.B. 547

2002–14, 2002–8 I.R.B. 548

2002–15, 2002–8 I.R.B. 548

2002–16, 2002–9 I.R.B. 567

2002–17, 2002–9 I.R.B. 567

2002–18, 2002–12 I.R.B. 644

2002–19, 2002–10 I.R.B. 619

2002–21, 2002–14 I.R.B. 730

2002–22, 2002–14 I.R.B. 731

2002–23, 2002–15 I.R.B. 742

2002–24, 2002–16 I.R.B. 785

2002–25, 2002–15 I.R.B. 743

2002–26, 2002–15 I.R.B. 743

2002–28, 2002–16 I.R.B. 785

2002–22, 2002–14 I.R.B. 733

2002–23, 2002–15 I.R.B. 744

2002–26, 2002–15 I.R.B. 746

Announcements:

2002–1, 2002–2 I.R.B. 304

2002–2, 2002–2 I.R.B. 304

2002–3, 2002–2 I.R.B. 305

2002–4, 2002–2 I.R.B. 306

2002–5, 2002–4 I.R.B. 420

2002–6, 2002–5 I.R.B. 458

2002–7, 2002–5 I.R.B. 459

2002–8, 2002–6 I.R.B. 494

2002–9, 2002–7 I.R.B. 536

2002–10, 2002–7 I.R.B. 539

2002–11, 2002–6 I.R.B. 494

2002–12, 2002–8 I.R.B. 553

2002–13, 2002–7 I.R.B. 540

2002–14, 2002–7 I.R.B. 540

2002–15, 2002–7 I.R.B. 540

2002–16, 2002–7 I.R.B. 541

2002–17, 2002–8 I.R.B. 561

2002–18, 2002–10 I.R.B. 621

2002–19, 2002–8 I.R.B. 561

2002–20, 2002–8 I.R.B. 561

2002–21, 2002–8 I.R.B. 562

2002–22, 2002–8 I.R.B. 562

2002–23, 2002–8 I.R.B. 563

2002–24, 2002–9 I.R.B. 606

2002–25, 2002–10 I.R.B. 621

2002–26, 2002–11 I.R.B. 629

2002–27, 2002–11 I.R.B. 629

2002–28, 2002–11 I.R.B. 630

2002–29, 2002–11 I.R.B. 631

2002–30, 2002–11 I.R.B. 632

2002–31, 2002–15 I.R.B. 747

2002–32, 2002–12 I.R.B. 664

2002–33, 2002–12 I.R.B. 666

2002–34, 2002–13 I.R.B. 702

2002–35, 2002–12 I.R.B. 667

2002–36, 2002–13 I.R.B. 703

2002–37, 2002–13 I.R.B. 703

2002–38, 2002–14 I.R.B. 738

2002–39, 2002–14 I.R.B. 738

2002–40, 2002–15 I.R.B. 747

2002–41, 2002–14 I.R.B. 739

2002–42, 2002–14 I.R.B. 739

2002–43, 2002–16 I.R.B. 792

Court Decisions:

2073, 2002–14 I.R.B. 718

Notices:

2002–1, 2002–2 I.R.B. 283

2002–2, 2002–2 I.R.B. 285

2002–3, 2002–2 I.R.B. 289

2002–4, 2002–2 I.R.B. 298

2002–5, 2002–3 I.R.B. 320

2002–6, 2002–3 I.R.B. 326

2002–7, 2002–6 I.R.B. 489

2002–8, 2002–4 I.R.B. 398

2002–9, 2002–5 I.R.B. 450

Proposed Regulations:

REG–209135–88, 2002–4 I.R.B. 418

REG–209114–90, 2002–9 I.R.B. 576

REG–107100–00, 2002–7 I.R.B. 529

REG–107366–00, 2002–12 I.R.B. 645

REG–118861–00, 2002–12 I.R.B. 651

REG–105344–01, 2002–2 I.R.B. 302

REG–112991–01, 2002–4 I.R.B. 404

REG–115054–01, 2002–7 I.R.B. 530

REG–119436–01, 2002–3 I.R.B. 377

REG–120135–01, 2002–8 I.R.B. 552

REG–125450–01, 2002–5 I.R.B. 457

REG–125626–01, 2002–9 I.R.B. 604

REG–142299–01, 2002–4 I.R.B. 418

REG–159079–01, 2002–6 I.R.B. 493

REG–165706–01, 2002–16 I.R.B. 787

REG–167648–01, 2002–16 I.R.B. 790

REG–102740–02, 2002–13 I.R.B. 701

Revenue Procedures:

2002–1, 2002–1 I.R.B. 1

2002–2, 2002–1 I.R.B. 82

2002–3, 2002–1 I.R.B. 117

2002–4, 2002–1 I.R.B. 127

2002–5, 2002–1 I.R.B. 173

2002–6, 2002–1 I.R.B. 203

2002–7, 2002–1 I.R.B. 249

2002–8, 2002–1 I.R.B. 252

2002–9, 2002–3 I.R.B. 327

2002–10, 2002–4 I.R.B. 401

2002–11, 2002–7 I.R.B. 526

2002–12, 2002–3 I.R.B. 374

2002–13, 2002–8 I.R.B. 549

2002–14, 2002–5 I.R.B. 450

2002–15, 2002–6 I.R.B. 490

2002–16, 2002–9 I.R.B. 572

2002–17, 2002–13 I.R.B. 676

2002–18, 2002–13 I.R.B. 678

2002–19, 2002–13 I.R.B. 696

2002–20, 2002–14 I.R.B. 732

Revenue Rulings:

2002–1, 2002–2 I.R.B. 268

2002–2, 2002–2 I.R.B. 271

2002–3, 2002–3 I.R.B. 316

2002–4, 2002–4 I.R.B. 389

2002–5, 2002–6 I.R.B. 461

2002–6, 2002–6 I.R.B. 460

2002–7, 2002–8 I.R.B. 543

2002–8, 2002–9 I.R.B. 564

2002–9, 2002–10 I.R.B. 614

2002–10, 2002–10 I.R.B. 616

2002–11, 2002–10 I.R.B. 608

2002–12, 2002–11 I.R.B. 624

2002–13, 2002–12 I.R.B. 637

2002–14, 2002–12 I.R.B. 636

2002–15, 2002–13 I.R.B. 668

2002–16, 2002–15 I.R.B. 740

2002–17, 2002–14 I.R.B. 716

2002–18, 2002–16 I.R.B. 779

2002–19, 2002–16 I.R.B. 778

Tax Conventions:

2002–14 I.R.B. 725

Treasury Decisions:

8968, 2002–2 I.R.B. 274

8969, 2002–2 I.R.B. 276

8970, 2002–2 I.R.B. 281

8971, 2002–3 I.R.B. 308

8972, 2002–5 I.R.B. 443

8973, 2002–4 I.R.B. 391

8974, 2002–3 I.R.B. 318

8975, 2002–4 I.R.B. 379

8976, 2002–5 I.R.B. 421

8977, 2002–6 I.R.B. 463

8978, 2002–7 I.R.B. 500

8979, 2002–6 I.R.B. 466

8980, 2002–6 I.R.B. 477

8981, 2002–7 I.R.B. 496

8982, 2002–8 I.R.B. 544

8983, 2002–9 I.R.B. 565

8984, 2002–13 I.R.B. 668

8985, 2002–14 I.R.B. 707

8986, 2002–16 I.R.B. 780

1

A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 2001–27 through 2001–53 is

in Internal Revenue Bulletin 2002–1, dated January 7, 2002.

April 29, 2002

ii

2002–17 I.R.B.

Finding List of Current Actions

on Previously Published Items2

Proposed Regulations:—Continued

Revenue Procedures:—Continued

96–13

Modified by

Rev. Proc. 2002–1, 2002–1 I.R.B. 1

Announcements:

REG–112991–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

Ann. 2002–38, 2002–14 I.R.B. 738

2001–83

Modified by

Ann. 2002–36, 2002–13 I.R.B. 703

REG–115054–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

2002–9

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

Ann. 2002–35, 2002–12 I.R.B. 667

REG–119436–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

Bulletins 2002–1 through 2002–16

Notices:

90–24

Modified and superseded by

Notice 2002–24, 2002–16 I.R.B. 785

98–31

Supplemented by

Ann. 2002–37, 2002–13 I.R.B. 703

98–43

Modified and superseded by

Notice 2002–5, 2002–3 I.R.B. 320

2000–11

Obsoleted by

Notice 2002–3, 2002–2 I.R.B. 289

2001–10

Revoked by

Notice 2002–8, 2002–4 I.R.B. 398

2001–61

Supplemented by

Notice 2002–15, 2002–8 I.R.B. 548

2001–68

Supplemented by

Notice 2002–15, 2002–8 I.R.B. 548

Proposed Regulations:

REG–209135–88

Corrected by

Ann. 2002–15, 2002–7 I.R.B. 540

Ann. 2002–30, 2002–11 I.R.B. 632

REG–251502–96

Withdrawn by

Ann. 2002–33, 2002–12 I.R.B. 666

REG–107100–00

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

REG–105344–01

Corrected by

Ann. 2002–7, 2002–5 I.R.B. 459

REG–120135–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

REG–125450–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

REG–125626–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

REG–126485–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

REG–137519–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

97–27

Modified and amplified by

Rev. Proc. 2002–19, 2002–13 I.R.B. 696

98–49

Obsoleted by

T.D. 8976, 2002–5 I.R.B. 421

99–49

Modified and superseded by

Rev. Proc. 2002–9, 2002–3 I.R.B. 327

2000–20

Modified by

Rev. Proc. 2002–6, 2002–1 I.R.B. 203

2000–46

Superseded by

Rev. Proc. 2002–22, 2002–14 I.R.B. 733

2001–1

Superseded by

Rev. Proc. 2002–1, 2002–1 I.R.B. 1

2001–2

Superseded by

Rev. Proc. 2002–2, 2002–1 I.R.B. 82

2001–3

Superseded by

Rev. Proc. 2002–3, 2002–1 I.R.B. 117

REG–142299–01

Corrected by

Ann. 2002–15, 2002–7 I.R.B. 540

Ann. 2002–30, 2002–11 I.R.B. 632

2001–4

Superseded by

Rev. Proc. 2002–4, 2002–1 I.R.B. 127

REG–142686–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

2001–5

Superseded by

Rev. Proc. 2002–5, 2002–1 I.R.B. 173

REG–159079–01

Corrected by

Ann. 2002–30, 2002–11 I.R.B. 632

2001–6

Superseded by

Rev. Proc. 2002–6, 2002–1 I.R.B. 203

Revenue Procedures:

2001–7

Superseded by

Rev. Proc. 2002–7, 2002–1 I.R.B. 249

84–37

Modified by

Rev. Proc. 2002–1, 2002–1 I.R.B. 1

84–57

Obsoleted by

T.D. 8976, 2002–5 I.R.B. 421

87–50

Modified by

Rev. Proc. 2002–10, 2002–4 I.R.B. 401

89–45

Superseded by

Rev. Proc. 2002–23, 2002–15 I.R.B. 744

2001–8

Superseded by

Rev. Proc. 2002–8, 2002–1 I.R.B. 252

2001–13

Corrected by

Ann. 2002–5, 2002–4 I.R.B. 420

2001–16

Modified by

Ann. 2002–26, 2002–11 I.R.B. 629

2001–27

Supplemented by

Rev. Proc. 2002–20, 2002–14 I.R.B. 732

2

A cumulative list of current actions on previously published

items in Internal Revenue Bulletins 2001–27 through 2001–53 is

in Internal Revenue Bulletin 2002–1, dated January 7, 2002.

2002–17 I.R.B.

iii

April 29, 2002

Revenue Procedures:—Continued

Revenue Rulings:—Continued

2001–36

Superseded by

Rev. Proc. 2002–3, 2002–1 I.R.B. 117

89–29

Obsoleted by

T.D. 8976, 2002–5 I.R.B. 421

2001–41

Superseded by

Rev. Proc. 2002–2, 2002–1 I.R.B. 82

92–19

Supplemented in part by

Rev. Rul. 2002–12, 2002–11 I.R.B. 624

2001–51

Superseded by

Rev. Proc. 2002–3, 2002–1 I.R.B. 117

2002–7

Corrected by

Ann. 2002–13, 2002–7 I.R.B. 540

2002–3

Modified by

Rev. Proc. 2002–22 I.R.B. 733

Treasury Decisions:

2002–6

Modified by

Notice 2002–1, 2002–2 I.R.B. 283

2002–8

Modified by

Notice 2002–1, 2002–2 I.R.B. 283

2002–9

Modified and clarified by

Ann. 2002–17, 2002–8 I.R.B. 561

Modified and amplified by

Rev. Rul. 2002–9, 2002–10 I.R.B. 614

Rev. Proc. 2002–17, 2002–13 I.R.B. 676

Rev. Proc. 2002–19, 2002–13 I.R.B. 696

8971

Corrected by

Ann. 2002–20, 2002–8 I.R.B. 561

8972

Corrected by

Ann. 2002–23, 2002–8 I.R.B. 563

8973

Corrected by

Ann. 2002–14, 2002–7 I.R.B. 540

8975

Corrected by

Ann. 2002–21, 2002–8 I.R.B. 562

Revenue Rulings:

8976

Corrected by

Ann. 2002–21, 2002–8 I.R.B. 562

55–261

Distinguished by

Rev. Rul. 2002–19, 2002–16 I.R.B. 778

8978

Corrected by

Ann. 2002–39, 2002–14 I.R.B. 738

55–747

Revoked by

Notice 2002–8, 2002–4 I.R.B. 398

61–146

Distinguished by

Rev. Rul. 2002–3, 2002–3 I.R.B. 316

64–328

Modified by

Notice 2002–8, 2002–4 I.R.B. 398

66–110

Modified by

Notice 2002–8, 2002–4 I.R.B. 398

73–304

Superseded by

Rev. Proc. 2002–26, 2002–15 I.R.B. 746

73–305

Superseded by

Rev. Proc. 2002–26, 2002–15 I.R.B. 746

79–151

Distinguished by

Rev. Rul. 2002–19, 2002–16 I.R.B. 778

79–284

Superseded by

Rev. Proc. 2002–26, 2002–15 I.R.B. 746

April 29, 2002

iv

2002–17 I.R.B.