Bulletin No. 1999–48

Internal Revenue

bulletin

Bulletin No. 1999–48

November 29, 1999

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.

INCOME TAX

EMPLOYEE PLANS

T.D. 8841, page 593.

Rev. Rul. 99–47, page 588.

Final regulations under section 6031 of the Code relate to

the filing of partnership tax returns.

Covered compensation tables for 2000. The covered

compensation tables for the year 2000 used for determining

contributions to defined benefit plans and permitted disparity are set forth.

T.D. 8843, page 590.

Final regulations under section 6011(e) of the Code generally require partnerships with more than 100 partners to file

their partnership tax returns on magnetic media for tax

years ending on or after December 31, 2000. However,

electing large partnerships and partnerships using foreign

addresses on their series 1065 forms are not required to

file their returns on magnetic media for tax years ending before January 1, 2001.

Finding Lists begin on page ii.

Department of the Treasury

Internal Revenue Service

Rev. Proc. 99–44, page 598.

Insurance companies; annuity contracts. This procedure

sets forth conditions under which the Service will treat a contract as an annuity contract described in sections 403(a),

403(b), or 408(b) of the Code, notwithstanding that contract

premiums are invested at the direction of the contract holder

in publicly available securities. Rev. Rul. 81–225 modified.

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 proce-

dures 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 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.

INS

ER

T

PH

OT

O

HE

RE

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

Section 61.—Gross Income

Defined

26 CFR 1.61–1: Gross income.

The circumstances are set forth under which the

Internal Revenue Service will treat a contract as an

annuity contract described in sections 403(a),

403(b), and 408(b) of the Internal Revenue Code

notwithstanding that contract premiums are invested

at the direction of the contract holder in publicly

available securities. See Rev. Proc. 99–44, page 598.

Section 401.—Qualified

Pension, Profit-Sharing, and

Stock Bonus Plans

26 CFR 1.401(1)–1: Permitted disparity in

employer-provided contributions or benefits.

Covered compensation tables for

2000. The covered compensation tables

for the year 2000 used for determining

contributions to defined benefit plans and

permitted disparity are set forth.

Rev. Rul. 99–47

This revenue ruling provides tables of

covered compensation under § 401(l)(5)(E) of the Internal Revenue Code (the

“Code”) and the Income Tax Regulations,

thereunder, for the 2000 plan year.

Section 401(l)(5)(E)(i) defines covered

compensation with respect to an employee, as the average of the contribution

and benefit bases in effect under section

230 of the Social Security Act (the “Act”)

for each year in the 35-year period ending

with the year in which the employee attains social security retirement age.

Section 401(l)(5)(E)(ii) of the Code

states that the determination for any year

preceding the year in which the employee

attains social security retirement age shall

be made by assuming that there is no increase in covered compensation after the

determination year and before the employee attains social security retirement

age.

Section 1.401(l)–1(c)(34) defines the

taxable wage base as the contribution and

benefit base under section 230 of the Act.

Section 1.401(l)–1(c)(7)(i) defines covered compensation for an employee as the

average (without indexing) of the taxable

wage bases in effect for each calendar

year during the 35-year period ending

with the last day of the calendar year in

which the employee attains (or will attain)

social security retirement age. A 35-year

period is used for all individuals regardless of the year of birth of the individual.

In determining an employee’s covered

compensation for a plan year, the taxable

wage base for all calendar years beginning after the first day of the plan year is

assumed to be the same as the taxable

wage base in effect as of the beginning of

the plan year. An employee’s covered

compensation for a plan year beginning

after the 35-year period applicable under

§1.401(l)–1(c)(7)(i) is the employee’s

covered compensation for a plan year during which the 35-year period ends. An

employee’s covered compensation for a

plan year beginning before the 35-year

period applicable under §1.401(l)–

1(c)(7)(i) is the taxable wage base in effect as of the beginning of the plan year.

Section 1.401(l)–1(c)(7)(ii) provides

that, for purposes of determining the

amount of an employee’s covered compensation under § 1.401(l)–1(c)(7)(i), a

plan may use tables, provided by the

Commissioner, that are developed by

rounding the actual amounts of covered

compensation for different years of birth.

For purposes of determining covered

compensation for the 2000 year the taxable wage base is $76,200.

The following tables provide covered

compensation for 2000:

2000 COVERED COMPENSATION TABLE

CALENDAR

YEAR OF

BIRTH

CALENDAR YEAR OF

SOCIAL SECURITY

RETIREMENT AGE

2000 COVERED

COMPENSATION

1907

1908

1909

1910

1911

1912

1913

1914

1915

1916

1917

1918

1919

1920

1921

1922

1923

1924

1925

1972

1973

1974

1975

1976

1977

1978

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

$4,488

4,704

5,004

5,316

5,664

6,060

6,480

7,044

7,692

8,460

9,300

10,236

11,232

12,276

13,368

14,520

15,708

16,968

18,312

November 29, 1999

588

1999–48 I.R.B.

2000 COVERED COMPENSATION TABLE—Continued

CALENDAR

YEAR OF

BIRTH

1926

1927

1928

1929

1930

1931

1932

1933

1934

1935

1936

1937

1938

1939

1940

1941

1942

1943

1944

1945

1946

1947

1948

1949

1950

1951

1952

1953

1954

1955

1956

1957

1958

1959

1960

1961

1962

1963

1964

1965

1966

1967 or later

1999–48 I.R.B.

CALENDAR YEAR OF

SOCIAL SECURITY

RETIREMENT AGE

2000 COVERED

COMPENSATION

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2022

2023

2024

2025

2026

2027

2028

2029

2030

2031

2032

2033

2034

19,728

21,192

22,716

24,312

25,920

27,576

29,304

31,128

33,060

35,100

37,092

39,072

42,984

44,940

46,896

48,816

50,688

52,488

54,252

55,992

57,708

59,376

60,900

62,340

63,660

64,920

66,072

67,164

68,220

70,116

71,004

71,820

72,528

73,176

73,764

74,304

74,748

75,180

75,564

75,864

76,092

76,200

589

November 29, 1999

2000 Rounded Covered

Compensation Table

Year of Birth

Covered

Compensation

1934

1935 – 1936

1937

1938

1939

1940 – 1941

1942 – 1943

1944

1945 – 1946

1947 – 1948

1949 – 1950

1951 – 1953

1954 – 1955

1956 – 1959

1960 – 1964

1965 or later

$33,000

36,000

39,000

42,000

45,000

48,000

51,000

54,000

57,000

60,000

63,000

66,000

69,000

72,000

75,000

76,200

The principal author of this revenue ruling is Todd Newman of the Employee

Plans Division. For further information

regarding this revenue ruling, call (202)

622-6076 between 2:30 and 3:30 Eastern

time (not a toll free number) Monday thru

Thursday. Mr. Newman’s number is (202)

622-8458 (also not a toll free number).

Section 403.—Taxation of

Employee Annuities

26 CFR 1.403(a)–1: Taxability of beneficiary under

a qualified annuity plan.

The circumstances are set forth under which the

Internal Revenue Service will treat a contract as an

annuity contract described in sections 403(a),

403(b), or 408(b) of the Internal Revenue Code

notwithstanding that contract premiums are invested

at the direction of the contract holder in publicly

available securities. See Rev. Proc. 99–44, page 598.

26 CFR 1.403(b)–1: Taxability of beneficiary under

annuity purchased by section 501(c)(3)

organization or public school.

The circumstances are set forth under which the

Internal Revenue Service will treat a contract as an

annuity contract described in sections 403(a),

403(b), or 408(b) of the Internal Revenue Code

notwithstanding that contract premiums are invested

at the direction of the contract holder in publicly

available securities. See Rev. Proc. 99–44, page 598.

November 29, 1999

Section 408.—Individual

Retirement Accounts

26 CFR 1.408–1: General rules.

The circumstances are set forth under which the

Internal Revenue Service will treat a contract as an

annuity contract described in sections 403(a),

403(b), or 408(b) of the Internal Revenue Code

notwithstanding that contract premiums are invested

at the direction of the contract holder in publicly

available securities. See Rev. Proc. 99–44, page 598.

Section 817.—Treatment of

Variable Contracts

26 CFR 1.817–5: Diversification requirements for

variable annuity, endowment, and life insurance

contracts.

The circumstances are set forth under which the

Internal Revenue Service will treat a contract as an

annuity contract described in sections 403(a),

403(b), or 408(b) of the Internal Revenue Code

notwithstanding that contract premiums are invested

at the direction of the contract holder in publicly

available securities. See Rev. Proc. 99–44, page 598.

ACTION: Final regulations.

SUMMARY: This document contains

final regulations relating to the requirements for filing partnership returns on

magnetic media. These regulations reflect changes to the law made by the Taxpayer Relief Act of 1997. These regulations affect partnerships with more than

100 partners.

DATES: Effective Date: These regulations are effective January 1, 2000.

Applicability Date: These regulations

apply to partnership returns for taxable

years ending on or after December 31,

2000. However, the regulations will not

apply to electing large partnership returns

under section 775 or partnership returns

with foreign addresses for taxable years

ending before January 1, 2001.

FOR FURTHER INFORMATION CONTACT: Bridget E. Finkenaur, (202) 6224940 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Section 818.—Other Definitions

and Special Rules

Background

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 301

This document contains amendments to

the Regulations on Procedure and Administration (26 CFR part 301) relating to filing partnership returns on magnetic media

under section 6011(e)(2). In addition, this

document contains conforming amendments to the Regulations on Procedure

and Administration (26 CFR part 301) relating to information reporting penalties

under section 6721.

A notice of proposed rulemaking

(REG–102023–98, 1998–48 I.R.B. 6) was

published in the Federal Register (63

F.R. 56878) on October 23, 1998. The

public hearing scheduled for January 13,

1999, was canceled in the Federal Register (64 F.R. 1148) on January 8, 1998.

No public hearing was requested or held.

Two written comments were received.

After consideration of the comments, the

proposed regulations are adopted as modified by this Treasury decision. The comments are discussed below.

Partnership Returns Required

on Magnetic Media

Explanation of Revisions and Summary

of Comments

AGENCY: Internal Revenue Service

(IRS), Treasury.

Both commentators requested that the

IRS and the Treasury Department post-

26 CFR 1.818–2: Accounting provisions.

The circumstances are set forth under which the

Internal Revenue Service will treat a contract as an

annuity contract described in sections 403(a),

403(b), or 408(b) of the Internal Revenue Code

notwithstanding that contract premiums are invested

at the direction of the contract holder in publicly

available securities. See Rev. Proc. 99–44, page 598.

Section 6011.—General

Requirement of Return,

Statement, or List

26 CFR 301.6011–3: Required use of magnetic

media for partnership returns.

T.D. 8843

590

1999–48 I.R.B.

pone the effective date of the regulations.

The commentators were concerned that,

given the various manners and formats

that nominees use to submit partner information to publicly traded partnerships,

these partnerships would be unable to create computer programs that would reformat the partner information in time to file

their 1999 tax returns on magnetic media.

In addition, partnerships required to file

their returns on magnetic media beginning in 2000 will be focusing their computer resources on ensuring that their

computer systems are year 2000 compliant. The commentators suggested that the

effective date of the regulations be postponed to take into account these programming considerations.

In considering these comments, the

IRS and the Treasury Department have

decided to postpone the general effective

date of the regulations for one year. This

will allow partnerships additional time to

develop systems that accommodate IRS

processing requirements and integrate

third party information while not interfering with efforts to ensure year 2000 compliance. Therefore, the final regulations

are generally effective for taxable years

ending on or after December 31, 2000.

However, the effective date for electing

large partnerships and partnerships using

foreign addresses on their Series 1065

forms remains the same as the proposed

regulations. Accordingly, electing large

partnerships and partnerships using foreign addresses will not be required to file

their returns on magnetic media for taxable years ending before January 1, 2001.

Although the general effective date of

the regulations has been postponed, on

March 15, 2000, the IRS will begin accepting partnership returns for taxable

years ending on or after December 31,

1999, on magnetic media. The magnetic

media filing of partnership returns for taxable years ending before December 31,

2000, is voluntary; partnerships will not

be penalized for submitting a partnership

return on paper for taxable years ending

before this date. However, partnerships

with the capability of submitting their

partnership tax returns on magnetic media

are encouraged to do so.

Partnerships with 100 or fewer partners

also may voluntarily submit partnership

returns on magnetic media beginning on

March 15, 2000. These regulations do not

1999–48 I.R.B.

require partnerships with 100 or fewer

partners to file their returns on magnetic

media; therefore, such partnerships will

not be penalized for their failure to do so.

In addition, partnerships with 100 or

fewer partners participating in the magnetic media filing program may discontinue their participation at any time.

One commentator suggested that the

IRS and the Treasury Department publish

regulations under section 6031(c) to require nominees holding partnership interests to submit partner information to partnerships in the same manner and format

that the IRS requires partnerships to file

their returns under §301.6011-3 of the

regulations. However, by postponing the

effective date, it is anticipated that partnerships and nominees will have adequate

time to establish satisfactory guidelines

for sharing information. Accordingly, this

comment has not been adopted by the

final regulations.

Finally, one commentator asked

whether fiscal year and short year returns

will be required to be filed on magnetic

media by the general effective date.

Again, because the IRS and the Treasury

Department have postponed the general

effective date for one year, it is anticipated

that partnerships will be able to meet the

systems requirements set forth in IRS revenue procedures and other published guidance by the effective date. However, due

to issues relating to creation of the system

for accepting returns on magnetic media,

the IRS will not be able to accept fiscal

and short year returns prior to the general

effective date. Therefore, partnerships

that use a fiscal year and partnerships that

must file a short year return may not voluntarily file their returns on magnetic

media before January 1, 2001.

As indicated in the preamble to the proposed regulations, although the regulations

define magnetic media broadly, the Service

currently plans, in prescribed procedures

for participation in the mandatory magnetic media filing program, to require partnerships with more than 100 partners to

file their partnership returns electronically.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in Executive Order

12866. Therefore, a regulatory assess-

591

ment is not required. It also has been determined that section 553(b) of the Administrative Procedure Act (5 U.S.C.

chapter 5) does not apply to these regulations, and because these regulations do

not impose a collection of information on

small entities, the Regulatory Flexibility

Act (5 U.S.C. chapter 6) does not apply.

Pursuant to section 7805(f) of the Internal

Revenue Code, the notice of proposed

rulemaking that preceded these regulations was submitted to the Chief Counsel

for Advocacy of the Small Business Administration for comment on its impact on

small business.

Drafting Information

The principal author of these regulations is Bridget E. Finkenaur, Office of

the Assistant Chief Counsel (Income Tax

and Accounting). However, other personnel from the IRS and Treasury Department participated in the development of

these regulations.

* * * * *

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR part 301 is

amended as follows:

PART 301—PROCEDURE AND

ADMINISTRATION

Paragraph 1. The authority citation for

part 301 is amended by adding an entry in

numerical order to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

Section 301.6011–3 also issued under

26 U.S.C. 6011; * * *

Par. 2. Section 301.6011–3 is added to

read as follows:

§301.6011–3 Required use of magnetic

media for partnership returns.

(a) Partnership returns required on

magnetic media. If a partnership with

more than 100 partners is required to file

a partnership return pursuant to

§1.6031(a)–1 of this chapter, the information required by the applicable forms and

schedules must be filed on magnetic

media, except as otherwise provided in

paragraph (b) of this section. Returns

filed on magnetic media must be made in

accordance with applicable revenue procedures or publications. In prescribing

November 29, 1999

revenue procedures or publications, the

Commissioner may determine that partnerships will be required to use any one

form of magnetic media filing. For example, the Commissioner may determine

that partnerships with more than 100 partners must file their partnership returns

electronically. In filing its return, a partnership must register to participate in the

magnetic media filing program in the

manner prescribed by the Internal Revenue Service in applicable revenue procedures or publications.

(b) Waiver. The Commissioner may

waive the requirements of this section if

hardship is shown in a request for waiver

filed in accordance with this paragraph

(b). A determination of hardship will be

based upon all of the facts and circumstances. One factor in determining hardship will be the reasonableness of the incremental cost to the partnership of

complying with the magnetic media filing

requirements. Other factors, such as

equipment breakdowns or destruction of

magnetic media filing equipment, also

may be considered. A request for waiver

must be made in accordance with applicable revenue procedures or publications.

The waiver will specify the type of partnership return and the period to which it

applies. The waiver will also be subject

to such terms and conditions regarding

the method of filing as may be prescribed

by the Commissioner.

(c) Failure to file. If a partnership fails

to file a partnership return on magnetic

media in the manner required and when

required to do so by this section, the partnership will be deemed to have failed to

file the return in the manner prescribed

for purposes of the information return

penalty under section 6721. See

§301.6724–1(c)(3) for rules regarding the

waiver of penalties for undue economic

hardship relating to filing returns on magnetic media.

(d) Meaning of terms. The following

definitions apply for purposes of this section:

(1) Magnetic media. The term magnetic media means any magnetic media

permitted under applicable regulations,

revenue procedures, or publications.

These generally include magnetic tape,

tape cartridge, and diskette, as well as

other media (such as electronic filing)

specifically permitted under the applica-

November 29, 1999

ble regulations, procedures, or publications.

(2) Partnership. The term partnership

means a partnership as defined in §1.761–

1(a) of this chapter.

(3) Partner. The term partner means a

member of a partnership as defined in

section 7701(a)(2).

(4) Partnership return. The term partnership return means a form in Series

1065 (including Form 1065, U.S. Partnership Return of Income, and Form 1065-B,

U.S. Return of Income for Electing Large

Partnerships), along with the corresponding Schedules K-1 and all other related

forms and schedules that are required to

be attached to the Series 1065 form.

(5) Partnerships with more than 100

partners. A partnership has more than

100 partners if, over the course of the

partnership’s taxable year, the partnership

had more than 100 partners, regardless of

whether a partner was a partner for the entire year or whether the partnership had

over 100 partners on any particular day in

the year. For purposes of this paragraph

(d)(5), however, only those persons having a direct interest in the partnership

must be considered partners for purposes

of determining the number of partners

during the partnership’s taxable year.

(e) Examples. The following examples

illustrate the provisions of paragraph

(d)(5) of this section. In the examples, the

partnerships utilize the calendar year, and

the taxable year in question is 2000:

Example 1. Partnership P had five general partners and 90 limited partners on January 1, 2000. On

March 15, 2000, 10 more limited partners acquired

an interest in P. On September 29, 2000, the 10

newest partners sold their individual partnership interests to C, a corporation which was one of the original 90 limited partners. On December 31, 2000, P

had the same five general partners and 90 limited

partners it had on January 1, 2000. P had a total of

105 partners over the course of partnership taxable

year 2000. Therefore, P must file its 2000 partnership return on magnetic media.

Example 2. Partnership Q is a general partnership that had 95 partners on January 1, 2000. On

March 15, 2000, 10 partners sold their individual

partnership interests to corporation D, which was

not previously a partner in Q. On September 29,

2000, corporation D sold one-half of its partnership

interest in equal shares to five individuals, who were

not previously partners in Q. On December 31,

2000, Q had a total of 91 partners, and on no date in

the year did Q have more than 100 partners. Over

the course of the year, however, Q had 101 partners.

Therefore, Q must file its 2000 partnership return on

magnetic media.

592

Example 3. Partnership G is a general partnership

with 100 partners on January 1, 2000. There are no

new partners added to G in 2000. One of G’s partners, A, is a partnership with 53 partners. A is one

partner, regardless of the number of partners A has.

Therefore, G has 100 partners and is not required to

file its 2000 partnership return on magnetic media.

(f) Effective date. In general, this section applies to partnership returns for taxable years ending on or after December

31, 2000. However, electing large partnerships under section 775 and partnerships using foreign addresses on their Series 1065 forms are not required to file

using magnetic media for taxable years

ending before January 1, 2001.

Par. 3. Section 301.6721–1 is amended

by removing the third, fourth, and fifth

sentences of paragraph (a)(2)(ii) and

adding four sentences in their place to

read as follows:

§301.6721–1 Failure to file correct

information returns.

(a) * * *

(2) * * *

(ii) * * * However, no penalty is imposed under paragraph (a)(1) of this section solely by reason of any failure to

comply with the requirements of section

6011(e)(2), except to the extent that such

a failure occurs with respect to more than

250 information returns (the 250-threshold requirement) or in the case of a partnership with more than 100 partners,

more than 100 information returns (the

100-threshold requirement) (collectively,

the threshold requirements). Each Schedule K-1 considered in applying the 100threshold requirement will be treated as a

separate information return. These

threshold requirements apply separately

to each type of information return required to be filed. Further, these threshold requirements apply separately to original and corrected returns. * * *

* * * * *

Robert E. Wenzel,

Deputy Commissioner of

Internal Revenue.

Approved October 29, 1999.

Joseph Mikrut,

Assistant Secretary

of the Treasury.

(Filed by the Office of the Federal Register on November 10, 1999, 8:45 a.m., and published in the

1999–48 I.R.B.

issue of the Federal Register for November 12,

1999, 64 F.R. 61502)

Section 6031.—Return of

Partnership Income

26 CFR 1.6031(a)–1: Return of partnership income.

T.D. 8841

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Parts 1, 301, and 602

Return of Partnership Income

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Final regulations.

SUMMARY: This document contains

final regulations revising the partnership

filing requirement. These regulations reflect changes to the law made by the Taxpayer Relief Act of 1997 (TRA). All partnerships required to file partnership

returns, including certain foreign partnerships, are affected by these regulations.

DATES: Effective Dates: These regulations are effective January 1, 2000, except

that §1.6031(a)–1(b)(3) is effective January 1, 2001.

Applicability Dates: For dates of applicability, see §§1.6031(a)–1(f) and

1.6063–1(c)(2).

FOR FURTHER INFORMATION CONTACT: Concerning the regulations, Martin Schäffer, 202-622-3070; concerning

foreign partnerships, Guy A. Bracuti,

202-622-3860 (not toll-free numbers).

SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act

The collection of information contained in these final regulations has been

reviewed and approved by the Office of

Management and Budget in accordance

with the Paperwork Reduction Act of

1995 (44 U.S.C. 3507(d)) under control

number 1545-1583.

The collection of information in these

final regulations is in §1.6031(a)–1. This

information is required to enable the IRS

to verify that a taxpayer is reporting the

correct amount of income or gain or

1999–48 I.R.B.

claiming the correct amount of losses, deductions, or credits from that taxpayer’s

interest in the partnership.

An agency may not conduct or sponsor,

and a person is not required to respond to,

a collection of information unless it displays a valid control number.

The burden is reflected in the burden

estimate of Form 1065.

Comments concerning the accuracy of

this burden estimate and suggestions for

reducing this burden should be sent to the

Internal Revenue Service, Attn: IRS Reports Clearance Officer, T:FS:FP, Washington, DC 20224, and to the Office of

Management and Budget, Attn: Desk

Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503.

Books or records relating to a collection of information must be retained as

long as their contents might become material in the administration of any internal

revenue law. Generally, tax returns and

tax return information are confidential, as

required by 26 U.S.C. 6103.

Background

On January 26, 1998, the IRS and Treasury published in the Federal Register

(63 F.R. 3677) proposed amendments to

the regulations (REG–209322–82,

1998–15 I.R.B. 26) under sections 6031

and 6063 of the Internal Revenue Code

(Code). These amendments were designed, in part, to reflect changes made to

section 6031 of the Code by section 1141

of TRA, Public Law 105-34 (111 Stat.

788). Written comments responding to

these proposed regulations were received.

No public hearing was requested or held.

After consideration of all the comments,

the proposed regulations under sections

6031 and 6063 of the Code are adopted as

revised by this Treasury decision, and the

current final regulations under section

6031 of the Code are removed.

Explanation of Revisions and Summary

of Comments

A. General Filing Requirements for

Foreign Partnerships

Section 6031(a) of the Code requires

every partnership to file a partnership return. However, section 6031(e) of the

Code provides that a foreign partnership

is not required to file a return for a taxable

593

year unless during that year it derives

gross income from sources within the

United States (U.S.-source income) or has

gross income that is effectively connected

with the conduct of a trade or business

within the United States (ECI).

Consistent with section 6031(e) of the

Code, the proposed regulations generally

required a foreign partnership to file a return under section 6031 of the Code if it

had either U.S.-source income or ECI.

This general rule is adopted without

change in the final regulations.

B. Exceptions to General Filing

Requirements

Under the proposed regulations, a foreign partnership that had no ECI, and that

otherwise was required to file a partnership return only because it had U.S.source income, was exempt from the requirement to file a partnership return if (i)

no United States person had a direct or indirect interest in the partnership; (ii) the

U.S.-source income was either fixed or

determinable annual or periodical income

described in §1.1441–2(b) or other

amounts subject to withholding described

in §1.1441–2(c); (iii) Forms 1042 and

1042-S were filed with respect to all such

gross income by the partnership, or by another withholding agent (or agents) if the

partnership was not required to file such

forms; and (iv) the tax liability of the partners with respect to such gross income

was fully satisfied by the withholding of

tax at source. Most of the written comments received with respect to the proposed regulations requested that the IRS

and Treasury modify this proposed exception to the foreign partnership filing requirement.

In response to these comments, the final

regulations liberalize the exceptions in

certain instances for foreign partnerships

that have U.S.-source income but no ECI.

The changes are designed to reduce duplicative filing requirements where other

information reporting and withholding requirements provide adequate protection

for the tax system and to recognize that

where there is de minimis ownership in a

foreign partnership by U.S. partners, the

return filing requirements should not be

invoked merely because the partnership

earns any amount of U.S.-source income.

The final regulations contain three

rules that modify the reporting obligations

November 29, 1999

of certain foreign partnerships that have

no ECI. These modified reporting rules,

with the exception of the de minimis exception, are applicable for partnership

taxable years beginning after December

31, 2000, because they are dependent on

rules contained in §§1.1441–5(c) and

1.1461–1, which will be applicable only

after December 31, 2000. See Notice 99–

27 (1999–20 I.R.B. 75). The de minimis

exception, however, will be effective for

partnership taxable years beginning after

December 31, 1999, the general effective

date of these regulations.

The modified reporting rules contain

some common requirements. None of

these rules will apply to a withholding

foreign partnership (as defined in

§1.1441–5(c)(2)(i)). Also, with the exception of the de minimis rule, the modified reporting rules will apply only when

one or more withholding agents file the

required Forms 1042 and 1042-S and pay

the associated withholding tax.

The first modified reporting rule is the

de minimis exception. This rule provides

that a foreign partnership (other than a

withholding foreign partnership, as defined in §1.1441–5(c)(2)(i)) with $20,000

or less of U.S.-source income and no ECI

is required to file a partnership return only

if one percent or more of any item of partnership gain, loss, deduction, or credit is

allocable in the aggregate to direct U.S.

partners.

The second modified reporting rule,

which also was contained in the proposed

regulations, provides that a foreign partnership with U.S.-source income but no

ECI and no U.S. partners is not required

to file a partnership return. Under the

third rule, a foreign partnership with U.S.source income and one or more U.S. partners but no ECI must file a partnership return. However, such a partnership need

file Schedules K-1 only for its direct U.S.

partners and for its passthrough partners

through which U.S. partners hold an interest in the foreign partnership.

The final regulations do not require a

foreign partnership to provide Schedules

K-1 for foreign partners deriving U.S.source income that is not ECI, because the

foreign partners are subject to information

reporting on Forms 1042-S under the rules

contained in §§1.1441–5(c) and 1.1461–1

of the regulations. These rules generally

subject the foreign partners, and not the

November 29, 1999

partnership, to an information reporting

regime with respect to U.S.-source income

(that is not ECI) paid to a foreign partnership. To the extent that information returns are not required for foreign partners

under section 1461 of the Code, the IRS

and Treasury have determined that reporting under section 6031 of the Code is unnecessary as long as the foreign partnership has no ECI. Accordingly, a foreign

partnership with no ECI need not report

on a Schedule K-1 a foreign partner’s allocable share of items of income, including

U.S.-source gains that are not subject to

Form 1042-S reporting, deposit interest

under section 871(i) of the Code, and interest or OID on short-term obligations

under section 871(g) of the Code.

In contrast to the rule for U.S.-source

income, the exception to Schedule K-1 reporting does not apply to a foreign partner’s allocable share of ECI. Under the

information reporting rules in §§1.1441–

5(c)(1)(ii)(B) and 1.1461–1(c) of the regulations, ECI must be reported to a foreign

partnership rather than to the foreign partners directly. In addition, because ECI is

subject to tax on a net basis, a foreign partnership must provide a foreign partner’s

allocable share of other items of partnership income, gain, loss, or deduction to

properly calculate the net taxable income.

Therefore, if a foreign partnership has

ECI, it must file a complete partnership return (with Schedules K-1 for all partners)

reflecting all items of partnership income,

gain, loss, deduction, and credit.

C. Partners That are Controlled Foreign

Corporations

One commentator suggested that a foreign partnership should not have to file

under section 6031 of the Code if it has no

direct U.S. partners and its only U.S.source income is bank deposit interest

under section 871(i) of the Code. The exception to the filing requirement in

§1.6031(a)–1(b)(2) of the proposed regulations did not apply to foreign partnerships with direct or indirect U.S. partners.

Thus, according to the commentator, this

exception did not apply to a common,

nonabusive situation in which a controlled foreign corporation (CFC) is a

partner in a foreign partnership whose

only U.S.-source income is interest

earned on a U.S. bank account. (Foreign

594

partners do not owe U.S. tax on this interest income; see section 871(i) of the Code

and §1.1441–2(a) of the regulations (final

sentence). In addition, a U.S. person who

controls a CFC must report such income

on Form 5471; see §1.6038–2.)

The term indirect interest was not defined in the proposed regulations. Thus,

whether a U.S. shareholder of a CFC partner held an indirect interest in the foreign

partnership was not clear. These final

regulations define the term United States

partner as any U.S. person owning a direct or indirect interest in the foreign partnership. An indirect interest is defined as

any interest held through one or more

passthrough partners (as defined in section 6231(a)(9) of the Code). A passthrough partner is a partnership, estate,

trust, S corporation, nominee, or other

similar person. Because a CFC is not a

passthrough partner, the U.S. shareholder

of a CFC has no indirect interest in the

foreign partnership under these final regulations. Accordingly, a partnership with

no ECI need not file a return solely as a

result of having a CFC partner.

D. Responsibility to Ensure Filing of

Forms 1042 and 1042-S and Payment

of Associated Tax

As stated above, a foreign partnership

may avail itself of the modified filing requirements in §1.6031(a)–1(b)(3) of these

regulations, for partnership taxable years

beginning after December 31, 2000, only

if it or another withholding agent actually

files the Forms 1042 and 1042-S and pays

the associated tax. A commentator suggested that a foreign partnership with no

withholding responsibility should not

have the burden of ensuring that another

withholding agent has properly filed

Forms 1042-S in order to invoke the modified filing requirements.

Where a withholding agent fails to

withhold (and to file the requisite forms)

with respect to a partner in a foreign partnership, the Service might be unable to

assess and collect the proper tax without

information from a partnership return. A

partnership return provides the Service

with the name of the foreign partner and

the amount subject to withholding. Accordingly, these final regulations do not

adopt the comment.

While this comment is not adopted,

certain relief still may be available. Each

1999–48 I.R.B.

person who has control, receipt, custody,

or payment of an amount subject to withholding is a withholding agent and is responsible for withholding tax and filing

Forms 1042 and 1042-S. Generally, a foreign partnership is a withholding agent

and must withhold tax and file the requisite forms. Under §1.1461–1(b) and (c),

one withholding agent among several

may be relieved of its responsibility to

withhold if another withholding agent

withholds tax and files the proper returns.

However, §1.1441–5(c)(3)(v) augments

this rule by deeming a foreign partnership

(other than a withholding foreign partnership as defined in §1.1441–5(c)(2)(i)) to

have satisfied its withholding responsibilities for an amount with respect to a partner to the extent that the partner’s distributive share of the payment can be reliably

associated with a withholding certificate

described in §1.1441–5(c)(3)(iii) pertaining to the partner that the partnership has

furnished to a withholding agent, and the

partnership does not know or has no reason to know that the correct amount has

not been withheld. These final regulations do not alter the result under

§1.1441–5(c)(3)(v). In addition, if a foreign partnership reasonably relies on a

modified filing requirement under these

regulations, but the modification is inapplicable because no party has satisfied

withholding responsibilities, the partnership should be able to show that its failure

to file a partnership return was due to reasonable cause for purposes of section

6698 of the Code if the foreign partnership is deemed to have satisfied its withholding responsibilities under §1.1441–

5(c)(3)(v).

E. Partnership Level Elections under

Section 703 of the Code

A commentator suggested that an abbreviated return should be permitted

where a foreign partnership would be exempt from the filing requirement but for a

partnership level election under section

703 of the Code. These final regulations

clarify that a return filed solely to make

an election under section 703 of the Code

need contain only information identifying

the partnership and the type of election.

In general, such a return is not considered

to be a return filed under section 6031(a)

of the Code. Therefore, a return filed

solely to make an election is not a partner-

1999–48 I.R.B.

ship return for purposes of section 6501

(regarding the statute of limitations) and

sections 6231(a)(1)(A) and 6233 (regarding the partnership audit rules) of the

Code.

Section 1.6031(a)–1(b)(3)(ii) of the proposed regulations provided that a return

filed by or for a foreign partnership to

make a section 703 election must be

signed by each partner who was a partner

at the time of election or by any partner

who was authorized (under local law or

the partnership’s organizational documents) to make the election and who represented having such authority under

penalties of perjury. A commentator suggested that the signature requirement for

returns filed solely to make a partnership

level election should be restricted to partners who are U.S. persons or are owned directly or indirectly by U.S. persons. These

final regulations do not adopt this comment but maintain the signature requirement as proposed. Cf. §301.7701–3(c)(2)

setting forth the same signature requirement for entity classification elections.

F. Electing Out of Subchapter K under

Section 761 of the Code

A commentator suggested that the final

regulations should provide a default rule

under which a foreign partnership with no

direct U.S. partners that is eligible to elect

out of subchapter K of the Code would be

deemed to have elected exclusion. Under

§1.6031(a)–1(c)(2) of the proposed regulations, a partnership that was deemed to

have elected exclusion from subchapter

K, as specified in §1.761–2(b)(2)(ii),

would be exempt from the partnership filing requirement. According to the commentator, for joint ventures in which all

the direct owners are foreign, it is often

difficult to clearly demonstrate an intention to exclude the entity from U.S. partnership treatment, as required by the

section 761 regulations. To avoid inconsistency with the requirements for

deemed exclusion under section 761 of

the Code, these final regulations maintain

the rule as proposed.

required. It also has been determined that

section 553(b) of the Administrative Procedure Act (5 U.S.C. chapter 5) does not

apply to these regulations. It is hereby

certified that the collection of information

contained in these regulations will not

have a significant economic impact on a

substantial number of small entities. This

certification is based on the fact that the

regulations would reduce (rather than increase) the number of small entities that

are required to file a partnership return.

Specifically, the regulations eliminate the

filing requirements for certain foreign

partnerships that are fully subject to withholding in order to prevent duplicative filing requirements. In addition to eliminating the filing requirements in these

circumstances, for ease of reference, the

regulations update and restate the general

requirements to file a partnership return

as set forth in existing regulations. Because these regulations do not impose any

new reporting requirements that are not

imposed by the existing regulations, and

the only significant modification of the

existing regulations is to eliminate the filing requirement for certain foreign partnerships, the regulations will not have a

significant economic impact on a substantial number of small entities. Accordingly, a Regulatory Flexibility Analysis

under the Regulatory Flexibility Act (5

U.S.C. chapter 6) is not required. Pursuant to section 7805(f) of the Code, the

proposed regulations preceding these regulations were submitted to the Chief

Counsel for Advocacy of the Small Business Administration for comment on its

impact on small business.

Drafting Information

The principal authors of these regulations are Martin Schäffer, Office of Assistant Chief Counsel (Passthroughs and

Special Industries), and Guy A. Bracuti,

Office of Associate Chief Counsel (International). However, other personnel from

the IRS and Treasury Department participated in their development.

* * * * *

Special Analyses

It has been determined that these regulations are not a significant regulatory action as defined in Executive Order 12866.

Therefore, a regulatory assessment is not

595

Adoption of Amendments to the

Regulations

Accordingly, 26 CFR parts 1, 301, and

602 are amended as follows:

November 29, 1999

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by adding an entry in

numerical order to read in part as follows:

Authority: 26 U.S.C. 7805. * * *

Section 1.6031(a)-1 also issued under

26 U.S.C. 6031. * * *

§1.6031–1 [Removed]

Par. 2. Section 1.6031–1 is removed.

Par. 3. Section 1.6031(a)–1 is added to

read as follows:

§1.6031(a)–1 Return of partnership

income.

(a) Domestic partnerships—(1) Return

required. Except as provided in paragraphs (a)(3) and (c) of this section, every

domestic partnership must file a return of

partnership income under section 6031

(partnership return) for each taxable year

on the form prescribed for the partnership

return. The partnership return must be

filed for the taxable year of the partnership regardless of the taxable years of the

partners. For taxable years of a partnership and of a partner, see section 706 and

§1.706–1. For the rules governing partnership statements to partners and nominees, see §1.6031(b)–1T.

(2) Content of return. The partnership

return must contain the information required by the prescribed form and the accompanying instructions.

(3) Special rule. A partnership that has

no income, deductions, or credits for federal income tax purposes for a taxable

year is not required to file a partnership

return for that year.

(4) Failure to file. For the consequences of a failure to comply with the requirements of section 6031(a) and this

paragraph (a), see sections 6229(a),

6231(f), 6698, and 7203.

(b) Foreign partnerships—(1) General

rule. A foreign partnership is not required

to file a partnership return, if the foreign

partnership does not have gross income

that is (or is treated as) effectively connected with the conduct of a trade or business within the United States (ECI) and

does not have gross income (including

gains) derived from sources within the

United States (U.S.-source income). Except as provided in paragraphs (b)(2) and

(3) of this section, a foreign partnership

November 29, 1999

that has ECI or has U.S.-source income

that is not ECI must file a partnership return for its taxable year in accordance

with the rules for domestic partnerships in

paragraph (a) of this section.

(2) Foreign partnerships with de minimis U.S.-source income and de minimis

U.S. partners. A foreign partnership

(other than a withholding foreign partnership, as defined in §1.1441–5(c)(2)(i))

that has $20,000 or less of U.S.-source income and has no ECI during its taxable

year is not required to file a partnership

return if, at no time during the partnership

taxable year, one percent or more of any

item of partnership income, gain, loss, deduction, or credit is allocable in the aggregate to direct United States partners. The

United States partners must directly report their shares of the allocable items of

partnership income, gain, loss, deduction,

and credit.

(3) Filing obligations for certain other

foreign partnerships with no ECI—(i)

General requirements for modified filing

obligations. A foreign partnership will be

subject to the modified filing obligations

in paragraphs (b)(3)(ii) and (iii) of this

section if, in addition to satisfying the requirements contained in paragraph

(b)(3)(ii) and (iii) of this section—

(A) The partnership is not a withholding

foreign partnership as defined in

§1.1441–5(c)(2)(i);

(B) Forms 1042 and 1042-S are filed by

the partnership with respect to the

amounts subject to reporting under

§1.1461–1(b) and (c), unless the partnership is not required to file such returns

under §1.1461–1(b)(2) and (c)(4), in

which case Forms 1042 and 1042-S must

be filed by another withholding agent or

agents; and

(C) The tax liability of the partners with

respect to such amounts has been fully satisfied by the withholding of tax at the

source, if applicable, under chapter 3 of

the Internal Revenue Code.

(ii) Foreign partnerships with U.S.source income but no U.S. partners. A

foreign partnership that has U.S.-source

income is not required to file a partnership

return if the partnership has no ECI and no

United States partners at any time during

the partnership’s taxable year.

(iii) Foreign partnerships with U.S.source income and U.S. partners. Except

as provided in paragraph (b)(2) of this sec-

596

tion, a foreign partnership with one or

more United States partners that has U.S.source income but no ECI must file a partnership return. However, such a foreign

partnership need not file Statements of

Partner’s Share of Income, Credit, Deduction, Etc. (Schedules K-1) for any partners

other than its direct United States partners

and its passthrough partners (whether U.S.

or foreign) through which United States

partners hold an interest in the foreign

partnership. Schedules K-1 that are not

excepted from filing under this paragraph

(b)(3)(iii) must contain the same information required of a domestic partnership filing under paragraph (a) of this section.

(4) Information or returns required of

partners who are United States persons—

(i) In general. If a United States person is

a partner in a partnership that is not required to file a partnership return, the district director or director of the relevant service center may require that person to

render the statements or provide the information necessary to verify the accuracy of

the reporting by that person of any items

of partnership income, gain, loss, deduction, or credit.

(ii) Controlled foreign partnerships.

Certain United States persons who are

partners in a foreign partnership controlled (within the meaning of section

6038(e)(1)) by United States persons may

be required to provide information with

respect to the partnership under section

6038.

(5) Certain partnership elections. For

a partnership that is not otherwise required to file a partnership return, if an

election that can only be made by the

partnership under section 703 (affecting

the computation of taxable income derived from a partnership) is to be made by

or for the partnership, a return on the form

prescribed for the partnership return must

be filed for the partnership. Unless otherwise provided in the form or the accompanying instructions, a return filed solely

to make an election need only contain a

written statement citing paragraph

(b)(5)(ii) of this section, listing the name

and address of the partnership making the

election, and clearly identifying the specific election being made. A return filed

under paragraph (b)(5)(ii) of this section

solely to make an election is not a partnership return. Thus, such a return is not a

return filed under section 6031(a) for pur-

1999–48 I.R.B.

poses of sections 6501 (except regarding

the specific election issue), 6231(a)(1)(A), and 6233. The return must be

signed by—

(i) Each partner that is a partner in the

partnership at the time the election is

made; or

(ii) Any partner of the partnership who

is authorized (under local law or the partnership’s organizational documents) to

make the election and who represents to

having such authorization under penalties

of perjury.

(6) Exclusion for certain organizations.

The return requirement of section 6031

and this section does not apply to the International Telecommunications Satellite

Organization, the International Maritime

Satellite Organization, or any organization that is a successor of either.

(c) Partnerships excluded from the application of subchapter K of the Internal

Revenue Code—(1) Wholly excluded—(i)

Year of election. An eligible partnership

as described in §1.761-2(a) that elects to

be excluded from all the provisions of

subchapter K of chapter 1 of the Internal

Revenue Code in the manner specified by

§1.761–2(b)(2)(i) must timely file the

form prescribed for the partnership return

for the taxable year for which the election

is made. In lieu of the information otherwise required, the return must contain or

be accompanied by the information required by §1.761–2(b)(2)(i).

(ii) Subsequent years. Except as otherwise provided in paragraph (c)(1)(i) of

this section, an eligible partnership that

elects to be wholly excluded from the application of subchapter K is not required

to file a partnership return.

(2) Deemed excluded. An eligible partnership that is deemed to have elected exclusion from the application of subchapter

K beginning with its first taxable year, as

specified in §1.761–2(b)(2)(ii), is not required to file a partnership return.

(d) Definitions—(1) Partnership. For

the meaning of the term partnership, see

§1.761–1(a).

(2) United States person. In applying

this section, a United States person is a

person described in section 7701(a)(30);

the government of the United States, a

State, or the District of Columbia (including an agency or instrumentality thereof);

or a corporation created or organized in

Guam, the Commonwealth of Northern

1999–48 I.R.B.

Mariana Islands, the U.S. Virgin Islands,

and American Samoa, if the requirements

of section 881(b)(1)(A), (B), and (C) are

met for such corporation. The term does

not include an alien individual who is a

resident of Puerto Rico, Guam, the Commonwealth of Northern Mariana Islands,

the U.S. Virgin Islands, or American

Samoa,

as

determined

under

§301.7701(b)–1(d) of this chapter.

(3) United States partner. In applying

this section, a United States partner is any

United States person who holds a direct or

indirect interest in the partnership.

(4) Indirect interest. An indirect interest is any interest held through one or

more passthrough partners, as defined in

section 6231(a)(9).

(e) Procedural requirements—(1)

Place for filing. The return of a partnership must be filed with the service center

prescribed in the relevant IRS revenue

procedure, publication, form, or instructions to the form (see §601.601(d)(2)).

(2) Time for filing. The return of a partnership must be filed on or before the fifteenth day of the fourth month following

the close of the taxable year of the partnership.

(3) Magnetic media filing. For magnetic media filing requirements with respect to partnerships, see section

6011(e)(2) and the regulations thereunder.

(f) Effective dates. This section applies

to taxable years of a partnership beginning after December 31, 1999, except that

paragraph (b)(3) of this section applies to

taxable years of a foreign partnership beginning after December 31, 2000.

Par. 4. Section 1.6063–1 is amended

by adding paragraph (c) to read as follows:

§1.6063–1 Signing of returns,

statements, and other documents made by

partnerships.

* * * * *

(c) Certain partnership elections—(1)

In general. For rules regarding the authority of a partner to sign a partnership

return filed solely for the purpose of making certain partnership-level elections, see

§1.6031(a)–1(b)(5)(ii).

(2) Effective date. Paragraph (c) of this

section applies to taxable years of a partnership beginning after December 31,

1999.

597

PART 301—PROCEDURE AND

ADMINISTRATION

Par. 5. The authority citation for part

301 continues to read in part as follows:

Authority: 26 U.S.C. 7805 * * *

§301.6031–1 [Removed]

Par. 6. Section 301.6031–1 is removed.

Par. 7. Section 301.6031(a)–1 is added

to read as follows:

§301.6031(a)–1 Return of partnership

income.

For provisions relating to the requirement of returns of partnership income, see

§1.6031(a)–1 of this chapter.

PART 602—OMB CONTROL

NUMBERS UNDER THE

PAPERWORK REDUCTION ACT

Par. 8. The authority citation for part

602 continues to read as follows:

Authority: 26 U.S.C. 7805.

Par. 9. In §602.101, paragraph (b) is

amended by removing the entry “1.6031–

1” from the table and adding the entry

“1.6031(a)–1 . . . . 1545–1583” in numerical order to the table to read as follows:

§602.101 OMB Control numbers.

* * * * *

(b) * * *

CFR part or section

where identified

and described

Current OMB

control No.

* * * * *

1.6031(a)–1 . . . . . . . . . . . . . 1545–1583

* * * * *

Robert E. Wenzel,

Deputy Commissioner

of Internal Revenue.

Approved October 29, 1999.

Jonathan Talisman,

Acting Assistant Secretary

of the Treasury.

(Filed by the Office of the Federal Register on November 10, 1999, 8:45 a.m., and published in the

issue of the Federal Register for November 12,

1999, 64 F.R. 61498)

November 29, 1999

Part III. Administrative, Procedural, and Miscellaneous

26 CFR 601.201: Rulings and determination letters.

(Also sections 61, 403(a), 403(b), 408(b), 817(h),

818(a); 1.61–1, 1.403(a)–1, 1.403(b)–1, 1.408–1,

1.817–5, 1.818–2)

Rev. Proc. 99–44

SECTION 1. PURPOSE

This revenue procedure sets forth the

circumstances under which the Internal

Revenue Service will treat a contract as

an annuity contract described in

§§ 403(a), 403(b) or 408(b) of the Internal

Revenue Code (“Code”) notwithstanding

that contract premiums are invested at the

direction of the contract holder in publicly

available securities.

SECTION 2. BACKGROUND

Rev. Rul. 77–85, 1977–1 C.B. 12, concludes that if a contract holder retains

control over the assets in a custodial account associated with a purported “annuity” contract, then the contract holder is

the owner of those assets for federal income tax purposes. The contract holder’s

gross income, therefore, includes any interest, dividends, and other income generated by those assets. In the ruling, the

contract holder’s control over the assets in

the custodial account is manifested by the

ability to direct the custodian: (1) to invest amounts in the account in any of an

approved list of investments, and (2) to

sell, purchase, or exchange securities or

other assets held in the account. Through

the interaction of the custodial agreement

and the annuity contract, the contract

holder enjoys any increase or suffers any

decrease in the value of the assets in the

account as well as any income from the

assets. The contract holder also has the

right to vote account securities either

through the custodian or personally. Rev.

Rul. 77–85 generally applies to contracts

entered into after March 9, 1977.

In Rev. Rul. 80–274, 1980–2 C.B. 27,

an insurance company and a savings and

loan association enter into a group annuity contract under which the association’s

depositors are issued annuity certificates.

The certificate holders’ premiums (net of

sales and other expenses) are invested in

certificates of deposit issued by the savings and loan association, with maturity

dates designated by the certificate hold-

November 29, 1999

ers. When a certificate of deposit matures, the proceeds generally are invested

in another certificate of deposit with the

savings and loan association. Prior to the

annuity starting date, a holder of an annuity certificate can withdraw part or all of

his or her investment (including the investment income thereon) by partially or

completely surrendering the certificate.

Due to fees imposed by the insurance

company, annuity certificate holders receive a lower rate of return than if they

were to invest directly in the certificates

of deposit. The ruling concludes, however, that, prior to the annuity starting

date, the position of holders of the annuity

certificates is substantially identical to

what their position would have been if investments were directly maintained or established with the savings and loan association, with the insurance company

acting merely as a conduit.

Rev. Rul. 81–225, 1981–2 C.B. 12, analyzes five situations involving purported

variable “annuity” contracts. In four of

the situations, the ruling concludes that

the contracts are not annuity contracts described in §§ 403(a), 403(b), or 408(b)

and that prior to the annuity starting date

the contract holders are the owners of the

assets held by the insurance company

with regard to the contracts. In these situations, the insurance company holds

shares of mutual funds that are directly or

indirectly available to the public. In the

fifth situation, the contract holder can invest only in a non-publicly-available mutual fund managed by the insurance company or one of its affiliates. The shares in

that mutual fund are available only

through the purchase of an annuity contract. In this situation, the ruling concludes that the insurance company is

treated as the owner of the mutual fund

shares held by the company for the contracts. Rev. Rul. 80–274 did not address

the treatment of contracts described in

§§ 403(a), 403(b) or 408(b). For that reason, Rev. Rul. 81–225 contains a special

transition rule for such contracts. This

rule provides that any contract entered

into on or before September 25, 1981, is

treated as an annuity contract if the

arrangement would have met the requirements imposed by those sections without

598

taking the holding or rationale of Rev.

Rul. 81–225 into account, and no contributions are made on behalf of any individual who was not included under the

contract on or before September 25, 1981.

In Rev. Rul. 82–54, 1982–1 C.B. 11, a

variable annuity contract holder can direct

that the consideration paid for the contracts be invested in any or all of three

non-publicly-available mutual funds managed by the insurance company. Each of

the funds has a different general investment strategy. One fund invests primarily

in common stocks, another in bonds, and

the third in money market instruments. A

contract holder is free to allocate payments among the three funds and to reallocate account values among the three

funds at any time before the annuity starting date. The ruling concludes that the

contract holder’s ability to choose among

broad general investment strategies, either at the time of the initial purchase of

the annuity contract or subsequent

thereto, does not constitute sufficient control over individual investment decisions

so as to cause the contract holder to be the

owner of the mutual fund shares.

Rev. Rul. 82–55, 1982–1 C.B. 12, clarifies that, if an annuity contract holder’s

premiums are invested in a separate account that holds mutual fund shares and

the mutual fund’s shares were originally

available to the public but are unavailable

to the public when the contract holder’s

premiums are invested, then the contract

holder is not treated as the owner of the

mutual fund shares.

In Christofferson v. United States, 749

F.2d 513 (8th Cir. 1984), an individual

purchased a purported deferred “annuity”

contract that permitted the contract holder

to allocate the consideration paid for the

contract among various mutual funds.

The contract holder could reallocate funds

among the mutual funds at any time, and

could withdraw part or all of the funds

with seven days notice. The contract also

gave the contract holder an option to purchase an immediate life annuity at guaranteed rates. The contract holder did not

have to exercise the option. The court

found that the contract holder had surrendered few of the rights of ownership or

control over the assets, and therefore con-

1999–48 I.R.B.

cluded that the contract holder was the

owner of the mutual fund shares for tax

purposes. As the contract holder could

surrender the contract for cash prior to annuitization, the possibility that the mutual

fund shares could be converted into an

immediate annuity at rates guaranteed in

the contract did not cause the contract

holder to lack ownership or control.

Section 817(h) of the Internal Revenue

Code was added by §211(a) of the Tax

Reform Act of 1984, 1984–3 (Vol. 1) C.B.

259–60, effective for taxable years beginning after December 31, 1983. Section

817(h) provides that a variable contract

(other than a pension plan contract described in § 818(a)) is not treated as a life

insurance, endowment, or annuity contract if the investments of a segregated

asset account upon which the contract is

based are not adequately diversified in accordance with regulations prescribed by

the Secretary. Pension plan contracts described in § 818(a) are subject to a variety

of statutory limits, including limits on annual contributions, that do not apply to

other variable contracts.

The legislative history explains the purpose underlying the § 817(h) diversification requirement as follows:

In authorizing Treasury to prescribe

diversification standards, the conferees intend that standards be designed

to deny annuity or life insurance

treatment for investments that are

publicly available to investors and

investments that are made, in effect,

at the direction of the investor.

H.R. Conf. Rep. No. 861, 98th Cong., 2d

Sess. 1055, 1984–3 (Vol. 2) C.B. 309.

1999–48 I.R.B.

Section 1.817–5 of the Income Tax

Regulations provides guidance related to

the minimum level of diversification applicable to the investments underlying

variable annuity and life insurance contracts. Satisfying the diversification requirements, however, does not prevent a

contract holder’s control of the investments of a segregated asset account from

causing the contract holder, rather than

the insurance company, to be treated as

the owner of the assets in the account.

SECTION 3. SCOPE

This revenue procedure applies to a

contract that otherwise would qualify as

an annuity contract for purposes of

§§ 403(a) or 403(b), or as an individual retirement annuity for purposes of § 408(b),

but for the fact that contract premiums are

invested at the direction of the contract

holder in publicly available securities.

SECTION 4. APPLICATION

Notwithstanding that contract premiums are invested at the contract holder’s

direction in publicly available securities,

the Service will treat a contract described

in section 3 of this revenue procedure as

an annuity contract and will not treat the

contract holder as owning the assets associated with the contract, provided the following conditions are met:

1. For a contract that is intended to

qualify as an annuity contract for purposes of §§ 403(a) or 403(b), no additional federal tax liability would have

been incurred if the employer of the contract holder had instead paid an amount

599

into a trust or a custodial account in an arrangement that satisfied the requirements

of §§ 401(a) or 403(b)(7)(A), respectively; or

2. For a contract that is intended to

qualify as an individual retirement annuity for purposes of § 408(b), no additional

federal tax liability would have been incurred if consideration for the contract

had instead been held as part of a trust

that would satisfy the requirements of

§ 408(a), except that the general account

of an insurance company shall be treated

as a common investment fund for purposes of satisfying § 408(a)(5).

EFFECTIVE DATE

This revenue procedure is effective on

November 16,1999, with respect to all

taxable years.

Under the authority of § 7805(b) of the

Code, this revenue procedure will not be

applied adversely to an issuer or holder of

a contract issued before November 16,

1999.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 81–225 is modified.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Katherine Hossofsky of the

Office of Assistant Chief Counsel (Financial Institutions & Products). For further

information regarding this revenue procedure, contract Ms. Hossofsky on (202)

622-3477 (not a toll-free call).

November 29, 1999

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 ap-

plies 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.

Abbreviations

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contribution 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.—Internal 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 Procedral 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.

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.

November 29, 1999

i

1999–48 I.R.B.

Numerical Finding List1

Bulletins 1999–27 through 1999–47

Announcements:

99–47, 1999–28 I.R.B. 29

99–64, 1999–27 I.R.B. 7

99–65, 1999–27 I.R.B. 9

99–66, 1999–27 I.R.B. 9

99–67, 1999–28 I.R.B. 31

99–68, 1999–28 I.R.B. 31

99–69, 1999–28 I.R.B. 33

99–70, 1999–29 I.R.B. 118

99–71, 1999–31 I.R.B. 223

99–72, 1999–30 I.R.B. 132

99–73, 1999–30 I.R.B. 133

99–74, 1999–30 I.R.B. 133

99–75, 1999–30 I.R.B. 134

99–76, 1999–31 I.R.B. 223

99–77, 1999–32 I.R.B. 243

99–78, 1999–31 I.R.B. 229

99–79, 1999–31 I.R.B. 229

99–80, 1999–34 I.R.B. 310

99–81, 1999–32 I.R.B. 244

99–82, 1999–32 I.R.B. 244

99–83, 1999–32 I.R.B. 245

99–84, 1999–33 I.R.B. 248

99–85, 1999–33 I.R.B. 248

99–86, 1999–35 I.R.B. 332

99–87, 1999–35 I.R.B. 333

99–88, 1999–36 I.R.B. 407

99–89, 1999–36 I.R.B. 408

99–90, 1999–36 I.R.B. 409

99–91, 1999–37 I.R.B. 421

99–92, 1999–38 I.R.B. 433

99–93, 1999–36 I.R.B. 409

99–94, 1999–39 I.R.B. 437

99–95, 1999–42 I.R.B. 520

99–96, 1999–41 I.R.B. 504

99–97, 1999–41 I.R.B. 505

99–98, 1999–42 I.R.B. 520

99–99, 1999–42 I.R.B. 522

99–100, 1999–42 I.R.B. 522

99–101, 1999–43 I.R.B. 544

99–102, 1999–43 I.R.B. 545

99–103, 1999–43 I.R.B. 546

99–104, 1999–44 I.R.B. 555

99–105, 1999–44 I.R.B. 555

99–106, 1999–45 I.R.B. 561

99–107, 1999–45 I.R.B. 561

99–108, 1999–46 I.R.B. 573

99–109, 1999–46 I.R.B. 573

99–110, 1999–46 I.R.B. 574

99–111, 1999–47 I.R.B. 587

Notices:

99–34, 1999–35 I.R.B. 323

99–35, 1999–28 I.R.B. 26

99–37, 1999–30 I.R.B. 124

99–38, 1999–31 I.R.B. 138

99–39, 1999–34 I.R.B. 313

99–40, 1999–35 I.R.B. 324

99–41, 1999–35 I.R.B. 325

99–42, 1999–35 I.R.B. 325

99–43, 1999–36 I.R.B. 344

99–44, 1999–35 I.R.B. 326

99–45, 1999–37 I.R.B. 415

99–46, 1999–37 I.R.B. 415

99–47, 1999–36 I.R.B. 391

Notices—Continued

99–48, 1999–38 I.R.B. 429

99–49, 1999–39 I.R.B. 436

99–50, 1999–40 I.R.B. 444

99–51, 1999–40 I.R.B. 447

99–52, 1999–43 I.R.B. 525

99–53, 1999–46 I.R.B. 565

99–54, 1999–47 I.R.B. 579

Proposed Regulations:

REG–252487–96, 1999–34 I.R.B. 303

REG–101519–97, 1999–29 I.R.B. 114

REG–107069–97, 1999–36 I.R.B. 346

REG–121063–97, 1999–43 I.R.B. 540

REG–106010–98, 1999–40 I.R.B. 493

REG–106527–98, 1999–34 I.R.B. 304

REG–108287–98, 1999–28 I.R.B. 27

REG–113526–98, 1999–37 I.R.B. 417

REG–113909–98, 1999–30 I.R.B. 125

REG–116733–98, 1999–36 I.R.B. 392

REG–116991–98, 1999–32 I.R.B. 242

REG–121946–98, 1999–36 I.R.B. 403

REG–105237–99, 1999–35 I.R.B. 331

REG–105327–99, 1999–29 I.R.B. 117

REG–105565–99, 1999–37 I.R.B. 419

REG–115932–99, 1999–47 I.R.B. 583

REG–116125–99, 1999–44 I.R.B. 552

Revenue Rulings—Continued

99–46, 1999–45 I.R.B. 557

Treasury Decisions:

8822, 1999–27 I.R.B. 5

8823, 1999–29 I.R.B. 34

8824, 1999–29 I.R.B. 62

8825, 1999–28 I.R.B. 19

8826, 1999–29 I.R.B. 107

8827, 1999–30 I.R.B. 120

8828, 1999–30 I.R.B. 120

8829, 1999–32 I.R.B. 235

8830, 1999–38 I.R.B. 430

8831, 1999–34 I.R.B. 264

8832, 1999–35 I.R.B. 315

8833, 1999–36 I.R.B. 338

8834, 1999–34 I.R.B. 251

8835, 1999–35 I.R.B. 317

8836, 1999–37 I.R.B. 411

8837, 1999–38 I.R.B. 426

8838, 1999–38 I.R.B. 424

8839, 1999–41 I.R.B. 498

8840, 1999–47 I.R.B. 575

8842, 1999–47 I.R.B. 576

Railroad Retirement Quarterly Rate:

1999–45 I.R.B. 560

1999–46 I.R.B. 563

Revenue Procedures:

99–28, 1999–29 I.R.B. 109

99–29, 1999–31 I.R.B. 138

99–30, 1999–31 I.R.B. 221

99–31, 1999–34 I.R.B. 280

99–32, 1999–34 I.R.B. 296

99–33, 1999–34 I.R.B. 301

99–34, 1999–40 I.R.B. 450

99–35, 1999–41 I.R.B. 501

99–36, 1999–42 I.R.B. 509

99–37, 1999–42 I.R.B. 517

99–38, 1999–43 I.R.B. 525

99–39, 1999–43 I.R.B. 532

99–40, 1999–46 I.R.B. 565

99–41, 1999–46 I.R.B. 566

99–42, 1999–46 I.R.B. 568

99–43, 1999–47 I.R.B. 579

Revenue Rulings:

99–29, 1999–27 I.R.B. 3

99–30, 1999–28 I.R.B. 24

99–31, 1999–37 I.R.B. 410

99–32, 1999–31 I.R.B. 135

99–33, 1999–34 I.R.B. 251

99–34, 1999–33 I.R.B. 247

99–35, 1999–34 I.R.B. 278

99–36, 1999–35 I.R.B. 319

99–37, 1999–36 I.R.B. 336

99–38, 1999–36 I.R.B. 335

99–39, 1999–38 I.R.B. 424

99–40, 1999–40 I.R.B. 441

99–41, 1999–40 I.R.B. 439

99–42, 1999–41 I.R.B. 497

99–43, 1999–42 I.R.B. 506

99–44, 1999–44 I.R.B. 549

99–45, 1999–45 I.R.B. 558

1 A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 1999–1 through 1999–26

is in Internal Revenue Bulletin 1999–27, dated July

6, 1999.

1999–48 I.R.B.

ii

November 29, 1999

Finding List of Current Action on

Previously Published Items1

Bulletins 1999–27 through 1999–47

Announcements:

99–5

Modified by

Ann. 99–106, 1999–45 I.R.B. 561

99–57

Modified by

Ann. 99–104, 1999–44 I.R.B. 555

99–59

Corrected by

Ann. 99–67, 1999–28 I.R.B. 31

Notices:

83–10

Modified by

Notice 99–44, 1999–35 I.R.B. 326

96–64

Modified by

Notice 99–40, 1999–35 I.R.B. 324

97–26

Modified by

Notice 99–41, 1999–35 I.R.B. 325

97–50

Modified and superseded by

Notice 99–41, 1999–35 I.R.B. 325

97–73

Modified by

Notice 99–37, 1999–30 I.R.B. 124

98–7

Modified by

Notice 99–37, 1999–30 I.R.B. 124

98–46

Modified by

Notice 99–37, 1999–30 I.R.B. 124

98–47

Modified and superseded by

Notice 99–41, 1999–35 I.R.B. 325

98–54

Modified by

Notice 99–37, 1999–30 I.R.B. 124

98–59

Modified by

Notice 99–37, 1999–30 I.R.B. 124

Proposed Regulations:

REG–208156–91

Corrected by

Ann. 99–65, 1999–27 I.R.B. 9

Revenue Procedures:

65–17

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

Revenue Procedures—Continued

Revenue Rulings—Continued

71–35

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

84–58

Modified and superseded by

Rev. Rul. 99–40, 1999–40 I.R.B. 441

72–22

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

88–98

Modified and superseded by

Rev. Rul. 99–40, 1999–40 I.R.B. 441

72–46

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

99–23

Corrected by

Ann. 99–89, 1999–36 I.R.B. 408

72–48

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

Treasury Decisions:

72–53

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

89–48

Obsoleted (after Jan. 31, 2000) by

Notice 99–42, 1999–35 I.R.B. 325

89–49

Obsoleted (after Jan. 31, 2000) by

Notice 99–42, 1999–35 I.R.B. 325

96–9

Superseded by

Rev. Proc. 99–28, 1999–29 I.R.B. 109

96–17

Modified by

Rev. Proc. 99–39, 1999–43 I.R.B. 532

96–47

Amplified and superseded by

Rev. Proc. 99–40, 1999–46 I.R.B. 565

97–19

Modified by

Notice 99–41, 1999–35 I.R.B. 325

97–47

Amplified, clarified, modified, and superseded by

Rev. Proc. 99–39, 1999–43 I.R.B. 532

98–22

Clarified and supplemented by

Rev. Proc. 99–31, 1999–34 I.R.B. 280

8476

Corrected by

Ann. 99–74, 1999–30 I.R.B. 133

8742

Corrected by

Ann. 99–73, 1999–30 I.R.B. 133

8793

Corrected by

Ann. 99–75, 1999–30 I.R.B. 134

8805

Corrected by

Ann. 99–66, 1999–27 I.R.B. 9

8806

Corrected by

Ann. 99–84, 1999–33 I.R.B. 248

8819

Corrected by

Ann. 99–47, 1999–28 I.R.B. 29

8823

Corrected by

Ann. 99–86, 1999–35 I.R.B. 332

8825

Corrected by

Ann. 99–100, 1999–42 I.R.B. 522

8827

Corrected by

Ann. 99–111, 1999–47 I.R.B. 587

98–35

Superseded by

Rev. Proc. 99–29, 1999–31 I.R.B. 138

98–37

Superseded by

Rev. Proc. 99–34, 1999–40 I.R.B. 450

98–63

Modified by Ann. 99–7 and superseded by

Rev. Proc. 99–38, 1999–43 I.R.B. 525

99–19

Modified and superseded by

Rev. Proc. 99–43, 1999–47 I.R.B. 579

Revenue Rulings:

65–31

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

77–475

Modified and superseded by

Rev. Rul. 99–40, 1999–40 I.R.B. 441

70–23

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

82–80

Superseded by

Rev. Proc. 99–32, 1999–34 I.R.B. 296

1 A cumulative finding list of actions published in

Internal Revenue Bulletins 1999–1 through 1999–26

is in Internal Revenue Bulletin 1999–27, dated July

6, 1999.

November 29, 1999

iii

1999–48 I.R.B.

INTERNAL REVENUE BULLETIN

The Introduction at the beginning of this issue describes the purpose and content of this publication. The weekly Internal Revenue

Bulletin is sold on a yearly subscription basis by the Superintendent of Documents. Current subscribers are notified by the

Superintendent of Documents when their subscriptions must be renewed.

CUMULATIVE BULLETINS

The contents of this weekly Bulletin are consolidated semiannually into a permanent, indexed, Cumulative Bulletin. These are

sold on a single copy basis and are not included as part of the subscription to the Internal Revenue Bulletin. Subscribers to the weekly Bulletin are notified when copies of the Cumulative Bulletin are available. Certain issues of Cumulative Bulletins are out of print

and are not available. Persons desiring available Cumulative Bulletins, which are listed on the reverse, may purchase them from the

Superintendent of Documents.

HOW TO ORDER

Check the publications and/or subscription(s) desired on the reverse, complete the order blank, enclose the proper remittance,

detach entire page, and mail to the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402. Please

allow two to six weeks, plus mailing time, for delivery.

WE WELCOME COMMENTS ABOUT THE

INTERNAL REVENUE BULLETIN

If you have comments concerning the format or production of the Internal Revenue Bulletin or suggestions for improving it, we

would be pleased to hear from you. You can e-mail us your suggestions or comments through the IRS Internet Home Page

(www.irs.ustreas.gov) or write to the IRS Bulletin Unit, OP:FS:FP:P:1, Room 5617, 1111 Constitution Avenue NW, Washington,

DC 20224.