Bulletin No. 1997–39

Internal Revenue

bulletin

Bulletin No. 1997–39

September 29, 1997

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

Rev. Rul. 97–39, page 4.

Mark-to-market accounting method for dealers in

securities. This ruling provides guidance to enable taxpayers to comply with the mark-to-market requirements of section 475 of the Code. Rev. Ruls. 94–7 and 93–76 clarified,

modified, partially obsoleted, and superseded.

Rev. Rul. 97–40, page 8.

change accounting methods is provided to certain taxpayers

that become subject to section 475(a) of the Code. In order

to receive automatic consent, the taxpayer must file a completed Form 3115, including a list of securities identified

under section 475(b)(2), in the manner provided in this revenue procedure.

EXEMPT ORGANIZATIONS

Interest rates; underpayments and overpayments. The

rate of interest determined under section 6621 of the Code

for the calendar quarter beginning October 1, 1997, will be

8 percent for overpayments, 9 percent for underpayments,

and 11 percent for large corporate underpayments. The rate

of interest paid on the portion of a corporate overpayment

exceeding $10,000 is 6.5 percent.

Announcement 97–98, page 15.

Rev. Proc. 97–43, page 12.

Announcement 97–96, page 15.

Consent to change accounting method to comply with

section 475 mark-to-market rules. Automatic consent to

The Service announces the number of medical savings accounts established as of June 30, 1997.

Finding Lists begin on page 18.

Department of the Treasury

Internal Revenue Service

A list is given of organizations now classified as private foundations.

ADMINISTRATIVE

Mission of the Service

ucts and services; and perform in a manner warranting

the highest degree of public confidence in our integrity, efficiency, and fairness.

The purpose of the Internal Revenue Service is to collect

the proper amount of tax revenue at the least cost; serve

the public by continually improving the quality of our prod-

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

At the same time, the examining officer should never hesitate to raise a meritorious issue. It is also important that

care be exercised not to raise an issue or to ask a court to

adopt a position inconsistent with an established Service

position.

The function of the Internal Revenue Service is to administer the Internal Revenue Code. Tax policy for raising revenue

is determined by Congress.

With this in mind, it is the duty of the Service to carry out that

policy by correctly applying the laws enacted by Congress;

to determine the reasonable meaning of various Code provisions in light of the Congressional purpose in enacting them;

and to perform this work in a fair and impartial manner, with

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

bounds of law and sound administration. It should, however, be vigorous in requiring compliance with law and it

should be relentless in its attack on unreal tax devices and

fraud.

At the heart of administration is interpretation of the Code. It

is the responsibility of each person in the Service, charged

with the duty of interpreting the law, to try to find the true

meaning of the statutory provision and not to adopt a

strained construction in the belief that he or she is “protecting the revenue.” The revenue is properly protected only

when we ascertain and apply the true meaning of the statute.

2

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 of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold

on a single-copy basis.

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.

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.

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).

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.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking

and the disbarment and suspension list included in this part,

none of these announcements are consolidated in the Cumulative Bulletins.

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-

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 quarterly and

semiannual basis, and are published in the first Bulletin of the

succeeding quarterly and 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.

3

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

Section 446.—General Rule for

Methods of Accounting

26 CFR 1.446–1: General rule for methods of

accounting.

Questions and answers about the application of

section 475 and the regulations thereunder. See Rev.

Rul. 97–39, page 4.

26 CFR 1.446–1: General rule for methods of

accounting.

What information must a taxpayer provide in

order to obtain automatic consent to change accounting method when section 475(a) becomes applicable as a result of the taxpayer making an election (i) to treat transactions within a consolidated

group as transactions with customers as provided by

section 1.475(c)–1(a), or (ii) not to be governed by

the exemptions from the status of a dealer in securities provided by section 1.475(c)–1(b) or –1(c)? See

Rev. Proc. 97–43, page 12.

Section 475.—Mark-to-Market

Accounting Method for Dealers

in Securities

26 CFR 1.475(b)–2: Exemptions—identification

requirements. (Also §§ 446, 475, 7805; 1.446–1,

1.475(c)–1, 301.7805–1.)

Mark-to-market accounting method

for dealers in securities. This ruling provides guidance to enable taxpayers to

comply with the mark-to-market requirements of section 475 of the Code. Rev.

Ruls. 94–7 and 93–76 clarified, modified,

partially obsoleted, and superseded.

Rev. Rul. 97–39

PURPOSE

This revenue ruling provides guidance

under § 475 of the Internal Revenue Code

to enable taxpayers to comply with the

mark-to-market requirements of § 475.

Rev. Rul. 93–76, 1993–2 C.B. 235 (which

was previously modified by Rev. Rul.

94–7, 1994–1 C.B. 151), is clarified,

modified, partially obsoleted, and superseded.

LAW

Section 475 of the Code was enacted

on August 10, 1993, in the Omnibus Budget Reconciliation Act of 1993 (the

“1993 Act”), section 13223, 1993-3 C.B.

1, 69. It requires mark-to-market accounting treatment for certain securities

September 29, 1997

held by a “dealer in securities” as defined

in § 475(c)(1). This requirement is effective for all taxable years ending on or

after December 31, 1993. Section 475

was amended on August 5, 1997, in the

Taxpayer Relief Act of 1997 (the “1997

Act”), section 1001(b) (redesignating

old § 475(e) as § 475(g) and adding new

§ 475(e) and (f) to allow dealers in commodities and traders in securities and

commodities to elect mark-to-market accounting, effective for taxable years ending after August 5, 1997). This revenue

ruling is limited to issues arising under

the 1993 Act and does not address issues

arising under the 1997 Act.

Section 475(a) sets forth two mark-tomarket rules. First, any security that is inventory in the hands of a dealer must be

included in inventory at its fair market

value. Second, any security that is not inventory in the hands of a dealer and that is

held at the close of any taxable year is

treated as sold by the dealer for its fair

market value on the last business day of

that taxable year, and any gain or loss is

required to be taken into account for that

taxable year.

Section 475(b)(1) provides that the

mark-to-market rules do not apply to: (1)

any security held for investment; (2) any

evidence of indebtedness that is acquired

(including originated), or any obligation

to acquire an evidence of indebtedness

that is entered into, by a dealer in the ordinary course of its trade or business, but

only if the evidence of indebtedness or

obligation to acquire an evidence of indebtedness is not held for sale; (3) any

security that is a hedge with respect to a

security that is not subject to the mark-tomarket rules; and (4) any security that is

a hedge of a position, right to income, or

liability that is not a security in the hands

of the taxpayer. Under § 475(b)(2), a security must be clearly identified in the

dealer’s records as being covered by one

of the exceptions described in §

475(b)(1) before the close of the day on

which the dealer acquired, originated, or

entered into the security.

In addition to the identification requirements in § 475(b), § 475(c)(2)(F)(iii) requires a dealer in securities to identify a

position that is not a security described in

§ 475(c)(2)(A)–(E), but that is treated as a

4

security because it is a hedge with respect

to such a security.

ISSUES AND HOLDINGS

Issue 1: If a taxpayer is not otherwise a

dealer in securities within the meaning of

§ 475(c)(1) but, nevertheless, timely identifies all of its securities as being covered

by one of the exceptions in § 475(b)(1),

does that “protective identification” cause

the taxpayer to be treated as a dealer?

Holding 1: No. A taxpayer that is not a

dealer in securities within the meaning of

§ 475(c)(1) does not become a dealer in

securities or create an inference that it is a

dealer in securities by making a protective

identification of its securities.

Issue 2: Is a bank or an insurance company excepted from the mark-to-market

rules on the grounds that it is, per se, not a

dealer in securities within the meaning of

§ 475(c)(1)?

Holding 2: No. A bank or an insurance company is subject to the mark-tomarket rules if its activities bring it

within the definition of a dealer in securities in § 475(c)(1). For example, many

banks are dealers because they regularly

originate and sell loans. As another example, an insurance company that regularly makes and sells policyholder loans

is a dealer for purposes of § 475.

Issue 3: If a taxpayer’s sole business

consists of trading in securities (that is,

the taxpayer does not purchase from,

sell to, or otherwise enter into transactions with customers), is the taxpayer a

dealer in securities within the meaning

of § 475(c)?

Holding 3: No. A taxpayer whose sole

business consists of trading in securities is

not a dealer in securities within the meaning of § 475(c) because that taxpayer does

not purchase from, sell to, or enter into

transactions with, customers in the ordinary course of a trade or business.

Issue 4: Does the classification of a security under financial accounting principles, including FASB Statement No. 115

(Accounting for Certain Investments in

Debt and Equity Securities), determine

whether the security qualifies for one of

the exceptions to the mark-to-market

rules under § 475(b)(1)?

Holding 4: No. The classification of

a security under financial accounting

1997–39 I.R.B.

principles is not dispositive of the treatment of the security for federal income

tax purposes. For example, for purposes

of § 475, a security may in certain cases

qualify for the held-for-investment exception to the mark-to-market rules even

though, under applicable financial accounting principles, the security is classified as available for sale.

Issue 5: Does an identification of a security as “held for investment” under

§ 1236 serve to identify that security as

“held for investment” (within the meaning of § 475(b)(1)(A)) or as “not held for

sale” (within the meaning of

§ 475(b)(1)(B))?

Holding 5: No. Taxpayers may choose

not to identify under § 475(b)(2) some or

all of the securities that they identify

under § 1236(a)(1). (For a transitional

rule applicable to securities held as of the

close of the last taxable year ending before December 31, 1993, however, see

§ 1.475(b)–4(a) of the Income Tax Regulations.) Accordingly, even if a § 1236

identification has been made, an identification of a security or hedge is a valid

identification for purposes of § 475(b)(2)

only if it contains a specific reference to

§ 475; this specific reference, however,

may be effected by any reasonable

method. For instance, certain accounts

may be identified in such a way that placing a security or hedge in the account

identifies the security or hedge for purposes of both § 1236(a)(1) and

§ 475(b)(1)(A), (B), or (C). See Holding

6 below. See Holding 15 below for a

transitional rule that requires less specificity for identification of securities held

by certain taxpayers that were not dealers

in securities under § 1.475(c)–1T (as contained in 26 CFR part 1 revised April 1,

1996).

Issue 6: Is a dealer in securities required to use a special procedure to comply with the identification requirements

under § 475?

Holding 6: No. Unless the Commissioner otherwise prescribes, a dealer may

comply with the identification requirements under § 475 using any reasonable

method (see, for example, guidance concerning identification requirements under

§§ 988(a)(1)(B), 1221, 1236(a)(1), and

1256(e)(2)(C)). The identification, however, must be made on, and retained as

part of, the dealer’s books and records.

1997–39 I.R.B.

The dealer’s books and records must

clearly indicate the specific security or

hedge being identified, and the identification must clearly indicate that it is being

made for purposes of § 475. Alternatively, the dealer may identify specific accounts as containing only securities or

hedges that are covered by a particular exception, so that placing a security or

hedge in the account identifies the security or hedge as being covered by that exception. Under § 1.475(b)–2(a), an identification need not distinguish between an

exception under § 475(b)(1)(A) (concerning certain securities held for investment)

and one under § 475(b)(1)(B) (concerning

securities not held for sale). Exceptions

under either of these provisions, however,

must be distinguished from exceptions

under § 475(b)(1)(C) (concerning securities held as hedges).

In addition, rather than identifying specific securities or accounts as being covered by an exception described in

§ 475(b)(1), a dealer may comply with the

identification requirement under § 475(b)

by clearly indicating the specific securities or accounts that are not covered by a

particular exception (that is, indicating

that they are covered by some other exception or that they are not exempt) and

identifying all other securities or accounts

as being covered by a particular exception.

For example, a dealer may place on its

books and records a statement that, unless otherwise identified, all of its securities for which an identification is still

timely (including securities yet to be acquired) are identified as exempt under

either § 475(b)(1)(A) or (B). This statement is effective to identify under

§ 475(b)(1)(A) or (B) each security covered by its terms unless, before the expiration of the period during which the security may be timely identified, the

dealer identifies it as not exempt or as

exempt under § 475(b)(1)(C).

Analogously, under Rev. Rul. 64–160,

1964–1 (Part I) C.B. 306, modified by

Rev. Rul. 76–489, 1976–2 C.B. 250,

dealers can identify specified accounts as

containing only securities held for investment for purposes of § 1236(a)(1). Accordingly, dealers can satisfy the identification requirements of § 475(b)(2) by

unambiguously indicating that all of the

securities in one or more of these ac-

5

counts are also described, for example, in

§ 475(b)(1)(A) or (B). Once such an

identification of an account is made,

placing a security in the account identifies the security not only as being “held

for investment” for purposes of § 1236

but also as being described in the applicable subparagraph of § 475(b)(1).

Issue 7 in Rev. Rul. 93–76 concerned

transitional identification issues for securities acquired, originated, or entered into

between August 10, 1993, and October

31, 1993. As the transition period has

now ended, Issue 7 is obsolete and is not

reprinted in this revenue ruling.

Issue 8: If a dealer in securities originates or acquires an evidence of indebtedness in the ordinary course of a trade or

business, are there any exceptions to the

requirement that the dealer make an identification under § 475(b)(2) before the

close of the day on which it originates or

acquires the security?

Holding 8: Yes. Pending further guidance, if a financial institution (as defined

in § 265(b)(5)) originates or acquires an

evidence of indebtedness in the ordinary

course of a trade or business, an identification of the evidence of indebtedness is

timely if it is made in accordance with the

dealer’s accounting practice, but no later

than 30 calendar days after the date of

origination, or acquisition, by the financial institution. The preceding sentence

applies to any dealer in securities for evidences of indebtedness that are mortgage

loans.

Also, pending further guidance, a

dealer in securities that enters into commitments to acquire mortgage loans may

identify those commitments as being held

for investment if the dealer acquires the

mortgage loans and holds the mortgages

as investments. This identification of

commitments to acquire mortgage loans

must be made in accordance with the

dealer’s accounting practice, but no later

than 30 calendar days after the date of acquisition of the mortgage loans.

Issues 9, 10, and 11 discussed transitional issues concerning proper identification, computation of adjustments, and the

period over which to spread any adjustments, for taxable years that included December 31, 1993. As the transition period

has now passed, Issues 9, 10, and 11 are

obsolete and are not reprinted in this revenue ruling.

September 29, 1997

Issue 12: May a taxpayer use an

amended return to make an election under

§ 1.475(c)–1(c)(1)(ii) (which concerns

taxpayers that purchase securities from

customers but make no more than negligible sales of securities)?

Holding 12: For any taxable year for

which an original federal income tax return is filed after October 31, 1997, an

election under § 1.475(c)–1(c)(1)(ii) must

be made on an original federal income tax

return that is filed on or before the due

date (including any extensions of time) for

that return. For any taxable year for which

an original federal income tax return was

filed on or before October 31, 1997, an

election under § 1.475(c)– 1(c)(1)(ii) also

may be made on an amended return filed

not later than October 31, 1997. Not later

than December 15, 1997, compliance with

§ 475 must be reflected on an original or

amended return for every other taxable

year which is subject to the election and

the original return for which is due on or

before October 31, 1997. Note that

amended returns must be filed before the

expiration of the statute of limitations on

assessment under § 6501(a).

As is noted in Holding 17 below, a taxpayer subject to more than one exemption

must affirmatively elect out of all applicable exemptions to be treated as a dealer in

securities.

Issue 13: If a taxpayer wishes to use an

amended return to make an election out of

the customer paper exemption under

§ 1.475(c)–1(b)(4)(i)(B), by what date

must the taxpayer file the amended return?

Holding 13: Section 1.475(c)–1(b)

(4)(i)(B) provides a June 23, 1997, deadline to make the customer paper election

on an amended return. Notice 97–37,

1997–27 I.R.B. 8, provides that additional

guidance will extend that deadline. Accordingly, that deadline to file an amended

return is extended to October 31, 1997.

Not later than December 15, 1997, compliance with § 475 must be reflected on an

original or amended return for every other

taxable year which is subject to the election and the original return for which is

due on or before October 31, 1997. Note

that amended returns must be filed before

the expiration of the statute of limitations

on assessment under § 6501(a).

Issue 14: What is the general rule for

identifying a security as excepted from

mark-to-market accounting?

September 29, 1997

Holding 14: For a security to be exempt

from mark-to-market accounting, the taxpayer must make an identification that is

timely under § 475(b)(2), which generally

requires a security to be identified before

the close of the day on which it is acquired.

For the only current exceptions to this rule,

see Holding 8 above (identifications of securities by financial institutions and dealers

in mortgages), § 1.475(b)–1(b)(4)(ii)(A)

(identification of securities to which

§ 1.475(b)–1(b)(1) ceases to apply), and

Holding 15 below (special identification

rules for taxpayers not treated as dealers

under § 1.475(c)–1T). For information

about the required specificity of the identification, see Holding 5 above.

Issue 15: If a taxpayer makes an election

out of either § 1.475(c)–1(b)(1) (customer

paper exemption) or § 1.475(c)–1(c)(1)

(negligible sales exemption) and the election has the effect of causing the taxpayer

to be treated as a dealer in securities for a

taxable year starting before the date the taxpayer filed the documentation effecting the

election (date of the election), how does the

taxpayer identify securities that were acquired before the date of the election?

Holding 15: A special identification

regime applies to taxpayers that satisfy

the following criteria:

First, the taxpayer is making an election out of the customer paper exemption,

the negligible sales exemption, or both.

Second, the taxpayer was not treated as

a dealer in securities under § 1.475(c)–1T

(as contained in 26 CFR part 1 revised

April 1, 1996).

The special identification regime applies

only to securities (“transition securities”)

for which an identification would have

been timely under the general rule (described in Holding 14 above) only if made

on or before October 31, 1997. In applying the preceding sentence, a taxpayer may

choose to substitute any earlier date that is

on or after December 24, 1996. To make

this substitution, the taxpayer must place in

its books and records no later than October

31, 1997, an unambiguous statement that

the taxpayer chooses to apply the general

identification rule described in Holding 14

for all securities acquired on or after the

specific date selected by the taxpayer.

Under the special identification regime,

a transition security was properly identified

as exempt for the purposes of § 475(b)(2)

or (c)(2)(F)(iii) if the information that is

6

contained in the taxpayer’s books and

records and that was entered substantially

contemporaneously with the date of acquisition of the transition security supports a

conclusion that the transition security was

described by § 475(b)(1)(A), (B), or (C).

This rule applies even if the information in

the books and records does not meet the

specificity that Holding 5 generally requires for identification. The status of a

transition security that was acquired before

the first day of the taxable year for which

the election is being made is determined by

examining the books and records as of the

last day of the preceding taxable year.

The taxpayer must, by October 31,

1997, place in its books and records a

statement resolving ambiguities, if any,

concerning which transition securities are

properly identified within the meaning of

the preceding paragraph. Any information that supports treating a transition security as being described in § 475(b)(2) or

(c)(2)(F)(iii) must be applied consistently.

A taxpayer, in determining whether a

transition security must be identified, must

apply the following principles: if the transition security was identified under

§ 1.1221–2 or § 1256(e) and the item

being hedged is described in

§ 475(b)(1)(C)(i) or (ii), the § 1.1221–2 or

§ 1256(e) identification constitutes an

identification for purposes of § 475(b)(2);

and, if the item being hedged was ordinary

property, as defined in § 1.1221–2, and the

taxpayer did not identify the transition security as a hedging transaction, the transition security cannot be identified under

§ 475(b)(1)(C).

If a taxpayer made a protective identification (as described in Issue 1 above) of a

transition security, and subsequent to the

protective identification the taxpayer

makes an election that causes the taxpayer

to be a dealer in securities for purposes of

§ 475, the protective identification is recognized and the taxpayer is subject to the

general rules governing identifications for

all transition securities that were eligible

to be timely identified after the date that

the taxpayer began making protective

identifications. Thus, if a transition security was properly and timely identified as

exempt from being marked to market and

remains eligible for the exemption

claimed, that transition security is not

marked to market even though § 475 applies to the taxpayer. If a transition secu-

1997–39 I.R.B.

rity was properly and timely identified

and thereafter ceases to be held for investment or as a hedge, see § 475(b)(3). If a

transition security was not eligible to be

identified as exempt, see § 475(d)(2).

Issue 16: If an issuer of an evidence of

indebtedness has the right to prepay at

any time without a penalty (for example,

a revolving credit card balance), does that

right preclude that indebtedness from

having a fair market value that is greater

than the face value of the obligation?

Holding 16: No. Securities must be

marked to fair market value based on all the

facts and circumstances. For example, in

light of contractual interest rates and general

payment history on customer obligations,

the fair market value of a customer obligation may be greater than the face amount,

even if the customer has the right to repay

the debt at its face amount at any time.

Issue 17: If a taxpayer would meet the

definition of a dealer in securities under

§ 475 but otherwise satisfies more than

one exemption from dealer status, must

the taxpayer elect out of all applicable

exemptions to be a dealer in securities

for the purpose of § 475?

Holding 17: Generally, a taxpayer must

make an election out of all applicable exemptions in order to be treated as a dealer

under § 475. A taxpayer subject to multiple exemptions from § 475 must file all

the documentation required to elect out of

each applicable exemption. Sometimes,

the documentation required for one election satisfies all of the filing requirements

for another election. For example, if a taxpayer is subject to both the customer paper

exemption under § 1.475(c)–1(b) and the

negligible sales exemption under

§ 1.475(c)–1(c), the taxpayer may make

an election under § 1.475(c)–1(b)(4) that

is effective as of January 1, 1993, and

timely file an amended 1993 federal income tax return using mark-to-market accounting for securities. The amended

1993 return itself represents an election

out of the negligible sales exemption.

Issue 18: How does a taxpayer that

is in its first year of existence elect out

of an exemption from dealer status

under § 475?

Holding 18: If a taxpayer decides for its

first year of existence to make an election

out of the negligible sales exemption to account for securities on a mark-to-market

basis, the taxpayer should attach to its orig-

1997–39 I.R.B.

inal return for that first year the following

statement: “[Insert name and taxpayer

identification number of the taxpayer]

hereby elects not to be governed by §

1.475(c)–1(c)(1)(i) of the income tax regulations for the taxable year ending [describe the last day of the year] and for subsequent taxable years.” If a taxpayer

decides for its first year of existence to

make an election out of the customer paper

exemption or to make the intragroup-customer election, the taxpayer must meet the

requirements of § 1.475(c)–1.

Issue 19: Which changes of accounting

method are covered by the consent provisions of § 13223(c)(2) of the 1993 Act?

Holding 19: Under § 13223(c)(2) of the

1993 Act, certain changes of accounting

method are treated as made with the consent of the Commissioner. This treatment

extends only to a change in method that

was effected by a taxpayer who (1) became

a dealer for the taxable year that includes

December 31, 1993, merely by virtue of

the passage of the 1993 Act, and (2) who

accounted for securities as a dealer under

§ 475 on its original federal income tax return for that year. Consent for other

changes of method to comply with § 475

must be obtained either on a taxpayer-bytaxpayer basis or as part of automatic consent contained in published guidance. See

Rev. Proc. 97–43, page 12, this Bulletin.

Issue 20: If a taxpayer is accounting

for securities by marking them to market

under § 475(a), may the taxpayer, without

the consent of the Commissioner, file a

federal income tax return for a later taxable year that does not account for securities on a mark-to-market basis?

Holding 20: No. Once a taxpayer has

used the § 475 mark-to-market method as

its method of accounting for securities,

the taxpayer may not change that method

of accounting without obtaining the consent of the Commissioner. See § 446(e).

Unless the Commissioner otherwise prescribes, to request consent the taxpayer

must comply with the requirements of

Rev. Proc. 97–27, 1997–21 I.R.B. 10. For

example, if a taxpayer accounts for securities by marking them to market because

the taxpayer made more than negligible

sales of securities and in a later year

makes only negligible sales of securities,

the taxpayer must obtain the consent of

the Commissioner to change its method of

accounting for securities. If a taxpayer

7

made no more than negligible sales of securities but, pursuant to § 1.475(c)–1(c)(1)(ii), accounted for securities on a

mark-to-market basis and the taxpayer

makes no more than negligible sales of

securities in a subsequent year, the taxpayer must obtain the consent of the

Commissioner to change its method of accounting for securities. Especially in the

latter example, consent for the change

will be granted only in unusual circumstances.

EFFECT ON OTHER DOCUMENTS

Rev. Rul. 93–76 as modified by Rev.

Rul. 94–7, is clarified, modified, partially

obsoleted, and superseded. Notice 97–37,

1997–27 I.R.B. 8, is obsoleted.

PROSPECTIVE APPLICATION

Pursuant to § 7805(b), if an identification is made on or before June 30, 1997,

and the identification complies with the

requirements set forth in the third paragraph of Holding 6 of Rev. Rul. 93-76,

the identification will not be treated as

failing to satisfy the requirements of §

475(b)(2) solely on the grounds that it

failed to identify the operative subparagraph of that provision.

PAPERWORK REDUCTION ACT

The collections of information contained in this revenue ruling have been reviewed and approved by the Office of

Management and Budget in accordance

with the Paperwork Reduction Act (44

U.S.C. 3507) under control number

1545–1558.

An agency may not conduct or sponsor,

and a person is not required to respond to,

a collection of information unless the collection of information displays a valid

control number.

The collections of information in this

revenue ruling are in sections 26 CFR

1.475(b)–2, 26 CFR 1.475(b)–4, and 26

CFR 1.475(c)–1. This information is required to facilitate the administration of §

475 of the Internal Revenue Code. This

information will be used to facilitate audits of taxpayers that elect to not be governed by certain exemptions under § 475

of the Code. The collections of information are required to obtain a benefit. The

likely respondents are business or other

for-profit institutions.

September 29, 1997

The recordkeeping burden described in

Holding 6 was reviewed and approved by

the Office of Management and Budget in

accordance with the Paperwork Reduction

Act (44 U.S.C. 3507) under control number

1545–1496.

The estimated total annual recordkeeping burden described in Holding 15 is

450,000 hours.

The estimated annual burden per

recordkeeper varies from 15 hours to 45

hours, depending on individual circumstances, with an estimated average of 22.5

hours. The estimated number of recordkeepers is 20,000.

Books or records relating to a collection

of information must be retained as long as

their contents may 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.

DRAFTING INFORMATION

The principal authors of this revenue

ruling are Pamela Lew and Robert B.

Williams of the Office of the Assistant

Chief Counsel (Financial Institutions

and Products). For further information

regarding this revenue ruling contact

Ms. Lew at (202) 622-3950 or Mr.

Williams at (202) 622-3960 (not tollfree calls)

26 CFR 1.475(c)–1: Exemptions—identification

requirements.

Questions and answers about the application of

section 475 and the regulations thereunder. See Rev.

Rul. 97–39, page 4.

26 CFR 1.475(c)–1; Definitions—dealer in

securities.

What information must a taxpayer provide in

order to obtain automatic consent to change accounting method when section 475(a) becomes applicable as a result of the taxpayer making an election (i) to treat transactions within a consolidated

group as transactions with customers as provided by

section 1.475(c)–1(a), or (ii) not to be governed by

the exemptions from the status of a dealer in securities provided by section 1.475(c)–1(b) or –1(c)? See

Rev. Proc. 97–43, page 12.

September 29, 1997

Section 6621.— Determination

of Interest Rate

26 CFR 301.6621–1: Interest rate.

Interest rates; underpayments and

overpayments. The rate of interest determined under section 6621 of the Code for

the calendar quarter beginning October 1,

1997, will be 8 percent for overpayments,

9 percent for underpayments, and 11 percent for large corporate underpayments.

The rate of interest paid on the portion of

a corporate overpayment exceeding

$10,000 is 6.5 percent.

Rev. Rul. 97–40

Section 6621 of the Internal Revenue

Code establishes different rates for interest on tax overpayments and interest on

tax underpayments. Under § 6621(a)(1),

the overpayment rate is the sum of the

federal short-term rate plus 2 percentage

points, except the rate for the portion of a

corporate overpayment of tax exceeding

$10,000 for a taxable period is the sum of

the federal short-term rate plus 0.5 of a

percentage point for interest computations

made after December 31, 1994. Under

§ 6621(a)(2), the underpayment rate is the

sum of the federal short-term rate plus 3

percentage points.

Section 6621(c) provides that for purposes of interest payable under § 6601 on

any large corporate underpayment, the underpayment rate under § 6621(a)(2) is determined by substituting “5 percentage points”

for “3 percentage points.” See § 6621(c)

and § 301.6621–3 of the Regulations on

Procedure and Administration for the definition of a large corporate underpayment

and for the rules for determining the applicable rate. Section 6621(c) and

§ 301.6621–3 are generally effective for

periods after December 31, 1990.

Section 6621(b)(1) provides that the

Secretary will determine the federal shortterm rate for the first month in each calendar quarter.

Section 6621(b)(2)(A) provides that the

federal short-term rate determined under

§ 6621(b)(1) for any month applies during

the first calendar quarter beginning after

such month.

8

Section 6621(b)(3) provides that the

federal short-term rate for any month is

the federal short-term rate determined

during such month by the Secretary in accordance with § 1274(d), rounded to the

nearest full percent (or, if a multiple of

1/2 of 1 percent, the rate is increased to

the next highest full percent).

Notice 88–59, 1988–1 C.B. 546, announced that in determining the quarterly interest rates to be used for overpayments and underpayments of tax

under § 6621, the Internal Revenue Service will use the federal short-term rate

based on daily compounding because

that rate is most consistent with § 6621

which, pursuant to § 6622, is subject to

daily compounding.

Rounded to the nearest full percent, the

federal short-term rate based on daily compounding determined during the month of

July 1997 is 6 percent. Accordingly, an

overpayment rate of 8 percent and an underpayment rate of 9 percent are established for the calendar quarter beginning

October 1, 1997. The overpayment rate

for the portion of corporate overpayments

exceeding $10,000 for the calendar quarter

beginning October 1, 1997, is 6.5 percent.

The underpayment rate for large corporate

underpayments for the calendar quarter beginning October 1, 1997, is 11 percent.

These rates apply to amounts bearing interest during that calendar quarter.

Interest factors for daily compound interest for annual rates of 6.5 percent, 8

percent, 9 percent, and 11 percent are

published in Tables 18, 21, 23, and 27 of

Rev. Proc. 95–17, 1995–1 C.B. 556, 572,

575, 577, and 581.

Annual interest rates to be compounded

daily pursuant to § 6622 that apply for

prior periods are set forth in the accompanying tables.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Marcia Rachy of the Office of

Assistant Chief Counsel (Income Tax and

Accounting). For further information regarding this revenue ruling, contact Ms.

Rachy on (202) 622-4940 (not a toll-free

call)

1997–39 I.R.B.

TABLE OF INTEREST RATES

PERIODS BEFORE JUL. 1, 1975 — PERIODS ENDING DEC. 31, 1986

OVERPAYMENTS AND UNDERPAYMENTS

PERIOD

Before Jul. 1, 1975

Jul. 1, 1975—Jan. 31, 1976

Feb. 1, 1976—Jan. 31, 1978

Feb. 1, 1978—Jan. 31, 1980

Feb. 1, 1980—Jan. 31, 1982

Feb. 1, 1982—Dec. 31, 1982

Jan. 1, 1983—Jun. 30, 1983

Jul. 1, 1983—Dec. 31, 1983

Jan. 1, 1984—Jun. 30, 1984

Jul. 1, 1984—Dec. 31, 1984

Jan. 1, 1985—Jun. 30, 1985

Jul. 1, 1985—Dec. 31, 1985

Jan. 1, 1986—Jun. 30, 1986

Jul. 1, 1986—Dec. 31, 1986

RATE

DAILY RATE TABLE

IN 1995–1 C.B.

6%

9%

7%

6%

12%

20%

16%

11%

11%

11%

13%

11%

10%

9%

Table 2, pg. 557

Table 4, pg. 559

Table 3, pg. 558

Table 2, pg. 557

Table 5, pg. 560

Table 6, pg. 560

Table 37, pg. 591

Table 27, pg. 581

Table 75, pg. 629

Table 75, pg. 629

Table 31, pg. 585

Table 27, pg. 581

Table 25, pg. 579

Table 23, pg. 577

TABLE OF INTEREST RATES

FROM JAN. 1, 1987—PRESENT

Jan. 1, 1987—Mar. 31, 1987

Apr. 1, 1987—Jun. 30, 1987

Jul. 1, 1987—Sep. 30, 1987

Oct. 1, 1987—Dec. 31, 1987

Jan. 1, 1988—Mar. 31, 1988

Apr. 1, 1988—Jun. 30, 1988

Jul. 1, 1988—Sep. 30, 1988

Oct. 1, 1988—Dec. 31, 1988

Jan. 1, 1989—Mar. 31, 1989

Apr. 1, 1989—Jun. 30, 1989

Jul. 1, 1989—Sep. 30, 1989

Oct. 1, 1989—Dec. 31, 1989

Jan. 1, 1990—Mar. 31, 1990

Apr. 1, 1990—Jun. 30, 1990

Jul. 1, 1990—Sep. 30, 1990

Oct. 1, 1990—Dec. 31, 1990

Jan. 1, 1991—Mar. 31, 1991

Apr. 1, 1991—Jun. 30, 1991

Jul. 1, 1991—Sep. 30, 1991

Oct. 1, 1991—Dec. 31, 1991

Jan. 1, 1992—Mar. 31, 1992

Apr. 1, 1992—Jun. 30, 1992

Jul. 1, 1992—Sep. 30, 1992

Oct. 1, 1992—Dec. 31, 1992

1997–39 I.R.B.

OVERPAYMENTS

RATE TABLE

PG

1995–1 C.B.

UNDERPAYMENTS

RATE TABLE

PG

1995–1 C.B.

8%

8%

8%

9%

10%

9%

9%

10%

10%

11%

11%

10%

10%

10%

10%

10%

10%

9%

9%

9%

8%

7%

7%

6%

9%

9%

9%

10%

11%

10%

10%

11%

11%

12%

12%

11%

11%

11%

11%

11%

11%

10%

10%

10%

9%

8%

8%

7%

21

21

21

23

73

71

71

73

25

27

27

25

25

25

25

25

25

23

23

23

69

67

67

65

9

575

575

575

577

627

625

625

627

579

581

581

579

579

579

579

579

579

577

577

577

623

621

621

619

23

23

23

25

75

73

73

75

27

29

29

27

27

27

27

27

27

25

25

25

71

69

69

67

577

577

577

579

629

627

627

629

581

583

583

581

581

581

581

581

581

579

579

579

625

623

623

621

September 29, 1997

TABLE OF INTEREST RATES — Continued

FROM JAN. 1, 1987—PRESENT

Jan. 1, 1993—Mar. 31, 1993

Apr. 1, 1993—Jun. 30, 1993

Jul. 1, 1993—Sep. 30, 1993

Oct. 1, 1993—Dec. 31, 1993

Jan. 1, 1994—Mar. 31, 1994

Apr. 1, 1994—Jun. 30, 1994

Jul. 1, 1994—Sep. 30, 1994

Oct. 1, 1994—Dec. 31, 1994

Jan. 1, 1995—Mar. 31, 1995

Apr. 1, 1995—Jun. 30, 1995

Jul. 1, 1995—Sep. 30, 1995

Oct. 1, 1995—Dec. 31, 1995

Jan. 1, 1996—Mar. 31, 1996

Apr. 1, 1996—Jun. 30, 1996

Jul. 1, 1996—Sep. 30, 1996

Oct. 1, 1996—Dec. 31, 1996

Jan. 1, 1997—Mar. 31, 1997

Apr. 1, 1997—Jun. 30, 1997

Jul. 1, 1997—Sep. 30, 1997

Oct. 1, 1997—Dec. 31, 1997

OVERPAYMENTS

RATE TABLE

PG

1995–1 C.B.

UNDERPAYMENTS

RATE TABLE

PG

1995–1 C.B.

6%

6%

6%

6%

6%

6%

7%

8%

8%

9%

8%

8%

8%

7%

8%

8%

8%

8%

8%

8%

7%

7%

7%

7%

7%

7%

8%

9%

9%

10%

9%

9%

9%

8%

9%

9%

9%

9%

9%

9%

19

19

19

19

19

19

21

23

23

25

23

23

71

69

71

71

23

23

23

23

RATE

TABLE

PG

1995–1 C.B.

13%

12%

12%

12%

11%

10%

10%

9%

9%

9%

9%

9%

9%

9%

10%

11%

11%

12%

11%

31

29

29

29

75

73

73

71

23

23

23

23

23

23

25

27

27

29

27

17

17

17

17

17

17

19

21

21

23

21

21

69

67

69

69

21

21

21

21

571

571

571

571

571

571

573

575

575

577

575

575

623

621

623

623

575

575

575

575

573

573

573

573

573

573

575

577

577

579

577

577

625

623

625

625

577

577

577

577

TABLE OF INTEREST RATES FOR

LARGE CORPORATE UNDERPAYMENTS

FROM JANUARY 1, 1991—PRESENT

Jan. 1, 1991—Mar. 31, 1991

Apr. 1, 1991—Jun. 30, 1991

Jul. 1, 1991—Sep. 30, 1991

Oct. 1, 1991—Dec. 31, 1991

Jan. 1, 1992—Mar. 31, 1992

Apr. 1, 1992—Jun. 30, 1992

Jul. 1, 1992—Sep. 30, 1992

Oct. 1, 1992—Dec. 31, 1992

Jan. 1, 1993—Mar. 31, 1993

Apr. 1, 1993—Jun. 30, 1993

Jul. 1, 1993—Sep. 30, 1993

Oct. 1, 1993—Dec. 31, 1993

Jan. 1, 1994—Mar. 31, 1994

Apr. 1, 1994—Jun. 30, 1994

Jul. 1, 1994—Sep. 30, 1994

Oct. 1, 1994—Dec. 31, 1994

Jan. 1, 1995—Mar. 31, 1995

Apr. 1, 1995—Jun. 30, 1995

Jul. 1, 1995—Sep. 30, 1995

September 29, 1997

10

585

583

583

583

629

627

627

625

577

577

577

577

577

577

579

581

581

583

581

1997–39 I.R.B.

TABLE OF INTEREST RATES FOR

LARGE CORPORATE UNDERPAYMENTS — Continued

FROM JANUARY 1, 1991– PRESENT

RATE

Oct. 1, 1995—Dec. 31, 1995

Jan. 1, 1996—Mar. 31, 1996

Apr. 1, 1996—Jun. 30, 1996

Jul. 1, 1996—Sep. 30, 1996

Oct. 1, 1996—Dec. 31, 1996

Jan. 1, 1997—Mar. 31, 1997

Apr. 1, 1997—Jun. 30, 1997

Jul. 1, 1997—Sep. 30, 1997

Oct. 1, 1997—Dec. 31, 1997

TABLE PG

1995–1 C.B.

11%

11%

10%

11%

11%

11%

11%

11%

11%

27

75

73

75

75

27

27

27

27

581

629

627

629

629

581

581

581

581

RATE

TABLE PG

1995–1 C.B

6.5%

7.5%

6.5%

6.5%

6.5%

5.5%

6.5%

6.5%

6.5%

6.5%

6.5%

6.5%

18

20

18

18

66

64

66

66

18

18

18

18

TABLE OF INTEREST RATES FOR CORPORATE

OVERPAYMENTS EXCEEDING $10,000

FROM JANUARY 1, 1995 — PRESENT

Jan. 1, 1995—Mar. 31, 1995

Apr. 1, 1995—Jun. 30, 1995

Jul. 1, 1995—Sep. 30, 1995

Oct. 1, 1995—Dec. 31, 1995

Jan. 1, 1996—Mar. 31, 1996

Apr. 1, 1996—Jun. 30, 1996

Jul. 1, 1996—Sep. 30, 1996

Oct. 1, 1996—Dec. 31, 1996

Jan. 1, 1997—Mar. 31, 1997

Apr. 1, 1997—Jun. 30, 1997

Jul. 1, 1997—Sep. 30, 1997

Oct. 1, 1997—Dec. 31, 1997

572

574

572

572

620

618

620

620

572

572

572

572

Section 7805.—Rules and Regulations

26 CFR 301.7805–1: Rules and regulations.

Questions and answers about the application of section 475 and the regulations thereunder. See Rev. Rul. 97–39, page 4.

1997–39 I.R.B.

11

September 29, 1997

Part III. Administrative, Procedural, and Miscellaneous

26 CFR 601.204: Changes in accounting periods

and in methods of accounting.

(Also Part I, §§ 446, 475; 1.446–1, 1.475(c)–1.)

Rev. Proc. 97–43

SEC. 1. PURPOSE

This revenue procedure tells taxpayers

how to request consent to change methods

of accounting to comply with elections

out of certain exemptions from dealer status for purposes of § 475 of the Internal

Revenue Code. See § 1.475(c)–1(a)(3) of

the Income Tax Regulations (concerning

taxpayers buying securities from or selling securities to members of the same

consolidated group); § 1.475(c)–1(b)

(concerning sellers of nonfinancial goods

and services); and § 1.475(c)–1(c) (concerning taxpayers that engage in no more

than negligible sales of securities).

SEC. 2. BACKGROUND

.01 Under § 475(a), dealers in securities must use a mark-to-market accounting method for securities other than certain securities timely identified as exempt

under § 475(b)(2). Section 475(c)(1) defines dealer in securities for purposes of

§ 475.

.02 One component of the definition of

dealer in securities in § 475(c)(1) is entering into transactions in securities with

customers. Members of the same consolidated group are ordinarily not each

other ’s customers for purposes of

§ 475(c)(1). Section 1.475(c)–1(a)(3)(ii).

A consolidated group may, however, elect

to treat its members as potential customers of one another for purposes of

§ 475(c)(1) (the intragroup-customer

election). Unless the Commissioner otherwise prescribes, the election is made by

filing a specified statement with a timely

filed consolidated federal income tax return. Section 1.475(c)–1(a)(3)(iii)(B).

.03 A taxpayer is ordinarily exempt

from treatment as a dealer in securities if

the taxpayer would not be a dealer in securities but for its purchases and sales of

debt instruments that are customer paper

as defined in § 1.475(c)–1(b)(2) with respect to the taxpayer or another member

of its consolidated group (the customer

paper exemption). Section 1.475

(c)–1(b)(1). Taxpayers may elect not to

September 29, 1997

be governed by the customer paper exemption. Section 1.475(c)–1(b)(4). Unless the Commissioner otherwise prescribes, the election generally is made by

filing a specified statement with a timely

filed federal income tax return (or, in limited cases, an amended return). Section

1.475(c)–1(b)(4)(i); see also Rev. Rul.

97–39, page 4, this Bulletin, Holding 13.

.04 A taxpayer’s purchases of securities

from customers do not make the taxpayer

a dealer in securities if the taxpayer engages in no more than negligible sales of

securities as defined in § 1.475(c)–1(c)(2)

(the negligible sales exemption). Section

1.475(c)–1(c)(1)(i). Taxpayers may elect

not to be governed by the negligible sales

exemption. This is done on a timely filed

original federal income tax return (or, in

limited cases, on an amended return).

Section 1.475(c)–1(c)(1)(ii); see also Rev.

Rul. 97–39, Holding 12.

.05 In general, making one of these

elections results in the taxpayer being required to change its method of accounting

to reflect the application of § 475(a). But

see Rev. Rul. 97-39, Holding 17 (discussing circumstances in which more than

one election must be made for § 475(a) to

apply). A taxpayer must obtain the consent of the Commissioner to change an

accounting method. Section 446(e).

.06 A taxpayer that accounts for securities under § 475(a) may change that

method only with the consent of the Commissioner. Section 446(e). See Rev. Rul.

97–39, Holding 20; see also Rev. Proc.

97–27, 1997–21 I.R.B. 10, or its successor on how to request consent to change.

SEC. 3. SCOPE

This revenue procedure applies to taxpayers required to change methods of accounting as a result of elections under

§ 1.475(c)–1(a)(3)(iii), –1(b)(4), or

–1(c)(1)(ii) (including taxpayers that

made those elections prior to September

10, 1997).

SEC. 4. PROCEDURE

.01 If a taxpayer elects to be governed

by the intragroup-customer election and

the election results in the taxpayer being

required to change its method of accounting, then the taxpayer must attach both

12

the statement described in § 1.475(c)–

1(a)(3)(iii)(B) and the additional documents required by section 4.07 of this revenue procedure to the taxpayer’s timely

filed original federal income tax return for

the first year subject to the election. If

that return is filed on or before October

31, 1997, however, the additional documents may be filed at a later date in accordance with section 4.04. In addition, a

copy of those documents must be filed as

required by section 4.05 and, if applicable, section 4.06.

.02 If a taxpayer elects not to be governed by the customer paper exemption

and the election results in the taxpayer

being required to change its method of accounting, then the taxpayer must attach

both the statement described in

§ 1.475(c)–1(b)(4)(i) and the additional

documents required by section 4.07 of

this revenue procedure to a timely filed

federal income tax return or to an

amended return, as appropriate under

§ 1.475(c)–1(b)(4)(i)(A) or (B) or Holding 13 of Rev. Rul. 97-39. If that return is

filed on or before October 31, 1997, however, the additional documents may be

filed at a later date in accordance with section 4.04. In addition, a copy of those documents must be filed as required by section

4.05 and, if applicable, section 4.06.

.03 If a taxpayer elects not to be governed by the negligible sales exemption

and the election results in the taxpayer

being required to change its method of accounting, then the taxpayer must attach

the documents required by section 4.07 of

this revenue procedure to the timely filed

original federal income tax return described in § 1.475(c)–1(c)(1)(ii) or the

amended return described in Rev. Rul.

97–39, Holding 12 (discussing when the

election not to be governed by the negligible sales exemption may be made by filing an amended return). If that return is

filed on or before October 31, 1997, however, the additional documents may be

filed at a later date in accordance with section 4.04. In addition, a copy of those documents must be filed as required by section

4.05 and, if applicable, section 4.06.

.04 A taxpayer that files the return described in section 4.01, 4.02, or 4.03 of

this revenue procedure on or before October 31, 1997, need not attach the docu-

1997–39 I.R.B.

ments required by section 4.07 to that return if the taxpayer instead attaches these

documents to the first federal income tax

return or amended return filed by the taxpayer after October 31, 1997, that is for a

taxable year subject to the election.

.05 The taxpayer must file a copy of the

documents required by section 4.07 of this

revenue procedure with the Commissioner

of Internal Revenue, Attention:

CC:DOM:IT&A, P.O. Box 7604, Benjamin

Franklin Station, Washington, DC 20044

(or, in the case of a designated private delivery service: Commissioner of Internal

Revenue, Attention: CC:DOM:IT&A,

1111 Constitution Avenue, NW, Washington, DC 20224). This filing must occur on

or before the later of October 31, 1997, and

the time the taxpayer files the return described in section 4.01, 4.02, or 4.03. The

documents must contain the name and telephone number of the examining agent, appeals office, or counsel of record for the

government, if any, described in section

4.06.

.06 If a taxpayer files an amended return

on which the taxpayer elects not to be governed by the customer paper exemption or

the negligible sales exemption and, at the

time of filing, the taxable year to which the

amended return applies or any subsequent

taxable year is before the Service or before

a federal court, then the taxpayer must provide a copy of the documents required by

section 4.07 of this revenue procedure to

the persons provided below.

(1) If a taxable year in question is before the Service, a copy of the documents

required by section 4.07 of this revenue

procedure must be provided to the taxpayer’s examining agent or, instead, if the

taxable year has been assigned to an appeals office, to such appeals office. The

taxpayer must provide the copy by the

later of October 31, 1997, and the day that

is 30 days after the date the taxable year

in question first came before the Service.

For purposes of this section, a taxable

year shall be considered before the Service from the time the taxpayer (or any

member of a consolidated group of which

taxpayer was a member during the taxable

year) has been contacted in any manner

by a representative of the Service for the

purpose of scheduling any type of examination of its federal income tax return for

that year until the receipt of a no-change

letter for that year, the execution of a

1997–39 I.R.B.

waiver of restrictions on assessment and

collection of deficiency in tax and acceptance of overassessment, the expiration of

the period for filing a petition with the

Tax Court for that year, or the filing of a

petition with the Tax Court.

(2) If a taxable year in question is before a federal court, a copy of the documents required by section 4.07 of this revenue procedure must be provided to

counsel of record for the government.

The taxpayer must provide the copy by

the later of October 31, 1997, and the day

which is 30 days after the date the taxable

year in question first came before a federal court. For purposes of this section, a

taxable year will be considered before a

federal court if the treatment of any item

(whether or not involving a method of accounting) for such taxable year would be

considered before a federal court for the

purpose of Rev. Proc. 97–27, 1997–21

I.R.B. 10, section 3.08(3).

.07 The taxpayer must properly complete and execute a Form 3115. A legend

must be typed on the top of the first page

of the Form 3115 that identifies the applicable parts of section 4 of this revenue

procedure (other than section 4.04 and

section 4.07). The legend should read

substantially as follows: “Filed under section[s] 4.** [and 4.**] of Rev. Proc.

97–43.”

(1) Form 3115 requires an explanation

of the legal basis of the proposed change

in method of accounting. That explanation must state specifically which election(s) the taxpayer made under

§ 1.475(c)–1. See also Rev. Rul. 97–39,

Holding 17 (discussing the need for multiple elections).

(2) The taxpayer must attach to the

Form 3115 a statement describing all identifications, if any, that are or were effective

for the purposes of § 475(b)(2) of securities acquired prior to the date of executing

the Form 3115 (or the date of filing if filed

more than 30 days after executing). For

identifications that are not subject to Holding 15 of Rev. Rul. 97–39, the statement

must describe the procedures or systems

used to make each identification, the date

on which the identifications were made,

and the content and location of the identifications in the taxpayer ’s books and

records. See Rev. Rul. 97–39, Holding 14

(discussing when an identification under

§ 475(b)(2) is timely made). If the tax-

13

payer holds, or held, transition securities,

which are subject to identification under

Holding 15 of Rev. Rul. 97–39, the statement must describe the basis for concluding that the securities were or were not described in § 475(b)(1)(A), (B), or (C),

including the date, content, and location of

documents in the taxpayer’s books and

records that support such conclusions. If

there were no identifications, or if none of

the taxpayer’s securities were transition securities, then the statement should convey

this information.

SEC. 5. CONSENT

.01 If a taxpayer described in section 3

of this revenue procedure complies with

the requirements set forth in section 4,

then the Commissioner hereby grants

consent for the taxpayer to change its

method of accounting for securities to reflect the application of § 475(a).

.02 Pending further guidance, in the

case of any taxpayer granted automatic

consent to change an accounting method

by this revenue procedure, § 475(a) applies only to changes in value of securities

occurring after the start of the year of

change, and any built-in gain or loss as of

the beginning of the year of change must

be taken into account under rules similar

to § 1.475(a)–3(b)(2).

SEC. 6. EFFECTIVE DATE

This revenue procedure is effective September 10, 1997, the date this revenue procedure was made available to the public.

SEC. 7. PAPERWORK REDUCTION

ACT

The collections of information contained in this revenue procedure have

been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act

(44 U.S.C. 3507) under control number

1545–1558.

An agency may not conduct or sponsor,

and a person is not required to respond to,

a collection of information unless the collection of information displays a valid

control number.

The collections of information in this

revenue procedure are in sections 2.02,

2.03, 2.04, and 4.07(2). This information

is required by the Service in order to facilitate monitoring taxpayers changing ac-

September 29, 1997

counting methods resulting from making

the elections provided by § 1.475(c)–

1(a)(3)(iii), –1(b)(4), or –1(c)(1)(ii). The

information collected will be used if a taxpayer making the change is audited. The

collection of information is required to obtain a benefit. The likely respondents are

business or other for-profit institutions.

The collection of information contained

in sections 2.02, 2.03, and 2.04 were reviewed and approved by the Office of Management and Budget in accordance with the

Paperwork Reduction Act (44 U.S.C. 3507)

under control number 1545–1496.

The estimated total annual reporting

September 29, 1997

burden described in section 4.07(2) is

100,000 hours.

The estimated annual burden per respondent varies from .25 hours to 50

hours, depending on individual circumstances, with an estimated average of 5

hours. The estimated number of respondents is 20,000.

The estimated annual frequency of responses is once in the existence of each

respondent.

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

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

14

revenue law. Generally, tax returns and

tax return information are confidential, as

required by 26 U.S.C. 6103.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Kenneth P. Christman of the

Office of Assistant Chief Counsel (Financial Institutions and Products). For further information regarding this revenue

procedure, contact Mr. Christman at 202622-3950 (not a toll-free call).

1997–39 I.R.B.

Part IV. Items of General Interest

Medical Savings Accounts

Announcement 97–96

PURPOSE

Sections 220(i) and (j) of the Internal

Revenue Code provide that if the number

of medical savings accounts (MSAs) established as of June 30, 1997, exceeds

525,000, then October 1, 1997, is a “cutoff” date for the MSA pilot project. The

Internal Revenue Service has determined

that the applicable number of MSAs established as of June 30, 1997, is 17,145.

Consequently, October 1, 1997 is not a

“cut-off” date and 1997 is not a “cut-off”

year for the MSA pilot project.

BACKGROUND

The Health Insurance Portability and

Accountability Act of 1996 added section

220 to the Code to permit eligible individuals to establish MSAs under a pilot project effective January 1, 1997. The pilot

project has a scheduled “cut-off” year of

2000, but may have an earlier “cut-off”

year if the number of individuals who

have established MSAs exceeds certain

numerical limitations. See sections 220(i)

and (j).

If a year is a “cut-off” year, section

220(i)(1) generally provides that no individual will be eligible for a deduction or

exclusion for MSA contributions for any

taxable year beginning after the “cut-off”

year unless the individual (A) was an active MSA participant for any taxable year

ending on or before the close of the “cutoff” year, or (B) first became an active

MSA participant for a taxable year ending

after the “cut-off” year by reason of coverage under a high deductible health plan

of an MSA-participating employer.

Section 220(j)(1) provides that the numerical limitation for 1997 is exceeded if

the number of MSAs established as of

June 30, 1997, is more than 525,000.

Under section 220(j)(3), in determining

whether any calendar year is a “cut-off”

year, the MSA of any previously uninsured individual is not taken into account.

In addition, section 220(j)(4)(D) specifies

that, to the extent practical, all MSAs established by an individual are aggregated

and two married individuals opening sep-

1997–39 I.R.B.

arate MSAs are to be treated as having a

single MSA for purposes of determining

the number of MSAs.

Based on Forms 8851 filed by MSA

trustees and custodians, it has been determined that 22,051 taxpayers have established MSAs as of June 30, 1997. Of this

total, 3,670 taxpayers were reported as

previously uninsured, and are therefore

not taken into account in determining

whether 1997 is a “cut-off” year. In addition, 1,236 taxpayers were reported as excludable from the count because their

spouse also established an MSA. Accordingly, because the applicable number of

MSAs established as of June 30, 1997,

17,145 (22,051 minus (3,670 plus 1,236))

is less than 525,000, 1997 is not a “cutoff” year for the MSA pilot project.

Questions regarding this announcement

may be directed to Felix Zech in the Office of Associate Chief Counsel (Employee Benefits and Exempt Organizations) at (202) 622-4606 (not a toll free

number).

Foundations Status of Certain

Organizations

Announcement 97–98

The following organizations have

failed to establish or have been unable to

maintain their status as public charities or

as operating foundations. Accordingly,

grantors and contributors may not, after

this date, rely on previous rulings or designations in the Cumulative List of Organizations (Publication 78), or on the presumption arising from the filing of notices

under section 508(b) of the Code. This

listing does not indicate that the organizations have lost their status as organizations described in section 501(c)(3), eligible to receive deductible contributions.

Former Public Charities. The following

organizations (which have been treated as

organizations that are not private foundations described in section 509(a) of the

Code) are now classified as private foundations:

Asian-Amerasian Youth, Inc., Albany, NY

Association for Rescue at Sea Inc.,

Webster Groves, MO

Association of Friends of Passages, Inc.,

New York, NY

15

Association to Promote Intercultural

Relations, Inc., Climax, MI

Athena Telematics Foundation, Inc.,

White Plains, NY

Avrohom Z. Shfronsky Torah Fund, Inc.,

Staten Island, NY

Bangladesh Cultural Exchange, Jamaica

Estates, NY

Basic Housing Needs, Inc., New Canaan,

CT

Believers of San Jose De Oasis, Inc.,

Bronx, NY

Big Green Apple Corp., New York, NY

Bill Weete Memorial Fund, Inc.,

Cambridge, MA

Bon Accord Theatre Company of New

York, Inc., New York, NY

Boston Rugby Football Foundation, Inc.,

Newton, MA

Branch Brook Parent Teacher

Association, Smithtown, NY

Brooklyn Community Correction Center

Advisory Board, Inc., Brooklyn, NY

Brooklyn Shipbuilding Foundation, Inc.,

Brooklyn, NY

Burrus Residential Group Home,

Washington, CT

Business Enterprise Assistance of

Connecticut, Inc., Bolton, CT

Causa–Peru, Inc., East Hartford, CT

Cambiata Chamber Players, Inc.,

Kingston, NY

Center for Advancement of International

Relations through Broadcast, New

City, NY

Center for Art and Earth, Inc.,

New York, NY

Chosen Children From Romania,

Barre, VT

Christian Clothing Drive, Inc.,

Merrick, NY

Circle of Children Charitable Foundation,

Inc., Lexington, MA

Citizen Empowerment, Inc., Bennington,

NH

Citizens Radiological Monitoring

Network Pilgrim, Inc., Duxbury, MA

Citizens United for the Rehab of Errants

Life Long Care, Inc., Jamaica Plain,

MA

Clothe the Children Foundation, New

York, NY

Clyde E. Wheeler Group, Mastic, NY

Coalition for Sustainable Agriculture,

Castile, NY

September 29, 1997

Cobble Hill Foundation, Inc.,

Brooklyn, NY

Columbus Avenue Committee, Inc., New

York, NY

Columbus Outdoor Club, Columbus, OH

Communication for Development and

Change, Inc., New York, NY

Connecticut Environment Roundtable,

Inc., Hartford, CT

Cooley Center for Indian Unity, Inc.,

Providence, RI

Diversified Educational Resources, Inc.,

Northfield Falls, VT

Don Costa Scholarship Fund, Lowell, MA

Drop In Club of Danbury CT Inc.,

Danbury, CT

Drum—The Heartbeat of the Native

American Community, Inc.,

Chicchester, NH

Eastcor, Inc., Hampton Bays, NY

East End Seaport and Marine Foundation,

Inc., Greenport, NY

Eastern Cashmere Association,

Shoreham, VT

Eaton Fire Reserve Association,

Eaton, NH

Ebony Horsewomen, Inc., Hartford, CT

E Call, Inc., Boston, MA

Echo Evangelique De Boston, Inc.,

Mattapan, MA

Ecletic Theatre Co., Inc., New York, NY

Educational Partnership, New York, NY

Education Law Project, Inc.,

Willimantic, CT

Environment Technology Education

Center, Inc., Cambridge, MA

September 29, 1997

Essex Firefighters Association,

Essex, VT

European Child Care Day Care Center,

Inc., Brooklyn, NY

Everybuddy, Incorporated, Manchester

Center, VT

Family and Child Therapies, Inc., New

York, NY

Faran Club International, Inc.,

Jamaica, NY

Father Peter G. Young, Jr. Foundation,

Inc., Albany, NY

First Baptist Church Development

Corporation, Strafford, CT

First Responders Emergency Medical

Services Association, Saranac

Lake, NY

Flag Acres Zoo, Inc., Hoosick Falls, NY

Flower City Down Syndrome Network,

Rochester, NY

Footnotes Corp., New York, NY

Force Athletic Club, Inc.,

Swampscott, MA

Foundation for International Environmental Law & Development, Inc.,

New York, NY

Foundation for the Fiftieth Anniversary

of the United Nations, New York, NY

Franklin County Mens Education Network, Inc., Greenfield, MA

Free Gift, Hudson, ME

French Cultural Heritage Society, Ltd.,

Brooklyn, NY

Friends of Fort Knox, Bucksport, ME

Friends of Frederick Douglass, Inc.,

Rochester, NY

16

Friends of Frederick E. Samuels

Foundations, Inc., New York, NY

Friends of Greenfield Public Schools,

Greenfield, MA

Friends of Kids Kreations, Inc.,

Monroe, CT

Friends of Ohel Moshe Institute, Inc.,

New York, NY

Friends of Salem Woods, Inc.,

Salem, MA

Hamilton Senior Center Foundation,

Hamilton, TX

National Black United Front Educational

Fund, Kansas City, MO

Pennsylvania Childrens Services, Inc.,

Harrisburg, PA

Public Lands Action Network, Silver

City, NM

Renewable Energy for African

Development, Inc., Arlington, VA

Saugus Business Education

Collaborative, Inc., Saugus, MA

If an organization listed above submits

information that warrants the renewal of its

classification as a public charity or as a private operating foundation, the Internal

Revenue Service will issue a ruling or determination letter with the revised classification as to foundation status. Grantors and

contributors may thereafter rely upon such

ruling or determination letter as provided

in section 1.509(a)–7 of the Income Tax

Regulations. It is not the practice of the

Service to announce such revised classification of foundation status in the Internal

Revenue Bulletin.

1997–39 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 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.

1997–39 I.R.B.

17

September 29, 1997

Numerical Finding List1

Bulletins 1997–27 through 1997–38

Announcements:

97–61, 1997–29 I.R.B. 13

97–67, 1997–27 I.R.B. 37

97–68, 1997–28 I.R.B. 13

97–69, 1997–28 I.R.B. 13

97–70, 1997–29 I.R.B. 14

97–71, 1997–29 I.R.B. 15

97–72, 1997–29 I.R.B. 15

97–73, 1997–30 I.R.B. 86

97–74, 1997–31 I.R.B. 16

97–75, 1997–32 I.R.B. 28

97–76, 1997–32 I.R.B. 28

97–77, 1997–33 I.R.B. 58

97–78, 1997–34 I.R.B. 11

97–79, 1997–35 I.R.B. 8

97–80, 1997–34 I.R.B. 12

97–81, 1997–34 I.R.B. 12

97–82, 1997–34 I.R.B. 12

97–83, 1997–34 I.R.B. 13

97–84, 1997–34 I.R.B. 13

97–85, 1997–35 I.R.B. 8

97–86, 1997–35 I.R.B. 9

97–87, 1997–35 I.R.B. 9

97–88, 1997–35 I.R.B. 9

97–89, 1997–36 I.R.B. 10

97–90, 1997–36 I.R.B. 10

97–91, 1997–37 I.R.B. 25

97–92, 1997–37 I.R.B. 26

97–93, 1997–36 I.R.B. 11

97–94, 1997–36 I.R.B. 12

97–95, 1997–36 I.R.B. 12

97–97, 1997–38 I.R.B. 22

Court Decisions:

2061, 1997–31 I.R.B. 5

2062, 1997–32 I.R.B. 8

Delegation Orders:

172 (Rev. 5), 1997–28 I.R.B. 6

Proposed Regulations:

REG–104893–97, 1997–29 I.R.B. 13

REG–105160–97, 1997–37 I.R.B. 22

REG–106043–97, 1997–37 I.R.B. 24

REG–107644–97, 1997–32 I.R.B. 24

REG–208151–91, 1997–38 I.R.B. 21

Revenue Procedures:

97–32, 1997–27 I.R.B. 9

97–32A, 1997–34 I.R.B. 10

97–33, 1997–30 I.R.B. 10

97–34, 1997–30 I.R.B. 14

97–35, 1997–33 I.R.B. 11

97–36, 1997–33 I.R.B. 14

97–37, 1997–33 I.R.B. 18

97–38, 1997–33 I.R.B. 43

97–39, 1997–33 I.R.B. 48

97–40, 1997–33 I.R.B. 50

97–41, 1997–33 I.R.B. 5

97–42, 1997–33 I.R.B. 57

Revenue Rulings:

97–27, 1997–27 I.R.B. 4

97–28, 1997–28 I.R.B. 4

97–29, 1997–28 I.R.B. 4

97–30, 1997–31 I.R.B. 12

97–31, 1997–32 I.R.B. 4

97–32, 1997–33 I.R.B. 4

97–33, 1997–34 I.R.B. 4

97–34, 1997–34 I.R.B. 14

97–35, 1997–35 I.R.B. 4

97–36, 1997–36 I.R.B. 5

97–37, 1997–37 I.R.B. 15

97–38, 1997–38 I.R.B. 14

Treasury Decisions:

8722, 1997–29 I.R.B. 4

8723, 1997–30 I.R.B. 4

8724, 1997–36 I.R.B. 4

8725, 1997–37 I.R.B. 16

8726, 1997–34 I.R.B. 7

8727, 1997–34 I.R.B. 5

8728, 1997–37 I.R.B. 4

8729, 1997–38 I.R.B. 4

8730, 1997–38 I.R.B. 16

Notices:

97–37, 1997–27 I.R.B. 4

97–38, 1997–27 I.R.B. 8

97–39, 1997–27 I.R.B. 8

97–40, 1997–28 I.R.B. 6

97–41, 1997–28 I.R.B. 6

97–42, 1997–29 I.R.B. 12

97–43, 1997–30 I.R.B. 9

97–44, 1997–31 I.R.B. 15

97–45, 1997–33 I.R.B. 7

97–46, 1997–34 I.R.B. 10

97–47, 1997–35 I.R.B. 5

97–48, 1997–35 I.R.B. 5

97–49, 1997–36 I.R.B. 8

97–50, 1997–37 I.R.B. 21

97–51, 1997–38 I.R.B. 20

97–52, 1997–38 I.R.B. 20

Railroad Retirement Quarterly Rate:

1997–28 I.R.B. 5

1

A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 1997–1 through 1997–26

will be found in Internal Revenue Bulletin 1997–27,

dated July 7, 1997.

September 29, 1997

18

1997–39 I.R.B.

Finding List of Current Action on

1

Previously Published Items

Bulletins 1997–27 through 1997–38

*Denotes entry since last publication

Revenue Procedures:

96–36

Superseded by

97–34, 1997–30 I.R.B. 14

96–42

Superseded by

97–27, 1997–27 I.R.B. 9

97–32

Modified and amplified by

97–32A, 1997–34 I.R.B. 10

Revenue Rulings:

89–42

Supplemented by

97–31, 1997–32 I.R.B. 4

1

A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1997–1 through 1997–26 will be found in Internal

Revenue Bulletin 1997–27, dated July 7, 1997.

1997–39 I.R.B.

19

September 29, 1997

Notes

September 29, 1997

20

1997–39 I.R.B.

Notes

1997–39 I.R.B.

21

September 29, 1997

Notes

September 29, 1997

22

1997–39 I.R.B.

1997–39 I.R.B.

23

September 29, 1997

INTERNAL REVENUE BULLETIN

The Introduction on page 3 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, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC

20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.

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U.S. Government Printing Office

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Official Business

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First Class Mail

Postage and Fees Paid

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Permit No. G–26

INTERNAL REVENUE BULLETIN

The Introduction on page 3 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, T:FP:F:CD, Room 5560, 1111 Constitution Avenue NW, Washington, DC

20224. You can also leave a recorded message 24 hours a day, 7 days a week at 1–800–829–9043.

Internal Revenue Service

Washington, DC 20224

Official Business

Penalty for Private Use, $300

First Class Mail

Postage and Fees Paid

IRS

Permit No. G–48