Bulletin No. 1997–16

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Text

April 21, 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

EXEMPT ORGANIZATIONS

Rev. Rul. 97–13, page 4.

Special use value; farms; interest rates. The 1997

interest rates to be used in computing the special use

value of farm real property for which an election is made

under section 2032A of the Code are listed for estates

of decedents.

Announcement 97–39, page 27.

A list is given of organizations now classified as private

foundations.

Notice 97–24, page 6.

Certain trust arrangements. This notice warns taxpayers about “trust” arrangements that purport to reduce or

eliminate federal taxes in ways that are not permitted by

the tax law. The notice describes some typical abusive

trust arrangements and provides that, in appropriate

circumstances, taxpayers and/or promoters in these

trust arrangements may be subject to civil and/or

criminal penalties.

Notice 97–25, page 8.

T.D. 8560, 1994–2 C.B. 200; T.D. 8597, 1995–2 C.B.

147; and T.D. 8660, 1996–1 C.B. 195, relating to the

consolidated return investment adjustment provisions,

intercompany transactions provisions, and the provisions

limiting losses and deductions from transactions between members of a nonconsolidated controlled group,

are corrected.

Finding Lists begin on page 31.

Announcement of Disbarments and Suspensions begins on page 29.

ADMINISTRATIVE

Rev. Proc. 97–24, page 10.

General rules and specifications for private printing

of Forms W–2 and W–3. Specifications are set forth for

the private printing of paper substitutes for tax year

1997 Form W–2, Wage and Tax Statement, and Form

W–3, Transmittal of Wage and Tax Statements. Rev.

Procs. 96–24 and 96–24A superseded.

Announcement 97–40, page 28.

T.D. 8699, 1997–6 I.R.B. 4, pertaining to the credit for

employer FICA taxes paid with respect to certain tips

received by employees of food or beverage establishments, is corrected.

Announcement 97–41, page 28.

T.D. 8677, 1996–30 I.R.B. 7, relating to the deductions

and losses of members of a consolidated group; the

carryover and carryback of losses to consolidated and

separate return years; and the built-in deduction rules,

is corrected.

Mission of the Service

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 products and services; and perform in a

manner warranting the highest degree of public

confidence in our integrity, efficiency and fairness.

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 of ficers 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 cour tesy 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.

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.

court decisions, rulings, and procedures must be considered, and Service personnel and others concerned are

cautioned against reaching the same conclusions in

other cases unless the facts and circumstances are

substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on

provisions of the Internal Revenue Code of 1986.

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,

The first Bulletin for each month includes an index for

the matters published during the preceding month.

These monthly indexes are cumulated on a quarterly and

semiannual basis, and are published in the first Bulletin

of the succeeding quarterly and semi-annual 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, D.C. 20402.

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

Section 2032A.—Valuation of

Certain Farm, Etc., Real Property

26 CFR 20.2032A–4: Method of valuing farm real

property.

Special use value; farms; interest

rates. The 1997 interest rates to be used

in computing the special use value of

farm real property for which an election

is made under section 2032A of the

Code are listed for estates of decedents.

Rev. Rul. 97–13

This revenue ruling contains a list of

the average annual effective interest

rates on new loans under the Farm

Credit Bank system. This revenue ruling

also contains a list of the states within

each Farm Credit Bank District.

Under § 2032A(e)(7)(A)(ii) of the Internal Revenue Code, rates on new Farm

Credit Bank loans are used in computing the special use value of real property used as a farm for which an

election is made under § 2032A. The

rates in this revenue ruling may be used

by estates that value farmland under

§ 2032A as of a date in 1997.

Average annual effective interest

rates, calculated in accordance with

§ 2032A(e)(7)(A) and § 20.2032A–4(e)

of the Estate Tax Regulations, to be

used under § 2032A(e)(7)(A)(ii), are set

forth in the accompanying Table of

Interest Rates (Table 1). The states

within each Farm Credit Bank District

are set forth in the accompanying Table

of Farm Credit Bank Districts (Table 2).

Rev. Rul. 81–170, 1981–1 C.B. 454,

contains an illustrative computation of

an average annual effective interest rate.

The rates applicable for valuation in

1996 are in Rev. Rul. 96–23, 1996–1

C.B. 198. For rate information for years

prior to 1996, see Rev. Rul. 95–38,

1995–1 C.B. 184, and other revenue

rulings that are referenced therein.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Lane Damazo of the Office of

Assistant Chief Counsel (Passthroughs

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

contact Lane Damazo on (202) 622–

3090 (not a toll-free call).

REV. RUL. 97–13 TABLE 1

TABLE OF INTEREST RATES

(Year of Valuation 1997)

Farm Credit Bank District in Which Property Is Located

Interest Rate

Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Omaha . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sacramento . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

St. Paul . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Spokane . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Springfield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Wichita . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8.88

8.09

8.48

8.39

8.27

8.57

8.42

8.21

REV. RUL. 97–13 TABLE 2

TABLE OF FARM CREDIT BANK DISTRICTS

District

States

Columbia . . . . . . . . . . . . . . . . . . . . . . . Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina,

Pennsylvania, South Carolina, Virginia, West Virginia.

Omaha . . . . . . . . . . . . . . . . . . . . . . . . . . Iowa, Nebraska, South Dakota, Wyoming.

Sacramento . . . . . . . . . . . . . . . . . . . . . . Arizona, California, Hawaii, Nevada, Utah.

St. Paul . . . . . . . . . . . . . . . . . . . . . . . . . Arkansas, Illinois, Indiana, Kentucky, Michigan, Minnesota, Missouri, North Dakota, Ohio, Tennessee, Wisconsin.

Spokane . . . . . . . . . . . . . . . . . . . . . . . . Alaska, Idaho, Montana, Oregon, Washington.

Springfield . . . . . . . . . . . . . . . . . . . . . . Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York,

Rhode Island, Vermont.

Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . Alabama, Louisiana, Mississippi, Texas.

Wichita . . . . . . . . . . . . . . . . . . . . . . . . . . Colorado, Kansas, New Mexico, Oklahoma.

Section 6011.—General

Requirement of Return, State or

List

Printing of substitutes for Form W–2, Wage and

Tax Statement, and Form W–3, Transmittals of

Income and Tax Statements. See Rev. Proc. 97–24,

page 10.

Section 6041.—Information at

Source

26 CFR 1.6041–2: Return of information as to

payments to employees.

26 CFR 1.6041: Return of information as to

payments of $600 or more.

Printing of substitutes for Form W–2, Wage and

Tax Statement, and Form W–3, Transmittal of

Income and Tax Statements. See Rev. Proc. 97–24,

page 10.

Printing of substitutes for Form W–2, Wage and

Tax Statement, and Form W–3, Transmittal of

Income and Tax Statements. See Rev. Proc. 97–24,

page 10.

Section 6051.—Receipts for

Employees

26 CFR 31.6051–1: Statements for employees.

Printing of substitutes for Form W–2, Wage and

Tax Statement, and Form W–3, Transmittal of

Income and Tax Statements. See Rev. Proc. 97–24,

page 10.

Section 6071.—Time for Filing

Returns and Other Documents

Income and Tax Statements. See Rev. Proc. 97–24,

page 10.

Section 6091.—Place for Filing

Returns or Other Documents

Section 6081.—Extension of Time

for Filing Returns

Printing of substitutes for Form W–2, Wage and

Tax Statement, and Form W–3, Transmittal of

Income and Tax Statements. See Rev. Proc. 97–24,

page 10.

26 CFR 31.6081(a)–1: Extension of time for filing

returns.

Printing of substitutes for Form W–2, Wage and

Tax Statment, and Form W–3, Transmittal of

Income and Tax Statements. See Rev. Proc. 97–24,

page 10.

26 CFR 31.6071(a)–1: Time for filing returns and

other documents.

Printing of substitutes for Form W–2, Wage and

Tax Statement, and Form W–3, Transmittal of

Part III. Administrative, Procedural, and Miscellaneous

Certain Trust Arrangements

Notice 97–24

This notice is intended to alert taxpayers about certain trust arrangements

that purport to reduce or eliminate federal taxes in ways that are not permitted

by federal tax law. (The notice refers to

such arrangements as ‘‘abusive trust

arrangements.’’ See Section I. ABUSIVE

TRUST ARRANGEMENTS—IN GENERAL, below.) The notice describes

some typical abusive trust arrangements,

as well as the tax benefits promised by

promoters, and then explains the correct

tax principles that apply to these trust

arrangements. Taxpayers should be

aware that abusive trust arrangements

will not produce the tax benefits advertised by their promoters and that the

Internal Revenue Service is actively examining these types of trust arrangements as part of the National Compliance Strategy, Fiduciary and Special

Projects. Furthermore, in appropriate circumstances, taxpayers and/or the promoters of these trust arrangements may

be subject to civil and/or criminal penalties.

This notice should not, however, create concerns about the legitimate uses of

trusts. For example, trusts are frequently

used properly in estate planning, to

facilitate the genuine charitable transfer

of property, and to hold property for

minors and incompetents.

Under the federal tax laws, trusts

generally are separate entities subject to

income tax (except for certain charitable

or pension trusts that are expressly exempted by the tax laws and certain

grantor trusts described in sections 671–

679 of the Internal Revenue Code).

Under these laws and certain court developed doctrines, either the trust, the

beneficiary, or the transferor, as applicable, must pay the tax on the income

realized by the trust including the income generated by property held in

trust.

I. ABUSIVE TRUST ARRANGEMENTS—IN GENERAL

Abusive trust arrangements typically

are promoted by the promise of tax

benefits with no meaningful change in

the taxpayer’s control over or benefit

from the taxpayer’s income or assets.

The promised benefits may include reduction or elimination of income subject

to tax; deductions for personal expenses

paid by the trust; depreciation deductions of an owner’s personal residence

and furnishings; a stepped-up basis for

property transferred to the trust; the

reduction or elimination of selfemployment taxes; and the reduction or

elimination of gift and estate taxes.

These promised benefits are inconsistent

with the tax rules applicable to the

abusive trust arrangements, as described

below.

Abusive trust arrangements often use

trusts to hide the true ownership of

assets and income or to disguise the

substance of transactions. These arrangements frequently involve more than one

trust, each holding different assets of the

taxpayer (for example, the taxpayer’s

business, business equipment, home, automobile, etc.), as well as interests in

other trusts. Funds may flow from one

trust to another trust by way of rental

agreements, fees for services, purchase

and sale agreements, and distributions.

Some trusts purport to involve charitable

purposes. In some situations, one or

more foreign trusts also may be part of

the arrangement.

II. EXAMPLES OF ABUSIVE TRUST

ARRANGEMENTS

Described below are five examples of

abusive trust arrangements that have

come to the attention of the Internal

Revenue Service. An abusive trust arrangement may involve some or all of

the trusts described below. The type of

trust arrangement selected is dependent

on the particular tax benefit the arrangement purports to achieve. In each of the

trusts described below, the original

owner of the assets that are nominally

subject to the trust effectively retains

authority to cause the financial benefits

of the trust to be directly or indirectly

returned or made available to the owner.

For example, the trustee may be the

promoter, or a relative or friend of the

owner who simply carries out the directions of the owner whether or not

permitted by the terms of the trust.

Often, the trustee gives the owner

checks that are pre-signed by the trustee,

checks that are accompanied by a rubber

stamp of the trustee’s signature, a credit

card or a debit card with the intention of

permitting the owner to obtain cash

from the trust or otherwise to use the

assets of the trust for the owner’s benefit.

1. The Business Trust. The owner of

a business transfers the business to a

trust (sometimes described as an unincorporated business trust) in exchange

for units or certificates of beneficial

interest, sometimes described as units of

beneficial interest or UBI’s (trust units).

The business trust makes payments to

the trust unit holders or to other trusts

created by the owner (characterized either as deductible business expenses or

as deductible distributions) that purport

to reduce the taxable income of the

business trust to the point where little or

no tax is due from the business trust. In

addition, the owner claims the arrangement reduces or eliminates the owner’s

self-employment taxes on the theory that

the owner is receiving reduced or no

income from the operation of the business. In some cases, the trust units are

supposed to be canceled at death or

‘‘sold’’ at a nominal price to the owner’s

children, leading to the contention by

promoters that there is no estate tax

liability.

2. The Equipment or Service Trust.

The equipment trust is formed to hold

equipment that is rented or leased to the

business trust, often at inflated rates.

The service trust is formed to provide

services to the business trust, often for

inflated fees. Under these abusive trust

arrangements, the business trust may

purport to reduce its income by making

allegedly deductible payments to the

equipment or service trust. Further, as to

the equipment trust, the equipment

owner may claim that the transfer of

equipment to the equipment trust in

exchange for the trust units is a taxable

exchange. The trust takes the position

that the trust has ‘‘purchased’’ the equipment with a known value (its fair market value) and that the value is the tax

basis of the equipment for purposes of

claiming depreciation deductions. The

owner, on the other hand, takes the

inconsistent position that the value of

the trust units received cannot be determined, resulting in no taxable gain to

the owner on the exchange. The equipment or service trust also may attempt

to reduce or eliminate its income by

distributions to other trusts.

3. The Family Residence Trust. The

owner of the family residence transfers

the residence, including its furnishings,

to a trust. The parties claim inconsistent

tax treatment for the trust and the owner

(similar to the equipment trust). The

trust claims the exchange results in a

stepped-up basis for the property, while

the owner reports no gain. The trust

claims to be in the rental business and

purports to rent the residence back to

the owner; however, in most cases, little

or no rent is actually paid. Rather, the

owner contends that the owner and

family members are caretakers or provide services to the trust and, therefore,

live in the residence for the benefit of

the trust. Under some arrangements, the

family residence trust receives funds

from other trusts (such as a business

trust) which are treated as the income of

the trust. In order to reduce the tax

which might be due with respect to such

income (and any income from rent actually paid by the owner), the trust may

attempt to deduct depreciation and the

expenses of maintaining and operating

the residence.

4. The Charitable Trust. The owner

transfers assets to a purported charitable

trust and claims either that the payments

to the trust are deductible or that payments made by the trust are deductible

charitable contributions. Payments are

made to charitable organizations; however, in fact, the payments are principally for the personal educational, living, or recreational expenses of the

owner or the owner’s family. For example, the trust may pay for the college

tuition of a child of the owner.

5. The Final Trust. In some multitrust arrangements, the U.S. owner of

one or more abusive trusts establishes a

trust (the ‘‘final trust’’) that holds trust

units of the owner’s other trusts and is

the final distributee of their income. A

final trust often is formed in a foreign

country that will impose little or no tax

on the trust. In some arrangements,

more than one foreign trust is used, with

the cash flowing from one trust to

another until the cash is ultimately distributed or made available to the U.S.

owner, purportedly tax free.

III. LEGAL PRINCIPLES

CABLE TO TRUSTS

APPLI-

As noted above, when trusts are used

for legitimate business, family or estate

planning purposes, either the trust, the

trust beneficiary, or the transferor to the

trust, as appropriate under the tax laws,

will pay the tax on the income generated by the trust property. When used in

accordance with the tax laws, trusts will

not transform a taxpayer’s personal, living or educational expenses into deductible items, and will not seek to avoid

tax liability by ignoring either the true

ownership of income and assets or the

true substance of transactions. Accordingly, the tax results that are promised

by the promoters of abusive trust arrangements are not allowable under federal tax law. Contrary to promises made

in promotional materials, several wellestablished tax principles control the

proper tax treatment of these abusive

trust arrangements.

1. Substance—not form—controls

taxation. The Supreme Court of the

United States has consistently stated that

the substance rather than the form of the

transaction is controlling for tax purposes. See, for example, Gregory v.

Helvering, 293 U.S. 465 (1935), XIV–1

C.B. 193; Helvering v. Clifford, 309

U.S. 331 (1940), 1940–1 C.B. 105.

Under this doctrine, the abusive trust

arrangements may be viewed as sham

transactions, and the IRS may ignore the

trust and its transactions for federal tax

purposes. See Markosian v. Commissioner, 73 T.C. 1235 (1980) (holding

that the trust was a sham because the

parties did not comply with the terms of

the trust and the supporting documents

and the relationship of the grantors to

the property transferred did not differ in

any material aspect after the creation of

the trust); Zmuda v. Commissioner, 731

F.2d 1417 (9th Cir. 1984). Accordingly,

the income and assets of the business

trust, the equipment in the equipment

trust, the residence in the family residence trust, and the assets in the foreign

trust would all be treated as belonging

directly to the owner.

2. Grantors may be treated as owners

of trusts. The grantor trust rules provide

that if the owner of property transferred

to a trust retains an economic interest in,

or control over, the trust, the owner is

treated for income tax purposes as the

owner of the trust property, and all

transactions by the trust are treated as

transactions of the owner. Sections

671—677. In addition, a U.S. person

who directly or indirectly transfers property to a foreign trust is treated as the

owner of that property if there is a U.S.

beneficiary of the trust. Section 679.

This means that all expenses and income of the trust would belong to and

must be reported by the owner, and tax

deductions and losses arising from transactions between the owner and the trust

would be ignored. Furthermore, there

would be no taxable ‘‘exchange’’ of

property with the trust, and the tax basis

of property transferred to the trust

would not be stepped-up for depreciation purposes. See Rev. Rul. 85–13,

1985–1 C.B. 184.

3. Taxation of Non-Grantor Trusts. If

the trust is not a sham and is not a

grantor trust, the trust is taxable on its

income, reduced by amounts distributed

to beneficiaries. The trust must obtain a

taxpayer identification number and file

annual returns reporting its income. The

trust must report distributions to beneficiaries on a Form K–1, and the beneficiary must include the distributed income on the beneficiary’s tax return.

Sections 641, 651, 652, 661 and 662.

4. Transfers to trusts may be subject

to estate and gift taxes. Transfers to a

trust may be recognized as completed

gifts for federal gift tax purposes. Further, whether or not the gift tax applies,

if the owner retains until the owner’s

death the use of, enjoyment of, or

income from the property placed in a

trust, the property will be subject to

federal estate tax when the transferor

dies. Section 2036(a).

5. Personal expenses are generally

not deductible. Personal expenses such

as those for home maintenance, education, and personal travel are not deductible unless expressly authorized by the

tax laws. See section 262. The courts

have consistently held that nondeductible personal expenses cannot be

transformed into deductible expenses by

the use of trusts. Furthermore, the costs

of creating these trusts are not deductible. See, for example, Schulz v. Commissioner, 686 F.2d 490 (7th Cir. 1982);

Neely v. United States, 775 F.2d 1092

(9th Cir. 1985); and Zmuda.

6. A genuine charity must benefit in

order to claim a valid charitable deduction. Charitable trusts that are exempt

from tax are carefully defined in the tax

law. Arrangements are not exempt charitable trusts if they do not satisfy the

requirements of the tax law, including

the requirement that their true purpose is

to benefit charity. Furthermore, supposed charitable payments made by a

trust are not deductible charitable contributions where the payments are really

for the benefit of the owner or the

owner’s family members. See, for example, Fausner v. Commissioner, 55

T.C. 620 (1971).

7. Special rules apply to foreign

trusts. If an arrangement involves a

foreign trust, taxpayers should be aware

that a number of special provisions

apply to foreign trusts with U.S. grantors or U.S. beneficiaries, including several provisions added in 1996. For example, a U.S. person that fails to report

a transfer of property to a foreign trust

or the receipt of a distribution from a

foreign trust is subject to a tax penalty

equal to 35 percent of the gross value of

the transaction. Other examples of these

provisions are the application of U.S.

withholding taxes to payments to foreign trusts and the application of U.S.

excise taxes to transfers of appreciated

property to foreign trusts. See sections

6048, 6677, 1441, and 1491.

8. Civil and/or criminal penalties

may apply. The participants in and promoters of abusive trust arrangements

may be subject to civil and/or criminal

penalties in appropriate cases. See, for

example, United States v. Buttorff, 761

F.2d 1056 (5th Cir. 1985); United States

v. Krall, 835 F.2d 711 (8th Cir. 1987);

Zmuda and Neely.

IV. IRS ENFORCEMENT STRATEGY

FOR ABUSIVE TRUSTS

The Internal Revenue Service has

undertaken a nationally coordinated enforcement initiative to address abusive

trust schemes—the National Compliance

Strategy, Fiduciary and Special Projects.

This initiative involves Service personnel from the Assistant Commissioner

(Examination), Assistant Commissioner

(Criminal Investigation), and the Office

of Chief Counsel.

As part of this strategy, the Service

seeks to encourage voluntary compliance with the tax law. Accordingly,

taxpayers who have participated in abusive trust arrangements are encouraged

to file correct tax returns for 1996, as

well as amended tax returns for prior

years, consistent with the explanation of

the law set forth in this notice.

For information regarding issues addressed in this notice, taxpayers may

call (202) 622–4512 (not a toll-free

number).

intercompany transaction provisions and

the provisions limiting losses and deductions from transactions between members of a nonconsolidated controlled

group.

DATES: The correcting amendments affecting §§ 1.267(f)–1, 1.1502–13(f)(2)(ii), (g)(5), (l)(1), 1.1502–20, 1.1502–

32(b), and 1.1502–80(b) are effective

July 18, 1995. The correcting amemdments affecting §§ 1.1502–11, 1.1502–

19, 1.1502–32(f), 1.1502–43, 1.1502–76

and 1.1502–80(d)(1) are effective January 1, 1995. The correcting amendments

affecting § 1.1502–13(f)(6) are effective

March 14, 1996. For dates of applicability see §§ 1.267(f)–1(l), § 1.1502–

11(b)(5), 1.1502–13(l)(1), 1.1502–

13(f)(6)(v), 1.1502–19(h), 1.1502–32(h),

1.1502–76(b)(5), 1.1502–80(d), and

other relevant provisions.

FOR FURTHER INFORMATION CONTACT: William Barry of the Office of

Assistant Chief Counsel (Corporate),

(202) 622–7770 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The final regulations that are the

subject of these correcting amendments

are under sections 267 and 1502 of the

Internal Revenue Code.

Need for Correction

As published, the final regulations

contain errors and omissions which may

prove to be misleading and are in need

of clarification.

Consolidated Returns; Consolidated

and Controlled Groups; Correction

Accordingly, 26 CFR Part 1 is corrected by making the following correcting amendments:

Notice 97–25

PART 1—INCOME TAXES

AGENCY: Internal Revenue Service,

Treasury.

Paragraph 1. The authority citation for

Part 1 continues to read in part as

follows:

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

ACTION: Correcting Amendments.

SUMMARY: This document contains

technical corrections to final regulations

[T.D. 8560[1994–2 C.B. 200]; T.D.

8597[1995–2 C.B. 147]; T.D. 8660

[1996–1 C.B. 195]] which were published in the Federal Register on Monday, August 15, 1994 (59 FR 41666);

Tuesday, July 18, 1995 (60 FR 36671);

and Thursday, March 14, 1996 (61 FR

10447); respectively. The final regulations amend the consolidated return investment

adjustment

provisions,

§ 1.267(f)–1 [Corrected]

Par. 2. Section 1.267(f)–1 is amended

as follows:

1. In paragraph (c)(1)(iii), the first

sentence is revised.

2. Paragraph (l)(2) is revised.

The revisions read as follows:

§ 1.267(f)–1 Controlled groups.

(iii) * * * To the extent S’s loss or

deduction from an intercompany sale of

property is taken into account under this

section as a result of B’s transfer of the

property to a nonmember that is a

person related to any member, immediately after the transfer, under sections

267(b) or 707(b), or as a result of S or

B becoming a nonmember that is related

to any member under section 267(b), the

loss or deduction is taken into account

but allowed only to the extent of any

income or gain taken into account as a

result of the transfer. * * *

(l) * * *

(2) Avoidance transactions. This

paragraph (l)(2) applies if a transaction

is engaged in or structured on or after

April 8, 1994, with a principal purpose

to avoid the rules of this section (and

instead to apply prior law). If this

paragraph (l)(2) applies, appropriate adjustments must be made in years beginning on or after July 12, 1995, to

prevent the avoidance, duplication,

omission, or elimination of any item (or

tax liability), or any other inconsistency

with the rules of this section.

§ 1.1502–11 [Corrected]

Par. 3. Section 1.1502–11 is amended

by revising paragraph (b)(2)(iii), Example 3. (e) to read as follows:

§ 1.1502–11 Consolidated taxable income.

(b) * * *

(2) * * *

(iii) * * *

Example 3. * * *

(e) Under paragraph (b)(2)(ii) of this section,

S’s $30 of loss limited under this paragraph (b) is

treated as a separate net operating loss.

§ 1.1502–13 [Corrected]

Par. 4. Section 1.1502–13 is amended

as follows:

1. In paragraph (f)(2)(ii), a sentence

is added before the last sentence of the

paragraph.

2. In paragraph (f)(6) introductory

text, the last sentence is revised.

3. In paragraph (g)(5), Example 5.(c),

the tenth sentence is revised.

4. In paragraph (l)(1) the third,

fourth, and fifth sentences are revised.

The addition and revisions read as

follows:

§ 1.1502–13 Intercompany transactions.

(f) * * *

(2) * * *

(ii) * * * B’s dividend received deduction under section 243(a)(3) is determined without regard to any intercompany distributions under this paragraph

(f)(2) to the extent they are not included

in gross income. * * *

(6) * * * For this purpose, P stock is

any stock of the common parent held

(directly or indirectly) by another member or any stock of a member (the

issuer) that was the common parent if

the stock was held (directly or indirectly) by another member while the

issuer was the common parent.

(g) * * *

(5) * * *

§ 1.1502–19 [Corrected]

Par. 5. Section 1.1502–19 is amended

as follows:

1. In paragraph (c)(1)(iii)(A), the last

sentence is revised.

2. Paragraph (g) is amended by:

a. Revising the first sentence of the

introductory text.

b. Revising the fourth and fifth sentences in Example 1.(d).

c. Revising the first sentence in Example 4.(b).

d. Revising the first sentence in Example 6.(b).

The revisions read as follows:

§ 1.1502–19 Excess loss accounts.

Example 5. * * *

up front payment by M1 to M2 is taken into

account over the term of the new contract in a

manner reflecting the economic substance of the

contract (for example, allocating the payment in

accordance with the forward rates of a series of

cash-settled forward contracts that reflect the

specified index and the $1,000 notional principal

amount).* * *

items from the subsequent intercompany

transaction are taken into account under

this section. * * *

(l) * * * (1) * * * For example, S’s

and B’s items from S’s sale of property

to B which occurs in a consolidated

return year beginning before July 12,

1995, are taken into account under prior

law, even though B may dispose of the

property in a consolidated return year

beginning on or after July 12, 1995.

Similarly, an intercompany distribution

to which a shareholder becomes entitled

in a consolidated return year beginning

before July 12, 1995, but which is

distributed in a consolidated return year

beginning on or after that date is taken

into account under prior law (generally

when distributed), because this section

generally takes dividends into account

when the shareholder becomes entitled

to them but this section does not apply

at that time. If application of prior law

to S’s deferred gain or loss from a

deferred intercompany transaction (as

defined under prior law) occurring in a

consolidated return year beginning prior

to July 12, 1995, would be affected by

an intercompany transaction (as defined

under this section) occurring in a consolidated return year beginning on or

after July 12, 1995, S’s deferred gain or

loss continues to be taken into account

as provided under prior law, and the

(1) * * *

(iii) * * *

(A) * * * An asset of S is not

considered to be disposed of or abandoned to the extent the disposition is in

complete liquidation of S or is in exchange for consideration (other than

relief from indebtedness);

(g) Examples. For purposes of the

examples in this section, unless otherwise stated, P owns all 100 shares of the

only class of S’s stock and S owns all

100 shares of the only class of T’s

stock, the stock is owned for the entire

year, T owns no stock of lower-tier

members, the tax year of all persons is

the calendar year, all persons use the

accrual method of accounting, the facts

set forth the only corporate activity, all

transactions are between unrelated persons, and tax liabilities are disregarded.

***

Example 1. * * *

(d) * * * Under section 301(d), P’s basis in the

T stock is $60. Under § 1.1502–13, and paragraph

(b)(2) of this section, S’s $160 gain from the

distribution is deferred and taken into account in

Year 5 as a result of P’s sale of the T stock. * * *

Example 4. * * *

(b) Analysis. Under paragraph (c)(2) of this

section, S is treated as disposing of each of its

shares of T’s stock immediately before T becomes

a nonmember. * * *

Example 6. * * *

(b) Analysis. Under paragraph (c)(1)(iii)(A) of

this section, P’s excess loss account on each of its

shares of S’s stock ordinarily is taken into account

at the time substantially all of S’s assets are

treated as disposed of, abandoned, or destroyed for

Federal income tax purposes. * * *

§ 1.1502–20 [Corrected]

Par. 6. Section 1.1502–20 is amended

as follows:

1. In paragraph (b)(6), Example 5.

(iii) is revised.

2. In paragraph (e)(3), Example 1. (i),

the third sentence is revised.

3. In paragraph (e)(3), Example 1. (ii)

is revised.

The revisions read as follows:

§ 1.1502–20 Disposition or deconsolidation of subsidiary stock.

(b) * * *

(6) * * *

Example 5. * * *

(iii) T’s issuance of additional shares to the

public results in S’s intercompany loss being taken

into account under the acceleration rule of

§ 1.1502–13(d) because there is no difference

between P’s $100 basis in the T stock and the

$100 basis the T stock would have had if P and S

had been divisions of a single corporation. S’s loss

taken into account is disallowed under paragraph

(a)(1) of this section.

(e) * * *

(3) * * *

Example 1. * * * (i) * * * With the view

described in paragraph (e)(1) of this section, P

transfers land with a value of $100 and a basis of

$100 to T in exchange for preferred stock with a

$200 redemption price and liquidation preference.

***

(ii) Under section 305, the redemption premium

is treated as a distribution of property to which

section 301 and § 1.1502–13(f)(2) apply. Under

§§ 1.1502–13 and 1.1502–32, P’s aggregate basis

in the preferred and common stock is unaffected

by the deemed distributions.

§ 1.1502–32 [Corrected]

Par. 7. Section 1.1502–32 is amended

as follows:

1. In paragraph (b)(3)(ii)(A), the second sentence is revised.

2. In paragraph (b)(3)(v), the last sentence is revised.

3. In paragraph (b)(5)(ii), Example

5.(c), the second sentence is revised.

4. In paragraph (b)(5), Example 6.(b)

is revised.

5. In paragraph (f), a sentence is

added after the second sentence.

The addition and revisions read as

follows:

§ 1.1502–32 Investment adjustments.

(b) * * *

(3) * * *

(ii) * * * (A) * * * For example, S’s

dividend income to which § 1.1502–

13(f)(2)(ii) applies, and its interest excluded from gross income under section

103, are treated as tax-exempt income.

***

(v) * * * See § 1.1502–13(f)(2)(iv)

for taking into account distributions to

which section 301 applies (but not other

distributions treated as dividends) under

the entitlement rule.

(5) * * *

(ii) * * *

Example 5. * * *

treated as making a $70 distribution to P at the

time P becomes entitled to the distribution. * * *

Example 6. * * *

(b) Analysis. Under section 358, P’s basis in the

S stock is increased by its basis in the T stock.

Under § 1.1502–13(f)(3) the money received is

treated as being taken into account immediately

after the transaction. Thus, the $10 is treated as a

dividend distribution under section 301 and under

paragraph (b)(3)(v) of this section, the $10 is a

distribution to which paragraph (b)(2)(iv) of this

section applies. Accordingly, P’s basis in the S

stock is $160 immediately after the merger, which

is then decreased by the $10 distribution taken

into account immediately after the transaction,

resulting in a basis of $150.

(f) * * * For example, if T merges

into S, S is treated, as the context may

require, as a successor to T and as

becoming a member of the group. * * *

§ 1.1502–43 [Corrected]

Par. 8. Section 1.1502–43 is amended

by revising paragraph (a)(3)(iii) to read

as follows:

§ 1.1502–43 Consolidated accumulated

earnings tax.

(a) * * *

(3) * * *

(iii) Earnings and profits resulting

from the disposition of a member’s

stock are determined without regard to

the stock basis adjustments under

§§ 1.1502–32 and 1.1502–33(c)(1).

§ 1.1502–76 [Corrected]

Par. 9. Section 1.1502–76 is amended

by revising paragraph (b)(4), Example

1.(a) and the first sentence of Example

1.(c) to read as follows:

§ 1.1502–76 Taxable year of members

of group.

SECTION 1. PURPOSE

Example 1. Items allocated between consolidated and separate returns. (a) Facts. P and S are

the only members of the P group. P sells all of S’s

stock to individual A on June 30, and therefore S

becomes a nonmember on July 1 of Year 2.

of tax year. The facts are the same as in paragraph

(a) of this Example 1, except that on July 31 P

acquires all the stock of T (which filed a separate

return for its year ending on November 30 of Year

1) and T therefore becomes a member on August

1 of Year 2. * * *

§ 1.1502–80 [Corrected]

Par. 10. Section 1.1502–80 is

amended as follows:

1. Paragraph (b) is revised.

2. In paragraph (d)(1), a sentence is

added to the end of the paragraph.

The addition and revision reads as

follows:

§ 1.1502–80 Applicability of other provisions of law.

(b) Non-applicability of section 304.

Section 304 does not apply to any

acquisition of stock of a corporation in

an intercompany transaction or to any

intercompany item from such transaction

occurring on or after July 24, 1991.

(d) * * * (1) * * * For purposes of

this paragraph (d), any reference to a

transferor or transferee includes, as the

context may require, a reference to a

successor or predecessor.

PART A. GENERAL

(b) * * *

(4) * * *

Rev. Proc. 97–24

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on

March 13, 1997, 8:45 a.m., and published in the

issue of the Federal Register for March 14, 1997,

62 F.R. 12096)

General Rules for Filing and

Specifications for the Private

Printing of Substitute Forms W–2

and W–3

26 CFR 601.602: Forms and instructions. (Also

Part I, Sections 6011, 6041, 6051, 6071, 6081,

6091; 1.6041–1, 1.6041–2, 31.6051–1, 31.6051–2,

31.6071(a)–1, 31.6081(a)–1.)

.01 The purpose of this revenue procedure is to provide the general rules for

filing and to state the requirements of

the Internal Revenue Service (IRS) and

the Social Security Administration

(SSA) for reproducing paper substitutes

for Form W–2, Wage and Tax Statement, and Form W–3, Transmittal of

Wage and Tax Statements, for amounts

paid during the 1997 calendar year. The

information reported on Forms W–2 and

W–3 is required to establish tax liability

for employees and their eligibility for

Social Security and Medicare benefits.

.02 Forms W–2 and W–3 have only

minor changes for 1997. Please see

‘‘Nature of Changes’’ (Section 2, below)

and the exhibits at the end of this

revenue procedure for changes to the

Form W–2 and W–3.

.03 For the purpose of this revenue

procedure, a substitute form is one that

is not printed by IRS. A substitute

Form W–2 or W–3 MUST conform to

the specifications in this revenue procedure to be acceptable to the IRS.

Preparers should also refer to the separate instructions for Forms W–2 and the

instructions on Form W–3 for details on

how to complete these forms. See Part

C, Sec. 4.01, for information on ordering the official IRS forms and instructions. See Part B, Sec. 2, for requirements for substitute forms furnished to

employees.

.04 IRS has instituted a centralized

call site to answer questions related to

information returns (Forms W–2, W–3,

1099, etc.). The call-site phone number

is (304)263–8700 (not a toll-free number). The number for Telecommunication Device for the Deaf (TDD) is

(304)267–3367 (not a toll-free number).

.05 IRS has established a personal

computer based Information Reporting

Program Bulletin Board System (IRP–

BBS) at the IRS Martinsburg Computing Center (IRS/MCC). This system provides access to the forms and

publications relating to information returns, news of the latest changes, the

ability to receive answers to specific

questions, access to shareware, and

other features. The IRP–BBS is available for public use and can be reached

by dialing (304)264–7070 (not a tollfree number). The IRP–BBS is compatible with most modems. For more infor-

mation concerning this system, call IRS/

MCC at (304)263–8700 (not a toll-free

number).

.06 Employers are reminded that under Section 6722 of the Internal Revenue Code (IRC) they can be assessed a

penalty of $50 per Form W–2 that is not

furnished to an employee on a form

acceptable to the IRS (up to $100,000).

To be acceptable to IRS, the Form W–2

must be either the ‘‘official’’ form or a

substitute form with the core data placed

exactly as specified in Part B., Section

2.04 of this Revenue Procedure. No IRS

office is authorized to allow deviations

from this Revenue Procedure.

.07 This revenue procedure supersedes Rev. Procs. 96–24 and 9624A,

1996–5 I.R.B., dated January 29, 1996,

and 1996–15 I.R.B., dated April 8, 1996

(Reprinted as Publication 1141, Revised

4–96).

SEC. 2. NATURE OF CHANGES

.01 The text and exhibits were updated for tax year 1997.

.02 Only 7 inch width Forms W–2

and W–3 are acceptable for SSA processing. The exhibits for the printing of

7.5 and 8 inch width Forms W–2 and

W–3 have been removed because 7.5

and 8 inch forms cannot be put through

SSA scanning equipment. Keying from

the paper documents will be necessary

for any 7.5 and 8 inch forms submitted

to SSA.

.03 Information has been added

that will require businesses terminating operations to give their employees

Form W–2 when the employer files

the final Form 941, Employer’s Quarterly Federal Tax Return. This also

changes the filing date Form W–2

must be sent to SSA. See Part A,

Section 3.06 below for new information.

.04 The Void Box on Form W–2,

Copy A, was enlarged and set with bold

rules. This was requested by SSA to

bring more attention to voided forms so

void totals are not included in subtotals

and total on Forms W–2 and W–3.

.05 Form W–2, Box 13, added codes

R, S, and T for medical savings,

SIMPLE retirement account, and

adoption assistance payment. More

details about these new codes can be

found beginning in Part B, Sec.

1.04.16 below.

.06 New paragraph was added to the

paperwork reduction act notice at the

direction of OMB.

.07 Added information stating Household Employers with only one household employee must file Form W–3

with Form W–2. This is based on an

agreement between SSA and IRS. See

Part B, Section 1.10 below for new

requirement.

.08 Form W–3, boxes 13 and 14, and

their related instructions have been deleted. SSA says they no longer need this

information. See Part A, Section 4.04.

.09 Changed the instructions for substitute forms W–2 to require that employers may provide multiple occurrences of box 13 but the boxes should

use the same codes as those assigned by

IRS. See Part B, Section 2.04.14 below

for new information.

.10 Provided examples of the various

types of information that should go in

box 14, Form W–2. See Part B, Section

2.04.19 for details.

.11 The section titled ‘‘Where to File’’

in the general instructions on the employer’s copy of the official Form W–3

must be printed in its entirety on all

substitute Forms W–3.

.12 The tax year (1997) must be

printed in non-reflective black ink on all

copies of Form W–2 and Form W–3

using 24 pt OCR–A font. The forms

identification numbers, e.g., 22222 or

33333, at the top of the forms must be

printed in non-reflective black ink. It is

imperative that SSA’s scanning equipment be able to recognize the form

number so that, for example, a Form

W–3 is recognized and is not scanned or

keyed as a Form W–2. The form number ( W–2 and W–3), and the signature

line information on Form W–3, must be

printed in non-reflective black ink. The

word ‘‘Form’’ as well as the form

title(s), e.g., Wage and Tax Statement

and Transmittal of Wage and Tax Statements, should be printed in red OCR

drop-out ink.

.13 The correct scanable image depth

of Form W–2, Copy A, must be 4.833

inches, instead of 5.5 inches as previously stated. The correct scannable image depth of Form W–3 on a page must

be 4.167 inches, and not 4.4 inches as

previously stated. See exhibits A and B.

.14 The Catalog Number, shown on

the 1997 Form W–2 as ‘‘Cat. No.

10134D’’, and the Catalog Number

shown on the 1996 Form W–3 as No.

10159Y, is used for IRS distribution

purposes and should not be printed on

substitute Forms W–3 or W–2 (Copy A

or employee copies).

.15 Added information regarding extensions of time to file for more than 50

employers. See Part A, Section 3.08, for

the new information.

.16 The zip code for P.O. Box number

reserved for the Information Returns

Magnetic Media Reporting Program has

changed. See Part A, Section 3.01.2, for

the new zip code.

.17 The Earned Income Credit notification to employees has been removed

from the back of Copy C, and must now

be printed on the back of Copy B, Form

W–2.

.18 Added information on how forms

can be ordered through computer on-line

services.

.19 Various editorial changes were

made.

SEC. 3. GENERAL RULES FOR

FILING FORMS W–2

.01 Employers MUST use magnetic

media for filing with SSA if they prepare and file 250 or more 1997 Forms

W–2 (Copy A). This requirement applies

unless:

1. The employer can establish that

filing on magnetic media will result in

undue hardship, AND

2. The employer is granted a waiver

of the requirement by IRS.

To request a waiver of the magnetic

media filing requirement, for the current

tax year only, submit Form 8508, Request for Waiver From Filing Information Returns on Magnetic Media, to:

If by Postal Service:

Internal Revenue Service

Martinsburg Computing Center

P.O. Box 1359

Martinsburg, WV 25402–1359

Or, if by truck or air freight:

IRS—Martinsburg Computing Center

Magnetic Media Reporting

Route 9 and Needy Road

Martinsburg, WV 25401.

Forms may also be FAXED to the

IRS/MCC at (304) 264–5602.

Form 8508 may be obtained through

electronic options on the Internet at

http://www.irs.ustreas.gov, or by calling

1–800–829–3676. Form 8508 also may

be obtained directly from the IRS

Martinsburg Computing Center (IRS/

MCC) at the above address or by calling

(304)263–8700 (not a toll-free number).

The number for Telecommunication Device for the Deaf (TDD) is (304)267–

3367 (not a toll-free number). It is

recommended that completed requests

for waivers (Form 8508) be submitted at

least 45 days before but no later than

the due date of the return (see Sec. 3.06,

below). The requestor will receive an

approval or denial letter from IRS, but

must allow at least 30 days for IRS to

respond. If you have any questions

concerning Form 8508, contact IRS/

MCC at the address or phone number

shown above. Employers who do not

comply with the magnetic media filing

requirements for Form W–2 and who

are not granted a waiver may be subject

to certain penalties. Since many states

and local governments accept Form

W–2 data on magnetic media, savings

may be obtained if magnetic media is

used for filing with both SSA and state

or local governments. In many instances, the state or local government is

willing to accept the data format specifications set out in SSA’s Technical Information Bulletin (TIB) No. 4, Magnetic

Media Reporting. You must contact each

individual state or local taxing agency to

receive approval and make arrangements

to file on magnetic media.

EMPLOYERS WHO FILE FORM

W–2 INFORMATION ON MAGNETIC

MEDIA WITH SSA MUST NOT SEND

THE SAME DATA TO SSA ON PAPER

FORMS W–2. This would result in

duplicate reporting and may subject the

filer to an unnecessary contact by the

IRS.

.02 TIB–4, Magnetic Media Reporting, Submitting Annual W–2 Copy A

Information to the Social Security Administration, (SSA Pub. No. 42–007,

revised Oct., 1996) contains the specifications and procedures for filing Form

W–2 information on magnetic media

with SSA. Specifications for both tape

and diskette reporting for Forms W–2

are included in the TIB–4.

.03 TIB–4 may be obtained by writing to:

Social Security Administration

OCRO, DEA

Attn: Resubmittal Unit

300 North Greene Street

Baltimore, MD 21201.

Employers may call their local SSA

Magnetic Media Coordinator (MMC) to

obtain the TIB–4 (see list of Magnetic

Media Coordinators’ telephone numbers

in the Appendix). The TIB–4 is also on

the SSA Annual Wage Reporting Bulletin

Board System (AWRBBS). The number

for the AWRBBS is (410)965–1133 (not

a toll-free number). Employers using

magnetic media are cautioned to obtain

the most recent revision of the TIB–4

and supplements due to possible changes

in the specifications and procedures.

.04 Employers not using magnetic

media must file a paper Copy A of

Form W–2 with SSA on either the IRS

printed official form or a privately

printed substitute paper form that exactly meets the specifications shown in

Parts B and C.

.05 Employers can design their own

statements to give to employees. This

applies to both employers who file with

SSA either on magnetic media or paper

Forms W–2, Copy A. Employee statements designed by employers must comply with the requirements shown in

Parts B and C, below.

NOTE: Copy A must not be filed on

paper with SSA when the same Form

W–2 information is filed on magnetic

media. Therefore, magnetic media filers who use the official IRS printed

form or any other pre-printed form

are advised not to print Copy A, or to

discard a printed Copy A, to prevent

duplicate information from being submitted to SSA.

.06 Beginning January 1, 1997, if

you are terminating your business,

you must provide your employees

with Forms W–2 on or before the due

date of the business filing its final

Form 941. Employers must also file

Forms W–2 and W–3 with SSA on or

before the last day of the month

following the due date of the final

Form 941. See Rev. Proc. 96–57, Automatic Extensions for Forms W–2,

Internal Revenue Bulletin 1996–53

dated 12/30/96, for more information.

Note: Use of a reporting agent or

other third-party payroll service provider does not relieve an employer of

the responsibility to ensure that tax

and information returns are sent out

and/or filed correctly and on time.

.07 1997 Forms W–2, whether filed

on magnetic media or paper, must be

submitted to SSA on or before March

2, 1998. In addition, the employee copies must be furnished to the employee

on or before January 31, 1998. If employment ended before December 31,

1997, the employee may be furnished

his/her copy any time after employment

ends, but no later than January 31, 1998.

However, if the employee requests Form

W–2, you must furnish him or her the

completed copies within 30 days of the

request or of the final wage payment,

whichever is later. This requirement is

met if the form is properly addressed,

mailed, and postmarked on or before the

due date. Failure to timely file with SSA

or to timely provide the employee copies may subject the employer to penalties. Employers needing additional time

to file Form W–2 information (paper or

magnetic media) with SSA may request

an extension of time to file by submitting Form 8809, Request for Extension

of Time to File Information Returns, to

the IRS/MCC at the address (or alternative address) listed in Sec. 3.01, above.

The extension request should be filed as

early as possible, but must be postmarked no later than the due date of the

forms (March 2, 1998). DO NOT

SEND FORM 8809 TO SSA.

NOTE: APPROVAL OF THE EXTENSION IS NOT AUTOMATIC. Approval or denial is based on administrative criteria and guidelines. The

requestor will receive an approval or

denial letter from IRS and must allow at

least 30 days for IRS to respond. Form

8809 may be obtained through electronic options on the Internet at http://

www.irs.ustreas.gov; by modem to IRIS

(703)321–8020; or by using the IRS Fax

Forms Program (703)487–4160, or by

calling 1–800–829–3676. You can also

contact IRS/MCC (See the address and

phone number in Sec. 3.01, above).

.08 If requesting extensions of time

for more than 10 employers, IRS encourages filers to submit the request on

tape, tape cartridge, 5 1/4 or 3 1/2-inch

diskette, or electronically through the

Information Reporting Program Bulletin

Board System (IRP–BBS). Transmitters

requesting an extension of time to file

more than 50 payers are required to

file the extension request on magnetic

media or electronically. Transmitters

who submit requests for multiple payers

will receive one approval letter with an

attached list of payers covered under

that approval. Publication 1220, Specifications for Filing Forms 1098, 1099

series, 5498 and W–2G Electronically

or on Magnetic Media, provides information on how to file requests for

extensions of time on tape, diskette, or

electronically.

NOTE: To file a request for extensions

of time magnetically or electronically

for multiple payers, third party filers

and/transmitters, must have an IRS

Transmitter Control Code (Authorization to file information returns).

SEC. 4. GENERAL RULES FOR

FILING FORM W–3

.01 Employers submitting Form W–2

(Copy A) on paper to SSA must transmit Forms W–2 with Form W–3.

.02 Form W–3 must be the same

width (7 inches) as the Forms W–2

filed.

.03 Form W–3 should only be used to

transmit paper Forms W–2 (Copy A).

Magnetic media filers do not file Form

W–3. Employers using magnetic media

must transmit Form W–2 data with

Form 6559, Transmitter Report and

Summary of Magnetic Media, (and Form

6559–A, Continuation Sheet for Form

6559, if necessary). These forms may be

obtained by calling either your SSA

MMC (see listing in Appendix) or IRS

at 1–800–829–3676.

.04 For 1997 Forms W–3, entries are

not needed for Adjusted total social

security wages and tips (formerly box

13) and Adjusted total Medicare wages

and tips (formerly box 14).

PART B. REQUIREMENTS FOR

FILING PAPER SUBSTITUTES

SEC. 1. REQUIREMENTS FOR

SUBSTITUTE ‘‘PRIVATELY PRINTED’’

FORMS SUBMITTED TO SSA

(FORMS W–2, COPY A, AND FORMS

W–3)

.01 Employers may file privately

printed substitute Forms W–2 and W–3

with SSA. The substitute form must be

an exact replica of the IRS printed form

(or official reproduction proof) with respect to layout and contents because it

will be read by machine. The Government Printing Office (GPO) symbol

must be deleted (see Sec. 1.16, below).

The specifications and allowable tolerances for the Copy A of substitute

Forms W–2 are provided later in this

Revenue Procedure. See Exhibit A for

Form W–2 specifications. The specifications for Forms W–3 are provided in

Exhibit B.

.02 Paper for substitute Forms W–2,

Copy A, and Form W–3 (cut sheets and

continuous pinfeed forms) that are to be

filed with SSA must be white 100%

bleached chemical wood, 18–20 pound

paper only, optical character recognition

(OCR) bond produced in accordance

with the specifications shown as follows:

Paper Requirements

1 Acidity: pH value, average, not

less than . . . . . . . . . . . . . . . . . . . . 4.5

2 Basis Weight 17 x 22

500 cut sheets . . . . . . . . . . . . . .18–20

Metric equivalent grams per.

sq. meter . . . . . . . . . . . . . . . . . .60–75

A tolerance of ±5 pct. shall be allowed.

3 Stiffness: Average, each direction,

not less than Gurley milligrams—

Cross direction . . . . . . . . . . . . . .50

Machine direction. . . . . . . . . . . .80

4 Tearing Strength: Average, each

direction, not less than—Grams . .40

5 Opacity: Average, not less

than—Percent . . . . . . . . . . . . . . . . .82

6 Reflectivity: Average not less

than—percent . . . . . . . . . . . . . . . . .68

7 Thickness:

Average . . . . . . . . . . . . . . inch 0.0038

Metric equivalent . . . . . . . mm 0.097

A tolerance of ±0.0005 inch

(0.0127mm) shall be allowed. Paper

shall not vary more than 0.0004

inch (0.012mm) from one edge to

the other.

8 Porosity: Average, not less

than—seconds . . . . . . . . . . . . . . . . .10

9 Finish (smoothness):

Average, each side—seconds. .20–55

(For information only, the

Sheffield equivalent unit . .170–d100

10 Dirt: Average, each side, not to

exceed— Parts per million . . . . . . .8

NOTE: Reclaimed fiber in any percentage is permitted, provided the requirements of this standard are met. DO

NOT USE RECYCLED PAPER.

.03 All printing for Copy A (of

Forms W–2) and Form W–3 will be in

red OCR dropout ink, as specified below, except for the form identifying

numbers ‘22222’ or ‘33333’ at the top

of the form, as well as the tax year at

the bottom of the form (see Exhibits C

and D), must be printed in nonreflective black ink. All other printing

will be in red OCR drop-out ink meeting, or comparable to, the specifications

in this paragraph. The OCR drop-out ink

for paper Forms W–2, Copy A, and

W–3 is specified as Flint Ink (formerly

Sinclair and Valentine) J–6983 red ink

or equivalent. This is the same ink that

is used for Copy A of the Form 1099

series. The use of this is required for

1997 Forms W–3 and W–2, Copy A.

NOTE: Printing in any other red OCR

dropout ink must be cleared by contacting Banc-Tech Corp., Attn: Forms Designer & Analyst, P.O. Box 660204,

MS–77, Dallas, TX 75266 (214–579–

6927—This is a voice mail number.

Leave a message and your call will be

returned).

.04 Type must be substantially identical in size and shape with corresponding

type on the official form. The form

identifying number MUST be printed in

non-reflective black ink using an

OCR–A font; 10 characters per inch.

1. On Form W–3 and Copy A of

Forms W–2, all the perimeter rules

must be 1-point (0.014 inch), while

all other rules must be one-half point

(0.007 inch).

2. Vertical rules must be parallel to

the left edge of the form; horizontal

rules parallel to the top edge.

.05 Two official Forms W–2 (Copy

A), or one official Form W–3 are contained on a single page that is 7 inches

wide (exclusive of any snap-stubs) by

11 inches deep. The form identifying

number for the official forms (7 inches

wide) is ‘22222’ (5 digits) for Form

W–2 and ‘33333’ (5 digits) for Form

W–3. The top margin for 1997 Forms

W–3 and W–2, Copy A is .375 inch (3/8

inch). The right margin must be .15 inch

and the left margin .35 inch (plus or

minus .0313 inch). The margins are

unchanged from 1996. Margins must be

free of all printing. For Forms W–2,

Copy A, the combination width of Box

1, ‘‘Control number’’, and the box containing the form identifying number

(22222) must always be 2.0 inches. For

Form W–3, the combined width of these

boxes must always be 2.2 inches.

NOTE: All form identifying numbers

are to be printed in non-reflective black

ink, using OCR-A font, printed 10 characters per inch.

.06 The depth of the individual scannable image on a page must be the same

as that of the IRS printed forms. For

Form W–2, the depth is 4.833 inches

(see Exhibit A). The scannable image

depth of the Form W–3 on a page must

be 4.167 inches (see Exhibit B).

.07 The words ‘‘Do NOT Cut or

Separate Forms on This Page’’ must be

printed in red OCR dropout ink between

the two Forms W–2 on Copy A only

(see Exhibit A). Perforations are required on all copies (except Copy A) to

enable the separation of individual

forms. Continuous pinfeed copy A forms

must be separated at the page perforation into individual 119 deep pages before submission to SSA. The pinfeed

strips must also be removed. However,

the two W–2 documents contained on

the 119 deep page must not be separated.

.08 The words ‘‘For Paperwork Reduction Act Notice, see separate instructions’’, must be printed in red

OCR drop-out ink on Forms W–2, Copy

A (see Exhibit A for format and location).

.09 The Office of Management and

Budget (OMB) Number must be printed

on each ply of Form W–2 and W–3 (see

Exhibits A and B for format and location).

.10 The section titled ‘‘Where to

File’’ in the general instructions on the

employer’s copy of the official Form

W–3, must be printed in its entirety on

all substitute Forms W–3 (see Exhibit

B). Household employers filing Forms

W–2 for household employees should

send the forms to the same address

shown listed in the instructions.

Note: Household employers, even

those with only one household employee, must file Form W–3 with

Form W–2. On Form W–2, mark the

‘‘Hshld. Emp.’’ Box in Box 15, and on

Form W–3 mark the ‘‘Hshld.’’ Box in

Box b.

.11 The Paperwork Reduction Act

Notice must be printed on Form W–3

(see Exhibit B for format and location).

.12 Privately printed continuous substitute Forms W–2, Copy A, must be

perforated at each 119 page depth. No

perforations are allowed between the

individual forms (5 1/2 inch Forms

W–2) on a single copy page of Copy A.

Continuous pinfeed Copy A forms must

be separated at the page perforation

prior to submitting them to SSA. Two

Copy A forms are contained on one

page. The two copies must remain together on the page. Only the pages are

to be separated (burst). Perforations are

required between all the other individual

copies on a page (Copies 1, B, C, 2, and

D) included in the set.

.13 The back of a substitute Form

W–2, Copy A, and Form W–3 (page 1)

must be free of all printing.

.14 Spot carbons are NOT permitted

for Copy A of Forms W–2 or for Form

W–3. Interleaved carbon should be

black and must be of good quality to

assure legibility of information on all

copies and to preclude smudging.

.15 Chemical transfer paper is permitted for Form W–2, Copy A, and Form

W–3 only if the following standards are

met:

1. Only chemically backed paper is

acceptable for Copy A.

2. Carbon coated forms are not permitted. Front and back chemically

treated paper cannot be processed properly by machine.

3. Chemically transferred images

must be black in color.

.16 The GPO symbol must not be

placed on substitute Copy A of Forms

W–2.

.17 The Catalog Number, shown on

the 1997 Form W–2 as ‘‘Cat. No.

10134D’’, and the Catalog Number

shown on the 1996 Form W–3 as ‘‘Cat.

No. 10159Y’’, is used for IRS distribution purposes and should not be printed

on substitute forms.

SEC. 2. REQUIREMENTS FOR

SUBSTITUTE FORMS FURNISHED

TO EMPLOYEES (COPIES B, C,

AND 2 OF FORMS W–2)

.01 All employers (including those

who file on magnetic media and do not

file a paper Copy A) must furnish

employees with at least two copies of

the Forms W–2 (three or more for

employees required to file a state, city,

or local income tax return). The dimensions of these copies (Copies B, C, etc.)

but not copy A, may be expanded from

the dimensions of the official form to

allow space for conveying additional

information, such as additional entries

required for Boxes 13 or 14, withholding from pay for health insurance, union

dues, bonds, charity, etc. The requirement that a maximum of three items are

permitted in Box 13 of Form W–2

applies only to the paper Copy A that is

filed with SSA. As long as sufficient

space is provided on the substitute employee copies, as many items as needed

may be placed in Box 13 or box 14.

Also, on these copies (Copies B, C,

etc.), the size of these boxes may be

adjusted. (However, see the minimum

sizes for certain boxes, below). This

may permit the employer to eliminate

other statements or notices that would

otherwise be furnished to employees.

1. The MAXIMUM allowable dimensions for employee copies of Forms

W–2 are:

(a) depth should be no more than 6.5

inches;

(b) width should be no more than 8.5

inches.

2. The MINIMUM allowable dimensions for employee copies of Forms

W–2 are:

(a) 2.67 inches by 5.0 inches.

(b) horizontal or vertical format is

permitted.

NOTE: These minimum and maximum

size specifications are for 1997 only and

may change for future years. The maximum width of 8.5 inches is for employee copies of Form W–2 only. The

width of the paper Copy A, submitted to

SSA, is specified in Part B, section 1.05

above.

.02 The paper for all copies should

be white. The substitute Copy B (or its

equal), that employees are instructed to

attach to their Federal income tax return,

must be at least 12 pound paper (basis

17 x 22–500), while the other copies

furnished the employee should be at

least 9-pound paper (basis 17 x 22–

500).

.03 Interleaved carbon and chemical

transfer paper for employee copies must

meet the following standards:

1. All copies must be CLEARLY

LEGIBLE;

2. All copies must have the capability to be photocopied; and

3. Fading must not be of such a

degree as to preclude legibility and the

ability to photocopy.

In general, black chemical transfer

inks are preferred; other colors are permitted only if the above standards are

met. ‘‘Spot carbons’’ are NOT permitted

(See Part B, Sec. 1.15, above, for standards for chemical transfer paper for

Copy A.)

.04 The following requirements govern the private printing of employee

copies of Forms W–2. All substitutes

must be a form, which contains boxes,

box numbers, and box titles that, where

applicable, match the IRS printed form.

The placement, numbering, and size of

certain boxes (the ‘‘core’’ information)

is specified as follows:

1. The items and box numbers that

constitute the core data are:

Box 1—Wages, tips, other compensation,

Box 2—Federal income tax withheld,

Box 3—Social Security Wages/

Railroad Retirement Compensation,

Box 4—Social Security tax withheld/

Railroad Retirement Tax

Withheld,

Box 5—Medicare wages and tips/

Railroad Retirement Tips,

and

Box 6—Medicare tax withheld/

Railroad Retirement Tax

Withheld.

NOTE: Railroad employees may not be

subject to Social Security coverage but

are subject to Railroad Retirement Tax

Tier I and II coverage. Railroad Compensation employers may make the

above modifications to Forms W–2 but

only for substitute Forms W–2 furnished

to employees and not for any Copy A

forms to be filed with SSA.

The ‘‘core’’ boxes must be printed in

the exact order on each line as on the

IRS printed form (see the Exhibits at the

end of this revenue procedure). Boxes 1

and 2 must be next to each other, with

Boxes 3 and 4 below on the next line,

and Boxes 5 and 6 on the line below

Boxes 3 and 4.

2. The block of core data (Boxes 1

through 6) must be placed in the upper

right of the form. Substitute employee

copies of Form W–2, which are printed

using a vertical format with dimensions

smaller than the IRS printed form, may

have the core data entirely on the top of

the form (see Exhibit F). In no instance

will boxes or other information be permitted to the right of the core data.

Standard margins or a small amount of

other blank space may appear to the top

or right of this data. The form title,

number, or copy (Copy B, C, etc.) may

be at the top of the form. Also, a

reversed or blocked-out area to accommodate a postal permit number or other

postal considerations is permitted at the

upper right of the form.

3. Boxes 1 through 6 must each be a

minimum of 1 3/8 inches wide and 1/4

inch deep.

4. Other required boxes:

—Employer identification number

(EIN),

—Employer’s name, address, and ZIP

code,

—Employee’s Social Security number, and

—Employee’s name, address, and ZIP

code.

These items are required to be present

on the form and must be in boxes

similar to those on the IRS printed form.

However, they may be placed in any

location, other than the top or upper

right. The lettering system used on the

IRS printed form (‘‘a’’ through ‘‘f’’)

need not be used. The employer’s EIN

may be included in the box for the

employer’s name and address. If this is

done, a separate box for the EIN is not

required. The Control number box (Box

‘‘a’’ on the IRS printed form) is not

required.

5. The Tax Year (1997) MUST be

clearly printed on all copies of substitute

Forms W–2. It is recommended (but not

required) that this information be located to the right of the form title on the

lower left of the Form W–2. The tax

year must also be printed in nonreflective black ink using 24 pt

OCR–A font.

6. If applicable, Social Security tips

MUST be shown separately from Social

Security wages. A separate box is not

required unless Social Security tips are

to be reported.

Boxes 1 and 2 on Copy B are

required to be outlined in bold 2-point

rule (see Exhibit E) or highlighted in

some manner to distinguish these boxes.

7. If a box for Advance EIC (Earned

Income Credit) payments (Box 9) is

present, the box must be outlined in

bold 2-point rule or highlighted in some

manner to distinguish this box. However, if no amounts are paid for Advance EIC, this box is not required and

may be omitted by printers. Do not use

Box 9 for any other purpose than reporting Advance EIC payments.

8. If Allocated tips (Box 8) are being

reported for the individual employee (or

class of employees that are being provided Forms W–2), it is recommended

(but not required) that this box also be

outlined in bold 2-point rule or highlighted on Copy B. However, if allocated tips are not being reported, this

box may be omitted by printers.

9. If Form W–2 contains additional

data concerning payroll deductions (e.g.,

saving bonds withholding, retirement

withholding, or payroll savings), there

should be a special highlighting of the

areas pertaining to Federal income tax

withheld; wages, tips, and other compensation; or Advance EIC (Earned Income Credit) payments that are related

to those items.

10. Employers who are required to

report or withhold state income tax

information are required to include the

following boxes on substitute Forms

W–2:

Box 16—State and Employer’s state

identification (I.D.) number,

Box 17—State wages, tips, etc., and

Box 18—State income tax withheld.

11. Employers who are required to

report or withhold local income tax

information are required to include the

following boxes on substitute Forms

W–2:

Box 19—Locality name

Box 20—Local wages, tips, etc., and

Box 21—Local income tax.

12. If state or local tax information is

required, this information is also considered ‘‘core data.’’ The state and local

information MUST be placed at the

bottom of the form. See the exhibits at

the end of this revenue procedure.

13. Other boxes on the IRS printed

form (Boxes 7 through 15) need not

appear on substitute Forms W–2 provided to employees unless an employer

has that item of information to report to

an employee. For example, if an employee did not have Social Security tips

(Box 7), Allocated tips (Box 8), or

Advance EIC payments (Box 9), the

form could be printed without these

boxes. However, if the employer had

provided amounts for dependent care

benefits, those amounts would be required to be reported separately and

shown in a box labeled ‘‘Box 10, Dependent care benefits,’’ as on the IRS

printed form and the exhibits in this

revenue procedure.

14. Employers may provide multiple

entries in Box 13, but each entry should

use the same codes as assigned by the

IRS for that type of item. (See Reference Guide for Box 13 Codes in the

1997 Form W–2 instructions). For example, employers reporting deferred

compensation must label the box as

‘‘13d’’ and not as ‘‘13a’’, even though it

is the first or only item to go in this

box. Use the codes shown with the

dollar amount. On Copy A, Form W–2,

do not enter more than three codes in

this box. If more than three items need

to be reported in box 13, use a separate

Form W–2 to report the additional items

(see Multiple Forms in the 1997 Form

W–2 instructions). However, employers

may enter more than three codes in box

13 of Copies 1, 2, B, C, and D of Form

W–2. Do not report in box 13 any items

that are not listed as codes A–T in the

Form W–2 instructions. Do not report

the same Federal tax data to the SSA on

more than one Copy A, Form W–2.

15. If you are a military employer

and provide your employee with basic

quarters, subsistence allowances, and

combat zone compensation, report the

amount in Box 13, Form W–2, using

code Q.

16. Beginning January 1, 1997, employer’s contributions to an employee’s

Medical Savings Account’s (MSAs),

must be reported in Box 13, Form W–2,

using code R.

17. Beginning January 1, 1997, an

employees elective contributions to a

salary reduction SIMPLE retirement account must be included in Box 13, Form

W–2, using code S. However, if the

amount is contributed to a SIMPLE that

is part of a section 401(k) arrangement,

that amount must be reported in Box 13,

Form W–2, using code D.

18. Beginning January 1, 1997,

amounts paid or expenses incurred by

an employer to or for an employee for

qualified adoption expenses must be

reported in Box 13, Form W–2, using

code T.

Note: See the 1997 Form W–2 instructions for more information regarding codes R, S, and T.

19. Employers may use Box 14 for

any other information you want to give

your employee. Please label each item.

Examples are union dues, health insurance, premiums deducted, nontaxable

income, voluntary after-tax contributions, or educational assistance payments.

.05 Substitute forms for employees

(Copies B, C, and 2 of Forms W–2)

must meet the following requirements:

1. All copies of Forms W–2 must

clearly show the form number, the form

title, and the tax year. The title of Form

W–2 is ‘‘Wage and Tax Statement.’’ It is

recommended (but not required) that

this be located on the bottom left of

Form W–2. The reference to the Department of the Treasury—Internal Revenue

Service must be on all copies of Form

W–2 provided to the employee. It is

recommended (but not required) that

this be located on the bottom right of

Form W–2.

2. If the substitute forms are not

labeled as to the disposition of the

copies, then written notification must be

provided to each employee as specified

below:

(a) The first copy of the form (Copy

B) is filed with the employee’s Federal

tax return.

(b) The second copy of the form

(Copy C) is for the employee’s records.

(Copy 2) of the form is filed with the

employee’s state, city, or local income

tax return.

3. If the substitute forms are labeled,

the forms must contain the applicable

description:

‘‘Copy B, to be filed with employee’s

Federal tax return,’’ and ‘‘Copy C, for

employee’s records.’’ It is recommended

(but not required) that this be located on

the lower left of Form W–2. The designation ‘‘Form W–2, is recommended

(but not required) to be located on the

lower left of Form W–2 and Department

of the Treasury—Internal Revenue Service.’’ It is recommended (but not required) that this be located on the lower

right of Form W–2.

4. Instructions similar to those contained on the back of Copies B and C of

the official Form W–2 must be provided

to each employees. Employers may

modify or delete certain information in

these instructions (such as modification

for employees of railroads to cover

Railroad Retirement Tier I and II Compensation and Taxes. Employers are allowed to delete instructions that do not

apply to the employee. For example, if

none of the employees have dependent

care benefits (Box 10), the employer

may delete the instructions for that item.

Also, if an employer will only be reporting amounts for a 401(k) plan in Box

13, those instructions may be modified

to cover only Section 401(k) contributions.

5. You must notify employees who

have no income tax withheld that they

may be able to claim a tax refund

because of the earned income credit

(EIC). You will meet this notification

requirement if you issue the IRS Form

W–2 with the EIC notice on the back of

the employee’s copy (Copy B), or a

substitute Form W–2 with the same

statement. You may also meet the requirement by providing a substitute

Form W–2 without the EIC notice and

Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit

(EIC), or your own statement that contains the same wording. For more information about notification requirements,

see Notice 1015 (formerly Pub. 1325),

Employers-Have You Told Your Employees About the Earned Income Credit

(EIC).

NOTE: Printers are cautioned that the

rules set forth here (Part B. Sec. 2)

apply to employee copies (Copies B, C,

etc.) only. Paper filers who send Copy A

of Form W–2 to SSA must follow the

requirements in Part B. Sec. 3, below

for those paper submissions.

SEC. 3. GENERAL RULES FOR

FILING ‘‘PAPER SUBSTITUTES’’

FOR FORMS W–2 AND W–3

.01 Paper substitutes that conform totally to the specifications contained in

this revenue procedure may be privately

printed without the prior approval of the

IRS. Penalties may be assessed for not

complying with the form specifications

set forth in this publication. SUBSTITUTE FORMS THAT DO NOT CONFORM TOTALLY TO THESE SPECIFICATIONS ARE NOT ACCEPTABLE.

This applies to both paper substitutes

that are filed with SSA and those that

are given to employees. Forms should

not be submitted to IRS or SSA for

specific approval. However, if you are

uncertain of any specification set forth

herein and want that specification clarified, you may submit a letter citing the

specification in question, your interpretation of that specification, and an example of how the form would appear if

produced using your understanding of

the specification. Any questions pertain-

ing to Copies B, C, and 2 of Forms

W–2 should be sent to:

Internal Revenue Service

ATTN: Substitute Form W–2

Coordinator

T:C:O:L,Room 7510

1111 Constitution Avenue, N.W.

Washington, DC 20224

Any questions pertaining to Copy A,

Form W–2, and Form W–3 should be

forwarded to:

Social Security Administration

Data Operations Center

1150 E. Mountain Drive

Wilkes-Barre, PA 18702–7997

Attn: Program Analyst Office

NOTE: You should allow at least 30

days for the IRS and SSA to respond.

.02 Forms W–2 and W–3 are subject

to annual review and possible change.

Employers are cautioned against overstocking supplies of privately printed

substitutes.

.03 Copies of the current year IRS

printed Forms W–2 and W–3 and the

instructions for these forms may be

obtained through electronic options on

the Internet at http://www.irs.ustreas.gov,

or from most IRS offices or by calling

1–800–829–3676. The IRS provides

only cut sheet sets.

.04 Substitute Forms W–2 and W–3

transmitted to SSA should generally

contain only data that is required by the

Form W–2, the Form W–2 instructions,

and this revenue procedure.

.05 Substitute Forms W–2, Copy A,

and W–3 are machine imaged and

scanned by Social Security, therefore

these forms must meet the same specifications as Forms W–2 and W–3 produced by IRS. The vertical and horizontal spacing for all Federal payment and

data boxes on Form W–2 must be in

compliance with the specifications contained herein.

.06 All ballot boxes on Forms W–2,

Copy A (Box 15), and W–3 (Box ‘‘b’’)

must be 8-point boxes.

NOTE: If a box is marked, more than

50% of the applicable ballot box must

be covered by an ‘‘X’’.

.07 Copy A of Form W–2 and Form

W–3 must have the form producer’s

EIN entered to the left of ‘‘Department

of Treasury’’.

PART C. ADDITIONAL INSTRUCTIONS

SEC. 1. INSTRUCTIONS FOR

FORMS PRINTERS

.01 Except as provided below, if

magnetic media is not used for filing

with SSA, the substitute copies of

Forms W–2 assembly should be arranged in the same order as the IRS

printed Forms W–2. Copy A should be

first, followed sequentially by perforated

sets (Copies 1, B, C, 2, and D). The

substitute form to be filed by the employer with SSA must carry the designation ‘‘Copy A.’’

NOTE: Magnetic media filers do not

submit Copy A of Form W–2 or Form

W–3. Form 6559 is the transmittal for

magnetic media filed Form W–2 data.

1. It is not a requirement that privately printed substitute forms contain a

copy to be retained by employers (Copy

D). However, employers must be prepared to verify or duplicate this information if it is requested by the IRS or

SSA. Paper filers that do not keep Copy

D should be able to generate a facsimile

of Copy A in case of loss.

2. Except as provided in the arrangement of the official assemblies, additional copies that may be prepared by

employers shall not be placed ahead of

the

copy

‘‘For

EMPLOYEE’S

RECORDS,’’ Form W–2 (Copy C).

3. Instructions similar to those contained on the back of Copies B and C

of the official form MUST be provided

to each employee. These instructions

may be printed on the back of the

substitute Copy B and C or may be

provided to employees on a separate

statement. Do not print these instructions on the back the the copy that is to

be filed with the employee’s state or

local returns.

.02 All privately printed Forms W–3

and Forms W–2 (Copy A), must have

the tax year, form number, and form

title printed on the bottom face of each

form using identical type to that of the

official format. The tax year must be

printed in non-reflective black ink

using 24 pt OCRA-font, on all copies

of Forms W–2, and Forms W–3. The

form title(s), e.g., Wage and Tax

Statement must be printed in red

OCR drop-out ink on Form W–2,

Copy A, and Form W–3. The form

identifying number of Forms W–2

and W–3, must be printed n black

reflective ink, using OCRA-font,

printed 10 characters per inch. The

word ‘‘Form’’ on the W–2 and W–3

must be printed in red OCR drop-out

ink.

.03 The substitute Form W–2, Copy

B, which employees attach to their Federal income tax return, must be at least

12-pound paper (basis 17 x 22–500)

while the other copies furnished to em-

ployee’s should be at least 9-pound

paper (basis 17 x 22–500).

.04 Employee copies of Forms W–2

(Copies B, C, etc.), including those that

are printed on a single sheet of paper,

MUST be produced so as to be easily

separated by the employee. Perforations

between the individual copies that are

printed on a single sheet of paper satisfy

this requirement.

.05 The Form W–2, Copy A, and the

OCR bond Form W–3 that are filed

with SSA must have no printing on the

reverse side.

.06 Instructions similar to those provided as part of the official form must

be provided as part of any substitute

Form W–3.

.07 The copy of the substitute Form

W–3 that contains the instructions and is

to be retained by the employer should

be at least 18-pound paper (basis 17 x

22–500).

SEC. 2. INSTRUCTIONS FOR

EMPLOYERS

.01 Only originals or ribbon copies of

Copy A (Forms W–2) and Form W–3

may be filed with SSA. Carbon copies

and photocopies are not acceptable.

.02 Employers should type or machine print entries on forms whenever

possible and provide good quality data

entries by using a high quality type face,

inserting data in the middle of blocks

that are well separated from other printing and guidelines, and taking any other

measures that will guarantee clear, sharp

images. The employer must provide a

machine scannable form for Copy A.

The employer must also provide payee

copies (Copies B, C, and 2) that are

legible and capable of being photocopied (by the employee).

.03 The Employer Identification

Number (EIN) may be entered in the

Employer’s name and address box on

Copy A of Forms W–2 (Box ‘‘c’’ on the

IRS printed Form W–2). If this is done,

the EIN need not be entered in the box

provided for the EIN (Box ‘‘b’’ on the

IRS printed Form W–2). The EIN must

be entered in Box ‘‘e’’ of the Form

W–3.

.04 The employer’s name, address,

and EIN may be preprinted.

.05 The optional employer’s state

number may be pre-printed in the employer’s name, address, and ZIP code

box. If this is done, the Employer’s state

I.D. Number section in Box 16 of

Forms W–2 need not be completed, as

long as the applicable state taxing au-

thority does not object. Please check

with the appropriate state taxing authority before doing this.

.06 Generally, an agent that has an

approved Form(s) 2678, Employer Appointment of Agent, should enter its

name as the employer in box c of Form

W–2, and file one Form W–2. However,

if the agent is acting as an agent for two

or more employers, or is an employer

and is acting as an agent for another

employer, and pays social security

wages in excess of the wage base to an

individual, special reporting for payments to that individual is needed. The

agent should file separate Forms W–2

reflecting the wages paid by each employer. Box ‘‘c’’ of Form W–2 should

include name of agent, agent for (name

of employer), and address of agent.

Each Form W–2 should reflect the EIN

of the agent in Box ‘‘b’’. In addition the

employer’s EIN should be shown in

Box ‘‘h’’ of Form W–3.

.07 The preparation and filing instructions for Forms W–2 are contained

in the 1997 Instructions for Form W–2.

The preparation and filing instructions

for Form W–3 are contained as part of

the 1997 Form W–3 snap set assembly.

.08 To avoid confusion and questions

by employees, employers are encouraged to delete the following items from

the employee copies of Forms W–2 that

are provided to employees:

1 Form identifying number (e.g.,

22222);

2 The words ‘‘subtotal’’ and ‘‘void’’

and their boxes;

3 Any other captions or box number

that would not be of any informational

use to employees (unless otherwise required).

.09 Employers should use the IRS

supplied label when filing Form W–3

with SSA. The label should be placed

inside the brackets printed in boxes ‘‘e’’

and ‘‘f’’.

SEC. 3. OFFICE OF MANAGEMENT AND

BUDGET (OMB) REQUIREMENTS FOR

SUBSTITUTE FORMS

.01 The Paperwork Reduction Act requires: (1) OMB approval of IRS tax

forms, (2) that each form (all copies)

show the OMB approval number and,

when appropriate, the form’s expiration

date, and (3) that the form (or its

instructions) state why IRS is collecting

the information, how we will use it and

whether it must be given to us. The

official IRS form (or instructions) will

contain this information.

.02 As it applies to substitute IRS

forms, this means:

1. All substitute forms (all copies)

must show the OMB number as it

appears on the official IRS printed form

(see Exhibits A and B).

2. The OMB number must be in one

of the following formats:

OMB No. 1545–0008 (preferred),

OMB # 1545–0008

3. You must inform the users of your

substitute forms of the reasons for IRS

collection, use, and requirements, as

stated in the instructions for the official

IRS form.

Sec. 4. FORMS and PUBLICATIONS

.01 Electronic access to IRS tax

forms, instructions, publications, and

other tax data is available through the

following:

Modem: IRIS at FedWorld (703)

321–8020

Technical questions regarding

FedWorld can be directed to the

FedWorld help desk 24 hours a day at

(703) 487–4608.

Internet: Telnet—iris.irs.ustreas.gov

FTP—ttp.irs.ustreas.gov

WWW—http://www.irs.ustreas.gov

Fax Forms: (703) 487–4160

.02 Over 100 of the most requested

forms and instructions may be obtained

via your fax machine. Just call

(703)487–4160 from the telephone connected to your fax machine.

.03 A CD–ROM containing over

2,000 tax forms, instructions, and publications may be purchased from the

Government Printing Office (GPO), Su-

perintendent of Documents (Supt.

Docs.). Current tax year materials, and

tax forms from 1991 and publications

from 1994, are included on the disc. To

order the CD–ROM, contact Supt. Docs.

at (202) 512–1800 (select Option #1), or

by computer through GPO’s Internet

Web Site (http;//www.access.gpo.gov/su

docs).

.04 List of Social Security Administrations Magnetic Media Coordinators is

included in the Appendix.

Sec. 5 EFFECT ON OTHER REVENUE

PROCEDURES

.01 Rev. Procs. 96–24 and 96–24A,

I.R.B. 1996–5, dated January 29, 1996,

and I.R.B. 1996–15, dated April 8,

1996, (Reprinted as Publication 1141,

Revised 4–96), is superseded.

Part IV. Items of General Interest

Foundations Status of Certain

Organizations

Announcement 97–39

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:

Absecon Police Athletic League Pal,

Absecon, NJ

African-American Adventure, Inc.,

Hyattsville, MD

Ageless Wisdom Seminary, Scottsdale,

Alyce Bartholomew Childrens Museum,

Laporte, IN

Amethyst Foundation Judi Laws,

Philadelphia, PA

Amoco Dealers & Jobbers for Kids,

Inc., Clearwater, FL

Anderson Art Association, Anderson, SC

Anderson Community Aquatics Club,

Inc., Anderson, IN

Anderson Urban League, Anderson, SC

Arts and Humanities Council of Pickens

County, Incorporated, Reform, AL

California Earthquake Legacy, San

Francisco, CA

California Foundation for the Blind, San

Francisco, CA

Camera Arts Foundation, Santa Ana, CA

Camp Rainbow, Encino, CA

C and D for Youth, Inc., Stockton, CA

Castro Valley Group Home, Castro

Valley, CA

CDF Museum Foundation, Ione, CA

Center for Constitutional Issues in

Technology, Los Altos, CA

Center for Creative Education, Seattle,

Center for Creative Work, Inc., San

Francisco, CA

Center for the Support & Protection of

Indian Religious & Indigenous

(Center for the Spirit), Oakland, CA

Charles Thaxton, Konos Connection,

Ramona, CA

Children Loving Others With Needs,

Spring Valley, CA

Childrens Literacy Corporation of

America, Inc., Portland, OR

Childrens Services of Central California,

Fresno, CA

Chitman Education and Research Fund,

Inc., San Diego, CA

Christian Airline Personnel Missionary

Outreach, Everett, WA

Christians Neighbors Network, Menlo

Park, CA

CHS Properties I, Pasadena, CA

Coalition for Kids, Inc., Grants Pass,

Coalition for the Creative Arts,

Berkeley, CA

Clergy Wellness Program, Hood River,

Committee To Aid Ukraine of Northern

California, San Francisco, CA

Conejo Open Alternative School

Taskforce, Newbury Park, CA

Consumer Advocates for Legal Justice,

West Hills, CA

Cook Inlet Vigil, Homer, AK

Cooley S Landing Center Incorporated,

East Palo Alto, CA

Copper Mountain Foundation, Cordova,

Create the Magic of Giving Foundation,

Redondo Beach, CA

Delphi Academy, Nicasio, CA

Delta Rebels Manteca Youth Football,

Manteca, CA

Destiny Bound Corporation, Santa

Barbara, CA

Dots for Tots, Inc., Tigard, OR

Earth Children, San Diego, CA

East Honolulu Girls Softball Amateur

Softball Association Jr Olympics,

Honolulu, HI

Educational Theatre for Higher Inner

Consciousness, Santa Rosa, CA

Eighty First Avenue Softball Club,

Mercer Island, WA

Everglades Equestrian Society, Inc.,

Bonita Springs, FL

Exodus Foundation, Las Vegas, NV

Gambling Problems Information, Inc.,

San Jose, CA

Garmons Group Home, Stockton, CA

Gentle Shepard Ministries, Inc., North

Hollywood, CA

Glea Foundation, Honolulu, HI

Global Relief and Childrens Services,

Olympia, WA

Great Basin Nature Interpreters, Reno,

Greater Redmond Foundation, Seattle,

Greek Folklore Dance Company,

Fremont, CA

Gunther Klaus African Foundation, Los

Angeles, CA

Guye Peak Alpine Foundation, Issaquah,

Hendersonville Friends of Chamber

Music, Hendersonville, NC

Jewel Baker Education Foundation,

Berkeley, CA

Jus County Cloggers of San Jose,

Sunnyvale, CA

Kahala Foundation, Honolulu, HI

Kappa Alpha of Theta Tau Theta

Sorority, Inc., Visalia, CA

Kapuna Foundation, Wailuku, HI

Kathleen A Toon Ministries, Hesperia,

Kings Court Play RS, Inc., San

Francisco, CA

Klamath Siskiyou Coalition, Cave

Junction, OR

Knix Swim Club, Eagle River, AK

Korean American Children & Youths

Choir, Irvine, CA

Lake Region Basketball Officials

Association, Lakeland, FL

Lamar County Literacy Council, Inc.,

Paris, TX

Laredo Independent School District,

Laredo, TX

Leonia Education Association

Scholarship Corp., Inc., Leonia, NJ

Miami Killian Senior High School Band

Patrons, Incorporated, Miami, FL

Michigan Wrestling Federation, Clinton

Twp., MI

Mid America Games for the Disabled,

Inc., Mission, KS

National Transplant Action, Inc.,

Washington, DC

New Group Theatre Troupe, El Paso,

North Texas State Soccer Association

Desoto, Desoto, TX

Northwest Indiana Excellence in Theatre

Foundation, Inc., Hammond, IN

Organization of Positive Youth, Inc.,

Philadelphia, PA

Parents on the Move, Inc., Irwinton, GA

Peninsula Scholarship

Foundation-Reach, Yorktown, VA

Pennsylvania Babe Ruth Leagues, Inc.,

Greentown, PA

Plan II Students Association, Austin, TX

Ramazzini Institute for Occupational

and Env. Health Res., Inc., Solomons,

1997–16

I.R.B.

Reading Fleming Middle School PTO,

Flemington, NJ

Ress of Puerto Rico, Inc., San Juan, PR

RSD Foundation, Houston, TX

Safety First Foundation, Inc., Tucker,

Salvageable Consumable Recyclable

Arts Parts, Houston, TX

Science Alliance for Valuing the

Environment, Inc., Sylvania, OH

Second Mile, Austin, TX

Theatre of Dare, Nags Head, NC

Tom Martino Help Center Foundation,

Littleton, CO

Troup Band Booster Club, Troup, TX

Troy Area Gators, Troy, MI

Union County Housing Asst. Corp,

Union, NJ

Vox Theatre Company, Philadelphia, PA

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.

Credit for Employer Social Security

Taxes Paid on Employee Tips;

Correction

Announcement 97–40

EFFECTIVE DATE: December 20,

1996.

FOR FURTHER INFORMATION CONTACT: Jean M. Casey, (202) 622–6060

(not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

EFFECTIVE DATE: June 27, 1996.

The removal of temporary regulations

that is subject to this correction is under

section 45B of the Internal Revenue

Code.

SUMMARY: This document contains a

correction to the removal of temporary

regulations (T.D. 8699[1997–6 I.R.B. 4])

which were published in the Federal

(61 FR 67212). That publication removes the temporary regulations pertaining to the credit for employer FICA

taxes paid with respect to certain tips

received by employees of food or beverage establishments.

1997–16

I.R.B.

FOR FURTHER INFORMATION CONTACT: Diana Fulton at (202) 622–7550

(not a toll-free number).

SUPPLEMENTARY INFORMATION

Need for Correction

Background

As published, the removal of temporary regulations (T.D. 8699) contains an

error which may prove to be misleading

and is in need of clarification.

Correction of Publication

Accordingly, the publication of the

removal of temporary regulations (T.D.

8699) which is the subject of FR Doc.

96–32249 is corrected as follows:

On page 67212, column 3, in the

heading, the RIN ‘‘RIN 1545–AS19’’ is

corrected to read ‘‘RIN 1545–AV06’’.

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on

March 11, 1997, 8:45 a.m., and published in the

issue of the Federal Register for March 12, 1997,

62 F.R. 11324)

AGENCY: Internal Revenue Service,

Treasury.

ACTION: Correction to the removal of

temporary regulations.

tions (T.D. 8677[1996–30 I.R.B. 7])

which were published in the Federal

FR 33321). The final and temporary

regulations relate to the deductions and

losses of members and also to the

carryover and carryback of losses to

consolidated and separate return years

and to the built-in deduction rules.

Consolidated Returns—Limitations

on the Use of Certain Losses and

Deductions; Correction

Announcement 97–41

The final and temporary regulations

that are the subject of this correction are

under section 1502 of the Internal Revenue Code.

Need for Correction

As published, the final and temporary

regulations contain an error which may

prove to be misleading and is in need of

clarification.

Correction of Publication

Accordingly, the publication of the

final and temporary regulations [T.D.

8677] which are the subject of FR Doc.

96–15823 is corrected as follows:

§ 1.1502–13 [Corrected]

On page 33323, the twentieth entry in

the table is corrected to read as follows:

Affected

section

Remove

1.1502–13(h)(2),

Example 2(b)

1.1502– 1.1502–22T

22(c)

Add

AGENCY: Internal Revenue Service

(IRS), Treasury.

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

ACTION: Correction to final and temporary regulations.

(Filed by the Office of the Federal Register on

March 14, 1997, 8:45 a.m., and published in the

issue of the Federal Register for March 17, 1997,

62 F.R. 12541)

SUMMARY: This document contains a

correction to final and temporary regula-

Announcement of the Expedited Suspension of Attorneys, Certified Public

Accountants, Enrolled Agents, and Enrolled Actuaries From Practice Before the

Internal Revenue Service

Under title 31 of the Code of Federal

Regulations, section 10.76, the Director

of Practice is authorized to immediately

suspend from practice before the Internal Revenue Service any practitioner

who, within five years, from the date

the expedited proceeding is instituted,

(1) has had a license to practice as an

attorney, certified public accountant, or

actuary suspended or revoked for cause;

or (2) has been convicted of any crime

under title 26 of the United States Code

or, of a felony under title 18 of the

United States Code involving dishonesty

or breach of trust.

Attorneys, certified public accountants, enrolled agents and enrolled actu-

aries are prohibited in any Internal Revenue Service matter from directly or

indirectly employing, accepting assistance from, being employed by, or sharing fees with, any practitioner disbarred

or suspended from practice before the

Internal Revenue Service.

To enable attorneys, certified public

accountants, enrolled agents, and enrolled actuaries to identify practitioners

under expedited suspension from practice before the Internal Revenue Service,

the Director of Practice will announce in

the Internal Revenue Bulletin the names

and addresses of practitioners who have

been suspended from such practice, their

designation as attorney, certified public

accountant, enrolled agent, or enrolled

actuary, and date or period of suspension. This announcement will appear in

the weekly Bulletin at the earliest practicable date after such action and will

continue to appear in the weekly Bulletins for five successive weeks or for as

many weeks as is practicable for each

attorney, certified public accountant, enrolled agent, or enrolled actuary so

suspended and will be consolidated and

published in the Cumulative Bulletin.

The following individuals have been

placed under suspension from practice

before the Internal Revenue Service by

virtue of the expedited proceeding provisions of the applicable regulations:

Name

Address

Designation

Date of Suspension

Loberg, Thomas

Rose Ann Galati

Labendeira, Anthony

St. Paul, MN

Thousand Oaks, CA

Fresno, CA

CPA

Indefinite from November 13, 1996

Indefinite from November 25, 1996

Nation, D. Mark

Behren, Daryl D.

Murphy, Virginia T.

Albuquerque, NM

Visalia, CA

Laurinburg, NC

CPA

Indefinite from November 25, 1996

Best III, James M.

Rehm, Aysha

Dineen, Lee M.

Miele, Ralph J.

Monroe, NC

Tulsa, OK

Castle Hayne, NC

North Babylon, NY

CPA

Indefinite from November 25, 1996

Indefinite from December 12, 1996

Indefinite from February 14, 1997

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as ‘‘rulings’’)

that have an effect on previous rulings

use the following defined terms to describe the effect:

Amplified describes a situation where

no change is being made in a prior

published position, but the prior position

is being extended to apply to a variation

of the fact situation set forth therein.

Thus, if an earlier ruling held that a

principle applied to A, and the new

ruling holds that the same principle also

applies to B, the earlier ruling is amplified. (Compare with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

to B, and the new ruling holds that it

applies to both A and B, the prior ruling

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

and clarified, above).

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

used in a ruling that lists previously

published rulings that are obsoleted because of changes in law or regulations.

A ruling may also be obsoleted because

the substance has been included in regulations subsequently adopted.

Revoked describes situations where

the position in the previously published

ruling is not correct and the correct

position is being stated in the new

ruling.

Superseded describes a situation

where the new ruling does nothing more

than restate the substance and situation

of a previously published ruling (or

rulings). Thus, the term is used to

republish under the 1986 Code and

regulations the same position published

under the 1939 Code and regulations.

The term is also used when it is desired

to republish in a single ruling a series of

situations, names, etc., that were previously published over a period of time in

separate rulings. If the new ruling does

more than restate the substance of a

prior ruling, a combination of terms is

used. For example, modified and superseded describes a situation where the

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

continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names

of countries, is published in a ruling and

that list is expanded by adding further

names in subsequent rulings. After the

original ruling has been supplemented

several times, a new ruling may be

published that includes the list in the

original ruling and the additions, and

supersedes all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

PHC—Personal Holding Company.

PO—Possession of the U.S.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

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.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

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

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

M—Minor.

U.S.C.—United States Code.

Nonacq.—Nonacquiescence.

X—Corporation.

O—Organization.

Y—Corporation.

P—Parent 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.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Numerical Finding List1

Bulletin 1997–1 through 1997–15

Announcements:

97–1, 1997–2 I.R.B. 63

97–2, 1997–2 I.R.B. 63

97–3, 1997–2 I.R.B. 63

97–4, 1997–3 I.R.B. 14

97–5, 1997–3 I.R.B. 15

97–6, 1997–4 I.R.B. 11

97–7, 1997–4 I.R.B. 12

97–8, 1997–4 I.R.B. 12

97–9, 1997–5 I.R.B. 27

97–10, 1997–10 I.R.B. 64

97–11, 1997–6 I.R.B. 19

97–12, 1997–7 I.R.B. 55

97–13, 1997–8 I.R.B. 38

97–14, 1997–8 I.R.B. 38

97–15, 1997–9 I.R.B. 23

97–16, 1997–9 I.R.B. 23

97–17, 1997–9 I.R.B. 23

97–18, 1997–10 I.R.B. 67

97–19, 1997–10 I.R.B. 68

97–20, 1997–11 I.R.B. 22

97–21, 1997–11 I.R.B. 23

97–22, 1997–12 I.R.B. 47

97–23, 1997–11 I.R.B. 23

97–24, 1997–11 I.R.B. 24

97–25, 1997–12 I.R.B. 47

97–26, 1997–12 I.R.B. 48

97–27, 1997–13 I.R.B. 30

97–28, 1997–14 I.R.B. 15

97–29, 1997–14 I.R.B. 16

97–30, 1997–14 I.R.B. 16

97–31, 1997–14 I.R.B. 16

97–32, 1997–14 I.R.B. 17

97–33, 1997–15 I.R.B. 8

97–34, 1997–15 I.R.B. 8

97–35, 1997–15 I.R.B. 9

97–36, 1997–15 I.R.B. 10

97–37, 1997–15 I.R.B. 10

97–38, 1997–15 I.R.B. 10

Notices:

97–1, 1997–2 I.R.B. 22

97–2, 1997–2 I.R.B. 22

97–3, 1997–1 I.R.B. 8

97–4, 1997–2 I.R.B. 24

97–5, 1997–2 I.R.B. 25

97–6, 1997–2 I.R.B. 26

97–7, 1997–1 I.R.B. 8

97–8, 1997–4 I.R.B. 7

97–9, 1997–2 I.R.B. 35

97–10, 1997–2 I.R.B. 41

97–11, 1997–2 I.R.B. 50

97–12, 1997–3 I.R.B. 11

97–13, 1997–6 I.R.B. 13

97–14, 1997–8 I.R.B. 23

97–15, 1997–8 I.R.B. 23

97–16, 1997–9 I.R.B. 15

97–17, 1997–10 I.R.B. 34

97–18, 1997–10 I.R.B. 35

97–19, 1997–10 I.R.B. 40

97–20, 1997–10 I.R.B. 52

97–21, 1997–11 I.R.B. 9

97–22, 1997–13 I.R.B. 9

97–23, 1997–14 I.R.B. 8

Proposed Regulations:

Social Security Domestic Coverage Threshold

REG–209332–80, 1997–14 I.R.B. 9

REG–209040–88, 1997–7 I.R.B. 34

REG–209121–89, 1997–11 I.R.B. 15

REG–208288–90, 1997–11 I.R.B. 14

REG–209494–90, 1997–8 I.R.B. 24

REG–208172–91, 1997–10 I.R.B. 59

REG–209672–93, 1997–6 I.R.B. 15

REG–209709–94 1997–13 I.R.B. 12

REG–209729–94, 1997–11 I.R.B. 19

REG–209762–95, 1997–3 I.R.B. 12

REG–209817–96, 1997–7 I.R.B. 41

REG–209824–96, 1997–11 I.R.B. 19

REG–254394–96, 1997–14 I.R.B. 14

REG–209828–96, 1997–6 I.R.B. 15

REG–209830–96, 1997–15 I.R.B. 7

REG–209834–96, 1997–4 I.R.B. 9

REG–209839–96, 1997–8 I.R.B. 26

REG–242996–96, 1997–9 I.R.B. 18

REG–246018–96, 1997–8 I.R.B. 30

REG–247678–96, 1997–6 I.R.B. 17

REG–247862–96, 1997–8 I.R.B. 32

REG–248770–96, 1997–8 I.R.B. 33

REG–249819–96, 1997–7 I.R.B. 50

REG–252231–96, 1997–7 I.R.B. 52

REG–252233–96, 1997–9 I.R.B. 19

REG–252665–96, 1997–12 I.R.B. 46

1997–9, I.R.B. 17

Revenue Procedures:

97–1, 1997–1 I.R.B. 11

97–2, 1997–1 I.R.B. 64

97–3, 1997–1 I.R.B. 84

97–4, 1997–1 I.R.B. 96

97–5, 1997–1 I.R.B. 132

97–6, 1997–1 I.R.B. 153

97–7, 1997–1 I.R.B. 185

97–8, 1997–1 I.R.B. 187

97–9, 1997–2 I.R.B. 56

97–10, 1997–2 I.R.B. 59

97–11, 1997–6 I.R.B. 13

97–12, 1997–4 I.R.B. 7

97–13, 1997–5 I.R.B. 18

97–14, 1997–5 I.R.B. 20

97–15, 1997–5 I.R.B. 21

97–16, 1997–5 I.R.B. 25

97–17, 1997–9 I.R.B. 15

97–18, 1997–10 I.R.B. 53

97–19, 1997–10 I.R.B. 55

97–20, 1997–11 I.R.B. 10

97–21, 1997–12 I.R.B. 44

97–22, 1997–13 I.R.B. 9

Revenue Rulings:

97–1, 1997–2 I.R.B. 10

97–2, 1997–2 I.R.B. 7

97–3, 1997–2 I.R.B. 5

97–4, 1997–3 I.R.B. 6

97–5, 1997–4 I.R.B. 5

97–6, 1997–4 I.R.B. 4

97–7, 1997–5 I.R.B. 14

97–8, 1997–7 I.R.B. 4

97–9, 1997–9 I.R.B. 4

97–10, 1997–10 I.R.B. 31

97–11, 1997–10 I.R.B. 5

97–12, 1997–11 I.R.B. 5

97–14, 1997–11 I.R.B. 5

97–15, 1997–12 I.R.B. 42

97–16, 1997–13 I.R.B. 4

97–17, 1997–14 I.R.B. 5

97–18, 1997–15 I.R.B. 4

A cumulative list of all Revenue Rulings,

Revenue Procedures, Treasury Decisions, etc.,

published in Internal Revenue Bulletins 1996–27

through 1996–53 will be found in Internal

Revenue Bulletin 1997–1, dated January 6, 1997.

Treasury Decisions:

8688, 1997–3 I.R.B. 7

8689, 1997–3 I.R.B. 9

8690, 1997–5 I.R.B. 5

8691, 1997–5 I.R.B. 16

8692, 1997–3 I.R.B. 4

8693, 1997–6 I.R.B. 9

8694, 1997–6 I.R.B. 11

8695, 1997–4 I.R.B. 5

8696, 1997–6 I.R.B. 4

8697, 1997–2 I.R.B. 11

8698, 1997–7 I.R.B. 29

8699, 1997–6 I.R.B. 4

8700, 1997–7 I.R.B. 5

8701, 1997–7 I.R.B. 23

8702, 1997–8 I.R.B. 4

8703, 1997–8 I.R.B. 18

8704, 1997–8 I.R.B. 12

8705, 1997–8 I.R.B. 16

8706, 1997–9 I.R.B. 11

8707, 1997–7 I.R.B. 17

8708, 1997–10 I.R.B. 14

8709, 1997–9 I.R.B. 5

8710, 1997–13 I.R.B. 4

8711, 1997–12 I.R.B. 35

8712, 1997–12 I.R.B. 4

8713, 1997–14 I.R.B. 4

8714, 1997–15 I.R.B. 5

Finding List of Current Action on

Previously Published Items1

Bulletin 1997–1 through 1997–15

*Denotes entry since last publication

Revenue Procedures:

66–3

Modified by

97–11, 1997–6 I.R.B. 13

87–21

Modified by

97–11, 1997–6 I.R.B. 13

92–20

Modified by

97–1, 1997–1 I.R.B. 11

92–20

Modified by

97–10, 1997–2 I.R.B. 59

92–90

Superseded by

97–1, 1997–1 I.R.B. 11

94–52

Revoked by

97–11, 1997–6 I.R.B. 13

96–1

Superseded by

97–1, 1997–1 I.R.B. 11

Revenue Rulings—Continued

74–59

Revoked by

8708, 1997–10 I.R.B. 14

92–19

Supplemented in part by

97–2, 1997–2 I.R.B. 7

96–12

Superseded by

97–3, 1997–1 I.R.B. 84

96–13

Modified by

97–1, 1997–1 I.R.B. 11

96–22

Superseded by

97–3, 1997–1 I.R.B. 84

96–34

Superseded by

97–3, 1997–1 I.R.B. 84

96–39

Superseded by

97–3, 1997–1 I.R.B. 84

96–43

Superseded by

97–3, 1997–1 I.R.B. 84

96–56

Superseded by

97–3, 1997–1 I.R.B. 84

96–2

Superseded by

97–2, 1997–1 I.R.B. 64

96–3

Superseded by

97–3, 1997–1 I.R.B. 84

96–4

Superseded by

97–4, 1997–1 I.R.B. 96

96–5

Superseded by

97–5, 1997–1 I.R.B. 132

96–6

Superseded by

97–6, 1997–1 I.R.B. 153

96–7

Superseded by

97–7, 1997–1 I.R.B. 185

96–8

Superseded by

97–8, 1997–1 I.R.B. 187

97–2

Amplified by

97–21, 1997–12 I.R.B. 44

Revenue Rulings:

70–480

Revoked by

97–6, 1997–4 I.R.B. 4

72–527

Obsoleted by

8704, 1997–8 I.R.B. 12

A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1996–27 through 1996–53 will be found in Internal Revenue Bulletin 1997–1, dated January 6,

1997.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.