Bulletin No. 1997–14

Agency decision

Ask Donna

What actually matters in this document.

Text

April 7, 1997

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be relied

upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 97–17, page 5.

Federal rates; adjusted federal rates; adjusted federal

long-term rate, and the long-term exempt rate. For purposes of sections 1274, 1288, 382, and other sections

of the Code, tables set forth the rates for April, 1997.

T.D. 8713, page 4.

REG–254394–96, page 14.

Temporary and proposed regulations under section 42 of

the Code relate to low-income housing tax credit federal

grants.

REG–209332–80, page 9.

Proposed regulations under section 453 of the Code

relate to the use of the installment method to report the

gain recognized by a shareholder who receives, in

exchange for the shareholder’s stock, certain installment obligations that are distributed upon complete

liquidation of a corporation.

EMPLOYEE PLANS

Notice 97–23, page 8.

Weighted average interest rate update. Guidelines are

set forth for determining for March 1997, the weighted

average interest rate and the resulting permissible range

of interest rates used to calculate current liability for

purposes of the full funding limitation of section

412(c)(7) of the Code as amended by the Omnibus

Budget Reconciliation Act of 1987 and by the Uruguay

Round Agreements Act (GATT).

Finding Lists begin on page 20.

Announcement of Disbarments and Suspensions begins on page 18.

Quarterly Index for January, February, and March begins on page 22.

Announcement 97–32, page 17.

Form 5309, Application for Determination of Employee

Stock Ownership Plan, has been revised. Prior versions

of the application form may be used until July 1, 1997.

EXEMPT ORGANIZATIONS

Announcement 97–28, page 15.

A list is given of organizations now classified as private

foundations.

ADMINISTRATIVE

Announcement 97–29, page 16.

The United States recently exchanged instruments of

ratification for new income tax treaties with Indonesia

and Kazakstan. This announcement provides information

on the income tax rates and withholding rates on certain

income prescribed by these treaties.

Announcement 97–30, page 16.

The 1996 fourth quarter update of the directory section

of Publication 938, Real Estate Mortgage Investment

Conduits (REMICs) Reporting Information (And Other

Collateralized Debt Obligations (CDOs)), is now available

on the IRS electronic bulletin board (IRS–BBS).

Announcement 97–31, page 16.

REG–251520–96, 1996–48 I.R.B. 15, relating to the tax

treatment of certain transactions involving the transfer

of computer programs, 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 42.—Low-Income Housing

Credit

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17,

page 5.

26 CFR 1.42–16T: Eligible basis reduced by

federal grants (temporary).

T.D. 8713

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 1

Section 42(d)(5) Federal Grants.

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Temporary regulations.

SUMMARY: This document contains

temporary regulations with respect to

the low-income housing tax credit relating to the application of section 42(d)(5)

to certain rental assistance programs

under section 42(g)(2)(B)(i). The regulations clarify that certain types of federal

rental assistance payments do not result

in a reduction in the eligible basis of a

low-income housing building. The text

of these regulations also serves as the

text of REG–254394–96, page 14.

EFFECTIVE DATE: These regulations

are effective January 27, 1997.

FOR FURTHER INFORMATION CONTACT: Christopher J. Wilson (202) 622–

3040 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

Background

Under section 42(d)(1), the eligible

basis used to compute the low-income

housing tax credit of a new low-income

building is the adjusted basis of the

building as of the close of the first

taxable year of the credit period. Section

42(d)(5) provides that if, during a taxable year in the compliance period (as

defined in section 42(i)(1)), a federal

grant is made with respect to a lowincome building or the operation

thereof, the eligible basis of the building

for the taxable year and all succeeding

taxable years is reduced to the extent of

the federal grant. Questions have arisen

whether rental assistance payments under section 8 of the United States Housing Act of 1937 (Act) (42 U.S.C.

§ 1437f) and certain rental assistance

payments under section 9 of the Act (42

U.S.C. 1437g) are federal grants requiring a reduction in eligible basis.

The legislative history of section 42

indicates that section 42(d)(5) was enacted to prevent a taxpayer from

‘‘double-dipping’’ in federal benefits. S.

Rep. No. 313, 99th Cong., 2d Sess. II–

767 (1986), 1986–3 (Vol 3) C.B. 767.

This would occur, for example, if the

owner of a building received both the

low-income housing credit and a

federal-interest subsidy or federal grant

with respect to the building. The legislative history further indicates, however,

that Congress did not intend to treat

federal rental assistance payments as

grants for this purpose. Thus, the legislative history indicates that no basis

reduction is required for rental assistance payments provided by the Department of Housing and Urban Development (HUD) under section 8 of the Act.

(In contrast to this treatment of section

8 rental assistance payments, section

42(c)(2) generally denies the lowincome housing tax credit to buildings

that receive ‘‘moderate rehabilitation assistance’’ under section 8(e)(2) of the

Act).

HUD recently was granted the authority to assist mixed-finance projects under section 9 of the Act. Under this new

initiative, public housing authorities receiving HUD assistance are permitted to

disburse that assistance to private owners as reimbursement for the operating

expenses of units the owner has agreed

to maintain for public-housing tenants.

This section 9 assistance for operating

expenses functions in a manner similar

to rental assistance payments under section 8 of the Act. The section 8 rental

assistance payments are designed to

compensate the unit owner for all or

part of the difference between the rent a

low-income tenant is able to pay and a

fair market rent standard as set by HUD.

Similarly, the section 9 payments are

designed to cover an allocable share of

operating costs of the units rented to

low-income tenants, thus, in effect,

supplementing the rents that these tenants are required to pay.

Explanation of Provisions

These temporary regulations provide

that certain federal rental assistance payments made to the owner of a building

on behalf of low-income tenants are not

federal grants with respect to a building

or its operation that require a reduction

in the building’s eligible basis under

section 42(d)(5). These payments include rental assistance payments made

under section 8 of the Act, certain

payments made under section 9 of the

Act, and payments made under such

other programs or methods of rental

assistance as may be designated in the

Federal Register or the Internal Revenue

Bulletin.

Special Analyses

It has been determined that this Treasury decision is not a significant regulatory action as defined in EO 12866.

Therefore, a regulatory assessment is not

required. It also has been determined

that section 553(b) of the Administrative

Procedure Act (5 U.S.C. chapter 5) does

not apply to these regulations and, because these regulations do not impose

on small entities a collection of information requirement, the Regulatory Flexibility Act (5 U.S.C. chapter 6) does not

apply. Therefore, a Regulatory Flexibility Analysis is not required. Pursuant to

section 7805(f) of the Internal Revenue

Code, this temporary regulation will be

submitted to the Chief Counsel for Advocacy of the Small Business Administration for comment on its impact on

small business.

Drafting Information

The principal author of these regulations is Christopher J. Wilson, Office of

Assistant Chief Counsel (Passthroughs

and Special Industries). However, other

personnel from the IRS and Treasury

Department participated in their development.

Adoption of Amendments to the Regulations

Accordingly, 26 CFR part 1 is

amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by adding an entry in

numerical order to read in part as follows:

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

Section 1.42–16T also issued under

26 U.S.C. 42(n); * * *

Par. 2. Section 1.42–16T is added to

read as follows:

§ 1.42–16T Eligible basis reduced by

federal grants (temporary).

(a) In general. If, during any taxable

year of the compliance period (described

in section 42(i)(1)), a grant is made with

respect to any building or the operation

thereof and any portion of the grant is

funded with federal funds (whether or

not includible in gross income), the

eligible basis of the building for the

taxable year and all succeeding taxable

years is reduced by the portion of the

grant that is so funded.

(b) Grants do not include certain

rental assistance payments. A federal

rental assistance payment made to a

building owner on behalf or in respect

of a tenant is not a grant made with

respect to a building or its operation if

the payment is made pursuant to—

(1) Section 8 of the United States

Housing Act of 1937;

(2) A qualifying program of rental

assistance administered under section 9

of the United States Housing Act of

1937; or

(3) A program or method of rental

assistance as the Secretary may designate through the Federal Register or in

the Internal Revenue Bulletin (see

§ 601.601(d)(2) of this chapter).

of this section, payments are made pursuant to a qualifying rental assistance

program administered under section 9 of

the United State Housing Act of 1937 to

the extent that the payments—

(1) Are made to a building owner

pursuant to a contract with a public

housing authority with respect to units

the owner has agreed to maintain as

public housing units (PH–units) in the

building;

(2) Are made with respect to units

occupied by public housing tenants, provided that, for this purpose, units may

be considered occupied during periods

of short term vacancy (not to exceed 60

days); and

(3) Do not exceed the difference between the rents received from a building’s PH–unit tenants and a pro rata

portion of the building’s actual operating

costs that are reasonably allocable to the

PH–units (based on square footage,

number of bedrooms, or similar objective criteria), and provided that, for this

purpose, operating costs do not include

any development costs of a building

(including developer’s fees) or the principal or interest of any debt incurred

with respect to any part of the building.

(d) Effective date. This section is effective January 27, 1997.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

Approved January 8, 1997.

Donald C. Lubick,

Acting Assistant Secretary of the

Treasury.

(Filed by the Office of the Federal Register on

January 24, 1997, 8:45 a.m., and published in the

issue of the Federal Register for January 27, 1997,

62 F.R. 3792)

Section 280G.—Golden Parachute

Payments

Federal short-term, mid-term, and long-term

rates are set forth for the month of April, 1997.

See Rev. Rul. 97–17, this page.

Section 382.—Limitation on Net

Operating Loss Carryforwards and

Certain Built-In Losses Following

Ownership Change

The adjusted federal long-term rate is set forth

for the month of April, 1997. See Rev. Rul.

97–17, this page.

Section 412.—Minimum Funding

Standards

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17, this

page.

Section 467.—Certain Payments

for the Use of Property or Services

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17, this

page.

Section 468.—Special Rules for

Mining and Solid Waste

Reclamation and Closing Costs

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17, this

page.

Section 483.—Interest on Certain

Deferred Payments

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17, this

page.

Section 807.—Rules for Certain

Reserves

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17, this

page.

Section 846.—Discounted Unpaid

Losses Defined

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17, this

page.

Section 1274.—Determination of

Issue Price in the Case of Certain

Debt Instruments Issued for

Property

(Also Sections 42, 280G, 382, 412, 467, 468, 482,

483, 642, 807, 846, 1288, 7520, 7872.)

Federal rates; adjusted federal

rates; adjusted federal long-term rate,

and the long-term exempt rate. For

purposes of sections 1274, 1288, 382,

and other sections of the Code, tables

set forth the rate for April, 1997.

Rev. Rul. 97–17

This revenue ruling provides various

prescribed rates for federal income tax

purposes for April 1997 (the current

month.) Table 1 contains the short-term,

mid-term, and long-term applicable federal rates (AFR) for the current month

for purposes of section 1274(d) of the

Internal Revenue Code. Table 2 contains

the short-term, mid-term, and long-term

adjusted applicable federal rates (adjusted AFR) for the current month for

purposes of section 1288(b). Table 3

sets forth the adjusted federal long-term

rate and the long-term tax-exempt rate

described in section 382(f). Table 4

contains the appropriate percentages for

determining the low-income housing

credit described in section 42(b)(2) for

buildings placed in service during the

current month. Finally, Table 5 contains

the federal rate for determining the

present value of an annuity, an interest

for life or for a term of years, or a

remainder or a reversionary interest for

purposes of section 7520.

REV. RUL. 97–17 TABLE 1

Applicable Federal Rates (AFR) for April 1997

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-Term

AFR

110% AFR

120% AFR

130% AFR

5.91%

6.51%

7.12%

7.72%

5.83%

6.41%

7.00%

7.58%

5.79%

6.36%

6.94%

7.51%

5.76%

6.33%

6.90%

7.46%

Mid-Term

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

6.49%

7.15%

7.82%

8.48%

9.82%

11.49%

6.39%

7.03%

7.67%

8.31%

9.59%

11.18%

6.34%

6.97%

7.60%

8.23%

9.48%

11.03%

6.31%

6.93%

7.55%

8.17%

9.40%

10.93%

Long-Term

AFR

110% AFR

120% AFR

130% AFR

6.88%

7.59%

8.28%

8.99%

6.77%

7.45%

8.12%

8.80%

6.71%

7.38%

8.04%

8.71%

6.68%

7.34%

7.99%

8.64%

REV. RUL. 97–17 TABLE 2

Adjusted AFR for April 1997

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term

adjusted AFR

3.75%

3.72%

3.70%

3.69%

Mid-term

adjusted AFR

4.55%

4.50%

4.47%

4.46%

Long-term

adjusted AFR

5.45%

5.38%

5.34%

5.32%

REV. RUL. 97–17 TABLE 3

Rates Under Section 382 for April 1997

Adjusted federal long-term rate for the current month

5.45%

Long-term tax-exempt rate for ownership changes during the current month (the highest of the

adjusted federal long-term rates for the current month and the prior two months.)

5.50%

REV. RUL. 97–17 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for April 1997

Appropriate percentage for the 70% present value low-income housing credit

8.57%

Appropriate percentage for the 30% present value low-income housing credit

3.67%

REV. RUL. 97–17 TABLE 5

Rate Under Section 7520 for April 1997

Applicable federal rate for determining the present value of an annuity, an interest for life or a term of

years, or a remainder or reversionary interest

7.8%

Section 1288.—Treatment of

Original Issue Discount on

Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17,

page 5.

Section 7520.—Valuation Tables

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17,

page 5.

Section 7872.—Treatment of Loans

With Below-Market Interest Rates

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the

month of April, 1997. See Rev. Rul. 97–17,

page 5.

Part III. Administrative, Procedural, and Miscellaneous

Weighted Average Interest Rate

Update

Notice 97–23

Notice 88–73 provides guidelines for

determining the weighted average interest rate and the resulting permissible

range of interest rates used to calculate

current liability for the purpose of the

full funding limitation of § 412(c)(7) of

the Internal Revenue Code as amended

by the Omnibus Budget Reconciliation

Act of 1987 and as further amended by

the Uruguay Round Agreements Act,

Pub. L. 103–465 (GATT).

The average yield on the 30-year

Treasury Constant Maturities for February 1997 is 6.69 percent.

The following rates were determined

for the plan years beginning in the

month shown below.

Month

Year

Weighted Average

90% to 107%

Permissible Range

90% to 110%

Permissible Range

March

1997

6.87

6.18 to 7.35

6.18 to 7.56

Drafting Information

The principal author of this notice is Donna Prestia of the Employee Plans Division. For further information regarding this

notice, call (202) 622–6076 between 2:30 and 4:00 p.m. Eastern time (not a toll-free number). Ms. Prestia’s number is (202)

622–7377 (also not a toll-free number).

Part IV. Items of General Interest

Notice of Proposed Rulemaking

and Partial Withdrawal of Previous

Notice of Proposed Rulemaking

SUPPLEMENTARY INFORMATION:

Installment Obligations Received

From Liquidating Corporations

Section 453(h), relating to the tax

treatment of installment obligations received by a shareholder from a liquidating corporation, was added to the Internal Revenue Code of 1954 by the

Installment Sales Revision Act of 1980.

Proposed regulations under section

453(h) were published in the Federal

1742). Subsequently, section 453(h) was

amended by the Tax Reform Act of

1986. This document withdraws a portion of the regulations proposed on

January 13, 1984, at 49 FR 1742 and

proposes new regulations under section

453(h). The new proposed regulations

are issued under the authority contained

in sections 453(j)(1), 453(k) and 7805 of

the Internal Revenue Code of 1986

(Code).

REG–209332–80

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Partial withdrawal of previous

notice of proposed rulemaking; Notice

of proposed rulemaking.

SUMMARY: This document withdraws

portions of the notice of proposed

rulemaking published in the Federal

1984–1 C.B. 648]) on January 13, 1984,

and proposes new regulations relating to

the use of the installment method to

report the gain recognized by a shareholder who receives, in exchange for the

shareholder’s stock, certain installment

obligations that are distributed upon the

complete liquidation of a corporation.

Changes to the applicable tax law were

made by the Installment Sales Revision

Act of 1980 and the Tax Reform Act of

1986. These regulations would affect

taxpayers who receive installment obligations in exchange for their stock upon

the complete liquidation of a corporation.

DATES: Comments or requests for a

public hearing must be received by

April 22, 1997.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–209332–80),

room 5226, Internal Revenue Service,

POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be

hand delivered between the hours of 8

a.m. and 5 p.m. to: CC:DOM:CORP:R

(REG–209332–80), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW, Washington, DC. Alternatively, taxpayers may submit

comments electronically via the internet

by selecting the ‘‘Tax Regs’’ option on

the IRS Home Page, or by submitting

comments directly to the IRS internet

site at http://www.irs.ustreas.gov/prod/

tax_regs/comments.html.

FOR FURTHER INFORMATION CONTACT: George F. Wright, (202) 622–

4950 (not a toll-free number).

Background

Explanation of Provisions

Prior to the Installment Sales Revision Act of 1980, a shareholder recognized gain or loss on receipt of an

installment obligation that was distributed by a liquidating corporation in

exchange for the shareholder’s stock.

Gain could not be reported under the

installment sale provisions of section

453 as payments were received on the

obligation distributed by the corporation

in the liquidation.

As enacted by the Installment Sales

Revision Act of 1980 and amended by

the Tax Reform Act of 1986, section

453(h) provides a different treatment for

certain installment obligations that are

distributed in a complete liquidation to

which section 331 applies. Under section 453(h), a shareholder that does not

elect out of the installment method

treats the payments under the obligation,

rather than the obligation itself, as consideration received in exchange for the

stock. The shareholder then takes into

account the income from the payments

under the obligation using the installment method. In this manner, the shareholder generally is treated as if the

shareholder sold the shareholder’s stock

to an unrelated purchaser on the installment method.

This treatment under section 453(h)

applies generally to installment obligations received by a shareholder (in exchange for the shareholder’s stock) in a

complete liquidation to which section

331 applies if (a) the installment obligations are qualifying installment obligations, i.e., the installment obligations are

acquired in respect to a sale or exchange

of property by the corporation during

the 12-month period beginning on the

date a plan of complete liquidation is

adopted, and (b) the liquidation is completed within that 12-month period.

However, an installment obligation acquired in a sale or exchange of inventory, stock in trade, or property held for

sale in the ordinary course of business

qualifies for this treatment only if the

obligation arises from a single bulk sale

of substantially all of such property

attributable to a trade or business of the

corporation. If an installment obligation

arises from both a sale or exchange of

inventory, etc., that does not comply

with the requirements of the preceding

sentence and a sale or exchange of other

assets, the portion of the installment

obligation that is attributable to the sale

or exchange of other assets is a qualifying installment obligation.

Interaction of Section 453(h) and Limitations on the Installment Method

Under section 453(k)(2), an installment obligation arising out of a sale of

stock or securities that are traded on an

established securities market does not

qualify for installment method reporting.

Accordingly, if the stock of a liquidating

corporation is traded on an established

securities market, an installment obligation received by a shareholder from that

corporation as a liquidating distribution

is not a qualifying installment obligation

and does not qualify for installment

reporting, regardless of whether the requirements of section 453(h) are otherwise satisfied. However, if an installment obligation received by a

shareholder from a liquidating corporation, the stock of which is not publicly

traded, arose from a sale by the corporation of stock or securities that are traded

on an established securities market, then

the obligation generally is a qualifying

installment obligation in the hands of

the shareholder. An exception to this

rule applies to the extent the liquidating

corporation is formed or availed of for a

principal purpose of avoiding limitations

on the availability of installment sale

treatment through the use of a related

party. For example, the exception would

apply if a shareholder contributed a

substantial amount of publicly traded

1997–14

I.R.B.

stock to a corporation shortly before or

after the corporation adopted a plan of

liquidation and sold its assets, including

the publicly traded stock, for an installment obligation. Under the exception,

the allocable portion of the installment

obligation is not a qualifying installment

obligation and, thus, is treated as a

payment received in exchange for the

shareholder’s stock. The IRS specifically

requests comments on this exception,

which is contained in § 1.453–11(c)(5)

of these proposed regulations.

Determination of Shareholder’s Selling

Price

All amounts distributed or treated as

distributed incident to the liquidation are

included in the selling price of the

shareholder’s stock in the liquidating

corporation. This selling price includes

the issue price of a qualifying installment obligation that is distributed in the

liquidation. For this purpose, the issue

price of a qualifying installment obligation is equal to the sum of the adjusted

issue price of the obligation on the date

of the distribution and the amount of

any qualified stated interest that has

accrued prior to the distribution but that

is not payable until after the distribution.

In this manner, the accrued but unpaid

qualified stated interest is treated as

having been received and taken into

account by the liquidating corporation,

and then distributed by the corporation

to the shareholder in exchange for the

shareholder’s stock. The issue price is

also used to compute interest and original issue discount accruals for the shareholder.

Liquidating Distributions Received in

More Than One Year

Generally, a shareholder that receives

liquidating distributions in more than

one taxable year may recover the basis

in the shareholder’s stock completely

before recognizing any gain. This general rule is inconsistent with installment

method reporting, which requires that

basis be ratably recovered as payments

are received. Therefore, if a shareholder

receives liquidating distributions in more

than one taxable year, and included in

the distributions is an installment obligation that qualifies for section 453(h)

treatment, then upon completion of the

liquidation, basis must be reallocated

among all property received, or to be

received, in all years. See section

453(h)(2). One method of achieving this

basis reallocation would be to require

1997–14

I.R.B.

the shareholder to file an amended return if the reallocation of basis would

affect the computation of gain recognized in an earlier year. An alternative

method would be to require the shareholder to recognize in the current year

the additional amount of gain that would

have been recognized in the earlier year

had the total amount of liquidating distributions been known in the earlier

year. This portion of the proposed regulations is reserved and comments are

specifically requested regarding these

and any other methods of accomplishing

the basis reallocation.

Recognition of Gain or Loss to the

Distributing Corporation Under Section

453B

Under section 453B, the disposition

of an installment obligation generally

results in the recognition of gain or loss

to the transferor. Thus, in accordance

with sections 453B and 336, a C corporation generally recognizes gain or loss

upon the distribution of an installment

obligation to a shareholder in exchange

for the shareholder’s stock, including

complete liquidations covered by section

453(h). Section 453B(d) provides an

exception to this general rule if the

installment obligation is distributed in a

liquidation to which section 337(a) applies (regarding certain complete liquidations of 80 percent owned subsidiaries). However, that exception does not

apply to liquidations under section 331.

The Internal Revenue Code provides

for a different treatment in the case of a

liquidating distribution by an S corporation. Section 453B(h) provides that if an

S corporation distributes an installment

obligation in exchange for a shareholder’s stock, and payments under the obligation are treated as consideration for

the stock pursuant to section 453(h)(1),

then the distribution generally is not

treated as a disposition of the obligation

by the S corporation. Thus, except for

purposes of sections 1374 and 1375

(relating to certain built-in gains and

passive investment income), the S corporation does not recognize gain or loss

on the distribution of the installment

obligation to a shareholder in a complete liquidation covered by section

453(h).

Proposed Effective Date

The proposed regulations provide that

this section will be effective for distributions of qualifying installment obliga-

tions made on or after the date final

regulations are filed with the Federal

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a significant regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It also has been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) does not apply to these

regulations, and because the regulations

do not impose a collection of information on small entities, the Regulatory

Flexibility Act (5 U.S.C. chapter 6) does

not apply. Pursuant to section 7805(f) of

the Internal Revenue Code, this notice

of proposed rulemaking will be submitted to the Chief Counsel for Advocacy

of the Small Business Administration for

comment on its impact on small business.

Comments and Requests for a Public

Hearing

Before these proposed regulations are

adopted as final regulations, consideration will be given to any comments

that are submitted timely (in the manner

described in the ADDRESSES portion

of the preamble) to the IRS. All comments will be available for public inspection and copying. A public hearing

will be scheduled if requested by any

person who timely submits comments. If

a public hearing is scheduled, notice of

the date, time and place for the hearing

will be published in the Federal Register.

Drafting Information

The principal author of these proposed regulations is George F. Wright of

the Office of Assistant Chief Counsel

(Income Tax and Accounting). However,

other personnel from the IRS and Treasury Department participated in their

development.

Partial Withdrawal of Notice of Proposed Rulemaking

Accordingly, under the authority of 26

U.S.C. 7805, § 1.453–2 (a), (b), (c), (d)

and (f) in the notice of proposed

rulemaking that was published on January 13, 1984 (49 FR 1742) is withdrawn.

Proposed Amendments to the Regulations

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by adding an entry in

numerical order to read as follows:

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

§ 1.453–11 also issued under 26

U.S.C. 453(j)(1) and (k). * * *

Par. 2. Section 1.453–11 is added to

read as follows:

§ 1.453–11 Installment obligations received from a liquidating corporation.

(a) In general—(1) Overview. Except

as provided in section 453(h)(1)(C) (relating to installment sales of depreciable

property to certain closely related persons), a qualifying shareholder (as defined in paragraph (b) of this section)

who receives a qualifying installment

obligation (as defined in paragraph (c)

of this section) in connection with a

liquidation that satisfies section

453(h)(1)(A) treats the receipt of payments in respect to the obligation, rather

than the receipt of the obligation itself,

as a receipt of payment for the shareholder’s stock. The shareholder reports

the payments received on the installment

method unless the shareholder elects

otherwise

accordance

with

§ 15a.453–1(d) of this chapter.

(2) Coordination with other provisions—(i) Deemed sale of stock for installment obligation. Except as specifically provided in section 453(h)(1)(C), a

qualifying shareholder treats a qualifying installment obligation, for all purposes of the Internal Revenue Code, as

if the obligation is received by the

shareholder from the person issuing the

obligation in exchange for the shareholder’s stock in the liquidating corporation. For example, if the stock of a

corporation that is liquidating is traded

on an established securities market, an

installment obligation distributed to a

shareholder of the corporation in exchange for the shareholder’s stock does

not qualify for installment reporting pursuant to section 453(k)(2).

(ii) Special rules to account for the

qualifying installment obligation—

(A) Issue price. A qualifying installment

obligation is treated by a qualifying

shareholder as newly issued on the date

of the distribution. The issue price of

the qualifying installment obligation on

that date is equal to the sum of the

adjusted issue price of the obligation on

the date of the distribution (as determined under § 1.1275–1(b)) and the

amount of any qualified stated interest

(as defined in § 1.1273–1(c)) that has

accrued prior to the distribution but that

is not payable until after the distribution.

For purposes of the preceding sentence,

if the qualifying installment obligation is

subject to § 1.446–2 (e.g., a debt instrument that has unstated interest under

section 483), the adjusted issue price of

the qualifying installment obligation is

determined by reference to the issue

price of the qualifying installment obligation under § 1.446–2(d)(1).

(B) Variable rate debt instrument. If

the qualifying installment obligation is a

variable rate debt instrument (as defined

in § 1.1275–5), the shareholder uses the

equivalent fixed rate debt instrument

(within the meaning of § 1.1275–

5(e)(3)(ii)) constructed for the qualifying

installment obligation on the date the

obligation was issued to the liquidating

corporation to determine the accruals of

original issue discount, if any, and interest on the obligation.

(3) Liquidating distributions treated

as selling price. All amounts distributed

or treated as distributed to a qualifying

shareholder incident to the liquidation,

including cash, the issue price of qualifying installment obligations as determined under paragraph (a)(2)(ii)(A) of

this section, and the fair market value of

other property (including obligations

that are not qualifying installment obligations) are considered as having been

received by the shareholder as the selling price (as defined in § 15a.453–

1(b)(2)(ii) of this chapter) for the shareholder’s stock in the liquidating

corporation. For the proper method of

reporting liquidating distributions received in more than one taxable year of

a shareholder, see paragraph (d) of this

section. An election not to report on the

installment method an installment obligation received as a liquidating distribution applies to all distributions received

in the liquidation.

(4) Assumption of corporate liability

by shareholders. For purposes of this

section, if in the course of a liquidation

a shareholder assumes secured or unsecured liabilities of the liquidating corporation, or receives property from the

corporation subject to such liabilities

(including any tax liabilities incurred by

the corporation on the distribution), the

amount of the liabilities is added to the

shareholder’s basis in the stock of the

liquidating corporation. These additions

to basis do not affect the shareholder’s

holding period for the stock. These

liabilities do not reduce the amounts

received in computing the selling price.

(5) Examples. The provisions of this

paragraph (a) are illustrated by the following examples. Except as otherwise

provided, assume in each example that

A, an individual who is a calendar-year

taxpayer, owns all of the stock of T

corporation. A’s adjusted tax basis in

that stock is $100,000. On February 1,

1998, T, an accrual basis taxpayer,

adopts a plan of complete liquidation

that satisfies section 453(h)(1)(A) and

immediately sells all of its assets to

unrelated B corporation in a single

transaction. The examples are as follows:

Example 1. (i) The stated purchase price for T’s

assets is $3,500,000. In consideration for the sale,

B makes a down payment of $500,000 and issues

a 10-year installment obligation with a stated

principal amount of $3,000,000. The obligation

provides for interest payments of $150,000 on

January 31 of each year, with the total principal

amount due at maturity.

(ii) Assume that for purposes of section 1274,

the test rate on February 1, 1998, is 8 percent,

compounded semi-annually. Also assume that a

semi-annual accrual period is used. Under

§ 1.1274–2, the issue price of the obligation on

February 1, 1998, is $2,368,450. Accordingly, the

obligation has $631,550 of original issue discount

($3,000,000 2 $2,368,450). Between February 1

and July 31, $19,738 of original issue discount

and $75,000 of qualified stated interest accrue

with respect to the obligation and are taken into

account by T.

(iii) On July 31, 1998, T distributes the installment obligation to A in exchange for A’s stock. No

other property is ever distributed to A. On January

31, 1999, A receives the first annual payment of

$150,000 from B.

(iv) When the obligation is distributed to A on

July 31, 1998, it is treated as if the obligation is

received by A in an installment sale of shares

directly to B on that date. Under § 1.1275–1(b),

the adjusted issue price of the obligation on that

date is $2,388,188 (original issue price of

$2,368,450 plus accrued original issue discount of

$19,738). Accordingly, the issue price of the

obligation under paragraph (a)(2)(ii)(A) of this

section is $2,463,188, the sum of the adjusted

issue price of the obligation on that date

($2,388,188) and the amount of accrued but

unpaid qualified stated interest ($75,000).

(v) The selling price and contract price of A’s

stock in T is $2,463,188, and the gross profit is

$2,363,188 ($2,463,188 selling price less A’s adjusted tax basis of $100,000). A’s gross profit ratio

is thus 96 percent (gross profit of $2,363,188

divided by total contract price of $2,463,188).

(vi) Under §§ 1.446–2(e)(1) and 1.1275–2(a),

$98,527 of the $150,000 payment is treated as a

payment of the interest and original issue discount

that accrued on the obligation from July 31, 1998,

to January 31, 1999 ($75,000 of qualified stated

interest and $23,527 of original issue discount).

The balance of the payment ($51,473) is treated as

a payment of principal. A’s gain recognized in

1999 is $49,414 (96 percent of $51,473).

Example 2. (i) T owns Blackacre, unimproved

real property, with an adjusted tax basis of

1997–14

I.R.B.

$700,000. Blackacre is subject to a mortgage

(underlying mortgage) of $1,100,000. A is not

personally liable on the underlying mortgage and

the T shares held by A are not encumbered by the

underlying mortgage. The other assets of T consist

of $400,000 of cash and $600,000 of accounts

receivable attributable to sales of inventory in the

ordinary course of business. The unsecured liabilities of T total $900,000.

(ii) On February 1, 1998, T adopts a plan of

complete liquidation complying with section

453(h)(1)(A), and promptly sells Blackacre to B

for a 4-year mortgage note (bearing adequate

stated interest and otherwise meeting all of the

requirements of section 453) in the face amount of

$4 million. Under the agreement between T and B,

T (or its successor) is to continue to make

principal and interest payments on the underlying

mortgage. Immediately thereafter, T completes its

liquidation by distributing to A its remaining cash

of $400,000 (after payment of T’s tax liabilities),

accounts receivable of $600,000, and the $4 million B note. A assumes T’s $900,000 of unsecured

liabilities and receives the distributed property

subject to the obligation to make payments on the

$1,100,000 underlying mortgage. A receives no

payments from B on the B note during 1998.

(iii) Unless A elects otherwise, the transaction

is reported by A on the installment method. The

selling price is $5 million (cash of $400,000,

accounts receivable of $600,000, and the B note of

$4 million). The total contract price also is $5

million. A’s adjusted tax basis in the T shares,

initially $100,000, is increased by the $900,000 of

unsecured T liabilities assumed by A and by the

obligation (subject to which A takes the distributed

property) to make payments on the $1,100,000

underlying mortgage on Blackacre, for an aggregate adjusted tax basis of $2,100,000. Accordingly,

the gross profit is $2,900,000 (selling price of $5

million less aggregate adjusted tax basis of

$2,100,000). The gross profit ratio is 58 percent

(gross profit of $2,900,000 divided by the total

contract price of $5 million). The 1998 payments

to A are $1 million ($400,000 cash plus $600,000

receivables) and A recognizes gain in 1998 of

$580,000 (58 percent of $1 million).

(iv) In 1999, A receives payment from B on the

B note of $1 million (exclusive of interest). A’s

gain recognized in 1999 is $580,000 (58 percent

of $1 million).

(b) Qualifying shareholder. For purposes of this section, qualifying shareholder means a shareholder to which,

with respect to the liquidating distribution, section 331 applies. For example, a

creditor that receives a distribution from

a liquidating corporation, in exchange

for the creditor’s claim, is not a qualifying shareholder as a result of that distribution regardless of whether the liquidation satisfies section 453(h)(1)(A).

this section, qualifying installment obligation means an installment obligation

(other than an evidence of indebtedness

described in § 15a.453–1(e) of this

chapter, relating to obligations that are

payable on demand or are readily tradable) acquired in a sale or exchange of

corporate assets by a liquidating corporation during the 12-month period be-

1997–14

I.R.B.

ginning on the date the plan of liquidation is adopted. See paragraph (c)(4) of

this section for an exception for installment obligations acquired in respect to

certain sales of inventory. Also see paragraph (c)(5) of this section for an exception for installment obligations attributable to sales of certain property that do

not generally qualify for installment sale

treatment.

(2) Corporate assets. Except as provided in section 453(h)(1)(C), in paragraph (c)(4) of this section (relating to

certain sales of inventory), and in paragraph (c)(5) of this section (relating to

certain tax avoidance transactions), the

nature of the assets sold by, and the tax

consequences to, the selling corporation

do not affect whether an installment

obligation is a qualifying installment

obligation. Thus, for example, the fact

that the fair market value of an asset is

less than the adjusted basis of that asset

in the hands of the corporation; or that

the sale of an asset will subject the

corporation to depreciation recapture

(e.g., under section 1245 or section

1250); or that the assets of a trade or

business sold by the corporation for an

installment obligation include depreciable property, certain marketable securities, accounts receivable, installment

obligations, or cash; or that the distribution of assets to the shareholder is or is

not taxable to the corporation under

sections 336 and 453B, does not affect

whether installment obligations received

in exchange for those assets are treated

as qualifying installment obligations by

the shareholder. However, an obligation

received by the corporation in exchange

for cash, in a transaction unrelated to a

sale or exchange of noncash assets by

the corporation, is not treated as a

qualifying installment obligation.

(3) Installment obligations distributed

in liquidations described in section

453(h)(1)(E)—(i) In general. In the case

of a liquidation to which section

453(h)(1)(E) (relating to certain liquidating subsidiary corporations) applies, a

qualifying installment obligation acquired in respect to a sale or exchange

by the liquidating subsidiary corporation

will be treated as a qualifying installment obligation if distributed by a controlling corporate shareholder (within

the meaning of section 368(c)) to a

qualifying shareholder. The preceding

sentence is applied successively to each

controlling corporate shareholder, if any,

above the first controlling corporate

shareholder.

(ii) Examples. The provisions of this

paragraph (c)(3) are illustrated by the

following examples:

Example 1. (i) A, an individual, owns all of the

stock of T corporation, a C corporation. T has an

operating division and three wholly-owned subsidiaries, X, Y, and Z. On February 1, 1998, T, Y,

and Z all adopt plans of complete liquidation.

(ii) On March 1, 1998, the following sales are

made to unrelated purchasers: T sells the assets of

its operating division to B for cash and an

installment obligation. T sells the stock of X to C

for an installment obligation. Y sells all of its

assets to D for an installment obligation. Z sells

all of its assets to E for cash. The B, C, and D

installment obligations bear adequate stated interest and meet the requirements of section 453.

(iii) In June 1998, Y and Z completely liquidate, distributing their respective assets (the D

installment obligation and cash) to T. In July

1998, T completely liquidates, distributing to A

cash and the installment obligations respectively

issued by B, C, and D. The liquidation of T is a

liquidation to which section 453(h) applies and the

liquidations of Y and Z into T are liquidations to

which section 332 applies.

(iv) Because T is in control of Y (within the

meaning of section 368(c)), the D obligation

acquired by Y is treated as acquired by T pursuant

to section 453(h)(1)(E). A is a qualifying shareholder and the installment obligations issued by B,

C, and D are qualifying installment obligations.

Unless A elects otherwise, A reports the transaction on the installment method as if the cash and

installment obligations had been received in an

installment sale of the stock of T corporation.

Under section 453B(d), no gain or loss is recognized by Y on the distribution of the D installment

obligation to T. Under sections 453B(a) and 336,

T recognizes gain or loss on the distribution of the

B, C, and D installment obligations to A in

exchange for A’s stock.

Example 2. (i) A, a cash-method individual

taxpayer, owns all of the stock of P corporation, a

C corporation. P owns 30 percent of the stock of

Q corporation. The balance of the Q stock is

owned by unrelated individuals. On February 1,

1998, P adopts a plan of complete liquidation and

sells all of its property, other than its Q stock, to

B, an unrelated purchaser for cash and an installment obligation bearing adequate stated interest.

On March 1, 1998, Q adopts a plan of complete

liquidation and sells all of its property to an

unrelated purchaser, C, for cash and installment

obligations. Q immediately distributes the cash

and installment obligations to its shareholders in

completion of its liquidation. Promptly thereafter,

P liquidates, distributing to A cash, the B installment obligation, and a C installment obligation

that P received in the liquidation of Q.

(ii) In the hands of A, the B installment

obligation is a qualifying installment obligation. In

the hands of P, the C installment obligation was a

qualifying installment obligation. However, in the

hands of A, the C installment obligation is not

treated as a qualifying installment obligation because P owned only 30 percent of the stock of Q.

Because P did not own the requisite 80 percent

stock interest in Q, P was not a controlling

corporate shareholder of Q (within the meaning of

section 368(c)) immediately before the liquidation.

Therefore, section 453(h)(1)(E) does not apply.

Thus, in the hands of A, the C obligation is

considered to be a third-party note (not a purchaser’s evidence of indebtedness) and is treated as a

payment to A in the year of distribution. Accordingly, for 1998, A reports as payment the cash and

the fair market value of the C obligation distributed to A in the liquidation of P.

(iii) Because P held 30 percent of the stock of

Q, section 453B(d) is inapplicable to P. Under

sections 453B(a) and 336, accordingly, Q recognizes gain or loss on the distribution of the C

obligation. P also recognizes gain or loss on the

distribution of the B and C installment obligations

to A in exchange for A’s stock. See sections 453B

and 336.

(4) Installment obligations attributable to certain sales of inventory—

(i) In general. An installment obligation

acquired by a corporation in a liquidation that satisfies section 453(h)(1)(A) in

respect to a broken lot of inventory is

not a qualifying installment obligation.

If an installment obligation is acquired

in respect to a broken lot of inventory

and other assets, only the portion of the

installment obligation acquired in respect to the broken lot of inventory is

not a qualifying installment obligation.

The portion of the installment obligation

attributable to other assets is a qualifying installment obligation. For purposes

of this section, the term broken lot of

inventory means inventory property that

is sold or exchanged other than in bulk

to one person in one transaction involving substantially all of the inventory

property attributable to a trade or business of the corporation. See paragraph

(c)(4)(ii) of this section for rules for

determining what portion of an installment obligation is not a qualifying installment obligation.

(ii) Rules for determining nonqualifying portion of an installment obligation.

If a broken lot of inventory is sold to a

purchaser together with other corporate

assets for consideration consisting of an

installment obligation and either cash,

other property, the assumption of (or

taking property subject to) corporate

liabilities by the purchaser, or some

combination thereof, the installment obligation is treated as having been acquired in respect to a broken lot of

inventory only to the extent that the fair

market value of the broken lot of inventory exceeds the sum of unsecured liabilities assumed by the purchaser, secured liabilities which encumber the

broken lot of inventory and are assumed

by the purchaser or to which the broken

lot of inventory is subject, and the sum

of the cash and fair market value of

other property received. This rule applies solely for the purpose of determining the portion of the installment obligation (if any) that is attributable to the

broken lot of inventory.

(iii) Example. The following example

illustrates the provisions of this para-

graph (c)(4). In this example, assume

that all obligations bear adequate stated

interest within the meaning of section

1274(c)(2) and that the fair market value

of each nonqualifying installment obligation equals its face amount. The example is as follows:

Example. (i) P corporation has three operating

divisions, X, Y, and Z, each engaged in a separate

trade or business, and a minor amount of investment assets. On July 1, 1998, P adopts a plan of

complete liquidation that meets the criteria of

section 453(h)(1)(A). The following sales are

promptly made to purchasers unrelated to P: P

sells all of the assets of the X division (including

all of the inventory property) to B for $30,000

cash and installment obligations totalling

$200,000. P sells substantially all of the inventory

property of the Y division to C for a $100,000

installment obligation, and sells all of the other

assets of the Y division (excluding cash but

including installment receivables previously acquired in the ordinary course of the business of

the Y division) to D for a $170,000 installment

obligation. P sells 1/3 of the inventory property of

the Z division to E for $100,000 cash, 1/3 of the

inventory property of the Z division to F for a

$100,000 installment obligation, and all of the

other assets of the Z division (including the

remaining 1/3 of the inventory property worth

$100,000) to G for $60,000 cash, a $240,000

installment obligation, and the assumption by G of

the liabilities of the Z division. The liabilities

assumed by G, which are unsecured liabilities and

liabilities encumbering the inventory property acquired by G, aggregate $30,000. Thus, the total

purchase price G pays is $330,000.

(ii) P immediately completes its liquidation,

distributing the cash and installment obligations,

which otherwise meet the requirements of section

453, to A, an individual cash-method taxpayer

who is its sole shareholder. In 1999, G makes a

payment to A of $100,000 (exclusive of interest)

on the $240,000 installment obligation.

(iii) In the hands of A, the installment obligations issued by B, C, and D are qualifying

installment obligations because they were timely

acquired by P in a sale or exchange of its assets.

In addition, the installment obligation issued by C

is a qualifying installment obligation because it

arose from a sale to one person in one transaction

of substantially all of the inventory property of the

trade or business engaged in by the Y division.

(iv) The installment obligation issued by F is

not a qualifying installment obligation because it

is in respect to a broken lot of inventory. A

portion of the installment obligation issued by G is

a qualifying installment obligation and a portion is

not a qualifying installment obligation, determined

as follows: G purchased part of the inventory

property (with a fair market value of $100,000)

and all of the other assets of the Z division by

paying cash ($60,000), issuing an installment

obligation ($240,000), and assuming liabilities of

the Z division ($30,000). The assumed liabilities

($30,000) and cash ($60,000) are attributed first to

the inventory property. Therefore, only $10,000 of

the $240,000 installment obligation is attributed to

inventory property. Accordingly, in the hands of A,

the G installment obligation is a qualifying installment obligation to the extent of $230,000, but is

not a qualifying installment obligation to the

extent of the $10,000 attributable to the inventory

property.

(v) In the 1998 liquidation of P, A receives a

liquidating distribution as follows:

Item

cash

B note

C note

D note

F note

G note1

Total

Qualifying Installment Obligations

Cash and

Other Property

$190,000

$200,000

$100,000

$170,000

$230,000

$700,000

$100,000

$ 10,000

$300,000

face amount $240,000.

(vi) Assume that A’s adjusted tax basis in the

stock of P is $100,000. Under the installment

method, A’s selling price and the contract price are

both $1 million, the gross profit is $900,000

(selling price of $1 million less adjusted tax basis

of $100,000), and the gross profit ratio is 90

percent (gross profit of $900,000 divided by the

contract price of $1 million). Accordingly, in

1998, A reports gain of $270,000 (90 percent of

$300,000 payment in cash and other property). A’s

adjusted tax basis in each of the qualifying

installment obligations is an amount equal to 10

percent of the obligation’s respective face amount.

A’s adjusted tax basis in the F note, a nonqualifying installment obligation, is $100,000, i.e., the

fair market value of the note when received by A.

A’s adjusted tax basis in the G note, a mixed

obligation, is $33,000 (10 percent of the $230,000

qualifying installment obligation portion of the

note, plus the $10,000 nonqualifying portion of the

note).

(vii) In respect to the $100,000 payment received from G in 1999, $10,000 is treated as the

recovery of the adjusted tax basis of the

nonqualifying portion of the G installment obligation and $9,000 (10 percent of $90,000) is treated

as the recovery of the adjusted tax basis of the

portion of the note that is a qualifying installment

obligation. The remaining $81,000 (90 percent of

$90,000) is reported as gain from the sale of A’s

stock.

(5) Installment obligations attributable to sales of certain property—(i) In

general. An installment obligation acquired by a liquidating corporation, to

the extent attributable to the sale of

property described in paragraph

(c)(5)(ii) of this section, is not a qualifying obligation if the corporation is

formed or availed of for a principal

purpose

avoiding

section

453(b)(2)(A) (relating to dealer dispositions), section 453(i) (relating to sales of

property subject to recapture), or section

453(k) (relating to dispositions under a

revolving credit plan and sales of stock

or securities traded on an established

securities market) through the use of a

party bearing a relationship, either directly or indirectly, described in section

267(b) to any shareholder of the corporation.

(ii) Covered property. Property is described in this paragraph (c)(5)(ii) if,

within 12 months before or after the

adoption of the plan of liquidation, the

property was owned by any shareholder

and—

1997–14

I.R.B.

(A) The shareholder regularly sold or

otherwise disposed of personal property

of the same type on the installment plan

or the property is real property that the

shareholder held for sale to customers in

the ordinary course of a trade or business (provided the property is not described in section 453(l)(2)(relating to

certain exceptions to the definition of

dealer dispositions));

(B) The sale of the property by the

shareholder would result in recapture

income (within the meaning of section

453(i)(2)), but only if the amount of

recapture is equal to or greater than 50

percent of the property’s fair market

value on the date of the sale by the

corporation;

securities market; or

(D) The sale of the property by the

shareholder would have been under a

revolving credit plan.

(iii) Safe harbor. Paragraph (c)(5)(i)

of this section will not apply to the

liquidation of a corporation if, on the

date the plan of complete liquidation is

adopted and thereafter, less than 15

percent of the fair market value of the

corporation’s assets is attributable to

property described in paragraph

(c)(5)(ii) of this section.

(iv) Example. The provisions of this

paragraph (c)(5) are illustrated by the

following example:

Example. Ten percent of the fair market value

of the assets of T is attributable to stock and

securities traded on an established securities market. T owns no other assets described in paragraph

(c)(5)(ii) of this section. T, after adopting a plan of

complete liquidation, sells all of its stock and

securities holdings to C corporation in exchange

for an installment obligation bearing adequate

stated interest, sells all of its other assets to B

corporation for cash, and distributes the cash and

installment obligation to its sole shareholder, A, in

a complete liquidation that satisfies section

453(h)(1)(A). Because the C installment obligation

arose from a sale of publicly traded stock and

securities, T cannot report the gain on the sale

under the installment method pursuant to section

453(k)(2). In the hands of A, however, the C

installment obligation is treated as having arisen

out of a sale of the stock of T corporation. In

addition, the general rule of paragraph (c)(5)(i) of

this section does not apply, even if a principal

purpose of the liquidation was the avoidance of

section 453(k)(2), because the fair market value of

the publicly traded stock and securities is less than

15 percent of the total fair market value of T’s

assets. Accordingly, section 453(k)(2) does not

apply to A, and A may use the installment method

to report the gain recognized on the payments it

receives in respect to the obligation.

(d) Liquidating distributions received

in more than one taxable year. [Reserved]

1997–14

I.R.B.

(e) Effective date. This section is applicable to distributions of qualifying

installment obligations made on or after

the date final regulations are filed with

the Federal Register.

Margaret Milner Richardson,

Commissioner of Internal Revenue.

(Filed by the Office of the Federal Register on

January 21, 1997, 8:45 a.m., and published in the

issue of the Federal Register for January 22, 1997,

62 F.R. 3244)

Notice of Proposed Rulemaking

Section 42(d)(5) Federal Grants

REG–254394–96

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Notice of proposed rulemaking by cross-reference to temporary

regulations.

SUMMARY: In *** T.D. 8713, page 4,

the IRS is issuing temporary regulations

with respect to the low-income housing

tax credit relating to the application of

section 42(d)(5) to certain rental assistance programs under section 42(g)(2)(B)(i). The text of those temporary regulations also serves as the text of these

proposed regulations.

DATES: Written comments and requests

for a public hearing must be received by

April 28, 1997.

ADDRESSES: Send submissions to:

CC:DOM:CORP:R (REG–254394–96),

room 5226, Internal Revenue Service,

POB 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be

hand delivered between the hours of 8

a.m. and 5 p.m. to: CC:DOM:CORP:R

(REG–254394–96), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW, Washington, DC. Alternatively, taxpayers may submit

comments electronically via the Internet

by selecting the ‘‘Tax Regs’’ option on

the IRS Home Page, or by submitting

comments directly to the IRS Internet

site at http://www.irs.ustreas.gov/prod/

tax_regs/comments/html.

FOR FURTHER INFORMATION CONTACT: Christopher J. Wilson (202) 622–

3040 (not a toll-free call).

SUPPLEMENTARY INFORMATION:

spect to the low-income housing tax

credit relating to the application of section 42(d)(5) to certain rental assistance

programs under section 42(g)(2)(B)(i).

The text of those temporary regulations

also serves as the text of these proposed

regulations. The preamble to the temporary regulations explains the temporary

regulations.

Special Analyses

It has been determined that this notice

of proposed rulemaking is not a significant regulatory action as defined in EO

12866. Therefore, a regulatory assessment is not required. It also has been

determined that section 553(b) of the

Administrative Procedure Act (5 U.S.C.

chapter 5) does not apply to these

regulations and, because these regulations do not impose on small entities a

collection of information requirement,

the Regulatory Flexibility Act (5 U.S.C.

chapter 6) does not apply. Therefore, a

Regulatory Flexibility Analysis is not

required. Pursuant to section 7805(f) of

the Internal Revenue Code, this notice

of proposed rulemaking will be submitted to the Chief Counsel for Advocacy

of the Small Business Administration for

comment on its impact on small business.

Comments and Requests for a Public

Hearing

Before these proposed regulations are

adopted as final regulations, consideration will be given to any written comments (a signed original and eight (8)

copies) that are submitted timely to the

IRS. All comments will be available for

public inspection and copying. A public

hearing may be scheduled if requested

in writing by a person that timely

submits written comments. If a public

hearing is scheduled, a notice of the

date, time, and place for the hearing will

be published in the Federal Register.

Drafting Information

The principal author of these regulations is Christopher J. Wilson, Office of

Assistant Chief Counsel (Passthroughs

and Special Industries). However, other

personnel from the IRS and Treasury

Department participated in their development.

Background

Proposed Amendments to the Regulations

Temporary regulations published in

*** T.D. 8713 provide rules with re-

Accordingly, 26 CFR part 1 is proposed to be amended as follows:

PART 1—INCOME TAXES

Paragraph 1. The authority citation for

part 1 is amended by adding an entry in

numerical order to read in part as follows:

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

Section 1.42–16 also issued under 26

U.S.C. 42(n); * * *

Par. 2. Section 1.42–16 is added to

read as follows:

§ 1.42–16 Eligible basis reduced by

federal grants.

[The text of this proposed section is

the same as the text of § 1.42–16T

published in T.D. 8713, page 4.]

Margaret Milner Richardson,

Commissioner of Internal Revenue.

(Filed by the Office of the Federal Reigster on

January 24, 1997, 8:45 a.m., and published in the

issue of the Federal Register for January 27, 1997,

62 F.R. 3848)

Foundations Status of Certain

Organizations

Announcement 97–28

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:

AIDS Equity League, Inc., Houston, TX

AIDS Resource Center of Texoma,

Sherman, TX

Albuquerque Literacy Program, Inc.,

Albuquerque, NM

Austin Area Youth, Austin, TX

Austin Junior Chamber of Commerce

Foundation, Inc., Austin, TX

Austin Releaf Council, Austin, TX

Big Bend, Inc., Riverton, WY

Brownsville Opportunity Youth Soccer

Association, Inc., Brownsville, TX

Buckingham Square Optimist Fund Inc.,

Aurora, CO

Cancer Scholarship Fund, Katy, TX

Candlelighters Circle of Friends

Childhood Cancer Support Group

Inc., Tulsa, OK

Christian Center of Universal Peace of

Houston, Houston, TX

Classical Traditions International

Entertainment, Los Angeles, CA

Clearwater Youth Wrestling Club,

Clearwater, KS

Colorado Latino AIDS Community

Network, Inc., Denver, CO

Colorado Parents for All Children,

Colorado Springs, CO

Cosme Garto Memorial Scholarship

Foundation, Salt Lake City, UT

Covenant Ministries, Inc., Fort Worth,

Delta Nutrition Services, Houston, TX

Docent Council of Forth Worth Zoo,

Fort Worth, TX

ECO-Fair Texas, Inc., Austin, TX

Elfields Residential, Houston, TX

Families Actively Communicating

Together, Winfield, KS

Family Outreach of Southern Dallas,

Inc., Dallas, TX

Flagstaff Youth Hockey Association,

Inc., Flagstaff, AZ

Flour Bluff Helping Hand, Corpus

Christi, TX

Fort Worth Foundation, Fort Worth, TX

Foster Place Community Center, Inc.,

Houston, TX

Freedom for Youth, Denver, CO

Friends of the Utah Center, Salt Lake

City, UT

Glendale Centennial Committee,

Glendale, AZ

Greater Fort Worth Luis Palau Crusade,

Fort Worth, TX

Hispanic American Medical Scholarship

Fund, Houston, TX

Housing and Neighborhood

Development, Phoenix, AZ

Houston Business League, Houston, TX

Houston Japanese Television Ministry,

Inc., San Antonio, TX

ICAK, Inc., Lawrence, KS

Indian Health Care Clinic, Inc., Salt

Lake City, UT

Intermountain Society for Parenteral and

Enteral Nutrition, Salt Lake City, UT

Irving Elementary School Parent

Teacher Organization PTO, Mesa, AZ

Joe Holland Evangelistic Association,

Colony, TX

Jones Spiritual Research Center, Inc.,

Longview, TX

Kerrville South Volunteer Fire

Department, Inc., Kerrville, TX

Kiamichi Country Genealogy Society,

Broken Bow, OK

Kids Place, Salt Lake City, UT

Killough Middle School Parent Advisory

Committee, Killough Middle School

Advise Committee, Houston, TX

La Compania Madre, Inc., Honolulu, HI

Life Giving Word Ministries, Inc., Tulsa,

Lighthouse Counseling Services, Inc.,

Oklahoma City, OK

Loyal Companions for the Handicap

Training Institute, Oklahoma City, OK

Mayes County Resource Council, Inc.,

Pryor, OK

Megan Ledue Guardian Angel

Foundation, Wichita Falls, TX

Metatheatre, Tucson, AZ

Moore County Crime Stoppers, Inc.,

Dumas, TX

National Commission on Rape

Prevention, Inc., Scottsdale, AZ

Neighborhood Pioneer Clubs, Colorado

Springs, CO

Network of Lyricists and Songwriters,

Inc., Pearland, TX

New Mexico Partnership for

Mathematics and Science Education,

Albuquerque, NM

New Mexico Wildlife Foundation, Santa

Fe, NM

North Valley Paralegal Service of

Arizona, Glendale, AZ

Open Heart, Inc., Houston, TX

Our House, Inc., Denver, CO

Phoenix Center for Rape Prevention,

Phoenix, AZ

Prairie Dog Pals of ABQ, Albuquerque,

Project Hungry for El Paso, El Paso, TX

Puente De Esperanza, Espanola, NM

Putnam-Fullana Education Association,

Inc., Fort Collins, CO

Pylon Salesmanship Club, Dallas, TX

Red River Symphony Guild, Inc.,

Sherman, TX

Rock Springs Youth Boys Basketball,

Rock Springs, WY

Rocky Mountain Center for Attitudinal

Healing, Colorado Springs, CO

Sal De Ahi, Santa Fe, NM

Shepherds Center of Chanute, Inc.,

Chanute, KS

Smithson Valley High School Athletic

Booster Club, Spring Branch, TX

Sonshine College for Oriental Senior

Citizens, Dallas, TX

Southern Arizona Environmental

Management Society, Inc., Tucson,

South Texas Festival of Film, Corpus

Christi, TX

1997–14

I.R.B.

South Texas Organization for

Reproductive Medicine, San Antonio,

Southwest Aquatic Specialties, Inc.,

Hobbs, NM

Spectrum Housing, Dallas, TX

Tarrant County Junior Livestock Show

Association, Inc., Fort Worth, TX

Tejanos for Onda Music, Dallas, TX

Texas Tiger Tournament, Inc., Houston,

Tiyospaye, Inc., Wichita, KS

Toe Tappers, Houston, TX

Tomboys, Burkburnett, TX

Touch Foundation, Colorado Springs,

Touch Town Incorporated, Missouri

City, TX

Toy Lending Library, Inc., Kerrville, TX

Triangle Recovery Foundation, Inc.,

Beaumont, TX

Triple Cross Ministries, Inc., Spencer,

Triumph, Inc., Wichita, KS

Troxler Charitable Foundation, Inc.,

Dallas, TX

Tulsa Parents As Teachers, Inc., Tulsa,

Tulsa Theatreworks, Inc., Tulsa, OK

Tulsa Visiting Nurse Services, Inc.,

Tulsa, OK

24 Hour Serenity Club, Poolview, TX

United Hispanic Fund, Uvalde, TX

Ushers of the Coming, Inc., Dallas, TX

Veterans Rainbow House, Inc., Salt

Lake City, UT

VNA Management Services, Inc., Tulsa,

Weatherization Managers Association,

Salt Lake City, UT

Yellow Ribbon Family Support Group,

Brownwood, TX

Yes I Can Extended Hours Child Care,

Broomfield, CO

Youth Development Tae Kwon Do

Foundation, Inc., Oklahoma City, OK

Youth Enchancement Services, Inc.,

Austin, TX

Youth for Christ Association of the

World, Spirit Lake, ID

Zora Neale Hurston-Roof Garden

Museum, Inc., Belle Glade, FL

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

1997–14

I.R.B.

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

Changes to Publication 515 for

New Income Tax Treaty and

Protocol

1996, through December 31, 1996. You

can download the publication if you

have a computer with a modem. Dial

1–304–264–7070 and follow the instructions. If you have problems downloading the publication, call the help line at

1–304–263–8700 and ask for the bulletin board. (These are not toll-free calls.)

Announcement 97–29

The United States recently exchanged

instruments of ratification for a new

income tax treaty with Kazakstan and a

new protocol with Indonesia. This information is not reflected in the 1996

revision of Publication 515, Withholding

of Tax on Nonresident Aliens and Foreign Corporations (For withholding in

1997), which was printed before these

items were exchanged. Use the following information to modify the 1997

withholding tables in Publication 515.

Kazakstan. The provisions for taxes

withheld on interest, dividends, and royalties are effective for amounts paid or

credited on or after February 1, 1997.

For other taxes, the provisions are effective for tax periods beginning on or

after January 1, 1996.

The withholding rates for 1997 are

the same as the tax rates for 1996. The

provisions and tax rates can be found in

Tables 1 and 2 of the March 1997

revision of Publication 901, U.S. Tax

Treaties.

Indonesia. The provisions of the new

protocol are effective for amounts paid

or credited on or after February 1, 1997.

Table 1 of Publication 515 reflects the

January 1997 rates. For amounts paid or

credited on or after February 1, 1997,

make the following changes to Table 1:

1) Under income codes 1, 2, 3, 7, 11,

and 12, replace ‘‘15’’ with ‘‘10.’’

2) In column 7, add footnote ‘‘b.’’

The reduced rate only applies if the

foreign parent corporation owns directly

at least 25% of the voting stock of the

company paying the dividends.

Classification of Certain

Transactions Involving Computer

Programs; Correction

Announcement 97–31

AGENCY: Internal Revenue Service

(IRS), Treasury.

ACTION: Correction to notice of proposed rulemaking.

SUMMARY: This document contains

corrections to the notice of proposed

rulemaking (REG–251520–96[1996–48

I.R.B. 15]) which was published in the

Federal Register on Wednesday, November 13, 1996 (61 FR 58152). The

notice of proposed rulemaking relates to

the tax treatment of certain transactions

involving the transfer of computer programs.

FOR FURTHER INFORMATION CONTACT: William H. Morris (202) 622–

3880 (not a toll-free number).

SUPPLEMENTARY INFORMATION:

Background

The notice of proposed rulemaking

that is subject to these corrections is

under section 861 of the Internal Revenue Code.

Need for Correction

As published, the notice of proposed

rulemaking (REG–251520–96) contains

errors that may prove to be misleading

and is in need of clarification.

Correction of Publication

REMICs Publication Updated

Announcement 97–30

The 1996 fourth quarter update of the

directory section of Publication 938,

Real Estate Mortgage Investment Conduits (REMICs) Reporting Information

(And Other Collateralized Debt Obligations (CDOs)), is now available on the

IRS electronic bulletin board (IRP–

BBS). The update contains information

received by the Internal Revenue Service during the period September 1,

Accordingly, the publication of proposed rulemaking (REG–251520–96)

which is the subject of FR Doc. 96–

29055 is corrected as follows:

§ 1.861–18 [Corrected]

1. On page 58157, column 2,

§ 1.861–18, paragraph (h), paragraph

(ii)(B) of Example 10., line 2, the

language ‘‘circumstances, P is properly

treated as the’’ is corrected to read

‘‘circumstances, Corp E is properly

treated as the’’.

2. On page 58157, column 2,

§ 1.861–18, paragraph (h), paragraph (i)

of Example 12., line 8, the language

‘‘fee, Corp C receives the right to

receive’’ is corrected to read ‘‘fee, Corp

E receives the right to receive’’.

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on

January 16, 1997, 8:45 a.m., and published in the

issue of the Federal Register for January 17, 1997,

62 F.R. 2633)

Form 5309 Revision

Announcement 97–32

Form 5309, Application for Determination of Employee Stock Ownership

Plan, has been revised and is now

available from Internal Revenue Service

Distribution Centers by calling 1–800–

TAX FORM. The new revision date is

January, 1997. Forms with prior revision

dates may be used until July 1, 1997.

Changes made to the form include the

substitution of ‘‘Yes’’ and ‘‘No’’ questions on lines 6 through 9 for questions

regarding the plan section number, and

new questions numbered 6d and 6f.

Other question numbers were reformatted accordingly. A space was added for

plan number, while the space for address, plan adoption date, and phone

number were deleted. These items appear on the forms (Form 5300 or 5303)

to which Form 5309 must be attached.

Persons may computer generate this

form without approval if it is word-forword identical to the revised form.

1997–14

I.R.B.

Announcement of the Disbarment, Suspension, or Consent to Voluntary

Suspension of Attorneys, Certified Public Accountants, Enrolled Agents and

Enrolled Actuaries From Practice Before the Internal Revenue Service

Under 31 Code of Federal Regulations, Part 10, an attorney, certified public accountant, enrolled agent or enrolled

actuary, in order to avoid the institution

or conclusion of a proceeding for his

disbarment or suspension from practice

before the Internal Revenue Service,

may offer his consent to suspension

from such practice. The Director of

Practice, in his discretion, may suspend

an attorney, certified public accountant,

enrolled agent or enrolled actuary in

accordance with the consent offered.

Attorneys, certified public accountants, enrolled agents and enrolled actuaries are prohibited in any Internal Rev-

enue 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 consent 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 consent suspension from

practice before the Internal Revenue

Service:

Name

Address

Designation

Date of Suspension

Vlymen, Neal Van

Lombardi, Theresa

Orfall, Warren

San Diego, CA

Livonia, MI

Hood River, OR

CPA

Indefinite from November 1, 1996

November 1, 1996 to October 31, 1998

November 1, 1996 to June 30, 1997

Oberman, Joseph

Gazzola, Frank

Tumminello, Anthony G.

Highland Park, IL

N. Mankato, MN

St. Louis, MO

CPA

Attorney

December 1, 1996 to August 31, 1997

December 1, 1996 to November 30, 1997

December 17, 1996 to June 16, 1997

Heffelfinger, Harry N.

Zintl Jr., Ernst J.

Alms, William R.

Smith, Arthur L.

DeGroote Sr., Kevin J.

Oliveri, Robert

Buffalo Grove, IL

Newport, MN

Lake Forest, CA

Athens, GA

Mesa, AZ

Bensalem, PA

CPA

December 20, 1996 to June 19, 1998

December 23, 1996 to December 22, 1997

January 1, 1997 to March 31, 1997

January 1, 1997 to December 31, 1997

January 1, 1997 to October 31, 1997

January 1, 1997 to December 31, 1997

Davies, Preston S.

Elbert, David L.

Deerfield, IL

Franktown, CO

CPA

January 15, 1997 to December 14, 1997

Indefinite from January 21, 1997

Smith Jr., Phillip M.

Pennington, Richard A.

Tameron, Joseph A.

Kalb, Mary C.

Pritchard, John J.

Long Beach, CA

Vandergrift, PA

Chandler, AZ

Kearny, NE

San Diego, CA

Attorney

CPA

Enrolled Agent

February 1, 1997 to March 31, 1997

February 1, 1997 to January 31, 2000

February 1, 1997 to September 30, 1998

February 1, 1997 to March 31, 1997

Garrett, Richard

Englert, Larry R.

Torrance, GA

Eaton, OH

Enrolled Agent

CPA

March 1, 1997 to May 30, 1997

April 1, 1997 to May 30, 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 1997–13

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

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

Proposed Regulations—Continued

Treasury Decisions—Continued

REG–209828–96, 1997–6 I.R.B. 15

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

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

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

Social Security Domestic Coverage Threshold

Proposed Regulations:

1997–9, I.R.B. 17

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

Treasury Decisions:

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.

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

Finding List of Current Action on

Previously Published Items1

Bulletin 1997–1 through 1997–13

Revenue Rulings—Continued

74–59

Revoked by

8708, 1997–10 I.R.B. 14

Revenue Procedures:

92–19

Supplemented in part by

97–2, 1997–2 I.R.B. 7

66–3

Modified by

97–11, 1997–6 I.R.B. 13

96–12

Superseded by

97–3, 1997–1 I.R.B. 84

*Denotes entry since last publication

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

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.

Index

Internal Revenue Bulletins 1997–1

Through 1997–13

For index of items published during

the last six months of 1996, see

I.R.B. 1997–1, dated Januar y 6,

1997.

The abbreviation and number in parenthesis following the index entry

refer to the specific item; numbers in

roman and italic type following the

parenthesis refer to the Internal Revenue Bulletin in which the item may

be found and the page number on

which it appears.

Key to Abbreviations:

Revenue Ruling

Revenue Procedure

Treasury Decision

Court Decision

Public Law

Executive Order

Delegation Order

TDO

Treasury Department Order

Tax Convention

SPR

Statement of Procedural

Rules

PTE

Prohibited Transaction

Exemption

EMPLOYMENT TAX

Social Security domestic employee coverage threshold amount for 1997, 9,

EXCISE TAX

Deposits (Notice 15) 8, 23

Epoxy (DGEBA) determination (Notice

22) 13, 9

Proposed regulations:

26 CFR 48.4081–1, amended;

48.4082–5, 48.6715–2, added;

gasoline and diesel fuel excise tax,

special rules for Alaska, definition

of aviation gasoline and kerosene

(REG–247678–96) 6, 17

Regulations:

26 CFR 48.4082–5T, 48.6715–2T,

added; diesel fuel excise tax, special rules for Alaska (TD 8693) 6,

INCOME TAX

Accounting periods; small business corporations (Notice 20) 10, 52

Adoption assistance (Notice 9) 2, 35

INCOME TAX—Continued

Advance guidance under Section 877

(Notice 19) 10, 40

Alternative minimum tax, change in accounting method (Notice 13) 6, 13

Automobile inflation adjustment (RP 20)

11, 10

Books and records; electronic storage;

imaging (RP 22) 13, 9

Credits against tax:

Low-income housing credit:

Building’s credit period beginning

after 1995 (RR 4) 3, 6

Satisfactory bond, bond factor

amounts for January, February,

and March 1997 (RR 16) 13, 4

Depreciation:

Retail motor fuels outlets (RP 10) 2,

Differential earnings rate (Notice 17) 10,

Domestic asset/liability and investment

yield percentages (RP 16) 5, 25

Electing Small Business Trust (ESBT)

election (Notice 12) 3, 11

Employee plans:

Cash or deferred arrangements (Notice 2) 2, 22

Funding:

Full funding limitations, weighted

average interest rate, January

1997 (Notice 8) 4, 7; February

1997 (Notice 16) 9, 15

Qualification:

Qualified domestic relations orders

(Notice 11) 2, 49

Qualified joint and survivor annuities (Notice 10) 2, 49

SIMPLES (RP 9) 2, 55

SIMPLE–IRAs (Notice 6) 2, 26

User fees (RP 8) 1, 187

Exempt organizations:

Unrelated business taxable income

(RP 12) 4, 7

User fees (RP 8) 1, 187

Fringe benefits aircraft valuation formula (RR 14) 11, 5

Insurance companies:

Interest rate tables (RR 2) 2, 8

Premium stabilization reserves (RR 5)

4, 5

Interest:

Investment:

Federal short-term, mid-term, and

long-term rates for January 1997

(RR 1) 2, 10; February 1997 (RR

7) 5, 14; March 1997 (RR 10)

10, 31

Interest—Continued

Penalties:

Underpayment and overpayment

rates for April 1997 (RR 12) 11,

Inventories:

LIFO, price indexes, department

stores, November 1996 (RR 6) 4,

4; December 1996 (RR 8) 7, 4;

January 1997 (RR 15) 12, 42

Low-income housing tax credit (Notice

14) 8, 23

Major disaster areas (RR 11) 10, 5

Medical and dental expenses (RR 9) 9,

Obsolete revenue rulings and revenue

procedures under TD 8697 (Notice 1)

2, 22

Photocopy fee increase (RP 11) 6, 13

Pilot pre-submission conference procedure (RP 21) 12, 44

Proposed regulations:

26 CFR 1.41–0, amended; 1.41–4,

revised; research activities increase,

credit, hearing (REG–209494–90)

8, 24

26 CFR 1.167(a)–3, amended;

1.167(a)–14, 1.197–0, 1.197–2,

added; amortization of intangible

property (REG–209709–94) 13, 12

26 CFR 1.337(d)–4, added; certain

asset transfers to tax-exempt entity

(REG–209121–89) 11, 15

26 CFR 1.338(b)–2, –3, added; intangibles under sections 1060 and 338

(REG–252665–96) 12, 46

26 CFR 1.354–1, 1.355–1, 1.356–3,

amended; reorganizations, receipt

of securities (REG–249819–96) 7,

26 CFR 1.368–1, amended; shareholder interest continuity requirement for corporate reorganizations

(REG–252231–96) 7, 52

26 CFR 1.368–1, –2, amended; continuity of interest and business requirements (REG–252233–96) 9,

26 CFR 1.468A–2, –3, amended;

nuclear decommissioning reserve

funds; revised schedules of ruling

amounts (REG–209828–96) 6, 15

26 CFR 1.704–3, 1.1245–1, amended;

depreciation allocations, recapture

among partners in a partnership

(REG–209762–95) 3, 12

26 CFR 1.801–4, amended; life insurance reserves, recomputation hearing (REG–246018–96) 8, 30

INCOME TAX—Continued

Proposed regulations—Continued

26 CFR 1.832–4, amended; insurance

companies, determination of earned

premiums (REG–209839–96) 8, 26

26 CFR 1.905–2, amended; foreign

tax credit filing requirements

(REG–208288–90) 11, 14

26 CFR 1.1275–7, 1.1286–2, added;

inflation-indexed debt instruments

(REG–242996–96) 9, 18

26 CFR 1.1293–2, 1.1295–2, added;

qualified electing fund elections,

preferred shares, hearing (REG–

209040–88) 7, 34

26 CFR 1.1396–1, added; empowerment zone employment credit;

qualified zone employees (REG–

209834–96) 4, 9

26 CFR 1.1402(a)–18, withdrawn;

(REG–209729–94) 11, 19

26 CFR 1.6013–2, 301.6334–1,

301.6601–1, 301.6651–1, 301.7430–

0, –1, –2, –4, –5, amended;

301.6656–3, added; 301.7122–1(e),

301.7430–6, revised; Taxpayer Bill

of Rights 2 and Personal Responsibility and Work Opportunity Reconciliation Act of 1996, miscellaneous sections affected (REG–

248770–96) 8, 33

26 CFR 1.7701(1)–1, amended;

1.7701(1)–2; obligation-shifting

transactions, multiple-party, realized

income and deductions (REG–

209817–96) 7, 41

26 CFR 53.6011–1, amended; 53.6017–

1T; return and time for filing requirements (REG–247862–96) 8, 32

Regulations:

26 CFR 1.25–3, added; 1.25–3T,

amended; mortgage credit certificate reissuance (TD 8692) 3, 4

26 CFR 1.45B–1; withdrawal of

credit for employer social security

taxes paid on employee tips (REG–

209672–93) 6, 15

26 CFR 1.45B–1T, removed; credit for

employer social security taxes paid

on employee tips (TD 8699) 6, 4

26 CFR 1.108(a)–1, –2, 108(b)–1,

1.1016–7, –8, 1.1017–2, removed;

1.108–4, –5, added; 1.1017–1, revised; 1.301.9100–13T, removed;

basis reduction due to discharge of

indebtedness (REG–208172–91) 10,

26 CFR 1.108(c)–1T, 1.163(d)–1T,

1.1044(a)–1T, 1.6655(e)–1T, removed; 1.108(c)–1, 1.163(d)–1,

1.1044(a)–1, 1.6655(e)–1, added;

Omnibus Budget Reconciliation

Act, elections (TD 8688) 3, 7

Regulations:

26 CFR 1.141–1, revised; 1.143–1,

redesignated; 1.144–3, removed;

1.141–0, –2 through –16, 1.142–0,

–3, 1.144–0, 1.145–0, –1, –2,

1.147–0, –1, –2, 1.150–4, added;

1.142–1, –2, 1.144–1, –2, revised;

1.148–6, 1.150–1, amended; private

activity bonds definition (TD 8712)

12, 4

26 CFR 1.170A–1, –13, amended;

charitable contributions, deductibility, substantiation, and disclosure

(TD 8690) 5, 5

26 CFR 1.338(b)–2T(b)(2)(v), –2T(c)(4), added; 1.338–3, 1.338(b)–2T,

–3T, 1.1060–1T, amended; intangibles under sections 1060 and 338

(TD 8711) 12, 35

26 CFR Part 1, 1.338–0, –4,

amended; 1.338–4T, removed;

1.338(i)–1(a) and (b), revised; target affiliates that are controlled

foreign corporations (TD 8710) 13,

26 CFR 1.367(a)–3, added; foreign

corporations, transfer of domestic

stock or securities by U.S. person

(TD 8702) 8, 4

26 CFR 1.475(b)–1T, –2T, 1.475(c)–

1T, –2T, 1.475(d)–1T, 1.475(e)–1T,

removed; 1.475–0, 1.475(a)–3,

1.475(b)–1, –2, –4, 1.475(c)–1, –2,

1.475(d)–1, 1.475(e)–1, added; securities dealers; mark-to-market accounting; equity interests in related

parties and dealer-customer relationship (TD 8700) 7, 5

26 CFR 1.581–1, revised; 1.581–2,

1.761–1(a), revised; 301.6109–1,

amended; 301.7701–1, –2, –3, revised; 301.7701–4, amended; domestic unincorporated business

organizations classified as partnerships or associations (TD 8697) 2,

26 CFR 1.731–2, added; partnerships,

distribution of marketable securities

(TD 8707) 7, 17

26 CFR 1.902–0, –1, –2, added; foreign taxes deemed paid by domestic corporate shareholder; computation (TD 8708) 10, 14

26 CFR 1.952–1(e), (f), addee; 1.952–

2(c)(1), 1.954–1(d)(4)(iii), 1.954–

2(b)(3), 1.954–2(g)(2)(ii)(B)(1)(i),

–(2), revised; 1.957–1, amended;

1.960–1(i), added; controlled foreign corporations, foreign bas company and foreign personal holding

company income, definitions (TD

8704) 8, 12

Regulations:

26 CFR 1.1271–0, 1.1275–4,

amended; 1.1275–7T, 1.1286–2T,

added; inflation-indexed debt instrument (TD 8709) 9, 5

26 CFR 1.1291–0, –9, –10, added;

1.1291–0T, amended; 1.1291–9T,

–10T, removed; treatment of shareholders of certain passive foreign

investment companies (TD 8701) 7,

26 CFR 1.1368–1 amended; 1.1377–

0, –1, –2, –3, added; 18.1377–1,

removed; S corporations and their

shareholders, definitions under

subchapter S (TD 8696) 6, 4

26 CFR 1.1402(a)–2, amended; definition of limited partner for selfemployment tax purposes (REG–

209824–96) 11, 19

26 CFR 1.6081–2, –6, added; 1.6081–

2T, –3T, –4T, removed; 1.6081–4,

amended; 301.6651, amended;

301.6651–1T, removed; individual,

partnership, trust, and U.S. real estate mortgage investment conduit income tax returns, automatic extension of filing time (TD 8703) 8, 18

26 CFR 1.6695–1(b), amended; 1.6695–

1T, removed; 301.6061–1, revised;

301.6061–1T, removed; returns,

statements, or other documents, signing methods (TD 8689) 3, 9

26 CFR 31.3402(f)(5)–1, amended;

31.3402(f)(5)–2T, removed; employment taxes and collection of

income taxes at source, Form W–4,

electronic filing (TD 8706) 9, 11

26 CFR 53.6011–1, amended;

53.6071–1T; return and time for

filing requirements (TD 8705) 8, 16

26 CFR 301.6103(n)–1, amended; return information disclosure; property or services for tax administration purposes, Justice Department

(TD 8695) 4, 5

26 CFR 301.6231(a)(7)–1T, removed;

301.6231(a)(7)–1, added; limited liability companies; tax matters partner selection (TD 8698) 7, 29

26 CFR 301.6335–1, amended; sale

of seized property (TD 8691) 5, 16

REIT preferred stock (Notice 21) 11, 9

Rulings:

Areas in which advance rulings will

not be issued:

Associate Chief Counsel (Domestic), Associate Chief Counsel

(Employee Benefits and Exempt

Organizations (RP 3) 1, 85; Associate Chief Counsel (International) (RP 7) 1, 185

INCOME TAX—Continued

Rulings—Continued

Determination letters, employee plans

(RP 6) 1, 153

Environmental cleanup costs; letter

rulings (Notice 7) 1, 8

Letter rulings, determination letter, information letter, Associate Chief

Counsel (Domestic), Associate

Chief Counsel (Employee Benefits

and Exempt Organizations), Associate Chief Counsel (Enforcement

Litigation), Associate Chief Counsel (International) (RP 1) 1, 11

Rulings and determination letters, issuance procedures (RP 4) 1, 97

Rulings—Continued

Technical advice; employee plans, exempt organizations (RP 5) 1, 132

Technical advice to district directors

and chiefs, appeals offices, Associate Chief Counsel (Domestic), Associate Chief Counsel (Employee

Benefits and Exempt Organizations), Associate Chief Counsel

(Enforcement Litigation), Associate

Chief Counsel (International) (RP

2) 1, 64

SBA guaranteed payment rights; participating securities (RR 3) 2, 5

Scenarios of disciplinary actions, 13, 32

S corporation bank accounting method

change (RP 18) 10, 53

S corporation subsidiaries (Notice 4) 2,

Small Business Corporations:

Accounting periods (Notice 3) 1, 8

Electing small business corporations

and banks (Notice 5) 2, 25

Tax-exempt bonds:

Private activity bonds (RP 13) 5, 18;

(RP 14) 5, 20; (RP 15) 5, 21

Timely filing or payment; private delivery services (RP 19) 10, 55

Transfers to foreign entities (Notice 18)

10, 35

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.