Bulletin No. 1997–17

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Text

April 28, 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.

SPECIAL ANNOUNCEMENT

Announcement 97–44, page 19.

The date and location of the public hearing on proposed

regulation, REG–208172–91, 1997–10 I.R.B. 59, relating to basis reduction due to discharge of indebtedness,

are changed.

EMPLOYEE PLANS

Notice 97–27, page 7.

Weighted average interest rate update. Guidelines are

set forth for determining for April 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 the Uruguay

Round Agreements Act (GATT).

Announcement 97–45, page 20.

The Service is reexamining the plan qualification and

other tax issues raised by a contribution of stock

options to a plan and subsequent exercise of those

options.

TAX CONVENTIONS

Page 5.

The bilateral agreements between the United States and

Malta, providing for the reciprocal tax exemption of

income from international operation of ships and/or

aircraft, are set forth.

charitable remainder unitrusts under section 664. Rev.

Proc. 97–3 is amplified.

Rev. Proc. 97–25, page 8.

Electronic and magnetic media filing specifications.

Specifications are set forth for the magnetic or electronic filing of 1997 Form 8851, Summary of Medical

Savings Accounts, Magnetically/Electronically. The form

may be filed with the Internal Revenue Service using ½

inch magnetic tape; IBM 3480/3490 or AS400 compatible tape cartridge; asynchronous electronic filing (IRP–

BBS); or 5¼-, 3½-inch diskettes.

Rev. Proc. 97–26, page 17.

Qualified mortgage bonds; mortgage credit certificates; national median gross income. Guidance is

provided concerning the use of the national and area

median gross income figures by issuers of qualified

mortgage bonds and mortgage credit certificates in

determining the housing cost/income ratio described in

section 143(f)(5) of the Code. Except as provided in

section 5.02 of this procedure, Rev. Proc. 96–37 is

obsolete.

Notice 97–26, page 6.

Timely filing or payment; private delivery services. A

list of designated private delivery services is provided

for purposes of the ‘‘timely filing/paying’’ rules of

section 7502 of the Code.

ADMINISTRATIVE

Announcement 97–42, page 19.

Examination guidelines for Simplified Employee Plans

(SEPs) have been developed for use during examinations. The guidelines are being released to the public for

comments.

Rev. Proc. 97–23, page 7.

This procedure provides that the Service will not rule on

whether trusts that hold certain assets qualify as

Announcement 97–43, page 19.

T.D. 8697, 1997–2 I.R.B. 11, relating to the classification of business organizations, is corrected.

Finding Lists begin on page 23.

Announcement of Disbarments and Suspensions begins on page 21.

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 25.—Interest on Certain

Home Mortgages

Section 103.—State and Local

Bonds

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

26 CFR 1.103–1: Interest upon obligations of a

state, territory, etc.

Guidance is provided for the use of the national

and area median gross income figures by issuers

of qualified mortgage bonds and mortgage credit

certificates in determining the housing cost/income

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

See Rev. Proc. 97–26, page 17.

Guidance is provided for the use of the national

and area median gross income figures by issuers

of qualified mortgage bonds and mortgage credit

certificates in determining the housing cost/income

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

See Rev. Proc. 97–26, page 17.

Section 143.—Mortgage Revenue

Bonds: Qualified Mortgage Bond

and Qualified Veterans’ Mortgage

Bond

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

Guidance is provided for the use of the national

and area median gross income figures by issuers

of qualified mortgage bonds and mortgage credit

certificates in determining the housing cost/income

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

See Rev. Proc. 97–26, page 17.

Part II. Treaties and Tax Legislation

Subpart A.—Tax Conventions

MALTA

Embassy of Malta

Washington, D.C.

December 26, 1996

The Embassy of Malta presents its

compliments to the Department of State

of the United States of America and has

the honour to propose that the two

governments conclude an agreement to

exempt from income tax, on a reciprocal

basis, income derived by residents of the

other country from the international operation of ships and aircraft. The following proposed terms of agreement have

been drafted on the basis of similar

agreements the United States has with

other governments:

The Government of Malta agrees to

exempt from tax gross income derived

from the international operations of

ships or aircraft by individuals who are

residents of the United States (other

than citizens of Malta) and corporations

which are incorporated in the United

States.

In case of a U.S. corporation, the

exemption shall apply only if the corporation meets one of the following conditions:

(1) the corporation’s stock is primarily

and regularly traded on an established

securities market in the U.S., another

country which grants a reciprocal exemption to Maltese corporations or

Malta, or

(2) more than fifty (50) percent of the

value of the corporation’s stock is owned

directly or indirectly by individuals who

are residents of the United States or of

another foreign country which grants an

equivalent exemption to Maltese corporations or by a corporation organized in

a country which grants an equivalent

exemption to Maltese corporations and

whose stock is primarily and regularly

traded on an established securities market in that country, another country

which grants an equivalent exemption to

Maltese corporations, or Malta.

The Government of the United States

of America, in accordance with sections

872(b) and 883(A) of the Internal Revenue Code, agrees to exempt from tax

gross income derived from the international operation of ships or aircraft by

individuals who are residents of Malta

(other than United States citizens) and

corporations which are incorporated in

Malta.

In case of a Maltese corporation, the

exemption shall apply only if the corporation meets one of the following conditions:

(1) the corporation’s stock is primarily

and regularly traded on an established

securities market in Malta, another

country which grants a reciprocal exemption to U.S. corporations or the

United States, or

(2) more than fifty (50) percent of the

value of the corporation’s stock is

owned directly or indirectly by individuals who are residents of Malta or of

another foreign country which grants an

equivalent exemption to U.S. corporations or by a corporation organized in a

country which grants an equivalent exemption to U.S. corporations and whose

stock is primarily and regularly traded

on an established securities market in

that country, another country which

grants an equivalent exemption to U.S.

corporations, or the United States.

For the purposes of exemption from

the U.S. tax, the Government of Malta

will be treated as an individual resident

of Malta, and subparagraph (2) shall be

considered to be satisfied if the corporation is a ‘‘controlled foreign corporation’’ under the Internal Revenue Code,

so however, that U.S. shareholders of

such corporations shall be treated as

residents of Malta.

In this agreement:

(a) the terms ‘‘contracting state’’, and

‘‘other contracting state’’ mean Malta or

the United States of America, the governments of which have concluded this

agreement.

(b) gross income includes all income

derived from the international operation

of ships or aircraft, including:

(1) Income from the rental on full

(time or voyage) basis of ships or

aircraft used in international

transport;

(2) income from the rental on a

bareboat basis of ships or aircraft

used in international transport;

(3) income from the rental of containers and related equipment

used in international transport that

is incidental to income from the

international operation of ships

and aircraft; and

(4) gains from the sale or other alienation of ships or aircraft used in

international transport derived by

a person primarily engaged in the

international operation of ships or

aircraft.

In the application of this agreement

by a contracting state, any term not

defined in this agreement shall, unless

the context otherwise requires, have the

meaning which it has under the laws of

that state relating to the taxes to which

the agreement applies.

The Government of Malta proposes

that, if the foregoing is acceptable to the

Government of the United States, this

note and the Department’s note in reply

shall constitute an agreement. The

agreement shall enter into force on the

date of the Department’s note in reply

and shall have effect in respect of

income derived on or after 1 January,

1997.

This agreement shall continue in force

until the Government of either contracting state gives written notice of termination of the agreement to the other

contracting state through the diplomatic

channel.

The Embassy of Malta takes this

opportunity to renew to the Department

of State of the United States of America

the assurances of it’s highest consideration.

Department of State

Washington, D.C.

March 11, 1997

The Department of State refers the

Embassy of Malta to the Embassy’s note

1065 of December 26, 1996, regarding

the reciprocal exemption from income

tax of income derived from the international operation of ships and aircraft.

The Department of State confirms

that the proposals contained in the Embassy’s note are acceptable to the Government of the United States of

America. Therefore, this note and the

Embassy’s note of December 26, 1996,

constitute an agreement which shall enter into force on the date of this note in

reply and shall be effective in respect of

income derived on or after January 1,

1997. This agreement shall continue in

force until the Government of either

contracting state gives written notice of

termination of the agreement to the

other contracting state through the diplomatic channel.

Part III. Administrative, Procedural, and Miscellaneous

List of Designated Private Delivery

Services

Notice 97–26

SUMMARY: This notice provides the

first list of private delivery services

(‘‘PDSs’’) that are designated private

delivery services (‘‘designated PDSs’’)

during the interim period described in

Rev. Proc. 97–19, 1997–10 I.R.B. 55.

The interim period ends on the date on

which the Service issues guidance superseding Rev. Proc. 97–19. Designation

is for purposes of the ‘‘timely mailing

as timely filing/paying’’ rule of § 7502

of the Internal Revenue Code. This

notice also provides special rules for

determining the date that will be treated

as the postmark date for purposes of

§ 7502.

BACKGROUND: Section 7502 provides rules that apply when a document

is required to be filed (or a payment is

required to be made) within a prescribed

period or on or before a prescribed date

under the authority of any provision of

the internal revenue laws. Section 7502

provides what is commonly called the

‘‘timely mailing as timely filing/paying’’

rule. For example, an individual income

tax return is considered timely filed

even though it is received by the Service after the April 15 due date if the

return was delivered to the Service by

United States mail in a postage prepaid,

properly addressed envelope that had a

post office postmark dated on or before

the April 15 due date.

Prior to the amendment made by the

Taxpayer Bill of Rights 2 (TBOR 2), the

‘‘timely mailing as timely filing/paying’’

rule applied only to documents and

payments sent by United States mail.

TBOR 2 amended § 7502 by adding

subsection (f), which authorizes the Secretary to designate certain PDSs for the

‘‘timely mailing as timely filing/paying’’

rule.

Rev. Proc. 97–19 provides the criteria

that are being used during the interim

period described in Rev. Proc. 97–19 to

determine whether a PDS qualifies as a

designated PDS under § 7502(f). This

notice provides the first list of the

designated PDSs for the interim period.

LIST OF DESIGNATED PDSs AND

TYPES OF SERVICES: The following

PDSs and the following specific types

of delivery services are designated for

purposes of § 7502(f):

1. Airborne Express (Airborne):

Overnight Air Express Service, Next

Afternoon Service, and Second Day

Service

2. DHL

Worldwide

Express

(DHL): DHL ‘‘Same Day’’ Service

and DHL USA Overnight

3. Federal Express (FedEx): FedEx

Priority Overnight, FedEx Standard

Overnight, and FedEx 2Day

4. United Parcel Service (UPS):

UPS Next Day Air, UPS Next Day

Air Saver, UPS 2nd Day Air, and

UPS 2nd Day Air A.M.

Airborne, DHL, FedEx, and UPS are

not designated with respect to any type

of delivery service not identified above.

Consequently, the ‘‘timely mailing as

timely filing/paying’’ rule of § 7502

does not apply to any other type of

delivery service offered by the designated PDSs.

Designation under this notice is effective until the Service issues a revised

list of designated PDSs. On or before

September 1st and March 1st of each

year of the interim period, the Service

will issue other notices that provide a

revised list of designated PDSs. In unusual circumstances, the Service may

issue additional notices at other times.

If taxpayers use a business that provides mailing services of a designated

PDS, but the business itself is not a

designated PDS, taxpayers should be

aware that the ‘‘timely mailing as timely

filing/paying’’ rule will not apply unless

an item is actually given to, or picked

up by, a designated PDS on or before

the due date. Taxpayers should take

appropriate precautions to ensure that

the item will be given to, or picked up

by, a designated PDS on or before the

due date.

SPECIAL RULES FOR DETERMINING POSTMARK DATE: Section

7502(f)(2)(C) requires a PDS to either

(1) record electronically to its data base

(kept in the regular course of its business) the date on which an item was

given to the PDS for delivery or (2)

mark on the cover of the item the date

on which an item was given to the PDS

for delivery. Under § 7502(f)(1), the

date recorded or the date marked under

§ 7502(f)(2)(C) is treated as the postmark date for purposes of § 7502.

This notice provides rules for determining the date that is treated as the

postmark date for purposes of § 7502.

There is one set of rules for the desig-

nated PDSs that qualified for designation because their ‘‘postmark date’’ is

recorded electronically to their data

bases. There is another set of rules for

the designated PDS that qualified for

designation because its ‘‘postmark date’’

is marked on the cover of an item.

Airborne, DHL, and UPS

The date on which an item is given to

Airborne, DHL, or UPS is recorded

electronically to the data base of these

designated PDSs. Accordingly, the date

recorded in the electronic data base of

these designated PDSs is treated as the

postmark date for purposes of § 7502.

For items that are delivered after their

due dates, there is a presumption that

the postmark date is the day that precedes the delivery date by an amount of

time that equals the amount of time it

would normally take for an item to be

delivered under the terms of the specific

type of delivery service used (e.g., two

days before the actual delivery date for

a two day delivery service). This presumption applies to items sent by taxpayers and, in appropriate cases, items

sent by the Government.

Taxpayers who wish to overcome this

presumption will need to provide information that shows that the date recorded

in the electronic data base is on or

before the due date. For example, a

taxpayer could obtain such information

in the form of a written confirmation

produced and issued by the designated

PDS before the expiration of the period

for storing the date recorded in its

electronic data base. If taxpayers wish to

maintain this type of proof for their

records, they should make a timely

request to receive this information from

the designated PDS before the expiration of that designated PDS’s data storage period.

Airborne, DHL, and UPS entered into

agreements pursuant to Rev. Proc.

97–19 that require these designated

PDSs to store (electronically or by microfiche) the dates recorded in their

electronic data bases for at least 6

months. Although Airborne, DHL, and

UPS may choose to store the dates for

more than 6 months, the agreements do

not require them to do so. Prior to the

expiration of the data storage period,

senders or recipients can obtain information concerning the date recorded to the

electronic data base by contacting Airborne, DHL, or UPS. The toll-free tele-

phone numbers for these designated

PDSs are as follows: Airborne, 1–800–

247–2676; DHL ‘‘Same Day’’ Service,

1–800–345–2727; DHL USA Overnight,

1–800–225–5345; and UPS, 1–800–

742–5877.

FedEx

An electronically generated label is

applied to the cover of all items delivered by FedEx, including those items

that already have an airbill attached. The

date on which an item is given to FedEx

for delivery is marked on the label.

There are two types of labels (which are

distinguishable from each other). One

type of label is generated and applied to

an item by a FedEx employee. The

other type of label is generated (using

computer software and/or hardware provided by FedEx) and applied to an item

by a customer.

The date that will be treated as the

postmark date for purposes of § 7502 is

determined under the following rules:

(1) If an item has a label generated

and applied by a FedEx employee, the

date marked on that label is treated as

the postmark date for purposes of

§ 7502, regardless of whether the

item also has a label generated and

applied by the customer.

(2) If an item has a label generated

and applied by a customer, the date

marked on that label is treated as the

postmark date for purposes of § 7502

if the item is received within the

normal delivery time. (Normal delivery time is one day for FedEx Priority

Overnight and FedEx Standard Overnight, or two days for FedEx 2 Day.)

If an item is not delivered within the

normal delivery time, the person required to file the document or to

make the payment must establish (a)

that the item was actually either given

to, or picked up by, a FedEx employee on or before the due date and

(b) the cause of the delay in delivery

of the document or payment. These

rules are similar to the rules for

United States mail that has a postmark made other than by the United

States Postal Service. (See Treas. Reg.

§ 301.7502–1(c)(1)(iii)(b).)

(3) The information recorded electronically to the data base of FedEx

(in the regular course of its business)

can be used to show that the item was

actually either given to, or picked up

by, a FedEx employee on or before

the due date when (a) an item has a

label generated and applied by a

customer or (b) an item has a label

generated and applied by a FedEx

employee, but the date is illegible or

otherwise unavailable.

EFFECTIVE DATE: Designation under

this notice is effective for documents

and payments that are given by taxpayers to a designated PDS on or after

April 11, 1997. Designation is not effec-

tive for documents and payments that

are given by taxpayers to a designated

PDS before April 11, 1997, even if such

documents and payments are delivered

by the designated PDS on or after April

11, 1997.

FOR FURTHER INFORMATION: The

principal author of this notice is Robert

J. Basso of the Office of Assistant Chief

Counsel (Income Tax and Accounting).

For further information regarding this

notice, contact Mr. Basso at (202) 622–

4940 (not a toll-free call).

Weighted Average Interest Rate

Update

Notice 97–27

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 March

1997 is 6.93 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

April

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).

26 CFR 601.201: Rulings and determination

letters.

(Also Part I, sections 664, 1.664–1(a)(4).)

Rev. Proc. 97–23

SECTION 1. PURPOSE

This revenue procedure amplifies Rev.

Proc. 97–3, 1997–1 I.R.B. 85, which

sets forth areas of the Internal Revenue

Code under the jurisdiction of the Associate Chief Counsel (Domestic) in which

the Internal Revenue Service will not

issue advance rulings or determination

letters.

SECTION 2. BACKGROUND

Rev. Proc. 97–3, section 5, lists specific areas in which rulings or determination letters will not be issued because

the areas are under extensive study. This

revenue procedure adds a subparagraph

for certain income exception charitable

remainder unitrusts under § 664(d)(3) of

the Internal Revenue Code. The Service

and Treasury will study whether creating

or using income exception charitable

remainder unitrusts to control the timing

of the trust’s receipt of trust income for

the benefit of the unitrust recipient

causes the trust to fail to function

exclusively as a charitable remainder

trust under § 1.664–1(a)(4) of the Income Tax Regulations. For a trust to

qualify as a charitable remainder trust, it

must function exclusively as a charitable

remainder trust from its creation. See

§ 1.664–1(a)(4).

SECTION 3. PROCEDURE

Rev. Proc. 97–3 is amplified by adding to section 5 the following: Section

664.—Charitable Remainder Trusts.—

Whether a trust that will calculate the

unitrust amount under § 664(d)(3) qualifies as a § 664 charitable remainder

trust when a grantor, a trustee, a benefi-

ciary, or a person related or subordinate

to a grantor, a trustee, or a beneficiary

can control the timing of the trust’s

receipt of trust income from a partnership or a deferred annuity contract to

take advantage of the difference between

trust income under § 643(b) and income

for federal income tax purposes for the

benefit of the unitrust recipient.

SECTION 4. EFFECTIVE DATE

The revenue procedure applies to all

ruling requests, including any pending in

the National Office on April 17, 1997,

and ruling requests received after April

17, 1997.

SECTION 5. EFFECT ON OTHER

REVENUE PROCEDURES

Rev. Proc. 97–3 is amplified.

DRAFTING INFORMATION

The principal author of this revenue

procedure is Mary Beth Collins of the

Office of the Assistant Chief Counsel

(Passthroughs and Special Industries).

For further information regarding this

revenue procedure, contact Mary Beth

Collins at (202) 622–3070 (not a tollfree number).

Part B. Magnetic Media

Specifications

Section 1. General

Section 2. Tape Specifications

Section 3. Tape Cartridge Specifications

Section 4. 5 1/4- and 3 1/2-Inch

Diskette Specifications

Section 5. Data Sequence Specifications

Section 6. The Trustee ‘‘A’’ Record General Field Descriptions and

Record Layout

Section 7. The Account Holder ‘‘B’’

Record - General Field Descriptions and Record Layout

Section 8. The Control Total ‘‘C’’

Record - General Field Descriptions and Record Layout

Part C. Asynchronous (IRP-BBS)

Electronic Filing Specifications

Section 1. General

Section 2. Electronic Filing Approval

Procedure

Section 3. Electronic Submissions

Section 4. Transmittal Requirements

Section 5. Information Reporting Program Bulletin Board System (IRPBBS) Specifications

Section 6. IRP-BBS First Time Logon

Procedures

26 CFR 601.602: Tax forms and instructions.

Rev. Proc. 97–25

NOTE: This revenue procedure may

be used to prepare Form 8851, Summary of Medical Savings Accounts, for

submission to Internal Revenue Service

(IRS) using any of the following:

Magnetic Tape

Tape Cartridge

5 1/4-inch Diskette

3 1/2-inch Diskette

Asynchronous Electronic Filing

Contents

Part A. General

Section 1. Purpose

Section 2. Where to File and How to

Contact the IRS Martinsburg Computing Center (IRS/MCC)

Section 3. Filing Requirements

Section 4. Filing of Form(s) 8851

Magnetically/ Electronically and

Retention Requirements

Section 5. Preparation Instructions for

Media Label

Section 6. Due Dates

Section 7. Processing of Information

Returns Magnetically/Electronically

Section 8 Effect on Paper Documents

Section 9. Definition of Terms

Part A. General

Sec. 1. Purpose

.01 The purpose of this revenue procedure is to provide the specifications

under which trustees may file Form

8851, Summary of Medical Savings Accounts, magnetically or electronically.

.02 Comments concerning this revenue procedure, or suggestions for making it more helpful and user friendly,

can be addressed to:

Internal Revenue Service

Martinsburg Computing Center

P. O. Box 1359

Martinsburg, WV 25402

.03 It is unlawful to intentionally

transmit a computer virus to the Internal

Revenue Service. Violators may be subject to a fine and/or imprisonment.

Sec. 2. Where To File and How To

Contact the IRS Martinsburg

Computing Center (IRS/MCC)

.01 All Forms 8851 filed magnetically or electronically are processed at

IRS/MCC. Inquiries concerning filing

procedures specified in this revenue procedure should be directed to IRS/MCC

by telephone at (304) 263–8700 (not a

toll-free number). The hours of operation are 8:30 a.m. to 4:30 p.m., Eastern

Time.

.02 Send magnetic media files and

any correspondence to MCC at the following addresses:

If by Postal Service:

IRS, Martinsburg Computing Center

P.O. Box 879, MS360

Kearneysville, WV 25430

If by truck or air freight:

IRS, Martinsburg Computing Center

Information Reporting Program

Route 9 and Needy Road, MS360

Martinsburg, WV 25401

.03 This revenue procedure and other

IRS publications concerning magnetic

and electronic filing of information returns are available through the IRP-BBS

as ‘‘downloadable’’ files. Using IRPBBS as a means of obtaining publications will provide faster access to this

information. Additionally, publications

will be available from the IRP-BBS

much earlier than the printed version.

The IRP-BBS is operational 24 hours a

day, 7 days a week. The telephone

number is (304) 264–7070.

.04 The IRP-BBS software provides a

menu-driven environment which allows

filers to access different parts of the

bulletin board. Whenever possible, IRS/

MCC personnel will provide assistance

in resolving communication problems

with the IRP-BBS.

.05 The telephone number for the

IRS/MCC fax machine is (304) 264–

5602.

.06 IRS/MCC has installed a Telecommunications Device for the Deaf

(TDD). The number is (304) 267–3367.

.07 The Information Reporting Program Centralized Call Site is located at

IRS/MCC and operates in conjunction

with the Information Reporting Program.

The Call Site provides service to the

payer community (financial institutions,

employers, and other transmitters of information returns). Recipients of information returns (payees) should continue

to contact 1–800–829–1040 with any

questions on how to report this information on their Form 1040.

.08 The Call Site accepts calls from

all areas of the country. The number to

call is (304) 263–8700 or Telecommunications Device for the Deaf (TDD)

(304) 267–3367. These are toll calls.

Hours of operation for the Call Site are

Monday through Friday, 8:30 a.m. to

4:30 p.m., Eastern Time. The Call Site

is open throughout the year to handle

payers’, transmitters’, and employers’

questions. Due to the high demand for

assistance at the end of January and

February, it is advisable to call as soon

as possible to avoid these peak filing

seasons.

.09 For assistance with regard to the

reporting of Form(s) 8851, magnetic

media filing, and processing requirements, contact:

Martinsburg Computing Center

Information Reporting Program

TEL: 304–263–8700

FAX: 304–264–5602

.10 Requests for the Form 8851 may

be directed to the IRS toll free forms

number 1–800–829–3676 or downloaded

from the Internet http://WWW.IRS.USTREAS.GOV. Requests for paper returns, publications, and forms not related to magnetic media processing may

also be requested by calling 1–800–829–

3676.

Sec. 3. Filing Requirements

.01 If you are required to report 250

or more medical savings accounts

(MSAs), you must file magnetically or

electronically. Even though a trustee

may not meet the required filing threshold of 250 documents, IRS encourages

the filing of the Form 8851

magnetically/electronically.

.02 Filers who are required to submit

their Forms 8851 on magnetic media

may choose to submit their documents

electronically instead. Filers who transmit their information electronically are

considered to have satisfied the magnetic media filing requirements.

.03 The filing requirement applies individually to each reporting entity as

defined by its separate Taxpayer Identification Number (TIN) (Social Security

Number [SSN] or Employer Identification Number [EIN]). For example, if

filing for a corporation with several

branches or locations and each uses the

same name and EIN, the filer must

aggregate the total volume to be filed

for that EIN and apply the filing requirement accordingly.

.04 For additional information on filing requirements, please refer to the

instructions on Form 8851.

Sec. 4. Filing of Form 8851

Magnetically/Electronically and

Retention Requirements

.01 Form 8851, Summary of Medical

Saving Accounts, MUST accompany

ALL magnetic media shipments. If you

wish to file electronically, complete

Form 8851 above line ‘‘a’’ (trustee’s

information only) and send it to:

Internal Revenue Service

P.O. Box 879, MS360

Kearneysville, WV 25430

Upon receipt, you will be contacted with

instructions on how to transmit your file

electronically.

In both instances, only the trustee

information requested on Form 8851

must be completed. The form may be

computer-generated; however, all of the

trustee information requested on the

original form must be on the computergenerated form.

.02 Do not report duplicate information. If a filer submits returns magnetically/

electronically, identical paper documents

must not be filed.

.03 An external label must be affixed

to each piece of media (tape, tape

cartridge, or diskette). For an example,

see Part A, Section 5. If diskettes are

used, and the operating system is not

MS/DOS compatible, the operating system and hardware information must be

provided. Failure to provide this information may result in the media being

returned to the filer.

.04 On the outside of the shipping

container, affix or attach a label which

.’’ If there

reads ‘‘IRB—BOX

is only one container, mark the outside

as Box 1 of 1. For multiple containers,

be sure to include the sequence (for

example, Box 1 of 3, 2 of 3, 3 of 3).

.05 When submitting files, include

the following:

(a) A Form 8851;

(b) A media label affixed to the

magnetic media;

the shipping container.

.06 IRS/MCC will not pay for or

accept ‘‘Cash-on-Delivery’’ or ‘‘Charge

to IRS’’ shipments of tax information

that an individual or organization is

legally required to submit.

Sec. 5. Preparation Instructions for

Media Label

Please create your own pressure sensitive label containing the following information:

Type of filing: Indicate whether data is

Original or Replacement.

Tax Year: Tax period for which media

is submitted as defined on

the Form 8851.

IRS TCC: (Transmitter Control Code):

MSA01

Trustee’s name

Operating system/Hardware:

Recommended label format:

For 5 1/4- and 3 1/2- inch diskette files, indicate the type of

personal computer operating system and software package used

to create the media (for example: IBM.PC/AT-MSD/DOS, Apple

MacIntosh/MacWrite V2.2).

Type of filing

Tax Year

IRS TCC MSA01

Trustee name

Operating system/Hardware

Number of account holders

Trustee number for media

Media sequence

For tape, indicate either EBCDIC or

ASCII.

For tape cartridge, indicate operating

system, either EBCDIC or ASCII, and

either 18- or 36-track.

Number of account holders: Indicate

the total number of Account Holder ‘‘B’’

Records reported on the media.

Trustee number for media: If avail-

able, provide the in-house number assigned by your organization to the tapes,

tape cartridges, or diskettes.

Media sequence: Indicate sequence

number of media and total number of

media in file (for example: Media sequence 1 of 3, 2 of 3, 3 of 3).

Please affix external label to appropriate area on magnetic media, so it

will not hinder the ability to process

media.

Sec. 6. Due Dates

.01 The due dates for filing paper

returns with IRS also apply to magnetic

media or electronic filing. File Form

8851, postmarked no later than June 2,

1997, to report the number of medical

savings accounts you established from

January 1 through April 30, 1997. File

another Form 8851 postmarked no later

than August 1, 1997, to report medical

savings accounts you established from

May 1, 1997, through June 30, 1997.

.02 In 1998, file Form 8851 postmarked no later than August 3, 1998, to

report MSAs that were established January 1 through June 30, 1998. In 1999,

file Form 8851 postmarked no later than

August 2, 1999, to report MSAs that

were established January 1, 1999

through June 30, 1999.

.03 In all instances, identify which

accounts are for individuals that were

previously uninsured or excludable account holders, if applicable.

.04 When using a delivery service

other than the U.S. Postal Service, if no

date of shipment appears on the package

or container, the date of receipt will be

the date received at IRS/MCC.

Sec. 7. Processing of Information

Returns Magnetically/Electronically

.01 All data received at IRS/MCC for

processing will be given the same protection as individual income tax returns

(Form 1040). IRS/MCC will process the

data and determine if the records are

formatted and coded according to this

revenue procedure.

.02 If you are filing information for

more than one trustee, each trustee must

be reported on separate media and/or

transmitted separately, if filing electronically.

.03 When the magnetic media is returned for replacement, a listing identifying the type of errors and frequency

of such errors will be provided. It is the

responsibility of the transmitter to check

the entire file for similar errors. The

transmitter must correct the problem(s)

and submit a replacement file to IRS/

MCC.

.04 The following definition has been

provided to help identify a replacement:

A replacement is media that IRS/

MCC has returned due to format or

coding errors encountered during

processing. Media returned should

receive the most prompt attention.

After necessary changes have been

made, these files are to be returned

to IRS/MCC.

.05 IRS/MCC will not return media

after successful processing. Therefore, if

the transmitter wants proof that IRS/

MCC received a shipment, the transmitter should select a service with tracing

capabilities or one that will provide

proof of delivery.

.06 IRS/MCC will work with the filers to identify and resolve processing

problems. If contacted by IRS/MCC,

please respond promptly. IRS/MCC may

have information the filers need to correct their files.

.07 Do not use special shipping containers for transmitting data to IRS/

MCC. Shipping containers will not be

returned.

Sec. 8. Effect on Paper Documents

.01 Magnetic or electronic reporting

eliminates the need to submit paper

Forms 8851 to IRS except as described

in Section 4.01.

.02 Even though the threshold for

filing magnetically or electronically is

250 or more MSAs, IRS encourages

transmitters to submit all returns magnetically or electronically.

.03 The address for filing paper

Forms 8851 is:

Internal Revenue Service Center

Philadelphia, PA 19255

Do NOT send paper Forms 8851 to

IRS/MCC except as described in Section 4.01.

.04 Do not send paper Forms 8851 to

Philadelphia if the Forms 8851 were

filed magnetically or electronically with

IRS/MCC.

Sec. 09. Definition of Terms

Element

Description

Account Holder

The owner of the MSA.

Asynchronous Protocols

This type of data transmission is most often used by micro-computers, PCs and some

mini-transmissions transfer data at arbitrary time intervals using the start-stop method.

Each character transmitted has its own start bit and stop bit.

Denotes a blank position. Enter blank(s) when this symbol is used (do not enter the letter

‘‘b’’). This appears in numerous areas throughout the record descriptions.

Blocked records

Two or more records grouped together between interrecord gaps.

Employer Identification Number

(EIN)

A nine-digit number assigned by IRS to a person for Federal tax reporting purposes.

Electronic Filing

Submission of information returns using switched telecommunications network circuits.

These transmissions use modems, dial-up phone lines, and asynchronous protocols (see

Part C of this publication for specific information on electronic filing).

File

For the purpose of this revenue procedure, a file consists of all records submitted by a

transmitter either magnetically or electronically.

Filer

Person or organization who prepares and submits files. May be the trustee and/or

transmitter.

Information Reporting Program

Bulletin Board System (IRP-BBS)

An electronic bulletin board which provides the ability to transmit information returns

via a personal computer (PC) using dial-up modems; provides immediate access to the

latest changes, updates, and publications.

IRS/MCC

Internal Revenue Service/ Martinsburg Computing Center

Element

Description

Magnetic Media

Refers to 1/2-inch magnetic tape, tape cartridge, 5 1/4- or 3 1/2-inch diskettes.

Multi-reel/diskette file

A group of tapes or diskettes submitted under one TCC where all media ends with an

account holder ‘‘B’’ Record, except for the last media of the file, which ends with a

Control Total ‘‘C’’ Record.

Replacement

Media that IRS/MCC has returned due to format errors encountered during processing.

Social Security Number (SSN)

A nine-digit number assigned by the Social Security Administration (SSA) to an

individual for tax and wage reporting purposes.

Special Character

Any character that is not a numeral, an alpha, or a blank.

Taxpayer Identification Number

(TIN)

May be either a Social Security Number (SSN) or an Employer Identification Number

(EIN).

Transmitter Control Code (TCC)

The five-digit code ‘‘MSA01’’ assigned to all filers prior to submitting Forms 8851

magnetically/electronically. This number is inserted in the ‘‘A’’ Record and must be

present in the file.

Trustee

Person or organization that is the custodian of the MSA and is required to file Form

8851.

Part B. Magnetic Media

Specifications

Sec. 1. General

.01 These specifications prescribe the

required format and content of the

Trustee ‘‘A,’’ Account Holder ‘‘B,’’ and

Control Total ‘‘C’’ records to be included in the magnetic media file. Usually, IRS/MCC will be able to process

any compatible file. Deviations cannot

and will not be permitted in any of the

data fields.

.02 If you are filing for more than

one trustee, each trustee must be reported on a separate tape, tape cartridge,

diskette, or in a separate electronic

transmission. A separate Form 8851 is

required for each.

.03 An external label must appear on

each tape, diskette, or cartridge submitted. The following information is needed

on the label:

(a) Type of filing (i.e., Original).

(b) The tax year of the data (i.e.,

1997).

(d) The five digit Transmitter Control Code ‘‘MSA01’’

(e) Operating system software and

hardware used to create the file

(i.e., IBM.PC/AT-MSD/DOS,

Apple MacIntosh/MacWrite

V2.2).

(f) The total number of account

holders in the file.

(g) Trustee’s media number. The

number assigned to the media

by the trustee.

(h) The sequence of each tape or

diskette (i.e., 001 of 008, 002

of 008,..., 008 of 008).

Information provided on the label will

assist IRS/MCC in identifying information that is reported and in locating a

specific file if it is necessary to return

the file to the trustee.

.04 Regardless of the type of media

used or if returns are filed electronically,

the record length must be 150 positions.

Sec. 2. Tape Specifications

.01 In most instances, IRS/MCC can

process any compatible magnetic tape

file if the following specifications are

met:

(a) 9-track EBCDIC (Extended Binary Coded Decimal Interchange Code) with a recording

density of 1600 or 6250 BPI.

(b) 9-track ASCII (American Standard Coded Information Interchange) with recording density

of 1600 or 6250 BPI.

.02 All compatible tape files must

have the following characteristics: 1/2inch (12.7 mm) wide, computer-grade

magnetic tape on reels of up to 2,400

feet (731.52 m) within the following

specifications:

(a) Tape thickness: 1.0 or 1.5 mils,

and

(b) Reel diameter: 10 1/2-inch

(26.67 cm), 8 1/2-inch (21.59

cm), 7-inch (17.78 cm), or

6-inch.

.03 The tape records may be blocked

subject to the following:

(a) A block may not exceed 30,000

tape positions.

(b) If the use of blocked records

would result in a short block,

all remaining positions of the

block must be filled with 9’s;

however, the last block of the

file may be filled with 9’s or

truncated. Do not pad a block

with blanks.

and trailer labels, may be

blocked or unblocked. A record

may not contain any control

fields or block descriptor fields

which describe the length of

the block or the logical records

within the block. The number

of logical records within a

block (the blocking factor)

must be constant in every block

with the exception of the last

block which may be shorter

(see item b above). The block

length must be evenly divisible

by 150.

(d) Records may not span blocks.

.04 Labeled or unlabeled tapes may

be submitted.

.05 Tape header and trailer labels,

record marks, and tape marks are all

optional. If used, they must conform to

the following standards:

(a) Header labels must begin with

VOL1, VOL2, HDR1, HDR2,

or 1HDR. They must be the

first record(s) on the reel immediately before the Trustee

‘‘A’’ Record. Header labels may

not exceed 80 characters in

length.

(b) Trailer labels must begin

1EOR, 1EOF, EOF1, or EOR1.

They must be the last record(s)

on the reel, after the ‘‘C’’

record and tape mark (if a tape

mark is used). Trailer labels

may not exceed 80 characters

in length.

immediately after the ‘‘C’’

Record. If both header and

trailer labels are used, the tape

mark must follow the header

label and must precede and/or

follow the trailer label(s).

Sec. 3. Tape Cartridge

Specifications

.01 In most instances, IRS/MCC can

process tape cartridges that meet the

following specifications:

(a) Must be IBM 3480, 3490, or

AS400 compatible.

(b) Must meet American National

Standard Institute (ANSI) standards, and have the following

characteristics:

(1) Tape cartridges will be 1/2inch tape contained in plastic

cartridges which are approximately 4-inches by 5-inches

by 1-inch in dimension.

(2) Magnetic tape will be chromium dioxide particle based

1/2-inch tape.

(3) Cartridges must be 18-track

or 36-track parallel. (See

Note.)

(4) Cartridges will contain

37,871 CPI or 75,742 CPI

(characters per inch).

(5) Mode will be full function.

(6) The data may be compressed

using EDRC (Memorex) or

IDRC (IBM) compression.

(7) Either EBCDIC (Extended

Binary Coded Decimal Inter-

change Code) or ASCII

(American Standard Coded

Information Interchange)

may be used.

.02 The tape cartridge records defined

in this revenue procedure may be

blocked subject to the following:

(a) A block must not exceed

30,000 tape positions.

(b) If the use of blocked records

would result in a short block,

all remaining positions of the

block must be filled with 9’s;

however, the last block of the

file may be filled with 9’s or

truncated. Do not pad a block

with blanks.

and trailer labels, may be

blocked or unblocked. A record

may not contain any control

fields or block descriptor fields

which describe the length of

the block or the logical records

within the block. The number

of logical records within a

block (the blocking factor)

must be constant in every block

with the exception of the last

block which may be shorter

(see item b above). The block

length must be evenly divisible

by 150.

(d) Records may not span blocks.

.03 Tape cartridges may be labeled or

unlabeled.

.04 For the purposes of this revenue

procedure, the following must be used:

Tape Mark:

(a) Used to signify the physical

end of the recording on tape.

(b) For even parity, use BCD configuration 001111 (8421).

and precede and/or follow the

trailer label.

Note: Filers should indicate on the

external tape label whether the cartridge is 36- or 18-track.

Sec. 4. 5 1/4-inch And 3 1/2-inch

Diskette Specifications

.01 To be compatible, a diskette file

must meet the following specifications:

(a) 5 1/4- or 3 1/2-inches in diameter.

(b) Data must be recorded in standard ASCII code. For 5 1/4inch diskettes, data may be recorded using EBCDIC if the

file is created on an IBM System 36.

of 150 bytes per record.

(d) Delimiter character commas (,)

must not be used.

(e) Positions 149 and 150 of each

record must contain carriage

return/line feed (cr/lf) characters, if applicable.

(f) Filename of 8851MSA must be

used. Do not enter any other

data in this field. If a file will

consist of more than one diskette, the file name 8851MSA

will contain a 3-digit extension.

This extension will indicate the

sequence of the diskettes within

the file. For example, the first

diskette will be named

8851MSA.001, the second diskette will be 8851MSA.002,

etc.

(g) A diskette file may consist of

multiple diskettes as long as

the filenaming conventions are

followed.

(h) Diskettes must meet one of the

following specifications:

Capacity

Tracks

Sides/Density

Sector Size

1.44 mb

1.2 mb

720 kb

360 kb

320 kb

180 kb

160 kb

96tpi

135tpi

96tpi

48tpi

ds/dd

ss/dd

512

.02 IRS/MCC encourages trustees to

use blank or currently formatted diskettes when preparing files. If extraneous data follows the ‘‘C’’ Record, the

file must be returned for replacement.

.03 IRS/MCC prefers that 5 1/4- and

3 1/2-inch diskettes be created using MS/

DOS; however, diskettes created using

other operating systems may be acceptable. 3 1/2-inch diskettes created on a

System 36 or AS400 are not acceptable. IRS/MCC has equipment that can

convert diskettes created under virtually

any operating system to the appropriate

MS/DOS format.

.04 Trustees are encouraged to use

high density diskettes. Low density diskettes are acceptable but must be formatted in low density.

Sec. 5. Data Sequence

Specifications

.01 In order to be acceptable, records

within the file must be in the following

sequence:

(a) A Trustee ‘‘A’’ Record

(b) Account Holder ‘‘B’’ Records

.02 If you are filing for more than

one trustee, each trustee must be reported on a separate tape, tape cartridge,

or diskette.

Sec. 6. The Trustee ‘‘A’’ Record-General Field Descriptions and Record Layout

.01 This record identifies the entity preparing and transmitting the file. The first record of a file MUST be a Trustee ‘‘A’’

Record, (preceded only by header labels, if any), and must appear on each tape and cartridge. Otherwise, the file will be

returned for replacement. The ‘‘A’’ Record is a fixed length of 150 positions.

Record Name: Trustee ‘‘A’’ Record

Positions

Field Title

Length

Description and Remarks

Record Type

Required. Enter ‘‘A’’

2–10

Trustee TIN

Required. Enter the Taxpayer Identification Number (TIN), either

the Employer Identification Number (EIN) or the Social Security

Number (SSN) of the Trustee.

11–50

Trustee Name

Required. Enter the trustee’s name. Abbreviate if necessary to fit

40-character limit. Omit punctuation if possible. Left-justify and

blank fill.

51–90

Trustee Address

Required. Enter mailing address of the trustee. Street address

should include number, street, apartment or suite number (or P.O.

Box if mail is not delivered to street address). Abbreviate as

needed to fit 40-character limit. Omit punctuation if possible. Leftjustify and blank fill.

91–119

Trustee City

Required. Enter the city or town of trustee. If applicable, enter

APO or FPO only. Left-justify and blank fill.

120–121

Trustee State

Required. Enter two- letter Post Office Code as shown in the list

below ONLY. Do NOT spell out the state name.

State

Code

State

Code

State

Code

Alabama

Alaska

Arizona

Arkansas

California

Colorado

Connecticut

Delaware

District of

Columbia

Florida

Georgia

Hawaii

Idaho

Illinois

Indiana

Iowa

Kansas

Kentucky

Louisiana

Maine

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Hampshire

New Jersey

New Mexico

New York

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Pennsylvania

Rhode Island

South Carolina

South Dakota

Tennessee

Texas

Utah

Vermont

Virginia

Washington

West Virginia

Wisconsin

Wyoming

American Samoa

Federated States

of Micronesia

Guam

Northern Mariana

Islands

Marshall Islands

Palau

Puerto Rico

Virgin Islands

NOTE: When reporting APO/FPO addresses use the following format:

Example:

Name

Street Address

City

*State

ZIP Code

PVT Willard J. Doe

Company F, PSC Box 100

APO (or FPO)

AE, AA, or AP

098010100

*AE is the designation for ZIPs beginning with 090–098, AA for ZIP 340, and AP for ZIPs 962–966.

Record Name: Trustee ‘‘A’’ Record-continued

Positions

Field Title

Length

Description and Remarks

122–130

Trustee ZIP Code

Required. Enter the ZIP code of the trustee for all U.S. addresses,

U.S. territories or possessions, APO/FPO addresses. For trustees

using a five-digit ZIP code, enter the ZIP code in the left-most five

positions and zero fill the remaining four positions. For trustees

outside the U.S., enter nine zeros only. Do NOT blank fill.

131–135

Transmitter Control Code

Required. Enter your five-digit Transmitter (TCC) Control Code,

‘‘MSA01.’’ This is the TCC assigned to all filers who report

Form(s) 8851 magnetically/electronically.

136

Report Period

Required. Identify the tax period for which the Form 8851 is being filed by entering the appropriate indicator from the list below:

Tax period

Indicator

April 30, 1997

June 30, 1997

June 30, 1998

June 30, 1999

137–148

Blanks

Enter Blanks.

149–150

Blanks or Carriage

Return/Line Feed (cr/lf)

Enter blanks or Carriage Return/ Line Feed(cr/lf).

Trustee ‘‘A’’ Record Layout

Record Type ‘‘A’’

Trustee TIN

Trustee Name

Trustee Address

Trustee City

2–10

11–50

51–90

91–119

Trustee State

Trustee ZIP Code

Transmitter Control

Code (TCC)

‘‘MSA01’’

120–121

122–130

131–135

Report Period

Blanks

Blanks or Carriage

Return/

Line Feed

136

137–148

149–150

Sec. 7. Account Holder ‘‘B’’ Record-General Field Descriptions and Record Layout

.01 The ‘‘B’’ record contains the account holder information. The format of the ‘‘B’’ record will remain constant and is a

fixed length of 150 positions.

Record Name: Account Holder ‘‘B’’ Record

Positions

Field Title

Length

Description and Remarks

Record Type

Required. Enter ‘‘B.’’

2–10

Account Holder’s Identification Number (TIN)

Required. Enter the nine-digit Taxpayer Identification Number

(TIN) (EIN or SSN) of the Account Holder. Do NOT enter blanks,

hyphens, or alpha characters. A TIN consisting of all the same digit

(e.g., 111111111) is not acceptable.

11–50

Account Holder Name

Required. Enter the name of the account holder. Abbreviate as

needed. Left justify and blank fill.

Record Name: Account Holder ‘‘B’’ Record

Positions

Field Title

Length

Description and Remarks

Previously Uninsured

Indicator

Required. Enter a code from the list below to indicate whether or

not the account holder was previously uninsured. For a definition

of ‘‘Previously Uninsured’’, please see Form 8851.

Condition

Code

Previously uninsured

Previously insured

Excludable Indicator

Required. Enter a code from the list below to indicate whether the

account holder is excludable. For a definition see Form 8851.

Condition

Code

Excludable

Not excludable

53–148

Blanks

Enter blanks.

149–150

Blank or Carriage Return/

Line Feed

Enter blanks or carriage return/ line feed (CR/LF).

Account Holder ‘‘B’’ Record Layout

Record Type ‘‘B’’

Account Holder TIN

Account Holder Name

Previously Uninsured

Indicator

2–10

11–50

Excludable Indicator

Blanks

Blanks or Carriage Return/ Line Feed

53–148

149–150

Sec. 8. The Control Total ‘‘C’’ Record-General Field Descriptions and Record Layout

.01 Enter a ‘‘C’’ Record after the last ‘‘B’’ Record submitted for a particular Trustee ‘‘A’’ Record. The ‘‘C’’ Record serves as

a summary of the preceding ‘‘B’’ Records’ data, and enables IRS to cross check the correctness of information received.

.02 A ‘‘C’’ Record may only be followed by ‘‘B’’ Records reported for a trustee, or by a tape mark and/or trailer label when

more reels follow this reel. The ‘‘C’’ Record can be the last record on the file.

.03 Each ‘‘C’’ Record has a fixed length of 150 positions.

.04 If the field is not applicable, allow for the field by entering blanks or zeros as instructed.

Record Name: Control Total ‘‘C’’ Record

Positions

Field Title

Length

Description and Remarks

Record Type

Required. Enter ‘‘C.’’

2–7

Number of Account

Holders

Required. Enter the total number of account holders being reported. Right justify and zero fill.

8–13

Previously Uninsured

Enter the total number of account holders that were previously uninsured. Right justify and zero fill.

14–19

Excludable

Enter the total number of excludable account holders being reported. Right justify and zero fill.

20–148

Blanks

149–150

Blank or Carriage Return/

Line Feed

129

Enter blanks.

Enter blanks or carriage return/line feed (CR/LF).

‘‘C’’ Record Layout

Record Type ‘‘C’’

Number of Account Holders

Previously Uninsured

Excludable

2–7

8–13

14–19

Blanks

Blanks or Carriage Return/Line Feed (CR/LF)

20–148

149–150

Part C. Asynchronous (IRP-BBS)

Electronic Filing Specifications

Sec. 1. General

.01 Asynchronous electronic filing of

Form(s) 8851 is offered as an alternative

to magnetic media (tape, tape cartridge,

or diskette) or paper filing, but is not a

requirement. Electronic filing using the

Information Reporting Program Bulletin

Board System (IRP-BBS) will fulfill the

magnetic media requirements for those

filers who are required to file magnetically. It may also be used by those payers

who are under the filing threshold requirement, but would prefer to file their

information returns this way. If the original file was sent magnetically, but was

returned for replacement, the replacement

may be transmitted electronically.

.02 The electronic filing of information returns is not affiliated with the

Form 1040 electronic filing program.

These two programs are totally independent, and filers must obtain separate

approval to participate in each of them.

All inquiries concerning the electronic

filing of information returns should be

directed to IRS/MCC. IRS/MCC personnel cannot answer questions or assist

taxpayers in the filing of Form 1040 tax

returns. Filers with questions of this

nature will be directed to the Taxpayer

Service toll-free number (1–800–829–

1040) for assistance.

.03 Filers participating in the electronic filing program for Form(s) 8851

will submit their returns to IRS/MCC by

way of modems and not through magnetic media or paper filing.

.04 The formats of the ‘‘A,’’ ‘‘B,’’

and ‘‘C’’ Records are the same for

electronically filed records as they are

for 5 1/4- and 3 1/2-inch diskettes,

tapes, and tape cartridges. For electronically filed documents, each transmission

is considered a separate file.

Sec. 2. Electronic Filing Approval

Procedure

.01 Filers must send a Form 8851 to

IRS/MCC prior to filing their Form(s)

8851 electronically. Only trustee information should be provided on the Form

8851 when filing electronically. Please

annotate the Form 8851 with ‘‘Electronic Filing’’ to indicate the method of

filing. The Form 8851 may also be

faxed to IRS/MCC in order to expedite

electronic processing. The fax number is

(304) 264–5602.

.02 With all passwords, it is the user’s responsibility to remember the pass-

word and not allow the password to be

compromised. However, if filers do forget their password, call (304) 263–8700

for assistance. Note: Passwords on the

IRP-BBS are case sensitive.

Sec. 3. Electronic Submissions

.01 Electronically filed information

may be submitted to IRS/MCC 24 hours

a day, 7 days a week. Technical assistance will be available Monday through

Friday between 8:30 a.m. and 4:30 p.m.,

Eastern Time by calling (304) 263–8700.

.02 Filers may submit as many documents as they choose electronically. Filers are allowed 240 minutes a day;

however, more time may be requested if

needed.

.03 Data compression is encouraged

when submitting information returns by

way of the IRP-BBS. MCC has the

ability to decompress files created using

several popular software compression

programs such as ARC, LHARC, and

PKZIP. Software data compression can

be done alone or in conjunction with

V.42bis hardware compression. Transmission time can be reduced by as

much as 85 percent when data compression is used; therefore, it is highly

recommended.

The time required to transmit information returns electronically will vary

depending on the modem speed and the

type of data compression used, if any.

.04 Files submitted to IRP-BBS must

have a unique filename. The trustee will

be contacted after receipt of the Form

8851 indicating the desire to file electronically. It is necessary for the trustee

to record the upload date, time, and

filename. This information will be

needed by MCC in order to identify the

file if assistance is required.

Sec. 4. Transmittal Requirements

.01 If you wish to file electronically,

complete Form 8851 above line ‘‘a’’

(trustee’s information only) and send it

to:

If by Postal Service:

Internal Revenue Service

P.O. Box 879, MS360

Kearneysville, WV 25430

If by truck or air freight:

IRS-Martinsburg Computing Center

ATTN: Electronic Filing Coordinator

Route 9 and Needy Road, MS366

Martinsburg, WV 25401

When the form is received, you will

be contacted by the Electronic Filing

Coordinator with instructions on how to

transmit your file. No return is considered filed until a Form 8851 is received

by IRS/MCC.

.02 Form 8851 can be ordered by

calling the IRS toll free forms and

publication order number 1–800–TAX–

FORM, (1–800–829–3676). The form

may also be obtained from the Internet

Http://WWW.IRS.USTREAS.GOVT.

The form may be computer-generated;

however, all of the trustee information

requested on the original form must be

on the computer-generated form.

.03 If you are submitting files for

more than one trustee, you must send a

separate Form 8851 for each trustee.

Each trustees’ information must be submitted in a separate transmission.

Sec. 5. Information Reporting

Program Bulletin Board System

(IRP-BBS) Specifications

.01 The IRP-BBS is an electronic

bulletin board system available to filers

of information returns. In addition to

filing information returns electronically,

the IRP-BBS provides other capabilities.

Some of the advantages of IRP-BBS are

as follows:

(1) Immediate access to the latest

changes and updates that affect

the Information Reporting Program at IRS/MCC (program,

legislative, etc.).

(2) Access to publications, such as

the Publication 1220, as soon

as they are available.

(3) Capability to communicate with

IRS/MCC personnel.

(4) Ability to retrieve information

and files applicable to the IRPBBS.

.02 The IRP-BBS is available for

public use and accessible using various

personal computer communications

equipment. A TCC is not needed to

access those portions of the IRP-BBS

that contain forms and publications or to

leave questions or messages for IRS/

MCC personnel.

.03 Contact the IRP-BBS by dialing

(304) 264–7070. The communication

software settings for IRP-BBS are:

- No parity

- Eight data bits

- One stop bit

- Full duplex

The communication software should be

set up to use the fastest speed allowed

by the filer’s modem.

.04 Due to the large number of communication products available, it is impossible to provide specific information

on a particular software package or

hardware configuration. Filers should

contact their software or hardware supplier for assistance.

.05 IRP-BBS software provides a

menu-driven environment allowing access to different parts of IRP-BBS.

Whenever possible, IRS/MCC personnel

will provide assistance in resolving any

communication problems with IRP-BBS.

.06 IRP-BBS can be accessed at

speeds from 1200 to 28,800 bps. The

speed is automatically negotiated for

connection at the speed of the calling

modem. The communication standards

supported include Industry Standard

212A, V.22bis, V.32, V.32bis, V.34, and

V.FC. Point-to-point error control is supported using the V.42 ITU-T standard or

MNP 2–4. Data compression is supported using V.42bis ITU-T standard or

MNP5.

Sec. 6. IRP-BBS First Time Logon

Procedures

.01 The following information will be

requested to set up the filer’s user

profile when logging onto the IRP-BBS

for the first time.

(A) Enter the letter, that corresponds to the filer’s terminal,

from the following:

<A> IBM PC

<B> IBM w/ANSI

<C> Atari

<D> ADM–3

<E> H19/Z19/H89

<F> Televid 925

<G> TRS–80

<H> Vidtex

<I> VT–52

<j> VT–100

<CR> if none of the above

Most PCs, clones, etc., will

select the IBM PC emulation.

Machines with color, CGA,

EGA, or VGA should select

IBM w/ANSI.

(B) Upper/lower case, line feed

needed, O (zero) nulls after

each <CR>, do you wish to

modify this? (Most users answer no.)

This is the end of the Revenue Procedure for reporting Forms 8851,

magnetically/electronically.

26 CFR 601.201: Rulings and determination letters.

(Also Part I, sections 25, 103, 143; 1.25–4T,

1.103–1, 6a.103A–2.)

Rev. Proc. 97–26

SECTION 1. PURPOSE

This revenue procedure provides

guidance concerning the United States

and area median gross income figures

that are to be used by issuers of qualified mortgage bonds, as defined in

§ 143(a) of the Internal Revenue Code,

and issuers of mortgage credit certificates, as defined in § 25(c), in computing the housing cost/income ratio described in § 143(f)(5).

SECTION 2. BACKGROUND

.01 Section 103(a) provides that, except as provided in § 103(b), gross

income does not include interest on any

state or local bond. Section 103(b)(1)

provides that § 103(a) shall not apply to

any private activity bond that is not a

‘‘qualified bond’’ within the meaning of

§ 141. Section 141(e) provides that the

term ‘‘qualified bond’’ includes any private activity bond that (1) is a qualified

mortgage bond, (2) meets the volume

cap requirements under § 146, and (3)

meets the applicable requirements under

§ 147.

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

the term ‘‘qualified mortgage bond’’

means a bond that is issued as part of a

‘‘qualified mortgage issue’’. Section

143(a)(2)(A) provides that the term

‘‘qualified mortgage issue’’ means an

issue of one or more bonds by a state or

political subdivision thereof, but only if

(i) all proceeds of the issue (exclusive

of issuance costs and a reasonably required reserve) are to be used to finance

owner-occupied residences; (ii) the issue

meets the requirements of subsections

(c), (d), (e), (f), (g), (h), (i), and (m)(7)

of § 143; (iii) the issue does not meet

the private business tests of paragraphs

(1) and (2) of § 141(b); and (iv) with

respect to amounts received more than

10 years after the date of issuance,

repayments of $250,000 or more of

principal on financing provided by the

issue are used not later than the close of

the first semi-annual period beginning

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

bonds that are part of the issue.

.03 Section 143(f) imposes eligibility

requirements concerning the maximum

income of mortgagors for whom financing may be provided by qualified mort-

gage bonds. Section 25(c)(2)(A)(iii)(IV)

provides that recipients of mortgage

credit certificates must meet the income

requirements of § 143(f). Generally, under §§ 143(f)(1) and 25(c)(2)(A)(iii)(IV), these income requirements are met

only if all owner-financing under a

qualified mortgage bond and all certified

indebtedness amounts under a mortgage

credit certificate program are provided

to mortgagors whose family income is

115 percent or less of the applicable

median

family

income.

Under

§ 143(f)(6), the income limitation is

reduced to 100 percent of the applicable

median family income if there are fewer

than three individuals in the family of

the mortgagor.

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

the term ‘‘applicable median family income’’ means the greater of (A) the area

median gross income for the area in

which the residence is located or (B) the

statewide median gross income for the

state in which the residence is located.

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

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

Under § 143(f)(5)(C), a high housing

cost area is a statistical area for which

the housing cost/income ratio is greater

than 1.2. The housing cost/income ratio

is determined under § 143(f)(5)(D) by

dividing (a) the applicable housing price

ratio by (b) the ratio that the area

median gross income bears to the median gross income for the United States.

The applicable housing price ratio is the

new housing price ratio (new housing

average purchase price for the area

divided by the new housing average

purchase price for the United States) or

the existing housing price ratio (existing

housing average area purchase price

divided by the existing housing average

purchase price for the United States),

whichever results in the housing cost/

income ratio being closer to 1. This

income adjustment applies only to bonds

issued and nonissued bond amounts

elected after December 31, 1988.

.06 The Department of Housing and

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

United States, the states, and statistical

areas within the states. The income

information was released to the HUD

regional offices on December 27, 1996,

and may be obtained by calling the

HUD reference service at 1–800–245–

2691, or, in the Washington, D.C., area,

at 301–251–5154. The Internal Revenue

Service annually publishes only the median gross income for the United States.

.07 The most recent nationwide average purchase prices and average area

purchase price safe harbor limitations

were published on September 6, 1994,

in Rev. Proc. 94–55, 1994–2 C.B. 716.

SECTION 3. APPLICATION

.01 When computing the housing

cost/income ratio under § 143(f)(5), issuers of qualified mortgage bonds and

mortgage credit certificates must use

$43,500 as the median gross income for

the United States. See section 2.06 of

this revenue procedure.

.02 When computing the housing

cost/income ratio under § 143(f)(5), issuers of qualified mortgage bonds and

mortgage credit certificates must use the

area median gross income figures released by HUD on December 27, 1996.

See section 2.06 of this revenue procedure.

SECTION 4. EFFECT ON OTHER

REVENUE PROCEDURES

.01 Rev. Proc. 96–37, 1996–29 I.R.B.

16, is obsolete except as provided in

section 5.02 of this revenue procedure.

.02 This revenue procedure does not

affect the effective date provisions of

Rev. Rul. 86–124, 1986–2 C.B. 27.

Those effective date provisions will remain operative at least until the Service

publishes a new revenue ruling that

conforms the approach to effective dates

set forth in Rev. Rul. 86–124 to the

general approach taken in this revenue

procedure.

in the period that begins on December

27, 1996, the date HUD released the

income figures, and ends on the date

when these United States and area median gross income figures are rendered

obsolete by a new revenue procedure.

.02 Notwithstanding section 5.01 of

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

area median gross income figures specified in Rev. Proc. 96–37 with respect to

bonds originally sold and nonissued

bond amounts elected not later than

May 28, 1997, if the commitments or

purchases described in section 5.01 are

made not later than July 28, 1997.

SECTION 5. EFFECTIVE DATES

DRAFTING INFORMATION

.01 Issuers must use the United States

and area median gross income figures

specified in section 3 of this revenue

procedure for commitments to provide

financing that are made, or (if the

purchase precedes the financing commitment) for residences that are purchased,

The principal author of this revenue

procedure is Patricia M. Monahan of the

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

further information regarding this revenue procedure contact Ms. Monahan on

(202) 622–4122 (not a toll-free call).

Part IV. Items of General Interest

Employee Plans; Examination

Guidelines

Announcement 97–42

FOR FURTHER INFORMATION CONTACT: Mark D. Harris, (202) 622–3050

(not a toll-free number).

SUPPLEMENTARY INFORMATION:

The Internal Revenue Service has

developed proposed examination guidelines for employee plans examiners to

use when examining Simplified Employee Plans (SEPs). The guidelines

provide technical background and guidance as to issues that should be considered during an examination. The guidelines are not intended to be all inclusive,

and may be modified based on specific

issues encountered by the examiners

during the examination.

As with earlier examination guidelines, the Service is seeking public comments with respect to the proposed

examination guidelines pertaining to

Simplified Employee Plans before the

guidelines are finalized in the Internal

Revenue Manual.

A copy of the proposed examination

guidelines for Simplified Employee

Plans may be obtained by submitting a

written request to the Internal Revenue

Service: Assistant Commissioner (Employee Plans and Exempt Organizations), CP:E:EP:FC, 1111 Constitution

Avenue NW, Washington, DC 20224.

Written comments on the guidelines pertaining to Simplified Employee Plans

may be submitted on or before July 28,

1997, to the Internal Revenue Service,

Attention: Assistant Commissioner (Employee Plans and Exempt Organizations), CP:E:EP:FC, 1111 Constitution

Avenue, NW, Washington, DC 20224.

Simplification of Entity

Classification Rules; Correction

Announcement 97–43

AGENCY: Internal Revenue Service,

Treasury.

Background

The final regulations that are subject

to these corrections are under section

7701 of the Internal Revenue Code.

Need for Correction

As published, the final regulations

(T.D. 8697) contain errors which may

prove to be misleading and are in need

of clarification.

Correction of Publication

Accordingly, the publication of the

final regulations (T.D. 8697) which are

the subject of FR Doc. 96–31997 is

corrected as follows:

§ 301.7701–3 [Corrected]

1. On page 66592, column 1,

§ 301.7701–3, paragraph (c)(1)(vi), Example 1, line 11 from the bottom of the

paragraph, the language ‘‘by September

13, 1998. See paragraph’’ is corrected to

read ‘‘by September 14, 1998. See paragraph’’.

2. On page 66592, column 1,

§ 301.7701–3, paragraph (c)(1)(vi), Example 1, line 7 from the bottom of the

paragraph, the language ‘‘Form 8832

after September 13, 1998, it will’’ is

corrected to read ‘‘Form 8832 after

September 14, 1998, it will’’.

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on

March 12, 1997, 8:45 a.m., and published in the

issue of the Federal Register for March 13, 1997,

62 F.R. 11769)

ACTION: Correction to the final regulations.

Basis Reduction Due To Discharge

of Indebtedness; Hearing

SUMMARY: This document contains

corrections to the final regulations (T.D.

8697 [1997–2 I.R.B. 11]) which were

published in the Federal Register on

Wednesday, December 18, 1996 (61 FR

66584). The final regulations relate to

the classification of business organizations.

Announcement 97–44

EFFECTIVE DATE: January 1, 1997.

AGENCY: Internal Revenue Service,

Treasury.

ACTION: Proposed rule; change of date

and location of public hearing.

SUMMARY: This document changes

the date and location of the public

hearing on the notice of proposed

rulemaking relating to basis reduction

due to discharge of indebtedness under

sections 108 and 1017 of the Internal

Revenue Code of 1986.

DATES: The public hearing is being

held on Thursday, May 29, 1997, beginning at 10 a.m. Requests to speak and

outlines of oral comments must be received by April 3, 1997.

ADDRESSES: The public hearing originally scheduled in the IRS Auditorium,

Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC is

changed to the Commissioner’s Conference Room, room 3313, Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

FOR FURTHER INFORMATION

CONTACT: Evangelista Lee of the

Regulations Unit, Assistant Chief Counsel (Corporate), (202) 622–7180 (not a

toll-free number).

SUPPLEMENTARY INFORMATION:

A notice of proposed rulemaking and

notice of public hearing appearing in the

Federal Register on Tuesday, January

7, 1997, (62 FR 955 [REG–208172–91,

1997–10 I.R.B. 59]) announced that a

public hearing on proposed regulations

relating to the basis reduction due to

discharge of indebtedness under sections

108 and 1017 would be held on Thursday, April 24, 1997, beginning at 10

a.m. in the IRS Auditorium, Internal

Revenue Building, 1111 Constitution

Avenue, NW, Washington, DC and that

requests to speak and outlines of oral

comments should be received by Thursday, April 3, 1997.

The date and location of the public

hearing has changed. The hearing is

scheduled for Thursday, May 29, 1997,

beginning at 10 a.m. in the Commissioner’s Conference Room, room 3313,

Internal Revenue Building, 1111 Constitution Avenue, NW, Washington, DC.

We must receive requests to speak and

outlines of oral comments by Thursday,

April 3, 1997. Because of the controlled

access restrictions, attenders are not admitted beyond the lobby of the Internal

Revenue Building until 9:45 a.m.

The Service will prepare an agenda

showing the scheduling of the speakers

after the outlines are received from the

1997–17 I.R.B.

persons testifying and make copies

available free of charge at the hearing.

Cynthia E. Grigsby,

Chief, Regulations Unit,

Assistant Chief Counsel (Corporate).

(Filed by the Office of the Federal Register on

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

issue of the Federal Register for March 17, 1997,

62 F.R. 12582)

1997–17 I.R.B.

Stock Options Contributed to a Plan

Announcement 97–45

On December 24, 1996, the Internal

Revenue Service issued P.L.R. 9712033

which concerned the federal income tax

(including unrelated business income

tax) and federal excise tax consequences

of the contribution of certain stock options to a qualified plan and the subse-

quent exercise of those stock options to

be used in the purchase of the common

stock of the employer maintaining the

plan.

The Service is reexamining the plan

qualification and other tax issues under

the Internal Revenue Code of 1986, as

amended, raised by a contribution of

stock options to a plan and subsequent

exercise of those options.

Announcement of the Expedited Suspension of Attorneys, Certified Public

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

Internal Revenue Service

Under title 31 of the Code of Federal

Regulations, section 10.76, the Director

of Practice is authorized to immediately

suspend from practice before the Internal Revenue Service any practitioner

who, within five years, from the date

the expedited proceeding is instituted,

(1) has had a license to practice as an

attorney, certified public accountant, or

actuary suspended or revoked for cause;

or (2) has been convicted of any crime

under title 26 of the United States Code

or, of a felony under title 18 of the

United States Code involving dishonesty

or breach of trust.

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

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

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

or suspended from practice before the

Internal Revenue Service.

To enable attorneys, certified public

accountants, enrolled agents, and enrolled actuaries to identify practitioners

under expedited suspension from practice before the Internal Revenue Service,

the Director of Practice will announce in

the Internal Revenue Bulletin the names

and addresses of practitioners who have

been suspended from such practice, their

designation as attorney, certified public

accountant, enrolled agent, or enrolled

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

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

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

many weeks as is practicable for each

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

suspended and will be consolidated and

published in the Cumulative Bulletin.

The following individuals have been

placed under suspension from practice

before the Internal Revenue Service by

virtue of the expedited proceeding provisions of the applicable regulations:

Name

Address

Designation

Date of Suspension

Loberg, Thomas

Rose Ann Galati

Labendeira, Anthony

St. Paul, MN

Thousand Oaks, CA

Fresno, CA

CPA

Indefinite from November 13, 1996

Indefinite from November 25, 1996

Nation, D. Mark

Behren, Daryl D.

Murphy, Virginia T.

Albuquerque, NM

Visalia, CA

Laurinburg, NC

CPA

Indefinite from November 25, 1996

Best III, James M.

Rehm, Aysha

Dineen, Lee M.

Miele, Ralph J.

Monroe, NC

Tulsa, OK

Castle Hayne, NC

North Babylon, NY

CPA

Indefinite from November 25, 1996

Indefinite from December 12, 1996

Indefinite from February 14, 1997

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as ‘‘rulings’’)

that have an effect on previous rulings

use the following defined terms to describe the effect:

Amplified describes a situation where

no change is being made in a prior

published position, but the prior position

is being extended to apply to a variation

of the fact situation set forth therein.

Thus, if an earlier ruling held that a

principle applied to A, and the new

ruling holds that the same principle also

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

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

to B, and the new ruling holds that it

applies to both A and B, the prior ruling

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

and clarified, above).

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

used in a ruling that lists previously

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

A ruling may also be obsoleted because

the substance has been included in regulations subsequently adopted.

Revoked describes situations where

the position in the previously published

ruling is not correct and the correct

position is being stated in the new

ruling.

Superseded describes a situation

where the new ruling does nothing more

than restate the substance and situation

of a previously published ruling (or

rulings). Thus, the term is used to

republish under the 1986 Code and

regulations the same position published

under the 1939 Code and regulations.

The term is also used when it is desired

to republish in a single ruling a series of

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

separate rulings. If the new ruling does

more than restate the substance of a

prior ruling, a combination of terms is

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

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

continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names

of countries, is published in a ruling and

that list is expanded by adding further

names in subsequent rulings. After the

original ruling has been supplemented

several times, a new ruling may be

published that includes the list in the

original ruling and the additions, and

supersedes all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

PHC—Personal Holding Company.

PO—Possession of the U.S.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign Corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

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

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

M—Minor.

U.S.C.—United States Code.

Nonacq.—Nonacquiescence.

X—Corporation.

O—Organization.

Y—Corporation.

P—Parent Corporation.

Z—Corporation.

The following abbreviations in current use and

formerly used will appear in material published in

the Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C.—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Numerical Finding List1

Notices—Continued

Revenue Rulings—Continued

Bulletin 1997–1 through 1997–16

97–24, 1997–16 I.R.B. 6

97–25, 1997–16 I.R.B. 8

Announcements:

Proposed Regulations:

97–1, 1997–2 I.R.B. 63

97–2, 1997–2 I.R.B. 63

97–3, 1997–2 I.R.B. 63

97–4, 1997–3 I.R.B. 14

97–5, 1997–3 I.R.B. 15

97–6, 1997–4 I.R.B. 11

97–7, 1997–4 I.R.B. 12

97–8, 1997–4 I.R.B. 12

97–9, 1997–5 I.R.B. 27

97–10, 1997–10 I.R.B. 64

97–11, 1997–6 I.R.B. 19

97–12, 1997–7 I.R.B. 55

97–13, 1997–8 I.R.B. 38

97–14, 1997–8 I.R.B. 38

97–15, 1997–9 I.R.B. 23

97–16, 1997–9 I.R.B. 23

97–17, 1997–9 I.R.B. 23

97–18, 1997–10 I.R.B. 67

97–19, 1997–10 I.R.B. 68

97–20, 1997–11 I.R.B. 22

97–21, 1997–11 I.R.B. 23

97–22, 1997–12 I.R.B. 47

97–23, 1997–11 I.R.B. 23

97–24, 1997–11 I.R.B. 24

97–25, 1997–12 I.R.B. 47

97–26, 1997–12 I.R.B. 48

97–27, 1997–13 I.R.B. 30

97–28, 1997–14 I.R.B. 15

97–29, 1997–14 I.R.B. 16

97–30, 1997–14 I.R.B. 16

97–31, 1997–14 I.R.B. 16

97–32, 1997–14 I.R.B. 17

97–33, 1997–15 I.R.B. 8

97–34, 1997–15 I.R.B. 8

97–35, 1997–15 I.R.B. 9

97–36, 1997–15 I.R.B. 10

97–37, 1997–15 I.R.B. 10

97–38, 1997–15 I.R.B. 10

97–39, 1997–16 I.R.B. 27

97–40, 1997–16 I.R.B. 28

97–41, 1997–16 I.R.B. 28

REG–209332–80, 1997–14 I.R.B. 9

REG–209040–88, 1997–7 I.R.B. 34

REG–209121–89, 1997–11 I.R.B. 15

REG–208288–90, 1997–11 I.R.B. 14

REG–209494–90, 1997–8 I.R.B. 24

REG–208172–91, 1997–10 I.R.B. 59

REG–209672–93, 1997–6 I.R.B. 15

REG–209709–94 1997–13 I.R.B. 12

REG–209729–94, 1997–11 I.R.B. 19

REG–209762–95, 1997–3 I.R.B. 12

REG–209817–96, 1997–7 I.R.B. 41

REG–209824–96, 1997–11 I.R.B. 19

REG–254394–96, 1997–14 I.R.B. 14

REG–209828–96, 1997–6 I.R.B. 15

REG–209830–96, 1997–15 I.R.B. 7

REG–209834–96, 1997–4 I.R.B. 9

REG–209839–96, 1997–8 I.R.B. 26

REG–242996–96, 1997–9 I.R.B. 18

REG–246018–96, 1997–8 I.R.B. 30

REG–247678–96, 1997–6 I.R.B. 17

REG–247862–96, 1997–8 I.R.B. 32

REG–248770–96, 1997–8 I.R.B. 33

REG–249819–96, 1997–7 I.R.B. 50

REG–252231–96, 1997–7 I.R.B. 52

REG–252233–96, 1997–9 I.R.B. 19

REG–252665–96, 1997–12 I.R.B. 46

97–14, 1997–11 I.R.B. 5

97–15, 1997–12 I.R.B. 42

97–16, 1997–13 I.R.B. 4

97–17, 1997–14 I.R.B. 5

97–18, 1997–15 I.R.B. 4

Notices:

97–1, 1997–2 I.R.B. 22

97–2, 1997–2 I.R.B. 22

97–3, 1997–1 I.R.B. 8

97–4, 1997–2 I.R.B. 24

97–5, 1997–2 I.R.B. 25

97–6, 1997–2 I.R.B. 26

97–7, 1997–1 I.R.B. 8

97–8, 1997–4 I.R.B. 7

97–9, 1997–2 I.R.B. 35

97–10, 1997–2 I.R.B. 41

97–11, 1997–2 I.R.B. 50

97–12, 1997–3 I.R.B. 11

97–13, 1997–6 I.R.B. 13

97–14, 1997–8 I.R.B. 23

97–15, 1997–8 I.R.B. 23

97–16, 1997–9 I.R.B. 15

97–17, 1997–10 I.R.B. 34

97–18, 1997–10 I.R.B. 35

97–19, 1997–10 I.R.B. 40

97–20, 1997–10 I.R.B. 52

97–21, 1997–11 I.R.B. 9

97–22, 1997–13 I.R.B. 9

97–23, 1997–14 I.R.B. 8

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

97–24, 1997–16 I.R.B. 10

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

97–13, 1997–16 I.R.B. 4

A cumulative list of all Revenue Rulings,

Revenue Procedures, Treasury Decisions, etc.,

published in Internal Revenue Bulletins 1996–27

through 1996–53 will be found in Internal

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

Social Security Domestic Coverage Threshold

1997–9, I.R.B. 17

Treasury Decisions:

8688, 1997–3 I.R.B. 7

8689, 1997–3 I.R.B. 9

8690, 1997–5 I.R.B. 5

8691, 1997–5 I.R.B. 16

8692, 1997–3 I.R.B. 4

8693, 1997–6 I.R.B. 9

8694, 1997–6 I.R.B. 11

8695, 1997–4 I.R.B. 5

8696, 1997–6 I.R.B. 4

8697, 1997–2 I.R.B. 11

8698, 1997–7 I.R.B. 29

8699, 1997–6 I.R.B. 4

8700, 1997–7 I.R.B. 5

8701, 1997–7 I.R.B. 23

8702, 1997–8 I.R.B. 4

8703, 1997–8 I.R.B. 18

8704, 1997–8 I.R.B. 12

8705, 1997–8 I.R.B. 16

8706, 1997–9 I.R.B. 11

8707, 1997–7 I.R.B. 17

8708, 1997–10 I.R.B. 14

8709, 1997–9 I.R.B. 5

8710, 1997–13 I.R.B. 4

8711, 1997–12 I.R.B. 35

8712, 1997–12 I.R.B. 4

8713, 1997–14 I.R.B. 4

8714, 1997–15 I.R.B. 5

Finding List of Current Action on

Previously Published Items1

Bulletin 1997–1 through 1997–16

*Denotes entry since last publication

Revenue Procedures:

66–3

Modified by

97–11, 1997–6 I.R.B. 13

87–21

Modified by

97–11, 1997–6 I.R.B. 13

92–20

Modified by

97–1, 1997–1 I.R.B. 11

92–20

Modified by

97–10, 1997–2 I.R.B. 59

92–90

Superseded by

97–1, 1997–1 I.R.B. 11

94–52

Revoked by

97–11, 1997–6 I.R.B. 13

96–1

Superseded by

97–1, 1997–1 I.R.B. 11

96–2

Superseded by

97–2, 1997–1 I.R.B. 64

Revenue Rulings—Continued

72–527

Obsoleted by

8704, 1997–8 I.R.B. 12

74–59

Revoked by

8708, 1997–10 I.R.B. 14

92–19

Supplemented in part by

97–2, 1997–2 I.R.B. 7

96–12

Superseded by

97–3, 1997–1 I.R.B. 84

96–13

Modified by

97–1, 1997–1 I.R.B. 11

96–22

Superseded by

97–3, 1997–1 I.R.B. 84

96–34

Superseded by

97–3, 1997–1 I.R.B. 84

96–39

Superseded by

97–3, 1997–1 I.R.B. 84

96–43

Superseded by

97–3, 1997–1 I.R.B. 84

96–56

Superseded by

97–3, 1997–1 I.R.B. 84

96–3

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

96–24

96–24A

Superseded by

97–24, 1997–16 I.R.B. 10

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

A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

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

1997.

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