Bulletin No. 1998–22

Internal Revenue

bulletin

Bulletin No. 1998–22

June 1, 1998

HIGHLIGHTS

OF THIS ISSUE

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

INCOME TAX

Rev. Rul. 98–27, page 4.

Spin-off of subsidiary, followed by its merger with unrelated corporation. Based on the enactment of section

1012 of the Taxpayer Relief Act of 1997, the Service will not

apply Court Holding (or any formulation of the step transaction doctrine) to determine whether the distributed corporation was a controlled corporation immediately before the distribution under section 355(a) solely because of any

postdistribution acquisition or restructuring of the distributed

corporation, whether prearranged or not. Rev. Ruls. 96–30

and 75–406 obsoleted. Rev. Rul. 70–225 modified.

Rev. Rul. 98–28, page 5.

Federal rates; adjusted federal rates; adjusted federal long-term rate, and the long-term exempt rate.

For purposes of sections 1274, 1288, 382, and other sections of the Code, tables set forth the rates for June 1998.

EMPLOYEE PLANS

Notice 98–29, page 8.

Qualified plans; plan amendments. The Service is requesting comments from the public regarding several approaches under which exceptions under section 411(d)(6) of

the Code for certain optional forms of benefit could be provided for defined contribution plans. The Service also requests comments regarding possible section 411(d)(6) relief

for defined benefit plans.

Notice 98–32, page 23.

Weighted average interest rate update. Guidelines are

set forth for determining for May 1998, the weighted aver-

age interest rate and the resulting permissible range of interest rates used to calculate current liability for purposes

of the full funding limitation of section 412(c)(7) of the Code

as amended by the Omnibus Budget Reconciliation Act of

1987 and by the Uruguay Round Agreements Act (GATT).

EXEMPT ORGANIZATIONS

Announcement 98–44, page 24.

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

ADMINISTRATIVE

Notice 98–30, page 9.

Electronic funds transfer; failure to deposit penalty.

This notice provides guidance relating to the waiver of the

failure to deposit penalty under section 6656 of the Code

for certain taxpayers first required to make federal tax deposits by electronic funds transfer beginning on or after

July 1, 1997.

Notice 98–31, page 10.

Methods of accounting; involuntary changes. The Service is requesting comments on a proposed revenue procedure that, when finalized, will provide the procedures under

sections 446(b) of the Code and section 1.446–1(b) of the

regulations for changes in method of accounting initiated by

the Service, and the procedures that the Service will use for

accounting method issues raised and resolved by the Service on a nonaccounting-method-change basis.

Finding Lists begin on page 31.

Announcement of the Consent Voluntary Suspension of Attorneys, Certified Public Accounts, Enrolled Agents, etc., begins on

page 27.

Announcement of the Expedited Suspension of Attorneys, Certified Public Accountants, Enrolled Agents, and Enrolled

Actuaries from Practice before the Internal Revenue Service begins on page 28.

Index for January-May begins on page 33.

Department of the Treasury

Internal Revenue Service

Mission of the Service

ucts and services; and perform in a manner warranting

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

The purpose of the Internal Revenue Service is to collect

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

the public by continually improving the quality of our prod-

Statement of Principles

of Internal Revenue

Tax Administration

The Service also has the responsibility of applying and

administering the law in a reasonable, practical manner.

Issues should only be raised by examining officers when

they have merit, never arbitrarily or for trading purposes.

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

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

adopt a position inconsistent with an established Service

position.

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

is determined by Congress.

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

policy by correctly applying the laws enacted by Congress;

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

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

neither a government nor a taxpayer point of view.

Administration should be both reasonable and vigorous. It

should be conducted with as little delay as possible and

with great courtesy and considerateness. It should never

try to overreach, and should be reasonable within the

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

should be relentless in its attack on unreal tax devices and

fraud.

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

is the responsibility of each person in the Service, charged

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

meaning of the statutory provision and not to adopt a

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

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

2

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly and may be obtained

from the Superintendent of Documents on a subscription

basis. Bulletin contents of a permanent nature are consolidated semiannually into Cumulative Bulletins, which are sold

on a single-copy basis.

dures must be considered, and Service personnel and others concerned are cautioned against reaching the same conclusions in other cases unless the facts and circumstances

are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements

of internal practices and procedures that affect the rights

and duties of taxpayers are published.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions, and Subpart B, Legislation and Related

Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to

these subjects are contained in the other Parts and Subparts. Also included in this part are Bank Secrecy Act Administrative Rulings. Bank Secrecy Act Administrative Rulings

are issued by the Department of the Treasury’s Office of the

Assistant Secretary (Enforcement).

Revenue rulings represent the conclusions of the Service on

the application of the law to the pivotal facts stated in the

revenue ruling. In those based on positions taken in rulings

to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature

are deleted to prevent unwarranted invasions of privacy and

to comply with statutory requirements.

Part IV.—Items of General Interest.

With the exception of the Notice of Proposed Rulemaking

and the disbarment and suspension list included in this part,

none of these announcements are consolidated in the Cumulative Bulletins.

Rulings and procedures reported in the Bulletin do not have

the force and effect of Treasury Department Regulations,

but they may be used as precedents. Unpublished rulings

will not be relied on, used, or cited as precedents by Service

personnel in the disposition of other cases. In applying published rulings and procedures, the effect of subsequent legislation, regulations, court decisions, rulings, and proce-

The first Bulletin for each month includes a cumulative index

for the matters published during the preceding months.

These monthly indexes are cumulated on a semiannual basis

and are published in the first Bulletin of the succeeding semiannual period, respectively.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, DC 20402.

3

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

Section 42.—Low-Income

Housing Credit

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

of June 1998. See Rev. Rul. 98–28, page 5.

Section 280G.—Golden

Parachute Payments

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

rates are set forth for the month of June 1998. See

Rev. Rul. 98–28, page 5.

Section 355.—Distribution of

Stock and Securities of a

Controlled Corporation

26 CFR 1.355–2: Limitations.

(Also § 7805; 301.7805–1.)

Spin-off of subsidiary, followed by its

merger with unrelated corporation.

Based on the enactment of section 1012

of the Taxpayer Relief Act of 1997, the

Service will not apply Court Holding (or

any formulation of the step transaction

doctrine) to determine whether the distributed corporation was a controlled corporation immediately before the distribution under section 355(a) solely because

of any postdistribution acquisition or restructuring of the distributed corporation,

whether prearranged or not. Rev. Ruls.

96–30, 1996–1 C.B. 36, and 75–406,

1975–2 C.B. 125, obsoleted. Rev. Rul.

70–225, 1970–1 C.B. 80, modified.

Rev. Rul. 98–27

PURPOSE

This revenue ruling obsoletes Rev.

Ruls. 96–30, 1996–1 C.B. 36, and 75–

406, 1975–2 C.B. 125, modified by Rev.

Rul. 96–30. This revenue ruling also

modifies Rev. Rul. 70–225, 1970–1 C.B.

80.

BACKGROUND

Rev. Rul. 96–30 applies the principles

of Commissioner v. Court Holding Co.,

324 U.S. 331 (1945), to a distribution of

controlled corporation stock by a publicly

traded parent, followed by a merger of the

June 1, 1998

controlled corporation into an unrelated

acquiring corporation. The former shareholders of the controlled corporation receive a 25 percent interest in the acquiring

corporation. Based on all the facts and circumstances, the ruling concludes that the

transaction satisfies the requirements of §

355 of the Internal Revenue Code. Rev.

Rul. 96–30 also modifies the factually

similar Rev. Rul. 75–406 by eliminating

the implication that an independent, postdistribution shareholder vote to approve

the acquisition of a controlled corporation

is, by itself, enough to prevent application

of the step transaction doctrine.

Section 1012(c) of the Taxpayer Relief

Act of 1997 (the “Act”), Pub. L. No.

105–34, 111 Stat. 788, 916–17, amended

the control requirements of §§ 351 and

368(a)(1)(D) to provide that, generally for

transactions seeking qualification after

August 5, 1997 under either provision and

§ 355, the shareholders of the distributing

corporation must own stock possessing

more than 50 percent of the voting power

and more than 50 percent of the total

value of the controlled corporation’s stock

immediately after the distribution. Sections 351(c) and 368(a)(2)(H). In addition, § 1012(a) of the Act amended § 355

by adding subsection (e), which provides

rules for the recognition of gain on certain

distributions of stock or securities of a

controlled corporation in connection with

acquisitions of stock representing a 50

percent or greater interest in the distributing corporation or any controlled corporation. Section 1012(a) of the Act generally

applies to distributions after April 16,

1997, pursuant to a plan (or series of related transactions) that involves an acquisition described in § 355(e)(2)(A)(ii) occurring after such date.

The Conference Report accompanying

the legislation states, in part, that:

The House bill does not change the present-law

requirement under section 355 that the distributing

corporation must distribute 80 percent of the voting

power and 80 percent of each other class of stock of

the controlled corporation. It is expected that this

requirement will be applied by the Internal Revenue

Service taking account of the provisions of the proposal regarding plans that permit certain types of

planned restructuring of the distributing corporation

following the distribution, and to treat similar restructurings of the controlled corporation in a similar manner. Thus, the 80-percent control require-

4

ment is expected to be administered in a manner that

would prevent the tax-free spin-off of a less-than80-percent controlled subsidiary, but would not generally impose additional restrictions on post-distribution restructurings of the controlled corporation if

such restrictions would not apply to the distributing

corporation.

H.R. Rep. No. 105–220, at 529–30

(1997).

ANALYSIS

The application of Court Holding principles to determine whether the distributed corporation was a controlled corporation immediately before the distribution

under § 355(a) imposes a restriction on

postdistribution acquisitions or restructurings of a controlled corporation that is inconsistent with § 1012 of the Act. See §

1012(c) of the Act and H.R. Rep. No.

105–220, at 529–30. Accordingly, the

Service will not apply Court Holding (or

any formulation of the step transaction

doctrine) to determine whether the distributed corporation was a controlled corporation immediately before the distribution under § 355(a) solely because of any

postdistribution acquisition or restructuring of the distributed corporation,

whether prearranged or not. In otherwise

applying the step transaction doctrine, the

Service will continue to consider all facts

and circumstances. See, e.g., Rev. Rul.

63–260, 1963–2 C.B. 147. An independent shareholder vote is only one relevant

factor to be considered.

HOLDING

Based on the enactment of § 1012 of

the Act, the Service will not apply Court

Holding (or any formulation of the step

transaction doctrine) to determine

whether the distributed corporation was a

controlled corporation immediately before the distribution under § 355(a) solely

because of any postdistribution acquisition or restructuring of the distributed corporation, whether prearranged or not.

EFFECT ON OTHER REVENUE

RULINGS

Rev. Ruls. 96–30 and 75–406 are obsoleted. Rev. Rul. 70–225 is modified to the

extent inconsistent with this revenue ruling.

1998–22 I.R.B.

EFFECTIVE DATE

Pursuant to the authority of § 7805(b),

this revenue ruling applies to distributions

after April 16, 1997. However, this revenue ruling does not apply to a distribution pursuant to a plan (or series of related

transactions) that involves an acquisition

described in § 355(e)(2)(A)(ii) if the acquisition is pursuant to an agreement that

was binding on April 16, 1997 and at all

times thereafter, described in a ruling request submitted to the Service on or before that date, or described on or before

that date in a public announcement or in a

filing with the Securities and Exchange

Commission required solely by reason of

the acquisition or restructuring. The previous sentence shall not apply to any

agreement, ruling request, or public announcement or filing unless it identifies

the acquirer of the distributed corporation.

DRAFTING INFORMATION

The principal author of this revenue

ruling is Phoebe Bennett of the Office of

Assistant Chief Counsel (Corporate). For

further information regarding this revenue

ruling, contact Ms. Bennett at (202) 6227750 or Brendan P. O’Hara at (202) 6227530 (not toll free calls).

Section 382.—Limitation on Net

Operating Loss Carryforwards

and Certain Built-In Losses

Following Ownership Change

The adjusted applicable federal long-term rate is

set forth for the month of June 1998. See Rev. Rul.

98–28, on this page.

Section 467.—Certain Payments

for the Use of Property or

Services

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

of June 1998. See Rev. Rul. 98–28, on this page.

Section 468.—Special Rules

for Mining and Solid Waste

Reclamation and Closing

Costs

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

of June 1998. See Rev. Rul. 98–28, on this page.

Section 482.—Allocation of

Income and Deductions Among

Taxpayers

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

rates are set forth for the month of June 1998. See

Rev. Rul. 98–28, on this page.

Section 483.—Interest on

Certain Deferred Payments

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

of June 1998. See Rev. Rul. 98–28, on this page.

Section 642.—Special Rules for

Credits and Deductions

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

rates are set forth for the month of June 1998. See

Rev. Rul. 98–28, on this page.

Section 412.—Minimum Funding

Standards

Section 807.—Rules for Certain

Reserves

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

of June 1998. See Rev. Rul. 98–28, on this page.

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

of June 1998. See Rev. Rul. 98–28, on this page.

1998–22 I.R.B.

5

Section 846.—Discounted

Unpaid Losses Defined

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

of June 1998. See Rev. Rul. 98–28, on this page.

Section 1274.—Determination

of Issue Price in the Case of

Certain Debt Instruments Issued

for Property

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

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

Federal rates; adjusted federal rates;

adjusted federal long-term rate, and

the long-term exempt rate. For purposes

of sections 1274, 1288, 382, and other

sections of the Code, tables set forth the

rates for June 1998.

Rev. Rul. 98–28

This revenue ruling provides various

prescribed rates for federal income tax

purposes for June 1998 (the current

month.) Table 1 contains the short-term,

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

purposes of section 1274(d) of the Internal Revenue Code. Table 2 contains the

short-term, mid-term, and long-term adjusted applicable federal rates (adjusted

AFR) for the current month for purposes

of section 1288(b). Table 3 sets forth the

adjusted federal long-term rate and the

long-term tax-exempt rate described in

section 382(f). Table 4 contains the appropriate percentages for determining the

low-income housing credit described in

section 42(b)(2) for buildings placed in

service during the current month. Finally,

Table 5 contains the federal rate for determining the present value of an annuity, an

interest for life or for a term of years, or a

remainder or a reversionary interest for

purposes of section 7520.

June 1, 1998

REV. RUL. 98–28 TABLE 1

Applicable Federal Rates (AFR) for June 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-Term

AFR

110% AFR

120% AFR

130% AFR

5.58%

6.14%

6.71%

7.28%

5.50%

6.05%

6.60%

7.15%

5.46%

6.00%

6.55%

7.09%

5.44%

5.98%

6.51%

7.05%

Mid-Term

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

5.77%

6.36%

6.95%

7.54%

8.72%

10.21%

5.69%

6.26%

6.83%

7.40%

8.54%

9.96%

5.65%

6.21%

6.77%

7.33%

8.45%

9.84%

5.62%

6.18%

6.73%

7.29%

8.39%

9.76%

Long-Term

AFR

110% AFR

120% AFR

130% AFR

6.02%

6.63%

7.25%

7.86%

5.93%

6.52%

7.12%

7.71%

5.89%

6.47%

7.06%

7.64%

5.86%

6.43%

7.02%

7.59%

REV. RUL. 98–28 TABLE 2

Adjusted AFR for June 1998

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term

adjusted AFR

3.86%

3.82%

3.80%

3.79%

Mid-term

adjusted AFR

4.43%

4.38%

4.36%

4.34%

Long-term

adjusted AFR

5.15%

5.09%

5.06%

5.04%

REV. RUL. 98–28 TABLE 3

Rates Under Section 382 for June 1998

Adjusted federal long-term rate for the current month

5.15%

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

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

5.15%

REV. RUL. 98–28 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for June 1998

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

8.38%

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

3.59%

June 1, 1998

6

1998–22 I.R.B.

REV. RUL. 98–28 TABLE 5

Rate Under Section 7520 for June 1998

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

term of years, or a remainder or reversionary interest

Section 1288.—Treatment of

Original Issue Discount on

Tax-Exempt Obligations

Section 7805.—Rules and

Regulations

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

of June 1998. See Rev. Rul. 98–28, page 5.

The revenue ruling provides that, based on the

enactment of § 1012 of the Taxpayer Relief Act of

1997, the Service will not apply Court Holding (or

any formulation of the step transaction doctrine) to

determine whether the distributed corporation was a

controlled corporation immediately before the distribution under § 355(a) solely because of any postdistribution acquisition or restructuring of the distributed corporation, whether prearranged or not. Rev.

Ruls. 96–30, 1996–1 C.B. 36, and 75–406, 1975–2

C.B. 125, obsoleted. Rev. Rul. 70–225, 1970–1 C.B.

80, modified. See Rev. Rul. 98–28, page 5.

Section 7520.—Valuation

Tables

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

of June 1998. See Rev. Rul. 98–28, page 5.

1998–22 I.R.B.

26 CFR 301.7805–1: Promulgation of regulations.

7

7.0%

Section 7872.—Treatment of

Loans with Below-Market

Interest Rates

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

of June 1998. See Rev. Rul. 98–28, page 5.

June 1, 1998

Part III. Administrative, Procedural, and Miscellaneous

Optional Forms of Benefit Under

Defined Contribution Plans

Notice 98–29

Section 411(d)(6) of the Internal Revenue Code precludes qualified retirement

plan amendments that have the effect of

eliminating optional forms of benefit and

further states, in § 411(d)(6)(B), that the

Secretary may provide exceptions to this

provision. The Internal Revenue Service

and the Treasury Department are considering further guidance exercising this authority in order to address a number of

concerns in this area. The Service and

Treasury believe that any such relief

should take into account the interests of

participants and the practical needs of employers in effectively and efficiently providing retirement benefits for their employees, including the need to adapt plans

to changing circumstances. The Service

and Treasury are inviting comments on

possible approaches before regulations

are proposed.

BACKGROUND

Section 411(d)(6) generally provides

that a plan is not treated as satisfying the

requirements of § 411 if the accrued benefit of a participant is decreased by a plan

amendment. Under § 411(d)(6)(B), a plan

amendment that eliminates an optional

form of benefit is treated as reducing accrued benefits to the extent that the

amendment applies to benefits accrued as

of the later of the adoption date or the effective date of the amendment. However,

§ 411(d)(6)(B) permits the Service and

Treasury to provide exceptions to this rule.

This authority does not extend to a plan

amendment that would have the effect of

eliminating or reducing an early retirement benefit or a retirement-type subsidy.

Regulatory exceptions to the application of § 411(d)(6)(B) to optional forms

of benefit generally have been developed

to address certain specific practical problems. For example, § 1.411(d)–4, Q&A3(b) of the Income Tax Regulations permits a transfer of a participant’s entire

nonforfeitable benefit between plans to be

made at the election of the participant,

without a requirement that the transferee

June 1, 1998

plan preserve all § 411(d)(6) protected

benefits, but only if the participant is eligible to receive an immediate distribution

and certain other conditions are satisfied.

The Service and Treasury recognize

that the accumulation of a variety of payment choices under plans may increase

the cost and complexity of plan operations. For example, an employer that initially adopted a plan form offered by a

prototype sponsor may now be using a

different prototype plan that offers a different array of distribution forms. The requirement to preserve the preexisting optional forms for benefits accrued up to the

date of change in the prototype plan may

present significant practical problems in

certain cases.

Similar issues arise where employers

merge with or acquire other businesses.

These employers often face issues of

whether to maintain separate plans, terminate one or more of the plans, or merge

the plans. If an employer chooses to

merge the plans, the resulting plan may

accumulate a wide variety of optional

forms, some of which may differ in insignificant ways or may entail special administrative costs. Because the existing

elective transfer rule of § 1.411(d)–4,

Q&A–3(b) applies only to terminated

plans and to other situations in which a

participant’s benefits have become distributable, its applicability is limited.

Furthermore, it has become easier for

individuals to duplicate the various payment choices available from qualified

plans through other means. The Unemployment Compensation Amendments of

1992 substantially expanded participants’

ability to transfer qualified plan distributions to individual retirement arrangements (IRAs) on a tax-deferred basis.

Individuals who receive single-sum distributions from qualified plans frequently

roll those distributions over directly to

IRAs, under which distributions can be

made in a wide variety of payment forms.

There are also indications that the vast

majority of participants in defined contribution plans who have a choice of options elect single-sum distributions,

which are often rolled over to IRAs.

The Service and Treasury are weighing

these considerations as they apply to vari-

8

ous circumstances and various benefit

forms, and expect to propose regulations

that would allow greater flexibility with

respect to plan payment forms.

Any § 411(d)(6) relief provided would

not provide exceptions from other requirements of the Code. For example,

any such relief would not permit a money

purchase pension plan to be amended to

eliminate any distribution form required

by §§ 401(a)(11) and 417, and would not

affect the requirements of § 401(a)(31)

(relating to direct rollovers).

POSSIBLE RELIEF FOR DEFINED

CONTRIBUTION PLANS

Under one approach being considered,

a plan amendment to a defined contribution plan would not violate § 411(d)(6)

merely because the amendment eliminated alternative forms of payment if,

after the amendment, each affected participant could elect between a single-sum

distribution form and at least one extended payment form. The extended payment form condition would be satisfied if

the plan offered at least one of the following three alternatives: (1) a single and a

joint life annuity, (2) installments payable

over a single and a joint life expectancy,

or (3) in the case of a plan that did not

previously provide for payment of benefits to the participant in any form described in (1) or (2), installments payable

over the longest installment period permitted under the plan before the amendment. Such an approach would apply to a

plan amendment eliminating or restricting

the availability of an alternative form of

payment only if the amendment did not

apply to a participant whose distribution

began before the date the amendment was

adopted or within 90 days thereafter.

In addition to comments on this approach, comments are invited on possible

variations, which might include providing

that the extended payment form condition

could be satisfied by installments for a

fixed number of years (such as five, ten,

or twenty years), or by a provision under

which a participant could elect to receive

any amount of the participant’s account

balance at any time, or not requiring an

extended payment form.

1998–22 I.R.B.

Such an approach would not permit the

elimination or restriction of other features

relating to a distribution form, including

the time of commencement, and the right

to receive payments in cash or in kind, to

receive a partial distribution, or to accelerate payments. Under such an approach,

absent other § 411(d)(6) relief, these other

features would have to be retained for

both the single-sum and extended payment forms. For example, a participant

would have to be able to receive payment

(under both the single-sum and extended

payment forms) beginning whenever payments could have begun under any alternative form of payment that has been

eliminated or restricted.

Comments are also requested on other

possible approaches, including the following approaches that some have suggested:

• Permitting amendments that eliminate optional forms of benefit with respect to which participant utilization is

demonstrably very low. This approach

would require resolution of a variety of

questions. For example, it would raise

practical issues of substantiation and

would require rules for separating and

combining optional forms of benefit (in

order to measure the utilization of any one

optional form). Other issues would include whether only utilization by retirees

or some other class of participants should

be taken into account as the basis for measurements (such as all participants retiring

within a specified period), and how such a

utilization approach might coordinate

with other § 411(d)(6) relief.

• Permitting amendments that eliminate optional forms of benefit that apply

with respect to no more than a small portion of participants’ benefits (such as

cases in which an optional form of benefit

is inapplicable to benefits attributable to

contributions made after a specific date

and the prior benefits represent no more

than a small percentage of a participant’s

total benefit).

• Permitting amendments that eliminate optional forms of benefit if the effective date of the amendment is deferred for

some period of years.

The Service and Treasury are also considering whether it would be appropriate

to develop additional relief for elective

transfers between defined contribution

plans. Such relief would apply under cer-

1998–22 I.R.B.

tain conditions, for example, where employees are transferred to a new controlled group in connection with an acquisition. This would permit employers to

allow employees of an acquired business

to elect to have their benefits transferred

between defined contribution plans, even

though the benefits may not yet be distributable. Comments are requested on this

approach and on whether the approach

should be limited to situations in which

both plans are of the same type (for example, the approach would be available if

both plans are profit-sharing plans with

qualified cash or deferred arrangements),

or whether the transferee plan should

merely be required to retain the distribution restrictions and other relevant characteristics of the transferor plan.

DEFINED BENEFIT PLANS

Defined benefit plans have special

characteristics, including benefit payment

calculation specifications and possible retirement-type subsidies (for which

§ 411(d)(6)(B) does not authorize the issuance of regulatory relief). See also S.

Rep. No. 575, 98th Cong., 2d Sess. 30

(1984) (addressing issues with respect to

elimination of optional forms of benefit).

These features are not characteristic of

defined contribution plans and provide

special protections to participants. Comments are invited on whether additional

§ 411(d)(6) relief is appropriate in the

context of defined benefit plans and, if so,

how any relief might adequately take account of the special characteristics of defined benefit plans.

COMMENTS REQUESTED

The Service and Treasury invite comments on the possible approaches described in this notice. It is anticipated that

further guidance in this area would take

the form of proposed regulations. Comments should be submitted by August 31,

1998, in writing, and should reference

Notice 98–29. Comments may be submitted by mail to—

Internal Revenue Service

P.O. Box 7604

Ben Franklin Station

Attn: CC:CORP:T:R (Notice 98–

29), Room 5226

Washington, DC 20044;

or may be hand delivered between the

hours of 8 a.m. and 5 p.m. to

9

CC:DOM:CORP:R (Notice 98–29),

Courier’s Desk, Internal Revenue Building, 1111 Constitution Avenue NW,

Washington, DC. Alternatively, comments may be submitted via the Internet

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

tax_regs/comments.html

DRAFTING INFORMATION

The principal authors of this notice are

Linda Marshall of the Office of the Associate Chief Counsel (Employee Benefits

and Exempt Organizations) and Kenneth

Conn of the Employee Plans Division.

For further information regarding this notice, please contact Ms. Marshall at (202)

622-6030 or Mr. Conn at (202) 622-6214.

These are not toll-free numbers.

Electronic Funds Transfer—

Temporary Waiver of Failure to

Deposit Penalty for Certain

Taxpayers

Notice 98–30

This notice provides guidance relating

to the waiver of penalties announced in

News Release IR–98–28, issued March

31, 1998. In IR–98–28, the Internal Revenue Service announced that it will waive

the failure to deposit penalty under § 6656

of the Internal Revenue Code for certain

taxpayers first required to make federal

tax deposits by electronic funds transfer

beginning on or after July 1, 1997.

BACKGROUND

Section 6302(h)(1)(A) provides that the

Secretary will prescribe regulations necessary for the development and implementation of an electronic funds transfer

system for the collection of depository

taxes. Section 6302(h)(2) provides a

phase-in schedule for the system.

Section 31.6302–1(h) of the Employment Taxes and Collection of Income Tax

at Source Regulations prescribes rules for

implementing an electronic funds transfer

system for the collection of depository

taxes. Under the regulation, taxpayers are

required to deposit taxes by electronic

funds transfer if the amount of their depository taxes in a specified earlier year

exceeds the applicable threshold amount.

The regulation provides that taxpayers

June 1, 1998

with more than $50,000 of federal employment tax deposits in calendar year

1995 must use electronic funds transfer to

make deposits that are due on or after July

1, 1997 and relate to return periods beginning on or after January 1, 1997. Taxpayers with more than $50,000 in employment tax deposits in calendar year 1996

must use electronic funds transfer to make

deposits of taxes relating to return periods

beginning on or after January 1, 1998. In

addition, taxpayers with no employment

tax deposits but with more than $50,000

in other federal tax deposits in either 1995

or 1996 must use electronic funds transfer

to make deposits of taxes relating to return periods beginning on or after January

1, 1998.

Section 6656(a) provides that in the

case of any failure by any person to deposit taxes on the prescribed date in an

authorized government depository, a

penalty applies unless the failure is due to

reasonable cause and not due to willful

neglect. Rev. Rul. 95–68, 1995–2 C.B.

272, provides that, absent reasonable

cause, a taxpayer that is required to deposit federal taxes by electronic funds

transfer is subject to the 10 percent failure

to deposit penalty if the taxpayer deposits

the taxes by means other than electronic

funds transfer.

Notice 97–43, 1997–30 I.R.B. 9, provides that, in the case of taxpayers first required to deposit electronically on or after

July 1, 1997, the Internal Revenue Service will not impose the failure to deposit

penalty under § 6656 solely for the failure

to make the deposit electronically. This

waiver applies only to deposit obligations

incurred on or before December 31, 1997.

Section 931 of the Taxpayer Relief Act

of 1997, Pub. L. No. 105–34, 111 Stat.

881, provides that no penalty shall be imposed under the Internal Revenue Code

solely by reason of a failure by a person to

use the electronic fund transfer system established under § 6302(h) of the Code if

(1) the person is a member of a class of

taxpayers first required to use such system on or after July 1, 1997, and (2) the

failure occurs before July 1, 1998.

TEMPORARY WAIVER OF PENALTY

FOR CERTAIN TAXPAYERS

For taxpayers first required to make

federal tax deposits electronically on or

June 1, 1998

after July 1, 1997, the Service will not impose the 10 percent § 6656 penalty solely

for the failure to make those deposits by

electronic funds transfer. However, a taxpayer will remain liable for the failure to

deposit penalty under § 6656 (absent reasonable cause) if the taxpayer fails to

make a required deposit (using either

electronic funds transfer or a paper

coupon) in a timely manner.

This waiver of the failure to deposit

penalty applies only to deposit obligations

incurred on or before December 31, 1998.

The penalty waiver includes deposits

made after December 31, 1998, provided

the deposit obligation was incurred on or

before December 31, 1998.

This waiver of the failure to deposit

penalty does not apply to taxpayers that

were required to begin using electronic

funds transfer in 1995 or 1996.

DRAFTING INFORMATION

The principal author of this notice is

Vincent G. Surabian of the Office of Assistant Chief Counsel (Income Tax and

Accounting). For further information regarding the penalty waiver, contact Mr.

Surabian at (202) 622-4940 (not a tollfree call).

Service-Initiated Accounting

Method Changes

Notice 98–31

This notice provides a proposed revenue procedure that, when finalized, will

provide the procedures under § 446(b) of

the Internal Revenue Code and § 1.446–

1(b) of the Income Tax Regulations for

changes in method of accounting initiated

by the Internal Revenue Service, and the

procedures that the Service will use for

accounting method issues raised and resolved by the Service on a nonaccounting-method-change basis.

As part of these procedures, the proposed revenue procedure describes the

discretion the Service may exercise in resolving an accounting method issue as an

accounting method change or on a nonaccounting-method-change basis. Except as

otherwise provided in published guidance, the proposed revenue procedure requires Examination to resolve any timing

10

issue as an accounting method change and

to make the change in the earliest taxable

year under examination with a § 481(a)

adjustment and a 1-year § 481(a) adjustment period. The proposed revenue procedure does not alter the authority of Appeals or counsel for the government to

resolve or settle any accounting method

issues.

The Service intends to publish additional guidance making the Coordinated

Examination Program (CEP) early referral process provided in Rev. Proc. 96–9,

1996–1 C.B. 575, available to non-CEP

taxpayers for the resolution of accounting

method issues. This will permit faster

resolution of timing issues that non-CEP

taxpayers want to refer to Appeals.

In addition, the Service intends to publish guidance that will delegate limited

discretionary authority to Examination to

resolve certain accounting method issues,

allow taxpayers and the Service to resolve accounting method issues for taxable years beyond the years under examination, before Appeals, or before a

federal court, and permit taxpayers under

examination who otherwise cannot request certain voluntary changes in

method of accounting from an impermissible method to request such changes

without audit protection. The Service

also intends to publish guidance that provides a model closing agreement for Service-initiated accounting method

changes. This guidance will increase the

number of accounting method issues that

the Service may resolve earlier in the examination/appeals process, provide a

more efficient use of Service and taxpayer resources, and facilitate greater

uniformity in the Service’s resolution of

accounting method issues.

The Service welcomes comments on

the proposed revenue procedure provided

in this notice. Comments should be submitted by July 31, 1998, either to:

Internal Revenue Service

P. O. Box 7604

Ben Franklin Station

Washington, DC 20044

Attn: CC:DOM:CORP:R (IT&A,

Branch 7), Room 5228

or electronically via:

http://www.irs.ustreas.gov/prod/tax_regs/

comments.html (the Service internet site).

1998–22 I.R.B.

Rev. Proc. 98–00

TABLE OF CONTENTS

SECTION 1. PURPOSE

.01 In general

.02 Voluntary compliance

.03 Procedures for Examination, Appeals, and counsel for the government for resolving timing issues

SECTION 2. BACKGROUND

.01 Change in method of accounting defined

.02 Method changes initiated by the Service

.03 No right to retroactive method change

.04 Service ordinarily will not initiate a taxpayer favorable method change

.05 Method change with a § 481(a) adjustment

(1) Need for adjustment

(2) Adjustments attributable to pre-1954 years

(3) Adjustment period

.06 Method change using a cut-off method

.07 Previous method change without consent

.08 Penalties

SECTION 3. DEFINITIONS

.01 Timing issue

.02 Year of change

.03 Section 481(a) adjustment period

SECTION 4. SCOPE

SECTION 5. EXAMINATION DISCRETION TO RESOLVE TIMING ISSUES

.01 In general

.02 Requirement to treat a timing issue as a method change

.03 Requirement to apply the law to the facts

.04 Requirement to impose a § 481(a) adjustment

.05 Terms and conditions of change

SECTION 6. APPEALS AND COUNSEL FOR THE GOVERNMENT DISCRETION TO RESOLVE TIMING ISSUES

.01 Authority to resolve timing issues

.02 Types of resolutions

(1) In general

(2) Accounting method change with compromise terms and conditions

(a) Treating a timing issue as a method change

(b) Requirement to apply the law to the facts

(c) Using a § 481(a) adjustment or cut-off method

(d) Terms and conditions of change

(3) Alternative timing

(4) Time-value of money

SECTION 7. PROCEDURES FOR A SERVICE-INITIATED ACCOUNTING METHOD CHANGE

.01 Requirement to notify of treatment as method change

(1) In general

(2) Form of notice

(3) Content of notice

(4) Method not established without notice

.02 Finalizing a Service-initiated method change

(1) In general

(2) Content of closing agreement

1998–22 I.R.B.

11

June 1, 1998

.03 Implementing a Service-initiated method change

(1) Years before the Service

(2) Succeeding years for which returns have been filed

(3) Future years

.04 Effect of final Service-initiated method change

(1) New method established

(2) Subsequent examination

(3) Audit protection

.05 Coordination with Examination

.06 Deemed cut-off method

SECTION 8. PROCEDURES FOR RESOLVING TIMING ISSUES ON A NONACCOUNTING-METHOD-CHANGE BASIS

.01 Closing agreement required

.02 Content of closing agreement

.03 Implementing resolution of a timing issue on a nonaccounting-method-change basis

(1) Resolution on an alternative-timing basis

(a) Years before the Service

(b) Succeeding years for which returns have been filed

(c) Future years

(2) Resolution on a time-value-of-money basis

.04 Effect of resolving a timing issue on a nonaccounting-method-change basis

(1) No change in method

(2) Subsequent change

(3) Effect of subsequent change

SECTION 9. DEFAULT PROCEDURES

.01 In general

.02 Effect of adjustments

(1) No omission or duplication

(2) No change in method

(3) Subsequent change

(4) Effect of subsequent change

SECTION 10. EXAMPLES

.01 Examination-initiated change

.02 Appeals resolution of timing issue as a method change with compromise terms and conditions

.03 Appeals resolution of timing issue on an alternative-timing basis

.04 Appeals resolution of timing issue on a time-value-of-money basis

.05 Default procedures

SECTION 11. INQUIRIES

SECTION 12. EFFECTIVE DATE

.01 In general

.02 Transition rule

SECTION 1. PURPOSE

.01 In general. This revenue procedure

provides the procedures under § 446(b) of

the Internal Revenue Code and § 1.4461(b) of the Income Tax Regulations for

changes in method of accounting initiated

by the Internal Revenue Service. This

revenue procedure also provides the procedures that the Service will use for timing

issues raised and resolved by the Service

on a nonaccounting-method-change basis.

June 1, 1998

.02 Voluntary compliance. This revenue procedure provides terms and conditions for Service-initiated changes that are

intended to encourage taxpayers to voluntarily request a change from an impermissible method of accounting prior to being

contacted for examination. Under this approach, a taxpayer that is contacted for

examination and required to change its

method of accounting by the Service generally receives less favorable terms and

conditions (for example, an earlier year of

12

change and a shorter § 481(a) adjustment

period for a positive adjustment) than if

the taxpayer had filed its request to

change before the taxpayer was contacted

for examination. See Rev. Proc. 97–27,

1997–1 C.B. 680, and Rev. Proc. 97–37,

1997–33 I.R.B. 18, which provide the

procedures for voluntary requests to

change an accounting method.

.03 Procedures for Examination, Appeals, and counsel for the government for

resolving timing issues. This revenue

1998–22 I.R.B.

procedure sets forth procedures for Examination, Appeals, and counsel for the government to resolve timing issues. It does

not alter Examination’s authority to examine the returns of a taxpayer. It provides parameters for Examination to resolve timing issues, but does not limit or

expand Examination’s authority to resolve any issues under Delegation Order

No. 236, Application of Appeals Settlement to Coordinated Examination Program Taxpayers, or Delegation Order No.

247, Authority of Examination Case Managers to Accept Settlement Offers and Execute Closing Agreements on Industry

Specialization Program and International

Field Assistance Program Issues. This

revenue procedure does not alter the authority of Appeals or counsel for the government to resolve or settle any issues.

SECTION 2. BACKGROUND

.01 Change in method of accounting

defined.

(1) Section 1.446–1(e)(2)(ii)(a) provides that a change in method of accounting includes a change in the overall plan

of accounting for gross income or deductions, or a change in the treatment of any

material item. A material item is any item

that involves the proper time for the inclusion of the item in income or the taking of

the item as a deduction. In determining

whether a taxpayer’s accounting practice

for an item involves timing, generally the

relevant question is whether the practice

permanently changes the amount of the

taxpayer’s lifetime income. If the practice does not permanently affect the taxpayer’s lifetime income, but does or could

change the taxable year in which income

is reported, it involves timing and is

therefore a method of accounting. See

Rev. Proc. 91–31, 1991–1 C.B. 566.

(2) Although a method of accounting

may exist under this definition without a

pattern of consistent treatment of an item,

a method of accounting is not adopted in

most instances without consistent treatment. The treatment of a material item in

the same way in determining the gross income or deductions in two or more consecutively filed tax returns (without regard to any change in status of the method

as permissible or impermissible) represents consistent treatment of that item for

purposes of § 1.446–1(e)(2)(ii)(a). If a

taxpayer treats an item properly in the

1998–22 I.R.B.

first return that reflects the item, however,

it is not necessary for the taxpayer to treat

the item consistently in two or more consecutive tax returns to have adopted a

method of accounting. If a taxpayer has

adopted a method of accounting under

these rules, the taxpayer may not change

the method by amending its prior income

tax returns(s). See Rev. Rul. 90–38,

1990–1 C.B. 57.

(3) A change in the characterization

of an item may also constitute a change in

method of accounting if the change has

the effect of shifting income from one period to another. For example, a change

from treating an item as income to treating the item as a deposit is a change in

method of accounting. See Rev. Proc.

91–31.

(4) A change in method of accounting does not include correction of mathematical or posting errors, or errors in the

computation of tax liability (such as errors in computation of the foreign tax

credit, net operating loss, percentage depletion, or investment credit). See

§ 1.446–1(e)(2)(ii)(b).

.02 Method changes initiated by the

Service.

(1) Section 446(b) and § 1.446–

1(b)(1) provide that if a taxpayer does not

regularly employ a method of accounting

that clearly reflects its income, the computation of taxable income must be made

in the manner that, in the opinion of the

Commissioner, does clearly reflect income.

(2) The Commissioner has broad discretion in determining whether a taxpayer’s method of accounting clearly reflects income, and the Commissioner’s

determination must be upheld unless it is

clearly unlawful. See Thor Power Tool

Co. v. Commissioner, 439 U.S. 522

(1979); RCA Corp. v. United States, 664

F.2d 881 (2nd Cir. 1981), cert. denied,

457 U.S. 1133 (1982).

(3) The Commissioner has broad discretion in selecting a method of accounting that the Commissioner believes properly reflects the income of a taxpayer

once the Commissioner has determined

that the taxpayer’s method of accounting

does not clearly reflect income, and the

Commissioner’s selection may be challenged only upon showing an abuse of

discretion by the Commissioner. See

Wilkinson-Beane, Inc. v. Commissioner,

13

420 F.2d 352 (1st Cir. 1970); Standard

Paving Company v. Commissioner, 190

F.2d 330 (10th Cir.), cert. denied, 342

U.S. 860 (1951).

(4) The Commissioner has the discretion to change a taxpayer’s method of

accounting even though the Commissioner previously changed the taxpayer to

the method if the Commissioner determines that the method of accounting does

not clearly reflect the taxpayer’s income.

The Commissioner is not precluded from

correcting mistakes of law in determining

a taxpayer’s tax liability, including the

power to retroactively correct rulings or

other determinations on which the taxpayer may have relied. See Dixon v.

United States, 381 U.S. 68 (1965); Automobile Club of Michigan v. Commissioner, 353 U.S. 180 (1957); Massaglia v.

Commissioner, 286 F.2d 258 (10th Cir.

1961).

(5) The Commissioner does not have

discretion, however, to require a taxpayer

to change from a method of accounting

that clearly reflects income to a method

that, in the Commissioner’s view, more

clearly reflects income. See Capitol Federal Savings & Loan v. Commissioner, 96

T.C. 204 (1991); W.P. Garth v. Commissioner, 56 T.C. 610 (1971), acq., 1975-1

C.B. 1.

(6) The Commissioner may change

the accounting method of a taxpayer that

is under examination, before an appeals

office, or before a federal court, except as

otherwise provided in published guidance. See, for example, section 9 of Rev.

Proc. 97–27, which generally precludes

the Service from changing a taxpayer’s

method of accounting for an item for prior

taxable years if the taxpayer timely files a

Form 3115 pursuant to Rev. Proc. 97–27

requesting to change its method of accounting for the item.

.03 No right to retroactive method

change. Although the Commissioner is

authorized to consent to a retroactive accounting method change, a taxpayer does

not have a right to a retroactive change,

regardless of whether the change is from a

permissible or impermissible method.

See generally, Rev. Rul. 90–38.

.04 Service ordinarily will not initiate a

taxpayer favorable method change. Consistent with the policy of encouraging

prompt voluntary compliance with proper

tax accounting principles, the Service or-

June 1, 1998

dinarily will not initiate an accounting

method change if the change will place

the taxpayer in a position more favorable

than the taxpayer’s position would have

been had the taxpayer not been contacted

for examination. For example, an examining agent ordinarily will not initiate a

change from an impermissible method

that results in a negative § 481(a) adjustment. If the Service declines to initiate

such an accounting method change, the

district director will consent to the taxpayer requesting a voluntary change

under Rev. Proc. 97–27. See section

6.01(4) of Rev. Proc. 97–27.

.05 Method change with a § 481(a) adjustment.

(1) Need for adjustment. Section

481(a) requires those adjustments necessary to prevent amounts from being duplicated or omitted to be taken into account

when the taxpayer’s taxable income is

computed under a method of accounting

different from the method used to compute taxable income for the preceding taxable year. When there is a change in

method of accounting to which § 481(a) is

applied, income for the taxable year preceding the year of change must be determined under the method of accounting

that was then used, and income for the

year of change and the following taxable

years must be determined under the new

method of accounting as if the new

method had always been used.

Example. A taxpayer, although not permitted to

use the cash receipts and disbursements method of

accounting by § 448, uses the overall cash method

and changes to an overall accrual method. The taxpayer has $120,000 of income earned but not yet received (accounts receivable) and $100,000 of expenses incurred but not yet paid (accounts payable)

as of the end of the taxable year preceding the year

of change. A positive § 481(a) adjustment of

$20,000 ($120,000 accounts receivable less

$100,000 accounts payable) is required as a result of

the change.

(2) Adjustments attributable to pre1954 years. Section 481(a)(2) and

§ 1.481–3 provide that if the adjustments

required by § 481(a) are attributable to a

change in method of accounting not initiated by the taxpayer, no portion of any adjustments which is attributable to pre1954 taxable years is taken into account

in computing taxable income.

(3) Adjustment period. Section

481(c) and §§ 1.446–1(e)(3)(i) and

1.481–4 provide that the adjustment re-

June 1, 1998

quired by § 481(a) may be taken into account in determining taxable income in

the manner and subject to the conditions

agreed to by the Commissioner and the

taxpayer. Generally, in the absence of

such an agreement, the § 481(a) adjustment is taken into account completely in

the year of change, subject to § 481(b)

which limits the amount of tax where the

adjustment is substantial.

.06 Method change using a cut-off

method. The Commissioner may determine that certain changes in method of accounting will be made without a

§ 481(a) adjustment, using a “cut-off

method.” Under a cut-off method, only the

items arising on or after the beginning of

the year of change are accounted for under

the new method of accounting. Any items

arising before the year of change continue

to be accounted for under the taxpayer’s

former method of accounting. Because no

items are duplicated or omitted from income when a cut-off method is used to effect a change in accounting method, no §

481(a) adjustment is necessary.

.07 Previous method change without

consent. The Commissioner may require

a taxpayer that has changed a method of

accounting without the Commissioner’s

consent to change back to its former

method. The Commissioner may do so

even when the taxpayer changed from an

impermissible to a permissible method.

The change back to the former method

may be made in the taxable year the taxpayer changed without consent, or if that

year is closed by the running of the period

of limitations, in the earliest open year.

See Commissioner v. O. Liquidating

Corp., 292 F.2d 225 (3rd Cir.), cert. denied, 368 U.S. 898 (1961); Handy Andy

T.V. and Appliances, Inc., T.C. Memo.

1983–713.

.08 Penalties. Any otherwise applicable penalty for the failure of a taxpayer to

change its method of accounting (for example, the accuracy-related penalty under

§ 6662 or the fraud penalty under § 6663)

may be imposed if the Service initiates an

accounting method change. See § 446(f).

Additionally, the taxpayer’s return preparer may also be subject to the preparer

penalty under § 6694.

SECTION 3. DEFINITIONS

.01 Timing issue. The term “timing

issue” means any issue regarding the pro-

14

priety of a taxpayer’s method of accounting for an item. See the definition of

change in method of accounting in

§ 1.446–1(e)(2)(ii)(a) and section 2.01 of

this revenue procedure.

.02 Year of change. The year of change

is the taxable year for which a change in

method of accounting is effective, that is,

the first taxable year the new method is

used, even if no affected items are taken

into account for that year. The year of

change is also the first taxable year for

complying with all the terms and conditions accompanying the change.

.03 Section 481(a) adjustment period.

The § 481(a) adjustment period is the applicable number of taxable years for taking into account the § 481(a) adjustment

required as a result of the change in

method of accounting. The year of

change is the first taxable year in the adjustment period and the § 481(a) adjustment is taken into account ratably over

the number of taxable years in the adjustment period.

SECTION 4. SCOPE

Except as otherwise provided in published guidance, this revenue procedure

applies to any accounting method change

initiated by the Service, and to any timing

issue raised and resolved by the Service

on a nonaccounting-method-change basis.

SECTION 5. EXAMINATION

DISCRETION TO RESOLVE TIMING

ISSUES

.01 In general. Except as otherwise

provided in published guidance (for example, Delegation Order No. 236), the discretion of an examining agent to resolve a

timing issue is set forth in sections 5.02

through 5.05 of this revenue procedure.

See section 10.01 of this revenue procedure for an example of the application of

section 5 of this revenue procedure.

.02 Requirement to treat a timing issue

as a method change. An examining agent

proposing an adjustment with respect to a

timing issue will treat the issue as a

change in method of accounting.

.03 Requirement to apply the law to the

facts. An examining agent changing a

taxpayer’s method of accounting will

properly apply the law to the facts without

taking into account the hazards of litigation when determining the new method of

accounting.

1998–22 I.R.B.

.04 Requirement to impose a § 481(a)

adjustment. An examining agent changing a taxpayer’s method of accounting

will impose a § 481(a) adjustment. The

change may be made using a cut-off

method only in rare and unusual circumstances when the examining agent determines that the taxpayer ’s books and

records do not contain sufficient information to compute the adjustment and the

adjustment is not susceptible to reasonable estimation.

.05 Terms and conditions of change.

An examining agent changing a taxpayer’s method of accounting will effect

the change in the earliest taxable year

under examination (or, if later, the first

taxable year the method is considered impermissible) with a one-year § 481(a) adjustment period, subject to the computation of tax under § 481(b) (if applicable).

SECTION 6. APPEALS AND

COUNSEL FOR THE GOVERNMENT

DISCRETION TO RESOLVE TIMING

ISSUES

.01 Authority to resolve timing issues.

An appeals officer or counsel for the government may resolve a timing issue when

it is in the interest of the government to do

so.

.02 Types of resolutions.

(1) In general. An appeals officer or

counsel for the government, to reflect the

hazards of litigation, may resolve a timing

issue by changing the taxpayer’s method

of accounting using compromise terms

and conditions, or on a nonaccountingmethod-change basis using either an alternative-timing or a time-value-of-money

resolution. See sections 10.02 through

10.04 of this revenue procedure for examples of the application of section 6 of this

revenue procedure.

(2) Accounting method change with

compromise terms and conditions.

(a) Treating a timing issue as a

method change. An appeals officer or

counsel for the government resolving a

timing issue may treat the issue as a

change in method of accounting.

(b) Requirement to apply the law

to the facts. An appeals officer or counsel

for the government changing a taxpayer’s

method of accounting will properly apply

the law to the facts without taking into account the hazards of litigation when determining the new method of accounting.

1998–22 I.R.B.

(c) Using a § 481(a) adjustment

or a cut-off method. An appeals officer or

counsel for the government changing a

taxpayer’s method of accounting may

make the change using a § 481(a) adjustment or a cut-off method.

(d) Terms and conditions of

change.

(i) In general. An appeals

officer or counsel for the government

changing a taxpayer’s method of accounting may agree to terms and conditions

that differ from those applicable to an Examination-initiated accounting method

change. The appeals officer or counsel

for the government may compromise the

year of change (for example, by agreeing

to a later year of change), the amount of

the § 481(a) adjustment (for example, by

agreeing to a reduced § 481(a) adjustment), or the § 481(a) adjustment period

(for example, by agreeing to a longer §

481(a) adjustment period). If an appeals

officer or counsel for the government

agrees to compromise the amount of the §

481(a) adjustment, the agreement must be

in writing.

(ii) Limitation on year of

change. An appeals officer or counsel for

the government changing a taxpayer’s

method of accounting ordinarily will not

defer the year of change to later than the

most recent taxable year under examination on the date of the agreement finalizing the change, and, in no event, will

defer the year of change to later than the

taxable year that includes the date of the

agreement finalizing the change.

(3) Alternative timing. An appeals

officer or counsel for the government may

resolve a timing issue by not changing the

taxpayer’s method of accounting, and by

the Service and the taxpayer agreeing to

alternative timing for all or some of the

items arising during, or prior to and during, the taxable years before Appeals or a

federal court. The resolution of a timing

issue on an alternative-timing basis for

certain items will not affect the taxpayer’s

method of accounting for any items not

covered by the resolution. For example,

the Service and the taxpayer may agree

that the taxpayer will capitalize the inventoriable costs incurred during 1995 that

were deducted under the taxpayer’s

method of accounting. The taxpayer’s inventoriable costs covered by the agreement must be capitalized and accounted

15

for under the taxpayer ’s inventory

method. The inventoriable costs that are

not covered by the agreement (that is,

those costs incurred in taxable years prior

and subsequent to 1995) are not affected

by the resolution and thus, consistent with

the taxpayer’s method of accounting,

must continue to be deducted.

(4) Time-value of money.

(a) In general. An appeals officer or counsel for the government may resolve a timing issue by not changing the

taxpayer’s method of accounting, and by

the Service and the taxpayer agreeing that

the taxpayer will pay the government a

“specified amount” that approximates the

time-value-of-money benefit the taxpayer

has derived from using its method of accounting for the taxable years before appeals or a federal court (instead of the

method of accounting determined by the

appeals officer or counsel for the government to be the proper method of accounting), reduced by an appropriate factor to

reflect the hazards of litigation. The specified amount is not interest under §

163(a), and may not be deducted or capitalized under any provision of the Code.

(b) Computation of specified

amount.

(i) In general. An appeals

officer or counsel for the government may

use any reasonable manner to compute

the specified amount, including the sample computation described in section

6.02(4)(b)(ii) of this revenue procedure.

(ii) Sample computation.

Under the sample computation, the specified amount equals the sum of the timevalue-of-money benefit (detriment) computed with respect to each taxable year

before Appeals or a federal court. However, if the sum of the time-value-ofmoney benefit (detriment) computed with

respect to each taxable year is negative,

the specified amount will be zero and no

refund will be made to the taxpayer. The

time-value-of- money benefit (detriment)

with respect to each taxable year before

Appeals or a federal court equals the “hypothetical underpayment (overpayment)”

(as defined in section 6.02(4)(b)(ii)(A) of

this revenue procedure), multiplied by the

“applicable time-value rate” (as defined

in section 6.02(4)(b)(ii)(B) of this revenue procedure), compounded daily for

the “applicable period” (as defined in section 6.02(4)(b)(ii)(C) of this revenue procedure).

June 1, 1998

(A) Hypothetical underpayment (overpayment). The hypothetical underpayment (overpayment) for each taxable year before Appeals or a federal court

is equal to the net increase or decrease in

taxable income (including the § 481(a) adjustment) that would have been reflected

on the return for the taxable year if the

Service had changed the taxpayer ’s

method of accounting (in the earliest taxable year before Appeals or a federal

court, or, if later, the first taxable year the

method is considered impermissible),

multiplied by the applicable tax rate for

the taxable year of the underpayment

(overpayment). For this purpose, only adjustments associated with the change are

taken into account. The applicable tax

rate is the highest rate of income tax applicable to the taxpayer (for example, the

highest rate in effect under section 1 for

individuals or section 11 for corporations).

(B) Applicable time-value

rate. The applicable time-value rate generally equals an average of the quarterly

underpayment rates in effect under §

6621(a) for the applicable period. However, for a taxpayer that would be entitled

to a deduction under § 163(a) for the

specified amount if the specified amount

were treated as interest arising from the

underpayment of tax, the applicable timevalue rate is computed at a reduced rate

equaling an average of the quarterly underpayment rates in effect under §

6621(a) for the applicable period, multiplied by the excess of 100% over the applicable tax rate for the taxable year of the

underpayment (overpayment).

(C) Applicable period. The

applicable period begins on the due date

(without regard to extensions) of the return for the taxable year of the underpayment (overpayment) and ends on the date

on which the specified amount is paid.

SECTION 7. PROCEDURES FOR A

SERVICE-INITIATED ACCOUNTING

METHOD CHANGE

.01 Requirement to notify of treatment

as method change.

(1) In general. An examining agent,

appeals officer, or counsel for the government changing a taxpayer’s method of accounting will provide notice that a timing

issue is being treated as an accounting

method change.

June 1, 1998

(2) Form of notice. The notice must

be in writing. If the taxpayer and the Service execute a closing agreement finalizing the change, the notice will be provided in the closing agreement. If the

taxpayer and the Service do not execute a

closing agreement, the notice ordinarily

will be provided in the examiner’s report

or the Form 870AD (Offer of Waiver of

Restriction on Assessment and Collection

of Deficiency in Tax and of Acceptance of

Overpayment). However, the Service

may also provide the notice in a preliminary notice of deficiency, a statutory notice of deficiency, a notice of claim disallowance, a notice of final administrative

adjustment, a pleading (for example, a petition, complaint, or answer) or amendment thereto, or in any other similar writing provided to the taxpayer.

(3) Content of notice. The notice

must include (a) a statement that the timing issue is being treated as an accounting

method change or a clearly labeled §

481(a) adjustment, and (b) a description

of the new method of accounting.

(4) Method not established without

notice. The resolution of a timing issue

will not establish a new method of accounting if the Service does not provide

the notice required by section 7.01 of this

revenue procedure. See section 9 of this

revenue procedure for the procedures applicable if the Service does not provide

this notice.

.02 Finalizing a Service-initiated

method change.

(1) In general. To finalize a Serviceinitiated accounting method change, the

taxpayer and the Service must execute a

closing agreement under § 7121 in which

the taxpayer agrees to the change and the

terms and conditions of the change. In

the absence of such an agreement, a Service-initiated accounting method change

is final only upon the expiration of the period of limitations for filing a claim for refund under § 6511 for the year of change

or the date of a final court order requiring

the change.

(2) Content of closing agreement. A

closing agreement finalizing a Serviceinitiated accounting method change must

comply with the requirements of Rev.

Proc. 68–16, 1968–1 C.B. 770, and must

include a statement setting forth:

(a) the name, address, telephone

number, and taxpayer identification num-

16

ber of any taxpayer included in the agreement;

(b) the timing issue(s) covered

by the agreement;

(c) the taxable years covered by

the agreement;

(d) the facts and representations

upon which the taxpayer and the Service

relied in reaching the agreement;

(e) the taxpayer ’s current

method of accounting;

(f) the notification required by

section 7.01 of this revenue procedure;

(g) the year of change;

(h) the § 481(a) adjustment and

the § 481(a) adjustment period, or that a

cut-off method is being used;

(i) any computations under

§ 481(b);

(j) the adjustments to taxable income necessary to reflect the new method

(including the § 481(a) adjustment required as a result of the change), and any

collateral adjustments to taxable income

or tax liability resulting from the change

for each of the taxable years covered by

the agreement;

(k) the taxable years that are

covered by the audit protection provided

in section 7.04(3) of this revenue procedure;

(l) if appropriate, a condition requiring the taxpayer to file amended returns to reflect the change for any affected

succeeding taxable years for which a federal income tax return has been filed as of

the date of the closing agreement; and

(m) any other appropriate conditions for implementing the closing agreement, including any requirements for

waiving restrictions on assessment and

collection, paying any tax, abating any

overassessment, or refunding or crediting

any tax overpayment.

.03 Implementing a Service-initiated

method change.

(1) Years before the Service. The

Service will make the adjustments necessary to effect a Service-initiated accounting method change to the taxpayer’s returns for the taxable years under

examination, before Appeals, or before a

federal court. These adjustments include

the adjustments to taxable income necessary to reflect the new method (including

the § 481(a) adjustment required as a result of the change), and any collateral adjustments to taxable income or tax liability resulting from the change.

1998–22 I.R.B.

(2) Succeeding years for which returns have been filed. If a Service-initiated accounting method change is finalized by a closing agreement, the Service

may require the taxpayer to file amended

returns to reflect the change for any affected succeeding taxable years for which

a federal income tax return has been filed

as of the date of the closing agreement.

The amended returns must include the adjustments to taxable income and any collateral adjustments to taxable income or

tax liability resulting from the change

necessary to reflect the new method. The

Service may require that the amended returns be filed prior to execution of the

closing agreement finalizing the change.

If the Service does not require the

amended returns, the taxpayer should file

such amended returns. If the Service does

not require the amended returns and the

taxpayer does not file the amended returns, the Service will make the adjustments necessary to reflect the change for

affected succeeding taxable years when it

examines the returns for those years. A

taxpayer that files an amended return

using the new method prior to the date a

Service-initiated change becomes final

must continue to use the new method on

all subsequent returns, unless the taxpayer

obtains the consent of the Commissioner

to change from the new method or the

Service changes the taxpayer from the

new method on subsequent examination.

See Rev. Rul. 90–38.

(3) Future years. The taxpayer must

use the new method of accounting on all

returns filed after the date that a Serviceinitiated accounting method change becomes final (see section 7.02 of this revenue procedure), unless the taxpayer

obtains the consent of the Commissioner

to change from the new method or the

Service changes the taxpayer from the

new method on subsequent examination.

A taxpayer that files a return using the

new method prior to the date a Serviceinitiated change becomes final must continue to use the new method on all subsequent returns, unless the taxpayer obtains

the consent of the Commissioner to

change from the new method or the Service changes the taxpayer from the new

method on subsequent examination. If

the taxpayer does not use the new method

on any return filed prior to the date a Service-initiated change becomes final, and

1998–22 I.R.B.

does not file amended returns to reflect

the change, the Service will make the adjustments necessary to reflect the change

for the affected taxable years when it examines those returns.

.04 Effect of final Service-initiated

method change.

(1) New method established. A Service-initiated change that is final establishes a new method of accounting within

the meaning of § 446(e) and § 1.446–1(e).

As a result, the taxpayer is required to use

the new method of accounting for the year

of change and for all subsequent taxable

years, unless the taxpayer obtains the consent of the Commissioner to change from

the new method or the Service changes

the taxpayer from the new method on subsequent examination.

(2) Subsequent examination. Except

as provided in section 7.04(3) of this revenue procedure, the Service is not precluded from changing the taxpayer from

the new method of accounting if the Service determines that the new method does

not clearly reflect the taxpayer’s income.

(3) Audit protection.

(a) In general. A taxpayer that

executes a closing agreement finalizing a

Service-initiated accounting method

change will not be required to change or

modify the new method for any taxable

year for which a federal income tax return

has been filed as of the date of the closing

agreement, provided that:

(i) the taxpayer has complied

with all the applicable provisions of the

closing agreement;

(ii) there has been no taxpayer fraud, malfeasance, or misrepresentation of a material fact;

(iii) there has been no change

in the material facts on which the closing

agreement was based; and

(iv) there has been no change

in the applicable law on which the closing

agreement was based.

(b) Limitations. The Service may

require the taxpayer to change or modify

the new method in the earliest open taxable year if the taxpayer fails to comply

with the applicable provisions of the closing agreement or upon a showing of the

taxpayer’s fraud, malfeasance, or misrepresentation of a material fact. The Service

may require the taxpayer to change or

modify the new method in the earliest

open taxable year in which the material

17

facts have changed. The Service may also

require the taxpayer to change or modify

the new method in the earliest open taxable year in which the applicable law has

changed. For this purpose, a change in

the applicable law includes: (i) the enactment of legislation; (ii) a decision of the

United States Supreme Court; (iii) the issuance of temporary or final regulations;

or (iv) the issuance of a revenue ruling,

revenue procedure, notice, or other guidance published in the Internal Revenue

Bulletin. Except in rare and unusual circumstances, a retroactive change in applicable law is deemed to occur when one

of the events described in the preceding

sentence occurs and not when the change

in law is effective.

.05 Coordination with Examination.

An appeals officer or counsel for the government changing a taxpayer’s method of

accounting will coordinate the resolution

with Examination if the appeals officer or

counsel for the government proposes to

defer the year of change to any taxable

year not before appeals or a federal court.

Examination will advise the appeals officer or counsel for the government of any

changes in material fact in any taxable

year under examination and may comment on the proposed resolution, but the

approval of the resolution by Examination

is not required.

.06 Deemed cut-off method. If the Service does not impose a § 481(a) adjustment but otherwise provides the notice required by section 7.01 of this revenue

procedure, the Service-initiated change

will be treated as being made using a cutoff method, unless the Service and the

taxpayer specifically have agreed in writing to compromise the amount of the

§ 481(a) adjustment.

SECTION 8. PROCEDURES FOR

RESOLVING TIMING ISSUES ON A

NONACCOUNTING-METHODCHANGE BASIS

.01 Closing agreement required. To resolve a timing issue raised by the Service

on a nonaccounting-method-change basis,

the Service and the taxpayer will execute

a closing agreement under § 7121. If the

timing issue is being resolved on an alternative- timing basis as described in section 6.02(3) of this revenue procedure, the

taxpayer must agree to pay the government any taxes and interest due as a result

June 1, 1998

of the resolution. If the timing issue is

being resolved on a time-value-of-money

basis as described in section 6.02(4) of

this revenue procedure, the taxpayer must

agree to pay the government the specified

amount as a result of the resolution. See

section 9 of this revenue procedure for the

procedures applicable if a closing agreement is not executed as required by section 8.01 of this revenue procedure.

.02 Content of closing agreement. A

closing agreement finalizing the resolution of a timing issue on a nonaccountingmethod-change basis must comply with

the requirements of Rev. Proc. 68-16, and

must include a statement setting forth:

(1) the name, address, telephone

number, and taxpayer identification number of any taxpayer included in the agreement;

(2) the timing issue(s) covered by the

agreement;

(3) the facts and representations

upon which the taxpayer and the Service

relied in reaching the agreement;

(4) that the Service is not changing

the taxpayer’s method of accounting;

(5) if the timing issue is being resolved on an alternative- timing basis as

described in section 6.02(3) of this revenue procedure:

(a) the items covered by the closing agreement and the manner in which

the items are to be accounted for in any

affected taxable year;

(b) that any items not covered by

the closing agreement are not affected by

the closing agreement;

(c) that the Service is not precluded from changing the taxpayer’s

method of accounting in any open taxable

year for the items not covered by the closing agreement;

(d) that if the taxpayer’s method

of accounting is changed (voluntarily or

involuntarily) in a subsequent taxable

year, the § 481(a) adjustment (if any) will

be determined by reference to all items

arising prior to the year of change, except

those items covered by the closing agreement (that is, those items for which the

closing agreement specifically provides

the manner in which the items are to be

accounted for); and

(e) if appropriate, a condition requiring the taxpayer to file amended returns to reflect the alternative-timing resolution for any affected succeeding

June 1, 1998

taxable years for which a federal income

tax return has been filed as of the date of

the closing agreement;

(6) if the timing issue is being resolved on a time-value-of-money basis as

described in section 6.02(4) of this revenue procedure:

(a) the taxable years covered by

the agreement;

(b) the computation of the specified amount as provided in section

6.02(4)(b) of this revenue procedure;

(c) that the specified amount is

not interest under § 163(a) and may not be

deducted or capitalized under any provision of the Code;

(d) that the Service is not precluded from changing the taxpayer ’s

method of accounting in any open taxable

year not covered by the closing agreement;

(e) that if the taxpayer’s method

of accounting is changed (voluntarily or

involuntarily) in a subsequent taxable

year, the § 481(a) adjustment (if any) will

be determined by reference to all items

arising prior to the year of change; and

(f) that if the Service changes the

taxpayer’s method of accounting in a subsequent taxable year and imposes a §

481(a) adjustment, the interest that is assessed on any underpayment or the interest that is due on any overpayment for the

year of change will be treated as paid to

the extent necessary to prevent the duplicate payment of the time-value-of-money

benefit relating to the § 481(a) adjustment; and

(7) any other appropriate conditions

for implementing the closing agreement,

including any requirements for waiving

restrictions on assessment and collection,

paying any tax, abating any overassessment, or refunding or crediting any tax

overpayment.

.03 Implementing resolution of a timing

issue on a nonaccounting-method-change

basis.

(1) Resolution on an alternative-timing basis.

(a) Years before the Service. The

Service will make the adjustments necessary to effect an alternative-timing resolution for the taxable years before appeals

or before a federal court. These adjustments include the adjustments to taxable

income necessary to reflect the resolution

and any collateral adjustments to taxable

18

income or tax liability resulting from the

resolution.

(b) Succeeding years for which

returns have been filed. The Service may

require the taxpayer to file amended returns to reflect an alternative-timing resolution for any affected succeeding taxable

years for which a federal income tax return has been filed as of the date of the

closing agreement. The amended returns

must include the adjustments to taxable

income and any collateral adjustments to

taxable income or tax liability resulting

from the resolution necessary to reflect

the resolution. The Service may require

that the amended returns be filed prior to

execution of the closing agreement finalizing the resolution. If the Service does

not require the amended returns, the taxpayer should file such amended returns.

If the Service does not require amended

returns and the taxpayer does not file

amended returns, the Service will make

the adjustments necessary to reflect the

resolution for affected succeeding taxable

years when it examines the returns for

those years.

(c) Future years. The taxpayer

must reflect the alternative-timing resolution on the returns for any affected succeeding taxable years for which a return

has not been filed as of the date of the

closing agreement. The taxpayer must

continue to file its returns on its current

method of accounting for all items not

covered by the closing agreement, unless

the taxpayer obtains the consent of the

Commissioner to change from its current

method or the Service changes the taxpayer from its current method on subsequent examination.

(2) Resolution on a time-value-ofmoney basis. The taxpayer must pay the

specified amount required by the timevalue-of-money resolution. The Service

will not change or otherwise propose adjustments to taxable income with respect

to the taxpayer’s method of accounting

for the taxable years covered by the closing agreement. The taxpayer must continue to file its returns on its current

method of accounting, unless the taxpayer

obtains the consent of the Commissioner

to change from its current method or the

Service changes the taxpayer from its current method on subsequent examination.

.04 Effect of resolving a timing issue on

a nonaccounting-method-change basis.

1998–22 I.R.B.

(1) No change in method. If the Service resolves a timing issue on a nonaccounting-method-change basis, the resolution does not constitute a change in

method of accounting. If the timing issue

is resolved on an alternative-timing basis,

the taxpayer is required to use its current

method of accounting for all items not

covered by the closing agreement, unless

the taxpayer obtains the consent of the

Commissioner to change from its current

method or the Service changes the taxpayer from its current method on subsequent examination. If the timing issue is

resolved on a time-value-of-money basis,

the taxpayer is required to continue to use

its current method of accounting on all returns for taxable years subsequent to the

years covered by the closing agreement,

unless the taxpayer obtains the consent of

the Commissioner to change from its current method or the Service changes the

taxpayer from its current method on subsequent examination.

(2) Subsequent change.

(a) Resolution on an alternativetiming basis. If a timing issue is resolved

on an alternative-timing basis, the Service

is not precluded from changing the taxpayer’s method of accounting in any open

taxable year for any item not covered by

the closing agreement.

(b) Resolution on a time-valueof-money basis. If a timing issue is resolved on a time-value-of-money basis,

the Service is not precluded from changing the taxpayer’s method of accounting

in any open taxable year not covered by

the closing agreement.

(3) Effect of subsequent change.

(a) Resolution on an alternativetiming basis. If a timing issue is resolved

on an alternative-timing basis and the

taxpayer ’s method of accounting is

changed (voluntarily or involuntarily) in a

subsequent taxable year, the § 481(a) adjustment (if any) will be determined by

reference to all items arising prior to the

year of change, except those items covered by the closing agreement (that is,

those items for which the closing agreement specifically provides the manner in

which the items are to be accounted for).

(b) Resolution on a time-valueof-money basis. If a timing issue is resolved on a time-value-of-money basis

and the taxpayer’s method of accounting

is changed (voluntarily or involuntarily)

1998–22 I.R.B.

in a subsequent taxable year, the § 481(a)

adjustment (if any) will be determined by

reference to all items arising prior to the

year of change. If the Service changes the

taxpayer’s method of accounting in a subsequent taxable year and imposes a §

481(a) adjustment, the interest that is assessed on any underpayment or the interest that is due on any overpayment for the

year of change will be treated as paid to

the extent necessary to prevent the duplicate payment of the time-value-of- money

benefit relating to the § 481(a) adjustment.

SECTION 9. DEFAULT PROCEDURES

.01 In general. Section 9 of this revenue procedure applies to the resolution

of any timing issue unless the Service

provides the notice required by section

7.01 of this revenue procedure, or the Service resolves the timing issue on a nonaccounting-method-change basis and the

Service and the taxpayer execute a closing agreement as required by section 8.01

of this revenue procedure. See section

10.05 of this revenue procedure for an example of the application of section 9 of

this revenue procedure.

.02 Effect of adjustments. For timing

issues resolved under section 9 of this

revenue procedure:

(1) No omission or duplication. The

Service and the taxpayer are required to

treat all items in a manner that prevents

the duplication or omission of items of income or deduction;

(2) No change in method. The resolution does not constitute a change in

method of accounting. The taxpayer is required to continue to use its current

method of accounting for all items not affected by the adjustments made by the

Service, unless the taxpayer obtains the

consent of the Commissioner to change

from its current method or the Service

changes the taxpayer from its current

method on subsequent examination;

(3) Subsequent change. The Service

is not precluded from changing the taxpayer’s method of accounting in any open

taxable year; and

(4) Effect of subsequent change. If

the taxpayer’s method of accounting is

changed (voluntarily or involuntarily) in a

subsequent taxable year, the § 481(a) adjustment (if any) will be determined by

reference to all items arising prior to the

year of change (including the items af-

19

fected by the adjustment made by the Service).

SECTION 10. EXAMPLES

.01 Examination-initiated change.

(1) Facts. A taxpayer that is a corporation deducted certain costs that, as a

matter of law, should have been capitalized as part of the cost of a nondepreciable

asset that was acquired in 1994. The taxpayer incurred and deducted $1,000,000

of the costs in 1994, $2,000,000 in each of

1995 and 1996, and $5,000,000 in each of

1997 and 1998. The taxpayer is examined

for the 1995 and 1996 taxable years (1995

is the earliest open year) and the examining agent discovers the taxpayer’s impermissible method of accounting.

(2) Effect. Under section 5 of this

revenue procedure, the examining agent

is required to properly apply the law to

the facts and change the taxpayer to the

capitalization method of accounting for

the costs for 1995. The examining agent

will provide the notice required by section

7.01 of this revenue procedure. The examining agent will impose a § 481(a) adjustment of $1,000,000 (representing the

$1,000,000 of the costs deducted in 1994)

the entire amount of which will be taken

into account in computing taxable income

in 1995. The examining agent will also

disallow the deductions of $2,000,000 in

each of 1995 and 1996. The taxpayer’s

basis in the property as of the end of 1996

is increased by $5,000,000 (representing

the $1,000,000 § 481(a) adjustment and

the disallowance of the $2,000,000 of deductions in each of 1995 and 1996). The

method change (once final) is effective

for 1995. Thus, the taxpayer is required

to capitalize the costs in 1995 and all subsequent taxable years, unless the taxpayer

obtains the consent of the Commissioner

to change the method or the Service

changes the taxpayer from the method on

subsequent examination.

.02 Appeals resolution of timing issue

as a method change with compromise

terms and conditions.

(1) Facts. The facts are the same as

in section 10.01 of this revenue procedure, except that the issue of whether the

costs should be capitalized is referred to

Appeals. The appeals officer believes

there is substantial merit to the Service’s

position that the costs must be capitalized

as a matter of law, but believes there are

June 1, 1998

hazards of litigation. The appeals officer

and the taxpayer agree to resolve the timing issue by changing the taxpayer’s

method of accounting for the costs, but

with compromise terms and conditions to

reflect the hazards of litigation.

(2) Effect. Under section 6.02 of this

revenue procedure, when the appeals officer changes the taxpayer’s method of accounting, the appeals officer is required to

properly apply the law to the facts and

change the taxpayer to the capitalization

method of accounting for the costs. The

appeals officer will provide the notice required by section 7.01 of this revenue

procedure.

The appeals officer may make the

change using the cut-off method. If the

appeals officer makes the change in 1995

using the cut-off method, the appeals officer will disallow the deductions of

$2,000,000 in each of 1995 and 1996.

The taxpayer’s basis in the property as of

the end of 1996 will be increased by

$4,000,000 (representing the disallowance of the $2,000,000 of deductions

in each of 1995 and 1996). The method

change (once final) is effective for 1995.

Thus, the taxpayer is required to capitalize the costs in 1995 and all subsequent

taxable years, unless the taxpayer obtains

the consent of the Commissioner to

change the method or the Service changes

the taxpayer from the method on subsequent examination.

Alternatively, the appeals officer may

compromise the amount of the § 481(a)

adjustment. If the appeals officer makes

the change in 1995 and agrees to reduce

the § 481(a) adjustment by 25%, the appeals officer will impose a § 481(a) adjustment of $750,000 (representing 75%

of the amount of the costs deducted in

1994), the entire amount of which will be

taken into account in computing taxable

income in 1995. The appeals officer will

disallow the deductions of $2,000,000 in

each of 1995 and 1996. The taxpayer’s

basis in the property as of the end of 1996

will be increased by $5,000,000 (representing the unreduced § 481(a) adjustment of $1,000,000 and the disallowance

of the $2,000,000 of deductions in each of

1995 and 1996). The method change

(once final) is effective for 1995. Thus,

the taxpayer is required to capitalize the

costs in 1995 and all subsequent taxable

years, unless the taxpayer obtains the con-

June 1, 1998

sent of the Commissioner to change the

method or the Service changes the taxpayer from the method on subsequent examination.

As another alternative, the appeals officer may compromise the year of change

and/or the § 481(a) adjustment period.

For example, the appeals officer may

agree to make the change in 1996 with a

two-year § 481(a) adjustment period. The

appeals officer will impose a § 481(a) adjustment of $3,000,000 (representing the

$1,000,000 of costs deducted in 1994 and

the $2,000,000 of costs deducted in 1995)

one-half of which will be taken into account in computing taxable income in

each of 1996 and 1997. The appeals officer will disallow the deduction of

$2,000,000 in 1996. The taxpayer’s basis

in the property as of the end of 1996 will

be increased by $5,000,000 (representing

the $3,000,000 § 481(a) adjustment and

the disallowance of the $2,000,000 of deductions in 1996). The method change

(once final) is effective for 1996. Thus,

the taxpayer is required to capitalize the

costs in 1996 and all subsequent taxable

years, unless the taxpayer obtains the consent of the Commissioner to change the

method or the Service changes the taxpayer from the method on subsequent examination.

.03 Appeals resolution of timing issue

on an alternative-timing basis.

(1) Facts. The facts are the same as

in section 10.02 of this revenue procedure, except that the appeals officer and

the taxpayer agree to resolve the issue on

an alternative-timing basis as described in

section 6.02(3) of this revenue procedure

and they enter into a closing agreement as

required by section 8.01 of this revenue

procedure. The timing issue is resolved

by providing in the closing agreement that

the taxpayer will deduct 50% of the costs

incurred in 1995 and 1996 and capitalize

the other 50% of the costs incurred in

those years.

(2) Effect. The appeals officer will

disallow $1,000,000 of the deductions in

each of 1995 and 1996. The taxpayer’s

basis in the property as of the end of 1996

is increased by $2,000,000 (representing

the disallowance of the $1,000,000 of deductions in each of 1995 and 1996). The

taxpayer’s current method of accounting

for the costs is not changed. Thus, the

taxpayer is required to continue to deduct

20

the costs not covered by the closing

agreement (that is, the costs incurred in

1994 and the costs incurred in 1997 and

all subsequent taxable years), unless the

taxpayer obtains the consent of the Commissioner to change the method or the

Service changes the taxpayer from the

method on subsequent examination. If

the Service changes the taxpayer ’s

method in 1997, the Service will compute

a § 481(a) adjustment of $1,000,000 (including the amount of the costs deducted

in 1994 which are not covered by the

closing agreement and excluding the

amount of the costs deducted in 1995 and

1996 because the costs are covered by the

closing agreement). The Service will also

disallow the deduction of $5,000,000 in

1997. The taxpayer’s basis in the property as of the end of 1997 will be increased by an additional $6,000,000 (representing the $1,000,000 § 481(a)

adjustment and the disallowance of the

$5,000,000 deduction in 1997). The

method change (once final) is effective

for 1997. Thus, the taxpayer is required

to capitalize the costs in 1997 and all subsequent taxable years, unless the taxpayer

obtains the consent of the Commissioner

to change the method or the Service

changes the taxpayer from the method on

subsequent examination.

Alternatively, the timing issue may be

resolved by providing in the closing

agreement that the taxpayer will capitalize $1,000,000 of the costs incurred in

each of 1995 and 1996 (when the closing

agreement is silent as to the manner in

which the other $1,000,000 of costs incurred in each of 1995 and 1996 are to be

accounted for). The results for 1995 and

1996 will be the same as under the closing

agreement in the original facts described

in section 10.03(1) of this revenue procedure. That is, the appeals officer will disallow $1,000,000 of the deduction in each

of 1995 and 1996. The taxpayer’s basis in

the property as of the end of 1996 is increased by $2,000,000 (representing the

disallowance of the $1,000,000 of deductions in each of 1995 and 1996). Because

the taxpayer’s current method of accounting for the costs is not changed, the taxpayer is required to continue to deduct the

costs not covered by the closing agreement (that is, the costs incurred in 1994,

the remaining $1,000,000 of costs incurred in each of 1995 and 1996, and the

1998–22 I.R.B.

costs incurred in 1997 and all subsequent

taxable years). However, if the Service

changes the taxpayer’s method in 1997,

the Service will compute a § 481(a) adjustment of $3,000,000 (including the

$1,000,000 of the costs deducted in 1994,

and the remaining $2,000,000 of the costs

deducted in 1995 and 1996 because the

costs are not items covered by the closing

agreement). The Service will also disallow the deduction of $5,000,000 in 1997.

The taxpayer’s basis in the property as of

the end of 1997 will be increased by an

additional $8,000,000 (representing the

$3,000,000 § 481(a) adjustment and the

disallowance of the $5,000,000 deduction

in 1997). The method change (once final)

is effective for 1997. Thus, the taxpayer

is required to capitalize the costs in 1997

and all subsequent taxable years, unless

the taxpayer obtains the consent of the

Commissioner to change the method or

the Service changes the taxpayer from the

method on subsequent examination.

Assuming, in the alternative, that the

timing issue is resolved by providing in

the closing agreement that, for the costs

incurred in 1994 through 1996, the taxpayer will deduct 50% of the costs and

capitalize the other 50% of the costs, and

will increase taxable income by $500,000

in 1995 (representing the disallowance of

$500,000 of costs in 1994). The appeals

officer will disallow $1,000,000 of the deductions in each of 1995 and 1996. The

taxpayer’s basis in the property as of the

end of 1996 is increased by $2,500,000

(representing the disallowance of the

$500,000 of deductions in 1994 and the

$1,000,000 of deductions in each of 1995

and 1996). The taxpayer ’s current

method of accounting for the costs is not

changed. Thus, the taxpayer is required

to continue to deduct the costs not covered by the closing agreement (that is, the

costs incurred in 1997 and all subsequent

taxable years), unless the taxpayer obtains

the consent of the Commissioner to

change the method or the Service changes

the taxpayer from the method on subsequent examination. If the Service

changes the taxpayer’s method in 1997,

the Service will compute a § 481(a) adjustment of $0 (excluding the amount of

the costs deducted in 1994 through 1996

because the manner in which the costs are

to be accounted for is specifically covered

by the closing agreement). The Service

1998–22 I.R.B.

will also disallow the deduction of

$5,000,000 in 1997. The taxpayer’s basis

in the property as of the end of 1997 will

be increased by an additional $5,000,000

(representing the disallowance of the

$5,000,000 deduction in 1997). The

method change (once final) is effective

for 1997. Thus, the taxpayer is required

to capitalize the costs in 1997 and all subsequent taxable years, unless the taxpayer

obtains the consent of the Commissioner

to change the method or the Service

changes the taxpayer from the method on

subsequent examination.

.04 Appeals resolution of timing issue

on time-value-of-money basis.

(1) Facts. The facts are the same as

section 10.02 of this revenue procedure,

except that the appeals officer and the taxpayer agree to settle the issue on a timevalue-of-money basis as described in section 6.02(4) of this revenue procedure.

The taxpayer files its return on a calendar

year basis. The appeals officer believes

that an appropriate factor to reflect the

hazards of litigation is 25%. The taxpayer pays the specified amount on May

15, 1998. The highest marginal tax rate

applicable to the taxpayer for 1995 and

1996 is 35% and the quarterly large corporation underpayment rates in effect for

January 1, 1996 through June 30, 1998

are: 11%, 10%, 11%, 11%, 11%, 11%,

11%, 11%, 11%, 10%. The specified

amount under section 6.02(4) of this revenue procedure would by deductible

under § 163(a) by the taxpayer if it were

treated as interest expense arising from an

underpayment of tax.

(2) Computation of specified

amount. The hypothetical underpayment

of tax for 1995 is $1,050,000, computed

as follows: the net increase in taxable income of $3,000,000 (representing the §

481(a) adjustment of $1,000,000 and the

disallowance of the deduction of

$2,000,000 computed as if Examination

had changed the taxpayer’s method in

1995) multiplied by the applicable tax

rate of 35%. The hypothetical underpayment of tax for 1996 is $700,000, computed as follows: the net increase in taxable income of $2,000,000 (representing

the disallowance of the deduction of

$2,000,000 computed as if Examination

had changed the taxpayer’s method in

1995) multiplied by the applicable tax

rate of 35%.

21

The applicable time-value rate for 1995

is 7.02%, which is computed as follows:

The applicable period for 1995 is March

15, 1996 (the due date of the return) to

May 15, 1998 (the date the specified

amount is paid). The underpayment rates

in effect for the applicable period are

11%, 10%, 11%, 11%, 11%, 11%, 11%,

11%, 11%, and 10%. The average underpayment rate in effect for the applicable

period is 10.8% [(11+10+11+11+11+

11+11+11+11+10)/10]. The applicable

after-tax time-value rate is 7.02%, computed by multiplying the average underpayment rate by one minus the applicable

tax rate [10.8% * (1–.35)].

The applicable time-value rate for 1996

is 7.04%, which is computed as follows:

The applicable period for 1996 is March

15, 1997 (the due date of the return) to

May 15, 1998 (the date the specified

amount is paid). The underpayment rates

in effect for the applicable period are

11%, 11%, 11%, 11%, 11%, and 10%.

The average underpayment rate in effect

for the applicable period is 10.83%

[(11+11+11+11+11+10)/6]. The applicable after-tax time-value rate is 7.04%,

computed by multiplying the average underpayment rate by one minus the applicable tax rate [10.83% * (1-.35)].

The time-value-of-money benefit for

each taxable year is computed by using

the following formula:

U * {[1+(r/365)]n–1}

where U = hypothetical underpayment for the taxable year

r = the applicable time-value

rate

n = the number of days in the

applicable period

The time-value-of-money benefit for

1995 is $172,512, computed as follows:

$1,050,000 * {[1+(.0702/365)] 791 –1}.

The time-value-of-money benefit for

1996 is $59,939, computed as follows:

$700,000 * {[1+(.0704/365)]426–1}.

The specified amount is the sum of the

time-value-of-money benefit for 1995 and

1996 reduced by 25% to reflect the hazards of litigation. The specified amount is

$174,338 computed as follows:

($172,512+$59,939)*(1-.25).

(3) Effect. The Service will not propose any adjustments to taxable income

with respect to the taxpayer’s method of

accounting for the costs for 1995 and

1996. The taxpayer’s basis in the prop-

June 1, 1998

erty as of the end of 1996 is not changed.

The taxpayer’s current method of accounting for the costs is not changed.

Thus, the taxpayer is required to continue

to deduct the costs in 1997 and all subsequent taxable years, unless the taxpayer

obtains the consent of the Commissioner

to change the method or the Service

changes the taxpayer from the method on

subsequent examination. If the Service

changes the taxpayer’s method in 1997,

the Service will compute a § 481(a) adjustment of $5,000,000 (representing the

$1,000,000 of the costs deducted in 1994

and the $2,000,000 of costs deducted in

each of 1995 and 1996). The Service will

also disallow the deduction of $5,000,000

in 1997. The taxpayer’s basis in the property as of the end of 1997 will be increased by $10,000,000 (representing the

$5,000,000 § 481(a) adjustment and the

disallowance of the $5,000,000 deduction

in 1997). The method change (once final)

is effective for 1997. Thus, the taxpayer

is required to capitalize the costs in 1997

and all subsequent taxable years, unless

the taxpayer obtains the consent of the

Commissioner to change the method or

the Service changes the taxpayer from the

method on subsequent examination.

The interest on the taxpayer’s deficiency (which reflects the inclusion of the

$5,000,000 § 481(a) adjustment in taxable

income) for 1997 is $100,000. A portion

of the $100,000 of interest will be treated

as paid to the extent necessary to prevent

duplicate payment of the time-value-ofmoney benefit relating to the § 481(a) adjustment. The interest on the deficiency

for 1997 includes the time-value-ofmoney benefit attributable to the § 481(a)

adjustment for the period March 15, 1998,

through the date of payment of the deficiency. The taxpayer previously paid the

Service the time-value-of-money benefit

attributable to $3,000,000 of the § 481(a)

adjustment for the period March 15, 1996,

through May 15, 1998, and $2,000,000 of

the § 481(a) adjustment for the period

March 15, 1997 through May 15, 1998.

The interest on the deficiency for 1997 attributable to the overlap period of March

15, 1998, through May 15, 1998, is

$20,073, computed as follows:

A * t * {[1+(r/365)]n-1}

where A = the § 481(a) adjustment

t = highest marginal tax rate

applicable to the taxpayer

June 1, 1998

r = the applicable time-value

rate (computed for the

overlap period)

n = the number of days in the

overlap period

$5,000,000 * .35 *

{[1+(.06825/365)]61–1}

The $20,073 is reduced by 25% (the factor used by the appeals officer to reflect

the hazards of litigation). The Service

will treat the $15,055 as a payment toward the $100,000 of interest on the taxpayer’s deficiency for 1997.

.05 Default procedures.

(1) Facts. The facts are the same as

section 10.01 of this revenue procedure,

except that the examining agent does not

provide the notice required by section

7.01 of this revenue procedure. Specifically, the examining agent disallows the

deductions of $2,000,000 in each of 1995

and 1996, but does not compute the

§ 481(a) adjustment of $1,000,000 or otherwise provide notice that the timing issue

is being treated as an accounting method

change.

(2) Effect. The taxpayer’s basis in

the property as of the end of 1996 is increased by $4,000,000 (representing the

disallowance of the $2,000,000 of deductions in each of 1995 and 1996). The taxpayer’s current method of accounting for

the costs is not changed. Thus, the taxpayer is required to continue to deduct the

costs in 1997 and all subsequent taxable

years, unless the taxpayer obtains the consent of the Commissioner to change the

method or the Service changes the taxpayer from the method on subsequent examination. If the Service changes the taxpayer’s method in 1997, the Service will

compute a § 481(a) adjustment of

$1,000,000 (representing the $1,000,000

of the costs deducted in 1994). The Service will also disallow the deduction of

$5,000,000 in 1997. The taxpayer’s basis

in the property as of the end of 1997 will

be increased by an additional $6,000,000

(representing the $1,000,000 § 481(a) adjustment and the disallowance of the

$5,000,000 deduction in 1997). The

method change (once final) is effective

for 1997. Thus, the taxpayer is required

to capitalize the costs in 1997 and all subsequent taxable years, unless the taxpayer

obtains the consent of the Commissioner

to change the method or the Service

changes the taxpayer from the method on

22

subsequent examination.

Assume that the examining agent disallows the deductions of $2,000,000 in each

of 1995 and 1996 and computes the §

481(a) adjustment of $1,000,000, but

does not label the § 481(a) adjustment or

otherwise provide notice that the timing

issue is being treated as an accounting

method change. The taxpayer’s basis in

the property as of the end of 1996 is increased by $5,000,000 (representing the

$1,000,000 adjustment and the disallowance of the $2,000,000 of deductions

in each of 1995 and 1996). The taxpayer’s current method of accounting for

the costs is not changed. Thus, the taxpayer is required to continue to deduct the

costs in 1997 and all subsequent taxable

years, unless the taxpayer obtains the consent of the Commissioner to change the

method or the Service changes the taxpayer from the method on subsequent examination. If the Service changes the taxpayer’s method in 1997, the Service will

compute a § 481(a) adjustment of $0 (excluding the $1,000,000 of the costs deducted in 1994 and the $2,000,000 of the

costs deducted in each of 1995 and 1996

because the costs were accounted for in

the prior adjustments). The Service will

also disallow the deduction of $5,000,000

in 1997. The taxpayer’s basis in the property as of the end of 1997 will be increased by an additional $5,000,000 (representing the disallowance of the

$5,000,000 deduction in 1997). The

method change (once final) is effective

for 1997. Thus, the taxpayer is required

to capitalize the costs in 1997 and all subsequent taxable years, unless the taxpayer

obtains the consent of the Commissioner

to change the method or the Service

changes the taxpayer from the method on

subsequent examination.

SECTION 11. INQUIRIES

Inquiries regarding this revenue procedure may be addressed to the Commissioner of Internal Revenue, Attention:

CC:DOM:IT&A, 1111 Constitution Avenue, NW, Washington D.C. 20224.

SECTION 12. EFFECTIVE DATE

.01 In general. Except as provided in

section 12.02 of this revenue procedure,

this revenue procedure is effective for:

(1) examiner’s reports issued on or

after [insert date that is 90 days from the

1998–22 I.R.B.

date this revenue procedure is published

in the Internal Revenue Bulletin]; and

(2) Forms 870AD and closing agreements executed on or after [insert date

that is 90 days from the date this revenue

procedure is published in the Internal

Revenue Bulletin] (regardless of when the

underlying examiner’s report was issued).

.02 Transition rule. The Service and

the taxpayer may agree to apply this revenue procedure to closing agreements executed on or after [insert the date this revenue procedure is published in the

Internal Revenue Bulletin].

DRAFTING INFORMATION

The principal authors of this notice and

proposed revenue procedure are Robert

A. Testoff and Dwight N. Mersereau of

the Office of Assistant Chief Counsel (Income Tax and Accounting). For further

information regarding this notice and proposed revenue procedure, contact Mr.

Testoff on (202) 622-4990 or Mr.

Mersereau on (202) 622-4970 (not tollfree calls).

Weighted Average Interest Rate

Update

Notice 98–32

Notice 88–73 provides guidelines for

determining the weighted average interest

rate and the resulting permissible range of

Month

Year

Weighted

Average

May

1998

6.63

Drafting Information

The principal author of this notice is

Donna Prestia of the Employee Plans Division. For further information regarding

1998–22 I.R.B.

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 April 1998 is

5.92 percent.

The following rates were determined

for the plan years beginning in the month

shown below.

90% to 106%

Permissible

Range

90% to 110%

Permissible

Range

5.97 to 7.03

5.97 to 7.29

this notice, call (202) 622-6076 between

2:30 and 3:30 p.m. Eastern time (not a

toll-free number). Ms. Prestia’s number

is (202) 622-7473 (also not a toll-free

number).

23

June 1, 1998

Part IV. Items of General Interest

Foundations Status of Certain

Organizations

Announcement 98–44

The following organizations have

failed to establish or have been unable to

maintain their status as public charities or

as operating foundations. Accordingly,

grantors and contributors may not, after

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

under section 508(b) of the Code. This

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

Former Public Charities. The following

organizations (which have been treated as

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

Code) are now classified as private foundations:

A A Raiders Youth Sports Organization,

Pasadena, MD

ACAP Austin Cen-Tex, Austin, TX

AGAPE Outreach Ministries

Incorporated, Yeadon, PA

Aman Inc., New Orleans, LA

Amateur Sports Foundation, Omaha, NE

American Dance Theatre, Dallas, TX

Animals Have Rights Too, Warren, MI

Arts for Education Inc., Half Moon Bay,

CA

Atrium Society, Houston, TX

Ballinger Meals on Wheels Inc.,

Ballinger, TX

Barbara Loey Child Development

Centers Inc., Concord, CA

Bayc Inc., Osseo, MN

Bike-a-Thon Inc., Dayton, OH

Blackwater Preservation Society,

Blackwater, MO

Boone County Courthouse Square,

Columbia, MO

Bradshaw Mountain Babe Ruth

Association, Dewey, AZ

Camden County College Foundation Inc.,

Blackwood, NJ

Camp All American Inc., Duluth, GA

Center for Peacekeeping Studies,

Washington, DC

Chicago Allcity Performing Arts Parent

Group, Forest Park, IL

June 1, 1998

Childrens Assistance Programs Inc.,

Berea, OH

Clay County Economic Development

Organization Inc., Brazil, IN

Concerned Black Men of Lufkin Texas

Inc., Lufkin, TX

Cread, Sierra Vista, AZ

Dalo Ministries Corp., Deer Trail, CO

Delaware Mental Health Consumer

Coalition Inc., Wilmington, DE

Earth Day New Jersey Inc., Bloomfield,

NJ

East Pennsboro Aquatic Association,

Mechanicsburg, PA

El Paso Soap Box Derby Inc., El Paso,

TX

Elmwood Park Education Association

Philanthropic Fund, Elmwood Park, NJ

Empower Incorporated, Albuquerque,

NM

Family Tyes Inc., Pittsburgh, PA

First Choice Community Services Inc.,

Dallas, TX

Fort Bridger Historical Rendezvous Site,

Rock Springs, WY

Foundation for Women in Need of

General Services, Inman, SC

Friends of Southern UniversityShreveport, Shreveport, LA

Glacier Foundation Non Profit Housing

Association, Seattle, WA

Grand Rapids E C Foundation Inc.,

Marne, MI

Greater Dallas Hispanic Community

Services Corporation, Dallas, TX

Griffith School PTG, Ferguson, MO

His Touch Ministries Inc., Houston, TX

Hopkins County Aquatics Club Inc.,

Madisonville, KY

Houston Storytellers Guild, Houston, TX

Indianapolis Childrens Theatre Inc.,

Indianapolis, IN

Lake County Symphony Board Inc.,

Leesburg, FL

Leedom Parent Teacher Organization,

Ridley Park, PA

Lisle Community Band, Lisle, IL

Los Alamos School District Educational

Foundation Corporation, Los Alamos,

CA

Los Gatos-Saratoga Girls Softball

Association, Los Gatos, CA

Made Alive Ministries, Westminster, MD

Make-a-Wish Foundation International,

Phoenix, AZ

24

Marion Harding Academic Boosters,

Marion, OH

Mental Health Consumer Advocates of

North Dakota, Bismarck, ND

Meriwether Lewis Institute Inc., Helena,

MT

Michigan Music Education Multicultural

Committee, Ann Arbor, MI

Mississippi River Coalition Inc.,

Memphis, TN

Missouri River Raiders, Liberty, MO

Moms of Tierra Verde Inc.,

St. Petersburg, FL

Montessori School of Herndon Parents

Teachers Association, Herndon, VA

Mt. Royal String Orchestra, Baltimore,

MD

National Tar Wars, Denver, CO

Nebraska Association of Child Care

Workers, Lincoln, NE

Nehemiah Youth Mission, Philadelphia,

PA

Nightingale Productions, Philadelphia, PA

NJEA Frederick L Hipp Foundation for

Excellence in Education, Trenton, NJ

North Bergen Education Association

Philanthropic Fund, Neptune, NJ

North Shore Community Theater,

Wilmette, IL

North Valley-Milpitas Bobby Sox

Softball, San Jose, CA

OBU Global Options Inc., Shawnee, OK

Okemos High School Parent Group,

Okemos, MI

On a Roll Inc., Phoenix, AZ

On Our Own Inc., Chicago, IL

Operation Phone Home a Non-Profit

Corporation, Philadelphia, PA

Oregon Community Theater, Oregon, OH

Other Opera Company, Bethesda, MD

Our God Reigns Mission Inc., Paradise,

CA

Our Lady of Tenderness Fraternity Inc.,

Dallas, TX

Outreach Latin America, Kalamazoo, MI

ORA Productions, Inc., Pittsford, NY

Oakland International Dragon Boat

Racing Association Inc., Oakland, CA

Ocean Shores Kiwanis Club Foundation,

Ocean Shores, WA

116th Pennsylvania Volunteer Infantry

Company B, Monmouth, OR

Operation Field Trip, Los Angeles, CA

Operation-Safe Community, Rowland

Heights, CA

1998–22 I.R.B.

Operation Uplift, Oakland, CA

Opus Seven Opera Company of Detroit,

Detroit, MI

Orange County Korean Senior Citizens

Association, Garden Grove, CA

Othello Huskie Hoop Club, Othello, WA

Our Lady of Nazareth Life Association,

Corp., West Park, NY

Outback Christian Ministries, Vista, CA

OV Homes for the Aged, Los Angeles,

CA

PMGS Imhotep Scholarship Foundation,

Inglewood, CA

PQ Aquatics Corporation, Poway, CA

Pacific Islanders Outreach Inc., East Palo

Alto, CA

Pacific Northwest Passages, Langley, WA

Palm Beach India Association, Palm

Beach Gardens, FL

Palos Verdes High School Grad Nite

Committee, Torrance, CA

Pan African Aid & Development Corp.,

New York, NY

Pan American Bank Scholarship

Foundation, Los Angeles, CA

Parent Organization of Williams Porter

Elementary School Inc., Mesa, AZ

Parents and Educators in Action at

Kamiakin, Kennewick, WA

Participation Puget Sound, Seattle, WA

Partners in Plastic Recovery, Inc.,

Bardonia, NY

Pasadena AIDS Resource Center,

Altadena, CA

Paso Robles Foundation for Cultural

Arts, Paso Robles, CA

Pawtucket Babe Ruth League, Pawtucket,

RI

Pax Christi Southern California, San

Pedro, CA

Peel Foundation, Oklahoma City, OK

People Educating Through Art Creativity

and Entertainment, Dayton, OH

People First of Otero County,

Alamogordo, NM

People for Progress Incorporated,

Banning, CA

Peoples Crisis Center, Shamokin, PA

Personal Safety Institute, Kirkland, WA

Pets are Wonderful Support of Chicago

Inc., Chicago, IL

Philadelphia Homes Project CDC,

Philadelphia, PA

Phoenix Creation Group, Inc., New York,

NY

Pierce County Womens Center, Tacoma,

WA

Philipinyana TV Magazine, Renton, WA

1998–22 I.R.B.

Pinellas Homestead Project Inc.,

Gulfport, FL

Polar Bears Alive, Fresno, CA

Port Charlotte Lions Club Foundation,

Inc., Port Charlotte, FL

Posterity, Chicago, IL

Postwar Enviro-Life Research &

Restoration Society Inc., Fullerton, CA

Powerhouse Ministries Unlimited Inc.,

Gloverville, SC

Pownal Education Foundation, Pownal,

ME

Prison To Success Program, San Quentin,

CA

Professional Business Leadership

Council, Glen Carbon, IL

Project New Beginning, Troy, NY

Project Turnaround Inc., Pocatello, ID

Protect the Child Foundation, Inc.,

Norwood, MA

Quakemobile Inc., San Jose, CA

Queen City Performing Arts Organization

Inc., Cincinnati, OH

Queen of the Apostles Mission

Association, Inc., Englewood, CO

Quincy After School Child Care, Inc.,

Quincy, MA

RAAD, Moses Lake, WA

R A D Educational Programs,

Carbondale, CO

RCT Christian Renewal Ministries Inc.,

Cleveland, OK

RH Project Inc., Louisville, KY

Reach for Peace Foundation, Kansas

City, KS

Reach Out Christian Community Center,

Detroit, MI

Reach Out Foundation Inc., Jackson, MS

Reaching the Worlds Families for Christ,

Inc., Woodbury, TN

R E A D Incorporated of America,

Stockbridge, MI

Real Estate Ministries of Dallas Inc.,

Dallas, TX

Real Hope Ministries Inc., Canyon, TX

Real World Foundation Inc., Lanham,

MD

Realtors Who Care Inc., Muskegon, MI

Recovery Support Services Inc.,

Minneapolis, MN

Recovery Television Network, Inc.,

Naples, FL

Recovery Way of Oklahoma Inc.,

Wellington, KS

Recycle Bicycles Corporation Inc.,

Washington, DC

Recycled Baseball Items Inc., Houston,

TX

25

Recycling Collection Center of San

Antonio, San Antonio, TX

Red and Black Booster Club, Franklin,

PA

Red Nose Hotline Inc., Lauderhill, FL

Red Oak Area Outreach Center Inc., Red

Oak, TX

Red Octopus Productions Inc., Little

Rock, AR

Redblock Report Inc., Jackson, MI

Redeeming the Time Ministries

Incorporated, Roswell, GA

Redeeming the Time Youth Ministries,

Raleigh, NC

Redemption, Ann Arbor, MI

Redfield Athletic Association, Redfield,

AR

Register Volunteer Fire Department, Inc.,

Register, GA

Rehoboth Bay Foundation, Rehoboth

Beach, DE

Reinvestment Partnership Corporation,

Warren, OH

Relief International, Chicago, IL

Retired Educational Consulting Service,

New Rochelle, NY

Reverence for Life, Royal Oak, MI

Rheems Ambulance Company Inc.,

Rheems, PA

Rialto Youth Soccer League, Rialto, CA

Riccardi Elementary Parent Teacher

Organization, Saugerties, NY

Richland School District Education

Foundation, Johnstown, PA

Richmond Area Christian Services,

Mechanicsville, VA

Richmond PC Users Group, Richmond,

VA

Ride for the Future Inc., Denver, CO

Ridgecrest Camp Alumni and Friends,

Winston Salem, NC

Ridgeview Community Association Inc.,

Hickory, NC

RISD Rotary D-FY-IT Inc., Dallas, TX

Rise Inc., Washington, DC

Rise Up Sanford Incorporated, Sanford,

FL

Rising Star Dance Ensemble, Howell, NJ

Rising Sun Foundation, Media, PA

Risk, Allentown, PA

Ritchie County Humane Society Inc.,

Harrisville, WV

River Falls Scouting Inc., River Falls,

WI

River Valley Skippers Incorporated,

Parkersburg, WV

Riverdale Home for Furry Friends Inc.,

St. Augustine, FL

June 1, 1998

Riverview Estates Resident Development

Corporation, Cleveland, OH

Riviera Productions Inc., Biloxi, MS

Riyans International Childrens

Foundation, Inc., Hollyhill, FL

Roadbuilders Mission, Houston, TX

Roanoke Valley Animal Foundation

Incorporated, Roanoke, VA

Robert E Snow Memorial Mathematics

Trust, Sturgis, MI

Robert F. Kennedy Institute of

Community and Family Medicine,

Redondo Beach, CA

June 1, 1998

Robert J. Stoller Foundation, Los

Angeles, CA

Robert W. Coleman Parent Action Board

Corporation, Baltimore, MD

Robinson House, Highland Park, MI

Rochdale Village Sport and Fitness

Organization, Jamaica, NY

Rockaway Area Chamber of Commerce

Community Projects Inc., Rockaway,

NJ

Rockwood Farm, Adrian, MI

If an organization listed above submits

information that warrants the renewal of

26

its classification as a public charity or as a

private operating foundation, the Internal

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

and contributors may thereafter rely upon

such ruling or determination letter as provided in section 1.509(a)–7 of the Income

Tax Regulations. It is not the practice of

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

1998–22 I.R.B.

Announcement of the Consent Voluntary Suspension of Attorneys,

Certified Public Accountants, Enrolled Agents, and Enrolled Actuaries

From Practice Before the Internal Revenue Service

Under 31 Code of Federal Regulations,

Part 10, an attorney, certified public accountant, enrolled agent, or enrolled actuary, in order to avoid the institution or

conclusion of a proceeding for his disbarment or suspension from practice before

the Internal Revenue Service, may offer

his consent to suspension from such practice. The Director of Practice, in his discretion, may suspend an attorney, certified public accountant, enrolled agent, or

enrolled actuary in accordance with the

consent offered.

Attorneys, certified public accountants,

enrolled agents, and enrolled actuaries are

prohibited in any Internal Revenue Ser-

vice matter from directly or indirectly employing, accepting assistance from, being

employed by, or sharing fees with any

practitioner disbarred or suspended from

practice before the Internal Revenue Service.

To enable attorneys, certified public accountants, enrolled agents, and enrolled

actuaries to identify practitioners under

consent suspension from practice before the

Internal Revenue Service, the Director

of Practice will announce in the Internal

Revenue Bulletin the names and addresses of practitioners who have been

suspended from such practice, their designation as attorney, certified public ac-

countant, enrolled agent, or enrolled actuary, and date or period of suspension. This

announcement will appear in the weekly

Bulletin at the earliest practicable date

after such action and will continue to appear in the weekly Bulletins for five successive weeks or for as many weeks as is

practicable for each attorney, certified

public accountant, enrolled agent, or enrolled actuary so suspended and will be

consolidated and published in the Cumulative Bulletin.

The following individuals have been

placed under consent suspension from

practice before the Internal Revenue Service:

Name

Address

Designation

Date of Suspension

Soulides, James C.

Bujan, Frank

Field, Edward L.

Cito, Paul J.

Sproul, Jerry

Hunt, Russell

Oertli, William

Maynard, Richard

McDonald, Bill

Komendant, Howard

Kwiatek, Fabian A.

Brown, Patricia

Marshall, Robert

Baloun, Donald J.

Goldman, Harold J.

Garner, Darrow C.

Klein, Charles U.

Morgan, Robert I.

Teel, Jeffrey J.

Hancock, Randall M.

Allison Jr., Dale A.

Gogel, William A.

Bose, Gautem

Woods, W. Rex

Monahan, John

Swartz, Lewis A.

Berwyn, IL

Orland Park, IL

Topeka, KS

West Orange, NJ

Idaho Falls, ID

Pauls Valley, OK

Rochester, MN

Reno, NV

Reno, NV

Passaic, NJ

Silver Spring, MD

DeKalb, IL

Woodland Hills, CA

Palatine, IL

Summit, NJ

Austin, TX

Dunedin, FL

Brownsville, VT

Hollis, NH

Gardendale, AL

Blairsville, GA

North Hills, NY

Oak Brook, IL

Belleville, KS

Seattle, WA

Syosset, NY

CPA

CPA

CPA

CPA

CPA

CPA

CPA

CPA

Attorney

CPA

CPA

CPA

Attorney

CPA

CPA

CPA

CPA

Attorney

CPA

CPA

Attorney

Attorney

CPA

CPA

Attorney

CPA

January 1, 1998 to June 30, 2000

January 1, 1998 to June 30, 2000

January 27, 1998 to April 26, 1999

February 21, 1998 to May 20, 1999

February 25, 1998 to October 24, 1998

March 1, 1998 to June 30, 1998

Mach 4, 1998 to March 3, 2000

March 10, 1998 to March 9, 2002

March 10, 1998 to March 9, 2002

March 10, 1998 to September 9, 1998

March 16, 1998 to March 15, 2001

March 16, 1998 to September 15, 1999

March 18, 1998 to November 17, 2000

March 25, 1998 to November 24, 1998

March 27 , 1998 to September 26, 1998

April 1, 1998 to March 20, 2000

April 1, 1998 to September 30, 1999

April 2, 1998 to April 1, 2000

April 2, 1998 to April 1, 2001

Indefinite from April 13, 1998

April 15, 1998 to July 14, 2001

April 21, 1998 to April 20, 2002

May 1, 1998 to April 30, 2001

May 1, 1998 to January 31, 1999

May 1, 1998 to April 30, 2001

May 1, 1998 to April 30, 2002

1998–22 I.R.B.

27

June 1, 1998

Name

Address

Designation

Date of Suspension

Eckert, Bruce G.

Rozanski, Lawrence J.

Mangum, Carl E.

Reeser, Richard M.

Bailey, Thomas O.

Johnson, Kenneth E.

Deren, Joseph

Cleveland, OH

Pittsburg, PA

Morris Plains, NJ

Thornton, CO

Dallas, TX

Forest Lake, MN

Lackawanna, NY

CPA

CPA

CPA

CPA

CPA

CPA

Attorney

May 2, 1998 to May 1, 1999

June 1, 1998 to May 30, 2000

July 1, 1998 to December 31, 1999

July 1, 1998 to September 30, 1999

July 1, 1998 to June 30, 2001

July 1, 1998 to November 30, 1999

July 1, 1998 to June 30, 2001

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 actuaries 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, en-

rolled 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 individual has 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

McDonald, Milton

Parsons, Gary D.

Stone Mountain, GA

Chattanooga, TN

Attorney

CPA

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Buchanan, Steven

Phoenix, AZ

Attorney

Indefinite from February 24, 1998

Caplan, Alan

San Francisco, CA

Attorney

Indefinite from February 24, 1998

Delany, R. Emmet

Ridgefield, CT

Attorney

Indefinite from February 24, 1998

Hirsch, Sheldon

Brooklyn, NY

CPA

Indefinite from February 24, 1998

Newman, Peter R.

Syossett, NY

Attorney

Indefinite from February 24, 1998

Land, Gary

Hunt, William D.

Hamilton, Robert

Rabinowitz, Emile

McCaffrey, Michael

Eisenstein, Joel

Fayetteville, AR

Tulsa, OK

Corpus Christie, TX

Minnetonka, MN

Wheaton, IL

St. Charles, MO

Enrolled Agent

Attorney

Attorney

Enrolled Agent

CPA

Attorney

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Indefinite from February 24, 1998

June 1, 1998

28

1998–22 I.R.B.

Name

Address

Designation

Date of Suspension

Cannavo Jr., Joseph S.

Tilker, Robert M.

Toms, James H.

Everett, Kenneth

Frederick, Charles

Artho, David

Seale, Forrest I.

Yancey, Quinton E.

Hunnicut, Benjamin

Finkel, Merle

Mullay, Carl P.

Cunning, Dennis A.

Adamson, Steven A.

Bowman, David W.

Beezley, Jack L.

Cunningham, Andrew

Palmquist, Craig S.

Ross, Mark J.

Madoch, Lawrence

Taylor, George M.

Casey, Kenneth J.

Akolt III, John P.

Dowdy, Frank

Eckert, Bruce G.

Rozanski, Lawrence J.

Mangum, Carl E.

Reeser, Richard M.

Bailey, Thomas O.

Johnson, Kenneth E.

St. Louis, MO

Fairfax, VA

Hendersonville, NC

New York, NY

Elk Grove,

Lubbock, TX

San Antonio, TX

Stephens City, VA

Reseda, CA

Beverly Hills, CA

Swoyersville, PA

Molalla, OR

Nampa, ID

Colorado Springs, CO

Dallas, TX

Hatfield, PA

Seattle, WA

Columbus, OH

Elgin, IL

Springfield, IL

Corte Madera, CA

Denver, CO

Huntsville, AL

Cleveland, OH

Pittsburgh, PA

Morris Plains, NJ

Thornton, CO

Dallas, TX

Forest Lake, MN

Attorney

CPA

Attorney

Attorney

Enrolled Agent

CPA

CPA

CPA

CPA

CPA

CPA

CPA

Attorney

Attorney

Attorney

CPA

Attorney

Attorney

CPA

Attorney

CPA

Attorney

CPA

CPA

CPA

CPA

CPA

CPA

CPA

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Indefinite from February 24, 1998

Indefinite from March 13, 1998

Indefinite from March 18, 1998

Indefinite from March 18, 1998

Indefinite from March 18, 1998

Indefinite from March 18, 1998

Indefinite from March 18, 1998

Indefinite from March 18, 1998

Indefinite from March 18, 1998

Indefinite from April 14, 1998

Indefinite from April 21, 1998

Indefinite from April 21, 1998

Indefinite from April 28, 1998

Indefinite from April 21, 1998

Indefinite from April 21, 1998

Indefinite from April 21, 1998

Indefinite from April 21, 1998

Indefinite from April 21, 1998

Indefinite from April 21, 1998

Indefinite from April 28, 1998

May 2, 1998 to May 1, 1999

June 1, 1998 to May 30, 2000

July 1, 1998 to December 31, 1999

July 1, 1998 to September 30, 1999

July 1, 1998 to June 30, 2001

July 1, 1998 to November 30, 1999

Deren, Joseph

Lackawanna, NY

Attorney

July 1, 1998 to June 30, 2001

1998–22 I.R.B.

29

June 1, 1998

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”) that

have an effect on previous rulings use the

following defined terms to describe the

effect:

Amplified describes a situation where

no change is being made in a prior published position, but the prior position is

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds

that the same principle also applies to B,

the earlier ruling is amplified. (Compare

with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

to B, and the new ruling holds that it ap-

plies to both A and B, the prior ruling is

modified because it corrects a published

position. (Compare with amplified and

clarified, above).

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

in a ruling that lists previously published

rulings that are obsoleted because of

changes in law or regulations. A ruling

may also be obsoleted because the substance has been included in regulations

subsequently adopted.

Revoked describes situations where the

position in the previously published ruling is not correct and the correct position

is being stated in the new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

that were previously published over a period of time in separate rulings. If the

new ruling does more than restate the

substance of a prior ruling, a combination

of terms is used. For example, modified

and superseded describes a situation

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

is continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

which a list, such as a list of the names of

countries, is published in a ruling and

that list is expanded by adding further

names in subsequent rulings. After the

original ruling has been supplemented

several times, a new ruling may be published that includes the list in the original

ruling and the additions, and supersedes

all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

E.O.—Executive Order.

ER—Employer.

ERISA—Employee Retirement Income Security Act.

EX—Executor.

F—Fiduciary.

FC—Foreign Country.

FICA—Federal Insurance Contribution Act.

FISC—Foreign International Sales Company.

FPH—Foreign Personal Holding Company.

F.R.—Federal Register.

FUTA—Federal Unemployment Tax Act.

FX—Foreign Corporation.

G.C.M.—Chief Counsel’s Memorandum.

GE—Grantee.

GP—General Partner.

GR—Grantor.

IC—Insurance Company.

I.R.B.—Internal Revenue Bulletin.

LE—Lessee.

LP—Limited Partner.

LR—Lessor.

M—Minor.

Nonacq.—Nonacquiescence.

O—Organization.

P—Parent Corporation.

PHC—Personal Holding Company.

PO—Possession of the U.S.

PR—Partner.

PRS—Partnership.

PTE—Prohibited Transaction Exemption.

Pub. L.—Public Law.

REIT—Real Estate Investment Trust.

Rev. Proc.—Revenue Procedure.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

S.P.R.—Statements of Procedral Rules.

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

T.I.R.—Technical Information Release.

TP—Taxpayer.

TR—Trust.

TT—Trustee.

U.S.C.—United States Code.

X—Corporation.

Y—Corporation.

Z—Corporation.

The following abbreviations in current use and formerly used will appear in material published in the

Bulletin.

A—Individual.

Acq.—Acquiescence.

B—Individual.

BE—Beneficiary.

BK—Bank.

B.T.A.—Board of Tax Appeals.

C.—Individual.

C.B.—Cumulative Bulletin.

CFR—Code of Federal Regulations.

CI—City.

COOP—Cooperative.

Ct.D.—Court Decision.

CY—County.

D—Decedent.

DC—Dummy Corporation.

DE—Donee.

Del. Order—Delegation Order.

DISC—Domestic International Sales Corporation.

DR—Donor.

E—Estate.

EE—Employee.

June 1, 1998

30

1998–22 I.R.B.

Numerical Finding List1

Notices—Continued

Revenue Procedures—Continued

Bulletins 1998–1 through 1998–21

98–22, 1998–17 I.R.B. 5

98–23, 1998–18 I.R.B. 9

98–24, 1998–17 I.R.B. 5

98–25, 1998–18 I.R.B. 11

98–26, 1998–18 I.R.B. 14

98–27, 1998–18 I.R.B. 14

98–28, 1998–19 I.R.B. 7

98–27, 1998–15 I.R.B. 15

98–28, 1998–15 I.R.B. 14

98–29, 1998–15 I.R.B. 22

98–30, 1998–17 I.R.B. 6

98–32, 1998–17 I.R.B. 11

98–33, 1998–19 I.R.B. 7

98–34, 1998–18 I.R.B. 15

98–35, 1998–21 I.R.B. 6

Announcements:

98–1, 1998–2 I.R.B. 38

98–2, 1998–2 I.R.B. 38

98–3, 1998–2 I.R.B. 38

98–4, 1998–4 I.R.B. 31

98–5, 1998–5 I.R.B. 25

98–6, 1998–5 I.R.B. 25

98–7, 1998–5 I.R.B. 26

98–8, 1998–6 I.R.B. 96

98–9, 1998–7 I.R.B. 35

98–10, 1998–7 I.R.B. 35

98–11, 1998–8 I.R.B. 42

98–12, 1998–8 I.R.B. 43

98–13, 1998–8 I.R.B. 43

98–14, 1998–8 I.R.B. 44

98–15, 1998–10 I.R.B. 36

98–16, 1998–9 I.R.B. 17

98–17, 1998–9 I.R.B. 16

98–18, 1998–10 I.R.B. 44

98–19, 1998–10 I.R.B. 44

98–20, 1998–11 I.R.B. 25

98–21, 1998–11 I.R.B. 26

98–22, 1998–12 I.R.B. 33

98–23, 1998–12 I.R.B. 34

98–24, 1998–12 I.R.B. 35

98–25, 1998–13 I.R.B. 43

98–26, 1998–14 I.R.B. 28

98–27, 1998–15 I.R.B. 30

98–28, 1998–15 I.R.B. 30

98–29, 1998–16 I.R.B. 48

98–30, 1998–17 I.R.B. 38

98–32, 1998–17 I.R.B. 39

98–33, 1998–17 I.R.B. 39

98–34, 1998–17 I.R.B. 39

98–35, 1998–17 I.R.B. 40

98–36, 1998–18 I.R.B. 18

98–37, 1998–19 I.R.B. 24

98–38, 1998–19 I.R.B. 26

98–39, 1998–20 I.R.B. 24

98–40, 1998–20 I.R.B. 24

98–41, 1998–20 I.R.B. 25

98–42, 1998–21 I.R.B. 26

98–43, 1998–21 I.R.B. 26

Notices:

98–1, 1998–3 I.R.B. 42

98–2, 1998–2 I.R.B. 22

98–3, 1998–3 I.R.B. 48

98–4, 1998–2 I.R.B. 25

98–5, 1998–3 I.B.R. 49

98–6, 1998–3 I.R.B. 52

98–7, 1998–3 I.R.B. 54

98–8, 1998–4 I.R.B. 6

98–9, 1998–4 I.R.B. 8

98–10, 1998–6 I.R.B. 9

98–11, 1998–6 I.R.B. 18

98–12, 1998–5 I.R.B. 12

98–13, 1998–6 I.R.B. 19

98–14, 1998–8 I.R.B. 27

98–15, 1998–9 I.R.B. 8

98–16, 1998–15 I.R.B. 12

98–17, 1998–11 I.R.B. 6

98–18, 1998–12 I.R.B. 11

98–19, 1998–13 I.R.B. 24

98–20, 1998–13 I.R.B. 25

98–21, 1998–15 I.R.B. 14

Proposed Regulations:

PS–158–86, 1998–11 I.R.B. 13

REG–100841–97, 1998–8 I.R.B. 30

REG–102144–98, 1998–15 I.R.B. 25

REG–102894–97, 1998–3 I.R.B. 59

REG–104062–97, 1998–10 I.R.B. 34

REG–104537–97, 1998–16 I.R.B. 21

REG–104691–97, 1998–11 I.R.B. 13

REG–105163–97, 1998–8 I.R.B. 31

REG–109333–97, 1998–9 I.R.B. 9

REG–109704–97, 1998–3 I.R.B. 60

REG–110965–97, 1998–13 I.R.B. 42

REG–115795–97, 1998–8 I.R.B. 33

REG–119449–97, 1998–10 I.R.B. 35

REG–120200–97, 1998–12 I.R.B. 32

REG–120882–97, 1998–14 I.R.B. 25

REG–121268–97, 1998–20 I.R.B. 12

REG–121755–97, 1998–9 I.R.B. 13

REG–208299–90, 1998–16 I.R.B. 26

REG–209276–87, 1998–11 I.R.B. 18

REG–209322–82, 1998–15 I.R.B. 26

REG–209373–81, 1998–14 I.R.B. 26

REG–209463–82, 1998–4 I.R.B. 27

REG–209476–82, 1998–8 I.R.B. 36

REG–209484–87, 1998–8 I.R.B. 40

REG–209485–86, 1998–11 I.R.B. 21

REG–209682–94, 1998–17 I.R.B. 20

REG–209807–95, 1998–8 I.R.B. 40

REG–243025–96, 1998–18 I.R.B. 18

REG–251502–96, 1998–9 I.R.B. 14

REG–251698–96, 1998–20 I.R.B. 14

Revenue Procedures:

98–1, 1998–1 I.R.B. 7

98–2, 1998–1 I.R.B. 74

98–3, 1998–1 I.R.B. 100

98–4, 1998–1 I.R.B. 113

98–5, 1998–1 I.R.B. 155

98–6, 1998–1 I.R.B. 183

98–7, 1998–1 I.R.B. 222

98–8, 1998–1 I.R.B. 225

98–9, 1998–3 I.R.B. 56

98–10, 1998–2 I.R.B. 35

98–11, 1998–4 I.R.B. 9

98–12, 1998–4 I.R.B. 18

98–13, 1998–4 I.R.B. 21

98–14, 1998–4 I.R.B. 22

98–15, 1998–4 I.R.B. 25

98–16, 1998–5 I.R.B. 19

98–17, 1998–5 I.R.B. 21

98–18, 1998–6 I.R.B. 20

98–19, 1998–7 I.R.B. 30

98–20, 1998–7 I.R.B. 32

98–21, 1998–8 I.R.B. 27

98–22, 1998–12 I.R.B. 11

98–23, 1998–10 I.R.B. 30

98–24, 1998–10 I.R.B. 31

98–25, 1998–11 I.R.B. 7

98–26, 1998–13 I.R.B. 26

Revenue Rulings:

98–1, 1998–2 I.R.B. 5

98–2, 1998–2 I.R.B. 15

98–3, 1998–2 I.R.B. 4

98–4, 1998–2 I.R.B. 18

98–5, 1998–2 I.R.B. 20

98–6, 1998–4 I.R.B. 4

98–7, 1998–6 I.R.B. 6

98–8, 1998–7 I.R.B. 24

98–9, 1998–6 I.R.B. 5

98–10, 1998–10 I.R.B. 11

98–11, 1998–10 I.R.B. 13

98–12, 1998–10 I.R.B. 5

98–13, 1998–11 I.R.B. 4

98–14, 1998–11 I.R.B. 4

98–15, 1998–12 I.R.B. 6

98–16, 1998–13 I.R.B. 18

98–17, 1998–13 I.R.B. 21

98–18, 1998–14 I.R.B. 22

98–19, 1998–15 I.R.B. 5

98–20, 1998–15 I.R.B. 8

98–21, 1998–18 I.R.B. 7

98–22, 1998–19 I.R.B. 5

98–23, 1998–18 I.R.B. 5

98–24, 1998–19 I.R.B. 6

98–25, 1998–19 I.R.B. 4

98–26, 1998–21 I.R.B. 4

Treasury Decisions:

8740, 1998–3 I.R.B. 4

8741, 1998–3 I.R.B. 6

8742, 1998–5 I.R.B. 4

8743, 1998–7 I.R.B. 26

8744, 1998–7 I.R.B. 20

8745, 1998–7 I.R.B. 15

8746, 1998–7 I.R.B. 4

8747, 1998–7 I.R.B. 18

8748, 1998–8 I.R.B. 24

8749, 1998–7 I.R.B. 16

8750, 1998–8 I.R.B. 4

8751, 1998–10 I.R.B. 23

8752, 1998–9 I.R.B. 4

8753, 1998–9 I.R.B. 6

8754, 1998–10 I.R.B. 15

8755, 1998–10 I.R.B. 21

8756, 1998–12 I.R.B. 4

8757, 1998–13 I.R.B. 4

8758, 1998–13 I.R.B. 15

8759, 1998–13 I.R.B. 19

8760, 1998–14 I.R.B. 4

8761, 1998–14 I.R.B. 13

8762, 1998–14 I.R.B. 15

8763, 1998–15 I.R.B. 5

8764, 1998–15 I.R.B. 9

8765, 1998–16 I.R.B. 11

8766, 1998–16 I.R.B. 17

8767, 1998–16 I.R.B. 4

8768, 1998–20 I.R.B. 4

1 A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 1997–27 through

1997–52 will be found in Internal Revenue Bulletin

1998–1, dated January 5, 1998.

1998–22 I.R.B.

31

June 1, 1998

Finding List of Current Action on

Previously Published Items1

Bulletins 1998–1 through 1998–21

Revenue Procedures:

91–59

Updated and superseded by

98–25, 1998–11 I.R.B. 7

94–16

Modified and superseded by

98–22, 1998–12 I.R.B. 11

93–62

Modified and superseded by

98–22, 1998–12 I.R.B. 11

Revenue Rulings:

68–352

Obsoleted by

98–24, 1998–19 I.R.B. 6

73–198

Modified by

98–24, 1998–19 I.R.B. 6

75–17

Supplemented and superseded by

98–5, 1998–2 I.R.B. 20

92–19

Supplemented in part by

98–2, 1998–2 I.R.B. 15

95–35

95–35A

Superseded by

98–19, 1998–7 I.R.B. 30

96–29

Modified and superseded by

98–22, 1998–12 I.R.B. 11

97–1

Superseded by

98–1, 1998–1 I.R.B. 7

97–2

Superseded by

98–2, 1998–1 I.R.B. 74

97–3

Superseded by

98–3, 1998–1 I.R.B. 100

97–4

Superseded by

98–4, 1998–1 I.R.B. 113

97–5

Superseded by

98–5, 1998–1 I.R.B. 155

97–6

Superseded by

98–6, 1998–1 I.R.B. 183

97–7

Superseded by

98–7, 1998–1 I.R.B. 222

97–8

Superseded by

98–8, 1998–1 I.R.B. 225

97–21

Superseded by

98–2, 1998–1 I.R.B. 74

97–24

97–24A

Superseded by

98–33, 1998–19 I.R.B. 7

97–26

Obsoleted by

98–28, 1998–15 I.R.B. 14

97–34

Superseded by

98–35, 1998–21 I.R.B. 6

97–53

Superseded by

98–3, 1998–1 I.R.B. 100

1 A cumulative finding list for previously published

items mentioned in Internal Revenue Bulletins

1997–27 through 1997–52 will be found in Internal

Revenue Bulletin 1998–1, dated January 5, 1998.

June 1, 1998

32

1998–22 I.R.B.

Index

ESTATE TAX—Continued

INCOME TAX—Continued

Internal Revenue Bulletins

1998–1 Through 1998–18

Revocable trust; election (RP 13) 4, 21

Special use value; farm real property;

1998 interest rates (RR 22) 19, 5

Underpayment interest, interest expense

deduction, estates (RP 15) 4, 25

Valuation of compensatory stock options

(RP 34) 18, 15

Books and records; automatic data processing system (RP 25) 11, 7

Business expenses:

Underground waste storage tank (RR

25) 19, 4

Capital gains and charitable remainder

trusts (Notice 20) 13, 25

Classification settlement program:

Extended until further notice (Notice

21) 15, 14

Education loans (Notice 7) 3, 54

Elections under section 7704(g) (Notice

3) 3, 48

Electronic Federal Tax Payment System:

Batch filers and bulk filers (RP 32) 17,

11

Electronic or magnetic media filing:

Specifications for 1998 Forms 1098,

1099, 5498, and W–2G (RP 35) 19,

6

Employee plans:

Administrative programs; closing

agreements (RP 22) 12, 11

Determination letters (RP 6) 1, 183;

(RP 14) 4, 22

Discrimination; CODAs (Notice 1) 3,

42

Eligible deferred compensation plans

(Notice 8) 4, 6

Group health plans; COBRA continuation coverage; HIPAA portability

(Notice 12) 5, 12

Net unrealized appreciation; capital

gains (Notice 24) 17, 5

Fuel from a nonconventional source,

credit; section 29 inflation adjustment;

reference price for 1997 (Notice 28)

19, 7

Funding:

Full funding limitations, weighted average interest rate for January 1998

(Notice 9) 4, 8; February 1998 (Notice 15) 9, 8; March 1998 (Notice

18) 12, 11; April 1998 (Notice 26)

18, 14

Letter rulings, etc. (RP 4) 1, 113

Limitations on benefits and contributions (RR 1) 2, 5

Minimum Funding Standards (RP 10)

2, 35

26 CFR 1.401(a)(9)–1, amended; qualified plans and individual retirement

plans, required distributions (REG–

209463–82) 4, 27

Recovery of basis; retirees (Notice 2) 2,

22

SIMPLE-IRAs (Notice 4) 2, 25

For the index of items published during

the first six months of 1997, see I.R.B.

1998–1, dated January 5, 1998.

The abbreviation and number in parenthesis following the index entry refer to

the specific item; numbers in roman and

italic type following the parenthesis refer

to the Internal Revenue Bulletin in which

the item may be found and the page

number on which it appears.

Key to Abbreviations:

RR

Revenue Ruling

RP

Revenue Procedure

TD

Treasury Decision

CD

Court Decision

PL

Public Law

EO

Executive Order

DO

Delegation Order

TDO

Treasury Department Order

TC

Tax Convention

SPR

Statement of Procedural

Rules

PTE

Prohibited Transaction

Exemption

EMPLOYMENT TAX

Electronic filing; magnetic media; 1998

Form W–4 specifications (RP 26) 13,

26

Proposed regulations:

26 CFR 31.3121(v)(2)–1, revised;

FICA and FUTA taxation of amounts

under employee benefit plans (REG–

209484–87; REG–209807–95) 8, 40

26 CFR 31.6053–1, –4; electronic tip

reports (REG–104691–97) 11, 13

Student FICA exception (RP 16) 5, 19

ESTATE TAX

Regulations:

26 CFR 20.2041–3, 20.2056(d)–2,

amended; 20.2046–1, revised; property interests and disclaimer (TD

8744) 7, 20

26 CFR 25.2702–5, –7, amended; qualified prsonal residence trust, sale of

residence (TD 8743) 7, 26

26 CFR 25.2511–1, 25.2514–3,

25.2518–1, –2, amended; property

interests and disclaimers (TD 8744)

7, 20

1998–22 I.R.B.

EXCISE TAX

Bows and arrows; taxable and nontaxable

articles (RR 5) 2, 20

Federal excise taxes for consular officers

and employees, exemption (RR 24) 19,

6

Proposed regulations:

26 CFR 40.0–1T, added; 40.6011(a)–

1T, added; 40.6302(c)–2T, added;

deposits of excise taxes (REG–

102894–97) 3, 59

26 CFR 54.4980B–1, added; group

health plans continuation coverage

requirements (REG–209485–86) 11,

21

Regulations:

26 CFR 40.0–1(a), amended;

40.6011(a)–1(a)(2)(iii), 40.5302(c)–

1, amended, 40.6302(c)–2(b)(2)(iii),

added; deposits of excise taxes (TD

8740) 3, 4

26 CFR 40.6011(a)–1(b)(2)(vi),

amended; 48.4082–5T, removed;

48.4082–5, added; 48.4081–1,

amended; 48.4082–5T, redesignated;

48.6416(b)(4)–1, removed; 48.6421–

3(d)(2), amended; 48.6427–3(d)(2),

amended; 48.6715–1(a)(3), revised;

48.6715–2T, removed; gasoline and

diesel fuel excise tax; special rules for

Alaska, definitions (TD 8748) 8, 24

GIFT TAX

Nonstatutory stock option, transfer (RR

21) 18, 7

Qualifying income interest, disposition

(RR 8) 7, 24

Valuation of compensatory stock options

(RP 34) 18, 15

INCOME TAX

Advance pricing agreements, small business taxpayers (Notice 10) 6, 9

Article XIII (8) Rev. Proc. (RP 21) 8, 27

Automobile owners and lessees (RP 24)

10, 31; (RP 30) 17, 6

33

June 1, 1998

INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued

Technical advice (RP 5) 1, 155

User fees (RP 8) 1, 225

Environmental cleanup costs; letter

rulings (RP 17) 5, 21

Exempt Organizations:

Letter rulings, etc. (RP 4) 1, 113

Organizations excepted from reporting

lobbying expenditures (RP 19) 7,

30

Tax consequences of physicians recruitment incentives provided by

hospitals (RR 15) 12, 6

Technical advice (RP 5) 1, 155

User fees (RP 8) 1, 225

Failure to deposit federal tax; penalty

abatement (Notice 14) 8, 27

Foreign partnerships, reporting transfer of

property by U.S. persons (Notice 17)

11, 6

Foreign tax credit abuse (Notice 5) 3, 49

Fringe benefits aircraft valuation formula,

first half of 1998 (RR 14) 11, 4

Insurance companies:

Discounting estimated salvage recoverable (RP 12) 4, 18

Interest rate tables (RR 2) 2, 15

Loss reserves; discounting unpaid

losses (RP 11) 4, 9

Interest:

Investment:

Federal short-term, mid-term, and

long-term rates for January 1998

(RR4) 2, 18; February 1998

(RR7) 6, 6; March 1998 (RR11)

10, 13; April 1998 (RR 18) 14,

22; May (RR 23) 18, xx

Rates, underpayments and overpayments (RR 17) 13, 21

Inventory:

LIFO:

Price indexes; department stores for

November 1997 (RR 6) 4, 4; December 1997 (RR 9) 6, 5; January

1998 (RR 16) 13, 18; February

1998 (RR 20) 15, 8; March 1998

(RR 26) 21, xx

Shrinkage estimates:

Changing method of accounting for

estimating inventory shrinkage

(RP 29) 15, 22

Letter rulings, determination letters, and

information letters issued by Associate

Chief Counsel (Domestic), Associate

Chief Counsel (EBEO), Associate

Chief Counsel (Enforcement Litigation), and Associate Chief Counsel

(International) (RP 1) 1, 7

June 1, 1998

Losses attributable to a disaster during

1997 (RR 12) 10, 5

Low-income housing tax credit (Notice

13) 6, 19

Satisfactory bond; “bond factor”

amounts for the period October

through December 1997 (RR 3) 2, 4;

January–March 1998 (RR 13) 11, 4

Passive foreign investment companies:

Shareholders may use rules of sec.

1.1295–1T(b)(4), (f), and (g) to taxable years beginning before January

1, 1998 (Notice 22) 17, 5

Proposed regulations:

26 CFR 1.72(p)–1, amended; loans to

plan participants (REG–209476–82)

8, 36

26 CFR 1.72(p)–1, corrected; loans to

plan participants (REG–209476–82)

19, xx

26 CFR 1.141–7, 1.142(f)(4)–1,

1.150–5, added; 1.141–8, –15,

amended; obligations of states and

political subdivisions (REG–

110965–97) 13, 42

26 CFR 1.195–1, added; election to

amortize start-up expenditures

(REG–209373–81) 14, 26

26 CFR 1.356–6, added; reorganizations, nonqualified preferred stock

(REG–121755–97) 9, 13

26 CFR 1.368–1, amended; corporate

reorganizations, continuity of interest (REG–120882–97) 14, 25

26 CFR 1.460–6, amended; election

not to apply look-back method in de

minimis cases (REG–120200–97)

12, 32

26 CFR 1.469–10, revised; 1.7704–1,

added; investment income, passive

activity income and loss rules for

publicly traded partnerships

(REG–105163–97) 8, 31

26 CFR 1.475(g)–2, new; 1.482–8,

added; 1.482–0, –1, –2, 1.863,

1.863–7(a)(1), 1.864–4, –6, 1.894–1,

amended; 1.482–9, redesignated;

global dealing operation allocation

and sourcing of income and deductions among taxpayers (REG–

208299–90) 16, 26

26 CFR 1.702–1, 1.954–1, 301.7701–3,

amended; 1.952–1(b), (c), redesignated 1.954–2(a)(5), (6), 1.954–

4(b)(2)(iii), 1.954–9, 1.956–2(a)(3),

added (REG–104537–97) 16, 21

34

26 CFR 1.732–1, amended; 1.732–2,

amended; 1.734–1(e), added; 1.743–

1, revised; 1.751–1, amended;

1.755–1, revised; 1.1017–1, revised;

adjustments to basis of partnership

property and partnership interest

(REG–209682–94) 17, 20

26 CFR 1.925(a)–1, (b)–1, added;

1.927(e)–1, amended; foreign sales

corporation transfer pricing source

and grouping rules (REG–102144–

98) 15, 25

26 CFR 1.1291–1, 1.1293–1, 1.1295–1,

–3, 1.1297–3(c), added; 1.1296–4,

amended; passive foreign investment

company preferred shares, special

income exclusion (REG–115795–

97) 8, 33

26 CFR 1.1397E–1, added; qualified

zone academy bonds (REG–

119449–97) 10, 35

26 CFR 1.1502–3(c), revised; 1.1502–

4(f)(3), (g)(3), added; 1.1502–9(b)(1)(v), added; 1.1502–21(c)(1)(iii),

amended; consolidated returns, limitations on the use of certain losses

and credits (REG–104062–97) 10, 34

26 CFR 1.6031–1, removed;

1.6031(a)–1, added; 1.6063–1,

amended; partnership returns

(REG–209322–82) 15, 26

26 CFR 1.7702B–1, –2, added; qualified long-term care insurance contracts (REG–109333–97) 9, 9

26 CFR 301.6159–1, amended; agreements for tax liability installment

payments (REG–100841–97) 8, 30

26 CFR 301.6404–2, added; abatement

of interest (REG–209276–87) 11, 18

26 CFR 301.7433–1(a), (d), (e), and

(f), revised; civil cause of action for

certain unauthorized collection actions (REG–251502–96) 9, 14

26 CFR 54.9812–1, added; mental

health parity; HIPAA (REG–

109704–97) 3, 60

Qualified Funeral Trust; guidance (Notice

6) 3, 52

Qualified intermediary agreements:

Guidance provided to foreign financial

institutions (RP 27) 15, 15

Qualified mortgage bonds, mortgage

credit certificates:

Guidance provided regarding use of national and area median gross income

figures by issuers (RP 28) 15, 14

1998–22 I.R.B.

INCOME TAX—Continued INCOME TAX—Continued INCOME TAX—Continued

Qualified Subchapter S Trust (QSST)

conversion to Electing Small Business

Trust (ESBT) 10, 30

Qualified Zone Academy Zone Bonds

(RP) 3, 100

Real estate transactions (RP 20) 7, 32

Regulations:

26 CFR 1.61–12, 1.249–1, 1.1016–5,

1.1275–1, amended; 1.163–13,

1.171–5, added; 1.171–1, –2, –3, –4,

revised; 1.1016–9, removed; amortizable bond premium (TD 8746) 7, 4

26 CFR 1.141–0, –2, amended;

1.141–7, –8, removed; 1.141–7T,

–8T, –15T, 1.142(f)(4)–1T, 1.150–

5T, added; 1.141–15, revised; obligations of states and political subdivisions (TD 8757) 13, 4

26 CFR 1.166–3(a)(3), 1.1001–4,

added; 1.166–3T, 1.1001–4T, removed; modifications of bad debts

and dealer assignments of notional

principal contracts (TD 8763) 15, 5

26 CFR 1.280B–1, added; building demolition, definition of structure (TD

8745) 7, 15

26 CFR 1.338–2, 1.368–1, –2,

amended; 1.368–1T, added; corporate reorganizations, continuity of interest, and continuity of business enterprise (TD 8760) 14, 4; (TD 8761)

14, 13

26 CFR 1.354–1, 1.355–1, 1.356–3,

amended; reorganizations, treatment

of warrants as securities (TD 8752)

9, 4

26 CFR 1.356–6T, added; reorganizations, nonqualified preferred stock

(TD 8753) 9, 6

26 CFR 1.446–1, amended; 1.446–1T,

removed; 301.9100–0, added;

301.9100–1, revised; 301.9100–2,

–3, added; 301.9100–1T, –2T, –3T;

removed extensions of time to make

elections (TD 8742) 5, 4

26 CFR 1.453.11; installment obligations received from liquidating corporations (TD 8762) 14, 15

26 CFR 1.460–0, amended; 1.460–6T,

added; election not to apply lookback method in de minimis cases

(TD 8756) 12, 4

1998–22 I.R.B.

26 CFR 1.468A–2, –3, –8, amended;

nuclear decommissioning funds; revised schedules of ruling amounts

(TD 8758) 13, 15

26 CFR 1.904–5(o), 1.904–5T, 1.954–

0(b), 1.954–1, amended; 1.954–1T,

–2T, –9T, added; 301.7701–3(f)(1),

amended; controlled foreign corporation relating to partnerships and

branches (TD 8767) 16, 4

26 CFR 1.905–2, amended; foreign tax

credit filing requirements (TD 8759)

13, 19

26 CFR 1.925(a)–1T, 1.925(b)–

1T(b)(3)(i), amended; 1.927(e)–1T,

revised; foreign sales corporation

transfer pricing source and grouping

rules (TD 8764) 15, 9

26 CFR 1.985–1, –5(a), amended;

1.985–7, added; dollar approximate

separate transactions method of accounting (DASTM) to profit and loss

method of accounting, change from

P&L method to DASTM (TD 8765)

16, 11

26 CFR 1.1271–1, 1.1275–1, amended;

debt instruments with original issue

discount, annuity contracts (TD

8754) 10, 15

26 CFR 1.1202–0, –2, added; qualified

small business stock (TD 8749) 7, 16

26 CFR 1.1290–0, amended; 1.1294–0,

added; a. 1291–0T, amended;

1.1291–1T, added; 1.1291–9,

amended; 1.1293–0, –1T, added;

1.1295–0, –1T, –3T, 1.1297–3T(c),

added; passive foreign investment

company preferred shares, special

income exclusion (TD 8750) 8, 4

26 CFR 1.1396–1; empowerment zone

employment credit, qualified zone

employees (TD 8747) 7, 18

26 CFR 1.1397E–1T, added; qualified

zone academy bonds (TD 8755) 10,

21

26 CFR 1.1502–3, –4, –9(a),

–21T(c)(1)(iii), amended; 1.1502–

3T, –4T, –9T, –55T, added; 1.1502–

23T(b), (c), redesignated; consolidated returns, limitations on the use

of certain losses and credits, overall

35

foreign loss accounts (TD 8751) 10,

23

26 CFR 54.9801–2T, amended;

54.9801–4T, –5T, revised; 54.9804–

1T, redesignated; 54.9806–1T, redesignated; 54.9812–1T, added; mental

health parity, interim rules (TD

8741) 3, 6

Relocation payments:

Authorized by sec. 105(a)(11) of Housing and Community Development

Act, not includible in gross income

(RR 19) 15, 5

Renewable electricity production credit;

calendar year 1998 inflation adjustment

factor and reference prices. (Notice 27)

18, xx

Reorganizations; exchange of securities

(RR 10) 10, 11

Rulings:

Areas in which advance rulings will not

be issued:

Associate Chief Counsel (Domestic), Associate Chief Counsel

(EBEO) (RP 3) 1, 100

Associate Chief Counsel (International) (RP 7) 1, 222

Rural airports (RP 18) 6, 20

Social s

This text is long and has been trimmed here. Open the source document for the complete record.