Bulletin No. 2001–36

Internal Revenue

bulletin

Bulletin No. 2001–36

September 4, 2001

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. 2001–43, page 209.

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

purposes of sections 382, 1274, 1288, and other sections

of the Code, tables set forth the rates for September 2001.

Announcement 2001–88, page 220.

The Service invites comments on proposed changes to

the substitute forms requirements for the partner copy of

Schedule K-1 (Form 1065) and Schedule K-1 (Form 1065-B).

EXEMPT ORGANIZATIONS

Announcement 2001–85, page 219.

A list is provided of organizations now classified as private

foundations.

ADMINISTRATIVE

Rev. Proc. 2001–42, page 212.

Insurance companies; modified endowment contracts;

uniform closing agreement. This revenue procedure provides procedures by which an issuer may remedy an inadvertent non-egregious failure to comply with the modified

endowment contract rules under section 7702A of the Code.

Rev. Proc. 99–27 superseded.

Finding Lists begin on page ii.

Index for July and August begins on page iv.

Department of the Treasury

Internal Revenue Service

Notice 2001–47, page 212.

This notice provides an additional period for comments

before the Treasury Department and the IRS finalize regulations section 1.469–7, which was published as a proposed

regulation (PS–39–89, 1991–1 C.B. 983). Section 1.469–7

will provide rules relating to the treatment of self-charged

items of income and expense for purposes of applying the

limitations on passive activity losses and credits.

Announcement 2001–91, page 221.

A payer may rely on a Form W-9, Request for Taxpayer

Identification Number and Certification, received from an

investment advisor or introducing broker authorized to transmit that form (or an electronic version) as the payee’s agent,

provided certain conditions are met.

The IRS Mission

Provide America’s taxpayers top quality service by helping them understand and meet their tax responsibilities

and by applying the tax law with integrity and fairness to

all.

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 are consolidated semiannually into

Cumulative Bulletins, which are sold on a single-copy basis.

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.

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.

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-

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.

Part II.—Treaties and Tax Legislation.

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

Tax Conventions and Other Related Items, 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).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

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.

September 4, 2001

2001–36 I.R.B.

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 September 2001. See Rev. Rul. 2001–43, on this

page.

Section 482.—Allocation of

Income and Deductions Among

Taxpayers

sections 382, 1274, 1288, and other sections of the Code, tables set forth the rates

for September 2001.

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

rates are set forth for the month of September 2001.

See Rev. Rul. 2001–43, on this page.

Rev. Rul. 2001–43

Section 280G.—Golden

Parachute Payments

Section 483.—Interest on

Certain Deferred Payments

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

rates are set forth for the month of September 2001.

See Rev. Rul. 2001–43, on this page.

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

of September 2001. See Rev. Rul. 2001–43, on this

page.

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 September 2001. See Rev.

Rul. 2001–43, on this page.

Section 412.—Minimum Funding

Standards

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

of September 2001. See Rev. Rul. 2001–43, 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 September 2001. See Rev. Rul. 2001–43, 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 September 2001. See Rev. Rul. 2001–43, on this

page.

2001–36 I.R.B.

Section 642.—Special Rules for

Credits and Deductions

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

rates are set forth for the month of September 2001.

See Rev. Rul. 2001–43, on this page.

Section 807.—Rules for Certain

Reserves

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

of September 2001. See Rev. Rul. 2001–43, on this

page.

This revenue ruling provides various

prescribed rates for federal income tax

purposes for September 2001 (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.

Section 846.—Discounted

Unpaid Losses Defined

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

of September 2001. See Rev. Rul. 2001–43, 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

209

September 4, 2001

REV. RUL. 2001–43 TABLE 1

Applicable Federal Rates (AFR) for September 2001

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

3.82%

4.20%

4.59%

4.97%

3.78%

4.16%

4.54%

4.91%

3.76%

4.14%

4.51%

4.88%

3.75%

4.12%

4.50%

4.86%

4.82%

5.31%

5.79%

6.29%

7.27%

8.50%

4.76%

5.24%

5.71%

6.19%

7.14%

8.33%

4.73%

5.21%

5.67%

6.14%

7.08%

8.25%

4.71%

5.18%

5.64%

6.11%

7.04%

8.19%

5.57%

6.13%

6.70%

7.27%

5.49%

6.04%

6.59%

7.14%

5.45%

6.00%

6.54%

7.08%

5.43%

5.97%

6.50%

7.04%

Short-Term

AFR

110% AFR

120% AFR

130% AFR

Mid-Term

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

Long-Term

AFR

110% AFR

120% AFR

130% AFR

REV. RUL. 2001–43 TABLE 2

Adjusted AFR for September 2001

Period for Compounding

Annual

Semiannual

Quarterly

Monthly

Short-term

adjusted AFR

2.90%

2.88%

2.87%

2.86%

Mid-term

adjusted AFR

3.73%

3.70%

3.68%

3.67%

Long-term

adjusted AFR

4.85%

4.79%

4.76%

4.74%

REV. RUL. 2001–43 TABLE 3

Rates Under Section 382 for September 2001

Adjusted federal long-term rate for the current month

4.85%

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.)

5.00%

REV. RUL. 2001–43 TABLE 4

Appropriate Percentages Under Section 42(b)(2) for September 2001

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

8.21%

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

3.52%

September 4, 2001

210

2001–36 I.R.B.

REV. RUL. 2001–43 TABLE 5

Rate Under Section 7520 for September 2001

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 Discounts on TaxExempt Obligations

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 September 2001. See Rev. Rul. 2001–43, page

209.

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

of September 2001. See Rev. Rul. 2001–43, page

209.

5.8%

Section 7520.—Valuation Tables

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

of September 2001. See Rev. Rul. 2001–43, page

209.

Section 7702A.—Modified

Endowment Contract Defined

Procedures are provided by which an issuer may

remedy an inadvertent non-egregious failure to comply with the modified endowment contract rules

under § 7702A. Rev. Proc. 99–27 is superseded. See

Rev. Proc. 2001–42, page 212.

2001–36 I.R.B.

211

September 4, 2001

Part III. Administrative, Procedural, and Miscellaneous

Limitations on Passive Activity

Losses and Credits—Treatment

of Self-Charged Items of Income

and Expense

26 CFR § 301.7121–1: Closing agreements.

(Also Part 1, section 7702A)

Notice 2001–47

SECTION 1. PURPOSE

On April 5, 1991, the Treasury Department and the Internal Revenue Service published in the Federal Register a notice of proposed rulemaking (PS–39–89, 1991–1 C.B.

983 [56 Fed. Reg. 14034]) relating to the

treatment of self-charged items of income

and expense for purposes of applying the

limitations on passive activity losses and

passive activity credits under § 469 of the Internal Revenue Code. The comment period

for those regulations ended in 1991 and several comments were received.

Treasury and the Service intend to finalize regulations under § 1.469–7.

Given the length of time since the regulations were proposed and the number of

amendments that have been made to the

statutory provisions since that time, Treasury and the Service believe that an additional comment period is appropriate.

Consideration will be given to all comments previously submitted in response to

the notice of proposed rulemaking published in 1991 as well as to any additional

written comments on proposed regulations § 1.469–7 that are submitted timely

to the Service in response to this notice.

Written (a signed original and eight (8)

copies) or electronic comments must be received by November 5, 2001. Send written

comments to: Internal Revenue Service,

NT 2001–47, CC:PSI:3, P.O. Box 7604,

Ben Franklin Station, Washington, DC.

Comments may be hand delivered Monday

through Friday between the hours of 8 a.m.

and 5 p.m. to the courier’s desk at 1111

Constitution Avenue, NW, Washington, DC.

Alternatively, taxpayers may submit comments electronically to Notice.Com

ments@m1.irscounsel.treas.gov. All submissions will be open to public inspection.

The principal author of this notice is

Paul B. Myers of the Office of Associate

Chief Counsel (Passthroughs and Special

Industries). For further information regarding this notice, contact Paul B. Myers

or Danielle Grimm at (202) 622-3080 (not

a toll-free call).

This revenue procedure provides the

procedures by which an issuer may remedy an inadvertent non-egregious failure

to comply with the modified endowment

contract rules under § 7702A of the Internal Revenue Code.

September 4, 2001

Rev. Proc. 2001–42

SECTION 2. BACKGROUND

.01 Definition of a modified endowment

contract (“MEC”).

(1) Section 7702A(a) provides that a

life insurance contract is a MEC if the

contract—

(a) is entered into on or after June

21, 1988, and fails to meet the “7-pay

test” of § 7702A(b), or

(b) is received in exchange for a

contract described in paragraph (a) of this

section 2.01(1).

(2) A contract fails to meet the 7-pay

test if the accumulated amount paid under

the contract at any time during the first 7

contract years exceeds the sum of the net

level premiums which would have to be

paid on or before such time if the contract

were to provide for paid-up “future benefits” (as defined in §§ 7702A(e)(3) and

7702(f)(4)) after the payment of 7 level

annual premiums.

(3) Section 72(e)(11) provides that,

for purposes of determining amounts includible in gross income, all MECs issued

by the same company to the same contract

holder during any calendar year are

treated as one MEC.

.02 Tax treatment of amounts received

under a MEC. Section 72(e)(10) provides

that a MEC is subject to the rules of

§ 72(e)(2)(B), which tax non-annuity distributions on an income-out-first basis,

and the rules of § 72(e)(4)(A) (as

modified by §§ 72(e)(10)(A)(ii) and

72(e)(10)(B)), which generally deem

loans and assignments or pledges of any

portion of the value of a MEC to be nonannuity distributions. Moreover, under

§ 72(v), the portion of any annuity or nonannuity distribution received under a

MEC that is includible in gross income is

212

subject to a 10% additional tax unless the

distribution is made on or after the date on

which the taxpayer attains age 59 1/2, is attributable to the taxpayer’s becoming disabled (within the meaning of § 72(m)(7)),

or is part of a series of substantially equal

periodic payments (not less frequently than

annually) made for the life (or life expectancy) of the taxpayer or the joint lives

(or joint life expectancies) of such taxpayer

and the taxpayer’s beneficiary.

.03 Need for a correction mechanism.

(1) The Internal Revenue Service

(“Service”) became aware of situations in

which, as a result of inadvertent non-egregious failures to comply with the MEC

rules, life insurance premiums had been

collected which exceed the 7-pay limit

provided by § 7702A(b). This could produce significant unforeseen tax consequences for the contract holders. To allow

issuers to remedy such situations, Rev.

Proc. 99–27, 1999–1 C.B. 1186, set forth

the circumstances under which the Service

would enter into closing agreements which

would provide that contracts identified in

the closing agreements would not be

treated as MECs. Rev. Proc. 99–27 applied only to requests for relief that were

received by the Service on or before May

31, 2001, generally permitted an issuer to

make only one request for correction, and

excluded certain contracts from the procedure’s correction mechanism.

(2) Some issuers were unable to

comply with the May 31, 2001, deadline

in Rev. Proc. 99–27 or filed a timely submission for some contracts but desire to

file supplemental submissions for additional contracts. Also, issuers desire to

correct contracts that were not correctable

under Rev. Proc. 99–27. To allow issuers

to remedy such situations, the Service

under the circumstances described below

will enter into closing agreements which

will provide that contracts identified in

the closing agreements will not be treated

as MECs.

SECTION 3. DEFINITIONS

The following definitions and rules

apply solely for purposes of this revenue

procedure.

.01 Testing period. The 7-year period

described in § 7702A(b) or such addi-

2001–36 I.R.B.

tional period as may be required under

§ 7702A(c)(3) if a contract undergoes a

material change.

.02 Amount paid. The amount paid

under a contract in any “contract year” (as

defined in § 7702A(e)(2)) equals the premiums paid for the contract during the

year, reduced by amounts to which

§ 72(e) applies (determined without regard to § 72(e)(4)(A)) but not including

amounts includible in gross income. For

this purpose, premiums paid do not include—

(1) any portion of any premium paid

during the contract year that is returned

(with interest) to the contract holder

within 60 days after the end of the contract year in order to comply with the 7pay test, or

(2) the “cash surrender value” (as defined in § 7702(f)(2)(A)) of another life

insurance contract (other than a contract

that fails the 7-pay test) exchanged for the

contract.

.03 7-pay premium. (1) In general. Except as otherwise provided in section

3.03(2) of this revenue procedure, the 7pay premium for a contract is the net level

premium (computed in accordance with

the rules in § 7702A(c)) that would have to

be paid for the contract if the contract were

to provide for paid up future benefits after

the payment of 7 level annual premiums.

(2) 7-pay premium for a contract

that undergoes a material change. If a

contract (other than a contract that fails

the 7-pay test) is materially changed, the

contract is treated as newly issued on the

2001–36 I.R.B.

date of the material change and the 7-pay

premium for the changed contract is an

amount equal to the excess, if any, of—

(a) the net level premium (computed in accordance with the rules in

§ 7702A(c)) that would have to be paid

for the changed contract if the contract

were to provide for paid up future benefits

after the payment of 7 level annual premiums, over

(b) a “proportionate share of the

cash surrender value” (as defined in section 3.04 of this revenue procedure) under

the contract.

.04 Proportionate share of cash surrender value. The proportionate share of the

cash surrender value of a contract is the

amount obtained by multiplying—

(1) the “cash surrender value” (as defined in § 7702(f)(2)(A)) of the contract,

by

(2) a fraction, the numerator of

which is the net level premium (computed

in accordance with the rules in

§ 7702A(c)) that would have to be paid

for the changed or new contract if such

contract were to provide for paid up future benefits after the payment of 7 level

annual premiums, and the denominator of

which is the net single premium (determined using the rules in § 7702) for such

contract at that time.

.05 Overage. A contract’s overage is

the amount of the excess, if any, of—

(1) the sum of amounts paid under

the contract during the testing period for

the contract year and all prior contract

years, over

(2) the sum of the 7-pay premiums

for the contract year and all prior contract

years of the testing period.

.06 Overage earnings. The overage

earnings for a contract year is the amount

obtained by multiplying—

(1) the sum of a contract’s overage

for the contract year and its cumulative

overage earnings for all prior contract

years, by—

(2) the earnings rate set forth in section 3.07 of this revenue procedure.

.07 Earnings rates. (1) Contracts other

than variable contracts. Except as otherwise provided in sections 3.07(3) and

3.07(8) of this revenue procedure, the

earnings rate applicable to a contract year

is the “general account total return” (as

defined in section 3.07(2) of this revenue

procedure) for the calendar year in which

the contract year begins.

(2) General account total return.

The general account total return is the calendar year arithmetic average of the

monthly interest rates described as

Moody’s Corporate Bond Yield Average Monthly Average Corporates as published

by Moody’s Investors Service Inc., or any

successor thereto.

(3)Variable contracts described in

§ 817(d). (a) Pre-2001 contract years.

The earnings rate applicable to a contract

year that begins before January 1, 2001, is

the rate set forth in the following table for

the calendar year in which the contract

year begins.

Calendar Year

Earnings Rate

1988

13.5%

1989

17.4%

1990

1.4%

1991

25.4%

1992

5.9%

1993

13.9%

1994

-1.0%

1995

23.0%

1996

14.3%

1997

17.8%

1998

19.7%

1999

12.8%

2000

-5.5%

213

September 4, 2001

(b) Post-2000 contract years. Except as otherwise provided in section

3.07(8), the earnings rate applicable to a

contract year that begins after December

31, 2000, is equal to the sum of—

(i) 10 percent of the general

account total return (as defined in section

3.07(2) of this revenue procedure), and

(ii) 90 percent of the “separate

account total return” (as defined in section

3.07(4) of this revenue procedure) for the

calendar year in which the contract year

begins.

(4) Separate account total return.

Except as otherwise provided in section

3.07(8), the separate account total return

equals—

(a) 75 percent of the “equity fund

total return” (as defined in section 3.07(5)

of this revenue procedure), plus

(b) 25 percent of the “bond fund

total return” (as defined in section 3.07(6)

of this revenue procedure), less

(c) 1.1 percentage point.

(5) Equity fund total return. The equity fund total return equals—

(a) the “calendar year percentage

return” (as defined in section 3.07(7) of

this revenue procedure) represented by

the end-of-year values of the Standard

and Poor’s (S&P) 500 Total Return Index,

with daily dividend reinvestment, as published by The McGraw-Hill Companies,

Inc., or any successor thereto, less

(b) 1.5 percentage point.

(6) Bond Fund Total Return. The

bond fund total return equals—

(a) the “calendar year percentage

return” (as defined in section 3.07(7) of

this revenue procedure) represented by

the end-of-year values of the Merrill

Lynch Corporate Bond Master Bond

Index, Total Return, as published by Merrill Lynch & Company, Inc., or any successor thereto, less

(b) 1.0 percentage point.

(7) Calendar year percentage return.

The calendar year percentage return for

an index described in section 3.07(5) or

section 3.07(6) of this revenue procedure

is calculated by—

(a) dividing the end-of-year value

of the index for the calendar year by the

end-of-year value of the index for the immediately preceding calendar year, and

(b) subtracting 1 from the result

obtained under paragraph (a) of this section 3.07(7).

September 4, 2001

(8) If the general account total return

or the separate account total return for a

calendar year cannot be determined because the calendar year in which the contract year begins has not ended, then the

earnings rate for the contract year (or portion thereof) is determined using the general account total return and, if applicable,

the average separate account total return,

for the 3 calendar years immediately preceding the calendar year in which the contract year begins.

.08 Proportionate share of overage

earnings allocable to taxable distributions. The proportionate share of overage

earnings allocable to taxable distributions

under a contract is the amount obtained

by multiplying—

(1) the total amount of the taxable

distributions under the contract, by

(2) a fraction, the numerator of

which is the contract’s cumulative overage earnings and the denominator of

which is the total income on the contract.

.09 Total income on a contract. The

total income on a contract as of any date

is an amount equal to the excess, if any,

of—

(1) the contract’s cash surrender

value (as defined in § 7702(f)(2)(A)) on

such date, over

(2) the premiums paid under the contract before such date, reduced by

amounts to which § 72(e) applies (determined without regard to § 72(e)(4)(A))

but not including amounts includible in

the contract holder’s gross income.

.10 Distribution frequency factor. The

distribution frequency factor for a contract is—

(1) .8, if—

(a) the interest rate with respect to

any portion of a policy loan that could be

made under the contract at any time (including policy loans that could be made

after a contractually specified date in the

future) is guaranteed not to exceed the

sum of:

(i) 1 percentage point, plus

(ii) the rate at which earnings

are credited to the portion of the contract’s

cash surrender value (as defined in

§ 7702(f)(2)(A)) that is allocable to such

portion of the policy loan; or

(b) the contract holder has an option to make a partial withdrawal of the

contract’s cash surrender value that reduces the “death benefit” (as defined in

214

§ 7702(f)(3)) under the contract by less

than an amount determined by multiplying—

(i) the death benefit under the

contract immediately before the withdrawal, by

(ii) the percentage obtained

by dividing the withdrawn amount by the

contract’s cash surrender value (as defined in § 7702(f)(2)(A)) immediately before

the withdrawal; and

(2) .5 for all other contracts.

.11 Applicable percentage. (1) In general. The applicable percentage for a contract is—

(a) 15%, if the death benefit under

the contract is less than $50,000,

(b) 28%, if the death benefit under

the contract is equal to or exceeds

$50,000 but is less than $180,000, and

(c) 36%, if the death benefit under

the contract is equal to or exceeds

$180,000.

(2) Determination of amount of

death benefit. For purposes of determining the applicable percentage, the death

benefit under the contract will be the

death benefit (as defined in section

7702(f)(3)) as of any date within 120 days

of the date of the request for closing

agreement, or the last day the contract is

in force.

.12 Reported amount. The reported

amount for a contract is the amount that—

(1) the issuer reports on a timely

filed information return as includible in

the contract holder’s gross income, or

(2) the contract holder includes in

gross income on a timely filed income tax

return.

.13 Aggregation of contracts. All

MECs issued by the same issuer to the

same contract holder during any calendar

year are treated as one MEC.

SECTION 4. SCOPE

.01 Applicability. Except as provided

in section 4.02 of this revenue procedure,

the issuer of a contract can use this revenue procedure to remedy the failure of

the contract to comply with the requirements of § 7702A.

.02 Inapplicability. The Service may

exclude a contract from the correction

mechanism provided under this revenue

procedure if the contract’s status as a

MEC resulted from a failure to comply

with the requirements of § 7702A that—

2001–36 I.R.B.

(1) are attributable to one or more

defective interpretations or positions that

the Service determines to be a significant

feature of a program to sell investment

oriented contracts, or

(2) arises where the controlling

statutory provision, as supplemented by

any legislative history or guidance published by the Service, is clear on its face

and the Service determines that failure to

follow the provision results in a significant increase in the investment orientation

of a contract.

.03 Example. Pursuant to section 4.02,

the Service generally will not apply the

correction mechanism under this revenue

procedure to a MEC if the contract provides for paid-up future benefits after the

payment of less than 7 level annual premiums.

SECTION 5. PROCEDURE

.01 Request for a ruling. An issuer that

seeks relief under this revenue procedure

must submit a request for a ruling that

meets the requirements of Rev. Proc.

2001–1, 2001–1 I.R.B. 1 (or any successor). Additionally, the submission must

contain the following information:

(1) a specimen copy of each contract

form;

(2) the policy number and original

issue date for each contract;

(3) the taxpayer identification number of each contract holder;

(4) the “death benefit” (as defined in

section 7702(f)(3)) under each contract

for purposes of determining the 7-pay

premium for the contract;

(5) the 7-pay premium assumed by

the issuer when the contract was issued;

(6) the cash surrender value (within

the meaning of § 7702(f)(2)(A)) of each

contract at the end of each contract year;

(7) a description of the defect[s] that

caused the contract[s] to fail to comply

with the 7-pay test, including an explanation of how and why the defect[s] arose;

(8) a description of the administrative procedures the issuer has implemented to ensure that none of its contracts

will inadvertently fail the 7-pay test in the

future;

(9) a description of any material

change[s] in the benefits under (or in the

other terms of) any contract together with

the date[s] on which the material

change[s] occurred;

2001–36 I.R.B.

(10) for any contract with regard to

which a contract holder directly or indirectly received (or was deemed to have

received) any distribution to which § 72

applies—

(a) the date and amount of each

distribution,

(b) the amount of the distribution

includible in the contract holder’s gross

income,

(c) the amount of gross income reported to the contract holder and to the

Service on a timely filed information return as a result of the distribution,

(d) the date on which the contract

holder attained [or will attain] age 59 1/2,

(e) whether the distribution is attributable to the contract holder becoming

disabled (within the meaning of

§ 72(m)(7)), and,

(f) whether the distribution is part

of a series of substantially equal periodic

payments (not less frequently than annually) made for the life (or life expectancy)

of the contract holder or the joint lives (or

joint life expectancies) of the contract

holder and his or her beneficiary;

(11) a template (see, for example,

section 5.03(3) of this revenue procedure)

setting forth the following information for

each contract:

(a) the cumulative amounts paid

under the contract within each contract

year of the testing period,

(b) the contract’s cumulative 7pay premium,

(c) the overage, if any, for each

contract year,

(d) the earnings rate applicable for

each contract year;

(e) the overage earnings for each

contract year; and,

.02 Closing agreement. The issuer also

must submit a proposed closing agreement, executed by the issuer, in substantially the same form as the model closing

agreement in section 6 of this revenue

procedure. The amount shown in section

1(A) of the closing agreement is the sum

of the amounts required to be paid (determined under section 5.03 of this revenue

procedure) for all of the contracts covered

by the agreement.

.03 Determination of amount required

to be paid with regard to a contract.

(1) General rule. Except as provided in section 5.03(2) of this revenue

procedure, the amount required to be paid

215

with regard to a contract is the sum of—

(a) the income tax (determined

using the applicable percentage for the

contract under section 3.11 of this revenue

procedure) and the additional tax under

section 72(v) with regard to amounts

(other than reported amounts (as defined

in section 3.12 of this revenue procedure))

received (or deemed received) under the

contract during the period commencing

with the date 2 years before the date on

which the contract first failed to satisfy the

MEC rules and ending on the effective

date of the closing agreement;

(b) any interest computed under

§ 6621(a)(2) as if the amounts determined

under section 5.03(1)(a) of this revenue

procedure are underpayments by the contract holder[s] for the tax year[s] in which

the amounts are received (or deemed received); and

(c) an amount, not less than $0,

obtained by multiplying—

(i) the excess, if any, of the contract’s cumulative overage earnings over

the proportionate share of overage earnings allocable to taxable distributions

under the contract, by

(ii) the applicable percentage

for the contract, and by

(iii) the distribution frequency

factor for the contract under section 3.10

of this revenue procedure.

(2) Special rule for contracts with de

minimis overage earnings. If the overage

earnings of a contract at all times during

the testing period do not exceed $75, then

the amount required to be paid with regard to the contract is determined without

regard to paragraphs (a) and (b) of section

5.03(1) of this revenue procedure.

(3) Examples of the determination of

the amount required to be paid with regard to a contract.

(a) Example 1. A, an individual,

purchases a life insurance contract other

than a contract described in section

3.07(3) or 4.02 of this revenue procedure. The death benefit of the contract

exceeds $180,000 on every day within

120 days of the date of the request for

closing agreement. The net level premium (assuming paid-up future benefits

after seven annual premium payments)

for the contract is $10,490. The contract

provides that, within 60 days after the

end of a contract year, the issuer will return (with interest) the amount of any ex-

September 4, 2001

cess premium that would cause the contract to be a MEC under § 7702A.

The interest rate on all portions of any

policy loans will always exceed the rate at

which interest is credited to the contract’s

associated cash value by more than 1 percentage point. A partial withdrawal of the

cash surrender value (within the meaning

of § 7702(f)(2)(A)) always reduces the

death benefit by an amount not less than

the amount determined by multiplying the

death benefit immediately before the

withdrawal by the percentage obtained by

dividing the withdrawn amount by the

cash surrender value immediately before

the withdrawal.

A pays a premium of $10,000 when the

contract is issued on January 1, 1991. At

the beginning of each of the next 6 contract years, A pays additional premiums of

Contract

Year

Cumulative

Amounts

Paid

Cumulative

7-Pay

Premiums

1 (1991)

10,000

10,490

0

9.2%

0

2 (1992)

20,750

20,980

0

8.6%

0

3 (1993)

31,550

31,470

80

7.5%

6.00

4 (1994)

42,250

41,960

290

8.3%

24.57

5 (1995)

53,750

52,450

1,300

7.8%

103.78

6 (1996)

64,750

62,940

1,810

7.7%

149.71

7 (1997)

74,750

73,430

1,320

7.6%

121.91

Prior to A’s payment of the $10,800

premium at the beginning of contract year

3, the cumulative premiums paid for the

contract do not exceed the contract’s cumulative 7-pay premiums. Therefore,

there are no overage earnings in contract

years 1 and 2.

Upon payment of the $10,800 premium

at the beginning of contract year 3, however, the cumulative amount paid for the

contract ($31,550) exceeds the contract’s

cumulative 7-pay premiums ($31,470) by

$80. As the earnings rate for the calendar

year in which contract year 3 begins is

7.5%, the contract’s overage earnings for

contract year 3 equal $6 ($80 x 7.5%).

For contract year 4, the overage is $290

($42,250 - $41,960). The cumulative

overage earnings for all prior contract

years equal $6.00. The earnings rate is

8.3%. The overage earnings for contract

year 4 equal $24.57 (($290 + $6) x 8.3%).

For contract year 5, the overage is

$1,300 ($53,750 - $52,450). The cumulative overage earnings for all prior contract

years equal $30.57 ($6 + $24.57). The

earnings rate is 7.8%. The overage earnings for contract year 5 equal $103.78

(($1,300 + $30.57) x 7.8%).

For contract year 6, the overage is

$1,810 ($64,750 - $62,940). The cumula-

September 4, 2001

Overage

$10,750, $10,800, $10,700, $11,500,

$11,000, and $10,000, respectively. Due

to an inadvertent error, the issuer fails to

return any of the excess premiums.

The issuer desires to enter into a closing agreement to remedy the failure to

comply with § 7702A. Pursuant to section 5.01(10) of this revenue procedure,

the issuer prepares the following template

with regard to the contract.

tive overage earnings for all prior contract

years equal $134.35 ($6 + $24.57 +

$103.78). The earnings rate is 7.7%. The

overage earnings for contract year 6 equal

$149.71 ($1,810 + $134.35) x 7.7%).

For contract year 7, the overage is

$1,320 ($74,750 - $73,430). The cumulative overage earnings for all prior contract

years equal $284.06 ($6 + $24.57 +

$103.78 + $149.71). The earnings rate is

7.6%. The overage earnings for contract

year 7 equal $121.91 (($1,320 + $284.06)

x 7.6%).

The cumulative overage earnings for

the contract equal $405.97 ($6 + $24.57 +

$103.78 + $149.71 + $121.91). Under

sections 3.10 and 3.11 of this revenue

procedure, the distribution frequency factor is .5 and the applicable percentage is

36%. Accordingly, the amount required

to be paid with regard to the contract

under section 5.03 of this revenue procedure is $73.07 ($405.97 x .5 x 36%).

(b) Example 2. The facts are the

same as in example 1 except that, at the

beginning of contract year 5, A receives

$3,000 as a policy loan. The contract’s

cash value (within the meaning of

§ 72(e)(3)(A)(i)) immediately prior to the

loan is $58,500, which exceeds A’s investment in the contract ($53,750) by $4,750.

216

Earnings

Rate

Overage

Earnings

Each year A pays the interest on the policy loan. The issuer does not file a timely

information return with regard to the

deemed distribution resulting from the

policy loan and A does not include the

distribution in gross income reported on

the income tax return for the taxable years

in which the deemed distribution is received. The total income on the contract

(as defined in section 3.09 of this revenue

procedure) is $14,500.

The amount required to be paid with regard to the contract under section 5.03 of

this revenue procedure is the sum of(1) an amount equal to the income

tax (determined using a 36% tax rate) and

the additional tax under section 72(v)

with regard to the $3,000 deemed distribution in contract year 5;

(2) interest computed under section

6621(a)(2) as if the amounts determined

under (1) were underpayments for the taxable year in which the distributions are

deemed to have occurred; and

(3) 36% of $160.99, which is the excess of the contract’s cumulative overage

earnings over the proportionate share of

the overage earnings allocable to taxable

distributions ($405.97 - $83.99), multiplied by the distribution frequency factor

(.5).

2001–36 I.R.B.

The proportionate share of overage

earnings allocable to taxable distributions is obtained by multiplying the

total amount of the taxable distribution

under the contract ($3,000), by a fraction, the numerator of which is the contract’s cumulative overage earnings

($405.97) and the denominator of which

is the total income on the contract

($14,500).

.04 Payment of amount. The issuer is

required to pay the amount determined

under section 5.03 of this revenue procedure within thirty (30) days of the date of

execution of the closing agreement by the

Service. Payment shall be made by check

payable to the “United States Treasury”

delivered, together with a fully executed

copy of the closing agreement, to Internal

Revenue Service, Philadelphia Service

Center, 11601 Roosevelt Boulevard,

Philadelphia, Pennsylvania 19154, Attention: Chief, Receipt and Control Branch,

DP3190.

.05 Correction of contracts. (1) General rules. If, on the date of the execution

of the closing agreement by the Service,

the testing period (as defined in section

3.01 of this revenue procedure) for a contract has more than ninety (90) days remaining, then the issuer must bring the

contract into compliance with § 7702A.

The issuer may bring a contract into compliance with § 7702A either by either increasing the contract’s death benefit or returning the contract’s excess premiums

and earnings thereon to the contract

holder. The issuer shall take the corrective action required under this section

5.05(1) within ninety (90) days of the date

of execution of the closing agreement by

the Service.

(2) No corrective action required if

Service executes closing agreement on a

date within 90 days of the expiration of

testing period. If the testing period for a

contract expires on or before the date

within 90 days of the execution of the

closing agreement by the Service, then

the issuer is not required to take any corrective action under section 5.05(1) of

this revenue procedure.

SECTION 6. MODEL CLOSING

AGREEMENT

Effective as of the date executed by

Internal Revenue Service _________

2001–36 I.R.B.

CLOSING AGREEMENT AS TO

FINAL DETERMINATION COVERING

SPECIFIC MATTERS

THIS CLOSING AGREEMENT

(“Agreement”), made pursuant to section

7121 of the Internal Revenue Code (the

“Code”) by and between [taxpayer’s

name, address, and identifying number]

(“Taxpayer”), and the Commissioner of

Internal Revenue (the “Service”).

WHEREAS,

A. Taxpayer is the issuer of one or

more modified endowment contracts, as

defined in section 7702A of the Code;

B. On

, Taxpayer pursuant

to Rev. Proc. 2001–1, 2001–1 I.R.B. 1,

submitted to the Service a request for a

ruling that

modified endowment

contracts (the “Contract[s]”), which are

identified on Exhibit A to this Agreement,

be treated as contracts that are not modified endowment contracts.

C. Taxpayer represents that the Contract[s] is [are] not described in section

4.02 of Rev. Proc. 2001–42.

D. Taxpayer represents that the cumulative “overage earnings,” within the

meaning of section 3.06 of Rev. Proc.

2001–42, for the Contract[s] equal

$_____.

E. Taxpayer represents that the total of

the amounts determined under section

5.03(1)(a), (b), and (c) of Rev. Proc.

2001–42, after taking the special rule in

section 5.03(2) of the revenue procedure

into account, with regard to the Contract[s] are $

,$

, and

$______, respectively.

F. To ensure that the Contracts are not

treated as modified endowment contracts,

Taxpayer and the Service have entered

into this Agreement.

NOW THEREFORE, IT IS HEREBY FURTHER DETERMINED AND

AGREED BETWEEN TAXPAYER AND

THE SERVICE AS FOLLOWS:

1. In consideration for the agreement of

the Service as set forth in Section 2

below, Taxpayer agrees as follows:

(A) To pay to the Service the sum of

dollars and

cents ($_____)

at the time and in the manner described in

Section 3 below;

(B) The amount paid pursuant to

Section 1(A) above is not deductible by

Taxpayer, nor is such amount refundable,

subject to credit or offset, or otherwise recoverable by Taxpayer from the Service;

217

(C) For purposes of its information

reporting and withholding obligations

under the Code, no holder’s investment in

any Contract may be increased by any

portion of—

(i) the sum set forth in Section

1(A) above, or

(ii) the excess of the cumulative

overage earnings over the proportionate

share of overage earnings included in

gross income reported to the Service on a

timely filed information return or income

tax return with regard to amounts received under any Contract; and

(D) To bring Contract[s] for which

the testing period (as defined in section

3.01 of Revenue Procedure 2001–42) will

not have expired on or before the date 90

days after the execution of this Agreement

into compliance with § 7702A, either by

an increase in death benefit[s] or the return of the excess premiums and earnings

thereon to the contract holder[s].

2. In consideration of the agreement of

Taxpayer set forth in Section 1 above, the

Service and Taxpayer agree as follows:

(A) To treat each Contract as having

satisfied the requirements of section

7702A during the period from the date of

issuance of the Contract through and including the later of—

(i) date of the execution of this

Agreement, and

(ii) the date of the corrective actions described in Section 1(D) above;

(B) To treat the corrective action described in 1(D) above as having no effect

on the date the Contract was issued or entered into;

(C) To waive civil penalties for failure of Taxpayer to satisfy the reporting,

withholding, and/or deposit requirements for income subject to tax under

§ 72(e)(10) that was received or deemed

received by a contract holder under a

Contract in a calendar year ending prior

to the date of execution of this Agreement; and

(D) To treat no portion of the sum

described in Section 1(A) above as income to the holders of the Contracts.

3. The actions required of Taxpayer in

Section 1(D) above shall be taken by Taxpayer within ninety (90) days of the date

of execution of this Agreement by the

Service. Payment of the amount described in Section 1(A) above shall be

made within thirty (30) days of the date of

September 4, 2001

execution of this Agreement by the Service by check payable to the “United

States Treasury,” delivered together with

a fully executed copy of this Agreement,

to Internal Revenue Service, Philadelphia

Service Center, 11601 Roosevelt Boulevard, Philadelphia, Pennsylvania 19154,

Attention: Chief, Receipt and Control

Branch, DP3190.

4. This Agreement is, and shall be construed as being, for the benefit of Taxpayer. The holder[s] of Contract[s] covered by this Agreement are intended

beneficiaries of this Agreement. This

Agreement shall not be construed as cre-

ating any liability of an issuer to the holders of the Contract[s].

5. Neither the Service nor Taxpayer

shall endeavor by litigation or other means

to attack the validity of this Agreement.

6. This Agreement may not be cited or

relied upon as precedent in the disposition

of any other matter.

NOW THIS CLOSING AGREEMENT

FURTHER WITNESSETH, that Taxpayer and the Service mutually agree that

the matters so determined shall be final

and conclusive, except as follows:

1. The matter to which this Agreement

relates may be reopened in the event of

fraud, malfeasance, or misrepresentation

of material facts set forth herein.

2. This Agreement is subject to sections

of the Code that expressly provide that effect be given to their provisions notwithstanding any other law or rule of law except § 7122 of the Code.

3. This Agreement is subject to any legislation enacted subsequent to the date of

execution hereof if the legislation provides that it is effective with respect to

closing agreements.

IN WITNESS WHEREOF, the parties have subscribed their names in triplicate.

Taxpayer

Date Signed:

By:

_______________________________

Title/Office

Commissioner of Internal Revenue

Date Signed:

By: _______________________________

_______________________________

Title/Office

SECTION 7. EFFECTIVE DATE

This revenue procedure is effective August 6, 2001, the date this revenue procedure was made available to the public.

SECTION 8. EFFECT ON OTHER

DOCUMENTS.

This revenue procedure supersedes

Rev. Proc. 99–27.

SECTION 9. PAPERWORK

REDUCTION ACT

The collections of information contained in this revenue procedure have

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

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

1545 –1752.

The collection of information and reporting burden are in section 5 of this rev-

September 4, 2001

enue procedure. This information will be

used to determine whether an issuer may

remedy failures to comply with the requirements of § 7702A. The likely respondents are insurance companies.

The estimated total annual reporting

burden is 1000 hours.

The estimated annual burden per respondent varies from 50 hours to 150

hours with an average of 100 hours. The

estimated number of respondents is 10.

The estimated annual frequency of the

responses is one time.

An agency may not conduct or sponsor,

and a person is not required to respond to,

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

OMB control number.

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

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

218

revenue law. Generally tax returns and

tax return information are confidential, as

required by 26 U.S.C. 6103.

DRAFTING INFORMATION

For further information regarding this

revenue procedure, contact Donald Drees

of Financial Institutions and Products at

(202) 622-3970 (not a toll-free call).

2001–36 I.R.B.

Part IV. Items of General Interest

Foundations Status of Certain

Organizations

Announcement 2001–85

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:

100 Black Men of Valdosta, Inc.,

Valdosta, GA

Affordable Housing Concepts, Inc.,

Clayton, GA

Alliance for a Responsible Swine

Industry, Inc., Burgaw, NC

Alternatives to Violence Project USA,

Inc., Albany, GA

American Saddlebreed Special

Commissioned, Inc., Madison, GA

Arc of Union Co., Maynardville, TN

At-Risk Childrens-Teens Shelter, Inc.,

Atlanta, GA

Atlanta Doo-Wopp Association, Inc.,

Fayetteville, GA

Atlanta World Basketball Championships

Organizing Comm., Inc.,

Atlanta, GA

Barbara A. Hayes Breast Cancer

Foundation, Inc., Melbourne, FL

Bartow Blaze Fastpitch Softball, Inc.,

Bartow, FL

Bay County Council for Children, Inc.,

Panama City, FL

Birth Health, Inc., Atlanta, GA

Blacks United for Youth-Cobb, Inc.,

Marietta, GA

Building Hope, Inc., Atlanta, GA

Camp Kaleidoscope, Inc., Alpharetta, GA

Center Court, Inc., Baton Rouge, LA

Chosen Ministries, Inc., Augusta, GA

2001–36 I.R.B.

Christian Mental Health Services, Inc.,

Duluth, GA

Circle of Love, Inc., College Park, GA

Citizens Coalition for Responsible

Power, Inc., Tampa, FL

Community Reinvestment Concepts, Inc.,

Clayton, GA

Consumer Law Center of the South, Inc.,

Atlanta, GA

Cup, Inc., Decatur, GA

Dale Davis Foundation, Inc.,

Boca Raton, FL

Economical Hope Development, Inc.,

Morrow, GA

Emmanuel Southside Community

Enrichment Center, Inc., Atlanta, GA

Fishing Hall of Fame, Inc.,

Daytona Beach, FL

Freemind Generation, Inc., Atlanta, GA

Friends of Bowden, Inc., East Point, GA

Friends of Georgia Cycling, Inc.,

Sharpsburg, GA

Friends of Ghana, Inc., Macon, GA

Friends of Goethe, Inc., Atlanta, GA

Froghop, Inc., Atlanta, GA

Fulton Parks Foundation, Inc., Atlanta, GA

Fundacor Heart Foundation, Inc.,

Woodstock, GA

Global Health Service, Charlotte, NC

Golf Hall of Fame, Inc., Atlanta, GA

Greater Atlanta Inner City Games, Inc.,

Atlanta, GA

Greyt Friends, Inc., Marietta, GA

Hall of Success, Inc., Atlanta, GA

Help our Youth USA International, Inc.,

Ellenwood, GA

Hot Club of Atlanta, Inc., Decatur, GA

Jesse Solomon Scholarship Foundation,

Inc., Madison, FL

John Chambers, Inc., Atlanta, GA

Kennesaw Youth Football Association,

Kennesaw, GA

Korean-American Helping Hands

Organization, Inc., Mableton, GA

Lee’s Mill Action Team, Inc.,

Plymouth, NC

Lifeline Academy, Inc., College Park, GA

Little Rock Housing Authority Technical

Assistance Organization,

Little Rock, AR

Maarji Institute, Inc., Fayetteville, GA

Macon County Community Housing

Development Corporation,

Montezuma, GA

Mary Lin Capital Campaign, Inc.,

Atlanta, GA

219

Marys Covenant Child Care and

Learning Center, Inc., Atlanta, GA

Med. Help International, Inc.,

Melbourne Beach, FL

Mike Elk Foundation, Carrollton, GA

Ministry Resource Group, Inc.,

Atlanta, GA

Montgomery Improvement 40th

Anniversary Foundation,

Montgomery, AL

Morven Landmarks, Inc., Columbus, GA

National Community Development, Inc.,

Plantation, FL

Nehemiah Community Development

Corporation, Inc., Riverdale, GA

Oakwood Non Profit Housing

Corporation, Mt. Dora, FL

Outreach Center, Inc., La Grange, GA

Owens Community Caring & Sharing,

Inc., Decatur, GA

Park Terrace Living Center, Lebanon, TN

Partnership of Atlanta Congregations,

Inc., Atlanta, GA

Peachtree Christian Foundation, Inc.,

Atlanta, GA

Pediatric Life Support International, Inc.,

Macon, GA

Philippine Medical Society of Florida,

Inc., East Coast Chapter,

Neptune Beach, FL

Portsbridge Foundation, Inc.,

Dunwoody, GA

Prime Life Foundation, Inc., Plano, TX

Rest Haven Nursing Home Auxiliary,

Ripley, MS

Rosslyn Counseling Ministry, Inc.,

Jonesboro, GA

Safe Start USA, Inc., Winter Park, FL

Sanford Festivals, Inc., Sanford, NC

Skua Productions, Inc., Atlanta, GA

Smith College Club of Atlanta,

Atlanta, GA

Solid Rock Ranch, Inc., Valdosta, GA

South Central Community Development

Corp., Memphis, TN

South Georgia Soccer Club, Inc.,

Douglas, GA

Southeast Community Development

Corporation, Memphis, TN

Southside Mega Flood Task Force, Inc.,

Albany, GA

Suwanee Community Development

Corp., Live Oak, FL

Sword of the Word, Inc., Augusta, GA

Twenty-First Century Senior Services,

Inc., Memphis, TN

September 4, 2001

Tybee Island Land Trust, Inc.,

Tybee Island, GA

Uhuru, Inc., Atlanta, GA

United Christian Childrens Fund,

Winter Springs, FL

United States Deaf Table Tennis

Association, St. Augustine, FL

Vaughan Perry Foundation, Inc.,

Marion, AL

Vaughan Thomasville Foundation, Inc.,

Thomasville, AL

Victory Network, Inc., Albany, GA

We Share, Inc., College Park, GA

Wilbur Foundation, Inc., Atlanta, GA

Wild Care, Inc., Denver, NC

Youth United for Prosperity,

Norcross, GA

If an organization listed above submits information that warrants the renewal of its classification as a public

charity or as a private operating foundation, the Internal Revenue Service will

issue a ruling or determination letter

with the revised classification as to

foundation status. Grantors and contrib-

utors 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.

The IRS Invites Your Comments on Proposed Changes to Substitute Forms Requirements for the

Partner Copy of Schedule K-1 (Form 1065) and Schedule K-1 (Form 1065–B)

Announcement 2001–88

Background

Based on recommendations of the Information Reporting Program Advisory Committee (IRPAC), the Internal Revenue Service (IRS) plans to revise Publication 1167, Substitute Printed, Computer-Prepared,

and Computer-Generated Tax Forms and Schedules. It will provide revised substitute forms requirements

for the copies of Schedule K-1 (Form 1065) and Schedule K-1 (Form 1065–B) furnished to partners, effective for the 2002 Schedule K-1.

The purpose of these revisions is to:

• Make the substitute forms requirements more specific.

• Set uniform visual standards that all taxpayers can recognize as representing a Schedule K-1.

Purpose

The purpose of this announcement is to request comments on proposed changes to the substitute forms

requirements for Schedule K-1 (Form 1065) and Schedule K-1 (Form 1065–B).

Revisions to

Publication 1167

The instructions in Publication 1167 would be supplemented by the following proposed requirements:

• Copies of substitute Schedules K-1 furnished to partners must be clear and legible.

• The substitute schedule must show the tax year, schedule number (K-1), related form number (1065 or

1065–B), and title exactly as shown on the official IRS schedule. This information must be prominently displayed together in one area of the schedule.

• The line items on the substitute schedule must be in the same order as those on the official IRS schedule. The wording for each line and instruction must be substantially the same as the official schedule.

• The schedule must contain all items required for use by the partner, but is not required to show lines

that do not have entries required for the particular partner. If line items are omitted, do not renumber

the remaining lines. The remaining lines must have the same letters or numbers as the corresponding

lines on the official schedule. Instructions should be provided to make it clear that the number and

order of the items relate to the official schedule.

• Either the official IRS version of the Partner’s Instructions for Schedule K-1 or substantially similar instructions must be furnished with the partner’s copy of Schedule K-1. If line items on a substitute

schedule have been omitted on a partner’s substitute Schedule K-1 because they do not apply to that

partner, the corresponding line instructions may be omitted from that partner’s substitute instructions.

• Logos are permitted on the substitute schedules, along with other information which is helpful to the

partners’ understanding of their tax responsibilities. Such information should be segregated in a manner that avoids confusion with the required Schedule K-1 tax items.

September 4, 2001

220

2001–36 I.R.B.

Benefit to

Partnerships

By providing clear and consistent reporting of tax information to its partners, partnerships will make it

easier for its partners to comply with their tax responsibilities. Partnerships will spend less time explaining to partners the tax information they have received and how it relates to their income tax returns.

Benefit to Partners

Income tax information the partners receive will be understandable and will be properly reflected on their

income tax returns. Partners will receive fewer notices from the IRS.

Benefit to the IRS

The IRS will receive more accurate returns, which in turn will reduce the need to contact taxpayers.

Comments Requested

The IRS would like to receive comments on the proposed revisions to Publication 1167 regarding Schedule K-1 (Form 1065) and Schedule K-1 (Form 1065–B) from partnerships, partners, and other interested

parties by October 1, 2001.

Please e-mail comments to the Substitute Forms Program Unit at tfp@publish.no.irs.gov. Please enter

“Substitute Forms” on the Subject Line. You can also mail comments to Internal Revenue Service, Substitute Forms Program, W:CAR:MP:FP:S:CS, 1111 Constitution Avenue, NW, Room 5244, Washington,

DC 20224. After the end of the comment period, the IRS will evaluate the comments and release a revised version of Publication 1167. Although we will not be able to respond to each comment, we will

carefully consider all of them.

The Internal Revenue Service

Will Permit Electronic

Submission of Forms W-9 by

Certain Intermediaries

Announcement 2001–91

Background

In Announcement 98–27 (1998–1 C.B.

865) the Internal Revenue Service (the

“Service”) announced that it will allow

payers to establish a system to electronically receive Form W-9, “Request for

Taxpayer Identification Number and Certification” from payees. The “Instructions for the Requester of Form W-9”

were revised to describe a proper electronic system.

The Service will also allow a payer

with an electronic system to electronically

receive a Form W-9 from an investment

advisor or introducing broker authorized

to transmit that form as the payee’s agent.

To receive a Form W-9 from an investment advisor or introducing broker, a

payer’s electronic system must meet the

requirements described below. The Service will revise the instructions to Form

W-9 to reflect the provisions of this announcement.

Definitions

For purposes of this announcement,

the term “payer” means a person re-

2001–36 I.R.B.

quired to file an information return for

payments described in §§ 3406(b)(2) and

(3) of the Internal Revenue Code. The

term “payee” means the person required

to submit Form W-9 to the payer. The

term “investment advisor” means a corporation, partnership or individual registered with the Securities and Exchange

Commission (“SEC”) under the Investment Advisers Act of 1940. The term “introducing broker” means a broker-dealer

that is regulated by the SEC and the National Association of Securities Dealers,

Inc., and that is not a payer.

that meets the requirements described

below. This announcement does not

apply to situations in which a broker acts

as a payee’s agent with respect to “readily

tradable instruments” pursuant to the special rule in § 31.3406(h)–3(d) of the Employment Tax Regulations. Therefore, in

the case of readily tradable instruments,

the payer may rely on a taxpayer identification number provided by the broker (including by electronic means) unless certification is required and the broker notifies

the payer that the number was not certified.

Reliance

Electronic System Requirements

A payer receiving a Form W-9 from an

investment advisor or introducing broker

authorized to transmit the Form W-9 to

the payer may rely on it as if the form had

been received directly from the payee, for

purposes of filing information returns and

determining the payer’s backup withholding obligations under § 3406. The advisor or broker must represent in writing

(which may include electronic means) to

the payer that the payee authorized the advisor or broker to transmit the Form W-9

to the payer.

The Form W-9 received from the investment advisor or introducing broker

may be either the original paper Form

W-9 or an electronic version (including a

facsimile). An electronic version must be

received by the payer through a system

(1) In general. The electronic system

must ensure that the information received

by the payer is the information sent by the

investment advisor or introducing broker.

The system must document all occasions

of user access that result in the submission. In addition, the design and operation of the electronic system, including

access procedures, must make it reasonably certain that the person accessing the

system and submitting the Form W-9 is

the investment advisor or introducing broker.

(2) Same information as paper Form

W-9. The electronic submission must

provide the payer with exactly the same

information as the paper Form W-9.

(3) Signature requirements and perjury statement. The electronic submission

221

September 4, 2001

must be signed with the payee’s electronic

signature, but only in situations where

Form W-9 and its instructions require a

signature by the payee.

(A) Electronic signature. In addition

to identifying the payee to whom the

Form W-9 relates, the electronic signature must authenticate and verify the

submission. For this purpose, the terms

“authenticate” and “verify” have the same

meanings as they do when applied to a

written signature on a paper Form W-9.

An electronic signature can be in any

form that satisfies the foregoing requirements. The electronic signature must be

the final entry in the submission.

(B) Perjury statement. The electronic signature on Form W-9 must be

under penalties of perjury. The perjury

statement must contain the language that

September 4, 2001

appears on the paper Form W-9. The electronic system must inform the payee that,

by signing, the payee makes the declaration contained in the perjury statement.

The perjury statement must immediately

precede the electronic signature.

(4) Copies of electronic Forms W-9.

Upon request by the Service, the payer

must supply a hard copy of the electronic

Form W-9 and a statement that, to the best

of the payer’s knowledge, the electronic

Form W-9 was submitted by the investment advisor or introducing broker acting

as the payee’s agent. The hard copy of

the electronic Form W-9 must provide exactly the same information as, but need

not be a facsimile of, the paper Form W-9.

(5) Effective date. This announcement

applies to Forms W-9 submitted to payers

by payees through investment advisors or

222

introducing brokers on or after September

4, 2001.

For further information regarding this

announcement, contact Nathan Rosen of

the Office of the Associate Chief Counsel

(Procedure & Administration), Administrative Provisions and Judicial Practice

Division, at (202) 622-4910 (not a tollfree call).

2001–36 I.R.B.

Definition of Terms

Revenue rulings and revenue procedures

(hereinafter referred to as “rulings”)

that have an effect on previous rulings

use the following defined terms to describe the effect:

Amplified describes a situation where

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

being extended to apply to a variation of

the fact situation set forth therein. Thus,

if an earlier ruling held that a principle

applied to A, and the new ruling holds

that the same principle also applies to B,

the earlier ruling is amplified. (Compare

with modified, below).

Clarified is used in those instances

where the language in a prior ruling is

being made clear because the language

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

prior ruling is being changed.

Distinguished describes a situation

where a ruling mentions a previously

published ruling and points out an essential difference between them.

Modified is used where the substance

of a previously published position is

being changed. Thus, if a prior ruling

held that a principle applied to A but not

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

plies to both A and B, the prior ruling is

modified because it corrects a published

position. (Compare with amplified and

clarified, above).

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

in a ruling that lists previously published

rulings that are obsoleted because of

changes in law or regulations. A ruling

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

subsequently adopted.

Revoked describes situations where the

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

is being stated in the new ruling.

Superseded describes a situation where

the new ruling does nothing more than

restate the substance and situation of a

previously published ruling (or rulings).

Thus, the term is used to republish under

the 1986 Code and regulations the same

position published under the 1939 Code

and regulations. The term is also used

when it is desired to republish in a single

ruling a series of situations, names, etc.,

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

new ruling does more than restate the

substance of a prior ruling, a combination

of terms is used. For example, modified

and superseded describes a situation

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

is continued without change in part and it

is desired to restate the valid portion of

the previously published ruling in a new

ruling that is self contained. In this case

the previously published ruling is first

modified and then, as modified, is superseded.

Supplemented is used in situations in

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

countries, is published in a ruling and

that list is expanded by adding further

names in subsequent rulings. After the

original ruling has been supplemented

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

ruling and the additions, and supersedes

all prior rulings in the series.

Suspended is used in rare situations to

show that the previous published rulings

will not be applied pending some future

action such as the issuance of new or

amended regulations, the outcome of

cases in litigation, or the outcome of a

Service study.

Abbreviations

E.O.—Executive Order.

PHC—Personal Holding Company.

ER—Employer.

PO—Possession of the U.S.

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

Bulletin.

ERISA—Employee Retirement Income Security

PR—Partner.

Act.

PRS—Partnership.

EX—Executor.

PTE—Prohibited Transaction Exemption.

A—Individual.

F—Fiduciary.

Acq.—Acquiescence.

Pub. L.—Public Law.

FC—Foreign Country.

B—Individual.

REIT—Real Estate Investment Trust.

FICA—Federal Insurance Contributions Act.

BE—Beneficiary.

Rev. Proc.—Revenue Procedure.

FISC—Foreign International Sales Company.

BK—Bank.

FPH—Foreign Personal Holding Company.

B.T.A.—Board of Tax Appeals.

F.R.—Federal Register.

C—Individual.

FUTA—Federal Unemployment Tax Act.

C.B.—Cumulative Bulletin.

FX—Foreign Corporation.

CFR—Code of Federal Regulations.

G.C.M.—Chief Counsel’s Memorandum.

CI—City.

GE—Grantee.

COOP—Cooperative.

GP—General Partner.

Ct.D.—Court Decision.

GR—Grantor.

CY—County.

IC—Insurance Company.

D—Decedent.

I.R.B.—Internal Revenue Bulletin.

T.I.R.—Technical Information Release.

DC—Dummy Corporation.

LE—Lessee.

TP—Taxpayer.

DE—Donee.

LP—Limited Partner.

TR—Trust.

Del. Order—Delegation Order.

LR—Lessor.

TT—Trustee.

DISC—Domestic International Sales Corporation.

M—Minor.

U.S.C.—United States Code.

DR—Donor.

Nonacq.—Nonacquiescence.

X—Corporation.

E—Estate.

O—Organization.

Y—Corporation.

EE—Employee.

P—Parent Corporation.

Z—Corporation.

2001–36 I.R.B.

Rev. Rul.—Revenue Ruling.

S—Subsidiary.

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

Stat.—Statutes at Large.

T—Target Corporation.

T.C.—Tax Court.

T.D.—Treasury Decision.

TFE—Transferee.

TFR—Transferor.

i

September 4, 2001

Numerical Finding List1

Bulletins 2001–27 through 2001–35

Announcements:

2001–69, 2001–27 I.R.B. 23

2001–70, 2001–27 I.R.B. 23

2001–71, 2001–27 I.R.B. 26

2001–72, 2001–28 I.R.B. 39

2001–73, 2001–28 I.R.B. 40

2001–74, 2001–28 I.R.B. 40

2001–75, 2001–28 I.R.B. 42

2001–76, 2001–29 I.R.B. 67

2001–77, 2001–30 I.R.B. 83

2001–78, 2001–30 I.R.B. 87

2001–79, 2001–31 I.R.B. 97

2001–80, 2001–31 I.R.B. 98

2001–81, 2001–33 I.R.B. 175

2001–82, 2001–32 I.R.B. 123

2001–83, 2001–35 I.R.B. 205

2001–84, 2001–35 I.R.B. 206

2001–86, 2001–35 I.R.B. 207

2001–87, 2001–35 I.R.B. 208

2001–90, 2001–35 I.R.B. 208

Treasury Decisions:

8947, 2001–28 I.R.B. 36

8948, 2001–28 I.R.B. 27

8949, 2001–28 I.R.B. 33

8950, 2001–28 I.R.B. 34

8951, 2001–29 I.R.B. 63

8952, 2001–29 I.R.B. 60

8953, 2001–29 I.R.B. 44

8954, 2001–29 I.R.B. 47

8955, 2001–32 I.R.B. 101

8956, 2001–32 I.R.B. 112

8957, 2001–33 I.R.B. 125

8958, 2001–34 I.R.B. 183

8959, 2001–34 I.R.B. 185

8960, 2001–34 I.R.B. 176

8961, 2001–35 I.R.B. 194

8962, 2001–35 I.R.B. 201

8963, 2001–35 I.R.B. 197

Court Decisions:

2070, 2001–31 I.R.B. 90

Notices:

2001–39, 2001–27 I.R.B. 3

2001–41, 2001–27 I.R.B. 2

2001–42, 2001–30 I.R.B. 70

2001–43, 2001–30 I.R.B. 72

2001–44, 2001–30 I.R.B. 77

2001–45, 2001–33 I.R.B. 129

2001–46, 2001–32 I.R.B. 122

2001–48, 2001–33 I.R.B. 130

2001–49, 2001–34 I.R.B. 188

2001–50, 2001–34 I.R.B. 189

2001–51, 2001–34 I.R.B. 190

2001–52, 2001–35 I.R.B. 203

Proposed Regulations:

REG–110311–98, 2001–35 I.R.B. 204

REG–106917–99, 2001–27 I.R.B. 4

REG–103735–00, 2001–35 I.R.B. 204

REG–103736–00, 2001–35 I.R.B. 204

REG–100548–01, 2001–29 I.R.B. 67

Railroad Retirement Quarterly Rates:

2001–27, I.R.B. 1

Revenue Procedures:

2001–39, 2001–28 I.R.B. 38

2001–40, 2001–33 I.R.B. 130

2001–41, 2001–33 I.R.B. 173

2001–43, 2001–34 I.R.B. 191

2001–44, 2001–35 I.R.B. 203

Revenue Rulings:

2001–30, 2001–29 I.R.B. 46

2001–33, 2001–32 I.R.B. 118

2001–34, 2001–28 I.R.B. 31

2001–35, 2001–29 I.R.B. 59

2001–36, 2001–32 I.R.B. 119

2001–37, 2001–32 I.R.B. 100

2001–38, 2001–33 I.R.B. 124

2001–39, 2001–33 I.R.B. 125

2001–41, 2001–35 I.R.B. 193

1 A cumulative list of all revenue rulings, revenue

procedures, Treasury decisions, etc., published in

Internal Revenue Bulletins 2001–1 through 2001–26

is in Internal Revenue Bulletin 2001–27, dated July

2, 2001.

September 4, 2001

ii

2001–36 I.R.B.

Finding List of Current Actions on

Previously Published Items1

Bulletins 2001–27 through 2001–35

Announcements:

2000–48

Modified by

Notice 2001–43, 2001–30 I.R.B. 72

Revenue Procedures—continued:

2000–20

Modified by

Notice 2001–42, 2001–30 I.R.B. 70

2000–39

Corrected by

Ann. 2001–73, 2001–28 I.R.B. 40

Notices:

2001–2

Modified by

Rev. Proc. 2001–41, 2001–33 I.R.B. 173

2001–4

Modified by

Notice 2001–43, 2001–30 I.R.B. 72

2001–6

Modified by

Notice 2001–42, 2001–30 I.R.B. 70

2001–9

Modified by

Notice 2001–46, 2001–32 I.R.B. 122

Revenue Rulings:

2001–15

Supplemented by

Notice 2001–51, 2001–34 I.R.B. 190

Proposed Regulations:

LR–97–79

Withdrawn by

REG–100548–01, 2001–29 I.R.B. 67

LR–107–84

Withdrawn by

REG–100548–01, 2001–29 I.R.B. 67

REG–110311–98

Supplemented by

T.D. 8961, 2001–35 I.R.B. 194

REG–106917–99

Corrected by

Ann. 2001–86, 2001–35 I.R.B. 207

REG–103735–00

Supplemented by

T.D. 8961, 2001–35 I.R.B. 194

REG–103736–00

Supplemented by

T.D. 8961, 2001–35 I.R.B. 194

REG–107186–00

Corrected by

Ann. 2001–71, 2001–27 I.R.B. 26

REG–130477–00

Supplemented by

Ann. 2001–82, 2001–32 I.R.B. 123

57–589

Obsoleted by

REG–106917–99, 2001–27 I.R.B. 4

65–316

Obsoleted by

REG–106917–99, 2001–27 I.R.B. 4

68–125

Obsoleted by

REG–106917–99, 2001–27 I.R.B. 4

69–563

Obsoleted by

REG–106917–99, 2001–27 I.R.B. 4

70–379

Obsoleted by

Rev. Rul. 2001–39, 2001–33 I.R.B. 125

74–326

Obsoleted by

REG–106917–99, 2001–27 I.R.B. 4

78–179

Obsoleted by

REG–106917–99, 2001–27 I.R.B. 4

92–19

Supplemented by

Rev. Rul. 2001–38, 2001–33 I.R.B. 124

Treasury Decisions:

8948

Corrected by

Ann. 2001–90, 2001–35 I.R.B. 208

REG–130481–00

Supplemented by

Ann. 2001–82, 2001–32 I.R.B. 123

Revenue Procedures:

93–27

Clarified by

Rev. Proc. 2001–43, 2001–34 I.R.B. 191

97–13

Modified by

Rev. Proc. 2001–39, 2001–28 I.R.B. 38

98–44

Superseded by

Rev. Proc. 2001–40, 2001–33 I.R.B. 130

1 A cumulative list of current actions on previously

published items in Internal Revenue Bulletins

2001–1 through 2001–26 is in Internal Revenue

Bulletin 2001–27, dated July 2, 2001.

2001–36 I.R.B.

iii

September 4, 2001

INDEX

Internal Revenue Bulletins

2001–27 through 2001–35

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

the specific item; numbers in roman and

italic type following the paranthesis

refer to the Internal Revenue Bulletin in

which the item may be found and the

page number on which it appears.

Key to Abbreviations:

Ann

Announcement

CD

Court Decision

DO

Delegation Order

EO

Executive Order

PL

Public Law

PTE

Prohibited Transaction

Exemption

RP

Revenue Procedure

RR

Revenue Ruling

SPR

Statement of Procedural

Rules

TC

Tax Convention

TD

Treasury Decision

TDO

Treasury Department Order

EMPLOYEE PLANS

Defined benefit pension plan, transfer of

excess assets (TD 8948) 28, 27; correction (Ann 90) 35, 208

Determination letters:

Future of the determination letter program (Ann 83) 35, 205

Qualified plans, simplifying application procedures (Ann 77) 30, 83

Full funding limitations:

Weighted average interest rate for:

June 2001 (Notice 39) 27, 3

July 2001 (Notice 48) 33, 130

August 2001 (Notice 52) 35, 203

Nondiscrimination requirements and

rules:

A defined benefit replacement allocation, cross-testing (RR 30) 29, 46

Certain defined contribution retirement

plans (TD 8954) 29, 47

Governmental and church plans, relief

from (Notice 46) 32, 122

Qualified plans:

Remedial amendment period under

EGTRRA (Notice 42) 30, 70

Required minimum distribution, alternative model amendment (Ann 82)

32, 123

September 4, 2001

EMPLOYEE PLANS—

Cont.

EMPLOYMENT TAX—

Cont.

Regulations:

26 CFR 1.401(a)(4)–0, –8, revised;

1.401(a)(4)–9, –12, amended; nondiscrimination requirements for certain defined contribution retirement

plans (TD 8954) 29, 47

26 CFR 1.420–1, added; minimum cost

requirement permitting the transfer

of excess assets of a defined benefit

pension plan to a retiree health account (TD 8948) 28, 27; correction

(Ann 90) 35, 208

26 CFR 301.7701–7, amended; classification of certain pension and employee benefit trusts, and investment

trusts as domestic trusts for federal

tax purposes (TD 8962) 35, 201

Trusts, classification of certain pension

and employee benefit trusts, and investment trusts as domestic trusts for

federal tax purposes (TD 8962) 35,

201

moved; removal of Federal Reserve

banks as federal depositaries (TD

8952) 29, 60

26 CFR 301.6323(j)–1, added; withdrawal of notice of federal tax lien in

certain circumstances (TD 8951) 29, 63

Tax liens, federal, circumstances for withdrawal of notice (TD 8951) 29, 63

EMPLOYMENT TAX

Back wages subject to FICA and FUTA

taxes, year paid (CD 2070) 31, 90

Electronic furnishing of payee statements,

voluntary, hearing (Ann 71) 27, 26

Federal tax deposits, removal of Federal

Reserve banks as depositaries (TD

8952) 29, 60

Interest-free adjustments, underpayments

of employment taxes (TD 8959) 34,

185

Penalties for underpayments of deposits

and overstated deposit claims (TD

8947) 28, 36

Railroad retirement, rate determination,

quarterly:

July 1, 2001, 27, 1

Regulations:

26 CFR 31.6205–1(a)(6), revised; interest-free adjustments with respect

to underpayments of employment

taxes (TD 8959) 34, 185

26 CFR 31.6302–1, revised; 31.6302

(c)–4, revised; 301.6656–1, –2, removed; 301.6656–3, redesignated as

301.6656–1; 602.101, amended;

penalties for underpayments of deposits and overstated deposit claims

(TD 8947) 28, 36

26 CFR 31.6302–1, amended; 31.6302

(c)–3, amended; 301.6302–1T, re-

iv

ESTATE TAX

Automatic extension of time to file Form

706 (TD 8957) 33, 125

Filing locations for estate, gift, and generation-skipping transfer tax returns, revised (Ann 74) 28, 40

Generation-skipping transfer tax, automatic allocation, election (Notice 50)

34, 189

Regulations:

26 CFR 20.6075–1, revised; 20.6081

–1, revised; 602.101, amended; estate tax return, Form 706, extension

to file (TD 8957) 33, 125

EXCISE TAX

Excise tax return filing, payment, and

deposit requirements (TD 8963) 35,

197

Form 2290SP, Declaración del Impuesto sobre el Uso de Vehículos Pesados en las Carreteras, new (Ann 69)

27, 23

Regulations:

26 CFR 40.0–1, amended; 40.6011

(a)–1, –2, amended; 40.6071(a)–1,

amended; 40.6071(a)–2, removed;

40.6091–1, amended; 40.6101–1, revised; 40.6109(a)–1, revised;

40.6151(a)–1, revised; 40.6302(c)

–1, –2, revised; 40.6302(c)–3,

amended; 40.6302(c)–4, removed;

40.9999–1, removed; deposits of excise taxes (TD 8963) 35, 197

EXEMPT

ORGANIZATIONS

List of organizations classified as private foundations (Ann 70) 27, 23;

(Ann 72) 28, 39; (Ann 76) 29, 67;

(Ann 78) 30, 87; (Ann 79) 31, 97;

(Ann 84) 35, 206

Revocations (Ann 81) 33, 175

2001–36 I.R.B.

GIFT TAX

INCOME TAX—Cont.

INCOME TAX—Cont.

Filing locations for estate, gift, and generation-skipping transfer tax returns, revised (Ann 74) 28, 40

Generation-skipping transfer tax, automatic allocation, election (Notice 50)

34, 189

Electronic furnishing of payee statements, voluntary, hearing (Ann 71) 27,

26

Federal tax deposits, removal of Federal

Reserve banks as depositaries (TD

8952) 29, 60

Forms:

1042–S, specifications for filing magnetically or electronically (RP 40)

33, 130

2290SP, Declaración del Impuesto

sobre el Uso de Vehículos Pesados

en las Carreteras, new (Ann 69) 27,

23

Insurance companies:

Differential earnings rate and recomputed differential earnings rate for

mutual life insurance companies (RR

33) 32, 118

Prevailing mortality and morbidity tables (RR 38) 33, 124

Interest:

Investment:

Federal short-term, mid-term, and

long-term rates for:

July 2001 (RR 34) 28, 31

August 2001 (RR 36) 32, 119

Inventory:

LIFO:

Price indexes used by department

stores for:

May 2001 (RR 35) 29, 59

June 2001 (RR 41) 35, 193

Notional principal contract (NPC), contingent nonperiodic payments (Notice

44) 30, 77

Partnerships, unvested partnership profits

interests (RP 43) 34, 191

Penalties for underpayments of deposits

and overstated deposit claims (TD

8947) 28, 36

Private foundations, organizations now

classified as (Ann 70) 27, 23; (Ann

72) 28, 39; (Ann 76) 29, 67; (Ann 78)

30, 87; (Ann 79) 31, 97; (Ann 84) 35,

206

Proposed Regulations:

26 CFR 1.341–1(b), –2, –5, –4(a),

–4(c), withdrawn; withdrawal of

proposed regulations relating to collapsible corporations (REG–

100548–01) 29, 67

26 CFR 1.441–0 through –4, added;

1.441–1T through 4T, removed;

1.442–1, revised; 1.442–2T, –3T, re-

moved; 1.706–1, amended; 1.706

–1T, removed; 1.898–4, amended;

1.1378–1, added; 5c.442–1, removed; 5f.442–1, removed;

18.1378–1, removed; changes in accounting periods (REG–106917–99)

27, 4; correction (Ann 86) 35, 207

26 CFR 1.1502–2, –3, –7, –8, –11, –21,

–22, –75, –78, –79, withdrawn; withdrawal of proposed regulations relating to corporations filing consolidated

returns (REG–100548–01) 29, 67

26 CFR 1.6011–4, amended; 301.

6111–2, amended; modification of

tax shelter rules II (REG–

103735–00, REG–110311–98,

REG–103736–00) 35, 204

Recognition of gain on:

Certain distributions of stock or securities in connection with an acquisition

(TD 8960) 34, 176

Certain transfers to foreign trusts and

estates (TD 8956) 32, 112

Regulations:

26 CFR 1.32–3, added; 1.32–3T, removed; 602.101(b), amended; eligibility requirements after denial of the

earned income credit (TD 8953) 29,

44

26 CFR 1.355–0, amended; 1.355–7T,

added; guidance under section

355(e); recognition of gain on certain distributions of stock or securities in connection with an acquisition

(TD 8960) 34, 176

26 CFR 1.679–0 through –7, added;

1.958–1, revised; 1.958–2, amended;

foreign trusts that have U.S. beneficiaries (TD 8955) 32, 101

26 CFR 1.684–1, through –5, added;

recognition of gain on certain transfers to certain foreign trusts and estates (TD 8956) 32, 112

26 CFR 1.732–3, added; 1.1502–34,

amended; special aggregate stock

ownership rules (TD 8949) 28, 33

26 CFR 1.1502–78, amended;

1.1502–78T, removed; guidance on

filing an application for a tentative

carryback adjustment in a consolidated return context (TD 8950) 28, 34

26 CFR 1.6011–4T, amended;

301.6111–2T, amended; 301.6112

–1T, amended; modification of tax

shelter rules II (TD 8961) 35, 194

INCOME TAX

Accounting periods, rules and procedures

for (REG–106917–99) 27, 4; correction (Ann 86) 35, 207

Backup withholding rate for amounts paid

after August 6, 2001 (Ann 80) 31, 98

Bonds, tax and revenue anticipation, safe

harbor (Notice 49) 34, 188

Business and traveling expenses, per

diem allowances (Ann 73) 28, 40

Collapsible corporations, withdrawal of

proposed regulations LR–107–84

(REG–100548–01) 29, 67

Corporations, consolidated groups:

Tentative carryback adjustments (TD

8950) 28, 34

Special aggregate stock ownership

rules (TD 8949) 28, 33

Corporations:

Consolidated income tax return filers,

withdrawal of proposed regulations

LR–97–79 (REG–100548–01) 29,

67

Mexican subsidiary formed to comply

with foreign law (RR 39) 33, 125

Credits:

Low-income housing credit:

Carryovers to qualified states,

2001 National Pool (RP 44) 35,

203

Satisfactory bond, “bond factor”

amounts for the period, July

through September 2001 (RR 37)

32, 100

Disclosure of return information, Census

of Agriculture (TD 8958) 34, 183

Earned income credit, eligibility after denial (TD 8953) 29, 44

Electronic and magnetic media:

Filing, specifications for Form 1042–S,

Foreign Person’s U.S. Source Income Subject to Withholding (RP

40) 33, 130

Information reporting seminars, Form

1042–S (Ann 87) 35, 208

Electronic filing for partnerships, exemption from (Ann 75) 28, 42

2001–36 I.R.B.

v

September 4, 2001

INCOME TAX—Cont.

INCOME TAX—Cont.

26 CFR 1.6302–1, –2, revised;

301.6656–1, –2, removed; 301.6656

–3, redesignated as 301.6656–1;

602.101, amended; penalties for underpayments of deposits and overstated deposit claims (TD 8947) 28,

36

26 CFR 1.6302–1, –2, amended;

1.1461–1, amended; 1.1502–5(a)(1),

amended; 1.6151–1(d)(1), amended;

removal of Federal Reserve banks as

federal depositaries (TD 8952) 29, 60

26 CFR 301.6103(j)(5)–1, added;

301.6103(j)(5)–1T, removed; disclosure of return information to officers

and employees of the Department of

Agriculture for certain statistical purposes and related activities, Census of

Agriculture (TD 8958) 34, 183

26 CFR 301.6323(j)–1, added; withdrawal of notice of federal tax lien in

certain circumstances (TD 8951) 29,

63

26 CFR 301.7701–7, amended; classification of certain pension and employee benefit trusts, and investment

trusts as domestic trusts for federal tax

purposes (TD 8962) 35, 201

Tax conventions:

French social security, tax treatment of

(Notice 41) 27, 2

Tax exempt bonds, private activity bonds

(RP 39) 28, 38

Tax liens, federal, circumstances for withdrawal of notice (TD 8951) 29, 63

Tax shelters:

Basis shifting tax avoidance transactions (Notice 45) 33, 129

Listed transactions (Notice 51) 34, 190

Modification of tax shelter rules II (TD

8961) 35, 194; (REG–103735–00,

REG–110311–98, REG–103736–00)

35, 204

Technical advice, from Associates Chief

Counsel and Division Counsel/Associate Chief Counsel (TE/GE), frivolous

issues (RP 41) 33, 173

Trusts:

Classification of certain pension and

employee benefit trusts, and investment trusts as domestic trusts for

federal tax purposes (TD 8962) 35,

201

Foreign trusts that have U.S. beneficiaries (TD 8955) 32, 101

Withholdings, payments to nonqualified

intermediaries and foreign trusts, U. S.

withholding agents (Notice 43) 30, 72

September 4, 2001

vi

2001–36 I.R.B.

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