# Bulletin No. 2001–36

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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 Proc. 99–27 superseded.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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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A785faefbd25d2c29. Public record. Not legal advice.